Opinion

Felix Salmon

HSX goes real-money

By Felix Salmon
February 24, 2010

Lauren Hatch mentions that the Hollywood Stock Exchange, which is to begin real-money trading on April 20, “has been just-for-fun since 1998″. What she doesn’t mention is that the company was sold to Cantor Fitzgerald with the express intention of turning it into a real-money exchange all the way back in 2001; it’s taken nine years to get the requisite permissions.

So while I’m happy to see a real-money prediction market finally get up and running on a fully-legal basis in the United States, it seems the barriers to entry in this business are so enormous that even Cantor Fitzgerald would probably not have bothered had they known what a hassle it would be.

A lot of the details about the new exchange remain unclear, including the degree to which it’s going to be accessible to ordinary punters as opposed to sophisticated investors. Whatever happens, its mechanism for returning money to participants can’t be worse than InTrade’s.

Comments
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I’m sure Cantor Fitzgerald is happy you don’t think of it first, but to me they are still most famous for losing two-thirds of their workforce on 9/11. HSX was acquired in May 2001. There has to be at least some delay due to 9/11 and it’s possible that HSX just wasn’t a priority for quite a while.

Posted by mattlehrer | Report as abusive
 

Good point.

 

Hmm… very interesting. The mechanism which does the trades for HSX is not a bid/sell mechanism. The market price is determined by momentum. Perhaps it doesn’t necessarily matter how the price is set. What is odd about the situation is that it seems that HSX must own the full set of shares to make the futures contracts valid. I’m curious how this is going to play out; there could be significant risk on the Cantor side.

Disclosure: I worked as CTO for HSX from 1997-98 at the point when the original trading mechanisms were written.

Posted by treejanitor | Report as abusive
 

treejanitor, that is interesting perspective that you bring to the discussion. I suspect that it is somewhat like the house in gambling. In the balance, they win, but not without a hell of a lot of upfront capital.

Disclosure: I am looking for someone who has experience leading the development of a bid/sell marketplace environment. Contact me if you know someone: chris.jacqueson@gmail.com

Posted by Jacqueson | Report as abusive
 

I’m a bit of a movie fanatic. As such, back in the day one of my favorite websites was Hollywood Stock Exchange (HSX). On it, you bought and sold both movies (moviestocks) and movie stars (starbonds) based on how you thought they would do with upcoming releases. Of course, all of this was done with virtual cash (H bucks), making it a fun game. But in April, the game turns real. As in, real money.make money in minutes

Posted by veerok | Report as abusive
 

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