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    Marketaxess Holdings Inc (MKTX)

    CEO Change
    Board Change

    Business Description

    MarketAxess Holdings Inc. operates leading electronic trading platforms that enhance trading efficiency and provide a diversified pool of liquidity for clients in the global fixed-income markets. Their platforms are utilized by over 2,000 institutional investor and broker-dealer firms to trade various fixed-income securities, including U.S. high-grade and high-yield bonds, emerging market debt, Eurobonds, municipal bonds, and U.S. government bonds . The company offers automated and algorithmic trading solutions, integrated data offerings, and a range of post-trade services, which include straight-through processing, post-trade matching, and regulatory transaction reporting .

    1. Commissions for Transactions - Generates revenue from commissions for transactions executed on its platforms, primarily in the fixed-income markets.
    2. Information Services - Provides integrated data offerings that support trading decisions and market analysis.
    3. Post-Trade Services - Offers services such as straight-through processing, post-trade matching, and regulatory transaction reporting to streamline post-trade activities.
    4. Technology Services - Delivers technology solutions that enhance trading efficiency and support electronic trading platforms.
    5. Algorithmic Trading Services - Includes commissions on equities and foreign exchange products, expanded through the acquisition of Pragma LLC .

    Q3 2024 Summary

    Initial Price$200.55July 1, 2024
    Final Price$255.85October 1, 2024
    Price Change$55.30
    % Change+27.57%

    What went well

    • MKTX expects the electronification of the high-grade credit market to accelerate, potentially increasing from 50% to 90% electronified, which could significantly expand their market share and volumes.
    • MKTX is making significant progress in its portfolio trading offering, capturing market share despite not yet being on par with competitors, and plans further enhancements in Q1 2025, which could drive future growth.
    • The company's new targeted block trading solution aims to capture the 30–40% of the market that currently trades over phone and chat, representing a substantial growth opportunity as they leverage their data and analytics to shift block trades to electronic platforms.

    What went wrong

    • MarketAxess's portfolio trading offering is currently not on par with competitors, as the company admits they are "coming from behind" and have "more work to do to be on par," potentially impacting market share growth.
    • The high-touch block trading solution may not significantly impact results until 2025, as its rollout is a "trader by trader targeting" process, which could delay market share gains in the block trading segment.
    • MarketAxess experiences decreased market share during periods of increased large block trading, as large block trades often move to "phone and chat," and their electronic solution is still in "early days" with limited client uptake.

    Q&A Summary

    1. Block Trading Solution Launch
      Q: What's the plan to grow your new block trading solution?
      A: We recently launched our targeted block trading solution, X-Pro, to capture large block trades that account for 30–40% of the market. Early feedback from pilot clients is positive, and we're leveraging pre-trade analytics and AI-driven dealer selection to reduce information leakage and improve execution. We're moving from defense to offense, targeting the phone and chat market with better data and fewer clicks.

    2. Portfolio Trading Competitiveness
      Q: How competitive is your portfolio trading offering now?
      A: We're still behind our primary competitor but are rapidly enhancing our portfolio trading tools. We've recently added benchmark trading features and plan significant upgrades by the end of Q1. Despite not being on par yet, we're growing market share and expect our fully enhanced offering to drive further gains.

    3. Fee Per Million Dynamics
      Q: How will duration and yields affect fee per million?
      A: An increase of one year in weighted average years to maturity adds approximately $15 per million in high-grade fee capture. Additionally, a 100 basis point decline in yields can add $3–$5 per million. We're currently at about 9 years weighted average maturity, up from 8 in Q2.

    4. Emerging Markets Growth
      Q: What's driving your strong growth in emerging markets?
      A: Emerging markets volume grew 19% year-over-year in Q3. We're seeing record block trading volumes, up 24%. The competitive landscape is favorable, with the phone being the main competitor, and we're capitalizing on new electronic solutions like our request-for-market protocol.

    5. Electronification Pace
      Q: Do you expect electronification to accelerate in high-grade markets?
      A: Yes, we anticipate faster electronification than in the past 25 years. The adoption of electronic solutions like portfolio trading, now 10–13% of the market, shows clients embracing electronification. We're optimistic about increased adoption of electronic block trading due to commercial pressures and efficiency gains.

    6. Automation Suite Advancements
      Q: How is your automation suite progressing?
      A: Automation grew 32% year-over-year and now represents 27% of trades on our platform. Clients are using it for larger trade sizes, including block trades. We've launched a new solution leveraging Pragma technology to enhance our adaptive Auto-X tool , and we're seeing growth across all products and regions.

    7. ICE Partnership Benefits
      Q: How is the ICE partnership developing?
      A: The partnership with ICE is off to a great start, especially in munis and high-yield credit. ICE has become one of our top open trade liquidity providers, offering unique liquidity, particularly in smaller trade sizes. We're expanding connections with ICE bonds and exploring opportunities in treasury clearing.

    8. Expense Management and Investments
      Q: What's your plan for expenses and investments in 2025?
      A: We're balancing investing for growth with disciplined expense management. While some fixed costs are shifting out of 2024, variable costs increased due to higher volumes. We remain focused on deploying resources into key investments like proprietary data sets and technology enhancements.

    9. Trade Velocity Increase
      Q: What's driving the increase in trade velocity?
      A: Higher yields are attracting inflows into ETFs and mutual funds, requiring investment. Portfolio trading facilitates faster market exposure and portfolio changes, contributing to increased velocity. Record new issuance in 2024 also boosts turnover. We expect these trends to continue into 2025.

    10. Dealer-to-Dealer Expansion
      Q: How are you increasing share in dealer-to-dealer trading?
      A: We're investing significantly in the dealer business, enhancing our RFQ protocol and automation solutions for sell-side traders. We've introduced a "Work up" protocol allowing traders to expand trades after initial execution. We're also investing in single-price auctions with our Mid-X product, expecting good results in 2025.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Commissions181.991158.586150.496171.93663.0184.873171.679180.392
    - Variable Transaction Fees147.228-------
    - Distribution Fees and Unused Minimum Fees34.763-------
    Information Services11.01011.65511.80111.9346.411.88112.54412.960
    Post-trade Services9.9809.4159.83310.9740.210.73010.40010.382
    Other0.1880.1900.154-----
    Technology Services----3.02.8343.0372.981
    - Information and Post-Trade Services--------
    - Investment Income--------
    Total Revenue203.169179.846172.284197.2752.5210.318197.660206.715
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States--------
    United Kingdom--------
    Other--------
    Americas161.573141.999136.398157.17597.145166.833156.538165.009
    Europe36.73633.51831.40135.33136.98937.72835.86335.889
    Asia4.8604.3294.4854.7418.4135.7575.2595.817
    Total Revenue203.169179.846172.284197.25752.547210.318197.660206.715
    KPIs - Metric / QuarterFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    **Open Trading Credit Volume ($ billion)**--201.5955.6--247.4265.4
    **Open Trading Credit Variable Transaction Fees (%)**36.533.431.733.9-31.530.230.4
    **Trading Volumes in Auto-X ($ billion)**68.7-75.3--93.688.396.1
    **Active Client Firms Using Auto-X**-146167204-231248249
    **Dealer Algorithmic Responses (million)**7.27.48.210-1110.210.2
    **Average Variable Transaction Fee per Million (Credit)**164.98157.42154.85156.28-154.15148.16148.97
    **Average Variable Transaction Fee per Million (Rates)**-4.704.564.62-4.794.454.15

    Executive Team

    NamePositionStart DateShort Bio
    Christopher R. ConcannonChief Executive Officer and Interim CFOApril 2023 (CEO), February 2024 (Interim CFO)Christopher R. Concannon has been the CEO of MarketAxess since April 2023 and took on the role of Interim CFO in February 2024, expected to hold this position until May 2024 . Previously, he was the President and COO from January 2019 to April 2023 .
    Richard M. McVeyExecutive ChairmanApril 2023Richard M. McVey is the Executive Chairman of MarketAxess since April 2023. He is the founder of the company and served as CEO and Chairman from 2000 until April 2023. He was a Managing Director at J.P. Morgan before founding MarketAxess .
    Kevin M. McPhersonChief Revenue OfficerJuly 2023Kevin M. McPherson has been the Chief Revenue Officer since July 2023. He was the Global Head of Sales from June 2014 to July 2023 and U.S. Sales Manager from January 2008 to June 2014 .
    Naineshkumar S. PanchalChief Information OfficerMarch 2022Naineshkumar S. Panchal has been the CIO since March 2022. He was previously a Managing Director at Goldman Sachs Asset Management Technology, holding leadership roles from November 2014 to February 2022 .
    Scott PintoffGeneral Counsel and Corporate SecretaryFebruary 2014Scott Pintoff has been the General Counsel and Corporate Secretary since February 2014. Before joining MarketAxess, he was the General Counsel and Corporate Secretary at GFI Group from 2003, responsible for legal, regulatory, and compliance matters .
    Christophe RoupieHead of EMEA and APACMay 2020Christophe Roupie has been the Head of EMEA and APAC since May 2020. He was previously the Head of Europe and Asia from March 2017 to May 2020 and CEO of HiRock AG from October 2015 to October 2016 .
    Ilene Fiszel BielerChief Financial OfficerMay 23, 2024Ilene Fiszel Bieler will be the CFO starting May 23, 2024. She was the Executive Vice President, Global Head of Investor Relations and COO of State Street Global Markets and Global Credit Finance at State Street Corporation since 2022, and held various positions at Barclays plc and Citigroup Inc. .

    Questions to Ask Management

    1. You've previously projected that the high-grade market would become 90% electronified, up from around 50% today, but electronification gains have slowed in recent years; do you expect this pace to accelerate soon due to your focus on block trading, or will capturing the remaining market share be a prolonged process?

    2. Despite recent gains in portfolio trading market share, do clients now perceive your offering as on par with your main competitor's, or is there still a gap; what specific enhancements are you implementing to close this gap and what feedback are you receiving from clients?

    3. Regarding your high-touch strategy and block trading initiatives, should we anticipate significant market share gains in 2025, or is the adoption process more gradual, requiring a client-by-client education effort?

    4. With a portion of your emerging markets business driven by U.S.-based asset managers, how might higher tariffs or reduced allocations to emerging markets by these clients impact your overall credit business?

    5. Given potential easing of regulatory constraints on dealers under the new administration, do you foresee any changes in dealer behavior that could affect the electronification process or your competitive positioning?

    Share Repurchase Program

    Program DetailsProgram 1Program 2
    Approval DateJanuary 2022 August 2024
    End Date/DurationN/AN/A
    Total Additional Amount$150.0 million $200.0 million
    Remaining Authorization Amount$41.4 million $200.0 million
    DetailsCombined remaining capacity under both programs was $241.4 million as of September 30, 2024. Reflects Board's confidence in the company's performance and outlook.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      • Full Year 2024 Expenses: Expected to be more or less in line with previous guidance, slightly below the low end of the range of $480 million to $500 million .
      • Capital Management and Cash Flow: Cash, cash equivalents, and investments totaling $602 million as of September 30, 2024. Generated $310 million in free cash flow over the trailing 12 months, a 4% increase over the last quarter .
      • Share Repurchase: Repurchased 297,000 shares year-to-date through October 2024 for $64 million, with $236 million remaining on the current authorization .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      • Full Year 2024 Expenses: Expected to come in slightly below the low end of the range of $480 million to $500 million .
      • Share Repurchase Program: New share repurchase program of $200 million, with a total authorization of $250 million including the remaining $50 million from the existing program .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      • Operating Expenses: Tracking to the low end of the range of $480 million to $500 million .
      • Expense Management: 18% of expenses are variable .
      • Compensation: First quarter run rate approximately $61 million to $62 million .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      • Revenue from Pragma: Expected to grow in the mid-single digits. Pragma's revenue was $8 million in Q4 2023 .
      • Total Expenses: Expected to be in the range of $480 million to $500 million, including impacts from Pragma, efficiency savings, and acquisition-related expenses .
      • Effective Tax Rate: Expected to be in the range of 24% to 25% .
      • Capital Expenditures: Expected to be in the range of $60 million to $65 million, with 80% related to capitalized software development costs .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Tradeweb (indirectly controlled by the London Stock Exchange) - Competes in the credit and municipal markets, and rates markets .
    • Bloomberg - Competes in the credit and municipal markets, and rates markets; also a competitor in the data business .
    • Intercontinental Exchange - Competes in the credit and municipal markets; acquired BondPoint and TMC Bonds, and IDC .
    • Trumid - Competes in the credit and municipal markets .
    • CME Group (BrokerTec) - Competes in the rates markets .
    • BGC Partners (Fenics UST) - Competes in the rates markets .
    • London Stock Exchange (Refinitiv) - Competitor in the data business .
    • S&P Global - Competitor in the data business .
    • UnaVista (London Stock Exchange) - Competes in post-trade services in Europe .
    • Other multi-party electronic trading platforms - Compete in various markets .
    • EMS and OMS Providers - Compete by offering aggregation of trading venue liquidity and direct-to-dealer electronic trading solutions .
    • Securities and Futures Exchanges - Compete through acquisitions and data and analytics businesses .

    Latest news

    Recent developments and announcements about MKTX.

    Corporate Leadership

      CEO Change

      ·
      Nov 6, 2024, 12:00 AM

      Rick McVey, the Founder and Executive Chairman of MarketAxess, announced his retirement effective December 31, 2024. Carlos Hernandez will succeed him as Chairman of the Board of Directors starting January 1, 2025. McVey will continue as Chairman of the Board of Directors of MarketAxess Limited, the company's international holding company .

      Leadership Change

      ·
      Nov 6, 2024, 12:00 AM

      Rick McVey is leaving his position as Executive Chairman of the Board of Directors at MarketAxess, effective December 31, 2024. His retirement is not due to any disagreement with the company. He will continue to serve as Chairman of the Board of Directors of MarketAxess Limited, the company's international holding company . Carlos Hernandez will step up as the new Chairman of the Board, effective January 1, 2025. Mr. Hernandez is an independent director and has previously served as a Director from 2006 to 2019 and rejoined the Board in September 2023 .

      Board Change

      ·
      Nov 6, 2024, 12:00 AM

      Richard M. McVey will retire from his position as Executive Chairman of the Board of Directors and as a member of the Board, effective December 31, 2024. Carlos M. Hernandez has been elected as the new Chairman of the Board, effective January 1, 2025 .