How to Invest on the Frankfurt Stock Exchange

Frankfurt is an important financial center on the world stage due to its economic integration created by the euro. This makes the Frankfurt Stock Exchange (FSE/FWB) a popular place for international investors to trade stocks.

FSE, FWB or FRA?

When searching for stocks listed on the Frankfurt Stock Exchange, the multiple acronyms FSE/FWB/FRA can be confusing.

The FSE is the Frankfurt Stock Exchange, also known as the Frankfurter Wertpapierbörse (FWB®), and these shares are listed on Google Finance under the FRA for Frankfurt.

The Frankfurt Stock Exchange is a public law institution with partial legal capacity. It is owned and operated by Börse Frankfurt Zertifikate AG, a subsidiary of the Deutsche Borse AG (FRA: 63DA).

Both the Börse Frankfurt Zertifikate AG and the Deutsche Börse AG are legal entities under private law. They organize the execution and adequate development of the operations of the Frankfurt Stock Exchange.

Börse Frankfurt Zertifikate AG

Börse Frankfurt Zertifikate AG is a German capital market company located in Eschborn that provides financial services. The company operates an exchange to market structured products to members to buy, sell and trade stocks, options, bonds and commodities. Börse Frankfurt Zertifikate AG operates with structured products such as certificates and warrants.

Deutsche Boerse AG

Deutsche Boerse AG provides various trading services, including introductions, trading and operating facilities for institutions and private investors. The company offers electronic trading systems for buying and selling securities on stock exchanges in Europe. Deutsche Boerse offers indices such as DAX, MDAX, SDAX, and XTF, as well as futures and options trading.

The organizational and operational functions of Deutsche Börse AG encompass the trading of stocks, bonds, funds, Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs).

Deutsche Börse also owns the Clearstream clearing company and the Eurex Frankfurt futures and options exchange.

Frankfurt Stock Exchange

The Frankfurt Stock Exchange is one of the largest securities trading centers in the world. With a participation in the billing of around 90%. It is the largest of the seven stock exchanges in Germany.

The market capitalization of the Frankfurt Stock Exchange is equal to around two billion eurosranking eleventh among the world’s largest stock exchanges.

There are two trading venues for buying and selling securities on the FSE:

  • Xetra® – the fully electronic trading venue accounts for the majority of the FSE’s trading volume.

  • trade specialized in trading floor of the ESF

Investors can trade 1200 German and international stocks on the Xetra trading platform. These include the German blue chips of DAX®, MDAX®, SDAX® and TecDAX® and shares of the EURO STOXX 50® and STOXX® Europe 50 European indices. Xetra is the largest stock exchange for German equities.

In Frankfurt, the parquet specialist shop offers around 10,000 sharesmost of them foreign shares.

The Frankfurt Stock Exchange has four market segments:

  • first standard

  • General norm

  • Scale

  • Basic Board

Prime Standard and Scale are premium segments with enhanced transparency requirements. Prime and General are regulated by the EU, while Scale is an exchange-regulated market.

The basic board is the main segment below the scale. It allows former Entry Standard issuers that do not meet the Scale listing requirements to continue trading on the Frankfurt Stock Exchange.

The Open Market, formerly Freiverkehr, is the least regulated segment with the lowest transparency obligations. Most of the companies in the Open Market have a different internal market. In addition, many backgrounds, certificates, etc. are included. Securities in the Open Market can be redeemed in the Scale segment or in the Basic Board. Scale is open to companies seeking an initial listing on the Open Market and who are prepared to adhere to a certain standard of transparency.

ESF/FWB/FRA listings

From September 2022There was:

49 of 422 listings on regulated markets are not German (11.6%).

There is no apparent bias towards a particular segment on the Frankfurt Stock Exchange. The companies cover a spectrum of sectors, including energy, resources, renewable energy, software, pharmaceutical, industrial, retail, technology, financial, biotech, fintech, construction, media, consumer staples, materials, chemicals, and more.

The ESF Scale segment loosely resembles the AIM of the London Stock Exchange or the OTC markets of the United States. This segment for SMEs offers an efficient opportunity to raise debt capital through the exchange and attract institutional investors. As a formally registered SME growth market, Scale facilitates access to debt capital financing through the stock market for small and medium-sized businesses.

Much of the trade occurs at the Deutsche Borse. In August 2022, its cash markets (Xetra and the Frankfurt Stock Exchange) posted a turnover of €99.23 billion ($98.65 billion), up from €106.74 billion in August 2021.

The current CEO of the Frankfurt Stock Exchange is Eric Leupold.

Visit the Frankfurt Stock Exchange

The Frankfurt Stock Exchange recently reopened to the public after a major refurbishment. Deutsche Börse redesigned the historic building in the center of Frankfurt that houses its well-known trading room. It features an exhibition and lectures for visitors, along with interactive activities.

The centerpiece of its expansion is the Frankfurt Stock Exchange Visitor Center, which has made the stock exchange more lively, stylish and tangible. This makes it an attractive point of contact for stock market issues and stock market culture.

Why is the Frankfurt Stock Exchange important?

Frankfurt is a major financial center on the world stage due to its economic integration created by the euro. Along with the Frankfurt Stock Exchange, Frankfurt is home to two major central banks: the German ‘Bundesbank’ and the European Central Bank (ECB).

The city also plays a vital role as a commercial center for capital and money markets. This is where German monetary policy and at the euro level are decided, and the regulatory policy of the eurozone is managed. Frankfurt is also where the German government debt is collected.

Opening hours of the Frankfurt Stock Exchange

The trading hours of the Frankfurt Stock Exchange are open every trading day from 9:00 a.m. to 5:30 p.m. (Xetra) and from 8:00 a.m. to 10:00 p.m. on the floor.

Who owns the FSE/FWB shares?

Shares on the Frankfurt Stock Exchange are owned by institutions, mutual funds, sovereign wealth funds, hedge funds, pensions, company insiders and retail investors.

More than 250 international trading institutions and more than 4,500 traders invest in the Frankfurt Stock Exchange worldwide. FSE/FWB/FRA investors represent 35% of global investment capital.

Major shareholders include Vanguard, Fidelity, Norges Bank Investment Management, BlackRock, Allianz and Baillie Gifford.

While you can invest in the individual stocks listed on the Frankfurt Stock Exchange, you can also invest on the Frankfurt Stock Exchange through index funds. There are many funds based on German indexes.

The most critical German indices are DAX, TecDAX, MDAX, SDAX and DivDAX.

The DAX index is the most watched index in Germany. Includes the 40 most significant and liquid FSE/FWB companies by market capitalisation, such as Volkswagen (FRA: VOWB), Mercedes Benz Group ADR (FRA: DAII), Adidas (FRA: ADS), and Allianz (FRA: ALVE). These are highly liquid stocks.

To be listed in a key German index, the company must be a member of Prime Standard.

The Global X DAX Germany ETF (NASDAQ: DAX) is a very popular US DAX index fund.

What kind of investors own FSE/FWB/FRA shares?

Growth at a Reasonable Price (GARP) is a capital investment strategy that combines growth and value investing attributes. GARP investors are by far the largest type of investor that owns shares of the Frankfurt Stock Exchange. Aggressive growth investors and deep value investors are the least represented property type at the time of writing.

Pros and Cons of Investing in FSE Stocks

For investors who want to invest in German stocks, the Frankfurt Stock Exchange is where you will find most of the major German public companies. There are also many non-German companies listed on the Frankfurt Stock Exchange.

Like any investment, FSE/FWB/FRA shares have advantages and disadvantages.

Advantages of investing in the Frankfurt Stock Exchange

  • Access to Interesting Variable Income: Stocks listed in Frankfurt are very diverse and interesting, encompassing companies from all sectors and industries.

  • Liquidity: There is usually a lot of liquidity in stocks listed in Frankfurt, making this an active environment for trading.

  • Market transparency: Exchange-traded stocks are considered more transparent than OTC stocks, with security against manipulation.

  • Lower costs: For companies that choose to list on the Frankfurt Stock Exchange, listing costs are lower than on other exchanges. Many US issuers believe that the Frankfurt Stock Exchange offers lower legal and compliance fees.

  • Quick IPO: The Frankfurt Stock Exchange offers one of the fastest routes to IPO in the world.

Cons of investing in the Frankfurt Stock Exchange

  • Volatility: Since many stocks on the Frankfurt Stock Exchange are speculative growth stocks, the volatility can be daunting for some investors.

  • Geopolitical risk: The German economy may be subject to geopolitical tensions that affect equity volatility.

How to buy FSE/FWB/FRA shares

There are more than 1.5 million tradable securities on the Frankfurt Stock Exchange. These include stocks, bonds, ETFs, ETCs, ETNs, funds, warrants, and certificates.

If you want to buy shares of a company listed in Frankfurt, here are the steps to follow:

fix your budget

Only invest what you can afford to lose. Carefully size your position in a diversified portfolio.

Choose your broker

To trade on the Frankfurt Stock Exchange, you need an account with your regulated bank or broker.

Not all brokerage firms offer trading in Frankfurt, but many do for publicly traded stocks. You may find that your regular broker offers the stocks you want, or you can shop around. Comparing rates to get the best value for money on your offer is smart. If you only want to trade occasionally or in small amounts, you can find a free broker or one that offers fractional trading.

Fund your account

To trade German stocks listed in Frankfurt, you must deposit funds into your account. Using a credit/debit card or even PayPal is usually very easy.

Buy your shares listed in Frankfurt.

When buying FSE/FWB/FRA shares, you will have the option of market or limit orders when you place the trade. Then press the buy button.

Leave a Comment