2

I hold a position in a Canadian oil stock that is on the TSX as well as the NYSE.

I read this post: Are stocks only listed with one exchange in one place? but still had some questions

  1. Are Multi Exchange Listed equities open to arbitrage trading because, well they are multiple exchanges?
  2. What keeps the price so similar between the two listings? Is it because of the chance of arbitrage people snag up any gaps between them ?
  • Deriving an arbitrage from such scenarios is long gone and maybe not worth it, if you think so. The costs involved to do the arbitrage might be higher than the profit you can derive. – DumbCoder Jan 23 '18 at 9:14
  • @DumbCoder Arbitrage opportunities are constantly appearing, being taken advantage of, and disappearing. Every price movement in one security creates a possible arbitrage against any related security. It is true that professional arbitrageurs exist to constantly take advantage of these opportunities, but that does not mean that "deriving an arbitrage ... is long gone". It is, in fact, happening millions of times per second every trading day. – dg99 Jan 24 '18 at 0:08
  • @dg99 - You didn't understand it properly. How much capital is invested to take profit out from arbitrages ? And as a personal trader, assuming the OP is, will it be worthwhile to try ? I said more from the point of an individual investor/trader. – DumbCoder Jan 24 '18 at 9:03
1

Are Multi Exchange Listed equities open to arbitrage trading bc, well they are multiple exchanges?
What keeps the price so similar between the two listings? Is it bc of the chance of arbitrage people snag up any gaps between them ?

Yes to both. However if the stock is listed on 2 exchanges across different jurisdictions, the arbitrage opportunity reduces unless there is an agreed clearing mechanism to transfer the shares.

For example one cannot buy a stock in one exchange and sell it in other. It has to be sold on same exchange. However if you are holding a stock in one exchange, you can sell the position on that exchange and buy same quantity on different exchange at cheaper price. Ofcourse it also means you have money to bridge the funding gap.

If the stock in listed in same jurisdiction, say NYSE vs Nasdaq; or there is a clearing mechanism agreed between the exchanges; i.e. allow to inter-operate then one can buy on one exchange and sell on other.

  • There are securities inter-listed on U.S and Canadian exchanges and quoted in different currencies, even, that can be bought on one and sold on the other. Being in a different jurisdiction does not necessarily mean the purchase and sale can't occur in different exchanges. What matters is the security must be identical (same CUSIP/ISIN) and the broker capable of dealing in both places. – Chris W. Rea Jan 23 '18 at 12:08
  • @ChrisW.Rea My understanding was unless there is an agreed mechanism of transferring ISIN by the respective Clearing & settlement agencies, this is not possible. Maybe US and Canadian exchanges work differently or have an agreed mechanism to transfer or have the same Clearing & settlement agency/platform. – Dheer Jan 23 '18 at 12:34
  • Yes agreed the Canada/U.S. case may not necessarily be representative. But it is a counter-example to the broad generalization. – Chris W. Rea Jan 23 '18 at 13:11
  • @ChrisW.Rea Modified the answer a bit. Else please feel free to edit / modify. – Dheer Jan 23 '18 at 14:09

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.