Am I reading this wrong? Probably…

Most of the time, the test will focus on the ex-dividend date with regular-way settlement . However, you might see a question regarding cash settlement trades, which settle the same day. Remember, all that is required to receive the dividend is to be a settled owner on the record date. If an investor does a cash settlement trade on the record date, they’ll settle the same day and receive the dividend. Therefore, the ex-dividend date for a cash settlement transaction is the business day after the record date.

I’m trying to get some clarification on what’s in bold, it reads (to me) like it’s saying a cash settlement is same day (record date) AND the business day AFTER the record date… yet the record date is after the ex-dividend date?

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Hi @Matthew! Good question. First, let’s establish this big point - an investor must be settled by the record date in order to receive a cash dividend. From there, it’s easiest if we break down the topic between regular-way and cash settlement:

Regular-way settlement

  • T+2
  • To receive the dividend, must purchase 2 business days prior to record date
  • Therefore, regular-way ex-date is 1 business day prior to record date

Cash settlement

  • Same day
  • To receive dividend, must purchase by record date
  • Therefore, cash ex-date is day after record date

There are technically two different ex-dates, which is where I think you got tripped up. Hopefully this helps. Please respond if you have additional questions.


Ah, yes it is.

Appreciate the clarification…

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