Wednesday, February 01, 2012

Understanding and buying foreign stocks

Trading stocks can be risky; trading foreign stocks is even riskier.

A first step in learning about foreign stocks is to get to know some of the organizations and their webpages that deal in foreign exchanges.  Jonathan Anderson, UBS chief economist, indicates that a correlation exists bewteen GDP and emerging markets. One might look for growth in national GDP in considering good investment markets.

The World Federation of Exchanges is the trade association of 54 publicly regulated stock, futures and options exchanges. The 2011 WFE Market Highlights reports variations in market capitalization by member exchange. Indonesia and the Philippines appear to be the gig winners in 2011.

The Depository Trust & Clearing Corporation (DTCC), based primarily at 55 Water Street in New York City, is the world’s largest post-trade financial services company. DTCC was established in 1999 as a holding company to combine The Depository Trust Company (DTC) and National Securities Clearing Corporation (NSCC). It was set up to provide an efficient and safe way for buyers and sellers of securities to make their exchange, and thus "clear and settle" transactions. It also provides central custody of securities.

User-owned and directed, it automates, centralizes, standardizes, and streamlines processes that are critical to the safety and soundness of the world’s capital markets. Through its subsidiaries, DTCC provides clearance, settlement, and information services for equities, corporate and municipal bonds, unit investment trusts, government and mortgage-backed securities, money market instruments, and over-the-counter derivatives. It also manages transactions between mutual funds and insurance carriers. The DTC subsidiary is the largest securities depository in the world handling over 3.5 million securities issues valued at $40 trillion, mostly stocks and bonds from the United States and 110 other countries and territories.

An American depositary receipt (ADR) is a negotiable security that represents the underlying securities of a non-US company that trades in the US financial markets. Individual shares of the securities of the foreign company represented by an ADR are called American depositary shares (ADSs).

The stock of many non-US companies trades on US stock exchanges through the use of ADRs. ADRs are denominated, and pay dividends, in US dollars, and may be traded like shares of stock of US-domiciled companies. gives a list of foreign ADRs at

The OTC Bulletin Board or OTCBB is an interdealer electronic quotation system in the United States that displays real-time quotes, last-sale prices, and volume information for many over-the-counter (OTC) equity securities that are not listed on the NASDAQ stock exchange or a national securities exchange. Broker-dealers who subscribe to the system can use the OTCBB to look up prices or enter quotes for OTC securities. To find foreign securities on the OTCBB click on the Foreign Only in the OTC Symbol Directory search tool and put an asterick (*) in the Search Criteria.

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