February 16, 2018 / 11:47 PM / in a month

Chicago Stock Exchange mulls options after sale blocked

NEW YORK (Reuters) - The Chicago Stock Exchange said on Friday it was evaluating its options after the U.S. Securities and Exchange Commission blocked the sale of the bourse to a group of U.S. and China-based investors due to the opaque nature of the buyers and their funds.

The SEC killed the politically sensitive deal on Thursday, ending a two-year effort to sell the exchange, known as CHX, to a consortium of investors led by China’s Chongqing Casin Enterprise Group and its U.S. affiliate North American Casin Holdings.

“By disapproving the transaction, the SEC has denied the American public an historic and unprecedented opportunity to build a mutually beneficial economic bridge between the world’s largest economies, while unfairly disadvantaging our company and shareholders,” CHX said in a statement.

SEC staff initially approved the roughly $25 million deal for the privately held exchange. But the agency’s commissioners, led by Jay Clayton, an appointee of U.S. President Donald Trump, stayed the decision pending their own review.

CHX, a niche player with a market share of around 0.5 percent, had hoped the deal would help it become a conduit for Chinese companies to list in the United States. Casin also said it planned eventually to build an exchange in China using CHX technology.

But on Thursday the SEC said CHX could not provide key information it had requested, including access to the potential owners’ books. The SEC also said the deal’s structure could let new, unknown entities assume stakes over time and that, overall, it was not convinced the exchange would be properly monitored after a deal.

The SEC order “contains logic and representations with which CHX strongly disagrees,” the exchange said.

The deal was proposed in February 2016 and was the target of harsh criticism by a group of lawmakers led by Republican Congressman Robert Pittenger. They claimed in letters to the SEC that Casin’s control of CHX could allow the Chinese government access to American financial markets.

The Committee on Foreign Investment in the United States, which scrutinizes acquisitions for potential national security concerns, approved the sale in August 2016, but it ultimately hinged on SEC approval.

Reporting by John McCrank; Editing by Tom Brown and Daniel Wallis

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