MarketAxess (MKTX) Goldman Sachs 2024 U.S. Financial Services Conference summary

Industry trends and market dynamics

• Electronic trading in credit markets has seen flat market share growth, with high-grade adoption stalling in the mid-40% range and high yield around 30%.

• Portfolio trading has shifted risk transfer methods, cannibalizing traditional electronic RFQ flows but increasing overall electronic notional volumes.

• TRACE data shows increased velocity and turnover in fixed income, driven by automation and portfolio trades, despite some noise from affiliate transfers.

• Record new issuance and structural changes are contributing to higher trading velocity and volumes.

• Dealer-to-dealer business is highly electronic and growing, though market share metrics are affected by affiliate trades.

Strategic initiatives and technology transformation

• Focus is on long-term technology transformation rather than short-term market share gains.

• New capabilities include X Pro, portfolio trading, block solutions, and rule-based automation, with data analytics at the core.

• Unlocking proprietary data is expected to change trading outcomes, especially in pre-trade optimization and dealer selection.

• High-touch block trading solutions are being rolled out, targeting larger trades and offering AI-driven dealer selection.

• The platform now supports more flexible trading protocols, including direct-to-dealer and multi-dealer options.

Revenue, pricing, and market share considerations

• Portfolio trading offers limited revenue opportunity despite its impact on market share.

• Willingness to accept lower price points for market share in portfolio and dealer-to-dealer trades, while automation is positioned as a premium service.

• Dealer-to-dealer pricing can be highly competitive, with elasticity demonstrated in Europe through the Mid-X solution.

• Fee per million is influenced by trade mix, volatility, and duration, with portfolio trading exerting downward pressure.

• Emerging markets and automation present long-term revenue growth opportunities.