Contract subject to 871 (m)

[GregorySG9]

Hi,
I traded many futures contracts for 6 years but for the first time I tried to short IXM.
And this message popped:

I understand that this specific regulation is to protect US from foreigners investors evading withholding tax. And I am indeed not based in the US. But:

1) It doesn't apply to broad based index: ES, NQ, any sector index except this specific one. Is it because the dividend yield for financials is usually higher than for other sectors therefore reaching a level that triggers an interdiction to trade?

2) I want to short IXM so I shouldn't be concerned by this withholding tax anti-avoidance law.

3) 871 (m) doesn't prevent traders to trade those contracts. So why shouldn't we be asked to pay withholding tax on the dividend part of the futures price instead of triggering an interdiction to trade?

Of course I asked IB about it. But while I enjoy this broker, answering customer's question is not their strong point!
May be some of you are aware of this regulation and/or experience same issue?

 

[Overnight]

Hi,
I traded many futures contracts for 6 years but for the first time I tried to short IXM.
And this message popped:
View attachment 205712

I understand that this specific regulation is to protect US from foreigners investors evading withholding tax. And I am indeed not based in the US. But:

1) It doesn't apply to broad based index: ES, NQ, any sector index except this specific one. Is it because the dividend yield for financials is usually higher than for other sectors therefore reaching a level that triggers an interdiction to trade?

2) I want to short IXM so I shouldn't be concerned by this withholding tax anti-avoidance law.

3) 871 (m) doesn't prevent traders to trade those contracts. So why shouldn't we be asked to pay withholding tax on the dividend part of the futures price instead of triggering an interdiction to trade?

Of course I asked IB about it. But while I enjoy this broker, answering customer's question is not their strong point!
May be some of you are aware of this regulation and/or experience same issue?

Hmmm.

https://www.cmegroup.com/trading/eq...ringCode=XAF&sector=EQUITY+INDEX&exchange=CME

Call them and ask their risk department? They are very friendly folks over there. They do not bite.

 

[maxinger]

No sure about this IXM product.

There are some exchanges which foreigners are not allow to trade.
Also there are some country restriction which the broker has to ban us from trading certain products.

 

[GregorySG9]

Thank you for contacting the CME Global Command Center (GCC).

We advise that you contact your clearing firm admin AND/OR your front end software provider clarify this rejection. This is not typically a rejection that originates from the exchange. It perhaps may have some regulatory implications, but this would again, need to be investigated at your Clearing firm or software vendor. Thank you.
I'll continue to look for answers

 

[Robert Morse]

Hi,
I traded many futures contracts for 6 years but for the first time I tried to short IXM.
And this message popped:
View attachment 205712

I understand that this specific regulation is to protect US from foreigners investors evading withholding tax. And I am indeed not based in the US. But:

1) It doesn't apply to broad based index: ES, NQ, any sector index except this specific one. Is it because the dividend yield for financials is usually higher than for other sectors therefore reaching a level that triggers an interdiction to trade?

2) I want to short IXM so I shouldn't be concerned by this withholding tax anti-avoidance law.

3) 871 (m) doesn't prevent traders to trade those contracts. So why shouldn't we be asked to pay withholding tax on the dividend part of the futures price instead of triggering an interdiction to trade?

Of course I asked IB about it. But while I enjoy this broker, answering customer's question is not their strong point!
May be some of you are aware of this regulation and/or experience same issue?

Try future's symbol XAF-This has very low volume and OI.
https://www.cmegroup.com/trading/eq...al-select-sector_contract_specifications.html

I checked with CQG, the software we offer, and the symbol is XAF.

 

[GregorySG9]

Try future's symbol XAF-This has very low volume and OI.
https://www.cmegroup.com/trading/eq...al-select-sector_contract_specifications.html

I checked with CQG, the software we offer, and the symbol is XAF.

Yes XAF and IXM are one same product.

 

[GregorySG9]

Unfortunately, 871 (m) restriction cannot be removed for IXM Futures as the index does not qualify for an exemption.

As of January 2, 2019, the cumulative weight of the five largest securities in the Financial Select Sector represented 45,1% of the overall index weight. The limit is 40%.