Markit announced plans to launch its commercial mortgage total return swap index, Markit TRX.NA, on Sept. 10.
The index is designed to provide investors with the opportunity to gain exposure to CMBS through total return swap (TRS) contracts.
The Markit TRX.NA index series will be based on a standardized basket of 118 CMBS reference obligations drawn from the Markit CMBX.NA.AAA index series.
Markit TRX.NA is the first total return index to use consensus pricing on the TRS. There will be 12 contributors to the daily pricing process. A TRS allows investors to benefit from a security’s price appreciation or depreciation without having to purchase the security outright.
The TRX.NA will allow investors to isolate the movement of CMBS prices, by contrast to the synthetic Markit CMBX contracts that are exposed primarily to the default risk of the reference obligations.
The index will be tradable from inception with market participants on both the buy- and sell-side expected to participate.
All swap contracts will have standardized documentation and the Depository Trust and Clearing Corp. will offer trade confirmation and settlement. Markit will provide third party oversight and consensus pricing for use in trade settlement.