Deutsche Börse is taking the introduction of the new Markets in Financial Instruments Directive (MiFID) as an opportunity to enhance its service portfolio: the company plans to introduce a range of new services for the cash market and with respect to market data. The Frankfurt Stock Exchange, where trading is conducted both on the Xetra platform and on the trading floor, will according to Deutsche Börse meet the transparency requirements set out in the Directive. The Frankfurt stock exchange is also able to fulfill the requirements for the “best execution” of client orders. Market Data & Analytics will be offering its MiFID toolbox.
MiFID is designed to create a transparent, fair competitive environment for all market participants and to improve investor protection. As a result, the Directive will introduce stringent regulations on pre- and post-trade transparency for both exchange and off-exchange equities trading. Furthermore, investment firms will be obliged to offer “best execution” in the future, whereby orders must be executed on the terms that are most favorable to the client.
The high liquidity, immediate execution and low transaction costs offered by the Frankfurt Stock Exchange mean that it already offers the best execution of client orders for over 120,000 securities. International studies regularly rank Xetra among the leaders with respect to what are known as implicit trading costs for highly liquid stocks (e.g. DAX® stocks), while trading on the Frankfurt trading floor is subject to rigorous quality criteria that are assessed on an ongoing basis as part of a performance analysis. Rainer Riess, Managing Director of Stock Market Business Development said, “The Frankfurt stock exchange already leads the field in terms of best execution, and we want to build upon our price and liquidity leadership in 2007”.
Deutsche Börse will also be offering bilateral trading in the form of Xetra BEST, allowing the so-called BEST executors to execute their own client orders, or orders from other trading participants, against their own books. Full execution against the BEST executor features an automatic price improvement as against the Xetra order book, ensuring best execution. Xetra BEST is an integrated part of Xetra, meaning that it is part of the regulated market in legal terms. Deutsche Börse will be making key improvements to Xetra BEST from Q2 2007 onwards in a drive to make the system more attractive.
Market Data & Analytics will be introducing new reporting services, allowing Deutsche Börse to help its clients to fulfill the comprehensive informational requirements with respect to off-exchange transactions. Holger Wohlenberg, Managing Director of Market Data & Analytics said, “Our services, which are bundled in the MiFID toolbox, not only allow our clients to ensure transparency, but also provide data histories and statistics, a transaction reporting service and support with counterparty cleansing.”
Deutsche Börse believes that the MiFID is a further step in the direction of the integration of the European capital market. It welcomes the publication of the German federal government’s draft bill of a MiFID implementation act as another key step towards the enforcement of the EU Markets in Financial Instruments Directive (MiFID). The draft legislation sets out regulations on the application of the MiFID provisions in Germany from November 2007 onwards. Deutsche Börse supports the legislature’s commitment to the 1:1 implementation of the European guidelines, which primarily affect the German Securities Trading Act (Wertpapierhandelsgesetz) and the Exchange Act (Börsengesetz).
