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Friday, February 5, 2016

Chicago Stock Exchange Sold to China

One of America's oldest stock exchanges has just been sold to China.


The 134-year-old Chicago Stock Exchange reached a deal on Friday to be acquired by a Chinese-led group of investors.

The purchase by Chongqing Casin Enterprise Group is the latest U.S. investment made by China and would give the country a foothold in the vast American stock market.

The struggling Chicago Stock Exchange is a very small player in the exchange world whose presence is overshadowed by Nasdaq (NDAQ), the iconic New York Stock Exchange and newer entrants.

As of January, the Chicago Stock Exchange handled just 0.5% of U.S. trading, making it the third-smallest U.S. exchange, according to TABB Group.

Terms of the Chicago acquisition were not released. Privately-held Casin Group was founded in 1997 and has investments in real estate, environmental protection, finance and other areas. The Chicago Stock Exchange is minority-owned by a group that includes Bank of America (BAC), E*Trade (ETFC), Goldman Sachs (GS) and JPMorgan Chase (JPM).

Related: China is buying foreign firms at a record rate

It's not clear yet if the acquisition of the tiny Chicago Stock Exchange will face any political hurdles. Some prominent lawmakers opposed the attempted takeover of NYSE in 2011 by Deutsche Boerse,(DBOEF) a German company. That deal later collapsed and NYSE was acquired by Intercontinental Exchange (ICE) in 2012.

The Chicago Stock Exchange is "such a small player. It's certainly not as iconic as the New York Stock Exchange," said Joel Hasbrouck, a finance professor at New York University.

There is precedent for foreign ties to U.S. exchanges. For instance, in 2007 Nasdaq merged with OMX, a Nordic exchange, becoming Nasdaq OMX Group. It has since changed its name back to Nasdaq.

Related: Cash is way more popular than stocks or bonds

Still, Joe Saluzzi, co-head of trading at Themis Trading and author of "Broken Markets," said the fact that a foreign entity could soon control a U.S. exchange may raise security concerns.

"Does foreign ownership open up any potential for information leakage to someone who can take advantage of it? As an investor, I would raise an eyebrow," Saluzzi said.

"As long as the information is secure, I don't have any problem with it," he said.

China has been on a buying spree this year. Its largest deal was a $43 billion takeover of Swiss chemicals giant Sygenta earlier this week. So far in 2016, Chinese companies have announced plans to buy 66 foreign companies worth $68 billion, according to Dealogic.

Related: Forget oil stocks. Banks are killing your portfolio

Sayena Mostowfi, head of equities research at TABB, said the Chicago Stock Exchange deal represents a vote of confidence in the U.S. stock market.

"We have one of the most liquid and efficient stock markets in the world. People are looking at us as a model they want to be part of and invest in," she said.

--CNNMoney's Sophia Yan contributed to this report.

Chicago Stock Exchange Says It's Being Sold to Chinese-Led Group

http://www.bloomberg.com/.../chicago-stock-exchange-says...

The Chicago Stock Exchange said a Chinese investor group agreed to acquire it, giving the buyer entry into the intensely competitive U.S. equity market.

Chongqing Casin Enterprise Group has signed a definitive agreement to acquire the company, according to a statement Friday, which didn’t give financial terms. The exchange said the deal is expected to close in the second half of the year, though that will require regulatory approval.

“We’re a good fit. Our strategy is something they like and is consistent with theirs,” Chicago Stock Exchange Chief Executive Officer John Kerin said in a phone interview. “We provide technology and we’re a standalone, full-service exchange that they can grow in a manner that suits their needs.”

The Chicago Stock Exchange -- a subsidiary of CHX Holdings Inc. -- is minority-owned by a group including E*Trade Financial Corp., Bank of America Corp., Goldman Sachs Group Inc. and JPMorgan Chase & Co., according to the company. The minority shareholders are also selling their stake, Kerin said.

The acquisition would be the first of a U.S. exchange by a Chinese company. The 134-year-old bourse, which handles about 0.5 percent of U.S. stock trading, would give the buyer a beachhead in the $22 trillion American equity market, where regulations require trades to be routed to whichever exchange has the best price for a stock at a given moment.

Political Objections

Sales of stocks exchanges, which tend to be national symbols, have faced political objections in the past. When Germany’s Deutsche Boerse AG wanted to buy the owner of the New York Stock Exchange in 2011, U.S. Senator Charles Schumer, a Democrat from New York, raised obstacles. Singapore’s stock exchange tried to buy Australia’s in 2010, but the Australian government barred that from happening.

Casin Group said it was attracted to the market because of the potential to “bring exciting Chinese growth companies to U.S. investors,” according to a quote in the statement from Shengju Lu, Casin’s founder and chairman.

Founded in the 1990s through a privatization of state-owned assets, Casin Group initially focused on developing real estate projects in Chongqing before expanding into the environmental and financial industries. While the firm owns stakes in banks and insurers, it has never owned an exchange. Calls to the company’s Chongqing headquarters went unanswered on Friday.

“We have reviewed CHX’s plans to improve market share through new growth initiatives and fully support them,” said Casin’s Lu, a torch bearer during the Beijing Olympic games in 2008, according to the statement.

Casin Group’s offer comes amid an unprecedented overseas shopping spree by Chinese companies. Businesses from Asia’s largest economy have announced $70 billion of cross-border acquisitions and investments this year, on track to break last year’s record of $123 billion, according to data compiled by Bloomberg.

The Chicago Stock Exchange was advised by GCA Savvian Advisors LLC and Sidley Austin LLP on the transaction, according to the statement. Broadhaven Capital Partners and Orrick Herrington & Sutcliffe LLP worked with Casin.

Chicago Stock Exchange Says It's Being Sold to Chinese-Led Group

The Chicago Stock Exchange said a Chinese investor group agreed to acquire it, giving the buyer entry into the intensely competitive U.S. equity market.

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