What is a Master List?
A primary listing is the main exchange where shares of a public company are traded. For some companies, it is crucial to have a prestigious primary listing on the New York Stock Exchange (NYSE) or Nasdaq, because it lends credibility to the stock and makes investors more likely to buy the stock. In addition to a primary listing, a stock may be traded on other exchanges with secondary listings. A company may want to do this to increase its liquidity and reach of investors.
Key points to remember
- A primary listing refers to the exchange on which a company’s shares first appeared, primarily through an IPO.
- A primary listing on a leading exchange often indicates that the issuer’s securities are of high quality and that the issuer is reputable.
- In order to obtain a primary listing, the issuing company must meet a set of strict financial and regulatory criteria.
- In addition to its primary listing, a stock may be traded on other exchanges with secondary listings to increase liquidity and reach for investors.
Understanding Master Lists
Shares first become available on the stock exchange for a primary listing after a company completes its initial public offering (IPO). In an IPO, a company evaluates and sells shares to an initial group of public shareholders. Once the IPO has “floated” those shares into the hands of public shareholders, the shares can be bought and sold on a listed stock exchange, through the secondary market.
Registration requirements understand the various criteria and minimum standards established by exchanges, such as the NYSE, to qualify for membership in the exchange. Only when the listing requirements of a stock exchange are met can a company listing shares on this exchange for trading. Companies that do not qualify for listing may still be able to offer shares for trading over the counter.
For example, Snap (INSTANTANEOUS), the parent company of popular social media app Snapchat, was one of the most anticipated IPOs of 2017. It decided to list its shares on the New York Stock Exchange and began trading on 2 March 2017. The NYSE lists more than 2,400 companies, including many components of the Dow Jones Industrial Average (DJIA), with a total market cap of tens of trillions of dollars.
In order to be listed on more than one exchange, a practice called dual listing Where cross quotationthe company must meet the requirements to be listed on these other stock exchanges, such as the size of the company and the liquidity of the shares.
Dual listing is attractive to many non-US companies due to the depth of the capital markets in the United States, the largest in the world economy. Companies tend to register in countries that have a similar culture or share a common language with their home jurisdiction. For example, many of Canada’s largest companies are also listed on US stock exchanges.
A foreign company can apply for a regular listing, the most prestigious type of listing, on an exchange like the NYSE or Nasdaq, but the requirements for doing so are strict.In addition to meeting the stock exchange’s listing criteria, the foreign company must also meet US regulatory requirements, rectify its financial statements, and arrange for the clearing and settlement of its transactions. For example, cross-listing would allow a multinational to trade not only on the NYSE, but also on the London Stock Exchange. If the company does not continually meet the requirements of an exchange registration requirementsit will be struck off.
A popular form of dual listing for many large non-US companies is to American certificates of deposit (ADR). An ADR represents the foreign shares of the company held in trust by a depositary bank in the country of origin of the company and bears the same rights as shares.
Advantages of stock market listing
Beyond prestige, there are a number of benefits when a company’s stock is listed on a stock exchange. These benefits may include:
- The ability to acquire other businesses using equity instead of just cash
- Attract the attention of influential investors, hedge funds, mutual funds and institutional traders
- The ability to raise funds through the issuance of additional equity offerings
- Increased ability to attract and better compensate employees
- Reduced cost of obtaining capital through loans