Trading Activities and Related Risks

6 Months Ended

Jun. 30, 2015

Trading Activities And Related Risks

9.	Trading Activities and Related Risks

The Fund engages in the speculative trading of futures and forward currency contracts traded in the U.S. and internationally. Trading in derivatives exposes the fund to both market risk, the risk arising from a change in the fair value of a contract and credit risk, the risk of failure by another party to perform according to the terms of a contract.

Purchase and sale of futures contracts requires margin deposits with futures brokers. Additional deposits may be necessary for any loss of contract value. The Commodity Exchange Act (“CEAct”) requires a broker to segregate all customer transactions and assets from such broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury securities) deposited with a broker are considered commingled with all other customer funds subject to the broker’s segregation requirements. In the event of a broker’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than (or none of) the total cash and other property deposited. The Fund uses SG Americas Securities, LLC (formerly Newedge USA, LLC) and J. P. Morgan Securities, LLC as its futures brokers and Société Générale Newedge UK Limited (formerly Newedge UK Finance Limited) as its forward currency counterparty.

For futures contracts, risks arise from changes in the fair value of the contracts. Theoretically, the Fund is exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.

In addition to market risk, upon entering into commodity interest contracts there is a credit risk that the counterparty will not be able to meet its obligations to the Fund. The counterparty for futures and options on futures contracts traded in the U.S. and on most non-U.S. futures exchanges is the clearinghouse associated with such exchanges. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.

In the case of forward currency contracts, which are traded on the interbank or other institutional market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a clearinghouse backed by a group of financial institutions; thus, there likely will be greater counterparty credit risk. While the Fund trades only with those counterparties that it believes to be creditworthy, there can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund. The Fund trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty non-performance. Accordingly, the risks associated with forward currency contracts are generally greater than those associated with exchange-traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency contracts typically involves delayed cash settlement.

The Cash Managers manage the Fund’s cash and excess margin through investments in fixed income instruments, pursuant to investment parameters established by the General Partner. The Fund’s objective in retaining the Cash Managers is to enhance the return on its assets not required to be held by the Fund’s brokers to support the Fund’s trading. There is no guarantee that the Cash Managers will achieve returns for the Fund, net of fees payable to the Cash Managers, in excess of the returns previously achieved through the General Partner’s efforts and/or available through the Fund’s brokers, or that the Cash Managers will avoid a loss of principal on amounts placed under their management.

The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The limited partners bear the risk of loss only to the extent of the fair value of their respective investments and, in certain circumstances, distributions and redemptions received.

Through its investments in debt securities, the Fund has exposure to U.S. and foreign enterprises. The following table presents the exposure at June 30, 2015.

Country or Region	U.S. Treasury Securities		Commercial Paper		Corporate Notes		Asset Backed Securities		Total		% of Partners' Capital (Net Asset Value)
United States	$	4,549,592	$	1,139,840	$	3,641,064	$	348,701	$	9,679,197		47.02	%
France		—		249,948		—		—		249,948		1.21	%
Switzerland		—		—		249,776		—		249,776		1.21	%
Luxembourg		—		—		210,950		—		210,950		1.02	%
Mexico		—		—		199,968		—		199,968		0.97	%
British Virgin Islands		—		—		199,925		—		199,925		0.97	%
Netherlands		—		—		151,088		—		151,088		0.73	%
Total	$	4,549,592	$	1,389,788	$	4,652,771	$	348,701	$	10,940,852		53.13	%

The following table presents the exposure at December 31, 2014.

Country or Region	U.S. Treasury Securities		Commercial Paper		Corporate Notes		Asset Backed Securities		Total		% of Partners' Capital (Net Asset Value)
United States	$	7,494,891	$	1,279,865	$	4,327,524	$	445,395	$	13,547,675		58.18	%
Netherlands		—		—		353,929		—		353,929		1.52	%
Japan		—		249,966		—		—		249,966		1.07	%
Mexico		—		—		200,797		—		200,797		0.86	%
British Virgin Islands		—		—		199,587		—		199,587		0.86	%
Canada		—		—		198,774		—		198,774		0.85	%
Spain		—		—		152,257		—		152,257		0.65	%
Total	$	7,494,891	$	1,529,831	$	5,432,868	$	445,395	$	14,902,985		63.99	%

SENECA GLOBAL FUND, L.P. 10-Q