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MarketAxess Inks Deal to Boost Post-Trade & Data Businesses

Zacks Equity Research
·4 min read

MarketAxess Holdings Inc. MKTX recently inked a deal to acquire the Regulatory Reporting Hub, which has a pan-European reporting and compliance platform. The deal is anticipated to close in fourth-quarter 2020 subject to customary approval.

It has to be noted that the buyout will take place through the wholly-owned post-trade data reporting unit of MarketAxess in the Netherlands — Trax NL B.V. It is worth mentioning that the Regulatory Reporting Hub is the regulatory reporting business of Deutsche Börse Group, which being an international exchange organisation is best known for enhancing integrity and transparency in markets on the back of varied products, services and technologies.

Rationale Behind the Deal

MarketAxess has been providing reporting and data services for more than 30 years to renowned financial institutions. The latest move is likely to bolster its global post-trade and data businesses further. This, in turn, will enable MarketAxess to cater to a wider client base in Europe, specifically across Germany, France and the Nordics. Notably, revenues from post-trade services have remained decent in the first half of 2020, where it improved 1.9% from the first half of 2019.

The buyout is also likely to provide the company with improved capabilities to roll out enhanced solutions and technologies, thereby somewhat simplifying the complexities prevalent in the trade lifecycle.

In fact, the Regulatory Reporting Hub acquisition seems to be in sync with abovementioned endeavor of MarketAxess. This business of Deutsche Börse Group offers services that encompasses transaction and trade reporting, best execution reporting and SI services, and APA and ARM services. The same business also helps clients in complying with regulatory obligations and transparency requirements prevalent in multiple regulations.

Shares of this Zacks Rank #4 (Sell) company have gained 34.8% in the past year against the industry’s decline of 5.3%.

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Another Recent Acquisition

The latest move is the second buyout undertaken by the company in this month itself. Last week, MarketAxess inked a deal to acquire MuniBrokers, which is renowned for serving municipal bond inter-dealer brokers and dealers. The acquisition is intended to strengthen the company’s presence in the municipal bond market. The company is keen on expanding presence in the municipal bond market as it has witnessed huge US Taxable Municipal Bond trading volumes last year, which surged 53% year over year in 2019.

These initiatives have not only strengthened the company’s existing capabilities but also enabled it to reach out to newer markets, which in turn, has been paving the way for volume growth at MarketAxess.

Needless to say, the company has been consistently recording strong trading volumes, with the month of August being no exception to the trend. The month of August witnessed total monthly trading volume of $450 billion last month, which reflected a whopping improvement of 160.4% year over year.

The company’s peers, namely Nasdaq, Inc. NDAQ, Intercontinental Exchange, Inc. ICE and Cboe Global Markets, Inc. CBOE reported trading volumes for the month of August. While U.S. equity options volume for Nasdaq surged 36.9% year over year to 215 million contracts, European options and futures volume declined 34.7% year over year to 4.9 million contracts.

Meanwhile, Intercontinental Exchange’s futures & options average daily volume (ADV) was 4.6 million, down 17.5% year over year. CBOE Global’s ADV in the month totaled 9.7 million contracts, which increased 10.7% year over year.

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