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Banks push into property derivatives market

So far 2007 has been an eventful period in the world of property derivatives as a second wave of banks push to enter the ever-growing market.

The Investment Property Databank (IPD) reports volume increases of £2.9 billion ($5.75 billion) in the first quarter of 2007 – impressive growth since a total of £4.675 billion-worth of trades were done in the whole of 2006. Since the first issue of Liquid Real Estate appeared three bulge-bracket banks have opened totally new property derivatives desks or hired influential players to push their market position forward.

BNP Paribas has confirmed the opening of a property derivatives desk, a move that coincides with the high-profile hire of Andrew Jeyarajah from Tullett Prebon, which had linked up with DTZ to broker property derivative transactions. Jeyarajah will be head of property derivatives structuring on the new desk.

Jeyarajah says: "This bank has been involved in property derivatives for nine months already, but now I think there is a bigger appetite in the market. In the last 18 months or so people have started to move from being educated to actually doing transactions."

Bank of America has also noticed the gradual maturity of the market as it finalizes plans to open a property derivatives desk in London.

The third bank to enter the drive in property derivatives is Morgan Stanley, which finalized the hire of Guy Ratcliffe at the end of April.

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