Table of Contents. Note Regarding Swaps Clearing Business Firm and Its Principals Our Business FCM Customer Business...

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1 COMMODITY FUTURES TRADING COMMISSION RULE 1.55: FCM-SPECIFIC DISCLOSURE DOCUMENT STATE STREET GLOBAL MARKETS, LLC The Commodity Futures Trading Commission ( CFTC ) requires each futures commission merchant ( FCM ), including State Street Global Markets, LLC, to provide the following information to a customer prior to the time the customer first enters into an account agreement with the FCM or deposits money or securities (funds) with the FCM. Except as otherwise noted below, the information set out is as of September 30, State Street Global Markets, LLC will update this information annually and as necessary to take account of any material change to its business operations, financial condition or other factors that State Street Global Markets, LLC believes may be material to a customer s decision to do business with State Street Global Markets, LLC. Nonetheless, State Street Global Markets, LLC s business activities and financial data are not static and will change in non-material ways frequently throughout any 12-month period. Please note that State Street Global Markets, LLC is a subsidiary of State Street Corporation, a publicly-traded company whose shares are traded on the New York Stock Exchange (NYSE: STT). Information that may be material with respect to State Street Global Markets, LLC for purposes of the CFTC s disclosure requirements may not be material to State Street Corporation for purposes of applicable securities laws. In this document, the term State Street is used to refer, collectively, to State Street Corporation and its affiliates. Table of Contents Topic Page Note Regarding Swaps Clearing Business... 2 Firm and Its Principals... 2 Our Business... 5 FCM Customer Business... 8 Permitted Depositories and Counterparties... 9 Material Risks... 9 Material Complaints or Actions Customer Funds Segregation Relevant Financial Data Our Risk Control Practices Filing a Complaint... 22

2 Note Regarding Swaps Clearing On December 5, 2014, State Street Global Markets, LLC filed an initial notice with the CFTC and CME stating that, in response to evolving market conditions and client demand, it would focus its execution and clearing activities as an FCM on futures and options on futures and planned to begin the process of withdrawing as a swaps clearing member at CME. After assisting our swap clearing customers with closing down and/or porting to another FCM their then-existing positions with State Street Global Markets, LLC, and following the CME s formal procedures for IRS Clearing Membership withdrawal, State Street Global Markets, LLC completed its withdrawal from IRS Clearing Membership at CME effective as of the close of business on July 24, State Street Global Markets, LLC continues to serve as a clearing member at the CME for futures and options on futures contracts. Firm and Its Principals State Street Global Markets, LLC is registered as an FCM with the CFTC and a member of the National Futures Association ("NFA"), and is also registered as a broker-dealer with the Securities and Exchange Commission ("SEC") and a member of the Financial Industry Regulatory Authority ( FINRA ). State Street Global Markets, LLC s designated self-regulatory organization for purposes of its activities as an FCM is the Chicago Mercantile Exchange, Inc., whose website address is State Street Global Markets, LLC s principal place of business for its futures and derivatives execution and clearing activities is: State Street Global Markets, LLC 1230 Avenue of the Americas 19 th Floor New York, New York Attention: Futures Client Services Phone: Electronic Mail: USFutures2@statestreet.com State Street Global Markets, LLC is a limited liability company and is governed by a board of managers. Information regarding the board of managers of State Street Global Markets, LLC and those of its principals (as defined in CFTC Rule 3.1(a)) who are responsible for its FCM products and services are listed below: Board of Managers Name Title Business Address Nicholas J. Bonn Chairman 1 Lincoln Street, Boston, MA Peter A. Williams Manager 20 Churchill Place, London, E14 5HJ, UK Howard Fairweather Manager 1 Lincoln Street, Boston, MA Stefan Gavell Manager 1 Lincoln Street, Boston, MA Christopher P. Jensen Manager 1 Lincoln Street, Boston, MA Mark Snyder Manager 1 Lincoln Street, Boston, MA James Ross Manager 1 Lincoln Street, Boston, MA R. Bryan Woodard Manager 1 Lincoln Street, Boston, MA Officers for State Street Global Markets, LLC FCM Products Name Title Business Address Nicholas J. Bonn President 1 Lincoln Street, Boston, MA Mark Trabucco Chief Compliance Officer 1 Lincoln Street, Boston, MA Christopher P. Jensen Chief Financial Officer 1 Lincoln Street, Boston, MA David Lamb Managing Director 1230 Avenue of the Americas 19 th Floor New York, NY Scott Bevier Managing Director 1230 Avenue of the Americas 19 th Floor New York, NY

3 Nicholas J. Bonn. Mr. Bonn serves as Chairman of the Board of Managers and President of State Street Global Markets, LLC, and also serves as Executive Vice President and the Head of Portfolio Solutions, the securities brokerage business unit within the State Street Global Markets division of State Street. During his tenure at State Street, Mr. Bonn established State Street s broker/dealer subsidiaries in Canada, Japan and the United Kingdom and acts as a board member of those entities. He has also sat on various management committees within State Street s asset management, trading and securities lending businesses. Mr. Bonn joined State Street in 1992 to establish State Street s equity trading and transition management business, which he managed through In 2009, he was appointed to head of sales for the combined trading and lending businesses of the State Street Global Markets division of State Street, and has remained a member of its Sales Council, responsible for strategy and governance for enterprise-wide sales, relationship management and client initiatives. In 2013, Mr. Bonn was appointed as the Head of Portfolio Solutions. Prior to joining State Street, Mr. Bonn had been with the National Association of Securities Dealers since 1986, working in market and broker surveillance. Before that, he was with Fidelity Investments in trading roles since Peter A. Williams. Mr. Williams is a Senior Vice President of State Street with responsibility for State Street s futures execution and clearing business globally. He joined State Street in Mr. Williams has over thirty years of experience in the financial services industry. Prior to his work at State Street, Mr. Williams spent eighteen years with Bear Stearns where he ran a number of business lines, including Financial Futures, Interest Rates, Commodities and Foreign Exchange Sales. Mr. Williams began his career as a stock jobber with Akroyd and Smithers on the London Stock Exchange before moving into the Financial Futures and Options market when the LIFFE market opened in He eventually moved into roles in sales and management at the exchange. Howard Fairweather. Mr. Fairweather s experience includes over thirty years of service in various credit and risk management roles at State Street Bank & Trust Company. He retired from active employment with State Street Bank & Trust Company in 1996 as Executive Vice President of Credit and Risk Policy. Mr. Fairweather has served as an independent director on the State Street Global Markets, LLC Board of Managers since Since his retirement from active employment, Mr. Fairweather has also served in a number of other board and management-level leadership roles, including as Chairman of State Street Bank Luxembourg SA from , Director of State Street Bank S.p.A. since 2010 and Director of State Street Bank Europe Limited since He began his career at the Central National Bank of Cleveland. Stefan Gavell. Mr. Gavell is Executive Vice President, Global Head of Regulatory, Industry and Government Affairs for State Street, with responsibility for global regulatory and government relations. He is also President of State Street International Holdings. Mr. Gavell has worked for more than 30 years in the financial services industry in the United States, Europe and Asia. Mr. Gavell joined State Street in 1990 as general manager of the Tokyo office. In 1994, he relocated to become general manager of State Street's global treasury operation in London, and from 1995 until 2000 had responsibility for the businesses within the State Street Global Markets division of State Street in the United Kingdom and continental Europe. He returned to the United States in 2000 to head the international activities of the State Street Global Markets division of State Street. In 2002 he served as interim chief financial officer for State Street after which he assumed the role of State Street's treasurer. Mr. Gavell chaired the Investment Committee of State Street from 2000 to Mr. Gavell began his career at Credit Industriel et Commercial in New York and Paris. Prior to joining State Street, he worked for Mellon Bank. Christopher P. Jensen. Mr. Jensen is a Senior Vice President of State Street and began serving as the Chief Financial Officer of State Street Global Markets, LLC in Mr. Jensen joined State Street in 2006 as Director of Global Treasury and served in that role until becoming the Chief Financial Officer of State Street Global Markets, LLC. Prior to joining State Street, Mr. Jensen was Director of Portfolio Operations at Investors Bank & Trust. Before joining Investors Bank & Trust, Mr. Jensen worked in 3

4 financial reporting for GMAC Mortgage and in various roles at JPMorgan. He began his career as an accountant with Deloitte & Touche. Mark Snyder. Mr. Snyder is Executive Vice President and Head of the Foreign Exchange business at State Street. Mr. Snyder also serves as a Member of State Street's Executive Management Group and the State Street Associates Management Team. Mr. Snyder joined State Street in 1983 in the Capital Markets Group and has held a variety of positions in foreign exchange, treasury, futures and currency risk management in Sydney, Hong Kong and the United States. Mr. Snyder served as General Manager of State Street's branch in Hong Kong beginning in Mr. Snyder moved to Sydney in 1993, to establish Sydney as State Street's regional foreign exchange center, serving as the branch General Manager. Mr. Snyder repatriated to Boston in 1995 and served as manager of State Street's Foreign Exchange business in the United States. Prior to joining State Street, Mr. Snyder served as a futures and currency trader with Waldner and Company. James Ross. Mr. Ross is Executive Vice President and Global Head of the SPDR Exchange Traded Funds Business and head of Intermediary Distribution in the United States for the State Street Global Advisors ( SSgA ) division of State Street. Mr. Ross is also chairman of SSgA Funds Management, Inc. Mr. Ross is responsible for all aspects of SSgA's SPDR exchange traded fund business globally. Mr. Ross also serves as chairman of the Investment Company Institute's Exchange-Traded Funds Committee. As head of United States Intermediary Distribution, Mr. Ross is responsible for overseeing SSgA's sales and relationship management efforts with clients in the private wealth management, national broker-dealer and premier private client segments. In addition, Mr. Ross is a member of SSgA's North American and Global Product Committees. Prior to joining State Street in 1992, he was employed by Ernst & Young as a senior accountant, responsible for auditing investment companies and insurance companies. R. Bryan Woodard. Mr. Woodard joined State Street in 2003 and is Senior Vice President and Senior Global Managing Counsel for the State Street Global Markets division of State Street. In this role, Mr. Woodard manages the legal team responsible for overseeing all legal matters pertaining to State Street Global Markets, LLC. Prior to joining State Street, Mr. Woodard practiced in the Boston office of Ropes & Gray LLP. He is an active member of numerous legal and financial industry associations, including the Securities Industry Financial Markets Association, Financial Markets Lawyers Group and Massachusetts Bar Association. Mark Trabucco. Mr. Trabucco is a Vice President of State Street and the Chief Compliance Officer of State Street Global Markets, LLC. Mr. Trabucco began his career at State Street in 2008 as a Compliance Manager of State Street Global Markets, LLC s broker-dealer businesses. When State Street launched its futures commission merchant services through State Street Global Markets, LLC in 2009, Mr. Trabucco began serving as a Compliance Manager for the futures commission merchant business as well. Mr. Trabucco maintains the FINRA Series 7 (General Securities Representative), Series 24 (General Securities Principal) and the S3 (National Commodity Futures) licenses. Prior to joining State Street, Mr. Trabucco was a Senior Compliance Examiner for the Boston office of FINRA. Mr. Trabucco also previously worked as an equities trader on the floor of the Boston Stock Exchange for Pershing Trading Company. David Lamb. Mr. Lamb is a Managing Director and global head of the in-business risk function for State Street s GlobalLink and FCM businesses. Mr. Lamb began his career in finance in 1997 at Citigroup where he served in a variety of positions focused on risk management, eventually exiting as head of the Risk Analytics function. Mr. Lamb then worked at Morgan Stanley where he spent approximately ten years in a number of risk management roles prior to joining State Street in Mr. Lamb also has a background in physics and holds a Ph. D. in Theoretical Physics from the University of Alberta. Scott Bevier. Mr. Bevier joined State Street in 2015 as a Managing Director. He is head of the FCM business of State Street Global Markets, LLC. Mr. Bevier has over 19 years of experience in the financial services industry. Prior to joining State Street, Mr. Bevier was a Managing Director in Trading 4

5 Management for Millennium Partners, L.P. where he oversaw trading and clearing operations globally for multi strategy portfolio managers. Mr. Bevier also held management positions within the Equity Prime Brokerage and Fixed Income Prime Brokerage businesses at Bear Stearns and JPMorgan. He began his career with Arthur Andersen as an operational risk management consultant. Our Business State Street Global Markets, LLC is registered as an FCM with the CFTC and as a clearing brokerdealer with the SEC. State Street Global Markets, LLC is a member of FINRA, the NFA, the New York Stock Exchange ( NYSE ), the Chicago Mercantile Exchange ( CME ), the Chicago Board of Trade and the CME Clearinghouse. State Street Global Markets, LLC s role as an FCM comprises the execution and clearing of exchange traded futures and options on futures contracts. State Street Global Markets, LLC s role as a securities broker-dealer comprises several classes of services, including agency transactions, limited principal transactions, and mutual fund distribution. State Street Global Markets, LLC does not extend credit to customers in the form of securities margin accounts and generally processes securities transactions on its customers behalf on a delivery versus payment/receive versus payment basis. The following chart identifies the significant types of business activities and product lines in which State Street Global Markets, LLC engages, and the approximate percentage of its assets and capital that are used in each type of activity as of September 30, A brief overview of each product line follows the chart. Activity/Product Line Percentage of Assets* Percentage of Capital** GlobalLink <1% <1% Fund Connect <1% <1% Portfolio Solutions 99% 98% Futures Commission Merchant 48% 40% Fixed Income Clearing <1% <1% Other Portfolio Solutions Activities 51% 58% Marketing Agent and Distributor 1% 1% Proprietary Trading*** <1% <1% *The percentages of assets shown in this chart were calculated by taking the total assets of State Street Global Markets, LLC as of September 30, 2015 and attributing each component of total assets to a State Street Global Markets, LLC activity/product line and then dividing the aggregate amount of assets attributed to each State Street Global Markets, LLC activity/product line by State Street Global Markets, LLC s total assets. ** As a registered broker-dealer and futures commission merchant, State Street Global Markets, LLC is subject to the higher of the net capital requirements of the SEC s Uniform Net Capital Rule under Rule 15c3-1 of the Securities Exchange Act of 1934 (Rule 15c3-1) and CFTC Rule 1.17, respectively. State Street Global Markets, LLC has elected to use the alternative method of computing regulatory net capital requirements provided for in Rule 15c3-1. Under the alternative method permitted by Rule 15c3-1, State Street Global Markets, LLC must maintain net capital equal to the greater of 2% of aggregate customer-related debit items, as defined, or $250,000, whichever is greater. State Street Global Markets, LLC is also subject to a minimum net capital requirement of $1,000,000 or 8% of maintenance margin requirements, whichever is greater, under CFTC Rule As of September 30, 2015, State Street Global Markets, LLC s net capital was $395,917,398, which was $359,466,603 in excess of the minimum required net capital of $36,450,795 under CFTC Rule The percentages of capital shown in this chart were calculated by utilizing the net capital computation for State Street Global Markets, LLC required by the SEC regulations described above as of September 30, 2015 and attributing each component making up the computation of State Street Global Markets, LLC s net capital to an activity/product line and then dividing the aggregate amount of capital attributed to each State Street Global Markets, LLC activity/product line by State Street Global Markets, LLC s net capital. This approach implicitly assumes that capital held in excess of the minimum net capital required under CFTC Rule 5

6 1.17 is to be allocated according to the same percentages as capital attributed to each State Street Global Markets, LLC activity/product line. *** State Street Global Markets, LLC does not engage in proprietary trading of futures or cleared derivatives for its own account. See below for more information. Overview of Product Lines GlobalLink. Following an internal reorganization of business lines, the Trading & Clearing business unit of the State Street Global Markets division of State Street was renamed GlobalLink. In addition, the Fixed Income Clearing Service and FCM businesses transitioned to the Portfolio Solutions business unit. The GlobalLink business unit of the State Street Global Markets division of State Street operates one business line through State Street Global Markets, LLC, Fund Connect, as described in more detail below. Fund Connect. The Fund Connect business activities consist of two primary models. The first model, which is referred to as the direct model, is an electronic communications platform that facilitates communications of purchase and redemption orders for money market mutual funds directly between subscribers to the platform. Subscribers to the platform include institutional investors and registered money market mutual fund companies or their agents. The direct model is essentially a technology solution, as the institutional investors do not open a brokerage account with State Street Global Markets, LLC, but rather they open accounts and have a direct trading relationship with the mutual fund company and/or its transfer agent. The second model is a brokerage model in which the institutional investors open cash securities brokerage accounts with State Street Global Markets, LLC and State Street Global Markets, LLC acts as a selling dealer for various mutual funds. In the brokerage model, the institutional investors use the Fund Connect electronic communications platform to send purchase and redemption orders to State Street Global Markets, LLC for money market mutual funds, and State Street Global Markets, LLC in turn submits those orders to the mutual fund company, either on an aggregated basis with the orders of other customers or on an individual basis for the benefit of an individual customer, as the broker of record for the resulting transaction. In this model, State Street Global Markets, LLC will not accept a purchase order from a customer with respect to its cash account unless the cash required to satisfy such order is in the customer s account. Portfolio Solutions. The Portfolio Solutions business offers Equity and Fixed Income Brokerage services, Commission Management services, BlockCross ATS and Transition Management and Liquidity Management services, each of which involve State Street Global Markets, LLC. Following an internal reorganization of business lines, State Street Global Markets, LLC s Fixed Income Clearing Service and FCM businesses are now considered part of the State Street Portfolio Solutions business line. This internal reorganization did not result in any change to the management structure of State Street Global Markets, LLC and is not expected to have a material impact on the ongoing operations of State Street Global Markets, LLC s FCM business. Futures Commission Merchant. As described in more detail throughout this document, State Street Global Markets, LLC is an FCM registered with the CFTC. Its FCM business activities consist of (i) providing clearing services for futures and options on futures and (ii) providing execution services for futures contracts. With respect to execution services, State Street Global Markets, LLC has a futures execution desk to which clients can call or route their orders for execution by traders on that desk, and also offers clients the ability to electronically route their orders from their desktop to the relevant exchange, subject to compliance with certain pre-trade checks established by State Street Global Markets, LLC. All FCM customers of State Street Global Markets, LLC are institutional investors. Fixed Income Clearing Service. The Fixed Income Clearing Service, operating as a separate business line within State Street Global Markets, LLC, was recently established. In this service, 6

7 State Street Global Markets, LLC acts as a matched principal intermediary on third-party electronic trading platforms to facilitate anonymous trading of corporate fixed income securities between subscribers to the platform that have agreed to price and quantity for such transactions. As a matched principal intermediary, State Street Global Markets, LLC enters into a transaction with one counterparty and an offsetting transaction with the other party. State Street Global Markets, LLC is typically compensated for this service by the inclusion of a preagreed, fully-disclosed spread between the prices of the two offsetting transactions. State Street Global Markets, LLC does not engage in speculative fixed income transactions for its own account, nor does it maintain an inventory of fixed income securities in connection with this fixed income clearing service. Equity and Fixed Income Brokerage Services. These services involve State Street Global Markets, LLC acting as a registered broker-dealer in connection with the execution and clearing of equity and fixed income transactions on behalf of institutional clients on a delivery versus payment/receipt versus payment basis. Commission Management. This service includes a commission sharing program as well as a commission recapture program, each operated by State Street Global Markets, LLC. With respect to the commission sharing program service, State Street Global Markets, LLC agrees with an investment manager client to maintain an account that holds a designated portion of the commissions paid by the investment manager s clients with respect to securities transactions executed on their behalf through State Street Global Markets, LLC or third-party brokers. The investment manager can then direct State Street Global Markets, LLC to use those funds to purchase eligible research and brokerage services. This program is designed to comply with the safe harbor for client commission arrangements under Section 28(e) of the Securities Exchange Act of 1934, as amended. With respect to the commission recapture program, State Street Global Markets, LLC agrees, directly with an asset owner client to maintain an account that holds a designated portion of recaptured commissions paid by the client with respect to securities transactions executed on their behalf through State Street Global Markets, LLC or third-party brokers. The client can direct that such recaptured commissions be returned to it or applied to pay for particular services. BlockCross ATS. BlockCross ATS is an alternative trading system offered and operated by State Street Global Markets, LLC that facilities block crossing and electronic execution for equity trades. State Street Global Markets, LLC serves as the broker for transactions effected on the BlockCross ATS. Transition Management and Liquidity Management. Certain of State Street Global Markets, LLC s global affiliates offer transition management and/or liquidity management services to their pension plans, investment manager, fund, endowment, and other asset owner clients. The transition management services are designed to assist clients with rebalancing or transitioning their portfolios in response to changing investments needs, such as the asset owner s decision to replace an investment manager. The liquidity management services are designed to assist clients with the hedging of certain cash positions. When providing these services State Street Global Markets, LLC s affiliates are engaged by the client and authorized to instruct State Street Global Markets, LLC to (i) in its capacity as a broker-dealer, effect securities transactions and (ii) in its capacity as an FCM, execute and clear transactions in futures contracts. Marketing Agent and Distributor. State Street Global Markets, LLC acts as marketing agent and distributor for a number of exchange-traded-funds and other registered investment companies offered through the State Street Global Advisors division of State Street, including the SPDR Gold Trust. Proprietary Trading (Futures). As noted above, State Street Global Markets, LLC does not engage in proprietary trading of futures or cleared swaps for its own account. State Street Global Markets, LLC does, however, clear futures for its affiliates relating primarily to the State Street corporate treasury function and foreign exchange trading business unit. Financial information regarding State Street Global 7

8 Markets, LLC s proprietary trading activities related to clearing futures transactions for its affiliates is provided in the Relevant Financial Data section below. FCM Customer Business The FCM customer base of State Street Global Markets, LLC as of September 30, 2015 consists solely of institutional clients, which, as of September 30, 2015, is comprised of banks (approximately 6.1% of the active accounts comprising our customer base and less than 1% of the initial margin held in customer accounts by State Street Global Markets, LLC), broker-dealers (approximately 19.7% of the active accounts comprising our customer base and less than 1% of the initial margin held in customer accounts by State Street Global Markets, LLC), funds (approximately 72.7% of the active accounts comprising our customer base and 96.9% of the initial margin held in customer accounts by State Street Global Markets, LLC) and municipalities (approximately 1.5% of the active accounts comprising our customer base and 2.6% of the initial margin held in customer accounts by State Street Global Markets, LLC). For these customers, State Street Global Markets, LLC supports the execution and clearing of futures and options on futures. State Street Global Markets, LLC does not have, nor does it operate any separate international business through, any branches located outside of the United States, although its client base extends to persons domiciled in certain jurisdictions within Europe and Latin America. An affiliate of State Street Global Markets, LLC, State Street Bank GmbH, London Branch, operates as a futures clearing broker primarily for European based clients. State Street Global Markets, LLC is a clearing member of the following exchanges, and has established clearing relationships with the following swap execution facilities ( SEFs ) enabling it to clear trades made on such SEFs. Exchange Memberships Chicago Board of Trade Chicago Mercantile Exchange, Inc. Eris Exchange LLC SEF Clearing Relationships Bloomberg SEF, LLC SwapEx, LLC Either State Street Global Markets, LLC or one of its affiliates, State Street Bank GmbH, London Branch, is a member of the following clearinghouses: Clearing Organization Chicago Mercantile Exchange Eurex Clearing ICE Clear Europe State Street Global Markets, LLC is a Member X A State Street Global Markets, LLC Affiliate is a Member X X State Street Global Markets, LLC also engages the services of the following carrying brokers in connection with executing contracts on, or clearing contracts through, exchanges and clearinghouses to which State Street Global Markets, LLC is not a member or to which State Street Global Markets, LLC does not have direct connectivity: 8

9 Carrying Brokers US/Non-US State Street Bank GmbH, London Branch RBS Securities, Inc. Morgan Stanley & Co. LLC Citigroup Global Markets Inc. Affiliated with State Street Global Markets, LLC (Yes/No) Yes No No No Permitted Depositories and Counterparties State Street Corporation s Enterprise Risk Management ( ERM ) group performs a fundamental review of the stand-alone creditworthiness of each depository holding customer segregated and secured amount collateral funds. Prior to approval, ERM analyzes the depository s capital, leverage, funding and liquidity, profitability, asset quality and risk management. If applicable, the review also incorporates an assessment of the depository s ownership and integration into a larger financial institution group. Once State Street Global Markets, LLC selects a depository that will hold customer funds, ERM conducts a credit review of each such depository on an annual basis thereafter. In addition, on an ongoing basis, ERM monitors the financial strength and creditworthiness of each depository selected by State Street Global Markets, LLC to hold customer funds through use of State Street s credit rating agency subscriptions, reviewing reports concerning the depositories in the financial press, and reviewing earnings releases issued by the depositories. State Street Global Markets, LLC currently maintains its FCM settlement bank accounts at BMO Harris Bank, which is a CME-approved settlement bank. State Street Global Markets, LLC also maintains FCM depository bank accounts at Brown Brothers Harriman & Company ( BBH ), which is CME-approved depository bank, and may deposit a portion of its excess segregated and secured amount funds (i.e., State Street Global Markets, LLC s residual interest) in accounts with BBH and, in accordance with CFTC Rule 1.25, invest such funds in eligible money market funds offered through BBH. As described in further detail below, the Commodity Exchange Act and CFTC Rule 1.25 authorize FCMs to invest customer funds in certain permitted instruments. State Street Global Markets, LLC s policies and procedures allow it to invest customer segregated and secured amount collateral funds only in permitted investments in accordance with the Commodity Exchange Act and CFTC Rule ERM is responsible for assessing the appropriateness of specific investments of customer segregated and secured amount collateral in permitted investments. State Street s Enterprise Credit Risk Management Group assigns credit risk ratings at a granular, legal entity level that clearly identifies the basis upon which overall credit ratings are assigned. Specifically related to investments in money market mutual funds, State Street Global Markets, LLC invests customer funds in money market mutual funds that: (i) qualify for CME s Interest Earning Funds 2 program, commonly known as IEF2; (ii) are managed by a top tier manager; and (iii) maintain most of their holdings in the United States in shorter term securities. State Street Global Markets, LLC may also make permitted investments of customer funds in treasury and government funds in accordance with CFTC Rule The State Street Global Markets, LLC Finance Department is responsible for confirming that investments of customer funds and the use of customer securities are conducted in accordance with applicable laws and regulations, including compliance with investment concentration limits in accordance with CFTC Rule Concentration limits are based on asset limits and issuer-based limits. Material Risks State Street Global Markets, LLC is subject to many risks. Set forth below are the most significant risks faced by State Street Global Markets, LLC, accompanied by an explanation of how such risks may be material to FCM customers in evaluating whether to entrust funds to State Street Global Markets, LLC: 9

10 1. Market Risk. All investments are subject to market risk, which an investor or trader may incur as a result of changes in the market or the fair value of a particular financial instrument. State Street Global Markets, LLC s exposure to market risk is determined by a number of factors, including the size, duration, composition, and diversification of the positions it holds, as well as market volatility and liquidity. While State Street Global Markets, LLC manages market risk by setting and monitoring risk limits, it may incur significant losses if it is not able to appropriately manage its market risk, which in turn could expose its customers to the risk of loss in the event that State Street Global Markets, LLC becomes unable to satisfy its obligations to its customers as a result of market losses that it suffers. State Street Global Markets, LLC invests in cash and cash equivalents which represent cash on deposit with financial institutions and highly liquid investments with original maturities of less than ninety days that are not held for sale in the ordinary course of business. These investments include demand deposits and money market securities. State Street Global Markets, LLC also maintains cash and cash equivalents segregated in compliance with federal regulations which consist of cash and cash equivalents deposited in special bank accounts for the exclusive benefit of customer under Section 4d(a)(2) of the Commodity Exchange Act as well as Regulation 30.7 of the CFTC. Funds are also invested in money market mutual funds in the CME s Interest Earning Funds 2 program, commonly known as IEF2. Funds invested in the IEF2 Program can be used to meet performance bond requirements at the CME. State Street Global Markets, LLC may also invest funds in treasury and government funds in accordance with CFTC Rule State Street Global Markets, LLC maintains securities in compliance with federal regulations which consist of U.S. Treasury bills deposited in a special reserve bank account for the exclusive benefit of customers under SEC Rule 15c3-3. These securities are carried at fair value. 2. Concentration Risk. State Street Global Markets, LLC provides services to a diverse group of customers, including institutional asset owners, institutional investment managers and other financial institutions. These services are described more fully in the Our Business section above. In the normal course of providing securities brokerage services, State Street Global Markets, LLC does not offer margin accounts. In the normal course of providing FCM services, State Street Global Markets, LLC requires margin collateral on a basis consistent with industry practice and regulatory requirements. The types and amount of margin collateral are continually monitored, and counterparties are required to provide additional collateral as determined to be necessary in the opinion of State Street Global Markets, LLC. State Street Global Markets, LLC s exposure to risk resulting from transactions with its customers is measured on an individual customer or counterparty basis. To reduce the potential for risk concentration, customer credit limits are established and continually monitored in light of changing customer and market conditions. Nevertheless, a significant portion of the FCM business of State Street Global Markets, LLC is concentrated with a small number of customer accounts, which creates a degree of concentration risk to State Street Global Markets, LLC should an adverse event occur that affects one or more of those customers accounts. Customer accounts are characterized generally as Customer Segregated Accounts and 30.7 Accounts, each as described in more detail in the section below entitled Basic Overview of Customer Funds Segregation. As of September 30, 2015 of the margin held in Customer Segregated Accounts, over fifty percent (50%) is attributable to a single customer account, and of the margin held in 30.7 Accounts, over fifty percent (50%) is attributable to two customer accounts. Consequently, a failure to meet a margin call or other default by one of these customers could have a material adverse effect on State Street Global Markets, LLC in the event that it does not have sufficient resources to meet its corresponding obligations to the derivatives clearing organization or is not able to timely close-out the positions in such accounts. In connection with the wind down of its swap clearing business (described in more detail in the Updated Note Regarding Swaps Clearing above), State Street Global Markets, LLC no longer holds margin in any Cleared Swaps Customer Accounts. 3. Capital and Financing Considerations. As a registered broker-dealer and FCM, State Street Global Markets, LLC is subject to the higher of the net capital requirements established under the SEC s Uniform Net Capital Rule (Securities Exchange Act of 1934 Rule 15c3-1) and CFTC Rule 1.17, 10

11 respectively. State Street Global Markets, LLC has elected to use the alternative method for computing regulatory net capital requirements provided for in SEC Rule 15c3-1. Under the alternative method permitted by this Rule, State Street Global Markets, LLC must maintain net capital equal to the greater of 2% of aggregate customer-related debit items, as defined in SEC Rule 15c3-1, or $250,000, whichever is greater. State Street Global Markets, LLC is also subject to a minimum net capital requirement under CFTC Rule 1.17 equal to the greatest of $1,000,000, the SEC Rule 15c3-1 requirement, and an amount that is equal to 8% of the risk margin requirement for positions carried by State Street Global Markets, LLC in customer and noncustomer accounts. These capital constraints act as a limit on the amount of futures activity State Street Global Markets, LLC is able to clear. If State Street Global Markets, LLC s capital position is adversely affected, it could jeopardize the ability of State Street Global Markets, LLC to continue to provide FCM services to its customers. Outside of its own ability to generate revenue, State Street Global Markets, LLC s primary source for additional liquidity is an uncommitted, unsecured line of credit provided by its parent company, State Street Corporation. This line of credit has a $1.25 billion limit and a stated maturity date of December 2, Because this line of credit is uncommitted, customers of State Street Global Markets, LLC should be aware that State Street Global Markets, LLC may not be able to access all or any portion of this facility should it need to do so. Additionally, State Street Global Markets, LLC has entered into subordinated liability agreements with State Street Corporation under which State Street Global Markets, LLC has borrowed a total of $125 million. These subordinated liabilities are covered by agreements on terms approved by FINRA such that they are available to State Street Global Markets, LLC in computing its net capital under SEC Rule 15c3-1. Of that $125 million sum, $75 million is scheduled to be repaid on September 13, 2016 and $50 million is scheduled to be repaid on April 12, State Street Global Markets, LLC pays interest in connection with these subordinated liability agreements based on the three-month LIBOR rate, plus a spread. While the repayment date of these borrowings may be extended upon mutual agreement of the parties, there can be no assurance that the parties will agree to do so. Repayment of these borrowings may have an impact on State Street Global Markets, LLC s capital position and its ability to continue to provide FCM services to its customers. State Street Global Markets, LLC will not be permitted to repay such borrowings if doing so would cause it to be noncompliant with its minimum net capital requirements. The leverage ratio for State Street Global Markets, LLC, calculated in accordance with NFA requirements, provides information on how much of the firm's assets is made up of borrowed funds or debt. The lower the leverage ratio, the less debt the firm has incurred. The leverage ratio is calculated by taking State Street Global Markets, LLC s total balance sheet assets (less customer segregated requirements) divided by total regulatory capital. As of September 30, 2015, State Street Global Markets, LLC s total balance sheet assets were $1,177,755,994 (less customer segregated requirements of $500,199,203 and U.S. Treasury positions owned of 20,001,607) and its total regulatory capital was $633,094,929. Accordingly, State Street Global Markets, LLC s leverage ratio as of September 30, 2015 was Non-Futures Business Activities. State Street Global Markets, LLC s FCM business is modest relative to its broker-dealer and other activities, including, without limitation, the other Portfolio Solutions businesses and its role as a marketing agent and distributor. Accordingly, risks presented by those businesses may have an impact on the overall risk to futures customers of State Street Global Markets, LLC. A significant portion of State Street Global Markets, LLC s revenues is derived from its role as marketing agent of the SPDR Gold Trust. This revenue could be adversely affected by any number of market events, such as price volatility, new entrants into the market or economic conditions. Should this revenue be adversely affected, State Street Global Markets, LLC s overall capital position could be affected, which could result in a reduced capacity for State Street Global Markets, LLC to provide FCM services to its customers. 11

12 As noted above in the section entitled Our Business, several businesses in State Street s Portfolio Solutions business line other than the FCM business also operate through State Street Global Markets, LLC. These other Portfolio Solutions businesses involve State Street Global Markets, LLC acting in its capacity as an SEC-registered broker-dealer to help clients implement their asset allocation and investment strategies in connection with these services. State Street Global Markets, LLC s customer equity and fixed income securities activities in connection with the Portfolio Solutions business are effected primarily on a delivery versus payment basis. Although delivery versus payment transactions do not require State Street Global Markets, LLC to extend credit to its customer or the counterparty, State Street Global Markets, LLC is exposed to risk of loss in the event of the customer s or contra broker s inability to perform its obligations. Should the customer or broker fail to perform, State Street Global Markets, LLC may be required to complete the transaction at prevailing market prices. This could adversely affect State Street Global Markets, LLC s capital position, thereby affecting its capacity to provide FCM services to its customers. Additionally, in connection with State Street s Fixed Income Clearing Service, State Street Global Markets, LLC acts as a matched principal intermediary on third-party electronic trading platforms to facilitate anonymous trading of corporate fixed income securities between subscribers to the platform that have agreed to price and quantity for such transactions by entering into offsetting transactions with each subscriber. These offsetting transactions are effected on a delivery versus payment basis. As a matched principal intermediary, State Street Global Markets, LLC is exposed to risk of loss in the event either customer on one of the offsetting trades fails to perform its obligations. Should either customer fail to perform, State Street Global Markets, LLC may be required to fulfill that side of the transaction in the marketplace at prevailing market prices in order to satisfy its obligations to the non-failing customer. This could adversely affect State Street Global Markets, LLC s capital position, thereby affecting its capacity to provide FCM services to its customers. State Street Global Markets, LLC does not engage in speculative fixed income transactions for its own account, nor does it maintain an inventory of fixed income securities in connection with this fixed income clearing service. Finally, State Street Global Markets, LLC also acts in its capacity as a broker-dealer registered with the SEC in connection with the brokerage model of State Street s Fund Connect services. In this brokerage model, institutional investors open cash securities brokerage accounts with State Street Global Markets, LLC and State Street Global Markets, LLC acts as a selling dealer for various mutual funds. The principal risk to State Street Global Markets, LLC in connection with the Fund Connect brokerage model is if a customer fails to make payment to State Street Global Markets, LLC for securities purchased through Fund Connect. State Street Global Markets, LLC seeks to mitigate this risk by requiring Fund Connect customers using the brokerage model to pre-pay amounts due in connection with orders submitted through Fund Connect to State Street Global Markets, LLC before State Street Global Markets, LLC sends such orders to the relevant mutual fund companies to be filled. While State Street Global Markets, LLC takes such actions in an effort to mitigate credit risk, it is possible that such actions could be ineffective and that State Street Global Markets, LLC could sustain losses that would adversely affect State Street Global Markets, LLC s capital position and hinder its capacity to provide FCM services to its customers. 5. Affiliated Entity Risk. In the ordinary course of business, State Street Global Markets, LLC enters into transactions with its affiliates. Proprietary cash balances held by State Street Global Markets, LLC are held on deposit in an account at State Street Bank and Trust Company, and cash equivalents held by State Street Global Markets, LLC may be invested in money market mutual funds managed by an affiliate, SSgA Funds Management, Inc. As of December 31, 2014, of the $163,909,727 of cash and cash equivalents held by State Street Global Markets, LLC and reported on its statement of financial condition, cash of $17,337,331 was held on deposit at State Street Bank and Trust Company and cash equivalents of $146,572,396 were invested in a money market mutual fund managed by SSgA Funds Management, Inc. 12

13 As noted in the Capital and Financing Considerations section above, State Street Global Markets, LLC is also the beneficiary of a $1.25 billion uncommitted, unsecured line of credit provided by its parent company, State Street Corporation. State Street Global Markets, LLC has also entered into subordinated liability agreements with State Street Corporation under which State Street Global Markets, LLC has borrowed a total of $125 million. For more information on the line of credit and the subordinated liability arrangements and the risks to State Street Global Markets, LLC associated with those arrangements, please see the portion of this Material Risks section entitled Capital and Financing Considerations above. State Street Global Markets, LLC maintains omnibus futures and options on futures accounts with its affiliate, State Street Bank GmbH, London Branch to faciliate the clearing of futures and options on futures activity of State Street Global Markets, LLC customers on non-united States exchanges of which State Street Global Markets, LLC is not a member. As of December 31, 2014, State Street Global Markets, LLC had a receivable of $4,270,569 and a payable of $20,259 respectively from this activity included in receivable from affiliate and payable to affiliate on the Statement of Financial Condition. In addition, State Street Bank GmbH, London Branch maintains an omnibus account with State Street Global Markets, LLC for the clearing of futures and options on futures activity of its customers on exchanges for which State Street Global Markets, LLC is a member. As of December 31, 2014, State Street Global Markets, LLC had a receivable of $9,282,102 from this activity. In addition, State Street Bank GmbH, London Branch also posted collateral with State Street Global Markets, LLC of $174,535,924 in the form of U.S. Treasury Securities. State Street Bank GmbH, London Branch is regulated in Germany by the Bundesanstalt fuer Finanzdienstleistungsaufsicht, as its home state regulator, and in the United Kingdom by the Financial Conduct Authority, as its host state regulator. As a German bank, State Street Bank GmbH is required to hold funds deposited with it in respect of the omnibus account in accordance with the requirements of the German Banking Act (Kreditwesengesetz). As noted above in the section entitled Permitted Depositories and Counterparties, State Street Global Markets, LLC invests its futures customer funds in the CME s IEF2 program eligible money market funds, which includes money market mutual funds managed by State Street Global Markets, LLC s affiliate, SSgA Funds Management, Inc. This means that as part of the CME s IEF2 program, State Street Global Markets, LLC is able to choose to invest customer funds in investments managed by one of its affiliates. When determining whether or not to entrust funds with State Street Global Markets, LLC, Customers should consider that investments of customer funds in money market mutual funds managed by SSgA Funds Management, Inc. through the CME s IEF2 program could create additional affiliated entity risk. State Street Bank and Trust Company, an affiliate of State Street Global Markets, LLC, also maintains a principal account with State Street Global Markets, LLC for clearing futures and options on futures transactions. As of December 31, 2014, State Street Global Markets, LLC had a net payable of $12,056,718 from this activity included in payable to affiliates. In addition, State Street Global Markets, LLC accepted collateral of $2,506,234 in the form of U.S. Treasury securities from State Street Bank and Trust Company related to initial margin amounts paid to the relevant exchanges related to open futures contracts as of December 31, State Street Global Markets, LLC may borrow securities from State Street Bank and Trust Company, acting in a principal capacity, to facilitate customer trading activity under security borrowing agreements on terms which permit State Street Global Markets, LLC to repledge or resell the securities to others. At December 31, 2014, securities with a fair value of $4,744,118 were obtained by State Street Global Markets, LLC under this relationship, and $4,900,979 of cash was given to State Street Bank and Trust Company as collateral in these security borrowing agreements. Customers using State Street s Portfolio Solutions transition management services (which services are described in more detail in the Our Business section above) can elect to have State Street Global Markets, LLC act as their FCM for purposes of effecting transactions in futures related to their transition activities. A significant amount of the futures customer activity cleared by State Street Global Markets, LLC originates from such customers of State Street s Portfolio Solutions business, which presents some 13

14 concentration risk to State Street Global Markets, LLC s futures clearing business. Consequently, if futures transaction activity in connection with Portfolio Solutions customers were to fall, State Street Global Markets, LLC could suffer a significant decrease in its overall futures customer activity. 6. Customer and Counterparty Activities and Credit Risk. Credit risk represents the maximum potential loss State Street Global Markets, LLC faces due to the possible nonperformance by customers and counterparties of their contractual obligations. State Street Global Markets, LLC s customer securities activities (excluding State Street Global Markets, LLC s activities in connection with the Fund Connect brokerage model, which activities are discussed in more detail within the section above entitled Non- Futures Business Activities ) are transacted primarily on a delivery versus payment basis. In delivery versus payment transactions, State Street Global Markets, LLC is exposed to risk of loss in the event of the customer s or contra broker s inability to perform its obligations. Should the customer or broker fail to perform, State Street Global Markets, LLC may be required to complete the transaction at prevailing market prices, which may result in a loss to State Street Global Markets, LLC in the event that the price of the security subject to the transaction has changed since the transaction was entered into by its defaulting customer. State Street Global Markets, LLC s exposure to credit risk can be directly impacted by volatile markets that may impair the ability of counterparties to satisfy their contractual obligations. State Street Global Markets, LLC seeks to manage its credit risk through a variety of reporting and control procedures, by applying uniform credit standards maintained for all activities with credit risk, and, in the case of its FCM services, by requiring additional margin to be posted by certain of its customers when State Street Global Markets, LLC s credit evaluations of such customers dictate. While State Street Global Markets, LLC takes such actions in an effort to mitigate credit risk, it is possible that such actions could be ineffective and that State Street Global Markets, LLC could sustain losses that would adversely affect State Street Global Markets, LLC s capital position and hinder its capacity to provide FCM services to its customers. 7. Clearing Member Obligations. State Street Global Markets, LLC is a clearing member of the CME Clearinghouse with respect to clearing of futures and options on futures transactions. In that capacity, State Street Global Markets, LLC has agreed generally to compensate the CME Clearinghouse for damages or losses caused by the failure of a customer of State Street Global Markets, LLC to perform its obligations under its futures customer agreements. State Street Global Markets, LLC is also required to contribute to a CME guaranty fund as security for its obligations with respect to futures. The guaranty fund is comprised of assets contributed by applicable clearing members that can be used to cover losses incurred by the CME Clearinghouse in the event of a clearing member default. The amount of a clearing member s required contribution to the guaranty fund is determined by the CME pursuant to a formula that is designed to cover the proportionate share of the risk introduced to the clearinghouse as a result of the trading activity cleared by such clearing member for the relevant product class, subject to a minimum contribution. To the extent the relevant aggregate guaranty fund is insufficient to cover the losses incurred by the CME Clearinghouse in the event of a clearing member default, State Street Global Markets, LLC, like all other clearing members, will also be required to make additional contributions to the CME Clearinghouse, as assessed by the clearinghouse. The amount of any such assessment is subject to an overall cap measured as a multiple of a clearing member s underlying original guaranty fund contribution. As of September 30, 2015, State Street Global Markets, LLC s contribution to the CME s guaranty fund with respect to its futures activity was approximately $10,135,053. In the event that there are additional increases in the volume and amount of transactions cleared by State Street Global Markets, LLC through the CME Clearinghouse, or if the CME determines that it needs to increase the aggregate size of any guaranty fund that it maintains, State Street Global Markets, LLC may be required to make further contributions to the applicable guaranty fund(s), the payment of which could have a materially adverse effect on its capital position or its ability to continue operating as an FCM. State Street Global Markets, LLC also has exposure to customer risk when it uses carrying brokers to clear futures and options on futures transactions for its customers on exchanges and their related clearinghouses where State Street Global Markets, LLC does not have a membership. These activities 14

15 may expose State Street Global Markets, LLC to financial risk in the event a customer defaults on its margin or other obligations under its futures customer agreement with State Street Global Markets, LLC since State Street Global Markets, LLC will typically have agreed to indemnify the carrying brokers for losses that the carrying brokers may sustain from the failure of an underlying customer to provide margin or satisfy any other obligation when due. 8. Outsourcing Risk. State Street Global Markets, LLC s execution and clearing businesses are dependent on relationships it has in place with third-party providers for back-office and technology support. With respect to the FCM futures execution and clearing businesses, The Royal Bank of Scotland plc ( RBS ) provides facilities management services to State Street Global Markets, LLC on an outsourced basis pursuant to a facilities management and services agreement. The facilities management services include trade processing, reporting and other back office operational services related to exchange traded derivatives as well as a sublicense to use the Rolfe and Nolan books and records processing system for exchange traded derivatives. Under the terms of the relevant agreement with RBS, RBS is generally required to provide advance prior written notice if it desires to terminate the applicable agreement and cease providing services. State Street Global Markets, LLC believes the duration of the advance written notice period will provide it with sufficient time to engage alternate providers of these outsourced services, although there can be no assurance that it will be able to do so. With respect to its securities brokerage services, State Street Global Markets, LLC has an outsourcing relationship in place with an industry leading provider pursuant to which State Street Global Markets, LLC receives use of a securities books and records processing system, and also outsources certain back office securities processing operations. In the event of an interruption of these outsourcing relationships or in the services provided by these vendors, State Street Global Markets, LLC s ability to provide securities brokerage services to its customers could be adversely affected. Material Complaints or Actions During the three-year period from August 31, 2012 through September 30, 2015, State Street Global Markets, LLC has been the subject of the following material proceedings: On December 12, 2013, FINRA accepted a Letter of Acceptance, Waiver and Consent pursuant to which State Street Global Markets, LLC was censured and fined $125,000. Without admitting or denying the findings, State Street Global Markets, LLC consented to the described sanctions and to the entry of findings that during the period from January 2011 to November 2011, (i) it did not prepare accurate bank reconciliations, which caused State Street Global Markets, LLC to inaccurately compute its net capital and customer reserve requirements, (ii) it did not maintain accurate books and records and (iii) that it failed to establish, maintain and enforce adequate supervisory systems, procedures and controls related to the preparation and maintenance of its operating bank account and general ledger, as well as the related reconciliations. State Street Global Markets, LLC took actions to address this matter by appointing a new Chief Financial Officer to oversee the finance and financial operations functions and by adding additional staff to support the finance function. State Street Global Markets, LLC also augmented and automated its reconciliations process such that automated reconciliations are produced and reviewed on a daily basis and that general ledger certifications are subject to a secondary review by senior personnel. Additionally, State Street Global Markets, LLC limited access to its general ledger to persons approved by the Chief Financial Officer of State Street Global Markets, LLC. On September 17, 2014, FINRA accepted a Letter of Acceptance, Waiver and Consent pursuant to which State Street Global Markets, LLC was censured and fined a total of $52,500. Without admitting or denying the findings, State Street Global Markets, LLC consented to the described sanctions and to the entry of findings that, at times during the period of November 14, 2008 through July 31, 2012: (i) it submitted incorrect short interest position reports to FINRA, (ii) it submitted inaccurate transaction reports to the Trade Reporting and Compliance Engine ( TRACE ) and (iii) its supervisory system did not provide supervision reasonably designed to achieve compliance with applicable securities laws and regulations concerning short interest reporting. State Street Global 15

16 Markets, LLC took actions to address this matter by reviewing and reinforcing its written supervisory procedures and updating its desktop procedures to more effectively document how to comply with short interest reporting rules. On June 3, 2015, FINRA accepted a Letter of Acceptance, Waiver and Consent pursuant to which State Street Global Markets, LLC was censured and fined a total of $35,000. Without admitting or denying the findings, State Street Global Markets, LLC consented to the described sanctions and to the entry of findings that, at times during the period of April 1, 2014 through June 30, 2014: (i) it failed to report to TRACE the correct time of execution for a number of transactions in TRACEeligible securities, (ii) it failed to report accurately other transactions in TRACE-eligible securities to TRACE and (iii) its supervisory system did not provide supervision reasonably designed to achieve compliance with applicable securities laws and regulations and the rules of FINRA. State Street Global Markets, LLC took actions to address this matter by revising its written supervisory procedures to address certain deficiencies identified in this Letter of Acceptance, Waiver and Consent. State Street Global Markets, LLC is a wholly-owned subsidiary of State Street Corporation. State Street Corporation and its subsidiaries have been, and continue to be, subject to various legal and/or regulatory actions, proceedings and claims that arise in the normal course of its business, but State Street Global Markets, LLC does not believe that such actions, proceedings or claims has had or will have a material adverse effect on its ability to perform its obligations as an FCM. For further information, please refer to Item 3, Legal Proceedings, in State Street Corporation s current Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as applicable, in each case on file with the SEC. Customer Funds Segregation Set forth below is a summary of the United States customer protection requirements for FCMs, including customer funds segregation, FCM management and investment of such funds and related matters applicable to State Street Global Markets, LLC. Customer Accounts. State Street Global Markets, LLC maintains two different types of accounts for customers, depending on the products a particular customer trades: (i) a Customer Segregated Account for customers that trade futures and options on futures listed on US futures exchanges; and (ii) a 30.7 Account for customers that trade futures and options on futures listed on foreign boards of trade. The requirement to maintain these separate accounts reflects the different risks posed by the different products. Cash, securities and other collateral (collectively, Customer Funds ) required to be held in one type of account, e.g., the Customer Segregated Account, may not be commingled with funds required to be held in another type of account, e.g., the 30.7 Account, except as the CFTC may permit by rule or order. Customer Segregated Account. Funds that customers deposit with an FCM, or that are otherwise required to be held for the benefit of customers, to margin futures and options on futures contracts traded on futures exchanges located in the United States, i.e., designated contract markets, are held in a Customer Segregated Account in accordance with Commodity Exchange Act Section 4d(a)(2) and CFTC Rule Customer Segregated Funds held in the Customer Segregated Account may not be used to meet the obligations of the FCM or any other person, including another customer. All Customer Segregated Funds may be commingled in a single account, i.e., a customer omnibus account, and held with: (i) a bank or trust company located in the United States; (ii) a bank or trust company located outside of the United States that has in excess of $1 billion of regulatory capital; (iii) an FCM; or (iv) a derivatives clearing organization. Such commingled account must be properly titled to 16

17 make clear that the funds belong to, and are being held for the benefit of, the FCM s customers. Unless a customer provides instructions to the contrary, an FCM may hold Customer Segregated Funds only: (i) in the United States; (ii) in a money center country; 1 or (iii) in the country of origin of the currency. An FCM must hold sufficient US dollars in the United States to meet all US dollar obligations and sufficient funds in each other currency to meet obligations in such currency. Notwithstanding the foregoing, assets denominated in a currency may be held to meet obligations denominated in another currency (other than the US dollar) as follows: (i) US dollars may be held in the United States or in money center countries to meet obligations denominated in any other currency; and (ii) funds in money center currencies 2 may be held in the United States or in money center countries to meet obligations denominated in currencies other than the US dollar Account. Funds that 30.7 Customers deposit with an FCM, or that are otherwise required to be held for the benefit of customers, to margin futures and options on futures contracts traded on foreign boards of trade, i.e., 30.7 Customer Funds, and sometimes referred to as the foreign futures and foreign options secured amount, are held in a 30.7 Account in accordance with CFTC Rule Funds required to be held in the 30.7 Account for or on behalf of 30.7 Customers may be commingled in an omnibus account and held with: (i) a bank or trust company located in the United States; (ii) a bank or trust company located outside the United States that has in excess of $1 billion in regulatory capital; (iii) an FCM; (iv) a derivatives clearing organization; (v) the clearing organization of any foreign board of trade; (vi) a foreign broker; or (vii) such clearing organization s or foreign broker s designated depositories. Such commingled account must be properly titled to make clear that the funds belong to, and are being held for the benefit of, the FCM s 30.7 Customers. As explained below, CFTC Rule 30.7 restricts the amount of such funds that may be held outside of the United States. Customers trading on foreign markets assume additional risks. Laws or regulations will vary depending on the foreign jurisdiction in which the transaction occurs, and funds held in a 30.7 Account outside of the United States may not receive the same level of protection as Customer Segregated Funds. If the foreign broker carrying 30.7 Customer positions fails, the broker will be liquidated in accordance with the laws of the jurisdiction in which it is organized, which laws may differ significantly from the United States Bankruptcy Code. Return of 30.7 Customer Funds to the United States will be delayed and likely will be subject to the costs of administration of the failed foreign broker in accordance with the laws of the applicable jurisdiction, as well as other intervening foreign brokers, if multiple foreign brokers were used to process the United States customers transactions on foreign markets. If the foreign broker does not fail but the 30.7 Customers United States FCM fails, the foreign broker may want to assure that appropriate authorization has been obtained before returning the 30.7 Customer Funds to the FCM s trustee, which may delay their return. If both the foreign broker and the United States FCM were to fail, potential differences between the trustee for the United States FCM and the administrator for the foreign broker, each with independent fiduciary obligations under applicable law, may result in significant delays and additional administrative expenses. Use of other intervening foreign brokers by the United States FCM to process the trades of 30.7 Customers on foreign markets may cause additional delays and administrative expenses. To reduce the potential risk to 30.7 Customer Funds held outside of the United States, CFTC Rule 30.7 generally provides that an FCM may not deposit or hold 30.7 Customer Funds in permitted accounts outside of the United States except as necessary to meet margin requirements, including prefunding margin requirements, established by rule, regulation, or order of the relevant foreign boards of trade or foreign clearing organizations, or to meet margin calls issued by foreign brokers carrying the Money center countries means Canada, France, Italy, Germany, Japan and the United Kingdom. 2 Money center currencies mean the currency of any money center country and the Euro. 17

18 Customers positions. Rule 30.7 further provides, however, that, in order to avoid the daily transfer of funds from accounts in the US, an FCM may maintain in accounts located outside of the US an additional amount of up to 20 percent of the total amount of funds necessary to meet margin and prefunding margin requirements to avoid daily transfers of funds. Investment of Customer Funds. Section 4d(a)(2) of the Commodity Exchange Act authorizes FCMs to invest Customer Segregated Funds in obligations of the United States, in general obligations of any State or of any political subdivision thereof and in obligations fully guaranteed as to principal and interest by the United States. CFTC Rule 1.25 authorizes FCMs to invest Customer Segregated Funds and 30.7 Customer Funds in instruments of a similar nature. CFTC Rules further provide that the FCM may retain all gains earned and is responsible for investment losses incurred in connection with the investment of Customer Funds. However, the FCM and customer may agree that the FCM will pay the customer interest on the funds deposited. Permitted investments include: (i) Obligations of the United States and obligations fully guaranteed as to principal and interest by the United States (United States government securities); (ii) General obligations of any State or of any political subdivision thereof (municipal securities); (iii) Obligations of any United States government corporation or enterprise sponsored by the United States government (United States agency obligations); (iv) Certificates of deposit issued by a bank (certificates of deposit) as defined in Section 3(a)(6) of the Securities Exchange Act of 1934, or a domestic branch of a foreign bank that carries deposits insured by the Federal Deposit Insurance Corporation; (v) Commercial paper fully guaranteed as to principal and interest by the United States under the Temporary Liquidity Guarantee Program as administered by the Federal Deposit Insurance Corporation (commercial paper); (vi) Corporate notes or bonds fully guaranteed as to principal and interest by the United States under the Temporary Liquidity Guarantee Program as administered by the Federal Deposit Insurance Corporation (corporate notes or bonds); and (vii) Interests in money market mutual funds. The duration of the securities in which an FCM invests Customer Funds cannot exceed, on average, two years. An FCM may also engage in repurchase and reverse repurchase transactions with non-affiliated registered broker-dealers, provided such transactions are made on a delivery versus payment basis and involve only permitted investments. All funds or securities received in repurchase and reverse repurchase transactions with Customer Funds must be held in the appropriate Customer Account, i.e., Customer Segregated Account, 30.7 Account or Cleared Swaps Customer Account. Further, in accordance with the provisions of CFTC Rule 1.25, all such funds or collateral must be received in the appropriate Customer Account on a delivery versus payment basis in immediately available funds. 18

19 For more information on the manner in which State Street Global Markets, LLC invests customer funds, please see the section above entitled Permitted Depositories and Counterparties as well as the disclosures within the Material Risks section above entitled Market Risk and Affiliated Entity Risk. 3 No SIPC Protection. Although State Street Global Markets, LLC is a registered broker-dealer, it is important to understand that the funds deposited with State Street Global Markets, LLC for trading futures and options on futures contracts on either United States or foreign markets are not protected by the Securities Investor Protection Corporation. Further, CFTC Rules require State Street Global Markets, LLC to hold funds deposited to margin futures and options on futures contracts traded on US designated contract markets in Customer Segregated Accounts. Similarly, unless otherwise permitted by the CFTC, State Street Global Markets, LLC must hold funds deposited to margin cleared futures and options on futures contracts traded on foreign boards of trade in a 30.7 Account. In computing its Customer Funds requirements under relevant CFTC Rules, State Street Global Markets, LLC may only consider those Customer Funds actually held in the applicable Customer Accounts and may not apply free funds in an account under identical ownership but of a different classification or account type (e.g., securities, Customer Segregated, 30.7) to an account s margin deficiency. In order to be used for margin purposes, the funds must actually transfer to the identically-owned undermargined account. For additional information on the protection of customer funds, please see the Futures Industry Association s Protection of Customer Funds Frequently Asked Questions located at: Relevant Financial Data The financial data provided below is as of September 30, Copies of State Street Global Markets, LLC s most recent publicly-available statements of financial condition can be found on the State Street corporate website at: Selected Financial Data (USD) Total Ownership Equity/Net Worth $508,094,929 Regulatory Capital $633,094,929 Regulatory Net Capital $395,917,398 Total Ownership Equity/Net Worth represents the amount invested by State Street Global Markets, LLC s parent plus profits earned but not distributed to the parent. Regulatory Capital represents Total Equity plus subordinated debt that has been approved in accordance with CFTC and SEC regulations. Regulatory Net Capital represents Regulatory Capital less illiquid assets and other charges/deductions required by the CFTC s and SEC s net capital regulations. Proprietary Margin Requirements As noted above, State Street Global Markets, LLC does not engage in proprietary trading of futures or cleared derivatives for its own account. State Street Global Markets, LLC does, however, clear derivatives for its affiliates relating primarily to the State Street corporate treasury function and foreign exchange trading. State Street Global Markets, LLC s derivatives clearing on behalf of its affiliates is 3 As discussed below, NFA publishes a semi-monthly report, which shows for each FCM, inter alia, the percentage of Customer Funds that are held in cash and each of the permitted investments under CFTC Rule The report also indicates whether the FCM held any Customer Funds during that month at a depository that is an affiliate of the FCM. 19

20 considered proprietary activity under CFTC Rules. The table below presents the margin requirements of such proprietary accounts as a percentage of the total margin requirements held by State Street Global Markets, LLC for each account type listed below. This information is presented as of September 30, Account Type Proprietary Margin Requirement Percentage Customer Segregated Accounts Less than 1% Cleared Swaps Accounts* 0% 30.7 Accounts 12% * Due to the closure of all customer accounts in connection with winding down State Street Global Markets, LLC s swaps clearing business (described in more detail in the Updated Note Regarding Swaps Clearing above), the percentage of State Street Global Markets, LLC s Cleared Swaps Account activity attributable to the swaps clearing activities of State Street Global Markets, LLC s is zero. Customer Receivable Balances Written-Off as Uncollectable in the Twelve Months Ending September 30, 2015 The following chart identifies the percentage of customer receivable balances, by account type, that State Street Global Markets, LLC had to write-off during the twelve month period ended September 30, 2015, as compared to the current aggregate balance of funds held in each such account type as of September 30, Account Type Total Customer Balance Write-Offs (as a percentage of Total Customer Balance) Customer Segregated Accounts $479,733,135 0% Cleared Swaps Customer Accounts $0 0% 30.7 Accounts $7,699,729 0% Additional Financial Disclosures State Street Global Markets, LLC s primary source for additional liquidity is an uncommitted, unsecured $1.25 billion line of credit provided by its parent company, State Street Corporation. Because this line of credit is uncommitted, however, customers of State Street Global Markets, LLC should be aware that State Street Global Markets, LLC may not be able to access all or any portion of this facility should it need to do so. State Street Global Markets, LLC does not otherwise have access to any undrawn committed lines of credit. State Street Global Markets, LLC has not entered into any non-hedged, principal over-the counter transactions. State Street Global Markets, LLC does not provide financing for customer transactions involving illiquid financial products for which it is difficult to obtain timely and accurate prices. For information relating to State Street Global Markets, LLC s customer base concentration, please see the disclosures entitled Concentration Risk within the Material Risks section above. Additional financial information on all FCMs, including State Street Global Markets, LLC, is available on the CFTC s website at: Customers of State Street Global Markets, LLC should also be aware that NFA publishes on its website certain financial information with respect to State Street Global Markets, LLC. State Street Global Markets, LLC s FCM Capital Report provides the most recent month-end adjusted net capital, required 20