Coalition Forms Against Bush User-fee Proposal
By Christopher Faille, Reporter
Monday, February 11, 2002
WASHINGTON (HedgeWorld.com)—The derivatives exchanges and futures commission merchants lined up last week against the proposed user fee on futures transactions contained in President Bush’s fiscal 2003 budget.
The chairman of the board and president of the New York Mercantile Exchange weighed in with a joint statement Feb. 6.
“Not only will this tax pose a very real danger of loss of American jobs and income, but it also places additional risk on commercial industries by making it more attractive for them to do business away from the security of organized futures and options markets, shifting their commerce to markets where there are no fees, no oversight, and no accountability,” said the statement from Vincent Viola and J. Robert Collins, Jr.
The Chicago Board of Trade was the first exchange to make known such views, on Feb. 4. Previous HedgeWorld Story On Feb. 8, the Futures Industry Association, the national trade organization for the futures industry, made much the same argument: that the proposed fee/tax, which would apply to round-turn transactions in futures or options on approved exchanges, and would discourage business on the exchanges, which offer transparency, risk management, mark-to-market valuation, multilateral clearing and strong self-regulation—sending more traffic over-the-counter.
“Institutional players today have many choices,” said John Damgard , FIA president in a statement, “If exchange traded products become less cost-efficient, they can choose to do business in the over-the-counter derivatives markets or move to more cost-efficient markets.”
Mr. Damgard’s statement explains that FIA membership includes more than 50 of the largest futures commission merchants, and that its membership as a whole is “responsible for more than 80% of all public customer business executed on U.S. contract markets.”
A Step Backward
Asked what he thought the prospects were of defeating this bill, FIA spokesman Will Acworth declined to offer any prediction. “I will say, though, that similar provisions have been proposed five times before [in the early and middle 1990s] and defeated five times before,” he added.
The White House proposal “sounds like a step backward, in light of the recent action on the Securities and Exchange Commission fees,” said John Baker.
Mr. Baker, a Washington-based lawyer with Stradley, Ronon, Stevens & Young LLP, which represents hedge and mutual funds, was referring to legislation passed in December that lowered the fees charged to the securities industries, fees that had been dedicate to the use of the SEC. |
