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DAX Owner Mulls Bigger Index, New Rules

Oct.05 -- Germany’s DAX 30 benchmark is set for a make-over. Index operator Qontigo, a unit of Frankfurt-based Deutsche Boerse AG, has started a four-week market consultation to improve the gauge. Bloomberg’s Dani Burger reports on “Bloomberg Markets: European Open.”

Video Transcript

MATTHEW MILLER: Let's get over to Dani Burger right now, because she's got the story on the possible expansion of the German DAX index. Dani.

DANI BURGER: Matt, yeah. That's just one part of it. There are really two buckets that the owner of the DAX has proposed. One of them are qualification requirements. The other one, the index composition itself, which is the DAX moving to 10 more members to 40 and the MDAX, the mid-cap company, going down to 50 from 60.

The qualification proposals I think are really fascinating, because it's hard to really see this other than a response to Wirecard. One of the big changes they said they'd make is the introduction of a new independent audit committee, and this committee would look at the accounting processes for companies as well as their risk controls. And if the companies are non-compliant, they say they will have a fast exit from the index. They've also said there are going to be new profitability requirements as well as liquidity. And let's remember, when the Wirecard accusations of fraud occurred, it took about two months after the collapse of Wirecard before it was eventually pulled from the DAX.

Now, another requirement that they're introducing as a proposal is a ban on any companies involved in controversial weapons. It's really unclear as to what companies that will be. They say that there's one company in the MDAX that would be excluded if they do introduce this screening.

But there are a lot of companies involved in the manufacturing of defensive systems, as we've been discussing, Matt. Everyone from Rheinmetall to Airbus. So we're not totally sure on who that will be yet. And these proposals, they'll be decided over the coming months. Matt. Anna.