Media Derivatives, a project owned by Veriana Networks, has
applied to the Commodity Futures Trading Commission for
permission to offer an "electronic exchange for contracts based
on box office movie revenues".
It is the second company bidding for a space in this virgin
market. US broker Cantor Fitzgerald applied to the CFTC in
December 2008 to launch Cantor Exchange, a bourse that would
list "domestic box office receipt contracts". Cantor is still
waiting for regulatory approval but recently told Futures and
Options World that it expected to receive the all-clear in the
Many novel ideas have been tried for applying financial
techniques to Hollywood, many of which have ended in failure
– often because financial specialists have
underestimated the riskiness and unpredictability of the movie
Derivatives may stand a chance of succeeding, because they
do not seek to disguise such risks or mitigate them with tax
benefits, but merely pass the risks on.
Veriana Networks, which owns Media Derivatives, is based in
Marion, Indiana. It describes itself as "dedicated to the
development of next generation media through its five operating
corporations which specialise in media creation, technology,
risk management and distribution".
On October 8 the CFTC invited public comment on Media
Derivatives’ application, made in August, for the
status of a designated contract market.
DCMs are boards of trade that operate under the regulatory
oversight of the CFTC, under Section 5 of the Commodity
Exchange Act. They may list for trading futures or options
based on any underlying commodity, index or instrument and may
allow access to their facilities by all types of traders,
including retail customers.
According to its application, Media Derivatives was formed
in April 2007, to facilitate the transfer of the risk
associated with developing new films.
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