… and why would one be removed?
Release date: 22 Jun 2020
The DAX Index is reviewed on a quarterly basis and the results are announced on specified review dates after the markets close. The last DAX review took place on 4 June. On 22 June, the new index composition will become effective. Here is a short explanation of why companies are added or deleted.
In determining the make-up of the DAX, index constituents are selected from Prime Standard companies according to predefined, transparent selection criteria, namely free-float market capitalization and 12-month average order-book turnover. Every quarter, the index rules are applied in an automated, rules-based way to determine whether any companies should be added or removed from the index. This process is conducted by the Index Review Team at Qontigo, which serves as the benchmark administrator for the STOXX and DAX indices. The basis for this review is a ranking list, where all companies from the Prime Standard that meet the basic criteria for index inclusion, set out in the Guide to the DAX Equity Indices, are ranked according to their free-float market capitalization and order-book volume.
Market analysts track this ranking list, too. Having a transparent, rules-based methodology helps them to foresee the index re-composition. Obviously, current market circumstances can have significant impact on companies’ rankings from one month to the next. The most important attribute of the index review process is transparency.
If a company does not rank among the top companies (top 45 at quarterly review or top 35 at annual Regular Review), it is removed from the DAX and added to the MDAX (an eligible candidate in the MDAX will then move to the DAX). The DAX is very stable in its composition, and companies do not tend to move in and out frequently. There have been 10 changes in the DAX in the last decade. However, the MDAX and especially SDAX include smaller companies, which tend to move with relatively higher frequency.
A few facts about the DAX index…
- DAX consists of German blue-chips: the 30 largest and most liquid companies listed on the Frankfurt Stock Exchange.
- DAX is the benchmark for the German equity market. It has been well established since its inception in 1988.
- More than 150,000 financial products use the DAX index as an underlying: ETFs, derivatives and structured products.
