SUBMISSION COVER SHEET

IMPORTANT: Check box if Confidential Treatment is requested

Registered Entity Identifier Code (optional): 16-571 (1 of 3)

Organization: Chicago Mercantile Exchange Inc. ("CME")

Filing as a: DCM SEF DCO SDR 

Please note - only ONE choice allowed.

Filing Date (mm/dd/yy): December 15, 2016 Filing Description: Adoption of New 

CME and CBOT Rule 990. (“U.S. Withholding Tax”)

SPECIFY FILING TYPE 

Please note only ONE choice allowed per Submission.

Organization Rules and Rule Amendments

Certification § 40.6(a)

Approval § 40.5(a)

Notification § 40.6(d)

Advance Notice of SIDCO Rule Change § 40.10(a)

SIDCO Emergency Rule Change § 40.10(h)

Rule Numbers: See filing.

New Product Please note only ONE product per Submission.

Certification § 40.2(a) 

Certification Security Futures § 41.23(a)

Certification Swap Class § 40.2(d)

Approval § 40.3(a)

Approval Security Futures § 41.23(b)

Novel Derivative Product Notification § 40.12(a)

Swap Submission § 39.5

Official Product Name: 

Product Terms and Conditions (product related Rules and Rule Amendments)

Certification § 40.6(a) 

Certification Made Available to Trade Determination § 40.6(a)

Certification Security Futures § 41.24(a)

Delisting (No Open Interest) § 40.6(a) 

Approval § 40.5(a)

Approval Made Available to Trade Determination § 40.5(a)

Approval Security Futures § 41.24(c)

Approval Amendments to enumerated agricultural products § 40.4(a), § 40.5(a)

“Non-Material Agricultural Rule Change” § 40.4(b)(5)

Notification § 40.6(d)

 Official Name(s) of Product(s) Affected: 

Rule Numbers: 
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 299 2299 christopher.bowen@cmegroup.com cmegroup.com

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Christopher Bowen 

Managing Director and Chief Regulatory Counsel

Legal Department

December 15, 2016

VIA ELECTRONIC PORTAL

Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, DC 20581

RE: CFTC Regulation 40.6(a) Certification. Adoption of CME and CBOT Rule 990. (“U.S. 

Withholding Tax”).

CME Submission No. 16-574 (1 of 3)

Dear Mr. Kirkpatrick:

Pursuant to Commodity Futures Trading Commission (“CFTC” or “Commission”) Regulation 40.6(a), 

Chicago Mercantile Exchange Inc. (“CME”) and The Board of Trade of the City of Chicago, Inc. (“CBOT”), 

(collectively, the “Exchanges”) hereby self-certify the adoption of CME Rule 990. (“U.S. Withholding Tax”)

(“New Rule 990.”) effective on January 3, 2017.

New Rule 990. is designed to ensure that the Exchanges are not liable for U.S. withholding tax with 

respect to certain transactions entered into by the Exchanges’ clearing members that are treated as nonU.S. persons for purposes of U.S. federal income tax law and is intended to address the application of 

Section 871(m) of the Internal Revenue Code of 1986, as amended (“Section 871(m)”) and the 

application of the Foreign Account Tax Compliance Act (“FATCA”) to listed futures transactions executed 

on the Exchanges commencing on January 1, 2017. New Rule 990. appears in Exhibit A, with additions 

underscored.

Section 871(m), which was enacted in 2010, imposes a 30% withholding tax on “dividend equivalent” 

payments that are made or deemed to be made to non-U.S. persons with respect to certain derivatives 

(such as futures contracts) that reference equity of a U.S. issuer. In enacting Section 871(m), Congress 

was attempting to prevent foreign persons from using derivatives as a way to enjoy the economic benefits 

of owning dividend-paying stock while at the same time avoiding the withholding tax that would apply if 

such foreign persons actually owned the stock and the dividends were paid to them directly. For 

purposes of applying Section 871(m), a dividend equivalent subject to withholding is deemed to arise if a 

dividend is paid on a U.S. stock referenced by a derivative, such as a futures contract. 

The obligation to collect withholding taxes on payments made to foreign persons ordinarily falls on the 

last U.S. person (the “withholding agent”) treated as having custody or control over the payment or funds 

before they leave the United States. Under the recently issued final Section 871 (m) regulations, in the 

case of a futures contract that references U.S. equities, the Exchange itself becomes the withholding 

agent whenever a non-U.S. Clearing member (“non-U.S. Member”) enters into a transaction on behalf of 

a customer or for its own account. 

FATCA was also enacted in 2010 for the purpose of preventing U.S. citizens and residents from evading 

income tax through the use of offshore bank accounts. FATCA imposes a 30% withholding tax on U.S.-

source dividends, dividend equivalents and similar payments that are made by a U.S. withholding agent 

to a foreign financial institution (“FFI”), such as a bank or brokerage firm, unless the FFI provides 

information about its U.S. account holders to the Internal Revenue Service (“IRS”). 
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 299 2299 christopher.bowen@cmegroup.com cmegroup.com

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A potential withholding agent, such as the Exchanges, can avoid the burden of reporting, collecting and 

remitting the withholding taxes imposed by Section 871(m) on outbound payments (including dividend 

equivalent payments) made or deemed to be made to a non-U.S. Member if the non-U.S. Member has 

entered into both a “qualified intermediary agreement” (relating to transactions executed on behalf of the 

non-U.S. Member’s customers) and a “qualified derivatives dealer agreement” (relating to transactions 

entered into for the non-U.S. Member’s own account) with the IRS whereby the non-U.S. Member 

essentially agrees to undertake these responsibilities. Similarly, the Exchanges can avoid the burden of 

reporting, collecting and remitting the withholding taxes imposed by FATCA on outbound payments 

(including dividend equivalent payments) made or deemed to be made to a non-U.S. Member if the nonU.S. Member has established an exemption from withholding under IRS procedures. By requiring nonU.S. Members to both enter into a qualified intermediary agreement and a qualified derivatives dealer 

agreement with the IRS and to establish a FATCA exemption under IRS procedures, New Rule 990.

transfers the burden of complying with these withholding taxes to the non-U.S. Member whose activities 

make them applicable. 

The Exchanges reviewed the designated contract market core principles (“DCM Core Principles”) and the 

derivatives clearing organization core principles (“DCO Core Principles”) as set forth in the Commodity 

Exchange Act (“CEA” or “Act”) and identified that the rule amendments may have some bearing on the 

following principles:

 DCM Core Principle 7 – Availability of General Information. DCM Core Principle 7 and CFTC 

Regulation 38.21(c)(7) requires that any matter relevant to participation in the clearing and 

settlement activities of the DCO be disclosed publicly. New Rule 990. would be made publicly 

available on the website for CME Group Inc. (“CME Group”).

 DCO Core Principle L – Public Information. DCO Core Principle L and CFTC Regulation 

39.21(c)(7) requires that any matter relevant to participation in the clearing and settlement 

activities of the DCO be disclosed publicly. New Rule 990. would be made publicly available on 

CME Group’s website.

Pursuant to Section 5c(c) of the Act and CFTC Regulation 40.6(a), the Exchanges certify that New Rule 

990. complies with the Act and regulations thereunder. There were no substantive opposing views to 

this proposal.

The Exchanges certify that this submission has been concurrently posted on the Exchange’s website at 

http://www.cmegroup.com/market-regulation/rule-filings.html.

If you require any additional information regarding this submission, please contact me at 212.299.2200 or 

via e-mail at CMEGSubmissionInquiry@cmegroup.com.

Sincerely, 

/s/ Christopher Bowen

Managing Director and Chief Regulatory Counsel

Attachment: Exhibit A: CME and CBOT Rule 990. (“U.S. Withholding Tax”) (blackline format)
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EXHIBIT A

CME, CBOT

Chapter 9

Clearing House and Performance Bonds

(additions underscored)

TAX COMPLIANCE

990. U.S. WITHHOLDING TAX

A. Beginning January 1, 2017, the date on which Section 871(m) of the Internal Revenue Code of 1986, as 

amended (for purposes of this Rule 990, the “Code”), and related Treasury regulations and other official 

interpretations thereof, first apply to any transactions on the Exchange:

1. No Clearing Member that is treated as a non-U.S. entity for U.S. federal income tax purposes shall conduct 

any transaction in equity index products on the Exchange unless: 

a. such Clearing Member has entered into a qualified intermediary agreement with the Internal Revenue 

Service (“IRS”) in which the Clearing Member has agreed to assume primary responsibility for reporting, 

collecting and remitting withholding taxes imposed pursuant to Chapters 3 and 4 of subtitle A, and 

Chapter 61 and Section 3406, of the Code with respect to any income (including dividend equivalents, 

as such term is defined in Section 871(m)(2) of the Code and Treasury Regulations Section 1.871-15(c) 

or any successor thereto) arising from transactions on the Exchange that are entered into by the 

Clearing Member as an intermediary, including transactions entered into on behalf of such Clearing 

Member’s customers;

b. (i) such Clearing Member has entered into a qualified intermediary agreement with the IRS to become 

a qualified derivatives dealer (“Qualified Derivatives Dealer”) that permits the Exchange to make 

payments of dividend equivalents (as such term is defined in Section 871(m)(2) of the Code and 

Treasury Regulations Section 1.871-15(c) or any successor thereto) or deemed payments, to such 

Clearing Member free from U.S. withholding taxes imposed pursuant to Chapters 3 and 4 of subtitle 

A, and Chapter 61 and Section 3406, of the Code arising from transactions on the Exchange that 

are entered into by the Clearing Member for its own account; and 

(ii) such transaction entered into by the Clearing Member is within the scope of the exemption from 

withholding tax for dividend equivalents (as such term is defined in Section 871(m)(2) of the Code 

and Treasury Regulations Section 1.871-15(c) or any successor thereto) paid to Qualified 

Derivative Dealers pursuant to Chapters 3 and 4 of subtitle A, and Chapter 61 and Section 3406, of 

the Code; and

c. such Clearing Member has qualified under such procedures promulgated by the IRS as are in effect 

from time to time to establish an exemption from withholding under FATCA (as defined below), such 

that the Exchange will not be required to withhold any amount with respect to any payment made or 

deemed to be made to such Clearing Member under FATCA. For purposes of this subparagraph c., 

“FATCA” means the provisions of Sections 1471 through 1474 of the Code, which were enacted as part 

of the Foreign Account Tax Compliance Act (or any amendment thereto or any successor sections 

thereof), and related Treasury Regulations and other interpretations thereof, as in effect from time to 

time, and the provisions of any intergovernmental agreement to implement the FATCA as in effect from 

time to time between the United States and the jurisdiction of the relevant Clearing Member’s residency.
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2. Beginning on January 1, 2017, and on each anniversary thereafter, each Clearing Member that is treated as 

a non-U.S. entity for U.S. federal income tax purposes and that conducts any transaction in equity index 

products on the Exchange in accordance with Rule 990.A. 1. shall certify to the Exchange that such Clearing 

Member satisfies the requirements of Rule 990.A.1.(a) through (c) by providing to the Exchange appropriate 

tax documentation attesting to such Clearing Member’s federal income tax status, with the first such 

certification being delivered to the Exchange no later than January 1, 2017. Each such Clearing Member is 

required to promptly update its certification to the Exchange if required by applicable law or administrative 

guidance or if the certification is no longer accurate.

3. Beginning on January 1, 2017, and on each anniversary thereafter, each Clearing Member that is treated as 

a non-U.S. entity for U.S. federal income tax purposes shall provide the Exchange with information relating 

to the dividend equivalents (as such term is defined in Section 871(m)(2) of the Code and Treasury 

Regulations Section 1.871-15(c) or any successor thereto) the Exchange pays or is deemed to pay such 

Clearing Member in sufficient detail and in a sufficiently timely manner to enable the Exchange to report on 

IRS Forms 1042 and 1042-S (or any successor forms) under Chapters 3 and 4 of subtitle A of the Code, the 

required amounts and other information relating to dividend equivalents (as such term is defined in Section 

871(m)(2) of the Code and Treasury Regulations Section 1.871-15(c) or any successor thereto) and 

transactions giving rise thereto between the Exchange and the Clearing Member.

4. Each Clearing Member that is treated as a non-U.S. entity for U.S. federal income tax purposes shall 

promptly inform the Exchange in writing if it undergoes a change in circumstance that would affect its 

compliance with this Rule 990, or otherwise knows or has reason to know that it is not, or will not be, in 

compliance with this Rule 990, but in each case, such writing must be delivered to the Exchange no later 

than within two days of the Clearing Member’s knowledge thereof.

5. A Clearing Member that is treated as a non-U.S. entity for U.S. federal income tax purposes shall indemnify 

the Exchange for any loss, liability or expense (including taxes and penalties) sustained by the Exchange as 

a result of such Clearing Member failing to comply with the requirements of this Rule 990.