Company: DEFI
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001999371-25-006264
Chunk: 22

Company: Tidal Commodities Trust I
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 8
Chunk 22
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 of the Fund as the Fund intends to close out any open positions prior to the contractual expiration
date. As a result, the Fund’s market risk is the risk of loss arising from the decline in value of the contracts, not from
the need to make delivery under the contracts. The Fund considers the “fair value” of derivative instruments to be
the unrealized gain or loss on the contracts. The market risk associated with the commitment by the Fund to purchase a specific
cryptocurrency will be limited to the aggregate face amount of the contacts 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