American depositary receipt: Difference between revisions
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{{a|glossary|{{ADR - FWMD}}}}''Not to be confused with [[synthetic equity]] derivatives.'' | {{a|glossary|{{ADR - FWMD}}}}''Not to be confused with [[synthetic equity]] derivatives.'' | ||
An [[American depositary receipt]], or “[[ADR]]”, is a way of getting [[Synthetic trade|synthetic]] exposure to securities in hard-to-access markets. | An [[American depositary receipt]], or “[[ADR]]”, is a way of getting [[Synthetic trade|synthetic]] exposure to securities in hard-to-access markets. They were introduced in 1927<ref>Fun fact: The first [[ADR]] was introduced by [[J.P. Morgan]] on fusty British haberdasher Selfridges.</ref> as an easier way for [[US person|U.S. investors]] to buy foreign stock. Before [[ADR]]s came along, [[US person]]s wanting to buy non-U.S. listed shares had to buy the shares on international exchanges in the local currency, with all the [[FX]] and regulatory hair that entails. | ||
ADRs are issued by a US custodian bank evidencing an entitlement to the stock purchased by the bank which the bank has bought through a broker in the open local market in the local currency are deposited in a foreign depositary bank. ADR holders realise any dividends and capital gains in U.S. dollars converted from their local currency net of conversion expenses and foreign taxes. They can be listed or unlisted. | ADRs are issued by a US custodian bank evidencing an entitlement to the stock purchased by the bank which the bank has bought through a broker in the open local market in the local currency are deposited in a foreign depositary bank. ADR holders realise any dividends and capital gains in U.S. dollars converted from their local currency net of conversion expenses and foreign taxes. They can be listed or unlisted. | ||
ADRs can be “sponsored” — where the underlying issuer lined up the custodian directly — or “unsponsored” where it didn’t, and the custodian set it up off its own bat without the issuer’s help. | |||
===Conversion of real underliers into ADRs and back again: A hobbit’s tale=== | |||
Holders of the underlying ordinary shares may ask the custodian to “convert” these shares into an ADR, by delivering them to the custodian in exchange for an ADR certificate. Similarly, holders of an ADR may request to convert to the underlying ordinary shares if they want to take the shares back out of the American market. | |||
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Revision as of 12:27, 7 April 2020
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Not to be confused with synthetic equity derivatives.
An American depositary receipt, or “ADR”, is a way of getting synthetic exposure to securities in hard-to-access markets. They were introduced in 1927[1] as an easier way for U.S. investors to buy foreign stock. Before ADRs came along, US persons wanting to buy non-U.S. listed shares had to buy the shares on international exchanges in the local currency, with all the FX and regulatory hair that entails.
ADRs are issued by a US custodian bank evidencing an entitlement to the stock purchased by the bank which the bank has bought through a broker in the open local market in the local currency are deposited in a foreign depositary bank. ADR holders realise any dividends and capital gains in U.S. dollars converted from their local currency net of conversion expenses and foreign taxes. They can be listed or unlisted.
ADRs can be “sponsored” — where the underlying issuer lined up the custodian directly — or “unsponsored” where it didn’t, and the custodian set it up off its own bat without the issuer’s help.
Conversion of real underliers into ADRs and back again: A hobbit’s tale
Holders of the underlying ordinary shares may ask the custodian to “convert” these shares into an ADR, by delivering them to the custodian in exchange for an ADR certificate. Similarly, holders of an ADR may request to convert to the underlying ordinary shares if they want to take the shares back out of the American market.
See also
- GDR - former communist East Germany - or - a global depositary receipt.
- Alternative dispute resolution
References
- ↑ Fun fact: The first ADR was introduced by J.P. Morgan on fusty British haberdasher Selfridges.