MarketAxess FY Conference Summary Company Overview - **Company**: MarketAxess (NasdaqGS: MKTX) - **Event**: Barclays' 23rd Global Financial Services Conference - **Date**: September 09, 2025 Key Points Industry and Market Dynamics - **Block Trading Business**: MarketAxess is focusing on enhancing its block trading capabilities, particularly in emerging markets (EM) and euro bonds, which are experiencing different trader attitudes compared to the U.S. market [3][4] - **Revenue Challenges**: The company faces challenges in its U.S. credit business, with flat revenue attributed to macroeconomic conditions, slow adoption of new trading protocols, leakage of small ticket trades into portfolio trading, and reduced activity in longer-term bonds [5][6][7] - **Growth in Non-U.S. Credit**: Non-U.S. credit revenue is growing at a rate of 13%, driven primarily by emerging markets and euro bonds, indicating a significant opportunity for electronic trading in these regions [4][9] Trading Protocols and Innovations - **Portfolio Trading**: MarketAxess is actively working to increase its market share in portfolio trading, which has seen a growth in block trading by 38% year-to-date. The company is investing in automation and targeted RFQ (Request for Quote) solutions to enhance trading efficiency [11][15][19] - **Automation Adoption**: The adoption of automation in trading is increasing, with one client reporting that automation now accounts for 35% of their volume on MarketAxess, indicating a shift towards larger block trades [12][14] - **Dealer Selection Tool**: A proprietary dealer selection tool has been developed to assist clients in choosing the right dealers for their trades, particularly in the EM market, where dealer diversity poses challenges [18][19] Macro Factors and Market Outlook - **Market Volatility**: The current macro environment is characterized by low volatility and tight spreads, which are impacting trading volumes. However, there is optimism for increased activity with potential rate cuts from the Federal Reserve [27][29][32] - **Future Opportunities**: The company sees significant opportunities in the U.S. investment-grade market, where 46% of TRACE trades are of larger sizes that are still primarily executed via traditional methods. MarketAxess aims to capture this segment through enhanced electronic trading solutions [10][20] Strategic Initiatives - **Midex Solution**: The upcoming launch of the Midex solution for dealer-to-dealer trading is expected to enhance MarketAxess's competitive position in this segment, which has been underserved [40][45] - **Partnership with ICE**: The integration with ICE is ongoing, with a focus on enhancing liquidity in the municipal and corporate bond markets [53] - **M&A Strategy**: MarketAxess is prioritizing organic growth over acquisitions, focusing on delivering new technology and solutions to meet market demands [55][56] Financial Performance and Shareholder Returns - **Share Repurchase Program**: The company has been active in share repurchases, reflecting its strong cash generation capabilities and commitment to returning value to shareholders [57] Additional Insights - **Algorithmic Trading**: There is a growing trend in algorithmic trading among buy-side clients, which is expected to improve market liquidity and turnover [47][49] - **Private Credit Market**: MarketAxess is exploring opportunities in the private credit market, anticipating a convergence of public and private credit trading on its platform [54] This summary encapsulates the key insights and strategic directions discussed during the MarketAxess FY Conference, highlighting the company's focus on innovation, market opportunities, and financial performance.

Core Insights - Triba Research aims to identify high-quality businesses capable of delivering sustainable, double-digit returns over the long term [1] - The investment strategy emphasizes companies with strong competitive advantages, operating in growing markets, maintaining low debt levels, and led by skilled management teams [1] - The focus remains on long-term value creation while staying informed about the latest developments in the market [1]

Core Viewpoint - S&P Dow Jones Indices will implement changes to the S&P 100, S&P 500, S&P MidCap 400, and S&P SmallCap 600 indices effective September 22, 2025, to enhance market capitalization representation [1][2]. Changes Summary - **S&P 100 Changes**: - Addition of Uber Technologies (Ticker: UBER) in the Industrials sector - Deletion of Charter Communications (Ticker: CHTR) from the index [2][3]. - **S&P 500 Changes**: - Additions: - AppLovin (Ticker: APP) in the Information Technology sector - Robinhood Markets (Ticker: HOOD) in the Financials sector - Emcor Group (Ticker: EME) in the Industrials sector - Deletions: - MarketAxess Holdings (Ticker: MKTX) in the Financials sector - Caesars Entertainment (Ticker: CZR) in the Consumer Discretionary sector - Enphase Energy (Ticker: ENPH) in the Information Technology sector [2][3]. - **S&P MidCap 400 Changes**: - Additions: - Nutanix (Ticker: NTNX) in the Information Technology sector - TransUnion (Ticker: TRU) in the Industrials sector - MP Materials (Ticker: MP) in the Materials sector - Kratos Defense & Security Solutions (Ticker: KTOS) in the Industrials sector - Deletions: - Emcor Group (Ticker: EME) in the Industrials sector - The Wendy's Company (Ticker: WEN) in the Consumer Discretionary sector - Acadia Healthcare Company (Ticker: ACHC) in the Health Care sector - ManpowerGroup (Ticker: MAN) in the Industrials sector [3][4]. - **S&P SmallCap 600 Changes**: - Additions: - MarketAxess Holdings (Ticker: MKTX) in the Financials sector - Caesars Entertainment (Ticker: CZR) in the Consumer Discretionary sector - Enphase Energy (Ticker: ENPH) in the Information Technology sector - The Wendy's Company (Ticker: WEN) in the Consumer Discretionary sector - Acadia Healthcare Company (Ticker: ACHC) in the Health Care sector - Noble Corporation (Ticker: NE) in the Energy sector - Q2 Holdings (Ticker: QTWO) in the Information Technology sector - Waystar Holding (Ticker: WAY) in the Health Care sector - Hecla Mining (Ticker: HL) in the Materials sector - Deletions: - MP Materials (Ticker: MP) in the Materials sector - Kratos Defense & Security Solutions (Ticker: KTOS) in the Industrials sector - ProPetro Holding (Ticker: PUMP) in the Energy sector - Xerox Holdings (Ticker: XRX) in the Information Technology sector - TechTarget (Ticker: TTGT) in the Communication Services sector - Mesa Laboratories (Ticker: MLAB) in the Health Care sector - Owens & Minor (Ticker: OMI) in the Health Care sector - B&G Foods (Ticker: BGS) in the Consumer Staples sector - Jack in the Box (Ticker: JACK) in the Consumer Discretionary sector - Simulations Plus (Ticker: SLP) in the Health Care sector [3][4].

Group 1 - Loews, AFLAC, and Marketaxess Holdings will trade ex-dividend on 8/20/25, with respective dividends of $0.0625, $0.58, and $0.76 to be paid on 9/2/25 and 9/3/25 [1][2] - The expected price adjustments for the stocks are approximately 0.07% lower for Loews, 0.55% lower for AFLAC, and 0.40% lower for Marketaxess Holdings when they open for trading [2] - Marketaxess Holdings is a contender for the "Dividend Aristocrats" index, having over 16 years of dividend increases [3] Group 2 - The estimated annualized yields based on the most recent dividends are 0.26% for Loews, 2.20% for AFLAC, and 1.60% for Marketaxess Holdings [10] - In Monday trading, Loews shares decreased by about 0.6%, while AFLAC shares increased by about 0.1%, and Marketaxess Holdings shares rose by about 1.3% [11]

PART I — Financial Information [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited Q2 2025 financials show total assets at **$1.97 billion**, revenue up **11.0%** to **$219.5 million**, and net income up **9.6%** to **$71.1 million** [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Total assets increased to **$1.97 billion** as of June 30, 2025, driven by receivables and goodwill, while liabilities also rose | Account | June 30, 2025 (In thousands) | December 31, 2024 (In thousands) | | :--- | :--- | :--- | | **Total Assets** | **$1,974,938** | **$1,789,216** | | Cash and cash equivalents | $462,837 | $544,478 | | Receivables from broker-dealers, etc. | $559,120 | $357,728 | | Goodwill | $286,020 | $236,706 | | **Total Liabilities** | **$574,038** | **$400,556** | | Payables to broker-dealers, etc. | $329,785 | $218,845 | | Income and other tax liabilities | $95,197 | $3,683 | | **Total Stockholders' Equity** | **$1,386,185** | **$1,388,660** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2025 revenues grew **11.0%** to **$219.5 million** and net income rose **9.6%** to **$71.1 million**, while H1 net income fell **37.3%** due to higher taxes | Metric | Q2 2025 (In thousands) | Q2 2024 (In thousands) | YoY Change | H1 2025 (In thousands) | H1 2024 (In thousands) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$219,462** | **$197,660** | **+11.0%** | **$428,038** | **$407,978** | **+4.9%** | | Commissions | $191,770 | $171,679 | +11.7% | $373,113 | $356,552 | +4.6% | | **Total Expenses** | **$127,598** | **$116,321** | **+9.7%** | **$247,792** | **$234,139** | **+5.8%** | | **Operating Income** | **$91,864** | **$81,339** | **+12.9%** | **$180,246** | **$173,839** | **+3.7%** | | Provision for Income Taxes | $26,236 | $21,399 | +22.6% | $107,325 | $45,501 | +135.9% | | **Net Income** | **$71,180** | **$64,938** | **+9.6%** | **$86,245** | **$137,553** | **-37.3%** | | **Diluted EPS** | **$1.91** | **$1.72** | **+11.0%** | **$2.31** | **$3.64** | **-36.5%** | - Cash dividends declared per common share increased to **$0.76** in Q2 2025 from **$0.74** in Q2 2024[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 operating cash flow increased to **$133.3 million**, but cash and equivalents decreased by **$50.0 million** due to acquisitions and share repurchases | Activity | Six Months Ended June 30, 2025 (In thousands) | Six Months Ended June 30, 2024 (In thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $133,343 | $113,900 | | Net cash (used in) investing activities | $(68,177) | $(33,753) | | Net cash (used in) financing activities | $(142,315) | $(114,015) | | **Net decrease in cash** | **$(50,005)** | **$(37,542)** | - The acquisition of RFQ-hub resulted in a net cash outflow of **$36.5 million**[23](index=23&type=chunk) - Cash used for repurchases of common stock increased to **$74.8 million** in H1 2025 from **$43.6 million** in H1 2024[23](index=23&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail revenue recognition, the RFQ-hub acquisition, goodwill, a significant tax provision, and share repurchase activities Commission Revenue by Fee Type (Q2 2025 vs Q2 2024) | Fee Type | Q2 2025 (In thousands) | Q2 2024 (In thousands) | | :--- | :--- | :--- | | Variable transaction fees | $158,073 | $138,440 | | Distribution fees and unused minimum fees | $33,697 | $33,239 | | **Total commissions** | **$191,770** | **$171,679** | - In May 2025, the Company acquired a **90.3%** controlling stake in RFQ-hub for cash consideration of **$38.1 million**, recognizing **$49.3 million** in goodwill and **$30.3 million** in intangible assets[78](index=78&type=chunk)[81](index=81&type=chunk)[83](index=83&type=chunk) - The effective tax rate for H1 2025 was **55.4%**, up from **24.9%** in H1 2024, primarily due to a **$58.8 million** provision for unrecognized tax benefits[91](index=91&type=chunk) - During H1 2025, the Company repurchased **355,688** shares for **$74.8 million**, with **$150.3 million** remaining under the 2024 Repurchase Program[116](index=116&type=chunk) Geographic Revenue Breakdown (H1 2025 vs H1 2024) | Region | H1 2025 (In thousands) | H1 2024 (In thousands) | | :--- | :--- | :--- | | United States | $291,288 | $282,666 | | United Kingdom | $87,299 | $79,111 | | Other | $49,451 | $46,201 | | **Total** | **$428,038** | **$407,978** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2025 revenue growth driven by trading volumes, increased expenses, a higher H1 tax rate, and strong liquidity [Critical Factors Affecting Our Industry and Our Company](index=35&type=section&id=Critical%20Factors%20Affecting%20Our%20Industry%20and%20Our%20Company) Market conditions, competition, and evolving regulations, including DORA, significantly impact the company's industry and operations - In H1 2025, U.S. high-grade and high-yield market average daily volumes increased by **12.3%** and **23.9%**, respectively[130](index=130&type=chunk) - Increased client demand for portfolio trading has intensified competition, potentially impacting market share due to competing platforms[136](index=136&type=chunk) - The E.U.'s Digital Operational Resilience Act (DORA) became applicable in January 2025, introducing significant ICT governance and risk management requirements[140](index=140&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Q2 2025 revenues rose **11.0%** due to higher trading volumes, while H1 net income dropped **37.3%** primarily from a substantial tax provision Q2 2025 vs Q2 2024 Trading Volume (in millions) | Product | Q2 2025 (in millions) | Q2 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total Credit | $1,035,916 | $861,535 | +20.2% | | Total Rates | $1,994,517 | $1,285,423 | +55.2% | | **Total Trading Volume** | **$3,030,433** | **$2,146,958** | **+41.2%** | Q2 2025 vs Q2 2024 Average Variable Fee Per Million | Product | Q2 2025 ($) | Q2 2024 ($) | % Change | | :--- | :--- | :--- | :--- | | Credit | $138.02 | $148.16 | -6.8% | | Rates | $4.03 | $4.45 | -9.4% | - Employee compensation and benefits for Q2 2025 increased by **$8.4 million** YoY, primarily due to **$4.0 million** in severance costs[185](index=185&type=chunk) - The effective tax rate for H1 2025 increased to **55.4%** from **24.9%** in H1 2024, due to a reserve for unrecognized tax benefits[205](index=205&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$620.9 million** in cash and investments, and **$749.9 million** available under its credit facility - As of June 30, 2025, the company had **$749.9 million** in available borrowing capacity under its Credit Agreement[208](index=208&type=chunk) - Regulated subsidiaries held aggregate net capital **$603.8 million** in excess of the required **$42.4 million**[216](index=216&type=chunk) - The 2022 Share Repurchase Program was exhausted in Q1 2025, with **$150.3 million** remaining under the 2024 program[222](index=222&type=chunk) [Non-GAAP Financial Measures](index=57&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like EBITDA and free cash flow, with Q2 2025 EBITDA at **$110.8 million** and an **EBITDA margin of 50.5%** Reconciliation of GAAP to Non-GAAP Diluted EPS (H1 2025) | Metric | H1 2025 ($) | | :--- | :--- | | Diluted EPS, GAAP-basis | $2.31 | | Notable items impact | $1.56 | | **Diluted EPS, excluding notable items** | **$3.87** | EBITDA and EBITDA Margin | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | H1 2025 (in thousands) | H1 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | EBITDA | $110,820 | $98,913 | $218,254 | $208,173 | | EBITDA Margin | 50.5% | 50.0% | 51.0% | 51.0% | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market, interest rate, foreign currency, and credit risks, with specific impacts quantified for interest rate and FX changes - A hypothetical **100 basis point** change in interest rates would impact annual interest income by approximately **$6.5 million**[232](index=232&type=chunk) - A hypothetical **10.0%** change in the U.S. dollar against other currencies would impact annual revenue by approximately **$13.8 million** and operating expenses by **$13.4 million**[236](index=236&type=chunk) - The company is exposed to credit risk as a matched principal trading counterparty, particularly with the growth of Open Trading[238](index=238&type=chunk) [Item 4. Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[242](index=242&type=chunk) PART II — Other Information [Item 1. Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal matters, with outcomes not expected to materially impact its financial position - The outcome of outstanding legal matters is not expected to have a material adverse impact on the Company's financial position[246](index=246&type=chunk) [Item 1A. Risk Factors](index=63&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for FY2024 [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2025, the company repurchased **169,195** shares for **$218.65** average per share, with **$150.3 million** remaining for repurchase Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | April 2025 | 63,593 | $216.14 | | May 2025 | 56,032 | $219.31 | | June 2025 | 49,570 | $221.12 | | **Total** | **169,195** | **$218.65** | - As of June 30, 2025, the company had **$150.3 million** of remaining capacity under the 2024 Repurchase Program[250](index=250&type=chunk) [Item 5. Other Information](index=64&type=section&id=Item%205.%20Other%20Information) The Chief Information Officer adopted a Rule 10b5-1 trading plan in May 2025 for the potential sale of up to **600** shares - On May 15, 2025, the Chief Information Officer adopted a Rule 10b5-1(c) trading arrangement for the sale of up to **600** shares of the Company's common stock, expiring May 29, 2026[253](index=253&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO and various agreements

Group 1 - MarketAxess Holdings Inc. held its Q2 2025 Earnings Conference Call on August 6, 2025, with key participants including CEO Christopher Concannon and CFO Ilene Fiszel Bieler [1][2][3] - The call was structured to provide updates on the company's strategy and trading businesses, with a financial results review by the CFO [3] Group 2 - The conference call was recorded and included instructions for participants, indicating a formal setting for discussing the company's performance [2] - Forward-looking statements were mentioned, highlighting the uncertainty of future events and the potential for actual results to differ from expectations [4]

Core Insights - MarketAxess reported record revenue of $219.5 million for Q2 2025, reflecting an 11% year-over-year growth, and non-GAAP EPS of $2.00, surpassing analyst expectations [1][2] - The company experienced significant trading volume growth, with overall trading volume reaching $3.03 trillion, a 41% increase year-over-year [5] - Despite revenue growth, profit margins faced pressure due to a decline in fee-per-million and rising costs [1][9] Financial Performance - Non-GAAP EPS for Q2 2025 was $2.00, exceeding the estimate of $1.96 and up 16% from $1.72 in Q2 2024 [2] - GAAP revenue was $219.5 million, slightly above the estimate of $219.17 million and up from $198.0 million in Q2 2024 [2] - Net income (GAAP) increased to $71.2 million, a 10% rise from $64.9 million in the previous year [2] Trading Activity and Volume - Total trading volume reached $3.03 trillion, marking a 41% increase year-over-year, with average daily volume (ADV) climbing to $49.0 billion, up 43% [5] - High-grade U.S. credit segment ADV rose 21%, while high-yield increased by 27% [5] - U.S. government bond ADV grew 57% year-over-year, indicating strong demand in this segment [5] Product and Protocol Innovations - The company focused on enhancing trading protocols, including "portfolio trading" and "block trading," which saw significant adoption [4][6] - Portfolio trading ADV surged 69% to a record $1.5 billion, while block trading also experienced record activity [6] - The Open Trading system continued to attract liquidity and alternative market makers, contributing to overall platform growth [6] Technology and Analytics - Services revenue reached a record $27.7 million, up 7%, driven by advanced analytics and technology services [7] - The X-Pro platform processed over 92% of portfolio trades in Q2 2025, showcasing the effectiveness of technology integration [7] - The acquisition of RFQ-Hub contributed approximately $1.8 million to commission revenues, enhancing technology services growth [7] International Expansion - Emerging markets and eurobonds saw commission revenue growth of 16% and 22% year-over-year, respectively [8] - The rollout of the X-Pro platform is planned for Europe, indicating ongoing international expansion efforts [8] Margin and Expense Management - Fee-per-million (FPM) declined sharply, with credit FPM dropping 7% to $138, attributed to a shift in trading protocols [9] - Total expenses grew 10% to $127.6 million, driven by higher headcount and technology investments [10] - The effective tax rate rose to 26.9%, influenced by provisions for uncertain tax reserves [11] Capital Management - Cash, equivalents, and investments decreased to $620.9 million, down from $698.6 million due to share repurchases [12] - The company declared a quarterly dividend of $0.76 per share, consistent with previous quarters [12] Future Outlook - Management did not provide formal quantitative guidance for the remainder of fiscal 2025 but indicated a focus on expense discipline and margin trends [13][14] - The ongoing shift towards lower-fee, higher-volume protocols may continue to pressure profit margins despite revenue growth [14]

Core Insights - MarketAxess Holdings Inc. (MKTX) reported Q2 2025 earnings per share of $2, exceeding the Zacks Consensus Estimate by 3.1%, and up from $1.72 a year ago [1][10] - Total revenues increased by 11% year over year to $219.5 million, also surpassing the consensus mark by 0.6% [1][10] - The strong performance was driven by record-high trading volumes amid heightened market volatility, although elevated expenses partially offset this growth [2][10] Financial Performance - Commission revenues rose 12% year over year to $191.8 million, beating the Zacks Consensus Estimate by 1.3% [4] - Information services revenues were $13.1 million, a 4% year-over-year increase, but missed the consensus mark by 2% [4] - Total expenses increased by 10% year over year to $127.6 million, primarily due to higher employee compensation, technology, and G&A costs [5][10] - Net income grew 10% year over year to $71.2 million, exceeding estimates, while the net income margin decreased by 50 basis points to 32.4% [5] Trading Volumes - High-grade trading volume reached $481.1 billion, a 19% year-over-year increase, surpassing the consensus estimate by 3.8% [6] - High-yield trading volume increased by 25% year over year to $104.9 billion, with an average daily volume (ADV) rise of 27% to $1.7 billion [7] - Total credit trading volume grew 20% year over year to $1.04 trillion, with total credit ADV rising 22% to $16.8 billion [8] Balance Sheet and Cash Flow - As of June 30, 2025, cash and cash equivalents were $462.8 million, down from $544.5 million at the end of 2024 [9] - Total assets increased to $1.97 billion from $1.79 billion at the end of 2024 [9] - Net cash from operations was $103.7 million, down from $118.8 million a year ago, while free cash flow increased to $113 million from $97.6 million [12] Capital Deployment - MarketAxess repurchased shares worth $36.7 million in the quarter, totaling $80 million year-to-date, with $145 million remaining under the repurchase program [13] - A quarterly cash dividend of 76 cents per share was declared [13] Strategic Outlook - The company aims to execute its long-term growth strategy through product innovation and strategic talent acquisition, focusing on expanding block trading solutions and enhancing portfolio trading capabilities [14]

Financial Data and Key Metrics Changes - The company reported an 11% revenue growth to a record $219 million, including a $2 million benefit from foreign currency fluctuations, with a 10% growth excluding FX [23][24] - Diluted earnings per share increased by 11% to $1.91, or $2 per share excluding notable items, representing a 16% increase [23] - Commission revenue rose 12% to a record $192 million, driven by strong market volumes and increased volatility [24][27] Business Line Data and Key Metrics Changes - The client-initiated channel saw a 38% growth in block trading average daily dollar volume (ADD) across U.S. Credit, emerging markets, and Eurobonds [8][14] - Portfolio trading channel generated a 69% increase in total portfolio trading ADV [9] - Dealer-initiated channel experienced a 40% increase in dealer-initiated ADV [9] Market Data and Key Metrics Changes - U.S. High grade market share dropped to 10% in July from 12% in June, attributed to large trades moving to phone and chat [11] - The company reported a record 12.5% share of blocks in U.S. High grade, representing an increase of almost 200 basis points year-over-year [15] - Emerging markets and Eurobonds saw significant growth, with block trading volume up 27% in Q2 [56][100] Company Strategy and Development Direction - The company is focusing on becoming more protocol agnostic and expanding its addressable market through multiple trading protocols [5] - Strategic hires have been made to enhance product delivery and drive growth, including key personnel in product management and analytics [34][78] - The launch of the new Midex solution is expected to enhance dealer-to-dealer trading capabilities [18][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, particularly in U.S. Credit, driven by new initiatives and a favorable macro environment [21][31] - The company acknowledged disappointing market share numbers in July but remains confident in its strategies to electronify the market [22][44] - Management highlighted the importance of adapting to market dynamics, particularly in the context of low volatility environments [42][72] Other Important Information - The company generated $360 million in free cash flow over the trailing twelve months, with $145 million remaining on the share repurchase authorization [29] - Operating expenses increased by 6% year-over-year, driven by higher employee compensation and technology costs [28] - The effective tax rate rose to 26.9%, reflecting increased accrual for uncertain tax positions [26] Q&A Session Summary Question: Can you provide details on the progress of new initiatives and market share? - Management reported significant growth in key areas, with investment grade portfolio trading up 47% year-to-date and market share in portfolio trading up 340 basis points [38][39] Question: What are the drivers behind the decline in fee per million? - The decline was attributed to protocol mix and increased portfolio trading volumes, although there was a slight recovery in July due to changes in high-grade duration [50][51] Question: Can you elaborate on the block trading initiative? - Management noted that block trading volume year-to-date is up over 20%, with significant growth in both Eurobonds and emerging markets [54][56] Question: What is the outlook for the municipal business? - The municipal business has seen a year-over-year growth of 23%, with a focus on enhancing electronic trading capabilities [85][89] Question: How does the company view M&A opportunities? - The company remains focused on organic growth but is also open to bolt-on acquisitions, leveraging a strong balance sheet for potential M&A activities [92][95]

Financial Data and Key Metrics Changes - The company reported an 11% revenue growth to a record $219 million, including a $2 million benefit from foreign currency fluctuations, with a 10% growth excluding FX [21][22] - Diluted earnings per share increased by 11% to $1.91, or $2 per share excluding notable items, representing a 16% increase [21] - Commission revenue increased by 12% to a record $192 million, driven by strong market volumes and increased volatility [22][25] Business Line Data and Key Metrics Changes - Block trading in the client-initiated channel saw a 38% growth in average daily volume (ADV) across U.S. Credit, emerging markets, and Eurobonds [6][12] - Portfolio trading channel generated a 69% increase in total portfolio trading ADV [7] - Dealer-initiated channel experienced a 40% increase in dealer-initiated ADV [7] Market Data and Key Metrics Changes - U.S. High grade market share dropped to 10% in July from 12% in June, attributed to large trades moving to phone and chat [9] - The share of lock trades equal to or larger than $5 million increased to 47% in July, up from 42% in June [9] - U.S. High grade portfolio trading market share was over 19%, up 370 basis points year-over-year [14] Company Strategy and Development Direction - The company is focusing on becoming more protocol agnostic and expanding its addressable market through multiple trading protocols and automation tools [4] - A high-touch strategy was launched in U.S. Credit to target the phone and chat market, which has seen significant block trading activity [10] - The company is preparing to launch a new Midex solution in September for U.S. Credit, aimed at enhancing dealer-to-dealer trading [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the supportive market backdrop and strong growth across new initiatives, despite disappointing U.S. High grade share numbers in July [19][20] - The company anticipates continued growth in U.S. Credit through progress in client-initiated, portfolio trading, and dealer-initiated channels [30][31] - Management highlighted the importance of strategic hires in driving future growth and enhancing product offerings [33][79] Other Important Information - The company generated $360 million in free cash flow over the trailing twelve months, with $145 million remaining on the share repurchase authorization as of July 31, 2025 [28] - Operating expenses increased by 6% year-over-year, driven by higher employee compensation and technology costs [26] Q&A Session Summary Question: Progress on new initiatives and July volumes - Management reported significant growth in key areas, with investment grade portfolio trading up 47% year-to-date and block activity up over 20% [37][39] - July market dynamics favored large portfolio trades, impacting market share [42][44] Question: Drivers of fee per million decline - The decline was attributed to new protocols and increased portfolio trading volumes, though July saw a slight recovery due to high-grade duration changes [49][50] Question: Update on block trading initiatives - Block trading volume in Eurobonds was up 54% in July, with expectations for continued growth as dealer content increases [56][62] Question: Performance in the muni business - The muni market saw a 23% increase in overall volume, with tax-exempt business growing by 34% [85][88] Question: Capital return priorities and M&A - The company remains focused on organic growth opportunities while being opportunistic with share repurchases and considering bolt-on acquisitions [92][95]