[Federal Register Volume 63, Number 210 (Friday, October 30, 1998)]
[Notices]
[Pages 58435-58438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29120]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40597; International Series Release No. 1163; File No. 
SR-NYSE-98-37]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the New York 
Stock Exchange, Inc., Relating to the Trading of the Ordinary Shares of 
DaimlerChrysler AG

October 23, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 22, 1998, the New York Stock Exchange, Inc. (``Exchange'' or 
``NYSE'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice and order to solicit comments on 
the proposed rule change from interested

[[Page 58436]]

persons and to approve the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange is proposing to adopt two interpretations under its 
rules to accommodate the trading of DaimlerChrysler AG 
(``DaimlerChrysler''). Daimler-Benz AG (``Daimler-Benz'') is combining 
with Chrysler Corporation (``Chrysler'') in a series of transactions 
pursuant to which Daimler-Benz will ultimately be merged into 
DaimlerChrysler and Chrysler will become a wholly owned subsidiary of 
DaimlerChrysler.
    DaimlerChrysler is a stock corporation incorporated under the laws 
of the Federal Republic of Germany with a single class of common 
stock--ordinary shares, no par value (``Ordinary Shares'')--that will 
trade on both the NYSE and the Frankfurt Stock Exchange, as well as on 
other exchanges around the world. The register for the Ordinary Shares 
will be administered by Deutsche Bank AG, DaimlerChrysler's transfer 
agent and registrar in Germany, and The Bank of New York, 
DaimlerChrysler's transfer agent and registrar in the United States. 
Transactions in the Ordinary Shares will be cleared through the central 
clearing systems of both countries. The Depository Trust Company 
(``DTC'') in the United States and Deutsche Borse Clearing in Germany.
    Although the Ordinary Shares are issued by a Germany company, they 
have many characteristics that are similar to shares of common stock 
issued by U.S. companies. For example, while most German stocks are in 
bearer form, DaimlerChrysler shares will be in registered form, the 
same as U.S. shares. However, the form of the stock certificate will 
have certain characteristics more similar to certificated shares of 
common stock of a German company than of a U.S. company. In addition, 
DaimlerChrysler will pay dividends and call stockholder meetings and 
conduct voting at such meetings generally in accordance with German 
practices. This requires the Exchange to adopt two interpretations of 
its rules to accommodate the listing and trading of DaimlerChrysler:
    Certificates: The Frankfurt Stock Exchange rules governing stock 
certificates are somewhat different than the Exchange's rules. To 
accommodate those differences, the NYSE is proposing to adopt an 
interpretation of Paragraphs 501.03 and 502 of the Exchange's Listed 
Company Manual (the ``Manual'') so the DaimlerChrysler certificates 
will meet the NYSE's requirements for certificates.
    Proxies: DaimlerChrysler will solicit proxies in a manner that 
combines characteristics of both the German and U.S. markets. This rule 
change interprets Paragraphs 401.03 and 402 of the Manual to accept 
DaimlerChrysler's proposed proxy procedures.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. The Exchange has prepared summaries, set forth in 
sections A, B and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    The purpose of the proposed rule change is to provide two 
interpretations under the Exchange's rules to accommodate the listing 
and trading of DaimlerChrysler. These interpretations pertain to 
DaimlerChrysler's share certificates and voting procedures.
Certificates
    The DaimlerChrysler share certificates will conform in most 
respects to the requirements in Paragraphs 501.03 and 502 of the 
Manual. The only exceptions are that the vignettes (pictures) will not 
be fully steel engraved and the form of endorsement will provide for 
German registry. The Exchange believes that these are relatively minor 
inconsistencies with current requirements, and one purpose of the rule 
change is to accept the DaimlerChrysler share certificates as proposed.
Voting
    Under German law, only stockholders who hold shares on the date of 
the stockholders meeting are entitled to vote. Accordingly, the record 
date for voting at a stockholder meeting is the meeting date. In 
contrast, Exchange rules require 10 days' notice of a record date and 
30 days between record and meeting date. DaimlerChrysler will modify 
its current practice to accommodate the notice period in the United 
States. In Germany, there already are procedures to distribute 
preliminary agendas and other information to shareholders approximately 
one month before the meeting. DaimlerChrysler has agreed to prepare and 
mail stockholder meeting materials approximately 45 days prior to its 
meeting, permitting the solicitation of proxies in the United States in 
the currently accepted time frame. The company also has agreed to give 
the Exchange 10 days' notice of the record date.
    The coincidence of the record and meeting date also raises the 
possibility that a selling shareholder could give a proxy and then sell 
the shares, with the buyer also getting a proxy. This could lead to 
double voting. To address this issue, both The Bank of New York as 
transfer agent (the ``Transfer Agent'') and Automatic Data Processing 
(``ADP''), the proxy agent for most member organizations, will 
institute procedures to monitor changes in the shareholder list between 
the date the proxy material is mailed out and the date of the meeting. 
These procedures will be designed (i) to cancel the votes of persons 
who submit proxies but sell their shares prior to the meeting date, and 
(ii) to facilitate voting by persons who purchase shares after the time 
the proxy material is mailed out, but before the meeting date. The 
second purpose of the proposed rule change is to accept these 
procedures as being in compliance with NYSE procedures.
    Both the Transfer and ADP will produce shareholder lists on the day 
designated for mailing the proxy material (approximately 30-45 days 
prior to the meeting). The Transfer Agent's list will reflect the names 
of registered holders and ADP's list will reflect the names of 
beneficial owners. Prior to the meeting date, the Transfer Agent and 
ADP will each produce a current shareholder list. If holders no longer 
appear on the list, then votes attributed to proxies submitted by them 
will be canceled. If new holders appear, proxy materials will be mailed 
to them by the Transfer Agent, in the case of registered owners, and by 
ADP, in the case of beneficial owners.
    The shareholders lists can be updated periodically up until the 
date of the meeting. If practicable, proxy materials will be mailed to 
any new holders on a best efforts basis. Such best efforts may include 
electronic notification and expedited delivery service. The proxy 
materials will describe voting procedures in detail. Notices will be 
included advising of the automatic revocation of the proxy if the 
holder sells stocks prior to the meeting. Finally, as a check and 
balance, the total vote cast in nominee name will not be

[[Page 58437]]

permitted to exceed the total position so held.
    In addition, DaimlerChrysler shareholders can vote in person at a 
shareholders' meeting. Under German law, a shareholder must give the 
company notice of his or her intent to vote in person no later than 
three business days prior to the meeting, and the person must be a 
record holder on the meeting date.\3\
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    \3\ With respect to dividends, DaimlerChrysler's record date 
also will be the date of the company's annual meeting (like most 
German companies, DaimlerChrysler pays dividends annually). This 
will make it impossible to trade the stock ``ex-dividend'' on the 
Exchange in the normal course. Accordingly, the Exchange will use 
its existing flexibility under Exchange Rule 235 and Paragraph 
703.02 of the Manual to trade DaimlerChrysler stock with ``due 
bills'' for the period that the stock normally would trade ex-
dividend. This is a process pursuant to which the seller will 
receive the dividend, but is obligated to pay the dividend to the 
buyer of the shares. This process will be transparent to investors 
since due bills net out in the clearing process. To avoid any 
potential confusion as to the ``ex-dividend date,'' the Exchange 
will endeavor to transmit notices to member organizations well in 
advance of the dividend declaration date.
    The ex-dividend date for DaimlerChrysler shares will be the day 
following the record date. That is in contrast to the Exchange's 
typical practice, in which the ex-dividend date is two business days 
prior to the record date.
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(2) Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) of the Act \4\ that an exchange have 
rules that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has not solicited comments on this proposed rule 
change. The Exchange has not received any unsolicited written comments 
from members or other interested parties.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549. Copies 
of the submission, all subsequent amendments, all written statements 
with respect to the proposed rule change that are filed with the 
Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Section, 450 Fifth Street, NW, 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the NYSE. All 
submissions should refer to File No. SR-NYSE-98-37 and should be 
submitted by November 20, 1998.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission finds that the NYSE's proposal to interpret the 
Manual to accommodate the listing and trading of DaimlerChrysler shares 
is consistent with the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\5\ Specifically, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act \6\ in that it will remove impediments to 
and perfect the mechanism of a free and open market, and will protect 
investors and the public interest, by enabling the NYSE to serve as a 
market for shares of DaimlerChrysler (rather than American depositary 
receipts) while maintaining trading standards that are substantially 
equivalent to the NYSE's existing standards.
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    \5\ In approving this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition and capital 
formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that it is reasonable for the NYSE to 
interpret the Manual to permit it to list DaimlerChrysler shares 
despite the share certificates' differences from the Manual's standards 
for engraving and endorsements. The interpretation is necessary to 
accommodate the unique aspects to DaimlerChrysler's share certificates. 
Moreover, the change is minor, and will not impinge on investor 
protection and the public interest.
    The Commission also believes that it is reasonable for the NYSE to 
interpret the Manual to accept DaimlerChrysler's proxy procedures. By 
mailing stockholder meeting materials approximately 45 days prior to 
its annual meeting, DaimlerChrysler will give shareholders the same 
type of advance notification provided for in the Manual. Moreover, 
DaimlerChrysler's proxy procedures will cancel proxies for shares sold 
prior to the meeting, and will facilitate voting by persons who 
purchase shares during the month leading up to the meeting. In that 
way, the Exchange's proxy procedures regarding DaimlerChrysler appear 
to be substantially equivalent to the NYSE's existing standards, by 
permitting the votes cast at the annual meeting to accurately reflect 
the company's shareholders at the time of the meeting.
    The Exchange has requested that the Commission approve the proposed 
rule change prior to the thirtieth day after publication of the 
proposal in the Federal Register. According to the Exchange, the 
trading of DaimlerChrysler shares on a ``when issued'' basis is 
scheduled to commence as early as October 26, 1998. The Exchange states 
that approval of the rule change by the date will facilitate the 
maintenance of an orderly market in the shares of DaimlerChrysler. The 
Exchange further states that without accelerated approval of this 
proposed rule change, there will be uncertainty in the market regarding 
the form of DaimlerChrysler certificates and the procedures governing 
DaimlerChrysler proxies.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing in the Federal Register. The Commission believes that 
it is necessary to approve the NYSE's proposal on an accelerated basis 
to permit the public to begin to trade the newly issued DaimlerChrysler 
shares on the NYSE without doubts about whether the share certificates 
are acceptable under NYSE rules, and without questions about how 
DaimlerChrysler will conduct proxy voting.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\7\ that the proposed rule change (SR-NYSE-98-

[[Page 58438]]

37) is hereby approved on an accelerated basis.

    \7\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-29120 Filed 10-29-98; 8:45 am]
BILLING CODE 8010-01-M