How will corporate actions impact

Who will get and how to deal with the dividends and distributions from any corporate action during short selling of Hong Kong stocks? 

According to the Securities Lending Agreement, in case of any corporate action in respect of borrowed shares, the borrower shall return all the dividends and distributions in relation to the borrowed shares to the lender.

In particular, for the dividends and distributions that are easy to buy in the market, the borrower shall pay for the dividends and distributions in relation to the borrowed shares and return them to the lender; for those that are not easy to buy or cannot be bought in the market, the borrower must close all his/her short positions within a specified time to ensure that the rights and interest from any corporate action can be obtained by the lender.


Cash Dividend / Special Dividend / Stock Dividend / Bonus Shares / Dividend Selection

Dividends and distributions from corporate actions such as cash dividends, special dividends, stock dividends, bonus shares, and dividend selection are easy to buy in the market.

When the listed company whose shares you sold short releases an announcement and one of the above corporate actions occurs, you need to pay for the corresponding dividends to counterparty. You can choose to close your short positions to avoid any cost for the dividends and distributions.

If you did not close your position before the specified date, the system will automatically freeze certain funds in your account, and deduct them on the date when the dividends and distributions from the corporate action are distributed.

Note:

In particular, for cash dividends or stock dividends, the system will freeze funds in your account based on an estimated price, and deduct them on the distribution date to buy the underlying shares.

For bonus shares, Frozen Funds = Open Positions  Bonus Shares Ratio  Previous Settlement Price;

For dividend selection, Frozen Funds = Open Positions * Dividend per Share.

Frozen funds do not represent actual deductions. Please be aware that your account may be in a 「Margin Call」 status due to your frozen funds insufficient to cover actual deductions.


Forward/Reverse Stock Split and Code Update

For forward/reverse stock split and code update, there will be no additional cost for short selling.Futu shall act according to the announcements of the listed companies.


Other Corporate Actions

Dividends and distributions from rights issues / subscription rights issues, acquisitions, delisting, voting, and other corporate actions (all corporate actions other than the above) are not easy to buy or cannot be bought in the market.

When the listed company whose shares you sold short releases an announcement and one of the above corporate actions occurs, the system will send you a message notification, and you can choose to close your short position before the date specified in the message.

If you did not close your position before the specified date, the system will be forced to liquidate your position at the market price on the forced liquidation date specified in the message.


Risk Statement

1. Dividends and distributions from corporate actions may incur significant costs for borrowed securities, and should be taken into consideration in advance.

2. Due to the risks of cancellation and change of corporate actions at any time, Futu may fail to get the latest information in time; however, after such cancellation and change, Futu will still handle the above matters according to the timeline as notified to you.

3. Since the interval between an announcement on a corporate action and the actual occurrence of such corporate action may be very short, your positions may undergo forced liquidation within a very short time after you receive the message.

4. Corporate actions constitute inherent risks for short selling. You need to understand and consider such risks carefully before deciding short selling.