This document discusses various international financial instruments, including: 1. Equity instruments such as American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) which allow foreign companies to issue shares in domestic markets. 2. Debt instruments including foreign bonds issued domestically, external bonds denominated in foreign currency, Euro bonds issued internationally, and European bonds issued collectively by Euro nations. 3. Key details are provided on ADRs, GDRs, foreign bonds such as Yankee bonds, and Euro bonds which were first issued in 1963 to fund Italy's motorway network.

1. 5.International Financial
Instruments
Dr Raju Indukoori

2. Dr Raju Indukoori
International Financial Instruments
Classification
Equity Instruments
1. American Depository Receipts (ADRs)
2. Global Depository Receipts (GDRs)
Debt Instruments
1. Foreign Bonds
2. External Bonds
3. Euro Bonds
4. European Bonds
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What is an ADR
An American depositary receipt (ADR) is a
negotiable certificate issued by an American
bank representing specified number of
shares of a foreign corporation traded in US
Markets.
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More about ADR
• Similar to domestic corporations’ shares in
terms of trading, dividend payment, etc..
• Introduced by JP Morgan in 1927 for Selfridges,
UK
• They equivalent to domestic GDRs and also
known as American Depositary Shares (ADSs).
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Types of ADRs
• Unsponsored: Through OTC, No formal agreement
with any depositary bank.
• Sponsored: Designated depositary / Transfer Agent.
• Level 1 : Through American OTC.
• Level 2 : Listed in US stock markets.
• Level 3 : Adhere to US GAAP and IFRS
• Restricted Programs
• Privately placed
• Offshore ADRs
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GDR
Global Depositary Receipt (GDR) is negotiable
certificate issued by a depositary bank, which
represents the shares of foreign corporation.
It is also known as International Depositary
Receipt (IDR).
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More about GDR
• It is the global equivalent of an ADR.
• It may be converted into different number of
shares.
• Priced in one of the freely convertible currency.
• It is listed and traded in European stock markets.
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Trading GDRs
• 1 GDR = 10 underlying shares or any other ratio.
• ADRs can become GDRs if they are sold to European
Investors.
• Listed in usually in2 or more exchanges. Usually i
• Frankfurt Stock Exchange
• Luxembourg Stock Exchange
• London Stock Exchanges.
• Traded in International Order Book (IOB)
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1.Foreign Bonds
Bonds issued by a foreign Corporation or
borrower in domestic currency for public
investors in the country and listed in one the
domestic stock exchanges.
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1.Foreign Bonds
• Yankee Bonds: By non American in America.
• Bull Dog Bonds: Non British in UK.
• Samurai Bonds: Non Japanese in Japan.
• Shibosoi Bonds: Private placement by Non
Japanese in Japan.
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2.External Bonds
• Bonds: Foreign currency denominated
domestic bonds issued by a domestic
company.
• Foreign Currency Convertible Bonds (FCCB) :
At the maturity time the bonds are partially
or fully converted into shares according the
agreed price or ratio.
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3.Euro Bonds
• Bonds issued by an international company or
syndicate in currency other than that of the
country in which they are issued. They are
categorized based on the currency in which
they are denominated
• External bonds are foreign currency
denominated domestic bonds issued by a
foreign company.
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3.Euro Bonds - Facts
• Originally created by Julius Strauss
• First in 1963 by Italian motorway network
company Autostrade issued 60000 @ USD
250 in London and listed in Luxemborg Stock
Exchange
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4. European Bonds
• Bonds issued in Euros collectively by Euro
nations and given to one of the individual
governments
• It is tool to handle debt crisis
• Free rider and force rider problems are
tackled in this process.
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