Why we publish our record

We trade only our own money. We have no clients and no investors, and we are not raising capital. We publish our results anyway, on the record, because the people who decide whether to work with us are better served by figures they can check than by assurances they have to take on trust.

Who the record is for

The readers we have in mind are practical ones. A venue that onboards liquidity providers wants to know that a firm quoting on its book has the capital to stand behind those quotes and keeps careful track of its positions. A bank or KYC reviewer wants to understand where the money in our accounts came from and how it moves. A counterparty wants some evidence that we settle what we owe. Each of them is deciding whether we are a sound business to deal with, and each of those questions is easier to answer with numbers on the table.

Publishing also binds us to a method. Once the counting rules are written down in public, we cannot quietly change them after a bad month.

How we count

The record shows three things: operating revenue, trading results, and the value of positions that are still open. The figures are unaudited.¹

Open positions take the most care. A contract that has not resolved has no settled value, only an estimate of what it is worth. For each open position we take an independent price estimate and use the conservative end of its range, the lower bound, rather than the midpoint.² To take a made-up case, if the estimate for a contract we hold runs from 40¢ to 46¢, we count it at 40¢. Some positions have no current estimate at all, for example because nothing has traded in them recently. We count those at a value between their full cost and zero, and never above what we paid.

We measure the lifetime result two independent ways. The first works from the accounts: what they are worth today, minus the money we have put in, plus the money we have taken out. The second builds up from the activity itself by adding operating revenue to trading results. The two draw on different inputs, so a gap between them means something has gone wrong somewhere: a transfer recorded in one place and missed in the other, a fee booked twice, an open position valued two different ways. We check one against the other. The first has to land inside the range the second allows (it is a range because of the positions with no current estimate), and a result outside it is an error we track down.

Two further rules apply to every figure. Operating expenses and taxes are excluded, so the record shows what the trading produced before the costs of running the business.³ And every figure is rounded in the cautious direction: totals down, and the value of open positions toward the larger loss. Nothing is ever rounded up.

Words we do not use

We never describe these figures as a return, a yield or an ROI, and we never annualize them. Those terms answer an investor’s question: what did my money earn, and what might it earn over a year? We are not raising money, so nobody needs to read our record with that question in mind, and we would rather not invite it.

There is a practical problem too. A return needs a denominator, and a firm that adds and withdraws its own capital as it sees fit has no single honest one. Divide by the starting balance and you get one answer. Divide by the average balance or the peak and you get others. Annualizing a short or uneven history then stretches whichever answer you picked. Plain dollar amounts, counted conservatively and checked two ways, sidestep both problems.

The record is there so the people who deal with us can see how we operate. Questions about it, or about how we count, can go to compliance@cipherg.io.

Footnotes

1. Unaudited means no outside accountant has examined the figures. This note sets out how they are counted so readers can judge the method for themselves. ↩

2. The lower bound is the bottom of the range the estimate treats as reasonable for the contract’s value. Using it makes an open position more likely to be understated than overstated. ↩

3. Because expenses and taxes are left out, the figures will be higher than the firm’s profit after expenses and taxes for the same period. Anyone comparing the record with a bank statement or a tax return should expect that difference. ↩