Equity Perpetual Futures: Dividend Adjustment Methodology

This document outlines Binance’s system workflow and mathematical models used to process dividend payouts for underlying equities on 24/7 perpetual futures. To account for the natural price drop of an underlying asset on its ex-dividend date, the system executes a one-time special funding settlement. During this event, short position holders will pay long position holders to neutralize the price gap.

1. Event timeline

The dividend adjustment process is executed around the ex-dividend date. For US Equity, the process begins on ex_date - 1 (the calendar day preceding the ex-dividend date) because the contract trades 24/7 including overnight sessions. For KR Equity, HK Equity and CN Equity, the process occurs entirely on ex_date itself, as the markets have no overnight session.

US Equity Perps: All times are in Eastern Time (ET).

KR Equity Perps: All times in Korea Standard Time (KST).

HK Equity Perps: All times in Hong Kong Standard Time (HKT).

CN Equity Perps: All times in China Standard Time (CST).

2. Special funding rate calculations

The special funding execution acts as a negative funding rate, meaning the funding fee is transferred from short positions to long positions. The calculation methodology depends strictly on the structure of the corporate dividend payout.

Cash dividend

For standard cash payouts, the special funding rate is determined by the dividend amount relative to the contract's mark price:

Funding rate = - D / M

Where:

D = gross dividend per share (For standard contracts, the value is the dividend per share in the local market converted to the settlement currency; for Quanto contracts, the value is the dividend per share in the local market)

M = real-time mark price at the time of execution

Stock dividend

In the rare event of a pure stock dividend, the special funding rate is exactly inverse to the dividend ratio, which is the exact proportion of new shares an investor receives as dividend for every existing share they currently hold:

Funding rate = - r / (1 + r)

Where:

r = (ratio_new / ratio_old) − 1.0, representing the net increase in share count per existing share

ratio_new = new share count after the corporate action

ratio_old = old share count before the corporate action (typically 1, but must not be assumed; reverse splits may have ratio_old > 1)

Cash + stock dividend

In highly exceptional cases where an equity issues both cash and stock simultaneously, the formula combines both parameters:

Funding rate = - (D / M + r) / (1 + r)

Where:

D = gross dividend per share

M = mark price at execution

r = (ratio_new / ratio_old) − 1.0

Funding cap bypass

To ensure accurate settlement during the dividend transition, the standard funding cap logic is intentionally skipped during this special settlement. This guarantees that long positions receive the full mathematical value of the dividend adjustment without being constrained by artificial ceiling limits.

Estimated dividend calculation methodology
Unlike stocks, the ETF’s dividend payouts are unpredictable in advance due to factors as below:

• The ETF’s portfolio consists of  a basket of many underlying companies.
• The ETF collects continuously from all the different underlying companies inside the fund with different paying dates.
• The ETF constantly rebalances their portfolio from time to time.
• The ETF would need to deduct their management fees or any fund fees (expense ratio) from the collected dividends before distributing the remainder to ETF investors.

Binance adopts estimation methodology when calculating the dividend payout to traders who hold positions in TradFi perpetual contracts with ETFs as the underlying.

Here is a breakdown of the primary considerations in the estimation methodology:

• Historical distribution patterns of an ETF
• Funds news and announcement of an ETF
• Projected dividend amounts provided by third-party data vendors

The estimated dividend payouts will be announced 4 to 12 hours in advance before the ex-dividend date. Users are strongly advised to check the estimated dividend payouts which will be available on the trading webpage of an ETF TradFi perp. The estimated dividend payout amount could be lower or higher than the actual dividend payout which the underlying ETFs announce. The estimated dividend amount is made on a best effort basis and Binance will not redistribute the payout difference. Users are advised to assess the estimated dividend payout amount and to manage the positions before deciding whether to participate on the ex-dividend date. 

Unlike stocks, the ETF’s dividend payouts are unpredictable in advance due to factors as below:

• The ETF’s portfolio consists of  a basket of many underlying companies.
• The ETF collects continuously from all the different underlying companies inside the fund with different paying dates.
• The ETF constantly rebalances their portfolio from time to time.
• The ETF would need to deduct their management fees or any fund fees (expense ratio) from the collected dividends before distributing the remainder to ETF investors.

Binance adopts estimation methodology when calculating the dividend payout to traders who hold positions in TradFi perpetual contracts with ETFs as the underlying.

Here is a breakdown of the primary considerations in the estimation methodology:

• Historical distribution patterns of an ETF
• Funds news and announcement of an ETF
• Projected dividend amounts provided by third-party data vendors

The estimated dividend payouts will be announced 4 to 12 hours in advance before the ex-dividend date. Users are strongly advised to check the estimated dividend payouts which will be available on the trading webpage of an ETF TradFi perp. The estimated dividend payout amount could be lower or higher than the actual dividend payout which the underlying ETFs announce. The estimated dividend amount is made on a best effort basis and Binance will not redistribute the payout difference. Users are advised to assess the estimated dividend payout amount and to manage the positions before deciding whether to participate on the ex-dividend date. 

However, leveraged ETFs will be excluded from the dividend adjustment process. No Special Dividend Funding Amount will be applied on the ex-dividend date. Users are advised to assess and to manage the positions before ex-dividend date. 

List of futures contracts with leveraged ETFs as the underlying that are excluded from the dividend adjustment process, are as follows:

• MUUUSDT
• TSLLUSDT
• SOXLUSDT
• KORUUSDT
• TMFUSDT
• TQQQUSDT
• SOXSUSDT
• TZAUSDT
• SQQQUSDT
• TBTUSDT