Ex date

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When a stock is trading with a declared dividend, there are two important dates: the “record date” or “date of record” and the “ex-dividend date” or “ex date”.

There is a charming Latinny feel to all of this, stocks trading “cum” (with) or “ex” (without) dividends, all based on when, relative to the ex date, you bought or sold them.

Record date: The record date is the date by which a shareholder must be on the company's share register to receive the dividend. Companies also use this date to determine who is sent proxy statements, financial reports, and other information.

Ex-dividend date: The ex date — the date on which the shares stop trading “dirty” and start trading “clean” — i.e., minus the value of a declared-but-as-yet-unpaid dividend — is set based on stock exchange rules. It is usually set one settlement cycle or business day before the record date. Sensible reason for this: If you trade a stock after this date, it won’t settle until after the record date, so you won’t be entitled to the dividend. Hence, you shouldn’t have to pay for the value of the declared dividend. The ex date — in the shape of the Ex Amount — is a theoretical means for paying Dividend Amounts under a Equity Derivatives confirmation, though hardly a practical one, as no swap dealer we have encountered would ever be insane enough to pay out a dividend before one is actually paid on the underlying for the Transaction.

If you buy a stock before its ex date, you get the dividend. If you buy a stock on or after its ex date you will not receive the associated dividend payment. The seller will get it.

Cautionary tale

Incidentally, beware cum-ex trades, which are (a) a highly imprisonable form of tax fraud; and (b) liable upon a cursory google to take you to parts of the world wide internets that your compliance department might not appreciate you visiting. Especially, I hear, if you google “Danish Cum-Ex” or “German Cum-Ex”. In any case fertile ground for double entendres if you have any literal-minded Americans in your office you fancy having fun at the expense of.

See also

• Ex date
• Record date
• Double entendre