Radar Logic has licensed its real estate data to three Wall Street firms that will allow investors to bet on which way residential real estate markets are headed.
Manhattan-based startup Radar Logic has licensed its real estate data to three Wall Street firms that will allow investors to bet on which way residential real estate markets are headed.
Lehman Brothers Holdings Inc., Merrill Lynch & Co. Inc. and Morgan Stanley are Radar Logic’s first real estate index customers, according to Crain's New York Business.
They plan to begin offering derivatives based on Radar Logic’s data in September, says Radar Logic Chief Executive Officer Michael Michael Feder.
Other Wall Street broker-dealers are expected to sign up shortly, allowing for the creation of uniform derivatives that can be traded among clients of different firms.
The derivatives initially will likely take the form of over-the-counter traded futures contracts and swaps.
The swaps would allow an investor to trade floating-rate interest payments, for example, to another investor in exchange for cash payments based on a real estate indices of home prices in 25 metropolitan areas.
Contracts will likely cover extended periods lasting up to seven years. While Radar Logic’s indices are not the first on the market -- the S&P/Case Shiller Home Price Indices are used to create a futures contract tradable on the Chicago Mercantile Exchange -- Radar Logic’s data gets updated every day, as opposed to monthly with Case Shiller, according to Mr. Feder.
Home sale prices are reflected in the index 63 days after sales are closed.
While the derivatives are designed for institutional investors, the broker-dealers are expected to eventually create ways for retail investors to play the real estate market.
