Electronic bond market operator, MarketAxess, has reported revenues in 2020 were up 34.8% on 2019 to US$689.1 million, compared to US$511.4 million for the previous year. These were driven by strong growth in its all-to all-trading protocol, Open Trading, and significant increases in other markets and services.
Profit for the year was reported at US$299.4 million, compared with US$204.9 million in 2019. US investment-grade trading volume was reported to be 21.6% of FINRA’s IG TRACE trading volume over an estimated 19.0% for 2019.
Increase in other revenue was driven by US$3.6 million of new data sales, US$1.3 million of regulatory trade reporting revenue generated by Regulatory Reporting Hub since its 30 November 2020 acquisition date and US$900,000 of revenue from the introduction of new SFTR reporting services.
In its latest report on ‘US Corporate Bond Market Structure in 2020 by the Numbers’, analyst firm Greenwich Associates wrote, “MarketAxess won big with Open Trading in 2020, not to mention its continued dominance in dealer-to-client RFQ markets and the launch of Live Markets.”
In a statement on the firm’s results, Rick McVey, chairman and CEO of MarketAxess, said, “New sources of liquidity delivered through Open Trading drove over US$1 billion in estimated transaction cost savings to our clients, exceeding total company revenue. Strong market share gains in all core trading products drove revenue growth of 35% for the year, and operating income growth of 49%. In addition, we continue to expand our product pipeline for future growth with new initiatives in rates, munis, data and post-trade services. New records were achieved in active clients trading with over 1,800 institutional investor and dealer firms now utilising our global marketplace.”
Reporting on its fourth quarter, the firm noted a 25.8% in US IG credit trading volume, a 74.3% rise in US high yield volume and a 30.7% increase in total credit trading volume.
Total revenues for the fourth quarter of 2020 increased 32% to US$171.3 million, compared to US$129.8 million for the fourth quarter of 2019. Profit totalled US$72.9 million compared to US$50.3 million, or $1.32 per share, for the fourth quarter of 2019.
US investment grade trading volume was estimated to be 22.8% of IG on TRACE for the fourth quarter of 2020, compared to an estimated 19.9% for the fourth quarter of 2019.
In an analyst note published earlier in January 2021, Morgan Stanley estimated that MarketAxess has around 70% share of electronic credit trading volume with a client base of 1,700+ institutional investors as well as broker/dealers.
“We see four paths to 12% earning per share (EPS) compound annual growth (CAGR) over the next 10 years,” wrote the firm’s analysts. “1) Market share gains from the structural shift to electronic credit trading; 2) accelerated growth from the rise of algorithmic credit trading and portfolio trading; 3) expansion of its TAM into rates; and 4) margin expansion via a scalable, capital-light business model. We think credit volumes can grow at 19% CAGR and revenue at 12% CAGR in the next 10 years. Platform scalability drives 500bps of EBITDA margin expansion to 65% and 13% EBITDA CAGR in our base case.”
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