This week regulators approved the creation of the first futures market that will based around film box office returns despite concerns from Hollywood executives and lawmakers that the new exchange may cause studies harm.
The Commodity Futures Trading Commission voted 5-0 to allow the Veriana Networks Inc. Media Derivatives Inc. to open a professional trading market that will allow traders to make financial bets on how well they think a movie will perform in ticket sales.
Another plan that includes retail investors created by Cantor Fitzgerald LP is currently pending with the commission.
The new market will be titled the Trend Exchange and will help studios recoup losses and regain their financial expenditure for marketing and producing poor performing movies according to the chief executive of Media Derivatives, Rob Swagger.
The company stated that professionals can use the market performance to hedge their risk against high risk movie investments. The company also told the commission that the financial risk of a movie would be transferred from theatres, studios, and producers, to an audience of speculators who are willing to take on the risks on their own.
Trading in the new market will begin during the third quarter of 2010 according to the company spokeswoman Stephanie Dilorio.
Before the Trend Exchange can officially open the CFTC will need to look over the way that the company deals with its contracts.
The company stated that when it opens the market it will coincide with an opening weekend box office. But this morning the company sent out emails to investors saying that due to industry concerns they would be delaying the launch to allow time to steady industry nerves.