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Ordinary vs. Extraordinary: ADR conversions amouse click away

Traders Magazine, July 2004

Ingrid Eisenstadter

It was 10:30 in the morning one day last spring when Chris Mitchell, a buyside trader at Harding, Loevner Management in New Jersey, decided to purchase 20,000 shares of Spain's Bankinter SA. The bank trades in its home country in euros and in U.S. dollars on the Pink Sheets. That's where the bank changes hands as an American Depositary Receipt (ADR) in the U.S. Although it was the ADRs that Mitchell wanted, he could not buy them because the bank has little liquidity on the Pink Sheets. But, no problem; the Bolsa de Madrid would be open for another hour. So, on his Bloomberg terminal, Mitchell logged onto G-Trade's trading platform, ADR Direct, and bought his shares directly on the Spanish stock exchange. There Bankinter trades around a quarter-million shares a day. "I purchased the entire balance in three executions in the local market," Mitchell says. "The whole thing took about 45 seconds." His trade moved the Spanish market by just two cents. To complete his trip, Mitchell clicked on "Create ADR" and just seconds later he had his U.S. shares. The ADR Direct platform does this trick in 23 foreign markets, instantly calculating for each one the foreign exchange rate, ordinary-to-ADR ratio, local taxes and exchange fees. Sheesh!

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