NYSE in Talks to Buy Chicago Stock Exchange
The New York Stock Exchange is in talks to buy the tiny Chicago Stock Exchange, after the recent collapse of a two-year acquisition effort by a Chinese-led investor group, people familiar with the situation said.
The talks could still fall apart. An acquisition by the NYSE would end the independence of the last U.S. regional stock exchange, which handles less than 1% of U.S. stock-trading volume. Instead of becoming a potential outpost for Chinese firms seeking to raise money from U.S. investors, the Chicago market would be swallowed by the country's best-known exchange operator, which is well positioned to win regulatory approval.
Spokesmen for the NYSE and for the Chicago exchange's parent company, CHX Holdings, declined to comment.
The Securities and Exchange Commission would have to sign off on the takeover. The SEC rejected the Chinese-led bid for the exchange in February, citing regulatory deficiencies.
U.S. lawmakers had alleged the deal risked hurting the security of the U.S. financial system. CHX and Chongqing Casin Enterprise Group Co., a Chinese conglomerate that would have acquired a 29% stake in CHX, had said such concerns were unfounded.
The Chicago exchange said March 6 that it was looking for new buyers.
The NYSE has discussed paying about $70 million for CHX, the people familiar with the situation said. That would be more than triple the $20 million price agreed on with the Chinese-led group.
The deal would come at a time when exchange licenses are potentially more valuable, due to the growth of unregulated platforms that trade cryptocurrencies. The government wants many of them to become regulated exchanges and to abide by investor-protection rules. To do this, the cryptocurrency platforms could merge or form alliances with companies that already have licenses.
NYSE is a minority investor in Coinbase, one of the world's largest cryptocurrency platforms.
The Chicago exchange, founded in 1882, would be a small acquisition for the NYSE, whose parent company Intercontinental Exchange reported profit of $2.5 billion last year.
Dozens of small, regional stock exchanges once dotted the country. But over the past few decades, markets such as the Philadelphia Stock Exchange, the Boston Stock Exchange and the Pacific Exchange in San Francisco have been folded into big conglomerates.
Analysts say CHX's most valuable asset is its license to run a national securities exchange. Applying for a new exchange license from the SEC can take years.
For a big market operator like the NYSE -- which owns four equities exchanges and two options exchanges -- acquiring an extra license can provide the opportunity to experiment with new pricing strategies and other ways of targeting specific types of investors and traders.
In December 2016, the NYSE agreed to acquire the failing National Stock Exchange, or NSX, founded as the Cincinnati Stock Exchange in 1885. The NYSE renamed the exchange "NYSE National" and plans to relaunch it in May.
Write to Dave Michaels at dave.michaels@wsj.com and Alexander Osipovich at alexander.osipovich@dowjones.com