Pdf Washington : 2010
Total Page:16
File Type:pdf, Size:1020Kb
HEARING TO REVIEW PROPOSALS TO ESTABLISH EXCHANGES TRADING ‘‘MOVIE FUTURES’’ HEARING BEFORE THE SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT OF THE COMMITTEE ON AGRICULTURE HOUSE OF REPRESENTATIVES ONE HUNDRED ELEVENTH CONGRESS SECOND SESSION APRIL 22, 2010 Serial No. 111–49 ( Printed for the use of the Committee on Agriculture agriculture.house.gov U.S. GOVERNMENT PRINTING OFFICE 56–431 PDF WASHINGTON : 2010 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate 0ct 09 2002 10:49 Aug 26, 2010 Jkt 041481 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 I:\DOCS\111-49\56431.TXT AGR1 PsN: BRIAN COMMITTEE ON AGRICULTURE COLLIN C. PETERSON, Minnesota, Chairman TIM HOLDEN, Pennsylvania, FRANK D. LUCAS, Oklahoma, Ranking Vice Chairman Minority Member MIKE MCINTYRE, North Carolina BOB GOODLATTE, Virginia LEONARD L. BOSWELL, Iowa JERRY MORAN, Kansas JOE BACA, California TIMOTHY V. JOHNSON, Illinois DENNIS A. CARDOZA, California SAM GRAVES, Missouri DAVID SCOTT, Georgia MIKE ROGERS, Alabama JIM MARSHALL, Georgia STEVE KING, Iowa STEPHANIE HERSETH SANDLIN, South RANDY NEUGEBAUER, Texas Dakota K. MICHAEL CONAWAY, Texas HENRY CUELLAR, Texas JEFF FORTENBERRY, Nebraska JIM COSTA, California JEAN SCHMIDT, Ohio BRAD ELLSWORTH, Indiana ADRIAN SMITH, Nebraska TIMOTHY J. WALZ, Minnesota DAVID P. ROE, Tennessee STEVE KAGEN, Wisconsin BLAINE LUETKEMEYER, Missouri KURT SCHRADER, Oregon GLENN THOMPSON, Pennsylvania DEBORAH L. HALVORSON, Illinois BILL CASSIDY, Louisiana KATHLEEN A. DAHLKEMPER, CYNTHIA M. LUMMIS, Wyoming Pennsylvania ——— BOBBY BRIGHT, Alabama BETSY MARKEY, Colorado FRANK KRATOVIL, JR., Maryland MARK H. SCHAUER, Michigan LARRY KISSELL, North Carolina JOHN A. BOCCIERI, Ohio SCOTT MURPHY, New York EARL POMEROY, North Dakota TRAVIS W. CHILDERS, Mississippi WALT MINNICK, Idaho ——— PROFESSIONAL STAFF ROBERT L. LAREW, Chief of Staff ANDREW W. BAKER, Chief Counsel APRIL SLAYTON, Communications Director NICOLE SCOTT, Minority Staff Director SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT LEONARD L. BOSWELL, Iowa, Chairman JIM MARSHALL, Georgia JERRY MORAN, Kansas, Ranking Minority BRAD ELLSWORTH, Indiana Member TIMOTHY J. WALZ, Minnesota TIMOTHY V. JOHNSON, Illinois KURT SCHRADER, Oregon SAM GRAVES, Missouri STEPHANIE HERSETH SANDLIN, South STEVE KING, Iowa Dakota K. MICHAEL CONAWAY, Texas BETSY MARKEY, Colorado BLAINE LUETKEMEYER, Missouri LARRY KISSELL, North Carolina ——— DEBORAH L. HALVORSON, Illinois EARL POMEROY, North Dakota TRAVIS W. CHILDERS, Mississippi ALETA BOTTS, Subcommittee Staff Director (II) VerDate 0ct 09 2002 10:49 Aug 26, 2010 Jkt 041481 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 I:\DOCS\111-49\56431.TXT AGR1 PsN: BRIAN C O N T E N T S Page Boswell, Hon. Leonard L., a Representative in Congress from Iowa, opening statement .............................................................................................................. 1 Prepared statement .......................................................................................... 2 Moran, Hon. Jerry, a Representative in Congress from Kansas, opening state- ment ...................................................................................................................... 2 Prepared statement .......................................................................................... 3 Peterson, Hon. Collin C., a Representative in Congress from Minnesota, open- ing statement ........................................................................................................ 4 Prepared statement .......................................................................................... 4 WITNESSES Berkovitz, Dan M., General Counsel, Commodity Futures Trading Commis- sion, Washington, D.C. ........................................................................................ 4 Prepared statement .......................................................................................... 6 Jaycobs, Richard, President, Cantor Futures Exchange, L.P., New York, NY ... 24 Prepared statement .......................................................................................... 26 Swagger, Robert S., Chairman and CEO, Media Derivatives, Inc., Scottsdale, AZ .......................................................................................................................... 31 Prepared statement .......................................................................................... 33 Pisano, A. Robert, President and interim CEO, Motion Picture Association of America, Inc., Washington, D.C. ..................................................................... 39 Prepared statement .......................................................................................... 40 Harbinson, Scott, International Representative, International Alliance of The- atrical and Stage Employees, Ellicott City, MD; on behalf of Directors Guild of America .................................................................................................. 50 Prepared statement .......................................................................................... 52 Moore, Schuyler M., Adjunct Professor, UCLA School of Law; Adjunct Pro- fessor, UCLA Anderson School of Management; Partner, Stroock & Stroock & Lavan LLP, Los Angeles, CA .......................................................................... 54 Prepared statement .......................................................................................... 56 SUBMITTED MATERIAL Chance, Ph.D., C.F.A., Don M.; on behalf of Cantor Fitzgerald, submitted statement .............................................................................................................. 75 Independent Film & Television Alliance, submitted statement .......................... 73 Plott, Charles R., Professor of Economics and The Edward S. Harkness Pro- fessor of Economics and Political Science, Division of the Humanities and Social Sciences, California Institute of Technology, submitted letter ............. 88 Rutledge, M.B.A., Ann, Adjunct Associate Professor, Department of Finance, Hong Kong University of Science and Technology, submitted letter ............... 91 Submitted questions ................................................................................................ 92 (III) VerDate 0ct 09 2002 10:49 Aug 26, 2010 Jkt 041481 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 I:\DOCS\111-49\56431.TXT AGR1 PsN: BRIAN VerDate 0ct 09 2002 10:49 Aug 26, 2010 Jkt 041481 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 I:\DOCS\111-49\56431.TXT AGR1 PsN: BRIAN HEARING TO REVIEW PROPOSALS TO ESTABLISH EXCHANGES TRADING ‘‘MOVIE FUTURES’’ THURSDAY, APRIL 22, 2010 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT, COMMITTEE ON AGRICULTURE, Washington, D.C. The Subcommittee met, pursuant to call, at 10:30 a.m., in Room 1300, Longworth House Office Building, Hon. Leonard L. Boswell [Chairman of the Subcommittee] presiding. Members present: Representatives Boswell, Marshall, Walz, Schrader, Markey, Kissell, Pomeroy, Childers, Peterson (ex officio), Moran, Luetkemeyer, and Goodlatte. Staff present: Aleta Botts, Clark Ogilvie, Rebekah Solem, John Konya, James Ryder, Debbie Smith, Kevin Kramp, Tamara Hinton, and Sangina Wright. OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE IN CONGRESS FROM IOWA The CHAIRMAN. Our hearing will come to order. I would like to thank everyone for joining us here today as we take a thorough re- view of proposals to establish exchanges to trade movie futures. I would like to give a special thanks to our witnesses for testifying before the Committee and offering their insight. The hearing today explores a novel, new product being consid- ered for trading on a futures exchange regulated by the Commodity Futures Trading Commission. This product is movie futures or box office derivatives. When the Commodity Exchange Act was first passed in the 1930s, it was very unlikely that the Congress envi- sioned such a product would be regulated by the Act. Even with subsequent amendments to the CEA, I doubt those here today fore- saw the development of this type of exchange. Nevertheless, two applicants have developed proposals to establish these box office exchanges and are seeking approval of contracts that would be of- fered there. I am pleased that both applicants are here today to discuss the products in more detail and, hopefully, answer some of the con- cerns that have been raised about the nature of the marketing of these products. Mitigating financial risk is a primary reason for fu- tures exchanges; however, the natural hedgers of the products have for the most part insisted they will not be using the products to (1) VerDate 0ct 09 2002 10:49 Aug 26, 2010 Jkt 041481 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 I:\DOCS\111-49\56431.TXT AGR1 PsN: BRIAN 2 hedge their risk for various reasons. We look forward to hearing from our witness today on why this may or may not be the case. The CFTC has approved the application to establish these ex- changes, but the contract applications are still pending. This hear- ing is especially timely, given the current state of financial regu- latory affairs and the actions going on in the Senate that we under- stand would establish in statute a prohibition of such exchanges. I hope the witnesses will provide this Committee with the context necessary to better understand