American Depositary Receipts
An American Depositary Receipt, or ADR, is a negotiable certificate representing shares in a non-US stock.[1] The ADR can represent whole share of the foreign company, a fraction of a share, or multiple shares.[2] These certificates trade in US dollars, on US stock exchanges, and allow individuals to purchase shares in non-US companies such as Toyota or Nestle without having to access overseas stock exchanges – and their clearing and settlement systems.
The largest supplier of certificates is The Bank of New York Mellon,[3] which is also among the biggest share custodians in the world. A custodian looks after record-keeping and corporate events such as dividend payments for the owners of the shares, be they individual investors or pension or mutual funds. ADRs represent shares where the underlying security is held by a U.S. financial institution, often by an overseas branch. They are traded much like ETFs, with market-makers buying and selling creation units to arbitrage price differences between the underlying stock price and what is bundled into an ADR.[4]
In 2012, there were more than 2000 ADRs available, for companies based on more than 70 countries.[2]
See also
References
- ^ Investopedia, American Depositary Receipt (ADR), viewed September 26, 2021.
- ^ a b US Securities and Exchange Commission, Investor Bulletin: American Depositary Receipts, August 2012, viewed September 26, 2021.
- ^ Bank of New York Mellon, Depositary Receipts, viewed September 26, 2021.
- ^ Investopedia,"What parties are involved in the creation of an American depositary receipt?," viewed 2009-03-11.
Further reading
- Financial Wisdom Forum topic: "Direct purchase or ADR?"