Published: Fri, February 16, 2018
Business | By Max Garcia

U.S. kills Chinese-led takeover of Chicago exchange

U.S. kills Chinese-led takeover of Chicago exchange

The top United States regulator of the financial markets has blocked the sale of the Chicago Stock Exchange (CHX) to a Chinese-led investor group due to concerns over the would-be buyers' ability to supervise the bourse after the deal.

The move by the Securities and Exchange Commission (SEC) ends a two-year battle to gain approval for the sale and underscores the more hostile environment facing Chinese buyers under the administration of U.S. President Donald Trump.

According to the exchange, which handles only 0.5 per cent of United States stock trades, the deal would have provided the exchange with "vital capital".

Casin has continued to deny any affiliation with the government of China and there have been no connections shown.

CHX declined to comment on Thursday on the final decision.

The decision by the SEC comes during a time of increased trade tensions between the USA and China.

Other Chinese-backed deals have come under scrutiny, including a partnership between Goldman Sachs and China's sovereign wealth fund, the China Investment Corporation; a hotel buying spree by the Chinese insurance company Anbang; and an effort by Huawei Technologies to purchase a stake in 3Com, an American maker of internet routers and networking equipment. Critics, both Democrats and Republicans, anxious the deal could allow the Chinese owners to acquire secrets about US trading strategies. Deutsche Boerse AG bought the USA -based International Securities Exchange for $2.8-billion in 2007, before selling it to Nasdaq Inc for $1.1-billion in 2016.

In a notice late Thursday, the Securities and Exchange Commission highlighted various concerns, including whether the deal would allow it to supervise the exchange properly.

In its decision to reject the deal, the S.E.C. said the proposal left too many unanswered questions about who would ultimately have control over big decisions at the exchange. In August, the SEC said it was reconsidering the sale after staff recommended the $20 million deal.

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.

The landmark Securities Exchange Act of 1934 governs secondary trading of securities - stocks, bonds, and debentures - in the United States, and provides the basis for government oversight of USA financial markets.

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