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As a financial derivative used in corporate financing activities, a depository receipt allows a company to offer its shares on a foreign exchange. For example, a company can transfer a certain amount of its shares to an intermediary such as a bank, which then notifies the depository bank abroad to issue depository receipts for the stock on the local market. This allows the shares to be traded on a foreign exchange or an over-the-counter market.
Editor: William Clegg