November 3, 2011 / 7:00 PM / 8 years ago

NYSE, ICE threaten to pull offices from Europe

(Reuters) - NYSE Euronext NYX.N joined IntercontinentalExchange Inc (ICE.N) in criticizing European proposals to introduce a transaction tax and to offer customers choice on where to clear trades, with each of the exchanges threatening to pack up and move offices out of Europe.

“Capital is not patriotic and the markets are indeed global, and capital can flow across borders pretty easily,” Duncan Niederauer, chief executive of NYSE Euronext, which runs markets across Europe as well as London’s Liffe venue, said on Thursday.

In October, the European Commission said it would push a G20 summit this month to forge agreement on a global financial transaction tax.

The Commission, meanwhile, also proposed a revamp of European Union trading rules to allow banks and brokers to clear their trades on their clearer of choice, rather than in-house at the exchange.

Both ideas would likely hit trading volumes at companies such as ICE and Deutsche Boerse AG (DB1Gn.DE), which run big exchanges and clearinghouses.

At the same time, Deutsche Boerse and NYSE Euronext are in talks with European Union antitrust regulators to seal their $9 billion (5 billion pounds) merger deal, announced in February.

The two European proposals would “lead to a flight from Europe of trading, and ultimately more volatility and more fracturing of markets, and really have a lot of unintended consequences,” ICE CEO Jeffrey Sprecher said on Wednesday.

ICE, which is based in Atlanta, runs European operations out of the UK because of its laws and its convenient time zone, Sprecher said.

“But other than that there is no natural reason for us to be in the UK. It could easily move if there were changes in market structure that were disadvantageous to hedgers and the ultimate users of the market, to some other domicile,” Sprecher said on a conference call discussing third-quarter results.

“It is there as a privilege I believe to the UK, and not a right, and we will be discussing that with European regulators.

Niederauer, also discussing quarterly results on a call with analysts and reporters, said: “I in large part agree.”

The transaction tax could potentially increase volatility and widen price spreads, he said, “but ultimately all of these decisions will inevitably lead to jurisdiction shopping.”

The transaction tax plan, pushed by Germany and France, comes after calls for banks and investors, rather than taxpayers, to fund their own bailouts. The idea has been around for some time and came back into vogue during the 2008-09 financial crisis.

On Wednesday, British Prime Minister David Cameron said he believed a transaction tax would not be adopted in the short term and would only work if it were implemented on a global basis.

The trading reform is known as MiFID, or markets in financial instruments directive.

The Commission has said the current “vertical” model may present advantages in terms of coordination, but it may also introduce inefficiencies with respect to competition and price transparency.

Niederauer said it is still early in the MiFID process.

“My guess is that if the vertical silo is ever going to be encouraged to go in the direction of being horizontal, that is something that the markets will do together and in concert rather than one region at a time,” he said.

Reporting by Jonathan Spicer, editing by Gerald E. McCormick

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