Occupy Wall Street is in the news. You may have seen protestors on the streets of Chicago. Lost in the hyperbole are some facts. Keep this in mind as you listen to their demands. One of their demands is to enact a transaction tax on financial exchanges.
This would kill the city of Chicago.
A transaction tax is one of the silliest tax schemes out there, and in this post I won't go into why. The short answer is it's a tax on liquidity and will increase transaction costs and hurt the broader marketplace.
However, a little known fact is that CME Group pays 6% off all corporate taxes in the State of Illinois. That's quite a bit when you consider that CME isn't even among the top ten companies in Illinois. The reason they do is because the clearinghouse is here, and the matching engine is here. Illinois taxes all transactions as if they occurred in state-when the bulk of them happen out of state.
CME is faced with a choice (as is the CBOE). Have Illinois reduce taxes to 0%-or move. Publicly four states have offered to move the exchanges and charge them 0% tax forever. CME has to move to protect its shareholders if the state of Illinois won't amend their tax laws.
What people fail to realize is that the overnight bank deposits in Chicago are driven by the exchanges. This overnight money creates ancillary jobs. Additionally, the high frequency trading community has set up shop here. Thousands of HFT programmers and traders are in the city, and would also move if CME moved.
That reaches down to the small business service providers that do things for people, like barbers and restaurants. If 10,000 people moved, it would affect the Loop.
A gaping economic hole would be left in the city. Think about that when you decide to sign on to the views of Occupy Wall Street.
