The Evolution of Cum-Ex

Abstract

This chapter shows how the basic cum-ex trade was subject to recurrent (and ingenious) further refinements through financial engineering in order to massively amplify its effectiveness and profitability. It identifies six separate constraints on a seller implementing a ‘stand-alone’ approach to cum-ex trading in the open market. These constraints are discussed in turn, before an exploration of the actions adopted by cum-ex traders to overcome each of them. The chapter then considers various refinements made to the design and implementation of the cum-ex trade to broaden the scale of trading activity, to improve the cosmetics and efficiency of the trade, and to boost its profitability both by devising a way to permit multiple repetitions of the basic trade between the same counterparties and also by cutting the costs of implementing the trade. Some further changes were made to sidestep efforts by the tax authorities to close down the cum-ex trade. The refinements to the cum-ex trade were continually layered onto the basic transaction, leading ultimately to colossally complex transaction structures.