Move over corn, pork bellies and cotton futures, make way for movie futures trading.
THR reports that U.S. regulators have approved the creation of a futures market for the movie industry. Under the proposed plan, called Trend Exchange, film industry pros and other investors will be able to trade on predicted boxoffice receipts. According to the report, Hollywood studios oppose the plan, calling it essentially “legalized gambling,” although it would allow buyers and sellers to reduce risk by locking in prices months ahead of a film’s release date, which exchange backers say would help Hollywood manage their risk.
The U.S. Commodity Futures Trading Commission is still reviewing the kinds of contracts – essentially presales of a share of future boxoffice receipts – that could be traded there.
The Commission is also reviewing a proposal to create a second market called Cantor Exchange, backed by the brokerage firm Cantor Fitzgerald, which would have lower investment requirements than Trend Exchange, with speculation that movie fans and the average investor will be able to participate.
A final ruling on Trend Exchange – which along with Cantor Exchange would be completely online – is expected next week.
Within the exchange, an investor could hedge against possible flops by pre-selling shares of future boxoffice receipts. If a movie live up to expectations, investors would be guaranteed revenue from the presales, called ‘futures contracts’.
Well what do you think – for or against?