EMERGING MARKETS INVESTOR: DR NEWS
By Gordon Platt
BNY Mellon set up unsponsored American depositary receipt (ADR) programs for two Thailand-based companies in December, Thai Airways International, the national carrier of Thailand, and BEC World, a television broadcasting and media group.The ADRs trade in the over-the-counter market.
Since an SEC rule change in October 2008 that simplified formation and OTC trading of non-US publicly trade companies, nearly 1,200 new unsponsored DRs from 35 countries have been launched, according to BNY Mellon research. "With investors seeking greater diversification, we're not surprised by the growth in interest and creation of unsponsored DRs that have helped global companies raise visibility in the US marketplace," said Michael Cole-Fontayn, CEO of BNY Mellon's DR business.
Much of the growth of these new DR issues has come from high-net-worth investors using separately managed accounts, which are required to invest in US securities. "Investment firms are launching a range of new ETFs (exchange traded funds) tied to indexes to address the surging demand for lower-cost, more transparent investment vehicles," Cole-Fontayn says.
An unsponsored DR is issued by one or more depositary banks in response to investor demand and requires no involvement from the non-US company whose stock the DR represents. Of the new unsponsored DR programs established since 2008, the top six are for companies in Japan, Britain, China, Australia, Hong Kong and Singapore.