How do Level 1 ADR trade?
Once issued, ADR trade in the US over-the-counter market. When the ADR holder sells, the ADR can either be sold to another US investor or it can be cancelled and the underlying shares can be sold to a non-US investor. In the latter case, the ADR certificate (if applicable) will be surrendered, and the shares held with the local custodian bank will be released and sold in the home market (i.e. Germany). The ADR certificate contains, among other things, the details of the responsibilities of the depositary bank with respect to the issuance, transfer and cancellation of ADR, the payment of dividends, voting at shareholders’ meetings and handling of possible future rights offerings, exchange offers, share splits and the like.
