Following the government rescue of US mortgage providers Fannie Mae and Freddie Mac, Markit has issued new versions of its CDX indices and the affected Markit RED codes, which include references to either of the providers.
The rescue is classified as a bankruptcy credit event under the International Swaps and Derivatives Association (ISDA) credit derivative definitions and this means indices that include either Fannie Mae or Freddie Mac as a constituent must be altered. As a result, new versions of all Markit CDX indices that include either Fannie Mae or Freddie Mac as a constituent were published with both entities removed. New Markit RED codes were also issued for the new versions of the Markit CDX indices, as well as for the Fannie Mae and Freddie Mac post-credit event entities, in order to reduce legal and operational risk in the credit derivative market.
