The weaving path of the Chicago Stock Exchange and its quest to be a significant player in the US seems to have finally ended. The “minuscule” exchange had less than 1% of daily stock trading volume but big plans that involved Chinese investors, creating a high-frequency trading “speed bump” and working as a funding vehicle for Chinese companies looking to list in the US publicly.
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The on-again, off-again deal for a group of Chinese investors to revitalize the Chicago Stock Exchange has effectively ended. The US Securities & Exchange Commission said it ran into transparency issues with the proposed Chinese owners and the ultimate beneficial ownership of the exchange.
After having received an approval recommendation from SEC staff, commissioners in August said they wanted to review the sale, echoing concerns raised in Congress.
At the center of the controversy were two investors and a cloud of obfuscated financial ties. Chongqing Longshang Decoration Co, a firm that Bloomberg described as offering “interior decoration services,” suddenly decided it wanted to integrate a stock exchange into its product line. They along with Chongqing Jintian Industrial Co. dropped out of the bidding after unclear ownership claims could not be discerned adequately by regulators.
The issue took center stage in 2016 when on the campaign trail President Donald Trump expressed national security concerns over the transaction, a point echoed by members of Congress.
While ownership was unclear, concerns over exposure to Chinese influence from a bi-partisan group emerged. In September, Democratic Senators Amy Klobuchar (MN) and Joe Manchin (WV) joined Republican members of Congress Robert Pittenger (NC), and Chris Smith (NJ) blasted the proposal.
“Simply put, this transaction would expose our markets to new vulnerabilities as a result of potential undue and unnecessary state influence from the Chinese government,” the letter said, pointing to national security concerns. “We see no mitigation steps that can fully insulate the Exchange’s activities and ensure that our nation’s interests are protected, not only in line with the intent of the 1934 Act but with our broader national security interests, as well.”
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