US, WASHINGTON (ORDO NEWS) — Despite the sharp price fluctuations worldwide, the German stock market remains open during the coronavirus crisis. Deutsche Börse has no plans to change that.
Corona sell-off is prevailing on the stock exchanges, and there is a sharp downward trend there. The savings of investors are vanishing into thin air, the Dax has lost almost 40 percent in value in the past four weeks.
German corporations could become a takeover target given the price drop. So the question arises: Why isn’t the trade suspended until the situation has at least calmed down somewhat?
For Deutsche Börse, the downward slide in the German stock market triggered by the corona virus crisis is no reason to stop trading. “The consequence of a closure of the markets would be non-transparency. The consequence of this would be greater uncertainty,” said a company spokesman.
The turmoil on the markets would then become even more drastic. In turbulent times in particular, transparent and fair pricing is required, as is the case on stock markets.
“Especially in times of high macroeconomic uncertainty, it is important that exchanges are open so that market participants are able to manage their risks,” said the spokesman.
If the stock exchanges are closed, investors can no longer get their money – although they may need it particularly badly during these times of crisis. “It is important that markets remain open and that normal trading hours are followed in order to secure the benefits of pricing and access to cash,” argues the World Federation of Exchanges (WFE), the global association of trading venues, Deutsche Börse is one of its members.
Short breaks possible
However, there are protective measures that the exchange operator can resort to in the event of turbulence. An important one is the so-called volatility interruption. In the event of extreme price fluctuations of a security, trading is stopped. During this time, all buy and sell orders are collected in an auction and a new price is then determined. Then trading resumes.
Even if the stock exchange wanted to stop trading in the face of the corona turmoil: there is no legal basis for this. The management of the exchange can only suspend trading as a whole or for individual securities, for example in the event of technical disruptions or indications of market manipulation.
According to a spokeswoman for the German Stock Exchange, the Federal Financial Supervisory Authority Bafin must not prescribe such a measure. At most, such a step could be decided by the federal government, which market experts currently consider extremely unlikely.
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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.