MarketAxess builds strategy around X-Pro

First quarter profits were down for fixed-income trading giant MarketAxess, but new trading capabilities shed light on plans for a new strategy. Despite lower profits, revenues rose 3.5% from the same period a year earlier, including $7.5 million from its August 2023 acquisition of multi-asset algorithm provider Pragma.

Meanwhile, developments in automation and the company’s new portfolio trading platform, X-Pro, showed promise. Last quarter, CEO Chris Concannon said the company was prioritizing increasing the use of automation on the platform. This quarter, automation volume hit a record $94 billion, up 36% over the year prior. Adaptive Auto-X, MarketAxess’ automation suite for larger trades, more than doubled its number of active clients.

Despite a drop in US credit market share, which was largely responsible for the lower profits, the company is paying attention to “faster growing segments of the market,” with a new strategy built around X-Pro, Concannon said during today’s earnings call. He added that MarketAxess will continue to prioritize large order flows and portfolio trades, which have enjoyed a boom within the last year.

X-Pro, which replaces the company’s legacy trading platform, has been slowly rolling out new capabilities over the past year. Last year, the platform added request-for-quote and portfolio trading in a bid to target its largest clients. By April of this year, Rich Schiffman, global head of trading solutions at MarketAxess, said on the call that X-Pro made up about 60% of portfolio trading volume on the platform.

Still, only about 16% of the company’s total US credit volume goes through X-Pro. “We still have a long way to go to accelerate the rollout of X-Pro,” Concannon said.

New features, though, are on the way. Concannon teased a “new phase” of X-Pro coming this summer, including the rollout of “high-touch” or block trading, a solution allowing dealers to price clients based on a smaller pool of competition. The company is also adding AI Dealer Select to help users select a preferred dealer in a given bond.

As the company caps out a period of tech investment, the challenge will remain on increasing adoption among clients and maintaining an edge in a crowded market. “X-Pro, both the portfolio trading tool and X-Pro for RFQ, are all built in cloud-based technology. It’s all new tech that we’ve rolled out here,” Concannon said. The modernized offering has helped the company release features, including proprietary datasets, faster. “That makes it highly competitive for us in an already competitive environment,” he said.

Despite the fall in US high-yield estimated market share, bright spots for the company also included record emerging markets, Eurobonds, and municipal bonds revenue, and strong growth in US high-grade bonds, which saw average daily trading volume for April increase by 42% year over year.