Q: I buy a number of my international stocks on the OTC Market, since my brokerage account does not let me directly transact on exchanges outside of North America. The American Depository Receipts (ADR) for a particular company ("xxxx") have the ticker format xxxxY, whereas the "fungible" shares (i.e. for which there is somewhere, at least in principle, an actual stock certificate issued by the company) have the ticker format xxxxF.
Assuming that there is at least some liquidity for the shares of a particular company, it is almost always the ADRs (xxxxY) that have the most trading volume. However, sometimes the fungible shares (xxxxF) are slightly more liquid than the ADRs.
In terms of risk (e.g. in the event of another major financial crisis) are the ADRs more risky, i.e. do they depend on the solvency of the custodial bank in New York (e.g. BNY)? On the other hand, who actually possesses the fungible shares (xxxxF)? Is it this same custodial bank? Is there a real stock certificate somewhere?
Thanks!
Assuming that there is at least some liquidity for the shares of a particular company, it is almost always the ADRs (xxxxY) that have the most trading volume. However, sometimes the fungible shares (xxxxF) are slightly more liquid than the ADRs.
In terms of risk (e.g. in the event of another major financial crisis) are the ADRs more risky, i.e. do they depend on the solvency of the custodial bank in New York (e.g. BNY)? On the other hand, who actually possesses the fungible shares (xxxxF)? Is it this same custodial bank? Is there a real stock certificate somewhere?
Thanks!