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CME’s Duffy rattles his saber again

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* Lynn Marek in Crain’s Chicago Business…

On the local political landscape, [CME chief exec Terry Duffy] is less sanguine. Budgetary and other fiscal problems plaguing Illinois and Chicago will lead CME to remain light on its feet and mindful of other headquarter options, he said. In 2011, CME threatened to move its base if the state didn’t provide a tax cut that was eventually forthcoming.

In the past few years, the company has sold and leased back much of its local Chicago real estate, including some of its Chicago Board of Trade buildings, and sold its Aurora data center to CyrusOne, making it more nimble, Duffy said.

“I’m a big believer that if you want these companies that are headquartered in this great city—and I call it a great city–you have to give clarity that you’re willing to make the tough decisions to put plans in place so we can reinvest here because it’s hard for us to reinvest when we don’t know what it’s going to be like,” Duffy said. “Right now, I will tell you this company is as nimble as it’s ever been in its history and it’s going to stay that way until we get more clarity.”

The company’s approximately 2,700 employees are about 43 years old, on average, and are some of the youngest, most highly paid in the city, with no particular loyalty to Chicago, he adds. “They rent and they’re ready to go–you gotta sometimes hold them back,” Duffy said. Duffy noted that Detroit has a lot of the same attributes as Chicago—on the water, with a central US location and a transportation hub, dangling the notion that Chicago isn’t a unique “geographic gem.” “Chicago and Illinois need to get (their) fiscal house in order,” he said.

Still, CME wouldn’t find the caliber of trading industry talent that is in Chicago in Detroit, Rosenthal said. Rival Intercontinental Exchange would have a heyday picking up CME Chicago employees on the cheap if CME were to move to someplace like Texas, he said.

posted by Rich Miller
Thursday, Feb 9, 17 @ 10:20 am

Comments

Throwing out Detroit was too much. I believed him up until that point.

Comment by Arsenal Thursday, Feb 9, 17 @ 10:22 am
Detroit has attracted some tech jobs in recent years. Quicken Loans and Microsoft have both moved jobs and regional offices there. So there could be as much fire as there is smoke.

Comment by Curl of the Burl Thursday, Feb 9, 17 @ 10:25 am
===they rent and are ready to go=== …to Detroit?

Run that by your blue blood employees base and see how that goes. Weak bluff.

Comment by Signal and Noise Thursday, Feb 9, 17 @ 10:57 am
Though Detroit is growing, would worry far more about Texas…
https://www.forbes.com/sites/joelkotkin/2016/07/21/the-u-s-cities-creating-the-most-white-collar-jobs-2016/#4e78c19f22be

“In many ways, argues urban analyst Aaron Renn, Dallas is becoming the new Chicago. It is anchored by a large airport, a diverse economy and a location in the middle of country. Even as downtown Chicago has attracted some notable new corporate headquarters in recent years, these generally employ relatively few people, while companies that need access to a large white-collar workforce, like Toyota and Jacobs, have been gravitating to the Big D.”

or New York, which obviously has no shortage of talented traders.
“The most impressive performance among metro areas with over 500,000 business and professional service jobs has been New York. With 714,000 business service jobs, the Big Apple is without question the leader in the field, but more importantly it continues to grow. Since 2010, New York has grown its professional and business service employment by an impressive 22%, helping it rank 14th on our list. This reflects the city’s continued preeminence in such fields as law, design, marketing, public relations and advertising.

But the other traditional business service leaders have not fared nearly as well. Gotham’s traditional rival, Chicago-Naperville-Arlington Heights, still has 673,000 business service jobs but has seen only a modest growth just under 15%, ranking 43rd. Whatever may have been gained in generally small scale “executive headquarters” has not been enough to make the vast Chicagoland region a big winner.”

Comment by m Thursday, Feb 9, 17 @ 10:57 am
I’ve seen this movie. Duffy has learned a lesson from the ComEd/Exelon boys: grease both parties, then regularly cry poor-mouth and ask for a little more of the pie.

Before anyone claims that technology allows CME to move anywhere, that couldn’t be more wrong.

You’ve got to have the pipes with direct hook-ups to New York, both fiber optic and microwave. No one is even in the ballgame with Chicago on that.

Speed is everything in high-speed algorithmic trading, and proximity to the pipes means everything. That’s why the Big Dog traders are still huddled around the CME servers downtown, even though the open-outcry pits are dead.

https://www.wired.com/2012/08/ff_wallstreet_trading/

Comment by wordslinger Thursday, Feb 9, 17 @ 10:59 am
The CME will eventually be close to where their big customers are in NYC. It’s just a matter of time.

Comment by Steve Thursday, Feb 9, 17 @ 10:59 am
Houston would be a great place for the CME, on the water, a thriving and bustling downtown, a young and educated workforce….and no state income tax.

Also, CME’s biggest energy customers are mostly based in Houston

Comment by Doug Thursday, Feb 9, 17 @ 11:02 am
=You’ve got to have the pipes with direct hook-ups to New York, both fiber optic and microwave. No one is even in the ballgame with Chicago on that.=

2012 was a long time ago. Networks go up very fast.

Comment by m Thursday, Feb 9, 17 @ 11:35 am
===Networks go up very fast. ===

Not a network like this one. Chicago is pretty unique in that regard.

Comment by Rich Miller Thursday, Feb 9, 17 @ 11:53 am
HQ might be easy to move for tax reasons, but there’s far more infrastructure that the traders rely on here than other places. http://www.chicagobusiness.com/article/20120915/ISSUE01/309159977/how-chicago-became-one-of-the-nations-most-digital-cities

Comment by Precinct Captain Thursday, Feb 9, 17 @ 11:53 am
- Networks go up very fast. -

Does the speed of light go faster, too? Because nanoseconds matter.

Comment by Daniel Plainview Thursday, Feb 9, 17 @ 11:54 am
–2012 was a long time ago. Networks go up very fast.–

Uh huh. And cheap, too, right?

That’s why the world’s trading centers are in low-tax, low-cost-of-living New York, London, Hong Kong and Tokyo.

I guess Florida kid Griff chose to build Citadel in Chicago because he likes the change of seasons.

Comment by wordslinger Thursday, Feb 9, 17 @ 11:57 am
@word - I agree, co-location is the name of the game in trading these days. But CME selling its Aurora data center then leasing it back is a big deal. CME’s lease allows them to use any one of CyrusOne’s 28 data centers. The idea that CME is physically bound to Chicago due to a significant infrastructure investment and therefore couldn’t move is dead. This was one of the arguments in favor of the LaSalle Street tax…but they can’t leave!

Comment by City Zen Thursday, Feb 9, 17 @ 11:57 am
If speed of the network to NYC was the prime reason, then CME would have moved a long time ago. Remember, they are the exchange. It’s the folks trading on their exchange that require that speed. That’s why if they move, it will be a huge loss to Chicago, because all those trading companies will move also.

Comment by Doug Thursday, Feb 9, 17 @ 11:58 am
== Networks go up very fast. ==

It’s not the network per se or even the bandwidth of the network, it’s the latency in the network. You can’t beat the speed of light and the inherent delay at each repeater / korelay point. The only way you beat latency in real time is to shorten the distant the data moves. NYC to Chicago is about 1/2 of NYC to Dallas. Moving to NYC makes sense, Dallas doesn’t.

Comment by RNUG Thursday, Feb 9, 17 @ 12:00 pm
Wordslinger….HK is actually a very low tax environment. And look at all the Hedge Fund managers moving to Florida.

Comment by Doug Thursday, Feb 9, 17 @ 12:07 pm
=Not a network like this one. Chicago is pretty unique in that regard.=
They could have faster microwave to a new city in less than 12 months.

In addition, note the map from the article Word posted, Chicago isn’t the only stop.

Further, the whole business is secretive and constantly launching new tech, so what else is out there isn’t really completely known, such as https://arstechnica.com/information-technology/2016/11/private-microwave-networks-financial-hft/

Money keeps getting pumped into new tech, new routes, new networks. They might not go up cheap to us, but customers are already paying. If the price was such an issue, there would be nothing other than fiber.

One big move, such as a CME, and you create a new financial center.

=The only way you beat latency in real time is to shorten the distant the data moves. NYC to Chicago is about 1/2 of NYC to Dallas. Moving to NYC makes sense, Dallas doesn’t.=
Fiber to newer fiber, fiber to microwave, microwave to laser, etc. Latency keeps getting shorter while the distance has stayed the same.
Moving to NYC does make a lot of sense, for a lot of reasons.

I mentioned two cities, New York and Dallas, so obviously you ignore the one that even you agree with. Besides, you can build a datacenter in new york or new jersey, drop most of your staff wherever you want. The vast majority of CME staff don’t need ultra low latency to their desks.

Point is, if you think CME can’t move, you’re blind. I’m not saying they will, but it gets easier every day.

Comment by m Thursday, Feb 9, 17 @ 12:21 pm
Doug, Hong Kong is one of the most expensive cities to live in the world.

And there all kinds of hedgies; those that live or die by nanoseconds ain’t trading on the beach in Florida.

Comment by Anonymous Thursday, Feb 9, 17 @ 12:26 pm
If the previous mention of lasers was confusing, here you go:
http://www.zerohedge.com/news/2015-03-01/meanwhile-over-new-york-stock-exchange-lasers

Comment by m Thursday, Feb 9, 17 @ 12:27 pm
–The company’s approximately 2,700 employees are about 43 years old, on average, and are some of the youngest, most highly paid in the city, with no particular loyalty to Chicago, he adds. “They rent and they’re ready to go–you gotta sometimes hold them back,” Duffy said.–

Lot of foot-loose and fancy-free “youngest” 43-year-old renters, ready to move to Detroit at the drop of a hat?

Duffy ain’t exactly bringing his A-Game here.

Comment by wordslinger Thursday, Feb 9, 17 @ 1:38 pm