US commercial property derivatives to launch in next two months

The first US commercial property derivatives will launch by May this year, following the National Council of Real Estate Investment Fiduciaries' (NCREIF) licensing of four investment banks to use NPI, its US property index.

Credit Suisse, Goldman Sachs, Merrill Lynch and Bank of America were all licensed to trade financial derivatives for three years, on NCREIF’s quarterly index on 5,333 US-based commercial properties.

Credit Suisse, Goldman Sachs and Merrill Lynch all said they expected to launch derivatives by May this year. Merrill Lynch also said it was ready to start trading immediately, with the advantage of a dedicated desk in its New York office.

Credit Suisse also has a dedicated desk that traded the first ever property derivatives in February 2006. The bank was granted an exclusive licence by NCREIF in 2005, but executed only a few trades. In September last year, the bank waived that exclusive licence to encourage the liquidity that would come from more participants.

Goldman Sachs will bring out its residential property derivatives (see: Goldman readies itself for property derivatives push) in the very near future, prior to bringing out its commercial property derivatives.

Bank of America refused to comment.