Four new credit derivative ETFs issued by db x-trackers II have been tradable on the pan-European Xetra trading platform since Thursday to expand Deutsche Brses XTF segment. The ETFs issued by db x-trackers make the iTraxx benchmark indices tradable in the format of OGAW III Fonds.
Banks use credit derivatives to pass on the risk of default by their borrowers to third party collateral providers, for which the latter receive a premium. In return, the collateral providers undertake to pay compensation to the bank in the event of payment default by the borrower.
The db x-trackers II iTraxx Europe Subordinated Financials 5-year TRI ETF and the db x-trackers II iTraxx Europe Subordinated Financials 5-year Short TRI ETF are based on the iTraxx Europe Subordinated Financials 5-year Total Return Index. The management fee for these two exchange-traded funds is 0.21 percent.
Two other ETFs are db x-trackers II iTraxx Europe Senior Financials 5-year TRI ETF and the db x-trackers II iTraxx Europe Senior Financials 5-year Short TRI ETF based on the iTraxx Europe Senior Financials 5-year Total Return Index. The management fee of these two products is 0.18 percent.
Two short ETFs enable investors to develop the return for credit protection buyers whereas two long products measure the return for a credit protection seller of holding iTraxx Europe Financials credit derivative transactions with a tenor of five years.
The underlying indices comprise the subordinated and senior debt respectively from the 25 finance companies from the iTraxx Europe index.
L.D.