Dual Listing

Dual listing refers to a listing of any security on two or more different exchanges. Companies use dual listing because its benefits, such as additional liquidity, increased access to capital and the ability for its shares to trade for longer periods if the exchanges on which its shares are listed are in different time zones outweigh the costs of a second listing. Some exchanges have a number of listing categories for companies that seek a dual listing, each with different requirements and benefits.

Dual listing, also known as interlisting or cross-listing, is attractive to many non-U.S. companies because of the depth of the capital markets in the U.S., the world’s biggest economy. Data indicate that companies tend to list in countries that have a similar culture or share a common language with their native jurisdiction. For example, most of the biggest Canadian companies are also listed on U.S. exchanges.

A foreign company may seek an ordinary listing, the most prestigious type of listing, on an exchange such as the NYSE or NASDAQ, but the requirements to do so are stringent. In addition to meeting the exchange’s listing criteria, the foreign company also has to satisfy U.S. regulatory requirements, restate its financials, and arrange for clearing and settlement of its trades.

A popular form of dual listing for many leading non-U.S. companies is through American Depositary Receipts (ADRs). An ADR represents the foreign shares of the company held in trust by a custodian bank in the company’s home country, and carries the same rights of the shares.

Note that the stock price of a dual-listed company should be approximately the same in both jurisdictions, after taking currency differences and transaction costs into account. Otherwise arbitrageurs would step in and exploit the price differences. That said, price divergences do occur from time to time, especially when trading hours do not overlap and there has been a significant price move in one market.

There are numerous advantages of dual listing. Companies get access to a larger pool of potential investors, which can be beneficial for investors as well. For example, many Australian and Canadian resource companies list their shares on European exchanges because of substantial investor interest, partly due to the relative paucity of local resource companies. 

Dual listing improves a company’s share liquidity and its public profile because the shares trade on more than one market. Dual listing also enables a company to diversify its capital-raising activities, rather than being reliant only on its domestic market.

Among the drawbacks is that dual listing is expensive due to the costs involved in the initial listing and ongoing listing expenses. Differing regulatory and accounting standards may also necessitate the need for additional legal and finance staff. Dual listing could place more demands on management as well, given the additional time required to communicate with investors in the second jurisdiction through road shows, for example.