MarketAxess Holdings Inc. (MKTX) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• 10% Total Revenue Growth: Achieved through the Pragma acquisition, with diluted earnings per share at $1.72.
• Solid Growth in Commission Revenue: Notable growth across most credit products, especially in international areas.
• Emerging Markets Commission Revenue Increased 22%: Highlighting strong growth in emerging markets trading activity.
• Record Information Services Revenue: Reached $13 million, up 8%, driven by new contracts and strong adoption of data products.
• New Share Repurchase Program: Board approved a new $200 million share repurchase program, reflecting confidence in the company's outlook.

Pessimistic Highlights

• U.S. Credit Market Share Disappointment: Despite overall growth, U.S. credit estimated market share continues to underperform expectations.
• Operating Expenses Increased 12%: Due to the impact of the Pragma acquisition, contributing to a rise in total operating expenses.

Company Outlook

• Positive Macro Backdrop: Recent increase in market volumes and volatility, combined with potential rate cuts in 2024, indicate an improving environment for MarketAxess.
• Continued Rollout of X-Pro: Extending the platform globally across most products to grow market share and enhance client experience.
• Focus on High-Touch Strategy: Targeting larger trade sizes with unique AI-powered data to capture a significant segment of the market.

Q & A Highlights

• Q: Can you provide any color on the ICE deal and its benefits? (Chris Allen, from Citigroup)

  A: The ICE partnership was client-driven, connecting complementary liquidity pools for mutual benefit. It's a shift in strategy, opening up our network to external platforms. The economics are straightforward, with each platform making money on trades executed within their system. (Chris Concannon)

• Q: What have you seen in terms of client engagement and protocol utilization in the last few days of market volatility? (Patrick Moley, from Piper Sandler)

  A: It's too early to predict a trend, but positive signs include increased activity from ETF market makers and a shift towards liquidity-focused protocols like Open Trading. (Chris Concannon)

• Q: Could you expand on the rollout of X-Pro and its impact on client behavior? (Dan Fannon, from Jefferies)

  A: X-Pro has been successfully rolled out to our most active traders, with significant adoption for portfolio trading. It's now being extended to Europe, enhancing our global PT solution and improving development cycles. (Chris Concannon)

• Q: How do you view the opportunity between Adaptive Auto-X and the high-touch offering in moving towards larger trade sizes? (Kyle Voigt, from KBW)

  A: Both strategies are pursued to cater to different market conditions, with high-touch solutions targeting direct dealer interaction for block trades and Adaptive Auto-X for more discreet trade execution. (Chris Concannon)

• Q: Can you talk about the goals and economics of the ICE partnership? (Alex Blostein, from Goldman Sachs)

  A: The partnership aims to bring complementary liquidity pools together, with each platform collecting revenue on trades executed within their system. It's a response to client needs for broader liquidity access. (Rich Schiffman)

• Q: How are you balancing growth and margins, especially with the new share repurchase program? (Benjamin Budish, from Barclays)

  A: The focus is on striking the right balance between investing for growth and being disciplined stewards of capital, with the new share repurchase program reflecting confidence in the company's future performance. (Ilene Fiszel Bieler)

• Q: What's your growth outlook for emerging markets over the next few years? (Jeff Schmitt, from William Blair)

  A: Emerging markets present a large opportunity with significant growth in local markets trading and portfolio trading, indicating early stages of electronification and a promising outlook. (Chris Concannon)

• Q: How does the ICE agreement impact market share dynamics and reporting? (Brian Bedell, from Deutsche Bank)

  A: The partnership will be transparent in reporting where transactions take place, with no expected regulatory concerns. It's designed to benefit clients by connecting two leading liquidity pools. (Chris Concannon)

• Q: Can you elaborate on initiatives to drive growth in information services and technology services? (Michael Cyprys, from Morgan Stanley)

  A: The focus is on expanding real-time data feeds, especially in emerging markets, and leveraging partnerships for indexing and end-of-day pricing, with a strong pipeline of products enhancing both trader and portfolio manager capabilities. (Chris Concannon)

• Q: Is there an opportunity to grow the partnership with ICE, and do you foresee any regulatory risks? (Eli Abboud, from Bank of America)

  A: The partnership could expand to include other execution assets, with no anticipated regulatory risks. It's aimed at leveraging retail opportunities and enhancing liquidity access for clients. (Chris Concannon)