What is an Interlisting?
Interlisting is the listing of any security on two or more different exchanges.
How Does an Interlisting Work?
Interlisting is also known as cross listing or dual listing.
Let's assume Company XYZ is a Canadian public company that lists its shares on the Toronto Stock Exchange. Company XYZ could issue 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 interlisting, however, Company XYZ must comply with all of the legal and exchange requirements that apply to companies doing business in the United States.
Interlisting has several effects on a stock's price and volume. 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 NYSE on the same day. Theoretically, this should not be the case. Several studies suggest that variances 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.
Why Does an Interlisting Matter?
Interlisting accomplishes two things for an issuer. First, it tends to increase the 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 stock (if the exchanges are in different time zones). Second, it often helps the issuer raise more capital because it makes more investors available from other markets and gives the company more exposure in general.
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