# CLEAR STREET MARKETS LLC X-17A-5 (2022-03-01) — Broker-dealer annual report
- Company: CLEAR STREET MARKETS LLC
- Form: X-17A-5
- Filed: 2022-03-01
- Period: 2021-12-31
- Accession: 0001708828-22-000005
- CIK: 1531593
- File #: 8-68977
- Type: Broker-dealer
- Material weakness: No
- Auditor: RSM US
- Auditor location: New York, NY
- Contact: Elliot Gulkowitz
- Phone: 646-532-6435
- Signed by: Elliot Gulkowitz (CEO)
Original filing: https://www.sec.gov/Archives/edgar/data/1531593/000170882822000005/CSM21public_Unsec.pdf
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# Clear Street Markets LLC Statement of Financial Condition As of December 31, 2021
SEC # 8-68977 CRD # 159283
With Report of Independent Registered Public Accounting Firm
This report is deemed PUBLIC in accordance with Rule 17a-5(d) under the Securities Exchange Act of 1934.
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# Page(s)
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| Report of I | 1 |
| Statement of Financial Condition. | 2 |
| Footnotes to Statement of Financial Condition
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# Report of Independent Registered Public Accounting Firm
To the Member of Clear Street Markets LLC
## Opinion on the Financial Statement
We have audited the accompanying statement of financial condition of Clear Street Markets 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 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. 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. Accordingly, 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 2019.
New York, New York February 28, 2022
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# Clear Street Markets LLC
Statement of Financial Condition December 31, 2021
| Assets | | |
|--------------------------------------------------------------|----|---------------|
| Cash and cash equivalents | S | 1,507,897 |
| Financial instruments owned, at fair value | | 1,213,480,062 |
| Receivable from broker-dealers and clearing organizations | | 4,885,157 |
| Other assets | | 816,183 |
| Total Assets | ಕಾ | 1,220,689,299 |
| Liabilities and Equity | | |
| Liabilities | | |
| Financial instruments sold, not yet purchased, at fair value | ಳಿ | 1,167,750,096 |
| Payable to broker-dealers and clearing organizations | | 4,282,059 |
| Accounts payable and accrued liabilities | | 13,138,497 |
| Total liabilities | | 1,185,170,652 |
| Equity | | |
| Member's Equity | | 35,518,647 |
| Total Liabilities and Equity | | 1,220,689,299 |
The accompanying notes are an integral part of these financial statements.
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# Clear Street Markets LLC Notes to Statement of Financial Condition December 31, 2021 1. Organization and Description of Business
state of Delaware.
Clear Street Markets LLC, (the Company), is a limited liability company organized in the the CEO has sole authority to carry out management responsibilities and control day-to-day manageme operations, including distributions and admittance of new members. As a limited liability company, the member s liabilities are limited to amounts reflected in their capital account.
The Company, founded in 2011 and headquartered in New York, is a proprietary trading firm and broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and maintains memberships at most principal United States exchanges including the New York Stock Exchange (NYSE), the NASDAQ Stock Exchange and the Chicago Board Options Exchange (Cboe). designated self-regulatory organization is Cboe.
CS LLC is also headquartered in New York and is a broker-dealer registered with the SEC, the Municipal Securities Rulemaking Board (MSRB) and the Financial Industry Regulatory Authority, Inc. (FINRA). CS LLC has clearing memberships with principal stock exchanges in the United States, including the NYSE and The Nasdaq Stock Market (NASDAQ) among others. CS LLC is also a member of the Depository Trust and Clearing Company (DTCC), the National Securities Clearing Corporation (NSCC) and the Options Clearing Corporation (OCC). CS LLC -regulatory organization is FINRA. 2. Significant Accounting Policies The accompanying Statement of Financial Condition has been prepared on the basis of accounting principles generally accepted in the United States of America (U.S. GAAP) as set Condition is presented in U.S. dollars.
The Company does not execute or clear securities transactions for customers. Accordingly, the Company claims an Exemption relying on Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5 because the Company limits its business activities exclusively to proprietary trading.
# Basis of Presentation
forth by the Financial Accounting Standards Board (FASB) and its Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU). The Statement of Financial The preparation of statements of financial condition in conformity with U.S. GAAP requires types of assets and liabilities and disclosure of contingent assets and liabilities at the reporting date. Actual amounts may differ from estimated amounts.
# Use of Estimates
management to make estimates and assumptions that affect the reported amounts of certain
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# Clear Street Markets LLC Notes to Statement of Financial Condition December 31, 2021
# Cash and Cash Equivalents
At December 31, 2021, the Company maintained cash in bank accounts that, at times, may exceed federally insured limits. The Company manages the risk by selecting financial institutions deemed highly creditworthy to minimize the risk. Cash equivalents are defined as highly liquid investments with original maturities of three months or less when purchased. At December 31, 2021, the Company had no cash
equivalents.
Receivable from and Payable to Broker-Dealers and Clearing Organizations Amounts receivable from broker-dealers and clearing organizations may be restricted to the extent they serve as deposits for securities sold, not yet purchased. At December 31, 2021, Receivable from and Payable to broker-dealers and clearing organizations primarily represent amounts due from or to . Financial Instruments Owned Including Those Pledged as Collateral and Financial Financial instruments owned and Financial instruments sold, not yet purchased, relate to market making and trading activities, and include listed and other equity securities, listed and financial instruments sold, not yet purchased, at fair value.
# Instruments Sold, Not Yet Purchased
equity options and debt securities.
The Company records financial instruments owned, including those pledged as collateral,
# Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. Fair value measurements are not adjusted for transaction costs. The recognition of discounts for large holdings (block discounts) of unrestricted financial instruments where quoted prices are readily and regularly available in an active market is prohibited. The Company categorizes its financial instruments into a three-level hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy level assigned to each financial instrument is based on the assessment of the transparency and reliability of the inputs used in the valuation of such financial instruments at the measurement date based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurements).
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# Clear Street Markets LLC Notes to Statement of Financial Condition December 31, 2021 Level 1: Unadjusted quoted prices in active markets that are accessible at the Level 2: Quoted prices in markets that are not active and financial instruments for which Level 3: Prices or valuations that require inputs that are both significant to the fair value
Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories based on inputs:
measurement date for identical, unrestricted assets or liabilities;
all significant inputs are observable, either directly or indirectly; or
measurement and unobservable.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When there is more than one input at different levels within the hierarchy, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessment of the significance of a particular input, to the fair value measurement in its entirety, requires substantial judgment and consideration of factors specific to the asset or liability. Level 3 inputs are inherently difficult to estimate. Changes to these inputs can have a significant impact on fair value measurements. in which they occur. For the year ended December 31, 2021, there were no transfers between trading instruments, are carried at fair value, and include futures contracts, and options. Fair values of exchange-traded derivatives, primarily listed equity options, are based on quoted
Transfers in or out of levels are recognized based on the beginning fair value of the year levels in the fair value hierarchy.
# Derivative Instruments
Derivative instruments are used for trading purposes, including economic hedges of market prices. The Company presents its derivatives balances on a net-by-counterparty basis when the criteria for offsetting are met. Refer to Note 5, Derivative Instruments, for further Exchange memberships include ownership interests in the exchanges that entitle the
# Exchange Memberships
Company to certain trading privileges (exchange memberships). Exchange memberships are initially recorded at cost, and subsequently at cost less impairment. The Company reviews the carrying value compared to the fair value of exchange memberships on an annual basis to determine whether an impairment has occurred and on an interim basis when certain events occur, or certain circumstances exist. The recorded in Other assets in the Statement of Financial Condition. At December 31, 2021, management concluded that no impairment had occurred on any such exchange memberships.
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# Clear Street Markets LLC Notes to Statement of Financial Condition December 31, 2021 4. Fair Value
# Income Taxes
The Company is a limited liability company and therefore no provision is made in this Statement of Financial Condition for federal, state or local income taxes as such liabilities are the responsibility of the member. 3. Receivable from and Payable to Broker-Dealers and Clearing Organizations December 31, 2021 consisted of amounts due from and to prime brokers.
Receivable from and Payable to broker-dealers and clearing organizations at
# Financial Instruments Measured at Fair Value
upon a fair value hierarchy in accordance with accounting standards as described in Note 2, Significant Accounting Policies. Exchange-traded equity securities and listed equity options, are valued based on quoted prices from the primary exchange, and are classified as Level 1 securities in the fair value hierarchy. Debt securities are valued based on recently executed transactions or market quotations, and are generally categorized as Level 2 investments in the fair value hierarchy. Values for financial instruments other than those discussed above are estimated in good faith by the Company, and are generally categorized as Level 3 in the fair value hierarchy. At December 31, 2021, the Company held no financial instruments whose values were estimated by the Company.
| | Level 1 | | Level 2 | | Level 3 | Total Fair Value |
|--------------------------------------------------|------------------|---|------------|---|---------|------------------|
| Assets | | | | | | |
| Financial instruments owned | | | | | | |
| Equities | \$1,136,913,323 | S | | S | | \$1,136,913,323 |
| Debt securities | | | | | | |
| U.S. I reasury bonds and notes | | | 3,232,894 | | | 3,232,894 |
| Non-U.S. government debt securities | | | 1,428,946 | | | 1,428,946 |
| State and municipal obligations | | | 1,393,237 | | | 1,393,237 |
| Corporate debt obligations | | | 14,511,746 | | | 14,511,746 |
| Listed equity options | 55,999,915 | | | | | 55,999,915 |
| Financial instruments owned | \$ 1.192.913.238 | S | 20.566.823 | ક | | \$ 1,213,480,061 |
| Liabilities | | | | | | |
| Financial instruments sold, not yet
purchased | | | | | | |
| Equities | 588,554,060 | S | | S | | 588,554,060 |
| Debt securities | | | | | | |
| U.S. Treasury bonds and notes | | | 2,194,556 | | | 2,194,556 |
| Non-U.S. government debt securities | | | 8.199,814 | | | 8.199.814 |
| Corporate debts obligations | | | 8,137,800 | | | 8,137,800 |
| Listed equity options | 560,663,866 | | | | | 560,663,866 |
| Financial instruments sold, not yet
purchased | \$1,149,217,926 | S | 18.532.170 | S | | \$1,167,750,096 |
Fair value measurements for those items measured on a recurring basis are summarized below at December 31, 2021:
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# Clear Street Markets LLC Notes to Statement of Financial Condition December 31, 2021
# Financial Instruments Not Measured at Fair Value
The table below presents the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value on the Statement of Financial Condition. The table below excludes non-financial assets and liabilities. The carrying value of financial instruments not measured at fair value categorized in the fair value hierarchy as Level 1 and Level 2 approximates fair value due to the relatively short-term nature of the underlying assets.
| December 31, 2021. For the year ended December 31, 2021, there were no transfers between
levels in the fair value hierarchy. | | | | | The table below summarizes financial assets and liabilities not carried at fair value at |
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| Derivative Instruments
The
Company does not have any derivative instruments designated as hedging | | | | | |
| instruments under ASC 815. The | gross basis consisted of the following at December 31, 2021: | | | | | |
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# Clear Street Markets LLC Notes to Statement of Financial Condition December 31, 2021 6. Risks and Uncertainties
# Market Risk
The Company has sold securities that it does not currently own and will therefore be obligated to purchase such securities at a future date. The Company recorded these obligations in the Statement of Financial Condition at December 31, 2021, at fair value of the related securities and will incur a loss if the fair value of the securities increases subsequent to December 31, 2021. In connection with its proprietary market making and trading activities, the Company enters into transactions in a variety of securities and derivative financial instruments, primarily exchange-traded equity options, futures contracts, and options on futures contracts. Options held provide the Company with the opportunity to deliver or take delivery of specified financial instruments at a contractual price. Options written obligate the Company to deliver or take delivery of specified financial instruments at a contractual price in the event the option is exercised by the holder. Futures contracts provide for the delayed delivery or purchase of financial instruments at a specified future date at a specified price or -balance-sheet risk are short-term in duration. The Company accounts for current estimated credit losses (CECL) on financial assets and organizations, in accordance with ASC 326-20, Financial Instruments Measurement of estimate expected credit losses over the life of its financial assets and certain off-balance The Company evaluated the guidelines of ASC 326-20, and deemed the credit risk of organizations with which it entered clearing into clearing agreements, relating to Receivables
# Credit Risk
certain off-balance sheet items, including receivables from broker dealers and clearing Credit Losses on Financial instruments (ASC 326-20). ASC 326-20 requires the Company to sheet items as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts of future events. a reserve account for CECL to be unnecessary at December 31, 2021. COVID-19 Risk Due to novel strains of coronavirus, commonly referred to as COVID-19, and the
from broker-dealers and clearing organizations, to be materially low, and the establishment of
uncertainty of the extent of the impacts related thereto, certain estimates and assumptions may require increased judgment. The COVID-19 pandemic is currently impacting the United States and many countries around the world. The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and and operations are uncertain and the Company is unable to estimate the full impact at this time.
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# Clear Street Markets LLC Notes to Statement of Financial Condition December 31, 2021
The Company is monitoring the potential impact of the COVID-19 pandemic on its business and Statement of Financial Condition. To date, the Company has not experienced material business disruptions or incurred impairment losses in the carrying values of its assets as a result of the pandemic and it is not aware of any specific related event or circumstance that would require it to revise its estimates reflected in this Statement of Financial Condition. The extent to which the COVIDfinancial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, and the duration and intensity of the related effects. 7. Commitment and contingencies 8. Related Party Transactions
# Litigation
examinations and other proceedings in the ordinary course of business. At December 31, 2021, there were no unasserted claims or assessments that management is aware of or legal counsel has advised are probable of assertion and which must be disclosed. In the opinion of management, the ultimate outcome of all matters will not have a material impact on the
The Company may engage in transactions in the ordinary course of business with related parties. The Company carries out these transactions on customary terms.
The Company has a management and an expense sharing agreement with Clear Street Management LLC (CS Management) which is a member of Holdings. The Company shares office space in New York with CS Management and its subsidiary entities. CS Management also provides payroll and administrative services to the Company. At December 31, 2021, included in Accounts payable and accrued liabilities was \$1,261,240 payable to CS Management. common control with the Company through Holdings which is the parent for both. At December 31, 2021, included in Accounts payable and accrued liabilities was \$2,630,991 In the ordinary course of business, the Company also interacts with an affiliated entity payable and accrued liabilities was \$2,834 payable this related party. Included in Clearing and execution fees is \$340 for 2021. At December 31, 2021, included in Receivable from broker-dealers and clearing organizations was \$1,577,725 receivable from
The Company maintains a consulting and service agreement with Clear Street Technologies LLC (CS Tech) for technology infrastructure and support. CS Tech is under payable to CS Tech.
under common control for various services. At December 31, 2021, included in Accounts
The Company clears a portion of its business through CS LLC on a fully disclosed basis. CS LLC.
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# Clear Street Markets LLC Notes to Statement of Financial Condition December 31, 2021 9. Net Capital Requirements
The Company is subject to the SEC Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of minimum net capital. The Company has elected to use the alternative method, permitted by SEC Rule 15c3-1, which requires the Company to maintain net capital equal to the greater of \$250,000 or a calculated amount based on the number of securities the Company makes markets in to a maximum of \$1,000,000. These regulations also prohibit a broker-dealer from paying cash dividends, making loans to its parent, affiliates or employees, or otherwise entering into transactions, which, if executed, would result in a reduction of its total net capital to less than 120% of its minimum required capital. Moreover, broker-dealers are required to notify the SEC and other regulators prior to paying cash dividends, making loans to its parent, affiliates or employees, or otherwise entering into transactions, which, if executed, would result in a reduction of 30% or more its excess net capital (net capital less the minimum requirement). The SEC and FINRA have the ability to prohibit or restrict such transactions if the result is detrimental to the integrity of the brokerdealer. At December 31, 2021, the Company had net capital of \$16,986,639 which was \$15,986,639 in excess of its required net capital of \$1,000,000. The Company has evaluated its subsequent events disclosure through February 28, 2022, the date Statement of Financial Condition were issued, and has determined that there are no events that have a material impact on this Statement of Financial Condition as of December 31, 2021.
# 10.Subsequent Events
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.