Real estate futures coming to CBOE Futures Exchange

CHICAGO, April 19, 2011 /PRNewswire/ -- CBOE Futures Exchange, LLC (CFE) today announced plans to begin offering futures contracts on several Radar Logic 28-Day Real Estate indexes (RPX) — daily spot market equivalents for housing asset valuations covering major U.S. metropolitan centers — pending regulatory approval.

CFE has completed a licensing agreement with Radar Logic Incorporated, a real estate data and analytics company that calculates RPX indexes on U.S. metropolitan centers, geographical regions and the broader U.S. housing market.

CFE's licensing agreement would make way for CFE to offer futures contracts on a number of Radar Logic 28-Day Real Estate indexes, including, but not limited to, those measuring real estate transactions in:

  • The U.S. as a whole - The 25-MSA Composite (includes metropolitan statistical areas — MSAs — for Atlanta, Boston, Charlotte, Chicago, Cleveland, Columbus, Denver, Detroit, Jacksonville , Las Vegas, Los Angeles, Miami, Minneapolis, Milwaukee, New York, Philadelphia, Phoenix, Sacramento, San Diego, San Francisco, San Jose, Seattle, St. Louis, Tampa and Washington DC).
  • Four geographical regions - Midwest, Northeast, West and South
  • Eight metropolitan centers - Chicago, New York, Los Angeles, Las Vegas, Miami, San Francisco, Seattle and Phoenix

Unlike other major housing price indicators, RPX index values are published daily (versus monthly or quarterly) and include all types of home-sale closings — single- and multiple-family homes, new-home sales, existing home sales, and homes that do not conform to federal loan limits.

Historical data on the RPX indexes spans from January 2000 to the present.

"Residential housing, which is among the largest asset classes in our economy, represents an exciting, new dimension for CFE," CBOE Futures Exchange Managing Director Andrew Lowenthal said. "We are pleased to partner with Radar Logic to offer futures on its RPX indexes, which will provide investors with a way to manage real estate values with the advantages of exchange trading, such as transparency and guaranteed clearing."

"The introduction of RPX Index futures will mark an exciting milestone for the real estate industry, with exchange trading in residential property contracts offering a major boost to the investment and risk management capabilities of investors, lenders and real estate enterprises," said Michael Feder, President, Radar Logic. "Financial tools that were previously traded over the counter can now begin trading in a regulated, efficient, and central location, which improves price discovery in the real estate space, and CBOE Futures Exchange is the perfect strategic partner for this initiative."

Users and possible applications of RPX index futures include:

  • Mortgage lenders: Seeking protection against diminishing loan-to-value ratios in existing and new lending portfolios
  • Fixed-income investors: Seeking to replicate real estate returns by combined use of RPX futures and credit instruments
  • Developers: Seeking to hedge against either rising values of real estate they plan to own or declining real estate values for owned developments under construction
  • Insurers: Seeking to create a type of "home equity insurance" by protecting lenders from unwanted real estate exposure due to mortgage defaults and property casualty insurers from replacement cost inflation.

For more information on RPX futures, see http://cfe.cboe.com/.

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