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FIA Tech has introduced a new data service aimed at helping market participants comply with U.S. tax regulation 871(m) when trading exchange-traded derivatives (ETDs). The solution is part of the firm’s broader regulatory and reference data offering, targeting firms exposed to dividend equivalent withholding rules on derivatives linked to U.S. equities.
The IRS and U.S. Treasury issued final rules under Section 871(m) of the Internal Revenue Code in 2015, establishing requirements for withholding on dividend-equivalent payments from certain financial instruments referencing U.S. equities. These include equity-linked notes, total return swaps, and listed options and futures. Market participants that fail to identify and process transactions subject to 871(m) can face penalties, operational disruption, and compliance risk.
FIA Tech said the new data product identifies relevant attributes of global index derivatives that determine whether a product is classified as qualified or non-qualified for 871(m) purposes. The classification depends on factors including index composition, weighting methodologies, and exposure thresholds, as defined under the IRS framework.
871(m) service in response to demand from brokers, clearing firms, and asset managers
Andrew Castello, SVP, Head of Client Operations at FIA Tech, commented, “Our 871(m) solution is a powerful addition to our end-to-end regulatory support for ETD clients—streamlining compliance in a complex landscape. Delivered in a standardized, consolidated format, it seamlessly integrates with our rich reference data and can be customized with vendor symbologies or other reference data inputs to meet each client’s unique needs.”
The new solution integrates with FIA Tech’s Databank Network, a centralized reference data infrastructure aggregating product and corporate action data from multiple global exchanges. The 871(m) service will draw on this network to deliver ongoing classifications that can be incorporated directly into client workflows.
FIA Tech emphasized that automating the process of flagging products subject to 871(m) withholding reduces the manual burden on compliance teams and lowers the likelihood of errors or oversights, particularly for firms with high volumes of cross-border equity derivatives exposure.
The new offering builds on FIA Tech’s existing Databank suite, which includes:
- Corporate Actions, a continuously updated feed of equity-related corporate events relevant to derivative contracts
- Cash & Collateral, a dataset tracking acceptable collateral types across CCPs
- Foreign Securities Futures, which catalogs the global futures landscape by security type
- Sanctioned Securities, identifying securities and instruments impacted by global sanctions regimes
By including 871(m) classifications in the broader data framework, FIA Tech is positioning the service as a modular component that integrates with trading, clearing, and compliance systems across the post-trade infrastructure of global derivatives participants.
The company said it designed the 871(m) service in response to demand from brokers, clearing firms, and asset managers seeking to automate withholding and tax reporting for instruments that fall under U.S. tax jurisdiction. Clients can tailor the dataset to align with internal systems and third-party data vendors using custom symbologies or identifiers.
