Deutsche Brse Group

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Deutsche Börse Group

• Transparency Key for market integrity

German-Ukrainian Conference on Financial Markets
Transparency
Kiev, April 22, 2005
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Deutsche Börse Group
The Markets Company
The only fully integrated exchange organisation
worldwide Cash market Derivatives market
Clearing Information IT
Market infra-structure and technology
Market information
Listing and trading network
Clearing/Central counterparty (CCP)
Settlement and custody
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Accessing XETRA
International Network of Members

• Liquidity through wide spread portfolio of
  trading members
• Strong liquidity in foreign securities through
  local expertise of foreign members
• Cost efficient European-wide access

• 283 members in 18 countries (January 2005)
• 49 of members outside Germany
• 4.277 registered traders

Cyprus (1)
Greece (1)
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Xetra Product offering
Initiator for international equity trading

• Access to almost 6.000 international Securities
• Around 90 of the market share for German stocks
• Round Lot size 1

• 30 biggest shares following the DAX from
  Technology Sector in Prime Standard

• 30 biggest German Blue Chip Stocks of Prime
  Standard

• Small Cap Index comprising the 50 shares
  following the MDAX Classic Sector of Prime
  Standard

• The 50 main mid caps from classic Sectors of
  Prime Standard

Xetra STARS
Other Stocks
Total Turnover per day
XTF

• DJ Stoxx 50
• Global Titans 50
• More than 4000 equities mostly of foreign origin
• Less liquid stocks are traded once daily in an
  auction

• European STARS - representing 80 of DJ
  EUROSTOXX 50
• US STARS cover instruments from NASDAQ 100, DJIA
  30, SP 100 and 27 US equities of the DJ Global
  Titans 50

• 55 Index Funds, based on German and international
  indices.
• 23 actively managed Funds based on countries and
  industry sectors.

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Listing Segments

Cash market segmentation One market, two listing
standards
A new cash market segmentation One market, two
standards
General Standard Cost effective listing based on
national requirements
Provides a strong foundation for all listed
companies

• Annual report
• Half-year report
• Ad Hoc disclosure
• in German

Prime Standard Targeting international Investors
through additional disclosure
Clear comprehension Comparability Timely
information to all investors from single source

• All corporate information in English
• International Accounting (IFRS/US GAAP)
• Ad Hoc disclosure
• Quarterly financial reporting
• Corporate calendar

Highest transparency standards in Europe
Helping issuers fulfil investor expectations
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Freiverkehr
Initial exposure for international companies
Flexible admission method dependent on issuer
profile
Freiverkehr profile
Admission to trading on Frankfurt Stock Exchange
and access to global investors
Freiverkehr regulation
Market regulated by German securities law.
Trading supervised by Federal Trading
Surveillance office

• Company already listed at home exchange
• (Member of WFE)
• Simple admission by Frankfurt broker
• Ongoing liquidity enhancement
• Improve investor relations

• Unlisted company seeking to increase investor
  exposure
• Draft admission document with broker
• Develop investor relations strategy
• Basis for full listing

International companies can generate investor
interest from Freiverkehr Experienced Frankfurt
brokers offer customized services at fair cost
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New Index Framework
Most attractive showcases for global investors
Focus on Prime classic and technology, all
traded continuously Improved peer-group
comparison through international sector
classification
Futures
DAX ETF
DAX
Index options
30 Options on shares
Prime All Share
MDAX ETF
CDAX
Futures
TecDAX
Index options
TecDAX ETF
6 Options on shares

• Investors benefit from
• Selection indices
• Benchmark coverage
• Derivatives
• Index EFTs

Prime Standard
General Standard
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Trading on Xetra
Principles of the Market Model
Concentration of total liquidity in one central
order book per security
Creation of equal and decentralised
market access
Market Model Equities Warrants
High degree of transpar-ency of order book and
trading activity
Specific provision of additional liquidity
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Trading on Xetra
Trading schedule trading forms for stocks
0900 1300 1730
CET
Pre- trading
Post- trading
Continuous Trading
Continuous Trading
Auction
Continuous Trading

• Trading in an open order book with accumulated
  volumesdisplayed for individual limits
• Lots of all sizes can be traded
• Continuous price determination and execution of
  orders by price/time priority

Order book balancing
Call Phase
Random end
Price Determination
Market
Auctions
Display of indicative price, best bid /ask limit
for equities.

• Lots of all sizes can be traded
• Transparency with open or partially closed order
  book
• Determination of an auction price corresponding
  to the highest executable order volume with the
  lowest surplus

For sponsored and DAX100 instruments there is
no order book balancing phase but a market order
surplus indication during the call phase
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Trading on Xetra
Order types and their specification
Limit Order
Limit orders are bid and ask orders which
are to be executed at their specified limit or
better.
Market Order
Market orders are unlimited bid or ask orders.
They are to be executed at the next price
determined.
Iceberg Orders are large orders with quantities
only partially visible in the order book.
Normally used by the trader to avoid adverse
price movements.
Iceberg Order
Market-to-Limit Order
Market-to-limit orders offer the high
probability of execution of market orders
combined with protection against unintended price
impact.
Validity Constraints
Execution Conditions
Good-for-day Good-till-date Good-till-cancelled
Auction Only Opening Auction Only Accept Surplus
Order Closing Auction Only
Immediate-or-Cancel Fill-or-Kill
Stop Limit Order Stop Market Order
Max. validity of 90 days
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Xetra Functionality
Xetra trading screen in detail
Accumulated buy quantity at a given limit
Accumulated sell quantity at a given limit
Number of Buyers/Orders behind each limit
Number of Sellers/Orders behind each limit.
Best Buy price
Best Sell price
Indication of the trading phase
(Continuous Vs. Auction)
Market Depth - 10 Best Bid / Best Ask
prices updated in real time
Order Entry Window
A highlight on the screen indicates the
execution of a Trade.
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Market Regulation
German regulatory framework meets international
standards
Regulatory benefits of Deutsche Börse markets
Reflected in national andEuropean legislation
International Accounting Standards Active
Investor Relations Disclosure of Directors
Dealings Quarterly Financial Reports Adoption
of Takeover Code Single supervisory authority
Comprehensive Corporate Governance
European Commission Directive German law
German law EC Transparency Directive EU
Directive / German law 2002 Creation of BAFin
German law
Deutsche Börse actively promotes transparency and
investor protection Providing standards the
investor can count on
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Transparency Directive

• Implementation of minimum transparency
  requirements for companies with stocks traded
  on a regulated market
• Information to be published on a periodical basis
• Annual reports according to international
  accounting standards
• 6 months interim reports (IAS 34), interim
  management statements
• Quarterly reports not obligatory Stock Exchanges
  are empowered to define such requirements in
  their regulation
• Other information
• Additional requirements concerning publication of
  changes in shareholder structure

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Modification of ISD
Pre Trade Transparency (Art. 27 ISD 2)

• Obligation to publish quotes before
  executingclients orders
• Protects investors interest in getting best price
• Facilitates arbitrage trading, between different
  pools of liquidity
• Strengthens competition between market
  participants
• Regulated Markets Publication of bid and offer
  prices as well as order book depth (Art.44 ISD
  2). Obligation already fulfilled by Stock
  Exchanges
• Systematic Internalisers and Multilateral Trading
  Facilities (MTFs) Similar obligation as
  Regulated Markets.Internalizers have to publish
  quotes only when dealing in sizes up to a
  standard market size (no minimum quote size)

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Modification of ISD
Post Trade Transparency (Art. 28 ISD 2)

• Obligation to publish information on executed
  trades
• Best execution assessment
• Reflects total market activity
• Supports price discovery process by additional
  trading information
• Regulated Markets in Europe already fulfill
  post-trade transparency required by Art. 45 ISD
  2.
• In future investment firms have also to publish
  post trade information on trades conducted
  off-exchange if the respective securities are
  admitted to trading on a regulated market (Art.
  28 ISD2). Similar rules apply to MTFs (Art. 30
  ISD 2)

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Your contact at Deutsche Börse AG
Your contact Dr. Albrecht Bürger Trading and
Clearing Market Development Tel.
49-69-211-15885 www.deutsche-boerse.com
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Backup
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Deutsche Börse Group
Exchange organization
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Agenda 2005 set
Market Regulation