Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an ~~“emerging~~emerging growth ~~company”.~~company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~October 26, 2017,~~May 3, 2024, the number of shares of the Registrant’s voting common stock outstanding was ~~37,536,939.~~37,896,895.


		Page
PART I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Financial Condition as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016~~2023	3
	Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	4
	Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	5
	Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2024 and 2023	6
	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	78
	Notes to Consolidated Financial Statements	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2028
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3641
Item 4.	Controls and Procedures	3743
PART II — Other Information
Item 1.	Legal Proceedings	3844
Item 1A.	Risk Factors	3844
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3844
Item 3.	Defaults Upon Senior Securities	3845
Item 4.	Mine Safety Disclosures	3945
Item 5.	Other Information	3945
Item 6.	Exhibits	3946

P~~ART~~PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)


	As of
	March 31, 2024			December 31, 2023
	(In thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents	$	376,679		$	451,280
Cash segregated under federal regulations		45,629			45,122
Investments, at fair value		135,831			134,861
Accounts receivable, net of allowance of $638 and $577 as of March 31, 2024 and December 31, 2023, respectively		99,878			89,839
Receivables from broker-dealers, clearing organizations and customers		662,888			687,936
Goodwill		236,706			236,706
Intangible assets, net of accumulated amortization		113,576			119,108
Furniture, equipment, leasehold improvements and capitalized software, net of accumulated depreciation and amortization		107,239			102,671
Operating lease right-of-use assets		62,006			63,045
Prepaid expenses and other assets		86,531			84,499
Total assets	$	1,926,963		$	2,015,067

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accrued employee compensation		28,665			60,124
Payables to broker-dealers, clearing organizations and customers		465,703			537,398
Income and other tax liabilities		2,931			7,892
Accounts payable, accrued expenses and other liabilities		33,361			37,013
Operating lease liabilities		78,070			79,677
Total liabilities	$	608,730		$	722,104

Commitments and Contingencies (Note 13)

Stockholders' equity
Preferred stock, $0.001 par value, 4,855,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Common stock voting, $0.003 par value, 110,000,000 shares authorized, 41,022,506 shares and 40,940,769 shares issued and 37,938,337 shares and 37,899,688 shares outstanding as of March 31, 2024 and December 31, 2023, respectively		123			123
Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Additional paid-in capital		327,519			333,292
Treasury stock – Common stock voting, at cost, 3,084,169 shares and 3,041,081 shares as of March 31, 2024 and December 31, 2023, respectively		(269,005	)		(260,298	)
Retained earnings		1,288,247			1,244,216
Accumulated other comprehensive loss		(28,651	)		(24,370	)
Total stockholders' equity		1,318,233			1,292,963
Total liabilities and stockholders' equity	$	1,926,963		$	2,015,067

The accompanying notes are an integral part of these consolidated financial statements.

As of

September 30, 2017

December 31, 2016

(In thousands, except share
and per share amounts)

ASSETS

Cash and cash equivalents
$
138,992

$
168,243

Investments, at fair value

237,221

194,404

Accounts receivable, net of allowance of $71 and $82 as of
   September 30, 2017 and December 31, 2016, respectively

63,027

50,668

Goodwill and intangible assets, net of accumulated amortization

63,155

63,443

Furniture, equipment, leasehold improvements and capitalized
   software, net of accumulated depreciation and amortization

35,321

31,104

Prepaid expenses and other assets

16,174

11,618

Deferred tax assets, net

8,457

8,562

Total assets
$
562,347

$
528,042

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Accrued employee compensation
$
31,027

$
34,783

Income and other tax liabilities

4,507

7,582

Deferred revenue

3,191

2,515

Accounts payable, accrued expenses and other liabilities

12,714

15,149

Total liabilities

51,439

60,029

Commitments and Contingencies (Note 10)

Stockholders' equity

Preferred stock, $0.001 par value, 4,855,000 shares authorized,
   no shares issued and outstanding as of September 30, 2017 and
   December 31, 2016

—

—

Series A Preferred Stock, $0.001 par value, 110,000 shares authorized,
   no shares issued and outstanding as of September 30, 2017 and
   December 31, 2016

—

—

Common stock voting, $0.003 par value, 110,000,000 shares
  authorized, 40,296,774 shares and 40,106,360 shares issued
  and 37,547,951 shares and 37,543,775 shares outstanding as of
  September 30, 2017 and December 31, 2016, respectively

121

120

Common stock non-voting, $0.003 par value, 10,000,000 shares
   authorized, no shares issued and outstanding as of
   September 30, 2017 and December 31, 2016

—

—

Additional paid-in capital

342,113

342,311

Treasury stock - Common stock voting, at cost, 2,748,823 and
   2,562,585 shares as of September 30, 2017 and
   December 31, 2016, respectively

(153,682
)

(117,330
)
Retained earnings

332,506

255,140

Accumulated other comprehensive loss

(10,150
)

(12,228
)
Total stockholders' equity

510,908

468,013

Total liabilities and stockholders' equity
$
562,347

$
528,042

~~The accompanying notes are an integral part of these consolidated financial statements.~~

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,
	2024			2023
	(In thousands, except per share amounts)
Revenues
Commissions	$	184,873		$	181,991
Information services		11,881			11,010
Post-trade services		10,730			9,980
Technology services		2,834			188
Total revenues		210,318			203,169

Expenses
Employee compensation and benefits		61,264			52,315
Depreciation and amortization		18,200			16,461
Technology and communications		17,051			14,999
Professional and consulting fees		6,395			7,127
Occupancy		3,425			3,611
Marketing and advertising		1,833			2,995
Clearing costs		4,911			4,545
General and administrative		4,739			5,760
Total expenses		117,818			107,813
Operating income		92,500			95,356
Other income (expense)
Interest income		5,973			4,249
Interest expense		(316	)		(130	)
Equity in earnings of unconsolidated affiliate		370			204
Other, net		(1,810	)		(1,484	)
Total other income (expense)		4,217			2,839
Income before income taxes		96,717			98,195
Provision for income taxes		24,102			24,567
Net income	$	72,615		$	73,628

Net income per common share
Basic	$	1.92		$	1.96
Diluted	$	1.92		$	1.96

Cash dividends declared per common share	$	0.74		$	0.72

Weighted average shares outstanding
Basic		37,740			37,478
Diluted		37,790			37,645

The accompanying notes are an integral part of these consolidated financial statements.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(In thousands, except share
and per share amounts)

Revenues

Commissions
$
86,270

$
81,456

$
267,307

$
246,788

Information and post-trade services

8,372

7,322

24,460

23,687

Investment income

964

534

2,551

1,469

Other

1,095

959

3,588

3,539

Total revenues

96,701

90,271

297,906

275,483

Expenses

Employee compensation and benefits

25,595

23,914

78,417

74,256

Depreciation and amortization

4,583

4,325

14,066

13,546

Technology and communications

5,035

4,245

14,442

12,826

Professional and consulting fees

5,547

4,342

13,912

12,449

Occupancy

1,795

1,220

4,621

3,606

Marketing and advertising

2,089

2,140

6,757

5,742

Clearing costs

1,476

1,035

4,320

4,754

General and administrative

3,364

2,696

8,974

7,029

Total expenses

49,484

43,917

145,509

134,208

Income before income taxes

47,217

46,354

152,397

141,275

Provision for income taxes

13,087

15,436

37,781

48,268

Net income
$
34,130

$
30,918

$
114,616

$
93,007

Net income per common share

Basic
$
0.93

$
0.84

$
3.11

$
2.52

Diluted
$
0.90

$
0.82

$
3.01

$
2.46

Cash dividends declared per common share
$
0.33

$
0.26

$
0.99

$
0.78

Weighted average shares outstanding

Basic

36,865

36,889

36,856

36,847

Diluted

38,019

37,792

38,069

37,738

~~The accompanying notes are an integral part of these consolidated financial statements.~~

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2024			2023
	(In thousands)
Net income	$	72,615		$	73,628
Cumulative translation adjustment		(4,241	)		5,755
Net unrealized (loss) on securities available-for-sale, net of tax of $33 and $14, respectively		(40	)		(41	)
Comprehensive income	$	68,334		$	79,342

The accompanying notes are an integral part of these consolidated financial statements.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(In thousands)

Net income
$
34,130

$
30,918

$
114,616

$
93,007

Net cumulative translation adjustment and foreign
   currency exchange hedge, net of tax of $(953),
   $346, $(2,586) and $4,448, respectively

1,102

(1,052
)

2,061

(5,093
)
Net unrealized gain (loss) on securities available-for-sale,
   net of tax of $16, $(27), $10 and $109, respectively

26

(44
)

17

177

Comprehensive income
$
35,258

$
29,822

$
116,694

$
88,091

��

~~The accompanying notes are an integral part of these consolidated financial statements.~~

MARKETAXESS HOLDINGS INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock Voting		Additional Paid-In Capital		Treasury Stock - Common Stock Voting		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	(In thousands, except per share amounts)
Balance at January 1, 2024	$	123	$	333,292	$	(260,298)	$	1,244,216	$	(24,370)	$	1,292,963
Net income		—		—		—		72,615		—		72,615
Cumulative translation adjustment		—		—		—		—		(4,241)		(4,241)
Unrealized net gain (loss) on securities available-for-sale, net of tax		—		—		—		—		(40)		(40)
Stock-based compensation		—		7,298		—		—		—		7,298
Exercise of stock options		—		1,977		—		—		—		1,977
Withholding tax payments on full value awards vesting and stock option exercises		—		(14,893)		—		—		—		(14,893)
Reissuance of treasury stock		—		(155)		1,440		(581)		—		704
Repurchases of common stock		—		—		(10,147)		—		—		(10,147)
Cash dividend on common stock ($0.74 per share)		—		—		—		(28,003)		—		(28,003)
Balance at March 31, 2024	$	123	$	327,519	$	(269,005)	$	1,288,247	$	(28,651)	$	1,318,233

The accompanying notes are an integral part of these consolidated financial statements.

Common
Stock
Voting

Additional
Paid-In
Capital

Treasury Stock -
Common
Stock
Voting

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Stockholders'
Equity

(In thousands)

Balance at December 31, 2016
$
120

$
342,311

$
(117,330
)

$
255,140

$
(12,228
)

$
468,013

Net income

—

—

—

114,616

—

114,616

Cumulative translation adjustment and foreign
   currency exchange hedge, net of tax

—

—

—

—

2,061

2,061

Unrealized net gain on securities available-for-sale,
   net of tax

—

—

—

—

17

17

Stock-based compensation

—

10,989

—

—

—

10,989

Exercise of stock options

1

1,639

—

—

—

1,640

Withholding tax payments on restricted stock
   vesting and stock option exercises

—

(12,906
)

—

—

—

(12,906
)
Repurchases of common stock

—

—

(36,352
)

—

—

(36,352
)
Cumulative effect of change in accounting for
   employee share-based payments

—

80

—

(51
)

—

29

Cash dividend on common stock

—

—

—

(37,199
)

—

(37,199
)
Balance at September 30, 2017
$
121

$
342,113

$
(153,682
)

$
332,506

$
(10,150
)

$
510,908

~~The accompanying notes are an integral part of these consolidated financial statements.~~

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

(Unaudited)


	Common Stock Voting		Additional Paid-In Capital		Treasury Stock - Common Stock Voting		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	(In thousands, except per share amounts)
Balance at January 1, 2023	$	123	$	345,468	$	(328,326)	$	1,101,525	$	(37,697)	$	1,081,093
Net income		—		—		—		73,628		—		73,628
Cumulative translation adjustment		—		—		—		—		5,755		5,755
Unrealized net gain (loss) on securities available-for-sale, net of tax		—		—		—		—		(41)		(41)
Stock-based compensation		—		7,488		—		—		—		7,488
Reissuance of treasury stock		—		(57)		511		—		—		454
Exercise of stock options		—		707		—		—		—		707
Withholding tax payments on full value awards vesting and stock option exercises		—		(20,492)		—		—		—		(20,492)
Cash dividend on common stock ($0.72 per share)		—		—		—		(27,060)		—		(27,060)
Balance at March 31, 2023	$	123	$	333,114	$	(327,815)	$	1,148,093	$	(31,983)	$	1,121,532

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2024			2023
	(In thousands)
Cash flows from operating activities
Net income	$	72,615		$	73,628
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		18,200			16,461
Amortization of operating lease right-of-use assets		1,599			1,368
Stock-based compensation expense		7,103			7,488
Deferred taxes		(1,338	)		(1,433	)
Foreign currency transaction losses		187			1,699
Other		1,730			(2,532	)
Changes in operating assets and liabilities:
(Increase) in accounts receivable		(10,491	)		(21,935	)
Decrease/(increase) in receivables from broker-dealers, clearing organizations and customers		21,735			(52,549	)
(Increase)/decrease in prepaid expenses and other assets		(1,323	)		3,163
Decrease/(increase) in trading investments		255			(419	)
(Increase) in mutual funds held in rabbi trust		(529	)		(630	)
(Decrease) in accrued employee compensation		(29,017	)		(31,567	)
(Decrease)/increase in payables to broker-dealers, clearing organizations and customers		(71,135	)		12,281
(Decrease)/increase in income and other tax liabilities		(4,001	)		10,904
(Decrease) in accounts payable, accrued expenses and other liabilities		(8,385	)		(6,838	)
(Decrease) in operating lease liabilities		(2,154	)		(1,562	)
Net cash (used in)/provided by operating activities		(4,949	)		7,527
Cash flows from investing activities
Available-for-sale investments
Proceeds from maturities and sales		4,302			1,048
Purchases		(4,972	)		(22,895	)
Purchases of furniture, equipment and leasehold improvements		(1,197	)		(217	)
Capitalization of software development costs		(13,963	)		(10,690	)
Net cash (used in) investing activities		(15,830	)		(32,754	)
Cash flows from financing activities
Cash dividend on common stock		(29,480	)		(28,357	)
Exercise of stock options		1,977			707
Withholding tax payments on full value awards vesting and stock option exercises		(14,893	)		(20,492	)
Repurchases of common stock		(10,147	)		—
Proceeds from short-term borrowings		—			50,000
Repayments of short-term borrowings		—			(50,000	)
Net cash (used in) financing activities		(52,543	)		(48,142	)
Effect of exchange rate changes on cash and cash equivalents		(3,186	)		3,345
Cash and cash equivalents including restricted cash
Net decrease for the period		(76,508	)		(70,024	)
Beginning of period		611,672			572,664
End of period	$	535,164		$	502,640

Supplemental cash flow information
Cash paid for income taxes	$	37,187		$	11,660
Cash paid for interest		431			187
Non-cash investing and financing activity
Operating lease right-of-use assets obtained in exchange for operating lease liabilities		630			—
Furniture, equipment, software and leasehold improvement additions included in accounts payable		4,825			—
Stock-based and accrued incentive compensation relating to capitalized software development costs		921			—
Exercise of stock options - cashless		1,735			—

The accompanying notes are an integral part of these consolidated financial statements.

Nine Months Ended September 30,

2017

2016

(In thousands)

Cash flows from operating activities

Net income
$
114,616

$
93,007

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

14,066

13,546

Stock-based compensation expense

10,989

10,636

Deferred taxes

326

(1,387
)
Other

1,290

10,044

Changes in operating assets and liabilities:

(Increase) in accounts receivable

(12,535
)

(16,439
)
(Increase) in prepaid expenses and other assets

(4,503
)

(2,151
)
Decrease (increase) in corporate debt trading investments

8,338

(74,535
)
(Increase) in mutual funds held in rabbi trust

(1,730
)

(1,328
)
(Decrease) in accrued employee compensation

(3,756
)

(750
)
(Decrease) in income and other tax liabilities

(3,277
)

(843
)
Increase in deferred revenue

676

694

(Decrease) increase in accounts payable, accrued expenses and other liabilities

(2,917
)

2,646

Net cash provided by operating activities

121,583

33,140

Cash flows from investing activities

Available-for-sale investments

Proceeds from maturities and sales

146,295

32,025

Purchases

(196,810
)

(42,495
)
Purchases of furniture, equipment and leasehold improvements

(7,245
)

(4,754
)
Capitalization of software development costs

(10,094
)

(9,058
)
Other

(53
)

383

Net cash (used in) investing activities

(67,907
)

(23,899
)
Cash flows from financing activities

Cash dividend on common stock

(36,717
)

(28,914
)
Exercise of stock options

1,640

2,172

Withholding tax payments on restricted stock vesting and stock option exercises

(12,906
)

(5,929
)
Repurchases of common stock

(36,352
)

(13,874
)
Net cash (used in) financing activities

(84,335
)

(46,545
)
Effect of exchange rate changes on cash and cash equivalents

1,408

(980
)
Cash and cash equivalents

Net (decrease) for the period

(29,251
)

(38,284
)
Beginning of period

168,243

199,728

End of period
$
138,992

$
161,444

~~The accompanying notes are an integral part of these consolidated financial statements.~~

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Principal Business Activity

MarketAxess Holdings Inc. (the “Company” or “MarketAxess”) was incorporated in the State of Delaware on April 11, ~~2000.~~ 2000.Through its subsidiaries, MarketAxess operates a leading electronic trading ~~platform that enables~~platforms delivering expanded liquidity opportunities, improved execution quality and significant cost savings across global fixed-income ~~market participants to efficiently trade corporate bonds and other types of fixed-income instruments using MarketAxess' patented trading technology.~~markets. Over ~~1,300~~2,000 institutional investor and broker-dealer firms are active users of ~~the MarketAxess~~MarketAxess’ patented trading ~~platform,~~technology, accessing global liquidity on its platforms in U.S. high-grade ~~corporate~~bonds, U.S. high-yield bonds, emerging ~~markets and high-yield bonds, European~~market debt, Eurobonds, municipal bonds, U.S. ~~agency~~government bonds ~~municipal bonds, credit default swaps~~ and other fixed-income securities. Through its Open ~~Trading™~~Trading® protocols, MarketAxess executes ~~certain~~ bond ~~transactions~~trades between and among institutional investor and broker-dealer clients ~~on a matched principal basis by serving as counterparty to both~~in the ~~buyer and the seller in trades which then settle through a third-party clearing broker.~~leading all-to-all anonymous trading environment for corporate bonds. MarketAxess also offers a number of trading-related products and services, including: CP+™ 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; and execution services for exchange-traded fund managers and other clients. Through its Trax® division, MarketAxess~~environments. The Company also ~~offers~~provides a range of pre- and post-trade services, including post-trade matching, trade ~~matching,~~publication, regulatory transaction reporting and market and reference data across a range of fixed-income and other products.

2. Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated. These consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2023. The consolidated financial information as of December 31, ~~2016~~2023 has been derived from audited financial statements not included herein. These unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) with respect to Form 10-Q and reflect all adjustments that, in the opinion of management, are normal and recurring, and that are necessary for a fair statement of the results for the interim periods presented. In accordance with such rules and regulations, certain disclosures that are normally included in annual financial statements have been omitted. Interim period operating results may not be indicative of the operating results for a full year.

~~Accounting Pronouncements, Recently Adopted~~

Effective January 1, 2017, the Company adopted ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects related to the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. Beginning January 1, 2017, the tax effects related to share-based payments are recorded through the income tax provision and the Company has elected to account for forfeitures as they occur. The adoption of ASU 2016-09 will cause volatility in the Company’s net income, effective tax rate and diluted earnings per share. The volatility in future periods will depend on the Company’s stock price at the vest date for restricted stock awards or exercise date for stock options and the number of awards that vest or are exercised in each period. Under the new guidance, excess tax benefits from share-based compensation are included as an operating activity in the Company’s Consolidated Statements of Cash Flows. Prior period cash flows have been adjusted to conform to the new presentation.

~~Accounting Pronouncements, Not Yet Adopted~~

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) requiring an entity to recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The Company intends to adopt the new guidance using the modified retrospective method beginning January 1, 2018. The Company’s implementation efforts include the identification of revenue streams within the scope of the guidance, the evaluation of certain revenue contracts underlying the revenue streams, discussions with our advisory consultants, and periodic discussions with our audit committee. The Company’s evaluation of the impact of this accounting guidance is ongoing although it does not expect this guidance to have a material effect on its Consolidated Financial Statements or disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”) requiring lessees to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. ASU 2016-02 will be effective for the Company beginning January 1, 2019 and early adoption is permitted and should be applied prospectively. The Company is currently evaluating the potential adoption impact and expects to recognize lease assets and lease liabilities in its Consolidated Statements of Financial Condition. The Company does not expect material changes to the recognition of operating lease expense in its Consolidated Statements of Operations.

In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other” (“ASU 2017-04”). ASU 2017-04 simplifies the testing for goodwill impairment. The guidance will be effective for the Company beginning January 1, 2020 and early adoption is permitted and should be applied prospectively. The adoption of this guidance is not expected to have a material effect on the Company’s Consolidated Financial Statements.

Cash and Cash Equivalents

Cash and cash equivalents includes cash and money market instruments that are primarily maintained at one major global bank. Given this concentration, the Company is exposed to certain credit risk in relation to its deposits at this bank. The Company defines cash equivalents as short-term interest-bearing investments with maturities at the time of purchase of three months or less.

Investments

~~Investments~~

The Company determines the appropriate classification of securities at the time of purchase which are recorded in the Consolidated Statements of Financial Condition on the trade date. Securities are classified as available-for-sale or trading. ~~The Company’s available-for-sale investments are comprised of municipal bonds and investment grade corporate debt securities.~~ Available-for-sale investments are carried at fair value with ~~the~~ unrealized gains or losses reported in accumulated other comprehensive loss in the Consolidated Statements of Financial ~~Condition.~~Condition and realized gains or losses reported in other, net in the Consolidated Statements of Operations. Trading investments ~~primarily~~ include ~~investment grade corporate debt securities~~U.S. Treasuries and are carried at fair value, with realized and unrealized gains or losses included in other, ~~income~~net in the Consolidated Statements of Operations.

The Company assesses whether an ~~other-than-temporary~~ impairment loss on ~~the~~its available-for-sale ~~investments~~debt securities has occurred due to declines in fair value or other market conditions. When the amortized cost basis of an available-for-sale debt security exceeds its fair value, the security is deemed to be impaired. The portion of an ~~other-than-temporary~~ impairment related to credit ~~loss~~losses is determined by comparing the present value of cash flows expected to be collected from the security with the amortized cost basis of the security and is recorded as a charge in the Consolidated Statements of Operations. The remainder of an impairment is recognized in accumulated other comprehensive loss if the Company does not intend to sell the security and it is more likely than not that the Company will not be required to sell the security prior to recovery. ~~No charges for other-than-temporary losses were recorded during the nine months ended September 30, 2017 and 2016.~~

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Fair Value Financial Instruments

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, trading securities, available-for-sale ~~trading~~ securities, ~~and~~ foreign currency forward ~~contracts.~~contracts and contingent consideration payables associated with acquisitions. All other financial instruments are short-term in nature and the carrying ~~amount is~~amounts reported on the Consolidated Statements 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-to-receive”). 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 ~~Doubtful Accounts~~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 ~~doubtful accounts~~credit losses is based ~~upon~~on the estimated expected credit losses in 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 ~~doubtful accounts~~credit losses are charged to bad debt expense, which is included in general and administrative expense in the Company’s Consolidated Statements of Operations. Balances that are determined to be uncollectable are written off against the allowance for credit losses.

The allowance for credit losses was $0.6 million as of each of March 31, 2024 and December 31, 2023. The provision for bad debts for the three months ended March 31, 2024 and 2023 was $0.1 million and $0.2 million, respectively. Write-offs and other charges against the allowance for credit losses were immaterial for each of the three months ended March 31, 2024 and 2023.

Depreciation and Amortization

Fixed assets are carried at cost less accumulated depreciation. The Company uses the straight-line method of depreciation over three to seven ~~years.~~years. The Company amortizes leasehold improvements on a straight-line basis over the lesser of the life of the improvement or the remaining term of the lease.

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~~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.~~ 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.

MARKETAXESS HOLDINGS INC.

~~Cash Provided~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Cloud Computing Costs

The Company capitalizes certain costs associated with cloud computing arrangements, including, among other items, vendor software development costs billed to us that are part of the application development stage. These costs are recorded as ~~Collateral~~

~~Cash is provided as collateral for broker-dealer clearing accounts. Cash provided as collateral is included in~~a prepaid ~~expenses and other assets in~~asset on the Consolidated Statements of Financial ~~Condition.~~Condition and are amortized over the period of the hosting service contract, which ranges 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.

Foreign Currency Translation and Forward Contracts

Assets and liabilities denominated in foreign currencies are translated using exchange rates at the end of the period; revenues and expenses are translated at average monthly rates. Gains and losses on foreign currency translation are a component of accumulated other comprehensive loss in the Consolidated Statements of Financial Condition. Transaction gains and losses are recorded in ~~general and administrative expense~~other, net in the Consolidated Statements of Operations.

The Company enters into foreign currency forward contracts to economically hedge its ~~net investment in its U.K. subsidiaries. Gains~~foreign currency transaction gains and losses. Realized and unrealized gains and losses on these ~~transactions~~forward contracts are included in ~~accumulated~~ other, ~~comprehensive loss~~net in the Consolidated Statements of Operations. The Company records the fair value of the forward contract asset in prepaid expenses and other assets or the fair value of the forward contract liability in accounts payable, accrued expenses and other liabilities in the Consolidated Statements of Financial Condition.

Revenue Recognition

The ~~majority~~Company’s classification of revenues in the ~~Company’s~~Consolidated Statements of Operations represents revenues ~~are derived~~ from ~~commissions~~contracts with customers disaggregated by type of revenue. The Company has four revenue streams as described below.

Commission Revenue – The Company charges its broker-dealer clients variable transaction fees for trades executed on its ~~platform~~platforms and, under certain plans, distribution fees ~~that~~or monthly minimum fees to use the platforms for a particular product area. Variable transaction fees are ~~billed to its broker-dealer clients~~recognized on a ~~monthly basis. The Company also derives revenues from information and post-trade services, technology products and services, investment income and other income.~~

~~Commission revenue.~~ ~~Commissions~~trade date basis, are generally calculated as a percentage of the notional dollar volume of bonds traded on the ~~platform~~platforms and vary based on the type, size, yield and maturity of the bond ~~traded. Under the Company’s transaction fee plans, bonds~~traded, as well as individual client incentives. Bonds that are more actively traded or that have shorter maturities ~~are~~ generally ~~charged~~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 broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller, the Company earns ~~the~~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 the majority of the Company’s U.S. Treasury matched principal ~~trades. Fee programs~~trades, commissions are invoiced and recorded on a monthly basis.

As a result of its acquisition of Pragma LLC and Pragma Financial Systems LLC (collectively, “Pragma”) in the fourth quarter of 2023, the Company also earns other commissions on equities and foreign exchange products for ~~certain products include distribution~~algorithmic trading services. These fees incorporate variable transaction fees, which are ~~recognized monthly.~~calculated as a percentage of the notional dollar volume traded and are billed on a monthly basis.

The following table presents commission revenue by fee type:


		Three Months Ended March 31,
		2024			2023
	(In thousands)
Commission revenue by fee type
Variable transaction fees
Disclosed trading	$		94,778	$		88,128
Open Trading – matched principal trading			48,180			54,236
U.S. government bonds - matched principal trading			3,712			4,864
Other			4,849			—
Total variable transaction fees			151,519			147,228
Distribution fees and unused minimum fees			33,354			34,763
Total commissions	$		184,873	$		181,991

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Information ~~and post-trade services.~~ ~~The Company generates revenue from information~~ services ~~provided~~– Information services includes data licensed to ~~our~~the Company’s broker-dealer clients, institutional investor clients and data-only ~~subscribers. Information~~subscribers; professional and consulting services; technology software licenses; and maintenance and support services. 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 ~~invoiced monthly, quarterly or annually. When billed~~transferred at a point in ~~advance,~~time. Revenues for services transferred over time are recognized ratably over the contract period as the Company’s performance obligation is met, whereas revenues ~~are deferred and recognized monthly on~~for services transferred at a ~~straight-line basis. The Company also generates revenue from regulatory transaction reporting and trade matching services. Revenue is~~point in time are recognized in the period the services are provided.

~~Technology products~~ Customers are generally billed monthly, quarterly, or annually; revenues billed in advance are deferred and ~~services.~~ The Company generates revenues from professional consulting services, technology software licenses and maintenance and support services. Revenue from professional consulting services is recognized as services are performed and software license subscription revenue and maintenance and support services are recognized ratably over the contract period. ~~Technology products and~~The following table presents information services revenue by timing of recognition:


	Three Months Ended March 31,
	2024		2023
	(In thousands)
Information services revenue by timing of recognition
Services transferred over time	$	11,874	$	10,659
Services transferred at a point in time		7		351
Total information services revenues	$	11,881	$	11,010

Post-trade services – Post-trade services revenue is ~~reported~~generated from regulatory transaction reporting, trade publication and post-trade matching services. Customers are generally billed monthly in arrears, and revenue is recognized in the period transactions are processed. Revenues billed in advance are deferred and recognized ratably over the contract period. The Company also generates one-time implementation fees for onboarding clients, which are invoiced and recognized in the period the implementation is completed. The following table presents post-trade services revenue by timing of recognition:


	Three Months Ended March 31,
	2024		2023
	(In thousands)
Post-trade services revenue by timing of recognition
Services transferred over time	$	10,540	$	9,955
Services transferred at a point in time		190		25
Total post-trade services revenues	$	10,730	$	9,980

Technology services – Technology services revenue primarily includes technology services revenue generated by Pragma and revenue from telecommunications line charges to broker-dealer clients. Customers may be billed monthly or quarterly in arrears or in advance, and revenue is recognized in the period transactions are processed. Revenues billed in advance are deferred and recognized ratably over the contract period.

The following table presents technology services revenue by timing of recognition:


	Three Months Ended March 31,
	2024		2023
	(In thousands)
Technology services revenue by timing of recognition
Services transferred over time	$	2,830	$	188
Services transferred at a point in time		4		—
Total technology services revenues	$	2,834	$	188

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Contract liabilities consist of deferred revenues that the Company records when cash payments are received or due in advance of services to be performed. Deferred revenues are included in accounts payable, accrued expenses and other ~~income in~~liabilities on the Consolidated Statements of ~~Operations.~~

Financial Condition. The revenue recognized from contract liabilities and the remaining balance is shown below:


	December 31, 2023			Payments received in advance of services to be performed		Revenue recognized for services performed during the period			Foreign Currency Translation			March 31, 2024
		(In thousands)
Information services	$		3,049	$	3,437	$	(3,544	)	$	—		$	2,942
Post-trade services			923		6,498		(5,487	)		(7	)		1,927
Technology services			567		2,014		(2,110	)		—			471
Total deferred revenue	$		4,539	$	11,949	$	(11,141	)	$	(7	)	$	5,340

The majority of the Company’s information services and post-trade services 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 $66.1 million as of March 31, 2024. The Company expects to recognize revenue associated with the remaining performance obligations over the next 55 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 Statements of Operations over the requisite service period, which is typically the vesting period, with an offsetting increase to additional paid-in capital. ~~Effective upon the Company’s adoption of ASU 2016-09, the Company accounts for forfeitures~~Forfeitures are recognized as they occur. ~~Prior to the adoption of ASU 2016-09, expected forfeitures were included in determining share-based compensation expense.~~

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 ~~general and administrative expenses~~the provision for income taxes in the Consolidated Statements of Operations. ~~Effective upon the Company’s adoption of ASU 2016-09,~~ ~~all~~All tax effects related to share-based payments are recorded ~~through tax expense~~in the provision for income taxes in the periods during which the awards are exercised or vest.

Business Combinations, Goodwill and Intangible Assets

Business combinations are accounted for under the purchase method of accounting. The total cost of an acquisition is allocated to the underlying net assets based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain assets acquired and liabilities assumed ~~is judgmental in nature~~requires judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates, revenue growth rates, customer attrition rates, royalty rates, obsolescence and asset lives. Intangible assets are valued using various methodologies, including the relief-from-royalty method and multi-period excess earnings method.

The Company operates as a single reporting unit. ~~Subsequent to~~Following an acquisition, goodwill no longer retains its identification with a particular acquisition, but instead becomes identifiable with the entire reporting unit. As a result, all of the fair value of the Company is available to support the value of goodwill. 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, including purchased technologies, customer relationships and other intangible assets, are amortized ~~on a straight-line basis~~ over their estimated useful lives ~~ranging~~which range from ~~three to15 years.~~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.

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Equity Investments and Consolidation

The Company evaluates equity investments for potential consolidation under the voting-interest or variable-interest models. The Company consolidates investees over which the Company determines it has control under the voting interest model, generally greater than 50% ownership, or for which the Company is the primary beneficiary under the variable-interest model. The Company uses the equity method of accounting when it exercises significant influence over the investee, but does not have operating control, generally between 20% and 50% ownership. Under the equity method of accounting, original investments are recorded at cost in prepaid expenses and other assets on the Consolidated Statements of Financial Condition and adjusted by the Company’s proportionate share of the investees’ undistributed earnings or losses. Equity investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable.

Earnings Per Share

Basic earnings per share is computed by dividing the net income attributable to common stock by the weighted-average number of shares of common stock outstanding during the period. For purposes of computing diluted earnings per share, the weighted-average shares outstanding of common stock reflects the dilutive effect that could occur if convertible securities or other contracts to issue common stock were converted into or exercised for common stock.

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.

Recent Accounting Pronouncements

~~Out-of-Period Adjustments~~

~~During~~In December 2023, the ~~first quarter of 2016, the Company determined that it had incorrectly recorded deferred~~Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation and income taxes paid. The ASU is effective for the ~~cumulative translation adjustment (“CTA”) that arises from converting~~Company’s Annual Report on Form 10-K for the ~~local currency financial statements into U.S. dollars. Upon making~~fiscal year ended December 31, 2025. The guidance may be applied on a ~~permanent reinvestment assertion on unremitted earnings from foreign subsidiaries effective January 1, 2013, the Company should have eliminated any deferred tax balances derived from the CTA balance.~~prospective or retrospective basis and early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also ~~determined that gains~~requires the disclosure of the title and ~~losses~~position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. All disclosure requirements under ASU 2023-07 and existing segment disclosures in ASC 280, Segment Reporting are also required for public entities with a single reportable segment. The ASU is effective for the Company’s Annual Report on Form 10-K for the ~~foreign currency forward contracts used~~fiscal year ended December 31, 2024, and subsequent interim periods, with early adoption permitted. The ASU must be applied retrospectively to ~~hedge the net investment in certain foreign subsidiaries were not appropriately considered as taxable income or expense~~all periods presented in the ~~consolidated tax returns.~~financial statements. The Company ~~assessed these errors and determined that they were not material to previous reporting periods. Therefore,~~is currently evaluating the Company recorded these items as out-of-period adjustments in the three months ended March 31, 2016 by decreasing deferred tax assets by $3.1 million, decreasing other comprehensive income by $2.1 million and increasing prepaid expenses and other assets by $1.0 million in the Consolidated Statementsimpact of ~~Financial Condition.~~adopting this ASU on its consolidated financial statements.

Certain reclassifications have been made to the prior period’s Consolidated Financial Statements in order to conform to the current year presentation. Such reclassifications had no effect on previously reported net income.

Certain ~~U.S. subsidiaries~~ of the ~~Company~~Company’s U.S. subsidiaries are registered as ~~a broker-dealer or swap execution facility~~broker-dealers and therefore are subject to the applicable rules and regulations of the SEC and the ~~Commodity Futures Trading Commission.~~Financial Industry Regulatory Authority (“FINRA”). These rules contain minimum net capital requirements, as defined in the applicable ~~regulations, and also may require a significant part of the registrants’ assets be kept in relatively liquid form.~~regulations. Certain of the Company’s foreign subsidiaries are regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom (“U.K.”) or other foreign regulators and must maintain financial resources, as defined in the applicable regulations, in excess of the applicable financial resources requirement. As of ~~September 30, 2017,~~March 31, 2024, each of the Company’s subsidiaries that are subject to these regulations had net capital or financial resources in excess of their minimum requirements. As of ~~September 30, 2017,~~March 31, 2024, the Company’s subsidiaries maintained aggregate net capital and financial resources that ~~was $128.2~~were $545.0 million in excess of the required levels of ~~$12.6~~$35.7 million.

One of the Company’s U.S. broker-dealer subsidiaries is required to segregate funds in a special reserve bank account for the benefit of customers pursuant to Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of March 31, 2024, this U.S. broker-dealer subsidiary had a balance of $45.6 million in its special reserve bank account. This U.S. broker-dealer subsidiary also maintained net capital that was $304.5 million in excess of the required level of $7.9 million.

Each of the Company’s U.S. and foreign regulated subsidiaries are subject to local regulations which generally ~~prohibit~~limit, or require the prior notification to or approval from such regulated entity’s principal regulator before, the repayment of borrowings from the Company or affiliates, paying cash dividends, making loans to the Company or affiliates or otherwise entering into transactions that result in a significant reduction in regulatory net capital or financial ~~resources without prior notification to or approval from such regulated entity’s principal regulator.~~resources.

4. Fair Value Measurements

The following table summarizes the valuation of the Company’s assets and liabilities measured at fair value as categorized based on the hierarchy described in Note 2.2:



	Level 1		Level 2		Level 3		Total
	(In thousands)
As of March 31, 2024
Assets
Money market funds	$	18,571	$	—	$	—	$	18,571
Securities available-for-sale
Corporate debt		—		25,389		—		25,389
Trading securities
U.S. Treasuries		—		99,427		—		99,427
Mutual funds held in rabbi trust		—		11,015		—		11,015
Total assets	$	18,571	$	135,831	$	—	$	154,402

Liabilities
Foreign currency forward position		—		196		—		196
Total liabilities	$	—	$	196	$	—	$	196

As of December 31, 2023
Assets
Money market funds	$	18,634	$	—	$	—	$	18,634
Securities available-for-sale
Corporate debt		—		24,694		—		24,694
Trading securities
U.S. Treasuries		—		99,682		—		99,682
Mutual funds held in rabbi trust		—		10,485		—		10,485
Foreign currency forward position		—		1,901		—		1,901
Total assets	$	18,634	$	136,762	$	—	$	155,396

Level 1

Level 2

Level 3

Total

(In thousands)

As of September 30, 2017

Money market funds
$
25,213

$
—

$
—

$
25,213

Securities available-for-sale

Corporate debt

—

168,278

—

168,278

Trading securities

Corporate debt

—

65,885

—

65,885

Mutual funds held in rabbi trust

—

3,058

—

3,058

Foreign currency forward position

—

591

—

591

Total
$
25,213

$
237,812

$
—

$
263,025

As of December 31, 2016

Money market funds
$
58,573

$
—

$
—

$
58,573

Securities available-for-sale

Corporate debt

—

118,870

—

118,870

Trading securities

Corporate debt

—

74,207

—

74,207

Mutual funds held in rabbi trust

—

1,327

—

1,327

Foreign currency forward position

—

(266
)

—

(266
)
Total
$
58,573

$
194,138

$
—

$
252,711

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Money market funds are included in cash and cash equivalents on the Consolidated Statements of Financial Condition. Securities available-for-sale and trading securities are included in investments, at fair value on the Consolidated Statements of Financial Condition. 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 foreign currency forward contracts are included in either other assets or accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Financial Condition, and are classified within Level 2 as the valuation inputs are based on quoted market prices. The mutual funds held in a rabbi trust represent investments associated with the Company’s deferred cash incentive ~~plan (see Note 14). There were no~~plan.

The table below presents the carrying value, fair value and fair value hierarchy category of the Company's financial assets ~~classified within~~and liabilities that are not measured at fair value on the Consolidated Statements 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
	(In thousands)
As of March 31, 2024
Financial assets not measured at fair value:
Cash	$	358,108	$	358,108	$	358,108	$	—	$	—	$	358,108
Cash segregated under federal regulations		45,629		45,629		45,629		—		—		45,629
Accounts receivable, net of allowance		99,878		99,878		—		99,878		—		99,878
Receivables from broker-dealers, clearing organizations and customers		662,888		662,888		112,713		550,175		—		662,888
Total	$	1,166,503	$	1,166,503	$	516,450	$	650,053	$	—	$	1,166,503

Financial liabilities not measured at fair value:
Payables to broker-dealers, clearing organizations and customers	$	465,703	$	465,703	$	—	$	465,703	$	—	$	465,703

As of December 31, 2023
Financial assets not measured at fair value:
Cash	$	432,646	$	432,646	$	432,646	$	—	$	—	$	432,646
Cash segregated under federal regulations		45,122		45,122		45,122		—		—		45,122
Accounts receivable, net of allowance		89,839		89,839		—		89,839		—		89,839
Receivables from broker-dealers, clearing organizations and customers		687,936		687,936		115,151		572,785		—		687,936
Total	$	1,255,543	$	1,255,543	$	592,919	$	662,624	$	—	$	1,255,543

Financial liabilities not measured at fair value:
Payables to broker-dealers, clearing organizations and customers	$	537,398	$	537,398	$	—	$	537,398	$	—	$	537,398

During the three months ended March 31, 2024 and 2023 there were no transfers between Level 1, Level 2 and Level 3 ~~during the nine months ended September 30, 2017 and 2016.~~securities.

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

The Company enters into foreign currency forward contracts toas an economic hedge ~~the net investment~~against certain foreign currency transaction gains and losses in the ~~Company’s U.K. subsidiaries. The Company designates each foreign currency~~Consolidated Statements of Operations. These forward contract as a hedge and assesses the risk management objective and strategy, including identification of the hedging instrument, the hedged item and the risk exposure and how effectiveness is to be assessed prospectively and retrospectively. These hedgescontracts are for ~~a one-month period~~three-month periods and are used to limit exposure to foreign currency exchange rate fluctuations. The Company records the fair value of the asset ~~is included~~ in prepaid expenses and other assets ~~and~~or the fair value of the liability ~~is included~~ in accounts payable, accrued expenses and other liabilities in the Consolidated Statements of Financial Condition. ~~Gains or~~The following table summarizes the Company’s foreign currency forward position:


	As of
	March 31, 2024			December 31, 2023
	(In thousands)
Notional value	$	63,305		$	61,858
Fair value of notional		63,109			63,759
Fair value of the (liability)/asset	$	(196	)	$	1,901

Realized and unrealized gains and losses on foreign currency forward contracts ~~designated as hedges~~are included in other, net in the Consolidated Statements of Operations. The Company recorded a net realized gain of $1.3 million and a net unrealized loss of $2.1 million for the three months ended March 31, 2024. The Company recorded a net realized loss of $1.7 million and a net unrealized gain of $2.5 million for the three months ended March 31, 2023. The Company records collateral deposits with its counterparty bank in prepaid expenses and other assets on the Consolidated Statements of Financial Condition. As of March 31, 2024, the Company did not maintain a collateral deposit with its counterparty bank.

The following table summarizes the Company’s investments:


	Amortized cost			Gross unrealized gains		Gross unrealized losses			Fair value
		(In thousands)
As of March 31, 2024
Securities available-for-sale
Corporate debt	$		25,473	$	25	$	(109	)	$	25,389
Trading securities
U.S. Treasuries			99,682		—		(255	)		99,427
Mutual funds held in rabbi trust			10,818		629		(432	)		11,015
Total investments	$		135,973	$	654	$	(796	)	$	135,831

As of December 31, 2023
Securities available-for-sale
Corporate debt	$		24,705	$	55	$	(66	)	$	24,694
Trading securities
U.S. Treasuries			99,236		446		—			99,682
Mutual funds held in rabbi trust			10,962		172		(649	)		10,485
Total investments	$		134,903	$	673	$	(715	)	$	134,861

Purchases of investments during the three months ended March 31, 2024 and 2023 were $5.0 million and $22.9 million, respectively. Proceeds from the sales and maturities of investments during the three months ended March 31, 2024 and 2023 were $4.3 million and $1.0 million, respectively.

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

The following table summarizes the Company’s unrealized and realized gains and losses on investments:


	Three Months Ended March 31,
	2024			2023
	(In thousands)
Unrealized gains/(losses)
Securities available-for-sale
Corporate debt	$	(73	)	$	(55	)
Trading securities
U.S. Treasuries		(255	)		420
Mutual funds held in rabbi trust		674			585
Total investments	$	346		$	950

Realized gains/(losses)
Securities available-for-sale
Corporate debt	$	2		$	(17	)
Trading securities
Mutual funds held in rabbi trust		35			—
Total investments	$	37		$	(17	)

Unrealized gains and losses on securities available-for-sale are included in accumulated other comprehensive loss inon the Consolidated Statements of Financial Condition. ~~A summary~~Realized gains and losses on securities available-for-sale and realized and unrealized gains and losses on trading securities are included in other, net on the Consolidated Statements of ~~the Company’s foreign currency forward position is as follows:~~

Operations.

As of

September 30, 2017

December 31, 2016

(In thousands)

Notional value
$
89,035

$
66,972

Fair value of notional

88,444

67,238

Fair value of the asset (liability)
$
591

$
(266
)

~~The following is a summary of the Company’s investments:~~

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair
value

(In thousands)

As of September 30, 2017

Securities available-for-sale

Corporate debt
$
168,455

$
18

$
(195
)

$
168,278

Trading securities

Corporate debt

65,940

67

(122
)

65,885

Mutual funds held in rabbi trust

2,729

329

—

3,058

Total trading securities

68,669

396

(122
)

68,943

Total investments
$
237,124

$
414

$
(317
)

$
237,221

As of December 31, 2016

Securities available-for-sale

Corporate debt
$
119,073

$
13

$
(216
)

$
118,870

Trading securities

Corporate debt

74,394

47

(234
)

74,207

Mutual funds held in rabbi trust

1,212

115

—

1,327

Total trading securities

75,606

162

(234
)

75,534

Total investments
$
194,679

$
175

$
(450
)

$
194,404

The following table summarizes the fair value of the investments based upon the contractual maturities:


	Less than one year		Due in 1 - 5 years		Total
	(In thousands)
As of March 31, 2024
Securities available-for-sale
Corporate debt	$	11,480	$	13,909	$	25,389
Trading securities
U.S. Treasuries		49,757		49,670		99,427
Mutual funds held in rabbi trust		11,015		—		11,015
Total	$	72,252	$	63,579	$	135,831

As of December 31, 2023
Securities available-for-sale
Corporate debt	$	10,727	$	13,967	$	24,694
Trading securities
U.S. Treasuries		49,756		49,926		99,682
Mutual funds held in rabbi trust		10,485		—		10,485
Total	$	70,968	$	63,893	$	134,861

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of

September 30, 2017

December 31, 2016

(In thousands)

Less than one year
$
133,207

$
117,904

Due in 1 - 5 years

104,014

76,500

Total
$
237,221

$
194,404

(Unaudited)

~~Proceeds from the sales and maturities of investments during the nine months ended September 30, 2017 and 2016 were $170.1 million and $48.1 million, respectively.~~

The following table provides fair values and unrealized losses on the Company’s available-for-sale investments and by the aging of ~~the~~ securities’ continuous unrealized loss ~~position~~positions:


	Less than Twelve Months					Twelve Months or More					Total
	Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses
	(In thousands)
As of March 31, 2024
Corporate debt	$	17,958	$	(100	)	$	2,043	$	(9	)	$	20,001	$	(109	)

As of December 31, 2023
Corporate debt	$	17,658	$	(66	)	$	—	$	—		$	17,658	$	(66	)

During the three months ended March 31, 2024 and 2023, the Company did not recognize any credit losses on its available-for-sale securities. The unrealized losses on securities are due to changes in interest rates and market liquidity.

5. Receivables from and Payables to Broker-dealers, Clearing Organizations and Customers

Receivables from and payables to broker-dealers, clearing organizations and customers consisted of the following:


	As of
	March 31, 2024		December 31, 2023
Receivables from broker-dealers, clearing organizations and customers:	(In thousands)
Securities failed-to-deliver – broker-dealers and clearing organizations	$	262,239	$	282,125
Securities failed-to-deliver – customers		282,172		284,322
Deposits with clearing organizations and broker-dealers		112,713		115,151
Other		5,764		6,338
Total	$	662,888	$	687,936

Payables to broker-dealers, clearing organizations and customers:
Securities failed-to-receive – broker-dealers and clearing organizations	$	169,798	$	125,022
Securities failed-to-receive – customers		287,086		405,186
Other		8,819		7,190
Total	$	465,703	$	537,398

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

6. Acquisitions and Equity Investments

Acquisition of Pragma

On October 2, 2023, the Company completed its acquisition (the “Pragma Acquisition”) of all of the outstanding ownership interests of Pragma LLC and Pragma Financial Systems LLC (collectively “Pragma”) pursuant to the terms and conditions of a Membership Interest Purchase Agreement entered into among the Company, Pragma Weeden Holdings LLC, Pragma Financial Systems LLC, Pragma LLC and, solely for certain limited purposes, David Mechner, Pragma’s chief executive officer, on August 5, 2023 (the “Purchase Agreement”). Following customary adjustments for cash, debt, transaction expenses and working capital, the aggregate purchase price for the Acquisition was $125.0 million, comprised of approximately $81.2 million in cash and 224,776 shares of common stock of the Company, valued at approximately $43.8 million as of ~~September 30, 2017~~the closing date of the Pragma Acquisition, as described below. A portion of the stock consideration, amounting to 8,603 shares of common stock, was placed in escrow for 12 months to secure the sellers’ indemnification obligations under the Purchase Agreement. In addition, pursuant to the Purchase Agreement and ~~December~~subject to certain exceptions, the sellers and their affiliates are prohibited from transferring any of the Company common stock received in the Acquisition for a period of six months following the October 2, 2023 closing date. The value ascribed to the shares by the Company was discounted from the market value on the date of closing to reflect the non-marketability of such shares during the restriction period.

Pragma is a quantitative trading technology provider specializing in algorithmic and analytical services. Pragma LLC is a registered broker-dealer. The Company has performed an allocation of the purchase price to the fair value of assets acquired and liabilities assumed at the date of acquisition. The Company utilized an independent third-party to assist in determining the fair value of the acquired intangible assets. The purchase price allocation is as follows (in thousands):


Purchase price	$	125,002
Less: acquired cash		(2,685	)
Purchase price, net of acquired cash		122,317
Intangible assets		(38,900	)
Accounts receivable		(2,637	)
Prepaid expenses and other assets		(4,181	)
Accounts payable, accrued expenses and other liabilities		5,318
Goodwill	$	81,917

The acquired developed technology and customer relationships intangible assets were valued using the relief-from-royalty method and multi-period excess earnings method, respectively. The fair values of the intangible assets acquired are as follows (in thousands, except for useful lives):


	Costs		Useful Lives
Developed technology	$	28,500	7 years
Customer relationships		9,200	15 years
Tradename - finite life		1,200	15 years
Total	$	38,900

The goodwill recognized in connection with the Pragma Acquisition is primarily attributable to the acquisition of an assembled workforce and expected future technology and synergies from the integration of the operations of Pragma into the Company's operations. All of the goodwill recognized in connection with the Pragma Acquisition is expected to be deductible for income tax purposes.

Pro forma financial information and current period results for the Pragma Acquisition were not material to the Company’s consolidated financial statements and therefore have not been presented.

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

RFQ Hub LLC Equity Investment

In May 2022, the Company invested $34.4 million to acquire a minority ownership stake in RFQ–hub Holdings LLC, an entity formed with a consortium of market participants to support the growth of RFQ-hub, a multi-asset request for quote platform. The Company possesses significant influence over RFQ–hub Holdings LLC and is accounting for its investment under the equity method of accounting. As of March 31, ~~2016:~~2024, the Company’s investment is recorded at carrying value of $36.6 million within prepaid expenses and other assets on the Consolidated Statements of Financial Condition. The Company’s proportionate share of RFQ–hub Holdings LLC’s net earnings was $0.4 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively, and is recorded within equity in earnings of unconsolidated affiliate on the Consolidated Statements of Operations.

Under a services agreement, the Company charges its equity method investee for certain reimbursable support costs incurred by the Company, including personnel compensation, and certain operational overhead costs. The amount billed for the three months ended March 31, 2024 was $0.5 million and is included within other, net on the Consolidated Statements of Operations. The receivable from the equity method investee was $1.6 million as of March 31, 2024 and is included within accounts receivable, net on the Consolidated Statements of Financial Condition.

Less than Twelve Months

Twelve Months or More

Total

Estimated
fair
value

Gross
unrealized
losses

Estimated
fair
value

Gross
unrealized
losses

Estimated
fair
value

Gross
unrealized
losses

(In thousands)

As of September 30, 2017

Corporate debt
$
173,000

$
(284
)

$
5,426

$
(33
)

$
178,426

$
(317
)

As of December 31, 2016

Corporate debt
$
136,667

$
(449
)

$
2,000

$
(1
)

$
138,667

$
(450
)

5.7. Goodwill and Intangible Assets

Goodwill and intangible assets with indefinite lives ~~was $59.7~~were $236.7 million as of ~~both September 30, 2017~~each of March 31, 2024 and December 31, ~~2016.~~ 2023. Intangible assets that are subject to amortization, including the related accumulated amortization, are comprised of the following:

September 30, 2017

December 31, 2016

Cost

Accumulated
amortization

Net carrying
amount

Cost

Accumulated
amortization

Net carrying
amount

(In thousands)

Technology
$
5,770

$
(5,770
)

$
—

$
5,770

$
(5,770
)

$
—

Customer relationships

5,645

(2,203
)

3,443

5,628

(1,897
)

3,731

Non-competition agreements

380

(380
)

—

380

(380
)

—

Tradenames

370

(370
)

—

370

(370
)

—

Total
$
12,165

$
(8,723
)

$
3,443

$
12,148

$
(8,417
)

$
3,731


	March 31, 2024							December 31, 2023
	Cost		Accumulated amortization			Net carrying amount		Cost		Accumulated amortization			Net carrying amount
	(In thousands)

Customer relationships	$	139,463	$	(54,366	)	$	85,097	$	140,348	$	(50,987	)	$	89,361
Technology and other intangibles		41,130		(12,651	)		28,479		41,130		(11,383	)		29,747
Total	$	180,593	$	(67,017	)	$	113,576	$	181,478	$	(62,370	)	$	119,108

Amortization expense associated with identifiable intangible assets was ~~$0.3~~$5.0 million and ~~$0.6~~$4.1 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively. ~~Estimated~~Annual estimated total amortization expense is ~~$0.4~~$19.8 million, $16.9 million, $15.2 million, $13.8 million and $12.3 million for ~~each year from 2017~~the years ended December 31, 2024 through ~~2021.~~2028, respectively.

The Company's provision for income taxes ~~consists~~includes U.S. federal, state and local, and foreign taxes. The Company’s effective tax rate was 24.9% and 25.0% for the three months ended March 31, 2024 and 2023, respectively. The Company’s effective tax rate can vary from period to period depending on geographic mix of our earnings, changes in tax legislation and tax rates and the ~~following:~~

T~~he Company recognized~~amount and timing of excess tax benefits onrelated to share-based payments, ~~of $~~3~~.8 million and $~~14~~.8 million through the provision for income taxes, for the three and nine months ended September 30, 2017, respectively.~~among other factors.

The Company or one of its subsidiaries files U.S. federal, state and foreign income tax returns. ~~Income tax returns for U.S. Federal (through 2013), New York City (through 2003) and state (through 2009) and Connecticut state (through 2003) have been audited. An examination of the Company’s~~The Company is currently under a New York State income tax ~~returns~~examination for ~~2010~~tax years 2015 through ~~2013 is currently underway. The~~2017 and a New York City income tax examination for the tax years 2016 through 2018. At this time, the Company cannot estimate when the ~~examination~~examinations will conclude or the impact such ~~examination~~examinations will have on the Company’s Consolidated Financial Statements, if any.

~~The~~ Generally, other than the New York City and New York State audits, the Company ~~has determined that unremitted earnings of the Company’s foreign subsidiaries are considered indefinitely reinvested outside of the United States.~~is no longer subject to tax examinations by tax authorities for years prior to 2020.

The Company has operating leases ~~office space under non-cancelable~~for corporate offices with initial lease terms ranging from one year to 15 years. Certain leases contain options to extend the initial term at the Company’s discretion. The Company accounts for the option to extend when it is reasonably certain of being exercised. The Company’s lease agreements ~~expiring at various dates through 2033. Office space~~do not contain any material residual value guarantees, restrictions or covenants. The Company also has operating and finance leases ~~are subject~~for equipment with initial lease terms ranging from one-year to ~~escalation based on certain costs incurred by~~5 years.

I~~tem~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to the end of each quarter or the year. Although these expectations may change, we ~~are under~~undertake no obligation to revise or update any forward-looking statements contained in this ~~report.~~report, except to the extent required by applicable law. Our ~~company~~Company’s policy is generally to provide our expectations only once per quarter, and not to update that information until the next quarter. Actual future events or results may differ, perhaps materially from those contained in the projections or forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this report, particularly in the section captioned Part II, Item 1A, “Risk ~~Factors.~~Factors,” and in our Form 10-K for the year ended December 31, 2023, including in Part I, Item 1A, “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Executive Overview

MarketAxess operates a leading electronic trading ~~platform that enables~~platforms delivering greater trading efficiency, a diversified pool of liquidity and significant cost savings to our clients across the global fixed-income ~~market participants to efficiently trade corporate bonds and other types of fixed-income instruments using our patented trading technology.~~markets. Over ~~1,300~~2,000 institutional investor and broker-dealer firms ~~are active users of~~use our patented trading ~~platform, accessing global liquidity in~~technology to efficiently trade U.S. high-grade ~~corporate~~bonds, U.S. high-yield bonds, emerging ~~markets and high-yield bonds, European~~market debt, Eurobonds, municipal bonds, U.S. ~~agency~~government bonds ~~municipal bonds, credit default swaps~~ and other fixed-income securities. ~~Through~~Our award-winning Open Tradingmarketplace is widely regarded as the preferred all-to-all trading solution in the global credit markets, creating a unique liquidity pool for a broad range of credit market participants. We leverage our diverse set of trading protocols, automated and algorithmic trading solutions, intelligent data and index products and a range of post-trade services to provide an end-to-end trading solution to our robust network of platform participants.

We provide automated and algorithmic trading solutions that we believe, when combined with our integrated and actionable data offerings, will help our clients make faster, better-informed decisions on when and how to trade on our platforms. In 2023, we introduced X-Pro, our newest trading platform, to more seamlessly combine our trading protocols with our proprietary data and pre-trade analytics. We expect that our recent acquisition of Pragma, a quantitative trading technology provider specializing in algorithmic and analytical trading services, will accelerate our development of artificial intelligence driven execution algorithms across many of our key product areas.

We operate in a large and growing market that provides us with a significant opportunity for future growth, due, in part, to the relatively low levels of electronic trading in many of our largest current product areas. We offer Open ~~Trading™ protocols, we execute trades~~Trading for most of our products in ~~certain bonds between~~order to capitalize on this addressable market by increasing the number of potential trading counterparties and ~~among~~providing our clients with a menu of solutions at each step in the trading process. We believe that Open Trading drives meaningful price improvement for our clients and reduces risk in fixed-income markets by creating a global, diversified pool of liquidity whereby our institutional investor, dealer and alternative liquidity provider clients can all interact on an anonymous basis. Institutional investors can also send trading inquiries directly to their traditional broker-dealer ~~clients in an all-to-all trading environment~~counterparties on a ~~matched principal basis.~~ disclosed basis, while simultaneously accessing additional counterparties through our anonymous Open Trading solutions.

We also ~~offer~~provide a number of ~~trading-related products~~integrated and ~~services, including: market~~actionable data offerings, including CP+™ and Axess All®, to assist clients with real-time pricing and trading ~~decisions; connectivity solutions that facilitate straight-through processing; technology services to optimize trading environments;~~decisions and ~~execution services for exchange-traded fund managers and other clients. Through our Trax® division, we also offer~~transaction cost analysis. We have a range of ~~pre- and~~ post-trade services, including straight-through processing, post-trade matching, trade ~~matching,~~publication, regulatory transaction reporting and market and reference data across ~~a range of~~ fixed-income and other products.

Our platform’s innovative technology solutions are designed to increase the number of potential trading counterparties on our electronic trading platform and create a menu of solutions to address different trade sizes and bond liquidity characteristics. Our traditional request-for-quote model allows our institutional investor clients to simultaneously request competing, executable bids or offers from our broker-dealer clients and execute trades with the broker-dealer of their choice from among those that choose to respond. Our Open Trading™ protocols complement our request-for-quote model by increasing the number of potential counterparties and improving liquidity by allowing all participants to interact anonymously in an all-to-all trading environment. Our platform also provides our broker-dealer clients a solution that enables them to efficiently reach our institutional investor clients for the distribution and trading of bonds.

~~The majority of our revenues are derived~~We derive revenue from commissions for ~~trades~~transactions executed on our ~~platform and distribution fees that are billed to our broker-dealer clients on a monthly basis. We also derive revenues from~~platforms, information ~~and~~services, post-trade services and technology ~~products and services, investment income and other income.~~services. Our expenses consist of employee compensation and benefits, depreciation and amortization, technology and communication expenses, professional and consulting fees, occupancy, marketing and advertising, clearing costs and ~~other~~ general and administrative expenses.

Our objective is to provide the leading global electronic trading ~~platform~~platforms for fixed-income securities, connecting broker-dealers and institutional investors more easily and efficiently, while offering a broad array of trading information ~~trading~~ and technology services to market participants across the trading cycle. The key elements of our strategy ~~are:~~

to innovate and efficiently add new functionality and product offerings to the MarketAxess platform that we believe will help to increase our market share with existing clients, as well as to expand our client base;

•

to leverage our existing client network and technology to increase the number of potential counterparties and improve liquidity by developing and deploying a wide range of electronic trading protocols to complement our traditional request-for-quote model and allowing broker-dealers and institutional investors to interact in our all-to-all Open Trading^TM ~~environment;~~

to leverage our existing technology and client relationships to deploy our electronic trading platform into additional product segments within the fixed-income securities markets and deliver fixed-income securities-related technical services and products;

•

to continue building our existing service offerings so that our electronic trading platform is more fully integrated into the workflow of our broker-dealer and institutional investor clients and to continue to add functionality to allow our clients to achieve a fully automated end-to-end straight-through processing solution (automation from trade initiation to settlement);

•

to add new content and analytical capabilities to BondTicker™ and expand Axess All™, the first intra-day trade tape for the European fixed-income market, and the other data service offerings provided by Trax^® ~~to improve the value of the information we provide to our clients; and~~

to continue to increase and supplement our internal growth by entering into strategic alliances, or acquiring businesses or technologies that will enable us to enter new markets, provide new products or services, or otherwise enhance the valueare discussed in Part I, Item 1. “Business – Our Strategy” of our platform to our clients. For example, in recent years, we entered into, and expanded a strategic alliance with BlackRock, Inc. (“BlackRock”) to combine BlackRock’s order flow with our Open Trading™ solution to improveForm 10-K for the range of trading connections available to global credit market participants. In 2016, we entered into an agreement with S&P Dow Jones Indices to jointly develop indices that will track the most liquid segments of the U.S. corporate bond market.year ended December 31, 2023.

Critical Factors Affecting Our Industry and Our Company

Economic, Political and Market Factors

The global fixed-income securities industry is risky and volatile and is directly affected by a number of economic, political and market factors that may ~~result in declining~~impact trading volume. These factors could have a material adverse or positive effect on our business, financial condition and results of operations. These factors include, among others, credit market conditions, the current interest rate environment, including the volatility of interest rates and investors’ forecasts of future interest rates, the duration of bonds traded, economic and political conditions in the United States, Europe and elsewhere, and the consolidation or contraction of our broker-dealer and institutional investor clients.

During the first quarter of 2024, the new issue calendar was very active across U.S. credit. U.S. high-grade and U.S. high-yield new issuance were $530.9 billion and $87.6 billion, up 34.0% and 116.5%, respectively, from the prior year. A strong new issue calendar can negatively impact our market share in the short-term, but is expected to positively impact secondary trading volumes over the long term. Strong new issuance and low levels of credit spread volatility negatively impacted our U.S. high-yield volumes and estimated market share in the first quarter of 2024. The low levels of credit spread volatility contributed to a decrease in exchange-trade fund (“ETF”) market maker activity on our platforms, and we believe our institutional investor clients decreased their secondary market trading activity in light of the increased availability of new issues during the quarter. The decrease in U.S. high-yield activity also negatively impacted our total credit average variable fee per million.

There has been increased demand for green bonds in the fixed-income markets in which we operate.

Because the majority of our assets are short-term in nature, they are not significantly affected by inflation. However, the rate of inflation impacts our expenses, such as employee compensation, technology and communications expenses, which may not be readily recoverable in the prices of our services. To the extent inflation continues to result in high interest rates or has other adverse effects on the securities markets or the economy, it may adversely affect our financial position and results of operations.

We expect that current cash and investment balances, in combination with cash flows that are generated from operations and the ability to borrow under our 2023 Credit Agreement, will be sufficient to meet our liquidity needs and planned capital expenditure requirements for at least the next twelve months. We ended the quarter with $749.9 million in available borrowing capacity under the 2023 Credit Agreement and capital significantly in excess of our regulatory requirements.

Competitive Landscape

The global fixed-income securities industry generally, and the electronic financial services markets in which we engage, in particular, are highly competitive, and we expect competition to intensify in the future. Sources of competition for us will continue to include, among others, bond trading conducted directly between broker-dealers and their institutional investor clients over the telephone or electronically and other multi-dealer or all-to-all trading platforms. Competitors, including companies in which some of our broker-dealer clients have invested, have developed or acquired electronic trading platforms or have announced their intention to explore the development of electronic platforms or information networks that may compete with us.

~~In general, we~~We primarily compete on the basis of ~~a number of key factors, including, among others,~~our client network, the liquidity provided ~~on our platform, the level of commissions charged for trades executed on our platform, the magnitude and frequency of price improvement enabled~~ by our ~~platform~~dealer, and, to a lesser extent, institutional investor clients, the total transaction costs associated with our services, the breadth of products, protocols and services offered, as well as the quality, reliability, security and ~~speed~~ease of ~~execution.~~use of our platforms. We believe that our ability to grow volumes and revenues will largely depend on our performance with respect to these factors.

There has been increased demand for portfolio trading workflows over the last few years, which has resulted in heightened competition among trading platforms to enhance their portfolio trading offerings and expand them across different geographies and products. During periods of relatively lower credit spread volatility, clients are beginning to use portfolio trading workflows in lieu of more established trading protocols designed to generate price competition on individual bonds. Our dealer clients have also increased their usage of matching sessions offered by competing platforms in recent periods. To the extent that our clients increase their use of portfolio trading and matching session protocols offered by other platforms, our market share in those products could decrease.

Our competitive position is ~~also~~ enhanced by the ~~familiarity~~unique liquidity provided by our Open Trading functionalities and the integration of our broker-dealer and institutional investor clients with our electronic trading ~~platform~~platforms and other systems. We have focused on the unique aspects of the credit markets we serve in the development of our ~~platform,~~platforms, working closely with our clients to provide a system that is suited to their needs.

Regulatory Environment

Our ~~industry has been and~~business is subject to ~~continuous regulatory changes and may become subject to new~~extensive regulations ~~or changes~~ in ~~the interpretation or enforcement of existing regulations, which could require us to incur significant costs.~~

~~Following the global financial crisis and other recent events in the financial industry, governments and regulators in both~~ the United States and ~~Europe called for increased regulation~~internationally, which may expose us to significant regulatory risk and ~~transparency~~cause additional legal costs to ensure compliance. The existing legal framework that governs the financial markets is periodically reviewed and amended, resulting in the ~~over-the-counter markets.~~ enactment and enforcement of new laws and regulations that apply to our business. In January 2022, the SEC proposed rules that will expand Regulation ATS and Regulation SCI to alternative trading systems (ATS) that trade government securities and amend the SEC rule regarding the definition of an “exchange” to include Communication Protocol Systems, such as our request-for-quote protocols. Based on these proposed rules, we expect that we will have to operate all of our trading protocols in compliance with Regulation ATS and we could become subject to Regulation SCI for certain parts of our business in the future. The SEC has also adopted final rule amendments that, effective May 2024, will shorten the standard settlement cycle for most broker-dealer securities transactions from two business days after the trade date (T+2) to one business day after the trade date (T+1). The shortening of the settlement cycle will lead to a reduction in the length of exposure to trading counterparties and lower margin requirements for our clearing operations, but it is also expected to increase the operational costs and complexities associated with cross border transactions conducted on our platforms. The SEC also recently adopted final rules regarding the central clearing of certain secondary market transactions involving U.S. Treasury securities. This central clearing mandate will impact certain of our participants who do not centrally clear such trades today, and some have expressed concerns about the potential impact of additional clearing costs. The impact of any of these reform efforts on us and our operations remains uncertain.

As a result the Dodd-Frank Act was signed into law in 2010 and, among other things, mandated the clearing of certain derivative instruments (“swaps”) through regulated central clearing organizations and mandatory trading of those instruments through either regulated exchanges or swap execution facilities (“SEFs”), in each case, subject to certain key exceptions.

Various rules promulgated since the financial crisis could also adversely affect our bank-affiliated broker-dealer clients’ ability to make markets in a variety of fixed-income securities, thereby negatively impacting the level of liquidity and pricing available on our trading platform. For example, while the Volcker Rule does not apply directly to us, the Volcker Rule bans proprietary trading by banks and their affiliates. In addition, enhanced leverage ratios applicable to large banking organizations in the U.S. and Europe

require such organizations to strengthen their balance sheets and may limit their ability or willingness to make markets on our trading platform. We cannot predict the extent to which these rules or any future regulatory changes may adversely affect our business and operations.

Following President Trump’s election in November 2016, he has pursued a path of financial deregulation, including by signing an executive order that requires the Treasury Department to review the provisions of the ~~Dodd-Frank Act. As a result,~~U.K.’s departure from the ~~Treasury Department has begun a process of reviewing existing U.S. capital markets regulations, and has issued a report with recommendations to improve corporate bond liquidity.~~

~~Similar to the U.S., regulatory bodies~~E.U. in Europe are developing new rules for the fixed-income markets. MiFID II and MiFIR were approved in June 2014 and introduce significant changes in market structure designed to: (i) enhance pre- and post-trade transparency for fixed-income instruments with the scope of requirements calibrated for liquidity, (ii) increase and enhance post-trade reporting obligations with a requirement to submit post-trade data to Approved Reporting Mechanisms, (iii) ensure trading of certain derivatives occurs on regulated trading venues and (iv) establish a consolidated tape for trade data. MiFID II and MiFIR are expected to take effect in January 2018 and the final rules may have an adverse effect on our operations or our ability to provide our electronic trading platform in a manner that can successfully compete against other types of regulated and non-regulated venues for the fixed-income trading needs of our clients. In addition, MiFID II is expected to cause us to expend significantly more compliance, business and technology resources, incur additional operational costs and create additional regulatory exposure for our trading and post-trade businesses. While we generally believe the net impact of the rules and regulations may be positive for our businesses, unintended consequences of the rules and regulations may adversely affect us in ways yet to be determined.

~~In March 2017, the U.K. notified the European Council of its intention to leave the European Union~~2020 (commonly referred to as “Brexit”)~~. By invoking Article 50 of~~, we obtained authorizations from the ~~Lisbon Treaty, the U.K. is currently set to leave the European Union in March 2019. Depending on the terms agreed between E.U. member states and the U.K. as part of the exit negotiations,~~AFM for our U.K. subsidiaries may not be able to rely on the existence of a “passporting” regime that allows immediate access to the single E.U. market. Accordingly, we have begun the process of establishing one or more new regulated subsidiaries in the Netherlands in 2019. We now provide regulated services to our clients within the E.U. in ~~order~~reliance on the cross-border services passport held by our Dutch subsidiaries. Brexit has led to ~~provide our trading platform~~an ongoing divergence between the U.K. and ~~certain post-trade services~~E.U. financial regulations, which has made it more difficult and costly to ~~clients~~comply with the extensive government regulation to which we are subject. The cost and complexity of operating across increasingly divergent regulatory regimes has increased and is likely to continue to increase in the ~~E.U. following Brexit.~~future.

~~Rapid Technological Changes~~Compliance with regulations may require us to dedicate additional financial and operational resources, which may adversely affect our profitability. For example, the E.U.’s Digital Operational Resilience Act (DORA), which will become applicable to portions of our business in 2025, will require us to dedicate additional financial and operational resources to meet the significant additional information communication technologies services-related governance, risk management, resilience testing and sub-contracting requirements created by the legislation. However, we also believe new regulations may increase demand for our platforms and we believe we are well positioned to benefit from those regulatory changes that cause market participants to seek electronic trading platforms that meet the various regulatory requirements.

For further description of the regulations which govern our business, see Part1, Item I. “Business – Government Regulation” of our Form 10-K for the year ended December 31, 2023.

Technology Environment

We must continue to enhance and improve our electronic trading ~~platform.~~platforms. The ~~electronic financial services industry is~~markets in which we compete are characterized by increasingly complex protocols, systems and ~~infrastructures and new business models.~~technology infrastructure requirements. Our future success will depend on our ability to enhance our existing products and services, develop and/or license new products and technologies that address the increasingly sophisticated and varied needs of our existing and prospective broker-dealer and institutional investor clients and respond to technological advances and emerging industry and regulatory standards and practices on a cost-effective and timely basis. For example, in 2023, we introduced MarketAxess X-Pro, our new trading platform, which provides traders with a flexible user experience, intuitive workflows and access to our proprietary data and pre-trade analytics. We ~~have been issued 13 patents covering~~plan to continue to focus on technology infrastructure initiatives and improving our ~~most significant~~platforms with the goal of further enhancing our leading market position.

As the overall share of electronic trading grows in global credit products, we are experiencing continued demand for, and growth in, our automated and algorithmic trading solutions. We also support a large and growing base of dealer market making algorithms. In the first quarter of 2024, trading volumes in Auto-X, one of our automated trading protocols, rose to $93.6 billion, up 36.4% from $68.7 billion in the first quarter of 2023. There were 231 active client firms using Auto-X in the first quarter of 2024, up 60.4% from the prior year. In the first quarter of 2024, there were 10.8 million dealer algorithmic responses on our platforms, up 50.2% from the first quarter of 2023.

We experience cybersecurity threats and ~~other aspects~~incidents from time to time. However, as of the date of this report, MarketAxess has not experienced a cybersecurity threat or incident that has materially affected the Company in at least the past three years. Cybersecurity incidents could impact revenue and operating income and increase costs. We therefore continue to make investments in our cybersecurity infrastructure and training of employees, which may result in increased costs, to strengthen our cybersecurity measures.

See also Part I, Item 1A. - “Risk Factors, Technology, IT Systems and Cybersecurity Risks” and Part I, Item 1C – “Cybersecurity.” of our ~~trading system technology.~~Form 10-K for the year ended December 31, 2023.

Trends in Our Business

The majority of our ~~revenues are~~revenue is derived from commissions for transactions executed on our ~~platform~~platforms between and among our institutional investor and broker-dealer clients and monthly distribution fees. We believe that ~~there~~the following are ~~five~~the key variables that impact the notional value of such transactions on our ~~platform~~platforms and the amount of commissions and distribution fees earned by us:


	•	the number of participants on our platforms and their willingness to use our platforms instead of competitors' platforms or other execution methods;
	•	the frequency and competitiveness of the price responses by participants on our platforms;
	•	the number of markets that are available for our clients to trade on our platforms;
	•	the overall level of activity in these markets;
	•	the duration of the bonds trading on our platforms; and
	•	the particular fee plan and protocol under which we earn commissions and distribution fees.

~~the number of participants on our platform and their willingness to originate transactions through the platform;~~

~~the number of institutional investor and broker-dealer clients on the platform and the frequency and competitiveness of the price responses they provide on our platform;~~

~~the number of markets for which we make trading available to our clients;~~

~~the overall level of activity in these markets; and~~

~~the level of commissions that we collect for trades executed through the platform.~~

We believe that overall corporate bond market trading volume is affected by various factors including the absolute levels of interest rates, the direction of interest rate movements, the level of new issues of corporate bonds and the volatility of corporate bond spreads versus U.S. Treasury securities. Because a significant percentage of our revenue is tied directly to the volume of securities traded on our ~~platform,~~platforms, it is likely that a general decline in trading volumes, regardless of the cause of such decline, would reduce our revenues and have a significant negative impact on profitability.

As further described under “— Critical Factors Affecting our Industry and our Company — Economic, Political and Market Factors” and “— Results of Operations — Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023,” our trading volumes and average variable transaction fee per million decreased compared to the three months ended March 31, 2023.

Components of Our Results of Operations

Commission Revenue

Commissions are recognized on a trade date basis, are generally calculated as a percentage of the notional dollar volume of bonds traded on our ~~platform~~platforms and vary based on the type, size, yield and maturity of the bond ~~traded. Under our transaction fee plans, bonds~~traded, as well as individual client incentives. Bonds that are more actively traded or that have shorter maturities are generally charged lower commissions, while bonds that are less actively traded or that have longer maturities generally command higher commissions.

For Open Trading trades that we execute between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller, we earn our commission through the difference in price between the two trades. ~~Distribution fees include any unused~~For the majority of U.S. Treasury matched principal trades, commissions are invoiced and recorded on a monthly ~~fee commitments under our variable fee plans.~~basis.

Credit Commissions. Credit includes U.S. ~~High-Grade Corporate Bond Commissions.~~ high-grade corporate bonds, high-yield bonds, emerging markets bonds, Eurobonds, municipal bonds and leveraged loans. Our U.S. high-grade corporate bond fee plans generally incorporate variable transaction fees and fixed distribution fees billed to our broker-dealer clients on a monthly basis. Certain ~~dealers~~broker-dealers participate in fee programs that do not contain monthly distribution fees and instead incorporate additional per transaction execution fees and minimum monthly fee commitments. Under these fee plans, we electronically add the transaction fee to the spread quoted by the broker-dealer client. The U.S. high-grade transaction fee is generally designated in basis points in yield and, as a result, is subject to fluctuation depending on the duration of the bond traded.

Commissions for high-yield bonds, emerging markets bonds, Eurobonds, municipal bonds and leveraged loans generally vary based on the type of the instrument traded using standard fee schedules. Our high-yield fee plan structure is similar to our U.S. high-grade fee plans. Certain dealers participate in a high-yield fee plan that incorporates a variable transaction fee and a fixed distribution fee, while other dealers participate in a plan that does not contain monthly distribution fees and instead incorporates additional per transaction execution fees and minimum monthly fee commitments.

The average ~~U.S. high-grade~~credit fees per million may vary in the future due to changes in yield, years-to-maturity and nominal size of high-grade bonds traded on our ~~platform.~~platforms and changes in product mix or trading protocols.

~~Other~~ Credit distribution fees include any unused monthly fee commitments under our variable fee plans.

Rates Commissions. ~~Other credit~~Rates includes ~~Eurobonds, emerging markets bonds, high-yield bonds~~U.S. Treasury, U.S. agency and ~~municipal~~European government bonds. Commissions for ~~other credit~~rates products generally vary based on the type of the instrument ~~traded using standard fee schedules. During the third quarter of 2017, we changed our high-yield fee plan structure. Similar to our~~traded. U.S. ~~high-grade~~Treasury fee plans ~~certain dealers now participate in a high-yield fee plan that incorporates a variable transaction fee~~are typically volume tiered and distribution fee and other dealers participate in a plan that does not contain a monthly distribution fee and instead incorporates additional per transaction execution fees and minimum monthly fee commitments. Prior tocan vary based on the fee plan change, our high-yield fee plan options generally consisted solely of variable transaction fees. During the fourth quarter of 2016, our Eurobond fee plan structure was changed to contain standardized minimum monthly commitments and variable transaction fees. Prior to the fee plan change, our European fee plans generally incorporated some combination of monthly distribution fees and variable transaction fees.trading protocol. The average ~~other credit fees~~rates fee per million may vary in the future due to changes in product mix or trading protocols.

~~Liquid Products Commissions.~~ Liquid products includes U.S. agency, European government bonds and credit derivatives. Commissions for liquid products generally vary based on the type of the instrument traded using standard fee schedules.

We anticipate that average fees per million may change in the future. Consequently, past trends in commissions are not necessarily indicative of future commissions.

Other Commissions. Other commissions include equities and foreign exchange commissions for Pragma's algorithmic trading services. Commissions for equities and foreign exchange are volume-tiered and consist of variable transaction fees that are billed monthly.

~~Other Revenue~~

~~In addition to the commissions discussed above, we earn revenue from information and post-trade services, investment income and other income.~~Information Services

~~Information and post-trade services.~~ We generate revenue from ~~information services provided~~data licensed to our broker-dealer clients, institutional investor clients and data-only ~~subscribers. Information services are invoiced monthly, quarterly or annually. When billed in advance,~~subscribers; professional and consulting services; technology software licenses; and maintenance and support services. These revenues are ~~deferred~~either for subscription-based services transferred over time, and may be net of volume-based discounts, or one-time services. Revenues for services transferred over time are recognized ~~monthly on~~ratably over the contract period while revenues for services transferred at a ~~straight-line basis. We also generate revenue from trade matching and regulatory transaction reporting services. Revenue is~~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.

~~Investment Income.~~ ~~Investment income consists of income earned on our investments.~~Post-trade Services

~~Other.~~ ~~Other revenues include~~We generate revenue from ~~professional consulting~~regulatory transaction reporting, trade publication and post-trade matching services. Customers are generally billed in the current month or monthly in arrears and revenue is recognized in the period that the transactions are processed. Revenues billed in advance are deferred and recognized ratably over the contract period. We also generate one-time implementation fees for onboarding clients, which are invoiced and recognized in the period the implementation is complete.

Technology Services

Technology services includes technology ~~software licenses~~services revenue generated by Pragma and ~~maintenance and support services, fees~~revenue generated from telecommunications line charges to broker-dealer ~~clients, initial set-up fees and other miscellaneous revenues.~~clients.

Expenses

In the normal course of business, we incur the following expenses:

Employee Compensation and Benefits. Employee compensation and benefits is our most significant expense and includes employee salaries, stock-based compensation costs, other incentive compensation, employee benefits and payroll taxes.

Depreciation and Amortization. We depreciate our computer hardware and related software, office hardware and furniture and fixtures and amortize our capitalized software development costs on a straight-line basis over three to seven years. We amortize leasehold improvements on a straight-line basis over the lesser of the life of the improvement or the remaining term of the lease. Intangible assets with definite lives, including purchased technologies, customer relationships and other intangible assets, are amortized over their estimated useful lives, ~~ranging~~which range from ~~three~~one to 15 ~~years.~~years, using either a straight-line or accelerated amortization method based on the pattern of economic benefit that we expect to realize from such assets. Intangible assets are assessed for impairment when events or circumstances indicate a possible impairment.

Technology and Communications. Technology and communications expense consists primarily of costs relating to software and licenses, maintenance on software and hardware, ~~our internal network connections, data center~~cloud hosting costs, ~~and~~ data feeds provided by outside vendors, ~~or service providers.~~U.S. government bonds technology platform licensing fees, data center hosting costs and our internal network connections. The majority of our broker-dealer clients have dedicated high-speed communication lines to our network in order to provide fast data transfer. We charge our broker-dealer clients a monthly fee for these connections, which is recovered against the relevant expenses we incur.

Professional and Consulting Fees. Professional and consulting fees consist primarily of accounting fees, legal fees and fees paid to information technology and other consultants for services provided for the maintenance of our trading ~~platform,~~platforms, information and post-trade services products and other services.

Occupancy. Occupancy costs consist primarily of office and equipment rent, utilities and commercial rent tax.

Marketing and Advertising. Marketing and advertising expense consists primarily of ~~print~~branding and other advertising expenses we incur to promote our products and services. This expense also includes costs associated with attending or exhibiting at industry-sponsored seminars, conferences and conventions, and travel and entertainment expenses incurred by our sales force to promote our trading ~~platform and~~platforms, information services and post-trade services.

Clearing Costs.Clearing costs consist of fees that we are charged by third-party clearing brokers and depositories for the clearing and settlement of matched principal ~~trades.~~trades, regulatory reporting fees and variable transaction fees assessed by the provider of our third-party middle office system.

General and Administrative. General and administrative expense consists primarily of general travel and entertainment, board of directors’ expenses, regulatory fees, media subscription costs, charitable contributions, provision for doubtful accounts, ~~foreign currency transaction gains (losses) and~~ various state franchise and U.K. value-added ~~taxes.~~taxes and other miscellaneous expenses.

Expenses may continue to grow in the future, notably in employee compensation and benefits ~~primarily~~as we increase headcount to support investment in new products, operational support and geographic expansion, depreciation and amortization due to increased investment in new products and ~~geographic expansion. We~~enhancements to our trading platforms, and technology and communication costs. Expenses may also ~~expect occupancy~~grow due to increased regulatory complexity, acquisitions or the continued effects of inflation.

Other Income (Expense)

Interest Income. Interest income consists of interest income earned on our cash and cash equivalents, restricted cash, deposits and investments.

Interest Expense. Interest expense ~~to increase~~consists of financing charges incurred on short-term borrowings.

Equity in ~~2018 as a result~~Earnings of Unconsolidated Affiliate. Equity in earnings of unconsolidated affiliate represents the ~~new office space for our global headquarters in New York City. See Item 2 of the Annual Report on Form 10-K for a discussion~~proportionate share of our ~~properties. However, we believe that operating leverage can be achieved by increasing volumes in existing products~~equity method investee's net income.

Other, Net. Other, net consists of realized and ~~adding new products without substantial additions to our infrastructure.~~unrealized gains and losses on trading security investments and foreign currency forward contracts, foreign currency transaction gains or losses, investment advisory fees, credit facility administrative fees, gains or losses on revaluations of contingent consideration payable and other miscellaneous revenues and expenses.

Critical Accounting ~~Policies and~~ Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our Consolidated Financial Statements, which have been prepared in accordance with ~~accounting principles generally accepted in the United States, also referred to as U.S.~~ GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting periods. We base our estimates and judgments on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under varying assumptions or conditions. Critical accounting estimates for us include stock-based compensation.

Stock-based compensation

We maintain the 2020 Plan, which provides for the grant of full value awards, stock options and other stock-based awards to encourage employees, consultants and non-employee directors to participate in our long-term success. We make critical accounting estimates related to performance shares and performance stock units granted under the 2020 Plan.

In 2022, 2023 and 2024, annual performance stock units (the “PSUs”) were granted to the executive officers and certain senior managers. Each PSU is earned or forfeited based on our level of achievement of certain predetermined metrics, including pre-tax adjusted operating margin, U.S. credit market share and revenue growth excluding U.S. credit. The vested share pay-out ranges from zero to 200% of the PSU target. The number of PSUs that vest, if any, is determined by the level of achievement of the performance metrics during the three-year performance periods, as certified by the Compensation and Talent Committee following the conclusion of the performance period. In addition, participants must provide continued service through the vesting date, subject to death, disability and qualified retirement exceptions, as applicable. Compensation expense for the PSUs is measured using the fair value of our stock at the grant date and estimates of future performance and actual share payouts. Each period, we make estimates of the current expected share payouts and adjust the life-to-date compensation expense recognized since the grant date. As of March 31, 2024, a 10.0% change in the expected final share payouts would increase or decrease the life-to-date compensation expense by $1.7 million. The estimated final share payouts for the 2022 and 2023 awards as of March 31, 2024 decreased 9.2% compared to December 31, 2023.

Recent Accounting Pronouncements

See Note 2 for a discussion of ~~the Notes~~any recent accounting pronouncements relevant to our Consolidated Financial ~~Statements includes a summary of the significant accounting policies and methods used in the preparation of our Consolidated Financial~~ Statements. There were no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2017, as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016.

~~Recent Accounting Pronouncements~~

~~See Note 2 to the Consolidated Financial Statements for a discussion on recent accounting pronouncements.~~

Segment Results

We operate an electronic ~~multi-party platform~~platforms for the trading of fixed-income securities and provide related data, analytics, compliance tools and post-trade services. We consider our operations to constitute a single business segment because of the highly integrated nature of these ~~product~~products and services, of the financial markets in which we compete and of our worldwide business activities. We believe that results by geographic region or client sector are not necessarily meaningful in understanding our business. See Note 1315 to the Consolidated Financial Statements for certain geographic information about ~~the Company’s~~our business required by ~~U.S.~~ GAAP.

Results of Operations

Three Months Ended ~~September 30, 2017~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2016~~March 31, 2023

~~Overview~~

~~Total revenues increased by $6.4 million or 7.1% to $96.7 million~~The following table summarizes our financial results for the three months ended ~~September 30, 2017, from $90.3~~March 31, 2024 and 2023:


	Three Months Ended March 31,
	2024		2023		$ Change			% Change
	($ in thousands, except per share amounts)
Revenues	$	210,318	$	203,169	$	7,149			3.5		%
Expenses		117,818		107,813		10,005			9.3
Operating income		92,500		95,356		(2,856	)		(3.0	)
Other income (expense)		4,217		2,839		1,378			48.5
Income before income taxes		96,717		98,195		(1,478	)		(1.5	)
Provision for income taxes		24,102		24,567		(465	)		(1.9	)
Net income	$	72,615	$	73,628	$	(1,013	)		(1.4	)	%

Net income per common share – Diluted	$	1.92	$	1.96	$	(0.04	)		(2.0	)	%

Changes in average foreign currency exchange rates compared to the U.S. dollar had the effect of increasing revenues and expenses by $0.8 million and $0.6 million, respectively, for the three months ended ~~September 30, 2016. This increase in total revenues was primarily due~~March 31, 2024 compared to ~~higher commissions of $4.8 million and information and post-trade services revenue of $1.1 million.~~

~~Total expenses increased by $5.6 million or 12.7% to $49.5 million for~~ the three months ended September 30, 2017, from $43.9 million for the three months ended September 30, 2016. This increase was primarily due to higher employee compensation and benefits of $1.7 million, professional and consulting fees of $1.2 million, technology and communication costs of $0.8 million, general and administrative costs of $0.7 million and occupancy costs of $0.6 million.March 31, 2023.

Income before taxes increased by $0.9 million or 1.9% to $47.2 million for the three months ended September 30, 2017, from $46.4 million for the three months ended September 30, 2016. Net income increased by $3.2 million or 10.4% to $34.1 million for the three months ended September 30, 2017, from $30.9 million for three months ended September 30, 2016.

Revenues

Our revenues for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, and the resulting dollar and percentage changes, were as follows:


	Three Months Ended March 31,
	2024					2023
	($ in thousands)
			% of Revenues					% of Revenues			$ Change		% Change
Commissions	$	184,873		87.9	%	$	181,991		89.6	%	$	2,882		1.6	%
Information services		11,881		5.6			11,010		5.4			871		7.9
Post-trade services		10,730		5.1			9,980		4.9			750		7.5
Technology services		2,834		1.4			188		0.1			2,646	NM
Total revenues	$	210,318		100.0	%	$	203,169		100.0	%	$	7,149		3.5
NM - not meaningful

Three Months Ended September 30,

2017

2016

($ in thousands)

$

% of
Revenues

$

% of
Revenues

$
Change

%
Change
Commissions
$
86,270

89.2

%

$
81,456

90.2

%

$
4,814

5.9

%
Information and post-trade services

8,372

8.7

7,322

8.1

1,050

14.3

Investment income

964

1.0

534

0.6

430

80.5

Other

1,095

1.1

959

1.1

136

14.2

Total revenues
$
96,701

100.0

%

$
90,271

100.0

%

$
6,430

7.1

%

Commissions. Our commission revenues for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, and the resulting dollar and percentage changes, were as follows:


	Three Months Ended March 31,
	2024		2023		$ Change			% Change
	($ in thousands)
Variable transaction fees
Credit	$	141,504	$	140,970	$	534			0.4		%
Rates		5,166		6,258		(1,092	)		(17.4	)
Other		4,849		—		4,849		NM
Total variable transaction fees		151,519		147,228		4,291			2.9

Fixed distribution fees
Credit		33,288		34,684		(1,396	)		(4.0	)
Rates		66		79		(13	)		(16.5	)
Total fixed distribution fees		33,354		34,763		(1,409	)		(4.1	)
Total commissions	$	184,873	$	181,991	$	2,882			1.6		%
NM - not meaningful

Three Months Ended September 30,

2017

2016

$
Change

%
Change

($ in thousands)
Variable transaction fees

U.S. high-grade
$
34,020

$
33,765

$
255

0.8

%
Other credit

31,381

30,181

1,200

4.0

Liquid products

545

798

(253
)

(31.7
)

Total variable transaction fees

65,946

64,744

1,202

1.9

Distribution fees

U.S. high-grade

16,305

15,077

1,228

8.1

Other credit

3,844

1,466

2,378

162.2

Liquid products

175

169

6

3.6

Total distribution fees

20,324

16,712

3,612

21.6

Total commissions
$
86,270

$
81,456

$
4,814

5.9

%

~~Variable Transaction Fees~~

~~The following table shows~~Credit variable transaction fees increased $0.5 million driven by a 7.4% increase in total credit trading volume, partially offset by a 6.6% decrease in total credit average variable transaction fee per million. Open Trading credit volume totaled $269.4 billion during the ~~extent to which the increase in~~three months ended March 31, 2024, down 3.6%, and Open Trading credit variable transaction fees represented 31.5% and 36.5% of total variable transaction fees for the three months ended ~~September 30, 2017 was attributable to changes in transaction volumes~~March 31, 2024 and 2023, respectively. Rates variable transaction fees decreased $1.1 million driven principally by a 29.0% decrease in trading volumes, partially offset by a 16.3% increase in average variable transaction fee per ~~million:~~million. Other variable transaction fees include equities and foreign exchange commissions earned by Pragma.

Credit fixed distribution fees decreased $1.4 million mainly due to the consolidation of two global dealers and lower unused minimums in U.S. high-grade on increased activity, partially offset by dealer migrations to fixed fee plans.

Change from the Three Months Ended September 30, 2016

U.S. High-Grade

Other Credit

Liquid Products

Total

($ in thousands)

Volume increase (decrease)
$
4,234

$
2,687

$
(332
)

$
6,589

Variable transaction fee per million (decrease) increase

(3,979
)

(1,487
)

79

(5,387
)
Total increase (decrease) in variable commissions
$
255

$
1,200

$
(253
)

$
1,202

Our trading volumes for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 were as follows:


	Three Months Ended March 31,
	2024		2023		$ Change			% Change
	($ in millions)
Trading volume data
Credit
High-grade	$	455,998	$	392,715	$	63,283			16.1		%
High-yield		85,379		122,873		(37,494	)		(30.5	)
Emerging markets		221,427		191,841		29,586			15.4
Eurobonds		128,849		118,366		10,483			8.9
Other credit		26,335		28,683		(2,348	)		(8.2	)
Total credit		917,988		854,478		63,510			7.4

Rates
U.S. government bonds		1,045,796		1,491,292		(445,496	)		(29.9	)
Agency and other government bonds		31,626		27,061		4,565			16.9
Total rates		1,077,422		1,518,353		(440,931	)		(29.0	)

Total trading volume	$	1,995,410	$	2,372,831	$	(377,421	)		(15.9	)	%

Number of U.S. Trading Days		61		62
Number of U.K. Trading Days		63		64

Three Months Ended September 30,

2017

2016

$
Change

%
Change

($ in millions)
Trading Volume Data

U.S. high-grade - fixed rate
$
192,092

$
172,006

$
20,086

11.7

%
U.S. high-grade - floating rate

8,734

6,442

2,292

35.6

Total U.S. high grade

200,826

178,448

22,378

12.5

Other credit

133,757

122,821

10,936

8.9

Liquid products

12,189

20,880

(8,691
)

(41.6
)

Total
$
346,772

$
322,149

$
24,623

7.6

%

Number of U.S. Trading Days

63

64

Number of U.K. Trading Days

64

65

For volume reporting purposes, transactions in foreign currencies are converted to U.S. dollars at average monthly rates.

The ~~12.5%~~16.1% increase in our U.S. high-grade volume was principally due to an increase in estimated market volumes, partially offset by a decrease in our estimated market share. Estimated U.S. high-grade market volume as reported by FINRA’s Trade Reporting and Compliance Engine (TRACE) increased by 19.3% to $2.4 trillion for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Our estimated market share of total U.S. high-grade corporate bond volume ~~as reported by Financial Industry Regulatory Authority (“FINRA”) Trade Reporting and Compliance Engine (“TRACE”)~~decreased to ~~17.2%~~19.3% for the three months ended ~~September 30, 2017~~March 31, 2024 from ~~16.0%~~19.9% for the three months ended ~~September 30, 2016, coupled with an increase~~March 31, 2023. U.S. high-yield volume decreased by 30.5% mainly due to a decrease in ~~overall~~our estimated market ~~volume as measured by TRACE.~~share. Lower levels of credit spread volatility drove a significant decrease in ETF market maker client activity on our platform, which negatively impacted our U.S. ~~high-grade TRACE volume increased 4.5% to $1.2 trillion for the three months ended September 30, 2017 from $1.1 trillion for the three months ended September 30, 2016.~~

~~Other credit~~high-yield market share. Emerging markets volumes increased by ~~8.9% for the three months ended September 30, 2017 compared to the three months ended September 30, 2016, primarily~~15.4%, mainly due to an increase ~~of 21.8%~~ in ~~emerging~~local markets trading volumes. Eurobond volumes increased by 8.9%. Other credit volumes decreased by 8.2% due to lower estimated municipal bond ~~volume,~~market volumes, partially offset by an increase in our estimated municipal bond market share. Rates trading volume decreased 29.0%, primarily due to a decrease ~~of 7.8%~~ in high-yield bond volume. Liquid products volume (excluding credit derivatives) decreased by 41.6% for the three months ended September 30, 2017 compared to the three months ended September 30, 2016, due mainly to a 38.4% decrease in U.S. agency bondour estimated market ~~volume as reported by TRACE.~~share.

Our average variable transaction fee per million for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 was as follows:


	Three Months Ended March 31,
	2024		2023		$ Change			% Change
Average variable transaction fee per million
Credit	$	154.15	$	164.98	$	(10.83	)		(6.6	)	%
Rates		4.79		4.12		0.67			16.3

Three Months Ended September 30,

2017

2016

Average Variable Transaction fee per million

U.S. high-grade - fixed rate
$
174

$
195

U.S. high-grade - floating rate

67

38

Total U.S. high-grade

169

189

Other credit

235

246

Liquid products

45

38

Total

190

201

~~Total U.S. high-grade~~Credit average variable transaction fee per million decreased by 6.6% to ~~$169~~$154.15 per million for the three months ended ~~September 30, 2017 from $189 per~~March 31, 2024, mainly due to a decrease in the duration of U.S. high-grade bonds traded on our platforms and product mix-shift in other credit products.

Information Services. Information services revenue increased by $0.9 million for the three months ended ~~September 30, 2016,~~March 31, 2024, mainly due to ~~a decrease in duration~~net new data contract revenue of ~~bonds traded, an increase in the number of larger sized trades~~$0.7 million and the ~~migration~~positive impact of ~~certain~~foreign currency fluctuations of ~~our broker-dealer clients from an all-variable fee plan to a plan that incorporates a monthly distribution fee. Other credit average variable transaction fee per million decreased to $235 per~~$0.2 million.

Post-Trade Services. Post-trade services revenue increased by $0.8 million for the three months ended ~~September 30, 2017 from $246~~March 31, 2024, principally due to net new contract revenue of $0.6 million and the positive impact of foreign currency fluctuations of $0.2 million.

Technology Services. Technology services revenue increased by $2.6 million for the three months ended ~~September 30, 2016, mainly~~March 31, 2024 due to a larger percentage of trading volume in emerging market bonds that command lower fees per million, as well as a decrease in high-yield average variable fee per million as a result of the change in the structure of our high-yield fee plan options implemented in August 2017. The decrease in other credit average variable transaction fee per million was partially offset by an increase in Eurobond fees per million as a result of the change in structure of our Eurobond fee plan which was implemented in the fourth quarter of 2016.

~~Distribution Fees~~

U.S. high-grade distribution fees increased $1.2 million principally due to the migration of certain of our broker-dealer clients from an all-variable fee plan to a plan that incorporates a monthly distribution fee. The $2.4 million increase in Other credit distribution fees principally relates to a $3.3 million increase in distribution fees under the high-yield fee plan structure implemented in August 2017 that allows our broker-dealer clients to elect a plan that incorporates a monthly distribution fee. This was offset by a decline of $1.0 million relating to the change in the Eurobond fee plan implemented in the fourth quarter of 2016.

~~Information and Post-Trade Services.~~ ~~Information and post-trade~~technology services revenue increased $1.1 million for the three months ended September 30, 2017 principally due to higher data revenue of $0.8 million and an increase in post-trade services revenue of $0.3 million related to MiFID II implementation services. Our transaction reporting business processed 247 million transactions for the three months ended September 30, 2017 compared to 302 million for the three months ended September 30, 2016. generated by Pragma.

~~Investment Income.~~ ~~Investment income increased by $0.4 million primarily due to higher investment balances and an increase in interest rates in 2017.~~

~~Other.~~ ~~Other income was $1.1 million and $1.0 million for the three months ended September 30, 2017 and 2016, respectively.~~Expenses

~~Expenses~~

~~Our~~The following table summarizes our expenses for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023:


	Three Months Ended March 31,
	2024				2023		$ Change			% Change
		($ in thousands)
Expenses
Employee compensation and benefits	$		61,264	$		52,315	$	8,949			17.1		%
Depreciation and amortization			18,200			16,461		1,739			10.6
Technology and communications			17,051			14,999		2,052			13.7
Professional and consulting fees			6,395			7,127		(732	)		(10.3	)
Occupancy			3,425			3,611		(186	)		(5.2	)
Marketing and advertising			1,833			2,995		(1,162	)		(38.8	)
Clearing costs			4,911			4,545		366			8.1
General and administrative			4,739			5,760		(1,021	)		(17.7	)
Total expenses	$		117,818	$		107,813	$	10,005			9.3		%

Employee compensation and benefits increased by $8.9 million, primarily due to increases in salaries, taxes and benefits on higher employee headcount of $7.1 million and higher employee incentive compensation of $2.1 million.

Depreciation and amortization increased by $1.7 million, primarily due to higher amortization of software development costs of $1.0 million and higher amortization of intangibles of $0.9 million, partially offset by lower depreciation of office hardware of $0.2 million.

Technology and communications expenses increased by $2.1 million, primarily due to higher connectivity costs related to Pragma of $0.7 million, higher software subscription costs of $0.7 million, higher market data costs of $0.3 million and higher equipment lease costs of $0.2 million.

Professional and consulting fees decreased by $0.7 million, primarily due to lower IT consultant expense of $1.8 million, offset by higher audit and tax fees of $0.7 million and higher acquisition related legal and consulting costs of $0.5 million.

Marketing expenses decreased by $1.2 million, primarily due to lower advertising and public relations costs.

General and administrative expenses decreased by $1.0 million, primarily due to lower reserves related to a dispute with a vendor of $0.5 million, lower value-added taxes of $0.2 million and lower travel and entertainment costs of $0.1 million.

Other Income (Expense)

Our other income (expense) for the three months ended March 31, 2024 and 2023, and the resulting dollar and percentage changes, were as follows:


	Three Months Ended March 31,
	2024					2023			$ Change			% Change
		($ in thousands)
Interest income	$		5,973		$		4,249		$	1,724			40.6	%
Interest expense			(316	)			(130	)		(186	)		143.1
Equity in earnings of unconsolidated affiliate			370				204			166			81.4
Other, net			(1,810	)			(1,484	)		(326	)		22.0
Total other income (expense)	$		4,217		$		2,839		$	1,378			48.5	%

Three Months Ended September 30,

2017

2016

($ in thousands)

$

% of
Revenues

$

% of
Revenues

$
Change

%
Change
Expenses

Employee compensation and benefits
$
25,595

26.5

%

$
23,914

26.5

%

$
1,681

7.0

%
Depreciation and amortization

4,583

4.7

4,325

4.8

258

6.0

Technology and communications

5,035

5.2

4,245

4.7

790

18.6

Professional and consulting fees

5,547

5.7

4,342

4.8

1,205

27.8

Occupancy

1,795

1.9

1,220

1.4

575

47.1

Marketing and advertising

2,089

2.2

2,140

2.4

(51
)

(2.4
)

Clearing costs

1,476

1.5

1,035

1.1

441

42.6

General and administrative

3,364

3.5

2,696

3.0

668

24.8

Total expenses
$
49,484

51.2

%

$
43,917

48.7

%

$
5,567

12.7

%

~~Employee Compensation and Benefits.~~ ~~Employee compensation and benefits~~Interest income increased by $1.7 million ~~primarily due to an increase of $1.9 million in salaries and benefits, principally as a result of~~driven by higher ~~employee headcount.~~interest rates.

~~Depreciation and Amortization.~~ ~~Depreciation and amortization~~Interest expense increased by $0.3 million. For the three months ended September 30, 2017 and 2016, $1.5 million and $0.8 million, respectively, of equipment purchases and leasehold improvements and $3.4 million and $2.9 million, respectively, of software development costs were capitalized.

~~Technology and Communications.~~ ~~Technology and communication expenses increased by $0.8 million due to higher software subscription costs of $0.4 million and technology maintenance and support costs of $0.3 million.~~

~~Professional and Consulting Fees.~~ ~~Professional and consulting fees increased by $1.2 million primarily due to fees related to various regulatory initiatives of $0.8 million.~~

~~Occupancy.~~ ~~Occupancy increased by $0.6 million due to an increase in rent expense of $0.3 million for additional space to accommodate our increased headcount and a non-recurring lease expense of $0.3 million.~~

~~Marketing and Advertising.~~ ~~Marketing and advertising expenses were $2.1 million for both the three months ended September 30, 2017 and 2016.~~

~~Clearing Costs. Clearing costs increased by $0.4~~$0.2 million primarily due to higher trading volume. Third-party clearing costs as a percentage of matched principal trading revenue increased from 10.2% for the three months ended September 30, 2016 to 13.1% for the three months ended September 30, 2017.financing charges incurred under our short-term borrowings.

~~General and Administrative.~~ ~~General and administrative expenses increased~~Other, net decreased by ~~$0.7~~$0.3 million ~~principally~~ due to ~~an increase in general travel and entertainment expenses of $0.3 million and employee relocation expenses of $0.3 million.~~higher credit facility fees.

Provision for Income ~~Tax. Our consolidated~~Taxes

The provision for income taxes and effective tax rate for the three months ended September 30, 2017 was 27.7%, compared to 33.3% for the three months ended September 30, 2016. The tax provision for the three months ended September 30, 2017 includes excess tax benefits of $3.8 million relating to a new standard for share-based payments accounting adopted effective January 1, 2017. March 31, 2024 and 2023 were as follows:


	Three Months Ended March 31,
	2024					2023			$ Change			% Change
		($ in thousands)
Provision for income taxes	$		24,102		$		24,567		$	(465	)		(1.9	)	%

Effective tax rate			24.9	%			25.0	%

Our consolidated effective tax rate can vary from period to period depending on the geographic mix of our earnings, changes in tax legislation and tax rates and the amount and timing of excess tax benefits related to share-based payments, among other factors.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Overview~~

Total revenues increased by $22.4 million or 8.1% to $297.9 million for the nine months ended September 30, 2017, from $275.5 million for the nine months ended September 30, 2016. This increase in total revenues was primarily due to higher commissions of $20.5 million. An 8.2% change in the average foreign currency exchange rates of the British Pound Sterling compared to the U.S. dollar from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 had the effect of decreasing revenues by $3.2 million.

Total expenses increased by $11.3 million or 8.4% to $145.5 million for the nine months ended September 30, 2017, from $134.2 million for the nine months ended September 30, 2016. This increase was primarily due to higher employee compensation and benefits of $4.2 million, general and administrative costs of $1.9 million, technology and communications expenses of $1.6 million, professional and consulting fees of $1.5 million, and $1.0 million in both occupancy costs and marketing and advertising costs. The change in average foreign currency exchange rates had the effect of decreasing expenses by $3.3 million in the nine months ended September 30, 2017.

Income before taxes increased by $11.1 million or 7.9% to $152.4 million for the nine months ended September 30, 2017, from $141.3 million for the nine months ended September 30, 2016. Net income increased by $21.6 million or 23.2% to $114.6 million for the nine months ended September 30, 2017, from $93.0 million for nine months ended September 30, 2016.

~~Revenues~~

~~Our revenues for the nine months ended September 30, 2017 and 2016, and the resulting dollar and percentage changes, were as follows:~~

Nine Months Ended September 30,

2017

2016

($ in thousands)

$

% of
Revenues

$

% of
Revenues

$
Change

%
Change
Commissions
$
267,307

89.7

%

$
246,788

89.6

%

$
20,519

8.3

%
Information and post-trade services

24,460

8.2

23,687

8.6

773

3.3

Investment income

2,551

0.9

1,469

0.5

1,082

73.7

Other

3,588

1.2

3,539

1.3

49

1.4

Total revenues
$
297,906

100.0

%

$
275,483

100.0

%

$
22,423

8.1

%

~~Commissions.~~ ~~Our commission revenues for the nine months ended September 30, 2017 and 2016, and the resulting dollar and percentage changes, were as follows:~~

Nine Months Ended September 30,

2017

2016

$
Change

%
Change

($ in thousands)
Variable transaction fees

U.S. high-grade
$
102,411

$
101,104

$
1,307

1.3

%
Other credit

110,221

94,928

15,293

16.1

Liquid products

1,746

2,096

(350
)

(16.7
)

Total variable transaction fees

214,378

198,128

16,250

8.2

Distribution fees

U.S. high-grade

47,985

43,598

4,387

10.1

Other credit

4,506

4,437

69

1.6

Liquid products

438

625

(187
)

(29.9
)

Total distribution fees

52,929

48,660

4,269

8.8

Total commissions
$
267,307

$
246,788

$
20,519

8.3

%

~~Variable Transaction Fees~~

The following table shows the extent to which the increase in variable transaction fees for the nine months ended September 30, 2017 was attributable to changes in transaction volumes and variable transaction fees per million:

Change from the Nine Months Ended September 30, 2016

U.S. High-Grade

Other Credit

Liquid Products

Total

($ in thousands)

Volume increase (decrease)
$
14,514

$
17,169

$
(510
)

$
31,173

Variable transaction fee per million (decrease) increase

(13,207
)

(1,876
)

160

(14,923
)
Total increase (decrease) in variable commissions
$
1,307

$
15,293

$
(350
)

$
16,250

~~Our trading volumes for the nine months ended September 30, 2017 and 2016 were as follows:~~

Nine Months Ended September 30,

2017

2016

$
Change

%
Change

($ in millions)
Trading Volume Data

U.S. high-grade - fixed rate
$
599,783

$
525,331

$
74,452

14.2

%
U.S. high-grade - floating rate

24,024

20,169

3,855

19.1

Total U.S. high grade

623,807

545,500

78,307

14.4

Other credit

438,055

370,963

67,092

18.1

Liquid products

40,840

53,982

(13,142
)

(24.3
)

Total
$
1,102,702

$
970,445

$
132,257

13.6

%

Number of U.S. Trading Days

188

189

Number of U.K. Trading Days

189

190

For volume reporting purposes, transactions in foreign currencies are converted to U.S. dollars at average monthly rates. The 14.4% increase in our U.S. high-grade volume was principally due to an increase in our estimated market share of total U.S. high-grade corporate bond volume as reported by TRACE to 16.7% for the nine months ended September 30, 2017 from 15.6% for the nine months ended September 30, 2016, coupled with an increase in overall market volume as measured by TRACE. U.S. high-grade TRACE volume increased 7.2% to $3.7 trillion for the nine months ended September 30, 2017 from $3.5 trillion for the nine months ended September 30, 2016.

Other credit volumes increased by 18.1% for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Emerging markets bond volume increased 41.6%, while high-yield and Eurobond volume decreased by 2.8% and 0.5%, respectively. Liquid products volume (excluding credit derivatives) decreased by 24.3% for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, due mainly to a 30.3% decrease in U.S. agency bond market volume as reported by TRACE.

~~Our average variable transaction fee per million for the nine months ended September 30, 2017 and 2016 was as follows:~~

Nine Months Ended September 30,

2017

2016

Average Variable Transaction fee per million

U.S. high-grade - fixed rate
$
168

$
191

U.S. high-grade - floating rate

62

37

Total U.S. high-grade

164

185

Other credit

252

256

Liquid products

43

39

Total

194

204

Total U.S. high-grade average variable transaction fee per million decreased to $164 per million for the nine months ended September 30, 2017 from $185 per million for the nine months ended September 30, 2016, mainly due to a decrease in duration of bonds traded, an increase in the number of larger sized trades and the migration of certain of our broker-dealer clients from an all-variable fee plan to a plan that incorporates a monthly distribution fee. Other credit average variable transaction fee per million decreased to $252 per million for the nine months ended September 30, 2017 from $256 million for the nine months ended September 30, 2016, mainly due to a larger percentage of trading volume in emerging market bonds that command lower fees per million, as well as a decrease in high-yield fee per million as a result of the change in structure of our high-yield fee plan implemented in August 2017. The decrease in other credit average variable transaction fee per million was partially offset by an increase in Eurobond fees per million as a result of the change in structure of our Eurobond fee plan which was implemented in the fourth quarter of 2016.

~~Distribution Fees~~

U.S. high-grade distribution fees increased $4.4 million principally due to the migration of certain of our broker-dealer clients from an all-variable fee plan to a plan that incorporates a monthly distribution fee. The $0.1 million increase in Other credit distribution fees was due to a $3.3 million increase in distribution fees under the high-yield fee plan implemented during the third quarter of 2017, a $0.2 million increase in emerging markets minimum fees, partially offset by a decline of $3.5 million relating to the change in the Eurobond fee plan implemented in the fourth quarter of 2016.

~~Information and Post-Trade Services.~~ Information and post-trade services revenue increased by $0.8 million for the nine months ended September 30, 2017. The negative impact of foreign exchange of $1.5 million was offset by a $2.2 million increase in data revenue from new data contracts. Our transaction reporting business processed 770 million transactions for the nine months ended September 30, 2017 compared to 892 million for the nine months ended September 30, 2016.

~~Investment Income.~~ ~~Investment income increased by $1.1 million primarily due to higher investment balances and an increase in interest rates in 2017.~~

~~Other.~~ ~~Other income was $3.6 million and $3.5 million for the nine months ended September 30, 2017 and 2016, respectively.~~

~~Expenses~~

~~Our expenses for the nine months ended September 30, 2017 and 2016, and the resulting dollar and percentage changes, were as follows:~~

Nine Months Ended September 30,

2017

2016

($ in thousands)

$

% of
Revenues

$

% of
Revenues

$
Change

%
Change
Expenses

Employee compensation and benefits
$
78,417

26.3

%

$
74,256

27.0

%

$
4,161

5.6

%
Depreciation and amortization

14,066

4.7

13,546

4.9

520

3.8

Technology and communications

14,442

4.8

12,826

4.7

1,616

12.6

Professional and consulting fees

13,912

4.7

12,449

4.5

1,463

11.8

Occupancy

4,621

1.6

3,606

1.3

1,015

28.1

Marketing and advertising

6,757

2.3

5,742

2.1

1,015

17.7

Clearing costs

4,320

1.5

4,754

1.7

(434
)

(9.1
)

General and administrative

8,974

3.0

7,029

2.6

1,945

27.7

Total expenses
$
145,509

48.8

%

$
134,208

48.7

%

$
11,301

8.4

%

~~Employee Compensation and Benefits.~~ Employee compensation and benefits increased by $4.2 million, primarily due to a $3.9 million increase in salaries and benefits, principally as a result of higher employee headcount, and a $0.3 million increase in stock-based compensation.

~~Depreciation and Amortization.~~ Depreciation and amortization increased by $0.5 million primarily due to a $0.6 million increase in amortization expense of leasehold improvements and higher amortization of software development costs of $0.5 million offset by a $0.4 million decrease in production hardware depreciation expense. For the nine months ended September 30, 2017 and 2016, $7.2 million and $4.8 million, respectively, of equipment purchases and leasehold improvements and $10.1 million and $9.1 million, respectively, of software development costs were capitalized.

~~Technology and Communications.~~ Technology and communication expenses increased by $1.6 million due to higher software subscription costs of $0.8 million, technology maintenance and support costs of $0.3 million and market data costs of $0.3 million.

~~Professional and Consulting Fees.~~ Professional and consulting fees increased by $1.5 million primarily due to fees related to various regulatory initiatives of $1.3 million and new systems implementations of $0.5 million, offset by lower risk consulting fees of $0.4 million.

~~Occupancy.~~ Occupancy costs increased by $1.0 million primarily due to an increase in rent expense of $0.7 million for additional space to accommodate our increased headcount and a non-recurring lease expense of $0.3 million.

~~Marketing and Advertising.~~ ~~Marketing and advertising expenses increased by $1.0 million due to higher advertising costs of $0.4 million associated with our Open Trading~~™ ~~protocols and travel and entertainment expenses related to sales activities of $0.4 million.~~

~~Clearing Costs~~. Clearing costs decreased by $0.4 million. During the third quarter of 2016, we amended the terms of our agreements with our third-party clearing brokers which resulted in a reduction in transaction and other clearing costs. Third-party clearing costs as a percentage of matched principal trading revenue decreased from 17.9% for the nine months ended September 30, 2016 to 12.5% for the nine months ended September 30, 2017.

~~General and Administrative.~~ General and administrative expenses increased by $1.9 million principally due to a decrease in foreign currency transaction gains of $0.6 million, an increase in general travel and entertainment expenses of $0.6 million and an increase of $0.3 million in employee relocation expenses.

~~Provision for Income Tax~~. Our consolidated effective tax rate for the nine months ended September 30, 2017 was 24.8%, compared to 34.2% for the nine months ended September 30, 2016. The tax provision for the nine months ended September 30, 2017 includes excess tax benefits of $14.8 million relating to a new standard for share-based payments accounting adopted effective January 1, 2017. Our consolidated effective tax rate can vary from period to period depending on the geographic mix of our earnings,

~~changes in tax legislation and tax rates and the amount and timing of excess tax benefits related to share-based payments, among other factors.~~

Liquidity and Capital Resources

During the ~~past~~ three ~~years,~~months ended March 31, 2024, we have met our funding requirements through cash on hand, ~~and~~ internally generated ~~funds.~~funds and short-term borrowings. Cash and cash equivalents and investments totaled ~~$376.2~~$512.5 million ~~at September 30, 2017.~~as of March 31, 2024. Our investments generally consist of investment-grade corporate bonds and U.S. Treasury securities. We limit the amounts that can be invested in any single issuer and invest in short- to intermediate-term instruments whose fair values are less sensitive to interest rate changes.

In ~~October 2015,~~August 2023, we entered into the 2023 Credit Agreement, which provides aggregate commitments totaling $750.0 million, including a ~~two-year amended~~revolving credit facility, a $5.0 million letter of credit sub-limit for standby letters of credit and ~~restated credit agreement (the “Credit Agreement”) that increased~~a $380.0 million sub-limit for swingline loans. The 2023 Credit Agreement will mature on August 9, 2026, with our ~~borrowing capacity~~option to ~~an aggregate~~request up to two additional 364-day extensions at the discretion of ~~$100.0 million.~~each lender and subject to customary conditions. As of ~~September 30, 2017,~~March 31, 2024, we had ~~$0.9~~$0.1 million in letters of credit outstanding and ~~$99.1~~$749.9 million in available borrowing capacity under the 2023 Credit Agreement. ~~In October 2017, we amended~~Borrowings under the 2023 Credit Agreement ~~and extended~~will bear interest at a rate per annum equal to the ~~maturity date to October 2018.~~alternate base rate or the adjusted term SOFR rate, plus an applicable margin that varies with our consolidated total leverage ratio. The ~~amended~~2023 Credit Agreement ~~also provides~~requires that we satisfy certain covenants, including a requirement to not exceed a maximum consolidated total leverage ratio. We were in compliance with all applicable covenants at March 31, 2024. See Note 11 to the Consolidated Financial Statements for ~~two additional one-year extension options~~a discussion of the 2023 Credit Agreement.

In connection with their self-clearing operations, certain of our operating subsidiaries maintain agreements with a settlement bank to allow the subsidiaries to borrow an aggregate of up to $500.0 million on an uncommitted basis, collateralized by eligible securities pledged by the subsidiaries to the settlement bank, subject to certain haircuts. Borrowings under these agreements will bear interest at a base rate per annum equal to the higher of the upper range of the Federal Funds Rate, 0.25% or one-month SOFR, plus 1.00%. As of March 31, 2024, the subsidiaries had no borrowings outstanding and ~~modified certain borrowing terms and covenants. Subject~~up to ~~satisfaction of certain specified conditions, we are permitted to upsize the~~$500.0 million in available uncommitted borrowing capacity under such agreements. See Note 11 to the ~~Credit Agreement by an additional $50.0~~Consolidated Financial Statements for a discussion of these agreements.

Under arrangements with their settlement banks, certain of our operating subsidiaries may receive overnight financing in the form of bank overdrafts. As of March 31, 2024, we had no overdrafts payable outstanding.

As a result of our self-clearing and settlement activities, we are required to finance certain transactions, maintain deposits with various clearing organizations and clearing broker-dealers and maintain a special reserve bank account for the benefit of customers pursuant to Rule 15c3-3 of the Exchange Act. As of March 31, 2024, the aggregate amount of the positions financed, deposits and customer reserve balances associated with our self-clearing and settlement activities was $244.9 million. These requirements can fluctuate based on trading activity, market volatility or other factors which may impact our liquidity or require us to use our capital resources.

Cash Flows for the Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Our cash flows were as follows:


	Three Months Ended March 31,
	2024			2023			$ Change			% Change
	($ in thousands)
Net cash (used in)/provided by operating activities	$	(4,949	)	$	7,527		$	(12,476	)	NM
Net cash (used in) investing activities		(15,830	)		(32,754	)		16,924			(51.7	)	%
Net cash (used in) financing activities		(52,543	)		(48,142	)		(4,401	)		9.1
Effect of exchange rate changes on cash and cash equivalents		(3,186	)		3,345			(6,531	)	NM
Net decrease for the period	$	(76,508	)	$	(70,024	)	$	(6,484	)		9.3		%
NM - not meaningful

Nine Months Ended September 30,

2017

2016

$
Change

%
Change

($ in thousands)

Net cash provided by operating activities
$
121,583

$
33,140

$
88,443

266.9

%
Net cash (used in) investing activities

(67,907
)

(23,899
)

(44,008
)

184.1

Net cash (used in) financing activities

(84,335
)

(46,545
)

(37,790
)

81.2

Effect of exchange rate changes on cash and cash equivalents

1,408

(980
)

2,388

(243.7
)

Net (decrease) for the period
$
(29,251
)

$
(38,284
)

$
9,033

(23.6
)
%

The ~~$88.4~~$12.5 million ~~increase~~decrease in net cash (used in)/provided by operating activities was primarily due to ~~an increase~~a change in net ~~income~~receivables from broker-dealers, clearing organizations and customers associated with our clearing activities of ~~$21.6~~$9.1 million and a decrease in ~~net purchases~~income and other tax liabilities of ~~corporate debt trading investments of $82.9~~$14.9 million, offset by ~~an increase in working capital~~lower accounts receivable of ~~$9.5~~$11.4 million.

The ~~$44.0~~$16.9 million ~~increase~~decrease in net cash used in investing activities was primarily due to ~~increases of $40.0 million in~~lower net purchases of available-for-sale investments ~~and~~of $21.2 million, offset by higher capital expenditures of ~~$3.5~~$4.3 million.

The ~~$37.8~~$4.4 million increase in net cash used in financing activities was principally due to ~~an increase of $22.5 million in~~higher repurchases of ~~our~~ common stock ~~a $7.8~~of $10.1 million ~~increase in the~~and higher cash ~~dividend paid on common stock and a $7.0~~dividends of $1.1 million, ~~increase in~~offset by lower withholding tax payments on ~~restricted~~full value awards vesting of $5.6 million and higher exercises of stock ~~vesting~~options of $1.3 million.

The $6.5 million change in the effect of exchange rate changes on cash and ~~stock option exercises.~~cash equivalents was driven by changes in the cumulative translation adjustment.

Past trends of cash flows are not necessarily indicative of future cash flow levels. A decrease in cash flows may have a material adverse effect on our liquidity, business and financial condition.

~~Non-GAAP Financial Measures~~

In addition to cash flow from operating activities in accordance with GAAP, we use a non-GAAP financial measures called “Free Cash Flow”. Free Cash Flow is defined as cash flow from operating activities excluding net purchases of corporate debt trading investments less expenditures for furniture, equipment and leasehold improvements and capitalized software development costs. We believe this non-GAAP financial measure is important in gaining an understanding of our financial strength and cash flow generation.

~~The table set forth below presents a reconciliation of our cash flow from operating activities to Free Cash Flow, as defined, for the twelve months ended September 30, 2017 and 2016:~~

Twelve months ended September 30,

2017

2016

(In thousands)

Cash flow from operating activities
$
177,898

$
67,832

Add: Net (sales) purchases of corporate debt trading investments

(8,678
)

74,535

Add: Excess tax benefits from share-based compensation previously recorded under financing activities

292

9,274

Less: Purchases of furniture, equipment and leasehold improvements

(8,876
)

(5,819
)
Less: Capitalization of software development costs

(13,154
)

(12,130
)
Free Cash Flow
$
147,482

$
133,692

Other Factors Influencing Liquidity and Capital Resources

We believe that our current resources are adequate to meet our liquidity needs and requirements, including commitments for capital ~~expenditure requirements for at least~~expenditures, in the short-term (during the next 12 ~~months.~~months). However, our future liquidity and capital requirements will depend on a number of factors, including liquidity requirements associated with our self-clearing operations and expenses associated with product development and expansion and new business opportunities that are intended to further diversify our revenue ~~stream.~~streams. We may also acquire or invest in technologies, business ventures or products that are complementary to our business. In the event we require any additional financing, it will take the form of equity or debt financing. Any additional equity offerings may result in dilution to our stockholders. Any debt financings, if available at all, may involve restrictive covenants with respect to dividends, issuances of additional capital and other financial and operational matters related to our business. In addition, in the long-term (beyond 12 months), we believe our liquidity needs and requirements will be affected by the factors discussed above.

Certain of our U.S. subsidiaries are registered as ~~a broker-dealer or a SEF~~broker-dealers and therefore are subject to the applicable rules and regulations of the SEC and ~~the CFTC.~~FINRA. These rules contain minimum net capital requirements, as defined in the applicable ~~regulations, and also may require a significant part of the registrants’ assets be kept in relatively liquid form.~~regulations. Certain of our foreign subsidiaries are regulated by the ~~Financial Conduct Authority~~FCA in the U.K. or other foreign regulators and must maintain financial resources, as defined in the applicable regulations, in excess of the applicable financial resources requirement. As of ~~September 30, 2017,~~March 31, 2024, each of our subsidiaries that are subject to these regulations had net capital or financial resources in excess of their minimum requirements. As of ~~September 30, 2017,~~March 31, 2024, our subsidiaries maintained aggregate net capital and financial resources that were ~~$128.2~~$545.0 million in excess of the required levels of ~~$12.6~~$35.7 million.

Each of our U.S. and foreign regulated subsidiaries are subject to local regulations which generally ~~prohibit~~limit, or require the prior notification to or approval from such regulated entity’s principal regulator before, the repayment of borrowings from our affiliates, paying cash dividends, making loans to our affiliates or otherwise entering into transactions that result in a significant reduction in regulatory net capital or financial ~~resources without prior notification to or approval from such regulated entity’s principal regulator.~~

resources. As of ~~September 30, 2017,~~March 31, 2024, the amount of unrestricted cash held by our non-U.S. subsidiaries was ~~$85.7~~$216.9 million. We have determined that unremitted earnings of our foreign subsidiaries are considered indefinitely reinvested outside of the U.S. Any repatriation of such foreign earnings by way of dividend may be subject to both U.S. federal and state income taxes, reduced by applicable foreign tax credits. However, we do not have any current needs or foreseeable plans to repatriate cash by way of dividends from our non-U.S. subsidiaries.

We execute ~~certain bond~~securities transactions between ~~and among~~our institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller in ~~trades which~~trades. Our operating subsidiaries settle such transactions using their self-clearing operations or through the use of third-party clearing ~~brokers.~~brokers or settlement agents. 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. ~~For~~Under both the ~~nine months ended September 30, 2017~~self-clearing and ~~2016, revenues from matched principal trading were approximately $34.4 million and $26.6 million, respectively. Under securities clearing agreements with~~the third-party clearing ~~brokers,~~models, we maintain collateral deposits with each clearing broker in the form of cash. As of September 30, 2017 and 2016, the amount of the collateral deposits included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition was $1.2 million and $1.1 million, respectively. For the nine months ended September 30, 2017, and 2016, clearing expenses associated with matched principal transactions were $4.3 million and $4.8 million, respectively, and are classified under clearing costs on our Consolidated Statements of Operations. We aremay be exposed to credit risk in the event a counterparty does not fulfill its obligation to complete a transaction or if there is ~~a miscommunication or other~~an error in executing a matched principal transaction.

Pursuant to the terms of the securities clearing agreements, each third-party clearing broker has the right to charge us for any losses they suffer resulting from a counterparty’s failure on any of our trades. We did not record any liabilities or losses with regard to ~~this right~~counterparty failures for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016.~~2023. Substantially all of our open securities failed-to-deliver and securities failed-to-receive transactions as of March 31, 2024 have subsequently settled at the contractual amounts.

In the normal course of business, we enter into contracts that contain a variety of representations, warranties and ~~general indemnifications.~~indemnification provisions. Our maximum exposure from any claims under these arrangements is unknown, as this would involve claims that have not yet occurred. ~~However, based~~

We have leases for corporate offices and equipment with initial lease terms ranging from one year to 15 years. We have total future contractual rent payments on ~~past experience, we expect~~these leases of $102.8 million, with $13.0 million due within the ~~risk~~next 12 months and $89.8 million due beyond 12 months.

We enter into foreign currency forward contracts to economically hedge our exposure to variability in certain foreign currency transaction gains and losses. As of ~~loss to be remote.~~March 31, 2024, the notional value of our foreign currency forward contract outstanding was $63.3 million and the fair value of the liability was $0.2 million.

In January ~~2016,~~2022, our Board ~~of Directors~~ authorized a ~~two-year~~ share repurchase program for up to ~~$25.0~~$150.0 million ~~of our common stock. In October 2016, our Board of Directors approved a $50.0 million increase~~that commenced in the size of the share repurchase program. In September 2017, the existing share repurchase plan was terminated and our Board of Directors authorized a new fifteen-month share repurchase program for up to $100 million commencing in October 2017.March 2022. Shares repurchased under ~~each~~the program will be held in treasury for future use. As of March 31, 2024, we had $89.9 million of remaining capacity under the program.

In ~~October 2017,~~April 2024, our Board ~~of Directors~~ approved a quarterly cash dividend of ~~$0.33~~$0.74 per share payable on ~~November 22, 2017~~June 5, 2024 to stockholders of record as of the close of business on ~~November 8, 2017.~~May 22, 2024. Any future declaration and payment of dividends will be at the sole discretion of our ~~Board~~Board.

On April 19, 2024, the Company entered into an agreement to acquire an additional 49.0% interest in RFQ–hub Holdings LLC for approximately $37.9 million of ~~Directors. Our Board~~cash consideration. The acquisition is subject to various closing conditions, including the receipt of ~~Directors may take into account such matters as general business conditions, our~~certain regulatory approvals. The acquisition is expected to close during the second half of 2024. Upon the closing of the acquisition, the Company will hold a 92.0% controlling stake in RFQ-hub Holdings LLC.

Non-GAAP Financial Measures

In addition to reporting financial results ~~capital requirements, contractual obligations, legal,~~in accordance with GAAP, we use certain non-GAAP financial measures: earnings before interest, taxes, depreciation and ~~regulatory restrictions on~~amortization (“EBITDA”), EBITDA margin and free cash flow. We define EBITDA margin as EBITDA divided by revenues. We define free cash flow as net cash provided by/(used in) operating activities excluding the ~~payment~~net change in trading investments and net change in securities failed-to-deliver and securities failed-to-receive from broker-dealers, clearing organizations and customers, less expenditures for furniture, equipment and leasehold improvements and capitalized software development costs. We believe these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, are important in understanding our operating results. EBITDA, EBITDA margin and free cash flow are not measures of ~~dividends~~financial performance or liquidity under GAAP and therefore should not be considered an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity. We believe that these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, provide additional information regarding our ~~stockholders or by our subsidiaries to their respective parent entities,~~operating results because they assist both investors and ~~any such other factors as~~management in analyzing and evaluating the ~~Board of Directors may deem relevant.~~

~~Effects of Inflation~~

~~Because the majority~~performance of our assets are short-term in nature, they are not significantly affected by inflation. However, the rate of inflation may affect our expenses, such as employee compensation, office leasing costs and communications expenses, which may not be readily recoverable in the pricesbusiness.

The table set forth below presents a reconciliation of our ~~services. To the extent inflation results in rising interest rates~~net income to EBITDA and ~~has other adverse effects on the securities markets, it may adversely affect our financial condition and results of operations.~~

~~Contractual Obligations and Commitments~~

~~As of September 30, 2017, we had the following contractual obligations and commitments:~~

Payments due by period

Total

Less than 1 year

1 - 3 years

3 - 5 years

More than 5 - years

(In thousands)

Operating leases
$
144,498

$
4,907

$
18,571

$
19,695

$
101,325

Foreign currency forward contract

88,444

88,444

—

—

—

$
232,942

$
93,351

$
18,571

$
19,695

$
101,325

~~During 2016, we entered into a lease agreement for our new global headquarters in New York City. We expect~~net income margin to ~~relocate our headquarters to approximately 83,000 square feet of newly built office space at 55 Hudson Yards upon the building’s completion in late 2018. The fifteen-year lease~~EBITDA margin, as defined above, for the ~~new headquarters will commence when we receive possession~~three months ended March 31, 2024 and 2023:


		Three Months Ended March 31,
		2024				2023
		($ in thousands)
Net income	$		72,615		$		73,628
Interest income			(5,973	)			(4,249	)
Interest expense			316				130
Provision for income taxes			24,102				24,567
Depreciation and amortization			18,200				16,461
EBITDA	$		109,260		$		110,537

Net income margin			34.5	%			36.2	%
Interest income			(2.8	)			(2.1	)
Interest expense			0.2				0.1
Provision for income taxes			11.4				12.1
Depreciation and amortization			8.6				8.1
EBITDA margin			51.9	%			54.4	%

The table set forth below presents a reconciliation of our net cash provided by operating activities to free cash flow, as defined above, for the ~~premises, which is currently expected to occur in the first quarter of 2018.~~three months ended March 31, 2024 and 2023:

We enter into foreign currency forward contracts to hedge our exposure to variability in certain foreign currency cash flows resulting from the net investment in our U.K. subsidiaries. As of September 30, 2017, the notional value of the foreign currency forward contract outstanding was $88.4 million and the fair value of the asset was $0.6 million.


	Three Months Ended March 31,
	2024				2023
		($ in thousands)
Net cash (used in)/provided by operating activities	$		(4,949	)	$	7,527
Exclude: Net change in trading investments			(255	)		419
Exclude: Net change in fail-to-deliver/receive from broker-dealers, clearing organizations and customers			51,288			46,767
Less: Purchases of furniture, equipment and leasehold improvements			(1,197	)		(217	)
Less: Capitalization of software development costs			(13,963	)		(10,690	)
Free Cash Flow	$		30,924		$	43,806

I~~tem~~

Item 3. Quantitative and Qualitative Disclosures ~~about~~About Market Risk

Market risk is the risk of the loss resulting from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates.

Market Risk

The global financial services business is, by its nature, risky and volatile and is directly affected by many national and international factors that are beyond our control. Any one of these factors may cause a substantial decline in the U.S. and global financial services markets, resulting in reduced trading volume and revenues. These events could have a material adverse effect on our business, financial condition and results of operations.

As of ~~September 30, 2017,~~March 31, 2024, we had ~~$234.2~~$99.4 million of investments ~~which~~in U.S. Treasuries that were ~~invested~~classified as trading securities and $25.4 million of investments in corporate bonds ~~and~~that were classified as ~~securities available-for-sale or trading securities.~~available-for-sale. Adverse movements, such as a ~~10%~~ decrease in the value of these securities or a downturn or disruption in the markets for these securities, could result in a substantial loss. A 10.0% decrease in the market value of our U.S Treasuries or available-for-sale investments would result in losses of approximately $9.9 million and $2.5 million, respectively. In addition, principal gains and losses resulting from these securities could on occasion have a disproportionate effect, positive or negative, on our financial condition and results of operations for any particular reporting period.

Interest Rate Risk

Interest rate risk represents our exposure to interest rate changes with respect to our cash and cash equivalents, restricted cash and ~~investments.~~deposits. As of ~~September 30, 2017,~~March 31, 2024, our cash and cash equivalents, restricted cash and ~~investments~~deposits amounted to ~~$376.2~~$535.2 million. A hypothetical ~~five~~100 basis point ~~decrease~~change in ~~short-term~~ interest rates would increase or decrease our annual ~~pre-tax earnings~~interest income by approximately ~~$0.2~~$5.4 million, assuming no change in the amount or composition of our cash and cash equivalents, restricted cash and ~~investments.~~deposits.

As of ~~September 30, 2017,~~March 31, 2024, a hypothetical 100 basis point increase or decrease in interest rates would decrease or increase the fair value of the available-for-sale investment portfolio by approximately ~~$1.4~~$0.3 million, assuming no change in the amount or composition of the investments. The hypothetical unrealized gain (loss) of ~~$1.4~~$0.3 million would be recognized in accumulated other comprehensive ~~income~~loss on the Consolidated Statements of Financial Condition.

A similar hypothetical 100 basis point increase or decrease in interest rates would decrease or increase the fair value of the trading securities portfolio by approximately $0.8 million. The hypothetical unrealized gain (loss) of $0.8 million would be recognized in other, ~~income~~net in the Consolidated Statements of Operations.

We do not maintain an inventory of bonds that are traded on our platform.

Foreign Currency Exchange Rate Risk

We conduct operations in several different countries outside of the U.S., most notably the U.K., and substantial portions of our revenues, expenses, assets and liabilities are generated and denominated in non U.S. dollar currencies. Since our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Accordingly, increases or decreases in the value of the U.S. dollar against the other currencies will affect our net operating revenues, operating expenses, operating income and the value of balance sheet items denominated in foreign currencies.

During the twelve months ended ~~September 30, 2017,~~March 31, 2024, approximately ~~12.7%~~15.9% of our ~~revenue~~revenues and ~~27.0%~~25.4% of our expenses were denominated in currencies other than the U.S. dollar, most notably the British Pound Sterling. Based on actual results over the past year, a hypothetical ~~10%~~10.0% increase or decrease in the U.S. dollar against all other currencies would have increased or decreased revenue by approximately ~~$5.0~~$12.1 million and operating expenses by approximately ~~$5.1~~$11.3 million.

~~Derivative Risk~~

Our limited derivative risk stems from our activities in the foreign currency forward contract market. We use this market to mitigate our U.S. dollar versus British Pound Sterling exposure that arises from the activities of our U.K. subsidiaries. As of September 30, 2017, the fair value of the notional amount of our foreign currency forward contract was $88.4 million. We do not speculate in any derivative instruments.

Credit Risk

~~Two~~Through certain of our subsidiaries, ~~MarketAxess Corporation~~we execute securities transactions between our institutional investor and ~~MarketAxess Capital Limited, act as~~broker-dealer clients on a matched principal ~~counterparty in connection with the Open Trading~~™ ~~transactions that we execute between clients. We act as an intermediary in these transactions~~basis by serving as counterparty to both the buyer and the seller in ~~trades which then~~trades. Our operating subsidiaries settle such transactions using their self-clearing operations or through athe use of third-party clearing ~~broker.~~brokers or settlement agents. 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.

We are exposed to credit and performance risks in our role as matched principal trading counterparty to our ~~Open Trading~~™ clients executing bond trades on our platform, including the risk that counterparties that owe us money or securities will not perform their obligations. These parties may default on their obligations to us 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 our risk. In connection with Open Trading™ or other anonymous protocols, we expect that the number of transactions in which we act as a matched principal will increase.

We have policies, procedures and ~~procedures~~automated controls in place to identify and manage our credit risk. ~~In connection with the recent growth of our Open Trading~~™ ~~protocols, we have implemented additional automated controls to help us manage our credit risk exposure.~~ There can be no assurance that ~~the~~these policies, procedures and automated controls ~~we use to manage this credit risk~~ will effectively mitigate our credit risk exposure. Some of our risk management procedures are reliant upon the evaluation of information regarding the ~~fixed- income~~fixed-income markets, our clients or other relevant matters that are publicly available or otherwise acquired from third party sources. Such information may not be accurate, complete, up-to-date or properly assessed and interpreted by us. If our risk management procedures fail, our business, financial condition and results of operations may be adversely affected. Furthermore, our insurance policies are unlikely to provide coverage for such risks.

Cash and cash equivalents ~~includes~~include cash and money market instruments that are primarily maintained at ~~one~~three major global ~~bank.~~banks. Given this concentration, we are exposed to certain credit risk in relation to our deposits at these banks.

Derivative Risk

Our limited derivative risk stems from our activities in the foreign currency forward contract market. We use this ~~bank.~~market to economically hedge our foreign exchange gains and losses on the Consolidated Statements of Operations that arise from our U.S. dollar versus British Pound Sterling exposure from the activities of our U.K. subsidiaries. As of March 31, 2024, the notional amount of our foreign currency forward contract was $63.3 million. We do not hold derivative instruments for purposes other than economically hedging foreign currency risk.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. Our management, including the Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”),~~ as of ~~September 30, 2017.~~March 31, 2024. Based on that evaluation, the Chief Executive Officer and Interim Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by MarketAxess in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that information is accumulated and communicated to our management, including the Chief Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended ~~September 30, 2017~~March 31, 2024 identified in connection with the evaluation thereof by our management, including the Chief Executive Officer and Interim Chief Financial Officer, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

P~~ART~~PART II — Other Information

Item 1. Legal Proceedings

In the normal course of business, we and our subsidiaries included in the consolidated financial statements may be involved in various lawsuits, proceedings and regulatory examinations. We assess liabilities and contingencies in connection with outstanding legal proceedings, if any, utilizing the latest information available. For matters where it is probable that we will incur a material loss and the amount can be reasonably estimated, we will establish an accrual for the loss. Once established, the accrual will be adjusted to reflect any relevant developments. When a loss contingency is not both probable and estimable, we would not establish an accrual.

Based on currently available information, the outcome of our outstanding matters is not expected to have a material adverse impact on our financial position. It is not presently possible to determine our ultimate exposure to these matters and there is no assurance that the resolution of the outstanding matters will not significantly exceed any reserves accrued by us. See Note 13 to the Consolidated Financial Statements for a discussion of our commitments and contingencies.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in our most recent Form 10-K for the year ended December 31, ~~2016.~~2023. For a discussion of the risk factors affecting the Company, see “Risk Factors” in Part I, Item 1A of our ~~2016~~2023 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

During the quarter ended ~~September 30, 2017,~~March 31, 2024, we repurchased the following shares of common stock:


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
							(In thousands)
January 1, 2024 - January 31, 2024		54,206	$	270.24		—	$	100,016
February 1, 2024 - February 29, 2024		22,258		216.05		14,597		96,867
March 1, 2024 - March 31, 2024		32,814		216.94		32,247		89,869
Total		109,278	$	243.20		46,844

Period

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans and Programs

Dollar Value of Shares That May Yet Be Purchased Under the Plans and Programs

(In thousands)

July 1, 2017 - July 31, 2017

47,137

$
200.45

20,000

$
23,030

August 1, 2017 - August 31, 2017

22,916

197.24

22,700

18,552

September 1, 2017 - September 30, 2017

22,400

182.41

20,800

—

92,453

$
195.28

63,500

During the three months ended ~~September 30, 2017,~~March 31, 2024, we repurchased ~~92,453~~109,278 shares of common stock. The repurchases included ~~28,953~~46,844 shares repurchased in connection with our share repurchase program and 62,434 shares surrendered by employees ~~to us~~ to satisfy the withholding tax obligations upon the vesting of full value awards and upon the exercise of stock ~~options and vesting of restricted shares and 63,500 shares repurchased in connection with our share repurchase program.~~options.

In January ~~2016,~~2022, our Board of Directors authorized a ~~two-year~~ share repurchase program for up to ~~$25.0~~$150.0 million ~~of our common stock. In October 2016, our Board of Directors approved a $50.0 million increase~~that commenced in the size of the current share repurchase program. In September 2017, the existing share repurchase plan was terminated and our Board of Directors authorized a new fifteen-month share repurchase program for up to $100 million commencing in October 2017.March 2022. Shares repurchased under ~~each~~this program will be held in treasury for future use. As of March 31, 2024, we had $89.9 million of remaining capacity under the program.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~(c) Trading Plans

In the first quarter of 2024, no director or officer (as defined in Exchange Act Rule 16a-1(f)) of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement for the purchase or sale of securities of the Company, within the meaning of Item 408 of Regulation S-K.

Item 6. Exhibits

Exhibit ~~Listing:~~Index:

Number

Description

10.1*10.1

~~Amendment,~~Letter Agreement dated as of ~~August 14, 2017, to the Restricted Stock Agreement, dated April 1, 2017,~~February 21, 2024, by and between Ilene Fiszel Bieler and MarketAxess Holdings Inc. ~~and Christophe Roupie~~(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report in Form 8-K dated February 21, 2024).†#

10.2*10.2

Severance Protection Agreement, dated as of February 21, 2024, by and between Ilene Fiszel Bieler and MarketAxess Holdings Inc. (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report in Form ~~of Indemnification Agreement for Directors~~8-K dated February 21, 2024)

31.1*10.3

Proprietary Information and Non-Competition Agreement, dated as of February 21, 2024, by and between Ilene Fiszel Bieler and MarketAxess Holdings Inc. (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report in Form 8-K dated February 21, 2024)

10.4

Form of 2024 Restricted Stock Unit Agreement (Non-Deferred) for U.S.-based executive officers other than Richard M. McVey pursuant to the MarketAxess Holdings Inc. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report in Form 8-K dated February 21, 2024

10.5*

Form of 2024 Restricted Stock Unit Agreement (Non-Deferred) for Richard M. McVey pursuant to the MarketAxess Holdings Inc. 2020 Equity Incentive Plan

10.6*

Form of 2024 Restricted Stock Unit Agreement for U.K.-based executive officers pursuant to the MarketAxess Holdings Inc. 2020 Equity Incentive Plan

10.7*

Form of 2024 Performance Stock Unit Agreement for U.S.-based executive officers other than Richard M. McVey pursuant to the MarketAxess Holdings Inc. 2020 Equity Incentive Plan†

10.8*

Form of 2024 Performance Stock Unit Agreement for Richard M. McVey pursuant to the MarketAxess Holdings Inc. 2020 Equity Incentive Plan†

10.9*

Form of 2024 Performance Stock Unit Agreement for U.K.-based executive officers pursuant to the MarketAxess Holdings Inc. 2020 Equity Incentive Plan†

10.10*

Form of 2024 Incentive Stock Option Agreement for U.S. based Executive Officers other than Mr. McVey pursuant to the MarketAxess Holdings Inc. 2020 Equity Incentive Plan

10.11*

Form of 2024 Incentive Stock Option Agreement for Mr. McVey pursuant to the MarketAxess Holdings Inc. 2020 Equity Incentive Plan#

31.1*

Certification by Chief Executive Officer ~~pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

31.2*

~~Certification by~~and Interim Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certification by Chief Executive Officer ~~pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

32.2*

~~Certification by~~and Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~101.INS*

Inline XBRL Instance Document**Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document

~~101.SCH~~101.SCH*

Inline XBRL Taxonomy Extension Schema Document**Document

~~101.CAL~~104

The cover page from the Company’s Quarterly report on Form 10-Q for the quarter ended March 31, 2024 has been formatted in Inline XBRL Taxonomy Extension Calculation Linkbase Document*and is included in Exhibits 101.


*		Filed herewith.
~~101.LAB~~†		XBRL Taxonomy Extension Label Linkbase Document**Certain schedules and other similar attachments to this exhibit have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The registrant will provide a copy of such omitted documents to the Securities and Exchange Commission upon request.
~~101.PRE~~#		XBRL Taxonomy Extension Presentation Linkbase DocumentCertain confidential information, identified by bracketed asterisks “[
~~101.DEF~~		XBRL Taxonomy Extension Definition Linkbase Document*****]” has been omitted from this exhibit pursuant to Item 601(b)(10) of Regulation S-K because it is both (i) not material and (ii) is the type that the registrant treats as private or confidential.

*	~~Filed herewith.~~

Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Financial Condition as of September 30, 2017 and December 31, 2016; (ii) Consolidated Statements of Operations for the Three and Nine months Ended September 30, 2017 and 2016; (iii) Consolidated Statements of Comprehensive Income for the Three and Nine months Ended September 30, 2017 and 2016; (iv) Consolidated Statement of Stockholders’ Equity for the Nine months Ended September 30, 2017; (v) Consolidated Statements of Cash Flows for the Nine months Ended September 30, 2017 and 2016; and (vi) Notes to the Consolidated Financial Statements.

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	MARKETAXESS HOLDINGS INC.

Date: ~~October 27, 2017~~May 7, 2024	By:	/s/ ~~RICHARD M. MCVEY~~ CHRISTOPHER R. CONCANNON
		~~Richard M. McVey~~Christopher R. Concannon
		Chief Executive Officer and Interim Chief Financial Officer
		(principal executive ~~officer)~~

~~Date: October 27, 2017~~	~~By:~~	~~/s/ ANTONIO L. DELISE~~
		~~Antonio L. DeLise~~
		~~Chief Financial Officer~~
		(officer and interim principal financial ~~and accounting~~ officer)


Delaware		52-2230784
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

~~299 Park Avenue, 10th~~55 Hudson Yards, 15th FloorNew York, New York		~~10171~~10001
(Address of principal executive offices)		(Zip Code)


Large accelerated filer	☑☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
~~Non-accelerated filer~~	~~☐ (Do not check if a smaller reporting company)~~	~~Smaller reporting company~~	☐
		Emerging growth company	☐

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In thousands)
Current:
Federal	$	11,331		$	13,273		$	28,676		$	30,898
State and local		1,651			1,895			4,579			5,055
Foreign		1,191			1,714			4,234			4,599
Total current provision		14,173			16,882			37,489			40,552
Deferred:
Federal		(930	)		(918	)		130			6,895
State and local		(158	)		(154	)		(64	)		964
Foreign		2			(374	)		226			(143	)
Total deferred provision		(1,086	)		(1,446	)		292			7,716
Provision for income taxes	$	13,087		$	15,436		$	37,781		$	48,268


Remainder of 2017	$	1,266
2018		4,815
2019		9,464
2020		10,577
2021		10,129
2022 and thereafter		108,247
	$	144,498


		Three Months Ended March 31,
Lease cost:	Classification	2024		2023
		(In thousands)
Operating lease cost - office space	Occupancy	$	2,753	$	3,111
Operating lease cost - equipment	Technology and communications		98		—
Variable lease costs	Occupancy		587		51
Total operating lease cost		$	3,438	$	3,162


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	As of
	September 30, 2017			December 31, 2016
	(In thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents	$	138,992		$	168,243
Investments, at fair value		237,221			194,404
Accounts receivable, net of allowance of $71 and $82 as of September 30, 2017 and December 31, 2016, respectively		63,027			50,668
Goodwill and intangible assets, net of accumulated amortization		63,155			63,443
Furniture, equipment, leasehold improvements and capitalized software, net of accumulated depreciation and amortization		35,321			31,104
Prepaid expenses and other assets		16,174			11,618
Deferred tax assets, net		8,457			8,562
Total assets	$	562,347		$	528,042

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accrued employee compensation	$	31,027		$	34,783
Income and other tax liabilities		4,507			7,582
Deferred revenue		3,191			2,515
Accounts payable, accrued expenses and other liabilities		12,714			15,149
Total liabilities		51,439			60,029

Commitments and Contingencies (Note 10)

Stockholders' equity
Preferred stock, $0.001 par value, 4,855,000 shares authorized, no shares issued and outstanding as of September 30, 2017 and December 31, 2016		—			—
Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued and outstanding as of September 30, 2017 and December 31, 2016		—			—
Common stock voting, $0.003 par value, 110,000,000 shares authorized, 40,296,774 shares and 40,106,360 shares issued and 37,547,951 shares and 37,543,775 shares outstanding as of September 30, 2017 and December 31, 2016, respectively		121			120
Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2017 and December 31, 2016		—			—
Additional paid-in capital		342,113			342,311
Treasury stock - Common stock voting, at cost, 2,748,823 and 2,562,585 shares as of September 30, 2017 and December 31, 2016, respectively		(153,682	)		(117,330	)
Retained earnings		332,506			255,140
Accumulated other comprehensive loss		(10,150	)		(12,228	)
Total stockholders' equity		510,908			468,013
Total liabilities and stockholders' equity	$	562,347		$	528,042

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
	(In thousands)
As of September 30, 2017
Securities available-for-sale
Corporate debt	$	168,455	$	18	$	(195	)	$	168,278

Trading securities
Corporate debt		65,940		67		(122	)		65,885
Mutual funds held in rabbi trust		2,729		329		—			3,058
Total trading securities		68,669		396		(122	)		68,943

Total investments	$	237,124	$	414	$	(317	)	$	237,221

As of December 31, 2016
Securities available-for-sale
Corporate debt	$	119,073	$	13	$	(216	)	$	118,870

Trading securities
Corporate debt		74,394		47		(234	)		74,207
Mutual funds held in rabbi trust		1,212		115		—			1,327
Total trading securities		75,606		162		(234	)		75,534

Total investments	$	194,679	$	175	$	(450	)	$	194,404


	As of
Lease Term and Discount Rate	March 31, 2024			December 31, 2023
Weighted average remaining lease term (in years) - operating leases		9.4			9.6
Weighted average discount rate - operating leases		6.0	%		6.0	%
Weighted average remaining lease term (in years) - finance leases		1.5			1.8
Weighted average discount rate - finance leases		7.2	%		7.2	%


	Operating Leases		Finance Leases
	(In thousands)
Remainder of 2024	$	9,852	$	88
2025		12,302		88
2026		11,730		—
2027		8,983		—
2028		8,603		—
2029 and thereafter		51,242		—
Total lease payments		102,712		176
Less: imputed interest		24,642		10
Present value of lease liabilities	$	78,070	$	166


		As of
	Statement of Financial Condition Location	March 31, 2024		December 31, 2023
		(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	376,679	$	451,280
Cash segregated for regulatory purposes	Cash segregated under federal regulations		45,629		45,122
Deposits with clearing organizations and broker-dealers	Receivables from broker-dealers, clearing organizations and customers		112,713		115,151
Other deposits	Prepaid expenses and other assets		143		119
Total		$	535,164	$	611,672

	Change from the Three Months Ended September 30, 2016
	U.S. High-Grade			Other Credit			Liquid Products			Total
	($ in thousands)
Volume increase (decrease)	$	4,234		$	2,687		$	(332	)	$	6,589
Variable transaction fee per million (decrease) increase		(3,979	)		(1,487	)		79			(5,387	)
Total increase (decrease) in variable commissions	$	255		$	1,200		$	(253	)	$	1,202

	Twelve months ended September 30,
	2017			2016
	(In thousands)
Cash flow from operating activities	$	177,898		$	67,832
Add: Net (sales) purchases of corporate debt trading investments		(8,678	)		74,535
Add: Excess tax benefits from share-based compensation previously recorded under financing activities		292			9,274
Less: Purchases of furniture, equipment and leasehold improvements		(8,876	)		(5,819	)
Less: Capitalization of software development costs		(13,154	)		(12,130	)
Free Cash Flow	$	147,482		$	133,692

	Payments due by period
	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 - years
	(In thousands)
Operating leases	$	144,498	$	4,907	$	18,571	$	19,695	$	101,325
Foreign currency forward contract		88,444		88,444		—		—		—
	$	232,942	$	93,351	$	18,571	$	19,695	$	101,325