Adjustments Due to Corporate Actions on Share CFDs

The CFD account maintained for recording transactions made by you is an ongoing account and many adjustments are made in it on daily basis. While some adjustments pertaining to ‘marked to market’ amounts or ongoing margins are made on all types of CFDs, there are some that are specific to share CFDs.

As a general rule, all corporate actions including dividends, rights issue and stock splits must be reflected in share CFDs as well. Announcement of corporate actions that benefit shareholders are likely to have a positive effect on share price of the company as well as on CFDs related to it. For example, when a company announces a dividend, other things being the same, the share price and consequently the price of its CFD, is likely to increase. 

This is done because of the basic nature of CFDs, which are contracts that allow you to make a profit (or loss) without actually owning the underlying asset, the share of a company in this case. Since you hold CFDs and not shares, you are not entitled to receive the dividend the company pays. To compensate those who hold long positions in shares CFDs, the CFD provider pays an equivalent amount in their accounts. On the contrary, it deducts a similar amount from the accounts of those who are short in share CFDs.

All adjustments on share CFDs are made at the end of the trading day and only if you hold positions till the close of business on the date prior to the record date of the corporate action.