European markets clarify treatment of corporate actions on derivative contracts

1 June, 2020
  • The ECAC, of which MEFF, BME’s derivatives market, is part, issues guidelines on the suspension of dividend payments

•  This committee is also made up of Borsa Italiana, Eurex Deutschland, Euronext, ICE Futures Europe and Nasdaq Stockholm

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 cancelled 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 considers 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 cancelled due to the COVID-19 crisis.

The European Corporate Actions Committee (ECAC) has 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.

These guidelines are provided for informational purposes only and are intended to harmonise adjustment decisions between the Member Exchanges of ECAC where possible. The guidelines shall 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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