Roll a Credit Index Swap to a Subsequent Version

Owned by Nancy Cohn (Deactivated)
Last updated: Feb 16, 2024 by Kinga Huszno
2 min read

You can roll a credit default index swap (also called a CDX swap contract) into another asset ID when you are rolling it to a subsequent version. 

A CDX swap refers to any credit default swap on a basket of underlying reference entities. Credit events occur when these reference entities default, at which point the security trades on a factored basis. In tandem with credit events, the security administrator for the credit default index swap issues a new series of the security to use for all subsequent trading and pricing. The new series has all the same terms and conditions as the original security, and the only difference is a slight change to the identifier. During the roll, you roll existing positions in the old series to new positions in the updated series. This process supports a roll to a subsequent version, such as from 24.1 to 24.2. It does not support a roll to a subsequent series, such as from 24.1 to 25.1. When you roll a CDX to a subsequent series in Eagle Accounting, you must process the CDX using close and open transactions. 

Eagle's accounting solutions allows you to use the Create Exchange Offers corporate action announcement panel and the corresponding Exchange Offer global processes panel for a CDX roll. During the roll, the system closes the existing position in the old security and opens a new position in the updated security. The system maintains a record of the original quantity (notional), current quantity, and factor from old position to new position. It clears out accrued interest life-to-date on the old position as part of the roll process. 

To set up an exchange offer for a CDX roll:

  1. In Reference Data Center, in the left navigation pane, click Reference Desk > Corporate Actions > Announcements > Create Exchange Offers. 
    You see the Create Exchange Offers panel. 

  2. In the Lookup Security Information area, select the CDX swap contract you are rolling.
    You can select a credit index swap, or CDX swap contract, with a processing security type of SWCDCX, as the From security.

  3. In the Exchange Offer Type list, click Rate.

  4. In the Treatment of Interest Indicator list. click Transfer.

  5. Complete the remaining options in the Create Exchange Offers panel.
    You identify the CDX with the new version as the To security. 

  6. Click Submit.
    The corporate action has a transaction type of NONTAXMERGR, indicating that the exchange offer is based on a rate and is non taxable.

You can use the global Exchange Offer panel to process the corporate action announcement for the exchange offer.Â