MarketAxess Reports Q3 Earnings: Lower Income, Record Volume

MarketAxess Holdings Inc., an electronic trading platform for fixed-income securities, has released its financial results for the third quarter of 2023. The report shows a stable revenue of $172.3 million, identical to the previous year. However, an uptick of 10% in total expenses, primarily due to strategic investments, led to a lower operating income of $66.9 million.

MarketAxess Reports Higher Revenue but Lower Net Income

The company's total revenue for the quarter remained unchanged at $172.3 million, reflecting the impact of low credit spread volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term. Operating income saw a decline, standing at $66.9 million, mainly due to a boost of 10% in total expenses. These expenses were primarily incurred to tap into long-term revenue opportunities in the global fixed-income markets.

Despite the increased expenses, MarketAxess maintains a robust financial position with $553.3 million in cash, cash equivalents, and investments. The company has also declared a quarterly cash dividend of $0.72 per share.

MarketAxess reported a diluted EPS of $1.46, with a net income of $54.9 million. Compared to last year's quarter, this represents a decrease of 4% in both metrics.

Table: 3Q 2023 select financial results

One of the bright spots in the report was the record information services revenue of $11.8 million, marking an improvement of 21.5%. This growth is attributed to the increasing adoption of the Composite+ data analytics Analytics Analytics may be defined as the detection, analysis, and relay of consequential patterns in data. Analytics also seeks to explain or accurately reflect the relationship between data and effective decision-making. In the trading space, analytics are applied in a predictive manner in an attempt to forecast the price more accurately. This predictive model of analytics generally involves the analysis of historical price patterns that are used in an attempt to determine certain price outcomes. Analy Analytics may be defined as the detection, analysis, and relay of consequential patterns in data. Analytics also seeks to explain or accurately reflect the relationship between data and effective decision-making. In the trading space, analytics are applied in a predictive manner in an attempt to forecast the price more accurately. This predictive model of analytics generally involves the analysis of historical price patterns that are used in an attempt to determine certain price outcomes. Analy Read this Term tool.

Diversification and Trading Volume

The company exhibited strong geographic and product diversification. Average daily volume (ADV) from international products, including emerging markets and Eurobonds, increased by 11.3%. Municipal bonds also saw a rise of 7.4% in ADV. Automated trading volume and trade count broke previous records, surpassing full-year 2022 levels.

Table: 3Q 2023 trading volume

The number of active client firms reached a record 2,093, a positive lift of 6.1%. This includes the highest number of active US credit client firms and international active client firms, indicating a broadening customer base.

Future Outlook

The company has refined its full-year 2023 expense guidance, now ranging from $432.0 million to $438.0 million, including an estimated $12.5 million of M&A-related expenses. The effective tax rate for the full year is expected to be approximately 23.5%, lower than the previously stated range.

Therefore, while MarketAxess faces challenges due to low credit spread volatility and increased expenses, its diversified product offerings and strong client engagement provide a positive outlook for the future.

Recently, MarketAxxes cooperated with Bloomberg and Tradeweb to form a joint venture and establish an independent company with the goal of becoming the consolidated tape provider (CTP) for fixed-income instruments in the European Union.