Why Xetra had ETF Stream confused

David Tuckwell

a city skyline at night

Here at ETF Stream we like to watch.

We watch as new ETFs are born, and crawl onto exchanges around the world. We watch as ETFs rise, mature and grow their AUM. And we watch as failed products join the ETF graveyard.

But in all our watching, something struck us as strange: Xetra.

Every other day, a new ETF would appear on Xetra. A new listing that made no sense. New cross-listings with no obvious purpose or strategy. Vanguard's MSCI Canada tracker appeared on Xetra for no apparent reason. SocGen's 3x leveraged oil note - and the 3x note alone - appeared despite tanking oil prices.

Were the Americans trying to get into London via the back door? Had Brexit sent Europeans off to German exchanges? Xetra had us puzzled.

But now we know.

Xetra has different trading rules to pretty much every other major stock exchange. Specifically, it has two "segments". One is regulated, under public law, and acts like any other exchange. But the other - the open market - is like the wild west.

The open market falls under private law and eases admissions requirements for new securities significantly. Almost any broker can list almost any security on the open market. As Boerse Berlin's website says, all you need is:

"the name and address of the issuer, the security class, ISIN, a short description of the type of business and the denotation of the home exchange… There are no ongoing obligations for companies."

In sum, it's a secondary listing free for all. If an ETF is listed on a recognised exchange, almost any broker can bring it on.

So going forward, we'll be watching Xetra a little differently.


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