American Depositary Receipt (ADR)

definition

A U.S. security that is backed by shares of non-U.S. stock held on deposit at a U.S. bank. Federal law prohibits trading non-U.S. stock on a U.S. stock exchange. By depositing the non-U.S. stock in an American bank and using those shares as assets to back an American depositary receipt, American investors are able to buy and sell non-U.S. stock without dealing directly with a foreign stock exchange.