Online Trading Blog

  • Weekly Stock Market Insights.
  • Trading Strategies, Products & Info
  • Indicators, Candlesticks & Patterns
  • Be a Subscriber be a Happy Trader
  • Click here to Explore the sitemap.

 

Wednesday, March 25, 2009

ADR – Types and Advantages

American Depository Receipt is a depository receipt representing one or more shares of a foreign company that is traded publicly in U.S. markets. There are many two types of ADR, as unsponsored and sponsored ADR.
  1. Unsponsored ADR – This is ADR which involve no direct involvement of the foreign company (whose shares are involved). Custodian banks buy shares of the company, hold then, and issues ADRs through a brokerage firm. The ADR holder may not receive all the benefits associated with the shares. Unsponsored ADRs are traded usually over-the-counter.
  2. Sponsored ADR – This is ADR which involve direct involvement of foreign company. The company chooses a single depository bank and registers DRs with SEC. The ADR holder receives all share holder benefits. Sponsored ADRs are usually traded through major exchanges like NYSE and AMEX.
ADR holds many advantages for investors.
  • ADRs help investors to invest in big foreign companies and are good instruments for portfolio diversification.
  • They help the investors to profit from many emerging market companies (high risk high return instruments).
  • All transactions including buying the shares, dividend payments and capital gains are done in U.S. Dollars.
  • The competitive rates of Euro and U.S. Dollar over other market currencies also benefit the investor.
  • ADRs offer more transparency and stability than trading the stock directly in a foreign market.
But ADRs also holds some additional risks; economic and political changes of foreign countries, currency-exchange rate changes and high volatility of foreign share prices, etc. can cause troubles.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Privacy Statement | Margin Disclosure | Risk Disclosure | Business Continuity Plan | Site Map | Order routing Disclosure Penson | Blog

The risks involved with online trading can be financially substantial. Online trading system delays or market volatility may adversely affect online trading related services. Not all securities, services or products are available in all countries or U.S. states. Please consider whether online trading is compatible with your financial resources and individual circumstances. Online trading in extended hours entails additional risks such as lower trading liquidity, higher volatility, more rapidly changing prices, wider spreads, and the like. Nothing herein should be deemed as an offer or solicitation of securities trading, products or services in any jurisdiction in which online trading brokerage services are not properly licensed. SIPC insurance does not apply to futures or forex business.

Brokerage Services provided by Lightspeed Trading LLC, Member finra/sipc/nfa
Copyright NobleTrading.com ®, Inc, a division of Lightspeed Financial, Inc, 2011. All rights reserved.