U.S. SEC official says closely watching exchange spat with New Jersey

By John McCrank

NEW YORK, Oct 7 (Reuters)A plan being considered by U.S. stock exchanges to leave New Jersey, where the bourses’ main electronic trading systems are located, to avoid a potential state tax on trading, could harm the industry, a senior U.S. Securities and Exchange Commission official said on Wednesday.

A sudden exit by the exchanges from northern New Jersey, where billions of dollars of trades are processed daily in three main data centers for all 16 U.S. stock exchanges, could be very costly and disruptive to market participants, said SEC Director of Trading and Markets, Brett Redfearn.

“We are watching it very closely. We are going to continue to talk to stakeholders about this, but needless to say, we certainly do have concerns,” he said at a virtual conference held by the Security Traders Association.

New Jersey is considering a tax of a quarter of a cent per financial transaction for firms that make more than 10,000 such transactions per year.

Intercontinental Exchange Inc’s ICE.N New York Stock Exchange unit ran the smallest of its five exchanges out of its Chicago backup site last week, in part to show it is prepared to quickly leave New Jersey if a transaction tax is enacted. Nasdaq Inc NDAQ.O also plans to run one of its exchanges from Chicago for a week at the end of the month.

If all the exchanges relocated to the same place, such as the Chicago data center where they all have their backup sites, it could benefit the market by neutralizing the speed advantages some firms have in sending and receiving data, Redfearn said.

“But if in the meantime, you have half of the people in Chicago, 25% in Texas and 25% in New Jersey, that then introduces a whole lot of dynamics that I’m not particularly thrilled about,” he said.

(Reporting by John McCrank; Editing by David Gregorio)

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