Which transaction type requires a valid ex-dividend date?

A valid ex-dividend date is crucial for cash transactions because it determines the eligibility of the buyer to receive the upcoming dividend payment. On the ex-dividend date, if a stock is purchased, the investor will not receive the upcoming dividend because the purchase was made after the cutoff point. To qualify for the dividend, the purchase must occur before this date. This rule is imperative to ensure that dividend payments are distributed correctly between sellers and buyers.

In contrast, while short sales, dividend reinvestment, and convertible transactions may involve aspects of dividend payments, they do not rely on the ex-dividend date in the same way that cash transactions do. For instance, in short sales, the short seller is responsible for paying any dividends to the lender of the stock, but the date of the transaction itself is not dictated by the dividend schedule in the same manner as cash transactions. Similarly, dividend reinvestment plans typically adjust the shareholdings based on previous dividends declared rather than requiring the ex-dividend date for future dividends. Lastly, convertible transactions pertain to the conversion of bonds into shares and are more about the terms of conversion rather than timing with respect to dividend payments.

Thus, the ex-dividend date plays a critical role in cash transactions by setting