put money into CDRs in Canada

Luckily, investing in international equities has by no means been simpler for Canadians. Buying and selling charges proceed to edge downward for shares listed on U.S. and worldwide inventory exchanges, and there are a whole lot of low-fee exchange-traded funds (ETFs) invested in international shares to select from proper right here in Canada.

Plus, should you’re fascinated about particular international shares—say, Nvidia or SAP—an increasing number of equities can be found in Canada within the type of Canadian depository receipts (CDRs). Within the first quarter of 2025, Canada’s two CDR issuers, CIBC and BMO, expanded their roster of CDRs past U.S.-listed shares to incorporate shares listed solely in European and Japanese markets. About 100 main international firms are actually accessible in CDR kind. You may get publicity to world-beating shares, in different phrases, with out leaving the consolation of Canadian markets.

What’s a depository receipt?

A depository receipt is a safety, issued by a financial institution, that trades on a inventory alternate, very like shares and ETFs. A CDR is invested solely in a single underlying inventory and so serves as a proxy for proudly owning that inventory. Certainly, the depository receipt can pay the identical dividend yield because the inventory and even grant the holder a say in company governance (with some limitations—see under). Why hassle with this sophisticated construction? For sure buyers, proudly owning depository receipts as a substitute of the inventory itself presents benefits.

CDRs, first launched by CIBC in 2021, had been predated by American depositary receipts (ADRs). These U.S.-listed proxies for international shares gave American buyers entry to worldwide equities with out the customarily larger buying and selling prices, international alternate charges and forex threat concerned with holding these shares straight. CDRs are designed to present Canadian buyers the identical comfort and price advantages, just for shares traded outdoors Canada, together with U.S. shares. CDRs commerce on the Cboe Canada alternate.

What are the potential advantages of CDRs?

Investing in CDRs has three key benefits, in contrast with shopping for international shares straight:

1. Relying on the charges your brokerage prices, CDRs could include decrease buying and selling prices than the underlying shares, as a result of CDRs are traded on home reasonably than international markets and keep away from brokers’ international alternate charges.
2. CDRs are usually priced at lower than $50, making them simpler to buy than the total international shares, which might price a whole lot and even hundreds of {dollars}. For instance, should you balk at paying USD$950 for a single Netflix share, you will get basically the identical publicity by shopping for CIBC’s Netflix CDR (NFLX) on the Cboe alternate for below CAD$40. On this respect, CDRs are much like fractional shares supplied by some brokerages.
3. CDRs are notionally hedged into Canadian {dollars}. That’s, you purchase it for a value that displays your fairness holding on the alternate charge that day (much like a CAD-hedged ETF). However value actions thereafter are hedged to trace the ups and downs within the inventory’s value in its house forex. This implies there isn’t any forex threat, and you’ll take pleasure in related capital beneficial properties (and losses) as should you had been investing in U.S. {dollars}, euros or yen.

What are the drawbacks of CDRs?

Canadian buyers ought to concentrate on these particulars earlier than buying CDRs:

• All these benefits come for a charge, albeit a small one. CIBC and BMO don’t cost direct administration charges on their CDRs, however they do earn a lower of the forex hedging that goes into them. BMO says its annual hedging charge is “usually below 0.5% per 12 months.” In response to CIBC, the international alternate unfold—the distinction between Canadian-dollar purchase and promote costs—quantities to a most of 0.8% per 12 months on its international CDRs.
• Within the 4 years that CDRs have been accessible in Canada, their efficiency has not precisely tracked the shares they mimic, largely as a result of price and imprecise nature of the hedging course of. The CDRs of a number of notable shares have lagged the beneficial properties of their fashions by a number of proportion factors per 12 months.
• Though they’re listed in Canada, CDRs are handled like international shares for tax functions. In taxable accounts, dividends from CDRs don’t profit from the dividend tax credit score like Canadian shares do. CDR dividends are additionally topic to withholding taxes within the nations the place the underlying shares commerce. For instance, 15% if the underlying shares are American. That is no completely different than should you owned international shares straight, although.
• CDR holders don’t robotically obtain voting supplies and the opposite paperwork that shareholders do. In the event that they wish to take part in company governance, they need to make their voting intentions identified, typically earlier than the voting deadline, to the CDR issuer. Additionally they can’t tender their securities on to an acquirer within the case of a takeover bid however should as a substitute promote on the present market value earlier than the deal’s shut.

The place can I purchase CDRs in Canada?

You possibly can usually purchase CDRs utilizing the identical brokerage account or funding advisor you employ to purchase shares and ETFs. Since nearly all CDRs signify sought-after multinational shares, liquidity shouldn’t be a problem.

Take care, although, to make sure your orders are correctly labelled—the ticker symbols utilized by CDRs typically resemble these of the underlying shares listed overseas. For instance, CIBC’s Lululemon Athletica CDR goes by LULU on the Cboe alternate, precisely the identical as LULU inventory buying and selling on the Nasdaq. The primary will set you again 15 bucks Canadian, the second over USD$300.