-- Cyprus is the best-liquid amongst the 18 European names

-- Greece likely to be re-admitted at next September roll when a "new" CDS emerges

-- Sovereign CDS index equally weighted, Cyprus will cause widening

-- No plans as of now to change index weighting, Markit says.

LONDON -- The new index for European sovereign credit default swaps, the Markit SovX Western Europe Index, will start to trade on 20 March with the inclusion of Cyprus instead of Greece, Markit's head of European Indices Tobias Sproehnle said Thursday.

Markit provides price information on the global credit default swaps market. It also constructs widely used indexes on sovereign and corporate CDS, such as the SovX Western Europe, which investors use to buy and sell protection against default on the debt of a basket of 15 European countries.

As Greece's CDS were triggered as a result of its debt restructuring, trading in its CDS halted and it was removed from the index. Tuesday 20 March is the date of the next "roll" of the index, where its constituents get checked for liquidity, and confirmed or removed from the index accordingly.

Markit decided last Tuesday 13 March that the CDS of Cyprus will be included in the index instead of Greece, Sproehnle said. "Cyprus is quite illiquid, but it was the best-liquid amongst the eligible names according to DTCC volume figures " he said. "We have to respect the index rules so we added Cyprus in the index," he added.

However, Sproehnle said the inclusion of Cyprus is likely to be temporary, as it is foreseeable a "new" Greek CDS will start trading and be more liquid than Cyprus by the time of the next roll, on 20 September.

The CDS on the Republic of Cyprus are very wide, trading between 1100 and 1200 basis points as a result of the country's many economic links with Greece. Its inclusion in the index will likely cause a widening of the SovX Western Europe index.

The SovX Western Europe is an equally weighted index, meaning that every country has the same weight regardless of the size of that country's volume of CDS actually traded.

This is why, when Greece was removed this week, the index switched from trading in the area of 350 basis points to the 225 basis point area.

-By Serena Ruffoni, Dow Jones Newswires, +44 (0) 207 842 9349; serena.ruffoni@dowjones.com