The Hollywood Stock Exchange may not have taken the world by storm, but it has been successful enough to become a real-money market. Started in 1996 as a funny-money virtual market, HSX (as they call themselves) specializes in the buying and selling “shares” of movie-related commodities, particularly box office returns.
HSX is nearing final approval by the U.S. Commodity Futures Trading Commission, and if all goes well, you will be able to make your first million starting April 20 by short-selling shares of Marmaduke, for example.* Most of the site’s current users are cinema fans, but the exchange hopes to expand their appeal to studios and other investors.
“Markets pop up when there’s a perceived need for trading something,” said Bob Korajczyk, professor of finance. Though HSX may have created this perceived need via their current virtual market, Korajczyk said the start up phase is the least of its challenges. “There’s always the test of time. Will the market attract enough volume? Will there be enough liquidity in it to attract people to trade there?”
“It’s a chicken and egg thing,” he said. “You need a lot of volume to make it a liquid market, but you need liquidity for people to come there and trade.”
Should HSX attract enough liquidity and volume, Korajczyk thinks studios could use the exchange to hedge their risks or even redirect marketing funds in extreme cases if a futures contract predicts an unexpected blockbuster. Shares begins trading six months before a movie’s release and are priced one-millionth of the predicted box office receipts for the first four weeks.
*Shorting Hot Tub Time Machine would also seem like a sure thing, but it opens before the exchange welcomes real money. Bummer.