Depositary Receipt: The Essence and Classification of Securities

Депозитарная расписка является привлекательным инвестиционным инструментом для многих профессиональных торговцев. В некоторых случаях инвестиции в перспективную компанию или экономическую отрасль затрудняются ввиду размещения ЦБ на иностранных биржах. При этом сами корпорации заинтересованы в сторонних источниках финансирования, а потому они занимаются выпуском депозитарных расписок на акции. Данный инструмент позволяет иностранцу стать акционером в обход прямой покупки ценных бумаг. Он пользуется спросом среди состоятельных вкладчиков, которые желают дополнить инвестиционный портфель самыми прибыльными активами.

What is a depository receipt and what is its purpose?

A depositary receipt is a derivative security based on bonds or shares of foreign companies. This document allows for ownership of financial assets within one’s own country, eliminating the need to purchase securities on global exchanges.

This investment instrument was invented to allow international market participants to provide financial support to foreign companies, receiving corresponding financial compensation. Initially, only American Depositary Receipts existed, but over time, the instrument began to be used in other countries. In particular, it is often used by European companies seeking third-party financing.

The process of purchasing securities is carried out through a specialized bank (custodian). The financial institution acquires the asset and stores it in its depository. It issues the client a receipt for the delivery of a certain number of shares.

By issuing depository receipts, a corporation receives the following benefits:

1. An increase in the market value of securities. Demand increases, and shares trade at a higher price.
2. The corporation attracts third-party funding sources. It can accelerate production, implement new technologies, improve product quality, and conduct global marketing campaigns.

For investors, depositary receipts offer a valuable opportunity to invest in foreign markets. Investors can profit significantly from the appreciation of promising companies’ assets. Developed countries attract investors by attracting international firms that utilize cutting-edge technology and employ the best specialists.

Classification of depository receipts

Securities are divided into types, which determine their value to investors. Understanding the key characteristics of specific assets allows global market participants to choose the optimal option.

There are two types of broker depositary receipts:

• Depository receipt ADR They are bought and sold through the order of a U.S. depository bank. Exchange trading takes place on the New York Stock Exchange, and the currencies traded are the U.S. dollar and the European euro. These securities are divided into two groups. Depository receipts for shares can be sponsored or unsponsored. The former are more popular and are divided into several levels.
• Depository receipt EDR Issued by European banks and traded on European markets, these securities are purchased in US dollars or euros. These investment assets are divided into Russian and global depositary receipts. Domestic securities only appeared in 2007 and have not yet gained widespread acceptance. Russia imposes no additional requirements, and Sberbank issues them. The GDR depositary receipt is a very popular asset, trading on all platforms except the US.

A wide selection of depositary receipts for shares allows you to acquire the securities that best suit your personal goals. Each instrument has its own characteristics, advantages, and disadvantages. There are many companies worldwide interested in issuing depositary receipts.

The types of these securities take into account the issuer’s location. Investors can choose the country that seems most promising.

A depositary receipt is a security that can generate significant returns if the analytical forecast is correct. Buying foreign shares appears more attractive than investing in local companies. However, a global market participant must understand what a depositary receipt is and what its benefits are. risks#atfp_close_translate_span# it provides. No one is immune from financial loss due to a global crisis or local difficulties in a specific economic sector.