FINANCE & CAPITAL | CAPITAL MARKETS
AMERICAN DEPOSITARY RECEIPTS
Three-quarters of all American depositary receipts trade in the OTC Markets, rather than on the New York Stock Exchange or Nasdaq. The number of ADRs on OTC marketplaces has increased more than 500% in the past 10 years to 1,519 at the end of last year.
So far this year, companies that have moved their ADR programs to OTCQX, the OTC’s top marketplace, include Heineken of the Netherlands, France’s Technicolor, Brazil’s Magnesita Refratários, the UK’s Travis Perkins, and Japan’s Shiseido.
The trend toward off-exchange trading of ADRs began following the passage of the Sarbanes-Oxley Act of 2002, says Jason Paltrowitz, managing director and global head of business development at OTC Markets. “Companies were looking to avoid the high cost and regulatory complexity of a stock-exchange listing,” he says.
The OTC listing fees are much lower, but, more important, “compliance costs of an exchange listing really start adding up,” Paltrowitz says. The growth of unsponsored ADRs on the OTC Pink marketplace accelerated after the Securities and Exchange Commission in 2008 exempted foreign-listed issuers from registration requirements.