Tag Archives: InTrade

CFTC-regulated, real-money prediction markets about movie box office – Cantor Exchange

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Cantor Exchange

http://www.cantorexchange.com/ &#8212- A twin site of the Hollywood Stock Exchange.

Here are my early thoughts about the &#8220-Cantor Exchange&#8221-. I regret to say that their &#8220-Cantor Exchange&#8221- website does not seem very usable. (I hope it is not a bad omen.) It is impossible for me to copy their explanations posted on their webpages (other than the 2 press releases) and to republish that material in this post.

The second thought that comes to my mind is that their offerings are not standardized (their event derivatives are described in HSX lingo), and I wonder whether the real-money traders, who are accustomed to dealing with the CME, the NYSE, or InTrade, but who are not familiar with HSX, will make the effort to adapt. We will see. (I don&#8217-t think that the HSX play-money traders will go speculating on this real-money prediction exchange.) The collateral question is, why would the Cantor Exchange (a brand-new exchange with not a single trader, as of today) be better positioned to organize event derivative markets on movie business than, say, HedgeStreet, InTrade, BetFair, or even the CME? Obviously, Cantor Fitzgerald (a bond broker) are thinking that they can leverage their Wall Street clientele and the HSX population to branch out and start up a brand-new, CFTC-regulated, real-money prediction exchange. It&#8217-s quite a big bet. I say &#8220-branch out&#8221- because starting off a real-money prediction exchange (Cantor Exchange) is quite different than running a play-money prediction exchange (HSX). Just look at how difficult it has been for HedgeStreet, which started off in 2004, and escaped bankruptcy in 2007 thanks to their rescue by IG Index. After 4 years, HedgeStreet is still not profitable, and it will probably take more years before it turns the first profit. Let&#8217-s wish a better future for Cantor Exchange.

I will update this present post, later on, linking to the reactions from the media and the blogs. (Cantor will be holding a conf call this Tuesday, so some media coverage will pop up over the next days.)

Here is a Financial Times news article, which won&#8217-t tell you much more than the 2 press releases re-published below.

Here&#8217-s Variety.

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Press releases:

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CANTOR ENTERTAINMENT TO ANNOUNCE MOVIE BOX OFFICE CONTRACTS

TO MOTION PICTURE INDUSTRY AND INVESTOR COMMUNITY

Cantor Fitzgerald Files Application for Domestic Box Office Receipt Contracts

Los Angeles, CA- New York, NY – (December 8, 2008) – Cantor Entertainment, which provides various services to the entertainment industry and owns the Hollywood Stock Exchange, is pleased to announce that Domestic Box Office Receipt contracts will soon be available to the motion picture industry and investor community. Cantor Fitzgerald, its parent company, announced earlier today that it has filed an application to launch the Cantor Exchange, whose first listed product will be Domestic Box Office Receipt contracts.

Domestic Box Office Receipt contracts will offer film finance professionals and traders a new opportunity to hedge and speculate on the theatrical performance of wide-release Hollywood movies. Domestic Box Office Receipt contracts will be a next generation film-financing tool that allows market participants to hedge risk and provides them profit opportunities based on the first four weeks of a film’s box office revenues.

“It’s clear from our conversations within the industry and investment community that there is a tremendous opportunity to introduce this exciting new tool to complement existing film financing alternatives. The market for Domestic Box Office Receipt contracts offers the motion picture industry, investment funds, banks and all other prospective investors a federally regulated trading exchange dedicated to the entertainment industry,” said Andrew L. Wing, President and Chief Executive Officer of Cantor Entertainment. “Our involvement in Domestic Box Office Receipt contracts reflects our continuing commitment to expand Cantor Entertainment’s numerous services in the entertainment industry.” The first Domestic Box Office Receipt contract is expected to be listed on the Cantor Exchange in the first quarter of 2009. Cantor Exchange is subject to final approval by the Commodity Futures Trading Commission (“CFTC”).

About Cantor Entertainment
Cantor Entertainment, a division of Cantor Fitzgerald, L.P., provides services to the entertainment industry. Cantor Entertainment also owns the Hollywood Stock Exchange (www.HSX.com), the world’s leading virtual entertainment stock market.

About Cantor Fitzgerald, L.P.
Cantor Fitzgerald is a leading global financial services firm. The Cantor Fitzgerald franchise includes institutional equity and debt sales and trading, investment banking, private equity, as well as other businesses and ventures. For over 60 years, Cantor Fitzgerald, a proven and resilient leader, has been committed to delivering a unique brand of unparalleled product expertise, innovative technology and customer service to its clients around the world. For more information, please visit www.cantor.com.

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Cantor Fitzgerald Announces Application for Cantor Exchange

Domestic Box Office Receipt Contracts are Expected to be First Contract Market

A New Tool in Film Finance

NEW YORK&#8211-(BUSINESS WIRE)&#8211- Cantor Fitzgerald, L.P., a leading global financial services firm, announced today that it has filed an application with the Commodity Futures Trading Commission (“CFTC”) to launch the Cantor Exchange. Cantor Exchange intends to list Domestic Box Office Receipt contracts as the exchange’s first traded product.

“The Cantor Exchange and our intention to list Domestic Box Office Receipt contracts reflect our continuing commitment to innovation in the finance and entertainment sectors,” said Howard W. Lutnick, Chairman and Chief Executive Officer of Cantor Fitzgerald.

Subject to final regulatory approval of the Cantor Exchange application, Domestic Box Office Receipt contracts will offer film finance professionals and traders a new opportunity to hedge and speculate on the theatrical performance (ticket sales) of major film titles. Domestic Box Office Receipt contracts will be a next generation financial management tool that allows film professionals to hedge risk and provides speculative opportunities to other market participants based on the first four weeks of a film’s box office performance.

The first Domestic Box Office Receipt contract is expected to be listed on the Cantor Exchange in the first quarter of 2009, subject to final approval of the Cantor Exchange application by the CFTC.

About Cantor Exchange

Cantor Exchange is launching the first trading platform based on movie box office revenue, and expects to begin listing Domestic Box Office Receipt contracts in the first quarter of 2009, subject to final regulatory approval. Cantor Exchange is a division of Cantor Fitzgerald, L.P., one of the world’s leading financial services firms, and is partnered with Cantor Entertainment, another subsidiary of Cantor Fitzgerald, which provides services to the entertainment industry and owns the Hollywood Stock Exchange® (www.HSX.com), the world’s leading virtual entertainment stock market.

About Cantor Fitzgerald, L.P.

Cantor Fitzgerald is a leading global financial services firm. The Cantor Fitzgerald franchise includes institutional equity and debt sales and trading, investment banking, private equity, as well as other businesses and ventures. For over 60 years, Cantor Fitzgerald, a proven and resilient leader, has been committed to delivering a unique brand of unparalleled product expertise, innovative technology and customer service to its clients around the world. For more information, please visit www.cantor.com.

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UPDATES WILL BE POSTED BELOW, LATER TODAY (AND DURING THE NEXT DAYS)&#8230-

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[T]he initiative is not for an application for a product extension of HSX. Rather it is an application for the launching of a new futures market, the Cantor Exchange, which will list Domestic Box Office Receipt Contracts. The contracts will also be known as Movie Box Office Contracts.

There are some similarities with HSX in that Movie Box Office Contracts are modeled on the MovieStock methodology of our site. For example, the contracts will be based on four weeks of a film&#8217-s domestic box office revenue. The regulatory approval process is inherently uncertain, so it&#8217-s a bit premature to say we are moving into real-money film trading markets just yet, but that is our intent.

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That is from Alex Costakis, MD of HSX.

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Here&#8217-s the Cantor Exchange project leader: Richard Jaycobs.

He seems to be a man open to suggestions.

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CNBC on Cantor Exchange &#8212- Via Jason Ruspini

Fox Business on Cantor Exchange &#8211-

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Financial Times:

All eyes on Hollywood futures

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Previously: Should the Hollywood Stock Exchange become a real-money betting exchange? – 2007-10-04

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Worlds #1 finance blogger withdraws all his money from InTrade… and blogs about it -detailing his negative customer experience to his thousands of Wall Street readers.

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Market Movers:

Dec 3 2008 5:52PM EST
The Problem With InTrade

I recently withdrew money from an InTrade account I&#8217-ve had for some years. The total cost of withdrawing the money was $53.10: A $20 fee to InTrade for &#8220-processing the bank wire&#8221-, a €10 ($13.10) wire-transfer fee to National Irish Bank, and a $20 fee to Bank of America, the intermediary bank via which the money arrived in my Citibank account. If Citi had charged their customary $25 incoming wire fee, the total would have been $78.10.

You need to have a very large balance at InTrade, or an incredibly successful trading strategy, to make trading there worthwhile if it costs the best part of $80 just to withdraw your money. And prediction markets need a critical mass of users, otherwise they die. InTrade, for one, can count me out.

[Felix Salmon]

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Posted: Dec 03 2008 6:24pm ET
I&#8217-ll definitely use the check option next time &#8212- but there&#8217-s no indication on their website as to which one is cheaper, and I stupidly thought that a wire transfer would be cheaper than printing and posting a check.
By Felix [Salmon]

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Posted: Dec 04 2008 04:46am ET
PayPal will not process transactions to online gambling sites (including Intrade) from the US. After the Unlawful Internet Gaming Enforcement Act none of the payment providers will process these transactions, that is why you are stuck with check and wire transfers.

I expect that Antiguan sports books offer free withdrawal because they have much higher margins than Intrade and therefore can absorb the costs elsewhere.
By nigeleccles [Nigel Eccles of HubDub]

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Previously: Why did John Delaney shut down TradeSports?

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Previously: The InTrade predicton markets on the viability of InTrade won&#8217-t reveal *ANYTHING* about the future of InTrade.

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Previously: on TradeSports death – on InTrade&#8217-s viability

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The one thing I enjoy every Monday morning

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As a prediction market aficionado, what lights me up are stories about&#8230- (of course)&#8230- how the prediction markets are assessing important news. The HubDub blog publishes, every Monday morning, a post that rounds up the 5 most prominent (that&#8217-s subjective) news stories of the week, with the prediction market charts, so we can spot which outcome is the more likely, for each issue.

I find this weekly newsletter addictive. I read it with attention each Monday. It is simple, short, but well done and effective.

I wish InTrade, BetFair, and NewsFutures would publish such a prediction market blog.

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Are prediction markets useful?

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According to Alan Abramowitz, John Tierney has been &#8220-greatly exaggerating the accuracy of the betting markets.&#8221- &#8220-They follow the polls. That’s it.&#8221-

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My comment to Alan Abramowitz and John Tierney:

&#8220-They follow the polls. That’s it.&#8221-

Yes, they follow the polls. No, that&#8217-s not it.

Traders also dig the news of the day and make anticipations about the outcome. For instance, towards the end of the 2008 Democratic primary, the polls and the mass media were still giving Hillary Clinton a very good standing, whereas the prediction markets (informed by a bunch of political experts who did the counting of the delegates and super-delegates) were telling us that she was as toasted as Lehman Brothers in the middle of the credit crunch crisis.

Are prediction markets useful? If John Tierney wants to answer this question, he should pick up a prediction market and put it in the social context of that day. Some prediction markets are more useful than others. In the case of the 2008 Democratic primary (a complicated matter), the prediction markets sided with the best informed political experts against the mass media and the polls. So to speak, they were an umpire. In that case, we see the emergence of a social utility. We now have the case for the media citing more the probabilities of the liquid (play-money and/or real-money) prediction markets.

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Previously: #1 – #2 – #3 – #4 – #5

External Link: Club of Growth

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The Intrade bettors expected Mr. Obama to end up with 364 votes in the Electoral College -one less than he actually got.

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My remark to John Tierney:

InTrade got it [almost] spot on because they were wrong on Missouri (which was predicted to go for Obama but went to McCain) and wrong too on Indiana (which was predicted to go for McCain but went to Obama) —and those 2 opposite mistakes canceled themselves because those 2 states have the exact same number of electoral votes (11). Hence, I disagree with your method.

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APPENDIX:

Here&#8217-s a visual post-mortem of the 2008 US presidential elections.

Pay attention to Missouri and Indiana.

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A) InTrade, on November 5, 2008 (screen shot taken at 2:00 am):

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Prediction Markets &amp- State Polls, on November 4, 2008:

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B1) Prediction Markets (on November 4, 2008)

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InTrade (screen shot taken at mid-day ET, November 4, 2008):

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InTrade (screen shot taken in the morning, November 4, 2008):

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BetFair (screen shot taken in the morning, November 4, 2008):

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HubDub (screen shot taken in the morning, November 4, 2008):

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B2) State Polls (on November 4, 2008)

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Karl Rove (on November 4, 2008):

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CNN (on November 4, 2008):

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Pollster (on November 4, 2008):

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Electoral-Vote.com (on November 4, 2008):

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Nate Silver (on November 4, 2008):

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PREDICTION MARKET PROBABILITIES

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Explainer On Prediction Markets

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A prediction market is a market for a contract that yields payments based on the outcome of a partially uncertain future event, such as an election. A contract pays $100 only if candidate X wins the election, and $0 otherwise. When the market price of an X contract is $60, the prediction market believes that candidate X has a 60% chance of winning the election. The price of this event derivative represents the imputed perceived likelihood of the partially uncertain event (i.e., its aggregated expected probability). A 60% probability means that, in a series of events each with a 60% probability, the favored outcome is expected to occur 60 times out of 100, and the unfavored outcome is expected to occur 40 times out of 100.

Each prediction exchange organizes its own set of real-money and/or play-money markets, using either a CDA or a MSR mechanism &#8212-with or without an automated market maker.

Prediction markets enable us to attain collective intelligence. Prediction markets produce dynamic, objective probabilistic predictions on the outcomes of future events by aggregating disparate pieces of information that the traders bring when they agree on prices. The event derivative traders are informed by the primary indicators (i.e., the primary sources of information), like the polls, for instance. These informed speculators then execute their transactions based on their anticipations about the future &#8212-anticipations that will be either confirmed or infirmed.

The value of a set of prediction markets consists in the added accuracy that these prediction markets provide relative to the other forecasting mechanisms, times the value of accuracy in improved decisions, minus the cost of maintaining these prediction markets, relative to the cost of the other forecasting mechanisms. According to Robin Hanson, a highly accurate prediction market has little value if some other forecasting mechanism(s) can provide similar accuracy at a lower cost, or if very few substantial decisions are influenced by accurate forecasts on its topic.

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More Info:

– The Best Resources On Prediction Markets = The Best External Web Links + The Best Midas Oracle Posts

– Prediction Market Science

– The Midas Oracle Explainers On Prediction Markets

– All The Midas Oracle Explainers On Prediction Markets

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Forbes endorses the Jason Ruspini prediction markets on tax rate.

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Forbes:

Whether you think prediction markets are miraculous indications of the wisdom of the crowd or just fun betting markets is sort of beside the point. Nor does it much matter if the markets are accurate or vulnerable to speculative manipulation. What&#8217-s key is that by hedging a tax increase, you are taking out a little insurance against that heaven-help-us event.

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TradeSports & InTrade – The saga continues…

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– See comment #2 that says that the InTrade PMs on InTrade are &#8220-absurd&#8221-.

– Scroll down there to spot Todd&#8217-s comment.

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Previously: Why did John Delaney shut down TradeSports?

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Previously: The InTrade predicton markets on the viability of InTrade won&#8217-t reveal *ANYTHING* about the future of InTrade.

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Previously: on TradeSports death – on InTrade&#8217-s viability

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Why did John Delaney shut down TradeSports?

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He has offered 2 different explanations.

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EXPLANATION #1: Let&#8217-s blame the Unlawful Internet Gambling Enforcement Act of 2006.

We underestimated the difficulties that current and new customers would experience in funding accounts and partly as a result of this we have reluctantly decided to close TradeSports. While we are not hopeful that funding issues may dissipate soon, should they TradeSports will be back and it is therefore an imperative for us to effect and orderly and goodwill preserving closure for you all.

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EXPLANATION #2: In spite of the InTrade-TradeSports splitting (sold to the gullible people since January 1st, 2007), TradeSports is the gambling stigma attached to InTrade. It is good business to get rid of that gambling stigma.

The closure of TradeSports is a good for Intrade as for too long the legacy association of Intrade to TradeSports has been a negative for Intrade for reasons that have been referred to above.

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Chris F. Masse

The InTrade predicton markets on the viability of InTrade are *STRUCTURALLY* designed to *DETER* any InTrade trader from betting on the negative side of the issue.

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Link via Jason Ruspini

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Previously: The InTrade predicton markets on the viability of InTrade won&#8217-t reveal *ANYTHING* about the future of InTrade.

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InTrade CEO John Delaneys 2 risky bets

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– Their upcoming “business development initiatives” will magically generate new, sustainable revenues.

– The CFTC will soon allow InTrade to export its Irish services, legally, to the Americans.

Each of those bets is risky &#8212-and InTrade need to succeed on both fronts. It will be very difficult.

Best of luck to them &#8212-luck is what they will be needed.

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