Lawmakers Demand Longer Review of Chinese Firm’s Deal to Purchase Chicago Stock Exchange

Members of Congress ask SEC to 'consider rejecting' the sale over national security implications

• December 22, 2016 4:32 pm


Lawmakers are demanding a longer review of a Chinese firm's deal to purchase the Chicago Stock Exchange, voicing concerns over the sale's impact on U.S. national security and the financial security of the American marketplace.

Five members of Congress wrote to leaders of the Securities and Exchange Commission on Thursday asking that the commission extend the public comment period for its review of the Chongqing Casin Enterprise Group's planned purchase of the Chicago Stock Exchange.

They also urged the SEC to "consider rejecting" the transaction based on the potential impact of the sale.

"As the Securities and Exchange Commission (SEC) conducts its process to review this transaction, we similarly urge you to consider the negative impacts Chinese state-affiliated ownership of the Chicago Exchange will have on national security and the financial security of the American marketplace," the lawmakers wrote.

"This transaction should be thoroughly reviewed and the period for public comment should be extended to ensure that the serious potential consequences of this transaction are adequately assessed."

Rep. Robert Pittenger (R., N.C.), a member of the House Committee on Financial Services, organized the letter after discovering that the SEC public comment period for the Chicago Stock Exchange deal was short and mostly over the holiday season, with a January 3 deadline. The lawmakers charged that the abbreviated review period "essentially precludes an appropriate review" and that it was shortened to avoid negative responses.

Reps. Earl "Buddy" Carter (R., Ga.), Peter DeFazio (D., Ore.), Collin Peterson (D., Minn.), and David Joyce (R., Ohio) signed onto Pittenger's letter.

"We strongly object to the timing of this comment period given the weight of this transaction. Holding the public comment period for a brief duration during the holiday season clearly indicates an effort to avoid negative response," they wrote, asking the deadline be extended to a more "reasonable" date.

Members of Congress have previously expressed concern about the national security implications of the sale, which was announced in February. Forty-six lawmakers wrote to the Committee on Foreign Investment in the United States, or CFIUS, asking officials to rigorously investigate the sale and block it if the company was found to have close ties to the Chinese government.

Earlier this month, the Chicago Stock Exchange announced that CFIUS found "no unresolved national security concerns" regarding the deal. The sale now only faces approval by the SEC. The Treasury Department has declined to comment on the development.

The lawmakers reiterated concerns about the sale's national security implications on Thursday, citing the Chongqing Casin Enterprise Group's involvement in the Chinese market and the origin of its financial assets. The company was founded in the 1990s with state-owned assets that were privatized, Bloomberg reported in February.

"CCEG is involved in a number of Chinese market sectors that would require close ties to the state, particularly in the environmental protection areas that are state-sensitive," the lawmakers wrote. "The company's financial assets were originally state-controlled, and CCEG's chairman sits on an industry council overseen directly by the mayor of the Chongqing Municipality, demonstrating a direct political connection."

"Given the lack of transparency in China, there is no way to refute concerns related to government influence over CCEG," they wrote. "Despite the fact that Chinese investment in the United States continues to grow at an exponential pace, our government has unfortunately been unable to adequately address transparency concerns with regard to the operations of Chinese businesses."

Should the deal be approved, it would afford Chinese investors greater access to the U.S. stock market. The 134-year-old Chicago Stock Exchange, which accounts for less than 1 percent market share of U.S. equities, had been struggling for years before the announcement of the sale.

The lawmakers argued Thursday that the deal would offer the firm the ability to "manipulate" the $22 trillion U.S. equity marketplace.

"The integrity of, and confidence in America's financial markets is a bedrock component of our nation's security," they wrote. "This transaction raises serious questions that go well beyond the limited scope of review that has already taken place. Allowing an entity such as CCEG to acquire one of our nation's exchanges—with the access, information, and opportunities that exist to undermine U.S. interests—is a very serious matter."

"Given these concerns, we urge you to consider rejecting this transaction," the lawmakers wrote.

Published under: China