MarketAxess Reports Record $15bn Total Credit ADV


Esma Urged to Open Up Trade Reporting Data

MarketAxess Holdings, the operator of a leading electronic trading platform for fixed-income securities, announced financial results for the first quarter ended March 31, 2024.

1Q24 select financial and operational highlights*

  • Total revenues of $210.3 million, up 3.5%, includes Pragma revenues of $7.5 million and an increase of approximately $0.8 million from the impact of foreign currency fluctuations.
    • Strong growth in U.S. high-grade commission revenue of 8.0% and record emerging markets, Eurobonds and municipal bonds commission revenue helped offset the impact of lower U.S. high-yield trading activity driven by lower credit spread volatility.
  • Total expenses of $117.8 million, up 9.3%, includes Pragma operating expenses of $7.9 million, and an increase of approximately $0.6 million from the impact of foreign currency fluctuations.
  • Diluted earnings per share (“EPS”) of $1.92 on net income of $72.6 million, compared to diluted EPS of $1.96 on net income of $73.6 million.
  • Information services revenue of $11.9 million, up 7.9%, and post-trade revenue of $10.7 million, up 7.5%. Information services and post-trade revenues each include increases from the impact of foreign currency fluctuations of approximately $0.2 million.
  • Strong geographic and product diversification with a 14.8% increase in average daily volume (“ADV”) from international products, including emerging markets and Eurobonds1record portfolio trading volume of $44.2 billion, up 40.6%.
  • Record automation suite trading volume (+36.4%), trade count (+40.9%) and active client firms (+60.4%); record level of dealer algorithmic responses (+50.2%).
  • Record 2,118 (+2.6%) active client firms, 1,619 (+2.0%) active U.S. credit client firms; record 1,066 (+2.5%) international active client firms and 1,155 (+2.9%) active client firms trading three or more products.
  • 34% total credit Open Trading® share,2 down from 37% in the prior year. The Company delivered estimated price improvement 3 via Open Trading of approximately $141 million in the quarter.

*All comparisons versus 1Q23 unless otherwise noted.

Chris Concannon, CEO of MarketAxess, commented:

“In the first quarter, we delivered record total credit ADV of $15.0 billion, strong growth in U.S. high-grade commission revenue of 8.0%, and record commission revenue across emerging markets, Eurobonds and municipal bonds. These strong results helped offset a 28.2% decrease in U.S. high-yield commission revenue, impacted by low levels of credit spread volatility.

Our client franchise continues to expand with a record 2,118 active client firms, reinforcing our strong leadership in the institutional investor client e-trading space. International expansion and product diversification was a strong driver of our results, with emerging markets and Eurobonds delivering a 14.8% increase in ADV, and portfolio trading volume was up 40.6%. Our automation and algorithmic trading product suite set new records across all key metrics, reflecting ongoing client demand for more efficient workflows and better trading outcomes.

MarketAxess X-Pro is the delivery mechanism that is delivering future product and protocol enhancements. These enhancements are focused on growing our share of the portfolio trading market, expanding our position in the growing dealer services segment, and most importantly, expanding our share of large-sized trades which are principally done over the phone. We believe that this strategy will enhance our ability to drive increased electronification of the global credit markets and deliver higher levels of revenue growth for shareholders in the future.”

Table 1: 1Q24 select financial results

$ in millions, except per share data

(unaudited)

Revenues Operating Income Net Income Diluted EPS Net Income

Margin (%)

EBITDA4 EBITDA

Margin (%)4

1Q24

$210

$93

$73

$1.92

34.5%

$109

51.9%

1Q23

$203

$95

$74

$1.96

36.2%

$111

54.4%

% Change

4%

(3%)

(1%)

(2%)

(170) bps

(1%)

(250) bps

Table 1A: 1Q24 trading volume (ADV)

CREDIT

RATES

$ in millions

(unaudited)

US/UK Trading

Days5

Total

ADV

Total

Credit

High-Grade High-Yield Emerging

Markets

Eurobonds Municipal

Bonds

Total

Rates

US Govt.

Bonds

Agcy./Other

Govt. Bonds

1Q24

61/63

$32,632

$14,982

$7,475

$1,400

$3,630

$2,045

$419

$17,650

$17,144

$506

1Q23

62/64

$38,202

$13,721

$6,334

$1,982

$3,094

$1,849

$447

$24,481

$24,053

$428

% Change

(15%)

9%

18%

(29%)

17%

11%

(6%)

(28%)

(29%)

18%

Table 1B: 1Q24 estimated market share

CREDIT RATES

(unaudited)

High-Grade

High-Yield

High-Grade/High-Yield

Combined

Municipals1

US Govt.

Bonds1

1Q24

19.3%

12.9%

17.9%

6.5%

2.0%

1Q23

19.9%

18.3%

19.5%

5.7%

3.0%

Bps Change

(60) bps

(540) bps

(160) bps

+80 bps

(100) bps

1Q24 overview of results

Commission revenue and trading volume

Credit

    • Total credit commission revenue of $174.8 million (including $33.3 million in fixed-distribution fees) decreased $0.9 million, or 0.5%, compared to $175.7 million (including $34.7 million in fixed-distribution fees) in the prior year. The decrease in total credit commission revenue was driven principally by lower U.S. high-yield estimated market share, mostly offset by record levels of emerging markets, Eurobonds and municipal bonds commission revenue. The decline in variable transaction fees per million (“FPM”) for total credit to $154.15 from $164.98 in the prior year was mainly due to product mix-shift away from U.S. high-yield. The decrease in fixed-distribution fees was principally driven by 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.
    • Record total credit ADV of $15.0 billion, up 9.2%.
    • Record U.S. high-grade ADV of $7.5 billion, up 18.0% on a 21.3% increase in estimated market ADV. Estimated market share of 19.3%, down from 19.9% in the prior year.
    • U.S. high-yield ADV of $1.4 billion, down 29.4%. Estimated market share of 12.9%, down from 18.3% in the prior year. U.S. high-yield estimated market ADV increased 0.5%. We believe the decrease in U.S. high-yield estimated market share year-over-year was driven, in part, by lower levels of credit spread volatility and a greater focus on the new issue calendar by our long-only client segment.
      • Lower levels of credit spread volatility drove an estimated 54.3% decrease in ETF market maker client activity on the platform, and high-yield ETF notional market volume traded declined 25.2% compared to 1Q23.
      • U.S. high-yield new issuance was $87.6 billion in 1Q24, up 116.5% from the prior year.
    • Record emerging markets ADV of $3.6 billion, up 17.3%. The year-over-year increase was due to a 13.1% increase in hard currency trading ADV and record local currency markets ADV, up 29.8%.1
      • Our Latin America and Asia-Pacific clients generated record levels of ADV in the quarter, up 11.1% and 54.8%, respectively, reflecting continued international expansion.
    • Record Eurobonds ADV of $2.0 billion, up 10.6%.1
        • Municipal bond ADV of $419 million, down 6.4% with estimated market ADV down 18.5%. Record estimated market share of 6.5%, up from 5.7% in the prior year.1
        • AxessIQ, the order and execution workflow solution designed for wealth management and private banking clients, achieved ADV of $140.1 million, up 22.2% from the prior year.
        • Record $44.2 billion in total portfolio trading volume, up 40.6%.
        • 34% Open Trading® share2 of total credit trading volume, down from 37% in the prior year.Total rates commission revenue of $5.2 million was down $1.1 million, or 17.4%. A 27.9% decrease in rates ADV to $17.7 billion was partially offset by a 16.3% increase in FPM to $4.79, compared to $4.12 in the prior year.

Rates

    • Total rates commission revenue of $5.2 million was down $1.1 million, or 17.4%. A 27.9% decrease in rates ADV to $17.7 billion was partially offset by a 16.3% increase in FPM to $4.79, compared to $4.12 in the prior year.

The full results can be read here 

Source: MarketAxess





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