Market Transparency can be broken into two categories.
- pre-trade transparency – refers to information about the prices at which trades can be executed i.e. the bid and offer prices and sizes (also known as volumes) in which market participants are willing to trade. Pre-trade prices can be indicative or firm.
- post-trade transparency – refers to information about the prices and volumes of trades that have already taken place.
The amount of pre-trade and post-trade transparency available to market participants can vary significantly from market to market, both in terms of:
- the kind of information is available – there tends to be greater transparency in retail markets than in wholesale markets. Additionally, some markets such as equity markets tend to have much greater levels of both pre- and post-trade transparency than other markets such as bond markets and over the counter (“OTC”) derivative markets.
- how frequently it is made available – information can be made available on a real-time basis (i.e. it updates as dealing interest changes) or it can be made available on a delayed basis (i.e. some time after the trade has been executed).
Source: International Capital Market Association (ICMA)
The definitions above come directly from the bond market.
So what does this have to do with you and commercial real estate?
You need to start paying attention to this basic structure that’s why.
It’s the basis of what will define the commercial real estate market.
I’m not talking about the financing side. I’m talking about Market Data.
I have already written that Commercial Real Estate Data As A Hedgable Commodity will happen.
The reason that is important is because of the marketplace and…….
The Willingness To Trade.
The data will create a marketplace for traders who see not only potential and confidence in commercial real estate data but actual profit in trading.
The marketplace for trading develops further because of………..the actual assets of commercial real estate.
Commercial real estate is its own asset class just like stocks and bonds are an asset class.
Commercial real estate is a sustainable asset class.
And guess what that is?
BRICKS and MORTAR.
Are you tearing up?
Wait a minute!
The bricks and mortar commercial real estate assets may actually become more valuable because of the tradable data?
I’m not going to go to deep on that one. Somebody from Wharton or somewhere jump on that one for me.
Why This Matters.
For starters we break away from the Draconian (I Googled it) vendor relations that exist today and their nihilistic (that one too) attitudes towards you (us me) and the rest of the world of commercial real estate.
It will standardize the marketplace.
NO ONE ENTITY ( insert the name of the company that holds it now here________) CONTROLS THE MARKET DATA OR DEFINES THE PERCEIVED STANDARD.
Does the marketplace data become regulated?
Would you really want it without some form of governance?
NOW DO NOT jump on the left or right side of this.
I know you may want to but, I don’t care about your politics. I said I don’t care.
You are sitting there and four different voices fight for your attention to give out flight details. You look down at your phone and scan the schedule for your alma maters next game. Checking the line for boarding you notice they have called for the prefered boarding. You grab your bag and stand up. Waiting in line you hit the screen with your finger and it changes to the commercial real estate market index. You have it set for your local market. The numbers are looking pretty good today. Steady trending and nothing that you did not expect. It’s going to be a nice quiet trip. A few days away and may be a little work. You walk towards the boarding line and switch your phone to the airline ticket app for scanning. Walking down the ramp you flip back to the commercial real estate market index dashboard on your phone and lean down to push your carry on handle down. Lifting your bag into the empty space above your first class seat you settle in for your flight. A last-minute check of a few emails a quick response to the wife and one to your son.
You fasten your seatbelt settle in and think.You think back to a time not so far back and you remember when the commercial real estate market that did exist now seems ridiculous and embarrassing. You remember how it used to be. How did we ever conduct business without market transparency? Was it fair for everyone? How did we let it happen for so long?
You reach for your phone. The commercial index dashboard stares you right in the face just like all the other market indexes. Free Transparent.
Market Transparency. The Willingness To Trade. Why This Matters.