Illinois legislators aim to complete a deal granting tax relief to the state's derivatives exchanges before Thanksgiving even though that might not be soon enough to prevent the exchanges from moving their headquarters to a more tax-friendly state.

Lawmakers have yet to agree on a plan to reduce taxes for CME Group Inc. (CME) and CBOE Holdings Inc. (CBOE) as they debate broader legislation that adds incentives to keep Sears Holdings Corp. (SHLD) in Illinois, too.

Other provisions include a multiyear extension of research-and-development tax credits for all Illinois businesses and tax relief for workers, even as Illinois struggles to overcome massive budget deficits.

Hearings on the bill are scheduled for next Wednesday and Friday, with votes by the full Illinois Senate and House of Representatives on Nov. 21, according to John Bradley, chairman of the House Revenue and Finance Committee.

"It's a Herculean effort," said Bradley, referring to the legislative schedule.

"We want to get something done as soon as we can, but we want to make sure we get it right," said Bradley, during a phone interview on Thursday.

Testifying before Bradley's committee Tuesday evening, CME Chairman Terry Duffy urged lawmakers to vote on the plan this week, stating that he did not want to limit the options of CME's board of directors.

CME's board is considering what Duffy described as "very, very lucrative" offers from other states.

It is unclear whether CME and CBOE have agreed to the delay. Representatives for both exchanges declined to comment on the latest developments.

The exchanges have waged a public battle on what they view as an unfair tax burden after the Illinois legislature in January raised the corporate income tax to 7%, from 4.8%. The tax increase costs CME an extra $50 million a year, according to Duffy.

CME pays 6% of all corporate taxes paid in Illinois, which Duffy said is "not acceptable."

A measure introduced by Illinois Senate President John Cullerton would tax the exchanges on only about 25.7% of the trades performed on their electronic platforms. Currently, they pay taxes on all electronic transactions, which make up the vast majority of the derivatives business.

Duffy warned that if CME moves its headquarters elsewhere, it would also relocate its Globex electronic control center, now based in Aurora, Ill. Only the trading floors at the Chicago Board of Trade would remain, which account for less than 5% of CME's business, said Duffy.

CME, owner of the Chicago Mercantile Exchange and CBOT, has been based in Illinois for 163 years.

CME is the world's largest futures exchange as measured by trading volume, and CBOE is the largest options exchange in the U.S.

   -By Howard Packowitz, Dow Jones Newswires; 312-750-4132; 
   howard.packowitz@dowjones.com
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