When I was CEO of HSX – I shared a board seat with members who were also on the board of Lionsgate Films.
Lionsgate was constantly moving the prices of their films (or films they had an interest in, or a friend’s film) on HSX as a way to manipulate perception and marketing dollar spends.
This conflict blew up in the now famous Access Hollywood incident- http://www.villagevoice.com/1999-11-16/news/access-denied/ I was stopped from reporting the real numbers on HSX on Access Hollywood and prices from that moment forward were controlled by people who whose interests lay with the studios.
I went to war with the rest of the board to defend my creation, and my technology, and all the IP that is HSX/Cantorx – board members included Citibank and NBC who sided with the studios – in allowing the prices on HSX to be moved per ‘marketing’ requests made by the studios. This lead to a blowout on the board and my leaving HSX as a result.
Shortly thereafter, the same dissident board members engineered the deal with Cantor for HSX – that has yet to be consummated. None of the investors who put $40 mn. into HSX have ever seen a penny from Cantor. There is no paper trail that links Cantor to HSX. Cantor claims everything was lost on 9/11.
Now – they hope to take the studio/wall st. collusion to the next level via Cantor Exchange. Bart Chilton is right to be suspicious of this. Will they really due their due diligence? Doubtful. This is Wall St. we’re talking about.
Personally, I put 95% of my wealth in gold bullion 8 years ago – so to be clear – another blowup of another exchange will only drive the price of gold higher – so I am half-wanting to see this catastrophe unfold.
CFTC Commissioner Bart Chilton called it a a€?popcorn prediction market,a€? […]
Hollywood studios that participate by hedging their filmsa€™ prospects will doom ticket sales, said Peter Guber, chairman and CEO of independent production company Mandalay Pictures LLC.
a€?The word will get out in three seconds and the picture will be a complete catastrophe,a€? said Guber, who was chairman and CEO of Sony Pictures Entertainment in the early 1990s. […]
a€?We have serious concerns regarding the trading of media contracts and we support a very thorough review of all of these first-of-a-kind products,a€? CFTC Commissioner Scott Oa€™Malia said in an e-mailed statement.
U.S. Senator Blanche Lincoln, an Arkansas Democrat, today added language banning trade in movie futures to a broader derivatives bill she is writing. Lincoln is chairman of the Agriculture Committee that oversees the commodity commission. […]
Activity on the exchanges would bring about a€?risky and manipulativea€? behavior, said Patrick Leahy, the Vermont Democrat who heads the Senate Judiciary Committee, and Senator Orrin Hatch, a Utah Republican.
a€?Ia€™m worried about manipulation,a€? Chilton said in an interview on Bloomberg Television before the vote.
No one can argue that the movie-making business is without risk or that there is no need for effective risk management tools. The potential introduction of innovative instruments for managing that risk should be applauded rather than criticized.
If you thought the mortgage-backed securities and other complex financial instruments that crashed the economy were risky, you’ll love Wall Street’s latest brainwave: a new financial market in which players can gamble on whether upcoming Hollywood movies will be blockbusters or bombs.
For years, Cantor Fitzgerald, a Wall Street investment firm, has been operating the “Hollywood Stock Exchange,” a fake-money game in which players trade “stocks” to bet on how films will do at the box office. Now Cantor could soon get government permission to make a real-money version of the game—a market in which players can gamble on the success or failure of, say, Pirates of the Caribbean 4. Critics are worried that this new market could be vulnerable to insider trading and create bizarre incentives for moviemakers—and that it will also enlarge the risky family of financial products that helped trigger the economic crisis. [More here >]
Last week, I carried a report that Cantor Fitzgerald, the firm that lost many people in the World Trade Center collapse, has been up to some shady business but I have been told there are many questions still unanswered about this firm. Below, a confidential report on the shenanigans, according to a source I trust:
Cantor Fitzgerald has not yet paid the HSX Holdings Inc. shareholders a penny for the “deal” that transpired in 2001.
A “transaction” occurred in 2001 –- that transferred HSX Holdings Inc. voting rights to Cantor –- giving the hundreds of investors –- who invested $40 mn. dollars into HSX from 1996 –- exactly NOTHING.
When queried by lawyers, Cantor claims they lost all the paper work in the 9/11 attacks (they moved the company from Santa Monica Ca. to the top floor of the WTT during the Spring of 2001).
What I know is that a board member of HSX –- Woody Knight of SBS (Scandinavian Broadcasting Service) –- engaged in a pre-arranged, third party transaction that passed voting control to Howard Lutnick at Cantor –- in exchange for $2 million in eSpeed stock (Cantor’s publicly listed entity at the time) that was immediately sold to ‘wash’ the sale.
Cantor is now going to launch ‘box office futures contracts’ based on intellectual property and technology they don’t have the rights to –- with the blessing of the CFTC.
According to my sources who are close to this –- the CFTC –- run by Gary Gensler –- a former Goldman guy (of course) –- took 25 mn. in ‘lobbying’ fees from Cantor to get these new contracts green lit. But did they do any due diligence? Did they spot the absence of any bona fide transaction between HSX and Cantor?
Does the world really need more weapons-of-mass-financial- destruction from the sickos on Wash. and the CFTC?
Why should we assume that Cantor will operate this market honestly when the circumstances of their “ownership” including the patented “Virtual Specialist” technology used for online CDA (Continuous Double Auction) technology, are dubious at best, if not outright fraud.
Will anyone be able to resist these new products that combine tinsel with wall st.?
Is this the new bubble the CFTC hopes will take people’s mind’s off the current spate of fraud on Wall St.?
Also, can you think of a market that is any easier to manipulate by insiders?
We understand that a former CEO of HSX got calls from people like Jeffrey Katzenberg asking to move prices of their projects up to change the perception in the market place (and media) and to free up more marketing dollars.
Just one example of many, many ways to game this market.
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 clientele 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.
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.
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.
UPDATES WILL BE POSTED BELOW, LATER TODAY (AND DURING THE NEXT DAYS)…-
[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.
That is from Alex Costakis, MD of HSX.
Here’-s the Cantor Exchange project leader: Richard Jaycobs.
He seems to be a man open to suggestions.
CNBC on Cantor Exchange —- Via Jason Ruspini
Fox Business on Cantor Exchange –-
All eyes on Hollywood futures
Previously: Should the Hollywood Stock Exchange become a real-money betting exchange? – 2007-10-04
Change is one thing, breaking the whole site and acting like its nothing happened is another. The whole concept of trading movie stocks, movie bonds and options have taken a backseat to making sure you can blog, add friends, and “Schmooze”.
The old portfolio page was color coded and extremely easy to understand, you instantly knew if you were making H$ or losing your shirt. Now the current portfolio page is a small box, one colour, light grey on a white backround and the type is half the size of the font here, also you can only see 12 stocks at any given moment. Whoever OK’d this part of the site has to have never traded any shares online before.
From what I can gather, there was a beta version of this 3rd generation of the game, but no one paid any attention to the any of the feedback, two days after this new rollout, HSX.com started calling this new version a beta game, and what HSX staff there is say that portfolios are now their priority. However the only things that really work right now are the blogs, which pay H$10,000 a posting, adding friends pays traders H$1000, Online Polls, and Schmoozing. which paid initially H$1000, but now pays H$100 per reply. The only reason I see for paying traders to blog is to bring more eyeballs to the garish 728?90 and 300?225 ads on each page to pump the number of advertising views on HSX. But if this is part of the grand scheme here, I can’t see Gold coin or Forex advertisers closing sales from a bunch of 13 years because all the veteran traders have left in disgust.
I welcome Jed [*] to read the HSX Support page: http://www.hsx.com/cms/forums/support and look around, I shudder to think this all is going to be a B-School case study on how to kill a successful site in under a week.
[*] Jed Christiansen, who put up a comment in defense of HSX (Jed systematically defends the people I slam on Midas Oracle) —-and who has just begun an MBA education.