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Deutsche Börse With New Trading Service For Private Investors' Orders - "Xetra BEST" New Product On Xetra - Advantages For Private Investors And Market As A Whole

Date 25/01/2002

Deutsche Börse wants to offer its market participants an additional trading service for private investors' orders on its Xetra platform. The new service, Xetra Best Execution - Xetra BEST, for short ? supports immediate execution of private investors' orders as well as a better price compared with the price that currently would have come about in the Xetra orderbook. The new product, which will be an integral part of the Xetra software, is expected to be made available for market participants in the fall, subject to approval by the Exchange Council of FWB Frankfurter Wertpapierbörse (the Frankfurt stock exchange).

With Xetra BEST, banks can offer a price edge for customer orders in the exchange environment. This offer is only valid for immediately executable orders. With Deutsche Börse's new execution mechanism, these orders are matched with an order from the respective customer's bank. The resulting transactions in Xetra BEST are reported with all other transactions in Xetra without delay and assigned an individual code number. Xetra BEST orders that are not executed immediately are directly posted in the Xetra order book.

With Xetra BEST, Deutsche Börse is shaping a market trend that is based on the immediate execution of an order. Immediate execution is in demand, especially from private investors. In the competition for orders, Xetra BEST offers the possibility of improving the price shown in the order book. It combines the immediacy of order execution with a price guarantee within the Xetra spread. With a market share of about 90 percent of German equities turnover, Xetra is the highest-liquidity recognized reference market.

Volker Potthoff, member of the Executive Board of Deutsche Börse responsible for Xetra Division, said: "The demand for trading models that address the immediacy of order execution is obvious. We are offering market participants a new service for retail trading which will put private investors on the demand side in a better position when it comes to immediacy than any other service existing at the moment." At the same time, he said, Xetra BEST will counteract a possible fragmentation of the retail market because the liquidity will remain bundled on the Xetra trading platform. Potthoff emphasized that Xetra BEST complements the Deutsche Börse product portfolio. It goes without saying that investors will still have the option of placing their orders directly in the Xetra order book, he pointed out. They can decide whether they prefer immediacy or want to place a limit order in the order book for a particular reason.

With Xetra BEST, investors profit from the "Best Execution", the combination of immediate order execution and guaranteed execution at Xetra prices or better. Further advantages are the transparency of the open Xetra order book and the monitoring of trading in Xetra as well as of Best Execution by the Frankfurt stock exchange's trading surveillance unit.

Xetra BEST will have advantages for the market as a whole, compared with a fragmented market on over-the-counter platforms that are not monitored. Xetra BEST is closely intertwined with the Xetra order book, which means that price competition for customer orders will continue to take place while resulting in substantially enhanced transparency in execution. Moreover, banks that want to execute customer orders in Xetra BEST have to function as Liquidity Managers in the Xetra order book. Deutsche Börse ensures that additional liquidity is provided in the order book.

Deutsche Börse's execution mechanism Xetra BEST means that intermediaries can offer their customers a Best Execution service that is monitored by a neutral party, without having to bear the costs for the development and operation of its own systems. Moreover, they can fall back on tried-and-proven uniform interfaces and the Europe-wide Xetra participant network.

With Xetra BEST, Deutsche Börse is pursuing its business strategy of making demand-oriented solutions available. Moreover, it results in further economies of scale in the operation of the Xetra trading platform because the platform will be loaded up with the new product Xetra BEST.