Morgan Stanley and JPMorgan to combine credit derivative indices
New York, NY, and London, April 1, 2003 – Morgan Stanley (NYSE:MWD) and JPMorgan Chase & Co. (NYSE: JPM) announced today a plan to combine their suite of globally traded credit default swap indices, effective as of July 25, 2003. Capitalizing on the success of Morgan Stanley’s Synthetic TRACERS and JPMorgan’s JECI and HYDISM products, the two firms will structure, market and trade a set of regional, rules-based credit derivative instruments in the U.S., Europe and Asia. The combined group of products will be named TRACX.
The European index will be the first of the TRACX family to trade. JPMorgan and Morgan Stanley have agreed to begin trading Euro-TRACX as of April 15, 2003, provided the standard for trading under the 2003 ISDA Credit Derivative Definitions has been agreed by that date.
In conjunction with the announcement of the joint plan, Morgan Stanley today launched its newest Synthetic TRACERS program, which uses a pool of 100 equally weighted credit default swaps to represent a broad exposure to the U.S. investment grade corporate market. Morgan Stanley and JPMorgan worked together on the structure and portfolio selection methodology for this TRACERS program. The new 100-name Synthetic TRACERS program is separate from Morgan Stanley’s existing Synthetic TRACERS, which consists of 49 names.
JPMorgan announced today the launch of its Japanese (JANICE) and Emerging Market (EMDI) tradable credit derivative indices. JPMorgan and Morgan Stanley are partnering on the development of all their major credit derivative indices, which will have similar features and form the basis for the launch of TRACX.
"Our clients are asking for industry-standardized credit products that provide exceptional liquidity and transparency," said Michael Pohly, a managing director and head of credit derivative trading at Morgan Stanley. "JPMorgan and Morgan Stanley’s combined commitment to create, trade and manage these products will meet these requirements and advance one of the most industry-transforming products in the credit markets."
Andy Brindle, managing director and global head of credit derivatives at JPMorgan said, "These products are the logical progression from traditional fixed income index products. By finding the right balance between diversification and tradability, we have developed a product family that provides broad exposure to the credit markets in a truly accessible format."
The parties are already cooperating outside Europe by synchronizing the issuance date of their products. On the date the venture becomes effective, all outstanding products will be rolled into TRACX. TRACX is an unfunded product that may also be traded in funded format. Other dealers will be invited to make markets in TRACX, which will further enhance the liquidity of all the products.
Morgan Stanley is a global financial services firm and a market leader in securities, investment management and credit services. With more than 700 offices in 28 countries, Morgan Stanley connects people, ideas and capital to help clients achieve their financial aspirations.
J.P. Morgan Chase & Co. is a leading global financial services firm with assets of $759 billion and operations in more than 50 countries. The firm is a leader in investment banking, asset management, private banking, private equity, custody and transaction services, and retail and middle market financial services. A component of the Dow Jones Industrial Average, JPMorgan Chase is headquartered in New York and serves more than 30 million consumer customers and the world's most prominent corporate, institutional and government clients.