Section 871(m) amendment - ISDA Provision: Difference between revisions

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Section 871(m) of the [[Internal Revenue Code]] clamps down on foreigners avoiding [[withholding tax]] for dividends on US [[Share - Equity Derivatives Provision|equities]].  
Section 871(m) of the [[Internal Revenue Code]] clamps down on foreigners avoiding [[withholding tax]] for dividends on US [[Share - Equity Derivatives Provision|equities]]. Previously, US dividend [[Withholding tax|withholding]] did not apply to returns on notional principal contracts and instruments linked to underlying US equities.
 
That’s all changed now.


The new regulations will establish up to a 30% [[withholding tax]] on foreign investors on dividend-equivalent payments under [[equity derivative|equity derivatives]].  There are a wide range of products that fall into this camp including [[swap]]s, [[option]]s, [[future]]s, [[convertible bond|convertible debt]], [[structured note|structured notes]] and other customised derivative where the  ...
The new regulations will establish up to a 30% [[withholding tax]] on foreign investors on dividend-equivalent payments under [[equity derivative|equity derivatives]].  There are a wide range of products that fall into this camp including [[swap]]s, [[option]]s, [[future]]s, [[convertible bond|convertible debt]], [[structured note|structured notes]] and other customised derivative where the  ...


===Beware of {{tag|Greeks}}===
===Beware of {{tag|Greeks}}===
... [[delta]] (see what I did there?) against the underlying stock is .08 or greater. (Pro tip: a delta of 1 gives a one-for-one correlation with the delta on the [[underlying]]. A delta of -1.0 does the exact opposite of what the underlyer is doing. a delta of 0 means the two products are correlated at random).
... [[delta]] (see what I did there?) against the underlying stock is .08 or greater.  
 
{{delta}}


The calculation is cumulative so even if the delta threshold isn’t met in one transaction, it may be as a result a connected transaction.
The calculation is cumulative so even if the delta threshold isn’t met in one transaction, it may be as a result a connected transaction.
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