Market Maker

Market MakersLiquidity counts

Designated Sponsors in Xetra and FWB® the Frankfurt Stock Exchange specialists ensure trading is liquid and price quality is high.

Supply and demand do not always match; usually the price and/or volume of the securities on offer or bid for differ. Less liquid securities can be rendered more fungible by mandating a so-called market maker to cover them as this increases the probability that orders placed will be executed. Actively supported shares are more favoured by investors in line with the principle of “liquidity attracts liquidity”.

Shares in one of the Deutsche Börse selection indices must be included in continuous trading, one criterion for which is liquidity in the security. Designated Sponsors guarantee higher liquidity onXetra®, the electronic trading platform. In Xetra Designated Sponsors (e.g., banks and securities trading houses) ensure that continuous trading is possible in less liquid securities by posting binding bid and sell prices (quotes).

Deutsche Börse provides its Specialists service as a way of supporting SMEs in trading on FWB® the Frankfurt Stock Exchange.

Overview of content

Xetra: Designated Sponsors

Designated Sponsors have to meet high quality standards as regards providing liquidity. For example, for quotes they have to abide by a maximum spread (difference between the bid and the sell price) and a minimum quote volume (number of units). Deutsche Börse compiles a rating on a quarterly basis of the Designated Sponsors to ensure their services are transparent. The rating includes each designated Sponsor’s average quote duration, the average spread and turnover.

By constantly monitoring the markets, Designated Sponsors have an expert knowledge of both the shares whose liquidity they support and the sectors to which these shares belong. Depending on the issuer’s requirements and the Designated Sponsor’s service portfolio this expertise can then be brought to bear in additional services, such as research, investor relations and market reports. Through their work, Designated Sponsors can strengthen relationships with their key clients in the fields of corporate finance and trading and forge links to new investors and analysts. In this way, Designated Sponsors make an important contribution to enhancing liquidity in the shares in exchange trading and to positioning the company in the capital markets.

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