How to invest in 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 researching stocks listed on the Frankfurt Stock Exchange, the multiple acronyms FSE/FWB/FRA can be confusing.

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

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

Both Börse Frankfurt Zertifikate AG and Deutsche Börse AG are legal persons under private law. They organize the execution and proper 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 for trading structured products with its members for buying, selling and trading stocks, options, bonds and commodities. Börse Frankfurt Zertifikate AG trades in structured products such as certificates and warrants.

Deutsche Borse AG

Deutsche Boerse AG provides various exchange services, including listings, trading operations and operational facilities to 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 trading options and futures.

The organizational and operational tasks of Deutsche Börse AG cover the trading of shares, bonds, funds, Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs).

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

Frankfurt Stock Exchange

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

The market capitalization of the Frankfurt Stock Exchange amounts to approximately two trillion euros, ranking eleventh among the largest stock exchanges in the world.

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

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

  • trade specializing in wooden floor of the FSE

Investors can trade approximately 1,200 German and international stocks on the Xetra trading platform. These include German blue chips from the DAX®, MDAX®, SDAX® and TecDAX® and stocks from the European EURO STOXX 50® and STOXX® Europe 50 indices. Xetra is the most important stock exchange for German stocks.

In Frankfurt, the specialized trading room offers about 10,000 stocks, mostly foreign stocks.

The Frankfurt Stock Exchange has four market segments:

  • Main standard

  • General standard

  • Ladder

  • basic advice

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

The base map is the main segment below the scale. It allows issuers of the old Entry Standard that do not meet the Scale inclusion requirements to remain listed on the Frankfurt Stock Exchange.

The Open Market, formerly Freiverkehr, is the least regulated segment with the weakest transparency obligations. Most free market companies have a different home market. In addition, many funds, certificates, etc. are included. Securities on the open market can be redeemed in the Scale segment or the Base Board. Scale is open to companies wanting a first listing on the open market and who are willing to adhere to a certain standard of transparency.

Registration FSE/FWB/FRA

From September 2022there was:

49 of the 422 listings on regulated markets are non-German (11.6%).

There is no apparent bias towards any particular segment of the Frankfurt Stock Exchange. The companies span a range of sectors including energy, resources, renewables, software, pharmaceuticals, industrials, retail, technology, finance, biotech, fintech, construction, media, consumer staples, materials, chemicals and more.

The Scale segment of the FSE vaguely resembles the AIM of the London Stock Exchange or the OTC markets of the United States. This segment for SMEs offers an effective opportunity to raise debt capital through the exchange and attract institutional investors. As an officially registered SME Growth Marketplace, Scale facilitates access to debt financing through the stock exchange for small and medium-sized businesses.

Many transactions are made on the Deutsche Borse. In August 2022, its spot markets (Xetra and the Frankfurt Stock Exchange) recorded a turnover of 99.23 billion euros ($98.65 billion), compared to 106.74 billion euros 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 renovation. Deutsche Börse has redesigned the historic building in downtown Frankfurt that houses its famous trading floor. It offers an exhibition and conferences for visitors, as well as interactive activities.

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

Why is the Frankfurt Stock Exchange important?

Frankfurt is an important financial center on the world stage due to its economic integration created by the euro. Besides 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 hub for capital and currency markets. This is where German and Euro monetary policy is decided and Eurozone regulatory policy is managed. Frankfurt is also where German public debt is collected.

Frankfurt Stock Exchange opening hours

Frankfurt Stock Exchange trading hours are open each 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 trading floor.

Who owns the FSE/FWB shares?

Frankfurt Stock Exchange shares are held by institutions, mutual funds, sovereign wealth funds, hedge funds, repos, corporate 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.

The main shareholders are Vanguard, Fidelity, Norges Bank Investment Management, BlackRock, Allianz and Baillie Gifford.

Although you can invest in 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 indices.

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

The DAX index is the most watched index in Germany. It includes the 40 largest and most liquid FSE/FWB companies by market capitalization, such as volkswagen (ENG: VOWB), Mercedes-Benz ADR Group (FRA: DAII), Adidas (FRA: ADS), and Allianz (ENG: ALVE). These are very liquid stocks.

To be included 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 American DAX index fund.

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

Growth at a Reasonable Price (GARP) is an equity investment strategy that combines growth and value investing attributes. GARP investors are by far the largest type of investor holding shares in the Frankfurt Stock Exchange. Aggressive Growth Investors and Deep Value Investors are the least represented property type at the time of writing.

Advantages and disadvantages of investing in FSE shares

For investors looking to invest in German stocks, the Frankfurt Stock Exchange is where you will find most of Germany’s major public companies. Many non-German companies are also 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 actions: The stocks listed in Frankfurt are extremely varied and interesting, covering companies from all sectors and industries.

  • Liquidity: There is usually plenty of liquidity in Frankfurt-listed stocks, making it an active trading environment.

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

  • Reduced costs: For companies that choose to list on the Frankfurt Stock Exchange, the listing fee is 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.

Disadvantages of investing in the Frankfurt Stock Exchange

  • Volatility: As many stocks on the Frankfurt Stock Exchange are speculative growth stocks, the volatility can be off-putting to some investors.

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

How to buy FSE/FWB/FRA shares

There are more than 1.5 million securities tradable 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:

Set your budget

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

Choose your broker-dealer

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

Not all brokerages offer Frankfurt trading, but for publicly traded stocks, many do. You may find that your regular broker offers the stocks you want, or you can shop around. It’s wise to compare fees to get the best value for your transaction. If you only want to trade occasionally or in small amounts, you can find a no-fee broker or a broker that offers split trades.

Fund your account

To trade German stocks listed in Frankfurt, you need to fund 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 placing market or limit orders when you place the trade. Then press the buy button.

James T. Quintero