# HAP TRADING, LLC X-17A-5/A (2021-03-15) — Broker-dealer annual report - Company: HAP TRADING, LLC - Form: X-17A-5/A - Filed: 2021-03-15 - Period: 2020-12-31 - Accession: 0001049854-21-000004 - CIK: 1049854 - File #: 8-50599 - Material weakness: No - Auditor: Lerner & Sipkin CPAs, LLP - Auditor location: New York, NY - Contact: Michael Joseph - Phone: 2123805186 - Email: lierner@lernersipkin.com - Website: lernersipkin.com - Signed by: Harsh Padia (Chief Executive Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1049854/000104985421000004/HAPTrading2020Short.pdf --- {0}------------------------------------------------ # HAP TRADING, LLC Financial Statements and Supplemental Schedules December 31, 2020 Filed pursuant to Rule 17a-5(e)(3) under the Securities and Exchange Act of 1934 as a PUBLIC DOCUMENT {1}------------------------------------------------ UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 # ANNUAL AUDITED REPORT FORM X-17A-5 PART III | | OMB APPROVAL | | |-------------|--------------|---------------------------| | OMB Number: | | 3235-0123 | | Expires: | | October 31, 2023 | | | | Estimated average burden | | | | hours per response 12.00 | ## SEC FILE NUMBER 8-50599 FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder | REPORT FOR THE PERIOD BEGINNING 01/01/2020 | | AND ENDING 12/31/2020 | | | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|--| | | MM/DD/YY | | MM/DD/YY | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF BROKER-DEALER: HAP TRADING LLC | | | OFFICIAL USE ONLY | | | Brand and the Children Company of Children Come of
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
395 HUDSON ST, SUITE 701
108882289118 On
Currinsed in Now York Count | | | FIRM I.D. NO. | | | NEW YORK | (No. and Street)
NY | And And Charles of Children Children Children Children Children Children Children Children Children Children Children Children Children Children Children Children Children Ch | | | | (City) | (State) | 10014 | | | | | B. ACCOUNTANT IDENTIFICATION | | 212-380-5186
(Area Code - Telephone Number) | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*
LERNER & SIPKIN CPAs, LLP | | | | | | | (Name - if individual, state last, first, middle name) | | | | | 420 LEXINGTON AVENUE, SUITE 2160 NEW YORK | | NY | 10170 | | | (Address) | (City) | (State) | (Zip Code) | | | SHECK ONE:
Certified Public Accountant
Public Accountant
Accountant not resident in United States or any of its possessions. | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | \*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on a the basis for the exemption. See Section 240 accountant > Potential persons who are to respond to the collection of information contained in this form are not required to respond mormation oontained in this form are not required to respond > unless the form displays a currently valid OMB control number. SEC 1410 (11-05) {2}------------------------------------------------ ## OATH OR AFFIRMATION | HARSH PADIA | swear survey and swear (or affirm) that, to the best of | |-----------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | HAP TRADING LLC | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
as as | | of DECEMBER 31 | 20 20 20 20 20 are true and correct. I further swear (or affirm) that | | | neither the company nor any partner, principal officer or director has any proprietary interest in any account | | classified solely as that of a customer, except as follows: | | | | | | | | | | | | | | | | Signature | | | CHIEF EXECUTIVE OFFICER | | Notary Public
This report ** contains (check all applicable ooxes) | Title
JEFFREY S PRETAT
Notary Public - State of New York
NO. 01PR6346891
Qualified in New York County
My Commission Expires Aug 22, 2024 | | (a) Facing Page. | | | (b) Statement of Financial Condition. | (c) Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement | | | of Comprehensive Income (as defined in §210.1-02 of Regulation S-X). | | (d) Statement of Changes in Financial Condition. | (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. | | | (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | (g) Computation of Net Capital. | | | | (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3. | | | (i) A Reconciliation, including appropriate explanation of Net Capital Under Rule 15c3-1 and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | | consolidation. | (k) A Reconciliation between the audited Statements of Financial Condition with respect to methods of | | (1) An Oath or Affirmation. | | | (m) A copy of the SIPC Supplemental Report. | | | | (n) A report describing any material inadequacies found to have existed since the date of the previous audit | | | ** For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3). | {3}------------------------------------------------ #### HAP TRADING, LLC STATEMENT OF ASSETS, LIABILITIES AND MEMBER'S EQUITY DECEMBER 31, 2020 #### ASSETS | Cash and cash equivalents | ਉ | 1,749,884 | |--------------------------------------------------------------|---|---------------| | Due from clearing broker | | 204,709,534 | | Securities owned, at market | | 4,503,439,463 | | Other receivables | | 1,363,494 | | Fixed assets, net of accumulated depreciation of \$1,151,152 | | 4,680,043 | | Prepaid expenses | | 546.378 | | Right-of-use asset | | 13,479,295 | | Other assets | | 1,286,493 | | TOTAL ASSETS | S | 4,731,254,584 | | LIABILITIES AND MEMBER'S EQUITY | | | | Securities sold, not yet purchased, at fair value | S | 4,544,558,923 | | Accounts payable and accrued expenses | | 12,792,342 | | Interest and dividends payable | | 1,022,267 | | Lease liability | | 14,730,334 | | TOTAL LABILITIES | | 4,573,103,866 | | Member's equity | | 158,150,718 | | TOTAL LIABILITIES AND MEMBER'S FOUTY | S | 4.731.254.584 | The accompanying notes are an integral part of these audited financial statements. {4}------------------------------------------------ #### NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS HAP Trading, LLC (the "Company"), a New York limited liability company is a brokerdealer registered with the Securities and Exchange Commission and is a member of NYSE ("NYSE-AMEX"), the Chicago Board Options Exchange ("CBOE", "CBOE BXY", "CBOE BZX", and "CBOE EDGX"), the Philadelphia Stock Exchange ("PHLX"), the NYSE-ARCA Exchange, and Nasdaq Exchanges ("NQX", "ISE", and "GMEX"). The Company engages in market making on the NYSE-AMEX, CBOE, and BATS BZX. The company hedges its risk with equities, Exchange Traded Funds ("ETFs") and the related equity options and/or options on the ETFs and/or indices. The Company may also engage in various other proprietary trading strategies. ### NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES #### Cash and Cash Equivalents All short-term investments with an original maturity of three months or less are considered to be cash equivalents. #### Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. #### Revenue Recognition The Company recognizes revenues as per ASU No. 2014-09 Topic 606: "Revenue from Contracts with Customers". The revenue recognition guidance requires that an entity recognize revenue due to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchanges for those goods or services. The guidance requires the entity to follow a five step model to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies the performance obligation. In determining the transaction price, the entity may include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. {5}------------------------------------------------ #### NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The Company records transactions in securities and the related revenues and expenses on a trade date basis. Realized and unrealized gains and losses on securities owned and securities sold, not yet purchased are included in the determination of trading income. The accounting for these revenues is outside the scope of ASC Topic 606, ("Revenue from Contracts with Customers"). #### Financial Instruments - Credit Losses The Company accounts for estimated credit losses on financial assets measured at an amortized cost basis and certain off-balance sheet credit exposures in accordance with FASB ASC 326-20, Financial Instruments - Credit Losses. FASB ASC 326-20 requires the Company to estimate expected credit losses over the life of its financial assets and certain off-balance sheet exposures as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. On January 1, 2020, the Company adopted FASB ASC 326-20 but is not required to restate information for prior years. The Company determined that the implementation did not have a material impact on its financial statements. The Company will continue to monitor its receivables to evaluate credit loss deductions and to adjust as needed from period to period as risk characteristics change. #### Receivables from Broker-Dealers and Clearing Organizations The Company's receivables from broker-dealers and clearing organizations include amounts receivable from unsettled trades, including amounts related to futures and options on futures contracts, amounts receivable for securities failed to deliver, accrued interest receivables and cash deposits. The Company's trades and contracts are cleared through a clearing organization and settle daily between the clearing organization and the Company. Because of this daily settlement, the amount of unsettled credit exposures is limited to the amount owed the Company for a very short period of time. The Company continually reviews the credit quality of its counterparties. #### Depreciation The cost of computers, furniture and equipment is depreciated over the estimated useful lives of the related assets of 3 to 7 years on a straight line basis. The costs of lease hold improvements are amortized over the life of the operating lease of approximately 11 years on a straight line basis. #### Recent Accounting Pronouncements The Company does not expect any recent accounting pronouncements to have any material impact on its financial condition or results of operations. {6}------------------------------------------------ #### NOTE 3 - FAIR VALUE OF INVESTMENTS #### Fair Value Measurements Fair value is an estimate of the exit price, representing the amount that would be received to, sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are not adjusted for transaction cost. Fair value measurement under generally accepted accounting principles provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels: - Level 1: - Level 2: indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. Level 3: Company develops based on available information about what market participants would use in valuing the asset or liability. An asset or liability's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities. The following are the Company's investments owned and securities sold short by level within the fair value hierarchy at December 31, 2020. | | Fair Value | Fair Value
Hierarchy | |---------------------------------------------------|------------------|-------------------------| | Assets
Securities owned | \$ 4,503,439,463 | Level 1 | | Liabilities
Securities sold, not yet purchased | \$ 4,544,558,923 | Level 1 | {7}------------------------------------------------ #### NOTE 4 - INCOME TAXES No provisions for federal and state income taxes are made in the financial statements as these taxes are the responsibility of the Company's members under a limited liability corporation. #### NOTE 5 - COMMITMENTS AND CONTINGENCIES #### Operating Leases The Company accounts for its leases in accordance with ASU 2016-02, "Leases". The Company has a lease agreement for office space expiring in 2026. During 2020, the Company signed an amendment to its existing lease for additional office space that expires in 2031. Remaining commitments under the operating lease are as follows: | Year ending December 31, | Amount | |-----------------------------------------|----------------| | 2021 | S
1,551,994 | | 2022 | 2,286,260 | | 2023 | 2,286,260 | | 2024 | 2,286,260 | | 2025 | 2,286,260 | | Thereafter | 9,691,598 | | l'otal | 20,388,632 | | Less: imputed interest | 5.658.298 | | Total lease liability - operating lease | \$ 14,730,334 | #### COVID-19 On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the "COVID-19 outbreak") and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company's financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021. {8}------------------------------------------------ #### NOTE 6 - NET CAPITAL REQUIREMENTS The Company is a member firm of the Chicago Board Options Exchange, and is subject to the Securities and Exchange Commission Uniform Net Capital Rule 15c3-1. Net Capital is defined as at least, the greater of \$1,000,000 or 6 2/3% of aggregate indebtedness, as defined. Net Capital and aggregate indebtedness change daily. The Company had net capital of \$83,562,071 at December 31, 2020 which exceeded \$1,000,000 by \$82,562,071 and exceeded 6 2/3% of aggregate indebtedness by \$82.557,694. The ratio of aggregate indebtedness to net capital was 18.03 to 1 at December 31, 2020. ### NOTE 7 - DERIVATIVE FINANCIAL INSTRUMENTS AND OTHER OFF-BALANCE SHEET RISKS In the normal course of business, the Company trades various derivative financial instruments with off-balance sheet risk. The Company enters into derivative transactions for both trading and economic risk management purposes, resulting from its own business activities. These derivative transactions typically include equity options, options on ETFs and index options, coupled with futures and options on futures for ETFs and indices. In addition, the Company has sold securities and derivative contracts that it does not currently own, and will therefore be obligated to purchase such securities at a future date. The Company has recorded these obligations in the financial statements at December 31, 2020 at fair value, and will incur a loss if the fair value of the securities and derivative contracts sold and not yet owned increases subsequent to December 31, 2020. Generally, the Company hedges against the securities and derivative contracts sold and not yet owned, thus a loss in these positions may be offset by income attributable to the hedge. Pursuant to a clearance agreement, the Company will introduce all of its securities transactions to its sole clearing broker on a fully disclosed basis. Therefore, all of the Company's money balances and long and short security positions will be carried on the books of the clearing broker. Under certain conditions as defined in the clearance agreement, the Company has agreed to indemnify the clearing broker for losses, if any, which the clearing broker may sustain from carrying securities transactions introduced by the Company. In accordance with industry practice and regulatory requirements, the Company and the clearing broker monitor collateral on the securities transactions introduced by the Company. {9}------------------------------------------------ #### NOTE 8 - RETIREMENT PLAN The Company has a 401(k) retirement plan covering substantially all employees. Only full time employees who meet the service period are eligible to participate in the plan. The Company makes a matching contribution on an individual basis, equal to 100% of the contributions made by the participants to the plan, not to exceed 6.67% of the employee's total annual compensation capped at the annual deferral limit as defined. For the period ending December 31, 2020, \$78,647 of the matching contribution was drawn from the forfeiture account. #### NOTE 9-RELATED PARTY TRANSACTIONS HAP Capital Advisors LLC, an affiliate of the Company, provides the Company with administrative, financial and technology services. Included in the statement of revenue and expenses was the following amount with related parties: \$8,682,655. ### NOTE 10 - SUBSEQUENT EVENTS The Company has performed an evaluation of events that have occurred subsequent to December 31, 2020 and through March 8, 2021, the date of the filing of this report. {10}------------------------------------------------ ![](_page_10_Picture_0.jpeg) 420 LexIngton Ave., Ste. 2160, NY, NY 10170 Tel 212,571.0064 / Fax 212.571.0074 Jay Lerner, C.P.A. lierner@lernersipkin.com Joseph G. Sipkin, C.P.A. jslpkin@ierners!pkln.com #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Members of HAP Trading, LLC 395 Hudson Street, Suite 701 New York, NY 10014 #### Opinion on the Financial Statement We have audited the accompanying statement of financial condition of HAP Trading, LLC as of December 31, 2020, and the related notes (collectively referred to as the financial statement). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of HAP Trading, LLC as of December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. #### Basis for Opinion The financial statement is the responsibility of HAP Trading, LLC's management. Our responsibility is to express an opinion on HAP Trading, LLC's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to HAP Trading, LLC in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Lerner & Sipkin CPAs, LLP Certified Public Accountants (NY) We have served as HAP Trading, LLC's auditor since 2013. New York, NY March 8, 2021 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.