Statement of Financial Condition

UBS Securities LLC Notes to the Statement of Financial Condition (continued) (In Thousands) 6. Fair Value Measurement (continued) Money market, commercial paper, and certificates of deposit (continued) deposit are valued based on pricing models. Typically, the credit quality of the issuers is high and the majority of exposure can be either directly or indirectly tested. Derivative equity contracts and Derivative interest rate contracts Derivative equity contracts represent OTC equity options. These OTC options do not have regulator market pricing, but value is determined by other data values and prices of similar type products. Derivative interest rate products represent Fixed Income Bond Forwards. Their fair value is calculated using estimates or risk adjusted value ranges. Brokerage receivables and payables Fair value of brokerage receivables and brokerage payables approximate amortized cost, which generally represents the balance due or balance owed. These receivables and payables are designated as Level 2 in the valuation hierarchy. Resale and repurchase agreements The fair value of resale agreements and repurchase agreements are computed using a standard cash flow discounting methodology. The inputs to the valuation include contractual cash flows and collateral funding spreads, which are estimated using various benchmarks, interest rate yield curves and option volatilities. As a result, these positions are classified as Level 2. Securities received as collateral and obligation to return securities received as collateral Fair value of securities received as collateral and obligation to return securities received as collateral represents the market value of the securities received. These receivables and payables are designated as Level 1 in the valuation hierarchy. 19

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