Markets

Dare to get more quality on Deutsche Börse

S.o something like Wirecard should never happen again. When it had long been clear that the company’s balance sheet was based on lies and deceit, even when the payment service provider had already filed for bankruptcy and the share price was only a shadow of itself, the title was still in the top league of Deutsche Börse: the Leading index Dax.

The regulations made it simply impossible for the market operator to quickly throw the scandalous company out of the Dax. Embarrassing for Deutsche Börse, embarrassing for the reputation of the entire German economy in the world.

The stock exchange now wants to react to this by reforming its index family. Among other things, it is intended to enable companies to be quickly excluded from the Dax that do not submit quarterly reports or even the entire annual financial statements or submit them too late. That would have helped in the Wirecard case.

The stock market asks investors

A few other proposals that it has now submitted also show that the stock exchange has understood: The Dax is not just a collection of the largest listed companies in the country. No, investors also expect that inclusion in the top index and the addition of the “Dax Group” to the company is associated with a certain quality of the company.

Of course, the exchange operator cannot control or even prevent when established corporations such as Volkswagen or Deutsche Bank get their money through fraud. Other supervisors are responsible for this. But it is only logical that the stock exchange is now trying to keep the Dax a little cleaner through stricter rules and more flexibility of its own. Anyone who does not want to completely scare off the small investors from the stock market must ensure, at least in the top segment, that basic rules are adhered to.

Are the cards now being completely reshuffled on the stock exchange? Hardly likely. The biggest innovation proposed by the stock exchange is the expansion of the Dax from 30 to 40 members. This would include some medium-sized companies in the top league, but their relatively low market value will hardly shift the weight there.

One of the core problems, however, would not be solved: In the Dax, which is already very industry-heavy, more chemical and pharmaceutical companies in particular would move up. The expansion hardly contributes to greater diversification. At the same time, the second-tier stocks in the M-Dax, which many professional investors see as the more interesting market segment, are weakened.

In this respect, there is a broad spectrum of opinions on the proposals on the market. What will really change at the end of the consultation cannot yet be foreseen. But it is good that the stock exchange asks investors. You can now give your opinion on the suggestions, which will hopefully lead to more quality in the Dax in the end.

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