The purpose of data protection, as defined by Germany's Federal Data Protection Act (BDSG), is to counteract any unwanted or harmful effects on natural living persons resulting from electronic data processing (protection of personal rights). The object of data protection is to safeguard the privacy rights of individuals and provide for the use of data in a responsible way. This applies not only to the data saving, modification, transmission, blocking and deletion phases that fall under the term 'processing', but also to the collection, application and use of such data. This act does not apply to data relating to legal entities.
The DAX® Index is made up of 30 major German stocks (blue chips). It represents roughly 75 percent of the combined share capital of domestic joint-stock corporations listed in Germany and accounts for some 85 percent of overall trading in German equities. DAX® stock are admitted to trading on the Official Markt and Regulated Market and are quoted in the Prime Standard segment. The criteria for stock weighting in the DAX® Index are exchange turnover and market capitalization on the basis of free float share capital and sectoral representativeness. Changes to the DAX® are resolved by the Executive Board of Deutsche Börse AG on the basis of proposal made by the Working Committee for Equity Indices.
Fixed-income securites (bonds, promissory notes, debt instruments). They certify the right to the repayment of the nominal value plus interest. By issuing debentures, the issuer procures long-term debt capital. Issuers on the capital markets are the public sector, banks and industrial companies. Correspondingly, these instruments are called public sector, bank and industrial bonds (debentures).
A debtor's mandate, done in writing and revocable at any time, to his bank authorising it to pay all future debit transfers to a specific payee (creditor) if sufficient funds are provided; besides the direct debit mandate, the debit order mandate is the less customary variant of the debit transfer system. It is used principally for payees who, over a long period, are owed different amounts of money, payable at irregular intervals, by certain customers.
Assets not evidenced by a stock certificate. In Germany, examples are Federal bonds and five-year Federal bonds which are entered in the Federal Debt Register. This means that there are no physical securities certificates. Investors can choose between a securities account credit note (collective share) and individual Debt Register claim: with an individual debt register claim, his share is entered separately in the Debt Register and managed directly by the Federal Debt Administration.
Compensation scheme used by pension funds. Here participants are promised a specific monthly benefit - or single lump-sum payment - at retirement. Opposite: defined contribution.
Commitment on the part of an employer to make contributions towards an employee's retirement pension. Under a defined contribution plan, no specific amount of benefits is promised. Opposite: defined benefit.
Deflation is a persistent and widespread decline in price levels for goods and services in an economy. Opposite: inflation. Deflation may be caused by economic (decline in demand) or monetary factors (restrictive monetary policy). Deflationary policies aim to combat inflationary pressure by restricting the money supply or pursuing an anti-inflationary course which keeps state spending low to counteract the widespread rise in demand.
Bank transactions that serve in the procurement of cash capital, thus representing liabilities for the bank. Deposit banking comprises the acceptance of deposits and the issue of the bank's own promissory notes (debentures). Opposite: lending business
Facility is an internationally widely used term for a credit line or borrowing framework. Deposit facility refers to a standing facility of the European Central Bank (ECB) which eligible counterparties (banks) may use to make overnight deposits with the Eurosystem at a previously established interest rate. Generally speaking, this interest rate is the lower limit of the overnight rate.
Serves to protect customers' deposits with banks. The member banks participate in the Deposit Protection Fund by means of contributions. The purpose of the fund is to give assistance, in the interest of depositors, in the event of imminent financial difficulties and prevent the impairment of public confidence in private banks. The protection ceiling for the non-bank depositors is 30% of the liable capital of the bank in question.
Credit balances held by customers with banks. They are formed by means of cash payments or amounts credited to the customer's account by bank transfer or presentation of a cheque. These deposits constitute an obligation on the part of the bank to its creditors.
In macro-economic terms a depression means a slump in economic activity (recession), expressed in particular by a significant reduction in the economy's aggregate output (social product), deflation and high unemployment. The last great depression to hit the world economy took place in the early 1930s.
Products whose value is primarily derived from the price, price fluctuations and price expectations of an underlying asset (such as stocks, bonds, currencies or indices). Owing to the way they are constructed, derivatives fluctuations are more pronounced than those of the underlying asset. For this reason they can be used both as a hedge against future losses and to speculate on price gains. Options, futures and swaps are among the most common types of derivatives.
Banks or specialized traders who bridge temporary imbalances between supply and demand in Xetra electronic stock trading, thereby improving a stock's liquidity. They do so by quoting bid and ask limits (market making), either on their own initiative, on request of a market participant (quote reuest) or in auctions. The fact that these quotes are shown in the order books gives investors greater security for limiting their orders. Depending on the market segment involved, a stock may have one or more designated sponsors, or none at all. On arrangement with issuers, designated sponsors with the necessary capabilities may also provide research or investor relations services.
The Bundesbank, and the other central banks of member states which have adopted the euro, together with the European Central Bank (ECB) constitute the Eurosystem, the monetary authority of the euro area. Monetary and other policy decisions for the Eurosystem are taken by the ECB Governing Council, which is made up of the governors of the national central banks in the euro area and the members of the ECB Executive Board. The resolutions of the Governing Council are applied by the national central banks. The Bundesbank's tasks and functions are governed by the Bundesbank Act (BBankG) and the EEC Treaty. The Bundesbank has five strategic pillars: price stability in the euro area, a stable financial and monetary system, secure and efficient payment and settlement systems, efficient cash supply and infrastructure, smooth functioning of German banks and financial service providers. See www.bundesbank.de.
Deutsches Aktieninstitut, or DAI for short, is an independent, non-profit institution committed to enhancing the conditions for Germany as a financial center and promoting equity as an investment and financing instrument at all levels of society and in the political domain. It provides a broad range of information about the advantages of equity without denying the potential risks. DAI also works towards improving the legal and regulatory framework for the German capital market - both in Berlin and Brussels. Furthermore, it sponsors campaigns at home and abroad to promote Germany as a financial center, and provides services for its member companies. For more details, see www.dai.de.
The decrease in the value of a share resulting from capital increases through the issue of additional shares or from retained earnings, or similar measures (see also anti-dilutive provisions).
Dilution protection guartantees initial shareholders that, in the event of a capital increase, the proportion of their share in the company will remain unchanged. They are granted the right to subscribe to new shares in the event of a capital increase. The option terms also contain protective clauses that protect the holder of equity warrants against dilution of their option right through any capital measures taken by the stock company.
Direct banks are branchless banks which conduct business solely by telephone, telefax or Internet. They offer round-the-clock execution of money and securities transactions at favourable conditions, but usually without advisory services. Payment business is conducted via cash dispensers and other banks' branch networks. Since they employ the latest communication technology, direct banks are not bound to any specific location. They are often domiciled in economically weak regions which have low labour costs and a favourable tax environment.
A securities service operated by a direct bank or discount broker without customized investment advice. This is a low-cost alternative suited primarily for experienced investors.
A clearing member of an exchange entitled to clear its own transactions, those of affiliated companies without a clearing license, as well as those of its clients.
Collection document that a payee can use to have an amount debited from a debtor's account through the services of a bank. Unlike a standing order, the payment is not initiated by the debtor but by the payee who submits the direct debt to his bank (first collecting agent), which then credits the direct debit amount to the account and charges it to the debtor's bank (paying agent). Direct debits are based either on a direct debit order or a pre-authorized payment mandate. Pre-authorized payment systems are particularlly suitable for periodically recurring payments of different amounts.
Alongside debit advice mandates ("Abbuchungsauftrag"), direct debit mandates ("Einzugsermächtigung") are the more common form of direct debit transaction. Direct debit mandates are used primarily to settle the payment of typical bulk transactions based on standardised, long-term contractual relationships. Under this procedure, the debtor authorizes the payee in writing to charge payments as they fall due by means of direct debit to the debtor's account. This mandate may be revoked at any time.
All commercial enterprises in Germany are subject to rules on financial disclosures. Depending on the company's legal structure and size, these are either closely or broadly defined. Stock corporations must report the most extensively on the development and results of their business operations. This usually takes place through the publication of annual financial statements and the annual report, comprising the balance sheet and income statement.
Companies are required by law to inform the public of their financial situations and of any change they may undergo. In this context, listed companies are subject to special obligations to regularly publish information on the development of their business and must also report on facts with a price-relevancy immediately (ad hoc disclosure rules). Deutsche Börse places additional requirements on companies listed in the prime standard segment (Frankfurt Stock Exchange): these companies must regularly publish quarterly reports in addition to their annual reports, hold at least one analysts' conference a year and issue ad hoc disclosures in English, too. The bodies of Deutsche Börse monitor compliance with the disclosure duty. The purpose of these rules is to guarantee a minimum amount of information for a company's stakeholders and shareholders.
A discount refers to the difference between the face value of a security (or loan) and its lower market price (or loan amount actually disbursed). A discount is usually expressed as a percentage of the security's nominal (par) value. Opposite: premium.
Interest rate at which a central bank purchases bills of exchange conforming to certain requirements. Adjustments to the discount rate and the rediscount quota (restrictions on volume) are traditional monetary policy instruments used by central banks. Since banks turn to the central bank to cover their funding needs to varying degrees, an increase or reduction in the discount rate may have an effect on the terms and conditions banks pass on to their customers. Now that the European Central Bank (ECB) has assumed responsibility for monetary policy, discount business has been discontinued within the euro area.
This procedure, designed to safeguard the best interests of the customer, is applied to unlimited or limited buy or sell orders which could possibly have a considerable impact on the price of a security. Brokers spread order execution over the day in several stages and file a report on the same day with the market surveillance office. Applied above all to large orders or securities with a narrow market.
Collective term for the payment of dividends and the issuance of bonus or scrip shares etc. to shareholders of an enterprise. In the broader sense, distribution may also cover interest paid.
A portion of a a joint-stock company's distributable profit paid out to shareholders on to each share. Dividends are expressed either as a percentage of the share's par value or in currency units per share. Dividend distribution is resolved by the general (shareholders') meeting. In Germany, dividends are paid annually, while in the U.S.A. and other countries it is common for quarterly dividend payouts to be made (quarterly dividend).
Also known as dividend coupon, it entitles the holder to payment of the annual dividend. A coupon sheet containing 10 to 20 coupons is attached to the physical share certificate. A coupon is detached from the sheet on the due date and redeemed as a dividend.
The return on an investment in shares, expressed as a percentage of the share price. Dividend yield is an important indicator for measuring the profitability of an equity investment.
A credit used in foreign trade finance and granted primarly on the basis of a documentary credit. The importer’s bank assumes liability for the acceptance and payment of the draft drawn by the exporter on his bank provided that all the conditions specified in the letter of credit are met.
Documentary collection is a service provided by banks to sellers as a secure way of settling payments. The buyer is presented with commercial documents in exchange for payment of the countervalue ('cash against documents') or for signing a bill of exchange ('documents against acceptance'). Documentary collection ensures that goods are paid on delivery.
International treaties, generally concluded between two or more countries to prevent or reduce double taxation in cross-border capital transactions. By clearly allocating specific types of income to each country involved, DT agreements are designed to avoid the risk of a simultaneous tax liability in both, the country of residence and the source country in which income was generated.
A strategic alliance between Deutsche Börse, Dow Jones and SWX Group to establish Dow Jones STOXX indices, an equity index family with regional and global reference. DJ STOXX 50 and DJ EURO STOXX 50 are the most well-known European blue chip indices.
At the end of the 19th century, publishers Dow, Jones & Company started producing indices for the New York Stock Exchange quoting the shares of 30 industrial, 20 railway and 15 power companies, respectively, as well as an overall index of all 65 stocks. The industrial index, in particular, quickly gained worldwide recognition and has become known as "the" Dow Jones Index. The indices issued by Standard & Poor's (500 stocks) and the New York Stock Exchange are more extensive. The Tokyo Stock Exchange publishes an index consisting of 225 Japanese company shares.
Bill of exchange that has been drawn but not yet accepted by the drawee. Accordingly, it is a payment instruction containing all statutory elements of a bill of exchange.
A special type of bond issue where coupon payments are made in one currency, but the principal is redeemed at maturity in another currency. In some cases, issuers or investors can choose whether or not to take advantage of the dual currency option.
Due diligence refers to a thorough and objective investigation perfomed in the pre-acquisition phase prior to a company acquisition or real estate purchase. Due diligence testing includes a systematic analysis of the strengths and weaknesses of the potential investment, an analysis of risks associated with the purchase, and an in-depth valuation.
For bonds or fixed-income assets, duration means the average capital lockup. Duration is shorter than the residual life owing to the interest payments made on the invested capital. Only in case of zero bonds is duration equal to the residual life. It also serves as a measure for the sensitivity of the bond price to changes in market interest rates. Generally speaking, it can be said that the higher the duration, the higher the bond's interest sensitivity.
Method of determining profits developed by the German Association for Financial Analysis and Asset Management ("DVFA"). The association of banking and economic experts is known for its outstanding achievements in equity analysis. DVFA has developed a formula which measures the annual profit of a company solely on the basis of its business purpose, adjusted for special items. This is generally referred to as 'result per share as defined by DVFA'. It can be used to calculate an adjusted price/earnings ratio and facilitates peer and industrial comparisons. However, this measure has fallen in importance since the switch of listed companies in Germany from the accounting standards of the German Commercial Code (HGB) to International Financial Reporting Standards (IFRS).