Cantor Fitzgerald Revives Hollywood Stock Exchange Plans To Let Studios Bet Against Movies
from the seems-like-an-odd-time-to-announce-derivatives... dept
Boing Boing has a post that caught my eye about Cantor Fitzgerald's plan to offer bonds based on the performance of movies, basically allowing movie studios to "hedge" bets on the investments they make in certain movies. Now, in theory that could make a lot of sense, but as we've seen with the credit default swap market and the resulting financial meltdown, what starts as a "hedge" can often turn into something very different. Either way, it struck me as odd that any financial firm would be rolling out some new, high profile, product like this in the midst of so many questions about similar products. The Boing Boing post also includes a pointed criticism of the plan.However, the story was also intriguing because in the back of my head I vaguely remembered that Cantor Fitzgerald had purchased the Hollywood Stock Exchange years back. HSX had been something of an early web success story -- getting people to bet on the success or failure of certain movies and actors -- but it had all been with play money. In wondering about this, I did a quick search here on Techdirt, and actually found a remarkably similar announcement from seven years ago, all about how Cantor Fitzgerald was getting ready to launch a real futures market for movies. Of course, even more noticeable was the date on that post: September 4th, 2001. That's exactly one week prior to September 11th, and the attack on the World Trade Center... where Cantor Fitzgerald was headquartered. 658 employees from the company died from the attack in one of the many tragic stories to come from that day. I'm not sure if the Hollywood futures market actually will do very well, but it's still interesting to see them revive this idea.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: futures, hedging, hollywood, hollywood stock exchange, movie industry
Companies: cantor fitzgerald
Reader Comments
Subscribe: RSS
View by: Time | Thread
To be fair to CDS...
Ultimately, credit default swaps were a pretty straightforward hedge for owners of the underlying asset; to the best of my understanding, the fact that sellers didn't keep the reserves necessary to cover losses unwound everything.
Anyways, great piece. It's humbling to be reminded of what happened at Cantor Fitzgerald. I remember being on the phone with a trader in the World Financial Center on that day, it was truly horrible.
[ link to this | view in thread ]
predicted by Mel Brooks?
[ link to this | view in thread ]
The office was destroyed
:-)
[ link to this | view in thread ]
bonds based on the performance of movies,
If memory serves me right, David Bowie did something like that with his early catalogue to leverage his buy of the later catalogue...
[ link to this | view in thread ]
Could be good
The problem with the CDS market was largely one of nearly zero transparency and fairly weak reserve requirements. Neither side could ever audit the other's financials to ensure the terms were being complied with, and that was unfortunately coupled with increasingly complex layers and webs of additional leveraging and hedging against those swaps, to such a degree that it would have been impossible to audit, evaluate and value them. In many cases, nobody even understood over time how this exponential hedge-upon-hedge approach affected their risk; there were just too many moving parts, too many variables, and too many greedy ignoramuses, to the point where all the highly talented quants, software and computer systems engineers, and tech people who occupied floors and floors inside some of these institutions could even remotely come up with a way to track and measure the actual risks to that institution. It was, quite literally, a house of cards -- an inverted house of cards, more accurately, which of course is even more precarious.
I just hope that if this idea takes off, that Cantor, Fitz or whomever actually sets up and operates (and regulates) this market, establishes rules of the game that include intelligent restrictions and rules that either keep things as simple and straightforward a way as possible, or else an even more robust set of adequately policed rules that truly allow every market participant the ability to accurately model their risks. Given that the assets being capitalized are among the most risky around (lots of dogs for every film that actually makes it into the black, almost no way to do any reality-based projections, and an accounting system that is a perversion of the very notion of accounting), this is no small task.
But I think it can, and probably should, be tried, at least on some small scale. If it works, there's not much reason to confine it to this one industry; it could be replicated, or expanded to include, a fair number of others. Greater liquidity combined with rational opportunities for risk management, if based in reality and on a functional system with enough transparency to allow for more accurate fixing of market prices by the participants, is for the most part, a highly desirable thing.
[ link to this | view in thread ]
Re: predicted by Mel Brooks?
[ link to this | view in thread ]
Oneseason.com is sports alternative and working..
I think this is a great idea and people who love movies now have a way to be more involved with their passion. Now, it's just a matter of getting them to market, which is always the real challenge.
[ link to this | view in thread ]