Designated Sponsor as a Prerequisite for Continuous Trading on Xetra
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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.
|Xetra Most Liquids (Stocks)|
|ALLIANZ SE VNA O.N.||4.4||2.2||2.2|
|SAP AG O.N.||4.4||2.2||2.2|
|SIEMENS AG NA||4.5||2.3||2.2|
|DEUTSCHE BANK AG NA O.N.||4.7||2.4||2.3|
|BASF SE NA O.N.||4.8||2.4||2.4|
|BAYER AG NA||4.9||2.4||2.4|
|E.ON AG NA||4.9||2.4||2.5|
|RWE AG ST O.N.||5.1||2.6||2.5|
|DAIMLER AG NA O.N.||5.7||2.7||2.9|
|DT.TELEKOM AG NA||5.8||2.9||3.0|
|As of: 08/10/2010
Results in basis points for 25.000 € roundtrip
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.