BGC launches property derivatives joint venture

Inter-dealer broker BGC has launched a property derivatives joint venture with Cushman & Wakefield, a US-based real estate group. The venture, called Cushman & Wakefield BGC, will provide strategic solutions and execution services across the European property derivatives market.

The JV follows a string of other initiatives from rival brokers over the past 12 months. Last June, GFI announced it was teaming up with real estate services group CB Richard Ellis to develop a property derivatives trading desk. Icap, Tullett Prebon and Tradition Financial Services followed suit and launched their own desks last year.

Phil Nicklin, a real estate tax partner at Deloitte, said: “Quite a few major brokers are already well established in this market. There is no such thing as missing the boat, but BGC are starting well behind the others.”

However, Mark Harris, manager, property derivatives at BGC, denied that the broker was late to the market. “If anything, our timing for this is very early. We expect more end users in the future, with not just 11 banks using the Investment Property Databank (IPD) but more than 30. We know that there are other banks getting ready to trade.”

Cushman & Wakefield BGC will offer services to banks and hedge funds, with the aim of boosting liquidity in the market by offering vanilla derivatives priced against indexes such as the IPD.

Earlier this year, Standard & Poor's announced plans to offer housing indexes, which will provide the basis for the Chicago Mercantile Exchange's (CME) new breed of property derivatives (see: Housing Indexes due from S&P, Risk April 2006).