Are you ready? Ready. All right. We're going to go ahead and get started here. For important disclosures, please see the Morgan Stanley Disclosure website at www.morganstanley.com/researchdisclosures. Note that taking your photographs and use of recording devices are not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. That out of the way, good afternoon. Thanks for sticking with us here on day one of Morgan Stanley's Financials Conference. I'm Mike Cyprys, Equity Analyst, covering brokers, asset managers, and exchanges for Morgan Stanley Research. Welcome to our fireside chat with MarketAxess. I'm excited to welcome Ilene Fiszel Bieler. You're doing great. Fiszel Bieler. Perfect. There we go. CFO of MarketAxess. MarketAxess, as many of you know, is an electronic fixed income trading venue that started with a primary emphasis on credit markets and has since expanded into new geographies and new asset classes. Ilene, thank you for joining us and welcome back. Thank you for having me. Great. Why don't we start off with a little bit of a quick intro, Ilene. It's been a year since you joined MarketAxess and also a year since your first appearance at our conference. I think at the time you were just a couple of days new on the job. Yeah, I couldn't believe you guys decided to put me on stage after that. I thought that was Chris's decision. I'm pretty sure. It was a game day moment you decided to join us on stage. I think everyone was a little surprised. Including me. OK, now it's you. It's been a year. Maybe talk a little bit about your transition to MarketAxess and where you're spending most of your time and focusing now. Great. Thank you so much again for having me. It has been a really interesting and exciting year. I would say that the firm has evolved so much since I started. My focus has really been in, I would say, three different areas. The first area, and then I'll kind of go through it a little bit, the first area has really been on execution of the strategy and really being able to furnish our businesses with the right metrics, the right data, and the right analytics to be able to drive execution. What we're doing is we're taking those measures and those metrics and we're driving them down further into the firm. That's something that has been an evolution since I've been there. We think it's been really helpful as we continue to roll out our new protocols. We can talk more about that as we go along. I would say, the first area of focus for me has really been on helping the business to execute by giving them the tools they need for decision management and to drive performance. That has been one of the key things we have worked on. I have a great team. I was very lucky. They have been great with driving this forward. The second place that I spent a lot of time, and this I did very early on, was really around capital deployment. You may recall that pretty soon after I joined MarketAxess, I went to the board and asked for a larger repurchase authorization than the firm had ever had. I really wanted the optionality. We are such a cash-generative model. I think historically the share repurchase philosophy had really been more about offsetting dilution from issuing employee shares for compensation. That is great. I also felt like I wanted to have a bit more in my arsenal in terms of what we could do to return capital to shareholders. What you have seen, for instance, through May was about we have already repurchased this year like $60 million in buybacks. That compares to just $24 million last year. I think all of last year we did about $75 million in buybacks. I really wanted to have that optionality. I still have about $160 million on that authorization. It does not have an end date. We can do it over time, et cetera. Capital deployment, really looking at how we were utilizing our capital and making sure it's as accretive as possible for shareholders was a key area of focus for me. Those are the first two. The third area was really what I think of as good corporate hygiene. MarketAxess for a long time has been investing, which is great. This is a business that you need to keep investing in. We will continue to invest in that business. I also wanted to look at a way that you started to see us last year really practice good expense discipline and expense management. How can we do more of that? One of the things you saw us do is we brought on Pragma. We have top-notch technologists from Pragma. What that has allowed us to do is really be able to flex their expertise across the firm in a way that allows us not to perhaps maybe hire more people to do some of the engineering and things that we're able to do with Pragma. Really making sure that we're looking at our talent and utilizing our talent in the best way has been an important part of that. Even just regular way, sort of vendor management and looking at what can we do. Are there places where we can switch out in our technology vendors, for instance? Our team has really been looking at that from an efficiency perspective. How can we continue to free up dollars to invest so that we can move forward but do it in a way that is very productive and efficient for the firm? Great. Why do not we shift and talk about volumes, market share? On the first quarter conference call back in May, you noted the macro environment remains supportive for volumes and market share into early May. Can you talk about what we saw in April in a period of heightened uncertainty, how that fared into the month of May as the environment normalized? What are you seeing so far here in June? Yeah. So I think everybody who's in the markets world and is watching what's been happening knows that in April we saw a real uptick in vol. If you looked at where the CVIX was on average in April for high-grade, you saw that at about 56. High-yield was about 390. I mean, you saw some really, really high numbers for vol relative to what we'd seen in the prior two years. That was something that in April was very clear. Now in May, interestingly enough, you saw that normalize some. Now we're still at levels that I would say were elevated from what we had seen for the prior two years. For instance, that CVIX 56 number came down to about 33, which has been about the median this year in terms of what we're seeing in vol on high-grade. For high-yield, that came down to about 190. You definitely see a difference in volatility. What has been so interesting to me in terms of the macro environment is even with this difference in vol, what you are also seeing is an incredible amount of velocity going through the system. Volumes have been up pretty much across the board. While they ebb and flow month to month, you are still seeing elevated levels of volumes. A lot of that is being driven by what you are seeing in terms of the turnover and what is happening in velocity. I think from a macro perspective, we saw through May still really nice volumes and elevated velocity. I think probably the last thing that we've been looking at and that we pay a lot of attention to is what's sort of happening in the rate environment because that obviously helps to drive what traders do in terms of how far out on the curve they're trading. The forward curve has kind of been all over the place. I mean, it started the year, people thought there would be three or four cuts. Then it was two or three. I think the most recent probabilities are giving you one or two. We're looking at those differences as well and kind of put all of that together. Spreads, I think the only thing I haven't commented yet in terms of macro is spreads. We obviously saw spreads widening considerably in April. That came back in a little bit in May, but not as low as we had necessarily seen previously. Definitely a step down in terms of tightening of spreads. All in all, I think the conditions that we saw have been relatively favorable, although we obviously saw a significant change between April and May. Your comment on velocity and turnover being a bit more elevated and sort of sustaining into May is an interesting one because people have been talking about prospects for a pickup in velocity for many years now. I guess, how do you think about the prospects for that to sustain as we move forward? Were you surprised that it sustained in May? I mean, I think if you look at the volumes, we know they came down a little bit in May, but they were still elevated from what you saw the prior year. Particularly on a year-over-year basis. That's right. On a year-over-year basis, for sure. I think what has happened is in some ways the electronification of these markets has made this possible. That, I think, is a big driver. That bodes well. We'll have to, obviously, we always have to wait and see how things go. I do think that having the electronification that we've seen is allowing that velocity to stay at perhaps levels that are higher than what you would have seen just a few years ago. Great. Why don't we shift and talk about market share and implications? We talked about volumes. Now market share. I guess, what are the biggest needle movers here for accelerating your investment grade market share? Again, it was pretty robust in April. I think it was flat sequentially into May. Actually, in May, market share was up on high-grade. Up on a year-on-year basis. A year-on-year basis. Flat sequentially month on month. Right. Yep. And then rebounding in high-yield. How do you think about the prospects for that as well in terms of the time frame there to see even continued strength in investment-grade? What sort of backdrop would you need for that? Yeah. I would just say even in high-grade, though, I just want to say we did almost get to 20%, 19.9% in high-grade in May versus it was about 19.4% in April. We were even up on a month-over-month basis, just saying. That is actually an important point that I'll come back to later. Here's how I think about the business and how when I came in in the first year, I think I needed to get a real sense for how do I structurally think about growth and how we're driving things forward. There are a lot of protocols and there are certain things that are coming online that are very exciting. I wanted to understand how does it work sort of by client channels? How does it work by if you think about there's horizontals and there's verticals. Folks have heard me say this before. The verticals are high grade, high yield, EM, EU. That is where you see share most readily. What we have been doing is really driving our business through channels that horizontally cross all of them. That is important also from a technology rollout perspective because we are building technology now that can cross all of those asset classes or markets within credit. You have the client-initiated channel. That is our bread and butter, what we have been so good at for so long, RFQ, Open Trading. One of the key pieces and protocols that we expect to help drive continued share there is our block trading protocol. I know we can talk more about that in a bit. That is sort of part of, we think of that as part of the client-initiated horizontal. You have got portfolio trading. Portfolio trading in and of itself could be considered part of client-initiated. Because there has been so much focus on it, we like to break it out and look at it separately and really measure it and focus on it as its own channel. There is dealer-initiated. Think of those three areas. If you think of client-initiated as being maybe 60% of the market in high grade and you think of PT as maybe 10% and dealer as 30%, we have got opportunity in the high-touch block protocols that you have heard about us rolling out within the client-initiated channel to help with market share there to drive market share. We are now at a place with PT, and happy to go into more on this in a bit, where we feel we are feature complete. We had to sort of get ourselves into a place where we can be really competitive with our functionality. We feel very good about that now with PT. There is always going to be more to do, but we feel like we are now on the front foot there. Dealer is a place where we have a lot that we can still achieve. We are very nascent in the dealer market. Those are areas where we think there is still quite a bit of market share growth for us. Great. We are going to dive into each of those. Maybe just first on automation. In the first quarter, we saw record automation volume. Nearly 250 clients have onboarded so far. Maybe just remind us how these algos work and how this is changing trader behavior and your outlook for further adoption. Yeah. Automation is really interesting. Someone in one of the meetings earlier today said to me that they're talking about we've always seen systematics in other marketplaces, like in the equities market and other. Now you're starting to hear about systematics in credit. What does systematics need to be successful on the other side? They need the algos. They need automation. That's really great to hear that you're getting sort of the buy side of the systematics becoming more and more excited about the algos and automation on our side. If I think about how our automation suite works, there are sort of three main areas right now for us. There's Auto-X, which is our kind of first-generation automation. That's the 250 clients that you're talking about. That is really where people are able to request for quote and really do it in an automated way. We see great data insights that are very helpful for them with that. Data is such a key differentiator for us across all of these different protocols we are talking about. It really makes a difference for MarketAxess is our data. The next generation of that is what we call adaptive or ADX. That is really a smart router system of algo where you can place your order and then the algo will tell you the best place to go with it. Where are you going to get the best price? Where are you seeing the deepest liquidity? Think of it almost as like your self-driving automation, self-driving algo. That is a place where we feel good. We have got about 80 clients now that are onboarded there. We have got kind of the dealer algos as the next component. You are seeing a lot of consistency and synergies between all of these different protocols and things that we are doing. What is also exciting is that the business model is really coming together. That is something that we think is also going to help us drive where we want to get to. Great. Why do not we shift and talk about blocks? You referenced that earlier. Your high-touch block trading solution has shown some early success in EM and also on Eurobonds, which you had launched late last year and earlier this year. What specific features or elements there would you say have resonated in the marketplace with your clients? Can you talk about the further rollout ahead for other geographies and products, including your recent launch here in the U.S. for a high-touch block solution in U.S. credit? Chris has probably been talking to you guys about blocks for a while. It has been a real focus for him, particularly when you think about the electronification and the next stage of electronification of the credit markets. That block space is really the next frontier for us in terms of electronification. What we've done with blocks and just to your point about EU and EM, which has been very exciting in what we've seen in volumes. Euros, obviously Eurobonds on a much smaller base. Even in May, we saw a 116% increase in volume in Eurobond blocks. We saw about a 24% increase in EM. That was after sort of 88% increase in April and about maybe 27% or something like that increase in EM in April. You're seeing some pretty nice consistent numbers of increases in volumes in our block protocols. What did we do in EM and EU that is helping to drive that? We launched just at the end of last year. This is still relatively new. You know that these things take time for adoption and rollout. We did it in a way that I think was very, very smart. We went into markets where we took time. We worked with our clients. We said, "Okay, what are their needs?" They want to know what the axes are. What are the dealers' axes? What are the inventories? What do they have? We worked with dealers in those markets to get the axes. We worked on that for quite some time. You have sort of three components to why block works. You have the axes and having that information. You've got the technology and making it so that they could go targeted to just a few dealers through our platform, which is something we hadn't had in the past. It was new technology that allowed them to feel more confident that we were minimizing the possibility for information leakage. That is something you hear about in blocks is, "Oh, we don't want to do the block electronically because everyone will know what it is." We have now created a protocol that helps minimize that concern through our targeted block solution. The third piece, which is really, I think, kind of the thing that really wraps it all together, the functionality that wraps it all together, is our ability to truly give them best pre-trade analytics, the best data through CP+. CP+ really does an incredible job of looking at what's on our platform, what's happening in trades, what's happening in other places to really give as close to real-time pricing as you can get in the credit markets. It has been when you put all of that together, we've seen very, very good reactions from clients in EU and EM. I think those numbers that I just told you kind of merit that out. In the U.S., what's exciting now, we've only launched two weeks ago in the U.S. It's small still. We're working with our clients. We're building the axe content. The really great data and analytics that we have is already in place. We're really excited about the opportunity set in the U.S. It's early days, but we've learned a lot, I think. For instance, one of the things we also learned in the U.S. that's a little bit different than in the other markets is that in the U.S., they may want to go just to one dealer. We've created the functionality that they can do that. Click once dealer, one dealer. We really did everything to replicate what it would mean to be on chat so that it's comfortable for people to change behavior into a more efficient workflow by doing this electronically through us, through our block solution. We're pretty engaged on this. Curious why start in EM and Europe versus the U.S.? I think it's just we decided to go to those markets. It's where we had good axe content. It's where we felt that we had sort of all three of those components that I was mentioning were in a good place. We just thought that that was a good market. Those were good markets for us to start in. Maybe CP+ being a big part of the EM business too, to your point. Okay. Why do we not talk about portfolio trading? You alluded to that earlier in terms of area of focus. It sounds like you have completed the build there, which is great to see. Your market share, I think, has grown to over 20%, but it can be a little volatile, I think, on a month-to-month basis. What has driven the success there? How does your portfolio trading protocol today stack up versus the competition? Where is there room for further innovation that could help expand market share from here and also further adoption? I think for us with portfolio trading, it's certainly no new news that we needed to play catch-up there. We are at the place now where we feel we are feature complete. That doesn't mean, by the way, that there won't be enhancements. I think the one thing we know for sure is that there's always going to be innovation. We want to stay ahead of that innovation curve. What we're hearing now from our clients is that we are at a place where we are feature complete and they have what they need, whether it be net hedging, the variety of different things, the benchmark, PT. There were certain things that we needed to add on. Now we're at a place where we have what they need. That's been great. As you mentioned, you're seeing that come through in the numbers. What is really important to us, though, about all of the investment and everything we've done in PT, because to be frank, PT is not your biggest revenue TAM. It's just not. The TAMs we have for blocks, the TAMs for dealer are multiple x of what it is for PT. What PT is important, besides the fact that we want to be there for our clients, which is very critical. If they want to use it, we want to provide it. We have talked about being protocol agnostic. That is really, really critical for us. We want to make sure that regardless of the macro environment, whether it's low vol, high vol, lots of velocity, sustained or not, what our clients need to trade, we want to be their go-to platform for that. That is what we mean when we say protocol agnostic, that however they want to trade, we have got the right protocol for them. If that is PT, we are going to be there. The other thing that is really important to us, though, about PT is those traders who are trading PTs are often the same traders that are trading the blocks. We want to be on their desktop. We want to be giving them what they need. We want that functionality to be easy for them and direct. That is also a lot of why we spent so much investment and focus in portfolio trading. To your point, we are seeing really, really nice results there. I do think what is different for us, again, it is our data. We still have the ability to give them the best insights, the best pre-trade analytics, the best data that you can get through CP+. I think that's also making a difference. We needed to build the functionality. We had the data. We needed to build the functionality. Now we've got both. Anything from a feature standpoint? I know you're feature complete, but further enhancements you allude to. Anything sort of come to mind on that front over the next couple of years? I mean, I think we're going to continue to see if there are other tweaks and things that our clients are looking for. The guys in product are really on top of this and looking at it. You probably have seen we have announced a number of new hires over the last few months. We have Spencer Lee, who joined us as the Head of Product. He comes from an EMS as well as from a large dealer in his background. We know that we're seeing 90% of PTs over X-Pro now. And for instance, right under Spencer, we also hired a new Head of Client Solutions who's really focused on X-Pro. He also comes from a dealer. That is, for us, a big focus is on making sure we've got the right people in the seats who can be on top of innovation and are also very well connected to both the buy side and the sell side. You're seeing a lot of focus on talent for us as well. Is there more to go in terms of key hires? I could keep going. When we start to talk about dealer, we hired a new person also to run our dealer business for us that has a new area. We're calling it DealerAxess, which is another area that we did not have before. He's been with us for probably a little less than a year now, maybe six months. That is another new hire. You probably also saw we hired a new Chief Operating Officer. He has not started yet. He is going to be in London. We're very excited about that. He's from a very large London-based institution. Correct. Correct. He'll also be running the EMEA and APAC businesses for us. He's fantastic. We also hired a new co-head of North America sales. She has incredible depth of knowledge in the credit markets. She's joining up with someone who's already at the firm who also has incredible relationships in the market to co-head it. I think what you're seeing is us looking at people who are truly innovative on the technology side as well as people who are good on the credit side. I mean, that's what we need. We need to put that together. We've made a lot of really, as I said when I started, we've made a lot of positive change over the last year. Right. Maybe just final thing on PT. You mentioned net hedging. That was something I think you guys rolled out within the PT suite earlier this year. Just anything to speak of in terms of notable traction, uptake on that? I know it's probably a little early. It's a little early. I mean, people have been positive on it. Again, it's just another thing that we wanted to have to really round out the offering. So far, we've just been hearing positive feedback. Okay. Another offering or sort of new offering from you guys is the Mid-X platform is expected to relaunch in the U.S. in the second quarter using the Pragma technology. I guess the question here is, how is the revamped version going to compare to what you've had in the market previously? What's different with this? What differences might we see in terms of reception uptake in the U.S. versus the Mid-X solution that we've seen from you guys in Europe for many years that has been successful over there? Mid-X, just to clarify for everyone, is the sessions-based. It's mid-market. Mid-market matching amongst dealers. Amongst dealers. That's right. Dealer solution. It is in that dealer-initiated horizontal channel that I was talking about. We keep talking about what is within client-initiated. That is RFQ, Open Trading, blocks. Then we talked about PT. Now you have moved on to dealer-initiated. Thank you for following my rubric of how I think about driving the business forward. We think it is going to be a third quarter later this year launch for Mid-X. We also, by the way, launched it in Asia as well just recently. We really see this as we have been working with the dealer community, really understanding what they need, what they are looking for. That to us has been the driving force behind what they are looking for from a mid-market matched protocol. We are excited for the rollout there. It is an area where there is significant opportunity for us. We have dealer RFQ. It is just not a space that we have played in in a big way. It gives us a really good opportunity to continue to drive forward. That is exciting. Again, we will be able to provide great data. We are really going to be able to help dealers with getting out of risk. They have exhaust. They have risks they want to get out of. They do not want to cross-spread. We are going to be able to provide them with a protocol that will do that for them. Great. Maybe shifting gears to emerging markets, which has become a larger part of the business today. I think probably your second. It is our second largest. Largest business now. Which countries are the biggest contributors, would you say, to that? How does the business portfolio look sort of when you peel under the hood there? As you look out over the next couple of years, which countries could see a meaningfully larger contribution and talk to some of the steps you're taking? EM is a great business for us. I love that business. That's actually another place where we hired. He's been there for about as long as I have. We also have a new head of EM over. He sits in London. He's fantastic. He has a very good partner that he works with in Asia as well. We are in about 30 local currencies there. If you think about what it takes to be successful, our biggest currencies for the most part that you asked about are Mexico, Brazil, South Korea, Argentina, Malaysia are probably some of the biggest ones. Malaysia. Yeah. Yeah. Think about how we've created a real network and relationships on the ground. The EM business is broken up into hard currency and local. Hard currency for us is about 60% of the business. Local currency is about 40% currently. There is more opportunity in local. Hard currency, as you're probably aware, is think of that as I'm a local corporate and I'm issuing in dollar, euro, yen. That's hard currency. Then there's all the local currency opportunities for us. We're there. We've been there. Think about every time you're trading in one of these markets, you need a certain license for the most part, depending on how you structure it. None of these things are overnight. It takes a while to build up the kind of EM franchise that we have. We have a great network. We've got great liquidity. Think of it this way too. Let's say you have dealers in investment grade. Maybe you need five. In EM, because you're dealing with to make it happen with local currencies, you need to have relationships with all those local dealers. This is not hard and fast, but I'm just giving you order of magnitude. For the five in investment grade, you need 25 in local. We have been building those relationships for years, for years. We have great relationships with our clients. You've seen our growth. I think volumes year to date are up 14% in emerging markets after a few years of things being EM had a tough road for a while. I think our most recent May numbers were up about 18% in volumes. We have got a block protocol that we talked about. We have got a PT protocol. We have something really, really interesting in the market that is in some ways they'll tell you if you talk to our guys over there, the gem, which is request for market versus request for quote. Request for market is you might be asking about a certain bond at a certain price, but you're not saying what direction you're going in. You are not necessarily divulging, "I want to buy this. I want to." It is yet another protocol that works incredibly well in that market from a client perspective. That has been, in fact, a driver of some of the block activity as well. Overall, I could go on and on about the EM business. It is a great business. We always are looking for ways to see what we can do there to expand and do more. We are really very happy with that business. Just curious on the topic of EM, when you sort of peel under the hood in terms of the volumes, is it emerging market clients trading with each other? Or is it a lot of the volume coming out of Europe and the U.S. that's trading amongst each other for emerging market? Or who's on the other side? Yeah. I I mean, I think it's certainly. There's a mystery there. Yeah. No, it's a good question. I think there's more to be done on the locals. There's more to be done there. It's certainly for us, if you think about hard currencies and you think about the fact that we're a global firm, you have a lot of global players as well. I just think there's kind of opportunity across the board. Got it. I know we have just a few minutes left. Just wanted to see if there's any questions in the room from anyone. If not, we can keep going and talk about competition and pricing. Big topic. I'll take that for the last two minutes. People's minds. Just curious how you see the competitive landscape evolving as you look out over the next three to five years, whether it is newer players, new technology solutions, dealers trying to establish direct connections. Maybe we could tie in there how you are seeing pricing evolve. I know one of the competitors out there recently made some changes to dealer pricing in credit, I guess. In what scenario might MarketAxess sort of reassess and adjust? Yeah. I think obviously pricing has certainly been a question that we've received, and understandably so. Again, I look at pricing as pricing within the channels that we talked about, so client-initiated, portfolio trading, and dealer. Pricing within client-initiated in our core traditional RFQ business and Open Trading has been very steady. You have a certain amount of fluctuation that you'll see based on, in particular, high-grade, macro-driven duration trade. We know that weighted average years to maturity, if we see an additional year in high grade on the platform, that can be worth, call it $15 in fees per million. For yields, if we see those come in about 100 basis points, that can be worth, call it $3-$5. You're always going to get some fluctuation from the macro in terms of what you see in high grade. That is not pricing pressure. That is fluctuation based on the DV01 and what we need to see and understanding how to translate a spread-based business into dollars so that we have the fee protocol there. Our pricing has been very, very steady beyond, for the most part, that situation of the macro piece of it. What I think you have heard Chris say before and is certainly not new news is some of these other newer protocols, they come in at different prices than that traditional business. We know that PT comes in lower. As this is a little bit of the irony, I would guess you could say, you want to see the market share in PT. Now for us, we also actually want to see PT because of the opportunity in block trading. That is where the revenue opportunity is for us. We also know that PT comes in at a lower fee capture. Dealers are sensitive, so you are going to see some sensitivity within that space as well in those protocols. What I think is really critical to keep in mind is that is a mix. That is about mix. That is about bringing on new products, new protocols within these channels that we have not been in before, that we have not been doing before. It is the opportunity for incremental revenue, and that is about mix. That is not about sort of fee pressure. Those are very different concepts to me. If you are keeping your rate card for the most part on your core business relatively static and the fluctuations there are based on macro and could go up as well as down, but also you have opportunity based on the macro, that is not fee pressure. These other pieces are about mix. We are very excited about the opportunity to have incremental revenue in those particular protocols. Great. I'm afraid we'll have to leave it there right at time. Thanks for joining me and thanking Ilene for joining us.