What, no index? What happens

Last week's release of Case Shiller indices produced an example of a "no index" moment. Specifically those doing deeper analysis may have noticed that there was no Detroit (DET) index published.

According to S&P,  " due to deed availability delays at the local recording office caused by the COVID-19 crisis, sale transaction records for March 2020 for Wayne County, MI have not been accounted for. Since Wayne is the most populous county in the Detroit metro area, S&P Dow Jones Indices and CoreLogic are unable to generate a valid March 2020 update of the Detroit S&P CoreLogic Case-Shiller indices for the May release.

When the sale transaction data flow resumes for Wayne County, S&P Dow Jones Indices and CoreLogic will provide estimated Detroit index values for months with missing updates."

This is the second time in the 14 years of following Case Shiller index updates that I'm aware of a "no index" event. (The second was during the Financial Crises when there were too few Charlotte data points to merit release of a CLT index).

While the data can be made up later, the key issue for users of CME Case Shiller futures, and HPHF OTC index agreements, is how do you settle a trade if there's a "no index" event in settlement month.

My working understanding for both platforms, is that an open exposure would settle on the most recent index value. That is, there would be no delay to wait and see what next month's numbers will be, or to apply numbers that might be generated in the future for the expiration month. The contracts/agreements settle on the index value available at expiration. Had there been a DET expiration in May, the index released in April would have applied.

As such, had there been an intercity spread expiring (e.g. Long DET/Short the HCI 10-city contract) each side would have settled on the number available -in this case one released in April and the other in May.

Treat as a head's up, and fell free to contact me if you have any related questions.