Germany’s blue-chip Dax to expand in wake of Wirecard debacle

Germany’s blue-chip Xetra Dax stock index will expand from 30 to 40 members and apply tougher qualification criteria in the wake of the Wirecard scandal.

Deutsche Börse, the stock exchange operator, said on Tuesday that it would include 10 more of Germany’s largest listed companies in the benchmark index and gradually change the rules for membership to improve the quality of listed companies.

“The comprehensive changes in the index rules were decided to increase the quality of the Dax indices and to align them with international standards,” Deutsche Börse said in a statement.

The largest overhaul of the blue-chip stock index since its founding in 1988 comes after the Wirecard accounting scandal, in which regulators failed to spot €1.9bn of missing cash before it fell into insolvency in June, the first sitting member of the Dax to do so.

The scandal triggered the chief executive of Deutsche Börse, Theodor Weimer, to push to enlarge Germany’s Dax and only admit profitable companies. Investors have pointed out that more constituents in the Dax would reduce the risk of being exposed to a failing company, by lowering the weight of the relative constituents.

Some of the tougher rules for Dax membership unveiled on Tuesday include requiring positive earnings before interest, tax, depreciation and amortisation in the two most recent financial years and immediate exclusion if quarterly reports are not produced within 30 days of a warning.

Selection criteria for the Dax at present only focus on quantitative market criteria such as a stock’s market capitalisation and liquidity.

The expansion of membership will take place in September next year, while some rules regarding profitability and governance will be effective from an earlier date.

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