Q4 2024 MarketAxess Holdings Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the market access for quarter and full year 2024 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. If you'd like to ask a question. During this time.
It seemed you press the star followed by the number one on your telephone keypad. If you would like to withdraw. Your question you May Press Star One again and as a reminder, this conference call is being recorded on February six 2025.
I'd now like to turn the conference over to Steve Davidson head of Investor Relations at market accident. Please go ahead Sir.
Steve Davidson: Good morning, and welcome to the market access fourth quarter and full year 2024 earnings conference call.
Speaker Change: For the call, Chris Concannon, Chief Executive Officer, who will provide you with a strategic update.
Speaker Change: Rich Schiffman global head of trading solutions will update you on our trading businesses and then I leave <unk> Chief Financial Officer will review the financial results.
Speaker Change: Before I turn the call over to Chris Let me remind you that today's call may include forward looking statements.
Speaker Change: These statements represent the company's belief regarding future events that by.
Speaker Change: Their nature are uncertain.
Speaker Change: The companys actual results and financial condition may differ materially from what is indicated in those forward looking statements.
Speaker Change: 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 in our annual report on Form 10-K for the year ended December 31 2023.
Speaker Change: I would also direct you to read the forward looking statements disclaimer in our quarterly earnings release, which was issued earlier. This morning and is now available on our website.
Chris Concannon: Now, let me turn the call over to Chris.
Chris Concannon: Good morning, and thank you for joining us to review, our fourth quarter and full year 2024 financial results.
Chris Concannon: Before I provide my strategic update I would like to welcome Roberto <unk> to our board of directors effective March one 2025.
Chris Concannon: Gross wealth of experience in fixed income and international markets will be integral to our continued global expansion.
Chris Concannon: Now turning to slide three of my strategic update.
Chris Concannon: We reported solid financial results for the year with 9% growth in revenue our strongest annual revenue growth rate since 2020 with record Commission revenue and record services revenue in.
Chris Concannon: In 2024, we also made solid progress with our high touch strategy focused on meeting both the portfolio trading and block trading needs of our clients, we generated record levels of portfolio trading ADP in 2024 with record levels of U S high grade portfolio trading estimated.
Chris Concannon: Sure.
Chris Concannon: Building on our focus on blocks during the year, we launched our block trading solution late in Q4 in emerging markets and eurobonds and we will be rolling out our full high touch block solution and newest credit at the end of Q1 this year.
Chris Concannon: To be clear 2024 was a build year and now 2025 will be a year of delivery and execution.
We will be highly focused on growing our market share across our leading client initiated channel the portfolio trading channel and the dealer initiated channel.
Chris Concannon: And we plan to regularly report back on our progress in each of these channels.
Chris Concannon: Slide four illustrates the record levels of credit and rates Adv, we delivered in 2024 <unk>.
Chris Concannon: In credit we generated a record $712 million in commission revenue and record Commission revenue across most product areas and record total credit 80 day.
Chris Concannon: We have maintained our leadership position in client initiated RF Q and U S credit growing across our other product areas in emerging markets euro bonds munis and rates.
Chris Concannon: Our challenge was the U S credit market share across key protocols I will walk you through how our enhanced functionality differentiated data and innovative client solutions are expected to drive increased revenue and market share in 2025.
Chris Concannon: Turning to our rates business, we have been very pleased with our growth in 2024 trading Adv in our client focus rates pool increased significantly from $2 9 billion per day in first Q 'twenty four to 11 4 billion Adv in Q4.
Chris Concannon: A lot of this growth was driven by more clients leveraging our rates alagoas, which they used to work larger block orders with low market impact over a specific time range in 2025, we expect to see more usage of our client alagoas as we migrate clients to pragma technology launching in Q1.
Chris Concannon: Slide five illustrates the strong progress we've made with our high touch blocks strategy first in terms of portfolio trading we gained over 200 basis points in share in U S High grade portfolio trading in 2024, while we rolled out our new X pro platform and delivered.
Chris Concannon: Leo trading tools in emerging markets euro bonds and munis.
Chris Concannon: In the fourth quarter with the launch of our global PT offering portfolio trading in eurobonds doubled to approximately $11 billion in volume compared to <unk> 24 in emerging markets our portfolio trading Adv was up 175% for the full year 2024 versus 2002.
Chris Concannon: Three.
Chris Concannon: Im pleased to report that we did over $400 million and portfolio trading volume in munis in 2024.
Chris Concannon: Turning to our high touch block solution. During 2024, we continued our investment in our block trading solution and now we are seeing early signs of progress since our launch in emerging markets. In late November we have done over half a billion dollars in block trades with over 75 <unk>.
<unk> of trades, one by dealers recommended by our proprietary pre trade selection tool that renewal rate substantially reduces information leakage on our platform.
Chris Concannon: The feedback from clients and dealers is very positive as we expand our pre trade analytics and block solutions into euro bonds and US credit in Q1 25 before I discuss the expected drivers of our growth in 2025, we released our January trading metrics yesterday, which reflect continue.
Chris Concannon: Food elevated market volume and disappointing U S high grade market share we have.
Chris Concannon: I've always guided investors to look at longer term trends and not read too much into the month over month fluctuations in our market share as we experienced in January during the month of January we saw continued spread tightening and low spread volatility. We also saw a sizable jump in block volumes in the market.
Chris Concannon: Drop in non block volumes, both factors have an impact on our high grade market share, but they make us even more focused on solving the block trading solution for our clients.
Chris Concannon: We have a clear strategy to return to market share growth in U S credit across our three channels and we believe that we will begin to see the benefits of our investments and acquisitions in 2025, which I will now walk you through on the next slide.
Chris Concannon: Slide six highlights the enhanced functionality differentiated data and innovative client solutions that we expect to drive growth in 2025 as I mentioned earlier, our key initiatives are focused on these three channels.
Chris Concannon: The client initiated channel, where we have a clear leadership position in smaller size trades and are focused on increasing our block share the.
Chris Concannon: The portfolio trading channel.
Chris Concannon: We're excited that we just launched our global benchmark portfolio trading solution. We also saw a pickup in high yield portfolio trading market share in January.
Chris Concannon: And the dealer initiated channel, where we have been in the process of enhancing our dealer solutions.
Chris Concannon: Slide seven lays out the key deliverables for 2025, as we realize the benefits of our investments tech modernization at acquisitions first.
Chris Concannon: In the client initiated channel with our high touch solution. We are focused on the global rollout of our block trading solution, which began in <unk> in December Euro bonds have launched in this quarter and we are on target to launch our high touch block trading in the first half of this year.
Chris Concannon: With our low touch solutions, we are expanding our automation suite with products like adaptive auto works to support our global product set and integrate our client algo solutions with key markets like ice bonds.
In terms of escrow our goal is to rollout traditional RF Q on Expo in Europe in the first half of 2025, while expanding our high touch and portfolio trading tools in the U S.
Chris Concannon: Next in the portfolio trading channel, we're expecting a full rollout of global benchmark pricing for portfolio trading and we will continue to enhance our offerings.
Chris Concannon: And last in the dealer initiated channel <unk> is expected to benefit from the migration to X broker dealers.
Chris Concannon: And we are looking to re launched mid Exxon Pragma technology, both in the first half of 2025.
Chris Concannon: Our expectation is that the client initiatives and portfolio trading channels will be feature complete in the first half of 2025 and the enhancements for our dealer initiated channel will be launched and available to dealers in Q2.
Chris Concannon: Slide eight frames the U S high grade market opportunity and the market channels that we are attacking to grow our share.
Chris Concannon: First the client initiatives channel is an estimated $690 million revenue opportunity representing approximately 63% of the total estimated E trading opportunity in U S high grade.
Chris Concannon: This is where we have a clear leadership position and have very high share in small sized trades.
Chris Concannon: <unk> made up 39% of the market at the end of 2024 and electronic penetration is very low.
Chris Concannon: This is the most exciting opportunity in the market for us and we are already seeing positive trends.
Chris Concannon: Next is the portfolio trading channel, which is important from a market share perspective, but smaller from a revenue perspective.
Chris Concannon: <unk> pro and the pre trade analytics that fuel expro have been integral to our share gains and portfolio trading.
Chris Concannon: Last is the dealer initiated channel, which is also attractive representing approximately $310 million or 28% of the tab.
Rich Schiffman: We are attacking this channel with our dealer our Q, our automation for dealers mid acts and live markets protocols supported by our data and our new X broker dealers now let me turn the call over to rich to provide you with an update on our trading businesses.
Rich Schiffman: Thanks, Chris on Slide 10, we highlight the key performance indicators for our trading businesses across channels for full year 2024.
Rich Schiffman: This slide clearly shows with the exception of U S credit market share the key performance indicators across our platform are largely green in 2024, reflecting the underlying fundamental strength of our business.
Rich Schiffman: And as Chris highlighted we have a comprehensive plan and our laser focus to address our U S credit market challenges.
Rich Schiffman: First across our clients' initiated channel, we generated record U S credit Adv up 10% to $8 billion.
Rich Schiffman: We saw strong growth in international products Adv to a record $5 billion up 17%.
Rich Schiffman: The EM local markets are the largest opportunity in <unk> from an addressable market perspective, we produced record local markets Adv of over $1 4 billion up 18%.
Rich Schiffman: Our performance in municipal bonds as a positive example of our product diversification strategy with record Adv up 22% and record estimated market share of 7% up from 6% in the prior year.
Rich Schiffman: We are very pleased with the liquidity coming from our partnership with ice bonds. This started with municipals and has now expanded to U S high yield and price based U S investment grade.
Rich Schiffman: <unk> is becoming a valuable micro lot liquidity provider in U S corporate open trading.
Rich Schiffman: We experienced another quarter of strong growth in automation with record trade volume of 378 billion up 25%. We had 245 active automation clients. In 2024 75 clients are now enabled for our aldose up from 13.
Rich Schiffman: <unk> in the prior year.
Rich Schiffman: Open trading Adv was a record $4 billion in 2024, an increase of 8%.
Open trading continues to be the largest single source of secondary liquidity in the U S credit markets driven by our diverse liquidity pool.
Rich Schiffman: Our share of blocks in U S. High grade was just over 11% up slightly from 2023.
Rich Schiffman: In the portfolio trading channel, we generated record total PT adv of over $900 million and record U S credit PT Adv of 800 million with record market share of 16%.
Rich Schiffman: Last in the dealer initiated channel dealer RF SKU and mid ex Adv was a record $1 3 billion, representing a 17% increase over the prior year.
Rich Schiffman: While we are in the early innings of our expanded dealer services strategy. We are encouraged by the improvement we are seeing in bid activity in Europe.
Speaker Change: Now, let me turn the call over to a lean to review our financial performance. Thank you rich turning to our results on slide 12, we provide a summary of our fourth quarter financials, we delivered total revenue of $202 million.
Rich Schiffman: Compared to 197 million in the prior year.
Rich Schiffman: Looking at each of our revenue lines Insurance Commission revenue increased 2% largely driven by increased market volumes, partially offset by lower market share information services revenue of $13 million was up 10% and included a $300000 benefit from FX. The increase was driven by new contracts as we can.
Rich Schiffman: Can you to experience strong adoption across our data products suite, especially CP plus.
Rich Schiffman: Post trade services revenue of $11 million was flat versus the prior year and included a 200 dollar benefit from FX. The prior year period included over $1 million, one time Resubmission revenue.
Rich Schiffman: Technology services revenue of $4 million increased 41% driven by higher <unk> related licenses.
Rich Schiffman: Other income decreased approximately $2 million.
Rich Schiffman: <unk> principally to mark to market losses on our U S Treasury portfolio in the current quarter of approximately $2 million versus a gain of $1 million in the prior year period.
Rich Schiffman: The effective tax rate was 23% and we reported diluted earnings per share of $1 73.
Rich Schiffman: On slide 13, we provide more detail on our commission revenue and our fee capture.
Rich Schiffman: Total commission revenue was $175 million compared to $172 million in the prior year.
Rich Schiffman: Strong growth in credit commission revenue across emerging markets up 18% euro bonds at 10% and municipal at 6% was partially offset by 19% decline in U S high yield and lower levels of credit spread volatility.
Rich Schiffman: The reduction in total credit fee capture from prior year was driven principally by product mix, specifically lower high yield activity.
Rich Schiffman: Total credit fee capture was in line with three to 24 level.
Rich Schiffman: The decline in fixed distribution fees, this principally driven by dealer migrations to variable fee plan.
Rich Schiffman: On slide 14, we provide a summary of our operating expenses fourth quarter operating expenses of $122 million increased 2% compared to the prior year as we anniversary the prisoner acquisition.
Rich Schiffman: Employee comp and that Ed Tech and communications and marketing costs were partially offset by lower depreciation and amortization professional and consulting and general and administrative costs.
Rich Schiffman: Head count was up 1%.
Rich Schiffman: On slide 15, we provide an update on our capital management and cash flow our balance sheet.
Rich Schiffman: Continues to be strong with cash cash equivalents and corporate bonds and U S. Treasury investments totaling $699 million as of December 30, <unk> up from $602 million at the end of last year.
Rich Schiffman: We generated $328 million in free cash flow over the trailing 12 months, an increase of 6% over last quarter.
Rich Schiffman: For the full year 2024, we repurchased 341000 shares for a total of $75 million.
Rich Schiffman: Including 64000 shares repurchased during the fourth quarter at a cost of $16 million.
Rich Schiffman: As of January 31, 2025, 220 million remained on the current authorization.
Rich Schiffman: Believe we are striking the right balance of investing to drive future growth while at the same time being disciplined stewards of capital.
Rich Schiffman: On slide 16, we provide you with our full year 2025 guidance total services revenue, which includes information post trade and technology services is expected to grow in the mid single digits in 2025.
Rich Schiffman: We expect total expenses to be in the range of 505 million to $525 million off a base of $476 million in 2024.
Rich Schiffman: It would imply a growth rate of approximately 8% the midpoint of the 2025 range. This includes the full year effect of 2024 hires inflationary increases as well as tech investments and higher variable costs.
Rich Schiffman: We expect that the effective tax rate will be in the range of 23 to 24, 5%.
Rich Schiffman: Capital expenditures are expected in the range of 65 million to $70 million of which roughly 80% relates to capitalized software development costs for the investments, we're making in new protocols and trading platform enhancements.
Chris Concannon: Now, let me turn the call back to Chris for his closing comments.
Chris Concannon: Thanks <unk> in summary on slide 17, we delivered solid financial results in 2024 in 2024, we made solid progress building our portfolio of trading tools are high touch block trading solution and our dealer solutions. Our focus in 2025 is now on.
Chris Concannon: The benefit of our investments and the acquisitions and delivering those solutions across all three of our channels $2025 a year of delivery and we look forward to reporting on the progress through the coming quarters.
Chris Concannon: Now we would be happy to open the line for your questions.
Chris Concannon: Thank you and we will now begin the question and answer session.
Chris Concannon: If you have dialed in and we would like to ask a question. Please press star followed by the number one on your telephone keypad. So Easter had an joined the queue.
Chris Concannon: We'd like to withdraw your question simply press Star One again and just a reminder, please limit yourself from asking one question and if you have any further questions. Please rejoin the queue with that your first question comes from the line of Chris Allen with Citi. Please go ahead.
Chris Allen: Yes, good morning, everyone. Thanks for taking the question.
Chris Allen: I wanted to talk about the block trading launch in the U S. So I'm kind of curious why you lead with emerging markets Euro bonds first when we think about the block trading launch, which we anticipate in the U S. Just how integral is having the dealers onboard for success unblock penetration moving forward.
Chris Allen: Perhaps you are taking to ensure that success.
Chris Allen: Thanks, Chris.
Speaker Change: And yes, I'm pretty excited about both where we are from a block trading perspective.
Chris Allen: Obviously very excited about.
Speaker Change: Launched depending launch in the U S.
Speaker Change: <unk> been talking about our high touch solution for quite some time.
Speaker Change: It was great to see it launched in December of last year.
Speaker Change: We targeted what.
Speaker Change: What we did is targeted.
Speaker Change: And then euro bonds first largely because of the pre trade analytics that we have in both those markets from a.
Speaker Change: Great inventory of dealer axes.
Speaker Change: We also have pre trade analytics that we call smart dealer select and then here in the U S. We have AI dealers select.
Speaker Change: Tool. So it was really when we looked at and added up all the pre trade analytics. We were very excited about what we're seeing in <unk> in particular and obviously the clients.
Speaker Change: Have been asking for a block solution for some time so it was.
Speaker Change: Really the right market to launch in.
Speaker Change: And we have seen in the fourth quarter, we did see our M block market share increase.
Speaker Change: Blocks in <unk> increased by about 22% as I mentioned in our opening remarks.
Speaker Change: The key ingredient to trading blocks. It just taking a step back and look we spent a lot of time looking at the electronic market and what the clients want solved the big challenge for block trading is information leakage.
Speaker Change: In our bond market you have to present your interest.
And in our Q to get our price back and so when Youre trading a block you do not want to share that information broadly because of the impact. It can have on the market. So that makes all to all less attractive for block and we've seen that over the years.
Around our block market share for all to all in a liquid market clients choose all to all quite regularly and we see that in our block trading stats in our all to all market, but what a client wants to do is target a specific dealer with a block and they want a short list of dealers that they want to target.
Speaker Change: They reduce that information leakage. The most important employee and this is what we are seeing the success in our tool as they want to know that that dealer has a high likelihood to respond and execute at a fair price and so more information than just whether a dealer is at.
Speaker Change: <unk> store, showing a price or an indicative price is a key ingredient so data matters when it comes to block trading and so on an electronic platform. There's more data that we can present as we present the pre trade analytics in and we're seeing in our block trading tool.
Speaker Change: Very high hit rates relative to the traditional RF Q we're.
Speaker Change: We're seeing about a 90% hit rate in our eurobond targeted block trading tool.
Speaker Change: Based on our axes, and our smart dealer selection. So that's that's an exceptionally high hit rate.
Speaker Change: In traditional <unk> <unk>, it's closer to 60% to 70% hit rate.
Speaker Change: We are.
Speaker Change: Bill early days, we are at about 65 active clients using our block trading tool and more importantly, just in.
Speaker Change: Wants it in December we've just done as of yesterday over $1 2 billion in volume and our targeted block trade solution. So it's still early days, but very excited about one.
Speaker Change: The volumes that are going through but more importantly, the experienced that.
Speaker Change: The clients are having in that tool.
Speaker Change: What our clients are asking for is what we call one click trading they want to see a price they want to share their information with a small list of dealers and they want to know that they will get a response high likelihood of a response and thats really the feedback that we're getting with that block trading tool.
We will be launching here in the U S and U S high grade and U S high yield the block solution, while call it enhanced the lockbox solution.
Speaker Change: At the beginning of Q Q2, and we will have that very direct to dealer solution, where you can one click with the dealer getting to your second part of your question. Sorry. This is a long winded answer because it is an exciting topic for us, but the second part of your question is about how to dealers perceive this.
Speaker Change: What's the reception from dealers.
Speaker Change: The dealers have been very supportive of us putting them in comp with a shorter list for clients. That's an important ingredient because dealers pay a price a broad dissemination of an inquiry like in all to all.
Speaker Change: It's called the winner's curse the whole market knows that you've just taken a position. So when it comes to being a counterparty for a block they like to know that Theres, a shorter list, where even one their own.
Speaker Change: That targeted inquiry and they tend to price.
Speaker Change: Aggressively are based on the number of people that are seeing that inquiry and so that's an important component it's actually dealer friendly.
Speaker Change: This block trading solution and so the feedback from dealers has been positive.
Speaker Change: The feedback from clients has been very positive.
Speaker Change: And your next question comes from the line of Dan Shannon.
Jeffrey: Jeffrey Please go ahead.
Speaker Change: Thanks.
Speaker Change: I wanted to just follow up on a lot of your prepared remarks around kind of goals this year and improving market share and I assume your first answer you put some of this but what gives you confidence in terms of the ability to grow share in high grade and you are rolling out products, but curious if you think the protocols you have today or what is going to drive letters.
Speaker Change: What is still on the come do you think that is going to be the driver of that increase market share.
Speaker Change: Thanks, Dan.
Speaker Change: First I'll start from.
Speaker Change: A macro market perspective, the market itself is quite favorable to the fixed income market broadly.
Speaker Change: Where yields currently stand.
Speaker Change: Flows into fixed income funds are generally positive and they continue to be positive here.
Speaker Change: Just in January so from a macro perspective the.
Speaker Change: The market is still.
Speaker Change: Fairly attractive new issue market is quite robust we saw heavy new issue market in January and most forecasts predict a strong new issue market throughout the year of 2025.
Speaker Change: Other pieces of the puzzle.
Speaker Change: Turnover in the market continues to be at high rates of turnover similar to what we saw in 2024, so the velocity of the market.
Speaker Change: And I think <unk> in particular, it's largely driven by electronic trading.
Speaker Change: Our portfolio trading solutions the growth of electronic Arts Q continues to drive that velocity of trading. The other pieces are very robust entry from systematic funds into the market both as takers of liquidity, but also as alternative liquidity providers.
Speaker Change: <unk>, so that's a key ingredient to our growth and overall growth of the velocity of trading in the bond market.
Speaker Change: The factors that our struggle for our model or our Q model with an all to all solution have been very low volatility and very tight spreads all to all is a great provider of alternative liquidity in high vol, and so the key for our growth rates.
Speaker Change: In 2025 is being is offering multiple protocols that are appropriate and multiple types of market environments.
Speaker Change: So as you think about it we are the largest liquidity solution alternative liquidity solution electronic alternative liquidity solution in the U S credit market our platform provides.
Speaker Change: In electronics, our Q4 small sizes, we have exceptionally strong automation solution for what I'd call no touch.
Speaker Change: <unk>.
Speaker Change: Our all to all market solves both no touch and low touch trading.
Speaker Change: And we're now.
Speaker Change: Near the.
Speaker Change: The edges of completing our <unk> solution.
Speaker Change: I think I used in my <unk>.
Speaker Change: My prepared remarks.
Speaker Change: Feature complete in Q1 for portfolio trading that doesn't mean, there won't be an endless supply of new analytics and new functionality that clients will ask for MPT, but we have sizable feature rollout in Q1, we just had a release in Q in January we have another relief.
Speaker Change: In February just next week, and we just see ourselves as being.
Speaker Change: Having a highly competitive offering and portfolio trading in Q1, the other area of growth that we're very excited about and I just talked about it with Chris Allen's question. Our block trading solution is finally launching in U S high grade.
Speaker Change: It's quite appropriate.
Speaker Change: What's exciting about that is we're targeting what I call. The next 50% of the market. If you really think about it that tool targets.
Speaker Change: A bigger portion of the market than all of electronic trading.
In the high grade market today.
Speaker Change: That's a huge opportunity for us to solve and while it's still early days the evidence that we're seeing on our block trading tool in both.
Speaker Change: And EU is quite exciting.
Speaker Change: Around our launch and high grade So look January was not.
Speaker Change: That was a disappointing market share for us in January and when we look at the rest of the year. We are quite excited about the scheduled and as you can see in our prepared remarks, we're quite regimented about dates and being committed to those dates of execution and delivery in 2025. So we're quite.
Speaker Change: Confident about our rollout strategy across.
Speaker Change: The U S corporate market and the last piece that we are introducing a new product in continuously in 2025 is the dealer business.
Speaker Change: The dealer to dealer business in U S. High grade is about 30% of the market, 29% to be exact and in in January that's a sizable portion of the business. We expect that portion of the business continue to grow as dealers turnover inventory at a much higher rate.
Speaker Change: In the market to come.
Speaker Change: As we mentioned in the in the remarks, we're we already have a robust dealer RQ platform.
Speaker Change: In fact saw market share gains both in high grade and high yield in January but we're rolling out.
Speaker Change: <unk> mid market matching solution in Q2.
And we're rolling out a new front end X pro for dealers, starting in Q2 and rolling out throughout Q3. So we have a number of product deliveries rolling out through the first half of 2025 each of those product deliveries.
Speaker Change: We intend to have market share impact as a result.
Benjamin Bullish: Thank you and your next question comes from the line of Benjamin bullish with Barclays. Please go ahead.
Benjamin Bullish: Hey, good morning, and thanks for taking the question.
Benjamin Bullish: Chris you kind of touched on what I wanted to ask you about which was sort of a higher level look at the market in terms of where there is room left to electronically, but I'll kind of ask it anyway.
Benjamin Bullish: You've always said historically that the key competitors the phone I guess as you think about that.
Benjamin Bullish: The block market I think that's unfortunately on electronic side, but I am curious where else do you think there is low hanging fruit parts of the market that are electronic side, but maybe not all the way.
Benjamin Bullish: How important or how would you describe sort of what's necessary in terms of either is it either a matter of competition or is it a matter of increasing electronic vocation. How do you think about like which of those two is sort of more important if you think about growing your share over the next few years. Thank you.
Speaker Change: Yeah, Great question, one that we spend a lot of time on.
Speaker Change: If you think about our investment in 2024.
Speaker Change: We made a strategic decision to continue to invest in our high touch block solution. While we knew we were facing competition in portfolio trading, but as we laid out in the in the Tam.
Speaker Change: Presentation, obviously the block.
Speaker Change: Part of the market is by far the largest part that is not electronics.
Speaker Change: It's really phone and IV that we see the blocks flowing through and when you look at the workflow.
Speaker Change: Over IV or phone, it's very inefficient and our clients continuously are looking for better ways to trade blocks, but in what I call. It a replicated fashion to phone and chat. They don't want information leakage over the electronic platform and Thats really what we perfected in.
Our targeted block trading solution.
Speaker Change: The other areas of opportunity.
Speaker Change: Really around the retail space and it's across U S corporates and across.
Speaker Change: Really the whole fixed income market.
Speaker Change: We have a platform that is targeting the private bank market called Axis IQ. It continues to deliver volumes and growth month over month, and obviously year over year. So we're encouraged that we have now tapped into the private bank space in the U S.
Speaker Change: Was largely targeting European private banks and APAC private bank. So we're seeing healthy growth from the retail market I think with the rates being so attractive more broadly youre going to continue to see higher levels of activity in the retail space.
Speaker Change: And then other areas really I think the biggest area of electronic opportunity and electronic evolution is really in emerging markets.
Speaker Change: It's hard to get the true denominator in emerging markets.
Speaker Change: For the total market size, but it's it's equivalent to.
Speaker Change: The total size of U S investment grade and U S high yield so it's a sizable market.
Speaker Change: By our estimates we're only looking at under 5% is electronically penetrated so there's a huge opportunity within the <unk> market and the most important ingredient to all of these electronic solutions.
Speaker Change: Really around data.
Speaker Change: You can't really electronic fire market absent the data and as we grow our footprint across the market our data footprint and our data intelligence becomes that much more valuable and thats. The most important ingredient the more you touch the better year data becomes and we.
Speaker Change: We're rolling out data products in the same pace in which we're rolling out these new protocols. So when you really see the complete offering.
Speaker Change: By mid this year, we're going to be touching the largest trade sizes portfolio trades and those are complicated with lots of line items.
Speaker Change: Next largest which is blocked trades will have protocol for that we will have our current highly liquid low touch all to all protocol and then full automation suite both.
Speaker Change: Auto RF Q, but more importantly.
Speaker Change: Oligos that replicate.
Speaker Change: Multiple trade through our Q and in other ways to trade. So it will be a complete offering in 2025, and we spent the full year of 2020 for investing in building out.
Speaker Change: The ability to deliver all of these products in 25.
Rich Schiffman: Hey, Ben It's rich just one thing I wanted to add to Chris's remarks on this and he highlighted all of the areas where electronic trading is let's say not not as well penetrated like.
Rich Schiffman: The block area for example, but one thing we definitely believe in is that even in the in the odd lot space, let's say the smaller size trades.
Rich Schiffman: This is going to continue to grow this segment and just like what has happened in equities with.
Rich Schiffman: All of the electronic trading adoption in the systematic liquidity providers that are out there are enabling new strategies for people to get in and out of internet of bonds a lot more easily it's.
Rich Schiffman: Boeing to lead to more turnover in that size range is our view and we believe we've got the right solutions to capture that flow. So.
Rich Schiffman: We expect it to keep growing I mean, we were just commenting before the call. We've seen a couple of trace days of 44 billion.
Rich Schiffman: In high grade, which is well above the running averages.
Rich Schiffman: There is a likelihood of increasing activity that's going on in the sweet spot, which means more more volume for us to capture.
Speaker Change: Thank you and your next question comes from the line of Kyle Voigt with <unk>. Please go ahead.
Kyle Voigt: Hi, good morning, everyone maybe.
Kyle Voigt: Maybe if I could just ask a bigger picture question on the high yield business.
Kyle Voigt: January market share near 12% I think two years ago, you were in the kind of 17% to 18% range I know theres been a number of changes with the market. It's been cyclical headwinds, maybe some structural headwinds as well, but if you look at market share by client type and high yields I'm, just trying to understand where youre seeing good progress over the past.
Kyle Voigt: Two years, which client segments are still seeing some good growth.
Kyle Voigt: Or are you seeing the most pull back.
Kyle Voigt: Or share migrate away our clients just pull back from the marketplace as.
Kyle Voigt: So we're trying to think about the growth trajectory in share from here.
Kyle Voigt: Yeah, Great question in high yield in 2020 for the market itself from a macro perspective.
Kyle Voigt: Certainly saw challenges.
Kyle Voigt: And investors very attractive market spreads were tight volatility was low for ETF market makers anyone trading ETF arbitrage, that's a very difficult market to trade in particularly as the borrow rate went up sizable in 2024, so being able to put on.
Kyle Voigt: Don.
Kyle Voigt: And arbitrage across the high yield market became quite difficult. So so really what we saw in 2024 and still in January is.
Kyle Voigt: The ETF players those that were trading high yield on an ETF or <unk>.
Kyle Voigt: Really exit the market, we saw some some trading pods at some of the hedge funds.
Kyle Voigt: Closed down.
Kyle Voigt: We still see.
Kyle Voigt: We continue to see.
Kyle Voigt: Systematics coming into high yield because they want to make the investment to be their most systematic that we talked to that are investing in the high yield products and high yield trading continue to that that volatility will return to the high yield market certain.
Kyle Voigt: If you have any any credit challenges through high yield we see individual issuer volatility snapback.
Kyle Voigt: But they are really predicting that there will be ball eventually back in high yield and that spread will widen out and so they will have the opportunity for the the arbitrage still have opportunity for just a straight dealer solutions when it comes to high yield in the traditional buy side.
Kyle Voigt: From a macro perspective high yield still very attractive that rate environment is very attractive. So we continue to see inflows into the high yield funds and really portfolio.
Kyle Voigt: Portfolio trading is picking up in high yield we've seen it come up to about 8% of the high yield market.
Kyle Voigt: We recently launched our benchmark portfolio trading tool, which we tend to see more benchmark trades in high yield.
Kyle Voigt: So we did pick up portfolio trading market share did increase in January which was encouraging.
Kyle Voigt: Not to talk about high touch block trading again, but we do hear from our clients that they are very sensitive to information leakage in high yield in particular.
Kyle Voigt: Walk trade sizes are smaller they are probably around $3 million are considered a block trade in a moral liquid high yield bonds. So the block trading solution will be.
Speaker Change: Welcome Bye most high yield traders, just because it's targeting either a single dealer.
Kyle Voigt: We're a small list of dealers and.
Speaker Change: If the.
Speaker Change: The hit rates continue at those high levels. That's one of the biggest challenges in high yield is just maintaining a high hit rate based on your inquiries.
Speaker Change: Hi, Thank you and your next question comes from the line of Alex <unk>.
Speaker Change: Please go ahead.
Speaker Change: Hey, good morning, everybody. Thank you for taking the question as well.
Speaker Change: Lots of great color really appreciate the Tam the Tam analysis as well I know, it's going to be a hard question to answer, but I guess, what we will try anyway. So 24 big build out year 25, you expect to see the benefits of that how would you define success in terms of market share accomplishments in 2025, when it comes to high grade and high yield.
Speaker Change: In the U S.
Speaker Change: Guess, what are the kind of top one or two protocols that you're pushing forward you named a lot of things that you think will help you recoup some of that market share and then ultimately the implications on fee per million all else constant and I know that the mix and macro could impact that was just kind of trying to get a sense of what the revenue implication from these efforts could ultimately be.
Given that things like portfolio, shedding et cetera come with a much lower fee per million.
Speaker Change: Okay.
Speaker Change: Simplify your question you want us to predict our market share in our overall revenue for 2025.
Speaker Change: What I think what.
Speaker Change: What I will do is let me go through the protocols individually because each one certainly could have sizable impact on share.
Speaker Change: Obviously sizable impact on revenue.
Speaker Change: Obviously, the I'll start with portfolio trading because it's obviously been a very focused area of ours and certainly continues to focus in Q1.
<unk> sizable market share impacts.
Speaker Change: We've seen this and we predicted this in the last quarter call.
Speaker Change: You can see swings of market share for our platforms.
That offer portfolio trading we see it in our own market.
Speaker Change: There are sizable portfolio trades that come to market.
Speaker Change: In January we saw actually very low level of what we call Mega portfolio trades anything of a $1 billion plus in size.
Speaker Change: There is just a smaller number of those mega Pts in the market.
Speaker Change: Whereas in December there was a lot a lot more of those are mega trades. So from a share perspective, not a revenue perspective, because we showed you the tam around PTA, you can really move and swing market share around.
Speaker Change: Based on portfolio trading tools, and we're very excited where we think we'll be just in Q1 with the next few releases on our portfolio trading tool.
Speaker Change: Moving to the block side I spend a lot of time talking about high touch in blocks, but that has a sizable impact on share and obviously revenue.
Speaker Change: It has very attractive fee schedule, it's not like a PT.
Speaker Change: It has.
Speaker Change: Certainly more consistent with traditional RF <unk> schedule.
Speaker Change: And but it does have larger trade sizes, so fee capture is quite attractive.
Speaker Change: But again it doesn't.
Speaker Change: It doesn't involve all to also.
Speaker Change: It has a slightly different fee capture to an all to all.
Speaker Change: To the extent there is higher levels of volatility and certainly we've seen momentary spikes of volatility with the announced.
Speaker Change: Announcements coming fast and furious out of the new administration to the extent there is volatility we would expect our all to all platform to pick up rapidly similar to what we saw just this week with the spike in activity around tariff news that came out over the week.
Speaker Change: And so.
Speaker Change: All to all is really a great protocol for smaller sizes for automation.
Speaker Change: <unk> Q and we obviously have the largest <unk> network in U S high grade and U S high yield for that all to all platform, but again.
Speaker Change: With volatility spiking, we can see share movement around that all to all platform. The last piece is obviously automation.
Speaker Change: We continue to see clients.
Speaker Change: Asked for.
Speaker Change: More sophisticated levels of automation.
Speaker Change: Just in 'twenty for our automation volume grew by 29% year over year.
Speaker Change: And in the fourth quarter was up 21%. So we continue to see that demand in January we continue to grow our automation volume grew 23% year over year in January so that automation suite.
Speaker Change: Is in high demand and one of the areas that is the sweet spot is in the <unk>.
Speaker Change: Clients that are offering large SMA solutions they're.
Speaker Change: They are getting smaller trade sizes through that SMA channel of their business and so they are adopting automation quite rapidly.
Speaker Change: Our automation suite is just touching 245 active clients of recently and Thats out of our over 2000.
Speaker Change: Clients around the globe.
Speaker Change: The penetration across our client base is still low relative to the global client base.
Speaker Change: But the demand for automation continues to grow and if you. If you follow the projections for SMA growth alone.
Speaker Change: It's projected to grow up to five trillion from the call. It current two trillion. That's obviously a great area of growth for us in the in.
Speaker Change: In the fixed income markets as those grow the demand for automation will grow so I covered all of our protocols. The nice thing is.
Speaker Change: We feel like we're going to be in a great spot in terms of offering.
Speaker Change: Multiple protocols to our clients all designed for different elements of the market in all designed for different environments to trade through into the market.
Speaker Change: So Alex let me take the eight 2 million part of your question and then if you think about sort of the four key protocols that Chris talked about there are puts and takes in terms of fee per million there right. But again. This is about sort of driving share driving revenue and thinking about the future and Chris talked about portfolio trading you talked about last we know that does come in at that lower fees per million in the talk.
Speaker Change: About open trading automation, which will now come in at a bit higher fees per million right. So theres puts and takes there, but let's take a step back and think about for instance, with the largest driver in the change of fees per million was just in January and we note that in high grade that's duration and it was duration and if you think about it right. We saw in January that.
Speaker Change: Weighted average years to maturity with an eight point call. It two eight years versus nine a little over nine last year and that was also down from call. It eight nine almost nine in December so that was a pretty big driver of what happened.
Speaker Change: So yields go up this past January to over 5% and if you think about that that's another you know.
Speaker Change: <unk> that we saw in the duration calculation.
Speaker Change: Now, let's think about how quickly trading behavior change and what that could mean for duration, we know that that can happen and we've actually even seen it already in just the first few David that'd be right now the first few days does not make a year needless to say, but I think we have to really keep in mind, how much duration does impact these types of things and so when you think about.
Speaker Change: These familiar and you think about duration and high grade. This is obviously a kitchen.
Speaker Change: But if I take a step back and I know, it's really people are trying to model that and I got it and I know how important it is.
Speaker Change: The average fees per million across most of our credit products really has been quite stable in terms of our peak hard over the past few years right and I just want to remind us of that and there are all these puts and takes that we've talked about and so if you think about the puts and takes and I just mentioned.
Speaker Change: Go through them again, just because I know, there's a lot here, but you've got the growth in PT. Even if you look just what happened year over year that 200 basis points that rich talked about we know that has a negative impact on fees per million right, but.
Speaker Change: But we also know that if you think about and I've talked about this on I think it was our last call when I looked back over call. It a five year time period, and I said, Okay. What was sort of the average fees per million over that time period, and it was about $173 per million.
Speaker Change: And we know that for instance, Chris just talked about high yield and we were asked well what what's going on in the high yield space. I know, we know that that also has a significant benefit and tailwind is familiar and so if we see our ETF market maker clients get more active.
Speaker Change: That could be a real benefit as well. So if you think about that as a benefit possibility. If you think about if we see changes in duration and high grade as another benefit possibility. If you see more volume pick up and again, we've got to see how this all works out but that could create additional open trading which is more of a premium.
Speaker Change: In terms of how you think about fees per million.
Speaker Change: I have to think about all these different different factors that go into the familiar now we do know that you also have to look at the macro environment.
Speaker Change: I would also say we've got to see that.
Speaker Change: That is and what's happening there in terms of the rate environment that is changing day by day and so obviously that also impact trading activity and so if you have sort of a more longer or call. It a long dated.
Speaker Change: About how the curve is moving you know that will take.
Speaker Change: If you think about how people look at their trading activity in the rate environment, whether or not they'll go out longer on the curve really theyre going to look at what's happening in the rate environment and so all of these types of things we have to take into effect and so that's kind of the puts and takes that I would say keep in mind and I hope that is helpful.
Speaker Change: You think about <unk> 2 million in general.
Jeff Schmitt: Great. Thank you and your next question comes from the line of Jeff Schmitt said Daniel Zhang. Please go ahead.
Speaker Change: Good morning.
Speaker Change: Portfolio trading as a percent of industry high grade and high yield activity.
Speaker Change: It's been around 10% for the last probably six months at least what do you think is driving that pause and Ken can you continue to drive share gains there even if it stays at these levels.
Speaker Change: First from a macro perspective, if you look at volatility if you look at.
Speaker Change: Spread.
Speaker Change: And spread volatility in the fixed fixed income market, it's been quite attractive to get a portfolio trade done at an attractive price.
Speaker Change: We have seen in the past again, we haven't seen a lot of volatility, but it becomes more difficult to trade a large portfolio in higher levels of vol and so at these levels of all.
Speaker Change: I think the 10% range is quite an attractive range.
Speaker Change: Our portfolio trades.
Speaker Change: There also has been a number of portfolio trading counterparties that have moved in and out of the market. So profitability for the dealer around portfolio trading has been.
Speaker Change: Up and down.
Speaker Change: And then low vol, it's probably a little bit more attractive and higher ball becomes more difficult to manage that large inventory that you are taking down and a portfolio trade. It is capital intensive trade.
Speaker Change: For a dealer so they obviously obvious.
Speaker Change: Cc.
Speaker Change: Large banks that have the capital are highly engaged in portfolio trading.
Speaker Change: It is a tool that the buy side finds attractive to move flows and it will be around it is not going anywhere I think the market environment and capital willingness will really dictate where portfolio trading.
Speaker Change: Moves in the market from quarter to quarter from year to year, because it is a trading tool that will be around for a long time with regard to our share in portfolio trading we continue to grow our portfolio trading just in investment grade last year.
Speaker Change: We are obviously grew overall notional portfolio trading about 80%. So we are encouraged with our performance but not.
Speaker Change: Not where we need to be so we're excited about what's happening with new features rolling out this quarter. We do think it will have an impact on our competitiveness in the portfolio trading space.
Speaker Change: Portfolio trades are getting bigger not smaller so the number of line items that we're seeing over 1000 line items is becoming a common place for for portfolio trades.
Speaker Change: And so we expect that market to continue to move in and around that 10%.
Speaker Change: At these levels of volatility you could see it move up certainly into the teens, but we expect it to be around that part of the market for some time to come it is a very valuable tool for the buy side to move in and out of flow quite quickly and aggressively and the pricing.
Speaker Change: That we're seeing in the market are relatively attractive for the end investor.
Speaker Change: The buy side is getting executed in that market that could change if volatility comes into the market obviously.
Speaker Change: And that's why we're so focused on having.
Speaker Change: Multiple protocols.
Speaker Change: Across our platform. So if youre sitting at our trade desk, you can trade of Pte trade a block trade the low touch list or trade.
Speaker Change: Fully automated that's the key ingredient that we're targeting in 2025.
Speaker Change: Jeff It's rich I'll, just add to that I mean, there is no question about the convenience of the PT trade an easy way to move.
Speaker Change: A lot of line items, but one thing about it is.
Speaker Change: It's a pretty concentrated market in terms of the liquidity so youre talking about.
Speaker Change: Fairly dominated by six to eight maybe kind of 10 firms.
Speaker Change: And that makes it not being really unique liquidity. So we're really confident in our ability in terms of in terms of share whatever the percentage of the market, it's going to be in.
Speaker Change: Maybe I'll take the under on it a little bit there but.
Speaker Change: In terms of grabbing market share it's the same liquidity.
Speaker Change: The different venues so as we continue to increase our capabilities in building the analytics and build all the features that our clients are looking for we feel that thats pretty.
Speaker Change: Easy volume to move is quite different in the in comp business, where open trading in that area, but that represents you know, let's say, 35% was was the.
Speaker Change: Q4 number and.
Speaker Change: That comes from over 1000 unique liquidity providers that is not easily replicated in other places, which makes the volume stickier keeping it with us, but we feel really confident about our ability to get.
Speaker Change: Increased share of the existing whatever percent of the market PT is going to be.
Speaker Change: Great. Thank you and your next question comes from the line of Ali <unk> Bank of America. Please go ahead.
Speaker Change: Good morning, Thanks for taking the question can you speak to your motivation behind acquiring the rest of RF Q hub and walk us through the materiality of the financial impacts there and then bigger picture to what extent is it a priority for you to become more cross asset is that something you feel like clients are demanding.
Speaker Change: Thanks for the question yes.
Speaker Change: Yes.
Speaker Change: Exceptionally excited about our Q hub and the prospects for our <unk> hub.
Speaker Change: It is a multi asset platform.
Speaker Change: So theres, obviously etfs.
Speaker Change: Focused on the ETF market and the opportunity for block trading in Etfs through our Q that as a.
Speaker Change: Sizable market both here in the U S as well as in Europe.
Speaker Change: Throughout Asia.
Speaker Change: It is also a derivative platform. So it offers futures equity derivatives complex.
Speaker Change: Swaps and other derivatives.
Speaker Change: That's really where the platform.
Speaker Change: Charted out first particularly in the European OTC market. So it's an exciting platform to have cross assets traded on the platform. It's a very flexible market. So we can add product quite easily.
Speaker Change: We think the important ingredient about having and where we see synergies is really being able to offer our large client base fixed income client base.
Speaker Change: Access to fixed income Etfs side by side that is an important component. If you look at the growth of the portfolio trading market. Every PT is really correlated to an ETF and so clients have a choice of trading directly the underlying bond in the PT or trading ETF.
Speaker Change: And it's really.
It depended on where that Etfs NAV is trading in real time relative to the underlying portfolio. So there are choices that we can offer clients just through data and analytics around trading the PT itself, we're trading the ETF, which is correlated.
Speaker Change: <unk> fixed income Etfs are a great way for a portfolio manager to get instant exposure to the bond market. They are highly liquid and can be traded in block form. So it's just another tool in our fixed income protocol solutions that we want to offer our clients. So we're excited about that transaction.
Speaker Change: Again, we already own 42% of <unk> through our partnership.
Speaker Change: With Virtu.
Speaker Change: We have a number of the dealers invested in that platform as well. So there is still continuous dealer support in the platform.
Speaker Change: And it's it's bringing all those alternative products into the market access suite and really the key synergy is our ability to redistribute.
Speaker Change: What is a very successful small platform to our huge client network and our international presence across the institutional marketplace.
Guys, probably know this but you can see the equity and earnings of unconsolidated affiliate rate on our consolidated statement of operations and that's really the RF you have current that Chris just talked about in terms of the ownership and that will obviously get consolidated into operating results once we bring that on.
Speaker Change: That's another way that you can look at it and think about sort of opportunity there.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you and your next question comes from the line of Michael Cyprus with Morgan Stanley. Please go ahead.
Michael Cyprus: Hey, good morning, Thanks for taking the question just hoping to touch on the rates platform for a moment the volumes were up very nicely there on a year on year basis, but it's still a smaller contributor to revenues today. So can you just talk about some of the initiatives across your rates platform that you have in mind to further scale. This part of the business talk about some of your ambitions here how you see this.
Michael Cyprus: Contributing over time, maybe you could also update us on the net spotting tool, what's been sort of the uptake from customers I know you've had this for a bit just how do you see that contributing as well to the broader platform great.
Michael Cyprus: Great and thanks for asking about rates.
Michael Cyprus: Certainly a product that we love in.
Michael Cyprus: Certainly we've seen growth in 2024, and a number of exciting things happening in that rate space.
Michael Cyprus: First I do think we have to recognize that in the rates market.
Michael Cyprus: It's really largely driven by electronic our Q2, the buy side, it's been that way traditional RQ typically RF Q to five dealers.
Michael Cyprus: Sure.
For many years and so when it comes to innovation to the client side.
Michael Cyprus: Haven't seen a lot of innovation in terms of interesting protocols for new tools.
Michael Cyprus: The rates are <unk> platforms in the market have also enjoyed low levels of volatility we've seen spikes of volatility but.
Michael Cyprus: The clients that we talked to in the right space are quite concerned that they don't have direct electronic access to alternative liquidity because when that market turns volatile.
Michael Cyprus: It becomes a much more challenging market to trade yet the alternative liquidity providers tend to provide more liquidity in those moments of volatility we've seen that on our platform in just traditional all to all incorporates so a key ingredient we think to the rates market is.
Michael Cyprus: Making sure there is a healthy interaction between clients are large dealers and <unk>.
Michael Cyprus: Ultimately all to all liquidity in times of need.
Michael Cyprus: We've been mostly innovative in our rate spaces offering clients Algo solutions.
Michael Cyprus: That provides a client the ability to trade large size orders.
Michael Cyprus: In smaller size without market impact, so really being both passive liquidity providers or using smaller size orders to take liquidity through a systematic algorithm I'm excited that we're launching are all goes just this month on.
Michael Cyprus: Pragma, so we're migrating our algo solution onto our pragma platform in the rates market, which just gives us great tooling for clients and very interesting controls around the algo suite of products that we can offer.
Michael Cyprus: The other pieces.
Michael Cyprus: Our net hedging for rates has been in our corporate bond market for quite some time, we launched at a number of years ago. It continues to get bigger we continue to see more and more clients adopt the net hedging solution again. It is client adopted we don't just turn it on for all clients.
Michael Cyprus: It's a very powerful way for us to actually provide.
Michael Cyprus: Large banks with liquidity and rates. So we offer net hedging and we offer our hedging for dealers. So overall the rates complex that you saw continues to grow and continues to grow here in January. So we're excited about rates, we do plan on launching in 2020.
Michael Cyprus: Five our <unk> solution, which the client community is much more familiar with so we want to have a hybrid offering where we're offering both electronic algorithmic solutions as well as traditional RF Q solutions.
Speaker Change: Thank you and your last question comes from the line of Simon claims with Redburn Atlantic. Please go ahead.
Speaker Change: Hi, Thanks for taking my question.
Speaker Change: I think most of my questions, we announced and then Chris Thanks, so much for the detail and color.
Steve Davidson: Really useful so go ahead Steve.
Speaker Change: Thanks.
Speaker Change: I just wanted to refer to slide 19 in the bottom left relationship between peak rate and a.
Speaker Change: Duration.
Speaker Change: Thank you very sensitive.
Speaker Change: Wondering if you could just.
Speaker Change: Talk about what kind of scenario, what kind of macro conditions, we would need to see for the fee per million dollars right to go or at least the duration to go below the lows that we saw in September 23 in Dawson.
Speaker Change: Below where we are today, just kind of curious as to what.
Speaker Change: I guess, how you're thinking about are we was the January number just like a bottom or is there still plenty of room for that to drop with conditions continued on this call.
Speaker Change: Sure. Thanks for the question Simon So I mean, it's it's always hard to call something a bottom it's hard, particularly when youre dealing with trading behavior and when you are talking about a rate environment and you are talking about central banks, making changes to economic policy. So I don't think I want to go there, but I think what we need to look at and think.
Speaker Change: About is where do we see the rate environment and how do we see trading behavior right.
Speaker Change: Right now we know that the.
Speaker Change: Most recently I think if we look at CME, what each fed watch right. The most recent call for rate.
Speaker Change: Great cuts is I want to say one Q.
Speaker Change: Just a little while ago. It wasn't so long ago that we saw three to four and when you saw three to four as what people were calling for you see folks wanting to trade out further on the curve that's pretty normal behavior.
Speaker Change: Do you see that type of a steepening now we've seen a bit of a bare steepen era and it's been quite unusual what you saw most recently some would call it a <unk> and thats not what we would expect in a rate cutting cycle and so having said that as I said, most recently with sort of differencing different outcomes.
Speaker Change: In terms of economic policy decisions things changing quite rapidly and Youre also seeing we saw just in the last few days as I've said before our change in behavior on duration just honestly. It went from quite quickly from call. It eight years of weighted average years to maturity to nine now I can't tell you it's.
Speaker Change: It's staying there, but I can tell you that we thought are quite quick change in behavior. So you have to look at things like all the normal things you would think of bond traders looking at what's happening with inflation, what's happening in those numbers.
Speaker Change: Are we seeing what the fed is saying there for in terms of where the rate environment is going to come out and so all of these things matter you know what do we think is going to happen in terms of will there be a soft landing.
Speaker Change: It takes longer for that to come down in rates I mean, all of these things matter, but again, we really have to see what's going to happen in the environment, we have to see where the yields are going to turn out as well because as you know we've talked about the sensitivity before when you see a one year incur.
Speaker Change: On the part on the platform and weighted average years to maturity that can be worth about $15 for us in high grade and if you see yields come in 100 basis points that can be worth three to $5 right. So all of this is we've got to see what happens in the macro environment.
Speaker Change: Sorry, I would just add in.
Speaker Change: In our client to dealer space.
Speaker Change: Obviously, there is Eileen pointed out there's lots of factors to go into <unk>.
Speaker Change: Figuring out what that fee per million will come out.
Speaker Change: But really the good news is from the client perspective, we spend more time focused on functionality features data and analytics and really don't get.
Speaker Change: Concerns from clients around fee pressure, so from a market broader market perspective.
Speaker Change: It's really about delivering.
Speaker Change: Delivering functionality to clients that they need to help them trade. Our fees are ultimately small small features of the overall spread in cost of trading so that fee pressure dialogue is just not present, we don't see fees as a weapon or a tool in the competitive.
Speaker Change: <unk> place, we really see rolling out functionality, new data and analytics is really the way to move move share around.
Speaker Change: Thank you and that ends our question and answer session I would like to turn it back to Chris Concannon for closing remarks.
Chris Concannon: Thanks, everyone for joining us as you heard in both our prepared remarks.
Chris Concannon: Our Q&A, we are laser focused on execution and delivery, we spent 2024 building product and.
Chris Concannon: Now we are rolling out specific dates specific timelines on delivering that product. So we're excited about 2025, and we're excited about the product rollout that we put out in the public on this call. Thank you and look forward to talking to you next quarter.
Speaker Change: Thank you and ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.