Company: DEFI
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001999371-25-011381
Chunk: 23

Company: Tidal Commodities Trust I
Filing Date: 2025-08-14
Form: 10-Q
Item: Item 8
Chunk 23
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 held.

The
exposure of the Fund to market risk will depend on a number of factors including the markets for the specific cryptocurrency,
the volatility of interest rates and foreign exchange rates, the liquidity of the Bitcoin Futures Contracts markets and the relationships
among the contracts held by the Fund.

Credit
Risk

When
the Fund enters into futures contracts, it will be exposed to the credit risk that the counterparty will not be able to meet its
obligations. For purposes of credit risk, the counterparty for the futures contracts traded on the Chicago Board of Trade, Intercontinental
Exchange and CME is the clearinghouse associated with those exchanges. In general, clearinghouses are backed by their members
who may be required to share in the financial burden resulting from the non-performance of one of their members, which should
significantly reduce credit risk. Some foreign exchanges are not backed by their clearinghouse members but may be backed by a
consortium of banks or other financial institutions. Unlike in the case of exchange traded futures contracts, the counterparty
to an over the counter futures contract is generally a single bank or other financial institution. As a result, there will be
greater counterparty credit risk in over the counter transactions. There can be no assurance that any counterparty, clearinghouse,
or their financial backers will satisfy their obligations to the Fund.

The
Sponsor will attempt to manage the credit risk of the Fund by following certain trading limitations and policies. In particular,
the Fund intends to post margin and collateral and/or hold liquid assets that will be equal to approximately the face amount of
the futures contracts it holds. The Sponsor will implement procedures that will include, but will not be limited to, executing
and clearing trades and entering into over the counter transactions only with parties it deems creditworthy and/or requiring the
posting of collateral by such parties for the benefit of each Fund to limit its credit exposure.

The
CEA requires all Future Commission Merchants (the “FCMs”), such as the Fund’s clearing brokers, to meet and
maintain specified fitness and financial requirements, to segregate customer funds from proprietary funds and account separately
for all customers’ funds and positions, and to maintain specified books and records open to inspection by the staff of the
CFTC. The CFTC has similar authority over introducing brokers, or persons who solicit or accept orders for commodity interest
trades but who do not accept margin deposits for the execution of trades. The CEA authorizes the CFTC to