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As the depositary bank for more than 65% of DRs and 70% of ADRs, The Bank of New York Mellon Corp. (NYSE: BK) is a big part of why we have so many options for investing overseas. The bank delivers DR services to nearly 1,300 issuers around the world, more than half of which are ADRs. So what makes BNY Mellon the leader in the DR space?

According to Michael Cole-Fontayn, the head of the depositary receipt division at BNY Mellon, its dominance in depositary receipts is the result of four factors. “First, we’re a very specialized institution,” he says. “We like agency businesses, and we like servicing businesses and adding value through technology.

“Second, we have very significant scope, both by presence in countries and in industries. Third, we are a very stable institution. The heritage of the organization that is today The Bank of New York Mellon is extremely strong, dating back to 1784. And finally, the scale of what we do means that we can leverage a lot of that world-class, back-office technology to support global issuers.”

Cole-Fontayn has been with the bank for years. He joined in 1984, fresh out of school with a business and finance degree, and worked in various banking units. In 1992, he joined the DR division, and from 1993 to 2000, he led the division’s Asia-Pacific business in Hong Kong. After that, he returned to London to run the division’s Europe, Middle East, and Africa business, and from 2003 until this year, he headed the business development division. Now he’s tasked with heading the bank’s entire DR division in London.

“London is a very significant base for our European operations,” Cole-Fontayn says. “But it’s also home to the most important stock exchange in Europe, the London Stock Exchange. Over the past several years, a good number of emerging market companies have chosen to list their depositary receipt programs there.”

Aiding in his task are 250 people around the world who help deliver the bank’s depositary receipt services, which are being represented in every major market around the world. “The vast majority of demand for the depositary receipt instrument comes from the United States, and we see that through the trading volumes on the main exchanges here—the New York Stock Exchange and NASDAQ—and increasingly, the OTCQX market. Last year, $3.3 trillion of depositary receipts were traded worldwide.”

Beyond the DR division, The Bank of New York Mellon is a financial services company that helps clients manage and service their assets. It operates in 34 countries and serves in more than 100 markets. The bank has about $1.1 trillion in assets under management, and on the servicing side, it administers more than $23 trillion in assets—about 14% of the world’s total investable assets.

As the demand for DRs grows, so does the demand for research on these companies. Before former Attorney General Eliot Spitzer’s settlement with Wall Street, there was a lot more research available. Investment banks and brokerage firms have found a clever way around this. “A lot of the research on foreign securities is actually written outside the United States—Goldman Sachs’ London office, Merrill Lynch’s Hong Kong office, Morgan Stanley’s Tokyo Office,” Cole-Fontayn says.

“They’re all full of analysts who research major stocks,” he adds. “We encourage investors to ask their brokers whether they have access to depositary receipt-specific research. I believe that Morgan Stanley, Merrill Lynch, JPMorgan Securities, as well as Citigroup, are all active in issuing depositary receipt-related research.”

Beyond the research, BNY Mellon supports the information flow by helping issuers maintain an active dialogue with investors. The bank does surveys for best investor practice for depositary receipt issuers and provides it to the issuers. “It depends on the size of the company as to what resources it’s able to dedicate to investor relations in the U.S.,” Cole-Fontayn says.

Companies that have depositary receipt programs with significant U.S. businesses typically end up with investor-relations people at their U.S. offices. “We see companies like GlaxoSmithKline, BP, and Nokia all with significant investor-relations offices over here capable of dealing with both U.S. institutional investor-relations requirements and also with the retail investor-relations requirements,” he says.

Recognizing that information isn’t as readily available as it would like, the bank has created various tools and services, giving investors something by which they can track depositary receipts as an asset class.

Ten years ago, the bank created the first depositary receipt index. “The index is important because it includes 374 companies listed on U.S. stock exchanges that come from 36 countries around the world,” Cole-Fontayn says. “In total, it has a market cap of about $6.7 trillion.”

The bank breaks down its indexes by country and region. It also has a specialty index for the BRIC countries as well as emerging markets. “These indexes have been particularly well-regarded and well-followed,” he says. “The DR index helps bring visibility to everything that is going on in the depositary receipt world.

Cole-Fontayn expects ADRs to continue to grow in popularity. “Clearly, market conditions at the moment are a bit uncertain and have been volatile,” he says. “We all know the backdrop to the market with the leveraging that is taking place, but conservative investors with a focus on capital preservation may turn to well-managed, well-governed international companies with depositary receipts.”

He also believes that we will continue to see good performance from the emerging and frontier markets this year. Frontier markets are high-risk, high-growth countries such as Vietnam, Pakistan, Nigeria, and Qatar. “We are active in all these markets, speaking with the top-quality perspective issuers,” he says. “We’re realistic about how best to help these companies gain visibility beyond their borders, and certainly, these types of investments are for sophisticated investors who know exactly what they’re doing.”