The Commodity Futures Trading Association recently gave preliminary approval to a new market for movie box office futures. Really, Wall Street? After the credit market crash, the Madoff mess, with Goldman Sachs in international hot water and other big investment banks under the microscope, you want to create a brand new derivatives market for um... here it comes, pardon the pun... derivative movies? (Sex in The City 2, anyone?)
Apparently so, despite the objections of official Hollywood, where top filmmakers issued it a statement calling the proposed market "an untested and unwanted plan that could cause serious harm to an important American industry and its workers." The CFTC gave its approval to Media Derivatives to start the new Trend Exchange, and is expected to approve a similar competitive exchange proposal for the Cantor Exchange, from Cantor Fitzgerald, tomorrow. Further approvals would be needed and Sen. Blanche Lincoln, D-Ark., has already introduced legislation that would ban trading on movies.
So maybe this film futures market will never happen. But if it does, how would it work? The Trend Exchange, or TrendEx, would be for the big boys -- minimum investments would start at $100,000 and you'd need a broker to trade for you. If you bought a contract based on a $150 million box office take, you'd make money if the film brought in more than that. The Canter Fitzgerald proposal would be more of a wild and crazy free-for-all: Anyone with 50 bucks to blow could jump right in to its online trading site, according to a preliminary report. (Want to play right now? Cantor already runs a film futures market called the Hollywood Stock Exchange where you can earn fantasy bucks.)
Media Derivatives is trying to make the case that this is good for small, independent filmmakers who could use the instruments to raise money for new projects. Yeah, right. Just like the subprime mortgage-backed derivatives helped little guys get into new houses.
Don't look for tips here because -- I don't really need to say this, do I? -- trading film futures isn't an investment, it's a party game. And as a party game, it might be fun and less expensive than a trip to Vegas. Each of your friends could bring $50, you could sit around with some margaritas and your laptops and bet on Ashton Kutcher vs. Robert Downey, Jr. It sounds like a bachelorette party waiting to happen, not a retirement plan.
Photo by Artemuestra on Flickr.
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