Depositary Receipts

A depositary receipt (DR) is a negotiable receipt or certificate issued by a depositary bank that represents ownership of a specified number of shares. We discuss the reasons why DRs were introduced, how they are used and the means by which they may be transferred. We look at the types of DRs and the concerns for custodians selling DRs. Finally we look at how market participants can take advantage of arbitrage opportunities using DRs.