Xetra Liquidity Measure (XLM)

Xetra Liquidity Measure (XLM)

Liquidity is the central criterion for assessing market quality in electronic securities trading. Liquid markets benefit the investor as they enable the exchange of cash and securities at low trading costs.

Since February 2019, Deutsche Börse offers a new service with the intraday Xetra Liquidity Measure (iXLM): iXLM provides information on how the trading costs of an ETF have developed over the course of the day. Accordingly, investors can use the iXLM as an indicator for determining favourable trading times and thereby reduce their implicit trading costs. For calculation purposes, the trading day from 9:00 to 17:30 is divided into half-hour intervals and the iXLM is calculated retroactively for each half-hour. These values are published once a month in the ETF statistics

Xetra Top Liquids (Shares)*

Instrument Roundtrip** Buy Sell
DT.TELEKOM AG NA 2.1 1.1 1.0
SIEMENS AG NA O.N. 2.4 1.2 1.2
SAP SE O.N. 2.5 1.2 1.2
BASF SE NA O.N. 2.6 1.3 1.3
ALLIANZ SE NA O.N. 2.7 1.3 1.4
E.ON SE NA O.N. 2.9 1.4 1.4
DAIMLER AG NA O.N. 2.9 1.5 1.4
VOLKSWAGEN AG VZO O.N. 2.9 1.5 1.4
DEUTSCHE POST AG NA O.N. 3.0 1.6 1.5
BAYER AG NA O.N. 3.1 1.5 1.6

Results in basis points for 25.000 € roundtrip
*On a daily basis
**Roundtrip = Opening and closing a position at the same tim
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For the sake of simplicity, to date liquidity has often been approximated using trading activity figures, e.g. trading volume and the number of transactions. Yet trading activity does not necessarily reflect liquidity at the level of the particular instrument. With the Xetra® Liquidity Measure (XLM), Deutsche Börse Cash Market provides an innovative concept for gauging liquidity in electronic order book trading on the basis of implicit transaction costs. XLM measures the committed liquidity of the Xetra open limit order book using the market impact costs, in other words, the costs of an immediate demand for liquidity. Market impact costs are paid by investors who demand liquidity and are collected by investors who supply liquidity. The provision of liquidity is thus rewarded and every transaction on a securities market leads to a redistribution of the market impact costs from investors demanding liquidity to investors supplying liquidity.

XLM integrates the market impact costs into a single figure. Since July 2002, the measure has been calculated over the entire trading day for all shares and ETFs in Continuous Trading on Xetra. The lower the XLM, the lower the market impact costs incurred in the trading of a security and the higher the liquidity of the security and its trading efficiency.

The Xetra top liquid shares and ETFs are determined on the basis of the Xetra Liquidity Measure. The XLM is given in basis points (100 basis points = 1 per cent) in relation to the relative market impact costs for the so-called roundtrip (simultaneous purchase and sale of a position) for a given order volume. An XLM of 10 basis points and an order volume of €25,000, for example, mean that the market impact costs for the purchase and sale of the share or ETF totalled €25. Deutsche Börse Cash Market provides the Xetra top liquid shares and ETFs for the last trading day on a daily basis.

Detailed explanations can be found in the article “The Market Impact – Liquidity Measure in Electronic Securities Trading”.

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