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A dual listing is a situation in which the securities of a given company are listed on more than one exchange. For example, the securities may be listed on both the New York Stock Exchange and NASDAQ. Typically, the reasoning behind a dual listing is to provide investors with more options in trading the shares, which in turn can increase the liquidity of those shares.
With a dual listing approach, the listing on one exchange is considered to be primary, while the other listing is considered secondary. This does not necessarily mean that the listings are not equal, simply that the company is likely to release new shares on one exchange before the other. Once the shares are in the marketplace, they can easily be traded on either exchange.
The benefits of the dual listing approach apply to both the issuer of the shares and investors who are interested in buying and selling those shares. For companies seeking to make their shares available on more than one exchange, the demand in each market may have some impact on activity in the other market, resulting in an increase in the unit value. At the same time, investors have more options regarding where to purchase or sell the shares. If there is some slight difference in price between the two markets, this means that the seller may realize more profit by trading shares on one exchange or purchase shares at slightly lower rates on a particular exchange. Typically, events of this type are short-lived, meaning investors must act quickly to take advantage of this type of disparity.
One of the ways that a company arranges a dual listing is to establish two holding companies that manage the issuance of the shares to each exchange. This approach can be especially helpful in situations where two companies decide to merge into one entity, while still choosing to operate publicly under both names. The approach is also helpful when one company is acquired by a different business and continues to function as a wholly owned subsidiary of the new owner.
A dual listing sometimes occurs when a company begins to establish an international presence by operating facilities in foreign nations. When this occurs, it is sometimes advantageous to be listed on international exchanges as well as domestic exchanges. Assuming that the company meets the listing qualifications related to the exchange, there is usually no problem in arranging for shares of the company’s stock to be traded on those markets.
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