REAL ESTATE - Independent pricing provider Tullet Prebon and e-trading firm Propex are teaming up to deliver the first real estate derivatives trading platform.
Under the partnership agreement, Propex, the main data exchange for real estate-holding UK pension funds, will stream property derivatives pricing via its website.
In the first phase, said Propex spokesman Paul Marples, “It won’t process the deal – but everything short of the deal.” Eventually, the platform will handle settlement as well.
The joint venture is an indication of optimism about real estate derivatives, which allow investors to hedge without having to sell or buy property directly.
“Property derivatives are a natural add-on to bricks and mortar,” said Marples. “The fledgling derivatives market has reached critical mass. If it follows other derivatives markets, it looks as if it will become significant. It’s as far advanced as we expected, with considerable intellectual property built around it.”
During the pilot Propex will make pricing information freely available on its website. “Hopefully the data will become more valuable and the spreads will become smaller,” said Marples. “Eventually, we’ll handle transactions as well. That’s when you really start to make some money – when you become a true transaction platform.”