Working of Depository Receipts (DRs)

♤ DRs are created when a foreign company wishes to list its securities on another country's stock exchange. For this, the issuing company has to fulfill the listing criteria for DRs in the other country.

♤ Before creating DRs, the shares of the foreign company, which the DRs represent, are delivered and deposited with the custodian bank of the depository creating the DR.

♤ Once the custodial bank receives the delivery of shares, the depository creates and issues the DR to investors in the country where the DRs are listed.

♤ These DRs are then listed and traded in the local stock exchanges of the other country.