Depositary receipts: a security on a security
· beginner
Automated material · TradeAlmanac editorial deskDraft prepared by a language model from our stored data; not reviewed by an editor.
A depositary receipt is a security evidencing a right to a foreign issuer's share held at a depository.
Why it exists
To give access to another country's securities without going to its exchange: the receipt trades on the local venue, in the local currency and during local hours.
What it adds
Another link between the owner and the issuer. On top of the ordinary custody chain there is now a depositary bank that issued the receipts — The depository: where your securities actually sit.
The ratio
One receipt may correspond to several shares or to a fraction of one. When comparing a receipt's price with a share's, the ratio has to be accounted for — otherwise the security looks cheaper or dearer than it is.
Dividends
They pass through the depositary, which withholds its own fee and the issuer country's taxes. The final amount is less than the issuer declared.
Price divergence
The price of a receipt and the price of the underlying share can diverge if arbitrage between the venues is obstructed. Under normal conditions the gap is small; under stress it widens and sometimes never closes.
Related: Substitute bonds: foreign-currency income inside a rouble contour.
Related instruments
Draft prepared by a language model from our stored data; not reviewed by an editor.
Model: claude-opus-5
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