Domestic Box Office Receipt (DBOR) Futures Contracts

What Is a Domestic Box Office Receipt (DBOR) Futures Contract?

A Domestic Box Office Receipt (DBOR) futures contract is a type of derivative product whose value depends on the future film industry incomes created from a forthcoming film. These products were momentarily authorized in the United States in June 2010 yet were restricted presently.

One of the primary protests in prohibiting DBOR futures was the conflict that they could be utilized for reasons for insider trading inside the film industry. Advocates for DBOR futures contended that they would help film studios hedge risk and empower speculators to take part in the film industry.

How DBOR Futures Contracts Work

DBOR futures contracts are like other derivative products, in that they are financial instruments whose value is tied to a underlying asset. In this case, the underlying asset comprises of the movies incomes expected to be created from an impending film release. Examiners who wish to profit from an impending film could buy DBOR futures for that film and hope to profit assuming its film industry receipts come in higher than expected. Simultaneously, film studios could reduce their risk exposure to certain motion pictures by selling futures contracts.

DBOR futures contracts were cash-settled, with the settlement amount calculated in view of the sum of all film industry receipts created in the United States and Canada inside the initial four weeks following a film's initial release. Like different futures products, higher film industry receipts would have pushed the futures prices up while lower film industry sales would have pushed the prices down.

While the contracts were approved momentarily, they didn't begin trading since they were restricted presently. Prior to being prohibited, the concept of DBOR futures contracts had previously run into resistance from a number of gatherings including major film studios, theater owners, and the Motion Picture Association of America in light of the fact that the instruments could be helpless to insider trading and manipulation.

True Example of a DBOR Futures Contract

At last, it was the [Dodd-Frank Act](/dodd-frank-financial-administrative reform-bill), marked July 16, 2010, which made the prior endorsement of DBOR futures be revoked. The act remembered expectations that disallowed futures contracts for film industry sales, or any index or instrument that could or would copy such sales. While the CFTC initially casted a ballot three-to-two for supporting the contracts, after one month, the general reform bill prohibited such contracts for the foreseeable future in the United States.

Prior to being prohibited, DBOR futures contracts were planned to be traded on two exchanges: the Cantor Exchange, presently called CX Markets; and the Trend Exchange (TrendEx). While TrendEx is at this point not operational, CX Markets keeps on working in the United States as a scene for trading derivatives in light of climate occasions.

Features

• The contracts were to be cash-settled in light of incomes from the initial a month following the film's release.
• The concept was momentarily approved, however at that point prohibited presently following the entry of the Dodd-Frank Act in July 2010.
• Domestic Box Office Receipt (DBOR) futures contracts are a type of derivative whose underlying asset is the movies incomes created from a recently released film.