For those up in arms over Friday's news that the Chicago Stock Exchange, a 134-year-old bastion of American capitalism, has agreed to sell itself to a Chinese investor group: Simmer down.
It's literally not that big of a deal, because the exchange is pretty insignificant. It was responsible for exactly 0.47 percent of U.S. equity trading volume during the month of January, according to data compiled by Bloomberg. For context, the main boards of Nasdaq and NYSE saw 33 and 27 times that volume, respectively.
That means the deal shouldn't be compared with Deutsche Boerse AG and NYSE Euronext's potential merger, which was blocked by the European Union on the grounds of competition, the same headwinds faced by Nasdaq OMX Group and IntercontinentalExchange, which abandoned their pursuit of NYSE Euronext when the Department of Justice threatened to file an antitrust lawsuit. Nor should "national interest" be a concern, as it was when the Singapore Exchange's multi-billion dollar bid for Australia's ASX (the nation's leader by trading volume) was blocked.
The stakes aren't as high when it comes to the Chicago Stock Exchange and the motivations behind the deal appear to be twofold. According to Shengju Lu, the buyer’s chairman, the exchange offers "a unique opportunity to help develop financial markets in China over the longer term and to bring exciting Chinese growth companies to U.S. investors."
In other words, Chinese companies may seek listings on the Chicago Stock Exchange, giving them another route to tap public investors the next time their home IPO market is suspended by policymakers.
And China's own stock exchanges could reap the benefits of the Chicago Stock Exchange technology, including its soon-to-be launched "Snap Auctions," which have been developed to neutralize the speed advantage held by high-frequency traders and "spoofers” (explained extensively in this Bloomberg News story). That's an issue that China’s own securities regulator has been targeting.
Rather than get defensive about a deal for the Chicago exchange -- however storied its history -- critics may be better off turning their attention elsewhere, especially considering the $22.7 billion in pending U.S. acquisitions by Chinese companies, ranging from crane makers to semiconductor products to Hollywood film production houses. These will surely leave a bigger impact.
And from the perspective of U.S. food safety, ChemChina's pending $43 billion acquisition of global pesticide and seed company Syngenta could raise legitimate questions. Moreover, with Chinese companies in a hurry when it comes to outbound M&A, there's undoubtedly more to come. Some deals may have good reason to raise hackles -- but as far as the Chicago Stock Exchange goes, there's nothing to fear here.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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Gillian Tan in New York at firstname.lastname@example.org
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