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CME Group execs anticipate push for changes to Volcker, tax code

CME Group Inc. executives expect to see the White House press for reforms to the Volcker rule and enhanced supplementary leverage ratio regulations, as well as tax reform, in 2017.

"I do think those will also get done," said CME Group Chairman and CEO Terrence Duffy on a second-quarter earnings conference call with investors Aug. 1. "But outside of that, it's kind of a jump ball right now."

President Donald Trump's administration has emphasized the need for financial deregulation, and clients of the options and futures exchange operator may benefit from such reforms, Duffy said, adding that the regulatory agencies have been "very engaged to get things done."

A national push for tax reform would be a "great benefit" for the company, Duffy said. The Chicago-based company saw a 0.2% increase to its tax rate for the current quarter, or 0.4% annually, as Illinois raised its state income tax beginning in July, he pointed out.

The Volcker rule, which bars banks from proprietary trading, has become a pushing point for certain regulators and administration officials. An outspoken critic of the rule since it was implemented because it excluded certain products, Duffy said he has had conversations with various Trump administration officials about reforms to the Volcker rule.

Meanwhile, Treasury Department and Federal Reserve officials have expressed interest in changing the enhanced supplementary leverage ratio, which Duffy said would also benefit CME clients. But the timing of such reforms is unknown largely thanks to the lack of regulatory bodies at full strength, Duffy said. That including the Commodity Futures Trading Commission, which is currently operating with just two commissioners, including Acting Chairman Chris Giancarlo, who has been nominated for the full-time position. The CFTC is supposed to operate with five commissioners.

"I think it's pure speculation right now as to what's going to happen in the timing thereof just because of the players," Duffy said.