http://www.cantorexchange.com/ — A twin site of the Hollywood Stock Exchange.

Here are my early thoughts about the “Cantor Exchange”. I regret to say that their “Cantor Exchange” website does not seem very usable. (I hope it is not a bad omen.) It is impossible for me to copy their explanations posted on their webpages (other than the 2 press releases) and to republish that material in this post.

The second thought that comes to my mind is that their offerings are not standardized (their event derivatives are described in HSX lingo), and I wonder whether the real-money traders, who are accustomed to dealing with the CME, the NYSE, or InTrade, but who are not familiar with HSX, will make the effort to adapt. We will see. (I don’t think that the HSX play-money traders will go speculating on this real-money prediction exchange.) The collateral question is, why would the Cantor Exchange (a brand-new exchange with not a single trader, as of today) be better positioned to organize event derivative markets on movie business than, say, HedgeStreet, InTrade, BetFair, or even the CME? Obviously, Cantor Fitzgerald (a bond broker) are thinking that they can leverage their Wall Street clientèle and the HSX population to branch out and start up a brand-new, CFTC-regulated, real-money prediction exchange. It’s quite a big bet. I say “branch out” because starting off a real-money prediction exchange (Cantor Exchange) is quite different than running a play-money prediction exchange (HSX). Just look at how difficult it has been for HedgeStreet, which started off in 2004, and escaped bankruptcy in 2007 thanks to their rescue by IG Index. After 4 years, HedgeStreet is still not profitable, and it will probably take more years before it turns the first profit. Let’s wish a better future for Cantor Exchange.

I will update this present post, later on, linking to the reactions from the media and the blogs. (Cantor will be holding a conf call this Tuesday, so some media coverage will pop up over the next days.)

Here is a Financial Times news article, which won’t tell you much more than the 2 press releases re-published below.

Here’s Variety.

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Press releases:

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CANTOR ENTERTAINMENT TO ANNOUNCE MOVIE BOX OFFICE CONTRACTS

TO MOTION PICTURE INDUSTRY AND INVESTOR COMMUNITY

Cantor Fitzgerald Files Application for Domestic Box Office Receipt Contracts

Los Angeles, CA; New York, NY – (December 8, 2008) – Cantor Entertainment, which provides various services to the entertainment industry and owns the Hollywood Stock Exchange, is pleased to announce that Domestic Box Office Receipt contracts will soon be available to the motion picture industry and investor community. Cantor Fitzgerald, its parent company, announced earlier today that it has filed an application to launch the Cantor Exchange, whose first listed product will be Domestic Box Office Receipt contracts.

Domestic Box Office Receipt contracts will offer film finance professionals and traders a new opportunity to hedge and speculate on the theatrical performance of wide-release Hollywood movies. Domestic Box Office Receipt contracts will be a next generation film-financing tool that allows market participants to hedge risk and provides them profit opportunities based on the first four weeks of a film’s box office revenues.

“It’s clear from our conversations within the industry and investment community that there is a tremendous opportunity to introduce this exciting new tool to complement existing film financing alternatives. The market for Domestic Box Office Receipt contracts offers the motion picture industry, investment funds, banks and all other prospective investors a federally regulated trading exchange dedicated to the entertainment industry,” said Andrew L. Wing, President and Chief Executive Officer of Cantor Entertainment. “Our involvement in Domestic Box Office Receipt contracts reflects our continuing commitment to expand Cantor Entertainment’s numerous services in the entertainment industry.” The first Domestic Box Office Receipt contract is expected to be listed on the Cantor Exchange in the first quarter of 2009. Cantor Exchange is subject to final approval by the Commodity Futures Trading Commission (“CFTC”).

About Cantor Entertainment
Cantor Entertainment, a division of Cantor Fitzgerald, L.P., provides services to the entertainment industry. Cantor Entertainment also owns the Hollywood Stock Exchange (www.HSX.com), the world’s leading virtual entertainment stock market.

About Cantor Fitzgerald, L.P.
Cantor Fitzgerald is a leading global financial services firm. The Cantor Fitzgerald franchise includes institutional equity and debt sales and trading, investment banking, private equity, as well as other businesses and ventures. For over 60 years, Cantor Fitzgerald, a proven and resilient leader, has been committed to delivering a unique brand of unparalleled product expertise, innovative technology and customer service to its clients around the world. For more information, please visit www.cantor.com.

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Cantor Fitzgerald Announces Application for Cantor Exchange

Domestic Box Office Receipt Contracts are Expected to be First Contract Market

A New Tool in Film Finance

NEW YORK–(BUSINESS WIRE)– Cantor Fitzgerald, L.P., a leading global financial services firm, announced today that it has filed an application with the Commodity Futures Trading Commission (“CFTC”) to launch the Cantor Exchange. Cantor Exchange intends to list Domestic Box Office Receipt contracts as the exchange’s first traded product.

“The Cantor Exchange and our intention to list Domestic Box Office Receipt contracts reflect our continuing commitment to innovation in the finance and entertainment sectors,” said Howard W. Lutnick, Chairman and Chief Executive Officer of Cantor Fitzgerald.

Subject to final regulatory approval of the Cantor Exchange application, Domestic Box Office Receipt contracts will offer film finance professionals and traders a new opportunity to hedge and speculate on the theatrical performance (ticket sales) of major film titles. Domestic Box Office Receipt contracts will be a next generation financial management tool that allows film professionals to hedge risk and provides speculative opportunities to other market participants based on the first four weeks of a film’s box office performance.

The first Domestic Box Office Receipt contract is expected to be listed on the Cantor Exchange in the first quarter of 2009, subject to final approval of the Cantor Exchange application by the CFTC.

About Cantor Exchange

Cantor Exchange is launching the first trading platform based on movie box office revenue, and expects to begin listing Domestic Box Office Receipt contracts in the first quarter of 2009, subject to final regulatory approval. Cantor Exchange is a division of Cantor Fitzgerald, L.P., one of the world’s leading financial services firms, and is partnered with Cantor Entertainment, another subsidiary of Cantor Fitzgerald, which provides services to the entertainment industry and owns the Hollywood Stock Exchange® (www.HSX.com), the world’s leading virtual entertainment stock market.

About Cantor Fitzgerald, L.P.

Cantor Fitzgerald is a leading global financial services firm. The Cantor Fitzgerald franchise includes institutional equity and debt sales and trading, investment banking, private equity, as well as other businesses and ventures. For over 60 years, Cantor Fitzgerald, a proven and resilient leader, has been committed to delivering a unique brand of unparalleled product expertise, innovative technology and customer service to its clients around the world. For more information, please visit www.cantor.com.

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UPDATES WILL BE POSTED BELOW, LATER TODAY (AND DURING THE NEXT DAYS)…

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[T]he initiative is not for an application for a product extension of HSX. Rather it is an application for the launching of a new futures market, the Cantor Exchange, which will list Domestic Box Office Receipt Contracts. The contracts will also be known as Movie Box Office Contracts.

There are some similarities with HSX in that Movie Box Office Contracts are modeled on the MovieStock methodology of our site. For example, the contracts will be based on four weeks of a film’s domestic box office revenue. The regulatory approval process is inherently uncertain, so it’s a bit premature to say we are moving into real-money film trading markets just yet, but that is our intent.

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That is from Alex Costakis, MD of HSX.

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Here’s the Cantor Exchange project leader: Richard Jaycobs.

He seems to be a man open to suggestions.

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CNBC on Cantor Exchange — Via Jason Ruspini

Fox Business on Cantor Exchange –

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Financial Times:

All eyes on Hollywood futures

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Previously: Should the Hollywood Stock Exchange become a real-money betting exchange? – 2007-10-04

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Video – spot the last minute

If you are reading this in a feed reader, and if the video does not appear embedded just below this present sentence, then download this post to watch the video.

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Honesty and fairness, when writing in a prestigious publication, would dictate that you mention your opponents’ opinions.

Academia = Ivory Tower.

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Will the Wall Street Journal give the same airtime to HedgeStreet and the CME Group?

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CME Group – (PDF file)

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CME’s comment is not far away from HedgeStreet’s take, which I told you I like. – (PDF file)

I suppose our good friend Jason Ruspini somewhat shares HedgeStreet and the CME’s views. Here’s his comment to the CFTC. – (PDF file)

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I like InTrade CEO John Delaney’s take, but, of course, on a different level. I mean, I like his industry analysis, but he didn’t elaborate in the legal way that was expected by the CFTC. That’s not a slam, just an observation. – (PDF file) — (original PDF file)

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… asks Google’s Bo Cowgill.

That could be… However, I’m not holding my breath. Here’s why. The CME (along side the CBOE and ISDA) represents forces that does not push for the kind of financial innovations we are pushing here, on Midas Oracle. We are pulling for Web-based, de-intermediated, low-cost, event derivative exchanges. The financial dinosaurs (like the CME) do not.

Take a look at the CME’s 2003 letter to the CFTC about HedgeStreet’s application as a DCM. - (PDF file) – Here are the titles of the first 2 sections:

1. HedgeStreet’s Proposal is Materially Deficient.
2. The [HedgeStreet] Application Violates the CEA.

No need to go further. … You have computed that the CME was (in 2003) no friend of HedgeStreet —and, thus, of our prediction markets. (For those who are just surfacing from an Afghan cave, yes, the CFTC did approve HedgeStreet’s application, finally, and told the CME to go fugging themselves.) So, I’m not holding my breath for a CME comment to the CFTC’s concept release on “event markets”. Saying that the CME is talking for the prediction market community is like saying the Ayatollah Khamenei was talking for priests, ministers, and rabbis.

As for the ISDA, they represent big institutional traders… who do not use exchanges ( !! ). What they say to the CFTC (PDF file), basically, is to be careful not to hurt the framework of the whole landscape. Well, thanks ISDA, but the CFTC knew that already.

As I said, 2 prediction market organizations will, each, submit their comment to the CFTC. I don’t expect that to be a deep read, with regards to derivative regulations. However, their industrial strategy might transpire, and that might be interesting for curious people like me.

The 3 interesting takes about the “event markets” are from:

1. the CFTC —if you are able to sense what their true opinion is.
2. Jason Ruspini —(PDF file).
3. Tom W. Bell —upcoming.

The future of US-based, non-sports, non-hedgeable prediction markets depends on those 3 poles of thought.

In the coming weeks, you’ll see many intellectual interactions between them.

The real question is: Will Jason Ruspini and/or Tom W. Bell have a proven impact on the CFTC process? I wish that, but both of them do stray away from the CFTC’s strict framework.

DEVELOPING…

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… on speculating and hedging directly on Non-Farm Payroll reports.

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MondoVisione:

Hurricane binary option contracts will pay the full contract value ($10,000) to the buyer if the combined CHI for all of the hurricanes during the season equals or exceeds a certain value (strike); otherwise, it pays nothing and the seller keeps the premium. The premium varies from $0 to $10,000, depending on the likelihood of the event.

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–> On Thursday, they sent out an e-mail to everybody saying that the two legacy websites will be closed just after the launch of the new website —that is, this Saturday, January 19, 2008.

–> Then, on Friday, they back-pedaled. The two legacy websites will remain on the Web for two short weeks. They call it a “grace period”.

–> Definitions of “grace” on the Web:

- (Christian theology) a state of sanctification by God; the state of one who under such divine influence; “the conception of grace developed …
- elegance and beauty of movement or expression
- seemliness: a sense of propriety and consideration for others
- a disposition to kindness and compassion; “the victor’s grace in treating the vanquished”
- (Greek mythology) one of three sisters who were the givers of beauty and charm; a favorite subject for sculptors
- a short prayer of thanks before a meal
- decorate: make more attractive by adding ornament, colour, etc.; “Decorate the room for the party”; “beautify yourself for the special day”
- (Christian theology) the free and unmerited favor or beneficence of God; “God’s grace is manifested in the salvation of sinners”; “there but for the grace of God go I”
- deck: be beautiful to look at; “Flowers adorned the tables everywhere”
–> wordnet.princeton.edu/perl/webwn

Commodities
Manage price risk with the widest range of commodity derivatives of any U.S. exchange – on grains, livestock, oilseeds, dairy, lumber, and other products. NYMEX Softs™ are also offered on the CME Globex® trading platform.
Energy & Metals
Manage price risk for NYMEX energy products and NYMEX/COMEX metals products on the CME Globex® trading platform, the industry’s leading platform for futures and options trading. CME Group also offers trading in standard and mini-sized precious metals products.
Equities
Take part in the world’s leading equity index marketplace, offering futures and options products on key benchmark indexes. These index baskets provide easy and efficient access to small-, medium- and large-cap companies in the U.S., Europe and Asia.
Foreign Exchange
CME is the largest regulated marketplace in the world for trading foreign exchange (FX) – with daily liquidity of over $80 billion. CME offers extensive coverage of this marketplace, with 41 futures contracts and 31 options contracts on more than 19 currencies.
Interest Rates
Manage risk effectively across the entire yield curve with highly liquid CME Group Interest Rate products – futures and options on Eurodollars, U.S. Treasuries, swaps and other dollar-related instruments.
Real Estate
Participate in the real estate market (the largest domestic asset class – $26.6 trillion) without having to buy and sell properties. CME Group offers products on the U.S. residential and commercial real estate markets.
TRAKRS
TRAKRS are exchange-traded, non-traditional futures contracts that provide market exposure to various TRAKRS Indexes – a series of market-based indexes of stocks, bonds, currencies, commodities and other financial instruments.
Weather
CME Group is the only regulated exchange offering risk management products for the weather market. CME currently lists weather contracts based on aggregate temperatures on 35 cities around the world, as well as hurricane, snowfall and frost indexes.

CBOT to merge with the Chicago Mercantile Exchange on/before 31st Dec 2007

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Static chart: