MarketAxess Holdings Inc

MarketAxess Holdings Inc is a leading electronic trading platform for fixed income securities, connecting institutional investors and broker-dealers. The company has established a strong market position, servicing over 2,100 institutional clients and holding nearly 20% market share of US corporate investment grade bond trading. Despite recent underperformance due to increased competition and margin pressure, we remain positive on the structural change opportunity under the new CEO and continue to hold the position.

In the quarter, we initiated a new position in MarketAxess Holdings (MKTX), a Quality Value company that owns and operates the largest e-trading platform in the U.S. for corporate bonds. MKTX’s operating margin, for example, exceeds 40% while gross margin can exceed 75%. We have been encouraged by recent trading data that suggest MKTX is gaining share in key areas of the U.S. credit market, with share recovery happening even faster than we expected. Looking forward, moderating investment spend should result in better operating leverage. We also believe the company’s international and emerging markets businesses have significant growth opportunity and scale advantages.

MarketAxess is positioned as a challenged member of the fixed income/credit exchange duopoly. Given the current macro and geopolitical backdrop, along with its depressed valuation, the company appears likely to stabilize its market share in the near term. Additionally, there is potential for acquisition by a larger exchange in the medium term, which could enhance its growth prospects.

Early in the quarter, we initiated a new position in MarketAxess Holdings. We believe the defensive positioning in a volatile market will prove beneficial and that it has the potential to improve its market share.

In Q1, the Fund also added MarketAxess (MKTX, a leading credit and fixed income exchange), a business Upslope has owned (and at times shorted) several times over the years. MKTX has had a challenging five years or so, but (1) should see stabilized/improved market share with higher volatility, (2) trades at a deep enough discount to consider the possibility of a take-out in the near-to-medium term.

In Q1, the Fund added MarketAxess (MKTX, a leading credit and fixed income exchange), a business Upslope has owned (and at times shorted) several times over the years. MKTX has had a challenging five years or so, but (1) should see stabilized/improved market share with higher volatility, (2) trades at a deep enough discount to consider the possibility of a take-out in the near-to-medium term.