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Financial Glossary

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Financial Glossary

abs.
The absolute difference states the change of the current share price on that of the previous trading day. It is also possible to determine the absolute difference between the current price and the initial buying price, whereby a positive value indicates a gain and a negative value shows a loss. On the Frankfurt Stock Exchange, the absolute difference is stated in euros.  
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Accrual bond
In Germany, the accrued interest is compounded.  
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Acquisition currency
This term is used primarily in connection with a merger that takes place between two listed companies via the exchange of their registered shares.  
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Actively managed fund
Actively managed funds are offered by investment companies. Some of them are traded in Deutsche Börse's Xetra® Active Funds segment. They are similar to individual stocks in that their shares can be bought or sold on the exchange at any time. Unlike typical mutual funds, Xetra Active Funds funds do not carry a load. Because the assets held by these funds are bought and sold as market conditions change, an actively managed fund can outperform a benchmark index. As a rule, dividends are reinvested.  
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Additional margin
The additional margin covers the losses that would result from the worst-possible price development (worst-case loss) during the following 24-hour period. The margin is paid to the central clearinghouse by the contract holder.  
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Admission of securities to the Regulated Market

In order to have a security admitted to the Regulated Market, the issuer, together with an underwriting bank (a bank or investment company), must first submit an application and a listing prospectus to the Admissions Office. These documents provide information on the type and volume of the security to be admitted. The issuer and the bank are responsible for the accuracy of the contents.

The admissions application is to be posted in the stock exchange building and published in the list of quotations (Kursblatt), in the journal for statutory stock market announcements (Börsenpflichtblatt) and in the Federal Official Gazette (Bundesanzeiger). The listing prospectus is published by the issuer in the journal for statutory stock market announcements. As soon as the company is admitted to the Regulated Market, the prospectus is to be made available free of charge at the underwriting banks and the Admissions Office named therein.

Pursuant to the Stock Exchange Listing Act (Börsenzulassungsverordnung) the most important conditions for admissions and follow-up requirements are:

The issuing company must have existed for at least three years.

The expected issuing value must be at least €1.25 million.

For shares, the total par value must be at least €250,000.  

At least one interim report on the financial situation and general business developments must be published during the financial year.

Information that is relevant to the company must be published forthwith.

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Admission to the exchange

At FWB® Frankfurter Wertpapierbörse (Frankfurt Stock Exchange) the Admissions Office is responsible for deciding whether to admit securities to the Official Market; the admission of securities to the Regulated Market is determined by the Admissions Committee. Each market segment has its own admissions requirements. However, all issuers must publish an offering prospectus containing the fundamental data required for an evaluation of the security.

Admission to General Standard does not require any further action on the issuers' part. However, issuers have to apply for admission to Prime Standard; a listing in this segment is subject to the fulfillment of high international transparency requirements.

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Admissions Office

Before a security is admitted to the Official Market, the Admissions Office examines the listing prospectus to determine whether the issuer and the sponsoring bank have met admission and disclosure requirements.

The Admissions Office comprises at least 20, but no more than 24, members who are elected by the Exchange Council. Of these, not more than half may be professionally involved in exchange trading. Members are elected for three years, and can be re-elected. The Admissions Office appoints one chairman and up to two deputy chairmen.

The Admissions Office has a quorum when at least five voting members have cast their vote, either verbally or in writing. A simple majority is required to pass a resolution. In case of a tie, the chairman or the member in charge of the session casts the deciding vote. Any member who owns shares in the company seeking admission is not eligible to vote.

Important regulations on the Admissions Office are contained in the Stock Exchange Act (Börsengesetz), section 4 para. 3 and section 37, as well as in the Stock Exchange Rules and Regulations.

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AIBD return (ISMA return)
The AIBD return determines the real interest return on bonds by compounding interest on a daily basis. Irrespective of the time at which the interest is credited, the interest that has accrued on a given day is added to the principal, itself bearing interest the following day.

In Germany, regulations on the real interest return are regulated in the Charges Disclosure Rule (Preisangabeverordnung).

AIBD stands for "Association of International Bond Dealers", the former name of ISMA (International Securities Market Association).
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Allotment
At the end of the subscription period, the demand for a new issue can exceed the number of shares being issued. In that case, the underwriting bank allots the securities with the approval of the issuer, either by lottery or on the basis of a formula. An allotment formula usually takes into account the issuer's preferred target groups.
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American depositary receipt (ADR)
On NYSE and NASDAQ, investors trade ADRs instead of the shares they represent.  
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American depositary share (ADS)
Depositary shares by means of which the registered shares of foreign companies can be traded on the US exchanges NYSE and NASDAQ
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American-style option
Antonym: European-style option  
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Annual General Meeting
The Annual General Meeting (AGM) convenes once a year. The date is announced by the company's executive board, with at least one month's notice. At the AGM, the Executive Board informs shareholders on the company's current economic and financial situation and its projected future development. Other typical items on the agenda of the AGM are to grant discharge to the executive and supervisory boards, to vote on the appropriation of profits, to appoint an auditor, and to discuss and vote on important corporate policy issues (takeovers, capital increases, etc.). Shareholders can exercise their right to vote at the AGM.

In urgent cases, an extraordinary General Meeting can be summoned.
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Arbitrage
If the price of a given security varies from one stock exchange to another, market participants will exploit these differences by simultaneously purchasing the security at the exchange where it is cheaper (Exchange A) and selling it on the exchange where it is more expensive (Exchange B). The price at Exchange A will rise owing to the increased demand for the security, while at Exchange B, the price will drop as a result of the increase in supply. Thus, arbitrage enhances the efficiency of the market by equalizing the prices of the same security at different exchanges. In so-called cash-futures arbitrage, participants exploit the discrepancy between the prices of a security in the cash market and in the futures market. For example, an arbitrageur will buy a stock option that expires the same day in the hope of selling it on the cash market at a price which is higher than the exercise price.
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Ask
A market participant publishes an ask price with an entry in the order book on an electronic trading system; in rare cases this is done orally on the trading floor. For investment and leverage products, this price is set by the issuer.  
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Ask price
Market participants announce ask prices either by open outcry on the trading floor, or by entering them into the open order book of an electronic trading system.  
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Asset-backed security
A company can generate liquid funds by selling a portion of its accounts receivable to a subsidiary, which then finances its own operations through the issue of asset-backed loans. Such subsidiaries are established expressly for the purpose of implementing the asset-backed securities (ABS) funding model. ABS can also be issued on receivables that are paid in installments, e. g. receivables from leasing agreements, long-term car loans, collateralized consumer loans, and similar receivables. ABSs are paid back as soon as the borrowers settle their debts.

Financing with ABSs enables companies to utilize a wider range of accounting procedures, and helps reduce their financing costs.
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Asterisk * (price addendum)
A price addendum is a code that is added to the price in floor trading. It states in what way the respective order situation is to be taken into account as the price is fixed. This information is part of the tick data.
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At the money
If this is the case, the intrinsic value of the warrant equals zero.
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Auction principle
In an auction, all buy and sell orders are pooled and matched in an order book; the auction price is determined according to the principle of highest volume transacted.

The auction system enables participants with the highest bid prices (the demand side of the market) and the lowest ask prices (the supply side of the market) to execute their orders. Because the price determination procedure does not require a trading intermediary, it can also be performed by the electronic trading system. During floor trading at FWB® Frankfurter Wertpapierbörse (Frankfurt Stock Exchange), the Xontro® system assists the lead broker in determining prices on the basis of the auction principle.

The Xetra® electronic trading system also determines prices using the auction system. The market model on which the system is based provides for a number of regular auctions: the opening auction, the closing auction and, depending on the stock, several intra-day auctions. Each auction consists of three phases:

Outcry phase: in this phase, participants can enter orders and quotes, or delete previous entries. In stock trading, the order book is sometimes closed, whereas in bond trading it is always open (i.e. it can be examined by anyone who wishes to do so).

Price determination phase: the auction price is determined in keeping with the principle of highest volume transacted, on the basis of the order book situation at the close of acceptance.

Market clearing phase: after the auction price has been determined, there may be an overhang of orders, either with a limit at the auction price or with no limit; in this case, the orders are offered to the market at the auction price.

Antonym: Market-maker principle
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Automatic exercise (warrants)
Automatic exercise is provided for in the issuing terms and conditions of the warrant.  
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b (price addendum)
A price addendum is a code that is added to the price in floor trading. It states in what way the respective order situation is to be taken into account as the price is fixed. This information is part of the tick data.

b stands for "bezahlt" (German for paid) and means that all orders were executed.
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Backwardation
This is an irrational phenomenon applicable to the price calculation of commodities, for the custody- and interest-related costs would lead to commodities being more expensive on the derivatives market than on the cash market.

Antonym: Contango
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Balance-sheet analysis
Balance-sheet analysis can be subdivided into internal and external analysis. Internal balance-sheet analysis generates information on the company for the management staff, and is part of corporate controlling operations. In external balance-sheet analysis, outside persons or institutions examine key ratios, as well as the published financial statements and accounts prepared for tax purposes, in order to ascertain the company's earning power, creditworthiness, and profitability. However, the findings of external balance-sheet analysis cannot be regarded as completely valid, because information on unused credit lines, outstanding contracts or undisclosed reserves can be concealed in the balance sheet by calculating higher depreciation expenses.

Balance-sheet analysis is the most important component of fundamental analysis.
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Basis point
One basis point relates to 0.01 percentage points. Thus, if the interest rate
or yield of a bond rises by 0.63 percentage points, this corresponds to an
increase by 63 basis points.
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Basis trade
Trade in the difference between the spot and the futures price of an instrument
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Basket certificate
The issuer determines the basket’s compilation before quoting the certificate. Fundamentally, all securities with regular, at least daily, price determinations are suited for the portfolio. The selection criteria for the shares or securities in the basket are known and remain unchanged during the life of the certificate.

Nevertheless, the composition of the share basket can change over time. If the issuer follows a specific strategy with the certificate, the basket has to be adjusted at specific end-of-period dates, provided the market leaders change. In such a case, the basket is called an active basket. If, in contrast, the composition of a share basket remains clearly defined, as is the case for an index certificate, it is called a passive basket.

The success of a basket certificate is measured on whether it can outperform a comparison index or fund, a so-called benchmark. Basket certificates can be roughly divided into three categories based on the criteria for selecting securities: Sector certificates; country or region certificates; and strategy and thematic certificates.

Basket certificates make sense if an investor is convinced of the potential in a particular sector or region, but shies from the risk of investing in individual securities. Because the certificate is expected to achieve higher profits than the benchmark index, the share basket usually contains fewer titles than the benchmark index. That increases the potential for profits; but the risk of loss increases compared to the index. Unlike shares, basket certificates are not eligible for dividend payouts. The limited maturity should also be taken into account.
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bB (price addendum)
A price addendum is a code that is added to the price in floor trading. It states in what way the respective order situation is to be taken into account as the price is fixed. This information is part of the tick data.

"bB” stands for "bezahlt Brief" and means that it was not possible to fully execute the sell orders limited to the fixed price. There was a surplus supply.
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Bear market

Investors in a bear market tend to have a pessimistic outlook. Their strategy is to acquire so-called short positions, for example, by selling securities in the hope that they will be able to buy them back at a much lower price, or by selling short (see also short sale).

As a consequence, prices and indices continue to fall over the long term.

Antonym: bull market

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Beta factor
The beta factor describes the extent to which the price of a stock follows the development of an index – i.e., whether it performs better or worse than the market. A stock with a beta factor larger than 1 is more volatile than the market; a beta factor smaller than 1 indicates that the stock is less volatile than the market. If the beta factor is 1.2, an increase (or decrease) of 10 percent in the index would lead to an increase (or a decrease) of 12 percent in the stock; if the beta is 0.8, the increase (or decrease) in the stock would be 8 percent. When there is a clear market trend, stocks can be valued on the basis of their beta factor. In a bull market, shares with a beta larger than 1 offer above-average earnings potential; in a bear market, investors are less likely to incur losses on shares with a beta smaller than 1. It is assumed that the beta factor of the previous period will apply in the future as well.

The validity of the beta factor as a performance indicator is linked to the correlation coefficient. Price movements forecast on the basis of the beta factor are more reliable as the correlation coefficient increases. While the correlation coefficient is a measure of the type of correlation between a stock and an index (positive or negative) and the likelihood of that the price of the stock will develop parallel to the index, the beta factor indicates the extent of deviation between the two.
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bG (price addendum)
A price addendum is a code that is added to the price in floor trading. It states in what way the respective order situation is to be taken into account as the price is fixed. This information is part of the tick data.

"bG” stands for "bezahlt Geld" and means that it was not possible to fully execute the buy orders limited to the fixed price. There was a surplus demand.
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Bid

A market participant sets the bid price with an entry in the order book on an electronic trading system; in rare cases this is done orally on the trading floor.

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Bid price
Market participants announce bid prices either by open outcry on the trading floor, or by entering them in the open order book of an electronic trading system. Antonym: ask price
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Bid-ask spread
The bid/ask spread shows the extent to which available bid and ask offers vary: the lower the spread, the greater the consensus between participants with respect to the value of the share in question. The bid/ask spread is a widely used measure of the efficiency of the currency and capital markets, since narrow spreads represent a high degree of market liquidity and low transaction costs.

On the trading floor of the Frankfurt Stock Exchange, the bid/ask spreads used to be issued by the lead brokers. However, that is rarely the case today. Instead, non-binding estimates are published via the trading system Xontro, the price boards on the floor and data vendors.

In so-called "zero-spread trading" for private investors, i.e. in trading without the difference between bid and ask prices, the lead brokers execute orders at the midpoint of the estimates given. This price is guaranteed by the lead brokers for orders in DAX® shares up to €10,000 (in MDAX® shares up to €5,000 and in TecDAX® and SDAX® shares up to €3,000) per price calculation. These no-spread prices are published in real-time as so-called indicative prices on the website of Deutsche Börse.
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Black-Scholes model
Named after the American economists Black and Scholes, this formula takes into account the five most important determinants for the price of an option: the price of the underlying stock, the exercise price, the time remaining to expiration, interest rate levels and volatility.
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Blue chips
Shares with large market capitalization, typically included in prominent indices, such as DAX
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Bobl Future
The Bobl Future (Bobl = Bundesobligation, the German word for federal government bond) is traded on the Eurex® exchange. The underlying instrument is a notional bond that represents a basket of deliverable bonds with an interest rate of 6 percent and a remaining maturity of between 4.5 and 5.5 years. The value of a Bobl Future contract is €100,000.
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Bodies of the stock exchange
As stipulated in the 1994 amendment to the German Stock Exchange Act, the bodies of the stock exchange comprise the Exchange Council, the Exchange Operating Board, Market Surveillance, the Sanctions Committee and the Arbitration Panel of the stock exchange. The Stock Exchange Act and the Stock Exchange Rules and Regulations require that the admission of securities to trading be handled by two separate exchange bodies: the Admissions Office the Official Market and the Admissions Committee for securities not listed in the Official Market. The relevant provisions can be found in sections 1, 3, 9, 28, 30, 37, 72 of the Stock Exchange Act.
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Bond
Bonds are issued by the government or other public authorities, credit institutions, and companies, and are sold through banks. They enable the issuer to finance long-term investments with external funds. The total volume of a bond issue is divided into smaller amounts of at least €50. The most important features of a bond are its maturity date, the coupon (interest rate), and whether the interest rate is fixed or floating. The rights vested in a bond are stipulated by law, but are typically supplemented with additional terms and conditions. Bonds can fall into one of the three following categories:

 fixed-rate bonds (interest rate remains constant throughout the life of the bond)  floating-rate bonds (variable interest rate that is tied to a benchmark such as a money market index)  zero-coupon bonds (bond that does not bear interest as such, but is sold at a substantial discount from its face value; the bondholder receives the full face value at maturity).
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Bond index
Bond indices are calculated, updated and published by exchanges, banks and other financial experts.

A bond index can be calculated either as a price or a performance index. Owing to the wide range of bond maturities, bond indices are calculated on the basis of a portfolio of notional bonds so that the structure of the index remains constant over time.

Examples of bond indices in Germany are REX ® , the iBoxx indices ( iBoxx EUR and iBoxx GBP ), the eb.rexX index famlily and the PEX® .
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Bonus
A company will distribute a bonus in addition to the dividend if it has been especially prosperous during the financial year, or generates extraordinary profits. For companies that pursue a dividend policy in which the amount of the dividend remains constant over a long period of time, a bonus payment will enable shareholders to benefit from positive fluctuations in earnings.
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Bonus certificate
A bonus certificate represents an alternative to a direct investment in a share or an index. Investors primarily use them if they believe that despite rising prices setbacks are still likely to occur.

A bonus certificate is furnished with a bonus amount and an upper and lower price level. If the certificate expires with the price of the underlying ranging between these two levels, owners are paid out their bonuses. If the underlying was at or below the risk level during the certificate's lifetime, its price is that of the current value of the certificate at expiry. If the underlying is above the upper level at expiry, the investor fully participates in the price gains. Some bonus certificates have a profit cap. This is where the certificate stops participating in the price gains of the underlying. 

A bonus certificate is issued at the current price of the underlying. The upper level is derived from adding the bonus to the issue price. The lower level is determined at issuance and usually expressed in percent.
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Bonus shares
A capital increase out of retained earnings is effected by converting general reserves into share capital. Bonus shares are distributed so that existing shareholders can own a percentage of the new share capital that is equivalent to their original stake in the company, which protects them from the effects of dilution. Bonus shares are admitted to exchange trading without having to undergo the admission process. The price of existing shares decreases following the issue of the new shares in proportion to the capital increase (see the example given under "subscription right"). However, the total value of the shares owned by existing shareholders does not change. Shareholders will profit from the issue of new shares if the bonus shares are entitled to a dividend payment in the same amount as the dividend paid on the original shares.
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Book-building
Unlike the fixed price system, book-building enables institutional and other large-scale investors to participate in the pricing procedure, which involves five steps. The time required to complete each of these steps depends on the issuing volume and the sector in which the company is active.

1. Selection of the lead manager:

The banks in the underwriting syndicate present their IPO strategies in so-called beauty contests. The issuer then selects a lead manger on the basis of criteria such as the consultancy services offered, the strategy for bringing the security to market, the bank's standing and expertise in the field, and the closeness of the business ties between bank and issuer. (Larger issues such as the privatization of Deutsche Telekom may be handled by several lead managers.)

2. Pre-marketing:

In this phase, the syndicate members contact potential large-scale investors to ascertain their degree of interest in the security. The syndicate members present their own research material as well as the issuer's offering prospectus, which the syndicate designs in conjunction with the issuer. The offering prospectus contains important information on the company's history, business activities, management, strategic alignment, as well as the relevant markets and its position vis-à-vis competitors. This information enables potential investors to assess more accurately the opportunities and risks of the issue. On the basis of discussions with institutional investors, the syndicate and the issuer agree on a price range for the offering price. The difference between the upper and lower values of the price range may be as much as 10 to 15 percent.

3. Marketing:

The marketing phase begins when the price range is announced at a press conference. The issuer's executive board then presents the company at "road shows", i. e. public events, analysts' conferences, and meetings with both domestic and foreign institutional investors. Private investors are informed of the pending issue by their personal financial consultants.

4. Order-taking:

This phase begins shortly after the inception of marketing activities. When syndicate members receive subscription requests, they fill out order forms which they then forward to the lead manager (also called "book runner"). The forms contain information on the subscriber's identity (name and nationality), what kind of investor the subscriber is (e.g. insurance company, pension fund, investment fund, private investor) the volume of shares desired, the price offered, and the investment strategy (short-term, medium-term, long-term). The identity of institutional investors is disclosed only with the subscriber's explicit consent, and the names of private investors are generally not disclosed at all.

The book runner enters all subscription orders received into an electronic order book. The orders are then evaluated so that preference can be given to long-term investors when the securities are distributed. By carefully choosing future investors, the lead manager can contribute to price stability and inspire confidence that the security will be valued fairly.

5. Price determination and allocation of shares:

Order-taking is followed by a subscription period which normally lasts from eight to ten days. Afterwards, the book runner analyzes the price elasticity of demand on the basis of the information provided in the subscription requests, usually assisted by a computer-driven scoring procedure that takes into account criteria such as investment horizon. On the basis of this analysis, the book runner determines a single offering price in agreement with the issuer (in some cases, different prices will be set for private investors and institutional investors). In allocating the securities, the book runner achieves the desired mix of investors by instructing the syndicate banks to set aside a certain number of shares to institutional investors (directed allocation). The book runner also makes available a certain quantity of shares to be distributed equally among for private subscribers (free retention).

The so-called green shoe has an important function in the allocation of shares. This is an agreement between the issuer and the syndicate banks which states that the issuer will provide a certain number of additional shares (a type of reserve) to be distributed by the syndicate at the original price should the demand for the security be considerably higher than expected. The green shoe helps stabilize the price of the share after exchange trading in the shares has begun.

Antonym: Fixed-price offering system
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Börsenordnung (Stock Exchange Rules and Regulations)
The Stock Exchange Rules and Regulations (Börsenordnung) are issued by the Exchange Council in agreement with the operating body of the stock exchange. It ensures that the respective exchange can perform the tasks expected of it, and guarantees the interests of the public and trading. More specifically, the Stock Exchange Rules and Regulations regulate the organization of the stock exchange and the publication of all information regarding prices and volumes. In the case of securities exchanges, the Rules and Regulations also govern the composition of the Admissions Office and the appointment of its members.
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Börsenrat (Exchange Council)
The Exchange Council (Börsenrat) comprises a maximum of 24 honorary members. These include bank representatives, market participants, issuers and investors. The Exchange Council is responsible for the following tasks: 1. Drafting and issuing the Stock Exchange Rules and Regulations as well as the fee schedule of the exchange 2. Specifying the terms and conditions for exchange transactions 3. designing the examinations to test the professional aptitude of exchange dealers 4. Issuing internal regulations for the Exchange Operating Board 5. Appointing and dismissing members of the Exchange Operating Board in agreement with the Exchange Supervisory Office 6. Monitoring the Exchange Operating Board 7. Appointing, re-appointing and dismissing the head and deputy of Market Surveillance as suggested by the Exchange Operating Board and in agreement with the Exchange Supervisory Office 8. Appointing members to the Admissions Office and the Admissions Committee. Decisions taken by the Exchange Operating Board regarding the introduction of technical systems that support trading or the settlement of exchange transactions also require the approval of the Exchange Council; the same applies to the use of exchange facilities pursuant to section 1 paragraph 2 of the Stock Exchange Act. Moreover, the Exchange Operating Board is required to submit decisions on fundamental issues to the Exchange Council for approval, a procedure that is regulated in greater detail in the internal regulations for the Exchange Operating Board.
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Break-even point (warrants)
A call warrant reaches the break-even point when the market price of the underlying instrument is equivalent to the exercise price plus the price of the warrant. A put warrant reaches the break-even point when the market price of the underlying instrument corresponds to the exercise price minus the price of the warrant.

The break-even point is one of the variables used in determining the value of a warrant.
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Breakout gap
A breakout gap usually signals the beginning of a new trend.
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Bridge capital
Investment banks and underwriting houses will help a company go public by providing bridge capital, which serves to "bridge" the period until the equity capital generated by the IPO flows into the company.
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Broker
They also provide assistance in making investment decisions and execute their clients’ buy and sell orders. Their role thus corresponds to that of a "Freimakler" in the German system. Synonym: exchange trader
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Brokerage commission
When a security is bought or sold on the floor, the investor is required to pay a brokerage commission that is determined on the basis of the order size. In the case of shares, it is calculated as a percentage of the price of the stock; in the case of bonds, it is specified as a percentage of the par value of the bond. The fee is charged by the institution responsible for executing and settling the order.

Brokerage fees are standardized and stipulated in the fee schedule of the stock exchange. In the Official Market, the brokerage fee for exchange brokers comes to 0.08 percent of the price of a stock, warrant or subscription right, but in all cases at least 0.75 euro. For stocks in the DAX index, the brokerage fee is 0.04 percent. For bonds, the fees are between 0.0015 and 0.075 percent, depending on the transaction.
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Bund Future

The Bund Future is traded on the Eurex® exchange. The underlying instrument is a notional bond that represents a basket of deliverable bonds with an interest rate of 6 percent and a time-to-maturity of between 8.5 and 10.5 years. The value of a Bund Future contract is €100.000.

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Bundesanstalt für Finanzdienstleistungsaufsicht (BAFin)
The Federal Financial Services Authority (BAFin) was established on 1 May 2002. The tasks of the former federal supervisory offices for banking (BAKred), insurance (BAV) and securities trading (BAWe) have been amalgamated under the umbrella of the new authority. Thus there is now only one state supervisory authority in Germany for banks, financial services institutes and insurance companies which covers the entire financial market. The establishment of BAFin has merged the central tasks of customer protection and solvency supervision. BAFin is a federal, legally responsible public institution in the business area of the Federal Ministry for Finance. It has registered offices in Bonn and Frankfurt am Main. BAFin supervises about 2,700 banks, 800 financial services institutes and more than 700 insurance companies.
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Business angel

Business angels are typically former entrepreneurs. They support new companies in their early stages by providing risk capital. In addition, they advise the management team or assume management tasks themselves. In return for their support, they acquire stock in the company.

Deutsche Börse AG and KfW Bankengruppe have joined forces with BAND (Business Angels Netzwerk Deutschland) to create a forum for establishing contacts between business angels and innovative companies.

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Business plan
In its business plan, a company outlines its business model and its medium-term goals. The main reason for writing up a business plan is to give providers of outside capital – and in particular venture capital companies – a means of evaluating the company's approach and development potential. Important components of a business plan are thus the investment plan, financing plan, liquidity plan and profitability forecast. The planning period usually spans three to five years.
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Buyback
Exit scenario which sees the original partners of a start-up company buy back the shares held by the participating venture capital company.
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Call (warrant)
If an investor expects the price of an underlying instrument to rise within a certain time frame, he will purchase a call warrant that grants him the right to acquire a particular quantity of the underlying instrument at an agreed-upon price, either at any time during the exercise period (American-style) or on the expiration date (European-style). The call writer is obligated to deliver the underlying instrument at this price, and in return receives a premium from the buyer. However, most warrants are settled in cash rather than through the physical delivery of the underlying instrument.
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Cancelled order
The cancellation of an order takes effect as soon as the exchange has notified the depositary bank of the cancellation. Banks usually charge a fee for cancelled orders.
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Cap (investment and leverage products)
As for discount certificates, the cap determines the upper limit on the extent to which the owner can participate in the price gain of the underlying.
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Capital increase
Stock corporations typically effect a capital increase through the issue of new shares. A resolution authorizing the capital increase must be approved by the annual general meeting.

As provided for in the German Stock Corporation Act, stock corporations can undertake a capital increase in one of four ways (section 182):

 Ordinary capital increase (capital increase through contributions): the company expands its capital stock by issuing new shares. Existing shareholders are entitled to subscription rights that will enable them to buy new shares before they are offered to the public so that they can maintain a proportionate share of ownership in the company.

 Authorized capital increase: the annual general meeting can authorize the executive board to increase the capital stock by a certain amount within five years through the issue of shares or through contributions in kind. The executive board can decide to undertake the capital increase on any date within this period, enabling it to respond quickly to a sudden need for capital, or take advantage of a favorable situation in the capital markets so as to maximize the volume of funding or earn the highest possible premium on its shares.

 Contingent capital increase: the new shares issued as part of a contingent capital increase can only be used for certain purposes for example, so that holders of convertible and warrant-linked bonds can acquire the shares to which they are entitled. They can also lay the groundwork for a merger, or be issued as employee shares. The amount of the capital increase is usually based on the number of shares to be converted or purchased through subscription rights; however, it may under no circumstances exceed 50 percent of the existing capital stock as of the date when the increase was approved. Existing shareholders are not entitled to subscription rights.

 Capital increase out of retained earnings: open reserves that are created from retained profits are transformed into capital stock; i. e., there is no direct provision of equity capital from outside sources. This type of capital increase is similar in form to capital in exchange for contributions; however, the subscription price of the new shares is equivalent to zero. Existing shareholders receive so-called bonus shares.

The company's capital reserves can be converted into capital stock if, together with the statutory reserves, they account for more than 10 percent of the capital stock (or a higher percentage that is stipulated in the company's charter).
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Capital market
Companies and the government can raise funds for long-term investments via the capital market. The capital market includes the stock market, the bond market, and the primary market. Securities trading on organized capital markets is monitored by the government; new issues are approved by official authorities and monitored by participating banks. Thus, organized capital markets are able to guarantee sound investment opportunities.
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Capital reduction
A capital reduction is undertaken in order to pay back capital to shareholders, or to avoid showing a negative net worth position. It is indicated as a separate item in the profit-and-loss statement, and may take one of three different forms: an ordinary capital reduction, a simple capital reduction, or a capital reduction through calling in shares. An ordinary capital reduction involves reducing the nominal value of the shares or grouping shares when the amount of capital stock no longer meets the minimum requirement. The shares must be handed over to the company, where they are declared null and void. New shares are issued immediately at the official exchange price by an exchange broker. An ordinary capital reduction must be approved by a three-fourths majority at the annual general meeting. A simple capital reduction serves to compensate for a decrease in the value of the company, offset other losses, or allocate contributions to the company's reserves. Before a simple capital reduction can be effected, the revenue reserves must be reversed and the profit carried forward must be appropriated. The portion of the statutory and capital reserves that exceeds the remaining capital stock by more than 10 percent must also be reversed. The funds released through these measures cannot be distributed to the shareholders. A capital reduction through calling in shares takes place when shares are either bought back or called in by the company; in the latter case, it is mandatory for shareholders to hand over their shares. This type of capital reduction must be authorized by the company's charter or by the annual general meeting. Important regulations pertaining to reductions in the capital stock are contained in the German Stock Corporation Act in sections 222-240.
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Capital stock
In Germany, the nominal or stated value of a company's capital stock must be at least €50,000. It is divided into par shares or no-par shares. If the company undertakes an ordinary or simple capital write-down, the value of the capital stock can temporarily drop below this minimum level. However, a capital write-down with this consequence will be approved only if the company plans to meet the minimum requirement through a subsequent capital increase.

The capital stock of a company may only be increased or reduced upon approval by the annual general meeting.
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Cash dividend
Companies must pay corporate tax on distributed profits. This tax is subtracted from the gross dividend before it is paid out to shareholders. The resulting amount – i.e. the gross dividend minus corporate tax – is called a cash dividend.

For example:

 Gross dividend: €3

 Corporate tax (25%): €0.75

 Cash dividend: €2.25

Synonyms: net dividend
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Cash market
In Germany, the settlement period is two trading days. Cash market transactions on FWB® Frankfurter Wertpapierbörse are settled both on the floor and in the Xetra electronic trading system.

Antonym: derivatives market

Synonym: spot market
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Cash settlement (warrants)
If the underlying instrument cannot be physically delivered to the warrant holder (e.g., in the case of index warrants), the contract is settled in cash. The difference between the strike price stipulated in the contract and the current market value of the underlying instrument is calculated and paid to the warrant holder.
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Cash settlement price
Technically speaking, the "cash settlement price" refers to both the variable price and the single cash price; in practice, however, the term is used in a narrower sense as a synonym for single cash price. This price is no longer published for equities.

Antonym: forward price
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Cashflow
Cash flow is a balance sheet ratio that indicates a company's financial strength. It is calculated by taking into account the net profit for the year, depreciations, changes to long-term reserves, and taxes on profit and income.
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CDAX
"Composite DAX®" ( CDAX ®) started on 17 September 1993 and is calculated as a price and performance index by Deutsche Börse. The base date for the index is 30 December 1987 = 1,000 points.

Historical data have been calculated as far back as 1970.
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Central bank
The objectives of a central bank include stabilizing the value of money, eliminating unemployment, and achieving balanced economic growth. On 1 January 1999, the central banks of the individual Euroland countries were superseded by the European Central Bank, which is located in Frankfurt.
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Certificate
The holder of a certificate participates, for example, directly in the price development of an index (index certificate) or in that of a specially created basket of shares (basket certificate). Even though certificates are mostly based on equities or equity indices, from a legal standpoint they are considered bonds and do not in any way certify the right of ownership or shareholder privileges. The investor receives a law of contract from the issuer, to whom he temporarily lends his money.

Certificates are freely tradable on each exchange trading day and can have limited or unlimited maturity. They do not entail regular earnings payouts and usually have a variable repayment amount. Their price development is coupled to that of the underlying security. Aside from equities and equity indices, currencies, interest rates and resources are other possible underlyings for certificates.

Certificates are investment products. In contrast to leverage products, investment products enable the investor to participate one-to-one in the performance of the underlying security. Thus, these products are best suited for conservative investment strategies. Discount, basket and index certificates, as well as reverse convertibles belong to this category.

Important provisions that govern the actions of certificate issuers are covered by the German law for capital investment firms, known as KAGG.
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Certificate of renewal
A renewal coupon is the last segment of the coupon sheet. When all dividend or interest coupons have been redeemed, the bearer of the security submits the renewal coupon to receive a new coupon sheet. For securities held in safe custody, this procedure is performed automatically by the bank where the investor maintains his or her securities account.
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Changes to the composition of an index
Indices reflect the development of a sector or a market. Their composition is therefore adjusted on a regular basis to account for current developments within the given frame of reference. For example, stocks may be incorporated into an index whose market capitalization and trading volume have increased, based on the number of shares in free float, which means that other companies will have to be removed. Exceptional events, such as a suspension of trading, debt composition proceedings, bankruptcy, and new listings also result in changes to the composition of an index.

Changes to the composition of the DAX® index are made only in September; changes to MDAX® and TecDAX® are also made in March. The composition of SDAX® can change on every review date, i.e. in March, June, September and December.

Moreover, a company can be taken out of an index outside the regularly scheduled chaining date if it no longer ranks among the top 45 companies in terms of market capitalization or stock-exchange turnover. Respectively, a company can be included in an index if it becomes one of the 25 largest companies in terms of market capitalization or stock-exchange turnover. A changeover within the index would take place as of the next chaining date.
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Chart
Charts track the movements of securities prices over a given period of time, using easy-to-read diagrams to depict trends and developments. Charts are used as the basis for technical analysis and for predicting future price developments. Important types of charts include line, bar, candlestick, anchor, and point & figure charts.
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Chart analysis
Chart analysis attempts to predict the future price development of securities on the basis of historical price trends. Typical patterns in the price charts (e.g., double tops, V formations, head-and-shoulders) are used to identify short-term trends. Support and resistance lines, which are of particular importance in chart analysis, are derived using historical price charts. A new trend is signaled by a breakout, in which a price drops below its support level or rises above its resistance level.
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Classic All Share
Factsheet Classic All Share
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Clearing
Clearing is typically performed by a central institution, the so-called clearinghouse. The clearinghouse determines the bilateral net debt of buyers and sellers involved in exchange transactions, and, at the end of the trading day, provides its members with a summary of their transactions, as well as the resulting net claims and liabilities. In the case of derivatives transactions, the clearinghouse will inform its members of the funds they must put up to meet their margin requirements.

To become a member of a clearinghouse, an institution must have a license, a securities account and a money settlement account with the clearinghouse. Moreover, it must furnish material, organizational and financial collateral as specified in the licensing agreements.

In its capacity as the central settlement institution for stock exchange transactions, the clearinghouse functions as a counterparty to trades, thereby guaranteeing the proper execution of trades as well as the settlement of the net debt. Eurex Clearing AG is the clearinghouse affiliated with Deutsche Börse AG.
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Closed-end fund
A closed-end fund, issued by an investment firm, has a predetermined fixed number of shares and a limited investment volume. As soon as the planned volume is reached, the fund is closed and shares are no longer issued.

In some countries, such as the USA, the shares of such funds can be traded on an exchange. In Germany, however, only the investment company can buy back the shares. However, investors do not have a right to sell their shares, i.e. the investment company is not obliged to buy them back. If investors want to sell before the shares mature, they often must pay a high premium.

The resale value of a share during the fund's maturity is not based on the share's representative value of the fund's current total assets. Instead, it underlies the market value determined by supply and demand. Therefore, the shares are often traded at a high premium or discount relative to their actual inventory value. Closed investment funds are not subject to the investor-protection regulations outlined by the German Capital Investment Companies Act (KAGG).

Antonym: open fund
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Closing Price
Until now lead brokers at FWB® Frankfurter Wertpapierbörse fixed closing prices as the last price of the trading day, when their order books allowed that to be done. Since 3 November 2003 the fixing of closing prices for stocks in the DAX® index starts on the Frankfurt trading floor at 7.55 p.m. and for remaining stocks already at 7.30 p.m.. From that time on, variable price determination is not allowed.

On the electronic trading platform Xetra®, closing prices are fixed from 5.30 p.m. in a closing auction.

Cash settlements of warrants are calculated from the individual closing prices of the underlying instruments.
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Collective custody
In collective custody, securities owned by many different investors are held at a central securities clearing and deposit bank (in Germany, Clearstream Banking AG, Frankfurt). The securities are separated by category. Each individual securities account holder is a joint owner of the collective holdings in the respective securities category.
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Commercial paper
Highly creditworthy institutions issue commercial paper to finance their short-term capital requirements. Commercial paper is usually discounted – i.e., its face value is high in relation to its market price, with the difference representing the "interest" earned on the investment. The maturity of commercial paper is determined individually by the respective issuer, and is typically less than a year.
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Commission
Investors pay banks and financial service companies a fee for each order placed. This fee covers order routing, processing, and settlement, as well as costs associated with operating trading desks on the exchange floor.

In Germany, commissions on stock and warrant trades, in general, amount to 1 percent of the total price of the order; for bonds, the commission is around 0.5 percent of the par value or the market value, whichever is higher. Investors can negotiate with their bank to receive a better deal. In some cases, the bank will stipulate a certain minimum fee.

Commissions on securities transactions on the Regulated Market are indicated explicitly on the trade confirmation. In Freiverkehr, they appear either as a mark-up (when the security is purchased) or a mark-down (when the security is sold).
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Commission trading
Trading in commodities or securities conducted by a commission agent not for own account but for the account of another. Examples are the exchange transactions of banks acting on behalf of their clients.

The specifics of commission trading are governed by the German Commercial Code (HGB), article 383, para. 1.

Synonym: factorage
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Commodity futures
A commodity future obligates the buyer to purchase, and the seller to deliver, a good such as a raw material for an agreed-upon price on a specified settlement date. The earliest derivatives transactions were commodity futures. Long ago, farmers wished to protect themselves against fluctuations in the price of their crops. To do so, they entered into futures contracts to ensure that they would be able to sell their products at a favorable price the following year.
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Commodity futures exchange
A commodities futures exchange enables traders and investors to hedge against the risks created by fluctuations in the prices of raw materials and commodities. Some of the world’s most prominent commodities futures exchanges are in Chicago, New York, Kansas City, Minneapolis, Winnipeg and London. The German commodities futures exchange, which commenced trading in 1998, is located in Hannover.
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Common gap
Common gaps occur when the value of a stock is perceived differently by various investors. In the context of technical analysis, ordinary gaps are not relevant when it comes to predicting trends. They are usually closed soon after they occur; in other words, the prices determined subsequently fall within the range of the gap.
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Compliance guidelines
Companies and their staff who have access to inside information must observe certain regulations with regard to securities trading. The Securities Trading Act stipulates that a compliance system must be established – among other things, the company must set up a Chinese Wall, appoint a compliance officer, and maintain an observation log as well as a list of blocked securities. The observation log lists securities with respect to which the company has insider information. In principle, the company or its employees can trade these securities – however, all trades are scrutinized to determine if the transacting parties took advantage of inside information. Blocked securities are those which the company has information about that could greatly impact the price of the security. The company and its employees are not permitted to trade in these securities. In addition, the company is obligated to establish a Chinese Wall to prevent inside information from being leaked to the outside.
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Consumer Confidence
The American Consumer Confidence Index, which is published by the Conference Board, reflects the private households’ evaluation of their current and future economic situation. For this purpose, 5,000 questionnaires are sent out in the US. An average of 3,500 households actually return their answers.   The participants are asked to give their evaluations on five components:

the economic conditions in the area the participant lives in an assessment of these conditions in six months the current availability of jobs in the area the availability of jobs in six months the family income in six months.

A partial index is calculated for each one of those components; together, they make up the total index. Furthermore, the participants’ consumption intent for the following six months is tracked. This includes information on cars, houses, holidays and larger purchases. In good economic times, or with good prospects looming, more investments in durable economic goods are made than in bad times.   There are only few days between the surveying of the households and the publication of the data. If consumer confidence is too high, this points to a good economic development and perhaps even to its overheating.   The American Consumer Confidence Index is published on the last Tuesday of the month.
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Continuous trading
In continuous trading, securities prices are determined on an ongoing basis as the order situation permits. Because of the minimum lot size of one, orders can be executed for even one single share in continuous trading.

The Exchange Operating Board is in charge of admitting actively traded securities to continuous trading. Being quoted in continuous trading is a prerequisite for an equity to be admitted to any of the selection indices of Deutsche Börse. In order to be admitted to continuous trading the appointment of at least one Designated Sponsor may be required if the liquidity of an equity is deemed unsufficient.
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Convertible bond
Like other bonds, convertible bonds bear interest, and their face value is repaid in full upon maturity. However, the owner of a convertible bond also has option rights. During a specified period, the convertible bond can be exchanged for shares in the issuing company at a pre-determined price, which is usually higher than the price of the stock at the time the bond was issued. Because option rights are attached to it, a convertible bond bears interest at a lower rate than other comparable bonds. The issue of a convertible bond must be approved at the Annual General Meeting by a three-fourths majority vote. The company usually undertakes a capital increase to ensure that there will be enough shares for conversion. Existing shareholders are given subscription rights to the new shares.
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Cooperative stock exchanges
The goal of the agreement between the stock exchanges in Berlin, Dusseldorf, Frankfurt and Munich was to enhance price quality and reduce operating costs. To this end, the IBIS electronic trading system was replaced with Xetra, and umbrella order books were introduced so that a single price can be calculated for the same security at the various exchanges.
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Corporate bond
In addition to bank credits, companies may acquire equity capital via the capital market by issuing corporate bonds. Its conditions and characteristics, such as maturity, coupon and issue volume, are stated in the sales prospectus.

The interest rate payable by a company to the investors depends on the company’s credit rating, which expresses its creditworthiness: the more fragile the latter, the higher the coupon.
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Correlation coefficient
The value of the correlation coefficient ranges between -1 and +1. If the correlation coefficient of a stock to an index is +1, then the price of the stock always changes by the same percentage as the index; i.e., the development of the two variables is exactly parallel. In this special case, the stock has a beta factor of 1. The smaller the coefficient, the weaker the correlation. A correlation coefficient of zero indicates that movements in the price of the stock are completely unrelated to those of the index. If the correlation coefficient is negative, then the stock price and the index move in opposite directions.

Deutsche Börse AG calculates the correlation coefficients of the shares in DAX® and MDAX® in relation to their respective index. The correlation of sector indices to CDAX® are also calculated.
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Counter transaction
The investor is responsible for holding the securities and redeeming the attached interest or dividend coupons at the bank.
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Country risk
Political risks are a consequence of an internal political situation in a given country, or of that country's foreign policy. Internal risks result from ideological clashes among the political parties in a country, social tensions, and incompetent or passive government. Risks relating to foreign policy stem from a country's membership in political alliances and/or from the hostile behavior of other countries toward the country in question. For the investor, such political risks are manifested as discrimination against foreign capital (to varying degrees) and, in the extreme case, in the danger of expropriation (with or without compensation). Economic risks are primarily macroeconomic and cannot be considered separate from political risks. In particular, they result from the structure of the economy in question, and how it is tied into the global economy. The financial repercussions of economic risks are manifested above all in exchange rate risks (also known as currency risk) and transfer risks that can impede or completely break down international payment transactions and movements of capital. The latter are counteracted by means of currency management, by monitoring the movement of capital, and, in extreme cases, by "freezing" the accounts of foreign business partners. Country risks are assessed on a regular basis by so-called country indices using scoring models. The best-known index is the Business Environment Risk Index (BERI), which assesses the country risk of around 50 countries on the basis of quality criteria (determined through surveys of experts) and quantitative economic data.
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Coupon
The coupon sheet, which consists of individual coupons and a renewal certificate, is attached to the stock or bond certificate. The bondholder submits the individual coupons to a bank to receive dividend or interest payments. It has become standard procedure for the bank handling the customer's portfolio to collect the coupons and transfer the dividend or interest payment to the respective account. Coupons expire after four years.
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Covered warrant
Covered warrants are a sub-category of naked warrants. They are typically issued by an underwriting bank rather than by the stock corporation itself. The exercise of covered warrants does not alter the company's capital stock.
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Creation
The so-called creation/redemption file regularly updates the lists of purchases and sales made by a mutual fund, ensuring the transparency of the fund's portfolio structure. Antonym: redemption
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Creditworthiness
Creditworthiness provides an indication of a borrower's quality. For example, a bond issuer receives a high credit rating when it fulfills its obligations with respect to making interest payments, and when there is a high probability that it will be able to repay the face value of the bond. Assessing the creditworthiness of bond issuers is often undertaken by rating agencies, the most prominent of which are Moody's and Standard & Poor's.
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Cum
Latin for “with”; indicates securities with interest, dividend or other coupons
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Currency bond
Currency bonds are typically issued by European institutions outside of
Europe, or by foreign institutions in Europe. Unlike bonds denominated
in euros, currency bonds involve a foreign exchange risk.
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Cyclical stocks
The return on a cyclical stock fluctuates considerably over relatively short periods of time because it is tied to the state of a sector or an economy. Thus, it is difficult to predict how cyclical stocks will perform over the long term. An example of a cyclical stock is a company that produces consumer goods. A downturn in the economy, which goes hand in hand with a lower demand for consumer goods, will impact the earnings situation of this company.
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DAX
DAX ® was launched on 1 July 1988 by FWB® Frankfurter Wertpapierbörse (Frankfurt Stock Exchange), Arbeitsgemeinschaft der Deutschen Wertpapierbörsen (Association of German Stock Exchanges) and Börsen-Zeitung (a German stock exchange newspaper).

It comprises the 30 most actively traded stocks (blue chips), and represents approximately 75 percent of the aggregate capital stock of listed German stock corporations. Moreover, DAX shares account for approximately 85 percent of trading volume in German equities.

DAX stocks are admitted to trading in the Regulated Market segment and are listed in Prime Standard. The criteria for weighting the stocks in the index are: trading volume and market capitalization on the basis of the number of shares in free float, as well as position in the respective sector.

DAX is calculated by Deutsche Börse AG as both a price and performance index on the basis of Xetra® prices, and updated by the second. The calculation procedure is independently monitored on a regular basis. Deutsche Börse decides whether changes are to be made to the composition of the index on an annual basis in September.

Outside the regular review dates, a company can be taken out of the index if it does no longer belong to the 45 largest companies in terms of market capitalization and trading volume. Respectively, a company can be included in the index if it ranks among the 25 largest companies in terms of market capitalization and trading volume. The changeover takes effect as of the next scheduled chaining date.

The base date for the index is 30 December 1987 = 1,000. Historical data have been calculated as far back as 1959.

Current market data
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DAX future
Both the price and the settlement date are specified in the contract.

There are two sides to a DAX® futures transaction. A long position represents the buyer's obligation to purchase the DAX portfolio for the agreed price on the settlement date; a short position refers to the seller's obligation to deliver the DAX portfolio. Normally, the DAX shares are not actually delivered; instead, the contract is settled in cash.

Futures on DAX are bought and sold every trading day on the Eurex exchange. The value of a DAX futures contract is equivalent to 25 times the current price of the contract in euros. The settlement date is always the third Friday of the respective contract month (March, June, September and December).

The price of a futures contract depends on supply and demand, with market participants attempting to anticipate the level of the index on the settlement date, taking into account the cost of money. The price of the DAX future is thus quoted higher than DAX. Normally, the further away the settlement date, the greater this difference will be. On the settlement date, the prices of DAX and the DAX future are equivalent.

Investors who trade in DAX futures must maintain a separate account at their bank, called a margin account, in which they deposit collateral to cover their futures positions. For every point that the DAX future moves, €25 will be either debited or credited to the margin account. If the margin in the account is no longer sufficient, the investor must furnish additional funds. Should he fail to do so, the bank has the right to sell the contract immediately.
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Day-Trading
In intraday trading, securities are bought and sold within the same trading day, in some cases even several times during the day. Day traders try to spot day trends and use price volatilities for their profit. They rarely keep a position over night.
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Dealer
Dealers are also authorized to trade securities for their own account.
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Delta (warrant)
The delta ranges between 0 and 1 for call warrants, and between 0 and -1 for put warrants. If a warrant is deep out of the money, fluctuations in the price of the underlying instrument will have a relatively minor impact on the price of the warrant, and the delta will be around zero. By contrast, a warrant that is deep in the money consists almost exclusively of its intrinsic value, and its performance will more or less match that of the underlying instrument. In this case, the delta will approach 1 or -1.
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Derivatives
The most important types of derivatives are options and futures. Derivatives are traded over-the-counter or on a derivatives exchange.
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Derivatives exchange
The world's largest derivatives exchange is Eurex® , the Swiss-German
electronic futures and options exchange.
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Derivatives market
An important aspect of trading in the derivatives market is that the delivery and settlement of an options or futures contract does not ensue immediately. In other words, at the time the contract is concluded, the buyer does not have to deliver the liquid funds, nor the seller the commodity. The world's largest derivatives market is Eurex® , a subsidiary of Deutsche Börse AG.

In addition to the exchange-based options and futures market, there is also an OTC (over-the-counter) derivatives market, in which the majority of participants are banks and other financial institutions.
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Designated Sponsor
Designated sponsors operate only in the Xetra® system, where they must be admitted as a participant. When an issuer is admitted to trading, it appoints a sponsor - or, in some cases, several sponsors - to ensure that there is additional liquidity in its stock by posting quotes in the system, either at the sponsor's own initiative, at the request of a market participant (quote request), or during auctions. The quotes can be seen in the order book, giving investors a more reliable reference for setting the price limit on their orders. Companies that are quoted in continuous trading in Xetra are required to appoint at least one designated sponsor if they are deemed to have insufficient liquidity. During trading, a market participant can send an electronic quote request to all designated sponsors registered for a particular security. The party making the request can, if desired, indicate whether it is interested in buying or selling, and how many shares it wishes to buy or sell. All Xetra participants are automatically notified as soon as a quote request has been made for a particular security. Deutsche Börse requires designated sponsors to fulfill certain quality criteria when performing their function. For example, they must be available throughout trading hours; the quotes they provide must be for a certain minimum number of shares and are not permitted to exceed a particular bid-ask spread. These criteria are more stringent for some stocks than for others, and are determined on the basis of characteristics such as volatility. Furthermore, each designated sponsor must respond to a quote request within a designated period of time by providing a quote. If a designated sponsor does not meet its obligations, Deutsche Börse can revoke its admission to trading. Because they continually observe the market, designated sponsors acquire expert knowledge on the stocks whose liquidity they are promoting, and on the sectors to which their stocks belong. Depending on the issuer's needs and the range of services offered by the designated sponsor, this knowledge can be used for research, investor relations, disclosure, sales and market reports.
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Dilution of ownership
When a company issues new shares or bonus shares, its capital stock increases, although the overall value of the shares remains the same. As a result, each individual share is worth less than it was prior to the new issue, and the proportion of the company owned by existing shareholders decreases. The company protects existing shareholders from the effects of dilution by granting them subscription rights, which they can use to acquire some of the newly issued shares.
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Direct bank
Direct banks provide banking services 24 hours a day and charge low fees. However, because they typically do not offer financial consultancy services, they do not require a large number of qualified bank employees. Payment transactions are handled via ATMs and the branch systems of other banks. Thanks to modern telecommunications systems, direct banks can operate from any location. They are typically domiciled in areas with low personnel costs and a favorable tax framework.
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Direct offering
Direct offerings are typically undertaken by banks and insurance companies – i. e., companies that have already developed business relations with the investing public and established an extensive sales system which they can use to place the securities. A direct offering is less costly than an issue supported by an underwriting syndicate. However, there are potential difficulties associated with a direct offering, for example, if the securities are to be placed with international investors. Moreover, if the issuing volume is particularly large, it can overload the issuer's sales system. For this reason, issuers are increasingly handling direct offerings via the Internet. Frequently, a company will opt for a direct offering if it has been able to agree upon the terms of the issue with a large-scale investor (private placement).
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Directors' Dealings
Directors’ dealings cover securities transactions by people with management duties at publicly traded companies. Since 1 July 2002, such transactions are subject to new notification rules. Per section 15a of the German Securities Trading Act (WpHG), people at publicly traded companies who have leadership duties, or people who have close relationships with these managers, must declare any securities transactions made with their own contingent of company shares.

Through the Fourth Financial Markets Promotion Act (FiMaFöG), the reporting requirement for so-called directors’ dealings was expanded to apply to all companies admitted for trading on the Regulated Market. This requirement used to apply only to companies on the Frankfurt Stock Exchange’s technology segment, Neuer Markt.

The goals of the new regulation covering directors’ dealings is to provide better investor protection, make the financial markets more transparent and to create more trust. In conjunction with the new rules for ad-hoc announcements, private investors are now offered a basis for damages claims in the case of missing or late publication of facts influencing the price development of a share.

Investors can review directors’ dealings online:

Database of the German Federal Financial Supervisory Agency (BaFin) BaFin operates an Internet platform that publishes directors’ dealings.

www.insiderdaten.de A privately run Web site that presents stock transactions in a very clear manner. The latest transactions are sorted by company, insider name, date and order volume.

Synonym: insider trading
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Disclosure requirement (Ad-hoc disclosure)
The regulations pertaining to the disclosure requirement are contained in section 15 of the German Securities Trading Act, which states that issuers of securities admitted to the Regulated Market on a German stock exchange are obliged to report all corporate developments that have a sufficiently strong impact on the issuer's financial situation or its business activities to influence the market price of the security. Securities listed in the Unofficial Regulated Market are exempt from this requirement.

The obligation to release such information without delay is intended to mitigate the abuse of inside information and enhance market transparency. A violation of the disclosure requirement is punishable with a fine.

While the Federal Supervisory Office for Securities Trading (BAFin) is responsible for investigating whether issuers are meeting the disclosure requirement as stipulated in section 15 of the Securities Trading Act, it is the task of the Exchange Operating Board to decide whether the information published requires a temporary suspension of a quotation.

According to section 15, paragraph 1, no. 1 of the Securities Trading Act, the information must be published in the German language in at least one national "Börsenpflichtblatt" (the journal for statutory stock market publications), or via an electronic information dissemination system. Furthermore, companies in Prime Standard are obliged to publish ad-hoc messages in English.

Prior to publication, the information must be communicated directly to BAFin and the Exchange Operating Board of the German exchange where the securities or their derivatives are listed.
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Discount broker
Discount brokerages are usually operated by direct banks. Because they do not provide financial advisory services, their fees for orders are normally lower than those of "normal" banks. Customers place orders with discount brokers via modern communications media such as the internet, fax and telephone.
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Discount certificates
The investor gets the certificate at a price that is below the current price of the underlying security or index. This is called a discount. In return, the potential profit is capped. At the end of the certificate’s maturity, a cash check occurs: If the price of the underlying when the maturity is up is higher than the maximal payout or identical to it, the issuer pays the maximum amount. If the price of the underlying is less than the cap, the issuer pays either the current price of the certificate in cash or he gives the investor the underlying, for example a share, at its current price. The issuer can choose. The cash payout is obligatory in the case of discount certificates on indices, currencies or interest. The maximum profit that an investor can reach with a discount certificate is calculated by taking the difference between the purchase price and the cap on the underlying. Losses, in contrast, are lessened by the discount. The investor suffers a loss only when the price of the underlying at the end of the maturity has fallen so far that the discount is depleted. The discount thus works as a buffer against risk. Discount certificates are ideal for conservative investors that want to guard against market fluctuations and who expect in the medium term sideways-moving prices. Because the buyer of a discount certificate does not profit from price gains that are higher than the cap, this form of investment is best suited for a medium-term oriented engagement. If the certificate reaches its cap before the maturity, the investor should take the profits. Details about currently traded investment product types.
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Discount rate
At the beginning of 1999, the European Economic and Monetary Union (EMU) came into effect. At that time, the European System of Central Banks (ESCB) and the European Central Bank (ECB) assumed authority for monetary policy in Euroland, and the Bundesbank's discount rate was replaced by the discount rate of the European Central Bank. Up to the end of 1998, banks could take out a short-term loan from the Bundesbank or the State Central Banks at the discount rate by selling bills of exchange with a maximum maturity of three months. Through the discount rate, the Bundesbank influenced the interest rate that the banks charged their own borrowers. As a rule, a lower discount rate increased demand for credit, whereas a high discount rate tended to reduce the overall demand for credit. The discount rate therefore influenced general liquidity, price stability, as well as the development of the inflation rate and interest rates.
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Distribution
Companies often distribute a portion of their profits to shareholders. In the case of stock corporations, distributions usually take the form of dividends. Distributed capital is no longer under the control of the company. Profits can also be distributed as interest payments, bonus payments, scrip certificates, and proceeds from sales that are paid out to shareholders.
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DivDAX
DivDAX ® comprises the 15 DAX® companies with the highest dividend yields. Its calculation is based on the DAX index rules; its composition is reviewed in September of each year. DivDAX was introduced on 1 March 2005. Current Market Data
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Diversification

The overall risk of a diversified securities portfolio is lower than the weighted average risk of the individual investments. The investment strategies of mutual funds are based on the principle of diversification.

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Dividend
The amount of the dividend is determined every year at the company's annual general meeting, and declared as either a cash amount or a percentage of the company's profit. Once the dividend has been declared, the share price is reduced by the amount of the dividend, and the share is then said to be "ex-dividend". The dividend is the same for all shares of a given class (e.g. preferred shares). The dividend is calculated mainly on the basis of the company's unappropriated profit and its business prospects for the coming year. It is then proposed by the Executive Board and the Supervisory Board to the annual general meeting. At most companies, however, the amount of the dividend remains constant. This helps to reassure investors, especially during phases when earnings are low, and sends the message that the company is optimistic with respect to its future performance. Because of the half-income procedure, dividend payments are only subject to half the shareholder's personal income tax. The dividend is paid out by the banks acting on behalf of the company.
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Dividend guarantee
Shareholders who own preferred shares receive a dividend guarantee to compensate for the fact that their shares do not carry voting rights. The stock corporation can postpone the payment of the dividend until it has had a "more profitable" year. Majority shareholders receive a dividend guarantee if they have entered into an affiliation agreement with the company and are excluded from a profit transfer agreement.
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Dividend stripping
In dividend stripping, a shareholder sells a stock just before the dividend payment is to be made and buys it back at a lower price after the dividend has been deducted. Dividend stripping is advantageous in particular for stockholders whose price gains are either not taxed at all, or taxed at a low rate, such as foreign investors with limited tax liability, or shareholders who realize long-term gains by holding their stock for longer than one year (in Germany, price gains are tax-free if the stock was held longer than twelve months).
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Double listing
Companies become listed on a second exchange in order to reach a broader-based public and attract additional investors. Because the fragmentation of share capital between different exchanges often results in diminished liquidity, companies usually undertake a capital increase in connection with a double listing.
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Dual Listing (DL)
With a dual listing, also called a secondary listing, a company’s shares are placed on an exchange other than its domestic exchange. This can happen at the behest of the company or a market maker. A second listing is therefore not an initial public offering: It isn’t the worldwide debut of the company’s shares or a public offer, and the company is not required to produce a prospectus.
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Early-stage financing
Early-stage financing is used to fund various activities during the seed and start-up phases, e.g. writing up a business plan, creating the first prototypes, and commencing with production and sales operations.
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eb.rexx indices
The eb.rexx® index family represents the market for fixed-interest securities denominated in euros, which are traded on the Eurex® Bonds platform and have a maturity of at least 1.5 years.

eb.rexx indices comprise the most liquid government bonds, collateralized bonds and sub-sovereigns.
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ebB (Price Addendum)
A price addendum is a code that is added to the price in floor trading. It states in what way the respective order situation is to be taken into account as the price is fixed. This information is part of the tick data. ebB stands for "etwas bezahlt Brief" (partially paid, offers) and indicates that only a small portion of the sell orders limited at the price determined could be executed.
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ebG (Price Addendum)
A price addendum is a code that is added to the price in floor trading. It states in what way the respective order situation is to be taken into account as the price is fixed. This information is part of the tick data. ebG stands for "etwas bezahlt Geld" (partially paid, bids) and indicates that only a small portion of the buy orders limited at the price determined could be executed.
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EBIT

EBIT is an earnings ratio. It provides an indication of a company's operative earning power independent of its capital structure.

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EBITDA
EBITDA is a profit ratio. It indicates the operative earning power of a company, independent of its capital structure or propensity to invest.
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ECN (electronic communication network)
ECNs are alternative private trading systems in the US. They are permitted to access the Nasdaq system provided they fulfill the following requirements, which were laid down by the US Securities and Exchange Commission (SEC) in January 1997:

Price information must be disseminated on an ongoing basis. The ECN must provide for limit book management or ongoing auctions. Customer orders must be (automatically) matched and executed.  

Moreover, the operators of the ECN must guarantee that they will forward the best available market maker orders to the Nasdaq system. Customers can view the ECN order book via a terminal or the internet. If a participant places an order through an ECN, the ECN attempts to execute the order in its own order book; if this is not possible, the order can be forwarded to Nasdaq or to another ECN. Orders are released from the system for only a brief period of time (e.g. 90 seconds) so that the ECN's own order book will remain sufficiently liquid. The obligation to ensure the best execution of customer orders is intended to prohibit an ECN from matching orders internally when the trade could be executed at a more favorable price in other markets. Thus, ECNs must link their order book with other markets to guarantee best execution.
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Economic indicators
The indicators provide information as to the overall economic situation and its expected future development. Economic indicators are subdivided into early indicators, present indicators and late indicators. The early indicators include the ifo Business Climate index, the ZEW Economic Expectations and the Consumer Confidence index.
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Elasticity (warrants)
Elasticity is calculated by multiplying the leverage of the warrant by its delta. Synonym: Gearing
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Electronic exchange
An electronic exchange is a trading platform in which order entry and forwarding, matching of buy and sell orders, and price determination are performed by a computer. In most cases, the system also includes functions for clearing and settlement procedures, market supervision, and the publication of relevant information.

Unlike a trading floor, which requires the physical presence of participants, an electronic exchange can be accessed from any location. Trading can take place 24 hours a day, or during established hours. The advantages of an electronic exchange are low costs, error-free settlement, quick reaction times, flexible markets and access from anywhere in the world.

Germany has two electronic exchanges: Eurex® for derivatives, and Xetra® for the cash market. Participants in an electronic exchange must be admitted to electronic trading.
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Employee shares
Employee shares are created when the company either undertakes a capital increase, or buys back its own stock on the stock exchange. They are usually issued at a preferential price that is substantially lower than the market price. Once purchased, the shares are usually frozen for a period of up to five years before they can be sold. From the point of view of the company, one advantage of issuing employee shares is that staff will have a greater personal stake in the company's performance. Moreover, such shares are increasingly being used as a component of flexible employee compensation systems, and thus as a way of motivating workers. When staff member purchase an employee share at the preferential price, the resulting non-cash benefit is tax-free, provided it does not exceed half of the market value of the stock, or €150. In addition, the shares must be held at least six years.
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Entry Standard
Entry Standard is a transparency standard within the Open Market (Regulated Unofficial Market) with additional requirements. Companies in Entry Standard must meet the following criteria and publish on their website:

significant company news or circumstances that may be significant for the valuation of the respective stock/issuer

the audited consolidated financial statements and management report (respective national accounting principles or IFRS) no later than six months after the end of the reporting period

a brief, up-to-date profile of the company and a calendar of company events

an interim report no later than three months after the end of the first half.

Inclusion in Entry Standard does not equal admission to a regulated market in the sense of article 2, para. 5 of WpHG (German Securities Trading Act). In Entry Standard, the provisions for organized markets do not apply. This particularly concerns the following stipulations:

admission to the stock exchange (article 3, para 2 of AktG – German Stock Corporation Act)

obligation to publish ad-hoc announcements (article 15 of WpHG – German Securities Trading Act)

notification when threshold levels are reached (article 21 of WpHG – German Securities Trading Act)

mandatory offer in the case of a change of control (WpÜG – German Securities Takeover Act)

publication of a prospectus in the case of a private placement (article 3 of WpPG – German Securities Prospectus Act)

Therefore, Entry Standard is primarily aimed at qualified investors in the sense of article 2, para. 6 of WpPG (German Securities Prospectus Act), who are able to assess and accept the potential risks related to the investment in shares of the respective organization. Investors must be aware of the fact that this part of the Open Market (Regulated Unofficial Market) on the Frankfurt Stock Exchange is not subject to the high Europe-wide transparency standards and strict provisions for investor protection on organized markets.
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Estimated price
An exchange broker will estimate the price of a security if there are no open buy or sell orders for that security. An estimated price is indicated with the letter "T", which stands for the German term "Taxe".
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ETF (exchange-traded fund)
The abbreviation, ETF, stands for exchange-traded fund and refers to index trackers tradable on the stock exchange. The two main features of ETFs:

Transparent portfolio The composition of ETF portfolios is published on a daily basis. Thus, investors are provided with a continuous overview of the weighting of individual shares in the portfolio, which is based on the closing prices from the previous trading day.

Creation/redemption ETFs have a so-called creation and redemption mechanism, which allows professional market participants to exchange share baskets with the same composition for the ETF from the investment company. 

On the Frankfurt Stock Exchange, ETFs are listed in the XTF® segment and can be traded continuously on Xetra® or in floor trading. There is no front-end load for investors.
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Euribor (European interbank offered rate)
On 1 January 1999, the Euribor was introduced as the new European reference rate. It replaces the national reference rates of all EU member countries (e.g. the Fibor in Germany), with the exception of London's Euro-Libor. The Euribor is calculated daily at 11:00am by Telerate in Brussels on the basis of the individual interest rates of selected European banks. The highest and the lowest rates are not taken into account in the calculation in order to arrive at a representative reference rate.
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Euro
On 1 January 1999, the euro became the official currency of all countries participating in European Economic and Monetary Union. As of 1 January 2002, the first new euro banknotes and coins were be issued to replace the notes and coins of the individual EU countries. The national currencies of the member countries were ceased to be legal tender on 1 June 2002. The sub-unit of the euro is the cent, with 100 cents to one euro (€). Banknotes are issued in denominations of €5, €10, €20, €50, €100, €200 and €500; coins are issued in denominations of €0.01, €0.02, €0.05, €0.10, €0.20, €0.50, €1 and €2. The official exchange rate of euro to Deutschmark is 1.95583 – in other words, €100,000 is equivalent to DM195,583.
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Euro Stoxx 50

The Euro Stoxx 50 index was introduced at the beginning of 1998 by Deutsche Börse AG in conjunction with Bourse de Paris, the Swiss Stock Exchange and the Dow Jones company. It is calculated as a price index and a performance index in euros and dollars. The base date is 31 December 1991 = 1,000.

The criteria for including a company in the index are market capitalization and trading volume of the European companies.
Until 1 March 2010 the index was named Dow Jones Euro Stoxx 50.

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European-style option
Antagonism: American-style option.
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Ex-day
With regard to dividend payments, the ex-day for German shares is generally the day after the general shareholders meeting, at which the dividend is set. Investors who have acquired a stake up to one day prior to the ex-day will be paid the dividend. Expected dividend payments are accordingly priced into the share’s price, i.e., they can lead to gains before the ex-day and a subsequent decline on that day. For mutual funds, the right to a disbursement of fund shares is separated on the ex-day. If investors acquire shares in the fund after that day, but prior to the actual disbursement, they pay a price that is reduced by the amount of the disbursement but do not, however, get the subsequent disbursement. The ex-day is generally one day prior to the actual disbursement.
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Exchange Operating Board
Members of the Exchange Operating Board (Börsengeschäftsführung) are appointed and dismissed by the Exchange Council, in conjunction with the Exchange Supervisory Office. Section 3e of the German Stock Exchange Act stipulates that one or more persons can be appointed to the Börsengeschäftsführung for a maximum term of five years; a second term is also allowed. Business managers represent the exchange both in and out of court. The Exchange Operating Board is above all responsible for deciding which participants are to be admitted to exchange trading, regulating the organization of the exchange, handling business matters, and ensuring that trading takes place smoothly. To this end, it has the power to suspend or temporarily interrupt trading.
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Exchange rate
The exchange rate indicates how much of a given currency (e.g., the respective national currency) must be paid in exchange for one unit of a different currency. As a rule, the exchange rate is determined on the basis of supply and demand, although it can also be fixed. The mexican Peso, for example, has a fixed exchange rate in relation to the US-Dollar.
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Exchange Supervisory Office
The Exchange Supervisory Office (Börsenaufsichtsbehörde) ensures that stock exchanges comply with the relevant laws, as well as with the detailed legal regulations and directives, and monitors whether trading and settlement procedures are duly performed. It also has the authority to require trading participants or the exchange to furnish information or documents, or conduct audits as it sees fit. Section 1a of the German Stock Exchange Act authorizes the Exchange Supervisory Office to impose regulations on the stock exchange and its participants for the purpose of promoting proper trading and settlement procedures. Section 2a of the German Stock Exchange Act stipulates that the Exchange Supervisory Office must enforce compliance with the Law Against Restraints on Competition. In doing so, it pays particular attention to whether participants have fair access to trading, information and settlement systems, and other exchange-related services. The Exchange Supervisory Office can engage the services of a state commissioner to supervise trading on the exchange. In practice, however, Trading Surveillance (HÜSt) usually performs this function, although the Exchange Supervisory Office has the power to take charge of an inquiry or investigation at any time.
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Exchange trader
Exchange traders conclude transactions on the exchange in the name of and for the account of their employer, or on behalf of a third party.

In order to be admitted to trading, exchange traders must demonstrate that they possess the necessary aptitude and sense of responsibility for trading on the exchange in an exam administered by the board of examiners at FWB® Frankfurter Wertpapierbörse (Frankfurt Stock Exchange). Traders who are active only in currency trading are not required to take the exam.

Exchange traders are permitted to trade only on behalf of their employer or a third party, and may not participate in own-account trading. In floor trading, each trader can represent only one firm; in electronic trading, one exchange trader can act on behalf of several firms.
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Exchange turnover
For instance, the daily exchange turnover comprises all transactions executed (traded shares x respective price) during a trading day.
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Exercise (warrants)
American options can be exercised on any bank business day during the entire exercise period. By contrast, European options can only be exercised on the expiration date. In some cases, the terms and conditions of the warrant stipulate that the warrant can only be exercised during a very specific time frame.
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Exercise period (warrants)
As a rule, the right to exercise a warrant expires several days prior to
the end of the official exercise period; at the same time, the warrant
ceases to be eligible for trading on the exchange.
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Exercise price
The exercise price is specified in the options contract.
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Exercise ratio
Number of units of an underlying instrument that a warrant holder can purchase or sell by exercising the warrant
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Exercise ratio (warrants)
Number of units of an underlying instrument that a warrant holder can purchase or sell by exercising the warrant.
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Exhaustion gap
Exhaustion gaps occur in market situations in which almost all investors have already invested in or sold a stock at which point supply and demand are both equally low. In such situations a slightly higher offer or demand result in relatively greater price losses or gains.
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Exit
Venture capital companies are usually very well-informed with respect to the earnings position of the company in which they have invested. If it becomes known that a venture capital company wishes to sell its participation in a company, potential buyers are often suspicious – and with good reason. For this reason, venture capital companies have four exit options: buyback, trade -sale, secondary purchase, and Going Public.
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Exotics
The innovative powers of issuers seem to know no boundaries. They meet the demands of investors with new constructions of warrants and other leverage products. The names of these exotic issues are just as creative: Knock-ins, corridor, hamster, chooser and turbo warrants and even CLICK warrants. Above average chances to make profits are countered by above average risks up to losing everything.
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Expiry
If the warrant has an intrinsic value, the option right must be exercised by this date at the latest; otherwise, the warrant expires without value.
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Expiry date
The expiry date is the last day on which an investor can exercise an option right or warrant right to buy the respective equity at the strike price. After the expiry date has passed, the option right expires without value.

Terms:Triple witching day
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FBF
FBF (Fördergesellschaft für Börsen und Finanzmärkte in Mittel- und Osteuropa mbH) was founded in 1992 as part of a joint initiative between the German Federal Government, the Working Group of the German Securities Exchanges, the banking industry, and the community of German brokers. The organization is financed with funds provided by TRANSFORM, a program run by the German Federal Government, and by Deutsche Börse AG. FBF carries out consultancy and training projects in the field of the securities market in numerous countries in Central and Eastern Europe on behalf of the German Government.
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Fee schedule of the stock exchange
The stock exchange charges fees for various services, such as the admission of participants or securities to exchange trading, or the listing of securities on the exchange. The fee schedule of the stock exchange is issued by the Exchange Council and approved by the Exchange Supervisory Office. Regulations on the fee schedule of an exchange are contained in the German Stock Exchange Act, section 5.
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Filing
The submission of admission materials (issuing prospectus) and follow-up mandatory reports (e.g., quarterly reports) to an exchange
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Fill or kill

Fill-or-kill orders are either executed in their entirety or not at all, i.e. the order lapses if complete execution is not possible.

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Financial futures transaction
The key feature of this kind of transactions consists therefore, not only in the open positions in the annual financial statement resulting from the future delivery term, but also in the fact that neither the buyer nor the seller has to perform the contract within the agreed date. Financial futures transactions comprise all the transactions settled on the over-the-counter (OTC) market, on the regulated unofficial market as well as in the regulated futures exchanges, where it is possible to trade financial futures contracts. Financial transactions settled on the OTC market are therefore high individually draftable and consequently suitable for an organized exchange trade. Therefore OTC-financial trading includes:

 non-standard financial futures  non-standard options forward rate agreements foreign exchange futures.
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First price
If an opening price has not been set, the price is quoted “–“, possibly with an assessed quotation.
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Fixed-price offering system
Under the fixed-price offering system, the issuing price is calculated on the basis of the company's fundamentals, taking into account the exchange price of comparable companies as well as the general market situation. It is then published in the offering prospectus so that investors can submit requests to purchase shares at this price during the subscription period. Once the issuing volume is completely subscribed, the lead bank can terminate the subscription process before the official subscription period is over. If an issue is oversubscribed, priority is often given to smaller orders, with the result that institutional investors receive fewer shares than requested. Alternatively, the securities can be divided equally among subscribers, or allotted proportionally. In some cases, a lottery system is used. Prior to 1996, issuing prices determined using the fixed-price offering system tended to be excessively high, owing to heightened competition among banks for lucrative IPO contracts. In principle, the banks were interested in setting prices that would reflect the current market situation because they wished to avoid difficulties in placing the securities among investors. However, many issuers wanted to inflate prices so as to maximize the capital generated by the issue, and chose as their syndicate leader the bank that offered the highest issuing price in conjunction with relatively low costs. In many cases, issuing prices determined in this way soon underwent a correction to what was considered a more appropriate level, resulting in disappointment among investors and a loss of confidence in the ability of underwriting syndicates to set fair prices. For this reason, alternative procedures such as book-building have become more popular since 1996.
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Fixing
In the fixing procedure, which takes place around 1.00 p.m. on exchange trading days, the prices of officially quoted bonds and exchange rates between the domestic currency and key foreign currencies are determined.
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Float
The float refers to shares that are not owned by major shareholders, and can therefore be acquired and traded by the general public. As a rule, the larger the float, the easier it is for investors to buy and sell the stock. Since June 2002, the stocks in Deutsche Börse's share indices have been weighted according to trading volume and market capitalization based on the number of shares in free float.
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Floor (warrants)
Lower limit on the extent to which the owner of a put warrant can participate in the difference between the strike price and the spot price of the underlying.
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Floor trading
The primary forms of communication used on the trading floor are speech and gestures; traders match orders by shouting them out and using hand signals (open outcry). According to the customs and usage of the trading floor, the spoken word or agreed-upon hand signals are sufficient to make the transaction legally binding.

Market participants on the trading floor are exchange traders, exchange brokers and independent brokers. Exchange brokers perform their activities on the trading floor in separate enclosed areas, at so-called trader's desks; exchange brokers and independent brokers must approach the trader's desks to execute their transactions.

In Germany, there are currently eight exchanges where securities are traded on the floor (all of which are cash markets):

FWB Frankfurter Wertpapierbörse

Rheinisch-Westfälische Börse in Dusseldorf

Bayrische Börse in Munich

Hanseatische Wertpapierbörse in Hamburg

Baden-Württembergische Wertpapierbörse in Stuttgart

Berliner Wertpapierbörse

Niedersächsische Börse in Hannover

Bremer Wertpapierbörse.  

The counterpart to the traditional floor trading system is the electronic, computer-based trading system, which is gradually phasing out floor trading. For example, at FWB® Frankfurter Wertpapierbörse, cash trading can also take place in the electronic trading system Xetra® , which now accounts for more than 90 percent of turnover in the DAX® shares.

Antonym: computer-based trading system
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Foreign bond
Foreign bonds are those issued by European issuers abroad or by foreign issuers in Europe. Compared to a European bond with a nominal value stated in euros, foreign bonds are subject to an additional exchange-rate risk.

Synonym: currency bond
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Foreign exchange
Foreign exchange comprises credit balances or checks denominated in foreign currencies. Foreign notes and coins are not termed foreign exchange, but rather currency.
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Forward
Because forwards are not standardized instruments, the type and price of the goods to be traded, the volume, and the contract maturity must be determined individually. Owing to the number of variables that must be considered when transacting a forward, the fungibility of these derivatives is limited. Forwards differ from futures in that the underlying instrument is nearly always delivered. Margin requirements must be agreed upon individually, because it is the parties to the contract – and not the clearinghouse – who bear the risk.

In Germany, forwards are executed primarily for currencies and interest rates, and rarely for stocks, bonds, derivatives or notional underlying instruments. Typical forward contracts are currency forwards and the forward rate agreement (FRA).
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Forward transaction
With a futures contract, the trade is finalized, i.e., the delivery of payment for goods, at a predetermined time in the future. In a spot (or cash) transaction, payment and delivery take place close to the time of the contract’s close.

This type of trade is possible with all types of goods, e.g. with securities, interest, currencies, metals and agricultural products such as wheat or orange juice. Commodity futures and financial futures are differentiated on the markets.

Derivative products are backed by a basis value or underlying. The term of the business – from contract close to fulfillment – is called maturity.

Buyer positions are called “long positions”; sellers take “short positions.”

Derivative transactions can take place on an organized derivatives market, such as a futures exchange. Investors trade standardized contracts; in addition, there are transactions between investors and issuers of warrants. There is also an over-the-counter (OTC) market for derivatives. These can be customized and are therefore not suited for organized exchange trading.

The most important characteristic of derivative transactions comes from the fact that the deal is about a “floating transaction”, in balance-sheet terms, until the actual date of the deal, especially because neither buyer nor seller must uphold their end of the deal until the maturity date
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Free float
The float refers to shares that are not owned by major shareholders, and can therefore be acquired and traded by the general public. As a rule, the larger the float, the easier it is for investors to buy and sell the stock. Since June 2002, the stocks in Deutsche Börse's share indices have been weighted according to trading volume and market capitalization based on the number of shares in free float.
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Freefloat definition for Deutsche Börse indices

During the chaining procedure in June 2002, Deutsche Börse has switched over its index calculation to a free-float weighting basis. Simultaneously, the various share categories were separated in all indices, i.e. each category of a company's stock is considered separately since then. Only the higher capitalized or more liquid category respectively can be admitted to a selection index. The following definition applies for determining the free-float for the weighting of the respective share category of a company in the equity indices:

1. All shareholdings of an owner which, on an accumulated basis, account for at least 5 percent of a company’s share capital attributed to a class of shares are considered to be non-free float. Shareholdings of an owner also include shareholdings

  • - held by the family of the owner as defined by section §15a of the German SecuritiesTrading Act (WpHG)
  • - for which a pooling has been arranged in which the owner has an interest
  • - managed or kept in safe custody by a third party for account of the owner
  • - held by a company which the owner controls as defined by section 22 (3) of the German Securities Trading Act (WpHG)

2. The definition of “non-free float” – irrespective of the size of a shareholding – covers any shareholding of an owner that is subject to a statutory or contractual qualifying period of at least six months with regard to its disposal by the owner. This does only apply during the qualifying period. Shareholdings as defined by sentence no. 1 above are counted as shareholdings for the calculation according to No. 1. Shares held by the issuing company (treasury shares) are always considered as block holdings and are not part of the free float of the share class.

3. As long as the size of such a shareholding does not exceed 25 percent of a company’s share capital, the definition of free float includes all shareholdings held by

  • - asset managers and trust companies
  • - investment funds and pension funds
  • - capital investment companies or foreign investment companies in their respective special fund assets (Sondervermögen)

with the purpose of pursuing short-term investment strategies.

Such shares, for which the acquirer has at the time of purchase clearly and publicly stated that strategic goals are being pursued and that the intention is to actively influence the company policies and ongoing business of the company, are not considered as such a short-term investment. In addition, shares having been acquired through a public purchase offer will not be considered as short-term investment. This does not apply to shareholdings managed or held in safe custody according to No. 1, or to venture capital companies, or other assets serving similar purposes. The shareholdings as defined by sentence no. 1 above are not counted as shareholdings for the calculation according to No. 1.

4. Shares that are under the control of a shareholder via derivatives will only be considered for the calculation of the Free Float if these positions have to be reported according to legislation in WpHG or
WPÜG and the company is in a takeover situation. The various criteria laid down in Nos. 1 to 4 are also fully applied to classes of shares that are subject to restrictions of ownership. Fur the purpose of the determination of the Free Float as described above each ISIN under which shares are traded is considered a separate share class.

Source: Guide to the Equity Indices of Deutsche Börse

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Freiverkehrsausschuss (Admissions Committee for the Unofficial Market)
The Admissions Committee for the Unofficial Market can refuse an application for admission to the Unofficial Market if the applicant has not taken sufficient steps to create a market for the security, or if the listing of a security in the Unofficial Market would undermine investor protection or run counter to the interests of the general investing public. Regulations on the work of the Admissions Office for the Unofficial Market are contained in the Guidelines for the Unofficial Market, in the Rules and Regulations of the respective stock exchange, as well as in the Stock Exchange Act, section 78.
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Front-Running
Front running occurs when investment planners, analysts or exchange dealers purchase securities before recommending them to their customers, or when bank employees execute customers' orders only after they have bought or sold the relevant security for their own account. Front running is prohibited by the Securities Trading Act.
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Full disclosure
The German Disclosure Act obligates stock corporations to publish annual financial statements and a management report. In addition, listed companies must report material information without delay. Deutsche Börse requires companies listed in the Prime Standard segment to comply with further rules concerning disclosure. For example, companies must publish quarterly reports in addition to annual financial statements; they must hold at least one analyst event per year and publish ad-hoc messages in English. The bodies of the stock exchange monitor whether a company is acting in compliance with disclosure requirements.
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Fund
Funds pool the assets of many investors and invest them in stocks, bonds, and other instruments, which enables investors to invest in a wide variety instruments with a small amount of money. Distributing risk among many different instruments reduces the overall risk for investors. Funds are the investment of choice for investors who do not want the burden of constantly monitoring their investments, and who prefer to leave the task of tracking and analyzing the market to professionals.

A fund is managed by an investment company. The fund's assets are kept in custody at a depositary bank. Investors can buy or sell shares through the investment company itself or on the stock exchange. In most cases, the shares carry a load to cover marketing costs. Income in the form of dividends or interest is either paid out to the shareholder or reinvested.

The value of a share is calculated by dividing the fund's total assets by the number of outstanding shares. If the value of the investments held by the fund increases, the fund's total assets increase, and in turn, the value of the shares goes up.

Two categories of funds, retail funds and special funds, are each geared to a different group of investors. A further distinction is made between open-end and closed-end funds; a closed-end fund issues a fixed number of shares.
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Fund of funds
Investment fund that invests primarily or exclusively in other funds.
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Fundamental analysis
The goal of fundamental analysis is to determine a fair price for a company's stock by studying how key company data develops over time. The analysis is divided into two parts: diagnosis and prognosis. Data from the income statement and the balance sheet are analyzed and set in relation to the price of the stock. The price-earnings ratio is one of the indicators utilized in fundamental analysis.
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Fungibility
The exchange is also defined as a market for fungible goods.
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Future
Futures are highly liquid standardized financial instruments that are traded in the derivatives market. There are two types of futures: financial futures and commodity futures. The underlying instruments of financial futures are stock indices, currencies, or interest rates, whereas commodity futures are tied to the movements of real goods such as raw materials or agricultural products. The value of a future depends on the value of the respective underlier. The earliest derivatives transactions were commodity futures. Long ago, farmers wished to protect themselves against fluctuations in the prices of their crops. To do so, they entered into futures contracts to ensure that they would be able to sell their product at a favorable price the following year. There are two sides to a futures transaction. A "long position" represents the buyer's obligation to purchase the underlying instrument or commodity for the predetermined price on the settlement date; a "short position" represents the seller's obligation to deliver the underlying instrument or commodity.
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Gamma
Warrants that are at the money have a high gamma value because their delta value is particularly elastic.
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Gap

Gaps occur in particular when trading in a stock is interrupted, in which case the valuation of the stock can change very rapidly. Longer interruptions can result in significant jumps in price, because this gives all market participants an opportunity to process the most recent information and reassess the value of the stock. A gap can also refer to the difference in price between the opening price and the trading range of the previous day (opening gap). Technical analysts use gaps as indicators of trends. There are several different types of gaps, including common gap, breakout gap, runaway gap and exhaustion gap.

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General Standard
Admission to General Standard does not require any action on the issuers' part; it occurs automatically with the listing in either the Official or Regulated Market.
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Geregelter Markt (Former Regulated Market)
The previous subdivision of the Official and Regulated Markets no longer exists. The admission and follow-up requirements for the Regulated Market are now those previously valid for the Official Market. Securities that were entered before November 1, 2007, are now listed only on the Regulated Market.

The admission and follow-up requirements for the Regulated Market are those previously valid only for the Official Market. The requirements regarding company age now apply for the Regulated Market.
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German Bunds
Exchange-traded securities of the Federal Government have a maturity of ten to 30 years. The issue prices vary and feature a fixed nominal yield. Redemption takes place at the nominal value. It is stipulated by law that German Bunds are admitted to trading without the need to publish a prospectus.
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German Stock Corporation Act
The German Stock Corporation Act (Aktiengesetz), enacted on 6 September 1965, regulates in particular the founding of a company, the legal relationships between the company and its partners or shareholders, capital, changes to the capital stock, and the dissolution of the company.
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Global depositary receipt (GDR)
Global depository receipts (GDRs), which were developed on the basis of American depositary receipts (ADRs), securitize the ownership in shares. A GDR can relate to one or several shares, or a mere proportion of a share. GDRs are traded instead of the original shares on exchanges worldwide and are denominated in euro.
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Global security
Global securities facilitate the safe custody and administration of shares. One disadvantage, however, is that shares held as in the form of a global security are less fungible than individual shares (see fungibility). Global securities cannot be traded on the stock market because they are not deliverable. For this reason, they are used primarily by large shareholders who wish to hold their shares over the long term. In Germany, global shares otherwise serve only as a temporary document until the final share certificates are printed, e.g., following a capital increase or new issue, so that trading in these shares, as well as price quotations, can continue without interruption. Synonyms: global share, global certificate, multishare certificate
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Going Public
Going Public is usually considered to be a synonym for initial public offering (IPO). In the original sense, Going Public refers to the change in a company's legal form when it is converted from private ownership – e.g., from a partnership, limited liability company – to a stock corporation, thereby giving the public the opportunity to invest in it. In the meantime, however, Going Public has come to be used in a broader sense, in which it is understood to mean the initial listing of a company's shares on the stock exchange, also called IPO. An IPO is usually planned and carried out in conjunction with an underwriting bank, or in the case of large new issues, a syndicate. The bookbuilding procedure has become the accepted method of determining the issuing price of a stock. The primary advantages of Going Public are that it enables the company to raise additional equity capital and gives the original venture capitalists the opportunity to exit. Moreover, it is a form of publicity for the company, and serves to distribute the equity capital among a broader shareholder base. The best time for a company to go public is during a bull market, when it is more likely that all new shares will be bought, as this will lower the cost of capital. Often, companies that are planning an IPO over the medium term will issue warrant-linked bonds and convertible bonds, which entitle the owner to subscribe to shares issued as part of the future IPO. If the IPO does not take place or is postponed, the bond is usually bought back by the issuer at above par.
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Gray market
Securities that have not yet been officially issued are traded in the gray market. The disadvantages to trading in the gray market are a lack of market transparency and a low degree of liquidity. Antonym: organized capital market/exchange
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Green shoe
Green shoe is an option to issue additional shares if, in conjunction with a new placement, demand exceeds supply: if a new issue is oversubscribed, the green shoe is used to satisfy excess demand or to stabilize the trading price.

The issuing company gives the lead bank an option for more shares under the original terms. In this way, the bank can ultimately issue more shares than originally planned. Investors who have subscribed for the shares get the additional shares at the issue price.

The issuer and syndicate banks determine the green shoe amount before the IPO. The number of securities in the reserve is noted in the issue prospectus. The additional shares generally come from the original owners. They can, however, be financed by an increase in capital.

The term comes from the US company Green Shoe Manufacturing, which was the first to utilize the method.

Synonym: oversubscription option
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Gross dividend
Dividend amount prior to the deduction of corporate tax.
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Growth market
Growth markets can be entire economies (e.g. emerging markets) or individual sectors (such as telecommunication, technology, etc.). They offer investors an above-average rate of return as well as excellent growth prospects.
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Guarantee certificates
Investors who want to play it safe, can bet on guarantee certificates. These products ensure the repayment of the invested capital and allow the investor to partake in price gains. However, the investor buys this security at the cost of lower profits. In addition, the capital guarantee is only valid at the end of the maturity. If the investor wants to have access to placed money before that, he could suffer losses. Details about currently traded types of investment products.
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Hands-off management
In hands-off management (as opposed to hands-on management), investors do not get involved in corporate decisions and limit their role to that of a mere provider of capital.
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Hands-on management
The venture capital company supports company management in a variety of areas, ranging from strategic decision-making and product development to establishing customer contacts and recruiting new staff.
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HCPI
The HCPI is used for measuring inflation in an international, mainly inner-European comparison. It is calculated according to uniform concepts, methodologies and processes, reflecting the price development in the various countries; it is based on the respective national consumption habits. The German HCPI is calculated by the Federal Statistical Office. The first steps to create a harmonized index were already taken in the late 1980s. However, there was no binding rule, so that these efforts proved little successful. This only changed when the Maastricht Agreement took effect and enabled a broader harmonization.   The HCPI surveys the consumption spending of private households. Thus, it differs from the concept of national accounting for it only takes into account the private spending that actually occurred. However, there is no uniform weighting formula for the member states of the European Union. Furthermore, national particularities as regards consumption habits are not abstracted, either. Based on the national HCPIs, the Statistical Office of the European Union (Eurostat) calculates the consumer price indices for the European Union, the Euro Zone and the European Economic Community. The preliminary result is published around the 25th of the reporting month; the final results are published around the 15th of the following month.  
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HDAX
In total, HDAX ® includes the 110 largest equities in Prime Standard.
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Hedge Funds Certificates
These investment products allow private investors a chance to invest in the hedge fund arena. The certificates are issued across a basket of various hedge funds – similar to a fund of funds, which holds stakes in several different funds. While classical investment funds focus on outperforming their corresponding benchmark, hedge funds use the entire spectrum of financial instruments to earn a yield independent of market developments. Aside from shares and bonds, they invest in currencies, commodities and futures such as options. Hedge fund managers are even allowed to sell short or to invest on loans. The pretense of this strategy is to earn profits even when prices are falling. A huge variety of investment strategies are represented in these funds. They range from following macroeconomic trends using investments in currencies or commodities to systematic but nevertheless highly risky trading in futures. Moreover, hedge fund managers often require minimum investment levels to the tune of six figures. They are thus too expensive for most private investors as a direct investment tool. Besides of that hedge funds are better suited to being just one part of a mixed depot because of their highly risky nature.With comparably less investment capital, private investors can use Hedge funds certificates to benefit from hedge fund strategies and evenly distribute the risk.
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Hedging (warrants)
If an investor expects that stock prices will fall, he can hedge his stock portfolio by acquiring put warrants that entitle him to sell his shares at a predetermined price – e.g. at the current market price – within the period stipulated in the warrant contract. In doing so, he will prevent the value of his portfolio from decreasing. Although the investor must pay a price, in the form of a warrant premium, to protect his assets, this price is far lower than the loss he would incur as a result of the expected downturn in the market.
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Historical volatility (warrants)
Average volatility of an underlying instrument, usually calculated on the basis of the last 100 closing prices.
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Holding period
The holding period in Germany was twelve months – i.e., capital gains resulting from the purchase or sale of securities held for less than a year were subject to income tax. As of 2009 with the introduction of the 'Abgeltungssteuer' (flat rate withholding tax) the holding period was abandoned.
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iBoxx indices
iBoxx® indices represent the European bond markets. The real-time index family comprises the iBoxx € liquid indices, the iBoxx € benchmark indices and the iBoxx £ benchmark indices.

The iBoxx € index family contains real-time indices for fixed-interest government bonds (in euros or any currency of the Euro Zone), sub-sovereigns, collateralized bonds and corporate bonds. Within the iBoxx € index family, the iBoxx € benchmark indices enable market participants to evaluate the euro bond markets. iBoxx £ index family represents the government bond market in British pounds.

iBoxx € liquid indices comprise a selection of the most liquid bonds from the iBoxx € benchmark indices. They are particularly suitable as a basis for OTC and exchange-traded derivatives. Bond prices are supplied in real-time by ABN AMRO, Barclays Capital, BNP Paribas, Deutsche Bank, Dresdner Kleinwort Wasserstein, Morgan Stanley and UBS Warburg. An independent index provider, Deutsche Börse consolidates those prices, calculating and distributing the indices.
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ifo Business Climate Index
The ifo Business Climate Index is one of the most important early indicators for the economic development in Germany. On a monthly basis, the Munich-based institute surveys some 7,000 companies on their evaluation of the economic situation and their expectations for the following six-month period.   The answers are weighted according to a complex formula and related to a basis of 100. That means: with an average neutral assessment of the business sentiment the index achieves 100 points; a worse assessment would result in a lower, and a better assessment would result in a higher figure. The index is published on the last Tuesday of each month.
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In the money
A warrant that is in the money has a positive intrinsic value.
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Independent broker
Like exchange brokers, independent brokers arrange securities transactions between the banks that are represented on the stock exchange. In contrast to exchange brokers, however, they are only authorized to determine prices in the Regulated Market and in the Unofficial Market, and not in the Official Market. They can trade for their own account, although they usually liquidate their positions at the end of each trading session.

Independent brokers are admitted to trading by the exchange operating board. They must demonstrate that they are responsible and reliable, and that they possess the necessary aptitude for exchange trading.
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Index

All indices calculated by Deutsche Börse: stock indices and bond indices.

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Index certificate
With Index certificates investors can participate one-to-one in the development of an exchange index – without actually buying the underlying shares in that comprise that index. Every index certificate has a subscription rate (e.g., 1:10 or 1:100) that defines the value of the certificate in relation to the index listing. The investor invest broadly diversified and transparently with minimal effort and smaller amounts. If the underlying share increases in value, the value of the certificate increases in analog to the gain; with every setback, the certificate value declines accordingly. Investors should think about currency risks when investing in index certificates that track a share index outside of the euro zone. And they should pay attention to whether the underlying index is a performance or price index. With a performance index, all dividends and profits from subscription rights flow into the index value. In contrast to that, price indices show the pure development of the shares and thus the price declines that usually accompany dividend payouts. Index certificates are particularly interesting to investors that want to profit from positive capital-market developments, but who don’t want to deal with the daily price developments of several individual shares. Details about currently traded investment product types.
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Indexfund
Like individual stocks, index funds can be traded on the exchange in continuous trading.

The performance of an index fund generally matches that of the benchmark index. Dividends are paid to the investor, and the administration costs of an index fund are usually lower than those of an ordinary mutual fund. One advantage of index funds is that they provide for greater diversification of risk than investors can achieve by purchasing individual stocks. Unlike index certificates, index funds do not have a maturity period, and thus there is no risk to the issuer.

Market Overview All Exchange-Traded Funds
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Indicative price
The indicative price represents the median of the current estimate, which is usually comprised of a bid and an ask quote. As a rule, investors buy at the higher bid price and sell at the lower ask price. In no-spread trading on the Frankfurt Stock Exchange, the lead brokers offer execution at the spread median, the indicative price.

If the indicative price is not shown, the lead broker is in the progress of determining the price. In this case, simply refresh the page.

These terms apply for all DAX® shares for an order volume up to €10,000. For MDAX® shares, the order volume may be up to €5,000; orders in SDAX® and TecDAX® titles may have a volume of up to €3,000. Usually, if the market situation permits, the lead brokers may also execute larger orders at the indicative price.

For titles with a price of less than €5, the indicative price, at which the lead broker will try to execute, will be shown. However, these shares – currently ten out of 160 – are not included in this voluntary commitment.

Estimates are published by the lead brokers in floor trading on the basis of the current order situation and under consideration of the reference market. For the 160 titles, this reference market is Xetra until 5.30 p.m. In evening trading, the trading floor itself the market place with the largest turnover. The estimate informs about the price level at which an exchange price could be fixed. It is non-binding and does not present an offer to buy.
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Individual custody

Securities held in individual custody are kept separate from those owned by the bank or by third parties. This form of custody is used if the securities in question are not admitted to collective custody by a securities clearing and deposit bank, or if the client requests it. The name of the owner is printed on a strip of paper which is wrapped around the securities to keep them together. The certificates and the coupon sheets are separated for security purposes. The client is responsible for any costs associated with this form of custody. From the client's perspective, the advantage of individual custody is that he can receive the original shares he delivered to the bank. He retains ownership of his specific shares. Regulations on individual custody are contained in the section 2 of the German Securities Deposit Law (effective on 4 February 1937) and in the terms and conditions of the bank groups. Antonym: collective custody

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Industry group
Companies listed in Prime Standard are sorted into industry groups by
their core business fields. There are 62 industry groups in total, based
on which companies are included in the 18 Prime Standard sector
indices.
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Initial Public Offering (IPO)

A company usually prepares and executes an IPO with the support of an issuing bank, or, in the case of large-scale issues, in conjunction with a syndicate. Companies go public primarily as a means of raising additional equity capital and as an exit channel for the original capital providers (e.g., venture capital companies). Additional benefits of an IPO include a higher profile for the issuing company and a broader investor base. It is more advantageous for a company to go public during a bull market because this increases the likelihood that all new shares will be purchased, thereby lowering the cost of capital for the issuer.

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Insider
According to sections 13 and 14 of the Securities Trading Act, enacted on 26 July 1994, insiders are persons who,

as members of the executive or supervisory bodies, or as personally liable partners of either the issuer or a company affiliated with the issuer; as investors with an equity participation in the issuing company or a company affiliated with the issuer; or  owing to their profession, activities or tasks, have access to inside information.

Inside information is any knowledge pertaining to an issuer of insider securities, or to insider securities themselves, that has not been made public, and which could have a considerable impact on the price of the insider securities if it were publicly announced. Insiders who abuse this situation by trading on the basis of such knowledge create unfair advantages for themselves with respect to other market participants. For this reason, the Securities Trading Act provides for a ban on insider trading. A violation of this ban is punishable with a prison term of up to five years or a fine. The Securities Trading Act differentiates between persons with direct access to inside information (primary insiders) and those who have acquired inside information indirectly (secondary insiders). Exchange trading and OTC trading in insider securities is constantly monitored by the Federal Supervisory Office for Securities Trading (BAFin).
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Intra-Day-Handel
In intraday trading, securities are bought and sold within the same trading day, in some cases even several times during the day. Day traders try to spot day trends and use price volatilities for their profit. They rarely keep a position over night.
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Intrinsic value
The warrant premium is the sum of two values: the intrinsic value and the time value. On the expiry date, the time value is zero, and thus the value of the warrant is equal to its intrinsic value. The intrinsic value is calculated by subtracting the exercise price from the current price of the underlying security and multiplying the result by the exercise ratio.
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Investment fund
Funds pool the assets of many investors and invest them in stocks, bonds, and other instruments, which enables investors to invest in a wide variety instruments with a small amount of money. Distributing risk among many different instruments reduces the overall risk for investors. Funds are the investment of choice for investors who do not want the burden of constantly monitoring their investments, and who prefer to leave the task of tracking and analyzing the market to professionals. A fund is managed by an investment company. The fund's assets are kept in custody at a depositary bank. Investors can buy or sell shares through the investment company itself or on the stock exchange. In most cases, the shares carry a load to cover marketing costs. Income in the form of dividends or interest is either paid out to the shareholder or reinvested. The value of a share is calculated by dividing the fund's total assets by the number of outstanding shares. If the value of the investments held by the fund increases, the fund's total assets increase, and in turn, the value of the shares goes up. Two categories of funds, retail funds and special funds, are each geared to a different group of investors. A further distinction is made between open-end and closed-end funds; a closed-end fund issues a fixed number of shares.
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Investment trust
Investment trusts are closed-end funds, and thus issue a limited number of shares. Once this number has been reached, the fund is closed. The investment company is not obligated to buy back shares, although investors can sell their shares on the stock exchange if the investment company refuses to redeem them. Closed-end funds are especially popular in the US and the UK. Synonym: Closed-end fund
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Investor relations
Investor relations (IR) provides current and potential shareholders with information about a company. The goal of IR is to promote long-term ties between shareholder and company via measures such as road shows, analysts' conferences, shareholder newsletters, the presentation of the financial statements, ad campaigns, company brochures, etc.
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IPO
Abkürzung für: Initial Public Offering; erstmaliges öffentliches Angebot von Wertpapieren eines Unternehmens.
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ISIN
Acronym for International Security Identification Number

The ISIN is the international standard used for the identification of securities. It consists of a two-digit code (e.g. DE for Germany) which is followed by a ten-digit alphanumerical code.
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ISM Index
The American early indicator is based on a monthly survey among purchasing managers from 350 companies in 20 representative US industry sectors. Thereby, the purchasing managers evaluate their current and future economic situation. The Purchasing Managers’ Index for the manufacturing sector has been calculated for more than 80 years. The Institute for Supply Management (ISM), which is responsible for the compilation and publication of the index, comprises 180 sub-institutions and has more than 45,000 members. Since May 2001, the ISM Purchasing Managers’ Index has also considered services alongside the supply of goods. Today it comprises the sub-areas: incoming orders (30 percent), production (25 percent), employment (20 percent), delivery times (15 percent) and stock (10 percent). For the calculation of the index, the sentiment among each sub-area is regarded in comparison to the previous month. All sectors that were able to post an increase and half of the unchanged values are added up. Thereby, a total value of above 50 points towards an expansion in the manufacturing industry, while a value below 50 indicates a downturn. An index level of 50 means a zero-growth rate and any value below 40 indicates a recession. This indicator is published on the first working day of each month.
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Issue
An issue is typically effected via an underwriting syndicate, although some companies also opt for a direct offering. The advantage of issuing securities with the support of a syndicate is that the issuer can utilize the syndicate bank's existing business connections to the investing public and its extensive sales system for placing the securities. As a rule, the syndicate purchases the entire issue from the issuer at the underwriting price and re-sells the securities to investors at a slightly higher price, also called the offering price. In doing so, the syndicate assumes the risk associated with the placement of the securities. The underwriting method is especially suited for large-scale international issues. Recently, global issuing syndicates have begun to form to handle the worldwide placement of securities (e.g., the offering of shares by Deutsche Telekom AG); these syndicates have regional sub-syndicates (e.g., for the regions of Europe, North and South America and Asia).
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Issuer
Stocks are typically issued by stock corporations, while bonds can be issued by both private-sector companies and entities under public law. For example, the Federal Republic of Germany is an issuer of federal government bonds. Some companies or entities, such as the public authorities or real-estate credit institutions, issue securities on an ongoing basis; they are referred to as tap issuers.
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Issuing price
In recent years, the bookbuilding method has become a widely used procedure for determining issuing prices.
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Jumbo-Pfandbrief
Criteria to be fulfilled by a Jumbo-Pfandbrief:

 The issue volume must be at least €500 million, although subsequent increases can be made in smaller amounts.

Jumbo-Pfandbriefe must be fixed-interest bullet bonds; interest is payable annually beginning one year after the date of issue.

 At least three market makers must be selected to provide simultaneous bid and ask prices for volumes of up to €15 million during the usual exchange hours. This function can also be performed by the issuer.

 Jumbo-Pfandbriefe must be admitted to trading in the Official Market or Regulated Market immediately after they have been issued.

The Association of German Mortgage Banks (Verband deutscher Hypothekenbanken) recommends that Jumbo-Pfandbriefe also meet the following criteria:

 Interest rates on Jumbo-Pfandbriefe should not move in fractions of less than one-quarter of a percentage point.

 The issuer should require that market makers remain within a certain spread when quoting bid and ask prices.

 The issuer should take steps to facilitate the placement of the bond on the international market.
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Kind (of warrants)
Market sentiment behind an investment or leverage product. Long, Call, or Bull speculates on rising prices. Short, Put or Bear speculates on falling prices.
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Knock-out limit
Knock-out limits represent a border for leverage products. If the underlying instrument climbs above, or falls beyond, this limit the knock-out certificate expires without value. Some knock-out certificates include an additional stop-loss limit at which the certificate does not expire without value, but a residual value is being paid to the investor. This value is dependent on the distance to the knock-out value.
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L-DAX
As of 3 November 2003, Deutsche Börse is calculating additional late indices in a minute cycle between 8am and 9am as well as 5.30pm and 8.00pm in order to provide investors with indicators for the price development of German benchmark indices.

In its composition the L/E-DAX corresponds to the “original“ index DAX . However, it is based only on the prices achieved on the trading floor of the Frankfurt Stock Exchange traded by Xetra Frankfurt Specialists.

L/E-DAX and the other Late/Early Indices L/E-MDAX, L/E-SDAX and L/E-TecDAX serve merely as indicators and not as underlyings for any derivative products such as certificates, warrants, funds etc.

With the extension of trading to 8 pm they replaced the Late indices as of 1 July.
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Laspeyres index
The Laspeyres index is used to calculate the value of a portfolio, whose composition was established at a given base date, in terms of the prices in effect at the reporting date. The composition of the portfolio thus does not change over time. The stock indices of Deutsche Börse – DAX® , MDAX® , etc., are calculated using the Laspeyres formula. Because the historical portfolio would become obsolete with time (e.g., when new companies are included in the index, or when companies in the index file for bankruptcy), Deutsche Börse adjusts the formula to account for the new portfolio at each review date.
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Last price

The last price represents the price that was calculated last. As a rule, this is a price at which an order has been executed, i.e. a transaction has been made. In exceptional cases it may be an estimate. Price addenda give further information on the way in which a price has been determined.

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Late indices
As of 3 November 2003, Deutsche Börse is calculating additional late indices in a minute cycle between 5.30pm and 8.00pm in order to provide investors with indicators for the price development of German benchmark indices.

In their composition the late indices correspond to the “original” indices DAX ® , MDAX ® , SDAX ® , TecDAX ® and NEMAX® 50. However, they are based only on the prices achieved on the trading floor of the Frankfurt Stock Exchange.

Under the names L-DAX ® , L-MDAX ® , L-SDAX ® , L-TecDAX ® and L-NEMAX® 50 the late indices serve merely as indicators and not as underlying for any derivative products such as certificates, warrants, funds etc.
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Lead brokers
According to the stock exchange rules and regulations, these financial services providers or banks are must take into account all orders that have been entered before the time of the price calculation. For these purposes, lead brokers keep their own order book, i.e., a list containing all respective buy and sell orders.

Lead brokers calculate the fair prices on the basis of the above-mentioned data.

The lead brokers' price fixing process is monitored by the market surveillance office of the respective exchange. Additionally, stock market supervision authorities are also monitoring the process. There are currently 15 lead brokers for all tradable securities in floor trading.

More basics about lead brokers.
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Lead manager
The management of a standing syndicate usually rotates on a regular basis. Lead managers receive a special fee for performing these functions.
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Leverage (Warrant)
The leverage is meant to express how much more strongly the value of an investment in a warrant theoretically rises (falls) than if the same sum was invested in the underlying instrument, if the price of the underlying instrument rises (falls) by one unit. This simple leverage calculation is based on the erroneous assumption that the price of the warrant and the underlying instrument change by the same absolute amount. Therefore, the refined leverage is calculated by multiplying the leverage by the delta. The result is often termed elasticity or leverage.
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Liability for statement made in a propectus (Prospekthaftung)
When it can be clearly proven that information contained in an issuing prospectus is inaccurate, an investor who has purchased newly issued securities has the right to return them to the issuer or the underwriting bank, who are then obligated to refund the issue price as well as any related transaction costs. In the case of securities acquired on the open market, the investor is entitled to a refund of the purchase price; if the securities have already been sold, the investor will be compensated for any losses incurred. The statute of limitations for filing a claim against an issuer or underwriting bank regarding statements made in a prospectus runs out six months after the information was determined to be incorrect, or three years after the prospectus was published, whichever comes first.
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Limit
A limit order specifies the highest price at which a purchase order is to be executed, or the lowest price at which a sell order is to be executed. For bonds, the limit is indicated as a percentage of the price; for stocks, it is indicated as a price per share. Limit orders are either good for the day or expire at the end of the month. If no limit is indicated when the order is placed, the order is filled immediately and the security is bought or sold on the exchange at the market price. For stocks that involve dividend payments, the bank automatically adjusts existing limit orders to account for the dividend. In the case of an ordinary capital increase or a capital increase out of retained earnings, the order is canceled when share price is quoted ex-rights. Banks and securities service providers usually charge a fee to cover the additional costs of processing limit orders.
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Liquidity
The liquidity of a security is a function of the number of shares or units in circulation and the number of market participants who are willing to buy or sell them. If a security is liquid, this means that both supply and demand are enough to ensure that a trade - another term for the simultaneous purchase and sale of a security - can take place at any time.

At FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), so-called designated sponsors furnish additional liquidity for securities that tend to be less liquid by providing quotes at which they are willing to buy or sell the security.

The liquidity of a security is usually measured on the basis of its stock exchange turnover.
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List price
With the changes to the German Stock Exchange Act (Börsengesetz) brought by the Fourth Financial Markets Promotion Act (Finanzmarktförderungsgesetz) of 2002, list prices (corresponding to the official German term "Kurs") were no longer offcially fixed by appointed brokers. The German term “Preis” (price) is now preferred over “Kurs”.

The price published for a stock or warrant is per single unit. Bonds and futures contracts are noted as a percentage of the security’s nominal value.
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Listing
“Listing” means that a security – a stock, bond, etc. – is now available to be traded on a specific market segment within an exchange. When a security is listed on FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), it is tradable on the exchange floor and/or on the Xetra® electronic trading system.

If the listing is for share in a company and the admission occurs on a publicly regulated market (Prime Standard and General Standard), then it is referred to as share placement. If the company also raises new capital and is legally required to provide a prospectus when making the placement, this is called an initial public offering (IPO).
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Load (XTF)

Charge added to the price of a share in a mutual fund, calculated as a percentage of the offering price. The funds listed in XTF® are no-load funds.

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Loan value

The loan value of a securities account is calculated on a daily basis by the bank where the account is maintained. The bank defines margin limits for particular securities categories. In Germany, investors can usually borrow up to 50 percent of the value of the German shares in their account, and up to 60 percent of the value of bonds and investment funds held.

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Lockup period
The shares of companies listed in Neuer Markt® were subject to a lockup period of six months.
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Lokomarket
Germany, the settlement period is two trading days. Cash market transactions on FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) are settled both on the floor and in the Xetra electronic trading system.

Antonym: derivatives market
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Lombard rate
Banks can borrow money from the German Bundesbank to bridge temporary liquidity gaps by pledging securities as collateral. The Lombard rate in turn determines the interest rate on loans granted by the bank to its credit customers, and thus also influences money market interest rates. In most cases, the Lombard rate is one to two percent higher than the discount rate. At the beginning of 1999, a comparable interest rate set by the European Central Bank (ECB) replaced the Lombard rate that was previously calculated by the Bundesbank. Regulations on the eligibility of securities as collateral for Lombard loans are contained in the Bundesbank Act (Bundesbankgesetz, BbankG), section 19 para. 1.
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Long position
Synonym: Bull position

Antonym: Short position
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Low
Lows are calculated for a particular period, such as a day, a week, a month or a calendar year. They are often used as a benchmark for measuring volatility or performance. Synonyms: Low price
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Margin
In Germany, the exchange clearinghouse requires that members provide margin for options and futures contracts. In the case of options, only the seller must provide margin, whereas both buyer and seller are obligated to meet margin requirements for futures transactions. When a derivatives contract is concluded, the investors must provide initial margin of 2 to 7 percent of the contract volume. During the lifetime of the contract, adverse price developments may result in a margin call, in which the investor is required to put up additional margin immediately. Futures traders are affected by daily price movements in the market. If the price of the underlying instrument moves adversely, they must furnish additional margin (variation margin). If the price moves in their favor, their margin account will be credited accordingly.
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Margin loan
Investors usually receive margin loans from their banks on very favorable terms and conditions. The amount of the loan is generally determined on the basis of the value of the investor's securities account, which serves as collateral for the loan. There are various lending limits for different securities. A higher percentage can be borrowed against blue chips and funds than against speculative stocks or bonds. If the value of the securities account falls, the maximum lending limit also drops, as does the customer's credit line. In this case, the bank has the right to close individual positions in the customer's account and hold them as collateral.
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Mark to the market
Open futures positions, for example, are marked to the market on a daily basis to ensure that margin requirements are being fulfilled. The margin owed is offset against the surplus margin in the account.
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Market capitalization
The market capitalization is calculated by multiplying the current market price of a stock by the number of outstanding shares. Because an increase in a market capitalization often implies a concomitant rise in the volume of shares traded, it serves as a measure for assessing the trading volume and the market liquidity of a company. The market capitalization of a stock exchange is equivalent to the total market capitalization of all listed companies and is often an indicator of its size. The market capitalization can be calculated for individual sectors or for the stock market as a whole.
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Market maker
Market makers guarantee that a security can be traded on an ongoing basis, thereby ensuring the liquidity and viability of the market. Through their readiness to step in as a counterparty at any time, market makers compensate for the inconsistent order flows of investors and stabilize the market when temporary imbalances occur. They are usually assigned to support trading in inactive stocks.

At FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), market makers are known as Designated Sponsors.
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Market outperformer
A security whose performance (i.e., price development) has been more favorable than that of the overall market.
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Market participant
The Exchange Operating Board is responsible for deciding whether a prospective participant is to be admitted to trading on the exchange.

The most important prerequisites for admission to trading are as follows:

The firm must trade securities or foreign currencies on the exchange, or act as an intermediary for such transactions.

 The brokers who represent the participating firm must demonstrate that they possess the necessary aptitude and sense of responsibility for trading on the exchange.

 The firm must ensure that exchange transactions executed on its behalf are settled according to regulations.

In cases where the stock exchange regulations and directives provide for it, the firm must provide collateral to guarantee the settlement of transactions executed on its behalf.

More than 400 market participants are admitted to trading on FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange).

Admission requirements are contained in greater detail in Section 16 of the Stock Exchange Act.
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Market performer
A security whose performance (i.e., price development) has kept pace with that of the overall market.
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Market price
Market prices are calculated on the basis of available buy and sell orders either by a lead broker on the trading floor or automatically via the electronic trading system.
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Market segment
When admitting shares to trading on FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), companies may choose between three market segments regulated by law: the Official Market, the Regulated Market and the Open Market (Regulated Unofficial Market). 

The Official and Regulated Markets are EU-regulated markets, i.e. they are markets governed by public law (e.g. by the German Securities Trading Act – WpHG). The admission criteria and transparency requirements are prescribed by the European legislator. Companies in the Official and Regulated Markets fulfill the highest Europe-wide transparency standards and enjoy all advantages of a full exchange listing. The Official Market features particularly strict admission criteria and follow-on obligations. The Regulated Market is characterized by slightly less strict admission criteria and lower admission fees; it serves as a entry segment and pre-stage of the Official Market.

The Open Market (Unofficial Regulated Market) is a segment under private law; it is regulated by Deutsche Börse. This is where companies fulfill lower admission requirements and less follow-on obligations in order to include their shares in trading. Besides German shares, primarily foreign shares as well as bonds of German and foreign issuers, certificates and warrants are traded here.

These three admission segments provide the legal framework – as stipulated by the legislator in the Securities Trading Act – for the transparency levels Prime Standard, General Standard and Entry Standard.

Additional to the legal market segments, there are two smaller trading segments for foreign shares which are listed on stock exchanges abroad. International blue chips from Europe and the US can be traded in a special quality segment, Xetra Stars®. Securities from central and eastern Europe that are included in the Open Market at the Frankfurt Stock Exchange can opt for Newex as a trading segment.

Exchange-traded funds also have their own market segment, Xetra Funds. Both Xetra Funds and Xetra Stars are subject to particular trading and transparency standards.
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Market surveillance
The function of the market surveillance (Handelsüberwachungsstelle) is to ensure that price determination takes place according to the pertinent rules and regulations. To this end, it gathers and analyzes all data related to exchange trading and settlement and immediately notifies the Exchange Operating Board (Börsengeschäftsführung) of any irregularities.

The market surveillance reports to the Exchange Supervisory Office (Börsenaufsichtsbehörde).
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Market underperformer
A security whose performance (i.e., price development) has lagged behind that of the overall market.
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Market value
Depending on the type of security involved, the market value is expressed either as a unit quotation or a percentage quotation:

The market values of stocks and options are published by the stock exchange as unit quotations (i. e., in currency units per share).   The market values of bonds and future contracts are expressed as percent quotations (i. e., as a percentage of the nominal value). market value = nominal value x price/100

The market value of a security is used as the basis for tax valuation.
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Matching
In the Xetra® electronic trading system, orders with the same bid and ask price are continuously offset and executed. Matching occurs according to price-time priority - i.e., if two bid orders have been placed for the same price, the first order received will be the first to be executed.
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Maturity (warrants)
The expiry date represents the end of the time to expiry; it is the last day on which the warrant may be exercised. After the last trading day, which usually takes place a few days before the expiry date, investors may only conduct the settlement with the issuer. Many issuers determine in their terms and conditions for warrants that the option right is executed automatically at the end of the time to expiry if there is a positive balance. Nevertheless, investors should constantly monitor the expiry and adapt their strategy accordingly especially with the remaining time to expiry coming to an end.
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MBI (management buy-in)
In an MBI, the incoming management has contacts to financial investors who provide liquid funds and accompany the takeover process, thereby guaranteeing that the new management team will be successfully integrated into the company.
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MBO (management buy-out)
MBOs often occur in response to restructuring measures, or when a takeover has been announced, which from the point of view of management is undesirable. The advantage of an MBO is that the company can retain its management know-how.
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MDAX
MDAX ® was launched on 19 January 1996. It comprises the 50 largest companies from classic sectors in the Prime Standard segment of FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) that rank below the DAX® shares in terms of market capitalization and trading volume. The base date for the index is 30 December 1987 = 1,000 points.

The composition of the index is reviewed on a semi-annual basis and adjusted in March and September. The criteria for weighting the shares in the index are: trading volume and market capitalization on the basis of the number of shares in free float, as well as position in the respective sector.

Outside the regular review dates, a company can be taken out of the index if it does no longer belong to the 75 largest companies in terms of market capitalization and trading volume. Respectively, a company can be included in the index if it ranks among the 40 largest companies in terms of market capitalization and trading volume. The changeover takes effect as of the next scheduled chaining date.

Decisions regarding changes to MDAX® are taken by the Executive Board of Deutsche Börse AG, which consults with the Arbeitskreis Aktienindizes (Stock Indices Working Group).
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Mezzanine money
Forms of mezzanine money typically used in Germany: shareholder loans, preferred shares, naked warrants, silent partnerships
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Midcap Market Index
The Midcap Market Index includes 80 equities of medium-sized market capitalization in Prime Standard.
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Minimum trading unit
In floor trading at FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), all stock orders are executed at the next possible opportunity. The minimum trading unit is one share.

Bond orders must have a par value of at least euro 1 million to be eligible for continuous trading.

In the Xetra® electronic trading system, the minimum trading unit for all stocks is one share.
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Momentum Indicator
The momentum is calculated as the difference between the current and previous price of a stock, divided by the previous price. It can be computed hourly, daily, weekly, or monthly. An interval of 10 days is typical. In a diagram, the momentum of a stock is usually depicted as a curve that fluctuates around a zero line. If the curve crosses the zero line from below, this is understood as a signal to buy. If the momentum curve crosses the zero line from above, it is considered to be a signal to sell.
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Money laundering
Money laundering is prohibited in Germany. Once money obtained through illicit activities has been introduced into the economy (e.g. through a cash deposit to a bank account), its origin can no longer be traced. To prevent money laundering, financial service providers and insurance companies that offer life insurance policies are obligated to confiscate the personal documents of anyone who attempts to make a deposit of more than euro 10,000, and to notify the police of any suspicious transactions. The prohibition on money laundering is specified in the German Penal Code (Strafgesetzbuch), section 261. Regulations on tracking down profits from criminal activity is regulated in the Money Laundering Act (Geldwäschegesetz).
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Money market
The money market provides banks and large industrial firms with a means of borrowing funds for a period of up to 12 months. This ensures the liquidity of banks and of the economy as a whole. Money-market loans have various maturities, e.g. overnight money (with a maturity of up to 24 hours), day-to-day money, one-month money, three-month money, and others. Money-market participants include the Bundesbank, commercial banks, and large industrial companies.
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Monthly report
Investment companies that operate actively managed funds listed in the XTF® segment must publish monthly reports as well as semiannual reports to enhance the transparency of their funds.
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Mortgage Bond (Pfandbrief)
Mortgage bonds are similar to bonds in form, and are issued by mortgage banks, ship mortgage banks, and public-sector credit institutions. Because they are collateralized with real estate, they are especially secure. A trustee ensures that mortgage bonds are always backed by mortgages of the same amount that carry at least the same interest rate. As a rule, mortgage bonds have a long maturity, in some cases over 25 years. The holder of a mortgage bond cannot redeem it before the end of the term agreed upon. The borrower must begin repaying the principal at the latest when one-third of the maturity has elapsed. The redemption value of mortgage bonds may not exceed their face value. Mortgage bonds are traded on the exchange in the Official market (Amtlicher Markt) segment. The name 'Pfandbrief' is registered. Important regulations pertaining to mortgage bonds are contained in the (German Mortgage Bank Act (Hypothekenbankgesetz) , section 7, section 9 para. 1 no. 3., and section 41; and in the Mortgage Bond Act (Pfandbriefgesetz), sections 2 and 10.
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Multiple voting rights
In most cases, multiple voting rights were granted between 1920 and 1923 - a period of high inflation - to prevent outside capital from gradually taking over the issuing company. Since 1998, they have been banned by the German law regulating supervision and transparency in the corporate sector (Gesetz zur Kontrolle und Transparenz im Unternehmensbereich). Existing multiple voting rights will expire during a five-year transition phase and be compensated in accordance with their value. However, the highest office responsible for the economy in each German Bundesland is authorized to grant multiple voting rights if such an action is considered necessary to protect the interests of the economy as a whole. Regulations on multiple voting rights are contained in the Stock Corporation Act, section 12, para. 2, no. 1.
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Naked Warrants
Like traditional warrants, naked warrants are traded on the stock exchange. They are issued primarily by banks and securities houses. The writer of a warrant need not be the issuer of the underlying instrument.
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NASDAQ
NASDAQ is a New York-based electronic trading and price information system for exchange traders. The system is primarily used for trading in growth stocks; however, speculative stocks can also be traded. The NASDAQ composite index tracks the price development of the stocks listed on NASDAQ.
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NEMAX 50
NEMAX® 50 was launched on 1 July 1999. Until 21 March 2003, it represented the 50 largest German and foreign companies listed in the Neuer Markt segment, measured in terms of market capitalization and volume of trading.

From 24 March 2003 until 31 December 2004, NEMAX 50 comprised the 50 largest shares from technology sectors in the Prime Standard segment of FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), ranking below the DAX® shares in terms of market capitalization and volume of trading. The base date for the calculation of the index was 30th December 1997 = 1,000 points. The calculation of NEMAX 50 was discontinued by the end of 2004.
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Net asset value (NAV)
The NAV is calculated by dividing the fund's assets by the number of shares outstanding, and is usually equivalent to the market price of one share. Deutsche Börse (the Frankfurt Stock Exchange) computes the NAVs of the index funds listed in XTF® at regular intervals on behalf of the respective investment company, and publishes them like the prices of individual stocks.
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Net dividend
Companies must pay corporate tax on distributed profits. This tax is subtracted from the gross dividend before it is paid out to shareholders. The resulting amount - i.e., the gross dividend minus corporate tax - is called a cash dividend. For example: Gross dividend: EUR 3 Corporate tax (25%): EUR 0.75 Cash dividend: EUR 2.25 Synonyms: Cash divided
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New issue
New issue describes the initial admission of a security to exchange trading. In this context, securities are company shares, bonds or certificates. The issue of shares serves companies as a means to acquire equity capital, which is then used by the company. In contrast to this measure, companies may alternatively acquire outside capital through bank credits or the issuance of corporate bonds, which they must pay back at the end of maturity.  

New issue may also describe the shares of a company being placed on the stock market for the first time within the scope of a capital increase or replacement. Before a company is admitted to exchange trading, it must fulfill a number of admission criteria, which vary according to the respective market segment.

Before the issue, investors can subscribe to the shares of a company during the subscription phase by placing a buy order. If – during this period – demand turns out to be higher than the available supply, the security is oversubscribed.
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New issue market
Synonyms: Primary market
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New shares
New shares are usually issued after the start of the financial year. As a result, they are not fully entitled to dividend payments, and are listed and traded on the exchange separately from the "old" shares until dividends have been paid. Before being admitted to trading on the exchange, new shares are traded in the regulated unofficial market and off-floor trading.

Existing shareholders usually have subscription rights to new shares. By purchasing new shares, they can ensure that they own the same percentage of the company's capital stock as they did prior to the capital increase.
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Newex
Former trading segment for central and eastern European securities in free float on FWB Frankfurter Wertpapierbörse (Frankfurt Stock Exchange)
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No-par share
In contrast to nominal par shares, which indicate a fixed amount of base capital, no-par shares securitize a percentage amount of the company’s base capital. No-par share certificates do not indicate the rate of participation, but instead only indicate, for example, “One Share in the Company.” That means an adjustment in the certificate can be avoided in the case of any capital increase. A no-par share’s rate of participation in the company can be calculated based on the base capital as indicated in the company’s articles of incorporation.
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Nominal capital
In Germany, the nominal or stated value of a company's capital stock must be at least €50,000. It is divided into par shares or no-par shares. If the company undertakes an ordinary or simple capital write-down, the value of the capital stock can temporarily drop below this minimum level. However, a capital write-down with this consequence will be approved only if the company plans to meet the minimum requirement through a subsequent capital increase.

The capital stock of a company may only be increased or reduced upon approval by the annual general meeting.
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Nominal value
Reverse convertibles have a nominal value, on which investors are paid an interest for each day they are holding the security. The interest paid does not depend on the current price of the reverse convertible. At the end of maturity, the issuer may choose to either deliver the number of underlying shares corresponding to the exercise ratio or pay out the nominal value of the reverse convertible. As a rule, this decision depends on the current price of the underlying.

In case of strong price losses of the underlying, the investor may not be paid the full nominal value at the end of maturity. 

If the reverse convertible has a knock-in level, the issuer's choice is restricted. He may only deliver shares if the price of the underlying fell below the knock-in level at least once during the derivative's maturity.

Synonyms: face value, par value

More information on reverse convertibles
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Offering price
The offering price of an investment fund, for example, is typically calculated on a daily basis by the investment company on the basis of the fund's net asset value (NAT). Investors who purchase shares in the fund are often required to pay a fee ("load") in addition to the offering price.
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Official Market (Amtlicher Markt)
On November 1, 2007, the Official Market was converted into the Regulated Market. The previous subdivision of the Official and Regulated Markets no longer exists. The admission and follow-up requirements for the Regulated Market are now those previously valid for the Official Market. Securities that were entered before November 1, 2007, are now listed only on the Regulated Market.
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Offsetting transaction
In Germany, the banks have voluntarily entered into an agreement to use the exchange. These types of transactions are therefore only allowed when the customer expressly asks for them.
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Omega (warrants)
The omega indicates the percentage change in the price of a warrant given a one-percent change in the price of the underlying instrument. Unlike leverage, which assumes that the absolute changes in price are the same for the warrant and the underlying instrument, the omega takes into account the delta and thus measures the actual leverage of the warrant.
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Open Market (Freiverkehr)
Primarily foreign shares are traded in Open Market (Freiverkehr) at FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange). However, a number of German companies are listed here, too - beside bonds of German and foreign issuers, certificates and warrants. The segment was created on 1 May 1987. The Regulated Unofficial Market is not an organized segment in the sense of article 2, paragraph 5 of the German Securities Trading Act. The Frankfurt Stock Exchange's Directives for the Regulated Unofficial Market are the basis on which the inclusion of a share is determined. There are only few admission criteria and no follow-up requirements for issuer.

The basic criteria are as follows:

Application for admission must contain a clear description of the share to be included as well as state on which national or international market prices have already been established. For shares, which are not traded on any other market, the applicant must provide detailed information in the form of an exposé which then enables an appropriate evaluation.

The issuer's application must be submitted in written form by a company already admitted to trading at the Frankfurt Stock Exchange.

The applicant must immediately and in written form notify the Frankfurt Stock Exchange about circumstances concerning the respective share and/or issuer.

The Frankfurt Stock Exchange, as the operator of the Regulated Unofficial Market, makes all decisions as regards inclusion of a share.

 Publication language: German or English.

Since October 2005 Freiverkehr is also referred to as Open Market.

Synonym: Freiverkehr
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Open outcry
Form of communication between dealers and brokers in floor trading in which securities prices and trading volume are indicated via hand signals or by shouting.
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Opening price
In floor trading, the first variable price serves as the opening price. It is determined by an exchange broker, usually shortly after the trading session has begun, on the basis of all orders received hitherto and in keeping with the principle of highest volume transacted. In the electronic trading system Xetra®, designated sponsors ensure liquidity in the securities assigned to them, which means that opening prices can nearly always be determined in the opening auction prior to the commencement of trading. As with floor trading, the price determination procedure is based on the principle of highest volume transacted. If the opening auction does not generate any turnover in a stock, and thus does not yield a price for that stock, the first variable price serves as the opening price.
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Opération blanche
The concept underlying the opération-blanche method is that once an investor commits a fixed amount of money to a stock portfolio, it will grow on its own - i.e. without the need for additional funds. New shares are purchased with dividend payments or through the sale of subscription rights. For example, in the case of a capital increase, the investor sells enough subscription rights to enable him to acquire the new shares without having to contribute more of his own funds. Consequently, the number of shares in the portfolio increases, although the amount invested did not change.
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Operational profit
The operational profit summarizes the profits generated by the various business areas of a company, for instance through sales of self-manufactured products. The operational profit does not include profits generated by subsidiaries or holdings nor earnings from financial investments.
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Option
Options are financial instruments in their own right. They belong to the class of instruments known as derivatives, which are traded either over-the-counter or as standardized contracts on an options and futures exchange. The buyer of an option pays the option writer a price (premium) for the right to exercise the option. In return, the option writer is obliged to deliver or accept the underlying instrument in exchange for payment of the agreed-upon price when the option is exercised. If the option owner does not exercise the option, it expires at the end of a specified period. Because the decision to exercise an option rests solely with the buyer, this class of derivative is also called a contingent forward deal.

Purchasing options enables investors to take advantage of expected upward trends in the cash market or hedge against risks. The two classic option contracts are the long call (purchase of a call) and the long put (purchase of a put):

 Long call:  

An investor expects stock A to go up. By purchasing a call, he acquires the right to buy this stock in six months' time at a price of euro 100 (the exercise price). He pays an option premium of euro 5 per share. If, at the end of the six-month period, the price of the stock has increased to, say, euro 108 (in which case the option is said to be "in the money"), the investor will exercise his option; in other words, he will buy the shares from the option writer for euro 100 and then sell them immediately on the market for euro 108. In this example, his profit -- the price of the share less the exercise price and the premium -- would be euro 3. If the stock price had been euro 105, the option would have been at the break-even point, and the investor would have neither earned a profit nor incurred a loss. If the market price of the stock is at the exercise price ("at the money") or below it ("out of the money") at the time of expiration, the investor will normally let the option expire, because he would lose money by exercising it.

 Long put:  

The purchase of a long put often serves as a strategy for hedging against losses. For example, an investor owns stock B, whose current price is euro 45. Because he expects prices to fall, he wishes to protect himself against a possible loss. He buys a put with an exercise price of euro 48 and pays the option writer a premium of euro 3. If the price of the stock has dropped to euro 40 at the time of expiration, the investor will exercise his option. He sells his shares and receives euro 48 per share. After deducting the option premium of euro 3, he retains euro 45, thus preserving the value of the stock.
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Option premium
The option premium reflects the intrinsic value and the time value of the option. Option pricing models such as the Black-Scholes model are typically used to calculate a fair option premium. The option premium is also referred to as premium income.
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Option writer
In return for a premium, the option writer promises to deliver either the underlying security or the appropriate cash amount if the option is exercised. There are two kinds of option writers:

A put writer must buy the underlying security at the agreed-upon price if the option holder exercises the option before it expires. A call writer must deliver the underlying security at the agreed-upon price if the option holder exercises the option before it expires.
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Order
A complete order contains information on the investor, the security, the order volume, the type of order and price, the time limit and the exchange on which the order is to be executed. The investor places the order with a bank, a financial services provider, or an institution admitted to exchange trading.

There are two kinds of orders, limit orders and market orders. A limit order to buy must be executed at or below the limit price; a limit order to sell must be executed at or above the limit price. Market orders are to be executed at the best available price. In general, it is recommended that investors place limits on all orders (except for stocks contained in the DAX® index) to protect their assets from excessive price fluctuations.

A further type of order is the so-called stop order, which is executed as a market order when a stock price reaches a specified threshold. For example, an investor can limit losses during a price slide by placing a stop-loss order, which means that a stock is to be sold as soon as the price has fallen to a certain level. Conversely, a buy stop order is not to be executed until the price has risen to the designated level. The advantage of stop orders is that investors do not need to constantly monitor the price of their stocks.
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Order book
An order book is used to pool, compare and match the volumes and prices of buy and sell orders for a particular security. Thus, in auction-based trading, the order book supports the price determination procedure.

Market orders, which are to be executed at the best available price, are given first priority in the order book. The remaining orders are sorted and listed, with the bid prices in ascending order and the ask prices in descending order.

Nowadays, most order books are computer-based. Some order books are closed, which means that only certain groups of persons have access to them, while others, such as the electronic order book of the Xetra® trading system, are open to all trading participants.
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Order book statistics
The order book statistics of FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) comprise all transactions in the Xetra® and Xontro (trading floor transactions) order books. In the statistics all volumes are single counted.
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Order routing
Banks typically forward buy and sell orders electronically. In Germany, orders can be routed to the trading floor via Xontro, or to the Xetra trading system via an order routing interface.
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Ordinary share
Most shares traded on the German stock exchanges are ordinary shares. The shareholder rights vested in ordinary shares include in particular

the right to a dividend payment the right to vote at the annual general meeting subscription rights for new shares the right to demand information during the annual general meeting the right to a share of liquidation proceeds

On the German exchanges, the abbreviation for ordinary shares is "Stämme" (for "Stammaktien"). Antonym: preferred
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OTC (over-the-counter) trading
Nearly all securities, currencies or precious metals can be traded over-the-counter by banks, investors and Exchange Broker. OTC prices are quoted in separate price lists. OTC trading is governed by the regulations pertaining to securities transactions; however, it is not subject to statutory supervisory or monitoring regulations. Generally accepted exchange customs serve as a guideline for OTC trading. Synonyms:   Off-floor trading
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Other types of certificates
Index certificates These track the development of an underlying index 1:1 – both for rising and falling prices.

Reverse index certificates In contrast investors bet explicitly on falling share prices when they invest in this kind of certificates, also known as short or bear certificates. If the underlying index contracts, the certificate gains in value.
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Out of the money (warrants)
A call warrant is "out of the money" when its exercise price is higher than the current market price of the underlying instrument. A put warrant is out of the money when its exercise price is lower than the current market price of the underlying instrument. A warrant that is out of the money has an intrinsic value of zero.
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Outperformance certificate
Outperformance certificates offer investors disproportional gain compared to a direct investment in a share, commodity or index. Classic outperformance certificates have a strike price and a participation rate. Both features are determined at the certificate’s issue. As soon as the defined price level is reached, the price of the certificate responds to the price development of the underlying with a participation rate of more than 100 percent. In return, investors are not paid a potential dividend. It is paid to the issuer of the certificate instead. The higher participation rate also applies in case of losses. Below the strike price, investors face no higher risk than with a direct investment. At the end of maturity, the investor is paid at least the price of the underlying for each certificate.

Sub-types are protect outperformance and spread certificates, which feature additional safety levels. Typical names used by issuers are: express, sprint, spread, sidestep, double chance and touchdown (certificate).
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Overweight
Market participants speak of overweighting when buying or selling a particular type of investment (e.g. shares, bonds and warrants), a region or sector, ultimately changing the weighting of their depot. This weighting is usually stated in percent. The additional purchase of securities lends the respective type a stronger weight in the portfolio.

Analysts often use these terms to express their recommendations to either buy (overweight) or sell (underweight) shares.
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Paasche index
The price index expresses the percentage by which the value of an existing portfolio has increased or decreased in comparison with the base date. The value of the index at a given reporting date can only be compared with its value at the base date, not with its value at other reporting dates.
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Par value
For stocks, the par value indicates the fraction of a company's nominal capital that is represented by a single share. Thus, the total par value of all the shares in a company is equivalent to its nominal capital, or capital stock. In Germany, stocks must have a par value of at least one euro. Since the launch of the euro, companies have also been able to issue of no-par shares. For bonds, the par value represents a fraction of the total debt issued. It is the amount which is paid to the bondholder upon maturity of the bond.
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Partial execution
As a rule, on the stock market a buy or sell order is split into partial transactions if the order cannot be matched in full at the desired price. This occurs particularly in securities with a small market capitalization or free float. This can be very bothersome to investors – particularly if the partial transaction volumes are small and the commissioned bank charges a fee for each transaction. The stock exchange does not charge additional transaction fees.

However, partial execution may also offer an advantage if part of the order is executed at a better price.

For buy and sell orders on the trading floor of FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), the lead brokers guarantee execution in full for private investors. This applies to orders in DAX® shares up to €10,000, as well as in MDAX® and TecDAX® shares up to €3,000.
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Participation certificates
These securities guarantee a share in the profit generated by the issuer, but they do not come with voting rights. For participation certificates, no general standards apply, neither stipulated by law nor by the rules of the stock exchanges themselves. Each feature can be adapted to the individual financing needs of the issuer.
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Pension fund
Because the objective of pension funds is to increase assets for retirement, their basic portfolio structure (the proportion of assets invested in stocks, bonds, real estate and cash) is stipulated by law. Thus, pension funds are not oriented toward any particular investment instrument, although the majority of their assets should be invested in high-quality securities. As a rule, income is reinvested. When an investor purchases shares in a pension fund, the investment company is required to offer the investor a savings plan with a maturity of at least 18 months. The investor contributes to the fund at regular intervals until he or she has reached the age of 60. At the end of the maturity, the investor can choose between a lump-sum payment or a payment plan in which a fixed amount is paid out each month. This relatively new type of fund will play a major role in the capital market.
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Peoples share
The peoles share is not a category of shares. A share is issued as a peoples share to support certain economic and financial policy goals, i.e. to enable lower-income segments of the population to invest in stocks. They are often issued at a price below market on the condition that the buyer hold them for a certain period of time. The IPO (Initial Public Offering) of Deutsche Telekom is the most recent example of a German peoples share. Other examples include Volkswagen, VEBA and Preussag.
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Performance evaluation
The results of this performance evaluation are published regularly on www.xetra.de. They can be found in the detailed view of the respective security. Based on these results, investors can compare issuers' performance with one another according the criteria which are important to them and use this information in taking investment decisions.
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Performance index
The most important stock and bond indices are calculated by FWB Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) as both price and performance indices. In calculating a stock performance index, dividends and other payments to shareholders are reinvested in the notional portfolio. Bond performance indices are calculated taking into account the income generated by reinvesting the discounted average annual interest payment.
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Physical delivery (warrants)
Settlement of a warrant transaction through the delivery of the physical underlying instrument against payment of the exercise price.
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Placement
In the case of new issues, an underwriting bank typically commits to purchasing the securities from the issuer. The shares are then subsequently sold to the public by the underwriter. The underwriting bank receives compensation from the issuer in return for bearing the risk that there will be insufficient demand for the securities. A placement is considered successful when the majority of the shares are acquired by investors in the market.
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Placement volume
The placement volume includes the value of all shares of a new issue or capital increase. This sum expresses the exact amount of capital procured by the company.
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Pool factor
The pool factor is calculated against the nominal value. It starts at 1 and moves successively towards 0, i.e., 1 x 100, 0.9 x 100 and so on. Another possibility for rated amortization is to subtract a certain percentage at fixed intervals, e.g., 10 percent from 100, then 10 percent from 90 and so on.
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Preferred shares
A stock corporation can issue both ordinary and preferred shares; however, the share of the capital stock accounted for by preferred shares must not exceed that of the ordinary shares. The ordinary and preferred shares of a company are traded separately on the exchange; preferred shares are designated by supplementing the stock exchange code with a "3". Because they do not carry voting rights, they usually receive a lower valuation than ordinary shares. On the German exchanges, preferred shares are usually referred to as "Vorzüge" (for "Vorzugsaktien").

The special rights attached to preferred shares typically include a larger dividend (the so-called preferred dividend). Moreover, preferred shares can be cumulative, which means that passed dividends (dividends not paid for any reason) can be made up in subsequent years. The charter of the stock corporation contains regulations pertaining to the special privileges vested in these shares.

If the preferred dividends for a given year are passed, or not paid in full, the preferred shareholders are entitled to voting rights until the dividend arrears have been made up. In this case, preferred shareholders must be taken into account when counting votes.
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Premium
The option premium reflects the intrinsic value and the time value of the option. Option pricing models such as the Black-Scholes model are typically used to calculate a fair option premium. The option premium is also referred to as premium income.
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Premium (warrant)
Calculating the premium is a way of measuring the value of a warrant at a particular point in time. The premium is usually expressed as an annual percentage because it more accurately reflects the value of the warrant.
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Premium Margin
Premium margin is calculated daily for all options whose option premium has been paid in full by the purchaser. If a change in the price of the underlying security results in an increase in the cost of liquidating the position, the option writer is obliged to deposit additional premium margin. The option holder is not required to put up margin because in purchasing the option he has acquired the right, and not the obligation, to exercise the option. The maximum risk for the option holder is the loss of the option premium. Premium margin is not required for options on futures because the profits and losses that arise from these positions are netted on a daily basis.
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Price addendum
The following price addenda are used:

b (or price without addendum) = bezahlt: market cleared (all orders were executed; supply and demand were offset)

bG = bezahlt Geld: market cleared, stocks continued to attract buying interest (not all buy orders with a limit at the current quotation were filled)

bB = bezahlt Brief: market cleared, further offerings (not all sell orders with a limit at the current quotation were filled)  

ebG = etwas bezahlt Geld: only some limited buy orders were filled at the current quotation  

ebB = etwas bezahlt Brief: only some limited sell orders were filled at the current quotation  

ratG = rationiert Geld: scaling-down of limited buy orders (buy orders with a limit at or above the current quotation and unlimited buy orders were filled only in part)  

RatB = rationiert Brief: scaling down of limited sell orders (sell orders with a limit at or above the current quotation and unlimited sell orders were filled only in part)  

*: Orders involving small lots could not be filled.
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Price category
Price categories provide information on the method used to determine prices in the Xetra® electronic trading system or on the floor.

There are eight different price categories:

In floor trading:

E = Opening price

K = Spot price for securities with a daily price determination by the market maker, typically by 12.00 p.m.

V = Variable trading in continuous listing, price determination is possible at all times

In Xetra® trading:

A = Auction (regular auction)

C = Continuous Trading

F = Final Auction

O = Opening Auction

V = Volatility Interruption Auction
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Price details
Price details are published along with a price. They indicate during which trading phase the price has been determined. Unlike the price extras, the details are not anchored in the exchange regulations.

These price details are used:

G = Geld (bids): there were no trades; only bids existed at this price

B = Brief (offers): there were no trades; only offers existed at this price

- = gestrichen (quotation cancelled): no price could be determined

- G = gestrichen Geld (quotation cancelled, bids): no price could be determined; non-limit bids existed

- B = gestrichen Brief (quotation cancelled, offers): no price could be determined; non-limit offers existed

- T = gestrichen Taxe (quotation cancelled, estimated): a price could not be determined; the price is estimated

- GT = gestrichen Geld/Taxe (quotation cancelled, bids/estimated): a price could not be determined because the price is estimated on the bid side

- BT = gestrichen Brief/Taxe (quotation cancelled, offers/estimated): a price could not be determined because the price is estimated on the offer side

ex D = nach Dividende (ex dividend): first quotation net of the dividend

ex A = nach Ausschüttung (ex distribution): first quotation net of the distribution

ex BR = nach Bezugsrecht (ex rights): first quotation after separation of the subscription right

ex BA = nach Berichtigungsaktien (ex bonus shares): first quotation after change of the price quotation to the share capital adjusted from the issuer’s funds

ex SP = nach Splitting (after share split): first quotation after adjustment of the price quotation to reflect a share split

ex ZS = nach Zinsen (ex interest): first quotation net of interest

ex AZ = nach Ausgleichszahlung (ex settlement payment): first quotation net of a settlement payment

ex BO = nach Bonusrecht (ex bonus right): first quotation after separation of a bonus right

ex abc = ohne verschiedene Rechte (without various rights): first quotation after separation of various rights

ausg = ausgesetzt (suspended): the price quotation is suspended; an open outcry is not permitted

- Z = gestrichen Ziehung (quotation cancelled, redemption): the quotation of the debt security has been suspended due to a date for a drawing for redemption. The suspension begins two Exchange days before the date fixed for the drawing and ends at the end of the following Exchange day.

C = Kompensationsgeschäft (compensating transaction): only those orders with respect to which purchaser and seller were identical were executed at this price

H = Hinweis (note): separate reference is made to special matters
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Price index
The most important stock and bond indices are calculated by FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) as both price and performance indices. Stock price indices are calculated without taking into account dividend payments or changes in the capital stock of the companies whose stocks comprise the index; bond price indices do not reflect the income generated by reinvesting the discounted average annual interest payment.

Major foreign stock price indices include:

the Dow Jones Industrial Average (Dow Jones Index) and the Standard & Poor`s-Index for US companies

the FTSE Index (Financial Times Stock Exchange Index, also known as the "Footsie" Index) for the London financial center

the Nikkei Dow Jones Average Index (Nikkei Index or NDJA Index) for Japan  

 the IHT World Stock Index of the International Herald Tribune for the global stock market.

An example of a foreign bond price index is the Pictet Index for bonds denominated in Swiss francs.
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Price markdown
A price markdown indicates a substantial decrease in the price of a security. A share that has been marked down is designated with a minus sign on the quotations board at the exchange prior to the price determination process. Depending on the extent of the change, a price may undergo a simple (-), double (--), or triple (---) markdown:

In the case of shares, "-" indicates a price change of more than 5 percent but less than 10 percent of the previous price, "--" designates a decrease of between 10 and 20 percent, and "---" indicates a change of more than 20 percent. A price markdown is always announced in conjunction with a new estimated price. Convertible bonds, warrant-linked bonds and participation certificates are treated like shares with regard to price markdowns. In the case of participation certificates without warrants, which, as stipulated by law, are issued via the banking sector, "-" indicates an expected change of more than 1.5 percent of the par value; "--" indicates a change of more than 3 percent. In the case of bonds, "-" indicates a change of more than 1.5 percent of the par value; "--" indicates a change of more than 3 percent of the par value. In the case of warrants, "--" indicates a decrease of between 10 and 20 percent of the previous price; a change of more than 20 percent is shown as "---".

When a price has been marked down, the exchange price can only be determined after an appropriate period of time has elapsed and with the authorization of a supervisory member of the Exchange Management Board, that member's deputy, or a supervisory member of the Exchange Supervisory Committee. Once approval has been given, the Exchange Broker can either postpone the price quotation process for an appropriate length of time, or, in the case of securities eligible for continuous trading, commence the quotation process by determining the single cash price.
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Price markup
A price markup indicates a substantial increase in the price of a security. A share that has been marked up is designated with a plus sign on the quotations board at the exchange prior to the price determination process. Depending on the extent of the change, a price may undergo a simple (+), double (++) or triple (+++) markup:

In the case of shares, "+" indicates a price change of more than 5 percent but less than 10 percent of the previous price, "++" designates a change of between 10 and 20 percent, and "+++" indicates a change of more than 20 percent. A price markup is always announced in conjunction with a new estimated price. Convertible bonds, warrant-linked bonds and participation certificates are treated like shares with regard to price markups. In the case of participation certificates without warrants, which, as stipulated by law, are issued via the banking sector, "+" indicates an expected change of more than 1.5 percent of the face value; "++" indicates a change of more than 3 percent. In the case of bonds, "+" indicates a price change of more than 1.5 percent of the par value; "++" indicates a change of more than 3 percent of the par value. In the case of warrants, "++" indicates an increase of more than 10 to 20 percent of the previous price; a change of more than 20 percent is shown as "+++".                                                          

Once a price has been marked up, the exchange price can only be determined after an appropriate period of time has elapsed and with the authorization of a supervisory member of the Exchange Management Board, that member's deputy, or a supervisory member of the Exchange Supervisory Committee. Once approval has been given, the Exchange Broker can either postpone the price quotation process for an appropriate length of time, or, for securities eligible for continuous trading, commence the quotation process by determining the single cash price.
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Price sensitivity
Price sensitivity can be between zero and one for a call, and between zero and minus one for a put. Warrants that are well out of the money show relatively little change in price when the underlying changes and thus have a price sensitivity near 0. A warrant that is deep in the money, in contrast, is comprised almost exclusively of an internal value. The development of the warrant and the underlying occur almost in parallel. The price sensitivity in this case is near 1 or -1. Synonym: Delta (warrants)
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Price-earnings ratio
The P/E ratio is calculated by dividing the current share price, in euros, by the company's annual net profit per share. Also known as the multiple, it indicates how many times greater the stock price is than the company's expected profit per share, or how much an investor must pay for a profit per share of one euro. The greater the earning power of a company, the higher the P/E ratio. The P/E ratio thus reflects the company's expected long-term earnings. While it is a popular standard for valuing stocks, there is no general rule which states that a particular P/E ratio always means a stock is undervalued or overvalued.
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Primary market
Synonyms:   New issue market
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Prime All Share
Factsheet Prime All Share
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Prime Standard
Admission to Prime Standard requires the fulfillment of the following transparency criteria: quarterly reports; international accounting standards (IAS or US-GAAP); company calendar; at least one analyst conference per year; ad-hoc messages in English. Companies aiming to be listed in this segment have to apply for admission. Being listed in Prime Standard is a prerequisite for an equity to be included in the selection indices of FWB Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange).
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Principle of highest volume transacted
The principle of highest volume transacted applies to the procedures for determining the single cash price, the opening price, and the closing price in the cash market, as well as to the auctions in the electronic trading system. After buy and sell orders have been entered into the order book and matched, the lead broker (or the electronic trading system) determines the price that will maximize share turnover. Example: Price quotation: 135bG In this example, the greatest number of shares will change hands at a price of euro 135. All market orders, all buy orders with a limit above the determined price and all sell orders with a limit below the determined price are executed. Moreover, all sell orders with a limit at the exchange price are executed, whereas buy orders with a limit at the exchange price are executed only in part. Because there is still supply for the stock at a price of euro 135, the price addendum bB, or "bezahlt Brief" is used.
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Private placement (PP)
When a company allows its shares to be listed on the exchange, the shares can be sold to selected investors either by the company itself (direct listing) or by an issuing bank.

If a maximum of 100 qualified investors (banks, funds, etc.) are involved, the company is not required to provide a prospectus (see article 2, paragraph 1e of the European Prospectus Directive).

The shares being sold can come from existing shareholders or be part of a capital increase.
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Proprietary trading
Customer orders in securities that are not listed on the Official Market are executed by banks for own account. The turnover is credited to/debited from the customer account at a later time.
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Prospectus
An issuing prospectus contains all key information about the security: the issuer, corporate structure, financial situation, business activities, as well as all executive bodies and companies involved in the floatation. The issuer and the issuing syndicate are responsible and liable for the accuracy of the contents of the prospectus (prospectus liability). Since 1991, each issuer of securities which are being offered publicly for the first time in Germany is obliged to publish an issuing prospectus. The prospectus obligation becomes obsolete if the securities are only offered to a limited number of persons – e.g. if they are only offered to persons who purchase or sell securities professionally or commercially for own account or for third party account, such as banks – or if they are offered to employees either by their own employer or by a company affiliated to their employer. The issuing prospectus may not be published until publication has been permitted by the German Financial Supervisory Authority (BAFin) or until ten working days have elapsed after the BAFin received the prospectus without the BAFin having forbidden its publication. The minimum content required for an issuing prospectus is regulated in the Ordinance on Securities Sales Prospectuses. Issuers who apply for admission to the Official Market must draw up an issuing prospectus which fulfills the requirements of an exchange admission prospectus. The content is determined by the Stock Exchange Act and the Exchange Admission Ordinance. The accuracy of all information required is examined by the Admission Board of FWB® Frankfurter Wertpapierbörse (Frankfurt Stock Exchange), which decides whether to admit the company. In addition, a prospectus with which a company applies to be admitted to the Official Market or Regulated Market segments of the Frankfurt Stock Exchange should adhere to the requirements of the Going Public Principles which were published on 15 July 2002 and which will come into effect as per 1 September 2002. Since July 2002 (Fourth Financial Market Promotion Act), the prospectus must also be made available to the exchange in electronic form for publication on the Internet.
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Put (warrants)
An investor who buys a put warrant expects that the price of the underlying instrument will fall during the exercise period. Thus, he acquires the right to sell a particular quantity of the security in question at an agreed-upon price, either at any time during the exercise period (American-style) or on the expiration date (European-style). The put writer is obligated to buy the underlying instrument at this price, and in return receives a premium from the put holder. However, most warrants are settled in cash rather than through the physical delivery of the underlying security.
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Quarterly report
Quarterly reports contain information on company developments during the previous three months. They provide investors and analysts with an indication of what the company's annual financial statements will look like at the end of the year. Companies in FWB Frankfurter Wertpapierbörse's (the Frankfurt Stock Exchange) Prime Standard segment are obligated to publish quarterly reports. Detailed regulations pertaining to the content of quarterly reports are to be found in Paragraph 63 of the Börsenordnung (Stock Exchange Rules and Regulations).
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Quotation cancelled
No price could be determined; the price is an estimate.
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Quotation volume
In addition to providing a quotation volume, the designated sponsor or warrant issuer indicates the minimum quantity he is willing to trade even in highly volatile market phases. This minimum or effective quotation volume is substantially smaller than the regular quotation volume. Price quotes for a volume that is smaller than the minimum quotation volume are rejected by Xetra.
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Quote
A binding order to buy or sell at a limited price that is entered into the Xetra® electronic trading system by a designated sponsor or warrant issuer to enhance the liquidity of that security.
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Quote request
Electronic message asking a designated sponsor or warrant issuer to enter a quote in the Xetra® electronic trading system.
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Quote volume

In addition to providing a quotation volume, the designated sponsor or warrant issuer indicates the minimum quantity he is willing to trade even in highly volatile market phases. This minimum or effective quotation volume is substantially smaller than the regular quotation volume. Price quotes for a volume that is smaller than the minimum quotation volume are rejected by Xetra®.

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Range warrant
Warrant entitling the holder to receive a cash sum if the price of the underlying security falls within a certain range on a specified date.
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ratB (price addendum)
A price addendum is a code that is added to the price in floor trading. It states in what way the respective order situation is to be taken into account as the price is fixed. This information is part of the tick data.

ratB stands for "rationiert Brief" (rationed, offers) and indicates that the sell orders limited at and below the price determined and the market buy orders could only be executed in part.
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ratG (price addendum)
A price addendum is a code that is added to the price in floor trading. It states in what way the respective order situation is to be taken into account as the price is fixed. This information is part of the tick data.

ratG stands for "rationiert Geld" (rationed, bids) and indicates that the buy orders limited at and above the price determined and the market buy orders could only be executed in part.
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Rating
A rating is a qualitative evaluation of the default risk of a debtor, a credit or a bond issue. There is a distinction between short-term ratings and long-term ratings – depending on the future period for which the repayment potential is assessed. 

Ratings are expressed in letter codes; they are divided into various levels. Rating agencies determine their ratings on the basis of a systematic procedure. The largest agencies in this area are Standard & Poor’s, Moody’s and Fitch.

Rating codes vary from agency to agency or according to different time patterns. Moody's, for instance, uses letters and numbers in combination, such as in A1, A2, A3. Standard & Poor's, on the other hand, adds "+" or "-", such as in B+, B, B-. Thereby, AAA (triple A) stands for the highest level of creditworthiness and D indicates a looming insolvency.
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Rating agency
A rating agency evaluates a company's ability to meet obligations related to interest and redemption payments - both short-term and long-term. On the basis of these criteria, companies receive a rating. The leading agencies in this field are Moody's and Standard & Poor's.
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Real-time price

The price of a security, announced immediately after it has been determined on the exchange

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Redemption
The so-called creation/redemption file in Deutsche Börse's XTF® segment regularly updates the lists of purchases and sales made by a mutual fund, ensuring the transparency of the fund's portfolio structure.

Antonym: creation
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Registered share with restricted transferability
A special form of nominal share whose ownership transferal is bound to § 68 Paragraph 2 of the German Stock Corporation Act with the agreement of the corporation.
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Registered shares
Registered shares can be made out to natural persons or legal entities. They are transferred by means of a written agreement, or endorsement.

Because the name of the new shareholder is entered in the company's stock ledger, registered shares are not highly fungible. For the most part, however, this obstacle can be circumvented with an endorsement in blank. Special regulations pertaining to the transfer of registered shares can be laid down in the company's charter.

Recently, there has been a clear trend toward registered shares, which have certain advantages over bearer shares. For one thing, issuers of registered shares know who their shareholders are, and thus can expect their shareholder structure to be more stable. Secondly, because the stock ledger contains current data on shareholders, it enables the company to communicate directly and more effectively with its shareholders. Furthermore, a company with a transparent shareholder structure will have more opportunities to utilize secondary market instruments such as listings on other market segments, share buybacks, or capital increases. In short, the issuance of registered shares facilitates all measures aimed at enhancing investor relations – a convincing argument now that shareholder value is playing an increasingly important role in the capital markets.

Stock corporations that are planning a direct listing (listing of the original shares) on the New York Stock Exchange (NYSE) – the world's largest stock exchange – are required to issue registered shares.

A special type of registered share is a registered share with limited transferability.
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Registrar
An issuing company may act as a registrar for its own registered shares or outsource this task to a registrar company.
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Registrar company
In addition to maintaining the shareholders' record, a registrar company supports issuers in organizing the Annual General Meeting, implementing IR campaigns, and undertaking changes to the capital stock.
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Regulated Market
As of November 1, 2007, the subdivision of the Official and the Regulated Markets no longer exists. Securities entered into these markets on or since this date are now listed only on the regulated market.

The admission and follow-up requirements of the former Official Market (Amtlicher Markt) apply for the Regulated Market. This also applies to the entry requirements, which previously differed in the two markets: The company must have existed for at least three years; the estimated market value of the shares, or, in the case that an estimate cannot be made, the capital of the company itself must be at least 1,25 million euros, 25 percent of which must be owned by diversified holdings.

The Regulated Market is an organized market in accordance with article 2, paragraph 5 of the Securities Trading Act. This means that the admission and follow-up requirements for the participants and the organization of trading are legally regulated.

Before being admitted to trading, issuers are required to undergo an approval process as stipulated by public law. Together with at least one bank, a financial service institution, or a company that does business under the provisions of article 53, paragraph 1, no. 1, or article 53b, paragraph 1, no. 1 of the Banking Act, prospective participants must submit an application to the Admissions Board of the respective exchange. Companies already listed on the Regulated Market at one German exchange can apply for admission to another exchange without a supporting institution.

In addition to the admission requirements, issuers on the Frankfurt Stock Exchange opt for a transparency standard. Issuers in the regulated market can choose either the general or the prime standard. Issuers in the open market choose the admission standard. This choice depends on the admission and follow-up requirements.
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Renewal coupon
A renewal coupon is the last segment of the coupon sheet. When all dividend or interest coupons have been redeemed, the bearer of the security submits the renewal coupon to receive a new coupon sheet. For securities held in safe custody, this procedure is performed automatically by the bank where the investor maintains his or her securities account.
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Repo
Repos are typically used by banks as a temporary source of liquid funds.
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Repurchase agreement
Repos are typically used by banks as a temporary source of liquid funds.
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Repurchase in the open market
Issuers will often buy back their own bonds on the stock exchange when they have adequate funds available. A repurchase on the open market can also be a lucrative strategy if the bond is listed below par, i. e. if the current price is lower than the redemption price. By repurchasing its own bonds, an issuer lowers its debt/equity ratio, which in turn enhances its creditworthiness.
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Resistance level
In technical analysis, a price ceiling that marks the upper limit of a current trading range of a stock. It is difficult for the stock to break through the resistance level.
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Retail investment fund
Investment fund whose shares can be purchased by the general investing public.
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Retained earnings
Retained earnings are not distributed to shareholders, but instead ploughed back into the company for investment purposes. The capital continues to be under the control of the company. In the case of certain mutual funds, profits (interest, dividends, sales proceeds) are immediately reinvested in new securities.
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Return
Return indicates the relationship between profit and capital deployed (return on invested capital, or ROIC) or between profit and sales (return on sales). The return on an investment in securities is calculated by taking the current price of the security plus interest or dividend payments received, less the capital invested. If this value is positive, the investment is considered to be profitable.
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Reverse Convertibles (Share-backed Bond)
Reverse convertibles are bonds that have fixed interest, the coupon, whose success is coupled to the price development of an underlying share. Although this product is also called an equity-linked bond, it actually deals with an investment in shares – albeit with reduced risks and less chance for profit. The base value of a reverse convertible is a share or an index.

The principle behind the share-backed bond: Instead of paying out the bond at its nominal value, the issuer has the right to deliver instead a previously fixed number of the underlying shares. The issuer would decide to deliver the shares when their value is less than the nominal value of the mature bond.

More basics of reverse convertibles.
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Review (indices)
On the third Friday in the last month of the quarter (March, June, September, December), Deutsche Börse AG reviews its indices. In the review process, the variables used in calculating the index are adapted to the current composition of the index. For example, adjustment factors, changes to the capital stock, and dividend payments that took place between review dates are given a value of one in the index formula. To ensure consistency, the newly calculated index values are multiplied by a review factor. Reviews are conducted using the Xetra® closing prices on the review date.
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REX (German bond index)
REX ® expresses the value of a representative segment of the German bond market. It is calculated by Deutsche Börse on the basis of 30 domestic bonds once daily. It is based on cash prices determined on FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange). The index takes into account bonds with a time to maturity of one to ten years, expressed as an integer, and three interest rates (6, 7.5 and 9 percent). Each of the 30 bonds is weighted according to its market share, which is determined by the number of issues in each of the 30 maturity-/interest-rate categories over the past 25 years. Deutsche Börse reviews the weighting annually.
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Rho (warrants)
Dynamic indicator that measures the change in the price of a warrant given a change in the interest rate level.
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Risk of total loss
The risk of total loss enables investors to select a warrant that matches their risk profile. It indicates the probability of a leverage product expiring without value on its maturity date.

The calulation is based on a theoretical value, which considers the time to maturity, the difference between the current price of the underlying and the strike price, the interest rate for risk-free investments and the historical volatility of the underlying.

Synonym: Probability of total loss
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Round lot
In floor trading at FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange), all stock orders are executed at the next possible opportunity. The minimum trading unit is one share.

Bond orders must have a par value of at least €1 million to be eligible for continuous trading.

In the Xetra® electronic trading system, the minimum trading unit for all stocks is one share.

Synonym: Minimum trading unit
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Runaway gap
A runaway gap occurs when the general investing public recognizes an existing trend and believes it will continue.
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Safety cushion
The safety cushion is stated in percent and shows how far the current price ranges from the lowest price level of the certificate. This corresponds to the loss that may be occurred by the underlying before the safety level is reached, i.e. all safety features of a certificate become invalid.

More information on the product types
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Sale in the open market
A sale in the open market is often synonymous with a direct offering, and is a procedure used primarily by tap issuers. However, a syndicate bank may attempt to sell securities in the open market if an issue is not fully subscribed. The price of the securities is continually updated to reflect the market situation.

Prior to the placement of the securities, the issuer must publish an offering prospectus that indicates the first day of sale, as well as a non-binding placement price. There is no subscription period.

A private placement, in which securities are sold to large-scale institutional investors, is a special type of sale in the open market.
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Schatz future
The Schatz future is traded on the Eurex® exchange. The underlying instrument is a notional bond that represents a basket of deliverable bonds with an interest rate of six percent and a remaining maturity of between 1.75 and 2.25 years. The value of a Schatz future contract is EUR 100,000.
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SDAX
SDAX ® was launched on 21 June 1999. It comprises 50 shares from classic sectors in the Prime Standard segment of FWB® Frankfurter Wertpapierbörse that rank directly below the MDAX ® shares in terms of market capitalization and trading volume. The base date for the index is 30 December 1987 = 1,000 points.

The composition of the index is reviewed on a semi-annual basis and adjusted in March and September. The criteria for weighting the shares in the index are: trading volume and market capitalization on the basis of the number of shares in free float, as well as position in the respective sector.

Decisions regarding changes to SDAX® are taken by the Executive Board of Deutsche Börse AG, which consults with the Arbeitskreis Aktienindizes (Stock Indices Working Group).
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Secondary market
In the secondary market, securities are sold by and transferred from one investor to another. It is therefore important that the secondary market be highly liquid and transparent. The eligibility of stocks and bonds for trading in the secondary market is regulated by the Stock Exchange Act and the stock exchange rules and regulations. Foreign financial instruments can become eligible through the issue of depositary receipts. The derivatives market consists only of a secondary market for standardized derivative instruments (i.e. instruments with comparable contract specifications).
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Secondary Purchase
In a secondary purchase, a venture capital fund sells off portfolio companies that are not developing according to plan and would otherwise have to be written off completely. Sometimes, a venture capital company will sell off its entire portfolio if it is uncertain that follow-on financing will be available. Typically, the buyer acquires holdings that are in a more mature stage of development, thereby avoiding the riskier early phase. For the start-up company, a secondary purchase is usually associated with considerable risk, but may be its only chance for survival.
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Sector fund
Fund that invests only in companies in one particular industry, such as telecommunications, software or technology.
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Sectorindex
FWB Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) calculates 18 sector indices for the companies listed in Prime Standard: Automobile; Banks; Basic Resources; Chemicals; Construction; Consumer; Financial Services; Food & Beverages; Industrial; Insurance; Media; Pharma & Healthcare; Retail; Software; Technology; Telecommunication; Transportation & Logistics; Utilities. Allocation to a sector index occurs on the basis of the categorization into 62 industry groups. The base date for the index is 31 December 1987 = 100 points.
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Securities
Securities include instruments such as stocks, bonds, mortgage bonds, and shares in investment funds. Banknotes, checks, and bills of exchange do not fall into this category.
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Securities account
A securities account is used for the safekeeping of physical securities at a bank. In addition to protecting the owner from loss, securities accounts facilitate the administration of securities because dividend payments, etc., can be processed automatically. For monitoring purposes, the bank is obligated to maintain two different account ledgers, one of which is organized by account holder, and another which is organized by security. At the end of the year, or upon request, the bank informs the account holder of the securities in the account. In most cases, a depositary bank will appoint a custody and clearing bank to hold the securities in safe custody. Securities accounts can be either open or closed, and safe custody can take the form of collective custody or individual custody. In the case of an open account, the customer provides the bank with a list of the securities or valuables being held. By contrast, only the account holder knows the contents of a closed account, e.g. a safe deposit box. In collective custody, securities of the same type and class owned by different investors are held in a joint account. An individual investor is a joint owner of the entire account, and thus cannot claim to own a particular certificate, but instead is entitled to withdraw the same number of certificates that he deposited in the account. In individual custody, the securities of each investor are held separately. The name of the owner is printed on a strip of paper used to bind the certificates. The investor retains ownership of his shares, and can withdraw the original certificates. The custody of securities is regulated in the German Safe Custody Act (Depotgesetz).
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Securities exchange
In practice, only securities (i. e. stocks, government bonds, mortgage bonds, public-sector bonds, corporate bonds, etc.) are traded on a securities exchange; derivatives trading takes place on a futures and options exchange. In Germany, there are currently eight securities exchanges, all of which use the floor trading system. Of these, FWB Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) is by far the largest.
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Securities Trading Act
The Securities Trading Act (Wertpapierhandelsgesetz) is subject to supervision by the Federal Financial Supervisory Authority ( BaFin ). It is part of the Fourth Financial Market Development Act, and has been in force to full extent since 2002.
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Seed phase
The seed phase is the initial phase in the life of a new company. It involves coming up with a business concept, developing an approach, and creating the first prototypes. In this phase, start-up companies usually have large capital requirements because they have not yet begun to generate sales.
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Semiannual report (funds)
Investment companies are required by law to publish semiannual reports. Issuers of funds listed in the XTF® segment must forward their reports electronically to Deutsche Börse, which then publishes them on the XTF internet site.
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Sensitivity (warrants)
The most important indicators of sensitivity are delta, gamma, rho, theta, and vega.
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Settlement
Completion of an exchange transaction - i.e., the delivery of the security or commodity in exchange for the equivalent in cash
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Share
Shares, which are issued by stock corporations, consist of a certificate and a dividend coupon sheet with renewal coupons. The bearer or owner of a share, called a shareholder, owns part of the company's capital stock, indicated either as a percentage of the total share capital or as a par value that is printed on the share certificate. The rights vested in the shares are regulated by the German Stock Corporation Act and the company's charter. Basic shareholder rights include:

the right to attend the annual general meeting the right to receive a share of the company's profits the right to subscribe to new shares the right to demand information the right to a share of winding-up revenues.  

Shares are classified according to various criteria, such as the way in which the capital stock is divided up, the fungibility of the shares, or the type of rights attached to the shares:

par value shares vs. no-par value shares bearer shares vs. registered shares (or registered shares with restricted transferability) ordinary shares vs. preferred shares.
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Share buy-back
Until some years ago, share buy-backs were allowed in Germany only in certain cases. The German law regulating supervision and transparency in the corporate sector (Gesetz zur Kontrolle und Transparenz im Unternehmensbereich), enacted in May 1998, stipulates that companies can buy back up to 10 percent of their own shares on the stock exchange. The company's shareholders must approve the buy-back at the Annual General Meeting. Companies buy back their own shares when they wish to invest surplus capital or thwart a hostile takeover. Following a buy-back, the company in question has fewer shares on the market. As a result, the earnings per share increase, which in turn usually causes the share price to rise.
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Shareholder value
Corporate strategy aimed at enhancing the value of the company - in particular, profits and cash flow - in the hope that this will in turn boost the price of the stock.
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Shareholders' record
Companies that issue registered shares are required to maintain a shareholders' record. It provides information on the current shareholder structure and reflects any changes that occur. Shareholders have the right to view the shareholders' record.
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Shareholders' right to request information
The shareholders' right to request information does not obtain if divulging such information would render the executive board liable, or if it would be detrimental to the company or any of its affiliates. Regulations on the type of information that must be disclosed can be found in the German Stock Corporation Act (Aktiengesetz), section 131.
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Short position
Situation in which an investor sells securities that he does not yet own, with the intention of buying them more cheaply at the time of delivery. Antonym: Long position
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Short sale
An investor who sells short is speculating that before the trade must be settled, he will be able to acquire the securities or commodities at a price lower than his selling price. The difference between the sale price and the purchase price is his profit - or loss. In Germany, exchange transactions must be settled within two days. An investor who sells short and is unable to deliver the securities before this time must borrow them from another party. He is then obliged to buy the securities and return them to the lender before the loan period or the repo agreement expires.
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Single cash price
The single cash price is determined primarily for stocks which, owing to their small trading volume, are not admitted to continuous trading. The lead brokers pool all buy and sell orders received prior to the close of acceptance and determine the single cash price using the principle of highest volume transacted.

Single cash prices are also determined for stocks admitted to continuous trading if there are orders that cannot be executed for lack of a suitable counterparty. However, the single cash price has become far less relevant for orders in continuous trading since a minimum trading unit of one share was introduced to floor trading at FWB Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) in June 1999.

A single cash price is determined according to the following regulations:

The single cash price must enable the greatest number of shares to change hands (principle of highest volume transacted).

The lead broker must be able to execute all market orders.  

The lead broker must be able to execute all buy orders with a limit that is higher than the single cash price.  

The lead broker must be able to execute all sell orders with a limit that is lower than the single cash price.

The lead broker must be able to execute at least some of the buy and sell orders with a limit at the single cash price. In this case, the orders can be rationed, or executed in a particular order according to certain priorities.  

The lead broker supplements single cash prices with price addenda to indicate the type of transaction and the volume transacted.  

The procedure for determining the single cash price and the allocation of orders in cash trading are supported by the Xontro computer system.

Synonym: Cash settlement price
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SMAX
The SMAX segment was discontinued with effect of 31 December 2003 in the course of the new segmentation of the stock market. Half of the SMAX companies transferred to Prime or General Standard. The SDAX index has replaced the SMAX All Share Index as barometer for companies with small stock market capitalization.
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Special fund
Special funds are owned by a maximum of 10 investors. In most cases, the shareholders of special funds are institutional investors. The shares, which do not carry a load, can be transferred only with the approval of the investment company. The investment policy of special funds are oriented to the individual needs of the shareholders.
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Spezialized fund
Specialized funds tend to be more risky than classic investment funds because they commit their assets to a relatively narrow range of securities. They are suitable for investors who expressly wish to invest in a particular sector or region.
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Spot market
In Germany, the settlement period is two trading days. Cash market transactions on FWB® Frankfurter Wertpapierbörse (the Frankfurt Stock Exchange) are settled both on the floor and in the Xetra® electronic trading system.

Antonym: derivatives market
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Spread
The breadth of the spread is influenced, among other things, by the market situation and the terms of the warrant. The issuer defines the maximum, absolute or relative breadth of this spread for each of its securities. This maximum spread is the maximum bid-ask spread which the issuer will observe when entering quotes, irrespective of the market situation. It is therefore larger than the spread which the issuer normally enters, since it must also be observed in times of volatile market phases. The absolute spread actually entered by the issuer on average is posted as an effective spread as part of performance assessment. If a quote is entered with a spread which is broader than the predefined maximum spread, it will be rejected by Xetra®.
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Spread certificate
If the price of the underlying share when the certificate matures is within the spread, the investor gets the share plus a cash adjustment in the amount of the difference between the price and lower limit. If the price is below the spread, he only gets the share; if it is above the price, he gets a cash adjustment in the amount of the upper limit plus the difference between the upper and lower limit. Spread certificates are worth it primarily when the investor expects neither strong price gains nor high losses of the underlying up to the end of the certificate’s maturity.
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Spread Certificates
The innovative powers of issuers seem to know no boundaries. They meet the demands of investors with new constructions of warrants and other leverage products. Above average chances to make profits are countered by above average risks up to losing everything. The names of these exotic issues are just as creative:

Knock-ins Corridor warrants Hamster warrants Chooser warrants Turbo warrants CLICK warrants
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Squeeze-out
In Germany, the majority shareholder has to hold at least 95 percent of a company’s shares before it can execute a squeeze-out.
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Standard deviation
Volatility provides a means of measuring a stock's potential for profit or loss independent of market development. It assumes that past values are an indication of future performance. Because the volatility ratio expresses the extent to which the value of a security can expected to change in the future, it plays a particularly important role in the calculation of options prices.
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Startup company
Startup companies are still in the development phase and have not yet marketed or sold their products to any significant extent.
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Startup phase
New companies usually require large sums of capital during the start-phase because they have not yet begun to generate sales.
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Steady
A market situation in which prices are slightly higher than they were on the previous trading day.
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Stock corporation
Founding a stock corporation requires a minimum capital stock of 50,000 euro. The capital stock is divided into equal shares with identical par values; the minimum par value is currently one euro. Owing to the launch of the euro, many stock corporations now issue no-par shares to avoid the complications involved in converting deutschmarks to euros. Instead of being assigned a par value (and thus a monetary value), these shares represent the percentage of the capital stock accounted for by a single share. A shareholder owns part of a company's capital stock, and is only liable for the amount of the investment. A shareholder cannot be made personally liable. In Germany, a stock corporation is required by law to have three administrative bodies: · The executive board manages the stock corporation, representing it both in and out of court. · The most important tasks of the supervisory board are to appoint and dismiss members of the executive board, audit the financial accounts and management report, and, at the annual general meeting, to inform stockholders of developments that took place within the company during the financial year. · The annual general meeting comprises the company's shareholders. It elects a shareholders' representative to sit on the supervisory board, makes decisions regarding the application of profit and the payment of dividends, and grants discharge to the executive and supervisory board. Large firms are typically organized as stock corporations because this enables them to raise large amounts of equity capital, primarily by going public. Another way to procure additional funding is through a capital increase, which can take one of several forms. A company that issues a large number of small shares with low par values will often have a large number of shareholders.
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Stock exchange
Exchange trading takes place at established times, with the exchange itself performing the following main functions: · Bringing together supply and demand (market function) · Creating an environment in which companies can raise capital by issuing securities (mobilization function) · Guaranteeing that securities can be sold and transferred at any time (substitution function) · Determining the current market price for an individual stock, and thus the market value of the company in question (valuation function). The key indicators for the size of stock exchange are the stock exchange turnover and market capitalization. As stipulated in the German Stock Exchange Act, the supervision of the regional stock exchanges is handled by the government of the respective states (Länder). Higher-level tasks which affect exchanges throughout Germany, such as the ordinance of stock exchange rules and regulations and the terms and conditions of business, are assigned to the bodies of the stock exchange, which include in particular the Exchange Council (Börsenrat) and Business Management. The decision to establish or close down an exchange is made by the State Exchange Supervisory Office, which is the highest authority at the state level. Depending on the focus of their activities, stock exchanges are classified according to the following criteria: 1) Goods traded (securities exchange, precious metals, currency and commodities exchange) 2) Type of transaction (cash market, derivatives market) 3) Organization (floor trading, computer-based trading).
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Stock Exchange Act (Börsengesetz)
The foundation for the Börsengesetz (BörsG) was laid in 1892 by a "Börsen-Enquête-Kommission" (Exchange Enquiry Commission) appointed by the Chancellor of the Reich. The task of the commission was to remedy the deplorable state of affairs which characterized the exchanges by developing guidelines for stock exchange activity. Important amendments followed in 1975, 1986, 1989, and in particular in 1994, with the enactment of the Gesetz über den Wertpapierhandel und zur Änderung börsenrechtlicher und wertpapierrechtlicher Vorschriften (the Second Financial Market Promotion Act). Each new amendment increasingly incorporated international law, adopting in particular the guidelines established initially by the European Community, and later by the European Union. One particular amendment - the Third Financial Market Promotion Act - was undertaken in 1998. It gives issuers easier access to the exchange, contains changes with respect to liability extending to statements made in an offering prospectus, and regulates the delisting procedure. The most recent amendment was made in 2002 when the Fourth Financial Market Promotion Act came into effect: This law especially underpins investor protection. The Börsengesetz comprises six main sections:

I. General provisions on the exchange and exchange bodies II. Exchange price determination and the broker system III. Admission of securities to Official Market IV. Derivatives trading V. Admission of securities to other trading segments VI. Regulations pertaining to penalties and fines; regulations on concluding transactions.
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Stock index
A stock index is computed, updated and published on each trading day by stock exchanges, banks, consultancy firms, the business press, and other financial experts. It is calculated for individual market segments, sectors or groups of stocks.

Stock indices are calculated as both price and performance indices using the Laspeyres or Paasche formulas. The Deutsche Börse indices are capital-weighted, i.e. the weighting of a stock is measured according to the total capital of the stocks contained in the index. At the chaining date in June 2002, Deutsche Börse converted index calculation to a free-float weighting basis. Now, only the freely tradable portion of a company's capital stock in one stock category is used to calculated its weighting in an index. Only the larger and more liquid stock category respectively is taken into account for the selection index.

Trading volume and market capitalization, on the basis of the number of shares in free float, are the selection criteria for admission to a stock index.

If the development of a stock index is tracked over time, it provides information on the performance of the underlying stock portfolio. A stock index is therefore a useful indicator for market sentiment, the state of the economy, and trends in individual sectors. It can also serve as the underlying instrument or benchmark for certain financial instruments, such as stock index options.

Some examples of German stock indices are DAX®, the FAZ stock index and the Dow Jones Euro STOXX.
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Stock market analysis
The goal of stock market analysis is to forecast how the price of a security will develop in the future. There are two approaches to stock market analysis: fundamental analysis, which appraises a company's earnings prospects, and technical analysis, which studies historical price data. Each method uses various mathematical formulas to identify and predict upcoming trends.
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Stock option
A type of derivative which gives the holder the right to buy or sell a certain number of shares at an agreed-upon price (exercise price) within a given period of time or on a particular date. The right to buy a stock is known as a call; the right to sell a stock is referred to as a put. The person or institution that sells an option is also called the option writer.    
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Stock price
Stock prices are calculated on the basis of available buy and sell orders either by a lead broker on the trading floor or via the electronic trading system.
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Stock split
For example, in a 10-for-1 split, a shareholder will receive 10 new shares for each original share owned without having to furnish additional capital. At the same time, however, the fraction of the capital stock represented by one share decreases in proportion to the split ratio. In the case of par value shares, the par value of each share is correspondingly reduced. Companies often split their stock in order to make their shares appear less expensive in the hope that this will induce investors to buy.
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Stop-buy order
When an investor places a stop-buy order, the stock will be purchased as soon as the price has risen beyond an established limit. Stop-buy orders are useful if an investor wishes to purchase a stock only after it has been "discovered" by other investors or broken through a resistance line, for example.
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Stop-limit order
An order to buy or sell as soon as a predetermined price limit (the stop limit) is reached.
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Stop-loss limit
A stop-loss limit represents a kind of warning to the investor. If the underlying instrument climbs above, or falls beneath, this limit, the knock-out certificate does not expire, but loses in value significantly. The investor then receives a residual value which depends on the knock-out limit.
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Stop-loss order
A shareholder can use a stop-loss limit to minimize losses in the face of a price slide. The stock will be sold immediately if the price falls below an established lower limit. The advantage of a stop-loss order is that the investor does not need to constantly monitor the price of the stock.
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Stop-market order
An order to buy or sell as soon as a specific price is reached.
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Stop-sell order
This order is then executed when a share starts trading at or below the stop price. It then becomes a sell-at-best-offer order. When a stop sell orders are established as a means to limit losses, they are also called stop loss orders.
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STOXX
STOXX Ltd. is owned by Deutsche Börse AG and SIX Group AG. STOXX Limited provides and services the Dow Jones STOXX indices.
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STOXX Europe 50

The STOXX Europe 50 index was introduced at the beginning of 1998 by Deutsche Börse AG in conjunction with Bourse de Paris, the Swiss Stock Exchange and the Dow Jones company. It is calculated as a price index and a performance index in euros and dollars. The base date is 31 December 1991 = 1,000.

The criteria for including a company in the index are market capitalization and trading volume of the European companies.
Until 1 March 2010 the index was named Dow Jones Stoxx 50.

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STOXX indices
Stoxx Ltd calculates approximately 300 indices. Among those is the Euro STOXX 50, which comprises the largest companies in the euro area.

The base date for the calculation of the index is 31 December 1991 = 1,000 points. Aside from the blue-chip indices, STOXX offers regional indices as well as indices for individual growth segments or sectors. Admission to an index is – further to the index-specific criteria – subject to the market capitalization of the free float of the company. The indices are calculated as price and performance indices. The shares on which the indices are based are converted into euros or dollars.
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Subscription period
When a new security is to be issued, investors typically have two weeks to submit their subscription orders. At the end of the subscription period, the issuer announces the offering price and the method of allotment.  
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Subscription rights
Subscription rights enable shareholders to maintain a proportionate share of ownership in the company. On the first day that a subscription right is traded on the exchange, the calculated value of the subscription right is subtracted from the price of the existing shares. Although this results in a restructuring of shareholders' assets, the overall value of the assets does not change.

When the stock corporation law was liberalized, so-called - small stock corporations - were given the option of excluding the subscription right. This means that companies under a certain size are not obligated to grant subscription rights provided the capital increase does not exceed ten percent of the capital stock, or the offering price of the new shares is not substantially lower than that of the existing shares. The law thus guarantees that in such cases existing shareholders will continue to own more or less the same percentage the company's stock even without subscription rights, thereby ruling out a capital dilution.

Subscription rights are typically granted to shareholders in the event of a capital increase through contributions, a capital increase out of retained earning, or when the company issues either participation certificates or warrant-linked, convertible, or income bonds. The number of new shares to which each shareholder is entitled is expressed as the subscription ratio (i.e. the number of existing shares needed to acquire one new share). The subscription ratio reflects the extent of the capital increase, and is usually announced by the company's Executive Board.

Shareholders can either exercise their subscription right or sell it on the exchange during a subscription period of no less than two weeks that is to be announced by the Executive Board. Although the value of a subscription right can be calculated, once it has been admitted to trading on the exchange, its price is subject to the laws of supply and demand.

Example: The share capital of a stock corporation is to be increased from euro 4 million to euro 6 million. The subscription ratio has been set at 2:1, which means that shareholders can subscribe to one new share for every two shares they own.
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Support buying
Support buying occurs when market participants purchase securities so that a particular price or interest rate level can be maintained at the current level, or boosted to a previous level following a decline.
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Suspended trading
Trading in a security listed in the Official Market (Amtlicher Markt) or Regulated Market (Geregelter Markt) can be halted temporarily. The decision to suspend trading is taken by the Executive Board of the respective exchange. Suspended trading signals to investors that a new development – or rumors thereof – could have a considerable impact on the price of the security. Any outstanding orders are cancelled during a trading halt. Trading is suspended long enough to ensure that investors are informed of the relevant developments, although all attempts are made to keep the suspension as brief as possible.
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SWAP
In the case of a pure interest swap, two debtors trade different qualities of interest repayments. These debts are in the same currency. What matters most in the transaction is that different interest payment calculations (fixed vs. variable) are applied to the same principal balance. In addition, mutual capital demands are not allowed as part of the swap. The point of the swap is to give up an advantage in credit rating in return for a corresponding reward. The one party gets a counter value for giving up its creditworthiness while the other benefits in the form of lower interest payments. A similar concept is applied to currency swaps. In this case, the traded securities are based in different currencies.
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Switch
In a switch, securities with a poor outlook are sold. The proceeds are then invested in securities with more favorable prospects. The sale and purchase takes place simultaneously between two counterparties.
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Syndicate
A syndicate consists of several legally and economically independent companies, and is headed by one or more syndicate leaders. Syndicates are created to oversee large-scale financing operations, such as the placement of securities, in order to spread the risk among several companies. The members sign an informal syndicate agreement that specifies the purpose of the syndicate, the length of time it is to exist, its composition and ownership structure, and the tasks to be performed by individual member. The agreement also stipulates each member's liability and the extent to which it participates in profits and losses. The syndicate is usually dissolved when the stated goal has been reached. In the case of a new issue, banks or investment companies will form an underwriting syndicate which acquires the stocks or bonds from the issuer and places them in the capital market.
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Syndicate bank
Syndicate banks support companies in issuing securities. Together with the issuer, they assume liability for statements made in the issuing prospectus.
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Synthetic bonds
Synthetic bonds allow the yields of different, complex bonds to be compared. To do so, the coupon payment, maturity and yield are calculated such that the bonds have the same value at a base starting point.
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Tax-exempt investment income (Sparerfreibetrag)
In Germany, income on capital assets (such as interest, dividends, etc.) is tax-exempt if it does not amount to more than €801 euros for singles, or €1.620 euros for married couples. Dividends and interest in excess of the respective limit are subject to investment income tax.
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TecDAX
TecDAX ® was launched on 24 March 2003. It comprises the 30 largest companies from technology sectors in the Prime Standard segment of FWB®  Frankfurter Wertpapierbörse that rank below the DAX® shares in terms of market capitalization and trading volume. The index is calculated as a price and performance index by Deutsche Börse. The calculation of TecDAX follows on from NEMAX® 50.

The composition of the index is reviewed on a semi-annual basis and adjusted in March and September. The criteria for weighting the shares in the index are: trading volume and market capitalization on the basis of the number of shares in free float, as well as position in the respective sector.

Outside the regular review dates, a company can be taken out of the index if it does no longer belong to the 45 largest companies in terms of market capitalization and trading volume. Respectively, a company can be included in the index if it ranks among the 25 largest companies in terms of market capitalization and trading volume. The changeover takes effect as of the next scheduled chaining date.

Decisions regarding changes to TecDAX are taken by the Executive Board of Deutsche Börse AG, which consults with the Arbeitskreis Aktienindizes (Stock Indices Working Group).
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Technical analysis
Technical analysis helps investors to predict the future price development of a stock on the basis of historical data such as price and trading volume. Instruments used in technical analysis include market capitalization and volatility, as well as the beta factor and the correlation coefficient of a stock with respect to a benchmark index. The latter two variables are used to value stocks in relation to the overall market. Chart analysis is an important component of technical analysis.
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Technology All Share
Factsheet Technology All Share
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Theta (warrants)
The theta factor, which reflects the decline of the time value, is expressed as a negative value for long positions and as a positive value for short positions. The value of theta increases as the expiration date approaches.
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Tick data
Tick data comprise all non-aggregated intraday prices of a security determined during a trading day. The prices are either generated automatically in the electronic trading system Xetra® or calculated by the lead broker on the trading floor.
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Tick Size

Prices for securities that are quoted in units (i.e. stocks, warrants, subscription rights and participation certificates) in Official Market, Regulated Market and Regulated Unofficial Market move in increments of euro 0.01. If the price for a security that is quoted in units is less than or equal to Euro 0.10 in floor trading, prices for these securities move in increments of Euro 0.001. For bonds, the following ticks apply:

Floaters, zero-bonds, strips in general 0.001 percent Bonds with a remaining time to maturity of less than 2 years 0.001 percent Bonds with a remaining time to maturity between 2 and 7 years 0.005 percent Bonds with a remaining time to maturity of more than 7 years 0.01 percent Bonds without a redemption date 0.01 percent

Shares and Certificates representing Shares

Lower Price Limit Upper Price Limit Tick Size in EUR
0 Euro 9.999 Euro 0.001 Euro
10 Euro 49.995 Euro 0.005 Euro
50 Euro 99.99 Euro 0.01 Euro
100 Euro ∞ Euro 0.05 Euro

 

ETFs and ETCs

Lower Price Limit Upper Price Limit Tick Size in EUR
0 Euro 4.999 Euro 0.001 Euro
5 Euro 9.995 Euro 0.005 Euro
10 Euro ∞ Euro 0.01 Euro

 

Mutual Funds on Xetra

Lower Price Limit Upper Price Limit Tick Size in EUR
0 Euro 4.999 Euro 0.001 Euro
5 Euro 9.995 Euro 0.005 Euro
10 Euro ∞ Euro 0.01 Euro
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Time index
A time index is usually calculated every trading day using cash settlement prices. Unlike an index which is calculated continuously on the basis of the most recent prices, a time index does not reflect the short-term price and market developments that occur in continuous trading. Examples of time indices published by Deutsche Börse are certain bond indices.
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Time value (warrants)
The time value of a warrant reflects the probability that the price of the underlying instrument will fluctuate during the exercise period. It is thus a type of "uncertainty premium". The time value is calculated on the basis of the remaining time to expiration and the volatility of the underlying instrument. It is used to determine the value of a warrant. The less time remaining to expiration, and the lower the volatility of the underlying value, the lower the time value will be. The time value is zero on the expiration date, at which point the value of the warrant is equivalent to its intrinsic value.
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Total net assets (XTF)
Market value of a fund's net assets (assets minus liabilities).
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Trade
Trades are executed by exchange participants, either on behalf of their customers or for their own account. The specific terms and conditions for executing trades (market practice) are determined individually by each exchange; in Germany, market practice has been standardized at all eight exchanges. The settlement of trades - i. e. the delivery of the instrument or commodity in return for cash payment - is handled by a clearing and settlement organization. One way to classify trades is on the basis of the instrument bought or sold - i. e. securities, commodities, cash, precious metals, currencies and derivatives. A further distinction is made between trades executed in the cash market, with immediate delivery, and trades executed in the forward market, with delivery ensuing at a future date.
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Trade-Sale
In a trade-sale, which is the most popular type of exit, the buyer benefits from the technical know-how and the market position of the acquired company. As a rule, it will attempt to retain the current management team, at least for a certain period of time. One difference between a trade-sale and an IPO is that a company typically receives a lower valuation if it opts for a trade-sale.
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Trading day
In Germany, trading days are Monday through Friday, with the exception of the following legal holidays: Good Friday, Easter Monday, May 1st, December 24th - 26th and New Year's Day. On all other holidays, the exchanges are open and trading takes place.
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Trading floor system
Exchange Brokers and dealers meet during fixed business hours on the exchange floor to trade. Floor trading is characterized by a high degree of interpersonal communication between participants. With the emergence of electronic trading, the importance of trading floor systems has diminished significantly. At present, there are eight exchanges in Germany that use the trading floor system. These are located in Berlin, Bremen, Dusseldorf, Frankfurt, Hamburg, Hannover, Munich and Stuttgart.
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Transaction costs
Transaction costs are incurred when an investor buys or sells securities. If an order is executed on the trading floor, the investor must pay a brokerage fee as specified in the fee schedule of the exchange. For stocks listed in Amtlicher Markt (Official Market) at the Frankfurt Stock Exchange, Exchange Brokers charge a fee of 0.08 percent of the share price (DAX®: 0,04 percent), while fees for bonds range between 0.015 percent and 0.075 percent, depending on the transaction volume. Freimakler (Independent Brokers) usually do not have fixed brokerage fees. Investors who trade securities on the exchange must do so through their bank. In return for its services as an intermediary, the bank will typically charge a fee equivalent to one percent of the price of the security.
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Transaction value
A DAX® future contract, for instance, has a current transaction value of €25 per DAX point. Futures on the EURO STOXX® or TecDAX® each have a respective transaction value of €10 per index point. 
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Transfer
Move from one exchange segment to another
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Transparency Standard
The transparency standard determines which follow-on obligations the listing of a company entails. 

In General Standard, the minimum legal requirements of the EU-regulated Official Market or the Regulated Market apply. Companies listing in either of these markets are automatically included in General Standard. Accordingly, companies listed in General Standard fulfill the follow-on obligations of the Official or Regulated Market. 

A listing in Prime Standard requires companies to fulfill international transparency requirements that go beyond those of General Standard. Admission to Prime Standard is a key prerequisite for inclusion in any of the selection indices DAX®, MDAX®, TecDAX® and SDAX®.

Entry Standard, the transparency level of the Open Market (Regulated Unofficial Market), features less follow-on obligations than the standards described above. Thus, Entry Standard affords small and medium-sized companies easy and cost-effective access to the capital market. It is primarily aimed at qualified investors who are aware of potential risks due to less information.
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TRICE
According to §9 of the German Securities Trading Act (WpHG), German financial institutions, subsidiaries of foreign financial institutions and members of German stock exchanges (including participants in the electronic trading platforms Xetra and Eurex) are required to report to the German Financial Supervisory Authority (BaFin) via electronic means all transactions in securities that are admitted for trading on any exchange in the European Union or in any member state of the European Economic Zone. Trading participants can fulfill this duty using the TRICE system. The transmission of transactions that require registration with the BaFin can occur in one of two ways:  

per dialogue process The registrations are entered manually into the registration system provided by Deutsche Börse.

per file transfer The trader converts the entry into the S.W.I.F.T. format and transmits it to Deutsche Börse.

Traders on Eurex and Xetra who exclusively trade from abroad can also use TRICE.
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Trustee
Trustees can be assigned when two contract parties exchange cash or assets. They act independently of the contract parties. By transferring asset rights to the trustee, he/she adopts the legal position of an owner and can thus, for instance, exercise voting rights or divest shares on behalf of the actual owner.
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Turn-around financing
Turn-around capital is used to finance measures (e.g. for developing new concepts and establishing a new market position) that have become necessary in the wake of an internal crisis such as flagging sales figures.
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Underlying instrument
Both commodities and financial instruments (shares, bonds, currencies, indices, etc.) can underlie derivatives contracts.

Some underlying instruments, such as commodities, shares, bonds, or currencies, can be physically delivered, while others - so-called notional underlying instruments - cannot. Notional underlying instruments are standardized and assigned certain attributes so that they can serve as benchmarks. For example, the Bund future is a contract on a notional instrument which represents a classic Federal Government Bond, with an interest rate of six percent and a maturity of ten years. Indices are another type of notional underlying instrument. An option on DAX® is a contract on the stock portfolio which represents the DAX® shares with their relative weightings.
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Underweight
Market participants speak of underweighting when buying or selling a particular type of investment (e.g. shares, bonds and warrants), a region or sector, ultimately changing the weighting of their depot. This weighting is usually stated in percent. The additional purchase of securities lends the respective type a stronger weight in the portfolio.

Analysts often use these terms to express their recommendations to either buy (overweight) or sell (underweight) shares.
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Underwriting bank
A company that lists on the exchange can enlist the help of an IPO underwriter. It overtakes project management and organizes numerous tasks that have to be completed prior to an IPO. These include the creation of a time plan or getting in touch with analysts. An IPO underwriter represents solely the interests of the IPO candidate.
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Value date (warrant)
Date on which an option contract is settled under good value.
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Variable price
A variable price is determined for shares admitted to continuous trading every time a trade is executed, i.e. when supply corresponds to demand. The calculation of variable prices begins after the opening price has been quoted and ceases when the closing price is determined at the end of the trading session.
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VDAX
VDAX ® was introduced on 5 December 1994. Since 14 July 1997, Deutsche Börse AG has calculated VDAX every minute using the Black-Scholes formula. The index is based on DAX option prices, and thus on the implicit volatility of DAX, i.e. how significant the market expects future price fluctuations to be.

The time series for daily VDAX values dates back to 2 January 1992.
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VDAX-NEW
The volatility index VDAX-NEW ®, which was developed by Deutsche Börse and Goldman Sachs, tracks the degree of fluctuation expected by the derivatives market – i.e. the implied volatility – for the DAX index. The index expresses in percentage terms what degree of volatility is to be expected for the following 30 days.  Since volatility is negatively correlated with the price development of a market, it is suitable for diversifying portfolios: as prices in DAX are slumping, the price of the VDAX-NEW is advancing.

The calculation of this index is based on DAX option contracts, which are quoted both “at the money“ and “out of the money“. Thus, VDAX-NEW has a broader volatility surface than VDAX®, which only takes into account options that are “at the money”. VDAX-NEW will supersede VDAX in the medium-term. Current market data
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Vega (Optionsschein)

The vega factor is expressed as a negative value for short positions and as a positive value for long positions.

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Venture capital company
Venture capital companies are specialized in assessing young companies - typically innovative enterprises in growth industries where there is an element of uncertainty. Before providing capital, the venture capital firm evaluates the company's business plan, sales prospects and the market potential of its products, as well as the management skills of the prospective entrepreneurs. Venture capitalists usually cover the capital requirements of the companies they support by establishing a venture capital fund. Private investors, pension funds and other investors who wish to allocate some of their assets to high-risk investments acquire shares in the fund, leaving the selection of the portfolio companies to the venture capital firm. Venture capital firms usually participate in young companies for five to eight years, at which point they realize their profits on the investment through an exit.
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Volatility
Volatility provides a means of measuring a stock's potential for profit or loss independent of market development. It assumes that past values are an indication of future performance. Because the volatility ratio expresses the extent to which the value of a security can expected to change in the future, it plays a particularly important role in the calculation of options prices.

Volatility is usually calculated for periods of 30 to 250 days.
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Warrant
There are two types of warrants: "traditional" warrants and so-called naked warrants. Traditional warrants are issued in conjunction with a bond (known as a warrant-linked bond), and represent the right to acquire shares in the entity issuing the bond. In other words, the writer of a traditional warrant is also the issuer of the underlying instrument. This type of warrant is traded on the stock exchange and is eligible for a listing in Amtlicher Markt (Official Market). Naked warrants are issued without an accompanying bond, and, like traditional warrants, are traded on the stock exchange. They are typically issued by banks and securities houses. The writer of a naked warrant need not be the issuer of the underlying instrument.
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Warrant-linked bond
Unlike normal bonds, warrant-linked bonds are issued with warrants that entitle the bearer to buy shares in the issuing company at a predetermined price, usually following a given period. Once the exercise period has begun, the investor can separate the warrants from the bond and sell them on the stock exchange. The bonds are then listed with the addendum "ex". Issuers benefit because the interest rates on warrant-linked bonds are relatively low. Moreover, if the warrant is exercised, their shares will be sold to the investor at a relatively high price. Investors benefit from the fixed interest payments on warrant-linked bonds, and from a potential increase in the stock price.
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Window dressing
The performance of an investment fund is measured using a benchmark such as a stock or an index. At the end of the year, or just before a reporting date, institutional investors will try to exert a short-term influence on this benchmark by placing appropriate orders. If a fund has achieved an above-average profit for the year, the fund manager will attempt to depress its performance slightly during the final days of trading so that part of the profit can be shifted to the following year. If a fund is not performing particularly well, the fund manager may purchase individual securities, and thereby drive up their prices, in the attempt to maximize the fund's profit during the final days of trading.
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WKN
The WKN (“Wertpapierkennnummer”) is a six-digit alphanumerical code for the identification of a security. It is issued by the Institute for the Issuance and Administration of Securities in Germany (Securities Information).

Meanwhile, the worldwide standard for securities identification, ISIN, has been introduced in Germany.

The WKN is included in the ISINs of securities registered in Germany. The twelve-digit ISIN consists of a two-digit country code, a nine-digit national identification code as well as a check digit. The sixth to eleventh digits represent the WKN.
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XB (Price Addendum)
A price addendum is a code that is added to the price in floor trading. It states in what way the respective order situation is to be taken into account as the price is fixed. This information is part of the tick data.

XB as a price addendum indicates that the order was executed within the scope of Xetra BEST. Xetra BEST exclusively handles orders from private investors. These orders are executed immediatedly and at a better price than in the current Xetra order book.

Private investors have the possibility to track all Xetra BEST trades from the previous 5 days, and compare the "improved" Xetra BEST prices with those available in the Xetra orderbook at the time of execution.
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Xetra
Around 320 European banks and securities trading houses currently (January 2004) use the Xetra® (Exchange Electronic Trading) system to trade the full range of shares listed on FWB® Frankfurter Wertpapierbörse and more than 10,000 warrants. Xetra is available between 9.00 a.m. and 17.30 p.m. Buy and sell orders placed by licensed brokers throughout the world are compared in a central computer and automatically executed when the number of shares and price are found to match. Designated Sponsors provide for additional liquidity during trading.

Xetra currently accounts for 75 percent of exchange turnover in German shares. In the case of the 30 DAX® blue chips, Xetra's market share comes to more than 95 percent.
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Xetra Liquidity Measure (XLM)
As a rule, the more liquid a market/transaction, the lower is its implicit transaction cost. The Xetra Liquidity Measure (XLM) measures liquidity and expresses the implicit transaction costs as a  single figure. These costs are calculated as monthly average of a minute-by-minute created hypothetical order without limit. At each point in time a theoretical, fair price is set, which ranges exactly between the best bid and the best ask order. The difference between this average price and the average execution price of the hypothetical order amounts to the implicit transaction costs. The larger the difference, and thus the XLM, the lower is the liquidity of a security.
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Xetra Stars
Xetra® Stars bundles the leading European and American shares in a special segment, making them available for trading on the fully electronic trading system Xetra.

Currently, Xetra European Stars includes all European blue chips of the Dow Jones Euro STOXX 50 Index ? with the exception of those from Italy and Spain. With the expansion of Xetra Dutch Stars, all additional shares in the Dutch AEX 25 blue-chip index are now continuously tradable on Xetra. Xetra US Stars comprises all shares of the Dow Jones Industrial Average, Standard&Poor`s 100, Nasdaq 100 and Dow Jones Global Titans 50.
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Xetra Top Liquids
The Xetra® Top Liquids are determined by means of the Xetra Liquidity Measure (XLM). The XLM is stated in basis points (100 basis points = 1 percent). It corresponds to the relative market impact costs for the so-called roundtrip (simultaneous buying and selling of a position) at a given order size.

Example:

An XLM of 10 basis points at an order size of €25,000 means that the market impact costs for buying and selling this share amount to €25. Deutsche Börse AG publishes the Xetra Top Liquids, which are based on the previous trading day respectively, on a daily basis.
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XONTRO
XONTRO supports the entire trading process from electronic order routing and broker-supported price fixing through to the execution and settlement of the trade. It enables trading in all exchange-listed national and international securities.
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XTF Exchange Traded Funds
Deutsche Börse supports trading in ETF®s by providing the regulatory framework as well as the necessary systems and information. ETFs, or Exchange Traded Funds, are no-load mutual funds offered by investment companies. Because share prices are quoted throughout the trading session in Xetra and on the floor, the funds can be traded like individual stocks. Designated Sponsors ensure sufficient liquidity in these funds in the Xetra system. To be admitted to XTF, the fund must be listed in Amtlicher Markt (Official Market) or Geregelter Markt (Regulated Market).

Two types of funds are eligible for trading in XTF®: index funds and actively managed funds. To maximize the transparency of the new segment, Deutsche Börse regularly supplies information providers and financial institutions with the most recent data on the funds and the performance of the respective benchmark. This information is also available in the Internet at www.deutsche-boerse.com.

Market Overview Funds All ETFs All Xetra Active Funds
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Yield
Annualized gains of a capital investment expressed in percent.
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Zero-coupon bond
Zero-coupon bonds are discount securities, i.e. the interest on the bond is not paid until the bond matures. Zero bonds are issued at a discount of up to 25 percent below their face value, and are redeemed at their face value upon maturity. The interest rate is calculated on the basis of the difference between the purchase price and the face value. Zero-bonds are useful to investors as a means of reducing their tax burden because the interest is not taxable until the bond matures. One risk associated with zero-coupon bonds is that if the issuer were to become insolvent, the investor would forfeit all profit on the bond; moreover, counterfeit zero-bond certificates are often not discovered until the end of the maturity period.
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ZEW Economic Indicator
The ZEW economic expectations are surveyed on a monthly basis. Since 1991, some 350 financial market experts – comprising 80 percent banking professionals, 15 percent insurance experts and 5 percent industry representatives – have participated in the survey.   The indicator reflects the difference between positive and negative forecasts for the future economic development in Germany – for the following six months to come.   For instance: if 30 percent of the survey participants are of the opinion that the economic situation will worsen during the following six months, with 40 percent believing in an improvement, this would result in an economic expectation of 10 points. Those who do not expect a change in the economic situation are not included in this result.
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