Corporate action

An event decided by the company rather than by the market. The common ones are a dividend, a stock split or its reverse, a rights issue, a bonus issue, a merger or acquisition, and a delisting. Each has a mechanical effect on the quoted price, on the number of shares in issue, or on both, and each runs to a published timetable with a record date that decides who is treated as a holder.

A contract for difference references the price and confers no ownership, so a corporate action reaches it as an adjustment rather than as an entitlement. No certificate exists, no registrar holds a record, and no notice of meeting is sent. Where the event moves the reference price mechanically, the counterparty applies a corresponding adjustment to the position so that the event itself neither creates nor destroys value for the holder, and the treatment of a given event is set out in that counterparty's terms rather than negotiated.

Two consequences follow for anyone holding such a position through one. A dividend adjustment is credited or debited according to the direction held rather than paid as income, and its tax treatment is a question for the holder's own jurisdiction. And an action that ends the underlying, a delisting or a completed acquisition, ends the contract with it: a position survives a corporate action only for as long as the price it references survives it.