Linkage

A A A

DEFINITION

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.

INVESTOPEDIA EXPLAINS

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.


RELATED TERMS
  1. Nasdaq

    A global electronic marketplace for buying and selling securities, as well as ...
  2. American Depositary Share - ADS

    A U.S. dollar-denominated equity share of a foreign-based company available ...
  3. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit from a difference ...
  4. Exchange

    A marketplace in which securities, commodities, derivatives and other financial ...
  5. New York Stock Exchange - NYSE

    A stock exchange based in New York City, which is considered the largest equities-based ...
  6. Tokyo Stock Exchange - TSE

    The largest stock exchange in Japan, headquartered in its capital city of Tokyo. ...
  7. American Depositary Receipt - ADR

    A negotiable certificate issued by a U.S. bank representing a specified number ...
  8. Bidder

    The party offering to buy an asset from a seller at a specific price. A bidder ...
  9. Foreign remittance

  10. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position in a security or ...
Related Articles
  1. Getting To Know The Stock Exchanges
    Options & Futures

    Getting To Know The Stock Exchanges

  2. The NYSE And Nasdaq: How They Work
    Options & Futures

    The NYSE And Nasdaq: How They Work

  3. The Stock Market: A Look Back
    Economics

    The Stock Market: A Look Back

  4. The SEC’s EDGAR System: Use It Fearlessly!
    Investing Basics

    The SEC’s EDGAR System: Use It Fearlessly!

  5. How To Use The Top Yahoo! Finance Tools
    Fundamental Analysis

    How To Use The Top Yahoo! Finance Tools

  6. How The SEC Places Rules On Penny Stocks
    Investing Basics

    How The SEC Places Rules On Penny Stocks

  7. How The Stock Market Works
    Investing Basics

    How The Stock Market Works

  8. Use The Percentage Price Oscillator: ...
    Investing

    Use The Percentage Price Oscillator: ...

  9. Top Companies Trading On The Toronto ...
    Investing Basics

    Top Companies Trading On The Toronto ...

  10. During what time does after-hours trading ...
    Investing Basics

    During what time does after-hours trading ...

comments powered by Disqus
Hot Definitions
  1. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  2. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  3. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  4. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  5. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  6. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
Trading Center