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Euro Markets Clarify Treatment of Corporate Actions on Derivatives

The European Corporate Actions Committee (ECAC) has defined guidelines for the treatment of corporate actions on derivative contracts when the payment of dividends is postponed or canceled due to the COVID-19 crisis.

The Member Exchanges of ECAC are: Borsa Italiana, Eurex Deutschland, Euronext, ICE Futures Europe, MEFF (BME Group) and Nasdaq Stockholm.

This Committee said that, given the current market conditions, it is crucial to provide clarity on whether derivative contracts will be adjusted for the payment of dividends that are postponed or canceled due to the COVID-19 crisis.

ECAC defined guidelines to assist in determining whether the announcement of dividends will result in an adjustment on derivative contracts in the current circumstances:

  • If the relevant information published by the issuer has a clear reference that the dividends to be distributed are associated with the distribution of 2019 earnings or replacing them: these dividends are regarded as ordinary, irrespective of whether or not the issuer defines such dividends as extraordinary.
  • If the information published by the issuer does not have a clear reference regarding the distribution of 2019 earnings and qualifies the dividend as extraordinary: ECAC Members will review on a case-by-case basis.
  • If the issuer has a clear reference that the dividend is in addition to the dividends associated with the distribution of ordinary earnings for the year or to the ongoing dividend policy: this dividend will be regarded as extraordinary.

The group said the guidelines are provided for informational purposes only and are intended to harmonize adjustment decisions between the Member Exchanges of ECAC where possible. The guidelines, it wrote, do not supersede the rules as set out in each individual Member Exchange’s Corporate Action Policy, which shall be final in determining the treatment of dividends declared by Issuers.

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