MarketAxess Holdings Inc. MKTX reported total monthly trading volume of $461 billion for September 2020, which highlighted a whopping improvement of 161.7% year over year.
This operator of a leading electronic trading platform for fixed-income securities and a provider of market data and post-trade services reported average daily volume (ADV) of $21.9 billion, which skyrocketed 150% year over year. This upside can primarily be attributed to increased trading in U.S. Government bonds.
Notably, there were 21 trading days in September 2020 compared with 20 days in September 2019.
The company’s strong volumes for each of the three months comprising July, August and September, which constitute the third quarter, reflect accelerating market share gains, robust credit market volumes and a global shift among dealers and investors toward fixed income trading automation.
The company is gaining from higher-than-normal spread volatility prevalent in the markets due to the intensified economic uncertainty induced by COVID- 19.
MarketAxess has been growing its share of U.S. credit market by virtue of its Open Trading platform. Launched in 2012, MarketAxess Open Trading is an electronic all-to-all credit trading marketplace, enabling market participants to source liquidity from a network of more than 1,100 institutional investor and dealer firms. Open Trading delivers real cost savings by increasing trading efficiencies and vastly expanding the liquidity pool for global credit trading. This means those investors can more easily find buyers or sellers on a moment's notice.
Also, the large fixed income market is undergoing a major structural shift owing to regulatory and market trends. The company is the leading electronic trading network for the institutional market in U.S. credit products and the electronic trading market share is growing but still in early stages of market penetration, which provides the company with ample room to grow.
The company’s acquisition of Liquidity Edge provided an attractive entry point to the U.S bond Treasury market.
Its solid growth in core products, superior financial model, large and increasing addressable market, significant operating leverage and an expanded suite of electronic trading protocols poise it well for long-term growth.
However, one risk that the company may face is a decline in volatility in the credit markets and a slowdown in corporate debt issuances. This might hurt its trading volumes, thereby depressing revenues.
Year to date, the stock has gained 30.7% compared with its industry’s growth of 0.7%.
The stock performance looks stronger than other companies in the same space, such as Intercontinental Exchange Inc. ICE and Nasdaq, Inc. NDAQ that have also rallied 10.4% and 16.9%, respectively.
However, CME Group Inc. CME has lost 16.1% during the same time frame. The stock currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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