PROPOSED TRANSACTION Q&As
The proposed transaction is the purchase of 100% of CHX Holdings, Inc. (“CHX”) by an investor group led by Chongqing Casin Enterprise Group (the “Casin Group”). CHX Holdings owns 100% of the Chicago Stock Exchange, Inc. and CHXBD, LLC a broker dealer which is a facility of the exchange.
CHX is a closely held, non-public company which is owned by more than 200 shareholders.
The specific terms of the transaction are confidential and have not been publicly disclosed.
CHX has worked very hard over the past two years to develop and begin implementing a strategic plan. However, CHX requires additional capital to continue implementing its plan and this transaction will provide that capital.
Yes. CHX is required to submit a rule filing to the SEC, which must be approved by the SEC before the transaction can close. The rule filing has been published in the Federal Register and on the SEC's website and anyone who is interested is encouraged to read it and submit comments.
Yes. CHX and the Casin Group have made a voluntarily submission to the Committee on Foreign Investment in the United States (“CFIUS”) for its review and approval. CFIUS is an inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign entity in order to determine the effect of such transactions on U.S. national security, including with respect to U.S. critical infrastructure. CFIUS conducted a fulsome review of the proposed transaction and has determined that there are no unresolved national security concerns.
The investor group is made up of individuals and corporations from the U.S. and China, with a total of 50.5% being owned by U.S. owners and 49.5% being owned by private Chinese investors. This is not the first time non-U.S. investors have purchased a stake in a U.S. national securities exchange and, as with previous investments, safeguards will be implemented in connection with this transaction. For example, no single investor will be able to own more than 40% of CHX or be entitled to vote more than 20% of the outstanding shares. In addition, foreign investors will be required to submit to the jurisdiction of U.S. regulators and courts as well as provide open access to their own books and records.
The Chinese government will not own or control CHX after the transaction is complete. The Chinese members of the investor group are private corporations that are not owned by or affiliated with the Chinese government. More details regarding the investor group and the proposed transaction are contained in CHX’s rule filing, which may be found here on the CHX website.
After the proposed transaction, the investor group will own 100% of the outstanding stock of CHX. However, special rules regarding the makeup of the board of directors of a self-regulatory organization will apply to the Chicago Stock Exchange board. These rules specify that a majority of the board must be made up of directors that are not from the securities industry and do not own or otherwise have a material relationship with the exchange. This, along with the other similar requirements, are designed to ensure that those responsible for the oversight and governance of the exchange are a diverse group that is not unduly influenced by ownership or other biases.
No. CHX already has robust policies and procedures in place which are designed to ensure that non-public trading information is kept confidential. CHX does not disclose such information to its shareholders and, to the extent non-public information is shared with its board of directors to facilitate oversight, it is in an aggregate form or redacted to maintain confidentiality. CHX will continue to operate consistently with its bylaws and rules, all of which are approved by the SEC. The SEC and other regulators will continue to oversee CHX.
No, the transaction will not make CHX or the National Market System more vulnerable to a cyberattack. The required security policies and procedures that affect CHX will not change. CHX will continue to comply with all SEC regulatory requirements regarding systems compliance and integrity. In addition, CHX, like other national securities exchanges, has physically separated its trading network from its business network to insulate the trading network from cyberattack. These mandated protections will remain the same before and after the proposed transaction. Furthermore, CHX's role as an exchange is to match orders that are sent to it. The transactions taking place on CHX must then be processed through an independent clearinghouse, which has the authority to delay and investigate the exchange's submission in the event of any unusual activity.
No, just the opposite. The proposed transaction and subsequent contribution of capital would allow CHX to expand its workforce to continue implementing its strategic plan. This includes expanding CHX's business here in the U.S. and hiring more employees in Chicago.
That is our expectation. In addition to receiving additional capital to expand CHX's business here in the U.S., the Casin Group has expressed an interest in eventually starting another securities exchange in China. If this transaction is approved, CHX employees may have the opportunity to consult on this and other potential projects that that our investors may pursue in China or other countries.
CHX has already been identified as an innovator in the securities industry. CHX's Market Data Revenue Sharing plan, which was implemented in recent years, has provided added incentives for liquidity providers to make quality markets at Chicago Stock Exchange. CHX's SNAP Auction, the first of its kind in the U.S., will be introduced this spring and will encourage block-sized trading on a securities exchange while mitigating information leakage as well as the speed advantages enjoyed by some market participants. CHX is also planning to introduce a primary listing program that focuses on listing the stocks of JOBS Act companies which will support Congress' goal of providing much-needed capital for startup companies in the U.S. With the additional capital from the proposed transaction, CHX will be well positioned to grow its business here in the U.S. and bring further innovation to the U.S. securities markets.