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Beware Dividend Investors: T+2 rule push past Ex Div Date

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  1. #1

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    Beware Dividend Investors: T+2 rule push past Ex Div Date

    Can somebody please enlighten me how HSBC can argue that the HKSCC rule of having to settle a trade within 2 days (T+2) can push me beyond the Ex Div date?
    Let me explain: on Friday Aug 30th I purchased shares of Henderson Land (0012.HK). at 10.15 am I get the usual sms notification that the trade has gone through. Then a few days later I receive a letter from HSBC acknowledging the trade date as of Aug 30th but stating the settlements will be Sept. 3 which happens to be the Ex Div Date for that company.
    In all my purchases I have never received this letter from my bank.
    I complained about that with HSBS and they say its the HKSC that settles that.
    My question to this community: have you ever had a purchase that was not settled on the actual trading day?
    I wonder if some algorythm did enforce that because I see no reason why this would have to take that long.
    Have you experienced anything like that or do you feel I have any recourse in this matter because I basically got cheated of my dividend.

    I appreciate any suggestions.


  2. #2

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    Settlement always takes place two days after execution for HK listed stocks. However, you should still be entitled to the dividend as you purchased it before ex-date.

    jrkob and traineeinvestor like this.

  3. #3

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    The last line of page 4 and all of page 5 have the current rules and enough detail to explain the process.

    I have not read it and also have not taken the time to map out your timeline.

    Can you take a look at this and see how it maps out in your situation?

    Name:  Screenshot 2019-09-13 at 9.23.02 AM.png
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    https://www.hkex.com.hk/-/media/HKEX...?la=en?noembed


  4. #4

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    It's been several years since I've been in that situation in Hong Kong but the last time it happened, the sequence went something like this:

    1. I purchased before the ex-dividend date;
    2. settlement took place on or or after the ex dividend date;
    3. I did not receive the dividend from the company but my broker credited an amount equivalent to the dividend to my account.

    I understand that my broker recovered the dividend from the seller (or the seller's broker) who was still on the register as the shareholder entitled to the dividend even though they had sold cum dividend because of the T+2 settlement process.

    shri likes this.

  5. #5

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    thank you all for your insightful replies. The timeline is a follows:
    Friday Aug 30: purchase of securities at 10am
    Tuesday Sept 3: settlement date coinciding with Ex Div date.

    I have never had this delay and HSBC issuing a letter on the purchase day already saying that the settlement will be on ex div day.
    That I find highly suspicious to randomly apply the T+2 rule when all other stock purchase were settle on the actual day of the trade.

    Now may I ask "The Brit and "jrkob" believe that I should get the dividend but "traineeinvestor" had the opposite experience regarding the dividend entitlement. Apart from waiting for the payment date is there a way to find out? The guide on "dividend distribution" kindly shared by SHRI does not really explain a situation under which the T+2 rule affects the dividend payment.
    Have you guys ever had this delay in settlement by the way?

    thanks again for your prompt and thoughtful replies


  6. #6

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    Any clause on T+2 working days!! in your case 31Aug-01sep is a weekend..


  7. #7

    Join Date
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    Don't worry about it. The facts are very clear - you are entitled to the dividend.

    Stock settlement is always T+2. HSBC aren't tricking you.


  8. #8

    Join Date
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    Quote Originally Posted by makeITcount:
    I have never had this delay and HSBC issuing a letter on the purchase day already saying that the settlement will be on ex div day.
    That I find highly suspicious to randomly apply the T+2 rule when all other stock purchase were settle on the actual day of the trade.

    Now may I ask "The Brit and "jrkob" believe that I should get the dividend but "traineeinvestor" had the opposite experience regarding the dividend entitlement. Apart from waiting for the payment date is there a way to find out? The guide on "dividend distribution" kindly shared by SHRI does not really explain a situation under which the T+2 rule affects the dividend payment.
    Have you guys ever had this delay in settlement by the way?
    errr. obviously you never paid attention to it then. Everywhere in the world has a settlement period for equities trading, used to be 5 days, then dropped to 3 and now HK and maybe US/most developed countries are at 2 days. So shares are always settled 2 business days after your trading, where your money that your broker already collected from you, will be matched against the shares, where a DVP (delivery versus payment) will be carried out. Go read your older settlement letters and you will see the same T+2 mechanism.

    There are alot of things at the back of it.. e.g. what if one has no stocks and need to borrow to settle, what is one has no money and settlement must fail, etc.etc.. So until today, short of some smart chap integrating block chain seamlessly into the settlement process, the T+2 or T+1 or whatever number it is, will continue.


    And like what said, you trade the shares on a cum-entitlement basis in the exchange. The shares are settled cum-entitlement. And dividend are paid in weeks to those ppl that bought or own the shares cum-entitlement.
    If you buy a share on and after the ex-date, then you have purchased an ex-entitlement share and you will not receive dividend.
    traineeinvestor likes this.

  9. #9

    Join Date
    May 2018
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    Lets see I just find it weird that I was informed of a later settlement and I thought thats so convenient if that falls onto ex div date. I never received this notification before. Payment date is Sept 16th I will reply back. thanks again


  10. #10

    Join Date
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    As others have pointed out, T+2 is the standard settlement arrangement for most transactions executed on HKEx. There is nothing random about it.

    Possibly what is causing confusion is that the broker will credit the purchased securities to your account with them immediately after purchase (so you could deal with them immediately if you wished) but this is only a book entry and is entirely different from what happens when the trade is settled though HKSCC/CCASS and Henderson's share register.

    "Stock and money positions of all Exchange Trades and Clearing Agency Transactions are required to be settled on T+2 day whereas stock positions of China Connect Securities Trades are settled on T day. SI transactions are settled on the settlement day stipulated by both Participants."

    Full details here: https://www.hkex.com.hk/Services/Settlement-and-Depository/Settlement?sc_lang=en


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