Jump Financial LLC

The stable outlook is based on our expectation that Jump will maintain its good operating performance, capitalization, and supportive liquidity. We also expect it will prudently manage the continued expansion of its trading operations, risk, and balance sheet. We expect the firm to maintain a RAC ratio above 10%. Over the next 12 months, we could lower the ratings if we expect: The RAC ratio to fall below 10% on a sustained basis because of large member distributions, among other things; The funding and liquidity profile to deteriorate as a result of, for example, a rising gap between the expansion of trading operations and the growth of stable funding resources; or Earnings or liquidity at unregulated entities to fall dramatically.

...Jump Financial LLC has a profitable market-making and principal trading business, with strong market shares in large futures exchanges across several major asset classes. However, its business relies on higher-risk and less stable principal trading revenue that depends on market volume and volatility. We think the firm's good geographic and asset class diversification only partly offsets this weakness. We view capitalization as strong, given we expect the risk-adjusted capital (RAC) ratio to remain above 10% over the next 12 months. It was a strong 14.2% as of March 31, 2024. The capital base has strengthened, owing largely to strong earnings generation and despite an expanding balance sheet. In addition, the implementation of Jump's enhanced VaR framework has VaR now encompassing 99% of trading book positions, and has not led to a material increase in the reported VaR or its volatility. This reduces uncertainty about the trajectory of its RAC ratio....

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