By Jacob Bunge Of DOW JONES NEWSWIRES CHICAGO -(Dow Jones)- The Chicago Stock Exchange aims to more than double its tiny share of U.S. stock market trading with a new electronic platform, and is open to strategic alliances as it looks to recover from a loss last year. Running dual stock exchanges would let parent CHX Holdings Inc. structure its fees and trading services to appeal to a broader swath of institutional investors, retail brokerages and trading firms, according to CHX Holdings Inc. Chief Executive David Herron. "We hope to attract enough volume to offset the relatively minor costs of duplicating the functionality," Herron said in an interview. The Chicago Stock Exchange, or CHX, traces its roots back to 1882 and is the last of the independently operated regional stock markets that once dotted the U.S. For a time it was known as the Midwest Stock Exchange after absorbing bourses in Minneapolis, St. Louis, Cleveland and New Orleans. Broker-dealers Goldman Sachs Group (GS), E-Trade Financial Corp. (ETFC), Bank of America Merrill Lynch (BAC) and JPMorgan Chase & Co. (JPM) are the biggest owners of CHX, together holding about one-third of the company. Other brokers, private investors and employees own smaller stakes. CHX still maintains a slate of listings that include companies like International Business Machines Corp. (IBM), PepsiCo Inc. (PEP) and Walgreen Co. (WAG), though nearly all of its listings are shared with much-larger rivals NYSE Euronext (NYX) and Nasdaq OMX Group Inc. (NDAQ). The CHX currently represents just a sliver of the average 6.4 billion shares traded daily on U.S. markets, with a U.S. market share of 0.37% over the past week, according to data from BATS Global Markets. Herron said he hopes to boost that figure after an "extremely disappointing" 2011 that saw U.S. market regulators temporarily stop CHX from using its systems to facilitate large, off-exchange stock transactions carried out by its users. The prohibition, which ran from August through December of last year, cost CHX's parent about $3 million in lost revenue as major customers took their business elsewhere, Herron said. The company lost $2.7 million last year. In a letter to shareholders sent last week, Herron said that CHX remains open to alliances, transactions or other ways to leverage its exchange license and trading infrastructure. No bank has been engaged, he said in an interview. Running a second stock exchange could allow CHX to set up one market aimed at individual investors and high-frequency trading firms carrying out smaller-sized trades, Herron said, with the other directed toward financial institutions doing larger transactions. "If the combined entity approaches 1% [of daily stock trading volume], we'd be happy and be on our way," Herron said. "You don't need 100 million shares traded per day to break even." Herron said his staff has begun crafting legal documents to submit to the Securities and Exchange Commission, which must approve any new exchange. -By Jacob Bunge, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com
