BEIJING, April 27 (Xinhua) -- China Foreign Exchange Trade System (CFETS) and Shanghai Clearing House (SHCH) announced to jointly release the CFETS-SHCH private enterprise credit default swap (CDS) index from Monday, reported Xinhua-run financial news platform Xinhua Finance Monday.
The two sides said they took the move to develop the credit derivatives market and better the function of CDS as a risk management tool in China.
The CFETS-SHCH private enterprise CDS index is compiled on basis of the index quotes from market institutions and related transactions. Market institutions are required to provide quotes for the index before 16 o'clock on each trading day.
CFETS and SHCH are both managers of the index and they will unveil on a daily basis corresponding CDS index curve for the index seven trading days after releasing of the announcement on April 26.
They, both important financial infrastructures in China, select a basket of top 25 private enterprises with sound liquidity conditions as the CDS reference targets for the index. Each of the 25 reference targets boasts the same weighting at four percent.
According to their index compiling specifications, these CDS reference targets are required to be non-financial private enterprises with AA or higher ratings, having issued in recent two years bonds whose remaining term to maturity is longer than one year, having unexpired bonds on China's interbank bond market and having publicized financial reports.
Previously in December 2019, CFETS, SHCH and Guotai Junan Securities jointly released a CDS index named CFETS-SHCH-GTJA high-grade CDS index, which served as the first China market-based CDS index.
The index has 40 CDS reference targets with high credit ratings and good liquidity conditions, each of which is given the same weighting of 2.5 percent.
Adjustment dates of the index is also set on March 20 and September 20 and after three rounds of adjustment, the CFETS-SHCH-GTJA high-grade CDS index is in experimental operation and nearly 20 financial institutions offer experimental quotes for the index each day. Its daily index curve is released and runs stable.
Prior to debut of the CFETS-SHCH private enterprise CDS index, SHCH once said to continue to diversify its credit derivatives products series to satisfy the diversified demand from market participants. At proper time in the future, the interbank market clearing service provider vowed to put CDS indexes into its central counterparty clearing to improve efficiency market lower systemic risks. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
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