Politicians concerned at Chicago Stock Exchange sale to Chinese interests

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Eleven Republican and Democratic politicians are urging federal regulators to reject the takeover of the Chicago Stock Exchange by a coalition that includes several Chinese investors.

The 11 House members were expected to send a letter to the Securities and Exchange Commission yesterday. The SEC faces an August 9 deadline to approve or reject the deal, which the tiny exchange hopes will help it become a listing destination for Chinese companies. Some of the politicians have previously expressed concern about the $US20 million ($26m) sale, which is part of a plan to reinvent the 135-year-old exchange as a bridge between US capital markets and Chinese entrepreneurs.

The politicians argue the SEC should be wary because the regulator may not be able to monitor the extent of Chinese ownership. US exchanges typically limit any one entity or participant’s control over their markets, in an effort to safeguard the independence of their regulatory duties.

“With little or no insight and transparency into government-dominated Chinese markets, the SEC will be unable to monitor the ownership structure … leaving CHX open to undue, improper, and possibly state-driven influence,” the politicians wrote in the letter, which was reviewed by The Wall Street Journal.

The letter was signed by a handful of Democratic and Republican House members who are often sceptical of free trade and international investment. The SEC is an independent agency and can make decisions that conflict with the wishes of politicians, but congress views often get close attention at the agency.

An SEC spokesman declined to comment, as did a spokesman for the Chicago Stock Exchange.

If the SEC certifies the change, the exchange owners would include Chongqing Casin Enterprise Group, a private company with more than 800 employees that has operations in China, Hong Kong, and Australia.

The Casin group hopes to take Chinese firms public on the Chicago exchange and wants to open a new exchange in southwest China, according to a March 2016 letter from Chicago exchange CEO John Kerin to his company’s shareholders. “We both see significant opportunities in the promotion of trans-Pacific equity trading between the two largest world economies,” he wrote.

The group of prospective owners once included Beijing Guoli Energy Investment, according to the merger documents.

Beijing Guoli’s owners have included Chinese state-owned investment firms, according to a bidding document filed with the Australian Securities Exchange related to a Beijing Guoli subsidiary’s acquisition last year of miner Cuesta Coal.

By DAVE MICHAELS
The Wall Street Journal

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