The U.S. Commodity Futures Trading Commission has approved the most ridiculous security exchange ever created. In a move only Mel Brooks could love, this exchange would create a marketplace where people can wager on the box-office results of motion pictures.

Really. I'm serious. Max Bialystock would be proud.

Now, the CFTC has not yet approved the trading of any actual securities and CFTC Commissioner Bart Chilton did say, "At this point in time, I have not heard any arguments to persuade me that 'movie futures' generally can overcome some fundamental design flaws." This is comforting news, because there are serious design flaws. It is vital that investors understand those flaws, and why they should avoid playing on this exchange should trading be approved. For that matter, if trading is approved, I would avoid all the movie stocks because they will be affected as well.

It doesn't take a brainless starlet to know that the ability to manipulate a market like this is easier than shouting, "Action!" The Motion Picture Association of America summed it up nicely in a press release, by pointing out that anyone from caterers to agents to families of crew members to studio insiders are essentially insiders, and it would be impossible to police and enforce their trading activity. Add to this the fact that just about anyone is capable of leaking footage or reviews from early screenings onto the Internet – whether that information is truthful or not -- and it brings new meaning to word "puppetry."

This manipulation would upend the entire movie business. Here's some examples. Let's say a big studio like Walt Disney (NYSE: DIS) is releasing the sequel to "David Gardner's Fools Unloaded!" Then, a multiplex exhibitor Regal Entertainment (NYSE: RGC) sees the futures pricing, which signals that the movie will perform poorly. Regal cancels the film's exhibition and books something else. Disney gets angry, and locks Regal out of screening its next blockbuster film. Now Regal gets damaged. Disney, of course, isn't that angry because it saw that the movie was going to be a stinker months ago and purchased puts on the exchange as a hedge.

What about a small studio like Lionsgate Entertainment (NYSE: LGF)? They don't make many movies, so every one is a huge part of their overall business plan. If a booking gets cancelled, Lionsgate can be irreparably damaged. It doesn't have the market clout Disney does, and it may not be able to hedge as effectively given fewer resources.

Now imagine a notoriously stern mogul like Rupert Murdoch of News Corporation (NYSE: NWS) getting involved with his movies. If I'm Carmike Cinemas (Nasdaq: CKEC), I'm terrified of Rupert boycotting me. Do I exhibit a not-so-good film, but purchase puts of my own?

Movies are risky enough as it is, and now they want to add yet another level of uncertainty to the whole thing? Investors don't need this garbage. If you want to invest in motion pictures, you already have a way to do it. It's called "stock," and you can buy or sell short companies like Paramount Pictures owned by Viacom (NYSE: VIA) or Dreamworks Animation SKG (NYSE: DWA).

Or, if you prefer, you can hitch a ride on Bialystock Inc. I hear Max is going public, and I'd rather bet on him than on a futures exchange for his movies.

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Fool contributor Rick Steier doesn't bet on the movies, but enjoys them from time to time. He holds no positions in any stocks mentioned. Walt Disney is a Motley Fool Inside Value recommendation. Walt Disney and DreamWorks Animation SKG are Motley Fool Stock Advisor picks. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.