Glossary

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.

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.

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.

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.

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.

The management of a standing syndicate usually rotates on a regular basis. Lead managers receive a special fee for performing these functions.

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.

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.

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.

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.

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.

“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).

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.

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.

The shares of companies listed in Neuer Markt® were subject to a lockup period of six months.

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

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.

Synonym: Bull position

Antonym: Short position

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