Marketaxess Holdings Inc Q3 2024 Earnings Call Transcript

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

Question: Chris Allen - Citigroup Inc. - Analyst : Good morning, everyone. First, I want to say congrats to Rick on the retirement. Hope you enjoy. Two, wanted to dive a little bit into October block. October is the first month, I recall you calling out lower block activity is an impediment to share. And you noted that your block solution is now in the market, can you provide some details on just in terms of what's the game plan and accelerating the penetration of the solution moving forward? And what is the current level of client uptake on the solution right now?

Question: Chris Allen - Citigroup Inc. - Analyst : And just a quick follow-up on that. So we should be thinking about time frame here more as a 2025 or maybe even later '25 opportunity. Is this

Question: Alex Kramm - UBS - Analyst : Yes. Hey, good morning, everyone. I want to shift gears quickly to portfolio trading. Obviously, very nice gains during the quarter and good to see that the market share is kind of in line with the overall market share for you guys now. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 3:00PM, MKTX.OQ - Q3 2024 Marketaxess Holdings Inc Earnings Call But obviously, curious why the gains and where we go from here? So just maybe specifically, do you see that clients basically now thinking that you are on par with your primary competitor and giving you maybe 20% of the share? Or do you think your product is actually superior you're hearing from clients that there's more to come? And yeah, where are different client types when it comes to having fully embraced your portfolio trading offering so far?

Question: Alex Kramm - UBS - Analyst : Excellent. And since you were just talking about data and analytics at the end a little bit. Can you maybe just quickly touch upon the new S&P partnership here. A, what's the revenue and costs direction because I think they're getting a lot of data from you, but obviously, you're getting something from them too. And then in the -- what you're getting from them to what degree is it going to help your pre-trade analytics and hopefully help enable clients even more? And when would that be coming?

Question: Benjamin Budish - Barclays - Analyst : Hi, good morning and thanks for taking the questions. I wanted to follow back up on the block trading discussion. Just curious if you could give any color on the FPM impact. Should you see that share really pick up? It sounds like that's sort of the biggest chunk of remaining non-electronified share? I understand with portfolio trading, it comes in at a lower-than-average FPM. And it sounds like it would be additive dollars, but just curious how we should think about the trade-off between volume and what the associated revenues might be if you're successful in this endeavor?

Question: Patrick Moley - Piper Sandler & Co. - Analyst : Good morning. Thanks for taking the questions. Just going back to the [fee per million], I have one on total credit fee per million. It's starting to trend upward again. Last I checked the Bloomberg duration index that you've pointed to in the past as a directional proxy is somewhere in the seven year range. I think in 2020, 2021, that number was closer to 8.5 or 9 years. So just broadly speaking, what do you think needs to happen to get that average duration back in that 8.5 to 9 year range? And how quickly do you think we could get there? And then just as a follow-up, last quarter, you said you expect to see, I think, a $15 million increase in high-grade fee per million for every one-year increase in duration and then $3 million to $5 million for every 100 basis point decline in rates. Is that still how we should kind of think about the dynamic there? Thanks.

Question: Jeff Schmitt - William Blair & Company L.L.C. - Analyst : Good morning. So your growth in emerging markets continues to be really strong, a sense on how much your market share is increasing there? And what does the competitive landscape look like in places like Latin America and APAC, which you're growing at a high rate?

Question: Jeff Schmitt - William Blair & Company L.L.C. - Analyst : And then in the dealer-to-dealer channel, could you discuss some of the things you're doing to increase share there? I mean, it seems to be, I guess, largely focused on extending automated services. But could you discuss that in more of that opportunity in more detail? Or is there other things you plan on doing there over time? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 3:00PM, MKTX.OQ - Q3 2024 Marketaxess Holdings Inc Earnings Call

Question: Dan Fannon - Jefferies - Analyst : Thanks, and good morning. I wanted to follow up on some comments around, I think you said deferred fixed investments here as you exit '24. So curious if you could talk about what the priorities of spend are and then maybe how that informs. I know, it's early kind of the 2025 expense build based upon the actions this year.

Question: Dan Fannon - Jefferies - Analyst : Great. That's helpful. And then just a quick question for Chris, or maybe not so quick, but curious, change in White House as we think about competition and maybe the dealers being less regulatory constrained. Do you think this changes any of the behavior or the electronification process in the interim as there's, as I said, potentially less restrictions around some of the financial institutions as a result of the new president.

Question: Alex Blostein - Goldman Sachs Group, Inc. - Analyst : Hey, good morning and thanks for the question. I was hoping you guys could expand a little more on your partnership with ICE. I think you mentioned it in the prepared remarks, I know this offering was originally announced maybe last quarter. But how is it going so far? How are you thinking about the benefits to both of you guys and other areas you could collaborate in as you get deeper into that endeavor?

Question: Kyle Voigt - Keefe, Bruyette, & Woods, Inc. - Analyst : Hi. Good morning, everyone. Maybe just a question for me on the velocity of trade. You've noted in the prepared remarks that we've seen this

Question: Simon Clinch - Redburn Atlantic - Analyst : Hi. Thanks for taking my question. I was wondering if we could just go back to fee per million and going back to the question actually about the changes in the White House right now. But just in terms of the environment that we might now see with potentially high bond yields from here, the mix that we're now seeing in portfolio trading and some of the other protocols. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 3:00PM, MKTX.OQ - Q3 2024 Marketaxess Holdings Inc Earnings Call Could you talk about the, I guess, the longer-term -- the way we should think about the longer-term normalized level of total credit fee per million? And sort of where that can go. I know we've got the sensitivities for movements in yields and so on right now. But it feels to me like the potential upside might be limited by some of these other factors like high bond yields and the mix.

Question: Brian Bedell - Deutsche Bank - Analyst : Great. Thanks for taking my question. Most have been asked and answered. Maybe just one big picture one for you, Chris. You've said before, I think the high-grade market you think will eventually become some 90% electronified and that's up from like 50% today. Just looking back, obviously, over the last 25 years, it's been a long journey, call it 2% of share gains per annum. And that pace is slowed in the last few years. Do you see that turning around, given everything you've been saying about tackling into the block trade and behavior on the dealer side. Do you see that pace inflecting upward in the near term? Or do you still think this will be kind of this last 40% is still going to be a grind? If you could just compare it versus that first 25 years, and to what extent would that be a faster electronification than the prior 25. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 3:00PM, MKTX.OQ - Q3 2024 Marketaxess Holdings Inc Earnings Call

Question: Michael Cyprys - Morgan Stanley - Analyst : Hey, good morning. Thanks for squeezing in me here. Just a question on the automation suite. Exciting to see representing 11% of volumes today. Just curious how you see that progressing over the next couple of years. What hurdles do you see that limit that from moving higher? Maybe talk about some of the steps you're taking to overcome that. And in particular, if you can elaborate on the next generation of the adoptive Auto-X suite. What might that look like? How you see that offering evolving? And how do you see that progressing as you look out over the next 12 months?

Question: Elias Abboud - BofA Securities, Inc. - Analyst : Good morning, everyone, and thanks for taking the question. Quick one on EM. How much of your emerging markets business is coming from US domiciled asset managers and if we get higher tariffs next year and US managers reduce allocations to emerging markets, how material should we expect that to be for your credit business?