Depositary receipt

A depository receipt allows investors to access overseas shares in their own market and currency.

A depository receipt allows investors to access overseas shares in their own market and currency. Rather than buying an overseas share direct and facing currency issues, plus the headache of trying to buy via an overseas broker, an investor can buy an American Depository Receipt (ADR) in dollars or a Global Depository Receipt (GDR) in sterling or euros instead. This is a separate piece of paper that represents the underlying shares, but is available in the investor's local currency and in their home market.

Typically, a bank will create the ADRs or GDRs by buying shares in the home market and then generating depository receipts according to a ratio say, ten shares to one ADR. An ADR investor then has similar rights to a normal shareholder the ADR can be traded like a share and will also pay dividends, assuming the underlying company offers them.

See Tim Bennett's video tutorial: Depository receipts: An easy way to invest in foreign firms.

Recommended

Margin call
Glossary

Margin call

When an investor borrows to bet on markets, they put down a deposit known as “margin”.
2 Apr 2021
Resource curse
Glossary

Resource curse

The term “resource curse” refers to the observation that countries with abundant natural resources also tend to be less economically developed than th…
14 Jan 2021
Balance of payments
Glossary

Balance of payments

The balance of payments refers to the accounts that sum up a country's financial position relative to other countries.
8 Jan 2021
Yield-curve control
Glossary

Yield-curve control

Yield-curve control is when a central bank aims to control long-term interest rates by pledging to buy (or sell) as many long-term bonds as needed to …
25 Dec 2020

Most Popular

China owns a lot more gold than it’s letting on – and here’s why
Gold

China owns a lot more gold than it’s letting on – and here’s why

In a world awash with money-printing, a currency backed by gold would have great credibility. And China – with designs on the yuan becoming the world’…
21 Apr 2021
“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?
Bitcoin

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?

Dogecoin – a cryptocurrency created as a joke – has risen by more than 9,000% this year alone. Saloni Sardana looks at how something that began as an …
19 Apr 2021
House prices in the UK are still surging – here’s why it’ll probably continue
Property

House prices in the UK are still surging – here’s why it’ll probably continue

The latest UK house price data shows no letup in the country’s booming property market, with the biggest yearly rise since 2014. And there’s no end in…
22 Apr 2021