- American Depositary Receipts
(ADRs)A mechanism designed to facilitate trading in shares of non-US companies in the US stock markets. The main purpose is to create an instrument which can easily be settled through US stock market clearing systems.USAA negotiable certificate that trades in the US market and represents an ownership interest in a non-US company's debt or equity securities. An ADR represents one or more (or a fraction) of the underlying securities. A US depositary bank issues ADRs after the underlying securities have been delivered to the depositary's local custodian bank in the non-US company's home market.Historically ADRs have been used to make it easier for US investors to invest in non-US companies (they are denominated in US dollars and pay dividends in US dollars). ADRs can be traded like other securities, either on a securities exchange or in the over-the-counter market, if they meet the listing or trading requirements of those markets.The terms ADRs and ADSs (American Depositary Shares) are often used interchangeably, although formally an ADR is the physical certificate that represents an ADS. Global Depositary Receipts (GDRs) are depositary receipts, including ADRs, that are issued in one or more markets outside a company's home market.
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.