American Depositary Receipts – The Convenient Way To Trade Foreign Stocks In the US


American Certificates of Deposit (ADR) are instruments that allow investors / traders based in the United States to buy shares of foreign (non-American) companies in US dollars and in a form tradable on American stock exchanges. same way as national actions. For the U.S.-based investor, the advantage of ADRs is the convenience of not having to deal with the added complexity of foreign trade and the registration requirements of the varied actions of foreign jurisdictions . Companies based in other countries are motivated to get their shares listed in the United States in this way, as it strengthens their investor base in a deepest and deepest capital market. sophisticated of the world.

Most often, foreign companies that use this facility issue sponsored ADRs. A designated depository institution holds the underlying shares in the country of origin and issues marketable securities called American Depositary Receipts which represent ownership of the underlying foreign securities. Three New York banking institutions dominate this market; Bank of New York Mellon, Citibank and JPMorgan Chase. Note that investing in ADRs always involves currency risk, as the US dollar share price of the ADR will always be based on the price of the underlying shares converted to US dollars. at prevailing exchange rates.

Well-known foreign companies traded in ADR include BP Plc (BP stock symbol) and GlaxoSmithKline (GSK) from the United Kingdom; Bayer (BAY) and Deutsche Bank (DB) of Germany; Novartis (NVS) and Credit Suisse (CS) of Switzerland; Sony (SNE) and Toyota Motor (TM) of Japan; Nokia (NOK) from Finland; and Grupo Televisa (TV) and Coca-Cola FEMSA (KOF) of Mexico.

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