SEBI vide circular dated June 28, 2022 has issued clarification to all stock exchanges regarding adjustment in derivative contracts for dividend announcements. Currently, dividends that are below the threshold, which is 5 percent of the market value of the underlying stock are deemed ordinary dividends and no adjustment in the strike price is made for such dividends. For extra-ordinary dividends, which will be at and above 5 per cent of the market value of the underlying security, the strike price would be adjusted.
As per the circular, It has been decided that the adjustment in derivative contracts shall be carried out in cases where dividends declared are at or above the revised threshold, which is 2% of the market value of underlying stock. The revised threshold would be applicable for dividend announcements done on or after the effective date of the circular.
