The paragraph is from the introduction of the MarketAxess First Quarter 2025 Earnings Conference Call, held on May 7, 2025. Steve Davidson, Head of Investor Relations, introduces the call and specifies that Chris Concannon, the CEO, and Ilene Fiszel Bieler, the CFO, will be presenting strategic updates and financial results. Davidson reminds listeners that the call may include forward-looking statements and directs them to the company's risk factors in the annual report. Concannon then begins by expressing satisfaction with the positive results from technology investments and highlights record commission revenue, driven by product and geographical diversification, particularly in areas like emerging markets, municipals, and U.S. government bonds.

The paragraph highlights the strong growth in U.S. government bonds trading, driven by institutional clients using advanced algorithms for efficient execution with minimal market impact. A trading record of $102 billion was set on April 9, and 97% of institutional trades achieved passive execution rates. The company plans to expand its algorithmic offerings and release an enhanced RFQ solution. Revenue from services grew by 7%, and expenses rose only by 2%, aided by reduced variable costs. Challenges exist in the U.S. credit market share, but positive trends were noted in high-grade market share and dealer-initiated channels. The company has also been strategic with its share repurchases.

In the third quarter, the company experienced significant growth across various channels and products, reflecting its strong business fundamentals. U.S. credit ADV increased by 2% to $9 billion, and international products saw an 11% rise to $6 billion. Emerging Markets local markets ADV reached over $1.5 billion, an 8% increase. Municipal bonds showcased the success of the company's diversification strategy with a 42% rise in ADV. The partnership with ICE Bonds brought liquidity, extending from municipals to U.S. high-yield and investment grade. Record trade volumes hit $110 billion, while automation clients grew to 249, with 80 using the Algo suite. Open Trading ADV was up 8% to $5 billion, with a 38% share in April, and block trading in U.S. high grade increased slightly. Portfolio trading ADV reached a record $1.3 billion, with U.S. credit ADV at $1.1 billion and a 19% market share. Dealer-initiated channel ADV grew 45% to $1.9 billion. The company is executing its strategy across three key channels to expand U.S. credit market share, emphasizing improvements in block trading solutions.

In the first quarter, there were record levels in block and portfolio trading across various markets, including U.S. high-grade, U.S. high-yield, emerging markets, and Eurobonds. Block trading has shown strong growth year-to-date through April, with significant increases in market share and trading volumes, particularly in Eurobonds. The launch of a targeted block trading solution has been successful, and a full high-touch trading solution is being expanded to a broader client base. Portfolio trading also reported record activity, with increased market share in both U.S. high-grade and U.S. high-yield credits. Additionally, a new MID-X solution is set to launch soon as progress is being made in the dealer-initiated channel, where U.S. high-grade dealer-initiated market share also rose. Overall, significant growth and performance improvements have been driven by client outreach and strategic solutions.

The paragraph discusses the launch of a new streamlined API solution, MID-X, for dealers in the second quarter. It highlights strong growth in April, building on March's trend amid increased credit market volatility. Trading volume grew significantly, with a 68% year-over-year increase to a record $57 billion. This growth included a 32% rise in total credit ADV and a 93% increase in total rates ADV. U.S. high-grade market share also saw a notable rise, reaching 19.4%. There was increased activity in ETF market making for U.S. high yield in April. Despite market volatility, the platform's portfolio trading remained resilient, accounting for 11% of the U.S. high-grade market. Clients demonstrated greater willingness to execute larger automated trades, particularly during volatile periods, with over 2,500 such trades in March and April, marking the highest two-month period on record.

The paragraph discusses the financial performance for the first quarter, detailing total revenue of $209 million, a slight decrease from the previous year. Commission revenue fell by 2% due to lower fees and market share in U.S. credit, though strong market volumes partly offset this. Services revenue rose by 7%, driven by a 9% increase in information services revenue from new contracts and data product adoption. Post-trade services and technology services revenues also grew by 3% and 14%, respectively. Other income increased by over $3.5 million due to higher interest income, mark-to-market gains, and reduced FX losses. The company reported diluted earnings per share of $0.40, or $1.87 excluding notable items, with a new tax reserve established for uncertain tax positions.

The paragraph discusses a recent court ruling that negatively impacts MarketAxess's historical tax filing position, leading to an expected increase in its effective tax rate in 2025. Despite experiencing lower total commission revenue ($181 million compared to $185 million the previous year), the company saw growth in credit commission revenue in certain markets, offsetting a decline in U.S. credit commission revenue. Operating expenses rose by 2% to $120 million due to cost discipline and lower variable costs, despite continued investments for growth. The company's headcount remained flat year-over-year, with a reduction from 891 in 2024. The balance sheet remains strong with a $642 million total in cash and investments, though this is a decline from $699 million at the end of 2024, primarily due to cash incentive payouts and share repurchases.

The company generated $344 million in free cash flow over the past 12 months, a 5% increase from the previous quarter. They repurchased a total of 251,000 shares by April 2025 for $52 million, with $173 million remaining in the Board authorization for repurchases. The company is maintaining its full-year 2025 guidance for services revenue and capital expenditures but is adjusting its expense guidance to the low end of $505 million to $525 million. The GAAP effective tax rate is projected at 41%-42%, but without a notable item, it is expected at 26%-27%. They also plan to complete the RFQ-hub transaction in May, increasing their ownership to about 90%. RFQ-hub's 2024 revenue was $13 million, with anticipated growth of 15%-20% in 2025.

The paragraph discusses the financial expectations and strategic progress of a company. It anticipates including most Q-hub revenue under transaction fees and expects $750,000 connectivity fees to be categorized under technology services. Incremental expenses due to the RFQ-hub consolidation are forecasted at $7-9 million for 2025, with an additional $2 million expected for depreciation and amortization. Chris Concannon, a representative, highlights significant advancements in initiatives to increase U.S. credit market share and records set in block trading across different markets. The company is seeing higher levels of activity in both client-initiated and dealer-initiated trading channels, driven partly by increased credit market volatility. The call concludes with Chris Allen asking about expectations for future market share growth.

In the paragraph, Chris Concannon discusses the current market environment's impact on their business model, highlighting the favorable conditions due to economic and geopolitical uncertainty and fluctuations in interest rates, which have increased market turnover and client liquidity needs. He mentions that volatility levels are expected to remain higher than in previous years, and while spreads have widened slightly, there are no immediate credit quality challenges. The focus is on the increased demand for alternative liquidity, which benefits their business. If macroeconomic impacts were to affect credit quality, it might alter spreads and investor behavior, potentially increasing turnover.

The company is experiencing growth opportunities in the market by adopting a protocol-agnostic model, offering various solutions for different trading needs, and expanding in the dealer-to-dealer market. They anticipate growth this year due to favorable market conditions and their ongoing product deliveries. They've made significant investments, seeing positive impacts as they launch new products: a high-touch block solution for direct dealer trades, a Mid-X solution for dealers to trade at mid-market, and the X-Pro tool for enhanced portfolio trading and analytics, with rollouts planned in Europe and emerging markets.

In the discussion, Chris Concannon expresses enthusiasm about the company's growth opportunities due to upcoming product releases, specifically mentioning portfolio trading, dealer-to-dealer transactions, and block trading solutions. He notes that April saw increased market activity, with high yield market volumes up 42% year-over-year, attributing this to the penetration of electronic trading. Despite volatility fluctuations, market turnover remained high throughout April and into May. Concannon finds this sustained market activity encouraging as they move into the second quarter.

The paragraph discusses the current market environment, highlighting that while volatility has decreased from the peak levels seen during the tariff wars, it remains at a relatively high and attractive level for the business model. There is a sustained demand for liquidity, particularly in high yield and emerging markets, as clients perceive market liquidity to be inadequate. The Open Trading platform continues to be favored as an alternative liquidity source under these conditions. The paragraph concludes by acknowledging the robustness of the current market situation despite not reaching early April's peak volatility and anticipates potential future challenges like rate adjustments or macroeconomic issues. Additionally, Kyle Voigt from KBW inquires about fee capture, particularly in high-grade sectors, noting year-on-year and quarter-on-quarter declines, and seeks understanding of these trends amid changing trading dynamics.

The paragraph discusses the company's strategy of investing heavily in multiple market protocols, focusing on portfolio trading and dealer-to-dealer business, both of which have significantly grown in market share. These areas, despite having lower fee capture rates, represent growth opportunities. Particularly in April, there was a record level of high-yield portfolio trading due to large sell-offs from redemptions in funds. While the increased portfolio trading impacts fee capture, it supports revenue growth by offering new protocols and solutions, and areas like block trading have low or no variable costs.

The paragraph discusses the company's financial strategies and performance metrics. It highlights that while they have higher-margin businesses, there is a trend toward lower capture rates due to the introduction of new protocols like block trading, which, despite offering at a discount, have no variable costs. Ilene Fiszel Bieler provides further insight, noting an increase in fee per million, driven by a more favorable product mix, higher high-yield activity, and higher duration. The company's weighted average years to maturity increased slightly. There was also an increase in open trading activity offset by a rise in portfolio trading. Overall, the company is gaining market share and increasing volume through newer protocols, although these come with lower fees. The conversation transitions to a question from Michael Cyprys about portfolio trading.

The paragraph discusses recent enhancements and innovations in a portfolio trading (PT) solution, highlighting their positive impact and market traction. Chris Concannon notes the company's investments in PT, mentioning the introduction of the X-Pro platform, which improves workflow efficiency and pre-trade analytics, enabling clients to optimize their portfolio trades effectively. The platform has gained significant market share, with 92% of portfolio trades now occurring on X-Pro. Additional features like net hedging and auto spotting have been well-received. The central focus remains on data and analytics, helping clients decide when to trade portfolios versus using RFQ lists, and optimizing pricing by correlating with ETFs.

The paragraph discusses the performance and strategy around portfolio trading (PT), highlighting its importance and the growing demand for pre-trade analytics. The speaker indicates plans for enhancing PT solutions in the coming periods. Alex Blostein from Goldman Sachs inquires about the breakdown of Average Daily Volume (ADV) between single dealer and in-comp trades and the current fee per million in portfolio trading and dealer RFQ. Ilene Fiszel Bieler provides insights into investment grade and high yield market share, noting positive growth in both. She mentions that portfolio trading typically comes with a lower fee per million, and single dealer trades do not have associated fees per million.

The paragraph discusses the impact of portfolio and block trading on investment-grade and high-yield shares, noting that while these trading methods create pressure on fees per million, they are beneficial overall. Chris Concannon highlights investment in these areas, noting that single-dealer portfolio trades (PTs), particularly large ones, can affect market share and fee capture month-over-month. Despite fee pressures, the focus remains on revenue growth across different trading protocols, pricing them according to market standards. Notably, client-to-dealer RFQ business fees have remained stable.

The paragraph discusses the positive response and success of the rollout of enhanced block trading in emerging markets (EM) and Eurobonds, particularly through a targeted RFQ model. Chris Concannon explains that this model differs from traditional trading in the U.S. and has led to increased market share and record block trading volumes in EM. The targeted RFQ approach allows clients to trade larger block sizes electronically with reduced information leakage by marketing to a select few dealers, thus maximizing price improvement without exposing their trading intentions to the broader market. The company is considering potential differences and hurdles as they plan to launch this model in the U.S. market.

The paragraph discusses the positive feedback received from U.S. clients for a new high-touch block trading solution set to launch next week. This solution allows clients to engage with dealers electronically without using chat, and it has been well-received due to its seamless workflow. The targeted solutions in emerging markets and Eurobonds are also producing positive results. Jeff Schmitt thanks the speaker, and Patrick Moley from Piper Sandler asks about the interest of alternative liquidity providers and market makers in the credit market. Chris Concannon responds, noting an increased demand from alternative market makers and systematic hedge funds, with record volume growth in that sector, as well as traditional ETF market makers.

The paragraph discusses the growing demand from ETF market makers and alternative liquidity providers for an all-to-all RFQ (Request for Quote) solution that allows them to price and respond to large client requests anonymously. Many alternative liquidity providers and clients are not prepared for direct settlement interactions, which makes the anonymous RFQ option more appealing. These providers often trade in smaller sizes across large portfolios, typically stemming from their activities in the ETF markets. There is a trend of them moving from the FX and treasury markets into credit, driving demand for proprietary data due to their API-driven operations and high trading velocity. The emphasis is on the importance of anonymity and non-direct settlement interactions for these providers. The paragraph transitions into a response from Chris O'Brien, representing Ben Budish, who inquires about competitive pricing strategies and capture rates.

In the paragraph, Chris Concannon discusses their pricing strategy. They price differently based on the protocol, particularly in the dealer-to-dealer space where clients are price sensitive. With the launch of Mid-X, they plan to offer lower fees in response to dealer demand. Despite smaller U.S. credit players offering free services and even Bloomberg being free for years, these haven't impacted their core business, particularly in client-to-dealer pricing, which they plan to keep stable. The focus is on expanding electronic trading over traditional phone and chat methods, as it's more efficient for clients, and they will strategically price products to grow in this area.

In the paragraph, Chris and Ilene Fiszel Bieler discuss the current market environment, emphasizing the lack of pricing pressure in the client-to-dealer space. The focus is on the demand for data and analytics to improve trading, rather than pricing concerns. Ilene explains that macroeconomic factors, such as interest rates and yield curves, along with product mix and trading activity, influence the market conditions. She notes that while growth in certain trading areas may put downward pressure on capture, increased activity in high-yield sectors and ETF market making could have a positive impact. Core fee capture protocols for core RFQ have remained stable.

The paragraph involves a discussion between Brian Bedell from Deutsche Bank and Chris Concannon about the rollout of X-Pro into Europe and its potential impact on portfolio trading (PT) market share. Chris emphasizes that X-Pro is crucial for their technology migration to modern, cloud-based systems, enabling enhanced capacity and improved data and analytics for clients. This upgrade allows for faster delivery of new functionalities and data, meeting client demand for better execution outcomes. Chris also indicates that the adoption of X-Pro significantly influences the growth of PT, though he doesn't specify how much the 11% market share of PT might increase in the coming years.

The paragraph discusses the rollout of X-Pro in Europe, highlighting its potential to enhance gains in Eurobonds and emerging markets trading. The integration of data and analytics makes portfolio trading easier and more efficient, leading to anticipated growth in IG and high yield market shares. Portfolio trading is becoming a key tool for clients to access liquidity, with an unexpected 15% market share in high yield during a volatile period. The growth of portfolio trading is further supported by the increasing presence of dealers and the development of credit futures, with a specific collaboration with MSCI and ICE Futures. Overall, the company is optimistic about rapid delivery and future enhancements.

The paragraph discusses trends in the fixed income market, highlighting increased turnover, the launch of credit futures, and the growth of ETFs, which assist market makers in hedging large portfolios and RFQ lists. These developments are driving portfolio trading growth in the U.S., European, and EM markets. The conversation concludes with Chris Concannon expressing appreciation to participants and anticipation for the upcoming quarter, while the operator ends the call.

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