XETRA: EUROPE'S LARGEST TRADING VENUE FOR ETFS - ETF. One transaction is all you need.
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Xetra. The market. XETRA: EUROPE’S LARGEST TRADING VENUE FOR ETFS ETF. One transaction is all you need.
ETFS ON XETRA 2
Deutsche Börse Group is the leading global service provider
to the securities industry. Its cutting-edge technology
provides access for companies and investors to the world’s
securities markets. Deutsche Börse’s XTF segment makes
it the European market leader in ETF trading. Investors have
access to more than 1,500 ETFs via Xetra® and find the most
diverse product portfolio and the highest turnover of all
stock exchanges in Europe. The average monthly trading
volume of this segment is about €11 billion.
ETFS ON XETRA 3 XETRA: EUROPE’S LARGEST TRADING VENUE FOR ETFS Fully electronic and liquid: matched in the Xetra order book and ETF trading on Xetra executed immediately. On peak days, ETFs (exchange-traded funds) are traded the trading system executes more than all over Europe via the trading venue Xetra ®. 2.6 million transactions per day. Xetra Xetra’s trader screens give investors access sets standards for liquidity, transparency, to more than 1,500 ETFs as well as an speed and flexibility in securities trading. extensive range of domestic and foreign What is more, it is location-independent equities. Buy and sell orders from traders and extremely price competitive. at diverse locations across the globe are
ETFS ON XETRA 4
The XTF segment: Development of the ETF segment
Wide selection, high volumes in the years 2004 – 2019
Deutsche Börse was the first European
stock exchange to commence trading in
listed index funds with its XTF segment, 1,505
which was launched in April 2000. Since 1,368
then, the segment has grown continuously,
enabling Deutsche Börse to maintain its 709.8
1,132
position as market leader in Europe for 1,044
1,015
exchange-traded funds. Since trading began,
the number of listings has risen to 1,505
by December 2019, while fund assets 761
have jumped from an initial €400 million 524.2
to a record high of €709.8 billion. The
annual growth rate of the fund assets over
399
the past ten years is 20 percent. 411.6
171
In the early years, the segment mainly
54
handled funds on major European indices 286.3
such as the DAX ®, the EURO STOXX 50 ®,
or the STOXX Europe 50 ®. Since then, 206.0
the selection of ETF products has grown
165.3
substantially. Besides large standard equity
indices , the range now also comprises
numerous other country and regional 82.1
47.6
indices, “exotic” markets such as Brazil,
16.4
Taiwan and Korea as well as a host of sector
indices. The fixed-income segment has 2004 2006 2008 2010 2012 2014 2016 2018 2019
a wide range of high-volume government
bond as well as money market ETFs. Number of ETFs Assets under management in €billion
Source: Deutsche Börse AG, Status: December 2019
The issue of new ETFs provides access
for investors to new asset classes and nume-
rous portfolio strategies. Deutsche Börse’s
XTF segment now also includes ETFs on ETFs tradable on Xetra
German and international real estate
shares, on volatility as well as on commo- 7
dity indices and strategy indices. The ETF Other (currencies, multi asset classes,
offering has developed strongly with a hedge funds, volatility) 44
focus on sustainability, which can be iden- Active ETFs
25
tified by the abbreviations ESG and SRI. Commodity funds 292
Equity funds/
291
You can find an up-to-date Strategy indices
country indices
overview of all tradable ETFs on Xetra at
boerse-frankfurt.de.
207
Equity funds/
regional indices
400
Bond funds
239
Equity funds/sector indices
Status: December 2019
ETFS ON XETRA 5
ETFS TRACK THE
PERFORMANCE OF INDICES
AND MARKETS
Unlike actively managed funds, where the a counterparty risk of the swap contract
investment objective of the fund manager partner, which is legally limited to no more
is to outperform a reference index, ETFs than 10 percent of the fund assets. However,
pursue a passive investment strategy, the issuers are able to reduce or eliminate this
aim of which is to replicate the performance risk by depositing appropriate collateral.
of an underlying index as accurately as
possible. Underlying indices may be natio- The main objective of ETFs is to replicate
nal or international equity indices, bond and the performance of specific indices as
real estate indices, or even commodity or accurately as possible. In the process, the
strategy indices. Indices and whole markets ETF manager must keep the tracking error
can be traded as easily as single shares. as small as possible. The tracking error is
The investor acquires an entire basket of the difference between the price perfor-
securities in a single stock exchange trans- mance of the ETF and the performance
action This means that investment strate- of the index it is linked to. In practice, the
gies can be implemented more simply and performance of the index fund may differ
more efficiently than with other financial from that of the index it is replicating.
instruments.
This is due to the following factors:
The price for a single share generally
corresponds to a fraction of the index value • Fund management costs: these are
defined by the issuer. The fair price can deducted from the performance.
be verified at all times using the indicative • The point in time at which the ETF is
net asset value (iNAV®) which is calculated valued: this may differ from the time of
continuously. the last index valuation.
• The use of profits: dividends, income
In contrast to certificates, ETFs, like tradi- from rights issues and special payments
tional investment funds, consist of a sepa- may be distributed or accumulated.
rate pool of fund assets. Consequently, ETFs • The date of the index change: the com-
are a very safe investment and investors position of the selection index DAX ®
are protected against total loss if the issuer is reviewed every three months, for
goes bankrupt. According to the swap example, with individual securities being
agreement, Swap-based ETFs may show reweighted as necessary.ETFS ON XETRA 6
BENEFITS OF ETFS FOR
INVESTORS AND TRADING
PARTICIPANTS
Broad diversification with a single group on Xetra; they show a higher liquidity ETFs on Xetra:
investment than even the most heavily traded DAX ® The advantages at a glance
Buying an ETF gives investors access to equities. On average, the implicit trans- • High degree of flexibility and possible
entire markets with just a single transaction. action costs for the 20 most liquid equity applications through pan-European
Exchange-traded funds allow various ETFs are less than 5 basis points for an electronic trading
investment strategies to be implemented. order size of €100,000. • Indicative net asset value (iNAV®) provides
ETFs combine the tradability of an equity transparent price information
with the risk diversification of a portfolio. Trading on Xetra enables the investor to • Low purchase and management cost
Investors spread their risk by investing in utilize the key functions of fully electronic without any front load fee
the entire basket of securities underlying equity trading for ETFs as well. In addition • Narrow bid/ask spreads
an index. Institutional investors also save to Designated Sponsors and continuous • High liquidity during continuous trading
themselves the hassle of having to do their trading, these include various forms of • High degree of risk diversification with
own research and can avoid the sometimes auctions, different order types and a mini- just one investment
complex currency and settlement procedures mum trading size of one fund share. • Implementation of a large number of invest-
involved in investing in individual markets. ment and trading strategies possible
The creation/redemption process has a • Protection from issuer risk due to separate
Continuous trading with top liquidity positive effect on ETFs’ liquidity and per- pool of fund assets
ETFs are continuously traded with top li- formance. In this process, the Designated
quidity on the trading venue Xetra. Xetra Sponsor and the ETF provider exchange
accounts for about 90 percent of the total baskets of securities for ETF shares and
turnover in exchange-traded funds in vice versa. The Designated Sponsor can
Germany. With a market share of 28 percent buy or sell baskets of shares on the market
Deutsche Börse’s Xetra is the leading without the ETF provider incurring trans-
trading venue in Europe. action fees. All participants profit from the
creation/redemption process: the issuer
The higher the liquidity, the lower the implicit can efficiently replicate the index, the
transaction costs, i e. the costs incurring Designated Sponsor benefits from additio-
the investor by the bid/ask spread when nal trading opportunities and the investor
buying or selling products. By now, ETFs receives a fair price with low trading fees
on the most popular standard indices have at all times.
evolved into the most liquid instrumentETFS ON XETRA 7
Creation/Redemption-Process
Private investors Institutional investors
Continuous publication
Buying and selling ETFs
of indicative NAV
Secondary market
ETF segment of stock exchange Block trades
Liquidity
MM1 MM2 MM3 Designated Sponsor
Primary market
Investment Trust
MM=Market Maker (also known as Designated Sponsor)
iXLM: New key indicator provides infor- vidual key indicator is available for all ETFs
mation on trading costs over the course traded on Xetra. To calculate the iXLM,
of the trading day Deutsche Börse divides the trading day
Deutsche Börse is providing ETF investors from 9:00 a.m. to 5:30 p.m. into half-hour
with a new key indicator: The iXLM (intraday intervals and calculates the iXLM retro-
Xetra liquidity measure) provides informa- actively for each half hour. The values are
tion on how trading costs of an ETF have published once a month. A current evalua-
developed over the course of a trading day. tion of all ETFs has shown that the implicit
This allows investors to deduce the period transaction costs at the best time are up
in which the trading costs of an ETF were to 30 percent lower than at the worst time
particularly low and to take this information during the day. The monthly evaluation is
into account for future decisions. The indi- published in the ETF statistics on xetra.com.ETFS ON XETRA 8
Transparency assured by the indicative For most ETFs the spread is very narrow, Indicative net asset values (iNAVs) state
net asset value which allows their purchase and sale on the current value of the fund assets, thus
For exchange-traded funds in the XTF a low cost basis. Highly liquid ETFs demon- ensuring maximum transparency. Indicative
segment an indicative net asset value is strate bid/ask spreads of less than 5 basis net asset values are usually calculated
calculated at least once per minute during points on the stock exchanges. By and on the basis of the portfolio, meaning they
trading hours by the issuer or a third party large, the spreads for major liquid indices are based on the current prices of the
commissioned by the issuer. Deutsche range between 5 and 10 basis points, individual items contained in the fund. The
Börse AG, for example, performs this func- though they may top 50 basis points for composition of the fund portfolio, which
tion for many issuers under its iNAV brand. more specialized products. is published daily, is factored into the cal-
culation. The cash in the fund is also added
Lower purchase and management costs No issuer and reinvestment risk to the individual items in the fund portfolio.
As ETFs are traded like equities they have Legally, an index certificate is a bearer bond. The fund assets calculated in this way
no front load or redemption fees – unlike By contrast, an exchange-traded fund divided by the number of fund shares gives
traditional funds. Only the usual transac- comprises a pool of fund assets that is the current indicative net asset value.
tion costs are incurred for the purchase or separate from the assets of the ETF ma-
sale via the stock exchange. What is more, nagement company. While a certificate This value has many possible applications:
thanks to the passive management strate- harbours the risk of total loss if the issuer Designated Sponsors use it to monitor their
gy, the annual management fees for ETFs goes bankrupt, ETFs are not exposed to calculations during trading, institutional in-
are generally far lower than those of active- this issuer risk. vestors use it to assist in risk management
ly managed funds. The management fee is and investors can easily find out about the
calculated pro rata for each day and deduc- ETFs generally have an unlimited duration current value of the ETF.
ted automatically from the fund assets. and no maturity date; they are open-ended
products. Investors have no reinvestment
risk; they do not have to dissolve the ETF at
the end of the term and reinvest the money
at less favourable conditions. As a result,
no reinvestment costs are incurred, which is
an advantage over fixed-income securities,
for example.ETFS ON XETRA 9
ETFS ON XETRA 10
ETFS ON XETRA 11
INVESTMENT AND TRADING
STRATEGIES
ETFs can be used to implement a number Cash equitization buy back the loaned ETFs at a lower unit
of different trading and investment strate- ETFs lend themselves extremely well to price and return them to the lender.
gies. As trading on Xetra ® provides high the short-term management of cash assets
liquidity, ETFs are also a suitable tool for because of their high liquidity and flexible A short-selling strategy using ETFs is espe-
algorithmic traders. trading. Fund managers and institutional cially useful for markets in which individual
investors can manage existing cash and equities cannot be sold short for regula-
Productive investment inflows of funds flexibly, rapidly and accu- tory reasons or for which a corresponding
Due to their attractive cost structure, ETFs rately using ETFs. By temporarily parking futures contract is not available. Moreover,
are ideal for both short- and long-term income from dividend, bonus, or interest ETFs provide an alternative to the use of
investments. A growing number of institu- payments in ETFs, they can benefit from futures for groups of investors that are not
tional investors have already invested in the performance of the benchmark. Sub- allowed to trade derivatives on account of
ETFs, leveraging the cost benefits and the sequently, it is possible to reinvest the their legal form, or when the aim is to avoid
opportunity these provide to implement funds in individual shares in accordance roll risk and managing margin accounts.
their strategy more effectively. For example, with the investment objective.
using ETFs, investors can exploit short-
term market trends as part of a short-term Arbitrage strategies
investment strategy without having to Different trading strategies can also be
analyse individual stocks. ETFs on broad implemented with ETFs. One of the main
indices lend themselves to longer-term strategies here is based on temporary price
investment strategies. They can be speci- imbalances between markets. Any time a
fically enhanced with individual securities, price imbalance of this nature arises for a
depending on the investor’s individual risk specific underlying instrument, a potential
appetite. arbitrage opportunity arises for market
participants. Taking advantage of this arbi-
Core-satellite approach trage opportunity not only eliminates the
In this strategy, portfolio managers use one temporary price imbalance; it also ensures
broadly diversified core investment plus high price quality on the relevant markets.
other, smaller individual investments called
satellites. The core investment generates Short-selling and an alternative to
a basic return in line with the benchmark or derivatives
a broad index while the satellites allow for Investors can use short selling to hedge
a higher risk/return profile. The satellites existing portfolios quickly and at low cost
chosen have a low correlation with the core or, alternatively, to bet directly that the market
investment. Due to their attractive cost will fall. To do this, ETFs are borrowed from
structure and extreme flexibility, ETFs are the lender against payment of a securities
ideally suited for use in such strategies, lending fee and then sold on the market. If
both as a core investment and as satellites. the underlying index falls the investor canETFS ON XETRA 12
DIFFERENT FORMS OF ETFS
Performance or price index as reference interest received increase the fund’s cash the performance of a reference index with
ETFs can replicate both performance assets i.e. they result in a positive difference a structured component to achieve lever-
indices and price indices. The main diffe- between the performance of the ETF and age, provide a capital guarantee or gene-
rence lies in the way the interest and divi- the underlying index until the date they are rate a reverse exposure to the reference
dend payments for the instruments quoted distributed to shareholders. Over and ab- index. Like traditional ETFs, active ETFs are
on the index are handled. Price indices, for ove this, in both index variants fund mana- continuously tradable on Xetra®, offering in-
example, measure the actual price perfor- gers can generate additional income e. g. vestors a comparatively high degree of flexi-
mance and are merely adjusted for the through securities lending transactions bility and a wide range of applications. Active
income from rights issues and special pay- that may boost the performance of the fund ETFs must meet the same requirements in
ments. In performance indices, all income and thus compensate for negative variance terms of transparency as passive ETFs.
from dividend, bonus, or interest payments from the performance index to a certain
is also reinvested in the index portfolio. extent or even in full. You can find a current overview of all
tradable ETFs and active ETFs, including
Independent of the calculation method Swap ETFs information about their distribution policies
for the underlying reference index, inves- Swap ETFs use derivatives to track the and structure at boerse-frankfurt.de.
tors benefit in both variants from the performance of indices as accurately as
dividend and interest payments that the possible. This enables non-index-related
ETF generates. costs such as trading expenses and tra-
ding taxes (e. g. stamp duty in the UK) to be
If the ETF replicates a performance index, largely avoided. The index is not tracked
the dividends or interest income accruing directly by acquiring the securities it con-
to the ETF will be reinvested in keeping with tains but rather indirectly via one or more
the calculation method of the reference index swap agreements. The company acquires
i.e. this income will accrue to the investor securities for the fund that initially do not
through the price performance of the ETF. generate any index-related income for the
If, on the other hand, the ETF replicates fund. Under the swap agreement, however,
a price index, the income accruing to the the entire performance of the securities
ETF will be paid out to investors at regular held by the fund is swapped for the perfor-
intervals. In this way, both variants of the mance of the underlying index so that the
ETF develop in line with the index. shareholder of the swap ETF participates
fully in the performance of the underlying
Minor differences in the degree of index index. By avoiding or reducing non-index-
tracking may occur depending on the related costs, swap-based ETFs allow even
calculation method. For example, when per- more precise tracking of the performance
formance indices are replicated the mana- of the underlying index.
gement fee for the ETF will be deducted
from the fund assets on a daily basis; on Active ETFs
the other hand, the fund must pay taxes Active ETFs are exchange-traded funds
on dividends and interest received that are that pursue an active investment strategy.
not included in the index calculation. When This may, for example, aim at outperforming
price indices are replicated, dividends and an underlying benchmark index or combiningETFS ON XETRA 13
ETFS ON XETRA 14
THE ADMISSION PROCESS
FOR ETFS
ETFs that are to be traded in Deutsche Applying for admission to trading on the For questions please contact:
Börse’s XTF segment must have been ad- stock exchange is a quick and easy pro-
mitted to trading in the Regulated Market cess. Issuers seeking admission to the XTF Cash Market Products & Regulation
of FWB ® Frankfurt Stock Exchange. segment should observe the following: Dagmar Wojcik
Applications can only be considered for Phone +49-(0)69-211-1 36 45
securities whose public distribution is per- • We recommend starting off by arranging dagmar.wojcik@deutsche-boerse.com
mitted in the Federal Republic of Germany. an informal meeting with Deutsche Börse’s
Other preconditions include the appoint- Cash Market Products & Regulation Listing Services
ment of at least one Designated Sponsor department, which will answer questions Phone +49-(0)69-211-1 39 90
and the calculation of an indicative net on the market segment and admission listing@deutsche-boerse.com
asset value. Further requirements for the to trading. This department will also put
participation in the ETF segment can be the issuer in contact with Designated STOXX Customer Support
found in the conditions of participation at Sponsors. Phone +41-(0)43-430-72 72
xetra.com/etf_e. • Application for admission to trading on customersupport@stoxx.com
the Regulated Market is filed jointly by
the issuer and a co-applying lead ma- Market Data & Services
nager who must be admitted to trading Phone +49-(0)69-211-1 24 42
on the FWB Frankfurt Stock Exchange. data.services@deutsche-boerse.com
Contact partner is the department Listing
Services.
• The Bundesanstalt für Finanzdienst-
leistungsaufsicht (BaFin – Federal
Financial Supervisory Authority) reviews
the prospectus and grants permission
for the public distribution of domestic
shares. For shares which are permitted
for public distribution outside of Germany
and which are liable to the UCIT directive
the issuers confirmation is sufficient.
• Funds approved for distribution can be
admitted to trading in the Regulated
Market of the FWB Frankfurt Stock Ex-
change within five trading days.
• Deutsche Börse admits Designated Spon-
sors to trading within one day. Please
find the application form for Designated
Sponsors at xetra.com/ds_e.
• Deutsche Börse’s Market Data & Services
department will answer any questions on
arranging and calculating indicative net
asset values (iNAV®).ETFS ON XETRA 15
ISSUERS IN THE ETF SEGMENT
www.amundietf.com easy.bnpparibas.de deka-etf.de expat.bg
fidelity-etfs.com ftportfolios.com franklintempleton.de gsam.com
hanetf.com assetmanagement.hsbc.de icbccs.com.hk etf.invesco.com
ETFs by
ishares.com jpmam.com/etf lgimetf.com lyxoretf.de
marketaccessetf.com ossiam.com rizeetf.com ssga.com
tabulaim.com ubs.com/etf cib.unicredit.eu vaneck.com
www.de.vanguard wisdomtree.eu Xtrackers.comPublished by Deutsche Börse AG 60485 Frankfurt/Main Germany xetra.com Follow us on twitter@xetra Contact Deutsche Börse AG Cash Market Products & Regulation Phone +49-(0) 69-2 11-1 36 45 March 2020 Registered trademarks DAX ®, FWB ® Frankfurter Wertpapier- börse, iNAV® and Xetra ® are registered trademarks of Deutsche Börse AG. EURO STOXX 50 ® and STOXX Europe 50 ® are registered trademarks of STOXX Ltd. Disclaimer All information contained in this brochure is subject to change without notice at any time, and no guarantee can be given as to its accuracy, commpleteness, correct- ness or fitness for a particular purpose. This brochure does not constitute legal or financial advice, nor does it give rise to any obligation on the part of Frankfurter Wertpapierbörse, Deutsche Börse AG or any of their subsidiaries.
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