The Commodity Futures Trading Commission has approved the set-up of Trend Exchange, a market for trading futures on US film box office receipts. However, three of the five commissioners put on record their misgivings about movie futures, and emphasised that just because they had permitted the exchange’s establishment, that did not mean they would approve its contracts.
The idea of box office futures is that market participants can bet on the quantity of revenues a certain film will make in a given period after its release. This instrument would allow film makers and distributors to hedge the commercial risk of a film.
The concept draws on the experience of “opinion markets” in which people wager on the outcome of an event such as an election. Such markets have sometimes proved good predictors – perhaps because they synthesise the knowledge of many people.
Trend Exchange is owned by Movie Derivatives, a...