What is Dual Listing?
Dual listing (also known as interlisting or cross-listing) is the listing of any security on two or more different exchanges.
How Does Dual Listing Work?
Let's assume Company XYZ is a Canadian public company that lists its shares on the Toronto Exchange. Company XYZ could more shares and list them on the New York Stock Exchange. Then, people in both the U.S. and Canada can buy and sell Company XYZ stock. By dual listing, however, Company XYZ must comply with all of the legal and exchange requirements that apply to companies doing business in the United States.
Why Does Dual Listing Matter?
Dual listing accomplishes two things for an liquidity of the security because there are more places to buy and sell, there are more participants in the market, and there is sometimes more time to trade the (if the exchanges are in different time zones). Second, it often helps the issuer raise more because it makes more investors available from other markets and gives the company more exposure in general. This theoretically lowers the cost of capital and furthers the idea of efficient markets, although government influence on foreign exchange or capital flows often presents difficulties.
Dual listing also has several effects on a stock's price and . The largest of these is disparity in trading prices. For example, Company XYZ might close at $5 per share on the Toronto Exchange and $4.90 on the on the same day. Theoretically, this should not be the case. Several studies suggest that in listing requirements among the exchanges, different accounting rules, and differences in the level of market regulation (particularly the effects of the U.S. Sarbanes-Oxley regulation) often cause these disparities.