Glossary

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.

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.

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.

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.

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.

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.

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.

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.

Settlement of a warrant transaction through the delivery of the physical underlying instrument against payment of the exercise price

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.

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.

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.

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.

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.

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.

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.

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.

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

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

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.

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.

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.

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)

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.

Synonyms:   New issue market

Factsheet Prime All Share

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).

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.

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.

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.

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.

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.

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.