A depositary receipt (DR) is a negotiable financial instrument issued by a bank to represent a foreign company's publicly traded securities.
The depositary receipt trades on a local stock exchange.
For example, a company must transfer shares to a brokerage house in its home country.
This connection ensures that the shares of stock actually exist and no manipulation occurs between the foreign company and the international brokerage house.
A typical ADR goes through the following steps before it is issued:[2] DRs should not be confused with other methods that allow a company's stock to be traded in multiple exchanges, such as: Additionally, CREST Depositary Interests (CDIs) in the United Kingdom function similarly, but not identically to depositary receipts.