Wednesday, June 16, 2010

Movies and pork bellies

Working for Options Clearing Corp taught me many things. Among those was an introduction to the history of Chicago's top exchanges. CME or Merc, originally started with futures contracts on frozen pork bellies, will soon see its first intangible commodity trading. Movies, will soon become the first intangible commodity to be traded on exchanges that allow future contract trading. Thinking of them as high risk commodities (is it really a commodity?), our Govt. is structuring regulations for these newly recognized commodities.

Why regulation? This commodity can be "manufactured" by two bound to doom Mr. Joes and the buyers of futures would lose all their money. To ensure that does not happen, we need regulation. But, how many times have we been able to capture all exceptions under regulations? Alright, no producer/director intends to make flop movies, BUT, only until there is no indirect payoff. And who suffers at the end of the day? Consumer - with potentially more flops shows than before and futures buyer whose money is snatched by the banker selling that security.