Singapore Depository Receipts FAQs
Singapore Depository Receipts (SDR) are instruments issued by the depository and represents beneficial interest in an underlying security listed on an overseas exchange. SDRs facilitate investments into overseas listed companies without having to deal with the complexities of cross-border trading and settlement.
SDR provide investors beneficial interest in an overseas listed security without having to purchase the security directly on an overseas exchange. SDR are issued by the depository and each SDR is represented by a specific number of underlying securities, held with a custodian in the home market on trust for SDR holders.
Currently, there are SDR issued on Non-Voting Depository Receipts (NVDR) on shares of a company listed on the Stock Exchange of Thailand (SET). An NVDR is an instrument issued by the Thai NVDR Co., Ltd (Thai NVDR), a subsidiary of the SET, to facilitate trading by reducing barriers of foreign ownership limits. Generally, NVDRs carry the same prices and benefits as its underlying shares but do not carry voting rights.
SDR are classified as Excluded Investment Products (“EIP”) and are generally for investors who expect low to moderate likelihood of loss of principal investment amount, with generally smaller potential returns. Investors who invest in this product should have a basic understanding of financial instruments with standardised terms and no unusual or complicated features.
Investors should refer to the SDR programme disclosure document provided by the depository for the features, and characteristics including a description of how corporate actions or distributions will be handled, as well as risks and other information. The SDR programme disclosure document is provided on the depository’s website.
SDR provides a convenient and cost-efficient way for investors to gain exposure to global markets for portfolio diversification. Local brokerage and exchange fees apply for trading of SDR, there are no additional overseas trading fees of foreign exchange fees. SDRs are traded on SGX-ST and custodised with the CDP.
SDRs are quoted and traded on SGX-ST. Investors can buy and sell SDR through their local brokerage account, similar to trading other listed securities on SGX.
The prices of SDR generally references the price of the underlying securities but may be influenced by factors including currency exchange rates, interest rates, liquidity, supply and demand and global economic conditions.
When investing in SDR, you have beneficial interest in an overseas security, but not legal title. As such, SDR gives you the rights and benefits of owning the overseas securities, subject to the terms and conditions of the SDR.
Investors are able to convert between SDRs and its underlying securities via a SDR issuance and cancellation process. Please refer to https://www.singaporedr.com/forms/ for the SDR issuance and cancellation form, fees payable and instructions.
The depository will use reasonable endeavours to pass on benefits of a corporate actions to SDR holders. The ability for SDR holders to participate in corporate actions will be offered whenever practicable, subject to the terms and conditions of the SDR. If an SDR holder wishes to participate directly in the corporate action of the underlying company, a cancellation request should be submitted to take delivery of the underlying security, thereafter the investor of the underlying security may participate directly in the corporate action.
The tax implications associated with investing in SDRs depends on the tax laws of the foreign country. As such, it’s advisable for investors to seek guidance from a tax professional to understand their tax obligations.