Corporate actions for CFDs
How are corporate actions processed for CFDs?
While CFDs don't confer ownership of the underlying asset or the associated rights (such as voting rights for stocks), they mirror any significant changes that occur in the asset's value due to corporate events.
Corporate actions come in various forms, leading to diverse effects on CFDs. Corporate actions processed for CFDs will include dividend payouts, mergers, stock splits and others. The effect an event has on an underlying asset will be mirrored for the CFD on that asset.
Long position example:
Suppose you hold a long position in XYZ stock CFD, and XYZ announces a dividend payment of $0.50 per share. As a CFD trader, you'll receive a dividend adjustment reflecting the dividend payout. This adjustment is credited to your trading account to reflect the dividend income you would have received if you owned the underlying shares.
Short position example:
Conversely, if you hold a short position in XYZ stock CFD when the dividend is announced, you may be subject to a dividend adjustment deducted from your trading account. This adjustment compensates the counterparty for the dividend payment they would have made if they owned the underlying shares.
In both cases, the dividend adjustment aims to ensure that CFD traders are treated fairly in relation to the underlying asset's performance, despite not owning the actual shares. Other corporate actions will also be mirrored as closely as possible, aiming for fairness, and will be dealt with on a case-by-case basis.