Q1 2021 Marketaxess Holdings Inc Earnings Call
Okay.
Today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by at this time all participants on 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 would like to withdraw your question press the pound key anytime please.
Please note each person is limited to one question before are being asked to rejoin the queue.
As a reminder, this conference call is being reported on April 22nd 2021 I.
I would now like to turn the call over to Dave Cresci Investor Relations manager at market access. Please go ahead Sir.
Good morning, and welcome to the market access first quarter 2021 conference call.
For the call, Rick Mcvey, Chairman and Chief Executive Officer.
Review the highlights from the quarter.
Chris Concannon, President and COO will discuss automation and product expansion and then Tony <unk> 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.
The company's actual results and financial condition may differ materially what is indicated in those forward looking statements.
For a discussion on some of the risks and factors that could affect the company's future results.
Please see the description of risk factors in our annual report on form 10-K for the year ended December 31 2020.
I would also direct you to read the forward looking statement disclaimer in our quarterly earnings release, which was issued earlier this morning.
Now available on our website now let me turn the call over to rich.
Thank you for joining us for our first quarter earnings call first quarter revenue reached a new quarterly record of $195 million up 16%.
Operating income of $103 million was up 14% and EPS of $2 at 11 was up 8%.
Our record revenue was driven primarily by market share gains in our core credit products.
New quarterly volume records were set for total credit trading volume as well as new volume records for high yield trading emerging markets euro bonds and municipal bonds.
Open trading volumes grew 20% year over year and estimated transaction cost savings delivered to our clients were $197 million.
International client volume was up 18% and reached a new record of $237 billion.
It is important.
Remember that in Q1 last year, we had five four weeks of elevated credit market activity due to the onset of the pandemic.
In light of the significant difference in market conditions. This year, we feel very good about the volume revenue and earnings growth this quarter.
Slide four provides an update on market conditions there.
The top left chart displays just how different the market environment was one year ago.
Our business thrives when credit spread volatility increases.
During Q1 last year credit spread volatility was 10 times greater than this year and credit spreads and high grade, where nearly 200 basis points wider.
New issue activity was strong during the quarter and similar to last year.
Trade volumes and high grade were up 7% in Q1, reflecting a continuing trend toward higher secondary market turnover.
Average years to maturity for investment grade bonds trade at on this system continues to climb and reached the high end of the historical range at 10 years this quarter.
Yeah.
Slide five provides an update on open trading.
Our market, leading all to all marketplace open trading set new records. This quarter with an average of 34000 orders per day totaling over 19 billion in notional value per day in credit products.
High grade high yield and emerging markets all show healthy open trading volume increases in excess of 20%.
Dealer initiated open trading orders were up 78% year over year.
Our <unk> business now represents 8% of our credit trading volume and 7% of credit trading revenue as we compete effectively in this client segment with more traditional <unk> competitors through open trading.
This quarter two thirds of our system wide open orders trade with a traditional dealer counterparty, while one third from price improvement in open trading.
Open trading Adv reached a new record of $4 billion per day up 22% year over year.
For the fifth quarter in a row estimated transaction cost savings of $197 million delivered to our clients were in excess of total company credit trading revenue.
Now, let me turn the call over to Chris to provide an update on product and client expansion.
Slide six highlights our international growth and product expansion.
Throughout the past year, we have remained focused on bolstering our global footprint and expanding our product offerings I will touch on a few of these initiatives today.
Our international growth continues with an 18% year over year increase in international client volumes driven by over 900 active clients across our global products in the first quarter U S credit volume from international clients was up 23% emerging markets volume increased by 22% on you.
<unk> bond volumes increased by 13% on.
Our ongoing investment in Asia Pacific region delivered an increase in the number of clients.
Significant gains in volume client credit volume from the region grew to 29 billion up 57% from the first quarter of 2020 as the number of clients in the region also grew by 14% over the past year. We are encouraged by the progress we are making outside the U S. And we believe we are well positioned to capture.
A larger share of trading in the growing global credit markets in.
In the area of product expansion, we continue to see momentum in our municipal bond offering in the first quarter. We again hit record volumes with a total of $5 8 billion in municipal bond volumes up 75% from a year ago. We also released recently closed on the acquisition of Muni brokers are central electronic venue.
New serving large banks and interdealer brokers in the municipal bond market the acquisition expands our connectivity with dealers and provides rich content for our growing muni client business.
Our post trade business, an important contributor to our data strategy continues to grow with organic post trade revenue up 50% in the first quarter driven largely by new client additions and our FTR offering we now have over 950 unique post trade clients.
The integration of our recently acquired regulatory reporting hub is well underway and is extending our leading regulatory reporting business across Europe, while further strengthening our data capabilities and our post trade services.
Slide seven demonstrates our continued momentum of automation in credit trade.
Automated trading and dealers automated responses continue to grow across the platform.
Automotive trading volumes rose to 39 billion in the first quarter up from $31 billion in the first quarter of 2020.
<unk> ex trade Count also grew in the quarter to 205000 up 37% from the prior year 95 firms utilized our auto ex functionality in the quarter up from 84 in Q1 of last year, while 22 firms used our auto responder functionality.
We are also seeing healthy adoption of auto ex across investment grade eurobonds high yield and emerging markets.
The use of dealer algorithms is continuing to grow on the platform with approximately $4 8 million algo responses in the first quarter up 57% from the same period last year the growth in the average number of responses per inquiry has resumed following a decline in the first half of last year.
The increasing responses ultimately improves the likelihood of execution across the platform.
As the overall share of electronic trading grows in global credit. We are seeing continued demand for and growth in our automated trading solutions were continuing to develop innovative automated trading solutions in collaboration with our buy and sell side clients and I look forward to sharing updates to our offering in the coming quarters.
On slide eight provides a summary of our trading volume across product categories. Our U S. High grade volumes were up 10% year over year to 363 billion for the quarter largely due to an increase in market volumes and market share gains estimated U S high grade market volumes were up 7% while estimated.
Share increased market share increased by <unk> five percentage points year over year to 25%.
Volumes in our other credit category were up 19% year over year to 391 billion for the quarter and we achieved record quarterly trading volume in high yield emerging markets Euro bonds and municipal bonds market share gains account for the vast majority of the increase across each product category with U S high yield volume.
Up 21% emerging markets volume up 18% eurobond volume up 15% on municipal bonds up 75%.
Our rates business maintained its dealer to dealer market share compared to Q4 of 2020, and we are beginning to see volume contribution from both our new dealer to client trading protocol and our recently launched hedging initiatives over 150 clients from now approved for a click to trade rates offering.
Regarding April activity with seven full days of trading left in April it is far too early to draw any conclusions on the four month. However, trace market volumes are currently running below Q1 levels and our market share is maintaining levels similar to Q1 now let me turn the call over to Tony to provide an update on our financials.
Thank you Chris on slide nine we provide a summary of our quarterly earnings performance.
Revenue was a record $195 million up 16% year over year.
A 14% increase in credit trading volume led to a 13% uplift in commissions.
Post trade services revenue.
More than doubled to $10 3 million and includes $4 million on trade reporting revenue from client added through the regulatory reporting hub acquisition.
Operating income was up 14% year over year and operating margin was 53% in the first quarter.
EBITDA hit a record quarterly level in the quarter.
Other expense was $1 $6 million on the first quarter and includes foreign currency transaction losses of $500000.
Absent unpredictable items like foreign currency transaction and investment gains and losses, we would expect other expense to run around $1 million per quarter.
The effective tax rate was 21% in the first quarter and reflects $4 million of excess tax benefits related to share based compensation awards.
Inclusive of the recently enacted increase in the New York State corporate tax rate, we are maintaining our full year effective tax rate guidance range of 22% to 24%.
On slide 10, we've laid out our commission revenue trading volumes and fees per million.
Total variable transaction fees were up 15% year over year.
On a composite basis, the majority of the 17% increase in credit transaction fees was driven by estimated market share gains.
The decline in rates transaction fees was due to lower U S. Treasury's trading volume, principally resulting from a decline in estimated dealer to dealer market volume.
U S high grade fee per million was down $7 versus the fourth quarter level, but $4 higher year over year.
There were several factors contributing to the sequential decline in fee capture including a shift in trade size.
The duration impact on U S high grade fee capture was muted on a sequential quarterly basis.
Its longer years to maturity on bonds traded over the platform was offset by higher bond yields.
Our other credit category fee per million or $202 with similar to both the fourth quarter 2020, and first quarter 2020 levels.
Mix, along with fee capture at the individual product level was very consistent across these periods.
Slide 11 provides you with the expense detail.
First quarter expenses were up 18% year over year and include $3 6 million of operating expenses amortization of acquired intangibles and nonrecurring integration costs related to the regulatory reporting hub business.
Excluding the regulatory reporting of activity expenses were up 14% year over year and up 11% on a constant currency basis.
The rise in compensation and benefits was due to an increase in head count of 74 personnel in support of our growth initiatives.
The increase in 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 in product development, along with the amortization of acquired intangibles.
While open trading volume increased 20%.
Overall clearing costs were down 15%.
In March we completed the second phase of our settlement project with the transition to a new settlement agent in the U K.
Although we expect to realize some further cost improvements over the balance of this year I am happy to report that third party clearing cost measured on a per ticket basis declined by over 35% year over year.
As Chris mentioned, we closed on the Muni brokerage acquisition on April nine.
We expect Muni brokerage expenses will be around $4 million in 2021, 50% of which will be amortization of acquired intangibles.
We are updating our full year expense guidance range to $370 million to $386 million to incorporate the muni brokers expense activity.
On slide 12, we provide balance sheet information.
Cash and investments were $415 million at March 31, and trailing 12 months free cash flow reached $340 million.
During the first quarter, we paid out year end employee bonuses and related taxes of roughly $50 million in the quarterly cash dividend of <unk> $25 million.
We also repurchased 54000 shares during the quarter the majority of which were associated with the investing of employee stock Awards.
We didnt borrow against our revolving credit facility in the first quarter and ended the period with over $300 million of excess net capital resident at market access Corp are regulated self clearing entity.
Based on our first quarter results. Our board has approved a 66 regular quarterly dividend.
Now, let me turn the call back to Rick.
Thank you, Tony and market share gains across all credit products in all geographic regions drove our record results in Q1.
Trading automation is advancing in credit products with both dealer and investor clients and market access open trading is leading the way.
We continue to invest actively in new product areas like municipal bonds government bonds and Asia emerging markets to sustain long term growth.
We are also pleased with the progress we are making with new electronic trading protocols.
Now I would be happy to open the line for your questions.
Ladies and gentlemen noted to ask a question. Please press star one on your telephone.
On to enjoy a question press the pound key.
Please be on violently compile the Q&A roster.
Our first question will come from rich Repetto.
From Piper Sandler you may begin.
Yes, good morning, Rick and Tony on Chris.
I guess the question is on the.
The fee per million and.
Slide.
Slide four helps chose the yield to maturity, but I guess I guess the question is Tony can you review the drivers we know that <unk>.
<unk> trade size and mix, but.
And we're just trying to see the moving parts.
If it's easier to compare quarter to quarter, I believe rather than year over year.
Because of the big change in.
In yields occurred between <unk> and <unk> I believe are.
Quite a bit easier easier. So we can understand that I guess.
Happy to do that rich.
Rich youre.
You're right that there is.
Lots of factors that influence the high grade fee capture and we're really talking about investment grade here.
Years to maturity matters.
Yields matter.
We have a tiered fee plan so trade size matters, we have.
The mix of dealers that are participating. So for example dealers that are on a distribution fee plan versus dealers that are on on all variable plan to fee capture looks different even up even when it comes from protocol. It may look different open trading fee capture is slightly different then.
Disclose request for quotes from the newer protocols the fee capture is different.
So theres a lot of moving parts here, but Richard you.
Youre right looking at say Q4 versus Q1.
That's probably the best way to describe it and when you look at those two periods fee capture was down about $7 per million.
Couple of items in their trade size. It was one of them not a big influencer, but trade size.
Did tended to want to shift to a little bit larger trade sizes, our fee capture is a little bit lower.
Dealer mix so when.
When we look at dealers that are on all variable plans versus fixed plan, a little bit heavier weighting to dealers on six planned fee capture a little bit lower but the item you mentioned, which is very interesting because it Rick picked it up on in his in his comments, we're at close to the post credit crisis high on <unk>.
As to maturity of bonds trade at over the platform typically that would result in higher fee capture dollar by the basis points higher with longer years to maturity, but in this case, what offset the years to maturity was the fact that yields were up so again youre right. You look at fourth quarter to first quarter. You did see you did see a rise in bond yields so those two were loss.
The offsetting.
One last thing because I'm getting on them on the clock right now.
One last thing just sensitivity going forward every year to maturity around 10% to $15 per million, all things being equal a 1% change in yields across the yield curve again about a 10% to 15.
10% to $15 per million, all things all else being Inc.
Okay.
Thank you.
Our next question will come from the line of Patrick.
And then Steve from.
Raymond James you may begin.
Hey, good morning, guys good morning.
I think portfolio trading is up to around 5% of high grade and high yield trading volume in recent months, what's driving this adoption by the buy side and can you provide an update on market access as efforts to develop a client solution on this area.
Sure I'll be happy to start on that Patrick. Thank you for the question, but yes.
Yes, you did see growth again in the first quarter and portfolio trading and I think that situationally clients and dealers are finding good opportunities to use the workflow solutions around portfolio portfolio trading for efficiency and execution and there are a variety of different.
Cases were.
Dealers can promote inventory and baskets to clients.
In an environment like this has been very popular from both sides you had certain transactions that involves offsetting buys and sells were.
The combined risk of the basket is less than it would be in individual bonds and can sometimes create efficient execution for both sides.
You've also seen trades, where investors are making room for new issues through portfolio trading so a variety of different case studies.
March was an unusually active month for portfolio trading.
Its tapered off from what we can see on the trade tape in April so far but very large month in March we continue to work on our workflow solution. There. We are very confident that we are closing the gaps that we have and will be competitive in this space.
At the same time, we're making very large investments in our liquidity solutions through open trading and a new product areas. So.
It's a convenient workflow solution, it's their subs.
Subset of very large dealers that are active a subset of very large clients limited client community, but growing importance in the market in.
It's something that we expect to be competitive in throughout 'twenty, one and beyond.
And Rick I'll, just add debt.
We are rolling out enhancements to our portfolio trading solution this quarter in the coming quarters, including things like critically important things like net hedging that.
That will be available.
Two portfolio trade the other things worth mentioning is we are seeing.
Activity in our dealer RF Q platform on open trading.
Which is likely resulting from the liquidation of portfolios that dealers are trading into so we are getting.
On collateral benefit on the platform, particularly in open trading and things like investment grade and high yield as a result of these very large block trades that are going up on trade and then we're seeing those dealer liquidations happening on the platform.
That's very helpful. Thank you.
Our next question will come from the line of Dan Fannon from Jefferies. You may begin.
Thanks, Good morning.
Wanted to follow up a bit more on some of the market share trends.
Year to date.
The detail on slide four highlights some of the macro factors, but as you think about <unk>.
Volatility maybe.
Being a bit more depressed in the work from home environment, ending as things normalize how are you thinking about kind of the trajectory of market share from.
From here.
Yeah, I'll start, but thanks for the question Dan but.
When we look at broadly at market share trends, we're really encouraged by what we see in the first quarter, even though as you point out.
Market volatility across most credit products was significantly lower than it had been much from much of last year.
It's coming through most clearly in year over year gains in high yield and emerging markets.
High grade a little bit more developed market electronically is going to have.
Ebbs and flows based on volatility and especially with the ETF or community.
You would've seen them very active a year ago and high volatility levels and they are always less active and low volatility environments, but beyond that when we look under the hood at the trends that we see with investment managers hedge funds dealers using open trading international clients. It's all.
Very encouraging for long term market share gains and we have no control over the quarter to quarter market conditions, but if you look historically at our consistent growth and success over almost 17 years of being a public company.
We've been able to show sustainable long term growth through any environment.
So our expectation is that we have lots of reason for optimism because of the liquidity solutions that we are delivering and the significant transaction cost savings to see share gains through any environment and that is certainly what we saw in the first quarter of this year.
Great. Thank you.
Our next question will come from the line of.
Ari Ghosh from credit Suisse, you may begin.
Hey, good morning, everyone. So just wanted to come back to some of your new initiatives and rollout, especially in institutional participation continues to improve this year, specifically I appreciate any color around the traction that you're seeing around live markets and then on should the opportunity for a full flow market access.
In China.
Given that there's been some recent regulatory changes on relaxation of up a little bit.
<unk> foreign investors. So just trying to think about how you scale that opportunity and timelines around when you think that can start rolling into your numbers on a meaningful amount on thanks. So much.
Well great question, so on on log markets I'll start we're.
We're seeing more activity on live markets and it's quite encouraging because it is a.
Brand New protocol to the credit space.
What we have seen is.
We've got 19 dealers live on the platform, we expect to have new announcements around designated market makers on the platform as well, we would likely have up to three designated market makers. Those are fully committed two sided market makers on the platform.
We expect to have announcements around that in the coming quarter.
Very encouraging signs on the size of trades on live markets right now our average trade size on live markets is $2 million, which is much larger than your traditional <unk> average on the platform. So we're encouraged that there is.
Sizable live liquidity with two way markets in over 250 <unk> across the platform. So again, it's a new protocol.
The changes in workflow and trading behavior by clients as a sizable lift but the liquidity. That's building on the platform is encouraging and the opportunity for clients to join a bidder on offer and not cross spread is growing as that liquidity on live markets grow.
I'll, let Rick cover.
Our recent activities in Asia, and the growth of our volumes there.
Alright.
We highlighted in the prepared remarks that we're really encouraged by the developments, we see with <unk>.
Our APAC business and part of it is organic where we.
We see more dealers and investor clients embracing electronic trading and trading consistently across the platform part of it we hear back from dealers is a view that our competitive position has gotten even stronger in <unk> globally, and particularly in the Asia region.
So really good news there in terms of the trends in the E on broadly in very large markets with respect to China I think that it's very clear that day will continue to take additional steps to open up their fixed income markets and given the presence we have with global investors in our E M.
Franchise, we know that we can play a significant role in bringing investor order flow into China, and we're also encouraged by southbound traffic where its likely that investors within China will be trading more actively outside of China.
So we would expect to be more involved in that market.
We're taking the steps to be.
Eligible to do so and we're hopeful that.
Our presence in the us.
Going to make a significant contribution to the Chinese golub opening up their fixed income markets.
Great. Thanks, so much.
Our next question comes from the line of Alex Bluestein from Goldman Sachs You may begin.
Hey, good morning, guys. Thanks for the question.
Just sticking with some of the new initiatives.
Chris you highlighted muni markets I was hoping to dig into that a little bit more.
Can you provide us I guess, maybe with some specifics around what market access is doing.
In order to enable greater pace of electrification in the media market today.
What are some of the biggest hurdles, obviously that feels like theres a lot of inertia in that space I'm trying to think how are you guys trying to break through that and.
And how much of a union of the Muni market do you think could ultimately become electronically trade it.
Sure ill tackle that one.
I continue to be excited about the muni market and our opportunity there.
You are talking about a very large market.
Difficult market to trade because of the.
The breadth of product in that market.
Data analytics will prove to be very helpful. In the muni market as we break down the more manual parts of the market and add electronic trading I am encouraged by our gross in munis.
Obviously, the 75% year over year increase in that market as is encouraging also I am encouraged by the size of our all to all market and Muni. So all to all is proving to be a very important component to our growth rate. It is now 43% of our volume in munis.
The other areas.
Seeing areas like dealer RF Q immunities grow over 170%.
Year over year. So we are seeing dealers using our platform.
To the way they would use on interdealer market Interdealer broker market.
Honestly you have closed the acquisition of Muni brokers.
That's approximately 4% of the muni market heavily weighted towards exempt munis.
We're working on the integration of that market.
We plan to have that integrated more largely in in 2021 I do think.
As you think about that market.
There are sizable costs to large investors to maintain their large small trade sizes across the muni market.
And we're seeing investments from the large investment managers to reduce their cost in that market similar to the way they've embraced electronic trading across their investment grade and high yield trading guests. So we just see that trend continuing.
C getting higher penetration rates in those large client flows in the muni market.
I can't predict how far it goes but given the small ticket sizes. The complexity of the market I would expect high dependency on electronic solutions for the years to come.
And then just.
Just one last thing just on the size of the market.
And thinking about where we are today, we're at about 2% market share.
And.
We've talked about this before in terms of revenue opportunity for us every 1% of share equates to about $10 million on annual revenue.
I don't nowhere.
You'll end up in terms of electronic adoption, but you can do a little math around.
Half the market goes electronic this as an enormous opportunity. That's why we're so focused on it. That's all we continued to invest that's ballpark the strategy around bringing on board Muni brokers, So big opportunity ahead of us.
Yes for sure it feels like a good run rate. Thanks.
Our next question on comes from the line of Michael <unk> from Morgan Stanley.
You may begin.
We're taking the question just hoping you could talk a little bit about block trade, maybe some of the initiatives you have there to further penetrate that where you stand today in terms of.
Block trade penetration and how you're seeing client behavior change around that.
Sure happy to.
Take a start on that Mike Thank you, but.
Let's say net.
It's.
An important part of the market.
Investing in new solutions to address blocks and we're seeing good progress in some areas as well.
I would point to high yield in particular, where for many years almost all of our volume was in odd lot trade sizes, and if you see the big jump year over year in high yield share. The majority of that is driven by more success than what is considered to be block size trades in high yield over $1 million.
So we've moved our market share up primarily by.
Investors and dealers in high yield getting more comfortable with large trade sizes.
In high grade, we've been pretty flat around the 10% area lately.
Clearly live markets is intended to tack part of the block trading market in very liquid bonds.
They're both new issues and benchmark deals trade actively in black block size in very tight bid offer and we're encouraged as you heard Chris say about some of the developments in live markets that we think over the coming quarters are going to make that a viable. New addition to activity on our trading platform and.
Especially in blocks.
And I'll just add Rick that.
We have a very unique view of the credit market and.
And developing a number of data solutions that help traders identify the true depth of the market things like our trade ability data solution. So.
So we do think we can be super helpful to the average trade desk when theyre determining true size of a block and how do we engage the market.
We do think that will attract larger size orders on our platform when we can define for them.
What the execution could be execution costs for that block.
And the true depth of the market at the moment in time, they want to trade.
Thank you. Our next question on comes from the line of Brian Bedell from Deutsche Bank, You may begin.
Thanks, Good morning, if I can squeeze the to partner on here.
I apologize I joined a few minutes late but just.
Just on fed back to the high grade market share question.
Given the growth initiatives and a pretty good client traction that you have across the different protocols, including auto ex in the transaction savings.
Given that vs. The challenges of the lower volatility at that sort of on more of a macro headwind.
When do you maybe it's hard to answer but when do you think you could cross.
Initiatives and client traction could could outweigh that headwind to volatility as we sort of move through 'twenty. One in terms of having a year over year gain in <unk>.
High grade market share and then the second part is is it just I don't think you've talked about this Chris yet, but just an update on the green bond trading.
Is that seems to be gaining momentum.
Momentum globally.
Well I'll start on the volatility question and then I'm sure Chris would like to update you on the Green Bond initiative.
And client adoption as well, but.
Listen volatility comes and goes in every market right. So yes, it's temporarily a headwind in credit.
Not to say that it'll be that way next week or next month or next quarter or so.
We do have a goldilocks scenario right now where people are quite optimistic on.
Economic growth for the quarters ahead, and that leads to better credit quality among a lot of corporate bond issuers, but our business keeps getting more diversified rates our European businesses.
More important than ever we talked about Asia Global E. M is loaded with opportunities all of them have different cycles and volatility characteristics along the way that it's not something that we worry that much about we would not have encourage anybody last spring to use those volatility levels as the new normal and we wouldn't.
Not encourage you today to leave to use current levels as the new normal either.
And what we do is focused on the long term is and that's where we've had great success is investing in important trading protocols in new markets around the world of new clients on boarding and Theres a lot of that going on right now.
And Theres a lot of reason to believe that over the coming quarters. There are multiple factors that could increase volatility. So it's a short term headwind, but we are.
It's not something we obsess over because we've been through all kinds of market environments over the last 17 years.
And I'll just add.
When it comes to long term growth rates.
We're encouraged by the growth of fixed income Etfs, we clearly.
Have correlation to some of the growth around fixed income Etfs on the trading of fixed income Etfs.
And that long term growth is underway in and quite powerful as you look at the numbers that.
AUM pouring into fixed income Etfs globally.
One reflection of that is.
In investment grade in the first quarter, our open trading which is an important component of the fixed income ETF Arb grew 24% in Q1 over over 2020, so important fundamental growth rates are happening.
Even in the face of.
Macro wins with regard to green bonds.
We're doing a lot of exciting things in the whole ESG area on.
Note that our ESG report is now live up on our website. So please take a look there has been a lot of work into that report on it reflects all the different things we're doing as a company.
But also some of the things that we're doing for our client investors, who trade green bonds.
First quarter Green Bond volume was $13 billion. So we continue to see increases on our platform in green bonds. More importantly, we launched last year, the green bond debt.
Trading for trees initiative, so not only are we.
Benefiting from the growth of Green bonds trading on our platform, but we're taking a stand in the environment and planting trees. We plan at 65000 trees in the first quarter. That's on top of what we planned it in 2020, which was 130000 trees. So.
We continue to see progress there.
And we have a small fire alarm tests going on in our in our background. So please ignore that but the trees are being planted green bonds are being trade it and we're super excited about what we can do in that in that environment.
Okay.
The last thing I'll say is that the other trend that's important for all of you to keep an eye on is the increase in trading velocity, that's taking place in credit and a variety of factors for that right. All to all trading is bringing a lot of new market participants into credit.
<unk>.
Many for the first time, so you have a new base of.
Market makers, new base of systematic credit investors. They are clearly adding to the mix around trading velocity and then you see all to all trading reducing transaction costs, which also traditionally will increase velocity. So lots of reasons to be optimistic that we could see higher levels of market.
Turnover in global credit as all client segments seem to be embracing greater levels of electronic trading and trading automation.
Yes.
Great. Thank you so much.
Once again as a reminder, debt by one quick question. Our next question comes from the line of Sean Hogan from Rosenblatt, you may begin.
Hey, guys. Thanks for taking my question.
I was wondering if you could talk about hiring plans for the year.
How many new hires you're targeting for 2021.
How many of those are will be technology is.
Yes, sure Sean happy to take the question in.
A big component of our of our.
Expenses, it is compensation and benefits, it's more than 50% of our costs.
And this year as we entered the year, we were looking to add somewhere around 60 or 70 personnel.
The majority of that the vast majority of that would be would be in the technology space.
We've got.
When you look at where we ended the first quarter with around 610 people. We've got just to put in perspective right now we've got about.
Line of sight on 50 roles with names attached to those roles and about half of those are part of our college Grad program, but but we've got we've got line of sight on around 50 roles today. So.
Feel pretty good about hitting that target of adding 60 or 70 personnel.
The balance of the full year.
Okay, great. Thank you.
And our next question on top line.
Alright, Josh from Credit Suisse, you may begin.
Taking my follow up guidance on Tony just a quick clean up items and again apologies if I missed this one but just looking at the <unk> non op expense of about $1 7 million.
I'm wondering if that's a good starting point for <unk> I know, there's a commitment fee.
In the numbers, but I was wondering if you know the other moving parts that might drop off on next quarter. Thanks, So much.
Sure Alright, and I know it's been a.
I know, it's been a challenge to predict that line items.
Theres a variety of non operating.
Items in there so you've got foreign currency transaction gains are hard to predict that one you've got unrealized and realized gains and losses on the investment portfolio again hard to predict there is items like our credit facility fees in there as well but.
It was around $1 6 million on the first quarter that did have some foreign currency transaction losses in there absent absent. These unpredictable items is what I had in the prepared remarks, you know absent the unpredictable items foreign currency transaction gains or losses, unrealized and realized gains and losses on the investment portfolio.
We think it is going to be about $1 million per quarter that that's where it would have been in the first quarter, that's where it would have been in the fourth quarter.
Again absent these unpredictable items, that's where we think it will be over the balance of the year.
Got it thanks, so much.
Thank you.
And there are no further questions turn on.
Call over to Rick.
Mcvey for any closing comments.
Thank you for joining us this morning, and we look forward to catching up with you again next quarter.
This concludes today's conference call. Thank you for participating you may now disconnect.
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