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OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF REALTORS®

Daily Real Estate News  |  March 20, 2006  |   CBOE Futures Exchange Index Based on NAR's EHS Data The CBOE Futures Exchange (CFE) announced Friday that it plans to launch futures contracts based upon median prices in the NATIONAL ASSOCIATION OF REALTORSŪ' existing-home sales data. Through a licensing agreement with NAR, CFE has created five new futures contracts designed to track the median price of existing-home sales nationally and in four distinct regions within the United States. CFE plans to launch the new contracts in the second quarter of 2006, pending regulatory approval. “With the U.S. housing market valued at nearly $20 trillion, real estate is not only the hottest topic of conversation, it is an asset class unto itself that is arguably one of the most important segments of the U.S. economy,” said CBOE Chairman and CEO William J. Brodsky. “CBOE gave careful consideration to the development of this contract to ensure that it had practical application for hedging as well as speculating, offering a chance to participate in the real estate market to a wide range of investors — whether your outlook is regional or national, bullish, or bearish.” “The launch of the NATIONAL ASSOCIATION OF REALTORSŪ Existing-Home Sales Median Price futures contracts marks an important milestone in the evolution of housing as an investment. Now investors, including home owners, real estate professionals, and companies in the real estate business, have a new way to participate in the housing market. In partnership with the CBOE, NAR is proud to be playing a central role in the creation of this new marketplace,” says Thomas M. Stevens, NAR president. “CBOE’s selection of NAR’s Existing Home Sales Series testifies to the quality of our data and the significant role the series plays tracking critical trends in the housing markets. Investors in the new futures contracts can be confident that the monthly series will report what is actually happening in the marketplace as accurately as possible,” says David Lereah, NAR senior vice president and chief economist. NAR's existing-home sales survey is a widely recognized median home sales indicator, and is broadly followed in the media. The NAR existing-home sales median price indicators are based on a large representative sample by local REALTORŪ associations, boards, and multiple listing services (MLS) across the nation that captures 40 percent of all existing-home closing transactions in its monthly data series. CFE has created five NATIONAL ASSOCIATION OF REALTORSŪ Existing-Home Sales Median Price futures contracts that track the median sales prices in the United States overall, and four regions in the country: Northeast, South, Midwest, and West. These contracts will settle monthly. An additional 10 contracts based on various metropolitan area markets also will be launched. Those contracts will settle quarterly. Futures quotes will be based on 1/1000th the respective NAR Regional Existing-Home Sales Median Price levels. For example, as of January 2006, the national median sales price was $211,000, so the futures index level for this contract would be 211.00. The new contracts will be traded electronically, via CBOEdirect, and will be cleared through the triple-A rated Options Clearing Corporation. At expiration, the futures contracts will be cash-settled, meaning settlement will result in the delivery of a cash amount based on the final settlement price, determined by the surveys conducted by the NAR. In general, there will be at least two near-term months and two months in the February quarterly cycle for the Regional NAR Existing-Home Sales Median Price futures and two months in the February quarterly cycle for the Metro Area NAR Existing-Home Sales Median Price futures. Price quotations will be in minimum ticks equivalent to $50.00 per contract. Trading hours will be 8:30 a.m. to 3:15 p.m. Central Time. For more details and contract specifications, go to CBOE's Web site. — NAR

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