Definition of Domestic Box Office Receipt (DBOR) Futures Contracts
Domestic Box Office Receipt (DBOR) Contract Futures are based on movie receipts at the box-office. DBORs received approval from the Commodity Futures Trading Commission (CFTC) on June 15, 2010, with the trading of these contracts permitted on two exchanges, the Cantor Exchange and the Trend Exchange. However, Congress enacted legislation shortly after which banned box-office receipts as the basis of any futures contract. These types of contracts are not currently available for trade.
Breaking Down Domestic Box Office Receipt (DBOR) Futures Contracts
Domestic Box Office Receipt futures contracts entailed cash settlement, based on the sum of daily box-office receipts in the United States and Canada during the first four weeks after a film's initial release. While the contracts were approved briefly, they did not commence trading since they were banned shortly after. Similar to other futures products, higher box-office receipts would have pushed the futures prices up, while lower box-office sales would have pushed the prices down.
The concept of DBOR futures contracts had already run into resistance from a number of parties including major movie studios, theater owners, and the Motion Picture Association of America, on the grounds that the instruments could be susceptible to insider trading and manipulation.
Reversal of DBOR Futures Approval
It was thought that the futures contracts could be used by those in the movie industry to hedge risk. On the flip side, it provided a way for people to speculate on the popularity of newly released and upcoming movies. While DBOR contracts are not available for trade in the U.S., speculators can still participate, indirectly, on the success of movies by buying or shorting the movie companies themselves. The stock of a movie company may rise in anticipation of the release of a movie which is expected to do well at the box office. It then may fall if sales are lackluster or the rise in the stock was too large for the sales generated.
It was the Dodd-Frank Act, signed July 16, 2010, that caused the prior approval of DBOR futures to be rescinded. The Act included stipulations that prohibited futures contracts on movie box office sales, or any index or instrument which could or would mimic such sales. While the CFTC originally voted three-to-two in favor of approving the contracts, one month later the sweeping reform bill banned such contracts for the foreseeable future in the U.S..
The Cantor Exchange, now called CX Markets, is regulated in the U.S. and offers trading products for both weather and currencies.
The Trend Exchange is not operational.