Global Equity Derivatives Regulation (871(m))

Institutions with high stakes in the US Equities business have been awaiting the publication of the Equity Derivatives Regulations (871(m)) with bated breath.

The rules were released by the Internal Revenue Service (IRS) and US Treasury on 18 September 2015 and are an enhancement of the US withholding tax framework to address perceived tax avoidance on derivative contracts based on US equities.  Withholding tax will apply on all dividend equivalent payments for eligible contracts / products (Notional Principal Contracts (NPCs) such as Equity Swaps and Warrants and Equity Linked Instruments (ELIs) such as Options, Forwards and Futures).

US equity-based derivatives contracts will be affected