On Tuesday, over the protestations of Hollywood executives, the Commodity Futures Trading Commission (CFTC) approved Cantor Fitzgerald’s application as a contract market and derivatives clearing organization. However, as with its recent Media Derivatives (MDEX) decision, the CFTC refrained from authorizing the actual trading of financial derivatives based on motion picture box office receipts.
Gaining approval as a contract market is an important first step in the development of a film futures exchange. However, Cantor’s next step is facilitation of the requisite trading vehicles. Yet, per the CFTC:
The Commission has not approved the trading of any futures or options related to box office receipts at this time.
This language mirrors the CFTC’s decision last Friday regarding Media Exchange’s request to trade movie futures. While the CFTC approved MDEX’s application as a contract market, the agency stated that it is still considering the firm’s request to trade contracts based on motion picture box office receipts.
Whereas the Commission may be hesitant, Senator Blanche Lincoln (D-AR) has been more decisive. On Friday, Lincoln–who as Chairwoman of the Senate Committee on Agriculture, Nutrition & Forestry has jurisdiction over futures markets–unveiled new financial reform legislation which contains language that favors the film industry. Among other items, her Wall Street Transparency and Accountability Act of 2010 amends the term “commodity” to specifically exclude motion picture box office receipt and related contracts.
Hollywood has responded to the proposed legislation enthusiastically. Last Friday, an entertainment industry coalition–which contained representatives from the Directors Guild of America (DGA), the Independent Film and Television Alliance (IFTA), the Motion Picture Association of America (MPAA) and the National Association of Theatre Owners (NATO)–released a statement praising Senator Lincoln’s proposal:
As Congress moves forward with financial regulatory reform, we are very grateful to Chairman Lincoln for seeking to put a stop to plans to allow wagering on box-office futures, which are based on a faulty understanding of the film business and could cause real financial harm to both the film industry and other Americans drawn in by an online gaming platform that could be easily manipulated.
This coming Thursday, the House Subcommittee on General Farm Commodities and Risk Management takes the issue to the next level. They are scheduled to hold a public hearing “to review proposals to establish exchanges trading ‘movie futures.’” Advocates both for and against these innovative contracts are expected to give testimony.
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