There are three main types of property derivative in use in the UK property market: Property Index Notes(PINs), Total Return Swap (TRS), and Forwards which incorporates the IPD Property Index Futures listed on Eurex. In the United States property derivative trading is primarily through forwards and future contracts. Forwards agreements are made generally on the RPX and NCREIF indices. Futures trading is done by the CME Group via Globex utilizing the S&P/Case-Shiller Home Price Indices. The PINs are essentially bonds. The cash flows of these bonds are structured in a way that is meant to be similar to a transaction in the physical property. This means that the PIN pays the capital return on redemption of the bond and it pays a quarterly coupon to investors. In this way, the seller of the PIN pays the IPD annual index capital growth at redemption and the income return, paid quarterly (IPD) or monthly (FTSE), to the counter party. This means that the counter party is, therefore, receiving the total return of the UK commercial property market, just as they would with a physical transaction in property. A property total return swap is simply an exchange of cash flows. Here, the total return on property, as measured by the change in the relevant IPD or FTSE UK Commercial Property Index, is exchanged for the return on cash. The UK IPD pricing mechanism was simplified on 15 January 2007. Rather than quoting libor +/- a spread, now it’s a fixed percentage. So take the Dec 2008 contract for example if it has a mid of -11.5%. This means that if you ‘buy’ the swap, you pay -11.5% (so receive 11.5% due to the -ve sign) to your counterparty and receive the performance of IPD. (Or pay it out if it’s a negative number.) No quarterly cashflows, simply one annual interest payment versus one annual property payment. A property forward contract is based upon the property returns in any annual period - the expected total return for example is agreed at trade, and on maturity the difference between the realized total return and the traded price is exchanged. Forward agreements are over the counter requiring a counter party to be found. Risk of default of either party must be considered in the trade   The CME Group has been trading in real estate futures since mid-2006. All trading is done electronically through the exchange who is the default counter party in all trades.