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< Investing with stocks: Special cases
Help Center > Investing > Investing with stocks: Special cases
American Depositary Receipts (ADRs)
American Depositary Receipts (ADRs) are securities listed on US exchanges and the Over-the-Counter (OTC) market that represent ownership of shares in foreign companies. For companies based outside of the US, listing shares directly on American exchanges like the NYSE or Nasdaq is a complicated and expensive process. However, American investors may want to purchase shares of these companies to diversify their portfolios and gain exposure to new markets. ADRs make it easier for American investors. To offer ADRs to investors, American banks first purchase shares of foreign companies on foreign exchanges. Then, the banks issue the ADRs, which are certificates denominated in American dollars that represent the foreign shares and can be traded on an American stock exchange or the OTC market. An ADR may represent a single foreign share, a fraction of a share, or a bundle of shares depending on the price the bank wants to list for the ADR. Many banks will divide or group foreign shares so the ADR price aligns more closely with typical prices on American stock exchanges. Holding an ADR is similar to owning a share in the foreign company, so ADRs still may pay dividends and are subject to capital gains taxation in American dollars. Robinhood offers certain ADRs for trading on our platform, but not all. We don’t offer ADRs that are subject to local financial transaction taxes, including ADRs on Spanish, French, and Italian listed companies.
What fees are associated with ADRs?
Some banks require investors who hold ADRs to pay periodic services fees (sometimes called custody fees), which typically run between $0.01 to $0.03 per share. If you purchase a share from a company that’s based outside the US on Robinhood, you can find information about any ADR fees that may apply on the website of the bank issuing the ADR. The following key dates are used for ADR fees:
Note
Standalone ADR fees are passed through to your account based on record date. If this fee results in a negative balance, you may sell shares or deposit cash to avoid the possibility of a margin call.
What are the potential benefits and risks of ADRs?
Just like all other securities, there are certain benefits and risks associated with ADRs. Potential benefits: Potential risks:
Why is my ADR no longer trading?
Occasionally, the American bank responsible for custody of the shares will terminate the ADR while the underlying foreign stock is still active. This is generally handled in one of the following ways:
Note
Robinhood doesn’t support the trading of foreign shares. Because we can’t support the underlying foreign shares, we’ll cover the cost of an ACAT (automated customer account transfer) to a broker that supports the underlying foreign shares. Note that you’ll be responsible for any fees that the outside broker may charge.
Still have questions?
The decision to terminate an ADR isn’t made by Robinhood. If you have questions about why an ADR was terminated, we suggest contacting the holding bank’s investor relations team to learn more.
Disclosures
Diversification doesn’t ensure a profit and cannot protect against losses in a declining market. All investments involve risk and loss of principal is possible.
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