Four of the world's largest banks are teaming up to launch the first US commercial property derivatives market. The lenders, including Credit Suisse, Goldman Sachs, Merrill Lynch and Bank of America, will work together with the National Council of Real Estate Investment Fiduciaries (NCREIF) to create a trading platform with the potential to grow to $26bn, newspaper The Financial Times has reported.

Four of the world's largest banks are teaming up to launch the first US commercial property derivatives market. The lenders, including Credit Suisse, Goldman Sachs, Merrill Lynch and Bank of America, will work together with the National Council of Real Estate Investment Fiduciaries (NCREIF) to create a trading platform with the potential to grow to $26bn, newspaper The Financial Times has reported.

The NCREIF will provide the data from its US property indices, and the banks will be provided with licenses to use it. The launch of the US derivatives market will follow the example of the UK platform, currently the only country in the world where a commercial property derivatives market has taken hold. There are currently 15 banks in the UK with licenses to use the data from the Investment Property Databank (IPD). Total trades in the UK Commercial Property Derivatives market grew to £4.68 bn (EUR 6.94 bn) by the end of 2006, according to the IPD Annual Index. The total volume for 2006 was £3.57 bn, a 300% increase over the previous two years. In Europe, Germany and France have done the first trades in the last three months.

The delay in launching a US market is partly due to the monopoly given by the NCREIF to Credit Suisse, which did not initially develop the market. The delay in establishing the market is also due to the difficulty to set up an index for a fast-growing market involving commodities that do not have a standardized price. In the UK, this problem has been successfully solved through the IPD, the standard benchmark that measures the size and growth of the commercial property sector.