Does trading on indices award dividends?

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Does trading on indices award dividends?

Dec 11, 2023

Indices are subject to dividend adjustments depending on whether you are a buyer or a seller of the index.

What are Dividends on Indices?

An index is a weighted basket consisting of many companies. When one of these companies pays a dividend, it is effectively reducing its value by the amount of the dividend.

This reduction in value is reflected by a fall in the share price on the ex-dividend date. In the case of an index, the fall in the price is proportional to the size of the dividend and the weight of the company within that index. As a result, sometimes dividend adjustments are unnoticeable, while other times, their impact on an index price needs to be clarified.

Dividend amounts will be deducted from or credited to the trading account balance daily at the opening of each index’s trading session.

How to Calculate Dividends on Indices?

To accurately reflect market conditions, KCM Trade applies dividend adjustments to indices. They are paid or charged on a “per instrument basis”, meaning an aggregated adjustment for all the positions on a specific index that are still open as of the end of day preceding the ex-dividend date. Indices trading hours can be found here.

Buy trades may receive a dividend, calculated as follows:

Dividend amount received (index quoted currency) = Lots × Contract size x Dividend rate

Sell trades may be charged a dividend, calculated as follows:

Dividend amount charged (in the index quoted currency) = Lots × Contract size x Dividend rate

Any balance changes due to dividends are also available in the MT4 trading platform.

Please closely monitor Dividend updates while trading respective indices.