Indian issuers are accessing the Frankfurt Stock Exchange (“FSE”) and other foreign capital markets in search of capital and liquidity for their shares.

The Entry Standard of the FSE is an appealing option for Indian issuers seeking an entryway to European capital markets. With the Entry Standard, Deutsche Börse has created a simple, fast and cost-efficient way of including shares in exchange trading that is particularly suited for small and medium-sized issuers.

About the Frankfurt Stock Exchange

The FSE is owned and operated by Deutsche Börse, which also owns the clearing company Clearstream. The FSE is the largest stock exchange in Germany and boasts a share turnover of over 90% making it the world’s 3rd largest trading place for stocks, as well as the world’s 6th largest by market capitalization. The FSE’s fully electronic trading system Xetra® is one of the leading electronic trading platforms in the world. With its launch in 1997, the FSE succeeded not only in strengthening its own competitive position but also in creating attractive framework conditions for foreign investors and market participants.

Increasing Popularity

The popularity of the FSE is demonstrated by the increasing  number of U.S. companies seeking to go public by listing on the FSE. Many U.S. issuers are seeking to go public direct on the FSE instead of the OTC Markets and U.S. Stock Exchanges. Like U.S. listed companies, issuers are able to list on the FSE using a direct public offering or by completing a reverse merger with a public shell. More than 3,000 U.S. issuers are listed on the FSE.

Regulations Affecting Foreign Listings by Indian Issuers

Under current laws and regulations in India, Indian issuers cannot list equity securities such as their shares on non-Indian exchanges. The only equity based securities that Indian issuers are permitted to list on an exchange outside of India are Global Depositary Receipts, American Depository Receipts, Foreign Currency Convertible Bonds and Foreign Currency Exchangeable Bonds. In order for an Indian issuer to have its shares listed on an exchange not in India it must use a foreign (non-Indian) holding company structure wherein the foreign holding company owns the Indian company. Under this structure, the foreign holding company can list its shares on the FSE and avoid being limited to only Indian stock exchanges. Establishing this structure allows foreign investors to invest in equity of a holding company’s assets that are located in India and held by an Indian subsidiary.

Acceptance of Indian GAAP Financial Statements

Indian GAAP financial statements satisfy the FSE financial statement requirements without incurring the expense of complying with the International Financial Reporting Standards. This simplifies the listing process and reduces the time and cost of the listing.

Access to Capital

The FSE has access to more than 1/3 of the investment capital in the world. With more than 250 international trading institutions and over 4,500 traders worldwide, the FSE receives massive exposure to investor capital. Investors that are directly connected to the FSE represent 35% of the world’s investment capital. This means that a listing on the FSE gives issuers access to greater than 1/3 of the investment capital in the entire world. Also, Germany happens to be home to the largest capital market conference in all of Europe, with over 5,500 participants and more than 100 exhibitors each year.

Enhanced Liquidity

The FSE does not impose restrictions on the sale of securities including securities held by officers, directors and beneficial owners. There are no tradability restrictions or registration requirements.

Prohibition Against Naked Short Selling

In June of 2010, Germany passed a regulation banning naked short selling. Critics blame short sales as a major cause of the U.S. market downturns. A naked short sale occurs when stock prices are manipulated by short sellers who take naked positions so that they can sell the stock without actually owning it. Then they use negative news announcements to drive down the stock’s price so they can cover their short position at a much lower cost.

Timely Approval Process

From the time it is submitted, a listing on the FSE takes as little as three to six weeks to be completed.

For more information about listing on the Frankfurt Stock Exchange please visit our blog post at: http://www.securitieslawyer101.com/frankfurt-listings-101/