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Wall Street banks take stake in Chicago Stock Exchange

21 June 2006  |  5826 views  |  0 cash

The Chicago Stock Exchange (CHX) has confirmed that Bank of America, Bear Stearns, E*Trade Financial and Goldman Sachs are making a combined $20 million equity investment in its business.

The news follows reports earlier this year that CHX was in talks with a number of banks about selling a minority stake of the business.

In a statement, CHX says it will use the funds to improve its electronic trading systems. The exchange eventually plans to drop floor trading in favour of an all-electronic automated system.

Valerie Jarrett, CHX chairman, says: "This transaction represents an endorsement of the exchange's strategic plan to leverage existing volume and connectivity, and to integrate a state of the art electronic trade matching engine in order to attract significant new business."

The exchange says each of the banks will have a voice on the boards of directors following closing of the transaction, which is scheduled for this summer, pending regulatory and stockholder approvals.

CHX's move to sell off a stake of its business follows similar transactions by regional exchanges in Boston and Philadelphia last year.

The investments come as regional US exchanges struggle to compete against larger competitors such as the New York Stock Exchange and Nasdaq, and amid rising concern that the dominant exchanges in the US could use their market power to raise trading fees.

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