Reinvestment of cash dividends

This guide explains how cash dividends received by a user can be automatically reinvested into the market.

How reinvestment works

Reinvestment refers to the process of using cash received from a user’s security holdings (such as an income distribution or a dividend payment) for an automated investing of the cash proceeds into a predefined instrument. Respective cash proceeds can stem from different events in a financial instrument’s lifecycle. Because the underlying process of cash proceeds and automated reinvestments does not change materially, we are going to refer to those instrument events and related payments as "dividend payments" for brevity. If automatic reinvestment is enabled for the accounts of your users, any cash inflow as a result of a dividend payment of an instrument is automatically converted into a buy order for the instrument that distributed the cash payment. The reinvestment process works on the basis of net cash proceeds, i.e. possible withholding taxes on any cash income are automatically deducted before the reinvestment process starts.

Activating automatic reinvestments for an account

In the first release of this functionality, the configuration for enabling automated reinvestments for your users is set on a global client level, meaning that reinvestments can be either turned on or off for all your users.

In future iterations, we will extend the configurability of activating or deactivating automatic reinvestment to a more granular account level, which will provide you and your users all the flexibility to make individualised investment decisions and automate the reinvestment of cash proceeds if desired.