I believe that S&P now "own" the CS index. No room for fudging index because it is based on second sales at arms length.
The problems that I see with new futures is a catch-22 and not what you describe. The catch-22 is that no one will trade them until there's liquidity and there won't be liquidity until everyone trades them. IMHO - 9/11 is not a good example because you don't base strategies around shock events. Yes, shock events will always happen but those are not what you are planning for in a futures trading strategy - insurance yes.
Those in the U.S. that have a large gain in a house should be short these futures. They will then be able to capture and retain the gains on their house.
You're missing my point. The example of 9/11 was not at all germane to my argument. Although of course hedging strategies revolve around shock events. Who the hell needs to hedge in a benign price environment. A record number of Index products traded last week. You don't think that the volume spike was related to increased volatility/exposure in the underlying? Futures markets MUST attract hedgers. If RE lenders, developers, portfolio managers who have REIT's, investors ect. don't see a fungible correlation of the contract to real life exposure, then there's no product. If retail guys merely want to bet on RE prices then I'm sure betonmarkets.com or someone of the like can list these indices.
You don't develop strategies around shock events. You use insurance for shock events and strategies for market moves - in both volatile and benign environments. Benign environments lend themselves to option writing and volatile to futures trading.
I agree. That's why I was a bit skeptical about how the index is calculated. The other problem I see is that you really need longer term 5 - 30 year contracts for this to make any sense. Betting on real estate prices on a month to month basis seems a bit arbitrary to me. In any event, the proof will be in the pudding as they say. So far, initial interest is zilch...
Guy, my point is, the contract specs SUCK! Have you seen the ridiculous nature of SPX and NDX SET prices. No one has a clue as to the value of these housing indices in the micro.
These are valid points but I feel that you are ONLY looking at the contract from the point of view of a trader. These contracts allow institutions to repackage the contracts into different products. For example, an insurance company could provide insurance against a fall in your house price. For a monthly premium you could lock in the appreciation of your house.
I'm sure a Goldman Sachs or ABN would structure those types of derivatives anyways. The CME is really not cutting any new or improved ground here. At the end of the day the CME is an Exchange where hedgers meet speculators in a forum of risk transference. Like I said earlier: exchanging price risk for basis risk is not an acceptable do.