Investing in dual-listed stocks can provide investors with several advantages, including better liquidity, currency diversification, and arbitrage opportunities. Companies that list their shares on multiple exchanges offer investors the flexibility to trade in different markets, often leading to increased trading volumes and price stability. A prime example of such stocks is Telus Corporation (T) on the Toronto Stock Exchange (TSX) and TU on the New York Stock Exchange (NYSE).
Key Benefits of Dual-Listed Stocks
1. Liquidity and Market Access
When a stock is listed on multiple exchanges, it benefits from increased trading volumes, which in turn enhances liquidity. Higher liquidity means tighter bid-ask spreads and reduced trading costs for investors. This can be particularly beneficial for large investors looking to move sizable positions without significantly impacting the stock price.
2. Currency Diversification
Investors in dual-listed stocks gain exposure to different currencies, allowing them to hedge against foreign exchange fluctuations. For instance, holding Telus shares on the TSX (T) gives exposure to the Canadian dollar, whereas investing in Telus shares on the NYSE (TU) involves U.S. dollars. This can be a strategic advantage in times of currency volatility.
3. Arbitrage Opportunities
Since dual-listed stocks trade on multiple exchanges, price discrepancies can arise due to exchange rate differences, market sentiment, or liquidity variations. Savvy investors can exploit these temporary inefficiencies through arbitrage trading—buying the stock at a lower price on one exchange and selling it at a higher price on another.
4. Broader Investor Base
Being listed on multiple exchanges allows companies to attract a more diverse group of investors. U.S.-based investors who may not have access to Canadian exchanges can invest in companies like Telus through the NYSE. Similarly, Canadian investors can gain exposure to U.S.-listed firms more easily through the TSX.
5. Avoiding FX Fees and Converting CAD to USD Efficiently
One of the lesser-known advantages of dual-listed stocks is their ability to help investors avoid foreign exchange (FX) fees when converting currencies. By purchasing shares on the TSX in CAD and selling them on the NYSE in USD (or vice versa), investors can effectively convert their currency by only paying the standard commission fee, which is typically much lower than bank FX conversion fees. This technique, often referred to as “Norbert’s Gambit,” is a cost-effective way to switch between CAD and USD without incurring excessive exchange rate costs.
How to Find Dual-Listed Stocks
If you are interested in exploring other dual-listed stocks, the Toronto Stock Exchange (TSX) provides a comprehensive list of interlisted companies. You can find the latest information here: TSX Interlisted Companies
This resource is valuable for investors looking to diversify their portfolios with stocks trading on multiple exchanges, ensuring better access, liquidity, and potential arbitrage gains.
Conclusion
Investing in dual-listed stocks can be a smart strategy for investors seeking diversification, liquidity, and potential arbitrage profits. Companies like Telus (T on TSX, TU on NYSE) exemplify the advantages of such investments. By leveraging the opportunities presented by dual-listed stocks, investors can gain greater market access, optimize their portfolio for long-term growth, and efficiently convert currency while avoiding high FX fees.
For a full list of dual-listed stocks and ETFs, visit the TSX interlisted companies page and explore the potential benefits for your investment strategy today.