Study: International public companies get home, US boost from OTCQX cross-trading

International companies, with a primary listing outside the US,  experienced a 28 per cent increase in trading volume by number of shares within their home market after joining the OTCQX Best Market, according to a new study released today by OTC Markets Group Inc. (OTCQX: OTCM). Companies also saw a sevenfold increase in US ownership.

Jason Paltrowitz

Jason Paltrowitz

The independent study The OTCQX Advantage: Benefits for International Companies was conducted by strategic advisory firm Oxford Metrica to evaluate the value and liquidity impact within an international company’s home market upon cross-trading on OTCQX. The study evaluated a data set of 500-plus international issuers that have traded on the OTCQX Market since 2007.

“We are pleased to deliver a premium market for cross-trading that provides executive management and investor relations teams with tangible, measurable results that correlate to enhanced visibility, growth in US ownership and an increase in shareholder value, while improving the respective home market liquidity,” said Jason Paltrowitz, executive vice president of corporate services at OTC Markets Group.  “This latest study is indicative of the demonstrated quality of OTCQX Market and the opportunity presented for established, investor-focused international companies to experience incremental benefits of an efficient, cost-effective path to trade among leading global issuers in the US capital markets.”

Study findings include:

  • US ownership increased sevenfold after joining the OTCQX Market;
  • Liquidity, as measured by trading volume by number of shares, increased by 28 per cent within the home market following a move to the OTCQX Market;
  • Trading volume by number of shares increased 37 per cent within the OTC market;
  • Trading volume of companies falling into the lower half of the distribution by size increased 43 per cent;
  • Trading volume of companies falling into the upper half of the distribution by size increased 12 per cent;

About the study and methodology

The study was commissioned by OTC Markets Group and conducted by Oxford Metrica. All international companies that have been admitted to the OTCQX since 2007 were analyzed. The resultant portfolio consists of more than 500 firms. Price and volume data one year prior to joining OTCQX and three years after joining were obtained, as well as ownership data one year prior and 5-years post-join.

  • The empirical study evaluates the value and liquidity impact within the home market of the respective international firms once they have joined OTCQX;
  • The value creation is measured as the performance of the share price, after controlling for market returns and idiosyncratic factors.
  • The liquidity impact is measured by the change in the average daily Trading Volume Multiplier™.

In January 2016, a previous study by Oxford Metrica, OTCQX: The Clear Advantage, evaluated the impact on liquidity of companies that trade on OTCQX. Findings indicated that after firms joined the OTCQX Market, 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.