Methods to put money into CDRs in Canada

Fortuitously, investing in overseas 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 tons of of low-fee exchange-traded funds (ETFs) invested in overseas shares to select from proper right here in Canada.

Plus, should you’re occupied with particular international shares—say, Nvidia or SAP—increasingly more 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 obtainable in CDR kind. You will 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 trade, very like shares and ETFs. A CDR is invested totally 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 trouble with this sophisticated construction? For sure buyers, proudly owning depository receipts as an alternative of the inventory itself gives benefits.

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

What are the potential advantages of CDRs?

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

1. Relying on the charges your brokerage costs, CDRs could include decrease buying and selling prices than the underlying shares, as a result of CDRs are traded on home somewhat than overseas markets and keep away from brokers’ overseas trade charges.
2. CDRs are usually priced at lower than $50, making them simpler to buy than the complete overseas shares, which may value tons of and even 1000’s of {dollars}. For instance, should you balk at paying USD$950 for a single Netflix share, you may get primarily the identical publicity by shopping for CIBC’s Netflix CDR (NFLX) on the Cboe trade for beneath CAD$40. On this respect, CDRs are just like fractional shares supplied by some brokerages.
3. CDRs are notionally hedged into Canadian {dollars}. That’s, you purchase it for a worth that displays your fairness holding on the trade fee that day (just like a CAD-hedged ETF). However worth actions thereafter are hedged to trace the ups and downs within the inventory’s worth in its residence foreign money. This implies there is no such thing as a foreign money threat, and you’ll take pleasure in related capital good points (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 payment, albeit a small one. CIBC and BMO don’t cost direct administration charges on their CDRs, however they do earn a minimize of the foreign money hedging that goes into them. BMO says its annual hedging payment is “usually beneath 0.5% per 12 months.” In response to CIBC, the overseas trade 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 obtainable in Canada, their efficiency has not precisely tracked the shares they mimic, largely because of the value and imprecise nature of the hedging course of. The CDRs of a number of notable shares have lagged the good points of their fashions by a number of proportion factors per 12 months.
• Though they’re listed in Canada, CDRs are handled like overseas 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 international locations the place the underlying shares commerce. For instance, 15% if the underlying shares are American. That is no completely different than should you owned overseas shares straight, although.
• CDR holders don’t mechanically obtain voting supplies and the opposite paperwork that shareholders do. In the event that they wish to take part in company governance, they have to make their voting intentions recognized, usually earlier than the voting deadline, to the CDR issuer. In addition they can’t tender their securities on to an acquirer within the case of a takeover bid however should as an alternative promote on the present market worth earlier than the deal’s shut.

The place can I purchase CDRs in Canada?

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

Take care, although, to make sure your orders are correctly labelled—the ticker symbols utilized by CDRs usually resemble these of the underlying shares listed overseas. For instance, CIBC’s Lululemon Athletica CDR goes by LULU on the Cboe trade, 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.