Marketaxess Holdings, Inc. · NASDAQ:MKTX
Marketaxess — Investor Day (September 2021)
60 slides from Marketaxess's investor day presentation, Sep 14, 2021
Slide 1: 2021 Investor Day
2021 Investor Day September 14, 2021
Slide 2: Speakers and agenda
Speakers and agenda Rick McVey Chris Gerosa Strategic overview Chairman and Chief Executive Officer Chief Financial Officer Kevin McPherson Christophe Roupie Core products Global Head of Sales Head of EMEA and APAC Chris Concannon Nichola Hunter New products President and Chief Operating Officer Hea
Slide 3: Forward Looking Statements
Forward Looking Statements This presentation may contain forward-looking statements, including statements about the outlook and prospects for Company and industry growth, as well as statements about the Company’s future financial and operating performance. These and other statements that relate to f
Slide 4: Strategic Overview
Strategic Overview Rick McVey, Chairman and Chief Executive Officer Chris Gerosa, Chief Financial Officer
Slide 5: Pioneer in Innovation and Expansion of Electronic Trading
Pioneer in Innovation and Expansion of Electronic Trading Liquidity Pool Expanded to Major Dealer Liquidity Pool Regional and Alternative Market All to All Liquidity Pool Makers 2000: MarketAxess 2001: 2003: 2008: 2011: 2013: 2015: 2016: 2017: 2021: launches first Acquires Surpasses Expands liquidit
Slide 6: Global debt market trends
Global debt market trends • Global bond market debt outstanding increased GLOBAL DEBT OUTSTANDING AND ISSUANCE GROWTH 16.5% to $123.5 trillion in 2020 Outstanding Issuance • Global long-term bond issuance increased by $130 $50 19.9% to $27.3 trillion in 2020 $45 $120 Global Debt Outstanding ($ in tr
Slide 7: Expanding the MKTX addressable market opportunity
Expanding the MKTX addressable market opportunity Current Estimated Revenue 2031 Estimated Revenue 2031 Aspirational Revenue Opportunity1 Opportunity1 Opportunity1 Historical Increased $5 Market $8.5 Market $11 Billion Growth Billion Velocity Billion NEW PRODUCT CREDIT RATES OPPORTUNITIES U.S. High
Slide 8: Early innings for fixed income electronification
Early innings for fixed income electronification Moving Past Tipping Highly VOLUME INCREASE FROM ELECTRONIFICATION Mostly Voice toward electronic Point Electronic 9.5x U.S. Equity Options (90%+) U.S. Exchange Traded Cash Equities (90%+) Spot FX (90%+) U.S. Treasuries E-penetration (65%) 3.9x 3.8x Eu
Slide 9: MarketAxess Growth Strategy
MarketAxess Growth Strategy 1 Increase Penetration in Core Credit Products 2 Expand Into New Products 3 Expand Trading Protocols and Leverage The Open Trading® Network Continue To Invest In and Grow Our Business Through Geographic 4 Diversification 9
Slide 10: 1. Increase penetration in core credit products
1. Increase penetration in core credit products ESTIMATED MONTHLY U.S. HIGH GRADE AND U.S. HIGH YIELD ESTIMATED AVERAGE DAILY VOLUME FOR MARKET SHARE U.S. High Grade U.S. High Yield ADDRESSABLE CORE CREDIT PRODUCTS 25.0% 20.0% Eurobonds 15.0% U.S. High Grade 10.0% $11BN 5.0% $25BN Local 0.0% Emergin
Slide 11: 2. Expand into new products
2. Expand into new products Existing Products New Products U.S. High Grade Municipal Bonds U.S. High Yield U.S. Treasuries Emerging Markets European Government Bonds Eurobonds Chinese Government Bonds Agencies Leveraged Loans 11
Slide 12: 3. Expand trading protocols and leverage the Open Trading network
3. Expand trading protocols and leverage the Open Trading® network BROADEST AND DEEPEST GLOBAL LIQUIDITY POOL % OF TOTAL DAILY NOTIONAL DAILY ORDERS PLATFORM VALUE AVAILABLE AVAILABLE ORDERS Dealers Investment $15 BN 29,000 AVAILABLE Managers 97% OPEN TRADING GROWTH 1,800+ ETF Active Clients $900 Tr
Slide 13: 4. Geographic diversification
4. Continue to invest in and grow our business through geographic diversification INTERNATIONAL CLIENT VOLUME REVENUE DIVERSIFICATION $900 $800 LONG-TERM Trade Volume ($ in billions) 2016 CURRENT $700 TARGET $600 $500 % OF REVENUE % OF REVENUE % OF REVENUE BREAKDOWN BREAKDOWN BREAKDOWN $400 $300 $20
Slide 14: M&A to accelerate expansion of addressable market
M&A to accelerate expansion of addressable market and growth in core markets • Augment our core internal growth through expansion into new RECENT ACQUISITIONS markets, new products or services • LiquidityEdge – Provides opportunity to connect and offer treasury trading to our investor client • Enhan
Slide 15: Long-term fee capture stability
Long-term fee capture stability U.S. HIGH GRADE U.S. HIGH GRADE FEE CAPTURE • Last major fee plan change over 15 years ago $220 • Fee capture sensitive to: $200 Variable F/MM – Years to maturity $180 $160 – Trade size $140 – Yields $120 – Distribution vs. all-variable fee plans $100 1Q18 2Q18 3Q18 4
Slide 16: Capital resources and capital management
Capital resources and capital management OVERVIEW TRAILING TWELVE MONTHS FREE CASH FLOW1 • Total cash and investments of $440 million $350 – Excludes $132 million of cash deposits supporting self-clearing obligations $300 $250 • Trailing 12-months free cash flow of $320 million, up $40 million from
Slide 17: Core Products
Core Products Kevin McPherson, Global Head of Sales Christophe Roupie, Head of EMEA and APAC
Slide 18: Award-winning trade execution & data solutions
Award-winning trade execution & data solutions for the world's largest network of institutional participants PRE-TRADE PRICE DISCOVERY TRADE EXECUTION CORE PRODUCTS • MarketAxess BondTicker® • Open Trading® Emerging Markets • Axess All® • Patented multi-dealer request-for-quote • Multi-dealer stream
Slide 19: Runway of potential: electronic trading still in early stages
Runway of potential: Electronic trading still in early stages across markets • ~$96 billion average daily volume in the credit TOTAL ADDRESSABLE MARKET market of which MarketAxess represents only a Total addressable market MarketAxess portion1 $60 $600 • $50 – 60 million in additional annual revenue
Slide 20: Innovative and client-focused technology
Innovative and client-focused technology to meet everchanging market needs 20+ YEARS OF UNPARALLELED EXPERIENCE AND GROWTH RESPONDING TO EVOLVING PROGRESSIVE PROTOCOL NEW PRODUCT AREAS GROWING THE GLOBAL CLIENTS NEEDS SOLUTIONS NETWORK • Municipal Bonds • Agile, client-centric • Automation • Central
Slide 21: Growing & diversifying our trading network
Growing & diversifying our trading network NEW CLIENT SEGMENT GROWTH TOTAL ACTIVE CLIENT FIRMS BY PRODUCT 1,842 • Dealers 2016 2021 – Dealer RFQ up over 100% year-over-year 1,272 1,279 1,252 1,190 • Private Banks 935 868 815 – Private bank revenue now nearly 5% of overall MA revenues. Greenwich: “…a
Slide 22: EMEA & APAC rapid client growth
EMEA & APAC have experienced rapid client growth over the last five years • Significant growth in EMEA and APAC average daily INTERNATIONAL DIVERSIFICATION – TOTAL CREDIT VOLUME BY REGION volume with a 26% compound annual growth U.S. EMEA APAC LATAM between 2016 and 2020 1H 2016 1H 2021 4% 1% • Open
Slide 23: APAC provides a long runway of growth opportunity
APAC provides a long runway of growth opportunity • APAC volume growth up nearly 40% year-over-year, building on an existing record year in 2020 • Regional client / dealer mix continues to grow. Local markets now around 50% of total Asia volume • Shifting investor demographics and trading behaviors
Slide 24: The world's best EM trading platform
The world’s best EM trading platform1 • Emerging Markets ADV up over 15% YOY, having hit several record months in 2020 / 2021 • Market share continues to grow with onshore clients and local markets making up a significant portion of growth Drivers for Success Protocol innovation & diversification •
Slide 25: New Products
New Products Chris Concannon, President and Chief Operating Officer Nichola Hunter, Head of Rates
Slide 26: Driving innovation and electronification of the Municipal bond market
We are driving innovation and electronification of the Municipal bond market Total Municipal bonds outstanding $4 trillion¹ up from TOTAL MUNICIPAL BOND MARKET $2.9 trillion in OUTSTANDING 2004 $4.8 billion² TOTAL MUNICIPAL BOND 10% to 15% is traded MARKET AVERAGE DAILY electronically⁴ VOLUME (ADV)
Slide 27: Evolution of the institutional municipal bond market
Evolution of the institutional municipal bond market 2016 October 2018 March 2021 June 2021 MarketAxess launches Municipal First month with over $1 billion in First month with over $2 billion in Record month with over $2.26 Bond electronic trading notional trade volume notional trade volume billion
Slide 28: Global Rates: large opportunity for all-to-all trading
Global Rates: Large opportunity for revenue growth by establishing the first successful all-to-all trading venue US TREASURY OPPORTUNITY EUROPEAN GOVERNMENT BONDS OPPORTUNITY • U.S. Treasuries trade in excess of $600 billion per day leveraging multiple • EGBs trade in excess of $65 billion per day w
Slide 29: Full-suite of solutions for the global rates market
Full-suite of solutions for the everchanging global rates market GLOBAL RATES EXECUTION MARKET STRUCTURE EVOLUTION (High-Level Group of 30 Recommendations) RFQ 1. Increased Transparency Global client and dealer network of over 1,800 participants 2. Market regulation Click-to- Hedging Trade 3. Liquid
Slide 30: Ongoing commitment to corporate responsibility
Ongoing commitment to corporate responsibility OUR FOUR PILLARS OF CORPORATE CITIZENSHIP An enduring Helping communities Building a strong, Adopting sound commitment to high become more resilient diverse workforce sustainability practices standards of across our business governance operations KEY ON
Slide 31: Supporting our clients' ESG objectives
Supporting our clients ESG objectives through an integrated product offering ESG INVESTING IS TRANSFORMING THE GLOBAL MARKET HOW MARKETAXESS HELPS CLIENTS MEET THEIR ESG NEEDS • ESG investing has become a large part of the global assets under • On a commercial level, we offer two ESG-integrated prod
Slide 32: Data
Data Chris Concannon, President and Chief Operating Officer David Krein, Global Head of Research and Data
Slide 33: Global Market Data Revenue Opportunity
Global Market Data Revenue Opportunity ESTIMATED GLOBAL DATA REVENUE OPPORTUNITY • The estimated global market data and analysis spend grew 5.9% in 20201 Estimate Global Market Data and Analysis Revenue • The global fixed income data revenue opportunity is estimated to be $33 billion1 $13-$14 billio
Slide 34: Our 2-part data strategy
Our 2-part data strategy focuses on growth, both in trading activity and data revenue DRIVE TRADING GROW GLOBAL ACTIVITY DATA REVENUE Real-time data Price discovery Closing prices Automation tools Unique Data & Portfolio Transaction New Product construction cost analysis Innovation Indices 34
Slide 35: Using data to drive trading activity on our platform
Using data to drive trading activity on our platform AUTO-X TRADE VOLUME AND COUNT Trade Volume Trade Count $45 250 $40 Trade Count (in thousands) 200 Trade Volume ($ billions) $35 $30 150 $25 Composite+™ Price discovery $20 100 $15 Market-making $10 50 $5 Auto-execution -- 1Q19 2Q19 3Q19 4Q19 1Q20
Slide 36: Global data revenue growth
Global data revenue growth INFORMATION SERVICES REVENUE CURRENT PRODUCT SUITE OPPORTUNITY TO GROW DATA REVENUE $40 9% 5-YR $35 CAGR REAL-TIME PRICING DATA Composite+ $30 Revenue ($ in millions) Axess All MIDDLE AND BACK-OFFICE USES $25 TRACE $20 PORTFOLIO AND INDEX VALUATION Trax & CONSTRUCTION $15
Slide 37: Composite+
Composite+™ 90% 35k 30mm global credit bonds with a price level generated market coverage generated per day per day THE MOST ACCURATE AND VALUABLE PRICING SOURCE AVAILABLE Launched May 2017 Consistently expanding Increasing depth of • U.S. Corporates product coverage coverage • Europe • Composite+ •
Slide 38: Portfolio Construction and Indices: Creating opportunity
Portfolio Construction and Indices: Creating opportunity • We are near the center of the index and asset management Solving portfolio construction and index industry challenges ecosystem through data innovation creates a virtuous circle that further – Managers, issuers, and ETF APs all trade here co
Slide 39: New Protocols
New Protocols Rich Schiffman, Head of Open Trading Chiqui Matthew, Sales Manager
Slide 40: What is Open Trading?
What is Open Trading®? Open Trading provides unparalleled levels of No matter the size, no matter the trading strategy, credit market liquidity and significant transaction Open Trading supports both investors and dealers costs savings by seamlessly connecting global with award-winning technology par
Slide 41: Our network provides access to a global liquidity pool
Our network provides access to a diverse and unmatched global liquidity pool A POWERFUL NETWORK ADVANCED FEATURES Greater source Over 1,800 investor and Cutting-edge technology of global liquidity broker-dealer firms and cost savings Pre-2000 2007 Financial crisis Today One to few One to more One to
Slide 42: Significant investment in new trading protocols
Significant investment in new trading protocols ALL PROTOCOLS POWERED BY Request-for-Quote (RFQ) Portfolio Trading GLOBAL CLIENT & MARKET DATA DEALER NETWORK Streaming Open Trading® Dealer Direct & Public Axes Liquidity Pool Central Limit Order Book STRAIGHT-THROUGH AUTOMATION (CLOB) PROCESSING SERV
Slide 43: Diversity Dealer Initiative: Forging connections
Diversity Dealer Initiative: Forging connections using the MKTX network ASSET MANAGERS MINORITY-, WOMEN- AND VETERAN- OPEN TRADING OWNED BROKER-DEALERS LIQUIDITY POOL BENEFITS BENEFITS BENEFITS • Best execution achieved on every trade • Diversity dealers participate in the • Opportunity = Access • I
Slide 44: Diversity Dealer Initiative
Diversity Dealer Initiative HOW DOES IT WORK? The Network Effect • Meets the needs of asset managers focused on diversifying their counterparties Using the most powerful network in the • Clients specify a list of diversity dealers to distribute business through using a market to empower minority and
Slide 45: Automation
Automation Gareth Coltman, Global Head of Trading Automation
Slide 46: Trading automation solutions are evolving
MarketAxess fixed income trading automation solutions are evolving TODAY DATA-OPTIMIZED WORKFLOWS • No-touch trading solutions • Client provides high-level WORKFLOW AUTOMATION objectives (order-type) and constraints • Multi-step workflows leveraging multiple protocols • System profiles order and sug
Slide 47: Market structure change is fueling trading automation
Market structure change is fueling trading automation in fixed income • Automated trading in fixed income has lagged, historically, behind other MARKET SHARE OF ALGORITHMIC TRADING BY ASSET CLASS2 markets due to opaque liquidity and price discovery 80% Equities • Growth of passive products has incre
Slide 48: Demand for trading automation solutions is growing
Demand for MarketAxess trading automation solutions is growing rapidly CLIENT TRADING AUTOMATION OBJECTIVES ARE CLEAR ACTIVE FIRMS AND USERS OF MARKETAXESS TRADING AUTOMATION SOLUTIONS • Improve operational efficiency and reduce execution costs Active Firms Active Users 120 300 • Create and systemat
Slide 49: Our automation solutions: Auto-X RFQ
Our automation solutions: Auto-X™ RFQ INCREASE OPERATIONAL EFFICIENCY AND REDUCE EXECUTION COST AUTO-X % OF TRADES BY PRODUCT Auto-X allows buy-side clients to automate the submission and execution of 25% RFQ orders High Grade 20% • Approximately 17% of all platform trades were executed using Auto-X
Slide 50: Our automation solutions: Open Trading Auto-Responder
Our automation solutions: Open Trading® Auto-Responder NEVER MISS AN OPPORTUNITY TO CREATE ALPHA AND CAPTURE BID-ASK SPREAD AUTO-RESPONDER: RESPONSE VOLUME AND COUNT Response Volume Response Count Auto-Responder allows buy-side clients to respond to inbound Open $3,000 9,000 Trading RFQ opportunitie
Slide 51: The future of trading automation: Adaptive Auto-X
The future of MarketAxess trading automation: Adaptive Auto-X Adaptive Auto-X will connect our sophisticated rules engine with multiple trading protocols available via the Open Trading marketplace—allowing Auto-X clients to move seamlessly throughout the MarketAxess ecosystem Rules Engine • Clients
Slide 52: Technology
Technology Nick Themelis, Chief Information Officer Madhu Chalamani, Chief Technology Officer Christine Nolan, Head of Trading Technologies
Slide 53: Our vision
Our vision Use a highly efficient and adaptable Trading Protocols Analytics & workforce to deliver products supporting & Workflows Automation diverse trading protocols combined with highly customizable and automated Best in Class Trading Trading Experience Content workflows augmented with rich analy
Slide 54: Driving innovation: The transformation process
Driving innovation: The transformation process • Transitioned to Agile Methodology in 4Q19 Plan • Monthly releases to production Feedback Design • More features delivered in every release • More automated delivery, enabling faster & more reliable releases AGILE METHODOLOGY Deployment Development Qua
Slide 55: Defining the trading experience: Modern tech foundation
Defining the trading experience: Modern tech foundation for a sustainable competitive advantage DATA CLOUD • Data is one of our best strategic assets. Combining trading and post- • Fully adopted the cloud trade, we have a substantial data footprint • Many applications including our newest trading pr
Slide 56: Live Markets: A streamlined fixed income central limit order book
Live Markets: A streamlined fixed income central limit order book BENEFITS Trade new issues as either a liquidity provider or liquidity taker Access live, executable levels without last look, providing speed and efficiency Access high-quality, execution-ready price discovery, with integrated benchma
Slide 57: Mid-X: A powerful liquidity opportunity
Mid-X: A powerful liquidity opportunity • Access network of buy- and sell-side participants to maximize matching opportunities • Match at more accurate, unbiased mid-price, derived from real, tradeable levels • Part of a suite of Open Trading® protocols, offering a range of trading opportunities • P
Slide 58: Retaining and attracting talent
Retaining and attracting talent How do we retain talent in a highly competitive environment? How do we attract new talent? INVESTMENT IN OUR EMPLOYEES INVESTMENT IN OUR RECRUITING AND BRANDING INNOVATION OUTREACH • Expansion and adoption of new technologies not only advances our • Broadening and div
Slide 59: Now you're in the market
\Y, oN Now you're in the market™
Slide 60: Disclosures
Disclosures ©2021 MarketAxess Holdings Inc. (the "Company"). MarketAxess Corporation and LiquidityEdge LLC are members of FINRA and SIPC. MarketAxess Canada Company is a member of IIROC. MarketAxess Europe Limited (04017160), MarketAxess Capital Limited (09777893), and MarketAxess Post-Trade Limited