Duffy Says He Would Have No Choice But to Move CME If Tax Passes

  • Chairman blasts tax plan, saying it would drive clients away
  • CME has ‘never, ever supported anybody spoofing,’ he says

CME's Duffy: Proposed Illinois Trading Tax 'Ridiculous'

A proposal for Illinois to tax trades on exchanges in the state is “ridiculous,” according to the executive chairman of Chicago-based market operator CME Group Inc. 

The suggested levy -- which would charge $1 or $2 per contract, depending on the product -- would make many transactions uneconomic, forcing the exchange to leave the state because customers would stop buying and selling, CME Chairman Terry Duffy said. The bill, designed to increase revenue in the financially troubled state, is in early stages and faces long odds of approval.

“I would have no other chance but to move the business,” Duffy said in an interview on Bloomberg Television on Thursday. The company, which runs markets including the Chicago Mercantile Exchange, is one of the biggest exchange operators in the world. “If you don’t have customers, you don’t have a business.”

CME has the flexibility to leave the state, skirting the tax. Earlier this year, it sold its main data center outside Chicago to CyrusOne Inc. Much of CME’s business is conducted there electronically, not in old-school trading pits, so the exchange could simply shift to a data center located outside Illinois. Other facilities “would welcome me with open arms,” Duffy said.

Duffy said CME doesn’t allow spoofing, a form of manipulation, and has technology designed to detect the practice. “We’ve never, ever supported anybody spoofing in our marketplace,” he said.

The U.S. government has accused futures trader Igor Oystacher of spoofing on markets including CME’s. Oystacher’s former business partner, Edwin Johnson, has said in a court filing that Duffy was among those who gave “false assurances” that “Oystacher’s trading practices were legal and legitimate” -- something CME has previously denied.