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In today’s globalized world, international financial markets have become key platforms that facilitate cross-border trade, investment, and capital flows. For UGC NET aspirants, especially from Commerce and Management backgrounds, understanding these markets and the associated financial instruments is essential.

This blog explains three critical components: Euro Currency Market, Global Depository Receipts (GDRs), and American Depository Receipts (ADRs)—concepts frequently covered in the UGC NET syllabus.

1. Euro Currency Market: A Global Lending Hub

The Euro Currency Market is a segment of the international financial market that deals with currencies deposited outside their country of origin. The most commonly traded currency is the Eurodollar—U.S. dollars held in banks outside the U.S.

Features:

• Not restricted by domestic regulations, offering more flexibility.
• Used by multinational corporations and governments for borrowing and lending large sums.
• Interest rates are typically lower due to fewer regulatory constraints.

Example:

A U.S. company might hold its dollars in a London bank account to avoid U.S. banking regulations. These deposits can then be used for international transactions or loans.

UGC NET Tip:

Remember that “Euro” in Euro Currency does not mean the Euro (€) as a currency—it refers to the deposit of any currency outside its home country.

2. GDRs – Global Depository Receipts

Global Depository Receipts (GDRs) are financial instruments used by companies to raise capital from international markets. A GDR is a negotiable certificate issued by a depository bank that represents shares in a foreign company.

Features:

• Traded on international stock exchanges (e.g., London or Luxembourg).
• Denominated typically in U.S. dollars or Euros.
• Helps companies attract global investors without getting listed in multiple countries.

Example:

An Indian company like Infosys may issue GDRs to attract European investors while remaining listed only on Indian stock exchanges.

UGC NET Tip:

GDRs do not give voting rights to the holder but allow access to foreign equity.

🇺🇸 3. ADRs – American Depository Receipts

American Depository Receipts (ADRs) are similar to GDRs but are issued and traded in the U.S. markets. They enable American investors to buy shares in foreign companies without dealing with foreign regulations.

Features:

• Traded on U.S. exchanges like NYSE or NASDAQ.
• Denominated in U.S. dollars.
• Subject to U.S. regulatory standards (SEC).

Example:

Infosys or Tata Motors may issue ADRs in the U.S. to reach American investors and raise capital.

 UGC NET Tip:

ADRs offer greater disclosure and investor protection due to strict U.S. regulations compared to GDRs.

Quick Comparison Table:

Conclusion

Understanding international financial markets and instruments like Euro Currencies, GDRs, and ADRs provides critical insights into global finance and corporate strategy. These tools help companies expand their investor base and manage capital efficiently on a global scale.

For UGC NET aspirants, mastering these concepts will not only help in scoring well in the exam but also provide a solid foundation for careers in international finance, investment banking, and corporate advisory.

Final Tip for UGC NET: Be ready for objective questions like:

• “Which instrument allows Indian companies to raise capital in U.S. markets?”
• “What is the full form of GDR?”
• “Which market deals with Eurodollar deposits?”

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