Fractional Rounding

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Status: Best Practice Finalised, Last Updated: 28/01/2022

Description:
Less than one full share of equity is called a fractional share. Such shares may be the result of stock splits (SPLF), dividend reinvestment plans (DRIPs), or similar corporate actions. How should fractional shares be rounded within corporate action management?

Best Practice:
Fractional positions - in most markets it is best practice for both the lender and borrower to round down when calculating entitlement positions. Rounding down should be considered the default practice unless otherwise stated.

New share entitlements should be calculated on the whole lent position per Manufactured Dividend Rate (MDR), rather than per loan.

Fractional cash should be paid based on the market price for the whole share. If the fractional payment is of minimal value, the lender and borrower can agree to write of this payment.

In markets such as Korea, where loans are tracked, segregated and fractions accounted for, entitlements should be rounded down per specific loan and fractional cash claimed and paid for per transaction. (COAC-138)