A Primer on Corporate Actions Trading for Investors in Securities Lending

Finadium
March 2017

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From mergers and acquisitions to share buybacks, corporate actions in equities have a direct impact on the securities lending market as arbitrageurs may take advantage of embedded options to capture a spread. In some corporate actions like scrip dividends and rights issues, this return can sometimes be projected beforehand with benefits for existing shareholders.

In this Investor Focus report, we provide a primer on securities lending trades that leverage scrip dividends and rights issues, two popular corporate actions in Asia and Europe. These opportunities are not limited to investors engaged in agency or principal securities lending programs; any investor holding securities can take advantage of these transactions through a bank or Peer to Peer lending network. We also evaluate the efficiency of scrip dividends and rights issues for investors and opportunities in electing cash or securities in a distribution.

This report should be read by long and short investors in Asian and European equity markets. The primer is applicable for portfolio management, securities lending, trading and operations management professionals.

This report is 13 pages with two exhibits.

TABLE OF CONTENTS
■ Executive Summary

■ The Benefits of Scrip Dividends and Rights Issues

■ A Scrip Dividend Example

■ A Rights Issue Example

■ Other Considerations for Investors

■ About the Author

■ About Finadium