DAX’s Creator Recalls ‘Quantum Leap’ on 25th Anniversary

Before Artur Fischer oversaw the development of Germany’s benchmark DAX Index (DAX), which began operations 25 years ago today, he says investors had little insight into the performance of the nation’s shares.

“The formation of the DAX was a quantum leap,” Fischer, who is now joint chief executive officer of Boerse Berlin, said in a telephone interview last week. “I was responsible for the innovation to calculate a real-time index, providing a moving picture of what German stocks were doing. Before, the index was just calculated once a day.”

Deutsche Boerse AG, the Consortium of German Stock Exchanges and the Boersen-Zeitung newspaper developed the DAX to attract global investors. The gauge was created with a theoretical base value of 1,000, calculated from the end of 1987, and began trading at 1,163 points on July 1, 1988, a year before the Berlin Wall fell.

Fischer was the project manager responsible for creating the DAX when he worked at the Frankfurt Stock Exchange. The index has become the underlying measure for two of the three largest exchange-traded funds in Europe, according to ETFGI, which advises institutional investors about ETFs.

The DAX’s level was first calculated every 60 seconds, then every 15 seconds, and as of January 2006 every second, according to Deutsche Boerse.

“I suggested on the basis of the technical implementation that I had provided that the index should start at 1,000 rather than 100, as this would make the second-by-second changes more visible,” Fischer said.

Performance Index

The DAX is one of the few national benchmarks to add reinvested dividend payments to the share-price performance when calculating the index level, thereby fully reflecting an investor’s returns. That was also Fischer’s idea, he says.

Membership of the 30-company DAX is based upon two criteria: free-float market value and liquidity. A stock can enter the gauge if it ranks number 30 or above in terms of market capitalization and trading volume, provided an existing member ranks worse than 35 in one of criteria, according to Deutsche Boerse, operator of the Frankfurt exchange.

The DAX has advanced 4.6 percent to 7,959.22 this year, compared with an 1.9 percent gain for the Stoxx Europe 600 Index. Stoxx Ltd., the index provider owned by Deutsche Boerse and SIX Group AG, currently oversees the German gauge.

“The DAX is the single most successful product the exchange has ever developed,” Fischer said. “It has become a global benchmark for the trading of German stocks.”

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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