Scandals and bankruptcies destroy Germany's Neuer Markt

The German stock exchange, Deutsche Börse, will scrap its ailing Neuer Markt technology index by the end of the year after bankruptcies and insider-dealing scandals destroyed investor confidence and the credibility of the index.

The German stock exchange, Deutsche Börse, will scrap its ailing Neuer Markt technology index by the end of the year after bankruptcies and insider-dealing scandals destroyed investor confidence and the credibility of the index.

The Neuer Markt was established five years ago with the aim of rivalling New York's Nasdaq index, which lists high-risk, high-growth technology stocks and took off during the dot.com boom.

Many other countries set up similar indices as the demand to invest in technology stocks took hold. At the Neuer Markt's height, shares would rise by as much as 70 per cent on their first day of trading on the index.

The Neuer Markt, however, has been beset by more serious problems than the bursting of the technology bubble. A number of companies listed on the exchange have gone bankrupt, directors have been charged with insider dealing and fraud, and accounts have been questioned.

The value of companies on the Neuer Markt rose to €440bn (£276bn) at its peak in March 2000 but has fallen by 95 per cent since then.

Alastair Duffy, manager of Aegon Asset Management's European smaller companies fund, said the index was killed by the bad reputation of its stocks. "High-growth companies that needed a lot of finance would look for a listing on Neuer Markt – it was a high-profile index. But companies listed on it have had issues with fraud, directors being jailed, and some of the business models have been very suspect. It became the last place you would want to list a business because of the negative associations."

The decision to discontinue Neuer Markt is part of a wider shake-up of the way in which German companies are listed. Companies wanting to trade on the German indices will have to comply with a set of vigorous reporting standards before they can seek a listing. Instead of trading through a stand-alone index, technology stocks will be brought in to the main exchange where companies will be divided by sector.

A segment for small to mid-cap companies will sit underneath the DAX, Germany's equivalent to the FTSE 100.

Volker Potthoff, a director at Deutsche Börse, said: "We will safeguard maximum transparency with clear rules and provide a consistent index world to support their investment decisions."

A spokesman for the London Stock Exchange yesterday said it was fully committed to its technology index, Techmark.