Marc is responsible for Asia-Pacific client services and business development matters in New York, assisting and advising listed companies on...
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Many foreign companies that list their shares in markets outside their home country have found it convenient to do so via Depositary Receipts (DRs), which represent ownership of equity shares in a foreign company. The main markets for DRs are the US, where the DRs are called American Depositary Receipts, and the UK and Luxembourg, where the DRs are called Global Depositary Receipts.
One barometer of an exchange’s ability to connect investors with foreign companies is the value of trading in DRs listed on that exchange. This is important for foreign companies seeking liquidity from their overseas listing, although there could be multiple reasons a foreign company would seek to list in the US. Let’s look at selected trading data from the half-year 2011 reports of three of the four major DR services firms: BNY Mellon, Citi, and JP Morgan (Deutsche Bank did not publish a half-year report this year).
US-listed programs represented nearly 86% of all DR trading value worldwide (US: $1.7 trillion / worldwide: $1.9 trillion). Across the Atlantic, DRs valued at $210 billion traded on the International Order Book (IOB), the primary trading venue for London Stock Exchange and Luxembourg Stock Exchange-listed DRs.
In the US, ADRs listed on the New York Stock Exchange accounted for 73% of ADR value of trading, while those on Nasdaq drew 23% and those quoted over-the-counter OTC, a mere 3%. NYSE-listed companies swept eight of the ten top ADR programs in US in terms of trading value.
Underscoring the strength of investor interest in NYSE-listed ADR programs: the value of trading in the 278 DR programs listed on NYSE in 2nd Q 2011 was more than double the total value of trading value in the 293 DR programs on Nasdaq and LSE combined.
The three regions that saw the most ADR trading activity in terms of value were Brazil, China, and the UK.
Trading activity is important to many companies, but there are other reasons a foreign company would seek to list outside its home market - such as direct access to a bigger pool of capital, shareholder diversification, and global visibility.
To learn more about what NYSE can offer companies considering the US market, please click on the following link.