Investors have access to various exchanges in this tech-driven era of global trading. It is now simpler than ever to trade and invest in stocks, thanks to the emergence of different electronic trading platforms. Many investors do, however, wonder if shares can be purchased on one market and then sold on a different one. We'll love to break it to you that, yes; it is very much possible. Let’s look at the systems that let investors transact across different exchanges.
Cross-listing is the process through which a corporation lists on multiple exchanges within the country or on an exchange in a different nation. If a company needs access to more capital than being offered through one exchange, it would desire to cross-list. Another scenario could be that this move is a part of its strategic expansion plans.
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The company in consideration must satisfy the same criteria for cross-listing approval concerning accounting policies as any other listed exchange member. The primary requirement specific to this process includes the initial and ongoing filings with regulators. Other requirements that need to be met are a minimum number of shareholders and a minimum market capitalisation.
Despite having the option, very few corporations list their stocks on multiple exchanges. However, the ability to trade shares across exchanges gives investors more choices and flexibility. It helps in managing their portfolios as the worldwide financial markets keep evolving. Let’s consider the possible scenarios when stocks can be traded on multiple exchanges.
A foreign stock market will accept depositary receipts (DRs). A DR is a negotiable certificate that represents equity shares in international corporations. It enables foreign market investors to trade company shares without possessing the underlying securities.
In India,, the following two types of DRs are frequently used:
A company that cross-lists might have to pay more to comply with the rules and conditions of the exchanges and nations they want to be listed on. Investors must take the fees of trading cross-listed shares into account.
Fee structures for trading commissions, foreign exchange fees, and clearing costs differ between exchanges. Before engaging in cross-listed trading, these expenses should be carefully considered as they may affect prospective profits.