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White papers
Deutsche Börse study recommends action plan to strengthen the capital market (September 2021)
How efficient is the German capital market? This question is addressed in the white paper “Strategies for the sustainable financing of Germany's future”, which Deutsche Börse published today. The results underline the urgent need for a national action plan to strengthen the German, as well as the European, capital market. In addition, the white paper provides concrete recommendations for the cornerstones of such an action plan.
Germany is facing enormous challenges: digitalisation, climate neutrality, a pension system that is fair to all generations. These issues must be the focal points for the new government. The necessary financial resources to master these topics are immense; at the same time, public budgets are heavily burdened by the Corona crisis. Private investment and private wealth creation will be decisive success factors in the future. The capital market therefore has to play a key role on the way to a sustainable and successful future.
Thomas Book, Member of the Executive Board of Deutsche Börse AG, says: “Today, the German capital market is not in the best possible position. That is why we urgently need a holistic, national capital market strategy that is supported by actors from politics, business, and society. With our study, we would like to provide an impetus for this. We must use all our potential to lead our society and economy into a sustainable and successful future.”
The white paper was co-authored by economist Prof. Dr. Wolfgang Bessler from the University of Hamburg. The specific recommendations of the white paper target three areas:
1. Facilitating equity-based corporate and innovation financing through:
- A capital market-oriented reform of company law and, in particular, more flexibility for start-up companies
- Better tax conditions for equity financing, especially for innovative start-up companies
2. Strengthening the competitiveness of the capital market through:
- More flexible legal and regulatory frameworks for IPOs, especially for small and medium-sized enterprises.
- Allowing shares with multiple voting rights according to international standards
- Strengthening transparent pricing and reducing fragmentation in the secondary market and regulated exchanges supporting IPOs
- Unify European framework and implement Capital Markets Union proposals
3. Enabling participation in economic success through:
- Reducing and eliminating tax disadvantages for direct and indirect share ownership
- Strengthening private asset accumulation and private old-age provision with shares
- Increasing the share quota among institutional investors through targeted promotion measures
- Strengthening economic education and political support for a culture of long-term equity investment in Germany
The full version of the white paper is only available in German.
Principles for a European Capital Markets Union – Strengthening capital markets to foster growth (February 2015)
The Capital Markets Union as put on the agenda of the European Commission by President Jean-Claude Juncker is the next step towards the integration of financial markets.
It reflects the shift in political priorities from crisis solving towards meaningful growth and reduction of unemployment levels. The overarching objective is to create growth and jobs for Europe based on stable and liquid capital markets.
The Capital Markets Union is a framework programme which will develop the ‘How to get there’. It is about building on the link between economic growth and capital markets, i.e. strengthening capital markets to foster growth. Bank funding has been decreasing in response to higher capital and liquidity requirements. To close the gap in needed funding, alternative non-bank funding channels need to be further developed. Ultimately, the Capital Markets Union should support efficient capital allocation throughout the EU leading to a broader and more efficient financial system.
As a regulated provider of market infrastructure to global capital markets and marketplace organiser, Deutsche Börse Group is a key player within the establishment of the Capital Markets Union. Market infrastructure providers are predestined and well positioned to contribute to the public consultation process on what features the Capital Markets Union should encompass.
Deutsche Börse Group has elaborated six core principles which we consider prerequisites to achieve a functioning Capital Markets Union. The paper at hand describes these principles and their key elements in detail.
- Revive investor trust
- Improve non-bank funding
- Promote financial stability
- Increase transparency
- Foster harmonisation
- Shape the supporting regulatory and supervisory environment
The Capital Markets Union represents a joint vision for policymakers, as well as industry and societal stakeholders, to further integrate and deepen European financial markets across all 28 EU Member States.
How central counterparties strengthen the safety and integrity of financial markets (July 2014)
This white paper is the third in our series on the global derivatives market. “The Global Derivatives Market – An Introduction” was published in 2008 and “The Global Derivatives Market – A Blueprint for Market Safety and Integrity” followed in 2009, which outlined the imperatives for the derivatives market structure. Together, these publications build a solid basis for understanding derivatives markets, their accompanying risks as well as potential risk mitigation measures.
Since 2009, a new regulatory regime has been progressively introduced. Its overarching goal is to increase the stability of the financial markets, in particular by reducing systemic risk. The implementation of these regulations – especially the clearing obligation for over-the-counter (OTC) derivatives – increases the importance of central counterparties (CCPs). Against this background, the time is right for an evidence-based discussion concerning the role of CCPs in strengthening the safety and integrity of financial markets, as well as their contribution to systemic risk mitigation.
Building on the previous two white papers on the derivatives markets, this paper focuses on how centrally cleared markets and CCPs manage systemic risk, with an emphasis on the OTC derivatives market and the regulatory environment of the European Market Infrastructure Regulation (EMIR).
The paper concludes that CCPs reduce systemic risk in financial markets. Furthermore, the paper discusses the ways in which CCPs permit markets to recover or be wound down without disrupting the functioning of entire financial markets, if unprecedented market shocks overwhelm the existing safeguards.
The benchmark industry – An introduction and outlook (January 2014)
The index industry plays an important role in a modern economy. However, recent discussions about how certain indices, such as the London Interbank Offered Rate (Libor), had been manipulated have triggered global concern about standards of practice in the industry as well as how to ensure the integrity of benchmarks.
In this discussion it is important to distinguish between what are known as objective indices – for example DAX-30 or CAC-40 –, and subjective indices such as Libor. It is subjective indices that lend themselves to manipulation and may require regulatory oversight.
Against this background, this white paper aims at facilitating an informed discussion about the benchmark industry and potential future regulatory principles. As such, it provides an overview of the industry by explaining how the benchmarks and benchmark providers work, their purpose, and their benefits for investors and an economy in general. Various regulatory bodies have responded to the recent manipulations of some subjective indices. Hereby, the “Principles for Financial Benchmarks” published by IOSCO are of particular importance and will serve as the international standard for the benchmark industry.
This white paper states four key elements which are imperative to a well-functioning benchmark industry:
- Assurance of a reliable and traceable index provision
- Absence of any conflicts of interest, as these provide a potential incentive to manipulate an index
- Encouragement for innovation to meet investors´ changing needs and to channel the flow of capital into emerging areas of the economy
- Requirement of a global level playing field in order to promote fair international competition and to ensure that all investors have access to the full range of indices
The Global Derivatives Market – A Blueprint for Market Safety and Integrity (September 2009)
As a consequence of the international financial crisis, the safeguarding of the financial market stability is at the centre of the political and regulatory debate. The aim of the paper is to contribute to this debate by laying out a market structure blueprint that effectively reduces systemic risk. It resumes the discussion of Deutsche Börse’s first derivatives white paper, published in May 2008, which provided a descriptive introduction to the global derivatives market.
The paper discusses both the derivatives market’s resilience and its structural deficiencies against the backdrop of the crisis. It focuses primarily on the advantages of effective risk management and improved transparency, especially for OTC derivatives, to ensure that the derivatives market functions well as a whole. The blueprint provides key proposals on how to strengthen the market’s current structure:
- Maximise the use of organised markets for derivatives trading
- Maximise the use of central counterparties (CCPs) where trading on organised markets is not feasible
- Bilateral collateralisation of derivatives exposure, preferably handled by a neutral third party, where organised trading or use of CCPs is not suitable, and
- Mandatory registration of open risk positions, introduction of reporting standards for all derivative contracts
The Global Derivatives Market – An Introduction (May 2008)
The market turmoil in autumn 2007 has again highlighted the importance of a sound and well functioning financial market organisation. Consequently, market transparency and effective risk management are key aspects of the current public debate to improve market integrity and efficiency. In light of this, Deutsche Börse and Eurex have published the white paper “The global derivatives market – an introduction” with the aim to make an objective and fact-based contribution to the debate. The paper discusses the fundamentals and characteristics of the derivatives market as well as the imperatives for its smooth functioning.
Among the key findings are some impressive figures: the derivatives market has grown strongly by around 24 percent p.a. over the last decade to reach a notional value of €457 trillion outstanding today. With a global market share of 44 percent, Europe plays a leading role. The market consists of two segments: over-the-counter trading accounts for 84 percent and on-exchange trading for 16 percent of the notional amount outstanding.
As a main conclusion, structural changes in the framework under which the derivatives market operates today in a global environment are not necessary. In contrast to other financial market segments, e.g. structured credit-linked securities, the derivatives market has proven resilient and reliable during recent market turmoil. The major economic function of efficient risk allocation is effectively fulfilled and especially the on-exchange segment strengthens financial market integrity with central counterparty clearing services that provide effective risk management.
The European Post-Trade Market – An Introduction (February 2005)
The paper provides a fact-based overview of the post-trade market and its players. It aims to contribute to the ongoing regulatory debate in order to create a basis for constructive discussion. The European Commission’s communication on clearing and settlement in April 2004 accelerated the debate on how to achieve safe and efficient cross-border post-trade services. The political discussion on the European post-trade industry makes clear that transparency of the mechanisms in this industry is crucial. Having a sound understanding of the status quo of post-trade markets should be the basis for further steps to achieve an integrated European financial market.
Studies
Euro-Clearing after Brexit (Centre for European Policy, January 2024)
In light of the trilogue negotiations on EMIR 3.0, the cep think tank (Centre for European Policy) compiled an analysis of different policy options to address the Euro clearing issue. The think tank elaborates on why a shift of Euro clearing from the UK to the EU is necessary, as well as which factors should drive political and regulatory decisions. Ultimately, they present ten dedicated guardrails for an appropriately calibrated regulatory approach. The study should thus be considered as a helpful policy recommendation in the Euro clearing discussion.
The design of equity trading markets in Europe (Oxera, March 2019)
One year on from the implementation of MiFID II, the objective of this report is to inform the debate on the design of equity trading markets in Europe – in particular, market data services – by providing an economic analysis of the role of the price formation process, the impact of regulatory change and the value chain for market data services.
Cologne Institute for Economic Research - The Economic Effects of a Merger of Deutsche Börse and London Stock Exchange - Part 1: Contribution to financing the economy (June 2016)
The Cologne Institute for Economic Research published the first part of an independent study commissioned by DBG in June 2016. The study from Prof. Dr. Hüther and Dr. Demary is the first part of a series consisting of three studies on economic effects of the purposed merger of Deutsche Börse and London Stock Exchange.
Pricing of market data services (Oxera, February 2014)
Is market data provided by trading venues too expensive? Would imposing price controls be expected to benefit the real economy?
New economic analysis by Oxera tackles these challenging questions. The results of the analysis question the need for regulation.
In recent years, there has been a debate about market data services provided by trading venues in Europe. The perception is that the fees charged for these services in Europe have increased and are far higher than in the USA. The European Parliament and the European Council agreed with proposals from the European Commission to require trading venues to provide market data services on “a reasonable commercial basis”, and allow for delegated acts to be passed by the Commission to clarify what this would mean. These rules potentially open the way for price regulation by the European Securities and Markets Authority (ESMA).
This Oxera report presents new empirical analysis and provides an economic framework within which the pricing of market data services can be analysed.
Additionally, Oxera provided the following documents that highlight other aspects of the discussion.
As a response to the ESMA consultation, Oxera published, in September 2014, a document regarding reasonable commercial terms for market data services. Ideally, this note should be read in conjunction with Oxera’s report (Pricing of market data services).
In addition, Oxera’s article “Is ESMA becoming a price regulator?”, also published in September, should be mentioned.
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