By Joyce Yu
Philadelphia, PA–The proposed acquisition of the Chicago Stock Exchange (CHX) from a group led by China-based investors was rejected for a lack of information which would threaten the ability to properly monitor the exchange after the deal, according to the Securities and Exchange Commission (SEC).
First announced in February 2016, the acquisition had previously been cleared by the Committee on Foreign Investment in the United States (CFIUS) who said in December 2016 that there were “no unresolved national security concerns” related to the takeover. SEC also initially approved the sale in August, but the decision was put on hold for further review within minutes of the announcement.
The SEC said in a filing that it was not satisfied with the source of funds for the deal and who the ultimate consortium owners would be, raising worries the structure of the deal could allow new, unknown entities to assume stakes over time, according to a Reuter’s report. Spearheading the acquisition is the Chongqing Casin Enterprise Group which has business in financial services, real estate and environmental protection. Casin, who claimed seeing potential in CHX, said it aimed to list Chinese companies in the United States on the bourse in the long term and also planned to eventually build an exchange in China using CHX technology.
In the past two years, the takeover has been under fire from U.S. lawmakers, who worried about the national security implications. During his election campaign, then Presidential election candidate Trump brought the CHX deal up twice as an example of how jobs and wealth were leaving the United States. There were however foreign owners in a U.S. exchange before. Deutsche Boerse AG bought the U.S.-based International Securities Exchange for $2.8 billion in 2007, before selling it to Nasdaq Inc for $1.1 billion in 2016.
SEC’s final decision comes at a time of rising US-Sino trade frictions. U.S. Commerce Department ‘self-initiated’ a dumping probe into Chinese aluminum imports first in late November, followed by China’s anti-dumping investigation into U.S. sorghum shipments earlier this month.
To CHX who said it needed the infusion of capital to invest in its operations and attract business, this is not good news either. Founded in 1882, the exchange handles just 0.5% of U.S. equities trades.
