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MarketAxess (MKTX) May Volumes Decrease But Stock Gains

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MarketAxess Holdings Inc. MKTX announced monthly trading volume for May 2021 of $478.7 billion. This consisted of $204.4 billion in credit volume and $274.3 billion in rates volume, both down 9% and 4% each sequentially. The metrics were also down 11% and 6%, respectively, year over year.

Except Eurobonds, volume decline was seen in all other categories, namely U.S High-Grade, High-Yield, emerging markets, other credit products, U.S Government bonds as well as agencies and other government bonds.

Despite soft volumes, shares of this operator of a leading electronic trading platform for fixed-income securities gained 1.35% in the last trading session.

The decline in US treasuries trading volume will put rate transaction fees under pressure. Lower trading volumes will also induce suppressed commission and fees revenues.

Trading volumes were weak last month due to a decline in overall credit market activity from the past when credit market activity was elevated, due to the economic disturbance caused by the pandemic. The downside may also be due to one less trading day than the previous month.

The company’s business thrives when credit spread volatility increases. Last year’s credit spread volatility was greater than this year’s while credit spreads in high-grade were also wider. Expansion of credit spread indicates more riskiness in the market and which is when bond looks more attractive. This led to increased bond trading, which in turn, aids volume, revenues and earnings growth for the company.

Despite dampened volumes, the company is poised for growth on the back of its international progress and addition to product pipeline. The company is advancing well outside the United States and is well-positioned to capture a larger share of trading in the growing global credit markets.

In the area of product expansion, it continues to experience momentum in its municipal bond offering. It recently closed the acquisition of MuniBrokers, a central electronic venue serving large banks and inter-dealer brokers in the municipal bond market. The buyout extends the company’s connectivity with dealers and provides a rich content for its growing muni client business.

The company is also gaining from a continued momentum of automation in credit trading. The use of dealer algorithms is continuing to grow on the platform. As the overall share of electronic trading broadens in global credit, the company will witness a steady rise in demand for its automated trading solutions, which will eventually boost growth. It is consistently developing innovative automated trading solutions, which bode well.

Year to date, the stock has lost 19.3% against its industry’s growth of 6.7%. However, other securities exchange companies in the same space, namely Cboe Global Markets CBOE and CME Group Inc. CME have rallied 21.2% and 18.8%, respectively, during the same time frame but Intercontinental Exchange Inc. ICE has dipped 3.1%

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MarketAxess carries a Zacks Rank #5 (Strong Sell), presently.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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