In my first piece of this series, I detailed some of the reasons this acquisition would benefit U.S. market structure by providing Chicago Stock Exchange with added capital to pursue new innovations and offer needed competition to the NYSE/Nasdaq/BATS oligopoly. This deal will also produce benefits that will reach people both inside and out of the financial industry. In short -- and as a lifelong Chicagoan, I’m happy to say this -- I believe this transaction will be a positive for the city of Chicago, possibly significantly.
You don’t need me to tell you that Chicago has been in the national news quite a bit during the past few years, and not necessarily for all of the best reasons. The state of our city’s financial health has been one of those reasons. Our city and state’s fiscal situation has caused people and jobs to leave, which in turn worsens our circumstances, causing a vicious cycle. This is bad news for any city, but as our nation’s third-largest city and the anchor of the entire Great Lakes region, Chicago’s financial health affects far more people than the 2.7 million who live here.
First and foremost, this transaction will mean job creation in Chicago. The acquisition will allow CHX to aggressively expand its initiatives, which means the exchange will be expanding its staff as well. More people will be hired in Chicago, and with Chicago being home to some of the world's top universities, CHX will aim to keep more of those talented students -- particularly those interested in fintech -- in Chicago.
An expanded Chicago Stock Exchange will also have the knock-on effect of promoting business for local professional services businesses, such as legal, accounting and marketing firms. Even places like corporate hotels and co-working spaces could benefit, as the exchange will often be hosting colleagues from China for extended stays and events. It wouldn’t surprise me if the lead investor for the transaction, the Chongqing Casin Enterprise Group, established its U.S. headquarters here in Chicago, further developing an economic bridge between Chicago and China. When it is said and done, this transaction will result in more money coming into our city, which means more general commerce, and in turn more tax revenue to help all Chicagoans.
More intangibly, this deal would further establish Chicago as a global financial center. This city is already well known for being the world’s leader in derivatives trading with the CBOE and CME leading the way; by growing the Chicago Stock Exchange and serving as a connection point with the world’s largest country, Chicago will be further recognized as an international leader in equities as well. That raises Chicago’s odds of additional international investment into other areas, as it will send a message to the world -- Chicago is a great place to do business.
This is not simply a symbolic international relationship, like “sister cities.” There is a real business connection here. This deal will bring international trading and listings business to Chicago and the United States. If it’s not Chicago, another city -- likely a non-American city such as London -- may end up taking the lead in helping China join the global marketplace, and they will see the financial benefits that follow.
You don’t just have to take my word on this: last December, the Chicago City Council adopted a resolution in support of the acquisition. (Scroll down to view this letter at the bottom of this post.) The council highlighted the same benefits mentioned above and in my previous posts -- more jobs in Chicago, a greater ability to compete with the New York exchanges, strengthening Chicago’s ties to the global business community, expanding the revenue base (tax receipts from an entity other than its citizens!) -- and urged the federal government to approve the agreement. The Chicago Tribune also weighed in on the deal, noting the benefits of international trade and criticizing irrational fears over foreign investment (those fears have already been addressed and dismissed by CFIUS).
I want to see this city add to its recognition as a leader on the world stage, known for its innovative successes, not it’s controversies. I firmly believe this acquisition would be another jewel in the city’s financial industry crown… a win for Chicago -- if I didn’t, I would not sit on the current CHX board and I would not be a part of this investment group.
Of course, with the vital role the city plays within the Midwest and the country as a whole, what benefits Chicago will benefit the United States through extension. Those national benefits will be the subject of my third post of the series. Stay tuned for that post, and if you have any questions or comments in the meantime regarding this acquisition’s effect on Chicago, please leave them in the comment section of this post or hit me on LinkedIn.
The views herein are those of Anthony Saliba and do not necessarily reflect those of the CHX Holdings Inc., Chongqing Casin Enterprise Group, or any other persons or entity.