Depositary receipts make it easier to buy shares in foreign companies because the shares of the company don't have to leave the home state The first ADR was introduced by J.P. Morgan in 1927 for the British retailer Selfridges.
A DR is a negotiable instrument issued by a U.S. depositary bank evidencing ownership of shares in a Non-U.S. corporation. Each DR denotes Depositary Shares (DSs) representing a specific number of underlying shares on deposit with a custodian in the issuer’s home market. The term “DR” is commonly used to mean both the physical certificate and the security itself. DRs are generally quoted and traded in $US and are subject to the trading and settlement procedures of the market in which they trade. The ease of trading and settling DRs makes them an attractive investment option for investors wishing to purchase securities issued by companies outside the investor’s home market.
DRs can be publicly offered, privately placed or issued pursuant to a global offering.
DR markets development (1)
Depositary receipts markets grew at a double-digit rate in the 1990’s There were 836 DR programs with 176 of them listed in the US in 1990; these figures reached 1,534 and 608 respectively in 2000. As a consequence of the global market corrections in 2000-2002 the DR markets growth slowed down. The number of sponsored DR programs was rising with exception of 2003; the number of US listed programs has been decreasing since 2001.
Development of number of DR programs
2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 1997 1998 1999 458 501 520 1 527 1 681 1 729
1 791
1 819
1 847
1 817
1 858
570
563
537
504
498
2000
2001
2002 Sponsored
2003
2004
Sponsored US-listed
Source: The Depositary Receipt Market Review 2004, The Bank of New York
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