Listing process Regulated Market
Listing process Regulated Market General Standard
Overview
Admission to Listing/Quotation
Briefly, you have to do the following:
Simultaneously to the application for the securities’ admission to stock exchange trading, you have to submit at the stock exchange an application for introduction of listing and prepare the necessary documents/evidence.
Legal Basis of the Admission Decision
The legal basis for the listing order is to be found in Sect. 32 Börsengesetz [BörsG, German Stock Exchange Act] in conjunction with Sect. 45 Börsenordnung für die Frankfurter Wertpapierbörse [BörsO FWB, Exchange Rules for the Frankfurter Wertpapierbörse]. Pursuant to these provisions, securities to be traded on the Regulated Market of a stock exchange require the admission or inclusion by the Management Board of Frankfurter Wertpapierbörse (Management Board FWB), unless provided otherwise in another legal provision.
Legal Basis for the Listing Introduction
The listing introduction of admitted securities on the Regulated Market (so-called “Introduction”) is governed by Sect. 38 BörsG in conjunction with Sect. 58 BörsO FWB. Pursuant to these provisions, the Management Board of Frankfurter Wertpapierbörse decides upon the issuer’s application on the introduction of admitted securities on the Regulated Market at Frankfurter Wertpapierbörse (FWB).
Subject of the Admission Decision
The admission procedure is concluded with the listing order by the Management Board FWB. This order is the authorization under public law in the form of an administrative act to use the stock exchange facilities for trading in the admitted securities; moreover, the order is the prerequisites for introduction the securities.
The fact has to be observed that this admission to trading refers exclusively to the securities, not to their issuer. According to the principle of complete admission of stock, generally the complete registered capital of the issuer divided in stock will be admitted, unless, by means of an exception, the requirements for a partial admission are met. The principle of complete admission ever covers any stock issued by the issuer at a later point in time, so that upon issuance of this stock a renewed admission procedure has to be performed. Pursuant to Sect. 69 Börsenzulassungs-Verordnung (BörsZulV) [German Stock Exchange Admission Regulation] the admission to listing for the new stock has to be applied for no later than one year after issue of such stock; in case of stock under a restraint on alienation or serving the purpose of maintaining a controlling influence, the admission has to be applied for as soon as such stock becomes freely tradable.
Procedure of the Listing Introduction
After admission of the securities, a separate resolution (administrative act) is adopted in a second step by the FWB Management Board for the commencement of trading (listing).
An application for admission to listing may be submitted by the issuer or its designated authorised representative. Listing on the Frankfurt Stock Exchange, as well as admission, is applied for via the eListing platform. As part of the listing application, the applicant provides information on the requested date for introduction and information to enable the technical listing of the shares in the trading system. This includes important information for trading, such as the choice of trading venue (XETRA or XETRA Frankfurt 2) on which the first price discovery is to take place on the day of the IPO.
“XETRA“ and “XETRA Frankfurt 2“ are trading venues in the cash market. Technically they are back ends of the fully electronic trading system XETRA, where orders are matched in a central, fully electronic order book. This system enables participants from all over Europe a location-independent participation in trading at Frankfurter Wertpapierbörse. In order to increase the liquidity of a security traded on the “XETRA“ stock market, the issuer’s stock will be supported by a Designated Sponsor. The necessity of support depends on the liquidity of a security. If a security fails to show the necessary amount of liquidity, its inclusion in continuous trading requires the support of at least one Designated Sponsor. The Designated Sponsor is assigned by Deutsche Börse AG and the company concludes an individual agreement with this Designated Sponsor governing the services provided by and the remuneration paid to the Designated Sponsor.
The Functions of the Designated Sponsors in XETRA
In XETRA-trading the Designated Sponsors ensure a minimum liquidity of the stock by entering, permanently or upon request, immediately tradable purchase and sales offers (so-called quotes) for the securities they support. In doing so, they allow in continuous trading a continuous price determination by supply and demand. This is especially important for less liquid securities for which only little trading interest exists. This procedure means for investors that at any time they will be able to buy or sell supported stock at fair prices and that their securities positions will be evaluated at fair market value. In order to describe the services of the Designated Sponsors in transparent manner, Deutsche Börse AG prepares a quarterly rating of the Designated Sponsors. Included in this rating are the average quotation periods, the average spread and the sales volume of a Designated Sponsor. The evaluation reaches from “AA” as top rating to “DD” or no rating at all.
Any formerly floor-traded securities have been transferred to the market XETRA Frankfurt 2 implemented in May 2011 with its trading model “XETRA Frankfurt Specialist“ (“continuous auction with specialist“). Through this trading model market participants benefit during securities trading from Specialists providing liquidity.
The Function of the Specialist in XETRA Frankfurt 2
The Specialists authorized by Deutsche Börse AG secure liquidity and continuous tradability of securities traded in the “continuous auctions“ trading model: the Specialists undertake to allow trading ranges and refrain from economically unreasonable partial executions. Among their tasks is the preparation of indicative price information considering the current order book situation as well as the provision of additional liquidity. The prices will be determined based upon the current order book situation matching all existent purchase and sales orders as well as on the order book situation of defined reference markets, if any. Moreover, the Specialist is able to enter into the order book orders for other trading participants, if such orders regard securities assigned to that specialist. There is only one competent Specialist for each security. In order to review the high quality requirements, the so-called performance of the Specialists active at Frankfurter Wertpapierbörse is measured. This performance measurement examines various aspects of quotation and execution. The first refers to the speed and continuity of quotation and the size of bid/offer spread. The execution quality, among other things, measures the execution speed and checks if execution of orders is performed within the respective spread.
Further information and details on XETRA, XETRA Frankfurt 2 and the particular trading models you can find here.
After determination of the first stock exchange price on the selected market, see Sections 88 et seq. BörsO FWB, the price determination is performed on both markets.
The application for the listing introductionmay be submitted, depending on the company’s IPO-time schedule, simultaneously to the application for admission to listing.
Pursuant to Sect. 52 BörsZulV the securities may be introduced for trading no earlier than on the working day following the first publication of the prospectus. If a public offering was carried out for the securities and the securities to be listed have been issued for public subscription, listing introduction may start only after the end of allocation, Sect. 38 Paragraph 2 BörsG. This requirement shall ensure orderly trading from the first trading day onwards. The end of the allocation of the new stock has to be confirmed to the stock exchange. In practice, this takes place in the course of the admission procedure before the listing order is issued.
Exactly like the listing order, the decision on the introduction of the securities is an administrative act under public law.
Announcement and Publication of Admission and Listing
The administrative acts listing order and decision on the listing introduction have to be announced to the applicant. The announcement is performed by means of a written notification to the applicant.
In addition to announcing the decision, pursuant to Sect. 51 BörsZulV the decision on the securities’ admission has to be published. This publication is caused by the Management Board of Frankfurter Wertpapierbörse at the applicant’s costs in the Bundesanzeiger [German Federal Gazette] and on the websites of Deutsche Börse AG under the column “FWB-Bekanntmachungen“ [FWB announcements].
The decision on introduction of the securities is also published. On the day before listing introduction, the Management Board of FWB publishes, free of costs for the issuer, a corresponding official announcement on the websites of Deutsche Börse AG, also under the column “FWB-Bekanntmachungen“.
Helpful Information for Admission / Listing
Is there a standard form for the application for the introduction of securities admitted to trading?
The introduction of securities admitted to trading is handled via the electronic eListing platform of Deutsche Börse AG. With the help of the electronic platform, applicants are guided through the listing process in a structured and step-by-step manner.
When should the Application for Listing of Admitted Securities be filed?
The application for listing of admitted securities may be filed simultaneously with the application for admission. However, the completely filled in application should be filed with the stock exchange no later than five banking business days prior to the day of the intended first pricing (= the date of listing introduction).
What Additional Details are required for the Listing?
In addition to the description of the securities to be listed, the time intended for listing introduction as well as further details like the contact at the underwriting bank or the invoice recipient, the application also offers the option
- to select the stock market (XETRA Frankfurt 2 or XETRA) where the first pricing should take place (this refers exclusively to the first exchange price at start of trading) and
- to name a Specialist who will assist with the trading on XETRA Frankfurt 2, provide liquidity, if need be, and include reference markets.
What Documents have to be attached to the Application?
If complete documents have been submitted already in the course of admission procedure, no further records have to be filed in general. Please note in case of filing the application through a third party that such application for listing of admitted securities has to be accompanied by the issuer’s authorization of the respective third party.
Which Markets are covered by the Application?
The application for listing of admitted securities covers both stock markets XETRA Frankfurt 2 and XETRA.
Will the Issuer be invoiced with Fees even in case the IPO should be postponed of cancelled?
If a admission application is revoked, the Management Board of FWB in its equitable discretion will determine the admission fee according to the stage of proceedings; see Sect. 11 Paragraph 5 GebO FWB [Fee Regulations for the FWB]. This fee will vary, for instance, according to the extent to which the review of documents involved in the procedure has advanced already.
How long will the Admission Decision be valid?
Pursuant to Sect. 38 Paragraph 4 BörsG [German Stock Exchange Act] the admission to listing shall expire if the securities have not been listed within three months following publication of the admission decision. Upon request, the Management Board of FWG may extend this period adequately if the issuer of the admitted securities can substantiate a legitimate interest in such extension.