24/11/20 08:13:39

DAX with 40 constituents and additional criteria

The DAX, Germany's leading index, will be expanded to 40 companies. In addition, various conditions for inclusion will be gradually adjusted to include additional quality criteria.


24 November 2020. FRANKFURT (Börse Frankfurt). Deutsche Börse's global index provider STOXX has published revised rules for the DAX selection indices DAX, MDAX, SDAX and TecDAX. These rules will now be introduced successively.

The comprehensive changes in the index rules were decided to increase the quality of the DAX indices and to align them with international standards. The changes to the rulebook are based on the results of the market consultation which ended on 4 November.

Stephan Flaegel, Global Head of Benchmarks & Indices at Qontigo, said: „We received feedback from more than 600 participants, including financial institutions, corporates, private respondents, as well as associations and interest groups." This allows Stoxx to launch a well-founded DAX reform. Market participants would benefit from a simple set of rules in line with international standards and new qualification criteria for the German benchmark index, which tracks the largest listed companies on the German capital market.“

The main results on changing the index rulebook are:

  • From September 2021, the benchmark index DAX will be expanded by ten members, to a total of 40 constituents. This means that it will cover the largest listed companies in Germany even more comprehensively. In return, the MDAX Index will be reduced from 60 to 50 constituents.
  • From December 2020, all future DAX candidates must have a positive EBITDA in their two most recent annual financial statements.
  • From March 2021, all companies in the DAX Selection Indices will have the obligation to publish audited annual financial reports and quarterly statements. After a 30-day warning period, an infringement of these requirements will result in the immediate exclusion from the index.
  • As a consequence, the obligation to be listed in the Prime Standard of the Frankfurt Stock Exchange will no longer apply; a listing on the Regulated Market will be sufficient. This new rule was introduced to allow the index provider to react faster in case of rule violations.
  • Additionally, starting in March 2021, all members of a DAX Selection Index will need to comply with the recommendations of the German Corporate Governance Code with respect to the formation of an audit committee in the supervisory board. For existing members there is a transitional period to maintain continuity in the DAX family; they must comply with these requirements from September 2022.
  • From 2021 the DAX Indices will have a scheduled main review twice a year (March and September). Currently, such a review only takes place in September.
  • In order to simplify the rules without foregoing investability, the constituents will be selected by market capitalization only from the September 2021 review onward. The exchange turnover will no longer be part of the ranking process. Instead, constituents will need to fulfill requirements in terms of minimum turnover.

The proposal for excluding companies which are involved in controversial weapons was rejected. “We saw very mixed opinions on the topics sustainability and ESG, outside of our proposals that concerned governance," Flaegel explains. Many participants had raised the general question whether such criteria should play a part in the selection of DAX constituents. "Therefore, we will continue our dialog with market participants."

Sustainable investment is and will remain one of the most important trends in the financial markets and will fundamentally change investment behavior in the coming years. In March the DAX 50 ESG index Was launched. 

24 November 2020, © Deutsche Börse AG