Q4 2020 Marketaxess Holdings Inc Earnings Call
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Ladies and gentlemen, and today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
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Ladies and gentlemen, thank you for standing by.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
At that time, if you have a question simply press Star then the number one on your telephone keypad.
If you'd like to withdraw your question press the pound key at any time.
Please note each person is limited to one question before being asked to rejoin the queue.
As a reminder of this conference call is being recorded on January 27th 2021.
I would now like to turn the call over to Dave Cresci Investor Relations manager at market access and please go ahead Sir.
Good morning, and welcome to the market access and fourth quarter 2020.
For the call Rick Mcvey, Chairman and Chief Executive Officer will review the highlights for the quarter and full year 2020.
Kristie Kenney, President and Chief operating officer will discuss the automation and growth initiatives.
And then Tony the least Chief Financial Officer will review the financial results.
Before I turn the call over to Richard Let me remind you of today's call May include forward looking statements. These statements represent the company's belief regarding future events that by their nature.
And.
The company's actual results and financial condition may differ materially from what is indicated in the forward looking statements for a discussion of some of the risks and factors that could affect the company's future results.
Please see the description of the risk factors and our annual report on form 10-K for the year ended December 31, 2019, and our quarterly report on form 10-Q for the third quarter.
Also direct you to read the forward looking statement disclaimer and our quarterly earnings release, which was issued earlier. This morning and is now available on our website.
Now, let me turn the call over to Rick.
Good morning, and thank you for joining us to review, our fourth quarter and full year 2020 results.
We finished the year strong with significant business momentum and the fourth quarter market share gains and core products fueled a 32% year over year increase and revenue and a 51% increase and operating income.
Revenue for the quarter was $171 million and.
And EPS of $1 91.
Was up 45% versus last year high.
Hi, great market share reached a new high of 22, 8% and high yield share surged to a new record of 17, 1% up from 10, 6%.
Open trading volume grew 63% to $218 billion and the fourth quarter driving estimated transaction cost savings of $225 million to our clients.
We closed on the acquisition of Deutsche Boerse as regulatory reporting hub during the quarter and client on boarding and integration is underway.
On the back of the strong results our board of directors approved an increase and our quarterly dividend to <unk> 66 per share up from 60.
Slide four highlights our record full year results.
Our long term results showed consistent execution of our growth agenda with strong five year, and 10 year compound revenue growth of 18% and compound EPS growth of 25%.
For full year 2020 revenue growth was 35% and EPS growth was 45%.
The results this year reflects strength and all of our core credit products with the record volume and revenue in the U S high grade high yield globally.
Euro bonds and munis and <unk>.
Total credit trading volume was up 29% and 2020 to $2 six trillion.
Active trading client firms during 2020 surpassed 1800 about half of which are outside of the U S.
Open trading grew to 33% of our traded volume up from 26% in 2019.
Estimated transaction cost savings from open trading skyrocketed to $1 $1 billion for the full year.
Investors and dealers both initiated record order flow into our open trading liquidity pool in 2020.
Slide five provides an update on market conditions.
As of year and high grade credit spreads have recovered to pre pandemic levels.
Credit spread volatility has also been declining over the last several quarters.
High grade and high yield bond issuance peaked in Q2 and fell back to more normal levels in Q4.
As a result of the combination of lower volatility and more normal new issue activity trace volume was up just 9% year over year in the fourth quarter.
Average years to maturity for corporate bonds traded on the system remained at the high end of the historical range at nine four years.
And this is one of the factors contributing to our increase in the feed capture per million and high grade the.
These market conditions are normally not favorable for volume growth How's.
However market share grew strongly during the second half of the year driving superior revenue and earnings growth.
Slide six provides an update on open trading.
Open trading saw sustained growth, even though market conditions normalized and the second half of the year, demonstrating the central role of our marketplace and today's credit market or.
And trading credit volume and the fourth quarter increased 63% and overall credit trading revenue grew 34% versus last year.
For the quarter open trading represented approximately 34% of our global credit trading volume up from 27% in the fourth quarter of 2019.
Dealer initiated open trading volume grew 70% year over year and over 1600 unique client firms completed at least one trade and open trading during the quarter.
Open trading volume showed strong growth trends in each of our core products.
We are creating new trading and portfolio opportunities for our clients by delivering over 28000 open trading orders per day totaling $15 billion and daily notional value.
During the year, we also delivered important protocol enhancements, including live markets. Our order book for actively traded corporate bonds as well as mid X R sessions based matching platform that utilizes our composite plus mid market data.
Now, let me turn the call over to Chris to provide and update on automation and information services and post trade.
And thank you Rick slide seven demonstrates the growing momentum of automation and credit trading automated trading volumes rose to 32 billion and the fourth quarter up from $24 3 billion and the fourth quarter of 2019 auto ex trade count grew in the quarter to 163000.
And up 28% from the prior year. We are also seeing of healthy adoption of auto ex across euro bonds high yield and emerging market bonds. The.
The average trade size conducted through <unk> is also rising and.
And U S investment grade the average trade size, and 2020 grew 14% compared to 2019 and 40% compared to 2018.
Clients continue to increase the size of the orders as they gain comfort with the execution quality of our auto ex solution the <unk>.
Use of dealer algorithms continues to grow on the platform with approximately $3 9 million al goes algo responses and the fourth quarter, resulting in 308000 trades. The average number of responses per inquiry remains strong, which ultimately improves the likelihood of execution across the platform.
New automated liquidity provision solution auto responder has seen early traction the solution allows investors to automatically respond to requests for liquidity through open trading in 2020 over $10 billion and notional value was automatically made available through our auto responder solution.
The overall share of electronic trading grows and credit we are seeing continued demand for our automated trading solutions slide.
Slide eight provides an update on product diversification.
Market data and analytics has never been more and demand than today and information services revenue reached $34 3 million for the year with a five year compounded growth rate of 11, 11%.
Unique data solutions are assisting bond pricing and liquidity providers on our trading platform, thus, helping to generate greater transaction volume.
And the year is following the implementation of Mifid to our post trade services business has grown substantially post trade revenues were $19 5.002 million 20 up 23% year over year.
Reflecting our commitment to post trade, we recently announced the completed acquisition of Deutsche of forces regulatory reporting hub, which adds significant client penetration and continental Europe and strengthens our data capabilities.
Our rates business had a critical milestone and the fourth quarter by integrating U S treasury trading capabilities within the market access platform, providing a centralized fixed income trading solution with a full click to trade suite of products. This allows current credit trading users to seamlessly access this unique rates trade.
The solution with <unk>.
Post trade integration.
We also launched our net hedging solution and Q4, which supports our credit trading clients ability to efficiently hedge their corporate bond transactions.
Slide nine provides the summary of our trading volume across product categories. Our U S. High grade volumes were up 26% year over year to 318 billion for the quarter largely due to market share gains and an increase and market volumes estimated U S high grade market share increased by two eight.
Eight percentage points year over year to 22, 8%, while estimated U S high grade market volumes were up 10% year over year.
Volumes and our other credit category were up 36% year over year to 321 billion for the quarter market share gains account for the vast majority of the 74% increase and U S high yield volume eurobond volume experienced a 31% increase and emerging market bonds.
Volume grew by 19% year over year.
Im also excited to report that our municipal bond volume doubled year over year.
Our rates business maintained its dealer to dealer market share compared to Q4 of 2019, and what was a difficult market environment. We believe the investment made and new trading technology expanded product coverage and enhanced data tools will continue to differentiate our rate offering our 2012.
And the Green Bond trading initiative was very successful with $27 billion Green bonds trade at on the platform, resulting in nearly 135000 trees planted and critical regions across the world.
With three trading days remaining in January estimated U S trace market volumes are running more than 10% above January 2020, while estimated eurobond and emerging market volumes are similar to January 2020 estimated combined market share across our four core products the seasonally below the.
The fourth quarter levels, but well above the January 2020 levels, our month to date average daily trading volume and credit products is up more than 20% versus January 2020.
Now, let me turn the call over to Tony to provide and update on our financials.
Thank you Chris.
On slide 10, we provide a summary of our quarterly earnings performance.
Revenue was $171 million up 32% year over year.
For the 31% increase and credit trading volume and higher overall credit fee capture resulted in a 33% uplift and commissions.
Post trade services revenue was up 67% to $6 6 million and reflects one month of trade reporting activity from the client added to the regulatory reporting of acquisition.
Operating income was up 51% year over year and operating margin reached 53, 5% during the quarter.
Full year 2020 operating margin was up more than five percentage points to 54, 4%.
The effective tax rate was 19, 2% and the fourth quarter and our full year effective tax rate came in at 20%, which was right at the low end of our 2020 guidance range.
On slide 11, we have laid out our commission revenue trading volumes and fees per million.
The total variable transaction fees were up 40% year over year, driven by the increase and credit trading volume and higher use of high grade fee capture.
U S high grade fee per million was down $12 versus the third quarter level, but the $17 higher year over year.
The combination of shorter duration and higher weighting to larger trade sizes accounted for the sequential decline and fee capture.
Our other credit category fee capture decreased by $6 on a sequential basis, but was $11 higher year over year the.
Slight drop and sequential other credit fee capture was principally due to a mix shift with the greater weighting towards euro bonds and emerging markets and sovereign bonds.
The sequential change and distribution fees was due to variances and unused minimum commitment fees under all variable dealer plans.
Slide 12 provides you with the expense detail for you.
Year over year rise and compensation and benefits was due to an increase and head count of 79 personnel and support of our growth initiatives.
The increase and professional and consulting expenses is due to a variety of factors, including M&A transaction and integration costs and consulting costs associated with our clearing and settlement transition projects.
Higher depreciation and amortization reflects the continuing investment and product development and the trading platform along with the amortization of acquired intangibles.
Clearing costs were up almost 50%, reflecting the 63% increase and open trading volume.
And as I mentioned on the third quarter earnings call. We expect our steady state third party clearing cost for credit trading measured as a percentage of both the trading revenue for on a per ticket basis to decline by upwards of one third.
Excluding M&A transaction and integration costs and.
And the amortization of intangible assets associated with the regulatory hub acquisition expenses were up 12% and the fourth quarter.
On slide 13, we provide balance sheet information.
Cash and investments as of December 31 for $489 million and free cash flow reached a record $340 million and 2020.
Dividends and share repurchases aggregated $150 million and capital expenditures were $46 million and 2020.
With the announced increase and the quarterly dividend of 66 per share we have tripled the dividend level over the past five years.
Which matches the growth and earnings and free cash flow generation.
Our board recently authorized the new $100 million share repurchase program.
Replace the plan expiring at the end of March and.
And it's been our practice the principal purpose of the repurchase plan is to offset dilution from employee equity grants.
During the fourth quarter, we also entered into a new $500 million revolving credit facility with the syndicate of banks to support our clearing activities and add financial flexibility.
And there were no borrowings outstanding at year end under this facility.
On slide 14, we've laid out our 2021 guidance for expenses capital expenditures and the effective tax rate.
We expect a total of 2021 expenses will be and the range of 362 million to $382 million.
Employee compensation and benefit costs are expected to represent around 50% of total expenses consistent with the trend over the past several years.
We have built the plan using of Sterling to U S. Dollar exchange rate of 135, which has the effect of adding around $4 million to the expense guidance.
This guidance range.
It reflects the full year of operating expenses related to the regulatory and reporting hub acquisition and.
Including an estimated $5 million for amortization of acquired intangibles and $5 million and nonrecurring integration costs.
Excluding the expenses related to regulatory reporting of the <unk>.
Midpoint of the guidance range would represent an approximate 13% year over year increase and expenses on a constant currency basis.
2021 capital expenditures are expected to range from $50 million to $55 million of.
Which roughly two thirds relates to capitalized software development costs.
<unk> from the investments, we're making and new protocols and enhancements to the trading platform.
We expect that the effective tax rate for full year 2021 will range from 22% to 24%.
The increase and the effective tax rate versus 2020 is driven by lower estimated excess tax benefits related to share based compensation awards.
Just on the expected timing for realizing the excess tax benefits.
The effective tax rate will likely be and the 20% range and the first quarter and then the 24% to 25% range in the second third and fourth quarters.
Now, let me turn the call back to Rick.
Thank you Tony and 2020 was an outstanding year for revenue and earnings growth.
And I want to thank all market access the employees for their dedication that led to these terrific results.
Market share momentum and the second half of 2020 positions us well for continued growth of the years ahead.
We are investing heavily to grow our portfolio of products protocols and clients in order to continue our track record of long term sustainable growth.
We would now be happy to open the line for your questions.
Ladies and gentlemen, if you would like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Please note each person is limited to one question before being able to rejoin the queue.
Our first question comes from Dan Fannon with Jefferies.
Hi, Thanks, good morning.
My first question is for Tony on the expenses and just kind of the outlook.
Looking at the organic expense growth slightly higher than where I think you started out last year in terms of what you were going to spend on could you maybe highlight some of the areas of spend and kind of initiatives that might be different year over year and then.
Yes that and then also just any.
The other kind of normalization of spending that might be for.
And in terms of travel and spending around the kind of of the macro and COVID-19 related expenses.
Sure Dan.
Take that one and.
And so on and on the expense guidance.
We tried to give you the pieces, it's easy to explain and the two pieces, which is the organic growth.
And then the regular regulatory reporting hub overlay on top of that.
We're guiding to a 13% constant currency increase it probably shouldnt be a surprise.
If you look at if you look at history, Richard given some some color on the on the revenue and earnings CAGR. If you look at the expense CAGR of over the past five or 10 years, it's 15%.
Okay.
The 13% that we're guiding to is really right in line with history and.
I would I would tell you also of that.
I would suggest the shareholders of continue to support that type of continuing investment and if you look at the revenue and earnings growth that we've delivered over the years, but put that aside in terms of the pieces the.
On the organic piece.
We entered 2021 with a full investment agenda, we've got new protocols newer product areas geographic expansion efforts.
So we're continuing on that investment path individual line items and this won't be of surprise, where youre going to see most of the absolute expense increase is in comp and benefits. Its really head count driven you think about the.
80% or so people that we added in and 2020, we have a plan.
Plans to add another 60, or so personnel to support our growth agenda in 2021, so it won't be a surprise that that's the line item that will dominate the the expense increase the other piece you look at and it would be along the the investment theme of depreciation and amortization is expected to be.
25% or so higher than 2020 on an organic basis and.
And that reflects the investment, we've been making and trading protocols and the platform and.
Specifically.
Around the amortization of stock of software development costs. So those are the big the big items.
Give you two other items just to give you a little bit of color, yes, we expect an increase in.
And in marketing and advertising and G&A expenses, which would be driven by.
The resumption of <unk> right now and our models, we've got we've got travel and entertainment resuming sometime in the second half of the year. So youll see some increase there, but thats not whats.
And what's dominated the absolute numbers. The other one just to give you a little bit of color, we're expecting clearing costs to be flattish year over year and.
I do want to spend just two minutes on that because there's two components. The clearing costs you have.
The clearing costs related to credit and then you have clearing costs related to the U S treasuries and we're budgeting in the aggregate to be flat the savings that we anticipate from going to self clearing and transitioning settlement agents and the U K those savings will likely be offset by an increase and expected volume from <unk>.
And trading and an increase in the U S Treasury and an increase and U S. Treasury trading volume so even though we're we're expecting steady state savings from from the transitioning and clearing of five or $6 million, we expect that to be offset so just wanted to give you a little bit of color on that.
Boy that was a long winded answer wasn't it.
And I fell asleep.
Our next question comes from Rich Repetto with Piper Sandler.
Yes, good morning, guys.
And I had a question.
And I had a question on automated trading, but Chris covered and so while I can skip it.
And I'll go.
And I'll go right because the other the long winded answer, but the Tony on the self clearing you mentioned that you.
The reduce it by I thought you said the third but I thought.
I thought that percentage.
I thought it was like it's running at 12% of open trading revenue right now and I thought that get cut in half and.
And just trying to understand why it doesn't seem like we saw any impact.
And this quarter and I thought we ramped our started to launch it in August and and.
And where are we at as we enter the new year and regards to for.
Fully half of all the capital and place et cetera.
And.
So rich no.
Happy to answer the follow on question and this and really you need to look at the clearing costs and <unk>.
And two pieces and we have.
And the costs associated with clearing open trading corporate bond transactions and that that has to do with with self clearing and the U S transition to the settlement agent in and.
In the U K and that's what we've been talking about a reduction and those clearing costs by upwards of the third but the second component and this is this is part of why youre not seeing seeing the reduction and the second component is clearing costs for U S Treasury trading.
Our market access intermediates of those those trades and the near term, we are leaving that treasury clearing model in place and I am.
<unk> talked about this and the past clearing costs for treasuries runs somewhere around 30% of Treasury revenue. It depends on the protocol depends on trade size during the quarter longer term, we'll look at rationalizing the broker dealers and ultimately addressing the clearing model longer term, but you have to look at those two piece.
Now in the fourth quarter and admittedly.
Admittedly.
We did see some improvement in clearing cost of for example, as a percentage of open trading revenue for credit.
Clearing costs were a little more than 9% they had been running the prior year was a little a little higher than 11% and the fourth quarter. So we did see some improvement, but we acknowledge that.
There were some.
And there were some teething pains and the fourth quarter.
We're still.
And we're looking at 2021 expenses.
And third party clearing cost expenses for credit and we believe that the savings will be upwards of a third on a steady state basis, whether you look at it as a percentage of.
Open trading revenue on a particular basis on a per million traded basis.
We're still looking at about a <unk>.
And 30% or so of savings so it doesn't come through clearly and the numbers but.
Some of it has to do with again with the.
We have two elements to our clearing costs, both corporate bonds, and then and the treasury side and rich just compete.
Complete that.
For the.
If you look at our self clearing its fully converted and the U S.
Across our products and OTC, so we're fully up and running of.
Our our conversion and Europe.
And is targeted for the end of the first quarter.
And then with regard to our Treasury platform anything that we recently launched as I mentioned, our click to trade solutions and our integrated rates trading platform that all comes through.
Our self clearing solution today, so growth in rates.
In 2021, as part of our new offering our unique new offering.
We'll be self clear, we're also looking at our third party clearing relationships and.
With regard to our current <unk> platform and we continue to look at Optionality, whether we want to self clear and when so a lot of movement will happen and continue to happen in 2021 with regard to.
And third party clearing.
Our next question comes from Chris Allen with Compass point.
Hey, good morning, guys.
I wanted to ask just on the the the fully integrated rich for any capability now and the net hedging just the what kind of uptake you've seen so far.
And what's the client participation and like and just kind of how does the outlook on that product suite.
Sure Great Great question.
And just going back the 2020 on our rates business, we launched auto hedging, which is really of dealer solution to protect dealers on their hedging capability net hedging was launched late in the fourth quarter and rolled out rolled out on a pilot basis. It is now go live in Q1 and we're seeing.
Obviously, a long list of clients that have had interest and net net hedging solutions for some time. So the client take up should rollout here and the first and second quarter with additional enhancements to net hedging over the first half of the year with regard to the fully live right solution.
Couple of movements, there I think of one of the more exciting things as our integrated trading solutions fully click to trade.
Liquid streams and.
And both on the run and more importantly, our very unique off the run streaming solution, which really no other platforms have.
Streaming off the runs to institutional clients. So that's new as part of our offering.
We also plan to launch our Q and the first half of this year. So we'd have a combined click to trade so for your more liquid.
The front end of the curve would be click to trade solutions.
And then you'd be able to RF <unk> across the curve for larger trade sizes of our less liquid products and and.
That debt right now is being communicated to our clients and the demand is quite high.
Particularly around the events of last year, and and the liquidity constraints that were on some of the other platforms offering of rates trading. So theres some excitement from our clients on providing not only of full breadth of product with unique off the run click to trade solutions, but also.
Having a unique liquidity on the platform similar to how we run our credit trading solutions.
Our next.
<unk> comes from Ari Ghosh with credit Suisse.
Hey, good morning, everyone, maybe quick one for either for Chris on the <unk>.
The beauty and the market slipping out.
Looking at <unk> and.
And actually Muni and they have lower levels of electronic.
The data and transparency.
The things that you could talk about your broader strategy, including initiatives.
Richard platform data and the recent acquisitions to kind of solve these inefficiencies and if you have a sense for sites of the revenue opportunity and potential timeline of some of these structural changes take hold.
Yes, Im happy to take a start of debt oriented and sure Chris will have some follow up points.
<unk>.
You pointed out two enormous growth opportunities for us and.
And we're excited about the progress that we made and the municipal bond market. During the course of 2020 and all signs are that we can add a lot of value. There in terms of transaction cost savings and efficiency and the years ahead and you are right the institutional market really hasnt been electronic historically.
So there is a lot of.
Market share available there that is still done.
Either through instant messaging or through phone conversations that we think will benefit from our platform and as you know of the Muni market is the most fragmented bond market and the world. So open trading ads.
<unk> adds a tremendous amount of value, where we can connect all market participants into our all to all of liquidity pool and add value in terms of connecting people and finding the other side of the trade.
And as much the same it has been an important growth area for us for many years.
But we're more excited about what's still ahead and what are your when you were here at the market access you don't really think all of that much about the part of the market. That's already of electronic you think about the 75% of global credit that's not yet electronic and global OEM is a great example of that where we are connecting not only.
The hard currency debt in the.
But 26 local markets all of them on marketplace with the combination of dealer liquidity and alternative liquidity true all to all of our open trading. So we think we've got a tremendous opportunity there and we're excited about the signs we see beginning of of electronic trading adoption and important areas like Asia.
We are seeing really good client and take up going on there and that will be an important part of part of our global E on the strategy.
This is why we are investing the way that we are as Tony talked about earlier is the future opportunity is just so large and moodys and globally of them are just too. Many examples that we're looking at right now and just to put it in the context of the whole market. If you look at the full year 2020.
The top five banks alone had global of FIC revenue of $68 billion.
The market access had a record year of about $690 million of 1% of that revenue pie. So we see tremendous opportunity ahead.
As the market continues to adopt to the structural changes that are taking place new forms of liquidity the growth and ETF assets the growth and portfolio trading.
And we're really excited about what we see is the change of the market taking place that will undoubtedly increase market turnover and velocity and that's what really fuels, our interest and continuing to invest and this business.
Our next question comes from Michael Cyprus with Morgan Stanley.
Hey, good morning, and thanks for taking the question and I just wanted to circle back to some of the commentary earlier around the automated trading.
I'm hearing that the size of the trade is going through there is increasing and just curious if the if you could add any color on the block size penetration where that is now how that's evolving and how you might be able to increase the penetration on the automated trading side, even further whether it's in terms of new protocols and innovation and just how youre thinking about that.
Sure and again just the.
And the automated trading solution has been largely adopted by clients for small ticket solution.
And it hasnt been targeted for larger ticket. However, as we think about developing the automated suite of products. Our target is for block trades, particularly when you start to it.
Integrate both auto responder, which is the.
The ability to provide liquidity to other parties, who are requesting price and auto acts and putting together of those products.
Intuit, a single suite or a single order.
And where to a client algorithm would allow larger block orders to provide liquidity throughout the day and then auto X at the end of the day. So both the liquidity provider and a liquidity of take or all in one automated solution. Those are some of the targets that we have in 2021 as part of the initiatives around <unk>.
Automation, but but today as we see the the current client experience the execution quality for.
True.
<unk> somewhere around $2 million and size.
Is quite similar to anything $5 million and size. So that's why we're seeing a nice growth of 14% growth year over year and trade sizes and automation.
Our next question comes from Kyle Voigt with K B W.
Hi, Good morning, maybe a bigger picture question on on the high yield business.
I think when we talked about the liquidity characteristics of that high yield market versus the high grade in the past.
The agreement that the eventual electronic penetration rate and the high yield market will be lower in the high.
<unk> market.
Just just curious of your updated thoughts there and if it's changed at all just given that we've just seen tremendous growth and high yield electronic trading last year, just wondering if there's something different about.
And the ETF market or the hedge fund adoption and growth there and that change your long term view.
And kind of of the high yield.
<unk>.
Electronic penetration rates.
Great. Thanks for that Kyle and and you are right. This is.
Undoubtedly the best year over year market share growth story, we have ever had and market access seeing the inflection point.
And high yield during the course of 2020, but I'd point to a number of things.
And the size of our open order trading open trading order book now is so significant that of drawing new interest into our platform for high yield trading.
And the results are very good in terms of the quality of execution and the transaction cost savings that we can deliver so that that creates this virtuous cycle, where investors are more inclined to continue to put more orders into the system because of the transaction cost savings that they are achieving.
I would also say this.
Market, which is a great example of the changes taking place and fixed income.
Because we have very active alternative market makers that are now committing new capital.
To the high yield market. This as their primary way of transacting with and institutional clients is through the market access system. The hedge funds are getting much more involved and our high yield platform and finding great trading opportunities and then there are some significant growth going on and systematic credit trading strat.
<unk> and we see a lot of activity and rebalancing from systematic strategies coming into the high yield platform.
It's really a combination of factors and.
Yes, I do we all have higher thoughts now about where that electronic share will go. The other thing that's been really interesting to observe over the last three or four quarters is that a year ago. The bulk of our activity and the high yield was really and $1 million and under trade sizes. We're now doing significantly better in route.
Lots of high yield trading and which is a terrific sign that the market is getting much more comfortable putting larger trade sizes through on the high yield system. So we.
And we're really pleased with the results, but we think there's a long way to go or 17% of the market and the fourth quarter and the other 83% is mostly conducted through traditional means so theres a lot of runway left and the high yield market and we're excited about what we see.
Our next question comes from Christopher Butler with William Blair.
Yes.
Hey, guys good morning.
Just kind of the big picture question of kind of follow up on that last one I know market share is going to vary in any given year based on conditions and the market.
Over let's say, a five year horizon and at this stage what is your expectation for your market share gains and high grade and.
And the high yield given the the acceleration we saw in 'twenty and 'twenty.
I just think that there are many favorable macro trends that are working their way through the global credit markets and.
Leading to very positive market share trends on market access and.
I've mentioned them briefly earlier, but the growth and ETF funds under management is driving a lot of activity and the underlying bonds.
And it's creating a lot of relative value trading activity between the ETF shares and the underlying and bond market.
Portfolio trading.
And really driving a lot of.
Activity into our system on managing the tail risk and blocked bulk transactions that take place.
And you are seeing this huge growth and both buy side and the sell side, new entrants and new participants and global credit markets. So it leaves me feeling like we are going to see five years of very healthy growth and market share and a significant portion of global credit over the next five to 10 years is likely to be <unk>.
<unk> and.
This is this is why we have no hesitation about investing heavily and the business as the majority of the business today is still conducted through traditional means and I.
I think the direction of travel is very clear the electronic trading percentage of the market will continue to grow because of the transaction cost benefits that we are delivering and the efficiency of brings to all market participants and the fact that it does allow everybody to participate on a level playing field.
So we see many good years ahead in terms of market share gains and Rick I'll just add.
When you look at electronics.
Market share growth and the global credit market.
It should experience a similar characteristics to other markets, where you also see combined with that electronic growth and market share of turnover growth.
Witness that in 2020, and we expect that to continue so as.
The electronics piece of the market growth and certainly people and the industry forecast it can be as high of 90% of the overall market you will likely see higher turnover rates across the.
And the global corporate bond market, as well and we're seeing elements of that happening and where.
Certain hedge funds and systematic hedge funds are entering the market.
Using our platform and net debt that we've seen those entries and other asset classes, where turnover does increase so you can't just look at it is.
The single number what is the electronic market share of the overall market you do typically experienced higher turnover rates and the market.
Our next question comes from Alex <unk> with Goldman Sachs.
Hey, guys. Thanks.
Thanks for taking the question just maybe building on that last.
The response can you provide some evidence.
Over the course of the last call it year, maybe year and a half of where a larger size trades get broken down into smaller trades.
Ultimately kind of make their way into your market I know that that's also a big part of some of the initiatives and the protocols that you guys have been putting together I'm just trying to put some numbers around that and to see how much of that has actually been coming through.
Yes.
The only thing I would I mean, we see large blocks go up we see large portfolios go up on trade and then we.
Obviously see activity on our platform as a result of those trades I think one area of evidence that we're benefiting from some of the block trade aside from just our overall block trade growth rate and then the <unk> block trading were up 11% and Q4.
It's just our dealer of Q initiatives that we really we're pushing throughout 2020 has seen exceptional growth.
Dealers are coming to us for liquidation of.
Positions and largely those liquidations are as a result of a larger block trade that was done and.
They have either pieces of that trade that theyre unloading.
Or other pieces of our portfolio of that they are liquidating sort of really our dealer or for Q.
Growth rate and in Q4 and high yield the loan our dealer of Q.
Offering doubled and volume.
And overall dealer of <unk> was up substantially throughout 2020, So I think thats an area of evidence where we may not be capturing the original block, but we are seeing the benefits of the liquidation of block pieces.
And our own view is the trading automation is still in early innings and global credit.
I think as that takes hold over the coming years youre going to see more optionality among institutional investors in terms of how they execute blocks.
It is not evident in terms of the percentage of block trading and trace yet, but I think automation will play a part of that story and the years ahead and I think it will give us another option to investors when they think about the best way to execute blocks.
Our next question comes from the line of Rich Repetto with Piper Sandler.
Yes, I have a follow up for Mr automation over there.
Okay.
So if we look at 2020 it appears that.
It was the year of open trade like you've talked about earlier EBITDA helped high yield market share et cetera.
When you look at all of the initiatives you got going on whether it would be.
Blocks of higher.
The block trades or.
Hi turnover portfolio of trading, let's just say and the next six to 12 months like what what really think which area do you think will really hit.
Are you expected to hit in 2021.
Well I think.
I'll start with our investment and treasuries and the rates business.
And that's an area of that I'm, most excited about because of our unique offering.
It also comes with a little bit of automation and so remember you can you.
You can wrap automation around the treasuries offering that we're launching in 2021.
I said a year ago that I loved munis, and if you look at our performance and munis and 2020.
And we're more excited about the opportunity in 2021.
Given our growth rate, we had a record day for <unk> and <unk>.
In January.
Just recently so continued excitement amount around that are planned for automation. It is quite sophisticated in how we are starting to combine.
<unk> auto responder together to create what are the early days of the traditional algorithm for clients to help clients take of large block order.
Passive throughout the period of the day have a timed auto execution later in the day.
And so they can still see the the success of the position getting executed, but they can improve their execution quality throughout the day features where we're providing all of messes with.
The trades.
It's partial trade on a larger sized order is all being rolled out in 2021, So just a great deal of activity and the automation area across all of our products and then as I mentioned and talking points, we're seeing auto automation uptake across not only just high grade and high <unk>.
Yield, but also euro bonds and.
And as well so pretty pretty.
Pretty big agenda for automation and 2021 I'm.
And I'm not sure if I answered your question right.
You bet. Thank you.
Our next question comes from Brian Bedell with Deutsche Bank.
Great. Thanks. Thanks, Good morning folks maybe just the follow on from the market share.
Electronic kind of penetration market share.
The maybe the flip side of that.
Can you characterize what you think is the the headwind from new issuance.
Bank of conductors.
The new bond newborn and and.
And largely trade the is on CS and bonds.
Maybe some commentary about through that part of the market, which.
Guests would be sort of untouchable, and so to speak or not.
As viable for electronic.
Penetration, maybe if you can sort of comment on that thought.
And roughly what percentage of the market.
Got it.
Sure I'm happy to happy to take a shot at that Brian, but I think what youre, referring to is the very robust and record levels of new issuance last year, and how that impacts new issue activity this year and.
And Youre right it would be unreasonable to expect that new issue volume and activity. This year will mimic last year. However, when we look at the deal our estimates it's still expected to be enacted the year on any normal basis. It was just last year was extraordinary.
Because of the needs for so many corporations to bolster liquidity on their balance sheet during the pandemic.
So.
We are we would temper our views on.
The new issue secondary trading activity this year relative to last but we still think the long term macro trend is toward more of market turnover and higher velocity and the.
The greater electronic vacation of credit markets is one piece of that and as I mentioned, the new tools around portfolio and Etfs to trade a transfer of risk are part of that story and then the massive increase in credit market participants as part of that story. So we still think and the short term, yes, we might have a <unk>.
Many of our headwind from slightly less newly issued bond trading, but and the long term, we're really bullish on overall market volume and market turnover.
We have new protocols live markets mid <unk>, others that are really designed around.
The active actively traded bonds, including newly issued bonds. So we think we of our role to play and that market. After the bonds break into the secondary market and we'll continue to push ahead on that as well.
Our next question comes from Dan Fannon with Jefferies.
Thanks, and just a follow up on the non transactional revenue and just kind of of the outlook for info services as well as post trade and if you could.
Separate out the recent acquisition and then the underlying growth rates as we kind of think about 2021.
Yeah sure Dan so.
On the info services side.
Chris had some comments debt.
Full year revenue was up around 12% and and even when you look at the five year compounded annual growth rate for information services, it's right around that 11% 12% range.
The terms of sales a little bit of guidance for for 2021.
Got a pretty decent.
Pipeline is as we enter 2021.
We think we can deliver and another year of double digit revenue growth.
We had new data sales last year, but about $6 $5 million and was about $5 $5 million of the year before that we've got a pretty good pipeline entering entering 2021, but yes.
I'd reiterate what we've said in the past around around data that we're also using data to to Incent clients the trade more on the platform and.
And that's of.
The principal use of the content debt debt, we're capturing so.
We expect to grow the the info services revenue double digits, but again.
And important piece of the information.
And we're delivering and to help clients make make pricing decisions.
On the on the post trade side.
Take it in two pieces on the post trade side and.
We had given some color on regulatory reporting hub, what the impact would be we gave some color and the in the third quarter take that piece, it's somewhere around $1 million per month and revenue with what were expecting maybe a little bit higher than that what we're expecting in 2021 on the organic side.
Good.
We're expecting double digit growth on the organic side and it's really of full year impact of FTR reporting which came online mid way through 2020, and it's also we've been adding clients organically. So.
The combination of of those two items.
We think we're looking at double digit organic growth overlay of regulatory reporting hub of 1 million.
And so and revenue a month and that gives you a sense for what we're expecting for 2021.
Great. Thank you.
Our next question comes from Chris Allen with Compass point.
Yes. Thanks.
And actually asked my question I guess, just the one quick one.
And there's been some recent calls and Europe for consolidated bond team and your thoughts around the impact there and and how you can participate.
Sure happy to take that I think it's it's.
Early days and the.
The new regulatory structure and Europe post Brexit in terms of.
Where this all lands.
Clearly mifid two included some commentary on consolidated trade tape.
And.
And.
And would start by saying we are big fans of market transparency and we think they do.
Transparency increases participation and creates a fair marketplace and Europe is lacking some of that transparency today. So we are supportive of transparency improving and the region.
Obviously with our Reg reporting and our E trading business have a substantial amount of transaction data and we do think we have a role to play but it is not exactly clear yet where this will all land I think we will learn more about it over the next year or two.
And it will take time before anything is implemented but we do believe with the vast base of transaction data that we have we have ways to participate in that.
Thanks, guys.
Our next question comes from Brian Bedell with Deutsche Bank.
Thanks for taking the opposite.
I'm wondering and green bond for Chris.
It looks like it's worth about one percentage of your volumes overall, and so it's still pretty small growing though.
And I guess, what's your outlook for.
Volume growth and there may be share of the market and maybe go back and.
And sort of.
Characterization of client demand for that over the next two to three years and then all of your economics on trading that any any significantly different than your overall.
The revenue capture it.
Great question and I appreciate the question on the Green Bond initiative, because that's something we work closely on all year.
Obviously.
The goal of the Green Bond initiative was certainly to provide our clients with a better solution.
As they went out to look for filling.
Some of their ESG mandates that they were getting from their own clients.
We certainly made green bonds much more available on the platform. The nice thing about the solution as we were planting trees for every million dollars of green bonds that you trade at on the platform. So the.
And the economic.
Incentives are there.
But also the.
The benefits for.
For the environment that there as well and planting over 135000 trees as a result of those green bonds trade at on platform Green bonds, and really ESG related bonds saw a record issuance in 2020 the.
The forecast for 2021 or even larger so we expect.
ESG related bonds to make up of much larger portion of the new issue market in 2021 and.
And we will continue to run our green bond trading for <unk> solution.
Clients are getting will be getting certificates for the trees that they planted and we're also excited to pick the number one trading for trees trader on the planet.
And they'll get and award as we rollout some of the awards for.
The environmental efforts that are clients of participated and there is another initiative thats related and I think it's worth mentioning because it cuts across many of our products and thats, our diversity of dealer solution that we rolled out and the fourth quarter and it's quite exciting because it really solve some of the similar mandates that are clients of <unk>.
Half of around ESG and this allows diversity of dealers to take advantage of our all to all marketplace open trading and attach themselves to that market and participate in trade.
They can also save our clients.
Better execution quality and save them money on their actual execution. So our clients are seeing the ability to select the diversity dealer at the same time as achieved best execution in their execution. So I expect the diversity of dealer solution and our green bond solution.
To be quite exciting solutions as we look into 2021 and all of the ESG related mandates that are coming down from investors across the globe.
Great that's great color. Thank you.
I'm showing no further questions in queue at this time I would like to turn the call back to Rick Mcvey for closing remarks.
Thank you for joining us this morning, and all of the best to all of you for 2021 and stay safe and stay healthy.
Yes.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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Okay.
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Ladies and gentlemen, thank you for standing by.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
At that time, if you have a question simply press Star then the number one on your telephone keypad.
If you'd like to withdraw your question press the pound key at any time.
Please note each person is limited to one question before being asked to rejoin the queue.
As a reminder of this conference call is being recorded on January 27th 2021.
I would now like to turn the call over to Dave Cresci Investor Relations manager and market access. Please go ahead Sir.
Good morning, and welcome to the market access and fourth quarter of 2020 conference call.
For the call Rick Mcvey, Chairman and Chief Executive Officer will review the highlights for the quarter and full year 2020, Chris Concannon, President and Chief operating officer will discuss automation and growth initiatives.
And then Tony the leaf Chief Financial Officer will review the financial results.
Before I turn the call over to Rick Let me remind you that today's call may include forward looking statements. These statements represent the company's belief regarding future events debt by their nature are uncertain.
Sure.
The company's actual results and financial condition may differ materially from what is indicated in the forward looking statements for a discussion of some of the risks and factors that could affect the company's future results.
Please see the description of risk factors and our annual report on form 10-K for the year ended December 31, 2019, and our quarterly report on form 10-Q for the third quarter I would also direct you to read the forward looking statement disclaimer and our quarterly earnings release, which was issued earlier this morning and now.
Available on our website.
Now, let me turn the call over to rich.
Good morning, and thank you for joining us to review, our fourth quarter and full year 2020 results.
We finished the year strong with significant business momentum and the fourth quarter market share gains and core products fueled a 32% year over year increase and revenue and a 51% increase and operating income.
Revenue for the quarter was $171 million and.
And EPS of $1 91.
And was up 45% versus last year high.
Hi, great market share reached a new high of 22, 8% and high yield share surged to a new record of 17, 1% up from 10, 6%.
Open trading volume grew 63% to $218 billion and the fourth quarter driving estimated transaction cost savings of $225 million to our clients.
We closed on the acquisition of Deutsche Boerse as regulatory reporting hub during the quarter and client Onboarding and integration is underway.
On the back of the strong results our board of directors approved an increase and our quarterly dividend to <unk> 66 per share up from 60.
Slide four highlights our record full year results.
Our long term results showed consistent execution of our growth agenda with strong five year, and 10 year compound revenue growth of 18% and compound EPS growth of 25%.
For full year 2020 revenue growth was 35% and EPS growth was 45%.
The results this year reflects strength and all of our core credit products with the record volume and revenue in the U S high grade high yield globally.
Euro bonds and munis and <unk>.
Total credit trading volume was up 29% and 2020 to $2 six trillion.
Active trading client firms during 2020 surpassed 1800 about half of which are outside of the U S.
Open trading grew to 33% of our traded volume up from 26% and 2019.
Estimated transaction cost savings from open trading skyrocketed to $1 1 billion for the full year.
Investors and dealers both initiated record order flow into our open trading liquidity pool in 2020.
Yes.
Slide five provides an update on market conditions.
As of year and high grade credit spreads have recovered to pre pandemic levels.
The credit spread volatility has also been declining over the last several quarters.
High grade and high yield bond issuance peaked in Q2 and fell back to more normal levels in Q4.
As a result of the combination of lower volatility and more normal new issue activity trace volume was up just 9% year over year in the fourth quarter.
Average years to maturity for corporate bonds traded on the system remained at the high end of the historical range at $9 for years.
This is one of the factors contributing to our increase in the fee capture per million and high grade the.
These market conditions are normally not favorable for volume growth.
However market share grew strongly during the second half of the year driving superior revenue and earnings growth.
Slide six provides an update on open trading.
And trading saw sustained growth, even though market conditions normalized and the second half of the year, demonstrating the central role of our marketplace and today's credit market.
Open trading credit volume and the fourth quarter increased 63% and overall credit trading revenue grew 34% versus last year.
For the quarter open trading represented approximately 34% of our global credit trading volume up from 27% in the fourth quarter of 2019.
Dealer initiated open trading volume grew 70% year over year and over 1600 unique client firms completed at least one trade and open trading during the quarter.
Open trading volume shows strong growth trends in each of our core products.
We are creating new trading and portfolio opportunities for our clients by delivering over $28 and open trading orders per day totaling $15 billion and daily notional value.
During the year, we also delivered important protocol enhancements, including live markets. Our order book for actively traded corporate bonds as well as mid X R sessions based matching platform that utilizes our composite plus mid market data.
Now, let me turn the call over to Chris to provide and update on automation and information services and post trade.
Slide seven demonstrates the growing momentum of automation and credit trading automated trading volumes rose to 32 billion and the fourth quarter up from $24 3 billion and the fourth quarter of 2019 auto ex trade count grew in the quarter to 163000.
And up 28% from the prior year. We are also seeing of healthy adoption of auto ex across euro bonds high yield and emerging market bonds.
The average trade size conducted through <unk> is also rising and.
And U S investment grade the average trade size, and 2020 grew 14% compared to 2019 and 40% compared to 2018.
Clients continue to increase the size of their orders as they gain comfort with the execution quality of our auto ex solution the <unk>.
Use of dealer algorithms continues to grow on the platform with approximately $3 9 million algo algo responses and the fourth quarter, resulting in 308000 trades. The average number of responses per inquiry remains strong, which ultimately improves the likelihood of execution across the platform.
New automated liquidity provision solution auto responder has seen early traction the solution allows investors to automatically respond to requests for liquidity through open trading in 2020 over $10 billion and notional value was automatically made available through our auto responder solution.
The overall share of electronic trading grows and credit we are seeing continued demand for our automated trading solutions.
Slide eight provides an update on product diversification.
Market data and analytics has never been more and demand than today and information services revenue reached $34 3 million for the year with a five year compounded growth rate of 11, 11%.
Unique data solutions are assisting bond pricing and liquidity providers on our trading platform, thus, helping to generate greater transaction volume.
And the year is following the implementation of Mifid to our post trade services business has grown substantially post trade revenues were $19 5.002 million 20 up 23% year over year.
Reflecting our commitment to post trade, we recently announced the completed acquisition of Deutsche of horses, regulatory reporting hub, which add significant client penetration and continental Europe and strengthens our data capabilities.
Our rates business had a critical milestone and the fourth quarter by integrating U S treasury trading capabilities within the market access platform, providing a centralized fixed income trading solution with a full click to trade suite of products. This allows current credit trading users to seamlessly access this unique rates trade.
The solution with complete post trade integration.
We also launched our net hedging solution and Q4, which supports our credit trading clients ability to efficiently hedge their corporate bond transactions.
Slide nine provides the summary of our trading volume across product categories. Our U S. High grade volumes were up 26% year over year to 318 billion for the quarter largely due to market share gains and an increase and market volumes estimated U S high grade market share increased by two eight.
Eight percentage points year over year to 222, 8%, while estimated U S high grade market volumes were up 10% year over year.
Volumes and our other credit category were up 36% year over year to 321 billion for the quarter market share gains account for the vast majority of the 74% increase and U S high yield volume eurobond volume experienced a 31% increase and emerging market bonds.
Volume grew by 19% year over year.
Im also excited to report that our municipal bond volume doubled year over year.
Our rates business maintained its dealer to dealer market share compared to Q4 of 2019, and what was a difficult market environment. We believe the investment made and new trading technology expanded product coverage and enhance data tools will continue to differentiate our rates offering our 2012.
The Green Bond trading initiative was very successful with $27 billion Green bonds traded on the platform, resulting in nearly 135000 trees planted and critical regions across the world.
With three trading days remaining in January estimated U S trace market volumes are running more than 10% above January 2020, while estimated eurobond and emerging market volumes are similar to January of 2020 estimated combined market share across our four core products the seasonally below the.
The fourth quarter levels, but well above the January 2020 levels, our month to date average daily trading volume and credit products is up more than 20% versus January 2020.
Now, let me turn the call over to Tony to provide and update on our financials.
Thank you Chris.
On slide 10, we provide a summary of our quarterly earnings performance.
Revenue was $171 million up 32% year over year.
For the 31% increase and credit trading volume and higher overall credit fee capture resulted in a 33% uplift and commissions.
Post trade services revenue was up 67% to $6 6 million and reflects one month of trade reporting activity from clients added to the regulatory reported by the acquisition.
Operating income was up 51% year over year and operating margin reached 53, 5% during the quarter.
Full year 2020 operating margin was up more than five percentage points to 54, 4%.
The effective tax rate was 19, 2% and the fourth quarter and our full year effective tax rate came in at 20%, which was right at the low end of our 2020 guidance range.
On slide 11, and we have laid out our commission revenue trading volumes and fees per million.
Total variable transaction fees were up 40% year over year, driven by the increase and credit trading volume and higher use of high grade fee capture.
U S high grade fee per million was down $12 versus the third quarter level of $17 higher year over year.
The combination of shorter duration and higher weighting to larger trade sizes accounted for the sequential decline and fee capture.
Our other credit category fee capture decreased by $6 on a sequential basis, but was $11 higher year over year.
Slight drop and sequential other credit fee capture was principally due to a mix shift with the greater weighting towards euro bonds and emerging markets sovereign bonds.
The sequential change and distribution fees was due to variances and unused minimum commitment fees under all variable dealer plans.
Slide 12 provides you with the expense detail the <unk>.
Year over year rise and compensation and benefits was due to an increase and head count of 79 personnel and support of our growth initiatives.
The increase of professional and consulting expenses is due to a variety of factors, including M&A transaction and integration costs and consulting costs associated with our clearing and settlement transition projects.
Higher depreciation and amortization reflects the continuing investment and product development and the trading platform along with the amortization of acquired intangibles.
Clearing costs were up almost 50%, reflecting the 63% increase and open trading volume.
And as I mentioned on the third quarter earnings call. We expect our steady state third party clearing costs for credit trading measured as a percentage of open trading revenue on a per ticket basis to decline by upwards of one third.
Excluding M&A transaction and integration costs and.
And the amortization of intangible assets associated with the regulatory of acquisition expenses were up 12% from the fourth quarter.
On slide 13, we provide balance sheet information.
Cash and investments as of December 31 for $489 million and free cash flow reached a record $340 million and 2020.
Dividends and share repurchases aggregated $150 million and capital expenditures were $46 million and 2020.
With the announced increase and the quarterly dividend to <unk> 66 per share we have tripled the dividend level over the past five years, which matches the growth and earnings and free cash flow generation.
Our board recently authorized the new $100 million share repurchase program to replace the plan expiring at the end of March.
And it's been our practice the principal purpose of the repurchase plan to offset dilution from employee equity grants.
During the fourth quarter, we also entered into a new $500 million revolving credit facility with the syndicated banks to support our clearing activities and add financial flexibility.
And there were no borrowings outstanding at year end under this facility.
On slide 14, we've laid out our 2021 guidance for expenses capital expenditures and the effective tax rate.
We expect the total of 2021 expenses will be and the range of 362 million to $382 million.
Employee compensation and benefit costs are expected to represent around 50% of total expenses consistent with the trend over the past several years.
We have built the plan using of Sterling to U S. Dollar exchange rate of 135, which has the effect of adding around $4 million to the expense guidance.
This guidance range.
The reflects the full year of operating expenses related to the regulatory reporting of acquisition and.
Including an estimated $5 million for amortization of acquired intangibles and $5 million and nonrecurring integration costs.
Excluding the expenses related to regulatory reporting other.
The midpoint and the guidance range would represent an approximate 13% year over year increase and expenses on a constant currency basis.
2021 capital expenditures are expected to range from $50 million to $55 million of which roughly two thirds relates to capitalized software development costs, resulting from the investments, we're making and new protocols and enhancements to the trading platform.
We expect of the effective tax rate for full year 2021 will range from 22% to 24%.
The increase and the effective tax rate versus 2020 is driven by lower estimated excess tax benefits related to share based compensation awards.
Based on the expected timing for realizing the excess tax benefits the.
The effective tax rate will likely be and the 20% range and the first quarter and then the 24% to 25% range in the second third and fourth quarters.
Now, let me turn the call back to Rick.
Thank you Tony too.
2020 was an outstanding year for revenue and earnings growth.
Want to thank all market access to employees for their dedication that led to these terrific results.
<unk> market share momentum and the second half of 2020 positions us well for continued growth and the years ahead.
We are investing heavily to grow our portfolio of products protocols and clients in order to continue our track record of long term sustainable growth.
We would now be happy to open the line for your questions.
Ladies and gentlemen, if you would like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Please note each person is limited to one question before being asked of me join the queue.
Our first question comes from Dan Fannon with Jefferies.
Hi, Thanks, good morning.
My first question is for Tony on the expenses and just kind of the outlook.
Looking at the organic expense growth slightly higher than where I think you started out last year in terms of what you were going to spend on could you maybe highlight some of the areas of spend and kind of initiatives that might be different year over year and then.
Yes that and then also just any.
The other kind of normalization of spending that might be.
And in terms of travel and spending around the kind of the macro and COVID-19 related expense.
Sure Dan happy to take that one and.
And so on and on the expense guidance.
We tried to give you the pieces, it's easier to explain and the two pieces, which is the organic growth.
And then the the regular regulatory reporting hub overlay on top of that.
We're guiding to it of 13% constant currency increase it probably shouldn't be a surprise.
If you look at if you look at history, Richard given some some color on the revenue and earnings CAGR. If you look at the expense CAGR over the past five or 10 years, it's 15% so.
Okay.
The 13% that we're guiding to is really right in line with history and and.
I would I would tell you also that debt.
I would suggest the shareholders of continue to support that that type of continuing investment and if you look at the revenue and earnings growth that we've delivered over the years, but put that aside in terms of the pieces the.
On the organic piece.
We entered 2021 with a full investment agenda, we've got new protocols newer product areas geographic expansion efforts.
So we're continuing on that investment path individual line items and this won't be of surprise, where youre going to see most of the absolute expense increase is in comp and benefits. Its really head count driven you think about the.
80, or so people that we added in and 2020, we have.
Plans to add another 60, or so personnel to support our growth agenda in 2021, so it won't be a surprise if that's the line item that will dominate the expense increase the other piece you look at and it would be along the the investment theme depreciation and amortization is expected to be.
25% or so higher than 2020 on an organic basis and.
And that reflects the investment, we've been making and trading protocols and the platform and.
Specifically in our <unk>.
And those around the amortization of soft of software development costs. So those are the big the big items.
Give you two other items just to give you a little bit of color, yes, we expect an increase in.
And in marketing and advertising and G&A expenses, which would be driven by.
The resumption of <unk> right now and our models, we've got we've got travel and entertainment resuming sometime in the second half of the year. So youll see some increase there, but that's not what.
And what's dominated the absolute numbers. The other one just to give you a little bit of color, we're expecting clearing costs to be flattish year over year and.
I do want to spend just two minutes on that because there's two components to clearing costs you have.
The clearing costs related to credit and then you have clearing costs related to the U S treasuries and we're budgeting in the aggregate to be flat the savings that we anticipate from going to self clearing and transitioning settlement agents and the U K those savings will likely be offset by an increase and expected volume from <unk>.
And trading and an increase and U S Treasury and an increase and U S. Treasury trading volume so even though we're we're expecting steady state savings from from the transitioning and clearing of five or $6 million, we expect that to be offset so just wanted to give you a little bit of color on that.
Boy that was a low and answer wasn't it.
And I fell asleep.
Our next question comes from Rich Repetto with Piper Sandler.
Yes, good morning, guys.
And I had a question.
And I had a question of automated trading, but Chris covenant, so while I can skip it.
And I'll go.
And I'll go right because the other long winded answer, but the Tony on the self clearing you mentioned that.
The reduce it by I thought you said the third but I thought.
I thought that percentage.
I thought it was like it's running at 12% of open trading revenue right now and I thought that get cut in half and.
And just trying to understand why it doesn't seem like we saw any impact.
And this quarter and I thought we ramped our started to launch it and in August and.
And where are we at as we enter the new year and regards to <unk>.
Fully half of all the capital and place et cetera.
So rich no.
Happy to answer the follow on question on this and really you need to look at the clearing costs and <unk>.
And two pieces and we have.
And the costs associated with clearing open trading corporate bond transactions and that that has to do with with self clearing and the U S transition to the settlement agent in and.
In the UK and that's what we've been talking about a reduction and those clearing costs by upwards of the third but the second component and this is this is part of why youre not seeing seeing the reduction and the second component is clearing costs for U S Treasury trading.
And where market access the intermediate those those trades and the near term, we're leaving that treasury clearing model in place and.
<unk> talked about this and the past clearing costs for treasuries runs somewhere around 30% of Treasury revenue. It depends on the protocol depends on trade size during the quarter.
Longer term, we'll look at rationalizing the broker dealers and the ultimately addressing the clearing model longer term, but you have to look at those two pieces.
In the fourth quarter and.
Admittedly.
We did see some improvement in clearing cost of for example, as a percentage of open trading revenue for credit.
Clearing costs were a little more than 9% they had been running the prior year was a little a little higher than 11% and the fourth quarter. So we did see some improvement, but we acknowledge that the.
There were some yes.
There were some teething pains and in the fourth quarter.
We're still.
We're looking at 2021 expenses.
Third party clearing cost expenses for credit and we believe that the savings will be upwards of a third on a steady state basis, whether you look at it as a percentage of.
Open trading revenue on a particular basis on a per million traded basis.
We're still looking at about a third.
And 30% or sales savings so it doesn't come through clearly and the numbers, but some.
Some of it has to do with again with the.
Have two elements to our clearing costs, both corporate bonds and then on the treasury side and Rick.
It's just a complete debt.
For the.
<unk>.
If you look at our self clearing its fully converted in the U S.
Our products and Ot and.
So we're fully up and running.
And our conversion and Europe.
And is targeted for the end of the first quarter.
And then with regard to our Treasury platform anything that we recently launched as I mentioned, our click to trade solutions and our integrated rates trading platform that all comes through.
And our self clearing solution today, so growth in rates.
In 2021, as part of our new offering our unique new offering.
We'll be self clear, we're also looking at our third party clearing relationships and.
With regard to our current <unk> platform and we continue to look at Optionality, whether we want of self clear and when so a lot of movement will happen and continue to happen in 2021 with regard to <unk>.
And third party clearing.
Our next question comes from Chris Allen with Compass point.
Hey, good morning, guys.
And I wanted to ask just on the the fully integrated rates trading capability now and the net hedging just of what kind of uptake you've seen so far.
What's the client participation and like and just kind of how does the outlook on that product suite.
Sure Great Great question.
Just going back the 2020 on our rates business, we launched auto hedging, which is really of dealer solution to protect dealers on their hedging capability net hedging was launched late in the fourth quarter and rolled out rolled out on a pilot basis. It is now go live in Q1, and we're seeing obviously.
A long list of clients that have had interest and net net hedging solutions for some time. So the client take up should roll out here and the first and second quarter with additional enhancements to net hedging over the first half of the year with regard to the fully live right solution.
Couple of movements, there I think of one of the more exciting things as our integrated trading solutions fully click to trade liquid streams and both on the run and more importantly, our very unique off the run streaming solution, which really no other platforms have.
The streaming off of the runs to institutional clients. So that's new as part of our offering.
We also plan to launch our Q in the first half of this year. So we'd have a combined click to trade so for your more liquid for.
And of the curve would be click to trade solutions.
And then you'd be able to <unk> across the curve for larger trade sizes of our less liquid products and and.
And that right now is being communicated to our clients and the demand is quite high particularly around the events of last year and and the liquidity constraints that were on some of the other platforms offering of rates trading. So there is some excitement from our clients on provider.
<unk> not only of full breadth of product with unique off the run click to trade solutions, but also.
Having a unique liquidity on the platform similar to how we run our credit trading solutions.
Our next question comes from Ari Ghosh with credit Suisse.
Hey, good morning, everyone, maybe one for either for Chris on <unk>.
The beauty.
And <unk> markets.
Yes.
Looking at both for <unk> and actually new needs they have lower level of electronic.
Data and transparency.
Hoping that you could talk about your broader strategy, including initiatives to leverage the platform, Dave out and the recent acquisitions you kind of of Salt. These inefficiencies and if you have a sense for sites and the revenue opportunity and potential timeline of some of the structural changes take hold.
Yes, Im happy to take a start of debt oriented sure Chris will have some follow up points, but.
Yes.
And you pointed out to the enormous growth opportunities for us and we.
We're excited about the progress that we made and the municipal bond market. During the course of 2020 and all signs are that we can add a lot of value. There in terms of transaction cost savings and efficiency and the years ahead and you are right the institutional market really hasnt been electronic historically.
So there is a lot of.
Our market share available there that is still done.
Either through instant messaging or through phone conversations that we think will benefit from our platform and as you know the muni market is the most fragmented bond market and the world. So open trading adds a tremendous amount of value, where we can connect all market participants into our all to all of liquidity pool.
And add value in terms of connecting people and finding the other side of the trade.
And as much the same it has been an important growth area for us for many years.
But we're more excited about what's still ahead and what are your when you are here and market access you don't really think all of that much about the part of the market. That's already of electronic you think about the 75% of global credit that's not yet electronic and global OEM is a great example of that where we are connecting not only.
The hard currency debt in the.
But 26 local markets all of them one marketplace with a combination of dealer liquidity and alternative liquidity through all of our open trading. So we think we've got a tremendous opportunity there and we're excited about the signs we see a beginning of of electronic trading adoption and important areas like Asia.
We are seeing really good client and take up going on there and that will be an important part of part of our global E and the strategy.
But this is why we are investing the way that we are as Tony talked about earlier is the future opportunity is just so large and muni and global head of them are just too. Many examples that we're looking at right now and just to put it in context of the whole market. If you look at the full year 2012.
The top five banks alone had global FIC revenue of $68 billion.
The market access had a record year of about $690 million of 1% of that revenue pie and so we see tremendous opportunity ahead.
As the market continues to adopt to the structural changes that are taking place new forms of liquidity and the growth and ETF assets the growth and portfolio trading and we're really excited about what we see is the change of the market taking place that will undoubtedly increase market turnover and velocity and that's what.
Fuels, our interest and continuing to invest and this business.
Our next question comes from Michael Cyprus with Morgan Stanley.
Hey, good morning, and thanks for taking the question and I just wanted to circle back to some of the commentary earlier around the automated trading.
Hearing that the size of the trade is going through there is increasing and I'm. Just curious if the if you could add any color on the block size penetration where that is now how that's evolving and how you might be able to increase the block penetration on the automated trading side, even further whether it's in terms of new protocols and innovation and just how youre thinking about that.
Sure and again just the.
And the automated trading solution has been largely adopted by clients for small ticket solution.
And it hasnt been targeted for larger ticket. However, as we think about developing the automated suite of products. Our target is for block trades, particularly when you start to it.
Integrate both auto responder, which is a.
The ability to provide liquidity to other parties, who are requesting price and auto acts and putting together of those products.
And towards a single suite or a single order similar to our client algorithm will allow larger block orders to provide liquidity throughout the day and then auto X at the end of the day. So both the liquidity provider and a liquidity of take or all in one automated solution. Those are some of the targets that we.
In 2021 as part of the initiatives around automation, but but today as we see the the current client experience the execution quality for.
For trades.
We're around two 2 million and size.
It is quite similar to anything $5 million and size. So that's why we're seeing.
Nice growth of 14% growth year over year and trade sizes and automation.
Our next question comes from Kyle Voigt with K B W.
Hi, good morning.
Bigger picture question on the high yield business.
When we talked about the liquidity characteristics of that high yield market versus the high grade and the past the results agreement that the eventual electronic penetration rate and that high yield market will be lower and the high.
Great market.
And just just curious of your updated thoughts there and if it changed at all just given that we've just seen tremendous growth and high yield electronic trading last year, just wondering if there's something different about the.
The ETF market or the hedge fund adoption of growth there and that change your long term view.
And of the high yield.
Eventual electronic penetration rates.
Great Thanks for that Kyle and <unk>.
And Youre right. This is.
Undoubtedly the best year over year market share growth story, we've ever had and market access seeing the inflection point.
And high yield during the course of 2020, but I'd point to a number of things.
And the size of our open order trading open trading order book now is so significant that of drawing new interest into our platform for high yield trading.
And the results are very good in terms of the quality of execution and the transaction cost savings that we can deliver so that that creates this virtuous cycle, where investors are more inclined to continue to put more orders into the system because of the transaction cost savings that they are achieving.
I would also say this.
Market, which is a great example of the changes taking place and fixed income.
Because we have very active alternative market makers that are now committing new capital.
And to the high yield market. This as their primary way of transacting with and institutional clients is through the market access system. The hedge funds are getting much more involved and our high yield platform and finding great trading opportunities and then there are some significant growth going on and systematic credit trading strat.
<unk> and we see a lot of activity and rebalancing from systematic strategies coming into the high yield platform.
It's really a combination of factors and.
Yes, I do we all have higher thoughts now about where that electronic share will go. The other thing that's been really interesting to observe over the last three or four quarters is that a year ago. The bulk of our activity and the high yield was really and $1 million and under trade sizes, We're now doing significantly better in round.
And what high yield trading and which is a terrific sign that the market is getting much more comfortable putting larger trade sizes through on the high yield system. So we.
And we're really pleased with the results, but we think there's a long way to go or 17% of the market and the fourth quarter and the other 83% is mostly conducted through traditional means so theres a lot of runway left and the high yield market and we're excited about what we see.
Our next question comes from Christopher Butler with William Blair.
Yes.
Hey, guys good morning.
Just another big picture question of kind of a follow up on that last one I know the market share is going to vary in any given year based on conditions and the market.
Over let's say, a five year horizon and at this stage what is your expectation for your market share gains and high grade and.
And the high yield given the acceleration we saw in 2020.
I just think that there are many favorable macro trends that are working their way through the global credit markets and.
Leading to very positive market share trends on market access and.
I've mentioned them briefly earlier, but the growth and ETF funds under management is driving a lot of activity and the underlying bonds.
And it's creating a lot of relative value trading activity between the ETF shares and the underlying bond market.
Portfolio trading.
And really driving a lot of.
Activity into our system on managing the tail risk and blocked bulk transactions that take place.
And you are seeing this huge growth and both buy side and sell side, new entrants and new participants and global credit markets. So it leaves me feeling like we are going to see five years of very healthy growth and market share and a significant portion of global credit over the next five to 10 years is likely to be <unk>.
<unk> and.
This is this is why we have no hesitation about investing heavily and the business as the majority of the business today is still conducted through traditional means of.
I think the direction of travel is very clear the electronic trading percentage of the market will continue to grow because of the transaction cost benefits that we are delivering and the efficiency of brings to all market participants and the fact that it does allow everybody to participate on a level playing field.
So we see many good years ahead in terms of market share gains and Rick I'll just add.
When you look at electronics.
Market share growth and the global credit market.
It should experience similar characteristics to other markets, where you also see combined with that electronics growth and market share turnover growth.
Witness that in 2020, and we expect that to continue so.
The electronics piece of the market growth and certainly people and the industry forecast it can be as high of 90% of the overall market you will likely see higher turnover rates across the the.
And the global corporate bond market as well and we're seeing elements of that happening where certain hedge fund systematic hedge funds are entering the market.
Using our platform and net debt, we've seen those entries and other asset classes, where turnover does increase so you can't just look at it is.
The single number what is the electronic market share of the overall market you do typically experienced higher turnover rates and the market.
Our next question comes from Alex <unk> with Goldman Sachs.
Hey, guys. Thanks.
Thanks for taking the question just maybe building on that last.
The response can you provide some evidence.
Over the course of the last call it year, maybe year and a half of where our larger size trades get broken down into smaller trades.
Ultimately kind of make their way into your market I know that's also a big part of some of the initiatives and the protocols that you guys have been putting together I'm just trying to put some numbers around that and to see how much of that has actually been coming through.
Yes.
The only thing I would I mean, we see large blocks go up we see large portfolios go up on trade and then we.
Obviously see activity on our platform as a result of those trades I think one area of evidence that we're benefiting from some of the block trade aside from just our overall block trade growth rate and then block trading were up 11% and Q4.
It's just our deal of our Q initiative that we really we're pushing throughout 2020 has seen exceptional growth.
Dealers are coming to us for liquidation of.
Positions and largely those liquidations are as a result of a larger block trade that was done and.
They have either pieces of that trade that theyre unloading.
Or other pieces of our portfolio of that they are liquidating sort of really our dealer or for Q.
Growth rate and in Q4 and high yield alone our dealer of cube.
Offering doubled and volume.
And overall dealer of <unk> was up substantially throughout 2020, So I think thats an area of evidence where we may not be capturing the original block, but we are seeing the benefits of the liquidation of block pieces.
And our own view is the trading automation is still in early innings and global credit and.
I think as that takes hold over the coming years youre going to see more optionality of among institutional investors in terms of how they execute blocks.
It is not evident in terms of the percentage of block trading and trace yet, but I think automation will play a part of that story and the years ahead and I think it will give us another option to investors when they think about the best way to execute blocks.
Our next question comes from the line of Richard Repetto with Piper Sandler.
Yes, I have a follow up for Mr automation over there.
And so.
So if we look at 2020 it appears that.
It was the year of open trade like you talked about earlier.
The <unk> high yield market share et cetera.
When you look at all of the initiatives you got going on whether it would be.
Blocks.
The block trades are.
Turnover portfolio of trading.
Let's just say the next six to 12 months like what what really.
Do you think will really hit.
Are you expected to hit in 2021.
Well I think.
I'll start with our investment and treasuries and the rates business.
That's an area of that I'm, most excited about because of our unique offering.
It also comes with a little bit of automation and so remember you can you.
You can wrap automation around the treasuries offering that we're launching in 2021.
I said, a year ago that I loved munis and.
You look at our performance and munis and 2020.
We're more excited about the opportunity in 2021, given our growth rate, we had a record day for <unk> and <unk>.
In January.
Just recently so continued excitement amount around that are planned for automation is quite sophisticated in how we are starting to combine.
<unk> auto responder together to create what are the early days of the traditional algorithm for clients to help clients take of large block order.
Passive throughout the period of the day have a timed auto execution later in the day.
And so they can still see the the success of the position getting executed, but they can improve their execution quality throughout the day features where we're providing all of messes with.
The trades.
It's partial trade on a larger size orders all being rolled out in 2021 so.
Great deal of activity and the automation area across all of our products and then as I mentioned and talking points, we're seeing auto automation uptake across not only just high grade and high yield but also euro bonds.
And as well, so pretty pretty big agenda for automation and 2021.
I'm not sure if I answered your question rich.
Thank you.
Our next question comes from Brian Bedell with Deutsche Bank.
Great. Thanks. Thanks, Good morning folks, maybe just to follow on from the market share.
Elektron, the kind of penetration market share argument.
The maybe the flip side of that.
Can you characterize what you're thinking is the the headwind from new issuance and.
The bank conducted.
The new bond newborn and and and.
And largely trade is on the than bonds.
Maybe some commentary about through that part of the market, which.
I guess would be sort of untouchable, and so to speak or not.
As viable for electronic.
Penetration, maybe if you can sort of comment on that thought.
And roughly what percentage of the market.
Got it.
Sure I'm happy to happy to take a shot at that Brian, but I think what youre, referring to is the very robust and record levels of new issuance last year, and how that impacts new issue activity this year and.
You are right it would be unreasonable to expect that new issue volume and activity. This year will mimic last year. However, when we look at the deal. Our estimates it is still expected to be enacting of the year on any normal basis. It was just last year was extraordinary.
And because of the needs for so many corporations to bolster liquidity on their balance sheet during the pandemic.
So.
We are we would temper our views on.
The new issue secondary trading activity this year relative to last but we still think the long term macro trend is toward more of a market turnover and higher velocity and the.
The greater electrification of credit markets is one piece of that and as I mentioned, the new tools around portfolio and Etfs. The trans transfer of risk are part of that story and then the massive increase in credit market participants as part of that story. So we still think and the short term, yes, we might have of my.
And our headwind from slightly less newly issued bond trading, but and the long term, we're really bullish on overall market volume and market turnover and.
We have new protocols live markets mid <unk>, others that are really designed around.
The active actively traded bonds, including newly issued bonds. So we think we of our role to play and that market. After the bonds break into the secondary market and we will continue to push ahead on that as well.
Our next question comes from Dan Fannon with Jefferies.
Thanks, and just a follow up on the non transactional revenue and just kind of the outlook for info services as well as post trade and if you could.
Separate out the recent acquisition and then the underlying growth rate because we kind of think about 2021.
Yeah sure Dan so on the.
The info services side.
Chris had some comments debt.
Full year revenue was up around 12% and any of when you look at the five year compounded annual growth rate for information services, it's right around that 11% 12% range.
The terms of sales a little bit of guidance for for 2021.
Got a pretty decent.
Pipeline is as we enter 2021, we think we can deliver and another year of double digit revenue growth and.
We had new data sales last year, but about $6 5 million and was about $5 5 million and the year before that we've got a pretty good pipeline entering entering 2021, but I just.
To reiterate what we've said in the past around around data that we're also using data to to incent clients to trade more and the platform and.
And thats the.
The principal use of the content debt debt, we're capturing so.
We expect to grow the the info services revenue double digits, but again it is.
And important piece of the.
The information, we're delivering and to help clients make make pricing decisions.
On the on the post trade side.
Take it in two pieces on the post trade side and we.
We had given some color on regulatory reporting what the impact would be we gave some color and the in the third quarter take that piece, it's somewhere around $1 million per month and revenue with what were expecting maybe a little bit higher than that what were expecting and in 2021 on the organic side.
Good.
We're expecting double digit growth on the organic side and it's really of full year impact of FTR reporting which came online mid way through 2020, and it's also we've been adding clients organically so that net.
The combination of those two items.
We think we're looking at double digit organic growth overlay regulatory reporting hub of $1 million or so and revenue per month and that gives you a sense for what we're expecting for 2021.
Great. Thank you.
Our next question comes from Chris Allen with Compass point.
Yes, Thanks, guys, Dan actually asked my question I guess, just the one quick one.
And there's been some recent calls and Europe for consolidated bonds and.
Your thoughts around the impact there and how you can participate.
Sure happy to take that I think it's.
Early days and.
The new regulatory structure and Europe post Brexit in terms of.
And where this all lands.
Clearly mifid two included some commentary on consolidated trade tape.
And.
And.
And would start by saying we are big fans of market transparency, and we think the transparency increases participation and creates a fair marketplace and Europe is lacking some of that transparency. Today. So we are supportive of transparency improving and the region.
We obviously with our Reg reporting and our E trading business of a substantial amount of transaction data and we do think we have a role to play but it is not exactly clear yet where this will all land I think we'll learn more about it over the next year or two.
And it will take time before anything is implemented but we do believe with the vast base of transaction data that we have we have ways to participate in that.
Thanks, guys.
Our next question comes from Brian Bedell with Deutsche Bank.
Hi, folks thanks for taking the.
Good morning, and Greenbaum for credit.
It looks like it's worth about one percentage of your volumes overall, and so it's still pretty small growing though.
I guess, what's your outlook for <unk>.
Volume growth and there are maybe share of the marker and then.
Goodbye.
And sort of.
Characterization of client demand for that over the next two to three years and then all of your economics on trading that any any significantly different than your overall.
Revenue capture.
Great question I appreciate the question on the Green Bond initiative because of something we worked closely on all year.
Obviously.
The goal of the Green Bond initiative was certainly to provide our clients with a better solution.
As they went out to look for filling.
Some of their ESG mandates that they were getting from their own clients.
We certainly made green bonds much more available on the platform. The nice thing about the solution as we were planting trees for every million dollars of green bonds that you trade at on the platform. So the.
The economic.
Incentives are there.
But also the.
And the benefits.
For the environment that there as well and.
Planting over 135000 trees as a result of those green bonds trade at on platform Green bonds, and really ESG related bonds sort of record issuance in 2020 of the.
And the forecast for 2021 or even larger so we expect ESG related bonds to makeup of much larger portion of the new issue market in 2021.
And we will continue to run our green bond trading for <unk> solution.
Clients are getting will be getting certificates for the trees that they planted.
Also excited to pick the number one trading for trees trader on the planet, So they'll get and award as we rollout some of the awards for the environmental efforts that are clients of participated and Theres. Another initiative thats related and I think is worth mentioning because it cuts across.
Many of our products and that's our diversity of dealer solution that we rolled out in the fourth quarter and it's quite exciting because it really solves some of the similar mandates that our clients have around ESG and this allows diversity of dealers to take advantage of our all to all marketplace open trading and attach themselves to that market.
And participate in trade.
They can also save our clients.
Better execution quality and save them money on their actual execution. So our clients are seeing the ability to select the diversity dealer at the same time as achieved best execution and their execution. So I expect the diversity dealer solution and our green bond solution.
To be quite exciting solutions as we look into 2021 and all of the ESG related mandates that are coming down from investors across the globe.
Okay, that's great color. Thank you.
I'm showing no further questions in queue at this time I'd like to turn the call back to Rick Mcvey for closing remarks.
Thank you for joining us this morning, and all of the best to all of you for 2021 and stay safe and stay healthy.
Yes.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.