As desribe in our 2Q Focus for February, I'm long specific German exchanges and market makers that are listed on Xetra. These exchanges are getting a large proportion of the retail order flow of the German equivalents to Robinhood. Two examples I also mentioned in the report are Baader Bank (a bankd and market maker at Gettex exchange in Munich) and Lang & Schwarz (market maker at LS Exchange, the electronic trading platform of Hamburg exchange).

Both companies are closely connected to neo brokers Scalable Capital (Baader) and TradeRepublic (Lang&Schwarz). Thus I expect them to further benefit from the trend in retail trading. (Disclosure: I worked at Scalable Capital before). They already had a good run but came back a bit recently despite ad-hocs that state record breaking trade volumes in January.

Baader Bank AG
Baader Bank AG
Lang & Schwarz AG
Lang & Schwarz AG

 

I extracted latest numbers on trade volume (in €) from data they have to publish in accordance with Mifid II regulations (L&S is lagging...apparently someone is not taking regulatory requirements very serious). 2020 has definitely been extraordinary and 2021 is record breaking. From what I see from Gettex, where the data is up to date, the trend has weakend a bit after GME but is far from over. Trading is still going strong. I don't won't to publish data on spreads yet before I'm 100% sure what I see in the reports is really true. But let's just put it this way...best execution probably depends on the perspective. In the report I also put some numbers from the L&S balance sheet and they were quite convincing.

 

 

Trade duration:

At least until end of Q1 2021 but probably longer. I'm monitoring the trading trend closely as my personal opinion is that it will keep on being strong. Germany keeps being in lockdown until at least March, people are bored and will keep trading. We were already told that vacationing on easter (end of April) is probably not possible, so what do you think people will do?

Risks:

Liquidity is not super large in these stocks, that's why I spread my bets among other exchanges and connected companies that showed strong performance, too (Sino AG, Berliner Effektengesellschaft, Tradegate AG etc.)

Return target:

I started the trade a second "tranche" of the trade including more companies in Jan 2021. This selection is currently up +30% (I'm tracking it here). I have no specific target but a trailing stop on all of my positions. For sizing I usually use an ATR based method similar to the one on our blog so that I'm not risking more than 1-2% of my portfolio on each trade.

This is only a trade idea, no investment advice of any kind. You have to conduct your own research before entering any trade.