MarketAxess (MKTX) Reports Mixed Trading Volumes September – October 6, 2021
MarketAxess Investments Inc. (MKTX – Free Report) reported mixed volumes of high quality and high yielding US securities, partially offset by a better emerging market and increased Eurobond volumes for the month of September.
The trading volume for high-quality US bonds was $ 96.73 billion, down 6.6% year-on-year. Trading volumes on other credits amounted to $ 118.2 billion, up 15.2% year-on-year. The rate trading volume of $ 344.5 billion increased 35.2% year-over-year.
Total transaction volume of $ 5.59 trillion increased 21.4%. Since MarketAxess’ main revenue driver is trading commission, an increase in trading volumes will directly help its revenue.
The Company’s bond trading business thrives when credit spread volatility increases. Last year, the volatility of credit spreads was greater than this year and the credit spreads of investment grade bonds were also wider. Widening credit spreads means more risk in the market, that is, when bonds look more attractive. Last year he also witnessed a huge corporate debt issuance. These factors have led to an increase in bond trading, which in turn has contributed to the growth of the company’s volume, revenue and profit.
MarketAxess is credited with revolutionizing the traditional way of trading bonds by introducing automated trading. The bond market has lagged behind other stock markets and stock markets in adopting electronic trading. Even now, most bond trading is done and settled over the phone.
Company founder Richard McVey earlier spotted an opportunity to make bond markets efficient by automating the bond trading system. Via its automated trading platform, it allows bonds to be traded electronically. The Company is the premier electronic trading network for the US institutional credit products market. It is also growing rapidly outside the United States and now has operations in Europe, the United Kingdom and Singapore. It also invests in Asia-Pacific.
This global expansion provides the company with ample room for growth in the global $ 100,000 billion fixed income market, which is still awaiting electronic transformation.
The various acquisitions of MarketAxess completed the organic growth. The buyout of Liquidity Edge provided MarketAxess with an attractive entry point into the US Treasury bond market. The acquisition of MuniBrokers expanded MarketAxess’ existing municipal bond trading solution for global institutional investors and broker clients. The acquisition of the Regulatory Reporting Hub extended MarketAxess’ post-trade reporting and pre-trade and post-trade data service to a wider European clientele, particularly in Germany, France and the Nordic countries.
The company’s strong growth in its commodities, superior financial model, large and growing addressable market, strong operating leverage as well as an expanded suite of electronic trading protocols prepare it well for long-term growth. .
Its long-term outlook looks good with the right products in place to provide the solutions the credit markets need. However, a drop in trading volumes could put earnings under pressure, which in turn could drag the stock down.
Since the beginning of the year, the title has lost 24.4% against a growth of 14.8% of its industry. Other stocks in the same space, such as Tradeweb Markets Inc. (TW – Free report), CME Group Inc. (CMF – Free report) and Cboe Global Markets, Inc. (CBOE – Free Report) gained 31.5%, 8.9% and 29.7% respectively over the same period.
Image source: Zacks Investment Research
MarketAxess currently carries a Rank 4 of Zacks (Sell).
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