The international derivatives exchange Eurex today announced that it has reached a license agreement with IPD (Investment Property Databank) and intends to launch futures on the total returns of Investment Property Databank (IPD) Property Indices. The new offering will be launched in the first quarter of 2009. The introduction represents for the first time that returns on European commercial property, one of the world’s largest asset classes, will be available at an exchange.
Peter Reitz, member of the Eurex Executive Board, said, “I am very pleased that we will be the first European exchange to offer property derivatives to our customers. The scope and coverage of IPD indices, their consistency and transparency make them the ideal provider of independent and comparable data on which to build exchange listed property derivatives. Our offering will foster the property markets by adding liquidity, transparent pricing and effective risk management tools. Through our central clearing we eliminate counterparty risks.”
Ian Cullen, IPD’s co-founding Director, commented, “Since the growth in the use of OTC property derivatives began in 2004, IPD’s central aim has been to support all market participants to the best of our abilities. We have become convinced over the past months that this exciting new market is now ready for the boost that can be provided by the introduction of standardized, homogeneous on-exchange products and services, and that Eurex will be a sympathetic partner in facilitating the next logical stage in the development of this new market.”
Nick Scarles, Chairman of the Property Derivatives Interest Group (PDIG) and Group Finance Director, Grosvenor Group, said, “This is a crucial milestone in the evolution of the property derivatives market. An active property derivatives futures market provides a forum for liquidity and transparent pricing, and all using standardized contracts. This will facilitate the more efficient management of counterparty credit risk, with credit support being provided under an exchange's rules, and with more effective netting of credit exposures. Market participants will be able to increase their property derivatives trading activity, while maintaining counterparty credit risk at acceptable levels.”
