# XTX MARKETS LLC X-17A-5 (2020-02-28) — Broker-dealer annual report

- Company: XTX MARKETS LLC
- Form: X-17A-5
- Filed: 2020-02-28
- Period: 2019-12-31
- Accession: 0001715650-20-000003
- CIK: 1715650
- File #: 8-70009
- Material weakness: No
- Auditor: Ernst & Young LLP
- Auditor location: New York, NY
- Contact: Anthony Savarese
- Phone: 9179320767
- Signed by: Eric Swanson (CEO)

Original filing: https://www.sec.gov/Archives/edgar/data/1715650/000171565020000003/xtxllcsofc2019ocr.pdf

---

{0}------------------------------------------------

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

| SEC FILE NUMBER |  |
|-----------------|--|
| 8-70009         |  |

#### ANNUAL AUDITED REPORT FORM X-17A-5 PART III FACING

PAGE

Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a5 Thereunder

REPORTFOR THE YEAR ENDING December 31, 2019

|                             |                                                                    | A. REGISTRANT IDENTIFICATION                                              |                      |                                |
|-----------------------------|--------------------------------------------------------------------|---------------------------------------------------------------------------|----------------------|--------------------------------|
|                             | NAME OF ITROKER-DEALER: XTX MARKETS LLC                            |                                                                           |                      | OFFICIAL USE ONLY              |
|                             | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (1)o not use P.O. Box No.) |                                                                           |                      | FIRM I.D. NO.                  |
| 40th Floor, 10 Hudson Yards |                                                                    | (No. and Street)                                                          |                      |                                |
| New York                    | (City)                                                             | NY<br>(Stale)                                                             | 10001                | (Lip (icde)                    |
| Oliver Scott                |                                                                    | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT   | . 44(0) 203 108 3484 |                                |
|                             |                                                                    |                                                                           |                      |                                |
|                             |                                                                    | B. ACCOUNTANT IDENTIFICATION                                              |                      | (Area Code - Telephone Number) |
|                             |                                                                    | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*  |                      |                                |
|                             |                                                                    | Einst & Young LLI' (Name - it individual, state last, first. middle name) |                      |                                |
| 5 Times Square (Address)    |                                                                    | New York(City)                                                            | New York(State)      | 10036(Zip Code)                |
| CHECK ONE:                  |                                                                    |                                                                           |                      |                                |
| ><br>Public Accountant      | Certified Public Accountant                                        |                                                                           |                      |                                |
|                             | Accounlant not resident in United Suates or any of its possessions |                                                                           |                      |                                |

\*Claims for exemplion from the annual report be covered by the opinion of on independent public accommit must be supported by a statement of facts and circumsances relied on as the basis for the exemption See Section 241. I a-S(e)(2)

> Potential persons who arc tu respond to the cullection of information contained in this form are not required to respond

SEC 1410 (11-05)

{1}------------------------------------------------

# **XTX Markets LLC**

Statement of Financial Condition

As at December 31, 2019

With Report of Independent Registered Public Accounting Firm

{2}------------------------------------------------

# XTX Markets LLC

Statement of Finuncial Condition as at December 31, 2019 (expressed in U.S. dollars in thousands unless otherwise stated)

# Contents

| P | ages |  |
|---|------|--|
|   |      |  |

| Oath or affirmation                           | 2                                                                                                                                                                             |
|-----------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Independent auditor's report                  | ﻢ ﺍﻟﻤﺴﺘﻘﻠﺔ ﺍﻟﻤﺴﺘﻘﻠﺔ ﺍﻟﻤﺴﺘﻘﻠﺔ ﺍﻟﻤﺴﺘﻘﻠﺔ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ |
| Statement of financial condition              | ব                                                                                                                                                                             |
| Notes to the statement of financial condition | ર-। રે                                                                                                                                                                        |

{3}------------------------------------------------

*XTX Markets LLC Statement of Financial Condition us at December 31, 2019 (expressed in U.S. dollars in thousunds unless otherwi . .,e .�tated)* 

#### *OATH OR AFFIRMATION*

**I, Eric Swanson , swear (or affinn) that, to the best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to Ilic firm of XTX Markets LLC, as of December** 31, 2019, **arc true and correct. I further swear (or amnn) that neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of a customer, except as follows:** 

*cco*  **Title \_ \_\_ Signature** 

**\_\_\_\_ \_\_ Notary rublic his repo1t \*\* DIANA CAROLINA ESCOBAR**  Notaiy Public - State of New YorK No. 01ES6374465 **Qualified** in Suffolk County My Commission Expires April 30, 2022

**conl;:ins (check all applicable boxes):** 

(a) **[x] Facing Page.** 

(b) **[xl Statement of Financial Condition.** 

- **( C) [ ] Statement of I ncomc (Loss) or. if there is other comprehensive income in the perio<l( s) presented, a Statement of Comprehensive Income (as defined in** §2 l 0.1-02 **or Regulation S -X).**
- (d) l **J Statement of Changes in Financial Condition.** 
	- *(c) []* **Statement ol"C:hanges in Stockholders' Equity or Partners' or Sole Proprietors' Capital.**
	- *(t)*  **[] Statement of Changes in Liabilities Subordinated tn Claims of Creditors.**
	- *(g)*  **[] Computation of Net Capital.**
	- **(h) [) Computation for Detennination of Reserve Requirements rursuant to Rule l Sc3-3.**
	- (i) **l J Information Relating to the Possession or Control Requirements Under Rule 15c3-3.**

*(j) [ )* **A Reconci I iation, including appropriate cxpl anation of the Computation of Net Capital Under Rule 15c3-l and the Computation for Detennination of the Reserve Requirements Under Exhibit A of Rule I 5c3-3.** 

**(k) [] A Reconciliation between the audited and unaudited Statements of financial Condition with respect to methods of consolidation.** 

- **(I) [x] An Oath or Affirmation.**
- *(m) []* **A copy of the SlPC Supplemental Report.**

**(n) [] A report describing any material inadequacies found to exist or found to have existed since the date of the previous auuit.** 

*\*""For co11ditio11s ofco11jiden1ia/ lrealmenl of cl?rlain portions of rhisfi/ing, see section 240. l 7a-5(e)(3).* 

{4}------------------------------------------------

![](_page_4_Picture_0.jpeg)

Ernst & Younq LLP Tel: +1212 773 3000 5 Times Square Fax:+ 1 212 773 6350 New York, NY 10036-6530

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

**To the Member of XTX Markets LLC** 

### **Opinion on the Financial Statement**

**We have audited the accompanying statement of financial condition of XTX Markets LLC (the "Company") as of December 31, 2019 and the related notes (the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company at December 31, 2019, in conformity with U.S. generally accepted accounting principles.** 

### **Basis for Opinion**

**Thts 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 the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.** 

**We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.** 

**We have served as the Company's auditor since 2018.** 

**February 28, 2020** 

{5}------------------------------------------------

# **STATEMENT OF FINANCIAL CONDITION**

*December 31, 2019* 

#### **ASSETS**

#### **MSEB**

| lOTALMSrn                                                 | \$151,697 |
|-----------------------------------------------------------|-----------|
| Other assets                                              | 390       |
| Operating lease ROU assets                                | 1,313     |
|                                                           |           |
| Due from related parties                                  | 31        |
| Deferred taxes receivable                                 | 32        |
| less accumulated depreciation and amortization of \$573   | 370       |
| Furniture, equipment, and leashold improvements, at cost, |           |
| Financial instruments owned, at fai r value               | 76,812    |
| Receivable from broker-dealers and clearing organizations | 3,511     |
| Deposits with clearing organizations and others           | 39,050    |
| Cash and cash equivalents                                 | \$30,188  |

#### **LIABILITIES AND MEMBER'S EQUITY**

#### **LIABILITIES**

|                 | TOTAL LIABILITIES AND MEMBER'S EQUITY                        | \$151,697 |
|-----------------|--------------------------------------------------------------|-----------|
|                 | TOTAL MEMBER'S EQUITY                                        | \$62,950  |
|                 | Retained earnings                                            | 18,954    |
|                 | Capital contribution                                         | \$43,996  |
| MEMBER'S EQUITY |                                                              |           |
|                 | TOTAL LIABILITIES                                            | \$88,747  |
|                 | Due to related parties                                       | 5,553     |
|                 | Operatins lease liabilities                                  | 1,394     |
|                 | Income taxes payable                                         | 396       |
|                 | Accounts payable, accrued expenses and other liabilities     | 2,134     |
|                 | Payable to broker-dealers and clearing organizations         | 5,255     |
|                 | Financial instruments sold, not yet purchased, at fair value | \$74,015  |

*The accompanying notes are a11 integral part of the statement of flnancial condition.* 

{6}------------------------------------------------

# **NOTES TO THE STATEMENT OF FINANCIAL CONDITION**

### **1 ORGANIZATION AND NATURE OF BUSINESS**

**XTX Markets LLC (the 'Company') is a U.S. registered broker and dealer under the Securities Exchange Act of** 1934. **The sole mc1nbcr of the Company is XTX Holdings Limited, a limited liability company registered in the Cayman Islands. The Company is an affiliate of XTX Markets Limited, which is a UK incorporated proprietary trading company and is an FCA authorised firm (referem.;i: number** 7 11945). **The Company was organized for the purpose Mtrnding securities and treasuries utilizing a proprietary electronic trading model. The U.S. dollar is the functional currency of the Company. The Company became registered as a securities broker-di:aler and mi:mber of the Chicago Stock Exchange (now NYSE Chicago) on December l 3 th •** 2017. **This Statement of Financial Condition covers the year en Lied December 3 1, 20 I 9. The Company opi:rntes as a single segment.** 

**The Company is a memb.:r of th,;: Si:curitii:s and lnwstor Protection Corporation ('SIPC'). Its designated examining authoring is NYSE Chicago. It trades via sponsored access on the Bats Exchange, The N cw York Stock Exchange, The EDGA and EDGX exchanges and the NASDAQ exchange for equities and on Brokertec via sponsored access for treasuries. The Company Lines not trade any derivative products.** 

#### **2 SIGNIFICANT ACCOUNTING POUCl!i:S**

#### **Basis of presentation**

**The Statement of Financial Condition of the Company has been prepared in accordance with accounting principles generally accepted in the United Stales ('US GAAP'). The Statement of rinancial Condition is presented in U.S. Dollars.** 

#### **Use of Estimates**

**The prcparntion of the Statement otTinancial Condition in confonnity with U.S. GAAP requires management to make esti111atcs and assumptions that affect the reported amounts of assi:ts and liabilities and disclosure of contingent assets and liabilities at the Llate of the Statement of Financial Condition. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual results could Lliffer f r om those estimates.** 

{7}------------------------------------------------

## NOTES TO THE STATEMENT OF FINANCIAI, CONDITION - continued

#### 2

#### Financial Instruments Owned

Proprietary securities transactions in regular-way trades are recorded on the trade date, as if they had settled. Profit and loss arising from all securities and commodities transactions entered into for the account and risk of the Company are recorded on a trade date basis.

Amounts reccivable and payable for scuritics transactions that have not reached their contractual settlement date are recorded gross on the statement of financial condition under "Recivable from broker-dealers and clearing organizations" and "Payable to broker-dealers and clearing organizations". Securities are recorded at fair value in accordance with FASB ASC 820, Fair Value Mcasurement.

#### Other assets

Other assets consist primarily of prepayments for rent and other expenses, which are recognized at initial value of consideration given, and are subsequently amortized over the period of the underlying contract,

#### Cash and cash equivalents

Cash consists of deposits with banks and all highly liquid investments. with maturities of three months or less, that are not scgregated and deposited for regulatory purposes. The balance consists with a bank.

#### Forcign currency transactions

Items included in the Statement of Financial Condition are measured using the currency of the primary economic environment in which the Company operates (the functional currency). The Statement of Financial Condition is presented in U.S. Dollars, which is the Company's tunctional and presentational currency.

Assets and liabilities denominated in non-U.S. Dollar currencies arc remeasured into United States dollar equivalents at spot forcign cxchange rates prevailing on the date of the Statement of Financial Condition.

#### Taxes

The amount of current aad deferred taxes payable or refundable is recognized as of the Statement of Financial Condition, utilizing currently cnacted tax laws and rates. The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the cxpcctcd future tax consequences of events that have been included in the Statement of Financial Condition. Under this method, the Company determines deferred tax assets and liabilities based on the differences between the financial statement and tax bases and liabilities by using cnacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rales on deferred tax assets and liabilitics is recognized in income in the period that includes the enactment date.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative cvidence, including future reversals of existing taxable temporary differences, projected fireome, tax-planning strategics, and results of recent operations. If the Company decemines that it would be able to realize a deferred tax asset in the future in excess of net recorded amount, it would make an adjustment to the defented tax asset valuation allowance, which would reducc the provision for income taxes.

{8}------------------------------------------------

# **NOTES TO THE STATEMENT OF HNANCIAL CONDITION - continued**

#### **2 SIGNIFICANT ACCOUNTING POLICIES - continued**

The Company recor<ls uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (I) it detennines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

#### **Operating Leases**

The: Company recognizes and measures its lease in accor<lance with FASB ASC 842, *leases.* The: Company is a lessee in one noncancelable operating lease, for office space. The Company detennines if an arrangement is a lease, or contains a lease. at inception of a contract and when the terms of an existing contract are change<l. The Conipany recognizes a lease liability an<l a right of use (ROU) asset at the commencement date of the lease. The lease liability is initially and subsequently recognized baseJ on the: present value of its future lease payments. Variable payments arc included in the future lease payments when those variable payments <lc::pend on an index ora rate. The discount rate is the implicit rate ifit is readily detenninable or otherwise the Company uses its incremental borrowing rate. The implicit rates of our leases arc not readily determinable and accordingly, we use our incremental borrowing rate baseJ 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 collaternlized basis to borrow an amount equal to the lease payments under similar tcnns and in a similar economic environment. The **ROU** asset is subsequently measureJ throughout the lease tcnn at the amount of the remeasun:J lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs. plus or minus any pn:paid or accrue<l lcasc payments, less the unamortized balance of lease incentives received, and any i1npainnent recognized. Lease cost for b1se payments is recognized on a straightline basis over the lease term.

The Company has electe<l, for all underlying classes of assets, to not recognize **ROU** assets and lease liabilities for short-term leases that have a lease:: tenn of 12 months or less at lease commencement, and Jo not include an option to purchase the underlying asset that the Company is reasonably certain to e xercise. We recognize lease cost associated with our short-term leases on a straight-line basis ove**<sup>r</sup>**the lease tt:nn.

#### **Securities sold not yet purchased**

The Company has sold securities that it <loes not currently own and therefore may be obligated to purchase such securities at a future date. The Company has recor<le<l these obligations of \$74,015 in the Statement of financial Con<lition as of December 31, 2019 at fair value which is the markt:t value of the relateJ securities. Such obligations have market risk to the e xtent that subsequent market fluctuations may require the Company to repurchase the securities at prices in e xcess of the market value reflected in the statement or linancial condition.

#### **Fixed Assets**

FixeJ assets arc initially recorded at cost. Subsequc::nt to recognition, fixed assets arc measured at cost less accumulated depreciation and any accumulated impairmc:nt losses.

Depreciation is computeJ on a straight-line basis over the estimated useful lives of the assets as follows:

- Leasehold improvements: over the life of the lease, or to the lease break, if shorter
- IT equipment: 3 years
- fixtures an<l {ittings: 7 years

ExpenJiturcs for additions, improvements an<l renewals arc capitalised.

{9}------------------------------------------------

# **NOTES TO THE STATEMENT OF FlNANCIAL CONDITION - continued**

#### **2 SIGNIFICANT ACCOUNTING POLICIES - continued**

**The carrying values of lixed asst:ts are reviewed for impainncnt when events or changes in circumstances indicate that the carrying value may not be recoverable.** 

**The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.** 

**A fixed asset is derecogniscd upon disposal or when no future economic benefits are expected from its use or disposal.** 

#### **Impact of recent accounting pronouncements**

**The FASH issued Accounting Standards Update No. 2016-02 (and also codification improvements under Update Nos. 201 8-1 0 and 201 8-1 1 ), I .eases codified as ASC 842.** 

**ASC �42 requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. A lessee should recognize in its balance sheet a liability lo make !ease payments (the lease liability) and a right-ot�usc asset representing its right to use the underlying asset for !he lease tenn. In transition, lessees and lessors are required to recognize and measure leases at the bcginni ng of the earliest period presented using a modilie<l retrospcxti ve approach. The new standard is effective for pub! ic business entities, such as the Company, for annua I periods beginning after December 15, 2018 (i.e. for the financial year beginning January 1, 2019).** 

**The Company has therefore adopted ASC 842 in the Statement of financial Condition. The impact of adoption was creation of a liability for lease payments of \$2,003 anu a right of use asset of \$1,891 as at January 1, 2019. Footnote 8 sets out details of the liability for lease payments and right of use asset as at December 31, 2019 along with other required disclosures.** 

**The following accounting pronouncements have been made and will be adopted by the Company in future periods when they become effective.** 

**FASB Accounting Standards Upd11tc (ASU) No. 2016-13, financial !nstruments----Credit Losses ( Topic 326): M casurcmcnt of Credit Losses on Financial Instruments, was issued in June 2016. For pu hi ic husiness entities that arc SEC filers, the amendments in this ASU are effective for fiscal years beginning after Decemher l 5, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments in this update are effective for fiscal years beginning alter December 15, 2020, including interim periods within those fiscal years.** 

**All entities may adopt the amend1m:nts in this ASU earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. See FASB ASU No. 2016-!3 for additional information regarding the effective date or this ASU.** 

**A SC 326 requires an entity to recognize an allowance for credit losses th al results in the financial statements reflecting the net amount expected to be collected from the financial asset. The allowance is based on the !l.5set's arnortized cost. That is, it represents the portion of the rel:eivable's amortized cost basis that 11n entity tloes not expect to collect over the rcccivable's contractual life, considering past i::vents, current conditions, and reasonable and supportable forecasts of future economic conditions. The allowance for credit losses i� measured anu recorded upon the initial recognition of a financial asset, regardless of whether it is originated or purchased.** 

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

## **NOTES TO THE STATEMENT OF FINANCIAL CONDITION - continued**

Management have yet to adopt ASU 326 however anticipate there being no impact on either the Statement of Financial Condition.

#### **3 CASH AND CASH EQUIVALENTS**

The Company had no restricted cash c1t December 31, 2019. All cash presented on the Statement otTinancial Condition was unrestricted. The C1)mpany hdd cash equivalents at December 31, 2019 in the form of breakable 7-day tenn deposits.

#### **4 FAI R VALUE HIERARCHY**

FASB ASC 820 defines fair value, establishes a fnimework for measuring fair value, and establishes a hierarchy of fair value inputs. rair value is the price that would be received to sell an asset or paid to t **r** ansfer 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 hy FASB ASC 820, arc used lo measure fair value.

The fair value hierarchy prioritizes tl1e inputs to valuation techniques used to measure fair value into three broad levels:

- Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.
- Level 2. Inputs other than quoted prices included within level I that arc observable for the asset or lia6ility either directly or indirectly.
- Level 3. Unobservable inputs for the asset or liability.

The availability of observable inputs can vary from sernrity to security and is affected by a wide variety of foe tors, including, for example, the type of security, the I iqu idi ly of markets, and other characteristics particular to the security. To the t:xtent that valuation is based on models or inpuls thal an: lt:ss observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.

There were no transfers between different levels of the fair value hierarchy within the period.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases. for disdosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowesl level input that is significant to the fair value measurement in its entirety.

A description of the valuation techniques applied to the Company's major categories or assets and liabilities measured at fair value on a recurring basis follows.

*Exchange-Traded Equity Securities.* Exchange-tra<led equity secu1ities arc valued based on quoted prices from the exchange. To the extent these securities arc actively traded, valuation adjustments are not applied, and they arc categorized in level l of the fair value hierarchy; otherwise, they are categori.:ed in leve I 2 or level 3 of the fair value hierarchy.

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

# NOTES TO THE STATEMENT OF FINANCIAL CONDITION - continued

The following tahle sets forth by level within the fair value hierarchy the Cumpany's financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2019. As required by this standard, linancial assets and liabilities are classified in their entirety hased 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 neasurement requires judgement, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. The Company utilizes exchange market data to obtain closing prices to value financial instruments.

|                                                                  | Level 1  | Level 2 |     | Level 3 Total Fair Value |
|------------------------------------------------------------------|----------|---------|-----|--------------------------|
| Financial instruments owned, at fair value.<br>Equity securities | \$76,812 | ili     | 124 | \$76,812                 |
| Total financial instruments owned at fair value                  | \$76,812 | )       | !   | \$76,812                 |
| Financial instruments sold, not yet purchased, at fair value:    |          |         |     |                          |
| Equily securities                                                | \$74,015 |         |     | \$74,015                 |
| Total securities sold, not yet purchased at fair value           | 574,015  | -       | 1   | 574,015                  |

Short term assets and liabilities carry a maturily of less than one year or are hearing market interest rates and according y are carried at amounts approximating firir value, and are as set out below:

|                                                           | Level 1  | Leve 2    | Level 3 | Total Fair Value |
|-----------------------------------------------------------|----------|-----------|---------|------------------|
| Cash                                                      | \$30,188 | =         |         | \$30,188         |
| Deposits with clearing organizations and others           | 39,050   | 1         | 12      | 39,050           |
| Receivable from broker-dealers and clearing organizations |          | 3,511     | -       | 3,511            |
| Other assets                                              | 390      |           | 11      | 390              |
| Total assets                                              | \$69,628 | \$3,511   |         | \$73,139         |
| Payable to broker-dealers and clearing organizations      |          | \$5,255   |         | \$5,255          |
| Total liabilities                                         | -        | રેટ 'ડેટર |         | \$5,255          |

#### 5

The Company clears its proprietary transactions through other broker-dealers. As of December 31, 2019, the Company had amounts due from these broker-dcalcrs and clearing organizations of \$42,561 and amounts due to broker-dealers and clearing organizations of \$5,255. Included in due toffrom broker-dealers and clearing organizations are deposits, margin, and unsettled transactions (including rebates, fees and interest).

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

*unless ntherwise .ftated)* 

# **NOTES TO TlIB STATEMENT OF F1NANCIAL CONDITION - continued**

#### *6 COMMITMENTS AND CONTINGENT LIABILITl[S*

**The Company has total balances lodged with hanks antl broker-dealers aggregating to \$315 as security for its office lease. These are included within "'Other assets" on the Statement of Finan�ial Condition.** 

#### *7 RELATED PARTIES*

**The Company is a fully owned subsidiary of** *XTX* **Holdings Limited, a company domiciled in Cayman Islands antl UK lait resident.** 

**Amounts due among related parties arc i ntcrcst free and repayable on demand. There have been no guara ntces received from related parties or provided to related parties.** 

**The Company pays transfer pricing revenues to XTX Markets Limitetl in respect of net income initially booketl within XTX Markets LL C but where management consider that the value-addet.l activities in respect of this income is provided by employees of XTX Markets Limited. These amounts are derived using a dctaikd profit split calculation that reallorntes revenues and costs (including technology and communications, staff and occupancy costs) at a mark-up among affiliated entities hased on the value-adtled services contributetl glohally.** 

**Technology and communications costs mentioned above consist of a combination nf trading and back office LT. costs including exchange connectivity, market data and back office subscription costs. lnclutlt:<l within services fees with related parties are fees paitl lo XTX Markets Limited in line with agreed profit sh<1ring agreements. The largest single component of service fees to related parties is in respect of allocation of a portion of net trading profits in respect of value-added activities performed by XTX Markets Limited, an affiliate.** 

**Additionally, a small number of eitpenses (mainly consisting of staff costs) arc initially incurred by the Company and then rcch<1rgcd to XTX Services LLC, an affiliate.** 

**No formal settlement terms exist for settlement of any associated related party receivables or payables.** 

**The fol lowing table sets forth th1: Company's related party assets and liabilities as of December 31, 2019:** 

|                     | Due to related party as of<br>December 31, 2019 | Due from related party as of<br>December 31, 2019 |
|---------------------|-------------------------------------------------|---------------------------------------------------|
| XTX Markets Limited | \$5,553                                         | \$0                                               |
| XTX Services LLC    | \$0                                             | \$31                                              |
|                     | \$5,553                                         | \$31                                              |

{13}------------------------------------------------

*unle.�.� otherwise stated)* 

# **NOTES TO THE STATEMENT OF FINANCIAL CONDITION - continued**

#### **8 LEASES**

**The Company has obligations as a lessee for office space with initial noncancelable tenns in excess of one year. The Company classified this lease as an opi:rating lease. This lease contains a renewal option for a pcri od of a further five years. Because the Corn pany is not reasonably certain to exercise th is option, the optional period is not included in determining the lease term, and associated payments under this renewal option is excluded from lease payments. The Company's lease does not include a termination option for either party to the lease or restrictive financial or other covenants. Payments due under the lease ccmtract includes tixcd plus variable payments. The lease requires it to make variable payments l'or the Company's proportionate share of the building's property taxes, insurance, and common area maintenan�e. Thtse variable lease payments are not included in lease payments used to determine lease liability and are rccogni;,:ed as variable costs when incurred.** 

**The components of lease cost for the year ended December 3 l, 201 9 are as fol I ows:** 

| Operating lease cost | \$596                                                                             |
|----------------------|-----------------------------------------------------------------------------------|
| Total lease cost     | \$596                                                                             |
|                      | Amounts reported in tht balance sheet as of December 3 I , 2019 were as fol lows: |

| Operating lease ROU assets  | \$1,313 |
|-----------------------------|---------|
| Operating lease liabilities | \$1,394 |

{14}------------------------------------------------

# **NOTES TO TUE STATEMENT OF FINANCIAL CONDITION - continued**

**Other i nfonnati on related lo leases as of December 3 I, 2019 was as follows:** 

| Supplemental cash flow information:                                                                                       |           |
|---------------------------------------------------------------------------------------------------------------------------|-----------|
| Cash paid for the amounts included in the measurement of lease liabil ities:<br>Operating cash flow from operating leases | \$628     |
| Reductions to ROU assets resulting from reductions to lease liabil ities:<br>Operating leases                             | (\$578)   |
| Remaining lease term:<br>Operating leases                                                                                 | 2.6 years |
| Discount rate:<br>Operating leases                                                                                        | 6.79%     |

**Maturities of lease liabilities under nom:ancelablc operating leases as of December 31, 2019 are as follows:** 

| 2020 | \$569 |
|------|-------|
| 2021 | 532   |
| 2022 | 293   |

#### **9 CRl:DIT RISK, FINANCING RISK AND MARKET RISK**

**The Company is engaged in various trading and brokerage activities in which counterparties primarily include broker-dealers. banks, and other financial institutions. In the event counterparties do nol fulfil their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the countcrparty or issuer of the instrument. It is the Company's policy to review, as necessary, the credit standing of each countcrparty.** 

**The Company fimnees a significant portion of its securities transactions. Financing risks include the exposure lhe Company has to margin requirements in place with clearing brokers and counlerparties, <1nd the risk that ongoing financing arrangemenls may not be available in the future at rates which are desirable to the Company. Changes in margin requirements, including the relate<l changes in fair value of investments, may result in the Company having to pledge additional margin or to sell securities to meet required margin. These activities may take plai;e when market conditions arc not optimal and may result in a realized loss on securities transactions and additi,mal margin requirements with clearing brokers and i;ounterpartics,** 

**Market risk is the potential for changes in the value of financial instruments. Categories of market risk include, but are not limited to, exposure to equity prices, interest rates, rnmmodity prices, credit prices and currency prices. Markel risk is diro::tly impacted by volatility and liquidity in the markets. As a quantitative trading firm, the Company's trading levels may vary significantly on an intraday basis as a result of changing market and economic conditions. End of day positions may not be representative of trading levels conducted by the Company during the trading day.** 

**The Company relics on service provide<sup>r</sup> s that are integral to its revenue generating activities. A disruption of services provided such as connectivity may have an impact on the financial results of the Company.** 

**The Company may invest directly in non-US currencies or st:eurilics that arc denominated in non-US currencies. Currency rates may t1 uctu ate significantly over short periods of time for a number of reasons,** 

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

# **NOTES TO THE STATEMENT OF l<'INANCIAL CONDITION - continued**

including changes in interest rates, intervention (or the failure to inlervem:) hy government entities, ccnlral banks or supranational entities, or by the imposition of currency controls or other geo1mlitical developments.

#### IO **CONTINGENCIES**

In the nonnal course of business, from time to time, the Company may be involved in legal or regulatory proceedings and/or inquiries concerning matters arising in connection with the conduct of its operations. In the Company's opinion, there are no matters that **may** ultimately result **from** such legal and regulatory actions which ;ire ex pectcd to have a mate**<sup>r</sup>** ial adverse effect on the financial position, results of operations, or liquidity of the Company. The Company may enter into agreements with indemnifications in the normal course of business.

#### **11 REGULATORY REQUI REMENTS**

The Company is subject to the SEC Uniform Net Capital Rule (SEC Rule 15e3-l), which requires the maintenance of minimum net capital.

During 2018, the Company applied for, an<l received permission from CHX **to** adopt the alternative treatment for calculating capital requirements. Therefore, dm;ng 2019 the capital requirement of the Company has been \$250 and it has rernaine<l in compliance with its minimum net capital requirement through the Jate of these financia I statements and had net capital of \$42,306, which was \$42.05 6 in excess of its required net capital nf \$250.

The Company is subject to the Customer Protection Rule (SEC Rule l 5c3-3), promulgated under the Securities Exchange Act of 1934, as amended. However, at December 31, 2019. and throughout the period, the Company **JiJ** not carry security accounts for customers or perfonn custodial functions related to customer securities. Consequently, at December 31, 2019, the**<sup>r</sup>** e arc no amounts required to he rese**<sup>r</sup>**ved in accordance with SEC Rule 1 5c3-3.

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

*unless othenvi.�e stated)* 

# **NOTES TO THE STATEMENT OF FINANCIAL CONDITION - continued**

#### **12 DF.FERRE:D TAX**

The following rcpresenls the approximate ta x effect of each significant type of temporary difference giving rise lo the deferred income tax asset.

| Propcrty, plant, and equipment | \$32 |
|--------------------------------|------|
| Deferred tax as�et, net        | \$32 |

Management has assesseLI the Company's uncertain tax position exposure in accordance with ASC 740 and current accounting policy. Management has concluded under the two-stt:p process that the tax positions taken will be sustained as determined under the more likely than not threshold, and theref**ore** a nil balance in relation tu unccrcain tax positions has been recorded in the financial statements.

As or Dei:emher 31, 2019, the Company detemtined that it has no material uncertain tax positions, interest or penalties as defined within ASC 740, and accordingly, management has concluded that no additional ASC 740 disclosures are required. The Company is subject to tax examination for tax year ending December 31, 2019 al the federal, state ani.1 city level. The Company docs not believe that it is reasonably possible that the total amount of unrecognized ta x benefits will significantly change within the ne xt 12 months.

The Company's management has deemed that the deferred tax assets arc realized on a more-likely-than-not basis.

#### **13 SUBSt:QUENT EVENTS**

The Company has performed an evaluation of events that have occurred subse4ui:nt to December 31, 2019, and through February 28, 2020. There have been no material subsequent events that occurred during such period that would require disi:losure in this report or would be required to be rccogni**.:**ed in the financial statements as of December 31, 2019.


Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.