Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MarketAxess Holdings Inc (MKTX, Financial) reported a 4% total revenue growth, benefiting from the Pragma acquisition with earnings per share of $1.92.
- Record levels of commission revenue were achieved across several credit product areas, including U.S. high-grade, emerging markets, Eurobonds, and municipal bonds.
- Non-U.S. credit revenue reached a record $92 million in the quarter, representing 44% of total revenue, highlighting successful geographic and product diversification.
- The company continues to maintain disciplined expense management, with total operating expenses increasing only 9%, including the impact of the Pragma acquisition.
- MarketAxess Holdings Inc (MKTX) saw an expansion of its global client franchise, with a record 2,118 active client firms trading on its platforms in the first quarter.
Negative Points
- MarketAxess Holdings Inc (MKTX) expressed concerns over recent trends in its estimated market share in U.S. credit, acknowledging the need for improvement.
- Historically low levels of credit spread volatility have impacted ETF market participants and hedge funds, decreasing activity in the U.S. high-yield business.
- The company's high-yield market share has shown volatility and a need for recovery to more normal levels of spread volatility.
- Open Trading's share of total credit volume decreased to 34% from 37% in the previous year, indicating a reduction in secondary liquidity market share.
- Despite overall growth, there was a noted decrease in estimated market share in high yield due to lower credit spread volatility, which also led to a reduction in total credit fee capture.
Q & A Highlights
Q: Can you provide an update on portfolio trading and any progress in adding new clients or share gains?
A: (Christopher Robert Concannon - CEO, Interim CFO & Director) We've focused significantly on portfolio trading, especially with our new X-Pro platform designed specifically for it. The platform has been enhanced with pre-trade analytics and other features, which have been well-received. In April, X-Pro handled about 60% of our portfolio trading volume. The end of April saw a high of 40% market share in portfolio trading, attributed to multiple large trades rather than a single event.
Q: What is the status of rolling out X-Pro to your overall client base, and how are you progressing with dealer access?
A: (Christopher Robert Concannon - CEO, Interim CFO & Director) X-Pro is currently used for about 16% of U.S. credit volume, with plans for broader rollout. It's designed for trades of all sizes and complexities and integrates trading automation tools for dealers. This summer, we'll introduce a high-touch or block trading solution on X-Pro, enhancing dealer content and proprietary data to improve dealer selection for specific trades.
Q: Could you provide an update on dealer-initiated opportunities and how you're competing in this crowded space?
A: (Richard J. Schiffman - Global Head of Trading Solutions) We're focusing on enhancing our dealer business, particularly through single price auctions and matching protocols. We're also developing new tools for sell-side traders to access these protocols more productively. Our efforts include integrating these protocols with our existing RFQ systems to offer a seamless trading experience for dealers.
Q: How is the fee structure for portfolio trading evolving, especially compared to other trading protocols?
A: (Richard J. Schiffman - Global Head of Trading Solutions) Portfolio trading generally has a lower fee capture due to its workflow-centric nature. We're aligning our fee model with market standards by shifting to charging fees primarily to dealers, which is consistent with other market participants.
Q: Can you discuss the growth and strategic importance of the emerging markets segment for MarketAxess?
A: (Christopher Robert Concannon - CEO, Interim CFO & Director) Emerging markets have shown strong growth, particularly in local currency trading. We're seeing significant activity from APAC clients, with record levels of trading volume. Our focus on emerging markets aligns with our broader strategy to expand internationally and leverage our technology to enhance trading efficiency in these markets.
Q: What are the latest developments with Pragma and its integration into MarketAxess?
A: (Christopher Robert Concannon - CEO, Interim CFO & Director) The integration of Pragma is progressing well, enhancing our algorithmic trading capabilities and automation suite. Pragma's technology is also being adapted for use in our dealer-to-dealer business, which will support new protocols and improve trading efficiency across our platforms.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
