Update, Monday 3:25 p.m.:
Shortly after getting federal approval for his movie-futures trading plan, Richard Jaycobs, president of Cantor Fitzgerald’s exchange, said Monday that congressional action will prevent the company from moving forward.
He cited the financial reform legislation expected to be approved this week by Congress, which includes a ban on box-office trading.
"Cantor Exchange wishes to express its appreciation to the hundreds of motion picture professionals who advocated for box office futures contracts, including all those who publicly Jaycobs their support and those who wrote letters of support to the CFTC and members of Congress," he said in a statement.
"We are, however, aware that a bill reported out of the House-Senate conference last Friday continues to include a provision banning box-office receipts as the basis of any futures contract. In light of this pending legislation, Cantor is continuing to assess its options for providing risk management and financing tools to the motion-picture industry."
A company spokesperson said the company is assessing trading other products on the exchange that have nothing to do with the movie industry.
Previously:
The Commodity Futures Trading Commission Monday gave a second OK for a firm to trade film box office futures, even as Congress readies to enact legislation that could ban the trading.
The commission, in a 3-2 vote, approved Cantor Fitzgerald’s request to begin trading. A week ago, the commission by an identical vote approved Media Derivatives' request. Media Derivatives uses Trend Exchange as its brand name for its market.
Congress, however, is expected to pass financial reform legislation this week that includes a ban on the commission approving trading in movie box office futures -- though the success of the bill could be affected by the death Monday of Sen. Robert Byrd.
How passage of the legislation would affect Cantor and Media Derivatives has been up for question.
The Motion Picture Association of America and some Capitol Hill aides say the legislation would ban any trading -- even that already approved by the commission after June 1. Media Derivatives, on the other hand, insists the ban only affects additional applications for trading, and that trading already approved by the CFTC are “grandfathered” and can go forward.
Courts may eventually be called on to decide who is right.
If Media Derivatives presses forward, the most likely scenario is that the CFTC would make a determination on how to proceed, and any resulting decision would face a court challenge.
In approving the request, the commission majority said that federal law requires commission to approve trading unless it can reach a finding that a trading instrument violates the act.
“Based on our review, the commission does not believe that the terms and conditions violates the act or the commission’s regulations.”
Commissioner Jill E. Sommers reiterated her dissent of two weeks ago. Commissioner Bart Chilton reiterated his dissent, too, but he added some comment.
“The contracts are not, in my view, ‘commodities’ under the definition contained in the Commodity Exchange Act.
