Standard & Poor’s has licenced Bear Stearns to trade over-the counter (OTC) contracts based on the S&P/Case-Shiller Home Price Indices the industry’s most widely followed measure of US residential home prices.
The licencing agreement with Bear Stearns is part of an initiative by Standard & Poor’s to help facilitate the development of an over-the-counter market for derivatives based on the Indices, and is in line with the recent announcement of Standard & Poor’s acquiring exclusive rights to the S&P/Case-Shiller Home Price Indices.
“The S&P/Case-Shiller Indices were created specifically for settlement of financial contracts. This licensing agreement is a first step towards working with more dealers to create an OTC market for trading on these Indices,” says Robert Shakotko, managing director, Standard & Poor’s Index Services.
The S&P/Case-Shiller Home Price Indices, launched in 2006, are constructed to accurately track the price path of typical single-family homes located in 20 metropolitan regions across the US using the repeat sales pricing technique developed by Karl Case and Robert Shiller. The index family consists of 20 regional indices and two composite indices as aggregates of the regions.
Additionally, the S&P/Case-Shiller US National Home Price Index represents home prices from all 9 US Census Divisions, drawing from over 100 of the largest metropolitan areas and nearly 500 counties.
Over 70% of the nation’s housing stock value is reflected in the US National Index. Standard & Poor’s also publishes indices designed to track changes in the average price of low-, mid- and high price U.S. homes.