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

Abstract

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.