Corporate Actions Glossary






Acceptance Period

In case of a tender offer or miscelanous offer, the accetance period is the period in which shareholder can accept the offer. They would usually do so by sending an instruction to their broker or custodian.



When one company takes over another company.


Actual settlement date

The actual settlement date is the date at which securities and cash factually settle in the account of the counterparties in a trade. Depending on which market, a trade settles 2-, 3- or even more days after the trade date. Please also refer to Trade date, Contractual settlement date below in this list.


ADR (American Depository Receipt)

Certificates that represent ownership of a given number of shares dealt separately from the underlying stock. They are issued by US banks and usually traded in US$. For example, British Airways, BG (British Gas) and all trade in the United States as ADRs


Allotment Letter

A legal document sent to shareholders during a Rights Issue. It represents the unconditional right to buy new shares. Shares should be paid for in advance. Allotment letters can be traded as renounceable documents, where the seller signs over the rights to a buyer


American style Options

Option contract that is exercisable at any point in time during the exercise period. A European style option is only exercisable at the expiry date.



The date at which a corporate actions event is officially announced. The announcement can either be made by the issuer or by the lead agent in the market.


At the money

One of the three forms of moneyness of a derivative (in-the-money, at-the-money and out-of-the-money). When "at-the-money", the price of the underlying security is exactly the same as the strike price of the derivative.



In some markets the Central Securities Depository (CSD) will autocompensate for trades that trade and settle over the exdates (resulting in claims). In effect this means that for every trade that settles over the exdate, it will consequently debit the seller the entitlement that was attached to the shares and credit the buyer with it. The attached entitlement could for example be a right in the case of a Rights Issue or a cash proceed in the case of a Capital Return event. The advantage of this is that both the seller and the buyer only have to reflect what the CSD has done (for which they will receive SWIFT message confirmation) in their own books rather than having to contact one another to claim from eachother.





A group of securities that can be traded, managed and tracked as one entity. Also derivatives can be issued relating to a basket of underlying securities. One of the aims of creating a basket is to spread risk.


Bearer shares

Securities can either have "bearer" or "registered" form. Let's imagine that in the past, when securities were in paper form, a shareholder would go to his bank and take the paper with him to collect for example a dividend. As proof that the dividend was paid out, the bankemployee would tear off one of the many coupons from the share. The name of the shareholder was not registered anywhere by the issuer of the security. The bank could go to the issuer and exchange the coupon for the dividend payment.



A form of debt security issued by a Company or Government that earns interest for the investor. Bonds normally have a fixed life and are repaid at maturity after a set number of years. Also referred to as Loan Stock.


Beneficial owner

The individual who enjoys the benefits of owning a security or asset, regardless of whose name the title is in.



Sometimes, for example in a rights issue event. the price at which shareholders can subscribe to new shares is being established by calculating the weighted average of shareprices and trading volumes over a certain period of time. This method of calculation is called bookbuilding.

Another form of bookbuilding is when investors are asked to indicate, either on a firm or uncommitted basis, the best price that they will offer and the maximum number of shares that they will buy at particular times. This information will establish the most appropriate offer price for the issue


Book Value

The value of a company's assets as shown in the Annual Report and Accounts.




Call Option

A contract giving the investor (the buyer of the call option) the right, but not the obligation, to buy shares at a fixed price (the strike price) within a certain time frame (up to the expiry date of the contract).


Capital Gains Tax

The tax that needs to be paid over profits that were made from holding securities - ie a percentage has to be paid over the difference between the price at which a security was sold and the price at which is was bought. Several Corporate Actions events result in profits over which capital gains tax needs to be paid. Please refer to our TAX section for more info.


Call Payment

A payment made for the Subscription for new securities, or in payment for sums outstanding to the issuer, in relation to existing Securities (commonly in the context of Rights Issues, Open Offers or partly paid securities).



Due to the Settelment Cycle, trades can be traded "over ex". This means that the security was purchased with the entitlement, but that the entitlement will get distributed to the seller, because he will still have the shares in his account on the record date. The buyer has to claim the entitlement from the seller. In corporate actions claims result in two types of actions: Compensations and Transformations.



Compensation is the amount of money or amount or additional securities a purchaser receives from the seller if he had bought the shares before the exdate of the event and the shares settled in his account after the exdate.


So for example: Person A buys 100 shares from Person B before the exdate of a cash dividend. The shares and the price he pays for them however, settle after the exdate. This means that the seller of the shares will receive the cash proceeds as a result of the cash dividend, while the buyer is entitled to them. The buyer has to CLAIM the cash proceeds from the seller.


Crest Depository Interests are independent Securities, constituted under English Law, which may be held, transferred and settled within CREST. CDI holders will not be the legal owners of the shares to which they are entitled as a result of a Corporate Action. They will however, have an interest in the shares through their ownership of CDIs


Cum (Ex)

Cum is Latin for "with". When one is trading shares "cum" it means that one is trading the shares "with" the entitlements to a certain corporate actions event. When one is trading shares "ex" it means that one is trading the shares "without"the entitlements to a certain corporate actions event.


Convertible Bond

A bond that may be converted into a fixed number of shares (sometimes at a fixed price). There can be certain timeframes in which conversion is not permitted during a year. Sometimes conversion is only possible at a certain date(s) during the year. If the Bond has not been converted into shares at maturity, it will be redeemed for cash just like any normal bond. Convertible bonds pay interest just like normal bonds.



A numbered part of a security on which interest is being paid out.



CREST is the UKs electronic registration and settlement system for equity share trading. In other words it is the book entry transfer system for UK and Irish registered equity and corporate stocks





Data Vendor

A company the sells information about corporate actions events to the financial services industry.


Default (upon non-receipt of Corporate Action instruction)

Default refers to the course of action that will be taken in case no instruction is received from the shareholder as to what decision to make.



The sum of all liabilities of a company



Form of debt. Like a bond it pays a fixed rate of interest.



The delivery of the cash and stock proceeds as a result of a corporate actions event.



The part of the nett profit of a company that will be paid out to its shareholders



Short for Dividend Re-Investment Plan





In voluntary events and in mandatory events the holders of the security are being given a choice and consequently they have send an instruction with their decision.



Issuance of new (primary emission) or already existing (secundary emission) shares, bonds or other securities.



The sum of all possessions of a company



Making use of your right (for example to buy shares at a given price)



The date at which a stock will trade "cum ex" (without entitlement). So for example in a normal cash dividend, if the exdate is 25.11.2008 then the stock will trade without the right to the cash dividendfrom the 25.11.2008 onwards. Cum (latin for with) and Ex (latin for without).


Expiry date / Expiration date

1) The date at which an option or a warrant expires, and therefore cannot be exercised any longer.

2) The date at which a Tender Offer expires, ie the day up until shareholders can tender their shares to the offer.





In several corporate actions events, ratios are involved that will lead to entitlements that are less than one share. For example in a reverse stock split where every 10 shares entitle to receive one new share (ratio = 10:1), sharholders who hold let's say 9 shares before the reverse split will be entitled to 0.9 shares after the reverse split. Securities are generally not tradeable in amounts less than 0, so the leadagent can chose to round up or down, or cash compensate the shareholders for fractions.



A future is a contract between a buyer and a seller whereby the buyer agrees to buy a predetermined amount of a product at a predetermined price at a predetermined date in the future. Please note the difference between a future and an option: with a future, there is the obligation to buy/sell, whereas with an option there is the right to buy/sell.





When you devide a company's total debts by it's total equity you will get a percentage. The higher the percentage, the higher the risk of investing in the company.



Payments as a result of a corporate actions event can be "gross" or "net". Gross means payment before tax has been deducted, nett means payment after tax has been deducted.



Another form of debt (like bonds and debentures).




Holder of Record

The name of an individual or entity that an issuer carries in its records as the registered holder. (not necessarily the beneficial owner) of the issuer's securities. Dividends and other distributions are paid only to the holders of record also called shareholder of record or owner of record.



Realised investor losses in a debt restructuring






The letters are standing for "International Central Securities Depository". It is in fact a Central Securities Depository through which securities from other countries can be held. Most well-known ICSD's are: DTCC, Clearstream, Euroclear and SegaInterSettle. 


Income Tax

Tax that needs to be paid over income resulting from holding securities. For example; income tax needs to be paid over a cash dividend.



The percentage of the nominal of a loan that will be paid to the lender as a reward for his willingness to lend the money to the borrower.


Interim Dividend

A dividend that is paid during the cause of a dividend year. In most cases a final dividend will follow.


In the money

One of the three forms of moneyness of a derivative (in-the-money, at-the-money and out-of-the-money). When "in-the-money", the price of the underlying security is such, that the derivative will pay out money when exercised.



International Seucrities Identification Number. Every security has got their own unique Identification number. The number starts with the letters of the country of its main listing.








Knock-Out Warrant

A warrant or an option is knocked out (becomes worthless) once the underlying instrument hits a level before the maturity of the warrant. The event is described in the termsheet of the warrant. 





Rights in a rights issue event and warrants can lapse if they are not sold or exercised by the owner before the deadline. Lapsing can be either "worthless" or "versus money". In case rights or warrants lapse worthless, they will just be booked out of the account of the investor free of payment on the day they lapse. In case of for example a rights issue the rights can be bought by interested parties after which they can be booked out of your account versus payment.



It is possible to lend shares to parties in the market in return for a fee. Often this is done in order to cover for "short positions" on the borrower's side.


Long position

The oppositite of a short position (see below). The investor expects this stock to rise in value.




Maker - Checker

Maker - checker refers to the concept that everything that is being done needs to be approved by at least one other person. In Corporate Actions this is due to the perceived risk that is attached to actions that are being made. 


Mandatory Event

A mandatory Corporate Actions event is an event in which the shareholder has no choice. The event will happen regardless of his approval. (most of the time mandatory event do require shareholder approval at the AGM though).


Market value

The market value of a share is the price at which it is being traded on the stock exchange. There are many methods to establish the value of a share.





Payments as a result of a corporate actions event can be "gross" or "nett". Gross means payment before tax has been deducted, nett means payment after tax has been deducted.


Nil paid

Securities can be fully paid or nil paid. Securities, like for example nil paid rights, that don't represent a share in the issuer's capital are called nil paid. Therefor the holder doesn't have to pay for them.


Nominal Value

This is the value of a share when it was first issued by the company. The total nominal value of all shares represents the total nominal value of equity on the balance sheet of the company. The nominal value of a share is not the same as the market value.



An official message in which an event or an entitlement payment is announced or confirmed. 




Ordinary Shares

Ordinary shares as opposed to preferred shares carry no fixed dividend obligations. Also, a dividend on ordinary shares can only be paid out after the obligations of the preferred shares have been met by the company (i.e. the dividend has been paid out on them). In case of a bankruptcy of the company, holders of preferred shares will receive payment before holders of ordinary shares will. Ordinary shares carry voting rights, which will entitle the holder to cast his vote on AGM's and EGM's - preferred shares usually do not carry voting rights.


Out of the money

One of the three forms of moneyness of a derivative (in-the-money, at-the-money and out-of-the-money). When "out-of-the-money", the price of the underlying security is such, that the derivative will be worthless when exercised.





In finance, a Pool Factor is a number expressed as a factor of one that is used to indicate the remaining principal balance of a note. Pool factors are only used to describe specific classes of securities, namely pooled Asset Back Securities and Mortgaged Backed Securities whose component payments are returned to investors on a monthly basis. Pool factors are published monthly for Ginnie Mae, Fannie Mae, and Freddie Mac mortgage-backed securities.

To calculate the pool factor:
Outstanding Principal Balance / Original Princial Balance = Pool Factor

For example, a pool factor of 0.523 indicates that for each note of $10,000, $4,770 of principal has been repaid.


Preferred Shares

Preferred shares will have fixed terms which have been negotiated between the investor that holds them and the company that issued them. Terms can include obligations to pay dividends on preferred shares before paying dividend on ordinary shares. In case of a bankruptcy, preferred shares rank higher in priority to receive payments (after bond holders - but before ordinary shares holders). Preferred shares carry no voting rights. Usually preferred shares get converted into ordinary shares after a certain period.





The minimum amount of shareholders that need to attend the annual general shareholders meeting (AGM) in order for the the voting points - that were voted in favor for - to become legally binding.




Record date

The date at which your positions will be recorded in order to calculate your entitlements. So for example; if the positions in your account on record date are 100,000 shares and a cash dividend pays EUR 0.25 per share then your entitlement will be calculated as 100,000 x EUR 0.25 = EUR 25,000.


Registered shares

Securities can either have "bearer" or "registered" form. Registered shares are shares of which the owner's name is registered by the issuer of the security. When for example a dividend payment has to be paid out, the issuer knows to which shareholders it should pay it to. When registered shares are traded between shareholders, the registration has to be administrated accordingly.


Response Deadline 

For voluntary corporate actions events, shareholders are expected to respond with sending an instruction about their decision. Their Broker and custodians will set them deadlines by which the can respond latest.





Similar like ISIN, but one Isin can have several sedols, each of them representing the country where the shares are being held.


Settlement Cycle

A settlement cycle is known to be the time difference between the trade date of a trade and the contractual settlement of a trade. By default most markets know a contractual settlement date 3 days after the trade date. 


So for example, if person A buys 100 shares from person B on the 25.11.2008, then the trade date of the trade by default is the 25.11.2008 and the contractual settlement of the shares and the money will be scheduled to take place 2 or 3 (depending on which market) later. Actual settlement of the trade will take place in case everything is in order on the contractual settlement date.


Short position

Short positions happen when a client sells more shares than he actually owns (he could do this for example when he expects the share price of the stock he is short selling to go down). At the end of each day, however, he needs to make sure he covers these short positions. He could do this by borrowing the shares from another party in the market in return for a fee. 



Stands for "Straight Through Processing" and refers to the fact that communication between the different players in the market is in the process of being automated.


Swift Messages

SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. Swift provids the proprietary communications platform , products and services that allow its customers to connect and exchange financial information securely and reliably. It is quite similar to sending and receiving emails. Messages are being sent from and to swift addresses just like email addresses.


Corporate Actions Message types:

MT564 Corporate Actions Notification Standard Format

MT568 Corporate Actions Notification Free Format

MT566 Confirmation of Corporate Actions Payment

MT565 Corporate Actions Instruction Standard Format

MT599 Corporate Actions Instruction Free Format

MT567 Corporate Actions Acknolodgement of Corporate Actions Instruction received





Transformation are the second type of claims. They occur in corporate actions events where the Isin or the nominal changes. All trades instructed before the exdate have to be cancelled on the exdate and they have to be replaced by new trades in which the new Isin or ratio have been applied.


For example: A 10:1 stock split takes place with exdate 25.11.2008. "A" instructs to buy 100 shares from "B" with trade date 24.11.2008 and contractual settlement date 27.11.2008 at Eur 1000 (the price per share = EUR 10). On the exdate, the pending trade will have to be reversed and replaced with a new trade for 1000 shares at EUR 1000 (the price per share post split = EUR 1).




Underlying Instrument

The instrument such as shares, commodities, currencies or indices on which warrants or options contracts are based. 



In the case of rights issues or IPO's, the issuing company can look for assurance that the issue will be successful. It can chose to sign purchase agreements with intermediaries who agree to buy all the newly issued shares that they can't sell to the market. That way, the company can be sure it will receive all the money it was looking for and the issue will be classified as successful by the media and investors (preventing reputational damage for the issuer). Underwriting can be a tricky business. In case the price proves too high and no other investors take up on the offer, the underwriter has to buy all the securities at a high price. Underwriters charge a fee to the issuer for their services.


Uninssued Stock

Stock of a company that is part of the authorised capital, but that has not yet been issued.




Voluntary Event

A voluntary Corporate Actions event is an event in which the shareholder is given a choice about what to do. The shareholder has to send an instruction to his broker to tell him what to do. Typically, in a voluntary event a shareholder can elect to TAKE NO ACTION, which means that he will not participate in the particular event.


Value date

The date at which a security and the corresponding cash flow is settled.





A derivative security that gives the holder the right to purchase or sell securities from or to the issuer of the warrant at a specific price within a certain time frame. No dividends are being paid on warrants and warrants can be traded on the market








Zero Coupon bond

A bond which pays no interest through its life and which pays a capital gain by being issued at a substantial discount to the maturity value. If it is a deep discounted bond, the gain is subject to income tax





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