The Securities and Exchange Commission (SEC) has until Aug. 9 to approve or reject the deal.
Remember 2016? Barack Obama was still president, Pokemon Go was all the rage and everybody was doing the Mannequin Challenge.
It also was the year that we got word that the Chongqing Casin Enterprise Group (CCEG) — a shady Chinese firm with suspected ties to the Chinese government — was aiming to buy the Chicago Stock Exchange. It was the latest in a string of high-profile purchases by Chinese companies, and it raised a ton of red flags.
More than 4,000 Alliance for American Manufacturing supporters even asked their Members of Congress to do something to stop China’s buying spree of U.S. companies, including the stock exchange.
Now we’re halfway through 2017, and there’s news about that potential sale.
“The lawmakers argue the SEC should be wary of the deal because the regulator may not be able to monitor the extent of Chinese ownership. U.S. 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 lawmakers wrote.”
The WSJ reports that the Chicago Stock Exchange hopes the new owners will help “reinvent the 135-year-old exchange as a bridge between U.S. capital markets and Chinese entrepreneurs.” But as we noted last year, there are huge risks.
Questions remain about CCEG, including whether the Chinese government is involved. The U.S.-China Economic and Security Review Commission has recommended Congress move to ban Chinese state-owned firms from acquiring American companies, as China often uses state-owned enterprises “in the service of the Chinese state to the detriment of U.S. national security.”
Private sector companies also are at risk by the potential sale. In order to join the exchange, companies must provide sensitive data — and we know China has stolen trade secrets from American companies to advance its own interests.
The Chicago Stock Exchange claims “none of its prospective owners are under the control of or affiliated with the Chinese government,” the WSJ reports. Beijing Guoli Energy Investment Co., which owners have included Chinese state-owned firms, had been in the group bidding for the exchange but dropped out.
In any case, the SEC has until Aug. 9 to decide whether to approve or reject the deal. We’ll be watching.