The Motion Picture Association of America has weighed in against two financial services firms seeking regulatory approval for new futures-trading systems based on movie box-office performance.
In a letter addressed to Gary Gensler, chairman of the Commodity Futures Trading Commission, MPAA interim CEO Robert Pisano urged the federal regulatory agency not to approve the services for fear they might be “vulnerable to price manipulation.”
The letter also labeled the new services the “economic equivalent of legalized gambling on movie receipts.”
In a prepared statement, Greg Frazier, MPAA executive VP, added, “Anyone who has followed the meltdown of the financial markets, and the pain this caused people throughout America, knows how important it is to ensure that the establishment of new financial marketplaces does not open the door to rampant speculation and financial irresponsibility.”
Currently, Cantor Fitzgerald – which has operated the play-money-based Hollywood Stock Exchange for several years — is seeking approval from the CFTC to launch a new, widely accessible service that would enable futures trading on movies based on their first four weeks of domestic box-office performance.
Another firm, Trend Exchange, is seeking approval for a similar service that would be limited to institutional traders.
Officials behind both systems expect their respective approvals to be announced in April.
For their part, the studios have been nervous about these services, fearing that they add another layer of pre-release complexity to an equation that already includes tracking, star behavior and critics’ reviews.
Speaking to TheWrap at ShoWest last week, one studio executive noted, “Trading on grain futures is one thing, but movies is quite another."
His point: While information on agricultural yields can be obtained from third-party sources such as weather and geological services, data on movies generally originates from one place — the studios themselves.
“These kinds of services would be very easy for us to manipulate,” the studio official said.
Meanwhile, Cantor Exchange president Rich Jaycobs said he was "disappointed" that the MPAA’s dissent came after several periods for public comment within the two approval processes had come and gone.
He added that Cantor officials had reached out numerous times to MPAA officials and its constituency to better explain the new financial product.
Despite these meetings, however, Jaycobs feels Wednesday’s letter reflects an "education problem" regarding the understanding of the new service, which he believes could be of real value to the industry.
"Similar comments were made in the 1980s before there were futures markets for oil and natural gas," he said. "Now, as a consumer, I can know what my fuel bills will be 12 months in advance."