Box office receipt derivatives on the way?

by Artemis on October 9, 2009

The Commodity Futures Trading Commission (CFTC) has put out a press release which asks for public comments on a proposal submitted by Media Derivatives, Inc. to allow them to set up a ‘movie derivatives’ exchange. Veriana Networks, a privately owned company, are applying to launch an exchange called Media Derivatives (MDEX) which would provide a platform for futures contracts based on box office returns to be traded.

The idea is that the exchange will help film producers hedge against the risks such as if production of a film is not to schedule or completed, if a film production exceeds budget, if a film is released late or (and most importantly) if a film is not a success and box office receipts are lower than expected.

As with every market there would be producers wanting to hedge their risks and speculators/investors who’d be willing to take those risks on in return for interest.

It’s an interesting idea, and reminds me of those infamous Bowie bonds. The Financial Times has much more on this here.

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