May 16, 2010
No, it’s not the tears both can cause, those shed by studio execs when weekend box office numbers come in lower than expected, or the unwanted eye watering cooks struggle to hold back when chopping brown, red, Spanish or other onions. What they really have in common is this. If the Wall Street Transparency and Accountability Act of 2010 becomes law, box office revenue will be added to onions as the only two items specifically excluded from the definition of “commodity” under the Commodity Exchange Act. [7 United States Code §1]. If this happens, box office futures will be banned before they get off the ground, and the new movie futures products proposed by Cantor Exchange and MDEX(Trend Exchange/TrendEx) will be dead in the water.
But there is hope. The Wall Street Transparency and Accountability Act came out of the Senate Agriculture Committee last month. Senator Blanche Lincoln of Arkansas, the Chair of that Committee, is in a fight for her political life. On Tuesday May 18, 2010 she faces a primary challenge in her home state by a fellow Democrat. If she manages to survive the primary, her chances in the general election remain questionable. Some believe the larger financial reform bill in Congress, of which the Wall Street Transparency and Accountability Act is part, has been championed by Senator Lincoln because of election year politics and fear for her seat. Further, that the bill will be watered down if she manages to survive the primary fight she now faces.
Does this mean the prohibition on movie futures contracts based on box office revenue will be removed from the bill if Senator Lincoln wins her primary? Unclear. Stay tuned.
The Bill Banning Box Office Futures
Here is the language on movie futures in the current bill for those who can’t get enough of this stuff. For the record, the entire bill is 1565 pages long. The section related to movie box office futures is one of 22 amendments to Section 1(a) of the Commodity Exchange Act. Those 22 amendments run 32 pages long. Thankfully, the section related to movie box office futures is relatively short. OK, enough stalling. Here you go:
7-12-2010 UPDATE: The language which follows may not be the final language in the bill that came out of Conference Committee. News reports indicate, for example, that a provision was added making the ban on motion picture box office receipts retroactive to June 1, 2010, which is prior to the date on which the CFTC approved the box office futures contracts submitted by Trend Exchange and Cantor Exchange.
RESTORING AMERICAN FINANCIAL STABILITY ACT OF 2010
TITLE VII- WALL STREET TRANSPARENCY AND ACCOUNTABILITY
Subtitle A—Regulation of Over-the-Counter Swaps Markets
Part II Regulation of Swap Markets
Sec. 721 Definitions
(a) Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended—
(4) in paragraph (9) (as redesignated by paragraph (1)), by striking ‘‘except onions’’ and all that follows through the period at the end and inserting the following: ‘‘except onions (as provided in section 13-1) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which contracts for future delivery are presently or in the future dealt in.’’;
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{ 2 comments… read them below or add one }
To an outsider like me who does not understand the US political systems, this whole ‘added language’ angle to this process stinks.
This language was added to the bill before the very same committee held what was supposed to be an open hearing and discussion on the topic of movie futures. How is that democratic?
Watching the committee hearing it was blatantly obvious that the majority of committee members had no grasp of the detail of these products or their possibilities – these guys are presumably paid to do a job yet could not be bothered to fulfill this task. Instead, they had already had their mind made up for them by the noise being generated by the MPAA.
The irony from where I am standing is that it has been Obama himself who has taken the biggest public stance against lobbyists and their sphere of influence and here we are with a committee dominated by Democrats who appear to have made up their mind instantly on a new, innovative product and concept without needing any time to undesrtand them or hear the arguments for or against them.
Lincoln’s “added language” to the bill outlawing movie box office futures is only a result of heavy lobbying by the MPAA, and a result of Lincoln and the other senators who approved this language catering to the special interests that are filling their political coffers.
Blanche Lincoln’s sister also happens to be a Hollywood director. Conflict of interest, anyone?
There is already a federal regulatory agency, the CFTC, which is more than capable of evaluating the merits of these proposed products, and according to the federal regulatory statutes has until late June to rule on them.
The language in this bill not only seeks to circumvent this review process by imposing a legislative ruling on these products, but also sends a CLEAR message that congress has no confidence in the CFTC to perform the regulatory functions that they are entrusted with through the Commodities Exchange Act (CEA).
We should not be advocating a precedence that excludes one industry from benefitting from exchange-traded, centrally-cleared, federally-regulated futures instruments without allowing the agency entrusted to approve or disallow them to conduct their due diligence.
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