ADR – What is an American Depository Receipt (ADR)?

What is an American Depository Receipt (ADR)?

What is ADR: ADR stands for American Depository Receipt, which is a negotiable certificate. This certificate is issued by a bank in U.S which represents a specific number of shares in the foreign stock which is traded by the U.S Foreign exchange. American Depository Receipt’s are referred in dollars with a security provided by a financial institution. These institutions efficiently enable the American investors to possess their own shares in overseas corporations. This depository receipt trades on the exchanges like for example conventional securities. However, American Depository receipts do not eradicate the currency and dangers for the shares in any other country. The changes in the exchange rate and performance of the company influence the value of the shares. For instance, the payments in euros are converted into U.S dollars. These depository rates are planned on AMEX, NYSE or NASDAQ. The American Depository Receipts were discovered in 1927 for reducing the administration effort and charges associated with the investors purchasing the shares and stocks in the companies located outside United States of America. There are several international banks which also offer “cousin” securities known as GDR’s and EDR’s for the purpose of trading on the global markets.