I’ve heard from my contacts at Euronext that the market makers for the Paris home price futures contracts are “on hold” for the moment. If you click to Paris home price futures quotes you can see that there are no quotes, no volume, no OI, and no changes in closes since before year-end.
Two of the (possibly several) challenges for the futures were: 1) that US citizens had a difficult time finding a way to trade, and 2) that some FCMs were waiting to see volume before allowing their customers to take positions.
I’m aware that the home price index provider (Compass) is considering an OTC alternative (most likely for European investors), and I’m looking to see if I can help on that effort. I’ll keep readers posted on their progress, as if they introduce a strong third party to clear trades, that will help address counterparty risk issues.
Meanwhile, I’m open to quoting OTC versions of the Paris contracts (in dollars instead of Euros) to US citizens^1 using the HPHF platform. (For example, each point would be worth $1, not 1 Euro, giving each "unit" a notional value of ~$11,000). As HPHF agreements, the results would be bounded (both to limit risk, and to be fully collateralized).
I’d like to focus on one expiration for the index to be released on Feb 11, 2022 as that will better concentrate inquiries, somewhat line-up with year-end predications (as the that index measures activity through Dec.29, 2021), and yet is short-enough to allow a wide band to cover a broad range of expected outcomes. In addition, I can see relative value performance trades (e.g. Paris v Case Shiller futures) as a trading strategy. For example, contract prices on CME New York contract for Feb '22 are above spot, while the mid-point of the Paris contract is below spot. I'd be open to other capital cities. (I'm open to figuring ways to square up different notional unit exposures.)
In addition (not shown), I'd be open to options on the Compass Paris index. Feel free to contact me for quotes/details.
The boundaries are likely to be +/-10% of a first trade, but I'd proposed 10,000-12,000 for any trade near 11,000.
Please feel free to contact me if you have any questions about this blog, have any trading ideas you'd like to explore, or just want to hear more about using home price index derivatives in hedging strategies.
Thanks, John
^1 That Is, I too, have to abide by KYC and AML rules, and sticking to US citizens makes that slightly easier, and I don’t want to overlap with Compass’s efforts.