Am I subject to corporate actions on CFD positions?

Corporate Actions and CFDs

A corporate action is an event initiated by a company that brings changes affecting both the organization and its shareholders—examples include dividends, rights issues, and stock splits.

When holding CFDs (Contracts for Difference), you do not own the underlying asset. Therefore, CFDs do not grant ownership rights, but corporate actions may still impact your CFD positions and could require action on your part.

On the platform, you can view dividends and other corporate actions related to your CFD positions under the Corporate Actions tab—just as you would for equity positions.

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Dividends on CFD Positions

Do I receive dividends when holding long (buy) CFD positions?

When you hold a long CFD position on an asset that pays dividends, you may be entitled to a cash adjustment that reflects the dividend amount.

For CFDs, dividend-related cash adjustments are recorded on the ex-dividend date. The eligibility is determined by your holding on the day before the ex-dividend date. This adjustment reflects the anticipated drop in the underlying asset's market price on the ex-date. However, the actual cash amount will be credited to your account on the official dividend payment date.

There are two key components in this process:

• Cash Adjustment: This is the amount of dividend you are eligible to receive based on your CFD position.
• Return Adjustment: This accounts for any withholding tax that applies in the market where the asset is listed. It ensures the final amount credited reflects the tax regulations of that jurisdiction.

You can view all dividend-related payments in your account statements under the CFD cash adjustments section.

Do I receive dividends when holding short (sell) CFD positions?

No. Holding a short CFD position does not entitle you to receive dividends.

Do I have to pay dividends when holding short CFD positions?

Yes. When you short a stock via a CFD, you are effectively borrowing the underlying shares. The original owner of those shares remains entitled to any dividends declared by the company.

As a result, a dividend adjustment equal to the gross dividend amount will be debited from your account on the ex-dividend date. This reflects your obligation to reimburse the dividend to the rightful holder of the shares.

The specific amount and process may vary depending on the CFD contract and market conditions.

Rights Issues on CFDs

A rights issue is an event where a company offers its existing shareholders the opportunity to purchase additional shares, usually at a discounted price.

Will I receive rights issues when holding long CFD positions?

Tradable Rights
On the ex-date, the market opens for rights trading. Sell orders for these rights are automatically placed on your behalf. Once executed, the proceeds are credited to your account.

Non-Tradable Rights
When you hold long CFDs, non-tradable rights may be allocated in the form of a dummy CFD position, typically labeled as "LOCK - xxxx." This is done based on the rights issue ratio and price.

You are not able to elect on non-tradable rights. If the subscription price is below the market price of the underlying stock, Totality may attempt to secure the additional entitlements for you. If the subscription price is equal to or above the market price, no action will be taken.

In some cases, Totality may not be able to participate in certain corporate actions due to restrictions or market conditions.

For events such as Share Purchase Plans (SPPs), participation may be possible, but you will need to provide additional details upon request.

After the pay date, either the new CFD position or the cash value will be booked to your account. If no entitlement is received, the dummy rights position will be removed.

Will I receive rights issues when holding short CFD positions?

Tradable Rights
If you hold a short CFD position, you may become liable for any rights issued. These rights are acquired and sold in the market. The resulting amount is debited from your account accordingly.

Non-Tradable Rights
When holding short positions, you are accountable based on the election made by the counterparty to your position (which may be another investor, broker, or institution). Once instructions are received, any resulting liabilities will be applied to your account.

Stock Splits

In the event of a stock split:

• For long positions: Additional CFDs will be credited to your account on the ex-date.
• For short positions: Your account will be debited with the equivalent number of CFDs.

Volatility and Liquidity During Corporate Actions

Corporate actions often lead to increased market volatility and reduced liquidity. These conditions may affect pricing and execution of CFD trades. It's important to be aware of the risks involved when trading CFDs during such periods and to manage your positions accordingly.

Non-Tradable Rights – Example

You may see several entries related to a single rights event under the Corporate Actions section of your platform. Clicking the information icon ("i") will display more details about each entry.

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The first entry, typically labeled "Intermediate Securities Distribution," announces the event. At this point, a dummy rights position labeled "LOCK - xxxx" is booked in your account.

As a CFD holder, you cannot make an election—even if the corporate action is voluntary. The “Call on Intermediate Securities” entry refers to the counterparty making a decision. If you hold a short position, you must wait for the counterparty’s instruction, after which your account will be adjusted accordingly.

Once the event is completed, and whether or not a new CFD or cash is booked, the dummy "LOCK - xxxx" position will be removed. This final removal is typically labeled "worthless" in the corporate action timeline.

Only Totality can remove this LOCK position. You cannot manually close it. The profit or loss shown on this dummy position is indicative only. Your account will be adjusted based on the confirmed outcome of the event.

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