Price adjustments
When a stock goes ex-dividend, ignoring other market forces, the value of that stock effectively falls by the dividend amount. In most cases this will in turn cause the index value to drop since the value of the index is calculated from the value of the stocks within it. The amount that the index drops is dependent on the weighting of the stock within the index. If more than one constituent stock of an index goes ex-dividend on the same day, we will add the amount of points each stock will cause the index to drop by together to calculate the total dividend amount in relation to the relevant index CFD offered by us.
As you would have benefitted from the artificial price movement at the time where in fact you shouldn’t have, the equivalent amount is debited from your account in order to offset this. Overall, you do not lose or gain anything due to this price adjustment.
With a rights issue, a company will offer its shareholders a chance to buy newly issued shares, usually at a discounted price, before they are offered to the public.
Stock splits usually happen when the value of a company's stock becomes too high. The company essentially offers more stocks at a lower price.
Here's a typical example:
You hold 300 units in company Q at 1,607 per share.
Q announces on R date, that it will be issuing a stock split of 5 for 1.
For every 1 stock you hold, you will be issued 5.
Now you will hold 1,500 units at the reduced price of 321.4.
Note: the overall contract value remains the same: (300 units x 1,607 = 4,821; 1,500 units x 321.4 = 4,821)
In the event that a listed issuer of a security (on which you hold an open CFD position with us) announces a share sub-division or share consolidation, or makes changes to its capital structure by way of rights issues, bonus issues or cash dividend payments, we will make an appropriate adjustment on the relevant listed share CFD on the ex-date or the corporate action effective day.
If you have a position on a company which announces a dividend, your account will be credited/debited prior to market open on the day the stock goes 'ex-dividend'. Here's a typical example:
Canadian National Railway announces a 15 cent dividend
You currently hold 3000 units of Canadian National Railway (or $30 per point)
15 cents x 3000 = $450
$450 will be credited to your CFD account.
(If you hold a short position going into the ex-dividend date, then your account will be debited for the same amount)
Please note, the amount you are credited or debited will be subject to the relevant tax holding rates according to the region in which the share is listed. On your daily statement the dividend will appear under 'Ledger Activity' as:
Corp Action: Cash Dispersion Corp Action:
Cash Disp XXX paying YYY'
(Where XXX is the instrument and YYY is the amount of the Corporate Action).