Moscow Exchange to streamline trading in international assets
National Clearing Centre (NCC, part of Moscow Exchange Group) has been granted the status of Qualified Derivatives Dealer (QDD) by the United States Internal Revenue Service (IRS).
QDD status will allow Moscow Exchange to facilitate trading in US securities for banks and brokers, as well as on the Money Market. Professional traders will be able to make better use of the margin trading mechanism on MOEX’s Equity Market for their retail clients.
With this status, NCC will be able to administer dividend equivalent income on US securities, in particular income transferred as a result of repo transactions, where the record date for the dividend is between the first and second parts of the repo. This eliminates cascading tax when income is transferred through a chain of repo transactions. Furthermore, NCC relieves the buyer under the first part of the repo transaction from having to make withholding own its own. Tax administration of dividend payments without QDD status does not comply with US legal requirements.
Irina Grekova, Managing Director for Compliance and Business Ethics at Moscow Exchange, said:
"Assignment of QDD status confirms Moscow Exchange Group's strong commitment to complying with all requirements, including US laws and regulations, and our efforts to build a culture of trust in the Russian financial market."
Georgy Uryutov, Deputy CEO at NCC, said, "QDD status will allow NCC to expand the liquidity management options for its clearing members and facilitate further growth in the scale of the entire Group's business."
Trading in international shares with settlement in RUB started on Moscow Exchange in August 2020. Today, 281 international securities are available for trading. From 27 September 2021, market participants and their clients will be able to trade international shares in US dollars. By the end of the year, the number of international shares available for trading is expected to increase to 500.
International stocks are currently traded and settled in RUB using MOEX’s robust infrastructure, which includes a qualified central counterparty and record-keeping with the central securities depository. Dividends are set in the issuers’ currency, i.e. in USD for American securities.
Individual investors may submit Form W8 used to calculate the dividend tax payable for U.S. securities.
National Settlement Depository (NSD, part of Moscow Exchange Group), will not charge a fee for the acceptance and recognition of Individual Identification Form W-8BEN when paying income on US securities until the end of January 2022. Form W-8BEN is to be completed by private investors holding US securities to avoid double taxation. When the form is in place, the tax will be 13%: 10% for the United States and 3% for the Russian Federation. If Form W-8BEN is not filed, tax will be withheld at the increased rate of 30%. The form is valid for three years. If Form W-8BEN is not filed, tax will be withheld at an increased rate of 30% under US law and 13% to the Russian tax authorities.