Tradeweb, a subsidiary of London Stock Exchange Group (LSEG), saw continued outperformance in fixed income markets in the first quarter (Q1) of 2024.
Tradeweb’s results were so good that LSEG reported them as part of its own earnings call, six hours before Tradeweb, a Nasdaq-listed company, had reported them to the public. This caused some confusion around the relationship, with analysts on the LSEG call asking for comment on Tradeweb but LSEG CEO, David Schwimmer, then saying he was unable to provide it.
An LSEG spokesperson said, “Tradeweb is majority owned by LSEG, and fully consolidated in our accounts down to pre-tax profit, entirely in line with global accounting practices. It is an important part of our capital markets division along with our equities and FX business, and is collaborating deeply across LSEG including with Data & Analytics, FTSE Russell, FX and post trade.”
Tradeweb’s rates revenues hit US$214.1 million for Q1 2024, up 25.6% on the same quarter in 2023. Rates average daily volume (ADV) was up 44.7% from prior year period, driven by volumes in swaps/swaptions ≥ 1-year and US government bonds. European government bonds reported a record 17.9% ADV increase from prior year period, supported by increased client activity, particularly in UK Gilts, while mortgages ADV was up 19.9% reflecting increased institutional client activity, as well as adoption of the new specified pool trading platform and roll trading activity.
Tradeweb CEO, Billy Hult, said on his firm’s Q1 earnings call with analysts, “The momentum we saw in January persisted into February and March as we eclipsed $400 million in quarterly revenues for the first time. Specifically, strong client activity, share gains and improved risk-appetite drove 24.1% year-over-year revenue growth on a reported basis.”
The firm’s credit trading revenues of US$115.8 million in the first quarter of 2024 had increased 30.1% compared to prior year period, with ADV up 8.1%, supported by strong US credit volumes, including record ADV in fully electronic US investment grade credit, and ongoing adoption of e-trading Tradeweb protocols, including request-for-quote (RFQ), Tradeweb AllTrade and portfolio trading.
European credit ADV was up 23.2% from prior year period, driven by strong activity in portfolio trading and Tradeweb Automated Intelligent Execution (AiEX), the firm noted. “Rates and credit led the way, accounting for 55% and 34% of our revenue growth, respectively,” Hult said. “Record revenues across rates were primarily driven by organic growth across global government bonds and swaps and were also supplemented by the addition of r8fin and Yieldbroker.
Similarly, record revenues across credit were led by strong US and European corporate credit, with record quarterly market share in electronic US investment grade being a highlight.” Its acquisition of r8fin, a specialist in algorithmic-based execution for US Treasuries and interest rate futures, closed in January 2024. Tradeweb’s president, Tom Pluta, told analysts the firm’s focus would be to onboard more Tradeweb clients to r8fin. “This access to US bond futures is a nice compliment to the rest of our rate products,” said Pluta. “I think you heard us talking about finding ways to get involved in that space and now we are … our plans include expanding into new markets with European cash and futures and potentially swaps likely next on the agenda. So we see growth in the US with existing products and international expansion coming in the relatively near future.”
Competition in futures markets is heating up this year as CME launches credit futures in June 2024 to compete with CBOE and Eurex, while also facing a direct challenger in Treasury futures from BGC Group’s FMX exchange, which is set to launch in September 2024. Tradeweb’s equities business had revenues of US$27.1 million in the first quarter of 2024 which was up 3.2% compared to prior year period, with ADV up 40.5% from prior year period, driven by equity convertibles/swaps and options. Converted into sterling, that means Tradeweb’s equities trading business, at approximately £22 million is nearly 40% that of LSEG’s £60 million equities business, which captures both primary listings and trading.
An LSEG spokesperson confirmed that Tradeweb’s equities business is NOT report in LSEG’s equities figures, but may be included in fixed income and derivatives revenue. Tradeweb’s money markets revenues were US$16.8 million in the first quarter of 2024, an increase 13.4% compared to prior year period (increased 13.1% on a constant currency basis). Money Markets ADV was up 30.3% from prior year period, led by repo activity.
Tradeweb’s acquisition of money market platform ICD itself generated headlines this week. LSEG its reported £318 million fixed income and derivatives revenue includes Tradeweb’s £307 million in fixed income and derivatives revenue (including equities), which suggests LSEG generated a standalone £11 million in fixed income and derivatives revenue, for the first quarter of the year.
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