I would like to buy a stock of a company, unfortunately I don't have access to the stock in my local stock exchange nor do I have access to the stock exchange of the country of the company.

But I would have access to two other markets which have the stocks.

It would look like this:

enter image description here

(Yes, I just realized that I'm bad at drawing stuff)

From the picture you can see that I can't "access" the stock directly. Now the question is:

Which Stock Exchange should I prefer?

Both cost me the same from fees, both are same level of complexity regarding taxes. In addition, the currencies are not bound with each other (no fixed exchange rate)

  • Maybe someone who's more fluent in English can rephrase the title for me... the stock IS available in the country of the company, I just don't have access to that stock market. – Swizzler Jun 12 '17 at 17:29
  • What's ATS? SGD presumably is Singapore Dollar, but the only ATS I can see was the Austrian Schilling which no longer exists (replaced with EUR). Other things being equal, I guess you want the exchange where conversion from your currency (?) to the exchange's currency (USD/EUR) to the stock's currenct (SGD) is less likely to fluctuate. – TripeHound Jun 13 '17 at 11:33
  • In efficient markets it wouldn't matter, there cannot be a difference between the prices. So the only question is how to hedge SGD and/or EUR or USD risk, right? – hroptatyr Jun 13 '17 at 12:08

Theoretically, it shouldn't matter which one you use. Your return should only depend on the stock returns in SGD and the ATS/SGD exchange rate (Austrian Schillings? is this an question from a textbook?). Whether you do the purchase "through" EUR or USD shouldn't matter as the fluctuations in either currency "cancel" when you do the two part exchange SGD/XXX then XXX/ATS.

Now, in practice, the cost of exchanging currencies might be higher in one currency or the other. Likely a tiny, tiny amount higher in EUR. There is some risk as well as you will likely have to exchange the money and then wait a day or two to buy the stock, but the risk should be broadly similar between USD and EUR.

| improve this answer | |
  • I used ATS to obscure the stock I'm interessted and to make it more obvious the currencies don't have any connection. Anywway an excellent answer, thanks a lot – Swizzler Jun 13 '17 at 16:11
  • ahh... fair. Good luck with the trade. – rhaskett Jun 13 '17 at 16:16

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.