NYSE vs TSX

E

Eldredge

Since IB started offering Canadian stocks, I thought I would take a look at possible arb opportunities in stocks that are traded on both exchanges. I assumed that I would be lucky to make a few cents a share after commissions. When I looked at some charts, it looked like the prices varied more than I would have expected. I thought there might be some problem with the charts converting currencies etc., so I decided to just put on some small positions and see what would happen. Then I got really confused.

For example, here are three of the positions I am holding right now:
sold BMO 43.56 - bought BMO-TC 46.40. Today down about .70
sold BNS 43.56 - bought BNS-TC 60.91. Today down about .90
sold ECA 37.16 - bought ECA-TC 51.91. Today down about .75

If anyone can help me understand what is going on I would appreciate it.
 
I like the idea, and have thought about doing the same. Do you know how order handling works on the tse? I don't even know if it's a specialist system or all electronic. That could make a difference on how you can catch outside prints and get good prices on the spreads.

You would think cross-market arb opportunities would be very fleeting, basically in and out within seconds. How are you accounting for the currency exchange, does IB give you the rates they convert for you and is there a mark-up in and out?
 
Quote from Eldredge:

Since IB started offering Canadian stocks, I thought I would take a look at possible arb opportunities in stocks that are traded on both exchanges. I assumed that I would be lucky to make a few cents a share after commissions. When I looked at some charts, it looked like the prices varied more than I would have expected. I thought there might be some problem with the charts converting currencies etc., so I decided to just put on some small positions and see what would happen. Then I got really confused.

For example, here are three of the positions I am holding right now:
sold BMO 43.56 - bought BMO-TC 46.40. Today down about .70
sold BNS 43.56 - bought BNS-TC 60.91. Today down about .90
sold ECA 37.16 - bought ECA-TC 51.91. Today down about .75

If anyone can help me understand what is going on I would appreciate it.
More...

I haven't looked into this, but is it possible that the Canadian stocks are priced in Canadian dollars ?
 
Quote from H2O:



I haven't looked into this, but is it possible that the Canadian stocks are priced in Canadian dollars ?
More...

All stocks on the TSX are in canadian dollars. All interlisted stocks are in USD on the US exchanges.

In the past I have seen a HUGE difference in the closing prices (up to 3%), that gap usually disappears at the open the next day.

Things to think about:

1. Canadian exchanges are open on some US holidays
2. Lots of tech stocks trade on the TSX... JDSU, NT, RIMM, CLS etc all are on the TSX.
 
Quote from lescor:

I like the idea, and have thought about doing the same. Do you know how order handling works on the tse? I don't even know if it's a specialist system or all electronic. That could make a difference on how you can catch outside prints and get good prices on the spreads.

You would think cross-market arb opportunities would be very fleeting, basically in and out within seconds. How are you accounting for the currency exchange, does IB give you the rates they convert for you and is there a mark-up in and out?
More...

The few fills I have had on TSE have been instant and at the price quoted. I have only done 100 share lots until I get this figured out, but I have been impressed with the fills - much better than NYSE in my opinion.

I am using the rates IB gives to calculate prices.

I would expect arb opportunities to be very fleeting too, that is why I am confused by the size and duration of what is happening. I may have some errors in my calculations, I am going to have to look into it some more.
 
Quote from H2O:



I haven't looked into this, but is it possible that the Canadian stocks are priced in Canadian dollars ?
More...

The prices I gave are Canadian for TSX and American for NYSE the losses are after converting $C to $US. I think I may be making some sort of error in my calculations. If not I need to understand how the same stock can be up a much larger percentage on one exchange than the other.
 
Quote from ctrader:



All stocks on the TSX are in canadian dollars. All interlisted stocks are in USD on the US exchanges.

In the past I have seen a HUGE difference in the closing prices (up to 3%), that gap usually disappears at the open the next day.

Things to think about:

1. Canadian exchanges are open on some US holidays
2. Lots of tech stocks trade on the TSX... JDSU, NT, RIMM, CLS etc all are on the TSX.
More...

Thanks for the tips. What is confusing me is that my positions are trending apart. I will recheck my calculations, because this doesn't make since.
 
Okay, I am officially confused. I must have set these positions up incorrectly for an arb, but I don't know what is wrong.

Let's look at just one position:

I sold 100 shares of BNS on the NYSE for 43.56 US
I purchased 100 shares of BNS-TC on the TSX for 60.91 CAN

At the time, based on IB's exchange rate I thought that BNS was overvalued by about .10.

This morning, the position looked like this:

BNS was offered at 44.43 US. So, BNS has GAINED about 2%, and I am down .87 US per share.
BNS-TC was bid at 60.60 CAN. So, BNS has DROPPED about .5%, and I am down .31 per share.

According to my calculations, BNS is still slightly overvalued according to IB's exchange rates. :confused:

So, how can the same stock gain 2% on one exchange, and lose .5% on the other exchange (without considering exchange rates)?

I feal a little dumb, but I can't figure out what I am doing wrong. Is a one to one ratio incorrect? Any help would be greatly appreciated.
 
One reason percent changes on different exchanges may vary is a change in the exchange rate. Post the exchange rates that were current at the time of the trades and let's see if this makes the difference.

q
 
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