Liberal politicians (sucking up to the Hollywood lobby) have managed to destroy one promising financial innovation applied to the movie business.

Cantor Fitzgerald abandoning box-office futures despite regulatory approval.

CNBC: The End of the Box Office Futures Business

The Wrap

CFTC Takes Jurisdiction Over Prediction Markets.

First, a hearty congratulations to Robert Swagger and Trend Exchange. Along with the Cantor Exchange folks, they have run quite a gauntlet, and although there remains a tremendous obstacle in the form of the Lincoln amendment, I consider these exchanges to have already accomplished a great deal.

In its approval of Trend Exchange and preceding statements, the CFTC has confirmed a very broad definition of “-commodity”- that includes “-event”- contracts. The old debate about whether or not the CFTC has jurisdiction over “-prediction markets”- has been decided for now. Yet, there is considerable dissent within the Commission. Commissioners Chilton and Sommers have expressed disapproval that the Commission did not first address the general questions raised in the 2008 Concept Release. To this point, given the very broad definition of “-commodity,”- it now seems that Intrade and online sports exchanges could be in violation of the Commodity Exchange Act. The Commission does not consider an “-economic purpose test”- in the contract review process, and there is no statutory basis for such a test being used in jurisdictional determinations. Perhaps as a matter of practice, in accordance with the spirit of the Act, the Commission is considering such a test for jurisdicitional questions as I suggested in my Concept Release comments (surprisingly cited by the MPAA group). Otherwise, it seems inconsistent that exchange-traded sports bets, for example, would not also be considered commodities and be subject to the Act.

As a whole, the Commission has apparently decided to defer such questions and focus on specific techniques for ensuring that the new contracts fulfill the Act from the standpoints of manipulation and fair trading. To these ends, the CFTC will require, “-entities and individuals who control a film’s marketing budget, release date or opening screen number to provide the Exchange with information regarding such decisions whenever that entity or individual holds a position of 1,000 or more contracts.”- Additionally, the Commission will require a “-firewall”- within studios and distributors, and has restricted certain employees from trading altogether. These are procedures that I had recommended for event contracts, but they are relatively novel mechanisms in the commodities world. Whether or not the CFTC would agree to support special trading restrictions was the pivotal question in whether the contracts would be approved. I applaud the principled, politically independent thinking of the Commission and the can-do attitude of the Market Oversight Division —- though some headline risk has been assumed here if something should eventually fall through the cracks.

CFTC: 3-2 in favor of approval of movie contracts -SO FAR.

What was said at the CFTC hearing on movie futures.

Hollywood Reporter.

Business Week. More.

CFTC.

Hollywood clashed with Wall Street on Wednesday at a government hearing about the potential sale of futures contracts linked to box office receipts of major motion pictures.

“-financial engineering synthetic derivatives”-

More.

The CFTC plans to hold a public hearing next week to examine the growing controversy surrounding a plan by two firms to offer futures contracts tied to box-office receipts.

The CFTC plans to hold a public hearing next week to examine the growing controversy surrounding a plan by two firms to offer futures contracts tied to box-office receipts.

Felix Salmons hastily written NYT Op-Ed about the Cantor Exchange and MDEX

You will learn nothing.

Watch the US House video instead. You will have more facts and more arguments.

UPDATE: Mike Giberson has a remark on Felix’-s piece.

Every investment in film is gambling.

A Case for Movie Futures –- by Buzz Potamkin, former studio executive and producer, in the biz for 40+ years, now a consultant

Max Keiser: Cantor Exchange and Media Derivatives Exchange would be an insiders/traderss paradise.

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Max Keiser –- 12:00 into (17,000 views already):

I disagree with Max that a prediction market quote can change perceptions that much.

What the Cantor Exchange (HSX) and the Media Derivatives Exchange (MDEX) really said to the US Congress about movie futures (a.k.a. box-office derivatives) – [VIDEO]

House Committee Agriculture @ US House Of Representatives:

Download this post to watch the video if your feed reader does not show it to you.

–-> Prof Schuyler Moore mentions InTrade 1:35 into.

Via Paul Bleier on FaceBook.

Previously.

Cantor Exchange and Trend Exchange defend the usefulness of movie hedging.

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Lions Gate vice chairman Michael Burns said the marketswould allow a diverse group of motion picture industry participants, including studios, film distributors, theater owners, investors and other financial intermediaries within the motion picture industry to manage their risk and exposure to new film releases.”-

“We believe a market in domestic box office receipts would substantially widen the number and breadth of financing sources available to the motion picture industry by lowering the risk inherent in such financing,” Burns wrote.

Robin Hanson is in favor of movie business futures.

ADDENDUM:

- “-Geithner also rejected the ban on creating a movie futures market, saying you don’-t want ‘-Washington bureaucrats’- stifling innovation.”-

- Jason Ruspini sends us the link of the Senate bill.