Depositary receipt

A depositary receipt (DR) is a negotiable financial instrument issued by a bank to represent a foreign company's publicly traded securities. The depositary receipt trades on a local . Depositary receipts facilitates buying shares in foreign companies, because the shares do not have to leave the home country.

Depositary receipts that are listed and traded in the United States are American depositary receipts (ADRs). European banks issue European depository receipts (EDRs), and other banks issue global depository receipts (GDRs).

A depositary receipt typically requires a company to meet a stock exchange’s specific rules before listing its stock for sale. For example, a company must transfer shares to a brokerage house in its home country. Upon receipt, the brokerage uses a custodian connected to the international stock exchange for selling the depositary receipts. This connection ensures that the shares of stock actually exist and no manipulation occurs between the foreign company and the international brokerage house.

A typical ADR goes through the following steps before it is issued:

Additionally, CREST Depositary Interests (CDIs) in the United Kingdom function similarly, but not identically to depositary receipts.

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