Payday loans and derivative market blossoms
Today, the United Kingdom is by far most advanced in trading property derivatives. In the late 1990s, a group of fund managers formed the Property Derivatives Users’ Association, now part of the Investment Property Forum (IPF). This lobbyist group helped persuade the UK’s Financial Services Authority (FSA) that there could be sufficient liquidity in a property derivatives market. New regulations in November 2002 meant that insurance companies could treat property derivatives as admissible assets. Before, they were subject to different tax rules from other derivatives, resulting in concern that any losses might not be tax deductible.
Besides tax accounting restrictions, stamp duty has been lifted, provided that no rights in the land exists. These changes in regulation and taxation boosted activity in the UK property derivative market. However, these were unfortunately by far not the only hurdles for the property derivatives market.
A survey of institutions, investment managers, property companies and investment banks undertaken by Hermes in May 2006 was targeted to find out the most significant hurdles to trading property derivatives.
