MarketAxess Holdings Inc.
CEO : Mr. Christopher R. Concannon
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 7.8% YoY | 8.3% | 13.7% | 2023-01-25 |
Chris Concannon says,
Strong Market Share Gains in Global Credit
- MarketAxess has achieved strong market share gains in global credit, which reflects the sizable revenue opportunity ahead
- The current market conditions with higher yields are expected to increase the demand for electronic trading solutions
- January month-to-date has shown solid double digit growth year-over-year and sequentially in total credit ADV
Diversity of Liquidity Pool and High Levels of Price Improvement in Open Trading
- MarketAxess delivered price improvement of $945 million in Open Trading for the full year, well in excess of the annual revenue of $718 million
- Open Trading is able to deliver high levels of price improvement by increasing market participation and bringing a multitude of investment banks, systematic and alternative funds, ETF market makers and institutional investor clients into one unique pool of liquidity
- Regulators have become more focused on protocols that support liquidity and market resiliency, which is a particular focus in the rate space where MarketAxess is well positioned with its all-to-all solution in U.S. treasuries
Increasing Momentum with Automation and Credit Trading
- Automation tools are critical to solving cost constraints and delivering high quality execution for clients
- Automated trading volume and number of no-touch trades increased to a record $62 billion and 383,000 respectively, reflecting strong adoption
- The use of dealer algorithms continues to grow across the platform
- MarketAxess is launching its Adaptive Auto-X solution in the first half of this year, which will provide algorithmic workflows for clients to systematically access broader liquidity across multiple trading protocols
Record Volume in Portfolio Trading
- The fourth quarter was a record for portfolio trading with total volume of $31 billion, up 135% year-over-year
- Approximately 65% to 70% of the portfolio trading activity is currently using electronic trading venues
- MarketAxess estimates that it had a 31% share of the electronic portfolio trading market, up from 17% in the prior year
Positive Outlook and Growth Opportunities
- The strength of MarketAxess’ franchise in terms of product and geographic breadth has never been stronger
- MarketAxess is well positioned to capitalize on the growth opportunities ahead
Richard McVey says,
Revenue and Earnings Growth
- MarketAxess delivered 8% revenue growth, 10% adjusted for currency, EBITDA growth of 10% and EPS growth of 15% in Q4 2022.
- The company delivered its 14th consecutive year of record annual revenue.
Market Share Gains
- MarketAxess recorded the third consecutive quarter of record market share gains across nearly all its product areas.
- Record estimated market share in high-yield in municipals, record share in Eurobonds and accelerating share gains of almost 300 basis points in emerging markets.
- A record 38% of the company’s credit volume was executed through Open Trading, which has been a key driver of its estimated market share gains.
Liquidity and Trading Volume
- The deep pool of liquidity on MarketAxess platform continues to expand with nearly 2,100 active client firms and a record number of active traders.
- Over 1,300 client firms provided liquidity on the MarketAxess platform in the full year 2022.
- MarketAxess saw especially strong growth in its international business with over 1000 active client firms and nearly 6,000 active traders.
- The importance of MarketAxess’ all-to-all liquidity increases as traditional sources of liquidity have become scarce.
New Leadership
- Chris Concannon, a proven leader, deeply experienced in electronic markets, will assume the CEO role in April.
- The current CEO will take on the new role of Executive Chairman.
Market and Credit Conditions
- The Fed raised the Fed funds rate a total of 425 basis points in 2022, making it the fastest rate hike cycle since 1980-1981, leading to an unprecedented 14% decline in investment grade indices for the year.
- The decline in duration directly impacted high-grade fee capture for institutional client e-trading activity.
Q & A sessions,
Mutual Fund Inflows
- Outflows have turned into inflows, opening up the new issue calendar for the high-grade market
- Retail numbers are up and ETF assets are growing
Fixed Income Market
- Quantitative easing caused significant changes in client asset allocation over the last three or four years, resulting in underweight fixed income, but this is changing
- The increasing demand for liquidity and capital is driving small tickets and requires automation
- The Open Trading order books are seeing significant increases in market participants, both in market makers as well as systematic credit funds
Electronic Trading
- High-grade has seen the highest adoption of electronic trading, followed by high-yield, emerging markets, and munis
- Predicts much higher levels of electronic adoption across fixed income landscape, aiming for 90% adoption rate
Operating Expenses
- 16-17% of total operating expense base is variable
- Compensation is the biggest uplift year-over-year, followed by T&E resuming to more normalized levels
- Depreciation and amortization account for 10% of $40 million in operating expenses
Portfolio Trading
- Growth rate of portfolio trading volume has slowed dramatically due to increased volatility
- Greater concentration in terms of the dealers that are printing portfolio trades
- Client behavior on where they think they’re going to get best execution affects the quality of pricing that comes through in portfolio trading
No bad stock 