SEC to rule on sale of Chicago Stock Exchange to Chinese investors

The Securities and Exchange Commission is expected to rule Wednesday on whether to allow a Chinese group of investors to buy the Chicago Stock Exchange, a controversial deal that some members of Congress fear would allow a foreign government to gain a foothold in the U.S. financial system.

An investor group related to Chongqing Casin Enterprise Group is seeking SEC approval of the deal. The proposal has been before the SEC since late 2016, and the regulatory body has received numerous letters challenging the deal.

Among the latest, 11 House members led by Rep. Robert Pittenger, R-N.C., urged the SEC in July to reject the proposed acquisition, calling it "a threat to the United States' financial security and Americans' faith in our national financial market infrastructure."

Under the proposal, the 135-year old exchange would be sold for an estimated $30 million to a group led by Chongqing Casin Enterprise Group, a China-based company involved in a wide variety of businesses — from operating sewage treatment plants to investing in real estate.

The exchange currently is owned by a consortium of investors and financial companies that includes JP Morgan Chase, Bank of America, E-Trade and Goldman Sachs.

In his letter to the SEC, Pittenger emphasized a lack of transparency in Chinese markets, and said he was concerned that the SEC would be unable to monitor the ownership and potential "state-driven influence" of China. In another letter in July, Sen. Joe Manchin, D-W.Va., raised similar concerns about China and added: "Their sustained efforts to steal intellectual property and state-sponsored cyber-attacks present clear and present threats to our national security."

North American Casin Holdings Chief Executive Yong Xiao told the SEC in a letter that the proposed transaction would "help establish links between the capital markets of China and the U.S."

John Kerin, president and chief executive officer of the Chicago Stock Exchange, noted in a letter to the SEC in March that the Committee on Foreign Investment in the United States had reviewed the proposed transaction and "found no unresolved national security concerns."

He said that the SEC would have adequate oversight over the exchange.

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