Overview of the OneChicago NoDiv Contract

The OneChicago NoDiv single stock futures contract (OCX.NoDivRisk) differs from the Exchange's traditional single stock futures contract by virtue of its handling of ordinary distributions (e.g., dividends, capital gains, etc.).  Whereas the traditional contract is not adjusted for such ordinary distributions (the discounted expectations are reflected in the price), the NoDiv contract is intended to remove the risk of dividend expectations through a price adjustment made by the clearinghouse. The adjustment is made on the morning of the ex-date to ensure that the effect of the distribution is removed from the daily mark-to-market or cash variation pay/collect.

For example, assume a NoDiv contract which closes at $50.00 on the business day prior the ex-date at which stockholders of a $1.00 dividend are to be determined. On the ex-date OCC will adjust that prior day's final settlement price from $50.00 downward by the amount of the dividend to $49.00. The effect of this adjustment will be to ensure that the dividend has no impact upon the cash variation pay/collect as of ex-date close (i.e., short position holder does not receive the $1.00 variation collect and the long holder incur the $1.00 payment).


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