Despite its high taxes that are deterring some firms, Chicago is becoming an increasingly sophisticated financial center which vendors are specifically targeting for its deep pockets and untapped technology opportunities.
Gravitas, the co-sourcing platform and technology consultant which offers cloud services as well as low-latency exchange connectivity for algorithmic and high-frequency trading firms, has just opened an office in Chicago, as part of a joint venture with Apogee Strategies. The combined organization operates two local data centers in addition to its core data center hub in New York City.
Mark Seaman, senior managing director, Gravitas, points out that Chicago, which has always been a hotspot for big funds and high-net worth individuals, has been leading growth for the fund-to-fund market in the aftermath of the financial crisis.
A growing number of local funds are accessing the Chicago Mercantile Exchange (CME Group) with needs for low latency, and need to step up their technology to compete with the fastest firms.
Last month, CME Group announced that it's opening a new colocation services facility from its data center located in suburban Illinois, offering clients the ability to place high speed trading strategies as close as possible to the CME's Globex matching engine. Trading is set to go live on Jan. 29, 2012. The site will have more than 428,000 square feet of space -- larger than 7 football fields.
Still, despite Chicago's popularity as a financial center, its tax burden is leading some firms to think again about setting up shop in the windy city.
In September, CME Group's executive chairman, Terrence Duffy, said he was debating whether or not to keep the organization's headquarters in Illinois because of what he called a "disproportionate tax burden".
Terrence Duffy said other U.S. states were seeking to attract the parent of the Chicago Mercantile Exchange and the Chicago Board of Trade.
"We are definitely working and seeking proposals actively from other states, and they're seeking us," Duffy said in an interview with Reuters.
Earlier this year, CME and other Illinois-bases businesses condemned the state for raising the corporate tax rate to 7 percent, from 4.8 percent. The move caused a hike in CME's state corporate taxes by about $50 million, to a total of $200 million per year.