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MarketAxess Holdings Inc. helps institutional investors find counterparties and compare prices when buying or selling bonds. Most credit trading on its platforms uses requests for competing dealer quotes: investors choose a responding dealer, and the two parties execute and settle directly. MarketAxess collects transaction fees and, under some plans, fixed monthly fees from dealers. U.S. investment-grade corporate bonds are a major source of revenue.
Its Open Trading marketplace also lets investors, dealers and other participants trade anonymously with one another. For these trades, MarketAxess stands between the buyer and seller, executing matching purchases and sales and earning a commission through the price difference. Data, post-trade and technology services provide a smaller share of revenue.
Revenue depends on how much clients trade on its platforms, the fees those trades carry, and dealers’ willingness to supply competitive prices. A limited number of institutional clients can account for substantial trading volume, and neither investors nor dealers are committed to using MarketAxess exclusively. Operating its platforms requires regulatory permissions; clearing and settlement also require funding, deposits and regulatory capital.
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MarketAxess’s results hinge on institutional bond trading volumes and its share of electronic trading, with privately held Bloomberg and Trumid also important competitors to watch.
Tradeweb competes with MarketAxess for institutional clients’ credit and rates trades, with both providing electronic marketplaces and earning revenue from trading activity. Watch Tradeweb’s institutional credit and rates volumes for evidence of competition for the trades that generate MarketAxess’s commissions.
Intercontinental Exchange challenges MarketAxess in both credit trading and fixed-income data: its BondPoint, TMC Bonds and Creditex platforms compete to execute trades, while its data business competes for financial clients’ spending on information. Watch its fixed-income data offerings for competitive pressure on the data MarketAxess licenses to dealers and institutional investors.
CME Group’s BrokerTec competes with MarketAxess to execute institutional clients’ electronic U.S. Treasury trades, earning revenue by handling cash-bond and repo transactions. BrokerTec’s U.S. Treasury trading activity is the business to watch for competition with MarketAxess’s rates transaction fees, rather than CME’s broader futures and options volumes.
BGC Group competes with MarketAxess for institutions’ and dealers’ bond trades, earning brokerage and execution revenue through brokers and electronic platforms. Watch its expansion into products and services for MarketAxess customers, which puts it more directly in contention for the trading activity that pays MarketAxess commissions.
CME Group Inc. earningsCME
CME Group’s BrokerTec report will show how much U.S. Treasury trading it handles electronically, a direct measure of competition for MarketAxess’s rates commissions.
Watch BrokerTec’s U.S. Treasury cash-bond activity, not CME Group’s broader futures and options volumes. More activity would mean BrokerTec may be handling a larger share of institutional Treasury trades, intensifying competition for MarketAxess’s rates business; less activity would ease that competitive pressure, but would not establish MarketAxess’s own volume.
Fed Interest Rate Decision
MarketAxess earns commissions when investors and dealers trade bonds on its platforms, so the Fed’s rate decision matters through the volatility that can change trading activity and through the cost of borrowing and financing self-clearing trades.
Expected4.0%Last release4.0%
If it comes in above expectations
If the Fed sets rates higher than expected, borrowing and trade-financing costs may rise for MarketAxess, while any resulting increase in volatility could also prompt more bond trading and commissions.
If it comes in below expectations
If the Fed sets rates lower than expected, borrowing and trade-financing costs may ease for MarketAxess, while any resulting decline in volatility could reduce bond trading and commissions.
MarketAxess Holdings Inc. earningsThis company
MarketAxess earns most of its revenue from bond-trading commissions, and this report will show whether more trading can offset lower fees per dollar traded.
Compare credit and rates trading volume with the average variable transaction fee per million. Rising volume with a steady average fee would show that more trading is not further diluting commissions. If volume rises while the average fee keeps falling, product mix or pricing pressure is still weighing on revenue per trade, so more activity is not translating into a matching increase in commissions.
