Alphidius
Great Supremacy Member
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- Nov 18, 2004
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1) what happens to CFD shorts during rights issue?
Corporate actions will always have impact on CFD and as such, it is up to brokerage to factor in the economic benefits or penalty. The only thing investors won't have in CFD is the non-economic benefits like voting rights.
Eg. Dividends for a stock is given and if investor holds CFD long for this stock, he may be given an equivalent amount as he would, if he actually owns the stock. Short positions will likely get penalize and need to cough out the dividend equivalent (they hope after XD the prices will fall and make profit from there).
In your questions, what happens to short position after rights issue. Depending on brokerage, they might or might not increase the size of the CFD to reflect the effect of rights issue for those in long position. For short position, they might lower the size of your CFD which means investor require lesser margin after rights issued and adjust the prices for closing positions accordingly. It is still best to call your brokerage to ask about the impact it will have on your open positions.
Actually some of my answers are found in E-Learning Portal by ABS.
You need to pass the quiz to get a certificate before can open an CFD account with any brokerage (MAS rule) unless you have financial background.
http://sips.abs.org.sg/Default.aspx
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