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Theodor Weimer: Why we are championing Frankfurt

07 Mar 2018

Theodor Weimer: Why we are championing Frankfurt“Listed in Frankfurt” to become a seal of quality – We need more than a central clearing house for interest rate swaps – Utilise strengths together

Deutsche Börse is championing Frankfurt – and this supports the city as a financial centre. And it also helps Deutsche Börse. Because these initiatives enable us to also strengthen ourselves as a listed company on the global competitive stage. However, this works the other way around too. Frankfurt as a financial centre relies on Deutsche Börse's strength to enable it to seize the opportunities currently available on the European financial market.

One example is euro clearing. With the forthcoming Brexit, the most important and, in terms of volume, predominant clearing house for interest rate swaps to-date would lie outside the EU. However, the EU will need to be strong enough to keep the systems so vital to its provision of financial instruments under its own jurisdiction without the British and without London.

Theodor Weimer, CEO, Deutsche Börse AG

Sounds complicated? Let me put it more simply: having just a single central clearing house for euro interest rate swaps is neither good nor is it in line with market requirements. Having a single such central clearing house – that is outside the EU, is just not on. Deutsche Börse has been very successful thus far with its offering to clearing customers. Customers see this matter the same way that we as the central financial service provider see it. We are ready, and in my opinion, the euro products clearing business should come to Frankfurt. Both the city and Deutsche Börse stand to profit. We should regard the decision to relocate the European Banking Authority (EBA) to Paris as a warning sign. We must all make an effort now; and I am sure that we will make an effort.

Our offer for the euro clearing operations, which nearly all major banks and financial service providers have meanwhile subscribed to, benefits us and simultaneously strengthens Frankfurt as a financial centre. By establishing a competitive, extremely efficient second trading point, we are promoting both the transparency and the robustness of the international financial markets. The volumes concerned are vast; our partnership programme achieved an average daily volume of €35 billion in the off-exchange interest rate segment in January 2018. Strengthening Frankfurt strengthens efficient and secure markets – and this is Deutsche Börse's aim.

Frankfurt needs Deutsche Börse as a strong partner in order to be able to seize opportunities. A second example: regulation. We have positioned ourselves much more broadly here too and developed offers that efficiently implement regulation.

Regulation is, in a sense, a double-edged sword, as it is designed to create security without stifling motivation or creativity. I personally believe that regulation in the last ten years since the financial crisis has done a great deal to make our markets more secure and our banks more robust. I say this as CEO of Deutsche Börse, but also as someone who still remembers very well some nine years I spent as head of a major bank. I know banks, and I know the stock exchange – better and better. While regulation and its unintended consequences should be subject to regular review, regulation itself is a success.

It is important to me to expressly state that. This is the viewpoint that we, as Deutsche Börse, submit to the debate. At the same time, we offer solutions that facilitate implementation of regulations for our customers and that help to accurately process reporting requirements. This position means we enjoy technological leadership and set the pace for the entire sector as well. This competitive advantage will enable us to hold our own at the top with new initiatives.

Frankfurt is, therefore, a regulatory centre; important institutions are based here – first and foremost, the European Central Bank and the Deutsche Bundesbank, with a BaFin representative office as well. Then we have the most important and largest German banks, and what I consider a definite advantage to Frankfurt – many international banks. And not forgetting us – Deutsche Börse. We are reinforcing our company with offerings that turn the tomes of rules and accompanying manuals into efficiently functioning systems. There is also a need for this. Three very important regulations have gone into effect this year: MiFID II, the Benchmarks Regulation, and the European Central Securities Depositories Regulation (CSDR). The MiFID II text alone numbers 25,000 pages.

Frankfurt needs Deutsche Börse in order to be able to seize opportunities. Example number three: IPOs. In this regard, we face a good, possibly an excellent year. This is good for the real economy, good for Frankfurt as a financial centre, and good for Deutsche Börse.

We want this trend to continue and we are doing what we can to also make Frankfurt an attractive location for IPOs. Our various initiatives that support companies long before their IPOs are part of that. With our offering of location, funding, and business environment, we address the start-ups and creative individuals that we so urgently need in Germany. Frankfurt has caught up considerably here but we need to become better still. Our Scale segment and the Venture Network will help Frankfurt to become considerably more visible across Europe in this regard.

We are now investing a lot of money in a major renovation of the stock exchange building in Frankfurt city centre – with a focus on three aspects of improvement.

Firstly, a visitor's centre, intended to bring especially young people closer to stock exchange activity and financial market functions. It is particularly important to me that the next generation knows and understands what our sector is all about. The stock exchange up close. This knowledge, referred to as “financial literacy”, makes many things a lot easier – from personal retirement savings to a broad public discussion about economic relationships. I believe that this century will be marked by these issues.

Centre for IPOs

Secondly, we are building a conference centre that we will also offer for use to others. The stock exchange is an ideal forum for debates and disputes. The architecture of our stock exchange building in Frankfurt actually invokes the agora of ancient Greece, the marketplace. A conference centre in a stock exchange is therefore not a strange thing that we made up. It belongs there.

Thirdly, we are constructing a new centre for IPOs. We can and want to do more for our customers in this regard and we are, of course, doing it wherever possible starting now. As part of the expansion, we are creating an appropriate physical space as well. IPOs serve first and foremost to raise capital. But they also always have a communicative function. They attract more attention – and that applies especially to SMEs. Attention to the right message — that applies to all companies, even large ones. This is because an IPO is pretty much a one-time chance for companies to make themselves known to a broader public. They will be even more successful if they use our new IPO centre – at least that is our plan. We want “Listed in Frankfurt” to become a seal of quality.

The renovation of the stock exchange – in the building owned by the Chamber of Commerce and Industry, with whom we have a long-term lease – strengthens Frankfurt as a financial centre and thus also Germany as a business location. Our sector needs Deutsche Börse to be strong, to be able to make good offers for raising capital. And one that promotes a vibrant system of young and small companies that (hopefully) demonstrate how we want to achieve prosperity in 20 or 30 years.

So, why is Deutsche Börse strengthening Frankfurt as a financial location? Because we need a strong European financial centre that can efficiently perform vital functions for our sector, such as euro clearing. Because Frankfurt is the centre of clever regulation with a sense of proportion, and because regulators and our customers have an interest in market-oriented implementation of those rules. And because Frankfurt is Germany's most important stock exchange location and therefore the leading stock exchange of the largest European economy.

After Brexit, Frankfurt will become more important in all these aspects. Let's all work together so that Frankfurt can utilise its strengths.

By Theodor Weimer
The article was first published in the Börsen-Zeitung, “Finanzplatz Frankfurt” supplement

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