Depository receipts (DRs) are a popular way for investors to gain exposure to foreign companies without dealing with the complexities of international markets. These financial instruments represent shares in a foreign company and trade on domestic stock exchanges, making them accessible to domestic investors.
Here’s how they work: A depository bank purchases shares of a foreign company and holds them in custody. In return, the bank issues depository receipts, which are traded on local exchanges like any other stock. This allows investors to buy shares in international companies through familiar domestic channels.