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CHX Looks to Re-Evaluate After SEC Nixes Acquisition

Traders Magazine Online News, February 28, 2018

John D'Antona Jr.

It’s back to the drawing board for the Chicago Stock Exchange.

How can it secure its future with 0.2% of total U.S. daily equity trading volume?

Just two weeks ago the Securities and Exchange Commission overturned an internal and lower working group’s recommendation to allow the Windy City exchange to be acquire by an investor’s group that include several Chinese companies. The CHX had tried for two years to complete the deal – lobbying local and Federal officials, meeting with regulators and even tinkering with the composition of the bidding group.

So, what should the CHX do now?

"They've got to do something different," Jim Angel, a finance professor at Georgetown University, said in an interview with S&P Global Intelligence. "They can't really survive on a business-as-usual basis."

With less than 1% of U.S. equity market share, the Chicago Stock Exchange, despite technology initiatives, including its own version of a speed bump, designed to boost business and market share, have failed to make a dent in the exchange space. Cboe Global Markets, NYSE, Nasdaq and even upstart IEX all have firmly planted roots in the equity markets.

The bid had represented a chance for the Chicago Stock Exchange to become an initial public offerings hub for Chinese companies, potentially cementing its specialization, S&P noted. But with it now blocked, the exchange may look to double down by fighting the SEC's decision in the courts.

In a blog post, the CHX said it was disappointed with the SEC’s decision to overrule its own staff’s recommendation in rejecting the acquisition of CHX by a majority American investor group led by North American Casin Holdings, Inc. The disapproval order of February 15, 2018, contains logic and representations with which CHX strongly disagrees.

“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.The CHX board and executive team are currently evaluating their options. Despite the SEC’s decision, CHX remains committed to increasing shareholder value and continuing to promote needed competition and innovation in the U.S. equity markets,” the blog said.

It continued:

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