SportsRiskIndex™ Critical Path to Regulatory Approval and Operational Rollout

August 26, 2011 in public

Critical Path to Regulatory Approval and Operation

Objective: The objective of this paper is to present the strategy and steps to be taken to achieve regulatory approval for the SportsRiskIndex™ (SRI) product family and begin trading on the world’s regulated financial markets.

Primary Tasks

1. Industry Support

Why?  One of the main criteria that the Commodity Futures Trading Commission (CFTC), the relevant regulatory agency for SRI futures, relies on during product evaluations is industry willingness to use the product.

Historical Fact: Sports industry support is vital. Lack of film industry backing led to an ultimate ban of movie box office futures, another innovative product, after the Motion Picture Association of America (M.P.A.A.) successfully lobbied for a last-minute amendment of the sweeping financial reform bill recently passed. This Congressional override took place in spite of the fact that the CFTC approved the product and the exchange.

Our Stakeholders:

-          Leagues: NFL, NBA, MLB, NHL

-          Player Unions: NFLPA, NBPA, MLBPA, NHLPA

-          Franchise Owners: Madison Square Garden, Inc., Comcast Spectator, Liberty Media, Rogers Communications, other corporate and individual owners

-          Media: Fox, NBC, ABC, CBS, ESPN, Direct TV

-          Apparel Companies/Brands: Nike, Adidas, Reebok

-          Beverage & Beer Companies/Brands: Coca-Cola, Pepsi, Gatorade, MillerCoors, Anheiser-Busch InBev

-          Food Management and Service Companies: Aramark, Delaware North, Ovation Food Services

-          Sports Agencies: IMG, CAA

-          Major Sports Sponsors: Bank of America, McDonald’s, Visa, AON

While the above list is not exhaustive, it frames the principal players in the industry. As such, these are precisely the entities/individuals that would benefit the most from the SRI products through two distinct, but equally important channels:

a)      Risk management: By virtue of being big players in the sports industry, the entities/individuals above bear significant risks that cannot be managed with existing tools. There are NO correlated products in the current global financial offerings that directly mitigate systemic sports risk.

b)      Fan engagement: Sports trading leads to fan engagement. Fans will pay more attention to sports they like or start following new sports from scratch. As fans increase their engagement, all stakeholders will benefit.

Next Steps

For selected entities from the category list above, we will:

1)      Review public filings and other relevant documents in the public domain

2)      Summarize the business as it relates to sports and the sports-related risks

3)      Clearly outline the value proposition: How will the SRI directly and tangibly benefit you?

4)      Prepare customized presentations for each business

5)      Schedule meetings

6)      Attend meetings

7)      Seek, receive and document support

2. Exchange Partner

Why? Per CFTC Rules, only a designated exchange can submit a new financial product for approval. As the developer of the product, we need to secure an exchange partner. Further, this exchange partner will be the listing and distribution mechanism to the global public via their established systems and channels.

Who? With more than 90% of the trading in active futures and options markets, the Chicago Mercantile Exchange (CME Group) is the clear leader and our primary target. Other exchanges will also be considered.

Next Steps: Once industry support is established, we will begin talks with the CME to secure a licensing and distribution agreement.

Supporting Tasks

These tasks are not absolutely necessary for regulatory approval. However, they will greatly enhance the effectiveness of the effort and critical backing of the sports industry while accelerating the securing of an exchange partner by demonstrating expertise and good faith. These are:

1. SportsFolio™ Manager (in progress): The simulator will be an Android and (later) iPhone based software application with web emulators (to run in a web browser) that can be used as demo trading platforms when meeting with the industry participants and interested parties. They will also be distributed to the public-at-large to foster familiarization with the product trading methodology and user interface.

2. Sports Finance Curriculum (in progress): Consisting of 10 chapters with 10 modules each, this free online course will not only educate the public on the SRI but also on sports and finance in general.

Next Steps

The SportsFolio™ Manager is currently out for bid. The Sports Finance Curriculum is an internal project with chapters being delivered and published as they are completed.

 

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1 response to SportsRiskIndex™ Critical Path to Regulatory Approval and Operational Rollout

  1. So, who do we start with and why?

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