IIAwards - Review of Frankfurt Stock Exchange

As part of the recently announced IIAwards, in which we celebrate innovations in the fintech and crypto industry, today we will review Frankfurt Stock Exchange.

Xetra (Market Identifier Code (MIC): XETR) is a trading venue operated by Frankfurter Wertpapierbörse (FWB, the Frankfurt Stock Exchange) based in Frankfurt, Germany. The Frankfurt Stock Exchange is the world's 10th largest stock exchange by market capitalization. With 90% of its turnover generated in Germany, namely at the two trading venues Xetra and Börse Frankfurt, the Frankfurt Stock Exchange is the largest of the seven regional securities exchanges in Germany.

Xetra is the reference market for exchange trading in German equities and exchange traded funds. In 2015, 90% of all trading in shares at all German exchanges was transacted through the Xetra. With regards to DAX listings, Xetra has a 60% market share throughout Europe. Investors can trade around 1,000 shares on the Xetra trading platform. Simply put, this is the most important stock exchange for German shares. In Frankfurt, specialist trading accounts for around 10,000 shares, most of them foreign shares. Companies can be listed in three different segments: Prime Standard, General Standard or the Open Market. Xetra is the largest trading venue for ETFs in Europe with the most listed products and the highest trading volume.

With around 1,500 ETFs on offer, investors can invest in almost any country, region or industry. It is also possible to trade with different funds, commodities and sustainable stocks. There are a plethora of Frankfurt Stock Exchange-listed companies to invest in, including the world-renowned Deutsche Lufthansa, Volkswagen, Henkel, BMW, Hugo Boss, Bayer and Beiersdorf. The prime trading indices of the exchange are TecDAX, LDAX, CDAX, VDAX, MDAX, SDAX and EuroStoxx 50. However, the Deutscher Aktienindex, widely known as DAX or DAX 30, remains by far the most popular one.

With Xetra® and Börse Frankfurt, Deutsche Börse Cash Market operates two of the largest cash markets in Germany and Europe. A high degree of reliability and availability are just two of the success factors which form the basis for smooth trading. Over 200 trading participants from 16 European countries (as well as Hong Kong and the United Arab Emirates) are connected via Xetra servers in Frankfurt/Main. Given the high turnover on the Xetra trading venue, orders for securities are executed swiftly at prices in line with the market. Moreover, this principle is supported by Designated Sponsors who post binding purchase and selling prices (quotes) on a continuous basis and thus ensure additional liquidity and fair prices.

As all the exchange trading is transacted electronically, there can be partial execution of orders on the Xetra trading venue. However, banks and online brokers do not face additional transaction costs for same-day partial executions and therefore most of them do not bill their clients additionally for partial executions. The trading venue Xetra migrated to the modern trading infrastructure T7 in June 2017, a technology also used by Eurex Exchange. Deutsche Börse ensures with the implementation of this innovative trading system that the trading venue Xetra is well known for low latency, high throughput and greater flexibility for the participants. Furthermore, Xetra occupies the position as global reference market for German shares and leading market in European ETF trading.

Germany is declared to be the largest exporter of goods in Europe and the third largest in the world. In terms of purchasing power parity, it is ranked fifth worldwide. However, what attracts so many international investors to trade German assets is the fact that the country offers one of the most active and liquid markets in the world. Nevertheless, Germany hasn’t escaped the effects of political and economic uncertainty that has swept over Europe in recent years. While the EU is predicted to experience growth of 2% in 2019, the risks are still tilted to the downside, including the potential aftermath of Brexit and the fallout from the trade disputes between the US and China.

Trading at the Frankfurt Stock Exchange is governed by clear rules, which apply equally for all trading participants. Independent market surveillance is made up of the Trading Surveillance Office (HÜSt), the Exchange Supervisory Authority attached to the Hessian Ministry of Economic Affairs, Transportation and Regional Development, and the Federal Financial Supervisory Authority (BaFin). With a view to improving the continuity of prices and to avoid mistrades, several protective mechanisms are in place for the trading venues Xetra and Börse Frankfurt. These include volatility interruption, market order interruption and liquidity interruption measures.

As of October 23, 2019, Deutsche Börse is now offering a free execution service for ETF savings plan orders on Xetra. This will be of particular benefit to those who wish to save assets regularly, and over the long term, via ETFs.