DEFINITION of 'DAX'
A stock index that represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange. The prices used to calculate the DAX Index come through Xetra, an electronic trading system. A free-float methodology is used to calculate the index weightings along with a measure of average trading volume.
The DAX was created in 1988 with a base index value of 1,000. DAX member companies represent roughly 75% of the aggregate market cap that trades on the Frankfurt Exchange.
BREAKING DOWN 'DAX'
In a different twist from most indexes, the DAX is updated with futures prices for the next day, even after the main stock exchange has closed. Changes are made on regular review dates, but index members can be removed if they no longer rank in the top 45 largest companies, or added if they break the top 25.
The vast majority of all shares on the Frankfurt Exchange now trade on the all-electronic Xetra system, with a near-95% adoption rate for the stocks of the 30 DAX members.