Marketaxess Holdings Inc at Goldman Sachs U.S. Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Well, let's jump in. So I wanted to start with a question around just bit of electronic trading within credit markets. If you think about some of the recent trends the market share collectively within US IG has kind of stalled out around mid-40s, maybe high 40s and in high yield at around 30%. And that's really collectively for you guys and your peers. Why do you think that is and what do you think will be the next leg of growth to take this market share higher for the space?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : So like a BlackRock US (inaudible)

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Got you. Does that get captured do you think in the portfolio trading volumes that we all observe?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : I got you. Your increased velocity point is very important because it feel like we have been talking about it for many years, right? It's there's more electronic trading, but velocity just keeps going down, and I agree with you. It's the first year or two where it actually feels like velocity in credit markets starting to improve? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 1:40PM, MKTX.OQ - Marketaxess Holdings Inc at Goldman Sachs U.S. Financial Services Conference

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Yeah. No, that's a really helpful way to frame it. All right. Let's bring this conversation down to MarketAxess a little bit closer. If we look at your guys' market share, it's also been pretty range bound, right? Like high grade has been kind of hovering in the 19% to 20% range, high-yield slip to kind of low to mid-teens. You've been very busy over the last 12 to 18 months, we rolled out a ton of new capabilities and the list is long. But you talk about X-Pro, you talk about portfolio trading, block solutions, rule-based automation. So we can talk quite a bit about all of that. But give us a sense of what's been most impactful so far, where are you seeing most traction? Where is it coming from and ultimately, when do you expect some of these initiatives to materialize in a more meaningful shift in market share gains?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : And the data unlocking would help you in the portfolio trading side of things because that's kind of how clients want to trade. Is it going to enhance, to, is it going to enhance RFQ? Like where is that going to be the most?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : We touched on a couple of interesting points here, and we'll double click into that in a minute. But I did want to ask, how are you thinking about the trade-off between market share and sort of advancing your initiatives and revenues. You kind of hit on that a little bit earlier on, look portfolio trading, obviously, lower fee per million. But how are you thinking about maximizing actual revenues of where you guys are trying to accomplish versus market share? How do you think about the risk of also cannibalizing some of your existing RFQ flow with enhanced portfolio trading or other things? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 1:40PM, MKTX.OQ - Marketaxess Holdings Inc at Goldman Sachs U.S. Financial Services Conference

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : How much lower do you think your price point would be relative to what's a level in marketplace in the dealer market?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Well, for many reasons. Okay. Let's talk about a couple of things you mentioned earlier on. So we touched the portfolio trading in a couple of different ways. But I did want to zone in on this just one more time thinking about the competitive edge you guys bring to that part of the market. And we talked about data. So that's clearly going to be critical, and it's pretty important. The other thing that we continue to hear is the importance, especially in the IG space, the importance of having a vibrant treasury pool liquidity from a [Nat] spotting perspective, right? So just making sure that it's really fishing and you're kind of hedging both legs of the trades, and it's all kind of done at once. Do you have enough there? Or is that ultimately the kind of prohibitive factor that will hold you guys back from becoming much bigger in portfolio trading relative towards you?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Is it fully integrated at this point.

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Lots of flavors. So the other important aspect of what you guys are working on has been high touch solutions. And for many of us kind of following this industry for a while, it feels like that is really kind of the part of the market that has been not penetrated by electronic trading for many reasons, mostly transparency, right? So as you think about what is ultimately within your TAM, most people will say, well, larger size straights are just not. So like the TAM is not 100 TAM is like 50 and they're already at 50, so kind of game over. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 1:40PM, MKTX.OQ - Marketaxess Holdings Inc at Goldman Sachs U.S. Financial Services Conference It's interesting what you come to market with. Can you -- and you alluded to that a little bit in terms of the number of folks you have signed up, but talk about how that's going to get rolled out, what has been the reception -- what's the target size kind of how high could you guys go in terms of size of the trade and ultimately, the [people] per million dynamics with that capital cervical?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Okay. Let's shift (inaudible) a little bit. I wanted to hit on EM. You guys had a lot of competitive advantages in this part of the market for a while. It's probably your fastest growing segment within credit over the last couple of years. Can you frame what percentage of emerging markets now trades electronically today? And how are you thinking about the addressable market here over time and really sustainability of your competitive advantage in this part of the market?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : All right. Let's talk about some of the other aspects of the business. I want to spend a couple of minutes on data. It really cuts through a number of really important issues for you guys, but also the value of data on itself is quite important. Other markets, and you know as well from equities have monetized data quite well. Credit markets are not quite there yet. So how are you thinking about monetization of the data opportunity outside of just accelerating the trading backdrop.

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Network effect from that is obviously, okay. All right. Let's turn our attention to maybe a couple of financial items, bring (inaudible). You did it on the mic. So I don't want to give too much on any given quarter, but fee per million is obviously an important part of the discussion acknowledging REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 1:40PM, MKTX.OQ - Marketaxess Holdings Inc at Goldman Sachs U.S. Financial Services Conference nobody's got a crystal ball. But if you think about the direction of travel and the fee growth algorithm that you guys have in the business over the next couple of years, knowing what portfolio protocols you guys are most excited about knowing the direction of travel. How do you think fee per million is likely to evolve over the next few years?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : A little less than a minute on the clock, but we'll try to sneak one way in, expenses and margins. You guys have been much more focused on expenses in the last couple of years. You've taken a couple of actions. It feels like the normalizing for some of the acquisitions you're probably running at something kind of high single-digit expense growth this year, give or take. How durable is that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 1:40PM, MKTX.OQ - Marketaxess Holdings Inc at Goldman Sachs U.S. Financial Services Conference How sustainable is that? I know you guys are still investing a lot. Is that roughly the right amount of expense growth we should anticipate in the model? And how important is margin expansion over time for you guys?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Got it. Great. Well, that's perfect. Thank you very much. Always a pleasure.