# MARKETAXESS CORPORATION X-17A-5 (2022-02-28) — Broker-dealer annual report - Company: MARKETAXESS CORPORATION - Form: X-17A-5 - Filed: 2022-02-28 - Period: 2021-12-31 - Accession: 0001052461-22-000002 - CIK: 1052461 - File #: 8-50727 - Type: Broker-dealer - Material weakness: No - Auditor: PricewaterhouseCoopers LLP - Auditor location: New York, NY - Contact: Michael Cianciulli - Phone: 212-813-6270 - Signed by: Christopher N. Gerosa (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1052461/000105246122000002/MAC_2021_Public.pdf --- {0}------------------------------------------------ # **MarketAxess Corporation** **(A wholly-owned subsidiary of MarketAxess Holdings Inc.) Consolidated Financial Statements and Supplementary Schedules December 31, 2021** {1}------------------------------------------------ | OMB APPROVAL | | | | |---------------------------|--|--|--| | OMB Number: 3235-0123 | | | | | Expires: Oct. 31, 2023 | | | | | Estimated average burden | | | | | 12
hours per response: | | | | | | SEC FILE NUMBER | | | | |---------|-----------------|--|--|--| | 8-50727 | | | | | {2}------------------------------------------------ | ignature: | | |-----------|--| | | | - - - - - - - - - - - - - - - - - - - - - - - - - - - {3}------------------------------------------------ | | Page(s) | |------|--------------------------------------------------------------------------------------------------------------------------------| | | Report of Independent Registered Public Accounting Firm1-2 | | | Consolidated Financial Statements | | | Consolidated Statement of Financial Condition
3 | | | Consolidated Statement of Operations
4 | | | Consolidated Statement of Changes in Shareholder's Equity5 | | | Consolidated Statement of Cash Flows
6 | | | Notes to Consolidated Financial Statements
7-23 | | | Supplementary Schedules | | I. | Computation of Net Capital Under Rule
15c3-1
of the Securities and Exchange Commission24 | | II. | Computation for Determination of Reserve Requirements Under Rule
15c3-3
of the Securities and Exchange Commission25 | | III. | Information Relating to Possession or Control Requirements Under Rule
15c3-3
of the Securities and Exchange Commission26 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) {5}------------------------------------------------ {6}------------------------------------------------ ## **MarketAxess Corporation (A wholly owned subsidiary of MarketAxess Holdings Inc.) Consolidated Statement of Financial Condition December 31, 2021** ## **Assets** | Cash and cash equivalents | 234,183,142 | |-----------------------------------------------------------------------------------------|-------------| | Cash segregated under federal regulations | 50,159,417 | | Investments, at fair value | 29,770,103 | | Accounts receivable, including accounts receivable from affiliates of \$892,277, net of | | | allowance of \$138,211 | 53,181,798 | | Receivables from broker-dealers, clearing organizations and customers, including | | | receivables from affiliates of \$18,566,106 | 288,240,947 | | Goodwill | 87,875,622 | | Intangible assets, net of accumulated amortization | 50,154,167 | | Equipment, net of accumulated depreciation | 13,072,073 | | Software development costs, net of accumulated amortization | 40,085,303 | | Prepaid expenses and other assets | 15,817,676 | | Total assets | 862,540,248 | | Liabilities and Shareholder's Equity | | | Liabilities | | | Accrued employee compensation | 32,330,306 | | Payables to broker-dealers, clearing organizations and customers | 158,407,483 | | Accounts payable and other liabilities, including payable to affiliates of \$7,605,927 | 44,347,147 | | Deferred tax liabilities, net | 6,294,174 | | Total liabilities | 241,379,110 | | Shareholder's Equity | | | Common stock, \$0.01 par value, 1,000 shares authorized, issued and outstanding | 10 | | Additional paid-in-capital | 236,611,617 | | Retained earnings | 384,549,511 | | | | | Total shareholder's equity | 621,161,138 | | Total liabilities and shareholder's equity | 862,540,248 | {7}------------------------------------------------ ## **MarketAxess Corporation (A wholly owned subsidiary of MarketAxess Holdings Inc.) Consolidated Statement of Operations Year Ended December 31, 2021** | Revenues | | |----------------------------------------------|-------------------| | Commissions | \$
544,141,150 | | Information services | 14,747,619 | | Investment income | 395,772 | | Other, including \$3,949,827 from affiliates | 5,580,535 | | Total revenues | 564,865,076 | | Expenses | | | Employee compensation and benefits | 96,104,943 | | Service agreement fees to affiliates | 79,070,083 | | Technology and communications | 38,861,828 | | Depreciation and amortization | 36,135,068 | | Marketing and advertising | 6,437,676 | | General and administrative | 7,989,821 | | Professional and consulting fees | 16,232,265 | | Clearing costs | 11,542,439 | | Occupancy | 8,130,954 | | Total expenses | 300,505,077 | | Income before provision for income taxes | 264,359,999 | | Provision for income taxes | 62,533,047 | | Net income | \$
201,826,952 | {8}------------------------------------------------ ## **MarketAxess Corporation** ## **(A wholly-owned subsidiary of MarketAxess Holdings Inc.) Consolidated Statement of Changes in Shareholder's Equity Year Ended December 31, 2021** | | Common Stock | | | Additional
Paid-in | Retained | Total
Shareholder's | | |---------------------------------------------|--------------|----|--------|-----------------------|-------------------|------------------------|--| | | Shares | | Amount | Capital | Earnings | Equity | | | Balance, December 31, 2020 | 1,000 | \$ | 10 | \$
236,611,617 | \$
288,722,559 | \$
525,334,186 | | | Dividends paid to MarketAxess Holdings Inc. | — | | — | — | (106,000,000) | (106,000,000) | | | Net income | — | | — | — | 201,826,952 | 201,826,952 | | | Balance, December 31, 2021 | 1,000 | \$ | 10 | \$
236,611,617 | \$
384,549,511 | \$
621,161,138 | | {9}------------------------------------------------ ## **MarketAxess Corporation (A wholly-owned subsidiary of MarketAxess Holdings Inc.) Consolidated Statement of Cash Flows Year Ended December 31, 2021** | Cash flows from operating activities | | |-------------------------------------------------------------------------------------|-------------------| | Net income | \$
201,826,952 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | Depreciation and amortization | 36,135,068 | | Stock-based compensation expense | 10,373,953 | | Deferred taxes | 1,287,238 | | Provision for doubtful accounts | 261,430 | | Other | 111,035 | | Changes in operating assets and liabilities: | | | Decrease in accounts receivable | 11,730,639 | | (Increase) in receivables from broker-dealers, clearing organizations and customers | (67,849,314) | | (Increase) in prepaid expenses and other assets | (3,324,270) | | (Increase) in trading investments | (25,012,835) | | (Increase) in mutual funds held in rabbi trust | (789,941) | | (Decrease) in accrued employee compensation | (3,767,444) | | Increase in payables to broker-dealers, clearing organizations and customers | 25,081,039 | | (Decrease) in accounts payable and other liabilities | (28,843,317) | | Net cash provided by operating activities | 157,220,233 | | Cash flows from investing activities | | | Purchases of equipment | (12,610,017) | | Capitalization of software development costs | (26,178,857) | | Net cash (used in) investing activities | (38,788,874) | | Cash flows from financing activities | | | Dividends paid to MarketAxess Holdings Inc. | (106,000,000) | | Proceeds from short-term borrowings | 36,045,566 | | Repayments of short-term borrowings | (75,312,566) | | Net cash (used in) financing activities | (145,267,000) | | Net decrease in cash and cash equivalents | (26,835,641) | | Cash and cash equivalents including restricted cash | | | Beginning of year | 348,806,915 | | End of year | \$
321,971,273 | | Supplemental cash flow information | | | Cash paid for income taxes | \$
2,979,000 | | Cash paid for interest | 715,085 | {10}------------------------------------------------ ## **1. Organization and Principal Business Activity** MarketAxess Corporation ("the Company") was incorporated in the State of Delaware in September 1997 and operates leading electronic trading platforms delivering expanded liquidity opportunities, improved execution quality and significant cost savings across global fixed-income markets. Almost 1,900 institutional investor and broker-dealer firms are active users of the Company's patented trading technology, accessing global liquidity on its platforms in U.S. investment-grade bonds, U.S. high-yield bonds, emerging market debt, Eurobonds, municipal bonds, U.S. government bonds and other fixed-income securities. Through its Open Trading® protocols, the Company executes bond trades between and among institutional investor and broker-dealer clients in the leading all-to-all anonymous trading environment in corporate bonds. The Company also offers a number of trading-related products and services, including: Composite+TM pricing and other market data products to assist clients with trading decisions; auto-execution and other execution services for clients requiring specialized workflow solutions; connectivity solutions that facilitate straight-through processing; and technology services to optimize trading environments. The Company is a wholly-owned subsidiary of MarketAxess Holdings Inc. (the "Parent"), which is a publicly traded enterprise listed on the NASDAQ Global Select Market under the symbol MKTX. On December 21, 2021, LiquidityEdge LLC, previously an affiliate of the Company under common control of the Parent, was merged into the Company ("the Merger"). The Company accounted for the Merger under ASC 805-50, Transactions Between Entities Under Common Control. Under ASC 805-50, the Merger represented a change in reporting entity. As such, on December 21, 2021, the net assets of LiquidityEdge LLC were combined with those of the Company at their historical carrying amounts. The Company's Consolidated Statement of Operations, Consolidated Statement of Changes in Shareholder's Equity and Consolidated Statement of Cash Flows reflect the combined balances of the Company and LiquidityEdge LLC beginning January 1, 2021. As a result of the Merger, the Company owns 100% of LiquidityEdge UK Ltd., an entity currently in the process of liquidation. The Company is a broker-dealer registered with the U.S. Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"). ## **2. Significant Accounting Policies** ## *Basis of Presentation* The Consolidated Financial Statements include the accounts of the Company and its subsidiary. All intercompany transactions and balances have been eliminated. ## *Cash and Cash Equivalents* The Company defines cash equivalents as short-term interest-bearing investments with maturities at the time of purchase of three months or less. ### *Investments, at Fair Value* Investments are recorded in the Consolidated Statement of Financial Condition on the trade date. Investments are carried at fair value, with realized and unrealized gains or losses included in other revenues in the Consolidated Statement of Operations. {11}------------------------------------------------ ## *Fair Value Measurements* Fair value is defined as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." A three-tiered hierarchy for determining fair value has been established that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as Level 1 (unadjusted quoted prices for identical assets or liabilities in active markets), Level 2 (inputs that are observable in the marketplace other than those inputs classified in Level 1) and Level 3 (inputs that are unobservable in the marketplace). The Company's financial assets and liabilities measured at fair value on a recurring basis consist of its money market funds and investments. All other financial instruments are short-term in nature and the carrying amount is reported on the Consolidated Statement of Financial Condition at approximate fair value. ### *Receivables from and Payables to Broker-dealers, Clearing Organizations and Customers* Receivables from broker-dealers, clearing organizations and customers include amounts receivable for securities not delivered by the Company to the purchaser by the settlement date (''securities failed-to-deliver'') and cash deposits held at clearing organizations and clearing brokers to facilitate the settlement and clearance of matched principal transactions. Payables to broker-dealers, clearing organizations and customers include amounts payable for securities not received by the Company from a seller by the settlement date (''securities failed-toreceive''). Securities failed-to-deliver and securities failed-to-receive for transactions executed on a matched principal basis where the Company serves as a counterparty to both the buyer and the seller are recorded on a settlement date basis. The Company presents its securities failed-to-deliver and securities failed-to-receive balances on a net-by-counterparty basis within receivables from and payables to broker-dealers, clearing organizations and customers. The difference between the Company's trade-date receivables and payables for unsettled matched principal transactions reflects commissions earned and is recorded within accounts receivable, net on a trade-date basis. #### *Allowance for Credit Losses* All accounts receivable have contractual maturities of less than one year and are derived from trading-related fees and commissions and revenues from products and services. The Company continually monitors collections and payments from its customers and maintains an allowance for doubtful accounts. The allowance for credit losses is based on an estimate of the amount of potential credit losses in existing accounts receivable, as determined from a review of aging schedules, past due balances, historical collection experience and other specific collection issues that have been identified. Account balances are grouped for evaluation based on various risk characteristics, including billing type, legal entity, and geographic region. Additions to the allowance for credit losses are charged to bad debt expense, which is included in general and administrative expense in the Company's Consolidated Statement of Operations. Balances that are determined to be uncollectible are written off against the allowance for credit losses. The allowance for credit losses, the provision for credit losses and write-offs against the allowance for credit losses were immaterial for the year ended December 31, 2021. #### *Depreciation and Amortization* Fixed assets are carried at cost less accumulated depreciation. The Company uses the straight-line method of depreciation over three or five years. {12}------------------------------------------------ ## *Software Development Costs* The Company capitalizes certain costs associated with the development of internal use software, including among other items, employee compensation and related benefits and third-party consulting costs, at the point at which the conceptual formulation, design and testing of possible software project alternatives have been completed. Once the product is ready for its intended use, such costs are amortized on a straight-line basis over three years. The Company reviews the amounts capitalized for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. #### *Cloud Computing Costs* The Company capitalizes certain costs associated with cloud computing arrangements, including, among other items, employee compensation and related benefits and third-party consulting costs that are part of the application development stage. These costs are setup as a prepaid asset on the balance sheet and are amortized over the period of the hosting service contract, which range from one to five years. The Company reviews the amounts capitalized for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. ### *Revenue Recognition* The Company's classification of revenues in the Consolidated Statement of Operations represents revenues from contracts with customers disaggregated by type of revenue. The Company has three revenue streams as described below. *Commission Revenue* – The Company charges its broker-dealer clients variable transaction fees for trades executed on its platform and, under certain plans, distribution fees or monthly minimum fees to use the platform for a particular product area. Variable transaction fees are recognized on a trade date basis and generally calculated as a percentage of the notional dollar volume of bonds traded on the platforms and vary based on the type, size, yield and maturity of the bond traded and individual client incentives. Bonds that are more actively traded or that have shorter maturities generally generate lower commissions, while bonds that are less actively traded or that have longer maturities generally command higher commissions. Under the Company's disclosed trading transaction fee plans, variable transaction fees, distribution fees and unused monthly fee commitments are invoiced and recorded on a monthly basis. For Open Trading trades that the Company executes between and among institutional investor and brokerdealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller, the Company earns its commission through the difference in price between the two trades. The commission is collected upon settlement of the trade, which typically occurs within one to two trading days after the trade date. For U.S. Treasury matched principal trades, commissions are invoiced and recorded on a monthly basis. The following table presents commission revenue by fee type for the year ended December 31, 2021: ## **Commission revenue by fee type** Variable transaction fees Disclosed trading \$ 303,400,290 Open Trading - matched principal trading 122,962,276 U.S. Treasuries - matched principal trading 12,400,170 Total variable transaction fees 438,762,736 Distribution fees and unused minimum fees 105,378,414 Total commissions \$ 544,141,150 {13}------------------------------------------------ *Information Services* – Information services includes data licensed to the Company's broker-dealer clients, institutional investor clients and data-only subscribers. The nature and timing of each performance obligation may vary as these contracts are either subscription-based services transferred over time, and may be net of volume-based discounts, or one-time services that are transferred at a point in time. Revenues for services transferred over time are recognized ratably over the contract period as the Company's performance obligation is met whereas revenues for services transferred at a point in time are recognized in the period the services are provided. Customers are generally billed monthly, quarterly, or annually; revenues billed in advance are deferred and recognized ratably over the contract period. The following table presents information services revenue by timing of recognition for the year ended December 31, 2021: | Information services revenue by timing of recognition | | | | | | | |-------------------------------------------------------|----|------------|--|--|--|--| | Services transferred over time | \$ | 14,283,119 | | | | | | Services transferred at a point in time | | 464,500 | | | | | | Total information services revenues | \$ | 14,747,619 | | | | | *Other Revenues* – Other revenues primarily includes revenue from telecommunications line charges to broker-dealer clients, revenues received for services provided to affiliates and realized and unrealized gains or losses on trading securities. Contract liabilities consist of deferred revenues that the Company records when cash payments are received or due in advance of services to be performed. The revenue recognized from contract liabilities and the remaining balance is shown below: | | | | Payments
received in
advance of | Revenue
recognized for | | | | |------------------------|----------------------|----|---------------------------------------|---------------------------|-----------------------------------------|----------|-----------| | | December
31, 2020 | | services to be
performed | | services performed
during the period | December | 31, 2021 | | Total deferred revenue | \$
3,196,692 | \$ | 10,077,294 | \$ | (9,747,438) | \$ | 3,526,548 | The majority of the Company's contracts are short-term in nature with durations of less than one-year. For contracts with original durations extending beyond one year, the aggregate amount of the transaction price allocated to remaining performance obligations was \$15,172,798 as of December 31, 2021. The Company expects to recognize revenue associated with the remaining performance obligations over the next 33 months. #### *Stock-Based Compensation* The Company measures and recognizes compensation expense for all share-based payment awards based on their estimated fair values measured as of the grant date. These costs are recognized as an expense in the Consolidated Statement of Operations over the requisite service period, which is typically the vesting period, with an offsetting liability to the Parent. Forfeitures are recognized as they occur. {14}------------------------------------------------ ### *Income Taxes* Income taxes are accounted for using the asset and liability method. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized against deferred tax assets if it is more likely than not that such assets will not be realized in future years. Tax benefits for uncertain tax positions are recognized when it is more likely than not that the positions will be sustained upon examination based on their technical merits. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statement of Operations. All tax effects related to share-based payments are recorded in the provision for income taxes in the periods during which the awards are exercised or vest. The Company files consolidated federal and combined state and local income tax returns with its Parent and U.S. affiliates. Pursuant to a tax sharing agreement between the Company and the Parent, income tax expense recorded by the Company is determined on a separate company basis. #### *Goodwill and Intangible Assets* The Company operates as a single reporting unit. An impairment review of goodwill is performed on an annual basis, at year-end, or more frequently if circumstances change. Intangible assets with definite lives are amortized over their estimated useful lives which range from one to 15 years using either a straight-line or accelerated amortization method based on the pattern of economic benefit the Company expects to realize from such assets. Intangible assets are assessed for impairment when events or circumstances indicate the existence of a possible impairment. ## *Use of Estimates* The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ## *Credit Risk* The Company acts as a matched principal counterparty in connection with the Open Trading transactions that it executes between clients. The Company acts as an intermediary in these transactions by serving as counterparty to both the buyer and the seller in trades. Settlement typically occurs within one to two trading days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded. The Company is exposed to credit and performance risks in its role as a matched principal trading counterparty to its Open Trading clients executing bond trades on its platforms, including the risk that counterparties that owe the Company money or securities will not perform their obligations. These parties may default on their obligations due to bankruptcy, lack of liquidity, operational failure or other reasons. Adverse movements in the prices of securities that are the subject of these transactions can increase the Company's risk. Where the unmatched position or failure to deliver is prolonged, there may also be regulatory capital charges required to be taken by the Company. There can be no assurance that the policies and procedures the Company uses to manage this credit risk will effectively mitigate the credit risk exposure. Cash and cash equivalents include cash and money market instruments that are primarily maintained at three major global banks. Given this concentration, the Company is exposed to certain credit risk in relation to the Company's deposits at these banks. {15}------------------------------------------------ ## *Accounting Pronouncements, Not Yet Adopted* In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which is designed to ease the potential burden in accounting for the transition away from the London Inter-bank Offered Rate ("LIBOR"). The ASU applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued and replaced with alternative reference rates as a result of reference rate reform. The ASU provides optional expedients and exceptions for applying U.S. generally accepted accounting principles ("GAAP") to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU can be adopted by all entities through December 31, 2022. The Company does not expect adoption of this ASU to have a material impact on its Consolidated Financial Statements. ## **3. Net Capital and Customer Protection Requirements** Pursuant to Rule 15c3-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act'), the Company is required to maintain minimum net capital, as defined, equal to the greater of \$1,000,000 or 2% of aggregate debit items, as defined. As of December 31, 2021, the Company had net capital of \$359,399,920 which exceeded its required net capital of \$2,632,796 by \$356,767,124. The Company is required to segregate funds in a special reserve bank account for the benefit of customers pursuant to Rule 15c3-3 of the Exchange Act. As of December 31, 2021, the Company had a balance of \$50,159,417 in its special reserve bank account. ### **4. Fair Value Financial Instruments** The following table summarizes the valuation of the Company's assets measured at fair value as categorized based on the hierarchy described in Note 2: | As of December 31, 2021 | Level 1 | Level 2 | Level 3
Total | |----------------------------------|------------------|------------------------|-------------------| | Money market funds | \$
10,000,641 | \$
—
\$ | —
\$10,000,641 | | Trading securities: | | | | | Corporate debt | — | 18,988 | —
18,988 | | U.S. Treasuries | — | 24,882,813 | —
24,882,813 | | Mutual funds held in rabbi trust | — | 4,868,302 | —
4,868,302 | | Total | \$
10,000,641 | \$
29,770,103
\$ | —
\$39,770,744 | Securities classified within Level 2 were valued using a market approach utilizing prices and other relevant information generated by market transactions involving comparable assets. The mutual funds held in a rabbi trust represent investments associated with the Parent's deferred cash incentive plan (see Note 13). There were no financial assets or liabilities classified within Level 3 during the year ended December 31, 2021. {16}------------------------------------------------ The table below presents the carrying value, fair value and fair value hierarchy category of the Company's financial assets and liabilities that are not measured at fair value on the Consolidated Statement of Financial Condition. The carrying values of the Company's financial assets and liabilities not measured at fair value categorized in the fair value hierarchy as Level 1 and Level 2 approximate fair value due to the short-term nature of the underlying assets and liabilities. | | | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | | Total | | |---------------------------------------|----|----------------|-------------------|---------------|---------------|---------|---|---------------|--| | As of December 31, 2021 | | | | | | | | | | | Financial assets not measured at fair | | | | | | | | | | | value: | | | | | | | | | | | Cash and cash equivalents | \$ | 234,183,142 | \$
234,183,142 | \$234,183,142 | \$
— | \$ | — | \$234,183,142 | | | Cash segregated under federal | | | | | | | | | | | regulations | | 50,159,417 | 50,159,417 | 50,159,417 | — | | — | 50,159,417 | | | Accounts receivable, net | | 53,181,798 | 53,181,798 | — | 53,181,798 | | — | 53,181,798 | | | Receivables from broker-dealers, | | | | | | | | | | | clearing organizations and customers | | 288,240,947 | 288,240,947 | 37,520,714 | 250,720,233 | | — | 288,240,947 | | | Total | \$ | 625,765,304 | \$
625,765,304 | \$321,863,273 | \$303,902,031 | \$ | — | \$625,765,304 | | | Financial liabilities not measured at | | | | | | | | | | | fair value: | | | | | | | | | | | Payables to broker-dealers, clearing | | | | | | | | | | | organizations and customers | | 158,407,483 | 158,407,483 | — | 158,407,483 | | — | 158,407,483 | | The following is a summary of the Company's investments: | | Amortized
cost | Gross
unrealized
gains | Gross
unrealized
losses | Fair
value | |----------------------------------|-------------------|------------------------------|-------------------------------|---------------| | As of December 31, 2021 | | | | | | Corporate debt | \$
19,058 | \$
- | \$
(70) | \$
18,988 | | U.S. Treasuries | 24,993,777 | - | (110,964) | 24,882,813 | | Mutual funds held in rabbi trust | 4,229,848 | 638,455 | - | 4,868,302 | | Total investments | \$
29,242,683 | \$
638,455 | \$
(111,034) | \$29,770,103 | The following table summarizes the fair value of the Company's investments based upon the contractual maturities as of December 31, 2021: | Less than one year | \$
4,868,302 | |-----------------------|------------------| | Due in 1 -
5 years | 24,901,801 | | Total | \$
29,770,103 | Purchases of investments during the year ended December 31, 2021 were \$25,012,835. Unrealized losses during the year ended December 31, 2021 were \$111,034. {17}------------------------------------------------ ## **5. Receivables from and Payables to Broker-dealers, Clearing Organizations and Customers** As of December 31, 2021, the Company's receivables from and payables to broker-dealers, clearing organizations and customers consisted of the following: | Receivables from broker-dealers, clearing organizations and | | |-------------------------------------------------------------------|-------------------| | customers: | | | Securities failed-to-deliver -
broker-dealers | \$
139,467,020 | | Securities failed-to-deliver -
customers | 106,886,682 | | Deposits with clearing organizations and broker-dealers | 37,520,714 | | Other | 4,366,531 | | Total | \$
288,240,947 | | Payables to broker-dealers, clearing organizations and customers: | | | Securities failed-to-receive -
broker-dealers | \$
109,589,357 | | Securities failed-to-receive -
customers | 45,753,689 | | Other | 3,064,437 | | Total | \$
158,407,483 | {18}------------------------------------------------ ## **6. Goodwill and Intangible Assets** As described in Note 1, the Company is accounting for the Merger as a common control transaction under ASC 805. LiquidityEdge LLC had previous goodwill and intangible assets that are subject to amortization recorded on its books and records recognized as part of the acquisition of LiquidityEdge LLC by the Parent in 2019. Subsequent to the Merger, these goodwill and intangible asset balances are recorded on the books and records of the Company. As of December 31, 2021, Goodwill was \$87,875,622. Intangible assets that are subject to amortization, including the related accumulated amortization, are comprised of the following: | | | December 31, 2021 | | |------------------------|------------------|-----------------------------|---------------------------| | | Cost | Accumulated
amortization | Net
Carrying
amount | | Customer relationships | \$
58,690,000 | \$
(8,535,833) | \$
50,154,167 | Amortization expense associated with identifiable intangible assets was \$5,346,667 for the year ended December 31, 2021. The following table summarizes the Company's estimated total amortization expense for the following periods: | Year Ended December 31, | | |-------------------------|-----------------| | 2022 | \$
6,544,833 | | 2023 | 7,561,000 | | 2024 | 6,460,000 | | 2025 | 5,406,333 | | 2026 | 4,686,167 | ## **7. Equipment** Equipment is comprised of the following: | Software licenses, computer and related equipment | \$
8,647,260 | |---------------------------------------------------|------------------| | Office hardware | 36,492,696 | | Accumulated depreciation | (32,067,883) | | Total equipment, net | \$
13,072,073 | For the year ended December 31, 2021, depreciation expense was \$10,542,024. {19}------------------------------------------------ ## **8. Software Development Costs** Software development costs are comprised of the following: | Software development costs | \$
153,203,698 | |---------------------------------------|-------------------| | Accumulated amortization | (113,118,395) | | Total software development costs, net | \$
40,085,303 | For the year ended December 31, 2021 software development costs totaling \$26,178,857 were capitalized and amortization expense recognized was \$20,246,377. Non-capitalized software costs and routine maintenance costs are expensed as incurred and are included in employee compensation and benefits and professional and consulting fees in the Consolidated Statement of Operations. ### **9. Income Taxes** The provision for income taxes consists of the following: | Current: | | |----------------------------|------------------| | Federal | \$
46,068,934 | | State and local | 15,176,875 | | Total current provision | 61,245,809 | | Deferred: | | | Federal | 893,841 | | State and local | 393,397 | | Total deferred provision | 1,287,238 | | Provision for income taxes | \$
62,533,047 | | | | The difference between the Company's reported provision for income taxes and the U.S. federal statutory rate of 21% is as follows: | U.S. federal tax at statutory rate | \$
55,515,600 | 21.0% | |-----------------------------------------------|------------------|-------| | State and local taxes, net of federal benefit | 12,633,964 | 4.8 | | Excess tax benefit from stock-based | | | | compensation | (6,054,812) | (2.3) | | Other, net | 438,295 | 0.2 | | Provision for income taxes | \$
62,533,047 | 23.7% | The following is a summary of the Company's net deferred tax liabilities: | Stock-based compensation | 3,181,042 | |-------------------------------|-------------------| | Other | 1,267,248 | | Total deferred tax assets | 4,448,290 | | Depreciation and amortization | (10,742,464) | | Deferred tax liabilities, net | \$
(6,294,174) | {20}------------------------------------------------ The Company or the Parent files U.S. federal, state, and local income tax returns. The Parent is currently under a New York State income tax examination for tax years 2010 through 2017 and a New York City income tax examination for the tax years 2016 through 2018. At this time, the Parent cannot estimate when the examinations will conclude or the impact such examinations will have on the Company's Consolidated Financial Statements, if any. Generally, other than New York City and State, the Parent is no longer subject to tax examinations by tax authorities for years prior to 2018. A reconciliation of the Company's unrecognized tax benefits is as follows: | Balance at December 31, 2020 | \$
16,316,507 | |----------------------------------------------|------------------| | Decrease attributable to state and local tax | | | apportionment | (1,228,405) | | Balance at December 31, 2021 | \$
15,088,101 | As of December 31, 2021, the Company recorded \$15,088,101 of unrecognized tax benefits which, if recognized, would affect the Company's effective tax rate. Due to the uncertainty related to the timing and potential outcome of the audits, the Company cannot reasonably estimate the amount of the unrecognized tax benefit that could be adjusted in the next 12 months. During the year ended December 31, 2021, the Company recognized \$3,277,172 in penalties and interest. The Company had \$8,336,681 accrued for the payment of interest and penalties at December 31, 2021. ## **10. Affiliate Transactions** Pursuant to an intermediary services agreement with an affiliate, the Company provides access to its trading platform for certain users located in Canada. In addition, the Company provides sales and customer support, legal and compliance and finance and accounting services to this affiliate. The Company charges the affiliate transaction fees for these services. The transaction fees amounted to \$3,372,250 and are included in other revenues from affiliates in the Consolidated Statement of Operations for the year ended December 31, 2021. As of December 31, 2021, the amounts due to and from this affiliate were \$237,422 and \$252,250, respectively. The net amount due from this affiliate was \$14,828 and is included in accounts receivable on the Consolidated Statement of Financial Condition. The Company allocates compensation costs for shared resources, which includes sales, legal and compliance, finance and accounting, marketing, IT and trade support and general management personnel to an affiliate based on an internal methodology. The allocated costs amounted to \$577,577 and are included in other revenues from affiliates in the Consolidated Statement of Operations for the year ended December 31, 2021. As of December 31, 2021, the amounts due to and from this affiliate were \$2,200 and \$227,939, respectively. The net amount due from this affiliate was \$225,739 and is included in accounts receivable on the Consolidated Statement of Financial Condition. The Company incurred allocated expenses from the Parent including occupancy, utilities, audit, insurance and depreciation and amortization of leasehold improvements and furniture and fixtures based on an internal methodology. The allocated costs were \$10,724,283 for the year ended December 31, 2021. As of December 31, 2021, the amounts due to and from the Parent were \$7,244,575 and \$3,067,939, respectively. The net amount due to the Parent was \$4,176,636 and is included in accounts payable and other liabilities on the Consolidated Statement of Financial Condition. {21}------------------------------------------------ The Company allocates total compensation costs for legal and compliance, finance and accounting, sales and marketing, IT and trade support and general management personnel to an affiliate. The allocated costs are based on an internal methodology and amounted to \$159,582 for the year ended December 31, 2021. As of December 31, 2021, the amounts due to and from this affiliate were \$2,399 and \$5,404. The net amount due from this affiliate was \$3,005 and is included in accounts receivable on the Consolidated Statement of Financial Condition. The Company allocates charges for shared resources to an affiliate. As of December 31, 2021, the amounts due to and from this affiliate were \$228,439 and \$862,139, respectively. The net amount due from this affiliate was \$633,700 and is included in accounts receivable on the Consolidated Statement of Financial Condition. The Company provides support for an overseas affiliate that operates a trading platform for certain users principally located in Europe and Asia. The Company also provides marketing, legal and compliance and finance and accounting services to this affiliate. This affiliate provides intermediary services to the Company for sales and customer support for clients in the region that trade U.S. products. The net costs charged to the Company by this affiliate amounted to \$77,448,601 and are included in service agreement fees to affiliates in the Consolidated Statement of Operations for the year ended December 31, 2021. As of December 31, 2021, the amounts due to and from this affiliate were \$3,998,122 and \$844,963, respectively. The net amount due to this affiliate was \$3,153,159 and is included in accounts payable and other liabilities on the Consolidated Statement of Financial Condition. An affiliate provides the Company with trade matching, regulatory transaction reporting and market data services. The Company also provides IT services and related infrastructure support to this affiliate. The net costs charged to the Company by this affiliate amounted to \$521,784 and are included in service agreement fees to affiliates in the Consolidated Statement of Operations for the year ended December 31, 2021. As of December 31, 2021, the amounts due to and from this affiliate were \$339,716 and \$92,449, respectively. The net amount due to this affiliate was \$247,267 and is included in accounts payable and other liabilities on the Consolidated Statement of Financial Condition. An affiliate provides sales and customer support to the Company for certain clients located in Latin America. The related costs charged to the Company by this affiliate amounted to \$522,121 and are included in service agreement fees to affiliates in the Consolidated Statement of Operations for the year ended December 31, 2021. As of December 31, 2021, the amount due to this affiliate was \$27,762 and is included in accounts payable and other liabilities on the Consolidated Statement of Financial Condition. The Company allocates charges for allocated resources to affiliates in Singapore and the Netherlands. As of December 31, 2021, the amount due to these affiliates was \$1,104 as of December 31, 2021 and is included in accounts payable and other liabilities on the Consolidated Statement of Financial Condition. An overseas affiliate serves as a counterparty for certain matched principal trades where the Company serves as a counterparty to both the buyer and the seller. The Company had securities failed-to-deliver and securities failed-to-receive balances with this affiliate as of December 31, 2021. The net securities failed-to-deliver balance with this affiliate was \$18,566,106 and is included within receivables from broker-dealers, clearing organizations and customers on the Consolidated Statement of Financial Condition. The Company's Parent and an affiliate provided loans to the Company during the year ended December 31, 2021. The Company incurred \$182,854 of interest expense to the Parent and the affiliate for these loans which is included within general and administrative on the Consolidated Statement of Operations for the year ended December 31, 2021. The Company made principal repayments of \$39,267,000 on these loans during 2021 and had no loan balances outstanding as of December 31, 2021. As a result of the Merger, the Company has an investment in a subsidiary of \$20,509 as of December 31, 2021. {22}------------------------------------------------ ## **11. Stock-based Compensation Plans** The Company's employees participate in the Parent's stock incentive plan, which provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, or other stock-based awards as incentives and rewards to encourage employees, consultants and nonemployee directors to participate in the long-term success of the Parent. Stock compensation expense related to restricted stock units, performance stock units and stock options was \$10,373,953 and is included in employee compensation and benefits in the Consolidated Statement of Operations. ## *Stock Options* The exercise price of each option granted is equal to the market price of the Parent's common stock on the date of grant. Generally, option grants have provided for vesting over a three or five-year period. Options generally expire in six or ten years from the date of grant. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model ("Black-Scholes"). The determination of fair value of sharebased payment awards on the date of grant using an option-pricing model is affected by the Parent's stock price as well as assumptions regarding a number of highly complex and subjective variables, including the expected stock price volatility over the term of the awards, the risk-free interest rate, the expected dividend yield rate and the expected term. Expected volatilities are based on historical volatility of the Parent's stock. The risk-free interest rate is based on U.S. Treasury securities with a maturity value approximating the expected term of the option. The dividend yield rate is based on the expected annual dividends to be paid divided by the expected stock price. The expected term represents the period of time that options granted are expected to be outstanding based on actual and projected employee stock option exercise behavior. The weighted-average fair value for options granted during 2021 was \$138.51. The following table represents the assumptions used for Black-Scholes to determine the per share weighted-average fair value for options granted for the year ended December 31, 2021: | Expected life (years) | 5.0 | |-------------------------|-------| | Risk-free interest rate | 0.4% | | Expected volatility | 31.1% | | Expected dividend yield | 0.4% | The following table reports stock option activity for the year ended December 31, 2021 and the intrinsic value as of December 31, 2021: | | Number of
Shares | Weighted
Average
Exercise
Price (\$) | Remaining
Contractual
Term | Intrinsic
Value (\$) | |----------------------------------|---------------------|-----------------------------------------------|----------------------------------|-------------------------| | Outstanding at December 31, 2020 | 75,459 | \$
138.39 | | | | Granted | 5,437 | 523.00 | | | | Cancelled | (616) | | | | | Exercised | (55,273) | 108.78 | | \$
19,837,163 | | Outstanding at December 31, 2021 | 25,007 | 281.13 | 2.8 | 3,842,792 | | Exercisable at December 31, 2021 | 15,487 | 192.22 | 1.8 | 3,392,387 | {23}------------------------------------------------ The intrinsic value is the amount by which the closing price of the Parent's common stock on December 31, 2021 of \$411.27 or the price on the day of exercise exceeds the exercise price of the stock options multiplied by the number of shares. As of December 31, 2021, there was \$638,494 of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted-average period of 1.4 years. #### *Service-Based Restricted Stock and Restricted Stock Unit Awards* The Company's annual compensation program includes share-based compensation awards as a component of certain employees' total compensation. These awards are generally subject to annual vesting requirements over a three-year period beginning at the date of grant, which occurs in the first quarter of each year. Accordingly, the expense is generally amortized over the stated vesting period. In addition, the Parent grants shared-based compensation awards to the Company's employees in conjunction with certain new hires and for retention purposes. These awards generally vest over a three-year period and expense is recognized over the requisite service period. #### *Performance Equity Awards* The Parent grants performance equity awards to certain executives and senior managers of the firm as a component of their total compensation and in conjunction with new hires and for retention purposes. Performance equity awards generally vest over a three-year period and contain both performance- and service-based elements. Awards may also be subject to retirement eligibility. The Parent's retirement eligibility criteria stipulate that if an employee has at least ten years of continuous service and is at least 58 years of age, the employee is eligible for retirement. Retirement eligibility allows for continued vesting of awards after the employee's termination of employment, provided that they give at least one year's notice prior to their retirement. In January 2020 and January 2021, annual performance equity awards were granted with three-year performance periods, whereby the final amount that vests will be determined based on the level of achievement by the Parent of certain predetermined metrics, including pre-tax adjusted operating income and market share for the following three fiscal years, including the year of grant. The final awarded pay-out will range from zero to 150% for the awards granted in 2020 and from zero to 200% for the awards granted in 2021. Subject to the grantee's continued service, any performance equity awarded to a participant will vest on the three-year anniversary of the grant date. Compensation expense for the three-year performance shares is measured at the grant date and expensed over the requisite service period with performance target achievement assessed at the end of each reporting period. In August 2021, the new Chief Financial Officer received a performance equity award of 1,070 target shares. The award is substantially similar to the annual bonus performance equity awards granted in January 2021, except that the performance achievement will be determined using 2022 and 2023 fiscal years only. The award will fully vest on August 1, 2024 after certification of the performance criteria, subject to continued employment by the Chief Financial Officer through such date. The following table report's the Company's performance payout estimates for three-year performance period awards at December 31, 2021 as well as the target and maximum share payouts for each award date granted: | | 2021 Estimate | Target | Maximum | |------------------|---------------|--------|---------| | January 15, 2020 | 2,367 | 2,491 | 3,737 | | January 15, 2021 | 3,133 | 4,000 | 8,000 | | August 1, 2021 | 1,070 | 1,070 | 2,140 | {24}------------------------------------------------ The following table reports restricted stock unit and performance stock unit activity during the year ended December 31, 2021: | | Number
of
Restricted
Shares | Weighted
Average
Grant
Date Fair
Value | |----------------------------------|--------------------------------------|----------------------------------------------------| | Outstanding at December 31, 2020 | 85,726 | \$
224.68 | | Granted | 25,851 | | | Forfeited | (3,461) | | | Vested | (58,004) | | | Outstanding at December 31, 2021 | 50,112 | \$
407.67 | As of December 31, 2021, there was \$14,596,071 of total unrecognized compensation expense related to non-vested restricted stock and performance shares. That cost is expected to be recognized over a weighted-average period of 1.6 years. ## *Employee Stock Purchase Plan* The Parent offered a non-qualified employee stock purchase plan for non-executive employees. Under the plan, participants were granted the right to purchase shares of the Parent's common stock based on the fair market value on the last day of the six-month offering period. On the purchase date, the Parent granted to the participants a number of shares of common stock equal to 20% of the aggregate shares purchased by the participant. These matching shares vested over a one-year period. The Parent issued 676 matching shares in connection with the plan for the year ended December 31, 2021. In January 2022, the Parent's Compensation & Talent Committee terminated the employee stock purchase plan with an effective date of February 28, 2022. ### **12. Borrowings, Commitments and Contingencies** ### *Prior Revolving Credit Agreements* In November 2020, the Parent entered into a one-year credit agreement (the "2020 Credit Agreement") with a syndicate of lenders and JPMorgan Chase Bank, N.A., as administrative agent, that provided aggregate commitments totaling \$500,000,000, consisting of a revolving credit facility and a \$5,000,000 letter of credit sublimit for standby letters of credit. Borrowings under the 2020 Credit Agreement bore interest at a rate per annum equal to the base rate or adjusted LIBOR plus an applicable margin that varies with the Parent's consolidated total leverage ratio. The 2020 Credit Agreement required the Parent to satisfy certain covenants, which include leverage ratios and minimum earnings before interest, tax, and depreciation and amortization ("EBITDA") requirements. {25}------------------------------------------------ ## *2021 Credit Agreement* On October 15, 2021, the Parent replaced the 2020 Credit Agreement with a new three-year revolving credit facility (the "2021 Credit Agreement") provided by a syndicate of lenders and JPMorgan Chase Bank, N.A., as administrative agent, which provides aggregate commitments totaling \$500,000,000, consisting of a revolving credit facility and a \$5,000,000 letter of credit sub-limit for standby letters of credit. The 2021 Credit Agreement will mature on October 15, 2024, with the Parent's option to request up to two additional 364-day extensions at the discretion of each lender and subject to customary conditions. Subject to satisfaction of certain specified conditions, the Parent is permitted to upsize the 2021 Credit Agreement by up to \$250,000,000 in total. As of December 31, 2021, the Parent had \$971,093 in letters of credit outstanding and \$499,028,907 in available borrowing capacity under the 2021 Credit Agreement. Borrowings under the 2021 Credit Agreement will bear interest at a rate per annum equal to the base rate or adjusted LIBOR plus an applicable margin that varies with the Parent's consolidated total leverage ratio. The 2021 Credit Agreement requires the Parent to satisfy certain covenants, which include a leverage ratio. The Parent incurred no interest expense under the 2021 Credit Agreement for the year ended December 31, 2021. ## *Collateralized Agreement* In connection with its self-clearing operations, the Company has entered into an agreement (the "Collateralized Agreement") with its settlement bank to provide loans to the subsidiary in amounts up to an aggregate of \$200,000,000 on an uncommitted basis. Borrowings under the Collateralized Agreement are collateralized by securities pledged by the Company to the settlement bank, subject to applicable haircuts and concentration limits. Borrowings under the Collateralized Agreement will bear interest at a rate per annum equal to the higher of the upper range of the Federal Funds Rate, 0.25% or one-month Secured Overnight Financing Rate ("SOFR"), plus 1.00%. The Company incurred \$1,215 of interest expense on borrowings under the Collateralized Agreement during the year ended December 31, 2021. As of December 31, 2021, the Company had no borrowings outstanding and \$200,000,000 in available borrowing capacity under the Collateralized Agreement. ## *Intercompany Loan Agreements* The Company previously entered into loan agreements with the Parent and an affiliate (the "Intercompany Loan Agreements") to satisfy liquidity requirements related to its self-clearing operations. Borrowings under the Intercompany Loan Agreements bore interest at a rate per annum equal to SOFR plus 2.50%. The Company incurred \$182,854 of interest expense on borrowings under the Intercompany Loan Agreements during the year ended December 31, 2021. The Company made principal repayments of \$39,267,000 on these loans during 2021and had no loan balances outstanding as of December 31, 2021. ## **13. Retirement and Deferred Compensation Plans** The Parent offers the Company's employees the opportunity to participate in a defined contribution 401(k) plan (the "401(k) Plan"). Participation in the 401(k) Plan is available to all full-time employees of the Company. The Company made \$3,443,092 in matching contributions to the 401(k) Plan for the year ended December 31, 2021. {26}------------------------------------------------ The Parent offers a non-qualified deferred cash incentive plan to certain officers and other employees. Under the plan, eligible employees may defer up to 100% of their annual cash incentive pay. The Parent has elected to fund its deferred compensation obligations through a rabbi trust. The rabbi trust is subject to creditor claims in the event of insolvency, but such assets are not available for general corporate purposes. Assets held in the rabbi trust are invested in mutual funds, as selected by the participants, which are designated as trading securities and carried at fair value. As of December 31, 2021, the fair value of the mutual fund investments and deferred compensation obligation were \$4,868,302. Changes in the fair value of securities held in the rabbi trust are recognized as trading gains and losses and included in other revenues and offsetting increases or decreases in the deferred compensation obligation are recorded in employee compensation and benefits. For the year ended December 31, 2021, the trading gains were \$638,455 with the offsetting impact included in compensation and benefits. ### **14. Cash and Cash Equivalents and Restricted Cash** The following table provides a reconciliation of cash and cash equivalents together with restricted or segregated cash as reported within the Consolidated Statement of Financial Condition to the sum of the same such amounts shown in the Consolidated Statement of Cash Flows as of December 31, 2021: | | Consolidated Statement of Financial
Condition Location | | |--------------------------------------|-----------------------------------------------------------|-------------------| | Cash and cash equivalents | Cash and cash equivalents | \$
234,183,142 | | Cash segregated for regulatory | | | | purposes | Cash segregated under federal regulations | 50,159,417 | | Deposits with clearing organizations | Receivables from broker-dealers, clearing | | | and broker-dealers | organizations and customers | 37,520,714 | | Other deposits | Prepaid expenses and other assets | 108,000 | | Total | | \$
321,971,273 | #### **15. Subsequent Events** The Company evaluated whether any other events or transactions occurred subsequent to the date of the Consolidated Statement of Financial Condition through February 28, 2022, and determined that there were no additional material events or transactions that would require recognition or disclosure in these Consolidated Financial Statements. {27}------------------------------------------------ ## **MarketAxess Corporation** **(A wholly-owned subsidiary of MarketAxess Holdings Inc.) Computation of Net Capital Under Rule 15c3-1 of the Securities and Exchange Commission December 31, 2021 Supplementary Schedule I** | Net Capital | | |-------------------------------------------------------|-------------------| | Total shareholder's equity | \$
621,161,138 | | Deductions | | | Nonallowable assets | | | Mutual funds held in rabbi trust, at fair value | 4,868,302 | | Accounts receivable, net | 17,962,983 | | Goodwill | 87,875,622 | | Intangible assets, net | 50,154,167 | | Equipment and software development costs, net | 53,157,376 | | Prepaid expenses and other assets | 22,125,537 | | Aged fail-to-deliver | 14,748,581 | | Other deductions and charges | 10,292,547 | | Net Capital before haircuts on securities positions | 359,976,023 | | Haircuts on securities | (576,103) | | Net capital | 359,399,920 | | Required net capital | 2,632,796 | | Excess net capital | \$
356,767,124 | | Net capital in excess of the greater of: | | | 5% of aggregate debits or 120% of min net capital req | \$
352,817,929 | There are no material differences between the calculation above and the Company's unaudited FOCUS Report as of December 31, 2021 as filed on January 26, 2022. {28}------------------------------------------------ **(A wholly-owned subsidiary of MarketAxess Holdings Inc.) Computation for Determination of Reserve Requirement Under Rule 15c3-3 of the Securities and Exchange Commission December 31, 2021 Supplementary Schedule II** ## **Customer Reserve Requirement** | Free credit balances and other credit balances in customers'
security
accounts | \$
52,996,482 | |------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------| | Customers'
securities failed to receive | 88,651,285 | | Total credits | 141,647,767 | | Debit balances in customers'
cash and margin accounts excluding
unsecured accounts and accounts doubtful of collection | 60,869,473 | | Failed to deliver of customers'
securities not older than 30 calendar days. | 70,770,348 | | Aggregate debits
Less 3%
Total debits | 131,639,821
(3,949,195)
127,690,626 | | Excess of total credits over debits | \$
13,957,141 | | Amount held in reserve bank account | \$
50,159,417 | There are no material differences between the calculation above and the Company's unaudited FOCUS Report as of December 31, 2021 as filed on January 26, 2022. {29}------------------------------------------------ | 1. | Customers' fully paid securities and excess margin securities not in the respondent's
possession or control for which instructions to reduce to possession or control had been
issued but for which the required action was not taken by respondent within the time
frames specified under Rule 15c3-3: | NONE | |----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------| | | A. Number of items | NONE | | 2. | Customers' fully paid securities and excess margin securities for which instructions to
reduce to possession or control had not been issued, excluding items arising from
"temporary lags which result from normal business operations" as permitted under Rule
15c3-3: | NONE | | | A. Number of items | NONE | Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.