Markit and Creditex, in partnership with major credit derivative dealers, today announced the results of a Credit Event Auction conducted to facilitate settlement of credit derivative trades referencing Ecuador debt. This marks the first time that a Credit Event Auction has been run to settle credit default swaps (CDS) referencing the debt of a sovereign nation or an emerging market credit.
At 2:00 pm ET today, the final price of Ecuador bonds was determined to be 31.375% for the purpose of settling credit derivative transactions. Market participants who bought protection against an Ecuador default will receive the face value of their bonds in exchange for a payment of 31.375% of face value to protection sellers.
Markit and Creditex are the official administrators of Credit Event Auctions, which enable market participants to cash settle credit derivative transactions. During a Credit Event Auction, dealers submit orders electronically on the Creditex platform. The auction submissions are delivered to Markit electronically. Markit calculates and verifies the results, and publishes them on www.creditfixings.com.
The Credit Event Auction process was launched in 2005 by Markit and Creditex in collaboration with the International Swaps and Derivatives Association and major credit derivative dealers. Since then, Markit and Creditex have conducted 29 Credit Event Auctions, including today’s Ecuador auction, and the process has become an integral part of the CDS market’s infrastructure.
