The Exchange Council of the Frankfurt Stock Exchange has agreed new criteria for the allocation of order books, but it remains subject to a judicial decision.
The new procedure implements the guidelines set out by the ruling of the Frankfurt Administrative Court, and makes use of the scope provided by the Court to take lead brokers’ performance into account.
In accordance with the new procedure, every authorized lead broker will receive order book groups with a maximum volume of two percent of the total order book turnover for the year. This allocation is not dependent on lead brokers’ performance. They will be allocated further order books on the basis of their individual relative performance weighted by the number of price determinations. Performance will be measured using the criteria established in the Exchange Regulations, such as the number of partial executions and allocation volume.
This means that the performance of lead brokers remains a key allocation criterion in the interests of the investors. The Frankfurt Stock Exchange will continue to meet the MiFID requirements for best execution.
The new allocation criteria are due to take effect from 26 March 2007, and the distribution applies for a period of 30 months.
Because the Frankfurt stock exchange filed an appeal against the ruling by the Frankfurt Administrative Court the implementation of the new criteria awaits a timely decision by the Higher Administrative Court of the Federal State of Hesse.
In the event that the decision allows the current regulations to be retained, the new allocation criteria will be void and the Frankfurt Stock Exchange will allocate order books according to performance only.
The Exchange council has affirmed it will return to an allocation based solely on performance if that is what the Higher Administrative Court of the Federal State of Hesse eventually decides.