Stock Market Terms, Definition, Share Market Glossary, Share Bazar Terminology

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ADR American Depositary Receipt is a negotiable certificate issued by an American bank stating that a number of shares in a foreign company has been deposited with them. The receipt can be deposited with them. The receipt can be traded in US markets. Instead of having to buy shares of foreign shares of foreign companies in foreign markets. Americans can buy them in the US in the form of ADRs, which are traded in New York Stock Exchange.

Each ADR is issued by a US depository bank and can represent a fraction of a share, a single share, or multiple shares of foreign stock. An owner of an ADR has the right to obtain the foreign stock it represents, but US investors usually find it more convenient simply to own the ADR. The price of an ADR is often close to the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares. In the case of companies incorporated in the United Kingdom, creation of ADRs attracts a 1.5% stamp duty reserve tax (SDRT) charge by the UK government.

Depository banks have numerous responsibilities to an ADR holder and to the non-US company the ADR represents. The first ADR was introduced by JPMorgan in 1927, for the British retailer Selfridges&Co. The largest depositary bank is the Bank of New York Mellon.

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