What is an Interlisted Stock
Interlisted stock is a security that is listed on multiple stock exchanges. Interlisting can increase the demand for the stock.
BREAKING DOWN Interlisted Stock
Interlisted stocks tend to be bigger and more well-known than non-interlisted stocks. Interlisted stocks could, for example, trade on both the New York Stock Exchange and the Toronto Stock Exchange (TSX). Many companies have shares that trade on multiple exchanges. The advantages of listing on several exchanges is that it allows a company's shares to gain access to more investors and increases a company's liquidity. The main disadvantages include the cost of listing on numerous exchanges and possible additional regulatory requirements. When Canadian stocks trade in the U.S. as well as in Canada, it’s usually beneficial for the company. Some examples of interlisted Canadian stocks are: Bank of Nova Scotia, Sun Life Financial, and Thomson Reuters.
Pros and Cons of Interlisted Stocks
The advantages of listing on more than one exchange is that it allows a company's shares to gain broader access to an international group of investors and increases a company's liquid assets. The disadvantages include the costs of listing on more than one exchange and any additional regulatory requirements a company may need to meet.
For investors, Canadian stocks interlisted on U.S. exchanges can represent stability. TSX stocks have generally become more desirable after the benchmark Toronto Stock Exchange (TSX) Composite rose to a record high by the summer of 2008. While the global market crash sunk the TSX 50 percent in a few months time, the quick recovery reflects Canada’s reputation of having one of the world's more resilient economies. This can be due to the country's economy being healthier than most nations at the onset of the recession and that the largest Canadian banks and financial institutions weren't loaded down by the doomed mortgage-backed securities traded during the U.S. housing boom during 2003-2007.
Often, the trading volumes in the U.S. are higher than the trading volumes in Canada. Overseas investors are more likely to buy the shares if they trade in U.S. exchanges. Canadian companies can find it useful to interlist their shares, especially if they’re growing in the United States.
For individual investors, the interlisting of Canadian or American companies offers little to no chance to profit from fluctuations in share prices or currencies because arbitrageurs control prices, buying shares in the cheaper market and then selling them off quickly in the market that offers a higher profit. Arbitrageurs will do this with interlisted stocks until the price is the same in both countries' stock markets. Individual investors might be able to make a profit if the stock trades for significantly more in one market than the other, as in this case, the bid-ask spread is narrowed and trade costs are lower.