Box office futures market chief attacks 'powerful special interest group' MPAA in mail blast to senators
The battle over box office futures has hit senators' in-boxes.
The head of Media Derivatives, one of two proposed markets for trading futures contracts related to box office receipts, has sent a letter to all 100 senators attacking a legislative provision supported by the major movie studios that would ban the markets as the unwise work of a "powerful special interest group."
The provision is contained in The Wall Street Transparency and Accountability Act of 2010, a bill proposed by Sen. Blanche Lincoln (D-Ark.) that would put new regulatory constraints on derivatives trading. It would make box office contracts only the second type of futures banned, along with onion futures, which were outlawed in 1958.
"Banning a futures contract at the request of a powerful special interest group like the [Motion Picture Assn. of America] sets a dangerous legislative precedent," the letter by Media Derivatives Chief Executive Robert Swagger says. "It undermines the role of the existing regulators and sets up a case that any time a new contract is developed, opponents will run to Congress and a decision is made to either accept or deny the request of special interests solely for political reasons."
Swagger's primary argument in the letter appears to be is that box office futures shouldn't be singled out and treated differently than other types of derivatives, which will be regulated on exchanges under Blanche's proposal.
He also points out that in a recent interview with ABC News, Treasury Secretary Timothy Geithner appeared to oppose the ban. "Well you can't -- you can't stop innovation," he said when asked by George Stephanopoulos if box office futures should be banned. "You can't run a system where you have a bunch of bureaucrats in Washington trying to figure out what's risky and what's not, because the risk is they'll miss it, they'll be too late, or they'll overdo it."
Media Derivatives and Cantor Fitzgerald's Cantor Exchange have both had their box office trading markets approved by the Commodity Futures Trading Commission, but are awaiting approval of the specific types of contracts they want to sell.
The MPAA on Wednesday released a letter sent by 10 House members to CFTC Chairman Gary Gensler asking him to take the full review period, which lasts until June, to analyze the box office futures contracts.
Echoing arguments made by the major studios and their supporters, the letter claims that box office futures serve no public purpose since they don't help to set a price for a product and that it could be too easily manipulated. The letter also says that regulating movie derivatives could distract CFTC staffers from focusing on more important ones related to agriculture.
Among the 10 signers are three representatives California: Democrats Howard Berman of Valley Village and Adam Schiff of Burbank, and Republican George Radanovich of Mariposa.
-- Ben Fritz