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Previous: 23/3/2010 - The MPAA Objects to Movie Futures Markets

On Friday 16^th April 2010, the Commodity Trading Futures Commission (CTFC) approved the proposal by Trend Exchange, a division of Media Derivatives Inc of Scottsdale, Arizona, for a futures exchange in movie futures, but expressed concerns about the contracts themselves. 

The Commission’s decision came as a blow to the Motion Picture Association of America (MPAA), who had strongly opposed the proposal.   Intense political lobbying had also put the passage of the proposal in doubt: two senators on the judiciary committee, Patrick Leahy and Orrin G. Hatch, had sent a letter to the commission on Thursday 15^th April listing their concerns, while Senators Barbara Boxer and Dianne Feinstein and other members of the House of Representatives had also written to the commission.   Meanwhile, Senator Blanche Lincoln introduced a bill that proposed changes to the derivatives market that would make the trading of futures contracts based on box-office receipts illegal on the very day that the proposal was approved.

The proposed Exchange would facilitate the buying and selling of contracts anticipating the revenue of any given movie from domestic ticket sales.   However, the CFTC failed to approve the contracts themselves, which meant they could not yet be traded.   Three of the five commissioners who approved the exchange expressed concern over the contracts.   One of them commented, ‘At this point in time, I have not heard any arguments to persuade me that ‘movie futures’ generally can overcome some fundamental design flaws.’   An alliance of the MPAA, the Independent Film & Television Alliance and the Directors Guild of America, welcomed the CFTC's decision to delay approving the contracts.

In a statement, Robert Swagger, the Chief Executive of Trend Exchange, said, ‘Like all Americans, we cherish the entertainment industry.   Historically, initial product skeptics have eventually become the greatest adopters through a process of time, education and communication that demonstrates the many benefits of futures market for the U.S. economy.’

Critics of the Exchange claimed there was no real commodity involved, and that there isn’t a standardized commodity.   They also feared the exchange would be vulnerable to widespread abuse.

Media Derivatives said they hoped the new market would be in operation by October 2010. 

Cantor Futures Exchange, another company applying to offer movie futures, hoped to receive approval on Tuesday 20^th April.

Press Release

CFTC Approves Media Derivatives, Inc. Designated Contract Market Application

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today approved the application of Media Derivatives, Inc. (MDEX) for designation as a contract market. The Commodity Exchange Act requires the Commission to approve such applications if the applicant meets criteria enumerated in the Act.

MDEX also has requested approval from the CFTC of a contract related to motion picture box office receipts. The Commission is still considering that issue. Moreover, given the novel nature of the contracts that MDEX has proposed trading, the CFTC has requested, and MDEX has agreed, that rather than self-certifying such contracts, MDEX must submit all new classes or categories of media-related contracts it lists for approval by the Commission. The Commission has not approved the trading of any futures or options related to box office receipts at this time.

Last Updated: April 16, 2010

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