What is Xetra?

Published by Thomas Herold in Economics, Investments, Trading

'Xetra' is explained in detail and with examples in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

The Xetra is a Frankfurt, Germany based trading system. What makes it so significant is that it is a completely electronic platform for trading German stocks. The Deutsche Borse first launched this platform for handling the stock trades back in 1997. This system provides broad order depth and greater flexibility for viewing the German markets. Traders can watch and access trading in German stocks, bonds, funds, commodities contracts, and warrants on the Xetra system.

The system has proven itself well enough to be adapted by other stock exchanges throughout Europe and the world since it began operating. The creators of Xetra originated it for the Frankfurt stock exchange. Since then, it has spread to other national stock exchanges in Vienna, Austria; Dublin, Ireland; and Shanghai, China.

Part of the success of Xetra lay in its relatively early launch. As such, it became among the first of the great electronic and global trading systems. Making German capital markets more accessible for foreigners and their investment proved to be one of its key benefits. Xetra has expanded to handle over 90% of all of the stock trades for the Frankfurt Stock Exchange.

The Frankfurt Stock Exchange represents Germany’s largest trading exchange. Also known as the FRA, it is based in Frankfurt. Deutsche Borse owns and operates Xetra and the Frankfort Stock Exchange along with all of Germany’s other trading exchanges. Thanks in part to the success of the Xetra, this exchange represents one of the most efficient and biggest facilities for trading markets on earth. It is also among the oldest stock exchanges around the globe.

The Frankfurt Exchange handles practically all of Germany’s trading. It also manages a significant portion of all trading in the whole of Europe. The FRA makes a large portion of its profits from the Xetra trading system. The many foreign investors flowing in because of Xetra are responsible for a significant share of the profits. FRA is open each day of the week from 9:30am till 5:30pm.

There are a number of important stock indices based on the Frankfurt Stock Exchange and run by Xetra. Among these are the DAX, the Eurostoxx 50 and the VDAX. Xetra DAX is Germany’s equivalent of the Dow Jones Industrial Average in America and the Financial Times Stock Exchange 100 in London. This blue chip index of their stock market exchange contains the 30 most important German companies that are traded on the FRA.

Deutsche Borse states that the performance of these companies is measured according to market capitalization and order book volume. All of the prices from the DAX are taken off of the Xetra trading system. While the DAX is an important index with its 30 Prime Standard companies represented, this does not equate to the strength of the whole German economy.

Prime Standard companies listed on the Xetra DAX and other important Frankfurt exchanges such as SDAX, MDAX, and TecDAX have to attain international transparency standards. This means they have to use international accounting standards as with US-GAAP or IAS. Their quarterly reports and ad hoc disclosure must be in German as well as in English. They must hold minimally one analyst conference every year. Finally, these companies must publish a financial calendar.

Xetra computes the DAX index values once every second. It has done this since the technology began managing all electronic functions for the DAX on January 1, 2006.  After the Xetra closes each weekday, the DAX index keeps trading under the name L-DAX. These prices are based on the FRA trading venue floor trades and continue until 5:45pm. At this point, the L/E-DAX Index picks up trading until 8pm.

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The term 'Xetra' is included in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.