Q4 2023 Tradeweb Markets Inc Earnings Call

Participants

Ashley Neil Serrao; Head of Treasury, FP&A & IR; Tradeweb Markets Inc.

Sara Hassan Furber; CFO; Tradeweb Markets Inc.

Thomas Pluta; President & Director; Tradeweb Markets Inc.

William E. Hult; CEO & Director; Tradeweb Markets Inc.

Alexander Blostein; Lead Capital Markets Analyst; Goldman Sachs Group, Inc., Research Division

Alexander Kramm; Executive Director and Equity Research Analyst of Exchanges, Ebrokers; UBS Investment Bank, Research Division

Andrew Bond; Senior Analyst; Rosenblatt Securities Inc., Research Division

Benjamin Elliot Budish; Research Analyst; Barclays Bank PLC, Research Division

Christopher John Allen; MD; Citigroup Inc., Research Division

Daniel Thomas Fannon; Senior Equity Research Analyst; Jefferies LLC, Research Division

Elias Noah Abboud; Research Analyst; BofA Securities, Research Division

Kyle Kenneth Voigt; MD; Keefe, Bruyette, & Woods, Inc., Research Division

Michael J. Cyprys; Executive Director and Senior Research Analyst; Morgan Stanley, Research Division

Patrick Malcolm Moley; Research Analyst; Piper Sandler & Co., Research Division

Presentation

Operator

Good morning, and welcome to Tradeweb's Fourth Quarter 2023 Earnings Conference Call. As a reminder, today's call is being recorded and will be available for playback. To begin, I will turn the call over to Head of Treasury, FP&A and Investor Relations, Ashley Serrao. Please go ahead.

Ashley Neil Serrao

Thank you, and good morning. Joining me today for the call are CEO, Billy Hult, who will review the highlights for the quarter and provide a brief business update; our President, Tom Pluta, who will dive a little deeper into some growth initiatives; and our CFO, Sara Furber, who will review our financial results.
We intend to use the website as a means of disclosing material, nonpublic information and complying with our disclosure obligations under Regulation FD. I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements related to, among other things, or guidance are forward-looking statements. Actual results may differ materially from these forward-looking statements. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our earnings release, presentation and periodic reports filed with the SEC.
In addition, on today's call, we will reference certain non-GAAP measures as well as certain market and industry data. Information regarding these non-GAAP measures, including reconciliations to GAAP measures is in our earnings release and presentation. Information regarding market and industry data, including sources, is in our earnings presentation.
Now let me turn the call over to Billy.

William E. Hult

Thanks, Ashley. Good morning, everyone, and thank you for joining our fourth quarter earnings call. I am extremely proud of our Tradeweb team that generated the best revenue quarter in our history and again showcased the diversity of our revenue growth. We entered 2024 with strong momentum across our businesses. Many of you heard me in the past talk about the battle against the phone as a one-way train. And in many of our businesses, that train has a long way to go.
While the secular tailwinds are powerful, we also need to be focused on making a difference in creating our own waves. Relationship building is a priority and, in the past year as CEO, I've stressed the importance of engaging regularly with our customers to understand how we can work together to move markets forward and improve their trading experience.
Our customer skill sets are evolving as they continue to become more tech savvy and sophisticated and how they want to interact with the markets. We believe the world is moving towards a more algorithmic and multi-asset class ecosystem. This puts the spotlight directly on our one-stop shop value proposition in a good way, which we continue to take to the next level by investing in technology and adding and linking products in geographies.
Diving into the fourth quarter, client activity and risk appetite continued to grow, which drove strong double-digit revenue growth. Specifically on Slide 4, record revenues of $370 million were up 26.3% year-over-year on a reported basis and 24.6% on a constant currency basis and adjusted EBITDA margins expanded by 15 basis points on a reported basis and 122 basis points on a constant currency basis relative to the fourth quarter of 2022.
Turning to Slide 5. Rates and credit led the way, accounting for 60% and 27% of our revenue growth, respectively. Record revenues across rates were driven by a double-digit revenue growth across global government bonds, swaps and mortgages. Similarly, the record revenues across credit were led by strong U.S. and European corporate credit in Muni trading, including record quarterly market share and electronic U.S. investment grade.
Money markets also had a record, fueled by growth in our retail certificate of deposit franchise and continued organic growth in institutional repos. Equities was driven by institutional ETFs and our efforts to diversify and grow our other equity products.
Finally, market data revenues were driven by our LSEG contract and our proprietary data products, which continue to enjoy robust growth.
Turning to Slide 6. Our record fourth quarter capped off a record year in 2023. Record volumes across most asset classes translated into 12.6% and 12.2% revenue growth on a reported and constant currency basis, respectively. The scale generated by our strong top line results drove approximately 49 basis points of adjusted EBITDA margin expansion and 19% adjusted earnings growth. As our growth initiatives continue to scale, we maintain our tradition of constant and focused organic investment.
2023 was a very productive year with numerous accomplishments to highlight. Broadly, they can be summed up as enhancing our existing product capabilities, adding new clients, forging new partnerships and placing more bets on the table.
On the capability front, we completed our integration of the NASDAQ fixed income acquisition, made meaningful progress across our mortgage-specified pool platform and expanded our product suite across global swaps. On the client side, we continue to scale our credit, mortgage and swaps platform as we make inroads with our largest clients. On the collaboration front, we completed the first phase of our integration with BlackRock's Aladdin, expanded our partnership with FTSE indices, went live with our FXall link for FX hedging and announced our new data licensing agreement with LSEG. Finally, we spent $205 million in a mix of cash and equity on our acquisitions of Yieldbroker in August of '23 and r8fin in January 2024.
We believe our investments have not only positioned us well for the future, but also helped make 2023 another banner year for Tradeweb.
Moving to Slide 7. 2023 continued the streak of robust revenue growth that we have worked hard to deliver for multiple years now. Specifically, while the majority of our revenues still come from rates, 40% of our revenue growth came from our other businesses. In fact, over the last 5 years, we have nearly doubled our overall revenues. Over 50% of that revenue growth coming from our non-rates businesses with nearly 40% of the revenue growth coming from our international business, which has averaged 18% since 2016.
Our international revenues are anchored by our European business, but our Asian business produced fourth quarter revenue growth in excess of 50% year-over-year. Looking ahead, we believe Asia Pacific and, more broadly, emerging markets will continue to become a larger component of our international growth story over the next few years. We are focused on expanding our client footprint across domestic markets and protocols and cross-selling our leading products. Our cross-selling initiatives continue to pay dividends with the recent Yieldbroker acquisition, which we believe will unlock more opportunities.
Relentless innovation has been critical to our success. Throughout our history, we have prioritized being first to market, which requires constant investment. In the last 8 years, we have invested over $630 million in technology to help shape the future of electronic markets, growing those investments at an average of 13% since 2016. And as our investments bear fruit, adjusted EBITDA margins have expanded methodically.
Looking ahead, we expect 2024 to be another investment year. Our investments remain heavily concentrated in rates and credit, and we are in the early stages of building out our emerging markets franchise. We are optimistic about the long-term durability of our growth across the business, given our market share gains and pipeline of innovations.
Turning to Slide 8. I will provide a brief update on 2 of our main focus areas, U.S. treasuries and ETFs and turn it over to Tom to dig deeper into U.S. credit and global interest rate swaps.
Starting with U.S. Treasuries. Fourth quarter revenues achieved a new record, increasing by 18% year-over-year. This was driven by our institutional business that had its best revenue quarter ever, led by record ADV across our institutional streaming protocol and growing adoption of our RFQ+ offering. The high-rate environment continued to propel our retail business, where fourth quarter revenues grew 10% year-over-year. The leading indicators of the institutional business remains strong. we gained share and we achieved record quarterly market share of long-dated U.S. treasuries versus Bloomberg.
Client engagement was healthy with institutional average daily trades up 55% year-over-year. Automation continues to be an important theme with institutional U.S. treasury AiEX average daily trades increasing by more than 120% year-over-year and over 50% of our institutional tickets utilizing our AiEX functionality. Our U.S. treasuries wholesale business produced its best revenue quarter in our history, led by record volumes across our sessions protocol and the second best quarter for our streaming protocol. Our central limit order book ADV was down 1% year-over-year, given tougher CLOB market conditions though the team remains focused on onboarding more liquidity providers over the coming quarters as they deliver on a holistic strategy across our wholesale protocols.
Within equities, our ETF business outperformed the overall market with fourth quarter revenues up 10% year-over-year with industry activity picking up. Other initiatives to expand our equity brand beyond our flagship ETF franchise continue to bear fruit. Fourth quarter institutional equity derivative revenues were up nearly 30% year-on-year, driven by strong double-digit growth across options and convertibles.
Looking ahead, the client pipeline remains strong as the benefits of our electronic solutions continue to resonate. We believe we are well positioned to capitalize on the long-term secular ETF growth story, not just in equities, but across our fixed income business.
With that, I will turn it over to Tom.

Thomas Pluta

Thanks, Billy. Turning to Slide 9 for a closer look at credit. Strong double-digit revenue growth was driven by 31% and 46% year-over-year revenue growth across U.S. and European credit, respectively. Muni has produced high single-digit growth, driven by a pickup in tax loss harvesting, while credit derivatives continued to see softer industry trends. Automation continued to surge with global credit AiEX average daily trades increasing 90% year-over-year. We achieved another fully electronic quarterly market share record across U.S. IG, helped by our highest quarterly IG block market share. Our institutional business continues to scale to new highs as we continue to provide our clients with a diverse set of protocols that meet their execution needs across a variety of market environments.
Our primary focus on growing institutional RFQ continues to pay off with ADV growing 28% year-over-year with strong double-digit growth across both IG and high-yield.
Overall, portfolio trading ADV rose over 40% year-over-year, led by growth across U.S. and European PT. In the fourth quarter, we produced record ADV across IG portfolio trading. Our clients continue to get more sophisticated in their usage of PT with 75% of our PT volume done in comp, the highest percentage since the second quarter of 2022. Retail credit revenues were up over 20% year-over-year as financial advisers turn their focus towards more spread-based yielding products to complement buying of U.S. treasuries. AllTrade produced a record quarter with over $157 billion in volume.
Our all-to-all volumes grew over 30% year-over-year, while we also saw over 40% year-over-year growth in our dealer RFQ offering. The team continues to be focused on broadening out our network and increasing the number of responses on the AllTrade platform. In the fourth quarter, the number of all-to-all responders rose by over 20% and responses increased by 60% year-over-year. We also continued to increase our engagement and wallet share with ETF market makers, where inquiry and traded volume was up over 300% year-over-year. Finally, our sessions ADV grew over 40% year-over-year, while Rematch produced 10% year-over-year growth.
Looking ahead, U.S. credit remains our biggest focused area, and we like the way we are positioned across our 3 client channels. We believe we have a long runway of growth ahead of us and are focused on serving the growing passive markets, investing in our auto responding and algorithmic technology, increasing our wallet share across all-to-all and DRFQ protocols, and looking at ways to help our dealer clients more efficiently recycle their risk.
Additionally, we are focused on improving the analytics around pre- and post-trade data. Specifically, across high yields, we have more work to do to drive increased client engagement. We believe we can replicate the success we've had across IG with a particular focus on increasing our penetration with ETF market makers and leveraging our Aladdin collaboration to grow our all-to-all network post integration. Beyond U.S. credit, our EM expansion efforts continue to progress steadily. In the fourth quarter, we went live with our nondeliverable forward for FX swap hedging in collaboration with FXall and we continue to build out functionality for multi-asset package trading.
Moving to Slide 10. Global swaps produced record revenues as a vigorous debate on the timing and direction of Central Bank rate moves and market share gains drove record results across U.S., European, APAC and emerging market swaps. The fourth quarter saw continued impacts from lower duration as clients traded on the shorter end of the yield curve, and we had record compression activity in November. Variable swaps revenues increased 65% year-over-year despite an 8% decrease in duration year-over-year. Overall, global swaps revenues in the fourth quarter grew 51% year-over-year and market share rose to 23.6% with record share across all currencies.
Additionally, over the last 2 years, we have produced strong double-digit active user growth across currencies with the fastest growth happening across our early-stage penetration into EM swaps. We continue to make progress across emerging market swaps and a rapidly growing RFM protocol. Our fourth quarter EM swaps revenues increased over 150% year-over-year and we believe there is still a lot of room to grow given the low levels of electronification, while our RFM protocol continued to see strong adoption with ADD rising over 160% year-over-year. The strong fourth quarter capped off another record year for our swaps business with overall swaps revenues increasing 18% year-over-year.
Moving to Slide 11. Over the last 5 years, our variable swaps revenues have grown at a CAGR of 26%. We produced this strong 5-year revenue growth despite an evolving macro backdrop and tepid industry volume growth of 4%. From falling rates to 0 rates back to the highest short-term rates we have seen since 2001, the durability of our swaps revenue growth continue to shine through despite COVID, elevated volatility driving a risk-off environment and the failure of several banks.
In fact, since the beginning of 2019, the swaps business has produced positive revenue growth in 18 of the last 20 quarters, with 15 of those 18 quarters producing double-digit year-over-year revenue growth. The 2 quarters with negative year-over-year revenue growth were due to extreme factors. Market dislocation related to COVID in the third quarter of 2020 caused revenues to fall 2% year-over-year and excess market volatility prompting clients to take risk off the table in the fourth quarter of 2022 led to a 4% drop in revenues.
As debate has picked up in the market around the level of rates and the shape of global yield curves, industry volumes rose 21% year-over-year. However, it's important to note that most of this increase has been driven by a pickup in short-end activity, which we monetize at very low levels. In fact, we generate over 95% of our swaps variable fees on longer-dated trades greater than 1 year and 82% on trades greater than 2 years.
Based on LCH data, over the last 2 years since Central Bank started to hike rates, short-dated industry volumes, which are defined as anything less than 2 years, grew over 80% versus 2021, while longer-dated industry volumes grew only 15%. Looking ahead, from a cyclical standpoint, we believe as the yield curve normalizes, this should boost longer-dated activity. In terms of what we can control, we continue to make further inroads across products and are seeing early success across inflation swaps, swaptions and EM swaps. We are also looking at expanding our presence across multi-asset package swaps in the coming year. The focus on building solutions that matter to clients is paying dividends.
With the market still only about 30% electronified, we believe there remains a lot that we can do to help digitize our client's manual workflows, while the global fixed income markets and broader swaps market grow.
Before I pass it on to Sara, let me touch on compression and the impact to our swaps fee per million. Compression trading is a natural part of the market. Clients put new risk on and then collapse old risk as the market environment changes. Given that we primarily charge clients for new risk put through the platform, we do not earn meaningful amounts of revenue from pure compression flow as that activity is mainly related to clients reducing line items that they have traded in order to reduce operational costs.
Stripping out compression activity, our risk fee per million has been relatively steady over the last few years with the movement really being driven by product mix shift and duration, which impacts the calculation of risk being put on by clients. While compression alone isn't meaningful for revenues, it has become essential to our client workflow increased platform stickiness and has driven higher risk trading, which we can monetize. Across our top 10 compression clients as they have picked up their compression flow, this has also led to a material pickup in the amount of risk volumes put through the platform.
Additionally, our top 5 compression clients have maintained or improved their overall risk flow ranking over the last year.
And with that, let me turn it over to Sara to discuss our financials in more detail.

Sara Hassan Furber

Thanks, Tom, and good morning. As I go through the numbers, all comparisons will be to the prior year period, unless otherwise noted.
Slide 13 provides a summary of our quarterly earnings performance. As Billy recapped earlier, this quarter, we saw record revenues of $370 million that were up 26.3% year-over-year on a reported basis and 24.6% on a constant currency basis. Specifically, we derived approximately 37% of our fourth quarter revenues from international customers. And recall that approximately 30% of our revenue base is denominated in currencies other than dollars, predominantly in euros. Our variable revenues increased by 35% and total trading revenues increased by 27%.
Total fixed revenues related to our 4 major asset classes were up 7% on a reported and 5.5% on a constant currency basis. Rates fixed revenue growth was driven by the addition of new dealers across our mortgage specified pools platform and our U.S. treasury streams and CLOB protocols.
Credit fixed revenue growth was driven by the previously disclosed dealer fee increases, which we instituted at the start of the fourth quarter. And other trading revenues were down 6%. As a reminder, this line fluctuates as it reflects revenues tied to periodic technology enhancements performed for our retail clients.
Full year 2023 adjusted EBITDA margin of 52.4% increased by 49 basis points on a reported basis and 100 basis points on a constant currency basis from the full year 2022.
Moving on to fees per million on Slide 14 and a highlight of the key trends for the quarter. You can see Slide 20 of the earnings presentation for additional detail regarding our fee per million performance this quarter. Overall, our blended fees per million decreased 15% year-over-year, primarily due to a shift away from cash rates and a decrease in cash credit and cash equities fee per million.
For cash rate products, fees per million were up 2%, primarily due to an increase in the European government bond fee per million. For long-tenor swaps, fees per million were down 29%, primarily due to an 8% decline in duration year-over-year and an increase in compression trades. This was partially offset by growth in emerging markets, European swaps and our RFM protocol. For cash credit, average fees per million decreased 4% due to a mix shift away from Munis, partially offset by an increase in European credit fee per million.
For cash equities, average fees per million decreased by 6% due to a reduction in U.S. ETF fee per million, given an increase in notional per share traded. Recall, in the U.S., we charge per share and not for notional value traded. Finally, within money markets, average fees per million increased 3%, driven by an increase in U.S. CDs fee per million.
Slide 15 details our adjusted expenses. At a high level, the scalability and variable nature of our expense base allows us to continue to invest for growth and grow margins. We have maintained a consistent philosophy here. Adjusted expenses for the fourth quarter increased 24.7% on a reported basis and 20.7% on a constant currency basis. Compensation costs increased 30.7% due to increases in head count and performance-related compensation.
Technology and communication costs increased 24.8%, primarily due to higher data fees and our previously communicated investments in data strategy and infrastructure. Professional fees decreased 18%, mainly due to a decrease in legal fees. And adjusted general and administrative costs increased due to a pickup in marketing and philanthropy and unfavorable movements in FX. Unfavorable movements in FX resulted in a $500,000 loss in the fourth quarter of '23 versus a $2.6 million gain in the fourth quarter of '22, a delta of over $3.1 million between the fourth quarter of '23 and '22.
Slide 16 details capital management and our guidance. On our cash position and capital return policy, we ended the fourth quarter in a strong position with $1.7 billion in cash and cash equivalents. Free cash flow reached approximately $684 million for the trailing 12 months, up 19% year-over-year. We spent $90 million in cash as partial consideration for r8fin on January 19 of this year. Our net interest income of $20.3 million increased due to a combination of higher cash balances and higher interest yields. This was primarily driven higher by recent Fed hikes and more efficient management of our cash.
Non-acquisition CapEx and capitalized software development for the quarter was $12.2 million, with the decrease driven primarily due to the timing of our investment spend. With this quarter's earnings, the Board declared a quarterly dividend of $0.10 per Class A and Class B common stock, an increase of 11.1% year-over-year. The Board periodically evaluates our dividend along with the consistency of our earnings and free cash flow generation over time. And finally, there were no share repurchases during the fourth quarter of 2023 under our share buyback program as we already offset equity-related dilution early in the year. This leaves approximately $239.8 million at the end of the quarter authorized for future deployment.
Turning to guidance for 2024. We will continue to invest in 2024 and are expecting adjusted expenses to range from $755 million to $805 million. Excluding the impact of acquisitions, the midpoint of this range would represent an approximate 10% increase, in line with our average expense growth from 2016. We believe we can drive adjusted EBITDA and operating margin expansion compared to 2023 at either end of this range, although we expect the incremental margin expansion to be more modest relative to last year as overall margins are higher, and we continue to focus on balancing margin expansion with investing for the future.
As compared to the first half of last year, we expect to accelerate investments given the anticipated healthy revenue environment. We continue to invest for the future with credit rates and emerging markets as key focus areas with a long runway for growth. We also continue to invest in technology that allows us to sustain and build our leading platform. Some of these investments will take some time to scale, but we continue to price innovation and have a technology pipeline that continues to grow.
We expect professional fee expenses to be above the first quarter of '23 levels as we continue to augment our technology effort with consultants. For forecasting purposes, our assumed non-GAAP tax rate ranges from 24.5% to 25.5% for the year. The primary driver of the increase in our tax rate is related to the revenue mix skewing towards higher tax states. We expect CapEx and capitalized software development to be about $75 million to $83 million. We estimate that approximately 60% will be spent on software development to support our growth initiatives and approximately 40% will be related to growth and maintenance CapEx.
The midpoint of our CapEx guidance implies roughly a 28% year-over-year increase, primarily due to the acquisitions of Yieldbroker and r8fin. Excluding these M&A-related investments and other onetime spend, the midpoint growth would be approximately 15% year-over-year. Acquisition and Refinitiv transaction-related D&A, which we adjust out due to the increase associated with pushdown accounting, is expected to be $142 million. As we highlighted last quarter, we continue to expect 2024 and 2025 revenues generated under the new master data agreement with LSEG to be approximately $80 million and $90 million, respectively.
Now I'll turn it back to Billy for concluding remarks.

William E. Hult

Thanks, Sara. As I embark on my 24th year at Tradeweb and my second year as CEO, we continue to see ample opportunity to grow our One Tradeweb mantra and build better markets for the future. We are focused on ensuring our DNA continues to evolve as we remain in the catbird seat as we look to innovate and find new ways to modernize the fixed income markets. Innovation, collaboration and transformation are at the core of our DNA, and I continue to be excited about the road ahead. On that note, we reported strong January volumes yesterday which translated into revenue growth in January in excess of 20% year-over-year.
I would like to conclude my remarks by thanking our clients for their business and partnership in the quarter, and I want to thank my colleagues for their efforts that contributed to our record quarterly volumes and revenues at Tradeweb. With that, I will turn it back to Ashley for your questions.

Ashley Neil Serrao

Thanks, Billy. (Operator Instructions) Operator, you can now take our first question.

Question and Answer Session

Operator

(Operator Instructions) Our first question will be coming from Christopher Allen of Citi.

Christopher John Allen

I wanted to ask about the r8fin deal, which I think has gone a little bit under the radar. I wonder if you could touch on what the opportunity set is from offering this technology to the institutional clients. Is there any cross-sell opportunity to Redfin's or relative value client base. How is the offering from an EMS perspective and rate futures complement or enhance Tradeweb's current rates offering?

William E. Hult

Sure. Chris, it's Billy. Thanks for the question. Good to hear your voice. Maybe let me start for a quick second with putting a little bit of a frame on a good question. So starting with, I think it's a good time to be in the rates business. I think it's actually a better time to place a really smart bet in the rates business. I love the idea conceptually of Tradeweb investing into our strength. I think that's a really important concept. So I would kind of start with that. If you think about our government bond franchise for a second in terms of the leadership position that we have, obviously, record market share, Chris versus Bloomberg on the long-dated part of the government bond market.
In the fourth quarter, our market share is now over 20% on an overall basis, record institutional volumes in January. So a real kind of like position of strength for us. I think that the Macro environment like sets up really well, again, to kind of like push these bets into our core strength. So when I think about the macro environment, we think about the concept, obviously, of like, we're in a real rate, 10-year notes above 4%. Maybe it's going to 4.75%. Maybe it's going to 3.50%. That's what sort of makes the market, and we love those kinds of thoughts that are entering in about this like real kind of real rate environment. The debt market is growing. The central banks are not the buyers in the market. So from our perspective, that means that the sort of private sector piece of the market are now the real intermediaries. And so that's a really good environment for us.
So when we think about r8fin, obviously, like 2 big things. One is electronifying high-touch flow, i.e., high-touch flow was always sort of like a code word for like voice business. So electronifying high-touch flow, smart, leading-edge algorithms that our biggest and most sophisticated important clients use. These funds, as you guys know very well, tend to be kind of multi-asset in nature. We love the concept of bringing futures into our kind of backcourt, which marries really well with our products. It's been a little bit of what I would describe as sort of like a missing piece in our client experience. So love the way we're kind of servicing that part of the world. Chris, in U.S. treasures alone, I think we sized that market at about like $50 billion in average daily volume. So it's big, it's robust.
And from there, we're going to kind of do what you would expect us to do, I think, which is like how do we build things like new asset classes going forward. So European government bonds, interest rate swaps versus future. We think like 15% to 20% of that volume gets done like on the phone, like it's -- I used the expression like it's 1994, not 2024, right?
And the last part of your question, I think, is important just in terms of like EMSs. On the surface, you need an EMS to access the futures market. But the reality is we see opportunities to leverage EMSs across protocols and merge our AiEX functionality along with that. So we think it fits us really well. As always, it comes down to execution. And so the team is very focused on it. It's a top priority for us as we enter '24. And thanks, it's a good question. Thanks, Chris.

Operator

And our next question will be coming from Ben Budish of Barclays.

Benjamin Elliot Budish

Billy, I was wondering if you could talk a little bit more about your international expansion plans for the next few years. Now that you've completed Yieldbroker, you alluded in the prepared remarks to sort of digging into a little bit more into Asia. Can you maybe talk a little bit, tactically, how does that work from Australia to maybe the rest of the continent? And for some context, could you perhaps give just a little bit of an overview of the current exposure? Where are the key customers? What are the primary products? And where does that grow from here?

William E. Hult

It's a good question. So let's start with it this way for a second for us, like very straightforward. It's like always about the clients. right? It's like always, always about the clients. So our clients are global, right? So that's always formed our sort of decision-making matrix in terms of where we're going, right? So the formula, the cadence has always been how do we take advantage of this like very strong appetite that exists out there for the demand for U.S. products, right? And from there, it's always been okay now let's build out our presence in these local markets.
So it's like U.S. government to European governments, dollar swaps to European swaps, U.S. credit to kind of European credit. So that's always been our formula or cadence of how we think about things because we're always building things around the client experience. Quick shout out, which I do once in a while, just -- Enrico Bruni is our Head of European and Asian business. He's done a great job. The team has been instrumental. They've been driving an average, I think, it is of 15% revenue growth in our international business over the last 5 years.
So we think about the business, Ben, kind of like in a straightforward way, 2 ways, I would say: growing the European, APAC part of the world, which has been our historical focus; and then sort of, two, and it's like a big two, which would be sort of competing and really driving a business for us kind of like in the EM region. I think that formula has worked very well for us. So fourth quarter revenues, we're up over 30% year-over-year across these products. In Asia, we're growing our presence across ETFs, swaps, government bonds, there, I'm becoming like (inaudible), but their there quarter revenues were up over 60% year-over-year across those products. So like this formula kind of continues to work.
I talked about like the concept of like putting a bet, placing that bet into strength, same follows through for Yieldbroker, right? Our acquisition of Yieldbroker expands our rates, credit repo footprint in a big way. Revenues there are up 30% year-over-year. So you can feel kind of like the momentum of how I'm kind of describing this. I said it was about the client and it is about the client. On the client side, continued penetration across like Europe and Asia. So active Asian clients, trading international products were up over 30% year-over-year. That's how we keep monitoring all this, North American, European active clients trading international products were up 15% and 10%, respectively. So this is like big sort of numbers and big momentum kind of headed in that direction, which we feel quite good about.
EM, again, I mentioned the focus that we'll have around rates. And EM is a huge priority for us as a company, and we feel really good about the marketplaces need and desire to support competition there. So we're focused on EM. Good question, and thanks very much.

Operator

Our next question will be coming from Alexander Blostein of Goldman Sachs.

Alexander Blostein

Lots of discussion on the call around just prospects of longer duration, and I appreciate the extra disclosure you guys put out in the deck around the swap business, definitely pretty helpful. But we'll you use them out a little bit, can you help frame the fee per million opportunity broadly across the business if duration starts to expand?

Sara Hassan Furber

Sure, Alex. It's Sara. Nice to hear from you. And it's a great question, and I'm glad you like the extra slide. We thought that they would be helpful. Let me frame it just with a little bit of context because when we're talking about fee per million, I've made this point on a couple of calls, the impact on fee per million is mostly driven by business mix, right? So what businesses were doing volume in protocol, product mix, but also to a lesser impact duration, which is really your question, so I'll kind of focus on that.
The 2 main business areas when you think about our portfolio where duration has the biggest impact across revenue and fee per million are largely swaps and investment-grade credit. And the reason for this, I know you know this, but just to kind of state it for everyone's benefit, we charge based on actual risk being created in both of those areas. So (inaudible) it's not charged on a notional volume basis. And as we kind of talked about in the prepared remarks, clients have definitely been doing more trading on the short end and duration in our businesses has been decreasing, particularly in swaps. And so if you think about the impact of duration, if you -- and this is a perfect world, if you try to hold everything constant, everything else being equal and just limit the impact of duration to give you a flavor, I would say in dollar swaps, a 1-year extension in duration from, call it, 10 to 11 years can increase that risk being treated by 7% or 8%, which obviously has a knock-on impact on revenue, all else being equal.
In credit, the same sort of 1-year extension in maturity could increase institutional IG credit fee per million by 8% to 9%. So that gives you a little bit of a continuum of the impact. Probably also worth mentioning that in terms of things that move duration, it's also impacted by the level of absolute rates. And so maybe another way to kind of think about the model and kind of putting these together gets you a really nice opportunity. But if rates were to fall by 100 basis points across the curve, that same concept of the risk being created in a 10-year dollar swap could rise by another 5% or 6%. And on the IG side, another 5%. So there are a couple of different variables. Business mix always being the biggest, but hopefully, that gives you a little bit of context as to how to model or think about the opportunity for duration.

Operator

Our next question will be coming from Craig Siegenthaler of Bank of America.

Elias Noah Abboud

This is Elias Abboud from Craig's team. It looks like the RFM protocol in swaps is breaking out. It looks like volumes there have tripled since 2021. What makes this protocol a great fit for swaps? And have you guys evaluated maybe rolling it out in other asset classes?

Thomas Pluta

It's Tom, and thanks for the question. Yes, the RFM protocol or request for market has gained a lot of popularity and swaps, particularly in emerging markets but also in developed market swaps. Just to remind people who may not know, this is where rather than asking a one-sided price in an RFQ, you ask for a 2A price. The primary benefit to a customer in receiving a 2A price is to minimize information leakage to the market, not signaling the direction that they want to trade.
So in markets where you have 2A streams, continuous markets, for example, U.S. treasuries, there's no real need or demand for RFM, but in less liquid markets or trades where there's a larger price impact like swaps compared to cash bonds or EM generally compared to DM or larger trades compared to smaller trades, there is a benefit. So for that reason, it has picked up as a protocol, particularly in EM. There's also a benefit for dealers in avoiding what we call the winner's curse, right?
So if a whole bunch of dealers get asked the price and they know the direction, when you win that trade, you got to be more cognizant of how you manage that exiting that trade, particularly in less liquid market. So we have been expanding the protocol as we see the demand from clients and dealers to support the protocol.
For example, list trading and swaps is moving more towards RFM. So we do think that RFM can expand to other products, yes, but we do so in a very thoughtful way. And when we see both demand on the client side and support from dealers to maximize the impact on the likelihood of success.

Operator

Our next question will be coming from Michael Cyprys of Morgan Stanley.

Michael J. Cyprys

Just a question on ETFs. We've seen meaningful growth across the industry, particularly fixed income ETFs over the last couple of years and you expect ETFs to be a beneficiary of a potential fixed income rotation. So can you just talk about how this is impacting your business and how you see this impacting market structure more broadly as fixed income ETFs continue to grow and how do you think about best monetizing the opportunity set here? Maybe talk about some of the steps you're taking here in '24.

William E. Hult

Yes. Michael, it's Billy. Thanks for the question. And I think ETFs is like absolutely the right time to sort of ask a question like that, so thank you. You know us very well. But from my perspective, a little bit of like -- our story has always been about like what I would describe as expansion, right? So it's sort of vertical across client channels and then horizontal across products and geographies, right? And so I wouldn't say it was necessarily like the elevator pitch when we went public. But when we were going public, Tradeweb was very well known as a rates trading platform kind of period. And in 2023, the reality is that almost half, I think it's like -- I think it's actually 48% of our revenues now come from non-rates businesses and 40% of that growth has come from non-rate businesses in 2023, right? That's like a big number, right?
So our investment and our execution in ETFs is like a huge piece of that story. It's like not that we couldn't spell ETFs in 2016. Obviously, like an E and T and an F. But we didn't have like unbelievable domain knowledge and expertise in 2016. I think we sense the opportunity, and I think we were viewed as the correct kind of industry partner around building a business there, and I give our team a lot of credit for figuring all that out.
So now what we're seeing is like this -- what I would describe as almost like an expansion of sophisticated market participants, obviously, including ETF market makers that are investing heavily to challenge what I would describe as the traditional manual kind of trading conventions. And my instinct is this push is sort of like this one-way train kind of thing, right?
Market participants are now using kind of multiple pricing sources, modeling techniques and market indicators to derive essentially a more accurate and up-to-date pricing on a bond, right? So we kind of understand all of that stuff. I would say the leading ETF player expects fixed income ETF AUM to triple by 2030, right? These are like big one-way market trends now that we feel, I think, proud to be a big part of.
We're going to monetize this all in a very straightforward way for our institutional ETF business globally that's doing really well. And then I would kind of remind you for a quick second, just the nature of how important these ETF market makers are in terms of credit market making in our sort of day-to-day operations of our credit business and we feel really good that we're monetizing that piece of the market as well. They are fundamentally important and strong players for us on the credit side. So it's feeling really good about how we've gotten here with ETFs and kind of where we're going. I think the credit piece of it is a really big one.

Operator

And our next question will be coming from Patrick Moley of Piper Sandler.

Patrick Malcolm Moley

I was hoping that you could share some more details on the opportunity and timeline to monetize the closing auction pricing data, how your relationship with FTSE benefits the strategy there? And then any color you can give us on how to size the TAM there would be very helpful as well.

William E. Hult

Patrick, it's Billy. Real quick, congratulations on like two things. First, asking a straightforward question coming from Piper Sandler on the heels of our friend, Mr. Repetto. And two, congratulations because we definitely heard you had, had a baby, it's the best thing in the world. So congratulations from the Tradeweb team, and thanks for a really good question.
It's interesting, right? You're talking about like trade at close, you're asking questions about trade at close. And my brain is going a little bit to the complexity of, for example, like the government bond market. The first question was about r8fin and about how these sort of macro hedge funds are engaging in liquidity through smart algorithms in r8fin. And this is almost like the other side of the coin in the government bond market, right? The thread is obviously all about like innovation and efficiency. But the other side of the coin are these, obviously, these large, large asset managers that track the benchmark that now we're looking for what we would describe as moments in time where they need liquidity. And so I mentioned the concept before that it's all about the client. It's all about the client understanding those clients' needs. And so that's how we've built the protocols for us around trade at close.
Clients are now leveraging list trading tools where we provide valuable kind of what we would describe as like post-trade data where they are filled relative to our reference prices. It's pretty straightforward, that works exceptionally well at the end of the month, some of our biggest, most important clients are accessing that protocol now through us. We currently have an official closing price on treasuries, U.K. gilts, European government bonds, where FTSE is our third-party administrator. Not to hand you a brick, Sara, but if you have a little more comment on our FTSE relationship and where we're going kind of around that pricing.

Sara Hassan Furber

Sure. I can jump in there, and congrats, Patrick, as Billy mentioned. On the FTSE side, I would just say, look, in order to have a trusted and valued benchmark, we need and we look to partner with third-party administrators that validate that methodology. And we have a really strong and good relationship with FTSE. It makes sense to continue to partner with them. I think as Billy referenced, we have a track record of working with them on the U.S. Treasury, U.K. gilt and European government bonds. And as we think about going forward, we see the expansion of that relationship across new benchmark products. So there's things that we're working on adding bid-ask information to the mids that we already use in products.
We have Muni AI pricing potential becoming a benchmark. So there are a number of other benchmarks in the works with a partner we already have had a good track record with. Probably worth noting, establishing a benchmark doesn't happen overnight. So the revenue and sales cycle for this can take some time. But certainly, we see a lot of opportunity here. And we've already realized and continue to realize strong growth in our third-party proprietary data products, and this is just going to be enhancing through that.

Operator

Our next question will be coming from Dan Fannon of Jefferies.

Daniel Thomas Fannon

My question is on high yields. Maybe if you could talk about the current kind of market backdrop. And as you think about your market share and opportunity within that, is there anything structural that limit your ability to grow that the way that you have in, say, the investment-grade market?

William E. Hult

Dan, so we have made steady gains in recent years in our IG market share for sure. And our progress in high yield has been slower or a little bit more uneven. But there are no structural impediments with making more significant gains. One thing to note, high yield doesn't trade on spread, so, therefore, the competitive advantage that we have in net spotting and net hedging isn't a factor here as it is in IG. And additionally, because high yield is less liquid, clients tend to use all-to-all more where we are focused on narrowing the gap in our responder network. So what have we been doing in high yield? A number of things. We've been investing in our client network and we've been making good inroads in adding significant clients to that network that were absent in the past.
So I'm optimistic about our progress on adding large clients in '24 that hadn't been there in the past, which will help boost high-yield results. Additionally, we've been hiring credit salespeople. We hired in '23, we are hiring more in 2024, and that will continue to move the needle in expanding our client network and delivering more from our existing clients. The third area of focus is expanding the responders on the platform, and we've seen very strong growth in responders and responses. For example, in high-yield, our anonymous responses were up 30% year-over-year. So we're making gains there.
And, I guess, the final thing I would point to is the Aladdin partnership, which should help level the playing field for us in high yields as this comes further online in 2024. We made good progress there. We're working through the integration with Aladdin in 3 phases. Phase 1 completed last year that was focused in getting dealer access and inventory data into Aladdin. Phase 2, we also recently completed and that allows Aladdin clients to respond to all-to-all inquiries right on the Aladdin dashboard. And in Phase 3, clients will be able to initiate an RFQ on Tradeweb right from within Aladdin and then also use our automation tools. So those Phase II and Phase III, we expect to be complete over the next 12 months and with all those investments, we expect to see continued progress. So while the progress in high yield has been more limited, we do have a multi-faceted plan that we are executing on and which we're optimistic will yield results going forward.

Operator

And our next question will be coming from Andrew Bond of Rosenblatt Securities.

Andrew Bond

Tradeweb is early and innovative in portfolio trading relative to market access and others that didn't really see the same growth opportunity that continues to play out today. That said, given it continues to be one of the primary drivers of credit volume growth, competitors are taking it more seriously. I think the protocol was mentioned more than 30 times on their last call last week, and they're about market access and investing more heavily to try to win share. So just given the heightened competition, how do you feel about your positioning and the moat around your offering and any potential to utilize portfolio trading in other parts of your business?

Thomas Pluta

Andrew, so yes, portfolio trading continues to be a huge success story and growth area for us. We had -- as you read and as you heard, we had record PT volumes in the fourth quarter and, in January, achieved another monthly record with over $60 billion in portfolio trading volume. We're also optimistic about the growth of PT as a market protocol, as you pointed out, a lot of the growth in the market is from PT, and we do expect PT share of the market to continue to grow given the efficiencies that it provides for clients.
And remember, a lot of the gain in share is still coming from the phone, so we think that overall part of the market will grow. As far as competition, we fully expect our peers to compete and to innovate. And overall, that's good for clients as the market gets more efficient and moves forward. But you asked about our moat, we do think we have a competitive moat that is strong, led by our ability to connect our leading U.S. treasury business and provide net spotting to clients. It starts right there, and that's something that saves millions for our clients.
Additionally, we continue to leverage our first-mover advantage by constantly iterating on and improving the functionality that we have in PT. So I'll give a few examples. We are in the process of revamping our entire portfolio trading list infrastructure and we're in the process of rolling it out right now. What does that do? That increases speed of execution for clients. It provides greater capacity. Right now, we can accommodate portfolio trades of 2,400 line items. That capacity will grow significantly. And we're also going to be able to provide better client and dealer analytics. Second thing, as far as innovations, we're expanding pre-trade data that we provide to clients and as well as post-trade TCA analytics.
So again, functionality, it's valuable to clients that they think will make them sticky with us. And the final thing that we're working on is providing electronic solutions around residual high-touch access that occur after a portfolio trade, where we can leverage our market-leading position in the wholesale market as well. So we call that PT residuals. Think of block trades that dealers will look to execute after a PT trade goes through the market.
So we're optimistic about the protocol overall. Yes, there is competition, but we're optimistic also about our ability to compete and innovate and continue to provide value to clients in this protocol going forward.

William E. Hult

And Tom is making great points. The only thing I would say to follow Tom, for a quick second is I'm sure there were times where we mentioned something 30 times on a call. I know that there's a kind of like a competitive dynamic that obviously exists. I think a connective thread on credit is the reality that I think both companies feel very strongly that the true and real competitor is the phone. And so from our perspective, like that's always going to be where our primary focus is going to be. And we feel like really strongly that the way that we've developed the portfolio trading protocols has created the right balance in the market and has allowed us to play this significant leadership role.
We are not relinquishing that role, and we feel really strongly about the position that we have today.

Operator

And our next question will be coming from Alex Kramm of UBS.

Alexander Kramm

I know it's late here. But just wanted to come back to, I think, the early part of the call. You proactively talked a lot about the cyclical outlook. And if I heard you correctly, you're actually pretty excited about what's in front of you on a cyclical perspective, so maybe you can just double-click on that. But more importantly, on the rate side, I think there's a prevailing view that as rates get cut, that's bad for rate volumes. I don't necessarily share that view, but would like to hear your thoughts on that. And maybe for Sara on that notion, do you think about rate cuts at all as you budget kind of like your revenues? Or do you think it's just like a negligible impact on trading revenues.

William E. Hult

Yes. We think this is a good environment for us. And I kind of -- I laid out this kind of concept that I was saying before, which is like we're into like real rate now, right? And again, directionally, if we go from here to 5% or 3.5% or 3% like we're talking about now like real rates. I think the high-level concept of like debt is growing kind of period. And then this concept of, I think, in a significant way, the central bank is not playing that sort of counterparty role in the marketplace, I think, is a really kind of really important one. And so like we kind of cheer on the reality of sort of the private sector back as being the real kind of market risk intermediaries. We think that's good. We love the business model of BlackRock connecting with Goldman or PIMCO connecting with JPMorgan. We think that's like a great end result. The curve is getting steeper. I mean, to make an obvious point, everything has evolved differently than anyone sort of expected, so you never quite know exactly where you're going, but there's no question from our perspective that this is a sort of environment that we think plays very, very well for us. And as the sort of the stronger whispers or the stronger feelings that a rate cut was kind of in the works, you could see how our business performed exceptionally well in the second half of last year in that sort of anticipation of all of that steeper curve, all of these things kind of, I think, working in the right way for us from a macro perspective.

Sara Hassan Furber

Yes. I mean I can translate that even a little bit. You obviously saw the really strong volumes we've put up in January. And that type of debate, that type of environment really does translate quite well. Probably no better place to see than in our swaps business where we're seeing revenue growth excess of 40% in January. So it's 1 month, but it does give you a sense of that environment, that type of place where we're able to add value for clients and kind of how it translates into the business.

Operator

And our next question will be coming from Kyle Voigt of KBW.

Kyle Kenneth Voigt

Maybe just a question for Sara on the margin commentary and expecting less margin expansion in '24 versus '23. Just given the start to the year that you've seen, it seems difficult to get the numbers to work out to lower margin expansion that you saw in 2023, even towards the higher end of the expense guidance range. So I'm just wondering if you kind of help frame where you'd expect expenses to come in relative to that guidance range you laid out, if we see revenue growth for the full year persist at similar levels to January's 20% rate. And are there scenarios where you'd expect to come in above the high end or below the low end of the range, depending on the revenue environment?

Sara Hassan Furber

Got it, Kyle, thanks for the question. Look, we put some thought into this range. Just kind of a reiteration to everyone's benefit. At the midpoint of the range, we're talking about 12% expense growth, which includes the acquisitions that now are closed. Excluding the acquisitions, that midpoint is about 10%, which is pretty much in line if you looked at any sort of track record of the expense growth we've put up historically.
When you think about how we think about margin expansion, there's really been no change in our philosophy there. We're constantly trying to balance investment through the cycle to make sure that we feel like we are putting the right bets on the table to invest in durable revenue growth. And I think 2023, if I were to play back the year, is kind of like that's the proof in the pudding.
We had an environment in the first part of the year where the revenue environment was more challenging for a lot of macro reasons. We were able to deliver margin expansion in that environment. And then, equally as importantly, particularly towards the back half of the year when the environment really became much more favorable and we were seeing very strong revenues in line with kind of what you're seeing for January, you saw us also be able to accelerate some of those investments. And so still delivering margin expansion, but obviously, pacing expense growth in line with revenues. This is an environment that we like. Billy just talked about it. This is an environment that we want to invest in through the long term.
We do care about margin expansion. We talked, I think, in the prepared remarks about delivering expansion, we're comfortable on either end of that guidance, but kind of cherry picking exactly where you land. It's a combination of sort of what's the environment and where things land. And obviously, if you look at any trend we've talked about, as revenues grow, our expenses grow. We have performance incentive compensation. We have variable fees, which is about 30% and so those correlate with revenue.
So generally, as revenue environment improves, you're going to see us have expenses that kind of trend in that direction, too. Hopefully, that gives you a little bit of color. But obviously, we have the acquisitions, too, which we could spend time on either now or later. But big picture, does that help give you a frame?

Kyle Kenneth Voigt

Yes, it's good.

Operator

Thank you. And that concludes today's Q&A session. I would like to turn the call back over to Billy Hult for closing remarks. Please go ahead.

William E. Hult

Everyone, thank you very much for joining us this morning. If you have any follow-up questions, obviously, feel free to reach out to Ashley, Samir and the team. Everyone, have a great day, and thank you so much for your time.

Operator

This concludes today's conference. You may all disconnect.