What It Costs to Trade

A Look at the Pricing Structures of Börse Frankfurt

Often private investors do not study their securities contract notes to see how much they pay the stock exchange for placing their orders, carrying the requested trades out and delivering the securities to their securities accounts. For the simple reason that most banks and brokers do not stipulate the fee of the stock exchange separately on the securities contract note. Therefore, almost no one knows how much it actually costs to trade on the stock exchange. In fact, it is often cheaper than you might think.

10 December 2009. Deutsche Börse provides market places where buyers and sellers meet to trade securities such as shares, bonds, funds or other derivatives. As with other stock exchanges, private investors do not have direct access to the market places of the Frankfurt Stock Exchange. They place their orders with banks or brokers.

When placing their orders, they choose between the fully electronic trading system Xetra®, or Xontro, the system connecting man and machine on the trading floor of the Frankfurt Stock Exchange. About 97 percent of the trade in German shares and 87 percent of the trade in all instruments are conducted via Xetra. Private investors are mostly active on the trading floor, where they have access to the services of lead brokers and can participate in late trading. Both trading systems handled on average 1.1 million orders per trading day in 2008.

Up to speed with Xetra

Those participating directly in stock market trading (the banks, brokers and traders) must pay a fixed monthly fee for access to the Xetra trading system. Depending on the connection selected the connection fee varies between €500 and €4,500 per participant. The final fee will depend on the data transfer rate or the type of service required. In addition, an annual participation fee of €1,500 is payable.

Trading costs depending on transaction volume

Now it is up to the Xetra clients to determine their order volume. The variable fee the client will pay depends on the value and number of transactions handled by a particular financial institution per month. Xetra participants can choose between the following pricing models: high volume, medium volume and low volume with overhead costs amounting to either €20,000; €5,000 or €2,000. If Xetra participants keep their fees for transaction volumes within the limits of their pricing model no additional fees will be charged. In the most favourable case variable transaction costs will amount to 0.36 basis points of the order volume. However, the value-based price applies to a maximum order volume of 1.5 million euros, i.e. €72 for high volume, €75.60 for medium and €82.80 for a low order volume.

All fees mentioned above are valid for stocks, ETFs, ETCs and ETNs, covered warrants and subscription rights. The overall value of the order can differ in line with the traded instrument. For ETFs, for instance, that means a value of €375,000, for bonds €60,000. There is no fee upper or lower limit for Xetra MidPoint orders. For OTC deals and XetraBest services there are fixed fees. For more details on limits and discounts please read the price list in pdf-format.

Actively managed funds

Actively managed funds have been traded on Xetra as of 1 December 2008 in the Specialist trading model. The trading model is also known as continuous auction with Specialist. The fixed charge per option in funds is 80 eurocents together with a fee of 6.5 basis points per executed order, but at least 50 eurocents. Value-based prices are applicable up to an order size of €29,230.

Since 7 December 2009 more than 700 bonds have been made available on Xetra. In the most favourable case of the high volume pricing model costs will amount to 6.5 basis points per order, but at least Deutsche Börse will charge €1.95 up to an order volume of €60,000.

Certificates and warrants

The fees for trading investment and leverage products executed in the quality segment of Scoach will be calculated on the basis of the underlying transaction with a differentiation being made according to the role of the participant. There is a small fee for each executed order: A value-based pricing up to a certain order volume. The pricing range is capped on the upside. Provided that an execution is carried out automatically by the specialist the value-based fee amounts to 6.0 basis points. The fee lower limit is €0.45 and the fee upper limit is €10.50 per executed order. (For further information, refer to the Scoach Price List as a pdf-file)

*depending on the selected pricing model: high volume, medium volume or low volume

Xontro – system controlled by man

The picture is the same when we take a look at the trading floor: As of November 2007 transactions have been charged per volume in a value-based pricing model – in a cooperative effort between man and machine, more specifically between lead brokers and Xontro, the order and settlement system of Deutsche Börse for the trading floor. Almost 150 banks and about 200 lead brokers are connected to Xontro. In stock exchange trade lead brokers are the linking factors between buyers and sellers of securities. Xontro controls the entire trading process – from placing the electronic order and determining the price with the support of the broker to settling the transaction.

The fee for the technical connection to the Xontro system for banks is €7,500 per month. Transaction settlements on Xontro are also calculated per transaction volume by means of a value-based pricing model. The order settlement on the trading floor costs 3.8 basis points of the order value, min. 1 euro and max. 19 euros. The fee lower limit applies up to an order size of €2,631.58 the fee upper limit is €50,000.

The transaction fee for a bond order is 1 basis point of the order value. The fee lower limit here is 1 Euro and the upper limit is 10 Euros. The lower limit applies for an order size up to €10,000 and the upper limit is €100,000.

Apart from the settlement of the individual trades, the traders must also carry the cost of the system connection. The technical connection costs €7,500 or €15,000 per month, depending whether the participant trades via the electronic system only, or also with a trader on the trading floor. For every trader on the trading floor his employer must pay €1,500 per year.

In addition, credit institutions, financial companies and financial service providers participating in floor trading pay an annual fee of €7,500.

Investors pay broker's fees

In turn, lead brokers on the trading floor calculate a broker's fee for every execution. The amount of this fee, the broker's fee, depends on the size of the order and is collected by the credit institution commissioned with the order. The rates of broker's fees are fixed in the fee regulations of the stock exchange to be uniform to all. With shares and option rights, the fee amounts to 0.8 percent of the order value and 0.4 percent for shares in the DAX® index, with a minimum amount of €0.75.

Next in line: Settlement and clearing

The security has been bought and Xetra or the lead broker on the trading floor passed the information of the transaction on per Xontro, such as the price, number of shares, time concluded and the participants to the transaction (counterparties). The only tasks still remaining at this point are to clear, meaning to clear claims and commitments emanating from the security or futures transaction and the exchange of traded objects and money – the so-called settlement.

Apart from a license, the banks and brokers need a securities account and a money clearing account at the clearing point. Here the fees are dependent on the total value of the concluded transactions and the order sizes.

An example

Apart from the connection fees, which cannot be broken down into cost per transaction, a DAX share order of €10,000 executed by a participant of medium-volume category on Xetra will cost €0.63. For clearing and settlement you will be charged another €0.17.