Leaders of the Chicago Mercantile Exchange and the Chicago Board of Trade, the world`s leading futures exchanges, condemned in harsh terms Monday a renewed call by the Bush administration to place a user fee on commodity trading.
Merc Chairman John F. Sandner and William F. O`Connor, chairman of the Board of Trade, decried the proposal, saying the tax would dampen liquidity, increase costs for consumers and, most significantly, chase business to foreign shores.
”There are about 10 reasons why this tax is ill-conceived, but I would begin by saying that the futures industry is the premier industry in the country, and now the president would impose a tax and make us less
competitive,” said Sandner.
”There is not one international commercial center in the world today that is not copying what we are doing. We are the innovators, the leaders, and now the president wants to tax our success.
”Are we to go the way of the automobile and the microchip industries?”
Sandner asked, alluding to Japanese success in competing with the U.S. in those areas.
O`Connor noted that, ironically, the proposal was being announced in the wake of precedent-setting plans by the Merc and the CBOT to consolidate many of their operations and cut costs to keep their markets competitive with the growing popularity of futures exchanges in London, Sydney, Paris and the Pacific Rim countries.
”What kind of policy is it to levy a tax on America`s financial exchanges when exchanges around the world are reducing or eliminating theirs?” O`Connor said.
”This proposal demonstrates tht the Bush admistration is out of touch with reality,” said Thomas R. Donovan, CBOT president.
”If enacted, this tax would result in the first case of America giving away business to foreign markets, not because they beat us competitively, but because of poor policy decisions in Washington,” he said.
The White House is pitching the transaction fee in the fiscal 1992 federal budget as a means of funding most of the $48.3 million Commodity Futures Trading Commission budget. The CFTC regulates the futures industry.
Under the proposal, a 13-cent fee would be imposed on each round-turn transaction, that is, each purchase and sale of a futures contract. A similar White House proposal to impose an 11-cent fee on each round-turn trade was defeated by the industry last year.
More than half of all futures contracts bought and sold annually around the world change hands at the Merc and the Board of Trade. However, their share of the world futures and options pie shrank again last year, extending a long trend, as more nations copy the U.S. in establishing markets for futures and options on stocks, bonds and other financial products.
While international futures and options volume rose 12 percent, to 576.5 million contracts, in 1990 U.S exchanges` share fell to 59 percent from 64 percent, according to the Futures Industry Association, a trade group.
