Why is American Depository Receipt (ADR) Needed?

American depository receipt is very important receipt. With its help, non – USA companies can purchase and sell shares in US stock and share markets. Thus, Investors of USA can buy the shares of foreign companies without any problem of cross border or cross currency. It is more famous with ADRs. All payment of price for getting ADR is in US dollars. Only after this receipt foreign company can deal in USA share market.

Now, I will give you more important information regarding this:-

• ADR can be issued by US depository banks like Citibank and Bank of New York Mellon.
  American depository shares are called ADS.
• It is just like licence to trade in USA stock exchange and this ADR can be gotten only by three levels. Ist level ADR is very simple. Any foreign company who has English website in which it shows his annual financial statements and also apply general conditions of Security exchange commission of USA. But other two level ADR is more difficult because for getting these ADRs, Foreign companies have to fill the form 20, accept all US GAAP and also accept all related conditions of SEC.