Investor Demand for Diversification Pushes Depositary Receipts to New Records in Trading and Program Availability

Investors propel growth in emerging markets during 2010 by trading more than 150 billion DRs worth $3.5 trillion, says BNY Mellon

Dec 21, 2010, 07:00 ET from BNY Mellon

NEW YORK, Dec. 21, 2010 /PRNewswire-FirstCall/ -- American and global depositary receipts (DRs) proved their value as a preferred vehicle for portfolio diversification and cross-border investing in 2010, surging an estimated 30% in trading value and 11% in trading volume.  

BNY Mellon's Depositary Receipts business estimates that DR trading volume will rise 11% to 150 billion DRs in 2010, an all-time high(1).  An estimated $3.5 trillion of DRs are expected to trade on U.S. and non-U.S. markets and exchanges by year-end, a 30% increase over 2009 and second highest total ever.  New DR programs and capital raisings will finish above 2009 levels, but below historical highs of 2007.  

The growing prominence of emerging markets can be seen in a continued shift in the flow of capital.  According to fund tracking service provider EPFR Global, from January 1 to October 31, 2010, aggregate fund flows to emerging markets totaled $80 billion.  During the same period, there was a total outflow of $118 billion from all developed market equity funds, including $82 billion from U.S. equity funds alone(2).

"Investors are using DRs as an easy, effective way to diversify their portfolio and gain exposure to equities outside their local market," said Michael Cole-Fontayn, chief executive officer of BNY Mellon's Depositary Receipts business.  "The DR industry saw solid growth in 2010 in nearly every key metric – more than 150 new sponsored DR programs were created, and we expect record trading volume by year-end.  Leading companies worldwide clearly continue to embrace DRs as a vital tool for their global expansion.

"As companies look to new markets and as new pools of investable capital emerge outside of the U.S. and Euro-zone, we're also seeing unprecedented interest in 'non-traditional' forms of DRs, such as Indian Depositary Receipts (IDRs), Brazilian Depositary Receipts (BDRs), Hong Kong Depositary Receipts (HDRs), plus other new and interesting structures," Cole-Fontayn added.

Key industry highlights from 2010 include:

  • 27 of the 59 BNY Mellon ADR country and regional indices posted higher returns through November, with the indices for Argentina, Denmark and Colombia each returning more than 50% year-to-date
  • The world's largest DR program as measured by value was Brazil's Vale, with more than $46 billion worth of DRs outstanding
  • As of November 30, 2010, investors were able to select from a record 3,289 sponsored and unsponsored DR programs for companies from 78 countries
  • DR issuers from emerging markets continue to dominate many DR market metrics, accounting for 96% of year-to-date DR capital raising transactions, 87% of DR capital raised, 57% of both DR trading value and volume, and 69% of new sponsored DR programs
  • DR capital raisings through November totaled $24.1 billion, compared to the 2009 mark of $32 billion.  Eighty-six percent of offerings occurred in the BRIC nations as market conditions continue to improve
  • Of the 77 DR capital raisings by BRIC companies, 69 transactions totaling $6.6 billion were from Chinese and Indian companies, accounting for 76% of global transactions and 27% of the total value.  The largest DR capital-raising transaction year-to-date was from Brazil's Petroleo Brasileiro, which raised more than $10 billion.

Further results from BNY Mellon's Depositary Receipts analysis follow.

Expected Record 2010 Trading Volume: Over 150 billion DRs valued at $3.5 trillion

BNY Mellon estimates that DR trading volume will reach a record 150 billion DRs by year-end, 11% more than 2009's full-year figures.  Overall DR trading value is expected to be $3.5 trillion, an increase of nearly 30% year-over-year.  The major U.S. stock exchanges – the New York Stock Exchange (NYSE) and NASDAQ – remained the largest trading markets, accounting for 89% of total DR trading value.  More than 125 billion DRs valued at $3.1 trillion are expected to trade on the U.S. exchanges, by year-end.  European-listed DR trading volume is expected to increase 77% to 18.6 billion DRs, while European-listed DR trading value is expected to reach $301 billion, an increase of 41% over 2009.  This trading activity largely occurred on the International Order Book (IOB), the primary trading platform for DRs listed on the Luxembourg Stock Exchange (LuxSE) and London Stock Exchange (LSE)(3).  Other trading, primarily DRs traded over-the-counter (OTC) and on PORTAL, NASDAQ's electronic trading platform for the 144A private placement market, are estimated to be five billion in volume and $79 billion in value, roughly 6.5% increases over 2009, respectively.

New DR programs continue to expand, with more than 200 established for issuers from 40 countries through November

Through November, 200 new sponsored and unsponsored DR programs for companies from 40 countries were established(4).  Of 2010's 133 new sponsored DR programs, 63 were listed on stock exchanges -- 30 in the U.S., 33 in Europe, and one in Asia.  56 issuers chose to trade their new sponsored DRs on the U.S. OTC market, with three issuers using the OTCQX platform.  The remaining new sponsored programs trade on various other platforms.  Indian issuers established the highest number of new sponsored programs with a total of 30, closely followed by Chinese issuers at 29.

In aggregate, investors were able to select from a record 3,289 sponsored and unsponsored DR programs for companies from 78 countries at the end of November 2010.  DR program availability has increased nearly 5% since December 2009 as the vast majority of the world's largest companies now have DRs available to investors.

Unsponsored Market Update

In response to continued investor and broker demand, 87 new unsponsored DR programs were established through November, bringing the total number of unsponsored DRs to more than 1,100, representing issuers from 42 countries.  Notable companies that converted their unsponsored DR programs to sponsored included Japan's Daiwa Securities, Sumitomo Mitsui Financial and Takeda Pharmaceutical, as well as Denmark's Carlsberg.  The most actively traded unsponsored DR programs through November were Japan's Nintendo and Sumitomo Mitsui, the UK's Anglo American and XSTRATA, and Denmark's Vestas Wind Systems, trading an aggregate $5.3 billion on the OTC markets.

The BNY Mellon ADR Index Performance

On November 30, 2010, overall DR performance as evidenced by The BNY Mellon Composite ADR Index closed at 177.18, a return of -2.3% year-to-date and -1.67% year-on-year through November.  As of November 30, the Composite ADR Index had 345 constituents and a free-float market capitalization, as defined by CME Group Index Service, in excess of $4.8 trillion.

As the only real-time index to track all DRs, New York Shares and global registered shares traded on the NYSE, NYSE Amex and NASDAQ, The BNY Mellon ADR Index has become a widely followed international benchmark.  27 of the 59 country and regional indices were up through November, with the BNY Mellon ADR Argentina, Denmark and Colombia Indices each returning greater than 50% year-to-date.  Australia's Samson Oil & Gas is the year's best-performing ADR Index constituent, returning 383.3%.  Other top-performing index constituents included the United Kingdom's Amarin, up 307.7% and China's Spreadtrum Communications, up 199.5%.  

Demand for more investable products based on DRs was evidenced by the launch of several new exchange-traded funds (ETFs):

  • WCM/BNY Mellon Focused Growth ADR ETF (NYSE: AADR), the first actively managed international ETF, referencing BNY Mellon's Classic ADR Index
  • Direxion Daily BRIC Bull and Bear 2x Shares ETFs, based on the BNY Mellon BRIC Select ADR Index
  • BMO China Equity Hedged to CAD Index ETF, replicating the BNY Mellon China Select ADR Index CAD Hedged
  • BMO India Equity Hedged to CAD Index ETF, based on the BNY Mellon India Select DR Index CAD Hedged.

In addition, three mutual funds – the Rydex SGI Emerging Markets 2x Strategy A, C and H classes – were launched during the year, set to replicate 200% of the daily performance of the BNY Mellon Emerging Markets 50 ADR Index.

BNY Mellon leads in new business and innovation

BNY Mellon continued to build on its DR leadership position across several categories in 2010.  Specifically, BNY Mellon was selected as depositary by nearly 54% of all new sponsored DR programs, with the remaining 46% split among the other depositary banks.  Also, since 1990, 191 issuers have switched 228 DR programs to BNY Mellon from other depositary banks.

In June, BNY Mellon demonstrated its strategic focus on innovation in the financial markets by acting as structural advisor to the UK's Standard Chartered when it became the first company to establish an Indian depositary receipt program and the first foreign company to list on India's domestic securities markets.  In September, BNY Mellon partnered with the Singapore Stock Exchange to create their ADR trading platform, the SGX GlobalQuote.  Initially, 19 BNY Mellon clients from China traded on GlobalQuote, with several trading in the Asian time-zone for the first time.  

BNY Mellon worked with DR issuers on several major international corporate events, including Russia's VimpelCom, in which BNY Mellon managed a large NYSE-listed DR tender offer and established a number of new processes in the local Russian market.  BNY Mellon also assisted in structuring a complex IPO for Rusal, establishing several new procedures for securities settlement in Europe.  Rusal became the first Russia-based company to list its local shares on the Hong Kong Stock Exchange and its GDRs on the NYSE Euronext Paris.  

BNY Mellon acts as depositary for more than 2,100 American and global depositary receipt programs, acting in partnership with leading companies from 67 countries. With an unrivaled commitment to helping securities issuers succeed in the world's rapidly evolving financial markets, the company delivers the industry's most comprehensive suite of integrated depositary receipt, corporate trust and stock transfer services. Learn more at

BNY Mellon (NYSE: BK) is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $24.4 trillion in assets under custody and administration and $1.14 trillion in assets under management, services $12.0 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Learn more at

This release is for informational purposes only. BNY Mellon provides no advice nor recommendation or endorsement with respect to any company or securities. Nothing herein shall be deemed to constitute an offer to sell or a solicitation of an offer to buy securities. Depositary Receipts: Not FDIC, State or Federal Agency Insured; May Lose Value; No Bank, State or Federal Agency Guarantee.

Note: New sponsored DR statistics count bifurcated GDRs (i.e., those with a 144A and a Regulation S tranche) as one new program and exclude successor DR programs.

(1) All estimates for DR trading value and volume are based on actual results through November, prorated for the month of December.

(2) Fund flow data provided by EPFR Global, based on public and proprietary sources.

(3) Data provided by LSE.

(4) Data from BNY Mellon and stock exchanges.