E-trading bond platforms outperform banks’ Q3 in fixed income trading

Dan Barnes

Market operator Tradeweb has seen a strong Q3 revenue against the same quarter in 2020, while electronic bond-trading MarketAxess has seen a slight decrease in revenues. By contrast, the third quarter saw major investment banks see a fall in fixed income revenues drop between 16-20%.

Tradeweb’s revenues were US$265.3 million in the third quarter of 2021 which was a 24.6% increase compared to prior year period.
Rates average daily volume (ADV) was up 19.2%, reporting record trading activity in US Treasuries and strong year-over-year volume growth in European government bonds and swaps/swaptions.

Lee Olesky, CEO of Tradeweb Markets, said, “Tradeweb’s strong momentum from the first half of the year continued through the third quarter of 2021, producing our second-best revenue quarter ever. Growth in trading volume was broad-based across our markets, with US credit, global swaps and US Treasuries leading the way.”

In credit, Tradeweb realised revenues of US$72.2 million in Q3, 43.9% up on Q3 2020, while credit ADV was up 13.8% with year-over-year increases in US and European credit trading.

Money market revenues hit US$11.2 million in Q3 2021 increased 7.0% compared to prior year period with ADV up 31.3%.
The firm also increased market data revenues, reaching US$20.5 million in the third quarter of 2021 up 10.3% year on year.

By contrast, MarketAxess saw total revenues for the third quarter of 2021 decrease 1.2% against to US$162.1 million, compared to US$164 million for the third quarter of 2020.

“Growth in our global client network and adoption of automated solutions continued in the third quarter in spite of generally weak secondary trading conditions in global credit trading.

Credit spreads and credit spread volatility have remained at historically low levels throughout the year,” said Rick McVey, chairman and CEO of MarketAxess. “Investments in our international client business are paying off with record estimated market share in Eurobonds and strong trends in global Emerging Markets bond trading. Combined data and post-trade revenue also reached a new record this quarter, providing an important source of diversification.”

It saw commission revenue for Q3 2021 decrease 5.2% to US$142.8 million, compared to US$150.6 million for the third quarter of 2020. Variable transaction fees decreased 9.0% to US$112.1 million for the third quarter of 2021, compared to variable transaction fees of US$123.2 million for the third quarter of 2020. Commission revenue includes US$1.2 million generated by MuniBrokers, which was acquired in April 2021. US high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume was an estimated 21.4% for the third quarter of 2021, compared to an estimated 22.2% for Q3 2020.

Revenue from information services, post-trade services and other revenue, increased to US$19.3 million, compared to $13.4 million for the third quarter of 2020, principally due to US$3.4 million of regulatory trade reporting revenue generated by Regulatory Reporting Hub, which was acquired from Deutsche Börse Group in November 2020, net new post-trade services contract revenue of US$1.1 million, and net new data sales of US$900,000.

In a note, analysts Michael Cyprys and Ian Buchanan on Morgan Stanley noted, “We see a persistent growth outlook ahead, as MarketAxess capitalises on the tailwinds from electronification of fixed income markets and expands into US$96 billion TAM of daily credit volume opportunity, driven by continued penetration through a deep liquidity network, innovative trading protocols including all-to-all trading, and algo/automated trading.”

©Markets Media Europe, 2021