The morning after a share goes ex-div the price of the share will drop by the amount of the dividend (approximately). If a quarterly contract discounts the dividend, it will have already been removed from the price quoted, so there will be no effect on the price quoted between the day before ex-div and the day after it.
Tradefair do not discount the dividend for Rolling Daily or Quarterly contracts as part of the price. In respect of declared dividends, a cash adjustment will be made with reference to any dividend or distribution attributable to any relevant security on which a trade is based, and shall be made and calculated as follows:
a. where your Position would result in a credit to your account (for example a Buy position in an equity which goes ex-dividend) we shall adjust the account balance in your favour by the gross dividend adjusted with applicable haircut percentage of Gross dividend (Standard adjustment for UK shares is 80% of Gross dividend), and multiplied by the Transaction Size; or
b. where your Position would result in a debit to your account (for example a Sell position in an equity which goes ex-dividend) we shall adjust the account balance in our favour by the gross dividend adjusted by the applicable haircut percentage(Standard charge for UK shares is 100% of Gross dividend), and multiplied by the Transaction Size.
For example, if Lloyds bank goes ex-div with a declared dividend of 7.5p, a client who was long (buy) position of £10 a point would receive £10x7.5x80% or £60. A client who was short the same amount (i.e. £10 a point) in Lloyds would be debited with £75 (£10x7.5x100%).
UK shares usually trade ex-div on the Wednesday morning if paying a dividend, and ceteris paribus, the value of these shares will go down by the dividend amount. This has a direct affect on any of the indices the particular share may be a constituent of. Although most shares go ex-div on Tuesday evening there will be exceptions when companies may make payments (whether dividend, return of capital etc) on days other than this. In these cases the relevant amendment will be made on the day on or a day before the effective date.
In the case of Rolling Daily contracts on the indices, Tradefair will make a dividend adjustment to clients' accounts the day on which or before the index constituents' trade ex-dividend. We will credit clients who have long (buy) positions and debit clients with short (sell) positions. Haircuts (due to charges on gross amounts due to tax, clearing charges etc.) may be applied to cash adjustments.
This is a common question for SB companies as it does cause some confusion with clients.
All major indices quoted by Tradefair Spreads have a Futures market related to them (i.e. the FTSE 100 has the LIFFE FTSE Futures market). This Future trades at a price which reflects the underlying market plus some adjustments. These adjustments are calculated from the theoretical value of dividends payable between today and the expiry of the Future AND the cost of carry for the index over the same period.
This Adjustment is called the 'Fair Value'. Tradefair Spreads will adjust the Daily Cash price of each index by it's own Fair Value number each day. Tradefair Spreads links the 'Daily Cash' quote to the relevant future concerned and offsets the quote by the current Fair Value. Therefore the Cash Daily price is moved by the Futures price and not vice versa, this is because the cash price is a lagging market indicator which does not react in a timely manner to market moving news.
For UK shares we price our bid using the underlying market bid and the offer from the underlying market offer. LCG's spread is then added around the underlying market bid/offer to create 'our quote'. On a day to day basis the difference between our bid and the underlying market bid will remain the same as will the difference between the offer prices. If the underlying market bid/ask spread widens/narrows then 'our quote' will widen/narrow with it.
We derive the future individual share prices (quarterly markets) by taking the underlying market price and adding the cost of carry from the trade date until the expiry date and removing any dividends/capital repayments on those shares which go ex-div/make payments between the trade date and the expiry date.
We subscribe to a data feed which gives us the best bid and offer in the market from several major banks in any given currency pair. The best bid might be from one bank, and the best ask might be from another bank. We take the best of each (i.e. the highest bid and the lowest offer) and put our spread (which remains fixed) around this spread.
There is no single exchange on which all FX trades are transacted, and so there is never a single price at which you can say that a given currency pair is trading. Bank 'A' might sell cable to Bank 'B' at 1.7750, whilst at exactly the same time Bank 'C' might sell cable to Bank 'D' at 1.7755. Bank 'A' may record its trades to a database to which Data Vendor 'X' has access, whilst Bank 'C' might record its trades on a separate database to which Data Vendor 'Y' has access. For this reason, it is highly possible for 2 different data vendors to be showing 2 different prices at exactly the same time in the same currency pair.
No. If the market spread is 1, we add one to each side so that our spread is 3. And even if we did, the net result is irrelevant. Say, for example, we rounded up on a 3-tick spread. If you went long you'd pay that extra half a tick on the way in, but you'd gain it on the way out. Whether we rounded up or down, the spread is still 3 ticks! Plus, you are still exposed to the same currency price movements - if GBP/USD rallies 10 ticks, you will make 10 ticks whether the price you traded at was rounded up or down.