Are Depositary Receipts Derivatives? - Answers

Depositary Receipts (DRs) are not considered derivatives; rather, they are financial instruments that represent shares in a foreign company, allowing investors to trade those shares on domestic exchanges. DRs, such as American Depositary Receipts (ADRs), facilitate investment in foreign companies by converting their shares into a format that complies with local regulations. While they derive their value from the underlying foreign shares, they do not have the same characteristics as derivatives, which are contracts based on the value of an underlying asset.