FOCUS Report Rbc Capital Markets Arbitrage, S.a.

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

Filed: 2010-01-11 08:48:26
Dated: 2009-12-30
Period of Report: 2009-10-31
scanned.pdf Scanned paper document

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                                                                                                                                                         SEC FILE         NUMBER
              DFC           2009

                                                                              FACING PAGE
                            Information      Required           of Brokers         and Dealers Pursuant                      to   Section    17 of the
                                      Securities Exchange                    Act of 1934            and Rule 17a-5           Thereunder

REPORT FOR THE PERIOD BEGINNiNG                                                   November                     2008      AND ENDING                      October     31   20O
                                                                                    MMIDDIYY                                                             MM/DD/YY

                                                                REGISTRANT                         IDENTIFICATION

NAME OF BROKER                     DEALER
                                -Q         Yk.d4                               oV-9-                                                                      OFFICIAL      USE ONLY

                                                                                                                                                              FIRM ID         NO
ADDRESS          OF PRINCIPAL PLACE OF BUSINESS                                    Do         not       use    P.O Box     No
                                                         One     Liberty Plaza
                                                          No          and     Street

     New      York                                                     NY                                                                            10006
              City                                                State                                                                                 Zip Code

NAME AND TELEPHONE                        NUMBER OF PERSON TO CONTACT                                             iN    REGARD TO           THIS   REPORT

  Earnest Chandler                                                                                                                                 212   858-7186

                                                                                                                                            Area Code        Telephone        No

                                                             ACCOUNTANT                            IDENTIFICATION

INDEPENDENT PUBLIC ACCOUNTANT                                     whose opinion                    is   contained      in this   Report

                                                     Deloitte           Touche LLP
                                                 Name            if   individual         state          last   first   middle     name
Two World Financial            Center            New      York                                                         New   York                               10281-1414
   Address                                            City                                                               State                                     Zip Code

                Certified    Public    Accountant

        Li      Public    Accountant

                Accountant      not resident     in   United      States        or any of           its   possessions

                                                                      FOR OFFICIAL USE ONLY

claims for      exemption    from the requirement         that the      annual report               be covered      by the opinion   of an independent      public    accountant
must be supported by          statement               and
                                           offacts          circumstances          relied          on     as the basis   for the exemption See section 240.1          7a-5e2
SEC 1410 3-91

            RBC CAPITAL MARKETS             ARBITRAGE        S.A
An Indirect    Wholly-Owned    Subsidiary   of the Royal    Bank   of Canada

                         SEC   I.D No 8-6540

            FOR THE YEAR ENDED OCTOBER 31 2009
              INDEPENDENT AUDITORS                REPORT

    Filed   pursuant to Rule   7a-5e3       as   Public    Document

Deloitte                                                                                                                                                                Deloitte           Touche       LIP

                                                                                                                   Sc7FT                                       Msoo                World    Financial         Center

                                                                                                                                                                        New York           NY 10281-1414

                                                                                                                                                                        Tel          2124362000
                                                                                                                                                                        Fax          2124365000


INDEPENDENT                      ACCOUNTANTS                       REPORT ON APPLYINQAGREEDUPQN                                                           PJ9.CEDURES
                                                                                     UiVllUll MUhU

To the Board of Directors                     of   RBC       Capital      Markets         Arbitrage           S.A
One    Liberty Plaza

165    Broadway
New York NY                 1006-1404

In accordance             with   Rule        17a-5e4             under the Securities Exchange                            Act of 1934          we have performed                    the procedures

enumerated below                 with    respect to the           accompanying              Schedule           of    Assessment           and Payments

Assessment Reconciliation                      Form SIPC-7T                   to    the Securities            Investor       Protection             Corporation        SIPC          for   the period

from April               2009    to   October 31 2009 which                        were agreed           to    by    RBC        Capital      Markets          Arbitrage       S.A the

Company                  and the Securities and Exchange                       Commission                Financial          Industry         Regulatory          Authority Inc and SIPC

solely    to   assist    you and the other specified parties in evaluating the Companys compliance with the applicable
instructions          of the Form SIPC-7T    The Companys management         is responsible for compliance with those

                          This agreed-upon              procedures         engagement was                 conducted              in   accordance         with    attestation         standards

established         by    the    American          Institute     of Certified Public              Accountants                The      sufficiency        of these procedures                 is   solely

the responsibility of those                   parties      specified       in this    report       Consequently we make no                             representation              regarding       the

sufficiency         of the procedures               described       below      either       for   the purpose             for    which       this    report    has   been requested               or    for

any    other    purpose          The procedures                we performed and                our findings           are   as    follows

               Compared           the    listed     assessment           payments         in   Form SIPC-7T                with       respective       cash     disbursement              records

               entries      noting      no differences

               Compared           the Total         Revenue        amounts          of the audited            Form X-17A-5                for the year          ended      October         31 2009
               less      revenues       reported        on   the Financial          and Operating                  Combined           Uniform        Single     FOCUS reports                     for    the

               period       November                2008       through     March          31 2009         as applicable               with     the   amounts reported                in   Form SIPC
               7T     for the period          from April             2009      to   October        31 2009            noting      no differences

               Compared            any adjustments              reported      in    Form SIPC-7T                   with    FOCUS         reports       for the periods              April         2009

                             October         31 2009 and            supporting            schedules       and work           papers       prepared        by management                   noting        no

               Proved the arithmetical accuracy                           of the calculations             reflected          in   Form SIPC-7T FOCUS                          reports      for    the

                             November                2008       through     October            31 2009 and            supporting          schedules           and work        papers       prepared

               by management                 supporting          the adjustments            noting       no differences

We                                                                                                                                                                be the expression                 of an
       were not engaged                 to and did not conduct                 an    examination the objective                         of which        would

opinion        on compliance             Accordingly              we do     not express           such        an    opinion       Had we performed                   additional           procedures
other matters            might have come              to our      attention        that    would     have          been reported          to   you

This    report      is   intended       solely for the information                   and use of the specified                     parties       listed   above       and      is   not intended              to

be    and should          not be      used    by anyone          other than         these      specified           parties

ioUc                              ciuAi-                                  W7
December         21 2009

                                                                                                                                                                        Member        of

                                                                                                                                                                        Deloitte      Touche      Tohmatsu

                                                              SECURITIES INVESTOR                                                      PROTECTION                            CORPORATION
      SIPC-7T                                                         805         15th         St      N.W          Suite       800       Washiriglon                    D.C 20005-2215                                                          SIPC-7T
                                                                                        Transitional                     Assessment Reconciliation
     29-REV           12/09                                                                                                                                                                                                                   29-REV          12/09

                                                              Read         carefully           the   instructions          in
                                                                                                                                your    Working        Copy         before        completing        this    Form

                                                         TO BE FILED                          BY ALL              SIPC      MEMBERS               WITH              FISCAL              YEAR        ENDINGS

       Name        of      Member             address          Designated                 Examining               Authority            1934     Act        registration            no     and    month          in     which    fiscal    year        ends   for

 purposes             of    the     audit         requirement          of     SEC         Rule         17a-5

                                                                                                                                          Note        If
                                                                                                                                                            any     of   the       information             shown        on    the   mailing      label

                                                                                        otr                                               requires           correction              please      e-mail         any      corrections        to

                                                                                                                                                   and       so    indicate          on   the     form    fifed

                                                                 fa              /.etS/4

                                                          aL                              t4J

                                                                                                                                          hIrne        and       telephone              number        of
                                                                                                                                                                                                           person        te    contact

                                                                                                                                                                  this   form
                                orI                    -.-c                               ci                                             respecting

                        A-ci                                                                                             5L                                                                                 c-
              General             Assessment                          2e     from        page             not       less    than       $150     minimum                                                              ___________________________

              Less         payment           made    with      SIPC-6            filed        including          $150    paid    with     2009        SIPC-4 exclude                    interest                  ___________________________

                                1jate         Pid

              Less         prior        overpayment             applied

              Assessment                 balance         due     or    overpayment                                                                                                                                _____________________________

              Interest          computed            on    late    payment                see         instrrnl icn                for              days         at    20%          per   annum                     ___________________________

              Total        assessment               balance        and           interest           due     nrbvdrpayment                  carried           forward

              PAID         WiTH          THIS      FORM
              Check         enclosed               payable       to    SIPO
              Total        must be same                  as       above

                                             carried     forward
              Overpayment                                                                                                                     ___________________________

      Subsidiaries                       and      predecessors                         included             in    this form        give       name         and      1934       Act      registration            number

The     SIPC       member               submitting            this form           and         the

that    all
              by   whom
                                   it   is   executed

                                                              herein        is

                                                                                  true         correct
                                                                                                                                          /C                        arre     of
                                                                                                                                                                                                    rrs                      /tr$r-c                         SA
and                                                                                                                                                                                                                                              .J

                                                                                                                                                                                          AuthorOed        Signarore

Dated     the_____                day        of                                               20O                                                                                                                                                 ___

This form            and        the      assessment              payment                 is    due     60        days    atler       the end          of    the     fiscal         year Retain              the      Working         Copy        of   this   form
for      period            of   not      less      than          years            the         latest             years     tn   an     easily     accessible                 place

          aes               ____________
                            Postmarked                                Received                                      Reviewed
        Calculations               _________                                                                        Documentation               __________                                                                    Forward     Copy


       Disposition                      exceptions

                                                                    DETERMINATION                                                     OF SIPC                                NET OPERATING                                              REVENUES
                                                                                                                      AND GENERAL                                                  ASSESSMENT
                                                                                                                                                                                                                                                       Amounts        for     the    fiscal    period

                                                                                                                                                                                                                                                          beginning           April           2009
                                                                                                                                                                                                                                                       and     ending   -4-r                         201
                                                                                                                                                                                                                                                                 Eliminate           cents

item     No
2a                                                                  l2JPart             IA    Line              Code 4030
       Total   revenue           FOCUS                  Line

2b AddiHons
                                                                                                                                                                                                         subsidiaries                and
                                                       from         the     securities                  business            of    subsidiaries                     except               foreign
                  Total        revenues

                                                     not       included           above

                                                                          transactions                    in   securities              in    trading               accounts
                  Net    loss        horn            principal

                                                                                                               commodities                       in   trading            accounts
                  Net     loss       from            principal            transactions                    in

                                     and         dividend                                    deducted            in      determining                       item        2a
                                                                                                                                                                                                                                                                5l ga
                  Interest                                            expense

                                                                                  oh                                             in   the                                         or     distribution             ot    securities
                  Net     loss       trom            management                          or    participation                                     underwriting

                                                                                                                                                       fees        and                     fees       deducted            in    determining      net
                                          other            than advertising                        printing            registration                                           legal
                                                                                                                                                                  or     distribution               of     securities
                               from                                         ot     or                                    in      underwriting
                    profit                     management                                participation

                          loss       from            securities             in    investment                   accounts

                                                                                                                                                                                                                                                               57                             ffr

2c     Deductions
                                                                                                                                                                            end    investment                                    or    unit
                  Revenues                 lroni        the       distribution                of    shares          of           registered                 open                                                company

                                                                                                                                                      from        the       business           ol     insurance                from     investment
                                                              train       the     sale        of        variable         annuities
                    investment                  trust

                                                               rendered            to                               investment                    companies                   or       insurance               company          separate
                    advisory          services                                               registered

                                                                    transactions                                              futures            products
                    accounts               and         from                                        in    security

                  Revenues                 from         commodity

                                                                                             and        clearance              paid         to    other           SIPC            members           in         connection        with
                  Commissions                         floor         brokerage

                    securities             transactions

                                                                                              connection                 with                          solicitation
                    Reimbursements                            for    postage            in                                            proxy

                                                      securities                   investment                  accounts
                  Net     gain        from                                  in

                                                                                                                                      transactions                      in             certilicales              of                   and
                                     commissions                          and                            earned          from                                                                                          deposit
                    100%        of                                                markups
                                                                                                                         commercial                                      that          nature       nine         months         or    less
                                                     bills        bankers          acceptances                    or                                       paper
                    ii    Treasury

                    from       issuance                date

                                                                                                                                                       incurred                    connection                  with     other    revenue
                                                             of                    advertising                  and         legal       tees                                 in
                    Direct       expenses                         prinling

                    related          to        the    securities                business                revenue             defined              by        Section           169L              of        the     Act

                                                                                                                                                      10    the         securities            business
                    Other        revenue               not        related         either           directly         or      indirectly

                  See        Instruction

                                                                                                                                      Line            22IPART                          Line    13
                         Total        interest                and     dividend               expense             FOCUS                                                       lfA

                          Code            4075          pIus
                                                                    line    2b4    above  but                         not        in   excess

                          at     total          interest            and     dividend  income

                                                                    earned         on        customers              securities                   accounts
                    ii 40%           of         interest

                          40%             oh     FOCUS              line           Code            3960

                          Enter            the        greater
                                                                      at    tine              or        ii

                          Total           deductions
2d      SIPC    Net                                  Revenues

2e      General       Assessment                           .0025
                                                                                                                                                                                                                                                                        but    not     less   than
                                                                                                                                                                                                                                                        to     page

                                                                                                                                                                                                                                                        $150     minimum

                  tte                                                                                                                          Deloitte         Touche   LIP

                                                                                                                                               Two World Financial Center
                                                                                                                                               New York NY 10281-1414

                                                                                                                                               Tel        212 436 2000
                                                                                                                                               Fax        2124365000

INDEPENDENT                    AUDITORS                    REPORT

To     the   Board     of Directors           and    Stockholders           of

RBC Capital Markets Arbitrage S.A
New York New York

We      have    audited       the    accompanying               statement of financial               condition of          RBC          Capital      Markets

Arbitrage        S.A the            Company                as of October          31 2009           that
                                                                                                            you     are filing      pursuant to Rule
     7a-5 under       the   Securities        Exchange Act of 1934 This                           financial        statement       is    the   responsibility

of the       Companys management                          Our                                                                             this financial
                                                                                                  express an opinion               on
                                                                                        is   to

statement based              on our audit

We      conducted        our audit       in   accordance           with auditing             standards       generally         accepted         in the     United

States       of America          Those    standards             require    that    we   plan and           perform      the      audit    to obtain

reasonable assurance                 about     whether          the    financial    statement          is   free    of material          misstatement

An      audit   includes      consideration               of internal     control       over financial             reporting       as      basis     for

designing        audit      procedures that are appropriate                       in the     circumstances             but not for the purpose                      of

expressing        an opinion          on the effectiveness                of the Companys                  internal     control         over financial

reporting Accordingly                   we     express no such             opinion           An    audit    also    includes        examining on
test    basis evidence             supporting        the       amounts and         disclosures         in the financial            statement

assessing       the    accounting        principles            used and     significant           estimates         made by management                       as

well as evaluating             the    overall       financial         statement presentation                 We     believe       that     our audit

provides         reasonable basis              for       our opinion

In     our opinion          such    statement of financial                condition          presents       fairly    in   all    material        respects

the financial         position       of the    Company            at   October      31 2009           in    conformity with accounting

principles       generally          accepted        in   the    United    States    of America

7LLoutQ-                             $9-- tC/
December 21 2009

                                                                                                                                               Member      of

                                                                                                                                               Deloitte    Touche    Tohmatsu

An   Indirect          Wholly-Owned                    Subsidiary          of the Royal           Bank    of   Canada

OCTOBER 31 2009
In thousands            except          share and per share               information


 Cash                                                                                                                                      21

 Securities        owned           at fair     value includes            securities     pledged     of   $7612156                   11814448
 Receivable         from    affiliates               net                                                                                  153

 Other assets                                                                                                                          76300

TOTAL ASSETS                                                                                                                       $11890922

LIABILITIES           AND STOCKHOLDERS                               EQUITY

 Bank   loans                                                                                                                        5247540
 Securities        sold but not yet purchased                       at   fair   value                                                1540710
 Payable      to   affiliates            net                                                                                         1983780
 Accounts          payable and          accrued       liabilities                                                                      62664

        Total       liabilities                                                                                                      8834694

LIABILITIES           SUBORDiNATED                         TO CLAIMS            OF GENERAL           CREDITORS                       1350000

STOCKHOLDERS                      EQUITY
 Common         stock      $1000 par value                    150000      shares    authorized       issued    and   outstanding      150000

 Retained       earnings                                                                                                             1556228

        Total stockholders                    equity                                                                                 1706228

TOTAL       LIABILITIES                 AND STOCKHOLDERS                         EQUITY                                            $11890922

See accompanying                notes    to    the    statement of financial            condition



An   Indirect      Wholly-Owned                             Subsidiary             of the Royal               Bank         of    Canada



     RBC      Capital    Markets            Arbitrage             S.A the           Company was                      incorporated                on October            26        2001     as

     Societe       Anonyme                 under       the    laws of the Grand Duchy                         of Luxembourg                      The Company                 is   an     indirectly

     wholly-owned             subsidiary           of the Royal                  Bank     of Canada the              Bank               foreign               corporation

     The Company            is         fully     disclosed             broker-dealer registered                  with the Securities                         and   Exchange
     Commission and                  is     member of               the Financial               Institutions        Regulatory          Authority                  F1NRA                 The

     Company        clears       its   transactions               through an affiliate                 RBC      Capital      Markets             Corporation               RBC CM Corp
     or the    Clearing          Broker

     The Company            is    engaged              in     single        line   of business            which      is    to trade     for           its   own      account           in securities

     and   commodities            including                 but not limited             to futures       contracts        and    options          thereon             The Company does
     not conduct        any customer                   business

     SUMMARY OF SIGNIFICANT                                            ACCOUNTING                        POLICIES

     The statement of             financial            condition            is   prepared        in    conformity with accounting                             principles          generally

     accepted      in the     United         States          of America             which         require     management               to    make            estimates       and

     assumptions         that     affect         the    amounts             reported       in   the    financial      statement and                    accompanying                notes

     including      valuation              of certain          securities          owned         and    securities         sold but not yet                   purchased           and

                            accruals              Management                  believes          that   the   estimates          utilized in            preparing           the    financial
     statement are reasonable                      Actual          results        could differ from these                   estimates

                        securities          transactions               in                          trades     are    recorded on the trade                         date     as    if   they had
     Proprietary                                                            regular-way
     settled    Dividend             income        and        dividend                           are   recorded       net       on    an ex-date              basis

     Securities     owned            and    Securities            sold but not yet                purchased          are    valued          at   fair        value     with both realized

     and   unrealized         gains        and     losses         included         in    Trading        gains         net       of losses on                 the   Statement of Income

     Amounts       receivable              and    payable          for securities           transactions            that    have      not reached                  their contractual

     settlement     date      are      recorded             net   on    the      Statement of Financial                    Condition             in    Payable        to   affiliates           net

     Commissions and execution                              fees are        recorded        on         trade-date      basis         as securities             transactions             occur

     Interest     income        is   recorded           on     an accrual          basis

     Depreciation        is   provided             on         straight-line             basis    using estimated useful                     lives           of one    to three         years


Recent Accounting                     Pronouncements

In    September          2006         the        FASB          issued     Statement                No         157 which was incorporated                                   into    ASC        820      Fair

Value Measurement                      and Disclosures                    ASC            820 ASC                   820       defines       fair       value        establishes                framework

for   measuring           fair       value and            enhances            disclosure                about      fair      value measurements                          It     also   nullifies       the

guidance        that     prohibits              recognition            of day one              gains          or losses            on derivative             transactions              where model

inputs     that    significantly                 impact         valuation           are      not observable                    In    addition           ASC          820      prohibits        the     use of

block     discounts            for large                              of unrestricted                   financial            instruments              that      trade      in    an active       market

and     requires        an issuer           to       consider changes                in      its    own        credit        spreads when                  determining             the    fair    value of

its   liabilities       ASC          820        is    effective       for the       Company                   for the        fiscal       year ending October                          31 2009 The
provisions of           ASC          820        are to        be applied prospectively                             except that the provisions related                                    to   block

discounts and                        one                  and       losses     on valuation of                     financial          instruments               with not observable                     inputs
                          day                   gains

are to    be    applied         as         one-time cumulative                          effect          adjustment            to    opening           retained          earnings in the year of

the    adoption          The adoption of                      the    standard resulted                       in   increased disclosure                       about       fair     value

measurement               which            is   discussed further                  in   note            12

In    February         2007      the       FASB          issued        Statement              No         159 The             Fair     Value           Option       for Financial              Assets and

Financial         and    Liabilities                 ASC       825-10             This amended                     principle          provides             an option            under     which

company may               irrevocably                  elect    fair    value as the                initial        and       subsequent               measurement                attribute       for certain

financial       assets         and    liabilities              This    fair       value option                will      be    available          on          contract-by-contract                    basis

with changes             in fair       value recognized                      in   earnings              This amended                  principle            is   effective         for the        Company
for the    fiscal       year ending October                          31 2009 The Company                                     did    not elect         to     apply this standard to any
financial       assets         or liabilities

In    March       2008     the       FASB             issued        Statement           No         161 Disclosure                    about        Derivative Instruments                         and

Hedging         Activities            ASC             31 5-1          This        Statement              is    effective           for the       Companys                  fiscal      year beginning

November                 2009         This amended                                       requires             qualitative            disclosures              about        objectives          and

                                                                                          disclosures                  about       fair    values and            gains and             losses     on
strategies        for    using derivatives                      quantitative

derivative                                      and      disclosures           about         credit-risk                related      contingent              features           in derivative

                        This amended                                    does not require                          any    new       derivative           or      hedging          measurements                 The
agreements                                              principle

Company           is    currently           assessing           the    impact           of    ASC             815-10 on              its   financial            statement

                                           FASB                       amended                                                              related         to   determining              fair    value of
In    October      2008          the                     issued                           accounting                   principles

financial       asset      when         the          market for that asset                   is    not active             ASC         820-10               This amended                 principle

clarifies the          application               of    ASC 820            for        market that                  is    not active          It   also        allows        for the       use of

                           internal                                     about        future             cash      flows with appropriately                           risk-adjusted               discount
managements                                     assumptions

rates    when       relevant           observable market                      data       does not exist                   This amended                     principle          did not change             the

objective         of    fair    value measurement which                                 is   the        determination                of the price             that    would be received                   in   an

orderly        transaction            that       is   not       forced        liquidation                or distressed              sale    at    the      measurement date This

amended                                                                           for which financial statements
                  principle          was    upon issuance including prior periods

had     not been         issued The adoption of this amended  principle had no impact on the Companys financial


FASB       Accounting                 Standards                 Codification                       In   July       2009        the    FASB            issued       the     FASB          Accounting

Standards Codification the Codification                                             as the          single         source of generally                       accepted            accounting

principles         GAAP                      While          the Codification                  did       not change             GAAP              it   introduced                 new     structure       to the

                    literature             and                        references             to    accounting                standards           and       other     authoritative               accounting
accounting                                            changed
                  The      Codification                  is   effective           for the         Companys 2009                       financial            statement             and    did   not      have    an
effect     on the       Companys                      financial       condition


                         Fair Value            When        the     Volume and                   Level     of Activity         for the Asset or Liability                       Have
Significantly            Decreased             and Identifying                  Transactions              That Are Not Orderly                        ASC 820                 In

                              FASB                    amended                                                     related    to    determining             fair   value when           the
April     2009        the                  issued                        accounting             principles

volume and             level      of activity       for the       asset       or                 have     significantly            decreased          and     identifying

transactions           that    are    not orderly          Specifically                these     amended          principles        list   factors       which should be

evaluated to determine                      whether           transaction            is   orderly       clarify that        adjustments             to transactions            or    quoted

                      be necessary when                       volume and                level    of activity        for    an asset or                         have     decreased
prices     may                                          the                                                                                      liability

                         and                                      for    determining             the    concurrent          weighting            of the transaction            price
significantly                     provide      guidance
relative    to    fair      value     indications          from other              valuation       techniques         when         estimating fair value                  The

                                             amended                                                     Since      the     Companys              fair   value methodologies
Company adopted                     these                     accounting               principles

were     consistent           with these        amended            accounting              principles       adoption         did     not affect        the     Companys
financial     condition

Subsequent             Events         ASC 855                 In   May 2009                the   FASB       issued         amended         accounting           principles          related

to                                      which       codify the guidance                     regarding       the     disclosure            of events occurring                subsequent
      subsequent            events
to the    balance           sheet     date     These       amended                                do not change             the    definition         of      subsequent            event

                                                           occurs after the balance                                 date    but before the financial                    statements
i.e      an event           or transaction          that                                                  sheet

are    issued         but requires           disclosure        of the date             through      which subsequent                 events were evaluated when

determining            whether         adjustment to or disclosure                          in the financial          statements            is   required These              amended

                  were        effective       for the      Company               for   2009      fiscal    year      Since        these    amended            principles       require

                              disclosures                                subsequent             events     adoption          of the standard did not affect                         the
only additional                                  concerning

Companys              financial        condition results of operations                             or   cash   flows
                                                                                                               Management has evaluated
                      events through            the date          the    financial          statement was issued which was December 21 2009

Fair Value Measurements                             and Disclosures                         Measuring          Liabilities           at    Fair     Value          In   August 2009
the    FASB       issued          amended       accounting              principle          to   ASC      820-10      as    Accounting             Standards Update                  ASU
No     2009-05 Fair Value                      Measurements                   and      Disclosures                Measuring          Liabilities           at Fair    Value          This

amended                                                                 in   measuring           liabilities      when        quoted         price       in   an active       market        for
                 principle          provides        guidance

an identical                          is    not available          and       clarifies that             reporting      entity       should not make               an adjustment               to

fair   value for              restriction      that                       the transfer           of the liability           This amended               principle        is   effective
for financial           statements issued               for the         first    reporting        period beginning                after    issuance of the          ASU
Because       the      Companys               current      fair    value measurement                     policies     are     consistent           with the       ASU adoption
will     not affect         the    Companys             financial


 The Companys business                          affairs are        managed              under     an agency          agreement            with     RBC        CM Corp           In

 addition        to   its    role as clearing           broker      for the          Company RBC                  CM       Corp      acts    as       computation             agent

 accounting           resource          risk   manager             executive              operational       and     legal representative                   for the      Company
 under     this       agency        agreement


SECURITIES                 OWNED AND                  SECURITIES                      SOLD BUT NOT YET PURCHASED

                                                                                                                                         31 2009                                               of
Securities        owned      and     Securities        sold but not yet purchased                               at    October                           consisted          principally

trading    securities and            derivative        contracts           at    fair    value       as    follows

                                                                                                                                                                            Sold But
                                                                                                                                                                             Not        Yet

                                                                                                                                               Owned                       Purchased

   Equities                                                                                                                                    7377003                      1085455
   Mortgage          backed        securities                                                                                                  2082982
   Derivative contracts                                                                                                                        1714056                         91250

   Corporates                                                                                                                                   425026                        196069
   Treasuries                                                                                                                                   215381                        167936

                                                                                                                                           11814448                    $1540710

The Company pledges                    its    securities     owned          to collateralize               bank loans with an                     affiliate      and       required

margin     with      RBC         CM Corp         The    fair      value of the securities owned                               by     the Company that have                     been

pledged      to    counterparties where those                       parties       have        the right to            sell    or    repledge was $5268352                          The

                                             $2343804                         Companys               securities             as collateral         under             stock
Clearing Broker                                                   of the                                                                                                      lending

activity     which can be              sold    or   repledged by the secured                         party

Derivative contracts                                 exchange-traded                  derivative           products           that       are   standardized          contracts

                                                                     that               used for trading                                   to                 market         risk
transacted        through         regulated         exchanges                   are                                        purposes             manage


On    October                                                                                                                        line      of credit the Secured                     Credit
                    31 2009 the Company maintained                                           $15000000                secured

              with the   Bank Under this agreement                                    this    loan    is   callable          at    the   discretion       of the Bank          and       the

Company           does not pay          interest       Had     interest          been        charged       at    market            interest     rates the net income of the

Company would                have      been     different         The outstanding                   loan    at       October         31 2009 was $5247540
collateralized        with firm-owned                 securities         of     $5268352


Income       Taxes               The Company            is        fully taxable              Luxembourg                resident          corporation          and     is   subject       in

Luxembourg            to    corporate         income     tax municipal                   business tax                and     net    worth       tax

Withholding           Taxes               The Company               is     foreign           US     registered             broker        and    dealer    that      trades

exclusively         for    its   own    account        As such           the    Company              does       not have             US        income     tax liability            it

however           subject    to      withholding            tax    on    certain        of    its   dividend           and        interest      income

The Company has no                   uncertain        tax    positions           as    of October           31 2009

COMMITMENTS AND CONTINGENT                                                      LIABILITIES

The Company maintains an operating                                 lease        for office          space in Luxembourg                         The new          lease      commitment

was    for three      years from             February 2008 until February                            2011        Thereafter              the    lease    renews        quarterly         until

notice     of cancellation           is   given


     LIABILITIES                    SUBORDINATED                            TO CLAIMS OF GENERAL                                     CREDITORS

     The Company                  has       $100000             Subordinated            Loan Agreement                  renewable            on     February 13 2012              with an

     affiliate        Royal        Bank        Holding          Inc         Canadian           holding company Under                         this        agreement       the    Company
     does not pay interest

     The Company                  has         $500000             Subordinated              Loan Agreement  renewable  on February 13 2012 with an

     affiliate        RBC         Capital       Markets         Arbitrage         LLC          US single member limited liability company Under this
                            the    Company must pay                       interest     equal to the one              month         floating         LIBOR        pIus 166       basis     points
     1.9         at    October       31 2009

     The Company                  has          $750000            Subordinated              Loan Agreement                 renewable              on February           13 2011 with an

     affiliate        RBC         Capital       Markets           Arbitrage       LLC           US       single    member          limited         liability     company         Under      this

     agreement              the    Company must pay                       interest     equal to the one              month         floating         LIBOR        plus    46    basis     points

     .7        at     October       31 2009

     All     liabilities          subordinated             to   claims of general               creditors         are   covered         by agreements                approved         by the

     FINRA          and     are thus          available         for     computing        the    Companys             net capital          pursuant         to the     Uniform Net

                    Rule To             the extent         that    such     liabilities        are required          for the       Companys               continued         compliance

     with minimum                  net capital         requirements               they       may    not be repaid


     The Company is subject to the                                Securities          and    Exchange Commission Uniform Net                                     Capital      Rule

     Rule 5c3-    which requires                                  the    maintenance           of   minimum net                 capital      The Company                has elected       to    use

     the    alternative           method permitted by                      the   rule which           requires       that    the    Company              maintain the greater             of    2%
     of aggregaie debit                  balances          minimum              net capital         as   defined          equal to $250              At October          31 2009          the

                       had        net capital         of   $2195500              which was $2195250                        in   excess       of the required            minimum          net

     Proprietary            accounts           held   at        clearing        broker      PAIB             are    considered allowable                     assets in the      net capital

     computation              Pursuant to an agreement                           between        the      Company and RBC                      CM Corp RBC CM Corp                               is

     required         to    perform             computation               for    PAIB       assets    similar to the             customer           reserve      computation


                              all    of the         Companys               assets     and    liabilities      are carried          at   fair      value or contracted             amounts

     that                               fair    value

                           owned        and                                                                         are carried                      value      Fair    value    is   generally
     Securities                                 Securities         sold but not yet purchased                                           at   fair

                                                                                      market prices                 not available                 fair   value   is   determined          based
     based      on quoted               market prices If quoted                                              are

                      relevant                                             dealer                                                activity         for equivalent         securities       and
     on     other                       factors        including                       price    quotations           price

     valuation         pricing          models

                                                                                               pursuant to bank loans and
                                                       short-term           liabilities                                                            certain      other    payables are
     Similarly the companys
     recorded               contracted              amounts                                  fair   value         These     instruments             generally        have     variable
                       at                                          approximating

                              and                                                              cases      overnight          and    accordingly                are   not materially
     interest       rates               short-term          maturities           in   many
     affected         by changes               in   interest       rates


     The     book value of $1250000                                 of   liabilities         subordinated             to    claims of general                 creditors          closely

     approximates                 fair    value based               upon market rates                  of interest available                  to    the    Company at               October             31
     2009 $100000                   of    liabilities         subordinated to claims of general                                creditors          is   non-interest          bearings         and        the

                                                The                value of the              $5247540 bank loan                       is                                 $5247526              The         fair
     fair   value      is   $99615                         fair                                                                            approximately

     value     is    based        on estimates               using present               value techniques                   which       are significantly                 affected       by    the

                                                               the       amount and timing of estimated                               futures       cash flows and                discount         rates
     assumptions used concerning
     The assumed              life       is   one    year or less based on the contractual                                   term

11   FINANCIAL INSTRUMENTS                                               WITH OFF-BALANCE SHEET RISK

     The Company maintains                                                  in        variety        of financial          instruments              Certain instruments                    including

                derivative                                   give rise to off-balance                      sheet      risk Risk            arises      from       changes         in the      value of
     equity                              products
     the contracts           market risk                      and      also      from the potential                  inability of counterparties                     to    perform under
     terms of the contracts                         credit          risk The Company attempts                                  to    control        its   exposure          to                risk

                                                                                                                                                          market risk inherent
                                                                              system which determines
                     use of                                                                                                     whether            the                                             in   the
     through                         proprietary              trading

     Companys               portfolios              is    within     established             limits

     Securities        sold but not yet purchased                                     represent       obligations            of the     Company              to deliver           specified

     securities              contracted                                                               an obligation            to    purchase          the    securities          in the    market             at
                       at                            prices thereby creating
                                                                       the    Companys                ultimate        obligation           to satisfy        the sale       of Securities               sold
     prevailing        prices Consequently
                                                             exceed                   amounts                                in the     Statement of Financial                         Condition
     but not yet            purchased                may                     the                      recognized

     ASC       815    Derivatives                   and Hedging               as      amended          requires        that    all    derivatives            be    recognized            as either

     assets or        liabilities             and    be    measured              at   fair   value        The Company buys and sells derivative                                        financial

                            for trading                                                for         own     account Net trading gains includes the                                       results          from
     instruments                                     purposes            solely              its

                    of the following                      instruments                                fixed                                         traded options                and    futures
     trading                                                                      equities                    income          exchange

     contracts        on equities               and       equity indexes                 and       OTC       equity        derivative        contracts            with     affiliates      and          third


12   FAIR VALUE                      MEASUREMENT                                      DEFINITION                 AND HIERARCHY

     The Company adopted the provisions of ASC 820 Fair Value Measurements and Disclosures                                                                                                         effective

     November  2008    Under this ASC fair value is defined as the price that would be received                                                                                               to    sell       an

                                                                                             exit price                    an orderly                                between            market
     asset     or paid        to transfer                  liability      i.e         the                             in                         transaction

     participants            at    the    measurement date                            ASC      820     establishes             hierarchy for inputs                   used        in   measuring               fair

     value that maximizes                           the    use of observable inputs                       and    minimizes             the       use of unobservable                    inputs          by
                       that       the     most observable                    inputs      be used when                available             The hierarchy             is    broken        down           into

     three     levels       based         on    observability                of inputs          as    follows

                     Level                Valuations               based      on                                in   active     markets for identical                       assets or       liabilities
                                                                                       quoted        prices

                                                            has the ability to access                         Valuation                                   and      block discounts                 are       not
                     that    the     Company                                                                                        adjustments

                                     to       Level         instruments                 Since valuations                are    based        on     quoted         prices     that      are readily             and

                                          available           in    an active          market         valuation            of these        products          does not entail             significant

                     degree         of judgment

                     Level                Valuations               based         on one       or   more quoted               prices     in   markets that             are       not active         or for

                     which         all                                        are      observable             either       directly        or indirectly
                                          significant              inputs

                                          Valuations               based         on                that   are    unobservable                and                           to    the overall            fair
                     Level                                                             inputs                                                          significant

                     value measurement


                                                                                                                          the   use of observable                  market data
Determination            of   fair    value and            the        resulting       hierarchy requires

                                      The                                 of      financial          instrument in the hierarchy                         is   based              the
whenever available                           classification                                                                                                             upon
                                                                               the    measurement                of           value      Valuation                                   that    may
lowest level of input                that    is    significant           to                                            fair                                    adjustments

be made       to    ensure that         financial              instruments            are   reported        at    fair      values include

              Credit valuation                                          that    represent          the    estimated           fair   value of the credit risk of the
              external       counterparties

                                                                                                                                                in the valuation               of the
              Credit     valuation           adjustments                to reflect      the        Companys              credit      quality

              Companys              liabilities

                                                          for financial           instruments             that    are       not quoted         in   an   active      market      when        the
              Liquidity        adjustments
                                                                  amount          realized          on    sale   may        be less than the estimated fair value due
              Company          believes           that     the

              to   low   trading       volumes

              Model      and                             adjustments             to reflect         the    impact of use of unobservable                             model inputs
                                                                                                                         valued using model                                 which
                                                          necessary when                    instruments           are                                          inputs                 are    not
              These      adjustments              are

              observable         and        are subject           to    significant          management judgment

                                                                                                                                                                   of assets and
   description          of the valuation techniques                             applied       to the       Companys               major      categories

liabilities        measured         at fair       value on              recurring           basis    follows

Securities         Owned        and    Securities              Sold Not Yet Purchased

                                                                Securities                                                            securities         are generally          valued
              Exchange-Traded                  Equity                                  Exchange-traded                    equity

              based                                        from        the                          To the       extent       these     securities          are actively        traded
                         on quoted           prices                            exchange
              they     are    categorized            in    Level             of the    fair    value hierarchy

              U.S                       Securities                U.S                        securities          are   valued using quoted                    market prices
                       Treasury                                              treasury

                                                                                                                                             Level            of the    fair   value
              Accordingly             U.S         treasury            securities       are generally             categorized           in


                                                          Valuations             are   based        on    both proprietary               and    industry           recognized
              Mortgage          Securities

                                                                                                          The most                                            to    the valuation           of
              models and              discounted               cash flow techniques                                           significant       inputs

              these     instruments            include           but are not limited                 to the       level       of interest rates           and      spreads rates of
                                      and     default           and     loss     expectations               Mortgage            securities          are generally           categorized
              the    Level          of the        fair    value hierarchy

                                                                       value     of corporate             bonds             estimated using executed                        transactions
               Corporate Bonds                     The         fair                                                    is

              market price            quotations               where observable                      bond spreads               or credit default              swap     spreads

                              for            basis        differences            between           cash    and     derivative          instruments                 Corporate      bonds          are
              adjusted                any
                                                          in   Level           of the       fair    value hierarchy
              generally         categorized

              Listed     Derivatives              Contracts               Listed       derivatives          that       are actively          traded      are       valued based         on

                                       from        the                          and    are generally              categorized           in   Level            of the hierarchy
              quoted         prices                        exchange

              OTC       Derivative Contracts                            OTC      derivatives             contracts          include     swap and            OTC        derivative

              contracts                                   on     the    product        and     terms of the transaction                        the   fair     value of the        OTC
              derivative                            can        be either observed                  or modeled using                    series       of techniques              The
                                                                                                                                                         of the             value
              majority of the               OTC          derivative            products are categorized                       within Level                           fair



                                                               instruments    measured      at          value on       recurring    basis    as at
The following          table   presents
                                          the      financial                                     fair

October     31 2009        categorized        by   the   valuation hierarchy set out in          ASC     820   in thousands

                                                                             Fair value   measurements         using


                                                                       Level                 Level                 Level
                                                                                                                                     at   fair   value

  Securities     owned
                                                                       7377003                                                               7377003

                        backed   securities                                                      2082982                                     2082982
      Derivatives         contracts                                    1667447                     46609                                     1714056
                                                                                                  425026                                         425026
                                                                                                  215381                                         215381

                                                                       9044450                   2769998                                    11814448

  Securities     sold but not yet purchased
                                                                       1085455                                                               1085455
                                                                                                  167936                                         167936

          Derivative     contracts                                           46426                  44824                                          91250

                                                                                                  196069                                         196069

                                                                       1131881                    408829                                     1540710


Deloitte                                                                                                                                                         Deloitte          Touche       LIP

                                                                                                                                                                Two World Financial Center
                                                                                                                                                                New York NY 10281-1414
December 21 2009                                                                                                                                                 Tel         212 436 2000
                                                                                                                                                                 Fax         2124365000
RBC      Capital
                        Markets           Arbitrage          S.A
One     Liberty       Plaza

New York New                     York 10006

In   planning         and      performing             our audit          of the financial             statements of         RBC         Capital          Markets            Arbitrage

     .A the       Company                  as    of and      for the       year ended           October         31 2009 on              which        we        issued        our report

dated    December 21 2009 and such                                 report       expressed an unqualified                    opinion           on    those financial

                      in    accordance             with auditing            standards           generally        accepted         in    the    United           States       of

America we              considered the                Companys              internal         control       over financial             reporting          internal            control

as     basis      for    designing            our auditing          procedures           for the          purpose     of expressing                an opinion            on      the

                                         but not for the purpose                     of expressing an                            on     the effectiveness                    of the
financial      statements                                                                                           opinion

                    internal            control Accordingly                     we do        not express an opinion                    on the effectiveness                       of the
Companys              internal

Also     as required              by Rule         17a-5g1                of the Securities              and    Exchange Commission the                                 SEC we
have     made           study of the practices                     and    procedures followed                   by   the    Company                 including

consideration            of control             activities     for       safeguarding           securities          This    study included                    tests    of

compliance            with such           practices          and    procedures that                we     considered relevant                 to    the objectives                stated

     Rule                                             the periodic                                     of aggregate debits                  and     net capital          under         Rule
in     7a-5g                     in     making                              computations

17a-3a1   and                     for    determining           compliance              with the exemptive               provisions                of Rule        15c3-3           We      did

not Iyiew          the practices                and   procedures followed                     by    the    Company          in   making            the    quarterly

                                                             verifications             and     comparisons            and     the recordation                   of differences
securities        examinations                  counts
                                                                             with the requirements                    for                                       for securities
required       by Rule            17a-13        or in   complying                                                           prompt payment

                               of Federal Reserve                                            of the Board            of Governors              of the Federal Reserve
under       Section                                                 Regulation
                                                          does not carry                                  accounts      for      customers or perform                        custodial
System         because the               Company                                       securities

functions         relating         to    customer        securities

                                                                                             for establishing          and                                internal          control
The management of                       the     Company is           responsible                                                 maintaining

                                  and                         referred          to   in the                      paragraph             In    fulfilling         this
and    the practices                      procedures                                            preceding
                                                and judgments                                                                    to    assess       the       expected           benefits
responsibility              estimates                                      by management                   are required

                                  of controls          and    of the practices               and                       referred         to    in the      preceding
and    related      costs                                                                            procedures
                                                                                          and                         can     be expected                to    achieve           the
                   and      to    assess      whether         those practices                       procedures
                                                                    Two                                       of internal        control           and    the practices                and
SECs above-mentioned                            objectives                      of the objectives

                                                                           with reasonable but not absolute                            assurance              that     assets for
procedures are to provide                         management
                                         has responsibility                                                          loss   from        unauthorized                  use or
which       the   Company                                                 are    safeguarded              against

                                                                     executed           in   accordance          with managemenrs                        authorization                 and
disposition           and        that    transactions         are

recorded properly to permit the preparation                                          of financial         statements        in   conformity with generally
                                                                                                                                        of the practices                and
accepted          accounting             principles          Rule         7a-5g         lists      additional       objectives

                      listed      in the      preceding            paragraph

               of inherent               limitations         in internal         control        and     the practices        and       procedures referred                       to
                                                             and     not be detected                 Also                         of any          evaluation           of them to
above        error or fraud              may      occur                                                        projection
future      periods         is   subject        to the risk that           they      may become               inadequate because                   of changes

conditions         or that         the    effectiveness             of their design and                 operation      may        deteriorate

                                                                                                                                                                  Member          of

                                                                                                                                                                  Deloitte       Touche      Tohmatsu

                      in internal           control     exists       when      the    design or operation                  of      control           does not allow

                      or    employees            in the     normal          course of performing                    their   assigned functions to prevent
                                                                          timely basis                                                                 deficiency
or detect      and    correct         misstatements             on                                      sign jficant deficiency

combination           of deficiencies                in internal          control     that    is   less severe          than       material           weakness             yet

                                      merit attention                                              with governance
important enough                 to                             by those charged

                                                                          combination             of deficiencies           in internal              control     such that
   material weakness                   is     deficiency         or

         is     reasonable possibility that                          material        misstatement               of the entitys          financial           statements will

not be prevented                 or detected          and   corrected         on       timely basis

                                 of internal          control    was        for the        limited                      described         in   the     first   and    second
Our     consideration                                                                                   purpose
                           would not                                                 all   deficiencies           in internal       control          that   might be
paragraphs and                                 necessarily           identify

material       weaknesses              We     did     not identify          any     deficiencies           in internal          control        and    control        activities

for                          securities that            we    consider to be               material        weaknesses             as   defined         above

                                                                                                                                           referred         to in the
We      understand that practices                     and   procedures that accomplish                           the objectives

second        paragraph of this report                  are     considered by the                  SEC     to    be adequate           for     its
                                                                                                                                                     purposes         in

                                                                                                              related                            and    that
accordance           with the Securities                Exchange Act of 1934 and                                         regulations                            practices

                            that      do    not accomplish            such objectives                in   all   material                        indicate         material
and     procedures                                                                                                              respects

inadequacy           for   such       purposes         Based         on this understanding                    and   on our study we                   believe        that   the

                                       and                           as   described          in   the     second     paragraph of this report were
Companys             practices                procedures

adequate        at   October          31 2009          to   meet      the    SECs          objectives

This report          is   intended          solely    for the    information and                   use of the Board of Directors                            management
                                                                                             Inc                                                               that              on
the    SEC      Financial          Industry         Regulatory            Authority                     and     other   regulatory             agencies                rely

                           under                                Exchange Act of 1934                       in their regulation               of registered            broker
Rule       7a-5g                      the    Securities

dealers       and     is   not    intended to be and                 should not be            used by anyone                other      than these           specified


Yours      truly

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