DEFINITION of 'Linkage'

Linkage occurs when an investor is able to purchase a security on one financial exchange and sell it on another. Certain depositary receipts, such as American Depositary Receipts (ADRs), allow for linkage, which means that an investor can purchase shares of a company on a foreign exchange, such as the Toronto Stock Exchange, and then sell those shares on a domestic exchange, such as the New York Stock Exchange.


Linkage should not be confused with arbitrage situations where an investor looks to profit from price discrepancies for equivalent securities trading on different exchanges. As financial markets progress, specifically with the growth of electronic exchanges spreading, the phenomenon of linkage will become more relevant and useful for investors in the future.

  1. Nasdaq

    A global electronic marketplace for buying and selling securities, ...
  2. American Depositary Receipt - ADR

    A negotiable certificate issued by a U.S. bank representing a ...
  3. American Depositary Share - ADS

    A U.S. dollar-denominated equity share of a foreign-based company ...
  4. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  5. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  6. New York Stock Exchange - NYSE

    A stock exchange based in New York City, which is considered ...
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