# EBX LLC X-17A-5 (2020-02-25) — Broker-dealer annual report
- Company: EBX LLC
- Form: X-17A-5
- Filed: 2020-02-25
- Period: 2019-12-31
- Accession: 0001343506-20-000001
- CIK: 1343506
- File #: 8-67145
- Material weakness: No
- Auditor: WithumSmith & Brown, PC
- Auditor location: Whippany, NJ
- Contact: Michael Stupay
- Phone: 212-509-7800
- Signed by: Neil Whitney Conary (CEO)
Original filing: https://www.sec.gov/Archives/edgar/data/1343506/000134350620000001/ebx2019s4.pdf
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Statement of Financial Condition Pursuant to Rule 17 A-5 under the Securities Exchange Act of 1934 December 31 , 2019
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| REPORT FOR THE PERIOD BEGINNING | 01/01/19
MM/DD/YY | AND ENDING | 12/31/19
MM/DD/YY |
|--------------------------------------------------------------------------|------------------------------|--------------------------------------------------------|-----------------------------|
| | | A. RECISTRATI DENTITION | |
| NAME OF BROKER - DEALER: | | | OFFICIAL USE ONLY |
| eBX LLC d/b/a Level ATS | | | FIRM ID. NO. |
| ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | |
| | 99 Summer Street, Suite 1700 | | |
| | (No. and Street) | | |
| Boston | MA | | 02110 |
| (City) | (State) | | (Zip Code) |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | |
| Michael Stupay | (212) 509-7800 | | |
| | | | (Area Code - Telephone No.) |
| | | B. ACCOUNTANT IDENTIFICATION | |
| | | | |
| INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | |
| | WithumSmith+Brown, PC | | |
| | | (Name - if individual, state last, first, middle name) | |
| 200 Jefferson Park, Suite 400 | Whippany | NJ | 07981 |
| (Address) | (City) | (State) | (Zip Code) |
| CHECK ONE: | | | |
| X Certified Public Accountant | | | |
| Public Accountant | | | |
| Accountant not resident in United States or any of its possessions. | | | |
| | FOR OFFICIAL USE ONLY | | |
| | | | |
| | | | |
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# **TABLE OF CONTENTS**
#### **This report \*\* contains (check all applicable boxes):**
- rx] Independent Auditors' Report.
- **[x]** Facing Page.
- **[x]** Statement of Financial Condition.
- l J Statement of Operations.
- L J Statement of Changes in Members' Equity.
- [ ] Statement of Cash Flows.
- [ ] Statement of Changes in Liabilities Subordinated to Claims of General Creditors (not applicable).
- r J Computation of Net Capital for Brokers and Dealers Pursuant to Rule l 5c3-1 under the Securities Exchange Act of I 934.
- [ ] Computation for Determination of Reserve Requirements for Brokers and Dealers Pursuant to Rule I 5c3-3 under the Securities Exchange Act of 1934.
- I l information Relating to the Possession or Control Requirements for Drokers and Dealers Pursuant to Rule l 5c3-3 under the Securities Exchange Act of I 934.
- [] A Reconciliation, including appropriate explanations, of the Computation of Net Capital Pursuant to Rule l 5c3-1 (included with item (g)) and the Computation for Determination of Reserve Requirements Under Rule I ~c3-3 (included in item (g)).
- [ ] A Reconciliation Between the Audited and Unaudited Statements of Financial Condition With Respect to Methods of Consolidation (not applicable).
- [x] An Affirmation.
- I J A copy of the SLPC Supplemental Report.
- [ ] A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit (Supplemental Report on lntemaJ Control).
- l ] lndependent Auditors' Report Regarding Rule I 5c3-3 exemption
- [ ] Rule I 5c3-3 Exemption Report
- \*\* *For condilions of con.ftdenlial trea/ment of certatn portions of this filing, see sec/ion 240. I 7a-5(e)(3).*
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#### **AFFIRMATION**
I, Neil Whitney Conary, affirm that, to the best of my knowledge god belief, the gccompnnying statement of financial condition pertaining to eBX LLC d/b/a Leve] ATS at December 31, 2019, is true and correct. I further affirm that neither the Company nor any officer or director bas any proprietary interest in any acCOU\_Dt classified sole1y as that of a customer.
CEO Title
Subscribed and S\\Or'I\ to before me
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### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To the Management Committee, Management and Members, eBX LLC d/b/a Level A TS:
#### Opinion on the Financial Statement
We have audited the accompanying statement of financial condition of eBX LLC d/b/a Level ATS {the "Company"), as of December 31 , 2019, and the related notes (collectively referred to as the "financial statemenr). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
#### Change in Accounting Principle
As discussed in Note 2 to the financial statement, the Company has changed its method of accounting for leases on January 1, 2019 due to the adoption of ASC Topic 842.
#### **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 lhe 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 w ell as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.
*IAJ;~~W.t~* ,vc\_
We have served as the Company's auditor since 2015. February 24. 2020
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# **Statement of Financial Condition December 31 , 2019**
| Assets | |
|----------------------------------------------------------------|---------------|
| Cash | S 13,823,247 |
| Restricted cash | 100,000 |
| Commissions receivable | l,111,777 |
| Commis ions receivable -
affiliates | 390,53
1 |
| Due from c
learing broker, net | 918,601 |
| ets (net of accwnuJated depreciation of\$3,90J,182)
Fixed a | 515,967 |
| Operating lease right-of-use assets | 2,162,780 |
| Prepaid expenses and other assers | 1,169,650 |
| l assets
Tota | \$20,192,553 |
| Liabilities and Members' Equity | |
| Liabilities | |
| Operating lease liabilities | \$ 2,267,054 |
| Accounts payable and accrued cxpen es | 184,203 |
| Accrued professional fees | 120,000 |
| Total liabilities | 2,571,257 |
| Members' equity | 17,621,296 |
| Total liabilities and members' equity | \$ 20,192,553 |
The accompanying notes are an integral part of chis financial scacemenc.
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# Notes to Financial Statements December 31, 2019
#### **1. Nature of operations**
cBX LLC d/b/a LEVEL ATS (the "Company") is a broker-dealer registered with the Securities and Exchange Commission (the "SEC'') and a member of the Financial Industry Regulatory Authority ("FINRA").
The Company operates an alternative trading system ("ATS'') creating an electronic matching system for US equity securities. The Company's customers are primarily other broker-dealers. The Company executes and clears all transactions on a fully disclosed basis through an affiliate of one of its members. Equity members in the Company include Credit Suisse First Boston Next Fund, Inc., Citigroup Financial Products, Inc., Fidelity Global Brokerage Group, Inc., LB I Group, lnc. and Merrill Lynch LP Holdings, Inc.
#### **2. Summary of significant accounting policies**
#### **Basis of presentation**
These financial statements were prepared in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabiliries ar the dare of the financial statements and the amounts ofrevenues and expenses during the reporting period. Actual results could differ from these estimates.
#### **Contract assets and liabilities**
The Company had outstanding receivables, from customers, relating to comn11ss1on revenue aggregating \$1,541,846 and S 1,502,309 at January I, 2019 and December 31 , 2019, respectively.
The Company had outstanding receivables from the TRF program of \$300,000 at January 1, 2019 and December 31, 2019.
Substantially all balances at January I, 2019 have been collected during the period.
The Company had no contract assets or liabilities at January J, 2019 or December 3 1, 2019.
#### **Cash and restricted cash**
All cash deposits are held by one financial institution and therefore are subject to the credit risk at that financial institution and may at times exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts and does not believe there to be any significant credit risk with respect to these deposits.
#### **Commissions receivable**
Commissions receivable are comprised of amounts due for processed trades. The Company performs a review of its receivables periodically to evaluate the need for an allowance for uncoUectible accounts. Management reviews all accounts receivable balances, determines a course of action on any delinquent amounts, and ·writes off amounts which collection is considered to be doubtful. At December 31, 2019, management believed no valuation allowance was wammted.
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#### **Notes to Financial Statements December 31 , 2019**
#### 2. Summa ry of significant acconnting policies (continued)
#### **FiYe.d** um~~
Fixed assets are recorded at cost, net of accumulated depreciation and amortization., which is calcuJated on a straight-line basis over estimated useful lives of three to seven years. Leasehold improvements are amortized on a straight-line basis over the lease term, which may be shorter than the useful life of the asset.
#### Income taxes
The Company is a limited liability company and treated as a partnership for income tax reporting purposes. The Internal Revenue Code ("fRC") provides that any income or loss is passed through to the members for federal and state income tax purposes. Accordingly, the Company has not provided for federal or state income taxes.
At December 3 l, 20 l 9, management has determined that the Company had no uncertain tax positions that would require financial statement recognition. This detennination will always be subject to ongoing reevaluation as facts and circumstances may require.
# **Le~ses**
Effective January 1, 2019, the Company adopted ASC Topic 842, Leases ("ASC 842"). The new gi.1idance increases transparency and comparability by requiring the recognition of right-of-use assets and lease liabilities on the statement of financial condition. The recognition of these lease assets and lease liabilities represents a change from previous US GAAP requirements, which did not require lease assets and lease liabilities to be recognized for most leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee, have not significantly changed from previous US GAAP requirements. Under the effective date transition method selected by the Company, leases existing at, or entered into after January I, 201 9 were required to be recognized and measured. Prior period amounts have not been adjusted and continue to be reflected in accordance with the Company's historical Accounting Standards.
lmplementalion of ASC 842 included an analysis of contracts, including real esrnre leases and service contracts to identify embedded leases, to determine the initial recognition of right-of-use assets ("ROU'') and lease liabilities, which required subjective assessment over the determination of the associated discount rates.
The discount rate is the implicit rate if it is readily determinable or otherwise the Company uses its incremental borrowing rate. The implicit rates of our leases are not readily determinable and accordingly, we use our incremental borrowing rate based on the information available at the commencement date for all leases. The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment.
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### **Notes to Financial Statements December 31 , 2019**
#### 2. Summa ry of significant acconnting policies (continued)
The Campany has elected, for all underlying classes af assets, to nat recognize ROU assets and lease liabilities for short-term leases chat have a lease term of J 2 months or less at lease commencement, and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. We recognize lease cost associated with our short-term leases on a straight-line basis over the lease term.
The Company's office space leases require it to make variable payments for the Company's proportionate share oftbe building's property taxes, insurance, and common area maintenance. These variable lease payments arc not included in lease payments used to determine lease liabilities and are recognized as variable costs when incurred.
The adoption of ASC 842 resulted in the recording of operating lease right-of-use asset and operating lease liabilities of approximately \$2,275,000 during 20 19.
| Other information related to leases as of December 3 l, 2019 are as follows: | |
|------------------------------------------------------------------------------|------------|
| Weighted average remaining operating lease term | 6.37 years |
| Weighted average discount rate of operating leases | 4.86% |
| | |
#### **3. Transactions with related parties**
The Company has a required deposit of \$ 100,000 and incurs a monthly minimum clearing fee paid to the clearing firm in accordance with the Correspondent Clearing Agreement. The deposit is included in due from clearing broker in the accompanying statement of financial condition. The clearing broker is an affiliate of one of the members of the Company.
At December 31 , 2019, approximately S39 l ,OOO is due from members affiliated and is included in commissions receivable in the accompanying statement of financial condition.
All transactions with related parties are settled in the normal course of business. The terms of any of these arrangements may not be the same as those that would otherwise exist or result from agreements and transactions among unrelated parries.
#### **4. Fixed assets**
Fixed assets nt December 31, 2019 consists of:
| Computer equipment and sof rware | \$4,362,725 |
|-------------------------------------------------|--------------------------|
| Furniture and fixtures | 36,864 |
| Leasehold improvement | 17,560 |
| Less: Accumulated depreciation and amorti7ation | 4,417,149
(3,901,182) |
| | 515,967
\$ |
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# **Notes to Financial Statements December 31 , 2019**
#### **5. Regulatory requirements**
The Company is subject to SEC Unifomi Nc1 Capital Rule 15e3-1 under the Securities Exchange Act of 1934, which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to l. At December 31, 2019, the Company had net capital of approximately \$15,139,000 which exceeded the required net capital by approximately S15,l 12,000. The ratio of aggregate indebtedness to net capital, at December 31 , 20 19 was 0.03 to I.
The Company is exempt from the provisions of Rule l 5c3-3 under the Securities Exchange Act of 1934 as the Company's activities are limited to clearing all transactions with and for customers on a fully disclosed basis with a clearing broker.
#### 6. **Commitments**
The Company leases office space under two non-cancellable lease agreements in Massachusetts and South Carolina which expire on January 31, 2027 and August 31 , 2022, respectively.
The leases have provisions for escalations. The Company has a security deposit, for the South Carolina lease, of approximately \$12,000 which is included in other assets in the accompanying statement of financial condition.
The Company has provided an irrevocable letter of credit to the landlord in the amount of S 100,000 as security for its obligations under the Massachusetts lease. The Company has pledged a \$100,000 bank account as collateral for the letter of credit that is shown as restricted cash on the accompanying statement of financial condition.
The furure minimum annual payments at December 31, 20 19 under these agreements are:
| 2020 | s | 420,86
1 |
|------------------------------------|----|---------------|
| 2021 | | 456,071 |
| 2022 | | 415,559 |
| 2023 | | 322,697 |
| 2024 | | 329,
151 |
| Thereafter | | 706,765 |
| T oral undiscounted lease payments | | 2,651,
104 |
| Less imputed interest | | (384,050) |
| Total lease liabilities | \$ | 2,267,054 |
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# **Notes to Financial Statements December 31 , 2019**
#### **6. Commitments (continued)**
The Company has cnmmitted to build a trading platfonn for a third party including hardware cm:rs and the pass through of a one-time licensing fee ("license fee"). During 2019, the Company paid the \$750,000 license fee to its own vendor and is included in prepaid expenses and other assets in the accompanying statement of financial condition. During January 2020. the customer paid the Company \$1,050,000 in deposits towards the final completion including the license fee. Once the project is completed, the agreement calls for the Company to receive an annual maintenance and monitoring fee.
#### 7. **Concentration**
The Company earned approximately 28% of commission income from its three largest customers. The same three customers account for approximately \$500,000 or 33% of accounts receivable at December 31 , 2019 of which approximately \$255,000 is from a related party.
#### **8. Employee benefits**
Eligible employees of the Company are covered under a defined contribution plan. The Company matches *50%* of employee contributions to the plan up to a maximum of3% of eligible compensation.
#### **9. lndemnjfications**
In the nonnal course of its business, the Company indemnifies its clearing broker against specified potential losses in connection with their acting as an agent of, or providing services to, tJ,e Company. The maximum potential amount of future payments that the Company could be required to make under this indemnification cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for this indemnification.
#### **l 0. New accounting pronouncement**
In June 2016, the Financial Accounting Standards Board ("F ASB") issued Accounting Standards Update ("ASU") 2016-13, *Financial Instruments* - *Credit losses (Fopic 326): Measurement of Credit Losses on Financial fnstn1ments,* which amends the F ASB's guidance on the impairment of financial instruments. The ASU adds to United States generally accepted accounting principles ("U.S. GAAP") an impairment model (known as the current expected credit loss (''CECL") model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for dtsbr instruments. Further, the ASU makes rargcred changes ro rhe impairment model for available-for-sale debt securities. The new CECL standard is effective for annual reporting periods beginning after December 15, 20 19, and interim periods therein. Management is currently evaluating the effect of adopting the new standard and expects that the impact to the Company's financial statements will be minimal.
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# **Notes to Financial Statements Decernber31, 2019**
#### **J 1. S ubsequent events**
Management of the Company has evaluated events or transactions **that** may have occurred since December 31 , 2 0 L 9 and detenruned that there are no material events tbat would require disclosure in the Company's financial statements.
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.