What is ADR? A Quick Overview of Core Concepts
ADR (American Depositary Receipt) is a financial instrument representing foreign stocks, issued by U.S. depositary banks. In simple terms, when foreign companies want to raise funds or trade in the U.S. market, they often do so by issuing ADRs. The advantage of this approach is that U.S. investors can invest directly in these foreign companies without needing to open foreign brokerage accounts.
For example, TSMC (TSM.US), BYD (BYDDY.US), and Great Wall Motors (GWLLY.US) are well-known ADR representatives. Investors can trade these ADRs on the New York Stock Exchange, NASDAQ, or over-the-counter (OTC) markets, just like trading regular U.S. stocks.
Mechanism and Classification of ADRs
How ADRs Work
Foreign companies deposit their shares with U.S. depositary banks, which then issue ADRs representing those shares.