Demerger processing is the handling by custodians, brokers and fund administrators of a demerger: a restructuring in which a company separates part of its business into a new company and distributes that company's shares to its own shareholders. It is usually a mandatory corporate action, so holders need do nothing, but operations teams have several tasks. They capture the terms, set up the new security in reference data, and notify clients of the entitlement ratio, record date and first day of dealing.
On the effective date, new shares are credited in proportion to each holding, with any fractional entitlement rounded or paid in cash. The original cost of the parent holding is then split between the two securities, using the apportionment published by the company, as a tax lot adjustment. The term is common in the United Kingdom and Commonwealth markets; the United States equivalent is covered under spin-off processing.