Market infrastructure - Germany
Institutions and organisation
In 1995, Frankfurter Börse AG became Deutsche Börse AG. Since 5 February 2001, it has been listed on the exchange and, in May of the same year, became an MDAX® stock.
Deutsche Börse AG is the operating company of FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange - FSE), a public corporation. Deutsche Börse AG operates the Xetra® trading platform, as well as Eurex, the largest derivatives market world-wide. A member of the FSE must be either a bank or a broker (official or unofficial). Banks are the necessary intermediaries between investors and official brokers and can also entrust orders to unofficial brokers. Securities traded on or outside the FSE are settled through Clearstream Banking, Frankfurt.
Deutsche Börse AG is organised according to three market segments:
- Official market (Amtliche Notierung)
Stock Exchange trading with official listing offers the issuer the highest standing and sets the most extensive requirements on the issuer. This market segment is subject to the highest degree of regulation with regard to investor protection and publicity; this applies to the reporting and publication duties that admission to this market segment entails. - Regulated market (Geregelter Markt)
The regulated market was created in 1987 as a second market segment, controlled by public law. The requirements for admission can be more easily met than in the case of the official market but this segment is also governed by the Exchange Act and so investor protection is also ensured here. - Free market (Freiverkehr)
German and foreign securities that are not traded on the official or regulated markets are traded on the free market. In principle, the regulations laid down in the Exchange Act do not apply to this market unless relevant trade practices have been established.
Central Counterparty - Eurex Clearing AG (ECAG)
Eurex was originally created in 1996 as a joint venture project between Deutsche Börse AG and the Swiss Stock Exchange, SWX, and formally established in 1998 following the merger of DTB Deutsche Terminbörse (German Options and Futures Exchange).
Since the introduction of the CCP on 27 March 2003, the CCP has successfully been live for more than 60 German equities. While the first introduction stage focused on the functionality and the interaction of the systems involved, the second stage of the Central Counterparty for Equities (CCP) was introduced on 10 April 03 at Frankfurt Stock Exchange (FWB).
With the integration of the remaining instruments on 10 April 2003, the CCP service supports trades in nearly 1000 German equities that are held in collective safe custody (CSC) and are tradable on Xetra.
In May 2005, Deutsche Börse introduced the CCP for foreign equities and ETF's in XETRA in order to increase efficiency and security for the trading of foreign equities and ETF's.
CSD - Clearstream Banking, Frankfurt (CBF)
Deutsche Börse Clearing AG (DBC) was renamed Clearstream Banking AG (CBF) following the merger with Cedel International on 1 January 2000. Clearstream Banking has since been fully acquired by the Deutsche Börse Group. Although CBF is the only Central Securities Depository (CSD) in Germany, the FSE amended its Rules in March 2004 to allow exchange transactions to settle via any duly registered Wertpapiersammelbank (CSD) in Germany, removing CBF’s monopoly as the national securities clearer.
CBF performs the following functions:
- It acts as CSD for German fungible securities;
- It provides clearing, settlement, safe custody and financing facilities for German domestic equities, bonds, warrants, certificates, money market instruments and international securities.
CBF is regulated by the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungen - BAFin), which has granted CBF the legal authority to act as a credit institution.
Central Bank - The Deutsche Bundesbank (BuBa)
The Deutsche Bundesbank, the central bank of the Federal Republic of Germany, is an integral part of the European System of Central Banks (ESCB) and fulfils the tasks assigned to it as part of the Eurosystem. The Bundesbank is the bank of issue, the banker's bank, the government's fiscal agent and the guardian for foreign services. It also plays a significant role in banking supervision.
BuBa’s tasks within the Eurosystem/ESCB are as follows:
- As RTGSplus system operator, to arrange for the execution of domestic and cross-border payments;
- To provide information on the Eurosystem's tasks and monetary policy.
BuBa’s National and international tasks are as follows:
- To participate in banking supervision;
- To act as fiscal agent.
Regulatory structure
Regulations
The regulation and supervision of the German banking system is governed by a number of Acts, including the following:
- The German Banking Act (Kreditwesengesetz);
- The German Securities Deposit Law (Depotgesetz).
The regulatory authorities are as follows:
- Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungen - BAFin);
- National Central Bank (Bundesbank) and subsidiaries;
- Ministry of Economics of the State of Hessia (Ministerium für Wirtschaft, Verkehr und Landesentwicklung) according §1 Abs. 3 Depotgesetz (German Securities Deposit Act).
Supervision of Stock Exchanges
Stock Exchange supervision is the responsibility of the Stock Exchange regulatory authorities of the respective federal states. The Hessian Stock Exchange Supervisory Authority, which is part of the Ministry of Economics (Börsenaufsichtsbehörde), is responsible for the legal and market supervision of the FSE with the right to impose sanctions on market participants. On an international level, BAFin shares the function of Stock Exchange supervisory authority.
Supervision of broker/dealers
The Chamber of Brokers is a public body responsible for the supervision of brokers, the allocation of securities among brokers, the control of settlements and prices and the publication of the official price list.
Insider trading legislation
Insider trading is considered to be a crime and is punishable with heavy fines and/or imprisonment of up to five years.