Deutsche Börse has concluded its preparations for the implementation of the Markets in Financial Instruments Directive (MiFID): it offers private and institutional investors best execution in around 245,000 securities and provides banks with a comprehensive range of services allowing them to meet the MiFID requirements. As announced, the company will be introducing a new price model for floor trading on the Frankfurt Stock Exchange on 1 November, as a final MiFID-related measure. Deutsche Börse recently revamped its Xetra BEST best execution service.
On Thursday Rainer Riess, Managing Director for Market Development for the Cash Market, explained to journalists in Frankfurt, “With the Frankfurt Stock Exchange trading floor and the XETRA electronic trading system, Deutsche Börse offers investors two trading platforms that meet the best execution requirements set out in the MiFID: the best prices, the lowest costs, high order execution speed and likelihood of execution.”
With Xetra BEST, Deutsche Börse offers a functionality that allows banks (order flow providers) to execute their clients' orders against best executors. This means that order flow providers can guarantee best execution within the meaning of the MiFID. Orders from private investors are executed in Xetra BEST with an automatic price improvement as against the price that would have been generated in the Xetra order book at the time in question. Furthermore, orders processed using Xetra BEST are generally executed fully and immediately in one transaction. As of 1 November, it will be even easier to integrate Xetra BEST into the bank order systems. Further banks then want to start using Xetra BEST. Deutsche Börse recently attracted five new best executors: Baader Wertpapierhandelsbank, Commerzbank, equinet, ICF Kursmakler and STEUBING.
Ten banks currently offer their clients Xetra BEST, while further order flow providers have shown an interest in the system. An average of around 60,000 transactions are already executed per month.
Banks benefit from Germany’s lowest transaction and settlement costs in Xetra BEST. The Xetra BEST functionality is an integrated component of Xetra and therefore offers exchange-based and monitored trading on an EU regulated market. Investors can access Xetra BEST transactions executed over the last five trading days and can check the price improvement for their individual transactions against the Xetra order book.
The new price model that Deutsche Börse is implementing to mark the launch of the MiFID will execute the majority of orders at a lower cost than in the past, and the trading fee will fall to as little as one euro, depending on the size of the order. Fees can be calculated as early as the order placement stage, making them more transparent.
As a further MiFID requirement, European investment firms have to disclose off-exchange transactions in shares and certificates representing shares to other market participants. The MiFID OTC post-trade transparency service means that Deutsche Börse offers its clients the full range of services required in order to meet this post-trade transparency obligation.