# BELVEDERE TRADING LLC X-17A-5 (2022-02-28) — Broker-dealer annual report - Company: BELVEDERE TRADING LLC - Form: X-17A-5 - Filed: 2022-02-28 - Period: 2021-12-31 - Accession: 0001300257-22-000003 - CIK: 1300257 - File #: 8-66612 - Type: Broker-dealer - Material weakness: No - Auditor: RSM US LLP - Auditor location: Chicago, IL - Contact: Lisa Muehlfelt - Phone: 312-262-3457 - Signed by: Richardo Forrer (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1300257/000130025722000003/BT21PublicFS.pdf --- {0}------------------------------------------------ BELVEDERE **TRADING** LLC #### **FINANCIAL** STATEMENT PURSUANT TO SEC RULE 17a-5(d) #### December 31, 2021 AVAILABLE FOR PUBLIC INSPECTION {1}------------------------------------------------ i **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** # **ANNUAL REPORTS FORM X-17A-5 PART Ill** | 0MB Number: 3235-0123 | | |---------------------------|--| | Expires: Oct. 31, 2023 | | | Estimated· average burden | | | hours per response: 12 | | SEC FILE NUMBER 8-66612 | 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 Q 1 /Q 1 /2021
AND ENDING 12/31/2021 | | | | MM/DD/YY | | - -
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MM/DD/YY | | A. REGISTRANT IDENTIFICATION | | | | Belvedere Trading LLC
NAME oF FIRM: | | | TYPE OF REGISTRANT {check air applicable boxes): [!] Broker-dealer D Security-based swap dealer D Check here if respondent is afso an OTC derivatives deaf er □ Major security-based swap participant ADDRESS OF PRINCIPA·L PLACE OF BUSINESS: {Do not use a P.O. box no.} # 10 S. Riverside Plaza, Suite 2100 | | {No. and Street) | | |----------------------------------------------|----------------------------------------------------------------------|-------------------------------------| | Chicago
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(Zrp Code) | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | Richardo Forrer | (702) 927-2155 | rforrer@belvederetrading~ com | | (Name} | _.e e _ __ . ~- ttes_ e _ e - t
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(Email Address} | | | B. ACCOUNTANT IDENTIFICATION | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this fifing\* # **RSM US** LLP | | | | 60606 | |-----------------------|-------------------------------------------------------------------------------------------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | (City) | • | ¢ \$ I, | . JS
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{Date of Registration with PCAOB)(tf applicable)
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* Claims for exemption from the requirement that the annuar 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 | - -- - - -- - - , {2}------------------------------------------------ I #### **OATH OR AFFIRMATION** I, Ricllardo Forrer swear (or affirm} that, to the best of my knowledge and belief, the financial report pertaining to the firm of Belvedere Trading LLC as of 12/31 2 021 is true and correct. I further swear (or 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.,** **Title: Chief Financial Officer, Belvedere Trading LLC** **This filing\*\* contains (chec.k al.I applicable boxes):** - ~ **{a)' Statement of financial condition.** - ~ **(b) Notes to consolidated statement of financial condition.** - D (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 **(d} Statement of cash ffows.** - D (e} Statement of changes in stockholders' or partners' or sole proprietor's equity. - **D {f) Statement of changes in liabilities subordi·nated to claims of creditors.** - **D {g) Notes to consolidated financial statements.** - D (h} Computation of net capital under 17 CFR 240.1Sc3-1 or 17 CFR 240.18a-1, as applicable. - **D (i) Computation of tangible net worth under 17 CFR 240.18a-2.** - D (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.1Sc3-3. - D {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.lBa-4, a·s applicable.** - **D {I) Computation for Determination of PAB Requirements under Exhibit A to§ 240.15c3-3.** - D (m} Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - D (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 appficable.** - D (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.1Sc3-1, 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.** - **D (p} Summary of financial data for subsidiaries not consolidated in the statement of financial condition.** - **iii** (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. - D (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - 0 (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - **ii** (t) Independent public accountant's report based on an examination of the statement of financial condition. 0 (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.** D (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.** - D (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.** - D **(x)** Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.l?a-12, **as applicable.** - D (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). D(z) Other: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_** - *\*\*To request confidential treatment of certain portions of this* fifing, *see* 17 *CFR* 240.17a-5(e)(3) *or* 17 *CFR 240.18a-7(d)(2), as* **applicable.** ,, {3}------------------------------------------------ . -- #### **INDIVIDUAL ACKNOWLEDGMEN'T** | State/Commonwealtl1 of | | |-----------------------------------------------------------------|-----------------------------------------------------------------------------------------| | County of _______
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-- | ~~ 1 2020 National Notary Association M1304-07 (09/2021 ) Used for states (AL, AZ, CO, CT, DE, GA, IA, ID. IL, IN, KS, KY. LA, MD, ME. Ml, MN, MS, MT, NC, ND, NE, NH, NJ, NM. OK, OR. Rl, SC, SD, TN. VA. VT, WV. WI, WY) f {4}------------------------------------------------ # **Contents** # Report of Independent Registered Public Accounting Firm Financial statement | | | | Statement of Financial Condition | |--|--|--|----------------------------------| |--|--|--|----------------------------------| Notes to Statement of Financial Condition 1 {5}------------------------------------------------ #### **Report of Independent Registered Public Accounting Firm** To the Manager and Member of Belvedere Trading LLC #### **Opinion on the Financial Statement** ![](_page_5_Picture_0.jpeg) RSMUSLLP We have audited the accompanying statement of financial condition of Belvedere Trading 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 accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company'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 the Company in accordance with 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 w·e 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordinglyt we express no such opinion. 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. Chicago, IUinois February 25, 2022 THE POWER OF BEING UNDERs1·000 AUDIT I TAX I CONSULTING 1 • 1 • • .. • • f • • • .. . ' . . ~ . . ' .. • I • • " - • I . . {6}------------------------------------------------ **BELVEDERE TRADING LLC Statement of Fi·nancial Condition December 31, 2021** Other assets **Liabilities and Member's Equity** Liabilities: | Assets | | |------------------------------------------------------------|----------------| | Cash | | | Derivatives, at fair value | \$
910,243 | | Securities owned, at fair value | 16,608,812,127 | | Memberships in exchanges, at cost (fair value \$3,956,000) | 757,074,576 | | Other receivables | 919,500 | | Receivables from affiliates | 355,600 | | | 81,897 | | Receivables from broker-dealers | 363,272.461 | Derivatives, at fair value Securities sold short, at fair value Payables to affiliates Accounts payable and accrued expenses Member's equity See accompanying notes to the Statement of Financial Condition. 2 108,044 \$ 17,731.,534,448 \$ 17,071, 17616.63 498,356,307 887 11,249,211 \$ 177731,534,448 {7}------------------------------------------------ #### **1. Organization and Business** Belvedere Trading LLC (the "Company"), an Illinois limited liability company, was formed in January 2002. The Company is a broker-dealer registered under the Securities and Exchange Act of 1934 and is a member of CBOE Global Markets, Inc., ("CBOE"), with regulatory services outsourced to Financial Industry Regulatory Authority. The Company is primarily a market maker buying, selling and dealing as a principal in U.S. exchange traded securities and derivative financial instruments. In addition to the Company's market making activity, the Company also engages in the proprietary trading of other exchangetraded equity securities, equity and index options, futures and futures options. The Company is a member of numerous U.S. options and securities exchanges. The Company is also a corporate equity member of the Chicago Mercantile Exchange ("CME"), (via its parent company Belvedere Group LLC) and the Commodity Exchange, Inc, as well as a trading participant of Intercontinental Exchange ("ICE") Futures Europe. Belvedere Group LLC, a wholly owned subsidiary of Belvedere Holdings LLC, is the Company's sole member. # **2. Summary of Significant Accounting Policies** The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) and are stated in U.S. dollars. The following is a summary of the significant accounting policies used in preparing the financial statements: # Revenue Recognition and Financial Instruments Valuation . . , I I I , Derivatives and securities transactions and related commissions and expenses are recorded on a trade date basis. Securities owned, securities sold, not yet purchased and derivatives are recorded in the statement of financial condition at fair value in accordance with Accounting Standards Codification ("ASC") 820 "Fair Value Measurements and Disclosures". The carrying values of cash, receivabl.es and payables approximate fair value due to the short maturities of these financial instruments. Investments in options on futures represent obligations to purchase or sell futures at a specified date. The value of the open position is recorded as either an asset or a liability, and the Company records an unrealized appreciation or depreciation to the extent of the difference between the proceeds received and the value of the open position. The Company records a realized gain or loss when the position is closed out. By entering into short sales, the Company bears the market risk of increases in value of the option sold short in excess of the proceeds received. Open trade equity in· futures. is included in receivable from broker-dealer and measured at closing exchange prices. #### Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates ·and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Management determines that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual {8}------------------------------------------------ # **2. Summary of Significant Accounting Policies, continued** **results could differ from these estimates.** # **Depreciatio11 and Amortization** " ; I *\$* . U.S. GAAP requires that fixed assets be depreciated over the estimated useful life of the **asset.** # **Receivable ~r9m and Payable, to Broker-Dealers** Receivables and payables relating to trades pending settlement are netted by brokerdealer and included in receivable from/payable to broker-dealers in the statement of **financial condition.** #### **Credit Losses on Financial Assets** I 7; **c** The Company evaluates all financial assets that are measured at amortized cost for credit losses under the Current Expected Credit losses model. Financial assets evaluated include cash, receivable from broker-dealer and other receivables. Expected credit losses are measured based on historical experience, current conditions and forecasts that affect the collectability of the reported amount. Due to the short duration of the financial assets, there are no material estimates of credit losses related to these financial assets as of **December 31, 2021.** # **Translati9r,i of,Foreign C~rrencies** Assets and liabilities denominated in foreign currencies are translated to U.S. dollars at **year-end exchange rates.** # **Exch,ange Memberships and rrading ,Rights** At December 31, 2021, the Company owned memberships at the CME and COMEX. The Company's memberships are reflected in the statement of financial condition at cost (fair value is shown parenthetically). U.S. GAAP requires that such memberships be recorded at cost, or, if an impairment in value has occurred, at a value that reflects management's **estimate of the fair value.** #### **Income Taxes** The Company is a limited liability company with all taxable income or loss recorded in the income tax returns of Belvedere Holdings, LP. Belvedere Holdings, LP is a limited liability company whose income or loss is includable in the tax returns of its owners. Accordingly, no provision for income taxes has been made in the accompanying financial statements. In accordance with U.S. GAAP, the Company is required to determine whether its tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, based on the technical merits of the position. Generally, the Company is no longer subject to income tax examinations by major taxing authorities for the years before 2017. The tax benefit recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authorities. Based on its analysis, the Company has detennined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2021. {9}------------------------------------------------ # **3. Related Party Transactions** The Company has expense sharing agreements with affiliate entities, which operate under common control (see below). At December 31, 2021, The Company had net payables from related parties totaling \$887. The Company settles related party liabilities and receivables by either cash payment or a direct impact to the member's equity of the Company, in addition to settlement with Parent. At December 31, 2021, the Company had a net intercompany receivable from Parent in the amount of \$81,897. The Company and Parent have entered into reciprocal credit agreements to cover liabilities resulting from ordinary business operations, up to \$50 million. The Company entered into a three-year short term note payable with Parent on August 1, 2020, bearing an Applicable Federal Rates ("AFR") of 0.17%, payable annually. There is no outstanding balance as of December 31, 2021 . Team Belvedere LLC rrB"), an affiliate, provides employment services to the Company. These services include, but are not limited to all employee compensation, health insurance and employment costs for the trading, technology and operational personnel. The Company had a zero payable balance to TB at December 31, 2021 . Belvedere Infrastructure LLC ("Bl"} provides colocation and related connectivity costs to the Company. Bl also provides all computer hardware, computer software, furniture and office equipment to the Company. As of December 31, 2021, the Company had a zero payable balance to Bl at December 31, 2021 . The Company conducts its operations in leased office facilities. The lease is subject to an escalation clause based on the operating expenses of the lessor. The lease is in the name of the Company's affiliate, Belvedere Infrastructure. The costs of the office facilities and other leases are allocated proportionally to the Company. Belvedere Futures LLC ("BF"), an affiliate, conducts proprietary trading in listed futures and options on futures. The Company will transfer certain positions held at a clearing firm between BF and the Company. These transfers are done at the exchange, typically at fair market value, alfowing the Company to manage its credit exposure to ABN. The Company and a net intercompany payable to BF for brokerage costs allocated to the Company on behalf of BF in the amount of \$887 on December .31, 2021. #### **4. Receivables from Broker-Dealer** The Company has a Joint Back Office ("JBO") clearing agreement with ABN AMRO Clearing Chicago LLC ("ABN"). This agreement allows the Company as the JBO participant to receive favorable margin treatment as compared to the full customer margin requirements of Regulation T. As part of this agreement, the Company has invested \$10,000 in a Class A preferred interest in ABN. The Company's investment in ABN is reflected in other assets in the statement of financial condition. Under the rules of the Chicago Board Options Exchange, the agreement requires that the Company maintain a minimum net liquidating equity of \$25 million, excJusive of its investment interest. {10}------------------------------------------------ # **4. Receivables from Broker-Dealer, continued** The Company entered into a revolving credit facility with ABN that permits it to borrow up to \$600 million to finance short positions, short term amounts owed and margin on open positions. At December 31, 2021, the Company had a loan payable balance of \$223.3 million with ABN. Receivables from broker...cJealer is reported net, and includes cash balances due from ABN and EDF plus unrealized net gains on open futures contracts with both firms. Receivables from broker---dealer at December 31, 2021, consists of the following: | | Receivables | |----------------------------------------------------------------|----------------------------------| | Receivable From
Exchange-traded futures - open trade equity | \$
107,200,791
256,071,670 | #### 5. **Credit Concentration** ![](_page_10_Figure_5.jpeg) At December 31, 2021, a significant credit concentration consisted of approximately \$159.6 million at ABN and \$19,340 at EDF. The Company limits its exposure to credit risk by executing futures and options transaction through regulated exchanges that are subject to the exchanges' counterparty and margin approval process. #### **6.. Derivative Financial Instruments** In the normal course of business, the Company enters into transactions in derivative financial instruments that include futures contracts and exchange-traded options contracts as part of the Company's overall trading strategy. All derivative instruments are held for trading purposes. Fair values of options contracts are recorded in derivatives, as appropriate. Open trade equity in futures transactions is recorded as receivables from and/or payables to broker-dealers, as appficable. All positions are reported in the acco,npanying statement of financial condition at fair value. As a proprietary trading firm, the Company executes a high volume of transactions in futures and securities on a daily basis. The Company provides Jiquidity in most major markets on which it trades. {11}------------------------------------------------ Belvedere Trading LLC **Notes to Statement of Financial Condition** # **6. Derivative Financial Instruments, continued** As of December 31, 2021, the Company's derivative activities has the foflowing impact on the statement of financial condition: | Underfying Risk
I | Statement of
Financial Condiiton Location | Assets at
Fair Varue | Liabilities at
Fair Value | Net | |-----------------------|----------------------------------------------|----------------------------------------|----------------------------------------------|-----------------------------------------------------| | Equity | Receh.able from/payable to
broker-dealers | | ;
,; I | I | | Commodities | Receivable from/payable to | \$
269,305,419 | \$
(14,441f595) \$ | 254,863,824 | | fnterest Rates | broker-dealers
Receivable irom/payable to | 3,226,235 | (2,045,540) | 1,180,695 | | Equity
Commodities | broker-dealers
Dertvati"8s
Derivath.es | 39,700
16,524,321,509
84,490,618 | (12,550)
(16,990,993,829)
(80,182,835) | 27,150
(466,672,320)
-----------
4,307,783 | | | | | \$ | (206,292,868) | Futures contracts provide for the delayed delivery/receipt of the underlying instrument. As a writer of options contracts, the Company receives a premium in exchange for giving the counterparty the right to buy or se.lt the underlying i.nstrument at a future date at a contracted price. The contractual or notional amounts related to these financial instruments reflect the volume and activity and do not reflect the amounts at risk. Futures contracts are executed on an exchange, and cash settlement is made on a daily basis for market movements. Accordingly, futures contracts generally do not have credit risk. The credit risk for options contracts is limited to the unrealized fair valuation gai,ns recorded in the statement of financial condition. Market risk is substantially dependent upon the value of the underlying instruments and is affected by market forces such as volatility and changes in interest and foreign exchange rates. Securities sold short represent obligations of the Company to deliver the security or underlying instrument and, thereby, create a liability to repurchase the security or underlying instrument in the market at prevailing prices. Accordingly, these transactions result in risk as the Company's satisfaction of the obligations may exceed the amount recognized in the statement of financial condition. #### The Company is engaged in various trading activities in which counterparties primarily include broker-dealers. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. It is the Company's policy to review, as necessary, the credit standing of each counterparty. The Company limits its exposure to credit risk by executing futures and options transactions through regulated exchanges that are subject to the exchanges' counterparty and margin approval process. {12}------------------------------------------------ # Belvedere Trading LLC **Notes to Statement, of Financial Condition** # **7. Offsetting** The following table provides disclosure regarding the effect of offsetting of recognized assets and liabilities included in receivable from broker-dealer section of the statement of financial condition. | I I | Gross Amounts
~ecognized | Gross Amounts Offset
in the Statement of
Financial Condition | Net Amounts of
Assets/liabilities
Presented in the
Statement of
Financial Condiiton lnstrume~t~ , Pl'edged | Fjnanciaf | ,Cash
Collateral
Received/ | Net
Amount | |------------------------------------------|-----------------------------|--------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|-----------|----------------------------------|------------------------| | Assets
Futures Open Trade Equity | \$ 272,571,354 | \$
(16,499,685} | \$
256,071 ,669 \$ | | \$
- | \$
3
256,071,669 | | Liabilities
Futures Open Trade Equity | \$ (16,499,685) | \$
16,499,685 | \$ | \$ | \$ | \$ | #### **7. Guarantees** Accounting Standards Codification Topic 460 ("ASC 460"), Guarantees, requires the Company to disclose information about its obligations under certain guarantee arrangements. ASC 460 defines g,uarantees as contracts and indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying (such as an interest or foreign exchange rate, security or commodity price, an index or the occurrence or nonoccurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. This guidance also defines guarantees as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity's failure to perform under an agreement, as well as indirect guarantees of th,e indebtedness of others. Certain derivatives contracts that the Company has entered into meet the accounting definition of a guarantee under ASC 460. Derivatives that meet the ASC 460 definition o,f guarantees include futures contracts and written options. The maximum potential payout for these derivatives contracts cannot be estimated as increases in interest rates, foreign exchange rates, securities prices, commodities prices and indices i'n the future could possibly be unlimited. The Company records all derivative contracts at fair value. For this reason, the Company does not monitor its risk exposure to derivatives contracts based on derivative notional amounts; rather the Company manages its risk exposure on a fair value basis. The Company believes that the notional amounts of the derivative contracts generally overstate Its exposure. Aggregate market risk limits have been established, and market risk measures are routinely monitored against these limits. The Company believes that market risk is substantially diminished when all financial instruments are aggregated. #### **8. Indemnifications** In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties that provide indemnifications under certain circumstances. The Company's maximum exposure under these arrangements is {13}------------------------------------------------ **Belvedere Trading LLC Notes to Statement of Financial Condition** # **9.. Indemnifications, continued** unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company assesses the risk of loss to be remote. # **10. Fair Value Measurement and Disclosures** ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an **orderly transaction between market participants at the measurement date. A fair value** measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or **cost approach, as specified by ASC 820, are used to measure fairvafue.** The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair **value into three broad levels:** - ., **Level 1 inputs are quoted prices (unadjusted) in active markets for i·dentical assets or f iabilities the Company has the ability to access.** - Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. - Level 3 are unobservable inputs for the asset or liability and rely on **management's own assumptions that market participants would use in p·ricing the asset or liability. The unobservable inputs should be developed based on the best information available in the circumstances and may include the Company's own data.** Derivative financial instruments (futures and options) are exchange-traded in active markets that are valued using exchange settlement prices with reasonable levels of price transparency and are classified in Level 1 of the fair value hierarchy. Equity securities traded on a national securities exchange, or reported on the NASDAQ national market, are stated at the last reported sales price on the day of valuation. Fair value of exchange-traded **contracts. is based upon exchange settlement prices.** **In certain cases, the inputs used to· measure fair value may fall into different levels of the fair** value hierarchy. In such cases, a financial instrument's level with the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value in its entirety **requires judgment, and considers factors specific to the financial instrument.** The Company assesses the levels of the financial instruments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Company's accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. For the year {14}------------------------------------------------ # **10. Fair Value Measurement and Disclosures, continued** ended December 31, 2021, there were no transfers among levels. The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2021: | | Level 1 | | | | |-----------------------------------|----------------------|----------------|----------------|--| | | Assets | | Liabilities | | | Equities | \$ | 757,074,576 \$ | 498,356,307 | | | Equity Options
Futures Options | 16,524,321,509 | | 16,990,993,829 | | | | | 84,4901618 | 80J182,835 | | | | \$
17,365,886,703 | \$ | | | At December 31, 2021, the Company had net unreal'ized gains on open futures contracts totaling \$256,071,669, which were Level 1 financial instruments. At December 31, 2021, the Company held no Level 2 or Level 3 financial instruments~ #### **11. Net Capital Requirements** The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (15c3-1). Under this rule, the Company is required to maintain "net capital" equal to the greater of \$250,000 or 5% of combined aggregate debit items or 120o/o of minimum net capital requirement. At December 31, 2021, the Company had net capital and net capital requirements of \$140,338,320, and \$250,000 respectively. #### **12. SubsequentEvents** The Company's management has evaluated events and transactions, through the date the financial statements were issued, noting no material events requiring disclosure in the Company's financial statements. ![](_page_14_Picture_11.jpeg) Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.