Xetra Liquidity Measure

Liquidity is one of the central criterions to rate the market quality in securities trading. This applies not only to trading in shares but also in Exchange Traded Funds. Investors and trading participants profit from liquid markets by trading securities immediately and at lowest costs.

With the Xetra Liquidity Measure (XLM), the liquidity of electronic order book trading is measured on the basis of implicit transaction costs. XLM integrates the market impact costs into one single figure. The lower the XLM, the lower the market impact costs for the trading of a fund and the higher the liquidity of a fund and its trading efficiency. The measure is also calculated for the ETFs and shows that they sometimes figure amongst the most liquid securities on the German equity market. Deutsche Börse publishes the XLM for the ETFs on a monthly basis in the Facts & Figures newsletter.

The XLM is stated in basis points (100 basis points = 1 percent). It corresponds to the relative market impact costs for the so-called round trip (simultaneous buying and selling of a position) for a given order size. An XLM of ten basis points and an order volume of €25,000 means, for instance, that the market impact costs for buying and selling this share have amounted to €25.

Detailed explanations can be found in the article “The Market Impact – Liquidity Measure in Electronic Securities Trading”.

Liquidity Studies of the Munich University of Technology

The studies are working papers of the Munich University of Technology. The studies can be downloaded on the website of the Social Science Research Network (SSRN). Please Note, you must register free of charge on the SSRN website.