Curtain up for the Neuer Markt!

This article examines the factors which contributed to the success of the Neuer Markt, a stock exchange in Germany which started operating on March 10, 1997. As the natural partner bank to the country's Mittelstand companies, DG BANK was immediately destined for the leadership role in the market segment. With 140% performance since January 1998, the index of the Neuer Markt has left other stock market barometers trailing in its wake. The bookbuilding method of share allotment has been successfully transplanted to Germany in the last few years. It has already played a central role in the success of some flotations and will certainly continue to do so in the future. Bookbuilding aims to optimally reconcile the conflicting aims and interests of issuers on the one hand and investors on the other. There are two processes in bookbuilding: the determination of a market-responsive issue price and the sharing of the risk associated with listing between the first-round investors. The bookbuilding approach safeguards the interest of all investors and for the first time brings equality of opportunity to the private investor. As the central bank of the cooperative Finanzverbund, DG BANK has made it its job to improve the access of small investors to stock market events as they happen.