# XTX MARKETS LLC X-17A-5 (2023-02-28) — Broker-dealer annual report - Company: XTX MARKETS LLC - Form: X-17A-5 - Filed: 2023-02-28 - Period: 2022-12-31 - Accession: 0001715650-23-000003 - CIK: 1715650 - File #: 8-70009 - Type: Broker-dealer - Material weakness: No - Auditor: Ernst & Young LLP - Auditor location: New York, NY - Contact: Anthony Savarese - Phone: 9179320767 - Email: oliver.scott@xtxmarkets.com - Website: xtxmarkets.com - Signed by: Eric Swanson (Chief Executive Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1715650/000171565023000003/xtxllcsofc2022v2.pdf --- {0}------------------------------------------------ OMB APPROVAL OMB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12 SEC FILE NUMBER **8-70009** **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 01/01/22 AND ENDING 12/31/22 # **A. REGISTRANT IDENTIFICATION** NAME OF FIRM: XTX MARKETS 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 P.O. Box No.) | One Manhattan West
(Address) | New York
(City) | Ernst & Young LLP
(Name – if individual, state last, first, middle name)
New York
(State) | 10001
(Zip Code) | |---------------------------------------------------------------------------|---------------------|----------------------------------------------------------------------------------------------------|-----------------------------| | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing* | | | | | | | | | | | | | | | | | | | | | | B. ACCOUNTANT IDENTIFICATION | | | (Name) | | (Area Code - Telephone Number) | (Email Address) | | PERSON TO CONTACT WITH REGARD TO THIS FILING
Oliver Scott | +44(0) 203 198 3484 | | oliver.scott@xtxmarkets.com | | | | | | | | NY | | 10001 | | New York
(City) | (State) | (No. and Street) | (Zip Code) | \*Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable. **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.** {1}------------------------------------------------ # XTX Markets LLC Statement of Financial Condition As at December 31, 2022 With Report of Independent Registered Public Accounting Firm {2}------------------------------------------------ XTX Markets LLC Statement of Financial Condition as at December 31, 2022 (expressed in U.S. dollars in thousands unless otherwise stated) # Contents | | 1 นตรีอา | |---------------------------------------------------------|----------| | Oath or affirmation | 2 | | Report of Independent Registered Public Accounting Firm | 3 | | Statement of financial condition | ব | | Notes to the financial statement | 5 - 15 | Do {3}------------------------------------------------ XTX Markets LLC Statement of Financial Condition as at December 31, 2022 (expressed in U.S. dollars in thousands unless otherwise stated) ### OATH OR AFFIRMATION I, Eric Swanson , swear (or affirm) that, to the best of my knowledge and belief, the financial report pertaining to the firm of XTX Markets LLC, as of December 31, 2022, is true and correct. I further swear (or affirm) that neither the company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer. ![](_page_3_Figure_3.jpeg) Notary Public #### This filing\*\* contains (check all applicable boxes): [a) Statement of financial condition 图(b) Notes to consolidated statement of financial condition. O(c) Statement of income (loss) or, if there is other comprehensive in the period(s) presented, a statement of comprehensive income (as defined in § 210\_1-02 of Regulation S-X). O(d) Statement of cash flows [(e) Statement of changes in stockholders' or partners' or sole proprietor's equity O(f) Statement of changes in liabilities subordinated to claims of creditors. [(g) Notes to consolidated financial statements [(h) Computation of net capital under 17 CFR 240 15c3-1 or 17 CFR 240 18a-1, as applicable [ (i) Computation of tangible net worth under 17 CFR 240 18a-2 D(j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3 D(k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit A to 17 CFR 240.18a-4, as applicable D(I) Computation for Determination of PAB Requirements under Exhibit A to § 240 15c3-3 D(m) Information relating to possession or control requirements for customers under 17 CFR 240 15c3-3 D(n) Information relaing to possession or control requirements for security-based swap customers under 17 CFR 240 15c3-3(p)(2) or 17 CFR 240 18a-4, as applicable D(o) Reconciliations, including appropriate explanation of the FOCUS Report with computation of net worth under 17 CFR 240 15c3-1, 17 CFR 240 18a-1, or 17 CFR 240 18a-2, as applicable, and the reserve requirements under 17 CFR 240 15c3-3 or 17 CFR 240 18a-4, as applicable, if material differences exist, or a statement that no material differences exist D(p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition 2(q) Oath or affirmation in accordance with 17 CFR 240 17a-12, or 17 CFR 240 17a-12, or 17 CFR 240.18a-7, as applicable, D(r) Compliance report in accordance with 17 CFR 240 17a-5 or 17 CFR 240 18a-7, as applicable D(s) Exemption report in accordance with 17 CFR 240 17a-5 or 17 CFR 240 18a-7, as applicable. &(t) Independent public accountant's report based on an examination of the statement of financial condition [u] Independent public accountant's report based on an examination of the financial statements under 17 CFR 240 17a-5, 17 CFR 240 18a-7, or 17 CFR 240 17a-12, as applicable [v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240 18a-7, as applicable [ (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240 18a-7, as applicable D(x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12, as applicable [1] Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240 17a-12(k) [(z) Other: \*\* To request confidential treatment of certain of this filing, see 17 CFR 240.17a-5(d)(2), as applicable. {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) Ernst & Young LLP One Manhattan West New York, NY 10001 Tel: +1 212 773 3000 Fax: +1 212 773 6350 ey.com # **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, 2022 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, 2022, in conformity with U.S. generally accepted accounting principles. # **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 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, 2023 {5}------------------------------------------------ # XTX Markets LLC Statement of Financial Condition as at December 31, 2022 (expressed in U.S. dollars in thousands # unless otherwise stated) # STATEMENT OF FINANCIAL CONDITION December 31, 2022 # ASSETS | TOTAL ASSETS | \$649,98 | |-----------------------------------------------------------|----------| | Other assets | 316 | | Operating lease assets | 13.553 | | Due from related parties | 7.397 | | Income taxes receivable | 2.165 | | less accumulated depreciation and amortization of \$2,728 | 6.943 | | Furniture, equipment, and leashold improvements, at cost, | | | Financial instruments owned, at fair value | 333.675 | | Investment in preferred shares and RSUs | 19.978 | | Receivable from broker-dealers and clearing organizations | 720 | | Deposits with clearing organizations and others | 204.255 | | Cash and cash equivalents | \$60.985 | # LIABILITIES AND MEMBER'S EQUITY ### LIABILITIES | | TOTAL LIABILITIES AND MEMBER'S EQUITY | \$649,987 | |-----------------|--------------------------------------------------------------|-----------| | | TOTAL MEMBER'S EQUITY | \$275,762 | | | Retained earnings | 201.766 | | | Contributed Capital | \$73.996 | | MEMBER'S EQUITY | | | | | TOTAL LIABILITIES | \$374,225 | | | Operating lease liabilities | 14.557 | | | Income taxes payable | 3.421 | | | Accounts payable, accrued expenses and other liabilities | 7.778 | | | Payable to broker-dealers and clearing organizations | 18.951 | | | Financial instruments sold, not yet purchased, at fair value | \$329,518 | The accompanying notes are an integral part of the financial statement. {6}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT #### 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 member of the Company is XTX Holdings LLC, a limited liability corporation registered in Delaware. The Company was organized for the purpose of trading equity securities and treasuries utilizing a proprietary electronic trading model. The Company exclusively trades on its own account and not on behalf of customers. The U.S. dollar is the functional currency of the Company became registered as a securities broker-dealer and member of the Chicago Stock Exchange (now NYSE Chicago) on December 13th, 2017. The Company operates as a single segment. The Company is a member of the Securities and Investor Protection Corporation ("SIPC"). Its designated examining authority is FINRA (on behalf of NYSE Chicago). It trades via sponsored access on various equities exchanges and equities Alternative Trading Systems ("ATS", a regulated electronic trading system with registered broker-dealers that match buy and sell orders), and on Brokertec via sponsored access for treasuries. In November, the Company started small scale trades on U.S. single stock options. The Company does not trade any other derivative products. #### 2 SIGNIFICANT ACCOUNTING POLICIES #### Basis of presentation The financial statement of the Company has been prepared in accordance with accounting principles generally accepted in the United States ('US GAAP'). The financial statement is presented in U.S. Dollars. #### Use of Estimates The preparation of the financial statement in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates utilized in preparing its financial statement is reasonable and prudent. Actual results could differ from those estimates. #### 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 transactions entered into for the account and risk of the Company are recorded on a trade date basis. Amounts receivable and payable for securities transactions that have not reached their contractual settlement date are recorded gross on the statement of financial condition under "Receivable from broker-dealers and clearing organizations" and "Payable to brokers and clearing organizations". Securities are recorded at fair value in accordance with FASB ASC 820. Fair Value Measurement. #### Investment in preferred shares and RSUs The Company holds investments in preferred shares and restricted stock units of a non-public financial technology company. These investments are measured at fair value. #### Other assets Other assets consist primarily of lease deposits and prepayments for other expenses, which are recognized at initial value of consideration given, and are subsequently amortized over the underlying contract. {7}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued ## 2 SIGNIFICANT ACCOUNTING POLICIES - continued #### Cash and cash equivalents Cash consists of deposits with banks and highly liquid investments, with maturities of three months or less, that are not segregated and deposited for regulatory purposes. #### Foreign currency transactions Items included in the financial statement are measured using the primary economic environment in which the Company operates (the functional currency). The financial statement is presented in U.S. Dollars, which is the Company's functional currency. Assets and liabilities denominated in non-U.S. Dollar currencies are remeasured into United States dollar equivalents at spot foreign exchange rates prevailing on the date of the Statement of Financial Condition, while revenue and expense accounts are remeasured at the actual foreign exchange rate on the date the transaction occurred. ### Taxes The amount of current and deferred taxes payable or refundable is recognized as of the financial statement, utilizing currently enacted 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 expected future tax consequences of events that have been included in the financial statement. Under this method, the Company determines deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities 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 evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize a deferred tax asset in the future in excess of the net recorded amount, it would make an adjustment to reduce the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines 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 accordance with FASB ASC 842, Leases. The Company is a lessee in one noncancelable operating lease, for office space. 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 recognizes a lease liability and a right of use (ROU) asset at the commencement date of the lease. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. The discount rate is the implicit rate if it is readily determinable or otherwise the Company uses its incremental borrowing rate. The implicit rate of our lease is not readily determinable and accordingly, the Company uses an incremental borrowing rate based on the information available at the commencement date for the lease. The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The ROU asset is subsequently measured throughout the lease term at the {8}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued ### SIGNIFICANT ACCOUNTING POLICIES - continued amount of the remeasured lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs, plus or minus any prepaid or accrued lease payments, less the unamortized balance of lease incentives received, and any impairment recognized. Lease cost for lease payments is recognized on a straightline basis over the lease term. The Company has elected, for all underlying classes of assets, to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement, and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. We recognize lease cost associated with our short-term leases on a straight-line basis over the lease term. #### Financial instruments sold not yet purchased The Company has sold securities that it does not currently own and therefore may be obligated to purchase such securities at a future date. The Company has recorded these obligations of \$329,518 in the financial statement as of December 31, 2022 at fair value which is the market value of the related securities. Such obligations have market risk to the extent that subsequent market fluctuations may require the Company to repurchase the securities at prices in excess of the market value reflected in the statement of financial condition. #### Fixed Assets Fixed assets are initially recorded at cost. Subsequent to recognition, fixed assets are measured at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is computed 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 leasehold improvement, if shorter - IT equipment: 3 years - Fixtures and fittings: 7 years Expenditures for additions, improvements and renewals are capitalised and expenditures for maintenance and repairs are charged to the statement of income under "other expenses". The carrying values of fixed assets are reviewed for impairment 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 derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on de-recognition of the asset is included in the statement of income in the year the asset is derecognised. #### Impact of recent accounting pronouncements The FASB issued Accounting Standards Update No. 2020-04, Reference Rate Reform, codified as ASC 848. In response to concerns about structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The amendments in this Update provide optional expedions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by {9}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued #### SIGNIFICANT ACCOUNTING POLICIES - continued 2 reference rate reform if certain criteria are met. The guidance is effective for all entities and generally can be applied through December 31, 2024. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024, except for hedging relationships existing as of December 31, 2024, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company does not have any material exposures to LIBOR or other reference rates either via its trading book activities or back office contracts and therefore does not expect this update to have a material impact on the results presented in future accounting periods. No additional FASB Accounting Standards updates are expected to impact the Company. #### 3 CASH AND CASH EQUIVALENTS The Company had restricted cash of \$4,000 at December 31, 2022 in respect of amounts lodged to support standby letters of credit to facilitate treasuries trading. All other amounts presented on the Statement of Financial Condition was unrestricted. The Company held cash equivalents at December 31, 2022 in the form of breakable 7-day term deposits and a savings account. #### 4 FAIR VALUE HIERARCHY FASB ASC 820 defines fair value, establishes a framework for value, and establishes a hierarchy of fair value inputs. 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 FASB 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 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 1 that are observable for the asset or liability either directly or indirectly. - · Level 3. Unobservable inputs for the asset or liability. The availability of observable inputs can vary from security and is affected by a wide variety of factors, including, for example, the type of security, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable 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 disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest 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 of assets and liabilities measured at fair value on a recurring basis follows. {10}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued Exchange-Traded Equity Securities. Exchange-traded equity securities are valued based on quoted prices from the exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy; otherwise, they are categorized in level 3 of the fair value hierarchy. Investments in Preferred Shares in Unlisted Securities and Restricted Stock Units earned but not yet delivered: The fair value of Preferred Shares in Unlisted Securities and Restricted Stock Units earned but not yet delivered are determined based on an option pricing model using various inputs, including the fair value of the underly ing entity, the expected term until a liquidity event , discounts applied to minority holdings, the overall rate of return discount rate and a discount for lack of marketability. The fair value of the underlying entity was determined using a market approach leveraging market multiples of guideline public companies and similar transactions. These inputs are subjective and generally require significant judgement. Increases in revenue multiples and decreases in minority discounts applied to these revenue multiples, the overall rate of return discount rate and the assumed period to exit might result in a significantly higher fair value, whilst decreases in revenue multiples and increases in minority discounts applied to these revenue multiples, the overall rate of return discount rate and the assumed period to exit might result in a significantly lower fair value. Additionally, decreases in the non-marketability discount applied might result in a significantly higher fair value whilst conversely increases in this discount might result in a significantly lower fair value. In calculating the following significant unobservable inputs were used. Management of XTX Markets LLC consider that the revenue multiple is the most significant input: | Revenue multiples | 6.9 - 7.1 | |-----------------------------------------------------|-----------| | Rate of return | 30% | | Minority discount | 15% | | Assumed period to exit | 3.5 years | | Non-marketability discount (restricted stock units) | 18% | | Non-marketability discount (preferred stock) | 11% | This analysis was performed by a third party valuations specialist and reviewed by management of XTX Markets LLC and considered reasonable. The following table sets forth a reconciliation of opening and closing balances for the investment in preferred shares and RSUs: | | Opening
Balance as of
12/31/2021 | Conversion to
preferred stock | Unrealized gain Closing Balance
/ (loss) | as of 12/31/2022 | |--------------------------------------------------------------|----------------------------------------|----------------------------------|---------------------------------------------|--------------------| | Preferred stock | 5 260
4.104 | | 389 | 5.649 | | Restricted Stock Units earned but not yet delivered
Total | \$9,364 | \$0 | 10,225
\$10,614 | 14,329
\$19,978 | The following table sets forth by level within the fair value hierarchy the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2022. As required by this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular {11}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued input to the fair value measurement requires judgement and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. | | Level 1 | Level 2 | Level 3 | Total Fair Value | |--------------------------------------------------------------------|-----------|---------|----------|------------------| | Financial instruments owned at fair value: | | | | | | Equity securities | \$333 675 | 14 | | \$333675 | | Investment in preferred shares and RSUs | | | | | | Equity securities | = | 14 | 5649 | \$5,643 | | Restriated Stock Units earned but not yet delivered | | | 14 529 | \$14329 | | Total financial instruments owned, at fair value | \$33,675 | | \$19,978 | \$353,653 | | | | | | | | Financial instruments sold, not yet purchased, at fair value | | | | | | Equily securities | \$329518 | - | 5 | \$329518 | | Total financial instruments sold, not yet purchased, at fair value | \$329,518 | 。 | | \$329,518 | Short term assets and liabilities carry a maturity of less than one year or are bearing market interest rates and acordingly are carried at amounts approximating fair value, and are as set out below: | | Level 1 | Level 2 | Level 3 | Total Fair Value | |-----------------------------------------------------------|-----------|----------|---------|------------------| | Cash and cash equivalents | S60.985 | - | - | \$60.985 | | Deposits with clearing organizations and others | 204,255 | = | | 204.255 | | Receivable from broker-dealers and clearing organizations | - | 720 | - | 720 | | Deposits | 315 | = | | 315 | | Total assets | \$265,555 | \$720 | 4 | \$266,275 | | Payable to broker-dealers and clearing organizations | | \$18.951 | | \$18,951 | | Total liabilities | | \$18,951 | - | \$18,951 | ### 5. DUE FROM/TO BROKER-DEALERS AND CLEARING ORGANIZATIONS AND DEPOSITS WITH CLEARING ORGANIZATIONS AND OTHERS The Company clears its proprietary transactions through other broker-dealers. As of December 31, 2022, the Company had deposits due from these broker-dealers and clearing organizations of \$204,255, receivables from broker-dealers and clearing organizations of \$720 and amounts due to broker-dealers and clearing organizations of \$18,951. Included in deposits with clearing organizations and others are deposits, margin, and unsettled transactions . Amounts due from broker-dealers and clearing organizations consist of rebates receivable and amounts due to broker-dealers and clearing organizations consist of exchange and clearing fees payable. ### 6. COMMITMENTS AND CONTINGENT LIABILITIES The Company has a standby letter of credit with a bank issued in respect of its treasuries trading for \$4,000 and \$2,256 for its new operating lease. The full amounts remain undrawn. The \$4,000 is included within "Cash and cash equivalents" and \$2,256 is unfunded and is an off balance-sheet item. #### 7. RELATED PARTIES {12}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued The Company is a fully owned subsidiary of XTX Holdings LLC, a company domiciled in the US and US tax resident. Intercompany amounts in respect of recharges under expense sharing agreements due among related parties are interest free and repayable on demand. There have been no guarantees received from related parties or provided to related parties. The Company made a \$227,000 dividend payment in March 2022 and \$75,000 dividend payment in July 2022 to XTX Holdings LLC. The Company attributes profits to XTX Markets Technologies Limited, an affiliate of XTX Markets LLC, in respect of net profits initially booked within XTX Markets LCC but where management consider that the value-added activities in respect of the profits are provided by employees of XTX Markets Technologies Limited. These amounts are derived using a profit split calculation that reallocates profits and costs (comprising administrative, general and operating expenses) among affiliated entitles based on the valueadded activities performed globally. Additionally, the Company receives amounts calculated in accordance with transfer pricing principles from affiliated entities in respect of net income generated by these entities but where management consider that the value added activities in respect of this income is provided by employees of XTX Markets LLC. Additionally, the Company pays amounts to XTX Markets Technologies Limited, in respect of bespoke I.P. and execution activities, and costs recharged as described above between XTX Markets LLC and these affiliated entities to ensure that each legal entity accurately bears incurred. These costs include administrative, general, and operating expenses, including employee compensation and benefits. Operating expenses consist of a combination of trading and back office I.T. costs including exchange connectivity, market data and back office subscription costs. In addition, XTX Markets LLC holds a receivable with XTX Holdings LLC for paying taxes on its behalf. Related party charges shall not be viewed as the solicitation of services and/or sale of tangible personal property. Charges incurred by XTX Markets LLC are solely costs of the entity and related party charges are generated to allocate the reimbursement of these costs. No formal settlement terms exist for settlement of any associated party receivables or payables although a master netting agreement is in place that allows for net settlement of intercompany payables and receivables. Balances are typically settled on a monthly basis. The following table sets forth the Company's related party assets and liabilities as of December 31, 2022: | | Due to related party as of
31-Dec-22 | Due from related party as of
31-Dec-22 | |----------------------------------|-----------------------------------------|-------------------------------------------| | XTX Markets Technologies Limited | \$0 | \$6,863 | | XTX Holdings LLC | \$0 | \$534 | | | \$0 | \$7.397 | #### LEASES 8. On June 30th, 2022, the Company's original office space lease terminated. On July 1st, 2022 XTX Markets LLC's new office space lease as lessee commenced. XTX Markets LLC did not have any involvement in the construction or design of the building. The new office space lease is determined to be an operating lease. The noncancelable lease term is 10.75 years, from July 1st, 2022 to March 31st, 2033. There is a 20-month rent-free period from July 2022 to February 2024, with fixed rent payments from March 2024 to March 2033. Payments due under the lease contract {13}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued includes fixed plus variable payments. The Company's lease does not include a termination option. The annual lease payments, including the known additional tax payments, are exhibited below. However, due to unknown estimate amounts, the future minimum lease payments do not include expenses such as other tax payments, operating payments, electric charges, insurance, and any other fees or expenses the Landlord deems incurred by the Company. These variable lease payments are not included in lease payments used to determine lease liability and are recognized as variable costs when incurred. Maturities of lease liabilities under noncancelable operating leases as of December 31, 2022 are as follows: | 2023 | 8 | 13 | |------------------------------------------------|---|---------| | 2024 | S | 1.906 | | 2025 | S | 2.302 | | 2026 | S | 2 322 | | 2027 | S | 2.322 | | 2028 and thereafter S | | 12.735 | | Total remaining undiscounted lease payments \$ | | 21.600 | | Impact of discounting S | | (7.043) | | Total | S | 14,557 | The components of lease cost for the year ended December 31, 2022 are as follows: | Operating lease cost | \$1.387 | |----------------------|---------| | Variable lease cost | 80 | | Total lease cost | \$1.387 | Amounts reported in the balance sheet as of December 31, 2022 were as follows: | Operating lease ROU assets | \$13.553 | |-----------------------------|----------| | Operating lease liabilities | \$14.557 | Other information related to leases as of December 31, 2022 was as follows: | Supplemental cash flow information : | | |----------------------------------------------------------------------------|------------| | Cash paid for the amounts included in the measurement of lease labilities: | | | Operating cash flow from operating leases | \$317 | | Increase to ROU assets resulting from increase to lease liabilities : | | | Operating leases | \$13.277 | | Remaining lease tem: | | | Operating leases | 10.6 years | | Discount rate: | | | Operating leases | 7.10% | {14}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued #### 9. CREDIT 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 not fulfil their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company's policy to review, as necessary, the credit standing of each counterparty. Financing risks include the exposure the Company has to margin requirements in place with clearing brokers and counterparties. Changes in margin requirements, including the related 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 place when market conditions are not optimal and may result in a realized loss on securities transactions and additional margin requirements with clearing brokers and counterparties. 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, commodity prices and currency prices. Market risk is directly 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 relies on service providers 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 securities that are denominated in non-US currencies. Currency rates may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by government entities, central banks or supranational entities, or by the imposition of currency controls or other geopolitical developments. ### 10. CONTINGENCIES In the normal 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 are expected to have a material 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 REQUIREMENTS The Company is subject to the SEC Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of minimum net capital. During 2018, the Company applied for, and received permission from NYSE Chicago ("CHX") to adopt the alternative treatment for calculating capital requirements. Therefore, during 2022 the capital requirement of the Company has been \$250 and it has remained in compliance with its minimum net capital requirement through the date of the financial statement and had net capital of \$147,855, which was \$147,605 in excess of its required net capital of \$250. The Company is subject to the Customer Protection Rule (SEC Rule 15c3-3), promulgated under the Securities Exchange Act of 1934, as amended. However, at December 31, 2022, and throughout the period, the Company did not carry security accounts for customers or perform custodial functions related to customer securities. {15}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued Consequently, at December 31, 2022, there are no amounts required to be reserved in accordance with SEC Rule 15c3-3. ### 12. INCOME TAXES The following table sets out the composition of XTX Markets LLC's current and deferred tax assets and liabilities as of December 31, 2022: | Current Laxes: | Payable | Receivable | |-----------------|-----------|------------| | Federal | | \$1,857 | | State and local | 1 | \$308 | | | | | | | | \$2,165 | | Deferred Taxes: | Liability | Asset | | Federal | \$3,238 | | | State and local | \$183 | | | | \$3,421 | | Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities. These temporary differences result in taxable or deductible amounts in future years and are measured using the tax rates and laws that will be in effect when such differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets to the amount that more likely than not will be realized. As of December 31, 2022, the entity had no valuation allowance to reduce deferred tax assets. {16}------------------------------------------------ # NOTES TO THE FINANCIAL STATEMENT - continued Deferred tax liabilities are recorded within Income taxes payable on the Statement of Financial Condition. The composition of the net deferred tax liability is as set out below: | Net Deferred Tax Assets/(Liabilities) | (3,421) | |---------------------------------------|---------| | Total Deferred Tax Liabilities | 7,859 | | Other | | | Unrealized Revenue | 3,233 | | Operating Lease - ROU | 3.007 | | Depreciation | 1.619 | | Deferred tax liabilities | | | | | | Total Deferred Tax Assets | 4.438 | | Operating Lease Obligation | 3.229 | | Compensation | 1.209 | | Deferred tax assets | | Management has assessed the Company's uncertain tax position exposure in accordance with ASC 740 and current accounting policy. Management has concluded under the two-step process that the tax positions taken will be sustained as determined under the more likely than not therefore a nil balance in relation to uncertain tax positions has been recorded in the financial statement. As of December 31, 2022, the Company determined 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's U.S. federal, New York State and New York City tax years are open to examination for tax years ended on or after December 31, 2019. The Company does not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within the next 12 months. #### 13. SUBSEQUENT EVENTS The Company has performed an evaluation of events that have occurred subsequent to December 31, 2022, and through February 28, 2023. There have been no material subsequent events that occurred during such period that would be required to be recognized in the financial statement as of December 31, 2022. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). 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