Commentary & Insight Options leaders opposing tax reforms and transaction tax
By Jim Kharouf Options exchange leaders at the Options Industry Conference in Las Vegas voiced strong opposition to proposed tax reform and transaction tax proposals. Steve Crutchfield, who heads NYSE Arca and NYSE AMEX, said that the proposal at tax reform would issue a tax on regular retail investors who are looking to cover their stock positions. The 60/40 tax treatment is also under fire, under the proposal. Crutchfield said that the proposal is “a severe deterrent to investors to manage their risks.” “Just buying some downside protection while I own stock, would cause the stock position (with) a long put as part of my portfolio would be treated as ordinary income for the purpose of any gains that are seen, not even realized, during the time that option is held, sold or expired,” Crutchfield said. “Just holding an option in the books will negatively impact the tax treatment for equity investors if this proposal goes into effect.” There are also several proposals in Congress and another in the Illinois State Legislature that call for various transaction taxes. Gary Katz, CEO of International Securities Exchange, said the concept of taxing the financial industry is popular in Congress, as well as in Europe. “Right now financial transaction taxes sound great to group people who don’t think of themselves as investors in the market,” Katz said. “The only thing we can do is to continue to educate. And it will do the exact opposite of what Dodd-Frank intended to do, which is to drive volume in the over-the-counter derivatives market into the lit market, the exchange traded market. These are the things we have to pound home.” While all oppose a transaction tax, one exchange leader said it may be the lesser of two evils that is coming, like it or not. Tony McCormick, CEO of BOX Options Exchange, said that the transaction tax may be the better of the two deals, tax reform and transaction tax, being proposed. “But it’s coming, it’s down the road,”  McCormick said. “The tradeoff down the road is the transaction tax. Don’t think this is going away if we dodge this bullet, because the need (from Congress) is there.” Crutchfield, however, said a transaction tax would raise the price of transactions and lower execution quality – a double whammy against investors who would likely have a tax passed down to them and get poorer fills from market makers. Retail brokers also have pushed to oppose the tax reform bill, proposed in late January by Sen. Dave Camp. Katz urged conference attendees to get involved to oppose the bill and help educate Congress about unintended consequences.

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NYSE Euronext Announces 2013 Annual Meeting of Stockholders Vote Results 
Press Release (NYSE)
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Dealers Petition SEC for Block Order Exposure Rule
Peter Chapman, Traders Magazine
Three options market-making firms have petitioned the Securities and Exchange Commission to adopt a rule that would require all block orders to be exposed to all market participants electronically.
Susquehanna International Group, Citadel Securities and the Chicago Trading Company argue in their petition that investors are often hurt when firms execute block orders—those of 500 contracts or more—on the floors of exchanges.

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