written by reader TSX vs. OTC

By mikekydd, April 18, 2021

Is there any advantage to trading Canadian stocks on TSX instead of OTC?

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Travis Johnson, Stock Gumshoe
April 20, 2021 4:02 pm

Yes, there’s more likely to be liquidity on the home exchange if you want to sell, and you’ll probably get a better price, particularly if the stock is volatile or under pressure at the time you’re trying to sell. If you’re a small investor, buying with a limit order is pretty similar either OTC or in Toronto, you might do a little better in Toronto but it probably won’t be dramatic, but selling OTC at a time when there aren’t a lot of buyers can add a little more friction.

Not nearly as big a deal for TSX-listed stocks as it is for some foreign exchanges, since the connection is tight between Toronto and NY, but it’s always a little better and a little safer to buy on the home exchange, it skips that step of your broker doing the trade in Toronto for you or using a market maker. I don’t trade on the home exchange all the time, and it’s not a huge deal, particularly for more liquid stocks, but it is my preference. Do at least make sure to use limit orders based on real prices in Toronto if you use OTC symbols for trading, and do the currency conversion — sometimes if a stock doesn’t trade much OTC the OTC symbol’s price will be very out of date.

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