Bond market operator MarketAxess has seen revenues for the first quarter of 2020 increase 36% to US$169 million, up on the US$124.5 million it generated in the first quarter of 2019. Operating margin was 53.9%, delivering an operating income of US$91.1 million, compared to US$63.2 million for the first quarter of 2019, an increase of 44%.
While commission revenue rose 38% on Q1 2019 to reach US$156.0 million, compared to $112.8 million for the first quarter of 2019, variable transaction fees increased 45% to US$129.2 million, including approximately US$4.8 million of US Treasuries trading commissions related to the November 2019 acquisition of LiquidityEdge, now operating as MarketAxess Rates.
US investment grade bond trading volume was 20% of IG trading reported on FINRA TRACE.
Other revenue, including information services, post-trade services and other revenue, increased 11% to US$13.0 million, compared to US$11.7 million for the first quarter of 2019 mainly driven by higher information services revenue of US$1.3 million. Total expenses for the first quarter of 2020 increased 27% to US$77.9 million largely due to higher staff costs following an increase in headcount.
The firms saw credit spreads, measured by its composite price aggregation tool, Composite+, increase between the first week of February and the peak in the 3rd week of March, by:
• + 633% for USD IG (2.49 bps to 18.25 bps);
• + 132% for USD HY (28 cents to 65 cents);
• + 325% for USD EM (20 cents to 85 cents);
• + 378% for EUR IG (9-euro cents to 43-euro cents).
By mid- April it found that bid/ask spreads had fallen and stabilised, albeit some have dropped more sharply than others. USD IG was now at 7.92bpts, USD EM was at 61 cents and EUR IG was at 22-euro cents; however, USD HY had stabilised and was at 69 cents, slightly higher than the global peak in March. They remained around three times their pre-crisis levels, potentially setting a new level for normal in 2020.
Rick McVey, chairman and CEO of MarketAxess said, "The steep drop in economic activity in the first quarter had an immediate and substantial impact on global credit markets with sharp credit spread widening, especially in high-yield and emerging markets. During this market disruption, credit trading volumes reached record levels in March, and electronic trading market share on MarketAxess increased. We believe Open Trading liquidity was essential to the functioning of credit markets during the quarter, and MarketAxess played a valuable role keeping our clients connected to the market as traders moved from their centralised trading floors to home offices. The indespensible role of electronic fixed-income trading networks was evident in the record number of client firms and individual traders that transacted on MarketAxess during the month of March.”
©The DESK 2020
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