User:Shariacap/ISLAMIC DEPOSITORY RECEIPTS AND SHARIA DEPOSITORY RECEIPTS

" Please note this is simply the explanation and description on a new financial product to be launched in a new Stock Exchange in the United Kingdom, it is pure information not to be considered as a promotional material."

Islamic Depositary Receipts and Sharia Depositary Receipts

Islamic Sharia Depository Receipt ( ISDR ) is a proprietary product of The Sharia Capital Markets Group plc and that will be exclusively traded on the Sharia Ummah Securities Information Exchange Ltd (ShariaUMEX). ShariaUMEX is an Islamic enterprise and Sharia compliant ‘community exchange’ and is to be the world’s first dedicated Islamic/Sharia compliant Multilateral Trading Facility (or MTF), a trading platform for equities, Sukuks (Islamic bonds), ETFs, ISDRs and Sharia Indexes.

Traded exclusively on ShariaUMEX an ISDR is a negotiable certificate issued by a bank or recognised financial depository agency. Like both ADRs and GDRs, ISDRs represent ownership of a specific number of shares issued by a company traded on a foreign stock exchange, the principle difference being that ISDRs represent shares of Sharia compliant companies or Islamic Enterprises that have to be approved and subsequently monitored by a Sharia screening authority to ensure that they conform to Islamic principles.

ISDRs provide investors with a series of benefits that will make it easier to invest in foreign Sharia compliant companies, by offering:

•	the availability of regulated $ / £ / € denominated pricing information •	lower transaction costs •	a more effective dividend distribution mechanism

Additionally ISDRs enable investors to buy shares in foreign companies without the hazards or inconveniences of cross-border & cross-currency transactions. The demand for Depositary Receipts is driven by the desire of individual and institutional investors to diversify their portfolios, reduce risk and invest internationally in the most efficient manner possible. While most investors recognize the benefits of global diversification, they also understand the challenges presented when investing directly in local trading markets. These obstacles can include inefficient trade settlements, uncertain custody services and costly currency conversions. Depositary Receipts overcome many of the inherent operational and custodial hurdles of international investing. In fact, they offer cost benefits and conveniences. The Benefits to an Issuing Company

The primary reasons to establish a Depositary Receipt program can be divided into two broad considerations:

•	Access to capital •	Access to liquidity in their shares through a pool of international investors

Additional advantages include:

•	stabilization of share price through increased liquidity; •	increase awareness, visibility and image for the company's products, services and financial instruments in a marketplace outside its home country; •	an instrument for raising matching trade finance; •	ability to raise capital for purposes for cross border mergers and acquisitions.

Benefits to an Investor

•	safe and dependable settlements through recognised brokers and clearing agents; •	avoid costly currency conversions; •	dependable custodial services by recognised Depository Banks; •	easy access to information flow; •	avoid unfamiliar market practices, confusing tax conventions; •	encourage institutions and private investors to invest in companies outside their local market; •	types of Depositary Receipt Facilities with ShariaUMEX; •	ShariaUMEX will trade two types of programmes.

Unsponsored Depositary Receipt

This can be established by an Institution that has sizable holdings of securities in companies in International jurisdictions who may wish to create liquidity to their portfolio holdings in an international recognised currency e.g. US $, Euro or £. This may be done without a formal agreement with the company.

Corporate Sponsored Depository Receipt 

This type of Depositary Receipt program is issued by a company that wishes to either raise capital, increase liquidity or enhance brand image in overseas markets. It requires the same regulatory approval as a company seeking a quote or listing on ShariaUMEX.

Depository Bank

ShariaUMEX will only trade ISDRs that are packaged by a recognised Depositary Bank in the UK, US or Europe and additionally when the underlying shares are deposited in such a custodian bank.

Who can issue ISDRs ?

•	Institutions or Brokers, through their international offices or through a local broker in the company's home market, purchase the underlying ordinary shares and request that the shares be delivered to the depositary bank's custodian in that country. •	A company, through a sponsored programme and approved by ShariaUMEX. •	An ISDR transaction is settled in the same manner as any other security.

Trading

When investors want to sell their ISDR, they notify their broker. The broker can sell the ISDR Depositary Receipts through an intra-market transaction, however ISDRs traded exclusively through the ShariaUMEX platform.