How to Invest on the Frankfurt Stock Exchange

By Kirsteen Mackay

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The Frankfurt Stock Exchange is also known as the Frankfurter Wertpapierbörse (FWB®). It is one of the world's largest trading centres for securities. Read on to discover how to buy FWB stocks.

Frankfurt is an important financial hub on the world stage because of 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 FRA for Frankfurt. 

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

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

Börse Frankfurt Zertifikate AG

The Börse Frankfurt Zertifikate AG is a German capital market company located in Eschborn providing financial services. The company operates an exchange for trading structured products to members for buying, selling, and trading in stocks, options, bonds, and commodities. Börse Frankfurt Zertifikate AG operates trading with structured products such as certificates and warrants.

Deutsche Boerse AG

Deutsche Boerse AG provides various stock exchange services, including introductions, trading, 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.

Deutsche Börse AG's organizational and operational duties cover trading in shares, bonds, funds, Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs). 

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

Frankfurt Stock Exchange

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

The market cap of the Frankfurt Stock Exchange equals around two trillion euros, coming eleventh out of the world's largest stock exchanges.

There are two trading venues to buy and sell securities on the FSE: 

  • Xetra® - the fully electronic trading venue, accounts for most of the FSE's trading volume.

  • specialist trading on the trading floor of the FSE

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

In Frankfurt, specialist trading on the trading floor offers around 10,000 shares, most of them foreign shares.

The Frankfurt Stock Exchange has four market segments:

  • Prime Standard

  • General Standard

  • Scale

  • Basic Board

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

The Basic Board is the primary segment below Scale. It allows issuers of the former Entry Standard that do not fulfill the inclusion requirements of Scale to remain listed on the Frankfurt Stock Exchange. 

The Open Market, formerly Freiverkehr, is the least regulated segment with the lowest transparency obligations. Most companies in the Open Market have a different home market. In addition, many funds, certificates etc. are included. Securities in the Open Market can be redeemed in the Scale segment or 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 transparency standard. 

FSE/FWB/FRA Listings

As of September 2022, there were:

  • 299 companies listed on Prime Standard

  • 123 companies in General Standard

  • 50 companies in Scale

  • 66 on the Basic Board

49 out of 422 regulated market listings are non-German (11.6%).

There is no apparent bias toward a particular segment in the Frankfurt Stock Exchange. Companies cover a spectrum of sectors, including energy, resources, renewables, software, pharma, industrial, retail, tech, financial, biotech, fintech, construction, media, consumer staples, materials, chemicals and more.

The FSE's Scale segment loosely resembles the London Stock Exchange's AIM or the United States OTC markets. 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 finance via the stock exchange for small and medium-sized enterprises. 

A lot of trading happens on the Deutsche Borse. In August 2022, its cash markets (Xetra and the Frankfurt bourse) logged a turnover of 99.23bn euros ($98.65bn), down from 106.74bn 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 refurbishment. Deutsche Börse redesigned the historic building in downtown Frankfurt that houses its well-known trading floor. It features an exhibition and lectures to visitors, along with interactive activities. 

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

Why is the Frankfurt Stock Exchange Important?

Frankfurt is a significant financial hub on the world stage because of 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 trading hub for capital and money markets. This is where German and euro-level monetary policy is decided, and eurozone regulatory policy is managed. Frankfurt is also where German government debt is collected.

Frankfurt Stock Exchange Opening Hours

The Frankfurt Stock Exchange trading hours are open each trading day from 9:00 to 17:30 (Xetra) and 8:00 to 22:00 on the trading floor.

Who Owns FSE/FWB Stocks?

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

Over 250 international trading institutions and more than 4,500 traders invest in the Frankfurt Stock Exchange globally. FSE/FWB/FRA investors represent 35% of the world's investment capital. 

Top stockholders 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 in the Frankfurt Stock Exchange via 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 Germany's most watched index. It includes the 40 most significant and most liquid FSE/FWB companies by market cap, such as Volkswagen (FRA: VOWB), Mercedes Benz Group ADR (FRA: DAII), Adidas (FRA: ADS), and Allianz (FRA: ALVE). These are highly liquid shares.

To feature 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 Type 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 investor type owning Frankfurt Stock Exchange shares. Aggressive growth investors and Deep Value investors are the least represented ownership type at the time of writing.

Pros and Cons of Investing in FSE Stocks

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

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

Pros of Frankfurt Stock Exchange Investing

  • Access to Interesting Equities: Frankfurt-listed stocks are hugely varied and interesting, covering companies from all sectors and industries.

  • Liquidity: There is usually plenty of liquidity in Frankfurt-listed equities making this an active environment for trading.

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

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

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

Cons of Frankfurt Stock Exchange Investing

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

  • Geopolitical Risk: The German economy can be subject to geopolitical stresses that affect stock volatility.

How to Purchase FSE/FWB/FRA Stocks

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

If you would like to purchase shares in a Frankfurt-listed company, here are the steps to follow:

Fix Your Budget

Only invest what you can afford to lose. Size your position carefully in a diversified portfolio.

Choose Your Broker-Dealer

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

Not all brokerage firms offer Frankfurt trading, but for Prime-listed stocks, many do. You may find your usual broker offers the stock you want, or you can shop around. Comparing fees to get the best value for money on your deal is wise. If you only want to trade occasionally or in small amounts, you may find a fee-free broker or one that offers fractional trading.

Fund your account

To trade Frankfurt-listed German stocks, you need to fund your account. Using a credit/debit card or even PayPal is usually very straightforward.

Buy your Frankfurt-listed stock.

When buying FSE/FWB/FRA stocks, you'll have the option for market or limit orders when you place the trade. Then press the buy button. 

How to Buy NYSE Stocks

How to Buy NEO Stocks

How to Buy TSX Stocks

How to Buy CSE Stocks

How to Buy OTC Stocks

How to Buy NASDAQ Stocks

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In this article:

Topics:
Financial Exchanges and Data
Industries:
Industrials
Consumer Discretionary
Consumer Staples

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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