After a long, drawn-out debate, the Commodities Futures Trading Association on Monday approved the first box office futures products.
Trend Exchange, also known as Media Derivatives (MDEX), was given approval to trade its proposed revenue futures and options based on box office performance. According to CNBC sources, the vote was three to two, with CFTC ruling that the Media Derivatives' contracts "do not violate the Commodity Exchange Act or the Commission's Regulations there under."
Although the CFTC isn't due to rule on the other pending box office futures proposal, "Cantor Exchange" until June 28, it's expected to earn the same ruling.
The CFTC defended the contracts, saying they "are intended to allow participants in the motion picture industry to manage the financial risks associated with the production and distribution of motion pictures," in response to concerns voiced by the MPAA that the contracts will be detrimental to the movie industry.
The Motion Picture Association of America, leading a coalition of movie industry players, including the Director's Guild, Independent Film Producers and the National Association of Theater Owners, has opposed box office futures since day one. Now the MPAA is stepping up its battle to shut these futures down, urging Congress to approve the financial regulation bill, which includes a ban on box office trading.
MPAA President and Interim CEO Bob Pisano said the proposed MDEX contract and the Cantor Futures Exchange, serve no public interest and on the contrary, can significantly harm the motion picture industry by imposing new, substantial costs.
"These are proposals that ought to be under the jurisdiction of the federal gambling and gaming laws, not the federal commodity trading laws. It is unfortunate that the CFTC has now given the go-ahead to a new gambling platform that could be plagued by financial irregularities and manipulation," said Pisano.
The Trend Exchange (aka Media Derivatives) is grateful that it has received approval from the CFTC to trade futures and options products based on Motion Picture Box Office receipts.
"We are pleased that the staff of the CFTC and a majority of the commissioners recognized the legitimate economic risk management benefits that these products will provide to the entertainment industry. We intend to launch our products as soon as possible," the company said.
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