Pfandbriefe can be broken down into various segments with respect to the outstanding issue volume and issue structure.
With Jumbo Pfandbriefe, issue liquidity plays an important role, because the market segment comprising large-volume Pfandbriefe is geared to the liquidity requirements of trading-oriented investors. The minimum standards developed by the vdp ensure that Jumbo Pfandbriefe constitute a very standardised and thus highly liquid product.
- Jumbo Pfandbriefe must have a minimum volume of EUR 1 billion. For Pfandbriefe that were issued after 9 January 2012, while there is no specific minimum volume prescribed for the time of issue, they attain Jumbo status if they reach an outstanding volume of at least EUR one billion.
- Jumbo Pfandbriefe issued prior to 9 January 2012 needed to have a minimum volume of EUR 750 million at the time of initial issue and reach EUR 1 billion within 180 calendar days. In addition, Pfandbriefe issued prior to 28 April 2004 retain their status as Jumbo Pfandbriefe even where the outstanding volume is less than EUR 1 billion, provided that all other requirements are met pursuant to the vdp Minimum Standards for Jumbo Pfandbriefe (see Downloads).
Market makers quote bid/offer prices upon request by investors
- However, it is not volume alone that makes this market so liquid. Another decisive feature is that select syndicate banks are obligated to quote prices when asked, including bid/offer prices upon request by investors. The certainty of being quoted a bid price at any time is of great importance to investors for liquidity reasons, and it underscores that fact that confidence in the German Pfandbrief remains justified.
Market Maker and Issuer Committee
- The Market Maker and Issuer Committee (MIC), which was formed in the summer of 2006 and is composed of representatives from syndicate banks and issuers, promotes the continuous dialogue between issuers and traders. It also meets when there are disruptions in the trading of an issuer’s Jumbo Pfandbriefe or on the entire market.
Traditional Pfandbriefe are subject to the same security requirements as Jumbo Pfandbriefe. The strict provisions of the Pfandbrief Act apply to both Pfandbrief types.
Instead, what makes traditional Pfandbriefe different is how they are structured. In contrast to Jumbo Pfandbriefe, traditional Pfandbriefe may be issued not only in the form of bearer securities but also as registered Pfandbriefe. The latter differ from bearer Pfandbriefe in that they are issued specifically in accordance with an investor’s needs and in its name. In turn, this means that they are not fungible and can be transferred to other investors only with difficulty.
The structure of traditional Pfandbriefe is normally geared strongly to the interests of certain investors.