Market Makers
Market Makers Liquidity counts
Designated Sponsors on Xetra and FWB® the Frankfurt Stock Exchange specialists ensure trading is liquid and price quality is high.
Shares in one of Deutsche Börse’s selection indices must be included in continuous trading. One criterion here is the security’s liquidity. Designated Sponsors guarantee higher liquidity on the trading venue Xetra®. In Xetra, Designated Sponsors (e.g. banks and securities trading houses) ensure that continuous trading is possible in less liquid securities by posting binding bid and sell prices (quotes).
In addition to Designated Sponsors, there are other trading participants that operate a market-making strategy in certain securities even without being mandated by an issuer. The minimum requirements for such market makers are lower in terms of quotation duration and quality compared to the requirements for Designated Sponsors, and are set by European capital market regulation. Market Makers must display their trading activity by officially registering as a Market Maker on Xetra. Further information can be found here.
Deutsche Börse provides its specialists service as a way of supporting small and medium-sized enterprises (SMEs) in trading on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse, FWB®).
- Xetra: Designated Sponsors
- FWB Frankfurt Stock Exchange: Specialists
Xetra: Designated Sponsors
Designated Sponsors have to meet high quality standards as regards providing liquidity. For example, for quotes they have to abide by a maximum spread (difference between the bid and the sell price) and a minimum quote volume (number of units). Deutsche Börse compiles a rating on a quarterly basis of the Designated Sponsors to ensure their services are transparent. The rating includes each designated Sponsor’s average quote duration, the average spread and turnover.
By constantly monitoring the markets, Designated Sponsors have an expert knowledge of both the shares whose liquidity they support and the sectors to which these shares belong. Depending on the issuer’s requirements and the Designated Sponsor’s service portfolio this expertise can then be brought to bear in additional services, such as research, investor relations and market reports. Through their work, Designated Sponsors can strengthen relationships with their key clients in the fields of corporate finance and trading and forge links to new investors and analysts. In this way, Designated Sponsors make an important contribution to enhancing liquidity in the shares in exchange trading and to positioning the company in the capital markets.
