Where does ex‐dividend trading occur: An examination of trading venues around dividends

We examine the fragmentation of trading around the ex‐dividend date. We argue that the taker‐maker and dark trading venues provide potential dividend capture traders a more favorable platform than the maker‐taker venue(s) given the price improvement, lower queues, and lower net transaction costs. Ou...

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Bibliographic Details
Published in:The Financial review (Buffalo, N.Y.) N.Y.), 2024-02, Vol.59 (1), p.31-55
Main Authors: Cox, Justin, Fuller, Kathleen P., Van Ness, Robert
Format: Article
Language:English
Subjects:
dark trading
dividends
ex‐dividend price drop
fragmentation
taker‐maker
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Summary:We examine the fragmentation of trading around the ex‐dividend date. We argue that the taker‐maker and dark trading venues provide potential dividend capture traders a more favorable platform than the maker‐taker venue(s) given the price improvement, lower queues, and lower net transaction costs. Our evidence indicates that taker‐maker (dark) venue market share decreases (increases) on cum‐dividend days but reverts to normal levels on the ex‐dividend day. Additionally, we find fragmented trading impacts the ex‐dividend price change and improves price efficiency. Finally, we find evidence that retail trades are associated with potential dividend‐capture trading.
ISSN:0732-8516
1540-6288
DOI:10.1111/fire.12362