CBOT Launches RE-Based Stock Futures

The Chicago Board of Trade is launching a stock index futures contract in the first quarter based on the Dow Jones U.S. Real Estate Index.The contract, which will allow commercial real estate investors to take a view on the market and manage their exposures, will settle to the value of the Dow Jones U.S. Real Estate Index, which is composed primarily of real estate investment trusts. The CBOT said it believes that REIT securities reflect the underlying U.S. commercial real estate market because market fundamentals are all reflected in REIT share prices. "Commercial real estate remains one of the largest classes of tradable assets not currently served by an exchange-traded futures instrument," said Robert D. Ray, senior vice president of business development at the CBOT. "We developed this contract after researching the U.S. commercial real estate market and conducting various conversations with real estate portfolio managers and pension funds who seek new avenues for managing the risks associated with property ownership. Moreover, since the underlying instrument is an equity index, it also provides investors with an efficient means to express their views on movements in the real estate market, with the added advantages of transparency, leverage, liquidity and the ability to more efficiently short the market." The CBOT can be found online at http://www.cbot.com.