A comprehensive study was recently published by Oxford Metrica entitled the OTCQX: The Clear Advantage (the “Paper”) regarding the effect on international issuers after joining the OTCQX. Companies found on the OTCQX are those that display sound transparency and corporate governance practices and provide shareholders with timely investor information. OTCQX-listed companies include Adidas, Heineken and Roche. Currently, there are over 400 securities from 27 countries traded on OTCQX.
Companies traded on OTCQX receive a suite of corporate services designed to increase their visibility and outreach to investors, including wide distribution of company news, financial disclosure and presentations, and eligibility for inclusion in the OTCQX Composite Index and other OTCQX indexes.
Increase in Ownership
A key objective for international companies seeking a trading platform in the US is to diversify their shareholder base outside their domestic market and to increase investment from US investors. The Paper states that one year after joining OTCQX, international firms have experienced on average a more than 7-fold increase in US ownership. This statistic demonstrates that being traded on OTCQX has enabled international companies to substantially increase and retain the proportion of shareholders based in the United States.
Liquidity
The Paper reports a study which evaluated the impact on liquidity of firms that have joined OTCQX. It was found that after firms joined OTCQX, there were significant increases in liquidity: trading volume by number of shares and dollar volumes increased; bid-ask spreads fell and there was an increase in the number of broker dealers per security. Thus, the OTCQX offers considerable benefits without the need to incur the significant additional cost associated with listing on an established US exchange
After joining OTCQX there is a positive increase in the volume of trading in the shares listed on the firm’s home exchange. Over the first 180 trading days the daily trading volumes are shown to increase by 28% on average. This indicates the positive impact that is created by joining OTCQX and provides evidence that allowing shares to trade on a market in the US, has additional home market benefits
There is evidence that smaller firms tend to exhibit a greater trading volume increase (43%) than larger firms (12%). This result is to be expected as the smaller firms have significantly smaller average daily trading volumes than larger firms prior to trading on OTCQX.
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