FOCUS Report Sig Brokerage, Lp

X-17A-5 [Paper] - FOCUS Report

Published: 2007-03-28 09:15:03
Submitted: 2007-03-01
Period Ending In: 2006-12-31
scanned.pdf Scanned paper document


                                                                      UNITED STATES
                                                SE CURITIES AND EXCHANGE COMMISSION                                                   OMB APPROVAL
                                                                Washington D.C. 20549                                            OMB Number:       3235—0123
                                                                                                                                 Expires:   January 31, 2007




             ul
                                                   ANNUAL AUDITED REPORT                                                         Estimated average burden
                                                                                                                                 hours per response. . . 12.00
                                                                  FORM X—17A—5
                                                                         PART IH                                                        SEC FILE NUMBER
                    07003518
                                                                                                                                      8— 52028
                                                                   FACING PAGE
                      Information Requirej 1 of Brokers and Dealers Pursuant to Section 17 of the
                             Securities Ex hange Act of 1934 and Rule 17a—5 Thereunder

REPORT FOR THE PERIOD BEGINNING                              01/01/2006                                 AND ENDING             12/31/2006
                                                                           MM/IDDIYY                                                          MMMDDIYY



                                              A. REGISTRANT IDENTIFICATION
NAME OF BROKER—DEALER:                                                                                                              OFFICIAL USE ONLY
  SIG BROKERAGE, LP
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)                                                                       FIRM iD. NO.
 401 CITY LINE AVENUE                             SUITE #220
                                                                         (No. and Street)



 BALA CYNWYD                                       BRA                                      19004
(Ciy)                                                        (Sutg                                   (Zip Code)

NAME AND TELEPHONE NUMBER OF PE RSON                          TO CONTACT IN REGARD TO THIS REPORT
 BRIAN SULLIVAN                                                       610—617—2600


                                              B. Al CCOUNTANT IDENTIFICATION
INDEPENDENT PUBLIC ACCOUNTANT w ose opinion is contained in this Report*

 Goldstein Golub Kessler LLP
                                                      (Name — if individual, state last, first, middle name)

 1185 Avenue of the Americas,                               New York,                                             NY
(Address)                                                    (City)                                               (State)                     (Zip Code)

CHECK ONE:
            Certified Public Accountant                                                                                 PHOCESSFD
     [—] Public Accountant                                                                                                               Ob
     D Accountant not resident in United States or any of its possessions.                                                  MAR 2 8 2007

                                                            FOR OFFICIAL USE ONLY                                   IHOMSON
                                                                                                                    <SraRmcAt
* Claims for exemption fromthe requirementt hat the annual report be covered by the opinion of an independent public accountant
  must be supported by a statement offacts an d circumstances relied on as the basisfor the exemption. See section 240.17a—5(e)(2).

                                Potential persons w o are to respond to the collection of information
SEC 1410 (06—02)                contained in thisfort in are not required to respond unless the form displays


                                                                                                                                                             C
                                                                                                                                                                 A
                                a currently valid OJB control number


                                                         OATH OR AFFIRMATION

1   BRIAN SULLIVAN
                                                                                                                     swear (or affitm) that, to the

best of my knowledge and belief th¢              accompanying financial statement and supporting schedules pertaining to the firm of

SIG BROKERAGE, LP                                                                                                                          , as of

DECEMBER 31                       , 20 96      _ |, are true and correct. 1 further swear (or affitm) that neither the company nor any partner, pro—

prictor, principal officer or director has any proprietary interest in any account classified soley as that of a customer, except as follows:




                                                                                                                .                           ignature
                                                                                                                ZI24jy réer"_
         7.                        J//f{cf?                                                                                                    Title


Nolnr&/ Public
                     COMMONWEALTH OF PENNSYLVANIA
                      toc       NOTARIAL SHAL
                      ANNA DiSANTO—MATzIK Natary Public
                      Lower Merion Twp., Montgomery County
                       My Commission Expires April 21, 2010
This report®* contains (check all applicable bbxes):
    E (a)        Facing Page.
    [J] (6)      Statement of Financial Condit ion.
    D (c)        Statement of Income (Loss).
    L__| (d)     Statementof Changes in Fingncial Condition.
    D (e)        Statement of Changes in Stogkholders‘ Equity or Partners‘ or Sole Proprietor‘s Capital.

    O &#         Statement of Changes in Liabilities Subordinated to Claims of Creditors.

    D (g)        Computation of Net Capital.
    D (b)        Computation for Determinatit n of Reserve Requirements Pursuant to Rule 15c3—3.

    { ®          Information Relating to the Possession or control Requirements Under Rule 15¢3—3.

    0®         A Reconciliation, including abpropriate explanation, of the Computation of Net Capital Under Rule 15c3—1 and the
                 Computation for Determinati n of the Reserve Requirements Under Exhibit A of Rule 15¢3—3.
    D (k)         A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of con—
                 solidation.
        (1)      An Oath or Affirmation.

    D (m) A copy of the SIPC Supplem ntal Report.
    [—] (n)    A report describing any materi 1 inadequacies found to exist or found to have existed since the date of the previous audit.




** For conditions ofconfidential treatment of c Eriain portions of this filing, see section 240.17a—5(e) (3).


                                                   Coal
                     GOLDS] [EIN GOLUB KESSLER LLP
                                Ce rtified   Public Accountants and Consultants




INDEPENDENT AUDITOR‘S REPORT




To the Partners of
SIG Brokerage, L.P.

We have audited the accompan [ying statement of financial condition of SIG Brokerage, L.P. (the
"Company") as of December B1, 2006. This financial statement is the responsibility of the
Company‘s management. Our responsibility is to express an opinion on this financial statement
based on our audit.

We conducted our andit in acd ordance with auditing standards generally accepted in the United
States of America. Those stand lards require that we plan and perform the audit to obtain reasonable
assurance about whether the st itement of financial condition is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
statement of financial condition h. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that of ur audit provides a reasonable basis for our opinion.
In our opinion, the statement 0 F financial condition referred to above presents fairly, in all material
respects, the financial position bf SIG Brokerage, L.P. as of December 31, 2006, in conformity with
accounting principles generally accepted in the United States of America.



 HobJate: HelL u_LLL
GOLDSTEIN GOLUB KES$SLER LLP
February 21, 2007




                     1185 Aveny e of the Americas Suite 500— New York, NY 10036—2602
                         TEL 20 2 372 1800 FAX 212 372 1801 www.ggkllp.com


                                                                        S$IG BROKERAGE, L.P.
                                                                              (a limited partnership)

  STATEMENT OF FINANCIAL CONDITION
———
December 31, 2006

ASSETS

Cash                                                                                         $       16118

Commissions Receivable                                                                              23,165

Receivable from Clearing Broker                                                                   3,339,949

Receivable from Affiliates                                                                          70,293

Investments in Securities — at fair value fcost $6,434,518)                                      19,492,772

Other Assets                                                                                          2,856
       Total Assets                                                                          $22,945,153
LIABILITIES AND PARTNERS® CAPITAL

Liabilities:
  Payable to affiliates                                                                      $     462,931
  Accrued expenses and otherliabilities                                                            234,425

       Total liabilities                                                                           697,356

Partners‘ Capital                                                                                22,247,797

       Total Liabilities and Partners® Capital                                               $22,945,153




                                                              See Notes to Statement of Financial Condition

                                                                                                              2


                                                                      SIG BROKERAGE, L.P.
                                                                            (a limited partnership)

                                     NOTES TO STATEMENT OF FINANCIAL CONDITION
                                                               December 31, 2006


1.    QORGANIZATION:   SIG Brok erage, LP. (the "Company") is a broker—dealer registered with the
                       Securities and Exchange Commission (the "SEC") and is a member of the New
                       York Sto k Exchange, Inc. (the "NYSE") and the American Stock Exchange,
                       LLC (" mex"). The Company earns commissions primarily from acting as an
                       introduci g broker for other registered broker—dealers on the NYSE and Amex.
                       The Com: pany is owned 99% by SIG Specialists, Inc. (the "Parent") and 1% by
                       SIG Brok prage, LLC.


2.    SIGNIFICANT      This statd ment of financial condition has been prepared in conformity with
     ACCOUNTING        accounting x principles generally accepted in the United States of America, which
     POLICIES:         require th use of estimates by management.

                       No provi ion for federal income taxes has been made since, as a limited
                       partnershi) p, the Company is not subject to federal income taxes. The Company
                       is exempt for state and local income tax purposes as the Company has elected to
                       file as a pr art of a consolidated group wherein the sole sharcholder of the Parent
                       files for the group. Provisions for state and local taxes are computed by the sole
                       sharehold t of the Parent and allocated to the Company, when applicable.


3.   RECEIVABLE        At December 31, 2006, the receivable from the clearing broker represents
     FROM CLEARING     commissigns eamed as an introducing broker.
     BROKER AND
     CONCENTRATION     The Company has agreed to indemnify its clearing broker for losses that it may
     OF CREDIT RISK:   sustain from the accounts introduced by the Company. As of December 31,
                       2006, ther P were no unsecured amounts related to these accounts that were owed
                       to the clea Fing broker.


4.    RELATED PARTY    The Company is under common control with Susquehanna International Group
     TRANSACTIONS:     LLP ("SIG") and Susquehanna Business Development, Inc.

                       The Company executes trades for affiliated broker—dealers for which it receives
                       commissigns at various rates.

                       SIG acts ab a common payment agent for the Company and various affiliates for
                       all direct and indirect expenses. The Company pays a monthly management fee
                       for the indirect costs based on allocations determined at the affiliated entity‘s
                       discretion. Included in the due to affiliates is an accrued management fee of
                       $82,614 relating to these indirect operating costs.

                       Susquehanna Business Development, Inc. performs marketing services for the
                       Company. The payable to this affiliate for these services is $126,602 as of
                       December 31, 2006. Because of its short—term nature, the fair value of the
                       payable to pffiliates approximates its carrying amount.


                                                                    SIG BROKERAGE, L.P.
                                                                           (a limited partnership)

                                   NOTES TO STATEMENT OF FINANCIAL CONDITION
                                                                               December 31, 2006
__


                    The Company and various other entities are under common ownership and
                    control. As a result, management can exercise its discretion when determining
                    which enfity will engage in new business activities. Therefore, the financial
                    position presented herein may not necessarily be indicative of that which would
                    be obtainid had these entities operated autonomously.


5.   NET CAPITAL    As a registered broker—dealer and member firm of the NYSE, the Company is
     REQUIREMENT:   subject tol the Uniform Net Capital Rule 15c3—1 of the SEC. The Company
                    computes |its net capital under the basic method permitted by the rule, which
                    requires the maintenance of minimum net capital of 6—2/3% of aggregate
                    indebtedngss, as defined, or $5,000, whichever is greater. At December 31,
                    2006, thq Company had net capital of $2,853,959, which exceeded its
                    requirement of $69,657 by $2,784,302.



6.   NYSE GROUP     As of Detember 31, 2005, the Company owned 3 NYSE memberships. The
     RESTRICTED     Company |accounted for its investment in these memberships under the cost
     STOCK          method since its inception. On March 7, 2006, the NYSE and Archipelago
     EXCHANGE       Holdings, (Inc. combined their businesses and became wholly—owned subsidiaries
     TRANSACTION:   of NYSE Group, Inc. ("NYSE Group"), a newly—created, for—profit and publicly—
                    traded holding company (the "NYSE Merger®").

                    In connection with the NYSE Merger, the Company received $1,109,350 in cash
                    and 237,379 shares of NYSE Group common stock (the "NYX stock") in
                    exchange jfor its 3 NYSE memberships. In addition, the Company received
                    $210,531 Wwith respect to the 3 NYSE memberships pursuant to a "permitted
                    dividend" geclared by the NYSE immediately prior to the consummation of the
                    NYSE Me}ger.

                    APB No.29, as amended by Statement of Financial Accounting Standards
                    No. 153, Axchanges of non—monetary assets, provides guidance on exchanges of
                    assets in alnon—monetary transfer. Accounting for non—monetary assets acquired
                    in a substantially non—monetary exchange is, at times, based on cost or fair value
                    of the assefs relinquished and, at times, on the fair value of the assets received in
                    the exchange. Based on the guidance under APB No. 29, the Company valued the
                    shares of NYX stock received immediately after the exchange based on the cost
                    of the assets relinquished in the exchange with an adjustment for the cash
                    received from the exchange. Based on this methodology, the Company
                    determined the adjusted cost basis of the shares received from the exchange to be
                    $6,434,518 as of the date of the NYSE Merger.

                    After the   consummation of the NYSE Merger, the Company accounts for its
                    investment] in the NYX stock as owned restricted stock and reflects its value on
                    its statement of financial condition at the estimated fair value of such restricted
                    shares pursuant to the American Institute of Certified Public Accountants Audif
                    and Accounting Guide — Brokers and Dealers in Securities. The shares of
                    NYX stock received in the NYSE Merger are subject to a three—year restriction
                    on transfer. The restriction will be removed in equal one—third installments on
                    each of March 7, 2007, 2008 and 2009, unless the restrictions are removed earlier
                    by the NYS$E Group in its sole discretion.


                                               CSA
                    GOLDSTEIN GOLUB KESSLER LLP
                               Certified Public Accountants and Consultants




INDEPENDENT AUDITOR‘S $UPPLEMENTARY REPORT
ON INTERNAL CONTROL


To the Members of
SIG Brokerage, LP

In planning and performing our gudit of the financial statements and supplemental schedule of SIG
Brokerage, LP (the "Company")) as of and for the year ended December 31, 2006, in accordance
with auditing standards generally accepted in the United States of America, we considered the
Company‘s internal control over| financial reporting (internal control) as a basis for designing our
auditing procedures for the purflose of expressing our opinion on the financial statements, but not
for the purpose of expressing an opinion on the effectiveness of the Company‘s internal control.
Accordingly, we do not express gn opinion on the effectiveness of the Company‘s internal control.

Also, as required by rule 17a—5(g)(1) of the Securities and Exchange Commission (the "SEC"), we
have made a study of the practices and procedures followed by the Company including
consideration of control activities for safeguarding securities. This study included tests of such
practices and procedures that we considered relevant to the objectives stated in rule 17a—5(g) in
making the periodic computafions of aggregate indebtedness (or aggregate debits) and net
capital under rule 17a—3(a)(11) and for determining compliance with the exemptive provisions of
rule 15c3—3. Because the Company does not carry securities accounts for customers or perform
custodial functions relating to chstomer securities, we did not review the practices and procedures
followed by the Company in any of the following:

    1. Making quarterly secufities examinations, counts, verifications and comparisons and
       recordation of differences required by rule 17a—13

    2. Complying with the requirements for prompt payment for securities under Section 8 of
       Federal Reserve Regulation T of the Board of Governors of the Federal Reserve System
    3. Obtaining and maintaining physical possession or control of all fully paid and excess margin
       securities of customers as required by rule 15¢3—3

The management of the Company is responsible for establishing and maintaining internal control
and the practices and procedures referred to in the preceding paragraph. In fulfilling this
responsibility, estimates and judlgments by management are required to assess the expected benefits
and related costs of controls and of the practices and procedures referred to in the preceding
paragraph and to assess whether those practices and procedures can be expected to achieve the
SEC‘s above—mentioned objectives. Two of the objectives of internal control and the practices and
procedures are to provide mal]agement with reasonable but not absolute assurance that assets for
which the Company has responsibility are safeguarded against loss from unauthorized use or
disposition and that transactio gs are executed in accordance with management‘s authorization and
recorded properly to permit thk preparation of financial statements in conformity with accounting
principles generally accepted |in the United States of America.         Rule 17a—5(g) lists additional
objectives of the practices and procedures listed in the preceding paragraph.




                    1185 Avenug of the Americas Suite 500 New York, NY 10036—2602
                        TEL 212 372 1800 FAX 212 372 1801 www.ggkllp.com


Because of inherent limitations in internal control and the practices and procedures referred to
above, error or fraud may occur nd not be detected. Also, projection of any evaluation of them to
future periods is subject to the risk that they may become inadeqiiate because of changes in
conditions or that the effectivenes s of their design and operation may deteriorate.

A control deficiency exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adverse y affects the entity‘s ability to initiate, authorize, record, process or
report financial data reliably in a ccordance with generally accepted accounting principles such that
there is more than a remote likel hood that a misstatement of the entity‘s financial statements that is
more than inconsequential will n t be prevented or detected by the entity‘s internal control.

A material weakness is a signi ficant deficiency, or combination of significant deficiencies, that
results in more than a remote likd lihood that a material misstatement of the financial statements will
not be prevented or detected by t re entity‘s internal control.

Our consideration of internal co htrol was for the limited purpose described in the first and second
paragraphs and would not nece ssarily identify all deficiencies in internal control that might be
material weaknesses. We did nq t identify any deficiencies in internal control and control activities
for safeguarding securities that w e consider to be material weaknesses, as defined above.
We understand that practices and procedures that accomplish the objectives referred to in the second
paragraph of this report are con kidered by the SEC to be adequate for its purposes in accordance
with the Securities Exchange Ag t of 1934 and related regulations, and that practices and procedures
that do not accomplish such ob ectives in all material respects indicate a material inadequacy for
such purposes. Based on this junderstanding and on our study, we believe that the Company‘s
practices and procedures, as de scribed in the second paragraph of this report, were adequate at
December 31, 2006 to meet the S EC‘s objectives.

This report is intended solely fo p the information and use of management, the SEC, the New York
Stock Exchange, Inc. and any lother regulatory agencies which rely on rule 17a—5(g) under the
Securities Exchange Act of 193 4 in their regulation of registered brokers and dealers, and is not
intended to be and should not be used by anyone other than these specified parties.


 Mollite._ Hotul4s k _ZLILLP
GOLDSTEIN GOLUB KESS LER LLP

February 21, 2007




                                                                                              $3



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