abhishreshthaa
Abhijeet S
In the recent years, a number of European and Japanese companies have got themselves listed on foreign stock exchanges such as New York and London.
Shares of many firms are traded indirectly in the form of depository receipts. In this mechanism, a depository, usually a large international bank, who receives dividends, reports etc. and issues claims against these shares, holds the shares issued by a firm.
The claims are called depository receipts with each receipt being a claim on specified number of shares. The depository receipts are denominated in a convertible currency, usually the US$. The depository receipts may be listed and traded on major stock exchanges or may trade in the OTC market.
The issuer firm pays dividend in its home currency, which is converted into Dollars by the depository and distributed to the holders of the depository receipts. This way, the issuing firm avoids listing fees and onerous disclosure and reporting requirements, which would be obligatory if it were to be directly listed on the foreign stock exchange.
This mechanism originated in the US and is called the American Depository Receipt. The recent years have seen the emergence of European Depository Receipts (EDRs) and Global Depository Receipts, which can be used to tap multiple markets with a single instrument.
Shares of many firms are traded indirectly in the form of depository receipts. In this mechanism, a depository, usually a large international bank, who receives dividends, reports etc. and issues claims against these shares, holds the shares issued by a firm.
The claims are called depository receipts with each receipt being a claim on specified number of shares. The depository receipts are denominated in a convertible currency, usually the US$. The depository receipts may be listed and traded on major stock exchanges or may trade in the OTC market.
The issuer firm pays dividend in its home currency, which is converted into Dollars by the depository and distributed to the holders of the depository receipts. This way, the issuing firm avoids listing fees and onerous disclosure and reporting requirements, which would be obligatory if it were to be directly listed on the foreign stock exchange.
This mechanism originated in the US and is called the American Depository Receipt. The recent years have seen the emergence of European Depository Receipts (EDRs) and Global Depository Receipts, which can be used to tap multiple markets with a single instrument.