Stay on top of global markets with American Depositary Receipts (ADRs)

Understanding ADRs.

Many non-U.S. companies, that would otherwise be unavailable or inconvenient to trade, do trade in the U.S. markets as ADRs (receipts for shares of the foreign stock issued by U.S. banks). They are denominated in U.S. dollars and pay dividends in U.S. dollars. 

American depositary receipts (ADRs) are negotiable securities issued by a bank that represent shares in a non-U.S. company. These can trade in the U.S. both on national exchanges and in the over-the-counter (OTC) market, are listed in U.S. dollars, and generally represent a number of non-U.S. shares to one ADR. This gives investors exposure to non-U.S. equities without having to trade on a local exchange in the local currency. Investors can trade ADRs during the U.S. market sessions. 

ADRs can be issued as unsponsored without any involvement or approval by the foreign company or they can be issued as sponsored, where the underlying foreign company participates in the issuance of the ADR and also retains a controlling relationship. Only sponsored ADRs may be listed on a national exchange in the U.S. and they must meet certain qualifications, otherwise they trade in the U.S. OTC market. Unsponsored ADRs only trade in the U.S. OTC market.

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Know the benefits and risks of ADRs.

  • Benefits

    • The issuing financial institution will collect any dividend payments and convert them into U.S. dollars for you.
    • ADRs listed on an exchange must file quarterly results because they are registered with the U.S. Securities and Exchange Commission and are subject to U.S. accounting rules. This means investors potentially have access to more information than they would if they’d invested directly overseas.
    • Depending on country and account type, applicable dividend withholding tax percentages may be lower than those applied to foreign ordinary shares. 
    • There are some listed ADRs that are marginable and may have options.
       
  • Risks

    • The institutions that issue ADRs may charge quarterly or annual 'ADR Pass-Through Fees' which consist of custody fees and fees for processing dividends and corporate actions. These fees can add to your investment costs.
    • Liquidity for some ADRs may be low, which may affect bid/ask spreads. Also, not every non-U.S. company has an ADR.
    • While a rare occurrence, the bank offering the ADR may decide to terminate the ADR program for any number of reasons, including lack of interest. This could result in a requirement that the position either be liquidated or converted to the underlying foreign ordinary shares.

Why invest in ADRs with Schwab?

  • US$0 online listed equity commissions¹

    Get commission-free online trades plus low per-contract fees for ADRs and Canadian stocks.

  • Intuitive platforms

    Trade ADRs using our advanced platforms and powerful tools. 

  • Trading specialists

    Get real-time trade analysis and focused support from trading specialists with extensive knowledge in the global markets.

  • Premium research

    Easily find ideas with Schwab Equity Ratings International, global market commentary, and more.

Considerations when investing in ADRs.

Considerations when investing in ADRs.
  • American Depositary Receipts (ADRs) & Canadian stocks
    American Depositary Receipts (ADRs) & Canadian stocks
  • Liquidity* 
  • American Depositary Receipts (ADRs) & Canadian stocks
    Varies by ADR
  • Minimum position size
  • American Depositary Receipts (ADRs) & Canadian stocks
    None
  • Trading hours
  • American Depositary Receipts (ADRs) & Canadian stocks
    U.S. market hours
  • Currency exposure
  • American Depositary Receipts (ADRs) & Canadian stocks
    Yes
  • Settlement date
  • American Depositary Receipts (ADRs) & Canadian stocks
    Trade date plus two days (T+2)2
  • Online trading 
  • American Depositary Receipts (ADRs) & Canadian stocks
    Yes
  • Ongoing management expenses
  • American Depositary Receipts (ADRs) & Canadian stocks
    ADRs have custody fees that are levied on a regular basis, such as annually or quarterly
  • Commission at Schwab
  • American Depositary Receipts (ADRs) & Canadian stocks
    U.S. Listed ADRs: 
    Online trades: US$01 
    Automated phone: US$5 
    Broker-Assisted: US$25  

    Canadian Stocks (Direct to Canadian Exchange):
    Online trades: US$6.95 
    Automated phone: US$11.95 (US$6.95 commission + US$5 TeleBroker fee) 
    Broker-Assisted: US$31.95 (US$6.95 commission + US$25 broker assistance fee) 

View important disclosures about this table


*Liquidity refers to the ability to quickly buy or sell an asset without affecting the asset’s price in a significant manner, not the ability to receive cash quickly.

1. Standard online US$0 commission does not apply to over-the-counter (OTC) equities, fixed-income investments, or trades placed directly on a foreign exchange or in the Canadian market. Service charges apply for trades placed through a broker (US$25). Exchange process and ADR fees still apply. Schwab Hong Kong U.S. Dollar accounts require a minimum deposit to open and maintain. Please contact Schwab for details. See the Charles Schwab Hong Kong Pricing Guide for Individual Investors for full fee and commission schedules.

2. Canadian stocks settlement dates are subject to Canadian market holidays which may differ from U.S. holidays.
 


Common questions

ADRs are created and issued by both domestic and international banks. These custodian banks or 'ADR agents' will typically charge an ADR 'pass-through fee' to cover administrative or other costs associated with the ongoing management of the particular ADR program. The average fee is one to three cents per share. The actual fee amount charged, and the timing of the pass-through fees vary per ADR issuer. Any fees charged to Schwab, like most brokerage firms, are automatically passed on and borne by the ADR investor. 

  • When are the fees collected? Pass through fees can be charged in two different manners. If the underlying ordinary share pays a dividend, the custodian banks collect the foreign issuer's funds and convert them to U.S. dollars and then forward the dividend payments to ADR holders. Generally, at this time, they also choose to charge the ADR pass-through fee. When the foreign issuer does not offer dividends, the pass-through fee is simply deducted from the investor's account according to the predetermined timing as delineated in the ADR's prospectus. 
  • How are the fees collected? To collect the fees owed by ADR investors, the Depository Trust Company (DTC) collects the custody fees on behalf of ADR agents and then charges companies like Schwab that hold ADRs for their clients. Fees charged to Schwab by the DTC are referred to as 'ADR pass-through fees' and labeled as such on client statements. The dividend and the ADR fee will appear as two separate items making it very clear for investors to understand the difference.
  • Where can I find information on the fees? Investors should review each individual ADR's prospectus for specific pass-through fee information. You can search for individual prospectuses online using the U.S. Securities and Exchange Commission's EDGAR Company Search.
     

The governments of some countries, such as France and Italy, have implemented foreign transaction taxes as a percentage of the purchase amount on certain securities, including ADRs. Executing brokers and market makers pass these foreign transaction taxes on to broker/dealers like Schwab as fees. In turn, Schwab passes these fees on to clients at the time of the purchase and they are reflected on trade confirmations and client statements as an 'Exchange Process Fee.'

Many ADRs can be converted into ordinary shares in the local home market and foreign ordinary shares can sometimes be converted to ADR shares. Occasionally, the underlying ordinary share is actually a Private Placement or the ADR custodian bank’s books are closed in anticipation of a dividend, corporate action, or they have reached a foreign ownership limit. In such instances, converting the ADR and holding the asset at Schwab would not be feasible or possible. 

It is also important to note there are often fees, taxes, and costs associated with an ADR conversion.

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