MSNBC- More than $250m of derivatives contracts based on Radar Logic’s residential property index (RPX) had traded since its launch in September, the research group said.
Property derivatives allow investors to take a view on the health and direction of the US housing sector without having to buy property directly or invest in housing-related stockssuch as homebuilders or mortgage lenders.
As the shake-out in the US housing sector continues, hedge funds, investment banks and property groups have looked to the RPX to hedge their exposure to specific geographic areas.
“A lot of people who used the ABX market to take a view on the housing market are now also looking at RPX as a way of taking a macro view on housing that is independent of the credit risk of the mortgage market,” said Andrew Samawi, head of residential property derivatives at Icap.
The RPX is based on prices per square foot of residential real estate in 25 US metropolitan areas, along with a composite national index, and contracts of up to five-year maturities are common.
Six active dealers, including Morgan Stanley, Deutsche Bank and Merrill Lynch, provide liquidity to the over-the-counter market.
