Section 871(m) amendment - ISDA Provision: Difference between revisions
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===So does that mean I can bin all this [[hypothetical broker-dealer]] nonsense?=== | ===So does that mean I can bin all this [[hypothetical broker-dealer]] nonsense?=== | ||
Since {{tag|WHT}} is now applied on [[high-delta equity derivative]]s in the same way it applies to physical cash trades, the [[recharacterisation]] risk is surely less fraught now, | Since [[871(m)]] means that {{tag|WHT}} is now applied on [[high-delta equity derivative]]s in the same way it applies to physical cash trades, the [[recharacterisation]] risk is surely less fraught now, isn’t it? do we really care whether the counterparty controls the hedge? Can we therefore get rid of that tiresome “[[hypothetical broker-dealer]]” language, which so mightily confuses many counterparties, and just reference the actual hedge liquidation price as the closing price of the derivative? | ||
No, because 871(m) does not apply to all underliers that might feature in a [[synthetic equity]] transaction. and also because there are [[WHT]] and [[stamp duty]] regimes in other jurisdictions ([[SDRT]] on UK equities for example) where a derivative acheives preferential tax treatment over a cash equity trade. | No, because [[871(m)]] does not apply to all underliers that might feature in a [[synthetic equity]] transaction. and also because there are [[WHT]] and [[stamp duty]] regimes in other jurisdictions ([[SDRT]] on UK equities for example) where a derivative acheives preferential tax treatment over a cash equity trade. | ||
But you’re right: the [[hypothetical broker-dealer]] business ''is'' [[Don’t take a piece of paper to a knife fight|ridiculous]]. | But you’re right: the [[hypothetical broker-dealer]] business ''is'' [[Don’t take a piece of paper to a knife fight|ridiculous]]. | ||