Month: February 2002

Wal-Mart Offers In-Store Futures Trading

Sept. 21, 2006
WALVILLE, ARK.–Representatives of the Wal-Mart corporation on Friday opened the first of many planned in-store trading ‘pits’ for the buying and selling of futures contracts on more than 1,100 consumer and household goods carried by the retailing giant. “This is about injecting some new excitement into the shopping experience,” exclaimed Wal-Mart VP of Marketing William Foursby. “It’s about capturing some of the energy of a bazaar, of an open marketplace, and, at the same time, extending our value chain that last mile to our retail customers.”

Futures–agreements to buy or sell a quantity of a commodity at a future date at a standardized location of delivery–are conventionally used by commodity sellers as hedges against the risk that the market price of a commodity will move in an unfavorable direction before the commodity is ready to be sold. “The easiest example is a farmer who needs to make decisions about what crops to grow,” explains Foursby. “With a liquid futures market, the farmer can easily get a guaranteed price for crops before planting, and so can figure out how much and what to plant.”

The Wal-Mart trading pits–located near the store’s registers and designed to accommodate up to 45 live traders–permit customers to buy futures contracts on such familiar products as Pringle’s potato chips and Elmer’s Glue. “I’m long 200 July Cheese Whiz contracts,” explained a breathless trader shortly after the pit opened for its first trading day. “This is great. I already cleared a half-cent spread on 400 August 100 ct. paper clips.”

Though designed to help commodity producers control risk, most futures contracts in mature markets–typically more than 90%–go unexercised, with the buyer and seller of the contract simply settling in cash the difference between the contract price and the market price. “We expect that the Wal-Pits will work like traditional commodities markets,” notes Foursby. “That is, they will function as markets in risk–in the buying and selling of price fluctuation risk–rather than, primarily, as markets in the underlying products.”

“The value of the pits to Wal-Mart is potentially quite great,” explains Morgan retail analyst Jean Wobble. “As I understand it, all of the contracts are written with Wal-Mart stores as the standard delivery location. For those contracts that do go all the way to fulfillment, the natural thing for traders to do would be to buy the underlying products right there in the store, not to mention the pricing and inventory-management leverage that Wal-Mart will get by trading in the pits for itself.”

Customers who sign up for trading during the initial phase receive complimentary garish jackets and some quick lessons in pit etiquette, including shouting, gesticulating, huffing and puffing, and jumping up and down. “I’m ready to do some tradin’,” exclaimed a newly-minted trader in a green tie-dyed jacket. “Those Doritos contracts sound really good.”

FCC to Auction Definite, Indefinite Articles

May 8, 2032
WASHINGTON–In a bid to “foster innovation” and “encourage the efficient use of public resources,” the U.S. Federal Communications Commission announced Tuesday plans to auction exclusive rights to the use of the English definite and indefinite articles. “For a number of years the Commission has been studying the possibility of enhancing the value of English through selective privatization of some of its features,” explains FCC Chairwoman Glenda Friedboot. “The auction we propose today is the first Commission initiative implementing the lessons of that research. It is also a test initiative, designed to gauge the effectiveness of a broader privatization policy.”

The auction will affect use of the English words “a,” “and,” and “the,” as well as any “derivatives or functional equivalents,” and will bestow upon the highest bidder the exclusive right to license use of the words in all digital media. “It’s important the people understand that the auction applies only to digital media, and not to conventional print or face-to-face conversation,” explains Chairwoman Friedboot. “Partly that’s because of technical limitations. The licensing we hope to foster depends upon computer-driven and enforced rights management schemes that aren’t currently feasible offline. But we also recognized the importance of protecting the historic practice of free, unlicensed use of many parts of speech in daily conversation.”

An FCC report issued alongside the auction announcement describes a state of “stagnation” in the area of “language technologies.” “The committee was unable to discover a single recent innovation in the use or function of many grammatical mechanisms,” noted the report. The committee went on to note that “distribution of rights in and to many of these mechanisms would likely provide sufficient incentive, in the form of licensing revenues, to spur investment and drive innovation in an important but otherwise static intellectual asset.”

The bidding system proposed by the Commission includes the sale of rights to the articles on a regional basis, with winning bidders acquiring the right to license use of the articles in all digital formats within a bounded geographic area. “Local control of media assets has always been an important value here at the Commission,” explains Chairwoman Friedboot. “So we require that all bidding entities be majority owned by members of the geographic regions they serve.”

Critics of the plan acknowledge its potential to raise billions of dollars for the public coffers, but point to the risks of privatizing key public resources. “This auction is simply a corporate giveaway,” exclaims Robert Desk, executive director of the Commons Defense Force (CDF). “The local ownership rules are a joke, and easily circumvented through a series of shells and dummy corporations. We’ve dug down in the list of preliminary bidders, and what we’ve found behind the mask of local ownership is, almost universally, big media companies like AOL, KT, and NPR. This plan is just going to extend already excessive private control over public discourse.”

A number of planned legal challenges to the FCC auction, including one joined by the CDF, argue that the sale infringes important free speech rights by privatizing words. “We’ve looked carefully at the [free speech] issue and designed the auction accordingly,” responds Chairwoman Friedboot. “The auction does not actually sell rights to the words ‘a’, ‘an’, and ‘the’. The plan offers only the rights to the definite and indefinite articles as grammatical functions. People will still be free to use the words, as long as they are not used as articles. By the same token, people will not be permitted to make unlicensed substitutions for the articles. Assigning rights in the grammar is key to driving substantial innovation in language. We don’t want to simply encourage cosmetic changes in the look and sound of words.”

Though a number of potential bidders were pre-qualified during a plan feasibility study, the period of bidder qualification begins officially today and is scheduled to run through the end of the year.