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On October 12 1998, Deutsche Börse began step two of its electronic trading system: Xetra Release 3. All of the 2,000 or so German and foreign stocks listed on the Frankfurt Stock Exchange as well as 360 bonds and 28 equity warrants may now be traded electronically. British securities are excluded from trading on Xetra because all market participants of Deutsche Börse may trade British securities on the London Stock Exchange by means of its electronic trading system SETS from January 1999.

The numerous innovations in Xetra Release 3 enhance trading efficiency and opportunities for market participants and investors. The innovations include that any share and order volume may be traded in Xetra auctions. In addition, Xetra Release 3 enables market participants and investors to place stop orders.

Designated sponsors, as they are already known in the new market segment (neuer Markt), will play an active role in the electronic trade. Their duties include improving the tradability of securities with lower trading volumes by quoting buying and selling prices. Thirty two banking and financial services institutions in 315 mandates with respect to 179 companies as clients have already registered as designated sponsors with Deutsche Börse.

Xetra Release 3 also has advantages for private investors with regards to securities trading — investment advisers may now inform their clients of the price in Xetra on placing their orders. Many banking institutions already transmit placing orders via order-routing systems directly to Xetra.

Innovations in Xetra also improve trading in fixed-income securities. Xetra Release 3 supports trading in public bonds issued by the federal government and trading in jumbo mortgage bonds (Pfandbriefe). In the future, trading on Xetra Release 3 will also include sovereign bonds issued by other Emu member states and European countries. Fixed-income securities are traded in auctions as well as on a continual basis enabling private investors to place low-volume orders.

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