Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MarketAxess Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. [Operator Instructions] As a reminder, this conference call is being recorded on January 25, 2023.

turn Relations over at to Head Steve like Investor of MarketAxess. now the to call Davidson, I'd Please go ahead, sir.

Stephen Davidson

XXXX Thank you, fourth conference year MarketAxess to welcome call. earnings Chris. Good quarter morning, and and the full

Chairman McVey, update through Financial will Officer, Gerosa, strategic company. review Rick call, business the the financial the and Executive results and provide for and Officer, President Concannon, you Chief trends will the Chief for Chris key walk a will COO, quarter. Chris For then

let Rick, statements to remind over statements. belief indicated call company's the turn and condition include their These I today's actual that statements. regarding by financial is may in The may represent me those call are that Before you company's uncertain. differ forward-looking nature results what future materially forward-looking events the from

the XXXX. report of is direct earnings of release, for would the XX, website. Form quarterly see risks factors issued this earlier ended discussion results, company's annual that also was description the available the a our read some our and could on on morning, you future in the and affect For statement our please in year XX-K risk which factors December I now of forward-looking disclaimer to

over call the turn Rick. me let to Now

Richard McVey

Good review and full joining morning year us thank for our and results. you to fourth quarter

in share execute our Open Trading. and growth volumes through market all trading to across protocol, gains third for Strong trading record strategy improvement our of nearly increases continued product consecutive all-to-all We and delivered significant quarter the unique clients our price areas.

XX bond With finish revenue EPS year of We of annual currency, duration trends growth XX% EBITDA and our improved materially growth straight record FX we to delivered Our of adjusted the headwinds. growth, in despite growth XX%. delivered year, strong underlying near-term for quarter revenue. the this revenue X% XX% revenue and

strategy. our key highlights of growth X Slide the areas

municipals, global our expand record deep high-yield market active increasing leadership of credit of our reflecting a just share on U.S. position nearly diversification. with beyond markets, continues in of to emerging continues and of record Eurobonds firms traders. almost liquidity number share pool and The global expand accelerating share basis record client in high-grade estimated gains active Our with a points in X,XXX in record platform in to XXX

We have our seen international with traders. nearly in active client especially XXXX firms business strong active growth X,XXX over and

sources scarce, the has have importance our traditional As volume of our record a of our of a executed This improvement market driver Open was and of our become increases share gains price a liquidity key all-to-all XX% of Trading. estimated through source liquidity and credit clients. been for valuable

volume, year records, trading firms a the substantial full addressable XXXX, market astonishing in the summary, better provided MarketAxess foundation with of new been opportunity. areas, increasing liquidity accelerating market platform. an growth our X,XXX in momentum business client In never has For on share product the new and

transition person right as time automation, position. And in the new earlier never in product CEO Chris been With will Executive month proven will make strengths like because April to take on experienced role would congratulate role this data, and a a as delivery, I Concannon, promotion markets of announced in well It have company. and protocols, Chris the is on is that financial the and electronic in performance given is strong better we now CEO. deeply assume we backdrop, e-trading deserved the leader, I right ETFs, the Chairman. Chris lead his to to this this the

affairs, client our Board relationships, long-term of my to key I role Chris am excited I investor about on strategy, communications. as Executive work and with regulatory Chairman continue new where will Directors and

We adding fixed invest and will revenue continue trading new believe and we favorable believe new the an capabilities, reasons developing have decade market our many be the set next expanding data beyond, and data internationally. for e-trading by to business growth. and income opportunity to environment outstanding and actively in will product We areas, for

negative market Fed a update the total credit. decline impacting XXXX raised return capture income price fastest an declines XXXX. my with levels an fee Along In in client and provides for seen funds approximately conditions the from activity. directly in it basis drove to in of rate year first in the the year, initial the lows declined rate year, cycle investment end Fed XXXX, since to on the U.S. of half institutional making especially unprecedented shock e-trading points, grade duration the high-grade hike October, This markets, career. XXXX X XX% moves to with I the indices these the Slide have the largest XX% XXX fixed for

bond one measures to increasing recent months in of index create trending a environment. yields world some the growth economic moved better and investing the With bond rates about interest have year Higher lower fixed inflation down, X% compared from around lows in the income ago October. duration

We grade are QX in up that ticket TRACE find versus already TRACE in bond investment volumes grade count use trading automation one to grew liquidity. a the QX of and investors seeing XX% the year with as market remarkable XX% benefits reenter ago. Investment

to this participation the opportunities. growth year to to in trend and remain XX% volumes at in velocity fee investing Smaller capture. high-grade automation We margin is TRACE tickets year-over-year, all-to-all markets in for trading expect down well. improve high-yield trade environment, the optimistic MarketAxess. in and due that to as favorable trading add automation average emerging trading require fixed size I greater on income is market increase another market trading improved market Eurobonds due in growth

volume in market quartile gains estimated the trends pre-pandemic This primary positioned share from XX gains quarter products of across and XXXX, in market share were data Strong market in but the versus one years. In of well of historical for combined the set X duration the company product XXXX. in top quartile Slide XXXX. year-over-year our strong bond our the growth company. the quarterly revenue the growth global consecutive with period market is for improving third for gains shows past multi-year share all QX top

Now call the for to over details trends. let Chris business me more on turn

Chris Concannon

pass have Board me you, thank reins for established an that the and of Thank grateful you for The your CEO several the confidence deeply MarketAxess. experience trajectory to the have and the to the knowledge kind and trusted fixed executive. and leveraging last you been next record is having I am market with income as unparalleled for deep to for their phase you Rick, growth incredible partner The remarks. years track a and working you

to you that honor, you support our your looking and I'm all forward truly our for Board the to shareholder well The growth to we have to ahead. working an capitalize unlock so come. will world-class the that value and many is years opportunities we with positioned initiatives team with This assembled on here for continue on we strategic are and is thank clients, with

tremendous Slide growth some opportunities. X illustrates those of

in XXXX, we of stronger. of never breadth our has geographic and franchise the As product terms begin strength been

serve Our several of leadership revenue over have in reflected that the sizable in gains we gains global credit ahead These share is last market opportunity we reinforce only the to that the us. quarters. expanding achieved strong

will current activity, conditions. enhanced We January by trading increases reduces believe increase issue yields the higher demand month-to-date the new are in the has market typically opportunities solutions. Higher electronic have outstanding further that the market product trading, strong share short-term, seen to velocity debt. lead we but for which which of

month-to-date ADV year-over-year credit digit and total double Our solid is showing growth sequentially.

levels price a has Open made Slide for full for diversity we of to significant our flexibility of difference improvement $XXX price liquidity to in on X the pricing provides clients We pool provides the improvement million in client transactions. The million. when that excess quality execution delivered Open of to execution we quality tune year, over of opportunity are our clients. well time, revenue $XXX fine deliver Trading. an additional us of believe annual in such of delivering the particularly update Trading our the our We with high

market able believe our banks, more we to from alternative unique and systematic these and with protocols treasuries market on support of of focused a the by where these a is multitude client clients Open recently deliver ETF that price in the XXX participants good and U.S. have platform participation solution positioned a is it and types funds, up because for is This liquidity treasury particular institutional space and pool regulators levels in resiliency. active prior of pool Trading record unique one of liquidity bringing become liquidity. investment firms more all-to-all increases on the is market rate in into market well investor improvement now year. makers XXX very This focus

to critical workflow our are automation cost need momentum we points increasing Slide constraints credit tools XX pain are find highlights increasing solutions. for trading. and clients. with are Automation efficient more seeing to facing the Clients facing and the solving

critical of record suite in cost solve XXX,XXX tools adoption. trades helping $XX for these and trading clients automation a billion pressures a delivering no-touch continued volume increased Automated quality high Our to execution. while reflecting be strong will our record to

XX% and X% represents total our Auto-X of of Today, trade credit count trading volume.

fourth saw Auto-X adoption solution also during the increased Responder quarter. of We our

grow technology of continues sizes counts while ticket use costs. algorithms higher to Clients manage our smaller to the increasingly and their across facing dealer trying platform. trade Additionally, are

growing challenges. demand address are Our these in tools automation increasingly to help

which an of simplifying This Lastly, clients algorithmic provide will while our expected workflows across clients we in protocols. initial Auto-X unlock additional savings broader have systematically new is cost the to first year, half service access workflow. Adaptive of trading multiple solution, this client to liquidity will for launch for

in volume quarter high-yield market XXX% secondary another high-grade flat are around Estimated continuing at X% XX $XX portfolio Slide have to year-over-year. billion of up to X% record for we market, to portfolio in we drive total fourth portfolio TRACE based several currently with trading the trading growth electronic portfolio electronic activity portfolio that, we trading. that share volumes XX% our over up illustrates and trading The relatively of XX% XX% remained And estimated XX% from venues. is believe prior the approximately using of volume of quarters. had last on an trading year. the estimate the trading We was

me to financials. on over let the Chris call Now to provide our update Gerosa turn an

Chris Gerosa

Slide summary you, quarterly On Chris. a XX, Thank we of financials. provide our

gains of $XXX quarter, million was the revenue our by most ever best X%, products. driven we quarter For which share up fourth record market across delivered

have by year the would we strong was revenue move over driver U.S. the Record into is Excluding quarter full platform. impact FX, the positive X% of the as traded contract a the approximately credit fourth up services FX. fee the of include capture, driven of increased lower The the decline effect X% in signed excluding of in of information a revenue XXXX. total XX%. impact high-grade or results XX% bonds negative impact duration These principally

million $X.X approximately Fourth quarter the of post-trade the dollar included revenue strengthening the prior U.S. to quarter. on year impact negative compared

by of impact income slightly which a impact the of $X.X year-over-year year [indiscernible] in FX, due was The included higher rates. was effective increase rate to have growth of negative the rate million interest driven Excluding the higher X%. would XX.X%, been provision to prior approximately The return tax the below period, adjustments. principally

we on revenue X%. fee XX, Total commission increased Slide our detail revenue and provide On commission more capture.

estimated in fee high in the higher share lower U.S. increases The and offset bonds credit driven revenue yields bond was Our capture volume, grade lower by partially capture to on principally increases growth by years maturity traded total healthy commission and lower was platform. of by record slightly our but trading fee was driven across in high-grade. market

of trading same assuming revenue in duration estimate fourth high-grade million. the U.S. quarter All-in-all commission approximately level our we $XX by change volume, lowered that the

high-grade duration, the did levels, in duration October, higher Corporate XQ down U.S. those from intra-quarter XXXX. move reflected Index capture set which declined slightly was and the fee is below well While XXXX Bond year-over-year as in

trading XX, we to Fourth driven expenses investments provide product and principally X%, our offering. On expense the our by with data system quarter Slide increased invest detail. you enhance

to support impact million and increased expenses compensation roles volume. increase would the FX, initiatives. in mainly strong benefits technology Excluding the increased customer of to growth in revenue clearing open trading on due headcount, and XX%. was credit increase facing in Employee The fees an $X have in increase

update provide flow management. we cash an on capital XX, Slide On and

As of $XXX were XX, December we cash had million and no our outstanding investments and debt.

in came at Our free flow trailing cash million. $XXX XX-month

shares we repurchased XXXX $XXX During $XXX remains out million in outstanding for of repurchase XXX,XXX on quarterly million, total the year, to a our authorization. and million the paid we $XX shareholders for dividends

$X.XX, the of a Our of of cash based company. the financial declared Board on Directors regular dividend quarterly which performance was

effective On have Slide XXXX guidance XX, CapEx. expenses, we and our for tax the rate,

is $XXX system to to $XXX We and a and our geographical the expenses that due be in XX% expect expansion. trading increase XXXX of million total to our in million. investments product range support personnel will Approximately of continued

expect full XXXX XXXX new software of the range million to which will investments from to majority the the development protocols XX% XX% are costs, year is $XX We we in $XX the trading platform effective tax be enhancements. of rate from million and expected relates for and range CapEx that to to in capitalized making resulting

guidance currency rates XX, Our full exchange CapEx as based year XXXX. expense on and of December foreign is

turn call let to the back Now Rick. me

Richard McVey

you, Thank and continue to e-trading enhanced in and the on international against growth both client in delivered summary, of front. levels space, market we position the U.S. Chris. execute strategy. well institutional In We very our share our competitive record the

we offering diversify footprint our achieve Our growth product clients. in record global continues deepen active broaden and and to as

volumes for and improved Trading positive macro the environment in trends MarketAxess Open XXXX. unique operating backdrop Market our significant And we seeing and to markets and currently is income lastly, creating are turning FX. improved improvement. increasingly is fee a have for for fixed attractive market solution very price The liquidity capture in

be I to Now, would open your questions. line for the happy

Operator

Thank Sandler. The Repetto first with question is Instructions] you. from Piper [Operator Rich

open. is line Your

Richard Repetto

Chris morning Yes. Rick and and Good Chris.

that the on asset and deserved It's mentoring Mr. Rick, well Chairman very proven transition we thank Concannon. much very new congratulations the First the you class, leader to in role. for

Richard McVey

Rich. Thanks,

Chris Concannon

Yes, Rich. I needed extra some mentoring

Richard Repetto

it you true, stuck and with Rick. no, But congrats

the So on you're for very bullish outlook volumes.

we guess at You it already there unexpected be, guess, volumes? anything -- people financial is there U.S. up. I appears that like, be is high-grade happen but on derailed the commodity impact you're volumes? record energy, and seen think this my that know stars could expected anything but and have that generally in how get when we've as Because question, volumes that you January potentially oil, in should can are watching products expected is level lining outlook Rick, I I the standing a performed

Richard McVey

of And the nothing we to the on high-grade we You markets we say know which I and expectation most for certain levels not anywhere to that surprise the will to ahead markets and seeing what, calendar not right place will full of took get but full that normal year. have the we who year near-term, course but see near now. expectation outflows up the And is could inflows, is markets that activity the fund has market a to to come numbers turn inflation open, continue knows are even like and the Fed and the encouraging a will down, inflation mutual into it's of XXXX probably, opening in as negative issue now start in soft say, have wide it's euros. move not the started but market of emerging is high-yield still a is high-grade the I the new and right there possibility surprises. in continue landing while rates that's higher that is are that

we're activity I high-yield year. particular challenges way depressed in last challenges of course markets well. EM in emerging throughout its volumes robust So high-grade new levels to good what But expect improving that this this were month. will XXXX with is is and sign as work the in of issue FX of happen into way having a the greatly leading it's market environment And and would the the some

huge something in done but continue improved. a opportunity to the have have watch, I market is improve that path high-grade EM that market volumes does They reopening the there would of follow that to think, the ahead. there's quarters we So that yet, and may not be China environment and

Richard Repetto

is at levels me, it. this and the, I that? the excuse Gerosa, cash Chris like color cash like cash for the or explanation cash, Got quarter-to-quarter just was up behind looking substantially seem went million And they Any over Got it. $XXX equivalents.

Chris Gerosa

Yes, our Rich, operations. it's a effect clearing with seasonality

to have our support We failed into capital put DTC activity. to

balance that on elevated trading more seasonality into So and to December, there's some as volume which which get at fails, DTC. you end have have on you we September, in takes the hold cash the fails, of sheet lower of at cash impact don't reduces the less the

Richard Repetto

that, thing, so guess here what higher don't new Got be, people that but I time share Got low to our Rick, one are December, seasonality braced, we know the market in effect? -- to seem issuance that to numbers all and because is that last just it seasonally low it. the can, And, so likely do market I come that you they usually, they issuance, I January so the come is won't had it. guess is fair expect share do to down, mentioned the down? higher in then in assume that is January, issue likely They seasonal like

Richard McVey

But the December is you're That new seasonal lowest highest month-to-month norm. Rich. issue because and is normal in pattern the the at That right, is That the is, January. exactly in level our at often January ADV and we're record holistic a that credit month-to-date around in credit of the gave us levels. taking Chris or guidance ADV credit puts market in view opportunity

see products we broadly we that involved we're trading credit. across robust look more all activity in, So in when

Richard Repetto

Got to guys transition. looking forward it. Thanks the and

Operator

is The from Citi. Allen Chris next with question

is line Your open.

Christopher Allen

side. little to wanted the followup a on I bit high-grade

of there, balancing apply? or down, size you high-grade. around should particularly wondering could you your high-yield of seeing the last in dealer three share see there's of other some now the versus for provide there, terms just kind you factors on I'm been look be the there's we're is basically high-grade in context good wondering where recent market one of just market gains it that was of if of on in any helpful -- XX%. I share share you're the at pushback pretty quarters trade years, average getting high-grade which over stock XX%, the activity has the static coming any One right if the color if

Chris Gerosa

to about Chris, we is, that even Open in way Yes, seeing happy think solution. all-to-all one. are record the high-grade I'm the I think our quarter to of in Trading activity fourth take And levels

in our seeing XX% of seeing total so we gains Trading terms are So in of gains are there. hit Open volume QX, we

in over We are high-grade record had gains high-grade. of in close solution We our up $XX trading in to volume in portfolio also XX%. billion seeing PT

So direct been RFQ dealer us. flat Obviously has we're for making gains. running

But XX%. is XX% high-grade clients high-yield. positive our We high-yield was also at the in dealer you're I by credit, driven high-yield which made QX. obviously our the in by still activity gains the corporate full big in up gains from overall ADV seeing look Trading sorry, RFQ, when volume and gains our grew Open U.S. those are But and again

credit overall substantial is So, Open showing the growth, by activity driven on of platform particularly signs Trading.

Christopher Allen

a in Got then the terms it's control, capabilities you. of obviously and the and in are I existing think under more where at in about there? things been when and positively with new agree just from and have ask, things customer rollout wanted mean, automation Where in looks the tools around But buy opportunity get better. of products and automation trending I we side penetration, to you just tools particularly it. products like different horizon blocking just the the for around Rick on the are of key focus environment the and tackling number areas to commerce are And a your I

Chris Gerosa

platform. record accounted trades QX, of be across a trades automation the of activity was but on and nothing platform. had on of volume Auto-X driver total in billion solution It Sure. in XX% overall platform $XX our then our the for Board to on the Automation continues records

see year in only of So the $XXX of overall volumes. did sort billion heightened volumes automated but of not in total XXXX of we growth -- we record QX,

clients their look hear continue they largest cost particularly in we XXXX. around As AUM we XXXX, from to controls that performance the of are facing, forward our given

solutions they our to of facing challenges and outsource like bigger So are some tools. looking in tech help automation and bigger those to workflow challenges us

adapts this remarks, market to half true in algorithm open of conditions I it is we're which are what mentioned year our Auto-X, client which As Adaptive the launching as in trades. we calling first a

solution being unique U.S. that's for the first time credit in in out So the rolled it's a trading

Richard McVey

around couple the to world a zero fixed three changes years, income because Just allocation comments or points over now result in was to the is changed. asset of interest quantitative the Chris's that last of and add underweight the client caused has significant net rate that, easing four policies

So seeing mutual people you're see driving of very fixed inflows the and reallocate I lot are of are the ETF a small assets off way is year, the the think kicking growing and stages starting retail income, what into is beginning numbers you this to with the up, it tickets. fund

ETFs, some Some is accounts, this but of money that retail of it growth of with it in all just into SMA into coming massive tickets.

an And very year it's think to I I that. tools not help clients of invest with our expect option to to going robust year. it's we're requirement. So continue And a to would in automate, this a growth automation

trading institutional add, thing are massive in opportunity of Chris, that the in our I in of as as both makers now credit as the On order systematic is market significant amount Trading result a that's still would Open books participants, increases well funds. market we side, seeing the other

this and due trading that's we're to one than about points income was years to excited for better reasons quantitative of XXXX. a investing that all and it easing of environment fact that is now the fixed the So

Christopher Allen

guys. Thanks

Operator

is with KBW. from The next Voigt question Kyle

Your is open. line

Kyle Voigt

Hi, good morning. Concannon, yes. Chris

to possible might fine balance as in you how pricing to over fine adding You to time you the much direction? changes that of pricing kind do guess, mentioned as there making right flexibility potentially with most Trading, pricing you're much pricing Open maintaining room be I incentivize your where time move that to comment over and tune clients. and now about flow a to tune relation in trying to value think how do

Chris Concannon

sizable in that being very growth and you careful for demand the of to Open historically that increased growth high-yield how The we we're in but want over product. high-yield across high-yield sizable savings gets continue particular, XX% value our to very Trading. in pricing open about in execution talked quality saw the we which in We offering time. of confident careful about do in delivered Open OT, Well, fine first Trading see value trading and We of adjust and that we're deliver value opening we I that all, we're over given would the offering. the flexibility pricing, remarks. about the of particularly have high-yield the OT our rate rates tuning overall say high given around the

Kyle Voigt

pricing are to adjustments clear, And planned be they made already we're or for XXXX?

Chris Concannon

We opportunity detriment have we already not the announced as behaviors but changes capture because we're changed we're in behavioral our any behaviors XXXX XXXX pricing change rate, that the and quite as positive saw obviously current is plans and that comfortable for in change, pricing seeing. XXXX. capture with we We're behaviors of our dynamic that to XXXX quite in those the given confident have high-grade, that in the

Kyle Voigt

a high-grade and share in guessed in I think maybe as going and just high-yield taking opportunity the of kind that share standpoint, from years have rewind if we step you market and were here for had Okay. you same a anyone have back, had we would sit ago a both to would market five followup, the about effectively today. don't that just think

the think So is, electronic do the share high-yield at level higher two given settle ultimately I these guess part high-grade over long-term? just liquidity still you first the than dynamics the total markets, of in question will that different a

market follow share? at a just momentum anything different level there? for now seem gain with because just up where single is earlier on much that's into right playing Allen's harder gets Chris of there it to in obviously incremental the share some that player And, dynamics all, high-yield the Is high-grade happening question, to

Chris Concannon

market, electronic So in electronic fixed the differences adoption various see see offer. we income adoption we I that first do that and share across the will on over, across products

So the growing trading, grade rapidly, highest on our platform. has electronic high-yield of adoption particularly obviously seen investment is

markets, the opportunity is at If opportunities one you of look globally. largest the emerging

global seeing in estimated shares, higher and adoption share. record share XXXX, we're where TRACE record we in particularly rates share, have EM market both But market there,

of probably and market seen munis probably think munis adoption of product adoption, I of the share both need share munis, we've in electronic the in most most size is a one is market record and interesting given electronic in of record ticket had average the year particularly we -- for ADV. record the

fixed that would at say across landscape, we it just entire product. look not income holistically I the one

trade high-grade. landscape. They fixed don't just trade the across entire income Our clients

So all achieve and have -- to certainly electronic in become your at adoption, you a one can we think classes, point way, where get we rate way, the when fully because view, see other you in about workflows the adoption asset electronic. electronic they XX% it and not part evolution the my in the to fully point that automated go just of

we they're not answers studying execution that. the When we clients of side. markets, I a role and They're that's electronic that will other outsourcing higher key market of our levels solution product across high-yield, Hopefully being studying all think So very by particular are solutions, delivered on trading high-grade, in that predict the share adoption question. like much do. quality your we emerging and in munis play obviously and

Richard McVey

Kyle. too, on add one, Just

to I able market is for market to way right most of with U.S. in the think elsewhere. leverage years have or that significantly our not that made point that unique you'll share that And anecdotally, challenges market, that come inventory, Trading for the the the particular, of And to Open are is have liquidity of Open challenges in market sheet people when in stories think differentiated from liquidity the favor. we loan showing we any in that a solution challenging, trading high-yield Trading just trades it's creates that plays conducting constraints and market, other balance credit investments in pronounced And in high-yield and for great positions think markets shows were high-yield you find what there. because elsewhere. in gains around us for I another data the I is many high-yield that the secondary liquidity through just I is high-yield think hear

Kyle Voigt

Rick. Thanks,

Operator

The with Suisse. next question is from Credit Sawant Gautam

line Your open. is

Gautam Sawant

provide out about contributions and on Good you should and we RFQ-hub. incremental volume had morning, build Can an the Chris, Rick, the how future I platform update quick question a us that on from Chris. of channel? think ETF

Richard McVey

Sure, happy that to take one.

RFQ-hub, and is their by to jump want I So it don't call reminder, and on RFQ-hub. operated earnings owned just a of activity levels ahead for Virtu

what the and the and excited XXXX thus are partner that seen in and We in RFQ-hub as investment both obviously partners partners terms and as with work our activity, in dealer RFQ-hub, client well. the key it we've from about client we've just RFQ-hub of had engagement, a BlackRock year far doing in been our

for do fixed exposure We the our quickly flows demand for and overall the a ETFs by dealing climbing. income to capital instrument. a through get clients liquid to It's wonderful credit is market vehicle with institutional think

client on continue, So that to activities going expect we're given the market and levels of heightened the and vehicle attractiveness seeing our demand and an forward. particularly the fixed investment in heightened income from XXXX base fixed income ETFs as

about the through So RFQ-hub. in market ETF the we're us opportunity provides investment very happy our that overall

Gautam Sawant

up you. And per commentary around fee to I a Thank follow the question, circle wanted just as back million. to

seen lows the of Corporate you up of continue the kind said some from X% in some with issuance You've dynamics deck into of duration of Index in that Have it's new trading the trend is the up January Bond and that changing? changes the marketplace October.

Chris Concannon

relatively saw stable itself rate exit index that in been has to December. the we the No,

Gautam Sawant

you. Thank it. Got

Chris Concannon

Yep.

Operator

Blostein Alex from Goldman is question with next Sachs. The

line Your is open.

Alex Blostein

morning good market and I a for taking question. of question bit structure for had you thanks a the guys. everybody, Hey

that here, into And think at is, wrapper, of are How naturally shift ETF ask you so look the I bonds, credit the for degree underlying in active do turnover kind also positively which ETFs. the rates are income when or why So into think that going players, as to ETFs the again markets? handful negatively bond concentrated turnover with in creates accelerate that the particularly I impacts BlackRock? of over secondary mutual even of flows the especially reason impacts if I liquidity continues funds accelerating flows the from year-to-date, fixed wonder but with XX% the you

Chris Gerosa

ETFs particular. fixed the think inflows well the positioned we we're ETF you well are income attractiveness products also the as and continued investment market, market into obviously about makers. we market situation we fixed point a income the as Both landscape. into fixed for in particular income fixed and inflows ETF it's products into for vehicles. out Alex question SMA those seeing as inflows, We're well products as In seeing ETF leave across inflows income us both inflows Great position SMA around see XXXX in of with as positioned given our us, wonderful

major and largest our Some Trading role makers strong of clients Open in play market very particular are offering. of the a ETF MarketAxess in

part and into of feel as a we earlier these income positioned an the in advantage again, solution the are execution talking also attractiveness to So -- that we our we're RFQ-hub It to take inflows the are fixed investment well offering. SMAs turning growing. overall were of market. like our SMA ETF of ETF justifies having opportunity, But

into go comes clients account market challenges our Those We and XXXX, well. for as saw through and of expect that small workflow demand solution. of in very as to we'd in terms growth fixed income institutional SMA that XXXX, some we deliver the tickets heightens grow despite the the the in the automation

So fixed market an AUM vehicle we're are two about think main we fixed well positioned. excited environment income coming products, investment into into and as in growth the where back we're the in those income overall

Richard McVey

onto be part because just of quickly. portfolio, managed transfer Alex, market investors than fixed ETF another portfolio overall share income way risk giving too, standalone and dealers that add to an liquidity of lower only adding to the really and while story is is that liquidity turnover the likely the is the an of I'll actively ETF the to that's And

way very view because positive industry liquidity trading are versus that additive as as tool to that the for overall I of And is participants it quickly of activity forget, a and actively underlying the whole a bonds, risk. there now to are shares So transfer group don't which velocity.

the in how ETFs it means velocity. ecosystem growth a the to valid have is terms adding view how in take in I So think what to to you holistic get of a order income outlook fixed that, for as

Alex Blostein

rest and like an positive question quite actually heard the think Yes, say the IG well? see I guys to of right? high-yield in in up, capture active you're trends or around quick last the between IG a So and is the that the sense. that a capture, underlying around business? fee will make as So bit rate other function into was maybe is to I words, see comments your driving think capture that a of you where just to I this improvement dissect mix starting you question Could that's fee fee what's in continue you a My follow second January. positive capture,

Chris Gerosa

a latter. of to think a pointed up October market and the level. going impacted Corporate and to so or a But put more movement a at And saw December. when December. maturity same we I of that back fee sized year-over-year high-grade to rate And through the talk January We at going on duration Index seen capture I It's the the relative look no, and that really you is low, directly chart recovery by the was developments Rick less December, out the bond about November math was when comparison. the Bond we capture were in it's as the high-grade years the the Yes, exit yield we've when fee conditions. strong far

Alex Blostein

Great, thanks much. so

Operator

question from The with Fannon is Jefferies. next Dan

is line Your open.

Daniel Fannon

about or I and to growth beyond? services good appropriate you think morning. just of Good the XX you. rates XXXX about growth non-transactional just kind Thank thinking post-trade, the info next followup rates what, are the wanted on what revenue, and or as to think months for about

Richard McVey

timing think towards glad we and the And the was for growth that were we constant that, that call just XX%. for prepared mentioned We of signed our But back mentioned QX. basis target outlook, do than on to growth a news the of services that. was in in that information the that the that I'm we fell data FX lot last an I some currency it, XX% great XXXX the Dan remarks and short in range because we to good you better due the hope question. when asked contracts. our adjusted of of those rate we the of to signed of a end contracts be XX% hit rates Yes, to will

rate. as post-trade, that not the acquisition mid-single-digit of We're to you've to Reg expecting be Hub. growth to seen any respect in upside, significant continues with a Reporting the And the due past

Chris Gerosa

so we'll hard market a where the the that and level real-time a be for market CP+ our achieve to my any CP+ of rolling more out we're just munis, with in high-yield the out I'll out high-grade, add, see demand for needs products for transparency growth for EM excited product on across also is We're XXXX, exciting a CP+ the products And now other we're to to provides seeing market. where transparency of CP+ products, and new that continue particularly products. our personal there favorite two excitingly CP+ those during of and data in lot market suite revenue some of treasuries

Daniel Fannon

characterizing what in helpful. And from a that's are you Great, of then improving environment guidance context perspective. as expense an the guys the revenue on just certainly

going dollars a revenues through those is compensation the if in, XX% So in where going is areas incremental constructive and is, to, what maybe other just more little base a there case bit dissect if that environment revenue you are terms maybe if we're above perspective? the spend flow where to from your at are come midpoint or that of would

Chris Concannon

Yes.

the variable talked to always three XX% items. variable mix our It's line what to we've being and expenses, operating expense? incentive variable contributes about bonus cash It's pool. really fixed So XX%

challenging and XXXX. environment We item. our fees And self-clearing I'm very pegged in approach to that happy have operating have that disciplined the a employed licensing directly some line treasury are business, treasury we to say we've the with

with disciplined We're fees had that XXXX, manage we've correlated directly and success variable lowering the some clearing in to some to continuing business. approach

as come see business line operating leverage the think we're to going Trading you item. I that Open on grow, see So through

is to the balance just expense size XX% that total being on XX% of So help math, base up operating to fixed. with the variable

to rate. And around, on are have your biggest is mid-teens T&E the XX% resuming to is uplift more rate attributed which to growth which levels, compensation being be mid-teens year-over-year, items the about normalized line to you growth going is then that which question a

we what across the and $XX million page, it it to is put of clearing to the other statement. line $X And dissect, that is with will where Open our the you items X% depreciation the amortization stand directly On balance X% of is statement, XX% growth million. in million income you the all across the on exception hope that pegged income in I across helps be the to Trading. allocate $XX need

Daniel Fannon

Thank that's helpful. you. Yes,

Operator

Michael Cyprys Stanley. from is Morgan question next The with

is Your open. line

Michael Cyprys

Hey, morning question. the good taking and thanks for

but BestEx of regulatory to reforms of backdrop year SEC the late aspects, fixed about bunch wanted rope I there believe, I income. largely So were put some in a equity geared of ask out sort towards including market structure that last do the markets, aspects

fixed the curious and the large? might at just income industry how on that, that views impact market So your in

perhaps more clearing. I treasury rates your could on we've as that all-to-all well impactful regulations, horizon key are tracking And past business? that the potential talked and of trading in are be broadly the backdrop, for the then know you what maybe some proposals about just guys are as and that regulatory on the

Chris Concannon

what I SEC of And meaningful terms would from Michael. so in thanks nothing Sure, the out far. say come has

think focused a in saying were of the as I dealer I'm fiduciary on agency that trading. right obligations best lot and execution revisions

So the material much long not the but fixed is quite something of through participants income world the we promoting that was in fixed directly overdue as and point FIMSAC were revisions involved to part I do SEC the as relevant helping around supporting of commission and would which what something income, that. when expect some think during view I XXXX, at more electronic as and industry rules, trading the at ATS

staff standardized do level The work forward with So to field is ATS what the community. e-trading I'm a really continues across to playing that. looking their rules on

those be calendar the So would we're expect XXXX. what out timing but, sometime that during sure ATS rules be will exactly fixed not income will year I

Michael Cyprys

about is enhancing Great, balance, think might vogue. thanks. that platform the that curious, fixed given And question, thoughts connectivity particular M&A clients, now to just where just you and becoming how clients retail just your to here on income including rising be latest additive income most retail in a followup and fixed more cash the

Chris Gerosa

a small the financial assets. re-pricing I the obviously given as call So companies. many of number an marketplace, look we scarcity we at of is When coming assets the there what opportunity at XXXX of look

bolt-on we're talking So much an size involves that clearly type M&A really about has been The smaller product FinTech repriced. offerings. space strategy of

year of So that providers in there's facing FinTech in ahead. the there challenges an the opportunity start number capital a are market and will

very a a capital. may re-priced of of in positioned balance sheet, players well be with strong to need So of a that advantage market with number we FinTech feel take

about scarcity there's what's at. material the nothing given we excited of ahead, assets but that look there again, out So

Michael Cyprys

you. thank Great,

Operator

The next Deutsche question is with from Bank. Brian Bedell

open. is line Your

Brian Bedell

Great, thanks. Good morning, folks.

extent other trading that Just not trade clients will for the the first the why PTs more that price versus guess protocols you getting trading of done? protocols or execution is focused regards some you're portfolio to improvement don't getting improvement to the I better to execution portfolio price some ask think you limit clients issue on of do more, particularly and legacy an and your and are of your in like the of that really quality what outside about list is all, in share trading.

Richard McVey

capital need of, because it's sizable liquidity capital of these and great clients from levels demanding commitment Brian. that So are view partners. a a as in trades question, our are so our they're really I dealer for portfolio higher trading demand very

which so offers And full think in do what I clients a result across that our dealer comp the trading in solution quality electronic done better competition, execution in portfolio. portfolio is does or our

call list to will help We priced an or however that are rolled being trade, clients analytics out roll and relative a either also how want you judge individual analytics to portfolios it. to continue out our

trade, as they all get individual we an proper tools clients the list are the as market additional large given where or participants. a or to block trading of So portfolio participation think trade being evaluate

we see that So now, point the dynamics. We flattening at it has see do market trading, it, rate grown on depending over years. couple It of has last growth portfolio right some grown.

trade smaller we're seeing More quarter obviously importantly, in is what first sizes. the

list a many that's more the probably going we for in demand be demand. that the come is XXXX, size and and trading where So activity at offer we trading theme protocols of into alternative other that see to other smaller

come portfolio and our instant while do dealers. trading from are see clients portfolio utilization for a inflows they exposure, many times the very we trade So way get that in, large using strength as as pay to in capital

Brian Bedell

And, you Great. then That's can great just, color. and give…?

Chris Concannon

If the in secondary growth if that slowed two of will we've XX One ability where PT look risk depending on that volume we're the the last year. with And challenges dramatically. I they're could there it's trying XXXX. portfolio high on X.X% even the seen their side and really liquidity it's just the severe. than is TRACE the in dealer MarketAxess and the pleased volume over been been have give add, growth the trading one, the, has we're to outcomes And choice the are clients the yield, think of you risk I been I this has that difficult more of that dealer and don't from to up, forget in at rate it's last of much picked year we say, move. right previewed side, volatility a become as ago large slower to manage that portfolios months, around more

because portfolio level that up I it, dealers rates of risk volatility. traits year PT are terms of sophistication but growth is to And see think are required greater a concentration of that's that's down, the volume way just the manage in did that we the than So ago. also, of we printing

through of in they get think of PT, result pricing a So client as weigh factors comes the they're best going of the all quality on and terms those to where in execution. that behavior

Brian Bedell

questions capture capture to investment question does So the more greater That's is, that's terms you Thanks overall about a ETF the similar the substitution, revenue diminution of velocity, that than up were capture? that. is or grid? offset in base in on just guess, follow using improves the pretty I then do interesting. fixed And very Obviously punch revenue of nature definitely for client of velocity color. one your trading think on the income of but any that the how number line of, asked the revenue

Chris Gerosa

markets, Well, to mean fixed thinking the I a when the ETF think equity direct about I'll but income in market. is equity you open there activities activities start velocity across fixed correlation by ETF first. trading, markets, activity overall on income the on about the

so, ETFs. And velocity level mentioned, inflows of you fixed with income as increase the into does

product the to it and those up market, electronic market, trading electronic important electronically for in underlying of dominant need other goes because electronic fixed risk as to hedge of makers back trading market. become executing ETFs They form demand choice or The in levels income point investors, a of by an the done income market electronic the is the are fixed the the that in goes in transfer capacity. best in ETF the equity is,

we see trading very in velocity do So and income ETFs and connection a in strong electronic between velocity the fixed market.

a in a income alternative funds, market leveraging open We market, the are of the they number ETF than to. ETF also access market in benefits makers trading hedge participants funds, are network the broader leveraging and see of from fixed hedge our huge solution typically new network see they have broader a that systematic

as tool wonderful a certainly is ETF that's market Trading using for investment maker vehicle. Open again, the So systematic any ETFs and average an fund hedge

Brian Bedell

helpful and and Chris well. Rick you, to congrats That's as super

Chris Gerosa

Thanks.

Operator

any for I'll McVey remarks. session. question-and-answer closing Mr. our to concludes over it That turn

Richard McVey

look Thanks trends forward updating for joining on us quarter. this you we and to morning business next

Operator

Thank Ladies you for concludes participating. and today's this gentlemen, call. conference

disconnect. now may You

MarketAxess (MKTX) 25 Jan 232022 Q4 Earnings call transcript