USA regulators nix China-led bid for Chicago Stock Exchange

Fredrick Soto
February 17, 2018

After a review that lasted for more than two years, the top US financial regulatory agency barred a Chinese-led group of investors from purchasing the Chicago Stock Exchange.

The move by the Securities and Exchange Commission (SEC) brings the curtain down on a two-year battle for approval of the sale and points to the more hostile environment faced by Chinese buyers under the administration of United States president Donald Trump. The deal had been recommended for approval by the S.E.C. staff, but was delayed by the chairman, Jay Clayton, a Republican and a Trump appointee.

USA lawmakers from both parties had harshly criticized the deal in joint letters to the SEC, arguing that it would give the Chinese government access to American financial markets and questioning the SEC's ability to regulate and monitor foreign owners.

The exchange, which handles less than 1% of daily USA stock trading, was hoping the sale could be a springboard to a brighter future, attracting new listings and investments from China.

The Securities and Exchanges Commission rejected the sale of the Chicago Stock Exchange to a group that includes Chinese investors, the Wall Street Journal reported late Thursday.

The deal was first announced in February 2016, and had been in regulatory limbo for two years.

"China, a Chinese company", Trump said in a debate in SC in early 2016. It also planned to eventually build an exchange in China using CHX technology.

In particular, the SEC said it was not satisfied it would have full access to the exchange's books and records if the deal were to go through.

"The review process has also raised questions about whether the proposed ownership structure will allow the commission to exercise sufficient oversight of the exchange", the Securities and Exchange Commission (SEC) said on Thursday.

"We have concluded that the Exchange has not met its burden to show that approval of the proposed rule change is appropriate", the SEC said in an order posted on its website blocking the sale, per Politico.

In a letter sent to the SEC chairman over the summer, 11 members of Congress said they had concerns about the "severe lack of transparency in China", which would make it hard for the committee for "prevent undue influence or control over a national securities exchange". The exchange said it needed the infusion of capital to invest in its operations and attract business. United States politicians who had opposed the stock exchange deal said they applauded the decision.

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