# MIZUHO MARKETS AMERICAS LLC X-17A-5 (2022-05-27) — Broker-dealer annual report - Company: MIZUHO MARKETS AMERICAS LLC - Form: X-17A-5 - Filed: 2022-05-27 - Period: 2022-03-31 - Accession: 0001825516-22-000001 - CIK: 1825516 - File #: 8-70594 - Type: Broker-dealer - Material weakness: No - Auditor: Ernst & Young - Auditor location: New York, NY - Contact: Mitchell Billek - Phone: 201-626-1286 - Email: mitchell.billek@mizuhogroup.com - Website: mizuhogroup.com - Signed by: Mitchell Billek (Managing Director & Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1825516/000182551622000001/MMASOFC21.pdf --- {0}------------------------------------------------ Mizuho Markets Americas LLC Statement of Financial Condition March 31, 2022 With Report of Independent Auditors ![](_page_0_Picture_4.jpeg) {1}------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ## ANNUAL REPORTS FORM X-17A-5 PART III FACING PAGE Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 FILING FOR THE PERIOD BEGINNING 04/01/2021 AND ENDING 03/31/2022 MM/DD/YY MM/DD/YY #### A. REGISTRANT IDENTIFICATION #### NAME OF FIRM: Mizuho Markets Americas LLC TYPE OF REGISTRANT (check all applicable boxes): Broker-dealer Security-based swap dealer Major security-based swap participant Check here if respondent is also an OTC derivatives dealer ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | (No. and Street) | | | | | |----------------------------------------------|----------------------------------------------------------------------------------------|-----------------|---------------------------------|--|--| | New York | NY | | 10020 | | | | (City) | (State) | | | | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | | Mitchell Billek | (201) 626-1286 | | Mitchell.Billek@mizuhogroup.com | | | | (Name) | (Area Code
Telephone Number) | (Email Address) | | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing* | | | | | | | | | | | | | | | | | | | | Ernst & Young | (Name
if individual, state last, first, and middle name) | | | | | | | | | | | | | One Manhattan West
(Address) | New York
(City) | NY
(State) | 10001
(Zip Code) | | | | | 10/20/2003____________________________________________________________42______________ | | | | | OMB APPROVAL OMB Number: 3235-0123 Expires: Oct. 31, 2023 Estimated average burden hours per response: 12 SEC FILE NUMBER {2}------------------------------------------------ \* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(1)(ii), if applicable. Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. {3}------------------------------------------------ - - - - - - - - - - - - - - {4}------------------------------------------------ - (o) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - (p) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - (q) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - (r) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - (s) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - (t) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - (u) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - (v financial condition. - (w statement of financial condition under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - (x d on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - (y 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - (z) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12, as applicable. - (aa) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (ab) Other: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \*\*To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable. {5}------------------------------------------------ ### Mizuho Markets Americas LLC Statement of Financial Condition March 31, 2022 ### Contents | Report of Independent Auditors1 | | |---------------------------------------------|--| | Statement of Financial Condition 3 | | | Notes to Statement of Financial Condition 4 | | {6}------------------------------------------------ ![](_page_6_Picture_0.jpeg) {7}------------------------------------------------ ![](_page_7_Picture_0.jpeg) - - - - {8}------------------------------------------------ ## Mizuho Markets Americas LLC #### Statement of Financial Condition March 31, 2022 (In Thousands) | Cash and cash equivalents | 223,579 | |------------------------------------------------------------------------------|-----------------| | Securities borrowed | 3,401,647 | | Securities owned, at fair value (including securities pledged of \$ 682,520) | 1,581,859 | | Derivatives | 564,389 | | Receivables from brokers/dealers, clearing organizations and customers | 321,208 | | Accrued interest receivable | 172 | | Total assets | \$
6,092,854 | | | | | Liabilities and Member's Equity | | | Securities loaned | 672,823 | | Securities sold, not yet purchased, at fair value | 3,275,029 | | Derivatives | 1,299,224 | | Payables to brokers/dealers, clearing organizations and customers | 547,620 | | Payables to affiliates | 4,582 | | Accrued interest payable | 2,582 | | Accrued expenses and other liabilities | 5,685 | | Total Liabilities | \$
5,807,545 | | | | | Subordinated borrowings | 130,000 | | Member's equity | 155,309 | | Total liabilities and member's equity | \$
6,092,854 | The accompanying notes are an integral part of the Statement of Financial Condition {9}------------------------------------------------ (In Thousands) ### 1. Organization and Description of Business in the purchase and sale of equity derivatives and is registered with the Securities and Exchange -the-Counter derivatives dealer. MCM, a Delaware limited liability company, is a wholly owned subsidiary of Mizuho Americas ho New York Stock Exchanges that provides comprehensive financial services through its subsidiaries. ### 2. Summary of Significant Accounting Policies ### Basis of presentation The Statement of Financial Condition is presented in accordance with U.S. generally accepted #### Use of estimates The preparation of the Statement of Financial Condition in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Statement of Financial Condition. Actual results could differ from those estimates. #### Cash and cash equivalents The Company defines cash equivalents as highly liquid investments with initial maturities of three months or less, that are not used for trading purposes. The Company had cash equivalents of \$211,000 as of March 31, 2022, consisting of money market funds. {10}------------------------------------------------ (In Thousands) ### 2. Summary of Significant Accounting Policies (continued) #### Fair value measurements The Company reports certain assets and liabilities at fair value on the Statement of Financial Measurements and Disclosures The Company has made no elections under the irrevocably elect fair value as the initial and subsequent measurement attribute for most financial assets and liabilities on an instrument-by-instrument basis. #### Securities transactions Securities owned and securities sold, not yet purchased, are recorded on a trade date basis at fair value. Fair value is generally based upon quoted market prices, when available. When quoted market prices are not available, the Company uses other market data, such as transacted prices for the same or similar securities. In securities borrowed transactions, the Company is required to deposit cash or other collateral with the lender in an amount generally in excess of the market value of securities borrowed. In securities loaned transactions, the Company receives collateral in the form of cash or securities in an amount generally in excess of the market value of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis and obtains or returns additional collateral as necessary. Securities borrowed and loaned transactions are generally recognized on the Statement of Financial Condition except where other securities are used as collateral. When the Company acts as a lender in a securities lending agreement and receives collateral in the form of securities that can be repledged or sold, it recognizes securities received as collateral and a corresponding obligation to return securities received as collateral at fair value in the Statement of Financial Condition. At March 31, 2022, the Company had no such transactions. #### Derivative financial instruments The Company recognizes all derivative financial instruments in the Statement of Financial Condition as either assets or liabilities at fair value. {11}------------------------------------------------ (In Thousands) #### 2. Summary of Significant Accounting Policies (continued) Transactions in derivative instruments are recorded on a trade date basis. In accordance with ASC 815, the same counterparty and eligible collateral in the Statement of Financial Condition. The Company does not apply hedge accounting as defined in ASC 815. Therefore, certain of the disclosures required under ASC 815 are generally not applicable with respect to these financial instruments. are determined using quantitative models that require the use of multiple market inputs including interest rates, prices and indices to generate continuous yield or pricing curves and volatility factors, which are used to value the positions. The majority of market inputs are not actively quoted and cannot be validated through external sources including brokers, market transactions and thirdparty pricing services. The fair values of derivative assets and liabilities traded on exchanges are determined using exchange prices. Refer to Note 3 for additional details of financial instruments. ### Foreign exchange Assets and liabilities denominated in foreign currencies are revalued into U.S. dollars using the spot foreign exchange rate at the date of the Statement of Financial Condition. #### Income taxes ASC 740 prescribes the method to account for uncertainty in income tax positions taken or -likely-thanwhether a tax position will be sustained upon examination, based on the technical merits of the position. Accordingly, the Company assesses this likelihood based on the facts, circumstances, and information available at the end of each period. A tax position that meets the MLTN recognition threshold is measured initially and subsequently as the largest amount of tax benefit that will likely be realized upon settlement with a taxing authority that has full knowledge of all the relevant information. The measurement of unrecognized tax benefits is adjusted when new information is available, or when an event occurs that requires a change. Deferred tax expenses or benefits are recognized in the Statement of Financial Condition at amounts expected to be realized for the recognizes the current and deferred tax consequences of all transactions in the Statement of Financial Condition using the provisions of the currently enacted tax laws. {12}------------------------------------------------ (In Thousands) #### 2. Summary of Significant Accounting Policies (continued) #### Recent accounting pronouncements No. 2016-13, Financial Instruments Credit Losses (Topic 326: Measurement of Credit Losses on Financial Instruments). This ASU requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, using the Current Expected Credit Losses model in measuring credit losses, and enhancement of disclosures regarding credit risk. Under the CECL model, expected credit losses will be measured using historical experience, current conditions, and reasonable and supportable forecasts. Subsequently, the FASB issued ASU 2019-11, 2019-04, for codification improvements related to ASU 2016-13. This ASU affects loans, debt securities, net investments in leases and off-balancesheet credit exposures, as well as any other financial assets that are not excluded from the scope and have the contractual right to receive cash. This ASU will be applicable for the Statement of Financial Condition issued for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of this ASU on its Statement of Financial Condition. #### Accounting pronouncements adopted during 2021 In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements in order to improve the effectiveness of disclosure in the notes to the Statement of Financial Condition by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each Statement of Financial Condition. The Company adopted the ASU in 2020 and enhanced disclosures as of March 31, 2022. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU facilitates the transition by providing optional expedients and exceptions to the existing accounting requirements for contract modifications and hedging relationships, and other transactions impacted by the reference rate reform. This ASU became effective on March 12, 2020 and applies to contracts and hedging relationships entered into on or prior to December 31, 2022. Subsequently the FASB issued ASU 2021-01 for codification improvements related to ASU 2016-13. The Company is evaluating which transitional guidance will be adopted, but does not expect there to be a material impact on its Statement of Condition. {13}------------------------------------------------ (In Thousands) #### 3. Financial Instruments #### Derivative financial instruments The Company transacts in derivative instruments to meet the financing and hedging needs of customers and to manage exposures to market and interest rate risk in connection with normal trading activities. These derivative instruments mainly include equity forwards, total return swaps, option contracts and futures contracts. These instruments involve, to varying degrees, elements of credit, interest rate, and currency risk. Equity forwards consist of a delayed delivery of equity securities at a specified future date and price. Such equity forwards are bilateral and face the counterparty directly. Total return swap contracts include payments based on a set rate in exchange for a return on an underlying stock or equity index. Option contracts include OTC and exchange-traded options. Option contracts allow the holder to purchase or sell financial instruments for cash at a specified price and within a specified period of time. When the Company is a seller of options, the Company receives a premium at the outset and then bears the risk of unfavorable changes in the price of the financial instruments underlying the option. OTC options consist primarily of call spreads. A call spread overlay is the use of the call spread option strategy by issuers of convertible bonds. By overlaying a call spread option over a convertible bond the issuer can synthetically change the exercise price of the convertible bond. The call spread is a derivative structure that can change the structure of a convertible bond from the perspective of the issuer. Futures contracts are exchange traded and cash settlement is made on a daily basis for market movements. Securities owned and securities sold, not yet purchased, consist of equity securities. Securities sold, not yet purchased, represent prevailing market prices, which may differ from the amount reflected on the Statement of Financial Condition. The following table summarizes the notional and fair value amounts of derivative instruments outstanding as of March 31, 2022. Fair value balances are presented net of derivative valuation adjustments, but prior to the application of counterparty and cash collateral netting. Total derivative assets and liabilities on the Statement of Financial Condition are adjusted on an aggregate basis to take into effect the legally enforceable master netting agreements with netting due to cash collateral received or paid. {14}------------------------------------------------ (In Thousands) #### 3. Financial Instruments (continued) | | | Fair value | | | | | |------------------------------------------------|------------------|------------------------|----------|------------------------|-----------|--| | | Notional amount | Derivative receivables | | Derivative
payables | | | | Equity Forwards | \$
5,878,789 | \$ | 62,900 | \$ | 674,957 | | | Interest Rate Swaps | 1,452,177 | | - | | 67,554 | | | Total Return Swaps | 187,488 | | 16,710 | | 2,740 | | | Option Contracts | 28,115,709 | | 636,804 | | 687,812 | | | | | | | | | | | Offset in the Statement of Financial Condition | | | | | | | | Counterparty Netting | | | (73,366) | | (73,366) | | | Cash Collateral Netting | | | (78,659) | | (60,473) | | | | \$
35,634,163 | \$ | 564,389 | \$ | 1,299,224 | | #### Valuation adjustments Valuation adjustments are integral to determining the fair value of derivative portfolios and are achieved by developing and calibrating sophisticated pricing models to determine the fair value and appropriate exit price. The Company utilizes a valuation methodology that incorporates erparty credit risk inherent in the uncollateralized portion of derivative portfolios, funding cost adjustment derivative trades and associated with balance sheet assets and funding benefit adjustment which accounts for the impact to the funding cost on uncollateralized derivative trades and associated with balance sheet liabilities. Market-based inputs are generally used when calibrating valuation adjustments to market-clearing levels. For derivatives that include significant unobservable inputs, the Company makes model or exit price adjustments to account for the valuation uncertainty present in the transaction. {15}------------------------------------------------ (In Thousands) #### 3. Financial Instruments (continued) The portfolio is made up of equity option trades that have vega risk exposures. Due to the growth of the portfolio, the Company has to take additional bid or offer liquidity reserves for these trades to reflect fair value on these trades. Implicit valuation adjustments arise when positions are valued directly to bid or offer levels, the valuation implicitly containing the mid to bid/offer valuation adjustment. The books and records prices are mid-market values, and additional liquidity reserves are taken on these trades to get to exit fair values in the market. #### Offsetting assets and liabilities For those derivative activities transacted under legally enforceable master netting agreements, the Company has the right, in the event of default by the counterparty, to liquidate collateral and to offset receivables and payables with the same counterparty. For purposes of the Statement of Financial Condition, and in accordance with ASC 210-20, Offsetting, and ASC 815 Derivatives and Hedging, the Company offsets derivatives assets, liabilities, and cash collateral, except on initial margin, held with the same counterparty where it has such a legally enforceable master netting agreement. In accordance with FASB ASC 210-20-45-1, Balance Sheet, Offsetting, Other Presentation Matters, the Company offsets securities borrowed and securities loaned on the Statement of Financial Condition with the same counterparty where they have a legally enforceable master netting agreement and all criteria for netting have been met. The following table presents derivative instruments and securities financing agreements as of March 31, 2022. Balances are presented on a gross basis, prior to the application of counterparty and collateral netting. {16}------------------------------------------------ (In Thousands) #### 3. Financial Instruments (continued) | | (a) | (b) | (c)=(a)-(b) | | (d) | (e)=(c)-(d) | |---------------------|---------------|---------------|------------------|----------------------------------------------------------------------------|----------------------------|--------------| | | | | Net Amounts | Gross Amounts | | | | | | Gross Amounts | of Assets | | Not Offset in the | | | | | Offset in the | Presented in the | | Statement | | | | Gross Amounts | Statement of | Statement of | | of Financial Condition (1) | | | | of Recognized | Financial | Financial | Financial | Collateral | | | Assets | Assets | Condition (2) | Condition | Instruments (3) | Received (4) | Net Amount | | Derivatives | \$ 716,414 | \$ 152,025 | \$ 564,389 | \$
38,166 | \$ 25,000 | \$ 501,223 | | Securities borrowed | 3,401,647 | | 3,401,647 | 672,823 | 2,728,824 | | | | | | | | | | | | (a) | (b) | (c)=(a)-(b) | | (d) | (e)=(c)-(d) | | | | | Net Amounts | | | | | | | Gross Amounts | of Liabilities | Gross Amounts
Not Offset in the Statement
of Financial Condition (1) | | | | | | Offset in the | Presented in the | | | | | | Gross Amounts | Statement of | Statement of | | | | | | of Recognized | Financial | Financial | Financial | Collateral | | | Liabilities | Liabilities | Condition (2) | Condition | Instruments (3) | Delivered (4) | Net Amount | | Derivatives | \$ 1,433,064 | \$ 133,840 | \$ 1,299,224 | \$ 38,166 | \$ | \$ 1,261,058 | | Securities loaned | 672,823 | | 672,823 | 672,823 | | | - (1) For some counterparties, the financial instruments and collateral not net on the Statement of Financial Condition may exceed the net asset recognized. Where this is the case, the total amounts reported in these two columns are limited to the balance of the net assets recognized. As a result, a net amount is reported even though the Company, on an aggregate basis has received securities collateral with a total fair value that is greater than the funds provided to counterparties. - (2) Amounts relate to master netting agreements, which have been determined by the Company to be legally enforceable in the event of default and where certain other criteria are met in accordance with applicable offsetting guidance or clearing organization agreements. - (3) These represent assets / liabilities with the same counterparties that are not presented net on the Statement of Financial Condition because all U.S. GAAP netting criteria were not met. - (4) These represent collateral values received on net assets recognized after consideration of liabilities with the same counterparties / collateral values posted on net liabilities recognized after consideration of assets with the same counterparties (note (3)). {17}------------------------------------------------ (In Thousands) #### 3. Financial Instruments (continued) collateral pledged and the remaining maturity of securities loaned at March 31, 2022: | | Remaining Contractual Maturity of
Agreements | | | | |---------------------|-------------------------------------------------|-----------|---------------|--| | | Open | Overnight | Total | | | Securities loaned | | | | | | Collateral pledged: | | | | | | Equities | \$
672,823 | \$ | \$
672,823 | | | Total | \$
672,823 | \$ | \$
672,823 | | #### 4. Risk Management has established risk management policies and procedures to measure and monitor each of the various types of manage its risk is critical to the overall exec Risk management at the Company requires independent Company-level oversight. Effective risk practices are carried out through constant communication, exercise of professional judgement, and knowledge active role in the identification, assessment, and management of risks at the Company level. #### Credit risk management e to meet its derivatives transactions are with financial and non-financial institutions. The risk of default depends on the creditworthiness of the counterparty. Credit risk is managed by entering into master netting agreements, which would reduce the maximum amount of loss. For financial and nonfinancial institutions with which collateral agreements have not been established, the Company assumes the counterparty risk. However, some of those counterparties provide a parent guarantee risk. With respect to collateralized financing transactions, the Company continually monitors the value and adequacy of the collateral pledged by its counterparties. {18}------------------------------------------------ (In Thousands) #### 4. Risk Management (continued) equivalent rating category was as follows: | Region | | Carrying Value | | | |----------------|------------------------|----------------|--|--| | North America | 100.0%
\$
67,101 | | | | | Credit ratings | | | | | | BBB/Baa | 100.0% | | | | #### Market risk management Market risk is the potential loss the Company may incur as a result of changes in the market value of a particular instrument. All financial instruments, including derivatives and securities, are subject to market risk. A number of factors, including the size, duration, composition and diversification of positions, the absolute and relative levels of equity prices, interest rates, foreign market risk. The Company manages market risk by setting risk limits and by economically hedging its exposure to risk factors. #### Operational risk management Operational risk is the risk of loss, whether direct or indirect, to which the Company is exposed due to inadequate or failed internal processes or systems, human error or misconduct, or external events. Operational risk includes legal and regulatory risk, business process and change risk, fiduciary or disclosure breaches, technology failure, cybersecurity, and financial crime. activities, of Financial Condition. {19}------------------------------------------------ (In Thousands) #### 5. Fair Value Measurements The Company applies the methods of calculating fair value defined in ASC 820, Fair Value Measurements and Disclosure, to value its financial assets and liabilities, where applicable. ASC 820 defines fair value as liability in an orderly transaction between market participants at the measurement or an The valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs, using techniques that are appropriate and for which sufficient data is available. For inputs based on bid and ask prices, the price within the bid-ask spread that is most representative of fair value is used to measure fair value. #### Fair value hierarchy ASC 820 prioritizes the inputs used to measure fair value into three broad levels, assigning the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest to unobservable inputs (Level 3 measurements). If the inputs used to measure an asset or liability fall into different levels within the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. The three categories are as follows: Level 1- Assets and liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include exchangetraded equity securities. Level 2 - Assets and liabilities whose values are based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. If no quoted market prices are available, the fair values of OTC derivative contracts in this category are determined using a pricing model with inputs that are observable in the market or can be derived from or corroborated by observable market data. Level 2 assets and liabilities consist of equity forwards and total return swaps. Level 3 - Assets and liabilities whose values are based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the {20}------------------------------------------------ (In Thousands) #### 5. Fair Value Measurements (continued) assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Level 3 assets and liabilities consist of call spread options. In determining the appropriate measurement levels, the Company performs analyses on the assets and liabilities subject to ASC 820 at the end of each reporting period. Changes in the observability of significant valuation inputs during the reporting period may result in a reclassification of certain assets and liabilities within the fair value hierarchy. #### Valuation techniques Equity securities are measured at fair value using quoted prices for identical securities traded on exchanges. Derivative contracts can be exchange-traded or OTC. The Company classifies exchange-traded contracts typically within Level 1 of the fair value hierarchy. OTC derivatives that trade in liquid markets, such as forwards, swaps, and options, are classified within Level 2 of the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. If quoted market prices are not available, fair value is based upon internally developed valuation models that use current market-based or independently sourced market parameters, such as interest rates, currency rates, credit spreads, and option volatilities. Such models are often based on a discounted cash flow analysis. measured at fair value on a recurring basis using the above fair value hierarchy at March 31, 2022. {21}------------------------------------------------ (In Thousands) #### 5. Fair Value Measurements (continued) | Description | | Level 1 | Level 2 | Level 3 | Counterparty
and Cash
Collateral | Balance as
of March | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|-----------------|------------------------------------------------|------------|----------------------------------------|------------------------| | | | | | | Netting | 31, 2022 | | Assets
Securities owned, at fair value | | | | | | | | Equity securities | \$ | 1,581,859
\$ | | \$ | \$ | \$ 1,581,859 | | Derivatives | | | 604,523 | 111,892 | (152,026) | 564,389 | | | \$ | 1,581,859
\$ | 604,523 | \$ 111,892 | \$
(152,026) | \$ 2,146,248 | | Liabilities | | | | | | | | Securities sold, not yet purchased, at fair
value | | | | | | | | Equity securities | \$ | 3,275,029
\$ | | \$ | \$ | \$ 3,275,029 | | Derivatives | | | 1,185,556 | 247,508 | (133,840) | 1,299,224 | | | \$ | 3,275,029
\$ | 35,562 | \$ 247,508 | \$
(133,840) | \$ 4,574,253 | | The following table presents the valuation technique covering the majority of Level 3 inventory
and the most significant unobservable input used in Level 3 fair value measurements. | | | | | | | | Significant Unobservable Input | | | | | | | | Category | Principal
Valuation
Technique | | Significant
Unobservable
Valuation Input | Min | Max | Weighted Average | #### Significant Unobservable Input | | Category | Principal
Valuation
Technique | Significant
Unobservable
Valuation Input | | | |--|----------|-------------------------------------|------------------------------------------------|--|--| | | | | | | | #### Uncertainty of Fair Value Measurements Relating to Unobservable Inputs Valuation uncertainty arises when there is insufficient or disperse market data to allow a precise determination of the exit value of a fairespecially prevalent in Level 3 fair value instruments, where uncertainty exists in valuation inputs that may be both unobservable and significant to the (or overall fair value measurement. The uncertainties associated with key unobservable inputs on the Level 3 fair value measurements may not be independent of one another. In addition, the amount and direction of the uncertainty on a fair value measurement for a given change in an unobservable input depends on the nature of the instrument as well as whether the Company holds the instrument as an asset or a liability. For certain instruments, the pricing, hedging and risk management are sensitive to the correlation between various inputs rather than on the analysis and aggregation of the individual {22}------------------------------------------------ (In Thousands) #### 5. Fair Value Measurements (continued) inputs. The following section describes the most significant unobservable input used by the Company in Level 3 fair value measurements. #### Volatility Volatility represents the speed and severity of market price changes and is a key factor in pricing options. Volatility generally depends on the tenor of the underlying instrument and the strike price or level defined in the contract. Volatilities for certain combinations of tenor and strike are not observable and need to be estimated using alternative methods, such as using comparable instruments, historical analysis or other sources of market information. This leads to uncertainty around the final fair value measurement of instruments with unobservable volatilities. #### Transfers into/out of Level 3 There have been no transfers into or out of Level 3 for the Year Ended March 31, 2022. #### 6. Receivables from and Payables to brokers/dealers, clearing organizations and customers Amounts receivables from and payable to brokers/dealers, clearing organizations and customers at March 31, 2022 consist of the following: | | Receivables | Payables | |-------------------------------------|---------------|---------------| | Receivables and payables for trades | | | | pending settlement | \$
320,084 | \$
522,536 | | Variation margin | - | 25,004 | | Other | 1,124 | 80 | | Total | \$
321,208 | \$
547,620 | Receivables and payables for trades pending settlement are determined by the contract prices of securities to be delivered or received by the Company. If a counterparty fails to deliver securities pending settlement to the Company, the Company may be required to purchase identical securities on the open market. Trades pending settlement at March 31, 2022 were settled without a material Statement of Financial Condition. Variation margin balances represent excess net variation margin resulting from changes in the fair value of derivatives as well as variation margin not eligible for offsetting. {23}------------------------------------------------ (In Thousands) #### 7. Subordinated Borrowing The Company has a \$130,000 subordinated note payable to MCM that is set to mature in September 2023. The interest rate on the note is based on one-month LIBOR plus a spread. This borrowing is subordinated to claims of general creditors, is covered by an agreement approved by Rule. To the extent that this borrowing is required for the continued compliance with minimum net capital requirements, it cannot be repaid. #### 8. Related-Party Transactions In the normal course of business, the Company transacts with affiliated companies as part of its trading, clearing, financing, and general operations. At March 31, 2022, the Statement of Financial Condition included the following balances with affiliates: | Statement of Financial Condition | | | |----------------------------------|--|--| | | | | | Assets | | |---------------------------------------------------------------------------|-----------------| | Securities borrowed | \$
3,401,647 | | Receivables from brokers/dealers, clearing organizations and
customers | 670 | | Derivatives | 10,944 | | | | | Liabilities | | | Securities loaned | \$
672,823 | | Payables to brokers/dealers, clearing organizations and customers | 25,165 | | Accrued expenses and other liabilities | 4,002 | | Payables to affiliates | 4,582 | | Derivatives | 175 | | Accrued interest payable | 14 | | Subordinated borrowing | 130,000 | Securities borrowed and loaned Securities borrowed and loaned are comprised of agreements with MSUSA. Receivables from and payable to brokers/dealers, clearing organizations and customers The receivables from and payable to brokers/dealers, clearing organizations and customers are primarily with MSUSA and MCM. {24}------------------------------------------------ (In Thousands) #### 8. Related-Party Transactions (continued) #### Subordinated borrowing The Company had a \$130,000 subordinated note payable to MCM with accrued interest payable in the amount of \$14. #### Commitments and contingencies The Company had uncommitted lines with affiliates with total limits of \$40,000, 270,000 and 465,000 with Cayman LP, respectively. The Company has a \$150,000 guarantee from Mizuho Bank Ltd #### Principal transactions Principal transactions consist of realized and unrealized gains and losses on the trading activities primarily with MSUSA and MCM. #### Interest and dividend expense The interest expenses are primarily with MSUSA and MCM related to securities loaned and subordinated borrowing. #### Payables to affiliates The Company and its affiliates share various resources for which they also share the associated costs. These are costs allocated to the Company for research, sales commissions, personnel expenses and other operational support and services, primarily from Mizuho Americas Services LLC and MSUSA. {25}------------------------------------------------ (In Thousands) #### 9. Income Taxes The Company is a single member limited liability company, and as such, is a disregarded entity owned by MHA for U.S. corpo federal, state and local income tax returns. In addition, the Company, as a division of MHA, files certain combined or unitary group tax return filings for state and local income tax purposes. Pursuant to a federal, state and local tax sharing agreement, the Company computes its federal, state and local tax provision on a separate return basis, which is then adjusted for the effect of filing in the combined or unitary group. This adjustment is computed on a consistent and equitable combined or unitary state tax expense or benefit will be settled periodically with the lead filer of each combined or unitary income tax filing. At March 31, 2022, the Company had an income tax payable of \$3,994 due to an affiliate, which was recorded under payables to affiliates in the Statement of Financial Condition. #### 10. Commitments and Contingencies #### Litigation In accordance with the provisions of ASC 450, Contingencies, the Company accrues for a litigation-related liability when the assessed likelihood of realizing a future loss is probable and the amount of loss can be reasonably estimated. In applying these principles, the information available may indicate that the estimated amount of loss is within a certain range. The Company accrues when an amount within a range of loss is identified as the most likely result. There are currently no material accruals. #### 11. Net Capital Requirements As a registered OTC derivatives- minimum net capital. This method requires that the Company maintain tentative net capital of at least \$100,000 and net capital of at least \$20,000, plus excess margin collected on securities received on resale agreements, as defined. 64,501 in excess of the required amount of \$20,000. Advances to affiliates, repayment of subordinated liabilities, dividend payments, and other equity withdrawals are subject to certain limitations and other provisions of the SEC. {26}------------------------------------------------ (In Thousands) ### 12. Subsequent events Under evaluate events and transactions that occur after the balance sheet date but before the date the Statement of Financial Condition is issued, or available to be issued in the case of non-public entities. As such, the Company is required to evaluate and recognize in the Statement of Financial Condition the effect of all events or transactions that provide additional evidence of conditions that existed at the balance sheet date, including estimates inherent in the preparation of the Statement of Financial Condition. The Company evaluated all events subsequent to March 31, 2022, through May 27, 2022, the date on which the Statement of Financial Condition is available to be issued. There were no other material recognizable or non-recognizable subsequent events during this period. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.