MarketAxess Holdings, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Market Access second quarter 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 would like to ask a question during that time, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. As a reminder, this conference call is being recorded on August 6th, 2024. I would now like to turn the call over to Steve Davidson, Head of Investor Relations at Market Access. Please go ahead, sir.

Good morning, and welcome to the Market Access second quarter 2024 earnings conference call. For the call, Chris Concannon, Chief Executive Officer, will provide you with a strategic update on the company. Rich Shipman, Global Head of Trading Solutions, will update you on the performance of our markets this quarter. And then Eileen Feazell-Beeler, Chief Financial Officer will review the financial results. Before I turn the call over to Chris, 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 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 31st, 2023. I would also direct you 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 Chris.

Good morning, and thank you for joining us to review our second quarter results. Turning to slide three of my strategic update, we delivered 10% total revenue growth, including the benefit of the Pragma acquisition, and diluted earnings per share was $1.72. We continued to execute our strategy this quarter and delivered solid growth in commission revenue across most credit products, with strong revenue growth in our international product areas. We continue to be disciplined around our expense management, with total operating expenses increasing 12%, including the impact of pragma. We released our July trading metrics yesterday, which reflected continued solid growth in our credit complex across most product areas. While our U.S. credit estimated market share continues to disappoint, we believe that our core RF business, underpinned by our differentiated liquidity and open trading, reflects our continued leadership in the institutional client-to-dealer e-trading space. We have a clear strategy to return to market share growth through our global rollout of ExPro. We are also pleased that we are continuing to grow our market share in the global credit e-trading space outside of U.S. credit. I would like to welcome Eileen to her first earnings call as CFO. In the short time that she has been here, she has already made a significant impact on the business. And more broadly, we have made several key hires recently, including a new head of U.S. sales, a new head of global emerging markets, and a new head of client solutions. All great hires that significantly enhance the already deep bench strength at market access. We have always guided investors to look at long-term trends and not read too much into the month-to-month gyrations in our estimated market share, as we saw in July. Slide four lays out our strategic priorities to grow market share. The fastest-growing segments of U.S. high-grade trades year-to-date have been portfolio trading and dealer-to-dealer trading, up 94% and 31% respectively. Client-to-dealer trading is only up 13%. Our estimated share in the dealer-to-dealer segment is down slightly, and we are allocating more resources to attack this segment with expanded dealer trading solutions. While our client-to-dealer segment performs much better in periods of volatility, as we have seen over the last few days, we have a clear strategy to reignite growth in our client-to-dealer business by capturing more share in portfolio trading and larger trade sizes. This strategy will be executed through our modernized, easy-to-navigate user interface, X-Pro, which we have been rolling out in stages across products and protocols for our clients. XPro is enabled by our proprietary pre-trade data and analytics designed to help traders achieve better trading outcomes. Furthermore, XPro is built on cloud-based technology, so it is easy to make changes and introduce new features and functionality in a matter of weeks. With XPro, we are enhancing our portfolio trading solution, giving clients access to our full suite of automation and algal tools to improve workflows, and building out our high-touch strategy to attack larger trade sizes with unique AI-powered data. As you can see on the slide, we have already completed a number of important steps in our expo rollout over the last several quarters. The next step for our high-touch strategy is to enhance our PT offering with the launch of our global multi-product portfolio trading solution. We are also launching our AI dealer selection tool which is a smart counterparty selection tool that predicts which counterparty is most likely to win a trade. Last, we are rounding out our custom algos with the launch of our new Take Algo, which will be available to both clients and dealers. Our announcement yesterday with ICE is a great example of how we are connecting to external platforms to aggregate available liquidity, leveraging the deep liquidity across both platforms. We are opening up our network for clients in order to provide them with the tools and trading options they need to achieve their trading objectives. Our goal is to create an interoperable marketplace that provides our clients access to robust liquidity through protocol agnostic solutions. Slide five highlights the multiple cylinders that drive our growth across regions and across products. While our U.S. credit volumes have not been where we would like, We truly are a multidimensional growth story as the largest global network for e-trading. Emerging markets is a perfect example of this multidimensional growth story with growth across all regions as shown on this slide. Slide six provides more detail on the strength of our expanding emerging markets franchise. Our emerging markets commission revenue increased 22% with EM trace eligible estimated market share of 26%. And we are seeing strong growth in emerging markets trading activity across regions with record LATAM and APAC emerging markets trading volume of 27% and 35% respectively. Over the past year, we have experienced a significant expansion of activity across local markets trading. DEM local markets are the largest opportunity in EM from an addressable market perspective and involve larger trade sizes because these markets are mostly rates focused. The top five local currencies represented 58% of local markets trading volume on a constant currency basis, down from 63%, reflecting the increasing breadth of local currencies traded on the platform. One of our fastest growing protocols is Request for Market, or RFM, which is perfectly suited for local markets trading where our clients are trading in larger sizes with limited trading data. We generated record local markets RFM activity in the quarter, up 45%, which also drove our growth in block trading in local markets. We are very excited about the emerging markets opportunity ahead of us. which we believe is still in very early stages of electronification. Slide seven highlights our strategic priorities that will drive our future success. We are focused on growing our fixed income trading revenue, enhancing our client network experience, delivering innovative technology and data solutions, and driving a high performance team culture. It is important to note that our use of AI is a key ingredient across these strategic priorities. In our data business, for example, AI powers CP+, enabling our automation and algo solutions. In addition, AI also helps to power our little platform, which is part of our Pragma acquisition. Our AI-enabled tradability data, designed to provide investors with indicative market depth, is integral to our portfolio trading tool that helps clients make portfolio selection decisions. And finally, our AI-driven dealer selection tool is a key component of our high-touch strategy that targets block-sized trading with dealers. Now let me turn the call over to Rich to provide you with an update on our markets.