U.S. stock exchanges have put New Jersey on notice: Pass a financial transaction tax and they will relocate their primary data centers, where billions of dollars of trades are executed daily - possibly to Chicago.
In the electronic trading world, the physical distance a signal must travel is a key factor in how long it takes to get an order filled, and the race to get the best prices is one in which nanoseconds matter. "Having all exchanges in one geographic location would be healthier for liquidity in our markets," said another senior industry executive.The backup to the U.S. stock market is in an eight-story English gothic-style building just off Lake Michigan, in the shadow of Chicago's sprawling McCormick Place Convention Center, that hosts several data centers.
But the exchanges also wanted to send a message to New Jersey, which is considering a state tax of a quarter of a cent per financial transaction for firms that make more than 10,000 such transactions per year.