Shares of Inc. traded on a Canadian stock exchange for the first time after Canadian Imperial Bank of Commerce launched a new product for investors who want to own U.S. stocks while hedging their currency risk.

The first Canadian depositary receipts, or CDRs, are listed on Neo Exchange, an upstart equity market that competes with the Toronto Stock Exchange. They’re modeled on American depositary receipts, which have been used for decades by U.S. investors to buy shares of foreign companies without having to trade through a foreign exchange.

Trading volume on the Amazon CDRs was modest on the first day, with 9,668 shares exchanged as of 1 p.m. in Toronto. The price at that time was CUS$22.62; each CDR represents 0.005 of a share of Amazon, which was trading at US$3,604.65 in New York.

Elliot Scherer, managing director and head of sales at CIBC’s Wealth Solutions group, said the idea for CDRs came in response to complaints from clients who’ve seen their U.S. stock gains reduced by a rise in the Canadian dollar.

“The S&P 500 was making all these all-time highs, Canadians in Canadian dollar terms weren’t seeing that big lift,” said Scherer.


Currency hedge

Last year, the S&P 500’s 16.3 per cent increase was cut to 14.4 per cent in Canadian dollars. In 2019, a strong loonie lopped more than 6 percentage points off the U.S. equity benchmark’s 28.9 per cent gain.

The Canadian depositary receipts are designed to allow investors to buy foreign shares in loonies. There’s a built-in hedge so that the investor’s returns are based on how the stock performs, regardless of moves in the exchange rate.

Retail investors who handle their own portfolios and have “no easy way” to hedge currency risks are the product’s initial target, Scherer said. However, CIBC aims to gain traction with investment advisers as well, he said.

CIBC and Neo Exchange plan to offer CDRs soon for Alphabet Inc., Apple Inc., Tesla Inc. and Netflix Inc., the companies said in a statement.