How do Companies Choose which Exchange to List on?
Uber and Pinterest are amongst the hottest tech start-ups in the world right now. This is why the fact that both of these companies have chosen the New York Stock Exchange (NYSE) to list their shares on is being seen as great news for the exchange. The NYSE has beaten the NASDAQ as well as many foreign stock exchanges in order to achieve this feat. This is remarkable from the point of view of NYSE. However, it also raises questions about how companies choose the stock exchange where they plan first to list their shares.
In this article, we will have a closer look at some of the factors which are commonly considered by companies before they zero down on a stock exchange.
About a century ago, the entire world was not well developed. This is the reason that there was a lot of difference in the operational performance of different stock exchanges. The operational charge at some stock exchanges was much higher when compared to the others. Also, there was a substantial difference in the liquidity offered at different exchanges.
However, in the past couple of decades, these differences have all but vanished. Stock exchanges across the world now work electronically. This allows buyers to trade seamlessly without experiencing much of a difference.
Hence, the factors which affect a companys choice of stock exchanges has undergone a huge change over the past few years:
Factors Which Affect the Choice of Exchange
The factors which now play an important role in the choice of stock exchange have been listed below
However, the listing of shares on one exchange does not mean that it cannot be traded on the other exchanges. It just means that the company first chose to sell their shares on a certain exchange. Over a period of time, the shares of big companies are usually sold at all exchanges at almost the same price. Every minor price differences are exploited by arbitrageurs looking to make a quick buck.
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