Explain the characteristics of Global Depository Receipts (GDRs).

The characteristics of GDRs are as follows: (i) Holders of GDRs participate in the economic benefits of being ordinary shareholders, though they do not have voting rights. (ii) GDRs are settled through CEDEL & Euro-clear international book entry systems. (iii) GDRs are listed on the Luxemburg stock exchange. (iv) Trading takes place between professional market makers on an OTC (over the counter) basis. (v) The instruments are freely traded. (vi) They are marketed globally without being confined to borders of any market or country as it can be traded in more than one currency. (vii) Investors earn fixed income by way of dividends which are paid in issuer currency converted into dollars by depository and paid to investors and hence exchange risk is with investor. (viii) As far as the case of liquidation of GDRs is concerned, an investor may get the GDR cancelled any time after a cooling period of 45 days. A non-resident holder of GDRs may ask the overseas bank (depository) to redeem (cancel) the GDRs. In that case overseas depository bank shall request the domestic custodians bank to cancel the GDR and to get the corresponding underlying shares released in favour of non-resident investor. The price of the ordinary shares of the issuing company prevailing in the Bombay Stock Exchange or the National Stock Exchange on the date of advice of redemption shall be taken as the cost of acquisition of the underlying ordinary share.