The paragraph is the introductory section of the MarketAxess Fourth Quarter and Full Year 2024 Earnings Conference Call, held on February 6, 2025. Steve Davidson, Head of Investor Relations, begins the call by introducing the key presenters: Chris Concannon, CEO, who will provide a strategic update; Rich Schiffman, Global Head of Trading Solutions, who will discuss trading businesses; and Ilene Fiszel Bieler, CFO, who will review financial results. The call includes a disclaimer about forward-looking statements and references risk factors in the company's annual report. Chris Concannon also welcomes Roberto Hoornweg to the Board of Directors, effective March 1, 2025.

Roberto's expertise in fixed income and international markets is crucial for the company's global growth. The company reported a 9% revenue growth for the year, the highest since 2020, with record commission and services revenue. In 2024, they advanced their high-touch strategy, achieving record levels of portfolio and U.S. high-grade portfolio trading. They launched a block trading solution in emerging markets and Eurobonds and plan to expand it to U.S. credit. The focus for 2025 will be on execution and growing market share across several channels. The company reported record credit and rates ADV in 2024, with $712 million in commission revenue from credit products. Despite challenges in U.S. credit market share, they expect enhanced functionality, differentiated data, and innovative solutions to boost revenue and market share in 2025. They noted strong growth in their rates business.

In the third paragraph of the article, it is highlighted that the trading average daily volume (ADV) and the client-focused rates pool experienced significant growth from $2.9 billion per day in the first quarter of 2024 to $11.4 billion in the fourth quarter, largely due to increased use of their rates algorithms. The company anticipates more clients adopting these algorithms in 2025 as they transition to Pragma technology. They successfully gained market share in U.S. high-grade portfolio trading in 2024 and expanded their services to include Eurobonds, munis, and emerging markets. The launch of their Global PT offering boosted Eurobond portfolio trading volumes in the fourth quarter, while emerging markets saw a 175% increase in ADV from 2023 to 2024. They achieved $400 million in munis portfolio trading volume for 2024. Their high-touch block trading solution showed promising early results, particularly in emerging markets, with most trades won by dealers recommended through their proprietary free trade selection tool. As they expand into Eurobond and U.S. credit markets in 2025, they mention elevated market volumes and some disappointment in U.S. high-grade market share based on January trading metrics.

The paragraph emphasizes the importance of focusing on long-term market trends over short-term fluctuations. In January, the market experienced spread tightening, low volatility, increased block volumes, and decreased non-block volumes, impacting the company's high-grade market share. The company is committed to enhancing its block trading solutions and aims for market share growth in U.S. credit through three main channels: client-initiated trades, portfolio trading, and dealer initiatives. By 2025, they anticipate benefiting from their investments, technology modernization, and acquisitions. Specific plans include expanding their block trading solutions globally and enhancing dealer solutions, with key deliverables outlined in subsequent slides.

The paragraph discusses the expansion of the company's automation suite with products like Adaptive Auto-X to support global markets and integrate client algorithm solutions. The company plans to launch traditional RFQ on X-Pro in Europe by mid-2025, along with enhancing high-touch and portfolio trading tools in the U.S. They aim to roll out global benchmark pricing for portfolio trading and improve dealer-initiated channels by Q2 2025. Slide 8 highlights opportunities in the U.S. high-grade market, focusing on the client initiative channel as a $690 million revenue prospect, with significant leadership in small trades. Portfolio trading is important for market share, supported by X-Pro, while the dealer-initiated channel represents a $310 million opportunity.

The paragraph outlines the performance and growth of a trading business in 2024, highlighting key performance indicators that are mostly positive, except for U.S. credit market share. The company achieved record ADV (average daily volume) in several areas, including U.S. credit, international products, and municipal bonds, with significant growth percentages. It credits improved liquidity to a partnership with ICE bonds, which now includes U.S. high-yield and investment-grade bonds. The company also reported significant growth in automation and open trading, marking record trade volumes and increased client engagement. Despite challenges in the U.S. credit market, the business remains strong and diversified.

The paragraph discusses the company's financial performance and market activities. In credit markets, their share of U.S. high-grade blocks increased slightly from 2023, and they achieved record totals in portfolio trading (PT) and dealer-initiated channels. The PT ADV reached over $900 million, with a U.S. credit PT ADV of $800 million and a 16% market share. The dealer-initiated channel saw a 17% increase to $1.3 billion. Financial results for the fourth quarter included $202 million in total revenue, a 2% rise in commission revenue due to increased market volumes, and a 10% increase in Information Services revenue, partially due to FX benefits. Post-Trade Services revenue remained flat, while Technology Services revenue increased by 41%. Other income decreased by $2 million due to mark-to-market losses on the U.S. treasury portfolio. The effective tax rate was 23%, with diluted earnings per share at $1.73.

The paragraph reports financial outcomes, including a $175 million total commission revenue, an increase driven by strong growth in credit commission across emerging markets, Eurobonds, and municipals, despite a decline in U.S. high yield commissions. The growth in credit revenue was in line with the third quarter of 2024, although fixed distribution fees declined due to dealer shifts to variable fee plans. Operating expenses rose by 2% due to the Pragma acquisition, and headcount increased by 1%. The company’s strong balance sheet showed an increase in cash and investments to $699 million, while free cash flow rose by 6% to $328 million. They repurchased 341,000 shares totaling $75 million for 2024, with $220 million remaining for future repurchases. The company aims to balance future growth investments with responsible capital management. The final slide offers guidance for the full year 2025.

The paragraph discusses the financial outlook and strategic initiatives for a company, highlighting expectations for 2025. Total services revenue is projected to grow in the mid-single digits, while expenses are expected to increase by approximately 8% from 2024 to 2025. The effective tax rate will range from 23.5% to 24.5%, and capital expenditures are anticipated to be between $65 million and $70 million, primarily for capitalized software development. Chris Concannon reflects on the achievements of 2024 and outlines the focus for 2025, which is to leverage investments and acquisitions to enhance their trading platforms across various channels. The paragraph concludes with the start of a Q&A session, where Chris Allen from Citi asks about the strategy behind the U.S. launch of block trading, particularly in relation to dealer involvement.

Chris Concannon discusses the company's excitement about launching their high-touch block trading solution, starting with emerging markets (EM) and Eurobonds, due to the availability of pre-trade analytics like Smart Dealer Select. The company has seen a 22% increase in EM block market share. The primary challenge in block trading is avoiding information leakage, as revealing interest in a block can impact market prices, making all-to-all trading less appealing for block trades. Despite this, all-to-all trading is popular in liquid markets.

The paragraph discusses a block trading tool designed to target specific dealers with a high likelihood of executing trades at fair prices, reducing information leakage. The electronic platform offers enhanced pre-trade analytics, resulting in a 90% hit rate for Eurobond trades compared to the traditional 60%-70% for RFQs. Since its launch in December, the tool has processed over $1.2 billion in volume with 65 active clients. Clients have responded positively to the "one-click trading" feature, which allows them to share information with select dealers and receive prompt responses. An enhanced block trading solution will launch in the U.S. for high-grade and high-yield trades in Q2.

The paragraph discusses the positive reception of a block trading solution in financial markets. The solution is dealer-friendly because it allows for a targeted inquiry with a shorter list of potential counterparties, avoiding the "winner's curse" of broad market awareness when taking a position. Dealers have been supportive of this approach, appreciating the ability to price aggressively based on the limited audience for inquiry. Both dealers and clients have given positive feedback. Following this, Dan Fannon from Jefferies asks about confidence in growing market share, particularly in high-grade bonds, and whether current protocols or upcoming developments will drive this growth. Chris Concannon responds by highlighting favorable market conditions and positive inflows into fixed income funds, suggesting a robust and attractive market environment.

The paragraph discusses the strong performance and outlook for the bond market in 2025, driven by high turnover rates and increased electronic and portfolio trading, particularly through RFQ solutions. It highlights the entry of systematic funds as both liquidity takers and providers and emphasizes the importance of offering multiple trading protocols for different market conditions. The company claims to lead in electronic alternative liquidity solutions in the U.S. credit market, offering automated trading solutions for small transactions and nearing completion of a portfolio trading solution. Regular feature rollouts, including a significant one in Q1, are part of their strategy to remain competitive.

The paragraph discusses the company's excitement about launching a block trading solution for the U.S. high-grade market, targeting a significant portion of the market that exceeds current electronic trading. Despite disappointing market share in January, the company is optimistic about its 2025 rollout schedule and plans to introduce several new products, including a dealer business and a mid-market matching solution. They expect these initiatives to enhance market share and impact the U.S. corporate market significantly. Additionally, they report market share gains on their Dealer RFQ platform in January.

In the paragraph, Benjamin Budish from Barclays asks Chris Concannon about opportunities to further electronify the market, particularly focusing on the block market, which remains largely unelectronified. Chris Concannon responds by highlighting their strategic investment in 2024 to enhance their high-touch block solution, despite facing competition in portfolio trading. He notes that the block market is the largest segment still reliant on inefficient phone and ID systems, which clients want to replicate electronically without information leakage. Additionally, Concannon identifies further electronification opportunities in the retail space and across the U.S. corporate and fixed income markets.

The paragraph discusses the growth and success of Access IQ, a platform targeting the private bank market in the U.S., Europe, and APAC. It notes strong growth in the retail space, influenced by attractive rates, and highlights the significant electronic opportunities in emerging markets, where electronic penetration is still low. The importance of data is emphasized as a critical component for electronic solutions, with the company expanding its data footprint and intelligence. By mid-year, the company aims to offer comprehensive electronic trading solutions, including support for large trade sizes, portfolio trades, block trades, and automation through RFQ and algorithmic trading.

The paragraph discusses the anticipated growth in electronic trading, particularly in less penetrated areas like block trades and smaller-sized trades, or odd lots. Rich Schiffman believes that the adoption of electronic trading and systematic liquidity providers, similar to what has happened in equities, will enhance bond trading ease and increase turnover in smaller trades. There's been an observed rise in high-grade trading days, indicating increased activity. In the context of a decrease in high-yield business market share from around 17-18% to near 12% due to various headwinds, Kyle Voigt asks about progress in market share by client type, seeking to understand which client segments are experiencing growth.

In 2024, the high-yield market faced challenges due to tight spreads and low volatility, making it difficult for ETF market makers and traders involved in ETF arbitrage to operate, especially as borrowing rates increased. Consequently, some hedge funds reduced their trading activities in high-yield ETFs. However, many systematic investors remain in the high-yield market, anticipating a return of volatility and wider spreads, which would provide arbitrage opportunities. Despite these challenges, the traditional buy side finds high-yield investments attractive due to favorable rate environments, leading to continued inflows into high-yield funds. Additionally, portfolio trading in high yield is growing, now representing about 8% of the market, supported by new tools like benchmark portfolio trading.

The paragraph discusses the trading market dynamics and addresses client concerns about information leakage, particularly in high-yield bond trading. It highlights that smaller block trades, around $3 million, are common due to liquidity issues and that solutions focusing on a limited number of dealers are appreciated. The speaker notes the importance of maintaining high hit rates. Alex Blostein from Goldman Sachs asks about expectations for market share growth in high-grade and high-yield markets in the U.S. by 2025, given the current strategies and market conditions. Chris Concannon responds by simplifying the question to predict the market share and overall revenue for 2025.

The paragraph discusses the significant impact of different trading protocols on market share and revenue. The focus is on portfolio trading, which has been a key area for the company, influencing market share significantly with fluctuations noted between December and January in mega portfolio trades. Anticipated improvements in their portfolio trading tool are expected to be beneficial in Q1. Additionally, the paragraph touches on block trading and its attractive fee schedule, highlighting its consistency with traditional RFQ fee structures and its appeal due to larger trade sizes. The paragraph also notes that increased market volatility may lead to heightened activity on their all-to-all platform, as observed with recent tariff-related events.

The paragraph discusses the benefits and growth of all-to-all trading and automation in fixed income markets. It highlights the demand for more sophisticated automation tools, evidenced by a 29% year-over-year growth in automation volume for 2024 and continuing growth in January. The paragraph also mentions that while only 245 out of over 2,000 global clients currently use their automation suite, demand is increasing, partly driven by large SMA solutions with smaller trade sizes. As the market for SMAs is projected to grow significantly, the demand for automation in trading is expected to rise, positioning the company well with multiple trading protocols for diverse market needs. Additionally, Ilene Fiszel Bieler addresses the variability in fee per million across different trading protocols.

The paragraph discusses the factors influencing changes in fees per million in trading, particularly focusing on the role of duration in high-grade markets. It highlights how changes in the weighted average years to maturity and rising yields affected fees, noting a significant shift in January compared to the previous year and December. The author emphasizes that while trading behavior and market conditions can rapidly influence duration and fees, the average fees per million for credit products have remained relatively stable over the years, despite various influencing factors.

The paragraph discusses various factors impacting fees per million in trading, particularly in the context of market dynamics and economic indicators like interest rates. It highlights elements such as growth in certain markets, high-yield benefits, ETF market activity, and changes in trading duration, all affecting trading fees. The influence of macroeconomic conditions and the Federal Reserve's interest rate decisions are also noted as significant influences on trading activities and fee structures. The paragraph stresses the complexity in predicting fees due to these multiple interacting variables.

The paragraph discusses the dynamics of portfolio trading as a percentage of industry high-grade and high-yield activity, which has remained around 10% for the past six months. Chris Concannon explains that low volatility in the fixed income market makes portfolio trading attractive at current levels for pricing. However, high volatility can make it challenging to manage large portfolios for dealers, as it is capital-intensive. Market participation by portfolio trading counterparties can fluctuate based on profitability and volatility conditions. Despite this variability, large banks with sufficient capital continue to engage in portfolio trading. Overall, its presence as a trade tool is stable and will persist, with market environment and capital availability influencing its fluctuations over time.

The paragraph discusses the company's growth in portfolio trading, particularly in investment-grade sectors, with an 80% increase in notional portfolio trading last year. They anticipate further competitiveness with new features and note that portfolio trades are growing larger, often exceeding 1,000 line items. The company expects this market to remain around 10% but could increase with volatility. They emphasize the value of portfolio trades as a quick and attractive tool for the buy side, but recognize potential changes with market volatility. The company's strategy includes multiple trading protocols to enhance flexibility. Rich Schiffman adds that while the convenience of portfolio trading is clear, the market is concentrated among a few firms, leading to less unique liquidity. Nonetheless, they feel confident in maintaining their market share.

The paragraph discusses the company's growing market presence and strategy. It highlights the ease of moving volume across different venues due to similar liquidity. The company is confident in gaining a larger market share, especially in platforms with high liquidity provider participation, which is difficult to replicate elsewhere. Eli Abboud from Bank of America inquires about the acquisition of RFQ hub, leading Chris Concannon to explain the strategic motivation behind it. RFQ hub is a multi-asset platform including ETFs, derivatives, and more, offering significant trading opportunities in the U.S., Europe, and Asia. The acquisition aligns with the company's goal to expand cross-asset trading capabilities, responding to market demands.

The paragraph discusses the synergies between offering a large client base access to fixed income ETFs alongside trading underlying bonds in portfolio trading (PT). It highlights the growth of the portfolio trading market and the flexibility clients have when deciding between ETFs and PT based on real-time net asset value (NAV). The paragraph emphasizes the liquidity and instant exposure provided by fixed income ETFs, making them an important tool in the company's fixed income protocol solutions. The company is excited about increasing its stake in RFQ hub, a platform supported by various dealers, to expand its market access suite. Ilene Fiszel Bieler mentions the financial implications of this transaction, noting that the ownership stake in RFQ will reflect in their financial statements and contribute to their operating results.

In the paragraph, Michael Cyprys from Morgan Stanley asks about initiatives to expand the rates platform, noting increased volumes but lower revenue contribution. Chris Concannon responds by highlighting the growth and developments in the 2024 rates market, emphasizing that the market is traditionally driven by electronic RFQs to the buy side with minimal innovation. He notes concerns from clients about the lack of direct electronic access to alternative liquidity, particularly during volatile periods, and mentions that alternative liquidity providers tend to offer more liquidity during such times.

The paragraph discusses innovations and advancements in the rates market, highlighting the introduction of algorithmic (algo) trading solutions on the Pragma platform to enable clients to handle large orders in smaller segments, reducing market impact. These solutions include passive liquidity provision and systematic algorithms for smaller trades. The speaker is enthusiastic about the upcoming launch of an RFQ solution in 2025, aiming to offer a hybrid of electronic algorithmic and traditional RFQ solutions. Additionally, the paragraph mentions the success and growth of net hedging in the corporate bond market, which provides liquidity to large banks. The overall rates market continues to expand, with client adoption being a key component.

The paragraph discusses the relationship between fee per million and duration in the context of trading behavior, rate environments, and central bank economic policies. Ilene Fiszel Bieler explains that predicting a bottom is challenging due to fluctuating trading patterns and economic conditions. Current rate cut expectations have adjusted from three to four to one to two. This shift influences trading behavior, with traders typically seeking longer durations when expecting more rate cuts. Recent developments have led to a bear steepener, which is unusual during a rate-cutting cycle, indicating changing trading behaviors and economic policies.

The paragraph discusses changes in bond trading dynamics, highlighting a recent shift from eight to nine years in the weighted average years to maturity and the implications of interest rate changes. The speaker emphasizes the importance of monitoring macroeconomic factors like inflation and Federal Reserve actions. A potential increase in bond maturity can result in significant value changes, and shifts in yields can also impact value. Additionally, in the client-to-dealer space, the focus is more on enhancing functionality, features, and analytics rather than fee pressure, suggesting that fees constitute a minor component of trading costs and are not a primary competitive tool.

The paragraph outlines the conclusion of a conference call where Chris Concannon, after a Q&A session, emphasizes the company's focus on execution and delivery. He mentions that throughout 2024, the company was dedicated to building products and now is excited about rolling them out with specific dates and timelines in 2025. The call ends with thanks and an indication of future updates in the next quarter. The operator concludes the session, allowing participants to disconnect.

This summary was generated with AI and may contain some inaccuracies.