Creditex and Markit, in partnership with 13 major credit derivative dealers, have successfully conducted four Credit Event Auctions to facilitate the settlement of credit derivative trades referencing Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”). The auctions were conducted in accordance with the International Swaps and Derivatives Association (ISDA) 2008 Fannie Mae and Freddie Mac CDS Protocol. Creditex and Markit are the official administrators of Credit Event Auctions.
At 4:00 pm EST today, the final prices were determined as follows:
Credit Event Auction Final Price
Fannie Mae Senior – 91.51%
Fannie Mae Subordinated – 99.90%
Freddie Mac Senior – 94.00%
Freddie Mac Subordinated – 98.00%
Fannie Mae and Freddie Mac, shareholder-owned companies mandated by the US Congress to provide funding to the US housing market, were placed under a conservatorship by the US government on September 7, triggering credit events in credit default swap (CDS) contracts referencing the companies. The Credit Event Auctions enabled market participants to cash settle triggered contracts which included single name, index, bespoke tranche and other credit derivative transactions.
During the Credit Event Auctions, dealers submitted orders electronically on the Creditex platform. The auction submissions were delivered to Markit electronically. Markit calculated and verified the results, and published them on www.creditfixings.com.
On October 10, Creditex and Markit will conduct a Credit Event Auction in relation to the settlement of CDS contracts referencing Lehman Brothers Holdings Inc.
The Credit Event Auction process was launched in 2005 by Creditex and Markit in collaboration with ISDA and major credit derivative dealers to facilitate the settlement of credit derivative contracts in the event of a corporate default. Credit Event Auctions have been held for Tembec Industries Inc., Quebecor World Inc., Movie Gallery, Collins & Aikman, Delta Air Lines, Northwest Airlines, Delphi Corporation, Calpine Corporation, Dana Corporation and Dura.