Cross-trading into the US via dual-listing allows companies to access giant American markets without sacrificing liquidity on a home exchange, according to Jason Paltrowitz, director of OTC Markets Group.
Citing figures from a 2018 study by strategic advisory firm Oxford Metrica, Paltrowitz scotched the suggestion that US-trading automatically dries up local capital, provided the bourse is equipped to manage companies reporting in the US as well as on other national exchanges, such as the ASX.
The OTC Markets Group specialises in international dual listings, operating both the OTCQX boards for established companies and the OTCQB venture market for early-stage enterprises.
According to the Oxford Metrica report, non-U.S. companies have on average experienced a liquidity increase of 28% in their home market and an increase of 37% on the OTC Market after joining the OTCQX Market.
Many harbour the misconception that cross-trading in the U.S. will lead to a loss of trading volume and drain in liquidity from their primary home market,” Paltrowitz said.
“This is typically guided by the experience of seeing companies cross-list on larger, national exchanges such as NYSE or Nasdaq, which often take over as the primary market.”
“Cross-trading on markets like the OTCQX Best Market and OTCQB Venture Market would definitely be the optimal solution,” he said.
The OTC has rapidly built a reputation for efficient access to the American market for international companies, with corporate services being offered to more than 2,000 companies with primary listings on more than 30 global markets.
The OTCQX Best Market lists globally renowned companies such as BNP Paribas, Lufthansa and Adidas, as well as Australian companies including Fortescue Metals Group, Alumina and Clean Teq.
Paltrowitz added that in addition to improved liquidity and expanded US investment the OTC markets also offer significantly reduced corporate governance burdens when compared to higher profile exchanges.
Trading on the OTCQX or OTCQB Markets allows companies to lodge local market disclosure without having to conduct any Sarbanes-Oxley or SEC Reporting, which is a necessary requirement for most US-listed company filings.
Companies can also use their own accounting standards from their home listing, which substantially reduces the time and financial burden of a dual-listing.
The OTCQX and OTCQB displays financial data in USD, press releases, and other material information presented in an identical format to the company’s U.S. peers.