Ex-Dividend Date Adjustments: The BLiSS Order Reduction Rule
A stock is trading at $52.00 on the day prior to the ex-dividend date. The company declared a $0.50 cash dividend. On the morning of the ex-date, which open customer orders on the specialist/designated market maker's order book are automatically reduced by the $0.50 dividend distribution, unless marked 'Do Not Reduce' (DNR)?
On the ex-dividend date, orders entered BELOW the market price are automatically reduced by the dividend amount: Buy Limit and Sell Stop orders (mnemonic: BLiSS).
Complete Analysis & Legal Rationale
When a stock goes ex-dividend, its opening market price is reduced by the exact amount of the dividend because the cash leaves the company. To prevent orders entered below the market from being inadvertently triggered by this artificial price drop, FINRA rules require that Buy Limit and Sell Stop orders (BLiSS: Buy Limit & Sell Stop) be reduced by the dividend amount on the morning of the ex-date, unless the customer enters a 'Do Not Reduce' (DNR) instruction. Orders entered above the market (Sell Limit, Buy Stop: SLoBS) are not reduced.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
On the ex-dividend date, orders entered BELOW the market price are automatically reduced by the dividend amount: Buy Limit and Sell Stop orders (mnemonic: BLiSS).
Fails to adhere to trade execution and settlement rules regarding B.
Fails to adhere to trade execution and settlement rules regarding C.
Fails to adhere to trade execution and settlement rules regarding D.
Official Standard: When a stock goes ex-dividend, its opening market price is reduced by the exact amount of the dividend because the cash leaves the company. To prevent