(Dow Jones)--Business leaders in the self-styled "derivatives capital of the world" on Wednesday criticized a planned rise in state taxes that they warned would hit jobs and growth in the financial exchange and trading community.
Terry Duffy, chairman of CME Group Inc. (CME), even raised the spectre of the world's largest derivatives exchange relocating business elsewhere as a broader corporate backlash grew against the planned raising of the state's corporate tax rate to 7% from 4.8%.
"To say we're disappointed would be an understatement," said Duffy in an interview.
He said that while CME maintains big, hard-to-move investments in the Chicago area - including a new data center supporting electronic trading - a potential move elsewhere for the company is "something we always analyze" with a view toward shareholders' best interests.
The planned tax raise would dent earnings at CME, CBOE Holdings Inc. (CBOE) and a raft of smaller listed companies in the trading sector, which is estimated to employ more than 120,000 people in the Chicago area.
Duffy, one of CME's government-relations heavyweights, said the move would put Illinois's corporate tax rate among the highest in the nation and make other companies think twice before relocating here.
The planned rise in the state's income tax to 5% from 3% could also hit Chicago's proprietary trading community, many of which operate as limited-liability companies. While servers for high-frequency trading would remain in Chicago-area data centers, closely connected to the trade-matching engines of the exchanges, strategy and programming could be done elsewhere, said industry observers.
However, Chicago has developed into a classic "cluster" economy where the proximity of technical, legal and financial support staff for the trading community would make any wholesale relocation less likely.
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