Neuer Markt, the market segment for high growth and
technology companies at Deutsche Börse, was established in
1997, modelled on the highly regulated NASDAQ.
Neuer Markt's issuers are typically innovative enterprises
that develop new sales markets and that are expected to
generate high turnovers and profits in the future.
At present, 337 companies are listed on Neuer Markt, out of
which 55 are non-German companies, mainly from the US,
Switzerland and the Netherlands.
In Europe, Neuer Markt is the most important growth segment
and accounts for approximately 56% of the market value of all
European new markets.
Listing on Neuer Markt
Trading on Neuer Markt is not organized under public law
like the trading on the Official Quotation (Amtlicher Handel)
or on the Regulated Market (Geregelter Markt). Instead, it
operates as an independent trading segment of the Frankfurt
Stock Exchange (FSE) and trading is organized under private law
as over-the-counter dealings.
Admission of shares to Neuer Markt requires the prior
admission of the shares to trading on the Regulated Market
(however, the submission of an application for admission of
shares to Neuer Markt constitutes a waiver by the applicant of
the commencement of the quotation of the shares on the
The regulatory landscape
Deutsche Börse has already fulfilled 90% of the
regulatory density of the NASDAQ. However, the regulatory
landscape in Germany is different than in the US, where the
Securities Exchange Commission (SEC) plays a vital role as an
independent regulatory agency and supervises the capital
markets to prevent fraudulent and unfair behaviour. The SEC
enjoys greater competencies than the equivalent German agency
– the German Federal Supervisory Office for Securities
Trading (Bundesaufsichtsamt für den Wertpapierhandel).
These competencies include the right of action and the right to
impose significant sanctions.
Deutsche Börse is seeking to assume a similar role to
the SEC in governing Neuer Markt. It has amended the rules and
regulations of Neuer Markt (RRNM) to increase possible
sanctions, and has, for example, already imposed sanctions of
euro 110,000 on Neuer Markt listed EM.TV for turning in annual
statements and quarterly reports too late.
Neuer Markt was established in March 1997 and had listed 160
companies by October 1999. This is in stark contrast to the
NASDAQ, which started in 1971, grew slowly, had time to react
to different market conditions and to adjust its
It can be said that Deutsche Börse was not quite
prepared for such a boom in its first years, and that some
issuers were not yet ready for a listing on a stock exchange.
As the market has slowed and stock prices fallen, Neuer Markt
faces a growing number of so-called 'penny stocks'.
Deutsche Börse has reacted to the weak market
conditions and the downfall of stocks by planning modifications
to the RRNM to de-list penny stocks. NASDAQ has had such
regulations in place for years.
Some listed companies have tried to resist the penny stock
rules, as they were not in place at the launch of Neuer
Penny stock de-listings
Deutsche Börse aims to give Neuer Markt a sharper
profile, and position itself with respect to further
development of the high growth and technology segment. Thus,
from October 1 2001, it plans to automatically de-list
companies from Neuer Markt, based on two quantitative and one
- a listed company's daily average price must not fall
below euro 1 and a market capitalization of euro 20 million
on 30 consecutive exchange trading days, nor fail to exceed
these values on at least 15 consecutive days in the next 90
exchange trading days thereafter; and
- Deutsche Börse will also de-list a company if
insolvency proceedings are opened against a company's assets
or dismissed for lack of assets.
In both instances, de-listing from Neuer Markt will occur
one month after the announcement is made by Deutsche
The question has arisen of whether Deutsche Börse is
entitled to change the RRNM unilaterally or whether it needs
the consent, or any other kind of involvement, of the listed
companies. This is dependent on whether the relationship
between Deutsche Börse and the issuers of stock is
governed by civil law or whether it is overlaid by public
One Neuer Markt listed company has already applied for a
preliminary injunction against the planned exclusion of penny
stocks, arguing that Deutsche Börse could not just amend
the RRNM on its own, and that listed companies need time to
prepare for such a modification and/or defend a possible
de-listing (by way of a capital increase, for example). The
plaintiff company argued that RRNM modifications, therefore,
should not enter into force before October 1 2002.
On August 16 2001, the district court (Landgericht) of
Frankfurt decided in favour of the plaintiff company and partly
granted the preliminary injunction. Despite Deutsche
Börse's arguments that section 78 of the Stock Exchange
Act authorizes it to change the RRNM unilaterally, the
Frankfurt court rightly held that:
- Neuer Markt is organized under private law,
notwithstanding the public admission of the traded stock to
the Regulated Market. The Stock Exchange Act does not
authorize Deutsche Börse to enact the RRNM as a public
regulation. Rather, the RRNM have to be judged as general
terms and conditions (Allgemeine Geschäftsbedingungen)
according to private law;
- in principle, Deutsche Börse is entitled to change
the RRNM according to private law, because when applying for
admission to trading on Neuer Markt, the issuers agree to
accept the RRNM in their "valid version at the respective
time". However, this acceptance does not authorize Deutsche
Börse to change the RRNM in an unfair way. It has to
keep in mind the interests of the issuers;
- Deutsche Börse did not keep in mind the interests of
the issuers in that it did not consider that a listed
company, threatened with a de-listing because of its low
market value, should be given more time to take measures to
prevent a de-listing; and
- the plaintiff company should be allowed sufficient time
to take such measures to prepare or defend itself (although,
in this case, the court deemed sufficient time to be six
months rather than the one year that was requested). The
court partly granted the application for a preliminary
injunction and the planned penny stock modifications will not
be valid for the plaintiff company before April 1 2002.
Nevertheless, Deutsche Börse is in principle entitled
to implement the penny stock rules.
The aforementioned Frankfurt court ruling is only binding
between Deutsche Börse and the plaintiff company. It is
not applicable to other companies listed on Neuer Markt.
However, several more issuers are now considering an appeal
against the penny stock rules to defer them.
Deutsche Börse has already announced that it will
appeal against the Frankfurt court decision. Furthermore, it
has announced that it will stick to the planned penny stock
modifications and the planned time schedule.
Deutsche Börse has already implemented several
modifications to the RRNM in 2001.
The essential part of these changes are obligations arising
from the admission to Neuer Markt.
Quarterly reports have been further standardized and made
more extensive to have the key figures of listed companies more
easily obtainable and comparable. They must now include:
- the balance sheet for the reporting period;
- information concerning the number of shares of the issuer
held by the members of the management board and supervisory
- the rights of members of the management board or
supervisory board to subscribe for such shares. These rights
must be listed separately for each member body.
Quarterly reports must be published on the internet and
shall be prepared according to the same accounting principles
as the annual financial statements, and therefore have to
comply with either the International Accounting Standards (IAS)
or US Generally Accepted Accounting Principles (US GAAP).
Until recently, it was not compulsory under the RRNM to
prepare interim balance sheets, despite being required under US
GAAP and IAS. This discrepancy has now been eliminated and
interim reports are now required under the modified RRNM.
To assist listed companies, an electronic template for
standardized quarterly reports has been provided by Neuer Markt
on its website – www.neuermarkt.com.
Supply and publication of information
Companies listed on Neuer Markt have to meet high standards
regarding transparency and information disclosure.
The obligation to provide information applies to the issuer,
as well as to the institution, applying for admission. Both are
obliged to provide Deutsche Börse with relevant
information required for admission to Neuer Markt or with
respect to subsequent obligations resulting from admission or
Pursuant to the Stock Exchange Act, Deutsche Börse may
publish all of the facts related to a request for information,
especially in cases where the issuer or the institution or
enterprise applying for admission does not fulfill a request
for information in a timely manner or fails to provide complete
In addition, Deutsche Börse may publish whenever an
issuer fails to fulfil the obligations resulting from its
admission to Neuer Markt in a timely manner or fails to fulfil
Fines have been increased in value and frequency. The issuer
will be obliged to pay a fine of up to euro 100,000 for each
non-performance, delay or incomplete performance of the
obligations arising from the admission to Neuer Markt. The
value of the fine is determined by Deutsche Börse.
The right of the Deutsche Börse to terminate the
admission to Neuer Markt remains unaffected.
Since March 1 2001, issuers have been obliged to notify
Deutsche Börse of every transaction that is effected by
the issuer or any member of its management board or supervisory
Also requiring notification are transactions concerning
shares of the issuer and derivatives (the price of which are
linked directly or indirectly to the exchange price or market
price of the shares of the issuer).
These reporting requirements also apply to rights that have
been granted to any member of its management board or
supervisory board (for example, convertible bonds or stock
Notifications must be received by Deutsche Börse within
three exchange days after the conclusion of the transaction.
Deutsche Börse has specifically listed which information
must be included in such notification in accordance with the
Securities Trading Act.
Disputes arising out of, or in connection with, admission to
Neuer Markt shall, to the extent of its competence, be decided
by a Primary Arbitration Panel which is comprised of three
Weil, Gotshal & Manges
Main Tower 31st Floor, Box 19
Neue Mainzer Strasse 52-58
Tel: +49 69 21 659 600
Fax: +49 69 21 659 699