MarketAxess Holdings, Inc.

Ladies and gentlemen, thank you for standing by. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, simply press the star, then the one key on your telephone keypad. If you would like to withdraw your questions, please press the pound key at any time. Please note each person is limited to one question before being asked to rejoin the queue. As a reminder, this conference call is being recorded on July 22, 2020. I would now like to turn the call over to Dave Kresge, Investor Relations Manager at Market Access. Please go ahead, sir.

Good morning, and welcome to the Market Access second quarter 2020 conference call. For the call, Rick McVeigh, Chairman and Chief Executive Officer, will review the highlights for the quarter. Chris Concannon, President and COO, will discuss automation and our trading volume. And then Tony DeLeese, 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 that, by their nature, are uncertain. The company's actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For 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-end of December 31, 2019, and our quarterly report on Form 10-Q for the first quarter. I was also directed to read the forward-looking statement disclaimer in our quarterly earnings release, which was issued earlier this morning and is now available on our website. Now let me turn the call over to Rick.

Good morning and thank you for joining us to review our second quarter 2020 results. Our second quarter results reflect accelerating market share gains, robust credit market volumes, and a global shift among dealers and investors toward fixed income trading automation. Revenues were up 47% to $185 million on the back of a 44% increase in fully electronic trading volume versus Q219. Earnings per share of $2.20 was up 73% year-over-year. Operating margins reached a new record of 56.4%, up from 48.5% last year. Record new issue activity contributed to the increase in market volumes during the quarter. Estimated market share on market access bucked the normal trend during the quarter with accelerating share gains in spite of the heavy new issue calendar. U.S. high-grade estimated share jumped to a record 21.5% during the quarter, up from 18.7%, and U.S. high-yield estimated share grew to 14%, up from 10.4%. Open trading volume grew to a new record of $241 billion in Q2, up 87%. With significantly higher volatility and price dispersion during the quarter, open trading estimated transaction cost savings reached a new record of $312 million, exceeding company revenues for the second quarter in a row. The value proposition to our clients has never been more clear as we deliver substantial transaction cost savings, essential new market liquidity, and greater trading efficiency. I'm also thrilled to announce the appointment of Courtney Gibson, President of Loop Capital, to our Board of Directors. Courtney's breadth of experience in both equity and fixed income markets and her investor-client relationships will bring valuable perspective to our company. Slide 4 highlights market conditions. Market volumes measured by trace remain high due to the combination of higher credit spread volatility and record new issue volume. Since the COVID-19 market conditions started on February 24th, high-grade average daily trace volumes have increased 28% and high yield is up 12% versus the levels earlier this year. New issue volumes are at record levels with high-grade issuance of $691 billion in Q2, up 150% year-over-year. Credit spreads peaked in March and declined throughout the second quarter following the Fed announcements on liquidity programs. Credit downgrades continued in the second quarter. Year-to-date, approximately $196 billion of high-grade debt has been downgraded to high yield. While credit spread volatility has fallen from extreme levels in March, our expectation is that it is likely spread volatility will remain higher than normal in the quarters ahead due to the increased economic uncertainty that is likely to be with us for some time to come. Slide 5 provides an update on open trading. Open trading delivered essential liquidity to market participants throughout the last four months. During the second quarter, open trading grew to 33% of our trading volume, up from 25% one year ago. On average, our open trading marketplace had 32,000 orders and over $18 billion in notional value available per day for trading. Dealer-initiated orders into open trading reached record volumes during the quarter, and investors reached new records for providing liquidity on the system. We believe this robust, all-to-all marketplace represents a substantial improvement In fixed income market structure, which is most evident during volatile times. Unlike the challenging experience in credit trading in 2008, market turnover actually increased throughout this recent credit event, demonstrating that new innovations in fixed income markets are creating important new tools for risk transfer in secondary markets. There are encouraging signs that credit market turnover or trading velocity is increasing. Open trading is creating opportunities for new market participants leading to record active client firms with over 1,500 institutional firms completing open trades during the quarter. These new participants are important contributors to the open trading liquidity pool in credit products. Now let me turn the call over to Chris to provide an update on automation and our trading volumes.