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 theyd 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.

Know the benefits and risks of foreign ordinaries.

  • Benefits

    • Foreign companies that do not offer ADRs have shares that can often be bought as foreign ordinaries via the U.S. OTC market, providing U.S. investors with access to more international companies.
    • Trades are in U.S. dollars and take place during U.S. trading hours. Commissions, while usually higher than ADRs, are generally lower than buying foreign ordinaries directly through the local market.
  • Risks

    • Foreign ordinaries in the OTC market may not be as liquid as the ones trading on a local market exchange, which can lead to greater volatility in the U.S. OTC foreign ordinarys price.
    • Wider spreads can exist because of lower liquidity in the U.S. OTC market and the additional costs that may be incurred by market makers. Due to the wider spreads, foreign ordinaries can trade at a premium or a discount compared to the local market shares. 
    • Trades may also be subject to a foreign transaction fee.
    • U.S. OTC markets are subject to fewer regulations and reporting requirements, making it more difficult to research them.

Know the benefits and risks of local foreign markets

  • Benefits

    • Securities trading in the local market tends to be relatively more liquid and have narrower spreads, resulting in possible better executions than the U.S. OTC market.
    • Many non-U.S. companies that are not available as ADRs or foreign ordinaries on the U.S. OTC market can be bought on local foreign markets, providing investors with a potentially wider inventory of available international equities.
    • You can generally place broker-assisted trades overseas in your Schwab One® International brokerage account in U.S. dollars, and many Canadian stocks can be traded in your account online.
  • Risks

    • Trading overseas may involve a variety of transaction fees, and taxes and commission costs can be much higher.
    • Some countries impose controls that restrict or delay currency conversions for overseas traders, meaning it can take time to access your funds. Reporting, clearing, and settlement of trades may add additional time. You also may be required to place trades in round lots (standard trading amounts).
    • Some countries may impose a cap on equity holdings by foreign investors (any investor not resident in the foreign company’s country of domicile would be considered a foreign investor in these instances), limiting the number of shares or percentage of outstanding stock the foreign investor is permitted to invest in. Each country operates under its own rules, and these varying regulations may differ from U.S. financial laws and requirements.
    • Research can be difficult since non-U.S. countries have different rules and regulations for reporting. Research reports may not be available in English.

Why invest in ADRs and foreign ordinaries with Schwab?

  • US$0 online equity commissions¹

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

  • Intuitive platforms

    Trade stocks in local markets using our advanced platforms and powerful tools, including international stock screeners.

  • Trading specialists

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

  • Premium research

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Considerations when investing in ADRs and foreign ordinaries.

  • American Depositary Receipts (ADRs) & Canadian stocks

    Varies by ADR

  • Foreign ordinaries traded in the over-the-counter (OTC) market

    Low

  • Foreign ordinaries traded on local exchanges overseas

    Generally high; depends on the security and market

  • American Depositary Receipts (ADRs) & Canadian stocks

    None

  • Foreign ordinaries traded in the over-the-counter (OTC) market

    None

  • Foreign ordinaries traded on local exchanges overseas

    Generally none

  • American Depositary Receipts (ADRs) & Canadian stocks

    U.S. market hours

  • Foreign ordinaries traded in the over-the-counter (OTC) market

    U.S. market hours

  • Foreign ordinaries traded on local exchanges overseas

    Foreign market hours

  • American Depositary Receipts (ADRs) & Canadian stocks

    Yes

  • Foreign ordinaries traded in the over-the-counter (OTC) market

    Yes

  • Foreign ordinaries traded on local exchanges overseas

    Yes

  • American Depositary Receipts (ADRs) & Canadian stocks

    Trade date plus two days (T+2)3

  • Foreign ordinaries traded in the over-the-counter (OTC) market

    Varies by country, but usually T+2

  • Foreign ordinaries traded on local exchanges overseas

    Varies by country/local holidays

  • American Depositary Receipts (ADRs) & Canadian stocks

    Yes

  • Foreign ordinaries traded in the over-the-counter (OTC) market

    Yes

  • Foreign ordinaries traded on local exchanges overseas

    No, broker-assisted by phone only

  • American Depositary Receipts (ADRs) & Canadian stocks

    ADRs: Yes

    Canadian stocks: Rarely

  • Foreign ordinaries traded in the over-the-counter (OTC) market

    Rarely

  • Foreign ordinaries traded on local exchanges overseas

    Rarely

  • 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

  • Foreign ordinaries traded in the over-the-counter (OTC) market

    None

  • Foreign ordinaries traded on local exchanges overseas

    None

  • American Depositary Receipts (ADRs) & Canadian stocks

    US$0 online trades1

    Automated phone: US$5

    Broker-Assisted: US$25

  • Foreign ordinaries traded in the over-the-counter (OTC) market

    Online: US$50 foreign transaction fee2

    Automated phone: US$55 (US$5 TeleBroker® fee, plus a US$50 foreign transaction fee)

    Broker-Assisted: US$75 (US$50 foreign transaction fee and a US$25 broker assistance fee) 

  • Foreign ordinaries traded on local exchanges overseas

    Online: Not available, except Canadian Stocks

    Automated phone: Not available

    Broker-Assisted: The greater of US$100 or 0.75% of principal, with no maximum 

Source: Schwab Center for Financial Research.

View important disclosures about this table

View important disclosures about this table

Common questions

What are ADR Pass-Through Fees?
What are Exchange Process Fees for ADRs?
Can an ADR be converted into shares of the foreign ordinary international stock and vice versa?
What is the difference between Y-suffixed and F-suffixed five-letter symbols for OTC listings for non-U.S. companies?
What are the risks of international stocks?

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