Designated sponsor

A designated sponsor is a stockbroker who is active in the XETRA trading system and who acts as a special market maker to ensure the necessary liquidity of the shares for continuous trading on behalf of an issuer .

backgrounds

The tasks of a Designated Sponsor include those of the market maker, but go far beyond these and are carried out on behalf of an issuer.

Securing liquidity

If the liquidity of a title is insufficient, the Designated Sponsors are supposed to produce the same in order to have current purchase and sales prices on a regular basis. A share is considered liquid if the average order book turnover is greater than 2.5 million euros per day and the Xetra Liquidity Measure is less than 1% (100 basis points ). If there is not enough trading volume, the Designated Sponsors have the task of regularly buying or selling shares in the relevant company themselves. They act on their own account, but are remunerated annually for their work by the respective company. When setting the buying and selling prices, a maximum bid-ask spread must not be exceeded. This depends on the liquidity class of a security and is between 2.5% and 10%.

In particular when volatility interruptions occur , the Designated Sponsors are asked to react as quickly as possible and to set a suitable course. This is necessary in order to meet the liquidity criteria of the exchange and thus achieve a desired liquidity ranking. Participation in the following auction must currently take place for at least 80% of the volatility interruptions.

In addition, a minimum participation quota must be achieved in the daily regular auctions. For example, there are three auction dates on the German stock exchange every day, on which securities, contrary to continuous trading , are traded by collecting buy and sell bids in an order book and then determining the auction price. Quotes currently have to be placed on at least 90% of these auctions .

Investor Relations Support

Through the intensive care of the securities, the Designated Sponsor acquires expert knowledge that qualifies him as an advisor for the issuer in matters relevant to the stock exchange and capital markets. To be mentioned are

• collaboration in investor relations ( roadshows , conference calls and presentations),
• the preparation of research reports, analyzes and studies, especially on the securities managed (see financial analysis ) and
• support in the preparation of quarterly and annual reports as well as ad hoc releases .

Another task is reporting on his activities as Designated Sponsor, in particular the development of his trading activities.

Requirements and quality review

The use is not a mandatory requirement for a general listing on the stock exchange, but a mandatory requirement for participation in continuous trading (provided that the share is not itself super liquid, which is only a few shares). Participation in continuous trading is, in turn, a mandatory requirement if a company wishes to be included in a selection index of Deutsche Börse ( DAX , MDAX , TecDAX or SDAX ). The German stock exchange AG is doing certain quality standards approved Designated Sponsors, with a focus on the quality of questions Quotes is. Depending on the liquidity of the underlying, these may not deviate from a fixed range between the bid and ask price ( spread ). In addition, compliance with a quotation volume , i.e. a minimum trading volume , should guarantee that a security can be traded even in highly volatile market phases. Another quality criterion is the reaction time in the auction or in continuous trading to so-called quote requests from market participants.

Deutsche Börse AG constantly checks compliance with the quality requirements and creates a quarterly ranking of all players, which can be accessed online at any time.

Remuneration and contractual commitment

A fixed remuneration or performance-related payment by the issuer enables the Designated Sponsor to fulfill the tasks incumbent on him. The spread when buying and selling securities at the same time serves as a possible source of income. However, the mandatory setting of buying and selling prices, especially when share prices are falling, tends to result in a risk of loss.

Special questions of liability are already regulated in the contract and are usually limited to a certain amount. By default, it is stipulated that in the event of breaches of contractual obligations in which the issuer suffers financial loss, recourse can be taken against the Designated Sponsor. The issuer can terminate the contract immediately, both in the event of gross negligence and in the event that a Designated Sponsor's company license no longer applies.

Admission requirements and revocation

All credit institutions, brokerage firms or securities trading houses approved for trading in Xetra can apply for approval as Designated Sponsor at the Frankfurt Stock Exchange (FWB). The traders of the respective trading houses need in-depth knowledge of the market and trading in order to meet the requirements to become a Designated Sponsor and to properly carry out their tasks. If there are gross violations of the performance obligations, the management of FWB can revoke the mandate at any time.

Web links

• Market making on the xetra.com website of Deutsche Börse AG

Individual evidence

1. ↑ Designated sponsor as a condition for continuous trading in Xetra ( Memento of the original dated December 26, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.  
2. ↑ Designated Sponsor Guide: Page 10 ( Memento of the original dated December 6, 2008 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF; 162 kB)  
3. ↑ Designated Sponsor Guide ( Memento of the original dated December 6, 2008 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF; 162 kB)