International derivatives exchange Eurex plans to launch Europe’s first property futures on 9 February 2009.
International derivatives exchange Eurex plans to launch Europe’s first property futures on 9 February 2009.
The launch of the futures, annual contracts based on the total returns of Investment Property Databank’s IPD UK Annual All Property Index for individual calendar years, follows the signing of a license agreement between Eurex and IPD in October.
Peter Reitz, member of the Eurex executive board, says: ‘Contracts on real estate mark the addition of an exciting new asset class to our existing product suite. Especially in the current market conditions, exchange listed, centrally cleared real estate futures bring added value to the market.
‘Risk management is a key issue and futures are an excellent risk management tool enabling hedging and bringing additional liquidity. They will allow open ended property fund managers greater flexibility with cash flow management and redemptions, unavailable in other property investment instruments.’
In addition, Reitz says, the central counterparty clearing of Eurex Clearing will mitigate counterparty risk effectively.
Eurex aims to work with major participants of the property derivatives market.
With a notional contract size of GDP50,000 and daily valuation, Eurex intends to encourage additional market participants into property derivatives and help increase liquidity and transparency into this growing derivatives asset class.
Additional futures based on Investment Property Databank’s IPD property indexes, such as UK sector indexes (offices, retail, industrial) and other European indexes (initially France and Germany), are also intended for launch later in 2009.
