MarketAxess Holdings | Unique Electronic Trading Platform for the Institutional Credit Markets | Richard McVey

Today, it is the market leader in the electronic trading of US corporate bonds, with 85% of investment-grade and 84% of high-yield debt traded electronically on its platform. That equates to 20% of all corporate bond trading volume in the US. As of October 2020, the company is valued at $20.43bn.

MarketAxess is provide electronic trading systems for 84 percent of high-yield debt trades and 85 percent of investments grade bond trades via its electronic platform. What this means is that the company provides the electronic platform used for roughly twenty percent of all of the United States’ corporate bond trading in volume. Thes are impressive figures since there is a fair amount of competition in the industry that MarketAxess serves.

The first conceptualization for the services that MarketAxess provides resulted from one of JP Morgan’s research teams investigating the use of web-based technology for trading. It was called the Lab Morgan program initially. McVey is the genius who first proposed the model that would become MarketAxess in 1999. Within a year, McVey took the idea out on his own and he launched the venture independently to form the new company.

It took a sizable amount of capital to launch the new MarketAxess. McVey had some serious promotion to do. He was able to raise $24 million in funding from several market participants. This would give them the necessary seed funding to proceed with the development of a few products to establish the business. There would be later rounds of funding for development of a more comprehensive line of technology products, but they were off to a good start.

Prior to the creation of the single electronic trading platform which covers a variety of trade types, investors were faced with a cumbersome means of gathering information and completing their trades. Since there wasn’t a single system to cover the different types of trades many would execute, it took a lot more time and effort to do. According to Crunchbase, investors needed a single trading platform which would offer access to several different dealers with competitive pricing over a vast array of credit products. This created more of a one-stop-shop in a user-friendly system which relieved much of the time-consuming steps previously required.

The company was established in New York, New York, USA and it began offering services nationally. Since then, it has expanded to include services for several different companies. They offer electronic trading systems all across the Americas, including North, South and Central America, The United Kingdom and other European countries, and Asia and the Pacific region.

MarketAxess Holdings Inc has grown to become a dominant source for online corporate bond trading in the marketplace. They recently made the acquisition of LiquidityEdge, which controlled roughly five percent of the electronic Treasury trading. Bringing them into the fold under the parent company opened more of the market for US government bonds for MarketAxess. It’s a $16 trillion market so this was a wise move which set them even higher in standings. Executives negotiated with David Rutter, owner and founder of LiquidityEdge to make the purchase for $50 million in stock and $100 million in cash.

Trax is a London, England-based company which provides post-trade services and market data for their clients. In addition, they also offer regulatory and trade matching reporting. Wisely, MarketAxess acquired this company in 2013, to bring the host of services that they provide into the portfolio of the company in a move that served them well with regard to the expansion of the products being offered along with the territories that the company serves. Black Rock is known for its Aladdin platform, which hosts client assets in excess of ten trillion dollars. The partnership is intended to move MarketAxess into an “all-to-all” electronic marketplace. The agreement between the two giants in the industry was completed in 2012, giving Market Axess one more resource and service to add to their ever-growing range of product offerings.

MarketAxess evolved at a fairly fast rate, adding diversity to their portfolio of products and services. They added another feature as they began trading corporate bonds of investment grade. This gave investors yet more in terms of their access to new research and issues and in this business, information is requisite to make the best possible decisions.

Trading Edge Inc was a strategic acquisition made by MarketAxess. Trading Edge also owned a start-up bond company called BondLink, which aided investors in the online purchase and sale of bonds. This transaction took place in 2001, and what it amounted to for MarketAxess, was getting a two for one in terms of the level of expansion it provided for the growing corporation.

MarketAxess went public in 2004. At the IPO the stocks were valued at $11 per share. Following their launch in the stock market, MarketAxess launched its all-to-all trading marketplace which they called Open trading. They went on to expand the partnership with Black Rock which uses the Aladdin platform to reduce the costs associated with making transactions for participants in the European Market. They experienced a growth of 86 percent in daily trading volume after the expansion, over the prior year. Further expansion just two years later in 2017 included a new office in Amsterdam, The Netherlands. MarketAxess and BlackRock followed with an expansion of their partnership services into Asia with a basis on the US dollar for sovereign and corporate bonds as well as other securities trading.