# FLOW TRADERS U.S. LLC X-17A-5 (2023-02-28) — Broker-dealer annual report - Company: FLOW TRADERS U.S. LLC - Form: X-17A-5 - Filed: 2023-02-28 - Period: 2022-12-31 - Accession: 0001466697-23-000005 - CIK: 1466697 - File #: 8-68300 - Type: Broker-dealer - Material weakness: No - Auditor: Ryan & Juraska LLP - Auditor location: Chicago, IL - Contact: Tim Leary - Phone: 917-210-5037 - Email: mpereira@us.flowtraders.com - Website: flowtraders.com - Signed by: Matheus Haserick-Lara (Managing Director) Original filing: https://www.sec.gov/Archives/edgar/data/1466697/000146669723000005/ftus-public1.pdf --- {0}------------------------------------------------ STATEMENT OF FINANCIAL CONDITION PURSUANT TO SEC RULE 17a-5(d) December 31, 2022 AVAILABLE FOR PUBLIC INSPECTION {1}------------------------------------------------ - - - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 # ANNUAL REPORTS FORM X-17A-5 PART III 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 01/01/2022 AND ENDING 12/31/2022 MM/DD/YY MM/DD/YY A. REGISTRANT IDENTIFICATION NAME OF FIRM: FLOW TRADERS US 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.) | NY
(State)
PERSON TO CONTACT WITH REGARD TO THIS FILING | | | 10036
(Zip Code) | |---------------------------------------------------------------|----------------------------------------------------|-------------------------------------------------------------|----------------------------------------------------------------------------------------------------------| | | | | | | | | | | | | | | | | (917-210-5027) | mpereira@us.flowtraders.com | | | | | | | | | | | | | | | | | 60604 | | (City) | (State) | | (Zip Code) | | | | | | | | | | | | | 3407
(PCAOB Registration Number, if applicable) | | | | FOR OFFICIAL USE
ONLY | | | | | | Chicago | (Area Code – Telephone Number)
ACCOUNTANT IDENTIFICATION | (Email Address)
INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
Illinois | 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. | OMB APPROVAL | |--------------------------| | OMB Number: 3235-0123 | | Expires: Oct. 31, 2023 | | Estimated average burden | | hours per response: 12 | SEC FILE NUMBER 8-68300 {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) **RYAN & JURASKA LLP** # **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Member of Flow Traders US LLC ### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Flow Traders US LLC (the Company) as of December 31, 2022, 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 Flow Traders US LLC as of December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. # **Basis for Opinion** This financial statement is the responsibility of Flow Traders US LLC'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 Flow Traders US 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 have served as the Company's auditor since 2009. 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. Chicago, Illinois February 8, 2023 {4}------------------------------------------------ # Statement of Financial Condition # December 31, 2022 #### Assets | Cash | \$
146,971 | |---------------------------------------------------------|---------------------| | Securities owned, at fair value | 2,651,444,725 | | Receivable from broker-dealers | 9,657,250 | | Receivable from affiliates | 3,886,579 | | Furniture, equipment and leasehold improvements (less | | | accumulated depreciation and amortization of 5,780,146) | 4,713,832 | | Right of use asset | 36,839,430 | | Other assets | 4,288,800 | | | \$
2,710,977,587 | | | | | | | | | | | Liabilities and Member's Equity | | | Liabilities: | | | Securities sold, not yet purchased, at fair value | 1,933,684,753 | | Payable to broker-dealers | 500,800,661 | | Payable to affiliates | 85,054,862 | | Lease liability | 36,913,317 | | Accounts payable and accrued expenses | 31,778,370 | | | 2,588,231,963 | | Member's equity | 122,745,624 | | | | \$ 2,710,977,587 {5}------------------------------------------------ # Statement of Financial Condition # December 31, 2022 ### 1. Organization and Business Flow Traders US LLC (the "Company"), a Delaware limited liability company, was organized on April 22, 2009. The Company is a broker-dealer registered with the Securities and Exchange Commission and is a member of various US securities and futures exchanges. The Company engages primarily in the market making of exchange-traded securities and financial futures contracts. Flow Traders US Holding LLC is the Company's sole member. Flow Traders Holding BV is the sole shareholder of Flow Traders US Holding LLC. #### 2. Summary of Significant Accounting Policies Revenue Recognition and Securities Valuation Securities transactions are recorded on a trade date basis. All financial instruments are recorded in the statement of financial condition at fair value in accordance with Accounting Standards Codification (ASC) 820 - Fair Value Measurement and Disclosures (see Note 6). Unrealized gains or losses on open futures contracts are included in receivable from and payable to broker-dealer in the statement of financial condition. #### Depreciation and Amortization Equipment, furniture, and leasehold improvements are being depreciated on a straight-line basis with a useful life of 5 years (60 months). # Income Taxes Flow Traders US LLC is a disregarded entity for tax purposes. No provision has been made for federal US income taxes as the taxable income or loss of Flow Traders US LLC is included in the respective income tax return of the sole member. In accordance with 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 2019. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authorities. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2022. #### Use of Estimates The preparation of financial statements is in conformity with US Generally Accepted Accounting Principles and requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. #### Translation of Foreign Currencies Assets and liabilities denominated in foreign currencies are translated to US dollars at year-end exchange rates, while revenue and expenses are translated to US dollars at prevailing rates during the year. {6}------------------------------------------------ Statement of Financial Condition December 31, 2022 #### Accounting for Leases In February 2016, the FASB amended the guidance on accounting for leases. The new guidance required lessees to recognize right-of-use (ROU) assets and lease liabilities on the balance sheet for the rights and obligations created by all qualifying leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee remains substantially unchanged and depends on classification as a finance or operating lease. The Company determines if an arrangement is a lease, or contains a lease, at inception of a contract and when the terms of an existing contract are changed. The Company adopted the new guidance beginning on January 1, 2019 and elected to use the effective date as the date of initial application. The new guidance also requires quantitative and qualitative disclosures that provide information about the amounts related to leasing arrangements recorded in the consolidated financial statements. For further information, see Note 10--Lease Commitments. The Company elected to apply the "package of practical expedients," which permits it to not reassess prior conclusions on existing leases regarding the maximum on existing leases regarding lease indemnification, lease classification and initial direct costs. In addition, the Company has elected to apply the short-term lease exception for lease arrangements with maximum lease terms of 12 months or less. Adoption of the standard did not have a material impact on the Company's results of operations or cash flows. At adoption, the Company recognized lease liabilities of \$9,519,628, representing the present value of the remaining minimum fixed lease payments based on the incremental borrowing rates as of December 31, 2018. Changes in lease liabilities are based on current period interest expense and cash payments. The Company also recognized ROU assets of \$9,519,628 at adoption, which represents the measurement of the lease liabilities, prepaid lease payments made to lessors, initial direct costs incurred by the Company and lease incentives received. During the year ended December 31, 2022, the Company extended its lease to 2034, at which point the Company recognized additional lease liabilities of \$35,198,099 and ROU asset of \$35,198,099. #### 3. Clearing Agreements The Company has Joint Back Office ("JBO") clearing agreements with two clearing brokers. The agreements allow JBO participants to receive favorable margin treatment as compared to the full customer margin requirements of Regulation T. As part of the first agreement, the Company has invested \$50,000 in the preferred shares/interest of its clearing broker. The Company's investment in this clearing broker is reflected as a receivable from affiliates on the statement of financial condition. The second agreement required the Company invest \$10,000 in the preferred shares/interest of its second clearing broker. The Company's investment in this clearing broker is reflected as a receivable from affiliates on the statement of financial condition. The agreements require that the Company maintains a minimum net liquidating equity of \$1 million with each of its clearing brokers, exclusive of its preferred stock/interest investment. #### 4. Financial Instruments Accounting Standards Codification Topic 815 ("ASC 815"), Derivatives and Hedging, requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit risk related contingent features in derivative agreements. The disclosure requirements of ASC 815 distinguish between derivatives, which are accounted for {7}------------------------------------------------ Statement of Financial Condition December 31, 2022 as "hedges" and those that do not qualify for such accounting. The Company reflects derivatives at fair value and recognizes changes in fair value through the statement of operations, and as such do not qualify for ASC 815 hedge accounting treatment. In the normal course of business, the Company enters into transactions in derivative financial instruments and other financial instruments with off-balance sheet risk that include futures contracts, swaps and short stocks as part of the Company's overall trading strategy. All derivative instruments are held for trading purposes. All positions are reported in the accompanying statement of financial condition at fair value. Futures contracts provide for the delayed delivery/receipt of securities or money market instruments with the seller/buyer agreeing to make/take delivery at a specified date, at a specified price. Fair value of futures contracts is included in payable or receivable from brokerdealers. 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 generally made on a daily basis for market movements. Accordingly, futures contracts generally do not have credit risk. Swaps involve the exchange of payments based on changes in the underlying instrument. The contractual or notional amounts related to these financial instruments reflect the volume and activity and generally do not reflect the amounts at risk. Securities sold, not yet purchased, represent obligations of the Company to deliver specified securities and thereby create a liability to repurchase the securities in the market at prevailing prices. These transactions may result in off-balance sheet risk as the Company's ultimate obligation to satisfy its obligation for securities sold, not yet purchased may exceed the amount recognized in the statement of financial condition. Risk arises from the potential inability of counterparties to perform under the terms of the contracts (credit risk) and from changes in the values of the underlying financial instruments (market risk). The Company is subject to credit risk to the extent any broker with whom it conducts business is unable to fulfill contractual obligations on its behalf. The Company attempts to minimize its exposure to credit risk by monitoring brokers with which it conducts trading activities. In management's opinion, market risk is substantially diminished when all financial instruments are aggregated. # 5. Financial Instruments - Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"). The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about an entity's expected credit losses on financial instruments and other commitments to extend credit at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to develop credit loss estimates. Subsequent to issuing ASU 2016-13, the FASB has issued additional standards for the purpose of clarifying certain aspects of ASU 2016-13, as well as providing codification improvements and targeted transition relief under the standard. The subsequently issued ASUs have the same effective date and transition requirements as ASU 2016-13. The adoption of this standard on January 1, 2020 did not have a material impact on the Company's financial statements. {8}------------------------------------------------ # Statement of Financial Condition # December 31, 2022 ### 6. Fair Value Measurement and Disclosure 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 fair value. 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 identical assets or liabilities 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 pricing 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. The availability of valuation techniques and observable inputs can vary from investment to investment and is affected by a wide variety of factors, including, the type of investment, whether the investment is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for investments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement. The Company values its positions based on the following principles and method of valuation: Equities securities listed on an exchange and which are freely transferable are valued at their last sales price on such exchange on the date of valuation. To the extent these securities are actively traded, and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Preferred, other equities and fixed income securities traded on inactive markets or valued by dealer quotations or an alternative pricing source or model supported by observable inputs are classified within Level 2. Securities sold short, not yet purchased represent obligations to purchase such securities at a future date. The value of the open short position is recorded as 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 short position. The Company {9}------------------------------------------------ Statement of Financial Condition December 31, 2022 records a realized gain or loss when the short position is closed out. By entering into short sales, the Company bears the market risk of increases in value of the security sold short in excess of the proceeds received. Exchange-traded derivatives, such as futures contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Swaps can be either observed or modeled using a series of techniques and model inputs from comparable benchmarks. The pricing models used by the Company do not entail significant judgment, and the pricing inputs are observed form actively quoted markets, thus swaps are categorized in Level 2 of the fair value hierarchy. 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, 2022: | Assets | | |------------------------------------|-------------------| | Securities owned | | | Equities (level 1) | \$ 2,089,760,429 | | Debt securities (level 2) | \$
561,684,296 | | Total | \$ 2,651,444,725 | | Liabilities | | | Securities sold, not yet purchased | | | Equities (level 1) | \$ 1,473,200,026 | | Debt securities (level 2) | \$
460,484,727 | | Total | \$ 1,933,684,753 | At December 31, 2022, the Company had net unrealized gains on open futures contracts totaling \$12,611,623 and net unrealized losses on open futures contracts totaling (\$8,856,724), which are Level 1 assets. These net amounts are reflected in payable to broker-dealer in the statement of financial condition. At December 31, 2022, the Company had net open swap contracts totaling \$567,237, which are Level 2 assets. This net amount is reflected in receivable from broker-dealer in the statement of financial condition. At December 31, 2022, the Company held no Level 3 investments. # 7. Credit Concentration At December 31, 2022, a significant credit concentration consisted of approximately \$105.8 million, representing the market value of the Company's trading accounts carried by one of its clearing brokers. The Company has an agreement with Bank of America guaranteeing payment from its clearing broker (Bank of America Securities). Management does not consider any credit risk associated with this net receivable to be significant. At December 31, 2022, a significant credit concentration consisted of approximately \$109.9 million, representing the market value of the Company's trading accounts carried by one of its {10}------------------------------------------------ Statement of Financial Condition December 31, 2022 clearing brokers, Goldman Sachs & Co. LLC. Management does not consider any credit risk associated with this net receivable to be significant. At December 31, 2022, a significant credit concentration consisted of approximately \$6.0 million, representing the market value of the Company's trading accounts carried by one of its clearing brokers, Merrill Lynch International. Management does not consider any credit risk associated with this net receivable to be significant. # 8. Receivable from and Payable to Brokers and Dealers Receivable from and payable to broker-dealers includes cash balances held at the Company's brokers and the unrealized gains and losses on open futures contracts and open swap contracts and the net amount receivable or payable for securities transactions pending settlement. The brokers provide execution, clearing and depository services for the Company's securities and futures trading activities. At December 31, 2022, the Company had a payable to broker-dealers of \$500,800,661. At December 31, 2022, the Company had a receivable from broker-dealers of \$9,657,250. # 9. Related Party Transactions At December 31, 2022, the Company had a loan payable to one of its affiliates, related by common ownership, totaling \$35,000,000 for one year at the euro short-term rate plus 50 basis points. This amount is in payable to affiliates on the statement of financial condition. At December 31, 2022, the Company had amounts payable to its affiliates, related by common ownership, totaling \$50,054,862. These amounts relate to recharged expenses and are included in payable to affiliates on the statement of financial condition. At December 31, 2022, the Company had a receivable from its affiliates, related by common ownership, totaling \$359,777. These amounts relate to recharged expenses and are included in receivable from affiliates on the statement of financial condition. At December 31, 2022, the Company had two open total return swaps with its affiliates, related by common ownership, totaling a receivable of \$2,287,414. This amount is included in receivable from affiliates on the statement of financial condition. #### 10. Lease Commitment The Company conducts its operations in leased office facilities and annual rentals are charged to current operations. The Company's remaining office lease obligation has a remaining lease term of 11.8 years, through October 31, 2034. The Company utilizes incremental borrowing rates to determine the present value of lease payments for the lease. As the Company's lease does not provide an implicit rate, the incremental borrowing rate estimates are based on the Company's existing financing arrangements to borrow similar amounts of funds under similar terms. The incremental borrowing rate the Company has used is 3.88%. Leases with an initial term of twelve months or less are not recorded on the balance sheet; lease expenses for these leases is recognized on a straight-line basis over the lease term. The Company does not have any short-term leases as of December 31, 2022. {11}------------------------------------------------ # Statement of Financial Condition December 31, 2022 The following table presents the maturities of lease liabilities: | Year ending December 31, | Amount | |------------------------------------|--------------| | 2023 | 1,732,757 | | 2024 | 734,608 | | 2025 | 4,407,648 | | 2026 | 4,407,648 | | 2027 | 4,407,648 | | Thereafter | 31,955,448 | | Total lease payments | \$47,645,757 | | Imputed Interest | (10,732,440) | | Present value of lease liabilities | \$36,913,317 | The Company has entered into a financial lease agreement with Banc of America Leasing & Capital, LLC for various fixed assets. The Company's long-term obligation under that lease is reflected in Capital lease payable on the statement of financial condition. # 11. Net Capital Requirements The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule 15(c)3-1). Under this rule, the Company is required to maintain "net capital" equal to the greater of \$1,000,000 or 2% of aggregate debit balances. The Company elected to use the alternative method to calculate the minimum net capital requirement. At December 31, 2022, the Company had \$ 37,637,773 excess net capital to its net capital requirement of \$1,000,000. # 12. 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 guarantees 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 the 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 of 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 in 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 {12}------------------------------------------------ # Statement of Financial Condition # December 31, 2022 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. # 13. Employee Expenses and Benefit Plan The Company awarded shares of Flow Traders NV to employees as part of their compensation package during 2022. Flow Traders NV is the sole shareholder of Flow Traders Holding BV which is the sole shareholder of Flow Traders US Holding LLC which is the sole member of the Company. The vesting of shares is conditional upon the employee being actively employed by the Company on the vesting date. During the year ended December 31 2022, \$1.5 million in shares were forfeited. Shares will be awarded based on the volume weighted average price of the shares during the corresponding vesting period. Share awards are included in accounts payable and accrued expenses on the statement of financial condition totaling approximately \$13.9 million. The Company has established a 401(K) plan for qualified employees. The Company can elect to match employees' contributions and make further discretionary contributions to the plan subject to certain limitations as set forth in the plan agreement. ### 14. Contingencies In the normal course of business the Company is subject to various regulatory inquiries that may result in claims from potential violation which may possibly involve sanctions and/or fines. These matters are rigorously defended as they arise. In 2021, A FINRA Arbitration Claim was filed against the Company by a former employee that alleged a claim for monetary relief. This matter was settled during the year ended December 31, 2022. #### 15. Subsequent Events The Company's management has evaluated events and transactions through February 8, 2023, the date the financial statements were issued, noting no material events requiring disclosure in the Company's financial statements, other than those noted below. On January 11, 2023, the Company received a capital contribution totaling \$5,000,000 from Flow Traders US Holding LLC. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.