The best way to put money into CDRs in Canada

Happily, 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 lots of of low-fee exchange-traded funds (ETFs) invested in international shares to select from proper right here in Canada.

Plus, if you happen to’re excited about particular international shares—say, Nvidia or SAP—increasingly 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 at the moment are obtainable in CDR type. 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 change, very similar to shares and ETFs. A CDR is invested completely 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 an alternative of the inventory itself affords benefits.

CDRs, first launched by CIBC in 2021, have 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 change charges and foreign money threat concerned with holding these shares immediately. 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 change.

What are the potential advantages of CDRs?

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

1. Relying on the charges your brokerage prices, CDRs might include decrease buying and selling prices than the underlying shares, as a result of CDRs are traded on home quite than international markets and keep away from brokers’ international change charges.
2. CDRs are usually priced at lower than $50, making them simpler to buy than the complete international shares, which may value lots of and even hundreds of {dollars}. For instance, if you happen to balk at paying USD$950 for a single Netflix share, you will get primarily the identical publicity by shopping for CIBC’s Netflix CDR (NFLX) on the Cboe change for underneath CAD$40. On this respect, CDRs are just like fractional shares provided 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 change 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 house foreign money. This implies there is no such thing as a foreign money threat, and you’ll take pleasure in related capital features (and losses) as if you happen to have 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 foreign money hedging that goes into them. BMO says its annual hedging charge is “usually underneath 0.5% per yr.” Based on CIBC, the international change unfold—the distinction between Canadian-dollar purchase and promote costs—quantities to a most of 0.8% per yr 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 features of their fashions by a couple of proportion factors per yr.
• 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 if you happen to owned international shares immediately, although.
• CDR holders don’t robotically obtain voting supplies and the opposite paperwork that shareholders do. In the event that they need to take part in company governance, they need to make their voting intentions identified, 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 may typically purchase CDRs utilizing the identical brokerage account or funding advisor you employ to purchase shares and ETFs. Since nearly all CDRs symbolize 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 change, 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.