# ATM EXECUTION LLC X-17A-5 (2022-02-25) — Broker-dealer annual report

- Company: ATM EXECUTION LLC
- Form: X-17A-5
- Filed: 2022-02-25
- Period: 2021-12-31
- Accession: 0001180488-22-000001
- CIK: 1180488
- File #: 8-65509
- Type: Broker-dealer
- Material weakness: No
- Auditor: KPMG LLP
- Auditor location: New York, NY
- Contact: Francis Jordan
- Phone: 646-690-3257
- Email: francis.jordan@cowen.com
- Website: cowen.com
- Signed by: Francis Jordan (Chief Financial Officer)

Original filing: https://www.sec.gov/Archives/edgar/data/1180488/000118048822000001/ATM2021SFC2.pdf

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# ATM Execution LLC

Statement of Financial Condition

December 31, 2021

(SEC I.D. No. 8-65509)

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#### **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549**

OMB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12

## **ANNUAL REPORTS FORM X-17A-5 PART III**

SEC FILE NUMBER

| 8-65509 |  |
|---------|--|
|         |  |

**FACING PAGE** 

**Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** 

FILING FOR THE PERIOD BEGINNING \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ AND ENDING \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ MM/DD/YY MM/DD/YY / / \_ 01/01/2021 A MM/DD/YY \_12/31/2021

## **A. REGISTRANT IDENTIFICATION**

NAME OF FIRM: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_ **ATM Execution LLC** \_

TYPE OF REGISTRANT (check all applicable boxes):

\_ Broker-dealer ܆ Security-based swap dealer ܆ Major security-based swap participant ܆ Check here if respondent is also an OTC derivatives dealer

## ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.)

#### **599 Lexington Avenue**

|                                                               | (No. and Street)                                                                                                                                    |                          |                                            |  |
|---------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------|--------------------------------------------|--|
| New York                                                      | NY<br>_____________________________________________________________________________________                                                         |                          | 10022                                      |  |
| (City)                                                        | (State)                                                                                                                                             |                          | (Zip Code)                                 |  |
| PERSON TO CONTACT WITH REGARD TO THIS FILING                  |                                                                                                                                                     |                          |                                            |  |
| Francis Jordan                                                | 646-690-3257<br>_____________________________________________________________________________________                                               | Francis.Jordan@cowen.com |                                            |  |
| (Name)                                                        | (Area Code – Telephone Number)                                                                                                                      | (Email Address)          |                                            |  |
|                                                               | B. ACCOUNTANT IDENTIFICATION                                                                                                                        |                          |                                            |  |
|                                                               |                                                                                                                                                     |                          |                                            |  |
|                                                               | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*                                                                           |                          |                                            |  |
|                                                               |                                                                                                                                                     |                          |                                            |  |
|                                                               | _____________________________________________________________________________________<br>(Name – if individual, state last, first, and middle name) |                          |                                            |  |
| 345 Park Avenue                                               | New York                                                                                                                                            | NY                       | 10154                                      |  |
| KPMG LLP                                                      | _____________________________________________________________________________________<br>(City)                                                     | (State)                  | (Zip Code)                                 |  |
| 10/20/2003                                                    |                                                                                                                                                     | 185                      |                                            |  |
| (Address)<br>(Date of Registration with PCAOB)(if applicable) | _____________________________________________________________________________________                                                               |                          | (PCAOB Registration Number, if applicable) |  |

\* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable.

**Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.** 

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#### **OATH OR AFFIRMATION**

I, Francis Jordan, affirm that, to the best of my knowledge and belief, the financial report pertaining to the firm of ATM Execution LLC as of December 31st, 2021, is true and correct. I further affirm that neither the company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Francis Jordan

Franicis Jordan – Chief Financial Officer

#### **This filing\*\* contains (check all applicable boxes):**

\_ (a) Statement of financial condition.

\_ (b) Notes to consolidated 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 cash flows.

- ܆) e) Statement of changes in stockholders' or partners' or sole proprietor's equity.
- ܆) f) Statement of changes in liabilities subordinated to claims of creditors.
- ܆) g) Notes to consolidated financial statements.
- ܆) h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable.
- ܆) i) Computation of tangible net worth under 17 CFR 240.18a-2.
- ܆) j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3.

܆) k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable.

- ܆) l) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3.
- ܆) m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3.
- ܆) n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable.
- ܆) o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist.
- ܆) p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition.
- \_ (q) Oath or affirmation\*\*\* in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable.
- ܆) r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
- ܆) s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
- \_ (t) Independent public accountant's report based on an examination of the statement of financial condition.
- ܆) u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable.
- ܆) v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
- ܆) w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.
- ܆) x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12, as applicable.
- ܆) y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k).
- ܆) z) Other: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
- *\*\*To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable.*
- *\*\*\*Based upon the Division of Trading and Markets Staff Statement Regarding Requirements for Certain Paper Submissions in light of COVID-19 Concerns and the difficulties arising from COVID-19, ATM Execution, LLC is making this filing without a notarization.*

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| Report of Independent Registered Public Accounting Firm |      |
|---------------------------------------------------------|------|
| Statement of Financial Condition                        |      |
| Statement of Financial Condition                        |      |
| Notes to Statement of Financial Condition               | 2-12 |

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![](_page_4_Picture_0.jpeg)

KPMG LLP 345 Park Avenue New York, NY 10154-0102

## **Report of Independent Registered Public Accounting Firm**

To the Member and Management ATM Execution LLC:

#### *Opinion on the Financial Statement*

We have audited the accompanying statement of financial condition of ATM Execution LLC (the Company) as of December 31, 2021, and the related notes (collectively, the financial statement). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2021, in conformity with U.S. generally accepted accounting principles.

#### *Basis for Opinion*

This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this 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 the Company 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 the 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 statement. 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 statement. We believe that our audit provides a reasonable basis for our opinion.

We have served as the Company's auditor since 2017.

New York, New York February 25, 2022

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{10}------------------------------------------------

|                         |   | Open and<br>Overnight  | Up to 30 days |  | Greater than<br>31-90 days<br>90 days<br>Total |  |   |  |  |            |
|-------------------------|---|------------------------|---------------|--|------------------------------------------------|--|---|--|--|------------|
|                         |   | (dollars in thousands) |               |  |                                                |  |   |  |  |            |
| As of December 31, 2021 |   |                        |               |  |                                                |  |   |  |  |            |
| Securities Loaned       |   |                        |               |  |                                                |  |   |  |  |            |
| Common Stock            | ಿ | 862,528 \$             |               |  | ക്ക                                            |  | ಿ |  |  | \$ 862.528 |
| Corporate Bonds         |   |                        |               |  |                                                |  |   |  |  |            |

#### 4.

Receivables from and payables to brokers and dealers primarily include outstanding commissions and rebates related to execution of customer trades.

Amounts receivable from and payable to brokers and dealers at December 31, 2021 are assessed for collectability according to the Company's Allowance for Credit Losses policy. Amounts receivable from and payable to brokers and dealers at December 31, 2021 consist of the following:

| (in thousands)       | Receivable |       |     | Payable |
|----------------------|------------|-------|-----|---------|
| Commissions and fees | સ્ત        | 354   | ಕೊ  |         |
| Liquidity fees       |            | 975   |     | 299     |
| Total                |            | 1,329 | ല്ല | 299     |

#### 5. Share-Based Payments, Deferred Compensation and Employee Ownership Plans

#### Share-Based Compensation

The Company's employees participate in the 2010 and 2020 Cl Equity and Incentive Plans (the "Plans"). The Plans permit the grant of options, restricted stock units ("RSU") and other equity based awards to the Company's employees and directors. Stock options granted vest over two-to-five-year periods and expire seven years from the date of grant. Restricted shares and restricted share units issued, both of which are eligible to accrue dividend equivalents, may be immediately vested or may generally vest over a two-to-five-year period. Awards are subject to the risk of forfeiture, inclusive of accrued dividend equivalents. As of December 31, 2021, there were 2.5 million shares available for future issuance under the Plans.

The Company records compensation cost for share based awards as an allocation to member's equity. In accordance with the expense recognition provisions of FASB ASC Topic 718, Compensation - Stock Compensation, the Company amortizes unearned compensation associated with share based awards on a straight-line basis over the vesting period of the option or award, net of forfeitures. The fair value of restricted shares and restricted stock units is determined based on the number of shares or units granted and the quoted price of Cl's Class A common stock on the date of grant.

#### Restricted Shares and Restricted Stock Units Granted to Employees

The following table summarizes the Company's nonvested restricted stock units activity for the twelve months ended December 31, 2021:

{11}------------------------------------------------

### ATM Execution LLC Notes to Statement of Financial Condition December 31, 2021

|                                            | Nonvested<br>Restricted<br>Shares and<br>Stock Units |     | Weighted-<br>Average<br>Grant-Date<br>Fair Value |  |
|--------------------------------------------|------------------------------------------------------|-----|--------------------------------------------------|--|
| Beginning balances as of December 31, 2020 | 234                                                  | ക്ക | 14.30                                            |  |
| Granted                                    |                                                      |     |                                                  |  |
| Vested                                     |                                                      |     |                                                  |  |
| Transfers                                  |                                                      |     |                                                  |  |
| Forfeited                                  | (234)                                                |     | 14.30                                            |  |
| Ending balances as of December 31, 2021    |                                                      | ಕಿ  |                                                  |  |

Included in the restricted share and restricted stock unit activity are performance-linked restricted stock units which were awarded in March 2016, April 2019, July 2020 and February 2021. Each RSU is equal to one share of the Company's Class A common stock. Certain of the awards granted have the ability to be cash settled when the attained award exceeds a certain percentage of granted amount. The cash portion of the award has been bifurcated from the equity component and recorded as a compensation payable in the accompanying consolidated statement of financial condition. Unvested awards vest on December 2022 and December 2023 and will be earned only to the extent that the Company attains specified market conditions relating to its volume-weighted average share price and total shareholder return in relation to certain benchmark indices and performance goals relating to aggregate net income and average return on shareholder equity. The actual number of RSUs ultimately earned could vary from zero, if performance goals are not met, to as much as 220% of the targeted award. Compensation expense is recognized to the extent that it is probable that the Company will attain the performance goals. The fair value of restricted stock is determined based on the number of shares granted and the quoted price of the Company's common stock on the date of grant.

#### 6. Income Taxes

During 2021, members of the Cl consolidated group utilized a portion of the Company's net operating loss carryovers to offset the group's taxable income. Pursuant to the tax sharing agreement among members of the CI consolidated tax group, which is recorded using the benefitsfor-loss methodology, the Company recorded a distribution through equity in the amount of \$1.7 million.

For the year ended December 31, 2021, the effective tax rate of 41.21% differs from the statutory rate of 21% primarily due to rate changes in state and local taxes, which resulted in remeasurement of the net deferred tax assets.

Deferred tax assets and liabilities reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for the same items for income tax reporting purposes. A valuation allowance is recorded to the extent deferred tax assets are not more likely than not to be utilized in the future.

The components of the Company's deferred tax assets and liabilities as of December 31, 2021 are as follows:

{12}------------------------------------------------

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{15}------------------------------------------------

#### 10. Guarantees and Off-Balance Sheet Arrangements

The Company does not have any material off-balance sheet arrangements as of December 31, 2021. However, through indemnification provisions in its clearing agreement with Cowen and Company, customer activities may expose the Company to off-balance-sheet credit risk. Pursuant to the clearing agreement, the Company is required to reimburse Cowen and Company, without limit, for any losses incurred due to a counterparty's failure to satisfy its contractual obligations. However, these transactions are collateralized by the counterparty's underlying security, thereby reducing the associated risk to changes in the market value of the security through the settlement date.

The Company introduces its securities transactions to be cleared through Cowen and Company on a fully disclosed basis. Pursuant to the terms of the agreements between the Company and Cowen and Company, the clearing broker has the right to charge the Company for losses that result from a counterparty's failure to fulfill its contractual obligations. As the right to charge the Company has no maximum amount and applies to all trades cleared through Cowen and Company, the Company believes that an estimable loss cannot be assigned. Accordingly, at December 31, 2021, the Company had recorded no liability.

Credit risk is the potential loss the Company may incur as a result of the failure of a counterparty or an issuer to make payments according to the terms of a contract. The Company's exposure to credit risk at any point in time is represented by the fair value of the amounts reported as assets at such time.

In the normal course of business, the Company's activities may include trade execution for its clients. These activities may expose the Company to risk arising from price volatility which can reduce clients' ability to meet their obligations. To the extent clients are unable to meet their commitments to the Company, it may be required to purchase or sell financial instruments at prevailing market prices to fulfill clients' obligations. In accordance with industry practice, client trades are settled generally two business days after trade date. Should either the client or the counterparty fail to perform, the Company may be required to complete the transaction at prevailing market prices.

The Company loans securities temporarily to CFP. The Company receives cash as collateral for the securities loaned. Increases in security prices may cause the market value of the securities loaned to exceed the amount of cash received as collateral. In the event the counterparty to these transactions does not return the loaned securities, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its client obligations. The Company controls this risk by monitoring the market value of securities loaned on a daily basis, and by requiring additional cash as collateral or returning collateral when necessary.

The Company borrows securities temporarily from Cowen and Company in connection with its securities borrowing activities. The Company deposits cash as collateral for the securities borrowed. Decreases in security prices may cause the market value of the securities borrowed to fall below the amount of cash deposited as collateral. In the event the counterparty to these transactions does not return collateral, the Company may be exposed to the risk of selling the securities at prevailing market prices. The Company controls this risk by monitoring the collateral values on a daily basis, and by depositing additional collateral with Cowen and Company or receiving cash when deemed necessary.

{16}------------------------------------------------

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