Frankfurt Listings Glossary
Regulated Market – FRANKFURT STOCK EXCHANGE
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Regulated Market
As of November 1, 2007, the subdivision of the Official and the Regulated Markets no longer exists. Securities entered into these markets on or since this date are now listed only on the regulated market.
The admission and follow-up requirements of the former Official Market (Amtlicher Markt) apply for the Regulated Market. This also applies to the entry requirements, which previously differed in the two markets: The company must have existed for at least three years; the estimated market value of the shares, or, in the case that an estimate cannot be made, the capital of the company itself must be at least 1,25 million euros, 25 percent of which must be owned by diversified holdings.
The Regulated Market is an organised market in accordance with article 2, paragraph 5 of the Securities Trading Act. This means that the admission and follow-up requirements for the participants and the organisation of trading are legally regulated.
Before being admitted to trading, issuers are required to undergo an approval process as stipulated by public law. Together with at least one bank, a financial service institution, or a company that does business under the provisions of article 53, paragraph 1, no. 1, or article 53b, paragraph 1, no. 1 of the Banking Act, prospective participants must submit an application to the Admissions Board of the respective exchange. Companies already listed on the Regulated Market at one German exchange can apply for admission to another exchange without a supporting institution.
In addition to the admission requirements, issuers on the Frankfurt Stock Exchange opt for a transparency standard. Issuers in the regulated market can choose either the general or the prime standard. Issuers in the open market choose the admission standard. This choice depends on the admission and follow-up requirements.
Registrar company – FRANKFURT STOCK EXCHANGE
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Registrar company
An outside company that administers shareholders’ records for issuers of registered shares.
In addition to maintaining the shareholders’ record, a registrar company supports issuers in organizing the Annual General Meeting, implementing IR campaigns, and undertaking changes to the capital stock.
Xetra
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Xetra
Electronic cash market trading system
Around 320 European banks and securities trading houses currently (January 2004) use the Xetra® (Exchange Electronic Trading) system to trade the full range of shares listed on FWB® Frankfurter Wertpapierbörse and more than 10,000 warrants. Xetra is available between 9.00 a.m. and 17.30 p.m. Buy and sell orders placed by licensed brokers throughout the world are compared in a central computer and automatically executed when the number of shares and price are found to match. Designated Sponsors provide for additional liquidity during trading.
Xetra currently accounts for 75 percent of exchange turnover in German shares. In the case of the 30 DAX® blue chips, Xetra’s market share comes to more than 95 percent.
Listing – FRANKFURT STOCK EXCHANGE
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Listing
A security is listed for trading on the exchange.
“Listing” means that a security – a stock, bond, etc. – is now available to be traded on a specific market segment within an exchange. When a security is listed on FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), it is tradable on the exchange floor and/or on the Xetra® electronic trading system.
If the listing is for share in a company and the admission occurs on a publicly regulated market (Prime Standard and General Standard), then it is referred to as share placement. If the company also raises new capital and is legally required to provide a prospectus when making the placement, this is called an initial public offering (IPO).
Market maker – FRANKFURT STOCK EXCHANGE
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Market maker
Bank or securities trading house that quotes binding buy and sell prices for a security.
Market makers guarantee that a security can be traded on an ongoing basis, thereby ensuring the liquidity and viability of the market. Through their readiness to step in as a counterparty at any time, market makers compensate for the inconsistent order flows of investors and stabilize the market when temporary imbalances occur. They are usually assigned to support trading in inactive stocks.
At FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), market makers are known as Designated Sponsors.
Prospectus – Frankfurt Stock Exchange
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Prospectus
Brochure published by the issuer of a security. It contains general information on the company and the placement of the security.
An issuing prospectus contains all key information about the security: the issuer, corporate structure, financial situation, business activities, as well as all executive bodies and companies involved in the floatation. The issuer and the issuing syndicate are responsible and liable for the accuracy of the contents of the prospectus (prospectus liability).
Since 1991, each issuer of securities which are being offered publicly for the first time in Germany is obliged to publish an issuing prospectus. The prospectus obligation becomes obsolete if the securities are only offered to a limited number of persons – e.g. if they are only offered to persons who purchase or sell securities professionally or commercially for own account or for third party account, such as banks – or are offered to employees either by their own employer or by a company affiliated to their employer.
The issuing prospectus may not be published until publication has been permitted by the German Financial Supervisory Authority (BAFin) or until 10 working days have elapsed after the BAFin has received the prospectus without the BAFin having forbidden its publication.
The minimum content required for an issuing prospectus is regulated in the Ordinance on Securities Sales Prospectuses (VerkProspG). Issuers who apply for admission to the Official Market must draw up an issuing prospectus which fulfills the requirements of an exchange admission prospectus. The content is determined by the Stock Exchange Act (BörsenG) and the Exchange Admission Ordinance (BörsenZulVO). The accuracy of all information required is examined by the Admission Board of FWB Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), which decides whether to admit the company.
In addition, a prospectus with which a company applies to be admitted to the Official Market, Regulated Market or Neuer Markt segments of the Frankfurt Stock Exchange should adhere to the requirements of the Going Public Principles which were published on 15 July 2002 and which will come into effect as per 1 September 2002. Since July 2002 (Fourth Financial Market Promotion Act), the prospectus must also be made available in electronic form for publication on the Internet.
Since July 2005 the prospectus are being made available by the Financial Supervisory Authority (BAFin) in a internat database at bafin.de.
Synonyms: Offering Circular
Stock exchange
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Stock exchange
Organized market for securities trading. (Auch: Börsengebäude)
Exchange trading takes place at established times, with the exchange itself performing the following main functions:
· Bringing together supply and demand (market function)
· Creating an environment in which companies can raise capital by issuing securities (mobilization function)
· Guaranteeing that securities can be sold and transferred at any time (substitution function)
· Determining the current market price for an individual stock, and thus the market value of the company in question (valuation function).
The key indicators for the size of stock exchange are the stock exchange turnover and market capitalization.
As stipulated in the German Stock Exchange Act, the supervision of the regional stock exchanges is handled by the government of the respective states (Länder). Higher-level tasks which affect exchanges throughout Germany, such as the ordinance of stock exchange rules and regulations and the terms and conditions of business, are assigned to the bodies of the stock exchange, which include in particular the Exchange Council (Börsenrat) and Business Management. The decision to establish or close down an exchange is made by the State Exchange Supervisory Office, which is the highest authority at the state level.
Depending on the focus of their activities, stock exchanges are classified according to the following criteria:
1) Goods traded (securities exchange, precious metals, currency and commodities exchange)
2) Type of transaction (cash market, derivatives market)
3) Organization (floor trading, computer-based trading).
Securities exchange – FRANKFURT STOCK EXCHANGE
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Securities exchange
In the broader sense of the word, an exchange on which securities or derivatives are traded under the provisions of the Securities Trading Act.
In practice, only securities (i. e. stocks, government bonds, mortgage bonds, public-sector bonds, corporate bonds, etc.) are traded on a securities exchange; derivatives trading takes place on a futures and options exchange.
In Germany, there are currently eight securities exchanges, all of which use the floor trading system. Of these, FWB Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) is by far the largest.
Initial Public Offering (IPO) FRANKFURT STOCK EXCHANGE
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Initial Public Offering (IPO)
Process by which a company becomes listed on an exchange
A company usually prepares and executes an IPO with the support of an issuing bank, or, in the case of large-scale issues, in conjunction with a syndicate.
Companies go public primarily as a means of raPPMg additional equity capital and as an exit channel for the original capital providers (e.g., venture capital companies). Additional benefits of an IPO include a higher profile for the issuing company and a broader investor base. It is more advantageous for a company to go public during a bull market because this increases the likelihood that all new shares will be purchased, thereby lowering the cost of capital for the issuer.
Admission to the exchange
Prerequisite for a listing on the stock exchange
At FWB® Frankfurter Wertpapierbörse (Frankfurt Stock Exchange) the Admissions Office is responsible for deciding whether to admit securities to the Official Market; the admission of securities to the Regulated Market is determined by the Admissions Committee. Each market segment has its own admissions requirements. However, all issuers must publish an offering prospectus containing the fundamental data required for an evaluation of the security.
Admission to General Standard does not require any further action on the issuers’ part. However, issuers have to apply for admission to Prime Standard; a listing in this segment is subject to the fulfillment of high international transparency requirements.
Issuing price
The initial price of a newly issued security determined off the exchange by the issuing company
In recent years, the bookbuilding method has become a widely used procedure for determining issuing prices.
Second Quotation Board – FRANKFURT STOCK EXCHANGE
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Second Quotation Board
The First Quotation Board and Second Quotation Board structure the Open Market.
All companies whose shares are already listed or included at another international or domestic trading venue and apply for admission to the Open Market are included in the Second Quotation Board.
First Quotation Board – FRANKFURT STOCK EXCHANGE
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First Quotation Board
The First Quotation Board and Second Quotation Board structure the Open Market.
All companies with an initial listing in Open Market are included in the First Quotation Board. It is directed at domestic and international companies for a cost efficient and fast admission of their shares to trading.
Filing – FRANKFURT STOCK EXCHANGE
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Filing
The submission of admission materials (issuing prospectus) and follow-up mandatory reports (e.g., quarterly reports) to an exchange
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Fee schedule of the stock exchange – FRANKFURT STOCK EXCHANGE
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Fee schedule of the stock exchange
Body of regulations governing fees and the reimbursement of outlays for stock exchange services
The stock exchange charges fees for various services, such as the admission of participants or securities to exchange trading, or the listing of securities on the exchange. The fee schedule of the stock exchange is issued by the Exchange Council and approved by the Exchange Supervisory Office.
Regulations on the fee schedule of an exchange are contained in the German Stock Exchange Act, section 5.
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Holding period – FRANKFURT STOCK EXCHANGE
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Holding period
Period of time during which capital gains from securities transactions are taxable (or subjected to the highest tax rate)
The holding period in Germany is twelve months – i.e., capital gains resulting from the purchase or sale of securities held for less than a year are subject to income tax. In Germany, all capital gains realized after the holding period has elapsed are tax-free. Investors can offset capital gains and capital losses recorded during a given year on their tax return. If an investor’s net gains in a given calendar year amount to less than €512, they will be tax-exempt irrespective of how long the securities were held. If this tax exemption limit is exceeded, the entire amount of capital gains is subject to tax.
Going Public – FRANKFURT STOCK EXCHANGE LISTINGS
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Going Public
Process in which a company raises external equity capital by offering its shares to public investors
Going Public is usually considered to be a synonym for initial public offering (IPO).
In the original sense, Going Public refers to the change in a company’s legal form when it is converted from private ownership – e.g., from a partnership, limited liability company – to a stock corporation, thereby giving the public the opportunity to invest in it.
In the meantime, however, Going Public has come to be used in a broader sense, in which it is understood to mean the initial listing of a company’s shares on the stock exchange, also called IPO. An IPO is usually planned and carried out in conjunction with an underwriting bank, or in the case of large new issues, a syndicate. The bookbuilding procedure has become the accepted method of determining the issuing price of a stock.
The primary advantages of Going Public are that it enables the company to raise additional equity capital and gives the original venture capitalists the opportunity to exit. Moreover, it is a form of publicity for the company, and serves to distribute the equity capital among a broader shareholder base. The best time for a company to go public is during a bull market, when it is more likely that all new shares will be bought, as this will lower the cost of capital.
Often, companies that are planning an IPO over the medium term will issue warrant-linked bonds and convertible bonds, which entitle the owner to subscribe to shares issued as part of the future IPO. If the IPO does not take place or is postponed, the bond is usually bought back by the issuer at above par.
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Global depositary receipt (GDR) – FRANKFURT STOCK EXCHANGE LISTINGS
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Global depositary receipt (GDR)
Security representing a foreign share
Global depository receipts (GDRs), which were developed on the basis of American depositary receipts (ADRs), securitize the ownership in shares. A GDR can relate to one or several shares, or a mere proportion of a share. GDRs are traded instead of the original shares on exchanges worldwide and are denominated in euro.
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German Stock Corporation Act
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German Stock Corporation Act
In law in Germany pertaining to stock corporations (AG) and commercial partnerships limited by shares (KGaA).
The German Stock Corporation Act (Aktiengesetz), enacted on 6 September 1965, regulates in particular the founding of a company, the legal relationships between the company and its partners or shareholders, capital, changes to the capital stock, and the dissolution of the company.
General Standard – Frankfurt Stock Exchange Glossary
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General Standard
Deutsche Börse listing segment for companies fulfilling the transparency requirements prescribed by German law
Admission to General Standard does not require any action on the issuers’ part; it occurs automatically with the listing in either the Official or Regulated Market.
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Exchange trader – Frankfurt Stock Exchange Glossary
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Exchange trader
Exchange traders are employees of firms admitted to exchange trading (see market participant).
Exchange traders conclude transactions on the exchange in the name of and for the account of their employer, or on behalf of a third party.
In order to be admitted to trading, exchange traders must demonstrate that they possess the necessary aptitude and sense of responsibility for trading on the exchange in an exam administered by the board of examiners at FWB® Frankfurter Wertpapierbörse (Frankfurt Stock Exchange). Traders who are active only in currency trading are not required to take the exam.
Exchange traders are permitted to trade only on behalf of their employer or a third party, and may not participate in own-account trading. In floor trading, each trader can represent only one firm; in electronic trading, one exchange trader can act on behalf of several firms.
To list and trade your firm on the Frankfurt Stock exchange contact ipo@PPM.net
Entry Standard – Frankfurt Stock Exchange Glossary
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Entry Standard
Capital market access provided by Deutsche Börse for small and medium-sized companies as an alternative to EU-regulated segments
Entry Standard is a transparency standard within the Open Market (Regulated Unofficial Market) with additional requirements. Companies in Entry Standard must meet the following criteria and publish on their website:
publication of a prospectus in the case of a private placement (article 3 of WpPG – German Securities Prospectus Act)
Therefore, Entry Standard is primarily aimed at qualified investors in the sense of article 2, para. 6 of WpPG (German Securities Prospectus Act), who are able to assess and accept the potential risks related to the investment in shares of the respective organization. Investors must be aware of the fact that this part of the Open Market (Regulated Unofficial Market) on the Frankfurt Stock Exchange is not subject to the high Europe-wide transparency standards and strict provisions for investor protection on organized markets.
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Electronic exchange – Xetra – Frankfurt Stock Exchange Glossary
Thursday, August 12, 2010 @ 05:08 PM
posted by PPM
Electronic exchange
A largely automatic, computer-based system for securities trading
An electronic exchange is a trading platform in which order entry and forwarding, matching of buy and sell orders, and price determination are performed by a computer. In most cases, the system also includes functions for clearing and settlement procedures, market supervision, and the publication of relevant information.
Unlike a trading floor, which requires the physical presence of participants, an electronic exchange can be accessed from any location. Trading can take place 24 hours a day, or during established hours. The advantages of an electronic exchange are low costs, error-free settlement, quick reaction times, flexible markets and access from anywhere in the world.
Germany has two electronic exchanges: Eurex® for derivatives, and Xetra® for the cash market. Participants in an electronic exchange must be admitted to electronic trading.
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Clearing – Frankfurt Stock Exchange Listings
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Clearing
The netting and settlement of claims and liabilities arPPMg from securities and derivatives transactions
Clearing is typically performed by a central institution, the so-called clearinghouse. The clearinghouse determines the bilateral net debt of buyers and sellers involved in exchange transactions, and, at the end of the trading day, provides its members with a summary of their transactions, as well as the resulting net claims and liabilities. In the case of derivatives transactions, the clearinghouse will inform its members of the funds they must put up to meet their margin requirements.
To become a member of a clearinghouse, an institution must have a license, a securities account and a money settlement account with the clearinghouse. Moreover, it must furnish material, organizational and financial collateral as specified in the licensing agreements.
In its capacity as the central settlement institution for stock exchange transactions, the clearinghouse functions as a counterparty to trades, thereby guaranteeing the proper execution of trades as well as the settlement of the net debt. Eurex Clearing AG is the clearinghouse affiliated with Deutsche Börse AG.
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Dual Listing (DL) – Frankfurt Stock Exchange Listings
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Dual Listing (DL)
A second listing on an exchange that isn’t the company’s domestic bourse
With a dual listing, also called a secondary listing, a company’s shares are placed on an exchange other than its domestic exchange. This can happen at the behest of the company or a market maker. A second listing is therefore not an initial public offering: It isn’t the worldwide debut of the company’s shares or a public offer, and the company is not required to produce a prospectus.
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Double listing – Frankfurt Stock Exchange Glossary
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Double listing
The listing of a security on more than one exchange.
Companies become listed on a second exchange in order to reach a broader-based public and attract additional investors. Because the fragmentation of share capital between different exchanges often results in diminished liquidity, companies usually undertake a capital increase in connection with a double listing.
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Disclosure Requirements (Ad Hoc) on the Frankfurt Stock Exchange
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Disclosure requirement (Ad-hoc disclosure)
Obligation of issuers of securities to immediately report and publish any information that might have a bearing on the price of their securities.
The regulations pertaining to the disclosure requirement are contained in section 15 of the German Securities Trading Act, which states that issuers of securities admitted to the Regulated Market on a German stock exchange are obliged to report all corporate developments that have a sufficiently strong impact on the issuer’s financial situation or its business activities to influence the market price of the security. Securities listed in the Unofficial Regulated Market are exempt from this requirement.
The obligation to release such information without delay is intended to mitigate the abuse of inside information and enhance market transparency. A violation of the disclosure requirement is punishable with a fine.
While the Federal Supervisory Office for Securities Trading (BAFin) is responsible for investigating whether issuers are meeting the disclosure requirement as stipulated in section 15 of the Securities Trading Act, it is the task of the Exchange Operating Board to decide whether the information published requires a temporary suspension of a quotation.
According to section 15, paragraph 1, no. 1 of the Securities Trading Act, the information must be published in the German language in at least one national “Börsenpflichtblatt” (the journal for statutory stock market publications), or via an electronic information dissemination system. Furthermore, companies in Prime Standard are obliged to publish ad-hoc messages in English.
Prior to publication, the information must be communicated directly to BAFin and the Exchange Operating Board of the German exchange where the securities or their derivatives are listed.
Directors Dealings and Insider Trading On The Frankfurt Stock Exchange
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Directors’ Dealings and Insider Trading on the Frankfurt Stock Exchange
Private purchases and sales by management of shares they own in the company they manage
Directors’ dealings cover securities transactions by people with management duties at publicly traded companies. Since 1 July 2002, such transactions are subject to new notification rules. Per section 15a of the German Securities Trading Act (WpHG), people at publicly traded companies who have leadership duties, or people who have close relationships with these managers, must declare any securities transactions made with their own contingent of company shares.
Through the Fourth Financial Markets Promotion Act (FiMaFöG), the reporting requirement for so-called directors’ dealings was expanded to apply to all companies admitted for trading on the Regulated Market. This requirement used to apply only to companies on the Frankfurt Stock Exchange’s technology segment, Neuer Markt.
The goals of the new regulation covering directors’ dealings is to provide better investor protection, make the financial markets more transparent and to create more trust. In conjunction with the new rules for ad-hoc announcements, private investors are now offered a basis for damages claims in the case of missing or late publication of facts influencing the price development of a share.
Investors can review directors’ dealings online:
Database of the German Federal Financial Supervisory Agency (BaFin)
BaFin operates an Internet platform that publishes directors’ dealings.
www.insiderdaten.de
A privately run Web site that presents stock transactions in a very clear manner. The latest transactions are sorted by company, insider name, date and order volume.
Synonym: insider trading
Direct offering – Frankfurt Stock Exchange Glossary
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Direct offering
Type of issue in which the issuer places its securities directly with investors, without the support of an underwriting syndicate
Direct offerings are typically undertaken by banks and insurance companies – i. e., companies that have already developed business relations with the investing public and established an extensive sales system which they can use to place the securities.
A direct offering is less costly than an issue supported by an underwriting syndicate. However, there are potential difficulties associated with a direct offering, for example, if the securities are to be placed with international investors. Moreover, if the issuing volume is particularly large, it can overload the issuer’s sales system. For this reason, issuers are increasingly handling direct offerings via the Internet.
Frequently, a company will opt for a direct offering if it has been able to agree upon the terms of the issue with a large-scale investor (private placement).
If you are looking to go public on the frankfurt stock exchange contact ipo@PPM.net
Dealer – FRANKFURT STOCK EXCHANGE GLOSSARY
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Dealer
Persons or companies that function as intermediaries in the purchase and sale of securities. Dealers are also authorized to trade securities for their own account.
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Business plan – FRANKFURT STOCK EXCHANGE
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Business plan
Plan that documents the viability of a company
In its business plan, a company outlines its business model and its medium-term goals. The main reason for writing up a business plan is to give providers of outside capital – and in particular venture capital companies – a means of evaluating the company’s approach and development potential. Important components of a business plan are thus the investment plan, financing plan, liquidity plan and profitability forecast. The planning period usually spans three to five years
Business angel – FRANKFURT STOCK EXCHANGE LISTINGS
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Business angel
Private investor who supports a start-up company by providing capital and what is usually many years’ management experience
Business angels are typically former entrepreneurs. They support new companies in their early stages by providing risk capital. In addition, they advise the management team or assume management tasks themselves. In return for their support, they acquire stock in the company.
Deutsche Börse AG and KfW Bankengruppe have joined forces with BAND (Business Angels Netzwerk Deutschland) to create a forum for establishing contacts between business angels and innovative companies.
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Brokerage commission – Frankfurt Stock EXCHANGE
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Brokerage commission
Fee paid by investors to cover the intermediation function performed by brokers
When a security is bought or sold on the floor, the investor is required to pay a brokerage commission that is determined on the basis of the order size. In the case of shares, it is calculated as a percentage of the price of the stock; in the case of bonds, it is specified as a percentage of the par value of the bond. The fee is charged by the institution responsible for executing and settling the order.
Brokerage fees are standardized and stipulated in the fee schedule of the stock exchange. In the Official Market, the brokerage fee for exchange brokers comes to 0.08 percent of the price of a stock, warrant or subscription right, but in all cases at least 0.75 euro. For stocks in the DAX index, the brokerage fee is 0.04 percent. For bonds, the fees are between 0.0015 and 0.075 percent, depending on the transaction.
Broker – Frankfurt Stock Exchange Glossary
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Broker
Brokers determine prices on the stock exchange.
They also provide assistance in making investment decisions and execute their clients’ buy and sell orders. Their role thus corresponds to that of a “Freimakler” in the German system.
Synonym: exchange trader
If you are looking to go public on the Frankfurt Stock Exchange you should contact ipo@PPM.net
Bridge capital – Frankfurt Stock Exchange Glossary
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Bridge capital
In venture capital language, capital used to finance an IPO
Investment banks and underwriting houses will help a company go public by providing bridge capital, which serves to “bridge” the period until the equity capital generated by the IPO flows into the company.
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Börsenordnung (Stock Exchange Rules and Regulations) – Frankfurt Stock Exchange Glossary
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Börsenordnung (Stock Exchange Rules and Regulations)
Statutes of the stock exchange
The Stock Exchange Rules and Regulations (Börsenordnung) are issued by the Exchange Council in agreement with the operating body of the stock exchange. It ensures that the respective exchange can perform the tasks expected of it, and guarantees the interests of the public and trading. More specifically, the Stock Exchange Rules and Regulations regulate the organization of the stock exchange and the publication of all information regarding prices and volumes. In the case of securities exchanges, the Rules and Regulations also govern the composition of the Admissions Office and the appointment of its members.
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Bodies of the stock exchange – Frankfurt Stock Exchange Glossary
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Bodies of the stock exchange
Committees that are directly responsible for performing the functions of the stock exchange
As stipulated in the 1994 amendment to the German Stock Exchange Act, the bodies of the stock exchange comprise the Exchange Council, the Exchange Operating Board, Market Surveillance, the Sanctions Committee and the Arbitration Panel of the stock exchange.
The Stock Exchange Act and the Stock Exchange Rules and Regulations require that the admission of securities to trading be handled by two separate exchange bodies: the Admissions Office the Official Market and the Admissions Committee for securities not listed in the Official Market.
The relevant provisions can be found in sections 1, 3, 9, 28, 30, 37, 72 of the Stock Exchange Act.
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Bear Market- Frankfurt Stock Exchange Glossary
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Bear market
Market trend characterized by sustained price declines, usually in all market segments
Investors in a bear market tend to have a pessimistic outlook. Their strategy is to acquire so-called short positions, for example, by selling securities in the hope that they will be able to buy them back at a much lower price, or by selling short (see also short sale).
As a consequence, prices and indices continue to fall over the long term.
Antonym: bull market
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Balance-sheet analysis
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Balance-sheet analysis
Analysis of individual items on the balance sheet with the goal of evaluating a company’s economic situation
Balance-sheet analysis can be subdivided into internal and external analysis. Internal balance-sheet analysis generates information on the company for the management staff, and is part of corporate controlling operations. In external balance-sheet analysis, outside persons or institutions examine key ratios, as well as the published financial statements and accounts prepared for tax purposes, in order to ascertain the company’s earning power, creditworthiness, and profitability. However, the findings of external balance-sheet analysis cannot be regarded as completely valid, because information on unused credit lines, outstanding contracts or undisclosed reserves can be concealed in the balance sheet by calculating higher depreciation expenses.
Balance-sheet analysis is the most important component of fundamental analysis.
In order to list on the Frankfurt Stock Exchange your companies balance sheet needs to be prepared and your documentations in order for listing. To hire a professional team to assist in taking you public on the Frankfurt Stock Exchange, contact ipo@PPM.net
American Depository Receipts and Shares – Frankfurt Stock Exchange Glossary
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American depositary receipt (ADR)
A receipt issued by an American bank for foreign shares
On NYSE and NASDAQ, investors trade ADRs instead of the shares they represent.
American depositary share (ADS)
Depositary shares by means of which the registered shares of foreign companies can be traded on the US exchanges NYSE and NASDAQ
Admissions Office – Frankfurt Stock Exchange Glossary
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Admissions Office
Stock exchange body in charge of admitting securities to the Official Market (Amtlicher Markt)
Before a security is admitted to the Official Market, the Admissions Office examines the listing prospectus to determine whether the issuer and the sponsoring bank have met admission and disclosure requirements.
The Admissions Office comprises at least 20, but no more than 24, members who are elected by the Exchange Council. Of these, not more than half may be professionally involved in exchange trading. Members are elected for three years, and can be re-elected. The Admissions Office appoints one chairman and up to two deputy chairmen.
The Admissions Office has a quorum when at least five voting members have cast their vote, either verbally or in writing. A simple majority is required to pass a resolution. In case of a tie, the chairman or the member in charge of the session casts the deciding vote. Any member who owns shares in the company seeking admission is not eligible to vote.
Important regulations on the Admissions Office are contained in the Stock Exchange Act (Börsengesetz), section 4 para. 3 and section 37, as well as in the Stock Exchange Rules and Regulations.
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Admission to the exchange – Frankfurt Stock Exchange Glossary
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Admission to the exchange
Prerequisite for a listing on the stock exchange
At FWB® Frankfurter Wertpapierbörse (Frankfurt Stock Exchange) the Admissions Office is responsible for deciding whether to admit securities to the Official Market; the admission of securities to the Regulated Market is determined by the Admissions Committee. Each market segment has its own admissions requirements. However, all issuers must publish an offering prospectus containing the fundamental data required for an evaluation of the security.
Admission to General Standard does not require any further action on the issuers’ part. However, issuers have to apply for admission to Prime Standard; a listing in this segment is subject to the fulfillment of high international transparency requirements.
If you are interested in listing on the Frankfurt Stock Exchange, contact ipo@PPM.net
Admission of securities to the Regulated Market – Frankfurt Stock Exchange Glossary
posted by PPM
Admission of securities to the Regulated Market
Decision of the Admissions Office of an exchange to admit a security to the Regulated Market
In order to have a security admitted to the Regulated Market, the issuer, together with an underwriting bank (a bank or investment company), must first submit an application and a listing prospectus to the Admissions Office. These documents provide information on the type and volume of the security to be admitted. The issuer and the bank are responsible for the accuracy of the contents.
The admissions application is to be posted in the stock exchange building and published in the list of quotations (Kursblatt), in the journal for statutory stock market announcements (Börsenpflichtblatt) and in the Federal Official Gazette (Bundesanzeiger). The listing prospectus is published by the issuer in the journal for statutory stock market announcements. As soon as the company is admitted to the Regulated Market, the prospectus is to be made available free of charge at the underwriting banks and the Admissions Office named therein.
Pursuant to the Stock Exchange Listing Act (Börsenzulassungsverordnung) the most important conditions for admissions and follow-up requirements are:
The issuing company must have existed for at least three years.
The expected issuing value must be at least €1.25 million.
For shares, the total par value must be at least €250,000.
At least one interim report on the financial situation and general business developments must be published during the financial year.
Information that is relevant to the company must be published forthwith.
If you are looking to become listed on the Frankfurt Stock Exchange, contact ipo@PPM.net
Acquisition currency – Frankfurt Stock Exchange Glossary
posted by PPM
Acquisition currency
Means of payment used in the takeover of a company
This term is used primarily in connection with a merger that takes place between two listed companies via the exchange of their registered shares.
If you are interested in performing a reverse merger on the Frankfurt Stock Exchange or listing a company on the Frankfurt Stock Exchange, contact ipo@PPM.net
Designated Sponsor- Frankfurt Stock Exchange
posted by PPM
Designated Sponsor- Frankfurt Stock Exchange
Shares in one of the selection indices of Deutsche Börse must be continuously tradable. The underlying criterion is the liquidity of the security. Designated Sponsors secure higher liquidity by quoting binding prices for buying and selling the shares. The probability that placed orders are executed increases considerably. Based on the principle ”liquidity attracts liquidity“, actively supported shares are more popular with investors.
Designated Sponsor Definition: Banks or specialized traders who bridge temporary imbalances between supply and demand in Xetra electronic stock trading, thereby improving a stock’s liquidity. They do so by quoting bid and ask limits (market making), either on their own initiative, on request of a market participant (quote reuest) or in auctions. The fact that these quotes are shown in the order books gives investors greater security for limiting their orders. Depending on the market segment involved, a stock may have one or more designated sponsors, or none at all. On arrangement with issuers, designated sponsors with the necessary capabilities may also provide research or investor relations services.
The specialist trading platform of which the Frankfurt Stock Exchange Open Market utilizes makes it one of the most competitive exchanges in the world for listing upon.
Frankfurt Stock Exchange – Lead Brokers – Frankfurt Market Maker
posted by PPM
These days, the majority of Frankfurt Stock Exchange buy and sell orders are executed via XETRA, the electronic trading platform. Even so, almost all shares listed on the Frankfurt Stock Exchange are also tradable on the floor of the exchange by specialists called lead brokers, and commonly referred to as market makers. Each Frankfurt Stock Exchange traded stock has its own lead broker/market maker that is responsible for the stocks quote as well as for calculating the actual execution prices. The quotes are non-binding and are to serve as an orientation for the market. There is only one lead broker/market maker per stock. The lead broker compiles all buy and sell orders in the ‘order book’. These orders in the order book serve as the basis for the quote.
If you are looking to go public on the Frankfurt Stock Exchange, contact ipo@PPM.net today!
Designated Sponsor as a Prerequisite for Continuous Trading on Xetra
posted by PPM
Are you looking to go public on the frankfurt stock exchange, look no further and contact ipo@PPM.net
For a quotation in continuous trading, it may be necessary, depending on the liquidity of the share, to engage at least one Designated Sponsor as a liquidity provider – regardless of admission to Prime or General Standard. In order to increase the liquidity in trading, Deutsche Börse recommends engaging two Designated Sponsors. Quotation in continuous trading is one of the prerequisites for inclusion of the share in the selection indices.
The liquidity of a share is measured on the basis of the Xetra Liquidity Measure (XLM)* and the average daily order book turnover.
The share is deemed to have sufficient liquidity when
1. Xetra Liquidity Measure = 100 bp (1 basis point = 0.01%)
2. average order book turnover = €2.5 million
If one of the two criteria is not met, at least one Designated Sponsor is necessary for admission to continuous trading.
The list includes all securities in liquidity category A which do not need a Designated Sponsor because of sufficient liquidity. Corresponding shares** of these securities are continuously traded. Securities, which are not included in the list, require at least one Designated Sponsor for continuous trading.
*The Xetra Liquidity Measure measures liquidity in the dimensions width, depth and immediacy.
**i.e., all other shares of a company admitted to trading, e.g. new shares, ordinary shares or preferred shares.
Xetra Liquidity Measure Liquidity is the central quality criterion for the efficiency of marketplaces in electronic securities trading. Liquid markets are for the benefit of investors as they allow exchanging cash and equities at minimum trading costs. Generally speaking, liquid assets can be converted immediately and at minimal costs into cash and vice versa.
So far, liquidity has often been approximated by figures of trading activity for the sake of simplicity, e.g. turnover volumes, number of trades or transaction frequency. But trading activity does not truly reflect liquidity on an instrument level. With the Xetra Liquidity Measure (XLM), Deutsche Börse now provides an innovative concept to assess liquidity in electronic order book trading on the basis of implicit transaction costs. XLM measures the committed liquidity of the Xetra open limit order book by the Market Impact costs, in other words the costs of a immediate demand for liquidity. Market Impact costs are paid by investors who demand liquidity and are collected by investors who supply liquidity via limit orders. The provision of liquidity is thus rewarded and every transaction on a securities market leads to a redistribution of the Market Impact costs from investors demanding liquidity to investors supplying liquidity.
XLM quantifies these Market Impact costs in a single figure. The measure is calculated since July 2002 over the whole trading day for every instrument in continuous trading on Xetra. The lower the XLM the less Market Impact costs arise trading an instrument, the higher is the instrument’s liquidity and efficiency in order book trading.
The Xetra Top Liquids are determined by means of the Xetra Liquidity Measure. The XLM is presented in basis points (100 basis point = 1 percent) in relation to the Market Impact costs of a certain order volume for the round trip (opening and closing a position in one point of time). For example, a XLM of 10 basis points and EUR 25,000 order volume means that the Market Impact costs of buying and selling a certain instrument are equal to EUR 25. Deutsche Börse provides the Xetra Top Liquids on daily figures for the last trading day.
Please find more detailed information in the article “The Market Impact – Liquidity Measure in Electronic Securities Trading“.
Exerpt from the Deutsche Borse Website.
Designated Sponsors: Providers of Liquidity
posted by PPM
Designated Sponsors: Providers of Liquidity
The lead broker/market maker of a Frankfurt Stock Exchange traded security can also be hired by the public company to provide the function of designated sponsor. In a stock with lowtrading volume, it is often difficult for investors to buy or sell because there may not be another buyer or seller willing to trade at that particular time at the price offered. In such cases, buys or sells in the shares oftencauses large market price fluctuations. Basically, the designated sponsor provides investors with immediate liquidity and allows for continuous trading in the security by guaranteeing an appropriate trading margin and, thus, fair prices in XETRA (the electronic trading platform). The designated sponsor does this by entering binding buy or sell prices into the trading system for less liquid securities, thus preventing imbalances between supply and demand. Because the lower tiered segments of the Frankfurt Stock Exchange are often illiquid, the designated sponsor provides an extremely important function by enabling shareholders to execute buy or sell orders at anytime. Moreover, without the designated sponsor function, there is continuous trading on the floor of the Frankfurt Stock Exchange, but only one ‘auction’ per day on XETRA. Designated sponsors ensure that trading continues even when trading volume is low. The service provided by the designated sponsoris valuable and includes advise and support in other areas not mentioned, but the service is not cheap.
If you are interested in going public, contact ipo@PPM.net to get you sponsored and listed today!
What determines the stock quote price of a new Frankfurt Listing?
posted by PPM
What determines the stock quote price of a new Frankfurt Listing? The initial stock quote for a new issue listed on the Frankfurt Stock Exchange is set by the market maker (otherwise known as the lead broker or specialist) and is determined by the buy and sell orders in the market maker’s order book. If there are no buy or sell orders, then the market maker will look to many factors, including but not limited to analyst valuations or price projections, pricing of prior private offerings, capital of the company vs the number of shares issued, and company assets. It is important to understand that the initial price reallydoesn’t bear much importance. What is much more important is where the share price goes after the initial stock quote is set by the market maker. This is determined almost exclusively by customer buy and sell orders in the market maker’s order book. Without customer buy and sell orders in the system, the market maker’s spread between the bid and offer will typically be very large. Conversely, with buy and sell orders in the system, the market maker can then reflect those orders in the publicly quoted bid and offer price. Thus, if for example there is a customer buy order at €3.00 and a customer sell order at €3.25, then the market maker’s quote will generally be €3.00 bid by €3.25 offer. The price at which initial orders are entered by customers in newly trading shares are usually quite arbitrary, and based on what the customer thinks the stock is worth, usually somewhere between the initial large-spread bid and offer. It is not unusual that, when a new issue begins trading on an exchange, there aren’t many public orders in the system. This is simply because at first, not many people know about the new publicly trading company. In fact, most of the time, the only buy and sell orders in a newly public company are from friends and family of the publicly traded company itself. Hopefully, once the company begins a quality IR/PR campaign and becomes more well known to potential investors, more and more people will buy the stock, resulting in more liquidity.