Industry Updates

Deutsche Boerse proposes changes to DAX 30 following Wirecard scandal

Changes include expanding number of constituents to 40

George Geddes

a group of people walking on a bridge

Deutsche Boerse has proposed a number of changes to the DAX 30 in a market consultation which includes amending the qualification, selection and weighting criteria.

The changes to the firm’s flagship German index follow the Wirecard scandal which took place earlier this year which saw the firm, a DAX 30 constituent, go into insolvency after €1.9bn was announced to be missing in June.

The proposed changes include a requirement for index constituents to provide audited annual reports and that an audit committee should be included in each supervisory board.

Furthermore, Deutsche Boerse is planning on expanding the number of German stocks in the index from 30 to 40. This would also result in reducing the size of the MDAX 60, the index with the next 60 largest stocks, to 50 constituents.

This change could result in sector exposure changes such as an increase to financial services and healthcare companies but a decrease in companies in technology, utilities and telecommunications.

Finally, in a bid to reduce volatility and improve returns, Deutsche Boerse plans to remove turnover as a factor for index weighting.

This is in addition to a profitability requirement where companies must have a market cap of €2bn as well as being profitable for the last two financial years.

German companies would have to improve their auditing measures and prove they have at least two years of profitability using EBITDA to be included in the leading index.

This would avoid any repeat scenarios like Wirecard which show false positive EBITDA scores and mislead investors.

There are a number of ETFs on the European market that track the DAX, the largest being the €6.1bn iShares Core DAX UCITS ETF (DAXEX).

The other two DAX ETFs that have over €1bn assets under management are the €3.6bn Xtrackers DAX UCITS ETF (XDAX) and the €1bn Deka DAX UCITS ETF (ETFDAX).

Last month, Vanguard changed the index on its Germany ETF, the Vanguard Germany All Cap UCITS ETF (VGER) from the DAX to the FTSE Germany All Cap index making it the first ETF in Europe to track this index.

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