MarketAxess Holdings Inc. MKTX reported total monthly trading volume of $450 billion for August 2020, which highlighted a whopping improvement of 160.4% year over year.
This operator of a leading electronic trading platform for fixed-income securities and provider of market data and post-trade services reported average daily volume (ADV) of $21.5 billion, which increased a massive 172.2% year over year. This upside can primarily be attributed to robust volumes across the company’s product lines.
Notably, there were 21 trading days in August this year compared with 22 days in August 2019.
In August, the company’s total credit ADV of $8.5 billion improved 11.2% year over year while overall trading volume of $178.6 billion climbed 6.2% year over year. MarketAxess also reported $271.3 billion in rates volume, which is way higher than $4.6 billion reported in August 2019.
Moreover, U.S. high-grade trading volume of $95.7 billion expanded 12.3% year over year. However, Emerging markets’ ADV and overall trading volume were $1.9 billion and $39.1 billion, respectively, down 5.2% and 9.5% year over year.
Nevertheless, for August, U.S. high-yield ADV of $1.3 billion climbed 26.8% year over year while overall trading volume of $27.2 billion improved 21% year over year.
Also, Eurobond’s ADV of $783 million inched up 2.8% year over year while overall trading volume of $15.7 billion declined 2.2% year over year.
It is to be noted that MarketAxess had also reported solid trading volumes last month. While total monthly trading volume of $438.9 billion in July reflected a whopping improvement of 144.1% year over year, the company’s ADV of $19.9 billion, surged 145.7% year over year.
Shares of the company have gained 22.9% in the past year compared with the industry’s growth of 0.8%. The company’s peers, namely, Intercontinental Exchange, Inc. ICE have rallied 13.4% in a year’s time, while that of CME Group Inc. CME have lost 20.7% in the same time period.
Another peer, Nasdaq, Inc. NDAQ, recently reported volumes for the month of August. While U.S. equity options volume improved 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.
Coming back to MarketAxess’ solid fundamentals, consistent rise in trading volumes have led to a rise in commissions, which forms major portion of the company’s revenues. The top line has been improving consistently since 2010 and the momentum continued in the first half of 2020 as well with revenues surging 41.5% from the prior-year comparable period.
Furthermore, the company has ample scope of boosting volume growth on the back of its diversified product suite of the high demand U.S. high-grade floating rate and other credit bonds. It also enjoys a strong liquidity position with no bank debt left outstanding. Improving free cash flows, in fact, paves the way for the company to undertake prudent shareholder-friendly moves via share repurchase and dividend hikes.
Notably, MarketAxess carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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