Hollywood To Become Tradable Commodity

While actors and celebrities grinned at the Oscars, two firms were busy putting the final touches to their entertainment stock markets. The Trend Exchange, backed by Veriana, a private investment group, and Cantor Fitzgeralds Hollywood Stock Exchange, are in a race to become the first derivatives marketplace to offer futures contracts based on U.S. box office receipts
By None

While actors and celebrities grinned at the Oscars, two firms were busy putting the final touches to their entertainment stock markets.

The Trend Exchange, backed by Veriana, a private investment group, and Cantor Fitzgeralds Hollywood Stock Exchange, are in a race to become the first derivatives marketplace to offer futures contracts based on U.S. box office receipts.

The Trend Exchange, unlike HSX, is targeted solely at institutional investors.

Similar to corporate firms that hedge commodities, the Trend Exchange hope to give the film industry the opportunity to hedge the risks surrounding the movie business. With film budgets increasing by the year Avatar and the latest Harry Potter instalment both spent around $250 million on production founder and CEO Robert S. Swagger is hoping that TrendEx represents a new era of opportunity in the futures industry and for Hollywood. By offering speculators and hedgers a market-based solution to transfer the considerable financial risks associated with major movie productions, The Trend Exchange will perform the same public service that futures exchanges have been providing to commercial users for nearly two hundred years, he said.

Swagger has some support amongst the film industry The business of making movies has changed drastically in the past two decades stated Ralph Winter, a well-known producer of films such as X-Men, Wolverine and Star Trek. Being a producer in todays marketplace requires attracting production capital much like the farmers and ranchers did in the last century. Ive enjoyed being a part of the vision that Rob and his team have developed for The Trend Exchange.

P. Clark Hallren, Managing Partner of entertainment advisory firm Clear Scope Partners and a 23 year veteran of JP Morgan Chases film finance group believes that A product like what is being provided by The Trend Exchange is precisely what is needed to allow investors or operators to manage the complex risks of the entertainment industry. Applied prudently by sophisticated parties, the volatility of film performance could be more easily managed, thereby making the business more attractive to all parties.

Swagger said the name is based, in part, on a phrase quoted by professional traders and marketers for generations, The trend is your friend whereby participants recognize and take positions based on research and analysis of events.

According to the press release concerning the launch of TrendEx: Trading rules and operations will be consistent with those of established futures and options exchanges, including post-trade clearing and settlement, and will be subject to oversight by the CFTC.

The Minneapolis Grain Exchange will act as a third-party to clear and settle trades.

The Hollywood Stock Exchange already has a sophisticated beta site, and has been running as a web-based, non-cash multiplayer game since 1996. Bought by Cantor in the aftermath of the dot.com boom, the exchange has recently announced that on 20 April it will become real-money commodity exchange, allowing retail investors to bet on box-office receipts.

The market for Domestic Box Office Receipt contracts offers the motion picture industry, investment funds, banks and all other prospective investors a federally regulated trading exchange dedicated to the entertainment industry, said Andrew L. Wing, President and Chief Executive Officer of Cantor Entertainment.

Both ventures are awaiting regulatory approval from the Commodity Futures Trading Commission.

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