Founder says Lionsgate’s Burns has conflict of interest in Hollywood Stock Exchange/Cantor Exchange
| June 2nd, 2010 | ||
| Contributed by: Teri Buhl | ||
| The chance to turn your virtual cash into the real thing on the Hollywood Stock Exchange is set to begin at the end of June. The futures market regulator, the CFTC, is moving forward on approving trading futures contracts on box office results. Now Hollywood and Wall Street are anxiously waiting to see if Congress will bless it. But one of the exchanges’ founders says there are important conflicts of interest that haven’t been investigated. Max Keiser, journalist for Russia Today TV, showed his viewers video tape of his former partner in the HSX/Cantor Exchange, Michael Burns, Vice Chairman of film studio Lionsgate (NYSE: LGF), bragging about trading on inside information on HSX, a virtual exchange they both created in the mid 90’s. Virtual prices on an exchange like HSX have real world impact - as noted by the Village Voice who wrote about how NBC banned reporting of prices on HSX before a film's opening for fear prices on HSX - and the perception they carry - would impact opening gross results. A problem that could be compounded when hedge funds and derivatives traders keying off CFTC approved box office futures contracts begin. (Source) The CFTC now has to work out these ethics issues with the exchanges existing owner Wall Street brokerage house Cantor Fitzgerald. But this isn’t Keiser’s only worry – what has him most troubled is it’s unclear if regulators have proven that Burns doesn’t still have an economic interest in the Hollywood Stock Exchange. Burns led a shareholder sell out of the exchange to Cantor Fitzgerald nearly a decade ago – a deal Keiser says was shady from the start. According to Keiser, Burns told him while at the Cannes Film Festival in 2002 that instead of just a side deal - stock swap payout for their business, Cantor made him a deal that he’d get a cash over ride of HSX trading revenue. A deal that could prove a huge conflict of interest if Burns, the head of a movie studio, is reaping cash off bets on his movie’s success or a competitor's failure. In April, John Lopez of Vanity Fair, noted that Lionsgate’s sudden stamp of approval over the legalization of movie box office betting was an odd turn of events. Why, because the Hollywood associations his studio has to work with were against it. Lopez writes: “ …Lionsgate went to the Dark Side and came out in support of Hollywood Stock exchanges. It was a crucial crack in the unified Rebel Alliance of the M.P.A.A., D.G.A., and I.A.T.S.E.” (Source) | ||
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3 Comments
by moviegeek23 on June 7th, 2010
- Hard to believe Teri that you've seen my comments on this topic over the past few months, yet fail to understand the benefits of these products or even their basic characteristics.
- No.
- and, no.
by Teri Buhl on June 6th, 2010
I've seen your comments on most of the HSX stories printed in the last few months. It looks like you are writing for Cantor PR or Lionsgate. I suggest you come out and comment with your real name and industry association.
by moviegeek23 on June 3rd, 2010
This article is filled with repeated misrepresentations and inaccuracies related to the topic of box office futures. Allow me to try and set the record straight.
Bob Pisano of the MPAA has publicly stated that "whether a motion picture will connect with an audience has proven quite difficult to predict, and in some instances sentiment for a motion picture can prove to be quite fleeting." And yet Michael Burns of Lionsgate can accurately predict these box office results based on his inside information. Truth is, if there were a formula for generating anticipated box office results, then there would not be such a thing as a movie flop.
And to compare Michael Burns' alleged manipulation of a make-believe marketplace to what could potentially happen in a lkive, real-world, real-money setting simply speaks to the ignorance of those arguing this point. They apparently have little if any understanding of how the regulated futures markets work. Margining, mark-to-market banking, large trader reporting, speculative position limits, common clearing, and daily oversight by the CFTC and NFA are only a few of the regulatory controls in place in these highly-regulated exchange markets that would prevent these fantasy scenarios from ever occurring.
But these box office products continue to be lumped in with the over the counter (OTC), UNREGULATED products that were at the root of the recent financial meltdown.
A rudimentary understanding of these markets would conclude that exchange-traded derivatives have worked flawlessly, without default, for over 100 years, and actually serves as the financial model which the U.S. government wishes to move all OTC products to. To paint all of derivatives trading as "out of control" and "high risk", as Heidi Moore does, is akin to generalizing the entire middle east as the enemy of the U.S., without giving any thought to the different countries.
The author Teri Buhl cannot even get product specifics correct. "Cantor’s made it easy for Main Street to jump into the betting because you only need $5,000 to place a bet that Lionsgate newest indie film will be a runaway hit or box office flop". Except that the Cantor Exchange contract size is $100. It is the Trend Exchange contract that is the $5000 notional amount.
And she promotes a continued line of attack issued by Max Keiser on how leveraged derivative products could potentially wipe out the entire Hollywood industry. Nevermind that neither the Cantor Exchange nor the Trend Exchange product offerings are leveraged products. They are fully capitalized, fully margined products.
But why let a silly thing like facts get in the way of creating such a risque and entertaining rant?
The rampant hypocrisy within the MPAA and the entertainment industry, and the related NON-objective, uninformed reporting associated with it, continues to be a major disappointment.
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