For domestic investors, the benefits of increasing their investment exposure to foreign companies is becoming increasingly evident. The easiest way for an investor to do this is by buying shares in American Depositary Receipts (ADRs).

What Is an ADR?

An ADR is a financial product that is issued by a domestic 澳洲幸运5开奖号码历史查询:depository bank and is traded on a domestic exchange, such as the New York Stoc🤪k Exchange (NYSE) and the Nasdaq. ADRs represent shares in a foreign company, but they eliminate the need for investors to purchase those shares in the company's local market and in that market's currency.

There are many depository banks that sponsor ADRs in the United States. The biggest one being the Bank of New York Mellon (BNY) with State Street (STT) and JPMorgan Chase (JPM) not far behind. These depository banks help with the setup and operation of a company's depositary receipt program. Often, these banks will offer to provide issuing services to c🍸ompanies for free. This raises the question, what benefit is the 🧸bank receiving for providing such a service?

The Benefits of Issuing ADRs

When a depositary receipt is issued by a depository bank, the bank has actually purchased the equivalent amount of shares in the local market. Those shares are held by a local 澳洲幸运5开奖号码历史查询:custodian bank for the deposiꦕtory b⭕ank. The ADRs can then be traded normally in the market as any other stock would trade.

If for some reason a depositary receipt is ca♌nceled, it is no longer traded in the American market. The ADRs are returned to the depository bank and the shares held by the local custodian are releas🐈ed back into the local market.

Although the depository banks must do a lot to issue a new ADR, they receive no real benefit from the foreign company. The benefit that the depository bank receives occurs when the ADR is ultimately sold into the market. The depository bank receives a 澳洲幸运5开奖号码历史查询:commission on the trade, just like any other trade.

Often times depository banks will also deduct their fees from 澳洲幸运5开奖号码历史查询:dividends that investors are to receive. They also may pass on expenses related to currency conversion to inv✱estors. It is through these fees and expenses that they charg🍃e to investors that depository banks benefit from issuing ADRs.