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February 2007

Trading to begin on new commercial real estate futures contract

By Gabby Warshawer

Starting next week, the Chicago Board of Trade will begin trading a real estate futures contract. CBOT joins the Chicago Mercantile Exchange as the only other exchange in the country that trades commercial real estate futures contracts.

The Chicago Merc began trading commercial contracts last month. In May 2006, the exchange introduced futures contracts for the residential real estate market.

The contracts are intended to help developers mitigate risks through derivatives, and they allow investors to gain exposure to the $5.3 trillion U.S. commercial real estate market.

CBOT's futures contract begins trading on Feb. 21. It is based on the Dow Jones U.S. Real Estate Index, which is comprised largely of REITs.

One New York brokerage, Domain Properties, has started a new division -- Domain Futures LLC -- that caters to investors interested in putting money into the real estate futures market.