Dozens of members of Congress plan to ask the Obama administration to review the planned acquisition of the Chicago Stock Exchange by a Chinese firm, to assess whether it poses a national security risk or a risk to the companies traded on the exchange.
The Chicago Stock Exchange announced this month that it would be sold to a consortium led by the Chongqing Casin Investment Group of China, a move that would inject needed resources into the exchange and give the Chinese firm a foothold in the $22 trillion U.S. equities marketplace. Chinese state media reported that the deal was meant to eventually bring more Chinese firms into the U.S. market and that U.S. technology could be used to open new exchanges in China, a potential win-win for both sides.
But the exchange’s CEO, John Kerin, has said that he cannot publicly identify who owns Chongqing Casin and that the Chinese government may be a minority stakeholder, as it is in most large Chinese businesses.
On Wednesday, a group of several dozen U.S. lawmakers plan to formally request that the Obama administration conduct a national security review of the deal through a process known as the Committee on Foreign Investment in the United States, or CFIUS.
“The American market has little information about CCEG, and it shares many of the traditional opaque qualities of a Chinese company,” said a letter from 45 Republicans and one Democrat to the members of the CFIUS board, which is led by Treasury Secretary Jack Lew. “While it is unclear the level of influence the state holds over CCEG, the firm is involved in a number of important Chinese sectors that would likely require close ties to the state.”
The company was created by the Chinese government in 1997 to absorb state-controlled assets, the lawmakers wrote, and the firm’s chairman Shengju Lu still has ties to the government of Chongqing, a city in southwestern China. The letter asks the administration to rigorously investigate the company’s ties to the Chinese government.
“Should you determine CCEG maintains a close relationship with the Chinese government – and therefore the Chinese military – we would urge CFIUS to deny this acquisition,” the lawmakers wrote.
Representative Robert Pittenger, the Republican who initiated the letter, told me in an interview that if the Chinese government had influence over U.S. markets, it could manipulate them to the advantage of Chinese companies or to artificially benefit the Chinese economy.
“It’s clearly of a concern they could play upon our own stock exchange,” he said. “The financial markets, the stock exchanges, they have a critical impact on our nation’s economy.”
He also sees risk in giving a Chinese firm access to the exchange, because it could also have access to proprietary information that U.S. companies share with the exchange in order to do business, and he said such access would constitute a “major cyber security concern.”