XETRA: EUROPE'S LARGEST TRADING VENUE FOR ETFS - ETF. One transaction is all you need.

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XETRA: EUROPE'S LARGEST TRADING VENUE FOR ETFS - ETF. One transaction is all you need.
Xetra. The market.

XETRA: EUROPE’S
LARGEST TRADING
VENUE FOR ETFS
ETF. One transaction is all you need.
XETRA: EUROPE'S LARGEST TRADING VENUE FOR ETFS - ETF. One transaction is all you need.
ETFS ON XETRA                                                            2

          Deutsche Börse Group is the leading global service provider
          to the securities industry. Its cutting-edge technology
          provides access for companies and investors to the world’s
          securities markets. Deutsche Börse’s XTF segment makes
          it the European market leader in ETF trading. Investors have
          access to more than 1,500 ETFs via Xetra® and find the most
          diverse product portfolio and the highest turnover of all
          stock exchanges in Europe. The average monthly trading
          volume of this segment is about €11 billion.
XETRA: EUROPE'S LARGEST TRADING VENUE FOR ETFS - ETF. One transaction is all you need.
ETFS ON XETRA                                                                                   3

XETRA: EUROPE’S
LARGEST TRADING
VENUE FOR ETFS

Fully electronic and liquid:                     matched in the Xetra order book and
ETF trading on Xetra                             executed immediately. On peak days,
ETFs (exchange-traded funds) are traded          the trading system executes more than
all over Europe via the trading venue Xetra ®.   2.6 million transactions per day. Xetra
Xetra’s trader screens give investors access     sets standards for liquidity, transparency,
to more than 1,500 ETFs as well as an            speed and flexibility in securities trading.
extensive range of domestic and foreign          What is more, it is location-independent
equities. Buy and sell orders from traders       and extremely price competitive.
at diverse locations across the globe are
XETRA: EUROPE'S LARGEST TRADING VENUE FOR ETFS - ETF. One transaction is all you need.
ETFS ON XETRA                                                                                                                            4

The XTF segment:                               Development of the ETF segment
Wide selection, high volumes                   in the years 2004 – 2019
Deutsche Börse was the first European
stock exchange to commence trading in
listed index funds with its XTF segment,                                                                                            1,505
which was launched in April 2000. Since                                                                                    1,368
then, the segment has grown continuously,
enabling Deutsche Börse to maintain its                                                                                             709.8
                                                                                                                 1,132
position as market leader in Europe for                                                                  1,044
                                                                                              1,015
exchange-traded funds. Since trading began,
the number of listings has risen to 1,505
by December 2019, while fund assets                                               761
have jumped from an initial €400 million                                                                                   524.2
to a record high of €709.8 billion. The
annual growth rate of the fund assets over
                                                                       399
the past ten years is 20 percent.                                                                                  411.6

                                                           171
In the early years, the segment mainly
                                                 54
handled funds on major European indices                                                                  286.3
such as the DAX ®, the EURO STOXX 50 ®,
or the STOXX Europe 50 ®. Since then,                                                         206.0
the selection of ETF products has grown
                                                                                  165.3
substantially. Besides large standard equity
indices , the range now also comprises
numerous other country and regional                                     82.1
                                                           47.6
indices, “exotic” markets such as Brazil,
                                                16.4
Taiwan and Korea as well as a host of sector
indices. The fixed-income segment has          2004        2006        2008        2010           2012   2014      2016    2018     2019
a wide range of high-volume government
bond as well as money market ETFs.               Number of ETFs              Assets under management in €billion
                                               Source: Deutsche Börse AG, Status: December 2019

The issue of new ETFs provides access
for investors to new asset classes and nume-
rous portfolio strategies. Deutsche Börse’s
XTF segment now also includes ETFs on          ETFs tradable on Xetra
German and international real estate
shares, on volatility as well as on commo-     7
dity indices and strategy indices. The ETF     Other (currencies, multi asset classes,
offering has developed strongly with a         hedge funds, volatility)                                                                 44
focus on sustainability, which can be iden-                                                                                    Active ETFs
                                               25
tified by the abbreviations ESG and SRI.       Commodity funds                                                                         292
                                                                                                                             Equity funds/
                                               291
You can find an up-to-date                     Strategy indices
                                                                                                                            country indices
overview of all tradable ETFs on Xetra at
boerse-frankfurt.de.

                                               207
                                               Equity funds/
                                               regional indices

                                                                                                                                      400
                                                                                                                               Bond funds
                                               239
                                               Equity funds/sector indices

                                               Status: December 2019
XETRA: EUROPE'S LARGEST TRADING VENUE FOR ETFS - ETF. One transaction is all you need.
ETFS ON XETRA                                                                                     5

ETFS TRACK THE
PERFORMANCE OF INDICES
AND MARKETS

Unlike actively managed funds, where the         a counterparty risk of the swap contract
investment objective of the fund manager         partner, which is legally limited to no more
is to outperform a reference index, ETFs         than 10 percent of the fund assets. However,
pursue a passive investment strategy, the        issuers are able to reduce or eliminate this
aim of which is to replicate the performance     risk by depositing appropriate collateral.
of an underlying index as accurately as
possible. Underlying indices may be natio-       The main objective of ETFs is to replicate
nal or international equity indices, bond and    the performance of specific indices as
real estate indices, or even commodity or        accurately as possible. In the process, the
strategy indices. Indices and whole markets      ETF manager must keep the tracking error
can be traded as easily as single shares.        as small as possible. The tracking error is
The investor acquires an entire basket of        the difference between the price perfor-
securities in a single stock exchange trans-     mance of the ETF and the performance
action This means that investment strate-        of the index it is linked to. In practice, the
gies can be implemented more simply and          performance of the index fund may differ
more efficiently than with other financial       from that of the index it is replicating.
instruments.
                                                 This is due to the following factors:
The price for a single share generally
corresponds to a fraction of the index value     • Fund management costs: these are
defined by the issuer. The fair price can          deducted from the performance.
be verified at all times using the indicative    • The point in time at which the ETF is
net asset value (iNAV®) which is calculated        valued: this may differ from the time of
continuously.                                      the last index valuation.
                                                 • The use of profits: dividends, income
In contrast to certificates, ETFs, like tradi-     from rights issues and special payments
tional investment funds, consist of a sepa-        may be distributed or accumulated.
rate pool of fund assets. Consequently, ETFs     • The date of the index change: the com-
are a very safe investment and investors           position of the selection index DAX ®
are protected against total loss if the issuer     is reviewed every three months, for
goes bankrupt. According to the swap               example, with individual securities being
agreement, Swap-based ETFs may show                reweighted as necessary.
ETFS ON XETRA                                                                                                                                 6

BENEFITS OF ETFS FOR
INVESTORS AND TRADING
PARTICIPANTS

Broad diversification with a single                group on Xetra; they show a higher liquidity    ETFs on Xetra:
investment                                         than even the most heavily traded DAX ®         The advantages at a glance
Buying an ETF gives investors access to            equities. On average, the implicit trans-       • High degree of flexibility and possible
entire markets with just a single transaction.     action costs for the 20 most liquid equity        applications through pan-European
Exchange-traded funds allow various                ETFs are less than 5 basis points for an          electronic trading
investment strategies to be implemented.           order size of €100,000.                         • Indicative net asset value (iNAV®) provides
ETFs combine the tradability of an equity                                                            transparent price information
with the risk diversification of a portfolio.      Trading on Xetra enables the investor to        • Low purchase and management cost
Investors spread their risk by investing in        utilize the key functions of fully electronic     without any front load fee
the entire basket of securities underlying         equity trading for ETFs as well. In addition    • Narrow bid/ask spreads
an index. Institutional investors also save        to Designated Sponsors and continuous           • High liquidity during continuous trading
themselves the hassle of having to do their        trading, these include various forms of         • High degree of risk diversification with
own research and can avoid the sometimes           auctions, different order types and a mini-       just one investment
complex currency and settlement procedures         mum trading size of one fund share.             • Implementation of a large number of invest-
involved in investing in individual markets.                                                         ment and trading strategies possible
                                                   The creation/redemption process has a           • Protection from issuer risk due to separate
Continuous trading with top liquidity              positive effect on ETFs’ liquidity and per-       pool of fund assets
ETFs are continuously traded with top li-          formance. In this process, the Designated
quidity on the trading venue Xetra. Xetra          Sponsor and the ETF provider exchange
accounts for about 90 percent of the total         baskets of securities for ETF shares and
turnover in exchange-traded funds in               vice versa. The Designated Sponsor can
Germany. With a market share of 28 percent         buy or sell baskets of shares on the market
Deutsche Börse’s Xetra is the leading              without the ETF provider incurring trans-
trading venue in Europe.                           action fees. All participants profit from the
                                                   creation/redemption process: the issuer
The higher the liquidity, the lower the implicit   can efficiently replicate the index, the
transaction costs, i e. the costs incurring        Designated Sponsor benefits from additio-
the investor by the bid/ask spread when            nal trading opportunities and the investor
buying or selling products. By now, ETFs           receives a fair price with low trading fees
on the most popular standard indices have          at all times.
evolved into the most liquid instrument
ETFS ON XETRA                                                                                                                     7

Creation/Redemption-Process

                                             Private investors                     Institutional investors

                    Continuous publication
                                                                    Buying and selling ETFs
                    of indicative NAV
 Secondary market

                                                                 ETF segment of stock exchange                  Block trades

                                                                           Liquidity

                                                    MM1                      MM2                     MM3     Designated Sponsor
 Primary market

                                                                       Investment Trust

MM=Market Maker (also known as Designated Sponsor)

iXLM: New key indicator provides infor-                    vidual key indicator is available for all ETFs
mation on trading costs over the course                    traded on Xetra. To calculate the iXLM,
of the trading day                                         Deutsche Börse divides the trading day
Deutsche Börse is providing ETF investors                  from 9:00 a.m. to 5:30 p.m. into half-hour
with a new key indicator: The iXLM (intraday               intervals and calculates the iXLM retro-
Xetra liquidity measure) provides informa-                 actively for each half hour. The values are
tion on how trading costs of an ETF have                   published once a month. A current evalua-
developed over the course of a trading day.                tion of all ETFs has shown that the implicit
This allows investors to deduce the period                 transaction costs at the best time are up
in which the trading costs of an ETF were                  to 30 percent lower than at the worst time
particularly low and to take this information              during the day. The monthly evaluation is
into account for future decisions. The indi-               published in the ETF statistics on xetra.com.
ETFS ON XETRA                                                                                                                                  8

Transparency assured by the indicative          For most ETFs the spread is very narrow,          Indicative net asset values (iNAVs) state
net asset value                                 which allows their purchase and sale on           the current value of the fund assets, thus
For exchange-traded funds in the XTF            a low cost basis. Highly liquid ETFs demon-       ensuring maximum transparency. Indicative
segment an indicative net asset value is        strate bid/ask spreads of less than 5 basis       net asset values are usually calculated
calculated at least once per minute during      points on the stock exchanges. By and             on the basis of the portfolio, meaning they
trading hours by the issuer or a third party    large, the spreads for major liquid indices       are based on the current prices of the
commissioned by the issuer. Deutsche            range between 5 and 10 basis points,              individual items contained in the fund. The
Börse AG, for example, performs this func-      though they may top 50 basis points for           composition of the fund portfolio, which
tion for many issuers under its iNAV brand.     more specialized products.                        is published daily, is factored into the cal-
                                                                                                  culation. The cash in the fund is also added
Lower purchase and management costs             No issuer and reinvestment risk                   to the individual items in the fund portfolio.
As ETFs are traded like equities they have      Legally, an index certificate is a bearer bond.   The fund assets calculated in this way
no front load or redemption fees – unlike       By contrast, an exchange-traded fund              divided by the number of fund shares gives
traditional funds. Only the usual transac-      comprises a pool of fund assets that is           the current indicative net asset value.
tion costs are incurred for the purchase or     separate from the assets of the ETF ma-
sale via the stock exchange. What is more,      nagement company. While a certificate             This value has many possible applications:
thanks to the passive management strate-        harbours the risk of total loss if the issuer     Designated Sponsors use it to monitor their
gy, the annual management fees for ETFs         goes bankrupt, ETFs are not exposed to            calculations during trading, institutional in-
are generally far lower than those of active-   this issuer risk.                                 vestors use it to assist in risk management
ly managed funds. The management fee is                                                           and investors can easily find out about the
calculated pro rata for each day and deduc-     ETFs generally have an unlimited duration         current value of the ETF.
ted automatically from the fund assets.         and no maturity date; they are open-ended
                                                products. Investors have no reinvestment
                                                risk; they do not have to dissolve the ETF at
                                                the end of the term and reinvest the money
                                                at less favourable conditions. As a result,
                                                no reinvestment costs are incurred, which is
                                                an advantage over fixed-income securities,
                                                for example.
ETFS ON XETRA   9
ETFS ON XETRA   10
ETFS ON XETRA                                                                                                                                   11

INVESTMENT AND TRADING
STRATEGIES

ETFs can be used to implement a number          Cash equitization                                    buy back the loaned ETFs at a lower unit
of different trading and investment strate-     ETFs lend themselves extremely well to               price and return them to the lender.
gies. As trading on Xetra ® provides high       the short-term management of cash assets
liquidity, ETFs are also a suitable tool for    because of their high liquidity and flexible         A short-selling strategy using ETFs is espe-
algorithmic traders.                            trading. Fund managers and institutional             cially useful for markets in which individual
                                                investors can manage existing cash and               equities cannot be sold short for regula-
Productive investment                           inflows of funds flexibly, rapidly and accu-         tory reasons or for which a corresponding
Due to their attractive cost structure, ETFs    rately using ETFs. By temporarily parking            futures contract is not available. Moreover,
are ideal for both short- and long-term         income from dividend, bonus, or interest             ETFs provide an alternative to the use of
investments. A growing number of institu-       payments in ETFs, they can benefit from              futures for groups of investors that are not
tional investors have already invested in       the performance of the benchmark. Sub-               allowed to trade derivatives on account of
ETFs, leveraging the cost benefits and the      sequently, it is possible to reinvest the            their legal form, or when the aim is to avoid
opportunity these provide to implement          funds in individual shares in accordance             roll risk and managing margin accounts.
their strategy more effectively. For example,   with the investment objective.
using ETFs, investors can exploit short-
term market trends as part of a short-term      Arbitrage strategies
investment strategy without having to           Different trading strategies can also be
analyse individual stocks. ETFs on broad        implemented with ETFs. One of the main
indices lend themselves to longer-term          strategies here is based on temporary price
investment strategies. They can be speci-       imbalances between markets. Any time a
fically enhanced with individual securities,    price imbalance of this nature arises for a
depending on the investor’s individual risk     specific underlying instrument, a potential
appetite.                                       arbitrage opportunity arises for market
                                                participants. Taking advantage of this arbi-
Core-satellite approach                         trage opportunity not only eliminates the
In this strategy, portfolio managers use one    temporary price imbalance; it also ensures
broadly diversified core investment plus        high price quality on the relevant markets.
other, smaller individual investments called
satellites. The core investment generates       Short-selling and an alternative to
a basic return in line with the benchmark or    derivatives
a broad index while the satellites allow for    Investors can use short selling to hedge
a higher risk/return profile. The satellites    existing portfolios quickly and at low cost
chosen have a low correlation with the core     or, alternatively, to bet directly that the market
investment. Due to their attractive cost        will fall. To do this, ETFs are borrowed from
structure and extreme flexibility, ETFs are     the lender against payment of a securities
ideally suited for use in such strategies,      lending fee and then sold on the market. If
both as a core investment and as satellites.    the underlying index falls the investor can
ETFS ON XETRA                                                                                                                                  12

DIFFERENT FORMS OF ETFS

Performance or price index as reference         interest received increase the fund’s cash         the performance of a reference index with
ETFs can replicate both performance             assets i.e. they result in a positive difference   a structured component to achieve lever-
indices and price indices. The main diffe-      between the performance of the ETF and             age, provide a capital guarantee or gene-
rence lies in the way the interest and divi-    the underlying index until the date they are       rate a reverse exposure to the reference
dend payments for the instruments quoted        distributed to shareholders. Over and ab-          index. Like traditional ETFs, active ETFs are
on the index are handled. Price indices, for    ove this, in both index variants fund mana-        continuously tradable on Xetra®, offering in-
example, measure the actual price perfor-       gers can generate additional income e. g.          vestors a comparatively high degree of flexi-
mance and are merely adjusted for the           through securities lending transactions            bility and a wide range of applications. Active
income from rights issues and special pay-      that may boost the performance of the fund         ETFs must meet the same requirements in
ments. In performance indices, all income       and thus compensate for negative variance          terms of transparency as passive ETFs.
from dividend, bonus, or interest payments      from the performance index to a certain
is also reinvested in the index portfolio.      extent or even in full.                            You can find a current overview of all
                                                                                                   tradable ETFs and active ETFs, including
Independent of the calculation method           Swap ETFs                                          information about their distribution policies
for the underlying reference index, inves-      Swap ETFs use derivatives to track the             and structure at boerse-frankfurt.de.
tors benefit in both variants from the          performance of indices as accurately as
dividend and interest payments that the         possible. This enables non-index-related
ETF generates.                                  costs such as trading expenses and tra-
                                                ding taxes (e. g. stamp duty in the UK) to be
If the ETF replicates a performance index,      largely avoided. The index is not tracked
the dividends or interest income accruing       directly by acquiring the securities it con-
to the ETF will be reinvested in keeping with   tains but rather indirectly via one or more
the calculation method of the reference index   swap agreements. The company acquires
i.e. this income will accrue to the investor    securities for the fund that initially do not
through the price performance of the ETF.       generate any index-related income for the
If, on the other hand, the ETF replicates       fund. Under the swap agreement, however,
a price index, the income accruing to the       the entire performance of the securities
ETF will be paid out to investors at regular    held by the fund is swapped for the perfor-
intervals. In this way, both variants of the    mance of the underlying index so that the
ETF develop in line with the index.             shareholder of the swap ETF participates
                                                fully in the performance of the underlying
Minor differences in the degree of index        index. By avoiding or reducing non-index-
tracking may occur depending on the             related costs, swap-based ETFs allow even
calculation method. For example, when per-      more precise tracking of the performance
formance indices are replicated the mana-       of the underlying index.
gement fee for the ETF will be deducted
from the fund assets on a daily basis; on       Active ETFs
the other hand, the fund must pay taxes         Active ETFs are exchange-traded funds
on dividends and interest received that are     that pursue an active investment strategy.
not included in the index calculation. When     This may, for example, aim at outperforming
price indices are replicated, dividends and     an underlying benchmark index or combining
ETFS ON XETRA   13
ETFS ON XETRA                                                                                                                     14

THE ADMISSION PROCESS
FOR ETFS

ETFs that are to be traded in Deutsche         Applying for admission to trading on the       For questions please contact:
Börse’s XTF segment must have been ad-         stock exchange is a quick and easy pro-
mitted to trading in the Regulated Market      cess. Issuers seeking admission to the XTF     Cash Market Products & Regulation
of FWB ® Frankfurt Stock Exchange.             segment should observe the following:          Dagmar Wojcik
Applications can only be considered for                                                       Phone +49-(0)69-211-1 36 45
securities whose public distribution is per-   • We recommend starting off by arranging       dagmar.wojcik@deutsche-boerse.com
mitted in the Federal Republic of Germany.       an informal meeting with Deutsche Börse’s
Other preconditions include the appoint-         Cash Market Products & Regulation            Listing Services
ment of at least one Designated Sponsor          department, which will answer questions      Phone +49-(0)69-211-1 39 90
and the calculation of an indicative net         on the market segment and admission          listing@deutsche-boerse.com
asset value. Further requirements for the        to trading. This department will also put
participation in the ETF segment can be          the issuer in contact with Designated        STOXX Customer Support
found in the conditions of participation at      Sponsors.                                    Phone +41-(0)43-430-72 72
xetra.com/etf_e.                               • Application for admission to trading on      customersupport@stoxx.com
                                                 the Regulated Market is filed jointly by
                                                 the issuer and a co-applying lead ma-        Market Data & Services
                                                 nager who must be admitted to trading        Phone +49-(0)69-211-1 24 42
                                                 on the FWB Frankfurt Stock Exchange.         data.services@deutsche-boerse.com
                                                 Contact partner is the department Listing
                                                 Services.
                                               • The Bundesanstalt für Finanzdienst-
                                                 leistungsaufsicht (BaFin – Federal
                                                 Financial Supervisory Authority) reviews
                                                 the prospectus and grants permission
                                                 for the public distribution of domestic
                                                 shares. For shares which are permitted
                                                 for public distribution outside of Germany
                                                 and which are liable to the UCIT directive
                                                 the issuers confirmation is sufficient.
                                               • Funds approved for distribution can be
                                                 admitted to trading in the Regulated
                                                 Market of the FWB Frankfurt Stock Ex-
                                                 change within five trading days.
                                               • Deutsche Börse admits Designated Spon-
                                                 sors to trading within one day. Please
                                                 find the application form for Designated
                                                 Sponsors at xetra.com/ds_e.
                                               • Deutsche Börse’s Market Data & Services
                                                 department will answer any questions on
                                                 arranging and calculating indicative net
                                                 asset values (iNAV®).
ETFS ON XETRA                                                                            15

ISSUERS IN THE ETF SEGMENT

www.amundietf.com     easy.bnpparibas.de        deka-etf.de            expat.bg

fidelity-etfs.com     ftportfolios.com          franklintempleton.de   gsam.com

hanetf.com            assetmanagement.hsbc.de   icbccs.com.hk          etf.invesco.com

                           ETFs by

ishares.com           jpmam.com/etf             lgimetf.com            lyxoretf.de

marketaccessetf.com   ossiam.com                rizeetf.com            ssga.com

                      
tabulaim.com          ubs.com/etf               cib.unicredit.eu       vaneck.com

www.de.vanguard       wisdomtree.eu             Xtrackers.com
Published by
Deutsche Börse AG
60485 Frankfurt/Main
Germany
xetra.com
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Contact
Deutsche Börse AG
Cash Market Products & Regulation
Phone +49-(0) 69-2 11-1 36 45

March 2020

Registered trademarks
DAX ®, FWB ® Frankfurter Wertpapier-
börse, iNAV® and Xetra ® are registered
trademarks of Deutsche Börse AG.
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are registered trademarks of STOXX Ltd.

Disclaimer
All information contained in this brochure
is subject to change without notice at any
time, and no guarantee can be given as
to its accuracy, commpleteness, correct-
ness or fitness for a particular purpose.
This brochure does not constitute legal
or financial advice, nor does it give rise to
any obligation on the part of Frankfurter
Wertpapierbörse, Deutsche Börse AG or
any of their subsidiaries.
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