Fri, Aug 11, 2017 - Page 10 News List

SEC puts off decision on Chicago Stock Exchange

Bloomberg

The US Securities and Exchange Commission (SEC) has dodged a political hot potato — for now — by delaying a decision on whether to approve a Chinese-led group’s controversial takeover of the Chicago Stock Exchange.

Facing a Wednesday deadline, the SEC, led by Chairman Jay Clayton, said its commissioners would review the proposed buyout, potentially setting up a vote at an unknown date on whether it should go through.

The surprise announcement effectively overrode a recommendation from the regulator’s staff to give the deal the green light.

BUREAUCRACY

Under the SEC’s byzantine structure, commissioners can overrule powers granted to staff attorneys to make decisions about the nation’s exchanges.

The agency, which has five commissioners at full strength, did not say which of its three current officials requested a review of the sale.

In a Wednesday letter to the Chicago Stock Exchange, the regulator said the staff’s decision to approve the transaction “is stayed” until further notice.

The move further stalls a takeover that has drawn opposition from members of US Congress and even elicited criticism from US President Donald Trump last year on the campaign trail.

POLITICAL HEADACHE

For months, the SEC has wrangled over whether to sign off on the buyout, which would put the 135-year-old exchange in the hands of a group of investors led by China’s Chongqing Casin Enterprise Group Co (重慶財信).

The US$27 million takeover is small on paper — the sleepy Chicago Stock Exchange handles less than 1 percent of daily US stock trading.

However, it poses political headaches for the SEC and Clayton, as some lawmakers have argued that the buyers could have ties to the Chinese government, something the exchange denies.

SEC approval would be the final hurdle for the deal to clear after the Committee on Foreign Investment in the US, which assesses the national security implications of takeovers by overseas companies, signed off on it in December last year.

CHINA CONDUIT

The Chicago Stock Exchange has said the buyout will remake its business, as the purchasers plan to turn the exchange into a destination for small companies to list their shares, particularly China-based firms.

Chongqing Casin wants to serve as a conduit to introduce Chinese companies to the US to raise money from investors.

Hundreds of enterprises are waiting for initial public offering approval on exchanges in China, China Securities Regulatory Commission data showed.

“We are confident that, upon further review by the commissioners, they will also conclude that this transaction is consistent with the Exchange Act and will allow CHX [Chicago Stock Exchange] to significantly add to exchange staff, provide needed capital to the small and medium-sized businesses that create jobs, and bring international business back to the United States,” the exchange said in a statement.

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