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Börse pulls more out of its Box

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Deutsche Börse, the German stock exchange, has launched the second phase of its Box euro fixed income indices. The latest batch of Box indices covers collateralised debt in euro, including Pfandbriefe, Jumbo Pfandbriefe and Obligations Foncières.
This follows the introduction in mid-December of the Box sovereign debt indices.
Both products were originally supposed to be up and running in the second quarter of last year, but the exchange declined to comment on the reason for the delay. “We wanted to get the best indices with the highest possible quality,” said Kai Silbach of Deutsche Börse’s product marketing team.
It says that the Box index family is the first series of bond indices which is calculated on the basis of prices which come directly from the trading rooms of contributor banks, and is available for investors in real-time.
The collateralised index family includes an overall index, a one to three-year index, a three to five-year index, a five to seven-year index, a seven to 10-year index and one for bonds of 10 years and over.
More additions to the bond index family are inevitable. “We have plans for more, but there are no dates yet,” says Silbach. There will be a set of sub-sovereign indices and a set covering corporate bonds, he says.
Further developments of the index families are planned, the exchange has said. Apart from extending the range to include other fixed income securities, exchange-traded derivatives such as futures and options are expected to be launched on the indices, and geographical boundaries will eventually be widened to include non-Euro-zone markets.
A major hurdle in creating bond indices is gathering the price information from the banks. “You need banks which give good quality information ... in the best case, you get information from all the banks,” says Silbach. Deutsche Börse’s Box indices are currently calculated based on information from ABN Amro, Barclays Capital, DNP Paribas, Deutsche Bank, Dresdner Kleinwort Benson, Morgan Stanley Dean Witter and UBS Warburg.
When Deutsche Börse first announced that it was creating the Box indices, it said it was responding directly to investor demand. Although some of its large family of bond indices would tread on groups already covered by other providers, it was the independence of the exchange which would give the benchmarks their advantage, a spokesman says.
So, have the indices met demands? Yes, says Silbach. “They like the indices and the way they are being published.”

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