Trading in fund units
Germany has undergone a revolution in fund investing: By purchasing units on the exchange, investors can avoid the loads typically charged by open-end, actively managed funds in Germany while enjoying the flexibility of exchange trading. This began in 2002, when SCHNIGGE joined together with the Hamburg Stock Exchange to establish trading of fund units – a market which SCHNIGGE has continued to lead since this pioneering work. When it comes to trading and market making in funds, SCHNIGGE has the longest experience in Germany, along with the expertise to match.
In 2002, a revolutionary change came to the German investment fund market. Under the name “fonds-x”, a joint venture between the Hamburg Stock Exchange and Hannover Stock Exchange was launched, in close cooperation with SCHNIGGE. This new exchange, called BÖAG Börsen AG, created a new market in German for secondary trading of units in open-end funds, which is today a vibrant and important market.
Building upon the remarkable success of exchange-traded funds (ETFs) in Germany and elsewhere, this new market provides investors in actively managed funds the possibility to buy units in these – but without the payment of sales surcharges (fund loads) customary among German fund providers. Although this fund trading was initially limited primarily to German equity and open-end real estate funds, it quickly spread to include all kinds of investment funds, a trend that is expected to continue.
At present, some 6,750 different investment funds are traded on Germany’s stock exchanges, with annual trading volume in the billions of euros. Alone on the Hamburg Stock Exchange, trades in fund units during 2012 totalled EUR 1.2 billion in value (source: www.fondsboerse.de).
At the Düsseldorf stock exchange, SCHNIGGE is sole specialist for all order books.
This new market in fund units provides investors with a number of advantages:
- It is a neutral and unbiased market in which units in all kinds of funds are traded, without promoting the funds of any particular provider.
- Other than the trading spread, there is no sales surcharge (load) to be paid. The only costs are those normally involved with trading shares.
- Investors can immediately trade during regular exchange trading hours (8:00 a.m. to 8:00 p.m.) and thus can lock in profits or losses, or take advantage of intraday price fluctuations, without waiting for end-of-day fund prices.
- Investors can place limit orders, which is not generally possible when placing orders directly with fund providers.
- Units may be bought or sold based upon current price quotations, without the uncertainty involved in waiting for fund providers to establish and publish end-of-day unit prices.
- There is no minimum investment amount. Trades may be in any number of fund units, even just one.
- The investor has the opportunity to place stop-loss orders.
Investors may place orders to buy or sell fund units with their own bank. These orders work exactly like orders for buying or selling stocks or bonds and thus do not involve any additional complication for either the investor or the bank. To the contrary, automated settlement means that banks save time and effort completed to the traditional purchase of fund units from fund providers, which generally involves forms to be manually completed.
For the investor, the waiting time between placement of an order and execution of the order is short, just as with share trading.
SCHNIGGE, which played such a key role in pioneering this market in Germany, is committed to its continued growth, working closely together with other banks and with leading fund providers.
If you have questions or require additional information about trading in fund units, please contact us.
Please note that information about specific funds should be obtained from the relevant fund providers, either by consulting their websites or contacting them directly.