Dividend arbitrage
Why would almost a third of a bank’s stock be out on loan on Friday, then drop back to under 5% on Monday? It’s an interesting point highlighted by a paper from Richard Davies Investor Relations. Having undertaken detailed analysis of stock-lending levels in a range of PLC stocks, the firm notes that these big shifts take place around ex dividend dates. A reasonable conclusion, therefore, is that this is linked to dividend arbitrage – the practice of moving stock between jurisdictions in order to reduce the tax hit on dividends. Whilst, in its basic form, the practice is legal under FCA rules, the hugeRead More →