What changed in MarketAxess's 10-K — 2023 vs 2024
vs
Paragraph-level year-over-year comparison of MarketAxess's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+445 added−397 removedSource: 10-K (2025-02-24) vs 10-K (2024-02-22)
Top changes in MarketAxess's 2024 10-K
445 paragraphs added · 397 removed · 329 edited across 2 sections
- Item 6. [Reserved]+289 / −294 · 238 edited
- Item 1A. Risk Factors+156 / −103 · 91 edited
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
91 edited+65 added−12 removed169 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
91 edited+65 added−12 removed169 unchanged
2023 filing
2024 filing
Biggest changeAny of these events could have a material adverse effect on our business, financial condition and results of operations. 32 Risks Related to Possible Transactions or Investments If we acquire or invest in other businesses, products or technologies, and are unable to integrate them with our business, our financial performance may be impaired or we may not realize the anticipated financial and strategic goals for any such transactions or any strategic alliances, partnerships or joint ventures, which we may enter into.
Biggest changeThe terms of many open source licenses are ambiguous and have not been interpreted by U.S. or other courts, and these licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our platforms and solutions, license the software on unfavorable terms, require us to re-engineer our platforms and solutions or take other remedial actions, any of which could have a material adverse effect on our business. 32 Risks Related to Possible Transactions or Investments If we acquire or invest in other businesses, products or technologies, and are unable to integrate them with our business, our financial performance may be impaired or we may not realize the anticipated financial and strategic goals for any such transactions or any strategic alliances, partnerships or joint ventures, which we may enter into.
Any such delay, disruption, expense or failure could adversely affect our ability to effect transactions and manage our exposure to risk. Moreover, any of these events could have a material adverse effect on our business, financial condition and operating results. 27 Economic sanctions levied against states or individuals could expose us to significant operational and regulatory risks.
Any such delay, disruption, expense or failure could adversely affect our ability to effect transactions and manage our exposure to risk. Moreover, any of these events could have a material adverse effect on our business, financial condition and operating results. Economic sanctions levied against states or individuals could expose us to significant operational and regulatory risks.
Our data, post-trade and automated and algorithmic trading solutions businesses compete against market data and information vendors, other approved regulatory reporting businesses and commercial algorithm providers, respectively. Many of our current and potential competitors are more established and substantially larger than we are and have substantially greater market presence, as well as greater financial, technical, marketing and other resources.
Our data, post-trade and automated and algorithmic trading solutions businesses compete against market data and information vendors, other approved regulatory reporting businesses and commercial algorithm providers, respectively. 23 Many of our current and potential competitors are more established and substantially larger than we are and have substantially greater market presence, as well as greater financial, technical, marketing and other resources.
These factors could have a material adverse effect on our business, financial condition, results of operations and cash flows, particularly in the case of a larger acquisition or multiple acquisitions in a short period of time. From time to time, we may enter into negotiations for acquisitions or investments that are not ultimately consummated.
These factors could have a material adverse effect on our business, financial condition, results of operations and cash flows, particularly in the case of a larger acquisition or multiple acquisitions in a short period of time. From time to time, we may enter negotiations for acquisitions or investments that are not ultimately consummated.
We regularly maintain cash balances with other financial institutions in excess of the FDIC insurance limit. A failure of any of the depository institutions that hold our deposits could impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance. 38 I tem 1B. Unresolved Staff Comments. None.
We regularly maintain cash balances with other financial institutions in excess of the FDIC insurance limit. A failure of any of the depository institutions that hold our deposits could impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance. 38 I tem 1B. Unresolved Staff Comments. None. I tem 1C.
These competitors have previously aggressively reduced, and may in the future further aggressively reduce, their pricing to enter into, or otherwise compete in, market segments in which we provide services, potentially subsidizing any losses with profits from trading in other fixed-income or equity securities or other business operations.
These competitors have previously aggressively reduced, and may in the future further aggressively reduce, their pricing to enter, or otherwise compete in, market segments in which we provide services, potentially subsidizing any losses with profits from trading in other fixed-income or equity securities or other business operations.
Our reputation could be adversely impacted by our sustainability practices and ESG disclosures or investor perceptions thereof, including if we fail to establish measurable environmental goals or subsequently fail to meet any such goals or if the Company is perceived to have not responded appropriately to the growing concern for ESG or climate issues.
Our reputation could be adversely impacted by our sustainability practices and sustainability disclosures or investor perceptions thereof, including if we fail to establish measurable environmental goals or subsequently fail to meet any such goals or if the Company is perceived to have not responded appropriately to the growing concern for sustainability or climate issues.
If we do succeed in acquiring or investing in a business, product or technology, such acquisitions and investments may involve a number of risks, including: • we may find that the acquired company or assets do not further our business strategy, or that we overpaid for the company or assets, or the economic conditions underlying our acquisition decision may change; • we may have difficulty integrating the acquired technologies or products with our existing electronic trading platforms products and services; • we may have difficulty integrating the operations and personnel of the acquired business, or retaining the key personnel of the acquired business; • there may be client confusion if our services overlap with those of the acquired company and we may have difficulty retaining key customers, vendors and other business partners of the acquired business; • our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises; • we may enter into markets, such as the equities and foreign exchange trading algorithm markets, in which we have limited experience or where competitors hold stronger market positions; • potential failure of the due diligence processes to identify significant problems, liabilities or other challenges of an acquired company or product; and • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to, claims from terminated employees, customers, former stockholders or other third parties.
If we do succeed in acquiring or investing in a business, product or technology, such acquisitions and investments may involve several risks, including: • we may find that the acquired company or assets do not further our business strategy, or that we overpaid for the company or assets, or the economic conditions underlying our acquisition decision may change; • we may have difficulty integrating the acquired technologies or products with our existing electronic trading platforms products and services; • we may have difficulty integrating the operations and personnel of the acquired business, or retaining the key personnel of the acquired business; • there may be client confusion if our services overlap with those of the acquired company and we may have difficulty retaining key customers, vendors and other business partners of the acquired business; • our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises; • we may enter markets, such as the equities and foreign exchange trading algorithm markets, in which we have limited experience or where competitors hold stronger market positions; • potential failure of the due diligence processes to identify significant problems, liabilities or other challenges of an acquired company or product; and • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to, claims from terminated employees, customers, former stockholders or other third parties.
In order to be successful, we must provide reliable, secure, real-time access to our electronic trading platforms for our clients. If our trading platforms cannot cope, or expand to cope, with demand, or otherwise fail to perform, we could experience disruptions in service, slow delivery times and insufficient capacity.
To be successful, we must provide reliable, secure, real-time access to our electronic trading platforms for our clients. If our trading platforms cannot cope, or expand to cope, with demand, or otherwise fail to perform, we could experience disruptions in service, slow delivery times and insufficient capacity.
If our risk management procedures fail, our business, financial condition and results of operations may be adversely affected. Furthermore, our insurance policies are unlikely to provide coverage for such risks. Self-clearing exposes us to significant operational, liquidity, financing and regulatory risks.
If our risk management procedures fail, our business, financial condition and results of operations may be adversely affected. Furthermore, our insurance policies are unlikely to provide coverage for such risks. 26 Self-clearing exposes us to significant operational, liquidity, financing and regulatory risks.
Competition in the markets in which we operate has intensified due to consolidation, which has resulted in increasingly large and sophisticated competitors. In recent years, our competitors have made acquisitions and/or entered into joint ventures and consortia to improve the competitiveness of their electronic trading offerings.
Competition in the markets in which we operate has intensified due to consolidation, which has resulted in increasingly large and sophisticated competitors. In recent years, our competitors have made acquisitions and/or entered joint ventures and consortia to improve the competitiveness of their electronic trading offerings.
Firms in the financial services industry have experienced increased scrutiny in recent years, and penalties, fines and other sanctions sought by regulatory authorities, including the SEC, FINRA, state securities commissions and state attorney generals in the U.S., and the FCA, ESMA and other international regulators, have increased accordingly.
The Company and other firms in the financial services industry have experienced increased scrutiny in recent years, and penalties, fines and other sanctions sought by regulatory authorities, including the SEC, FINRA, state securities commissions and state attorney generals in the U.S., and the FCA, ESMA and other international regulators, have increased accordingly.
If we cannot successfully implement the necessary processes to support and manage our expansion, our business, financial condition and results of operations may suffer. 25 We may not be able to successfully adapt our proprietary software and technology for use in any new markets.
If we cannot successfully implement the necessary processes to support and manage our expansion, our business, financial condition and results of operations may suffer. We may not be able to successfully adapt our proprietary software and technology for use in any new markets.
Liquidity and Funding Risks • We cannot predict our future capital needs or our ability to obtain additional financing if we need it. • Our credit agreement contains restrictive and financial covenants that could limit our operating flexibility, and we may incur additional debt in the future that may include similar or additional restrictions. • We maintain our cash at financial institutions, often in balances that exceed federally insured limits. 22 Risks Relating to Market and Industry Dynamics and Competition Global economic, political and market factors beyond our control could reduce demand for our services, and our profitability and business could suffer.
Liquidity and Funding Risks • We cannot predict our future capital needs or our ability to obtain additional financing if we need it. • Our credit agreement contains restrictive and financial covenants that could limit our operating flexibility, and we may incur additional debt in the future that may include similar or additional restrictions. • We maintain our cash at financial institutions, often in balances that exceed federally insured limits. 21 Risks Relating to Market and Industry Dynamics and Competition Global economic, political and market factors beyond our control could reduce demand for our services, and our profitability and business could suffer.
Systems failures, interruptions, delays in service, catastrophic events and resulting interruptions in the availability of our trading platforms could materially harm our business and reputation. Our business depends on the efficient and uninterrupted operation of our trading platforms, systems, networks and infrastructure.
System failures, interruptions, delays in service, catastrophic events and resulting interruptions in the availability of our trading platforms could materially harm our business and reputation. Our business depends on the efficient and uninterrupted operation of our trading platforms, systems, networks and infrastructure.
In particular, regulatory concerns have been raised about firms establishing effective cybersecurity governance and risk management policies, practices and procedures; protecting firm networks and information; identifying and addressing risks associated with clients, vendors, and other third parties; preventing and detecting unauthorized activities; adopting effective mitigation and business continuity plans to address the impact of cybersecurity breaches; and establishing protocols for reporting cybersecurity incidents.
In particular, regulatory concerns have been raised about firms establishing effective cybersecurity governance and risk management policies, practices and procedures; protecting firm networks and information; identifying and addressing risks associated with clients, vendors, and other third parties; preventing and detecting unauthorized activities; adopting effective mitigation and business resiliency plans to address the impact of cybersecurity breaches; and establishing protocols for reporting cybersecurity incidents.
These factors include: • economic and political conditions in the United States, Europe and elsewhere; • adverse market conditions, including unforeseen market closures or other disruptions in trading; • broad trends in business and finance, including the amount of new securities issuances; • consolidation or contraction in the number of market participants; • the current or anticipated impact of climate change, extreme weather events, natural disasters or other catastrophic events; • the emergence of widespread health emergencies or pandemics, including the Pandemic; • actual or threatened acts of war or terrorism or other armed hostilities, as well as international sanctions levied against countries and other parties; • actual or threatened trade war, including between the United States and China, or other governmental action related to tariffs, international trade agreements or trade policies; • concerns over, or actual, increased levels of inflation and weakening consumer confidence levels due to a recession (in the United States or globally) or otherwise; • the availability of cash for investment by mutual funds, exchange traded funds and other wholesale and retail investors; • the level and volatility of interest rates, including significant interest rate hikes, the difference between the yields on corporate securities being traded and those on related benchmark securities and foreign currency exchange rates; • the effect of monetary policy adopted by the Federal Reserve Board or foreign banking authorities, increased capital requirements for banks and other financial institutions, and other regulatory requirements and political impasses; • credit availability and other liquidity concerns; • concerns over credit default or bankruptcy of one or more sovereign nations or corporate entities; and • legislative and regulatory changes, including changes to financial industry regulations and tax laws.
These factors include: • economic and political conditions in the United States, Europe and elsewhere; • adverse market conditions, including unforeseen market closures or other disruptions in trading; • broad trends in business and finance, including the amount of new securities issuances; • consolidation or contraction in the number of market participants; • the current or anticipated impact of climate change, extreme weather events, natural disasters or other catastrophic events; • the emergence of widespread health emergencies or pandemics, including the COVID-19 pandemic; • actual or threatened acts of war or terrorism or other armed hostilities, as well as international sanctions levied against countries and other parties; • actual or threatened trade wars, or other governmental action related to tariffs, international trade agreements or trade policies; • concerns over, or actual, increased levels of inflation and weakening consumer confidence levels due to a recession (in the United States or globally) or otherwise; • the availability of cash for investment by mutual funds, exchange traded funds and other wholesale and retail investors; • the level and volatility of interest rates, including significant interest rate hikes, the difference between the yields on corporate securities being traded and those on related benchmark securities and foreign currency exchange rates; • the effect of monetary policy adopted by the Federal Reserve Board or foreign banking authorities, increased capital requirements for banks and other financial institutions, and other regulatory requirements and political impasses; • credit availability and other liquidity concerns; • concerns over credit default or bankruptcy of one or more sovereign nations or corporate entities; and • legislative, administrative, regulatory or government policy changes, including changes to financial industry regulations and tax laws.
Any negative publicity we receive regarding ESG, low ESG scores or ratings, or shifts in investing priorities may adversely affect the trading price of our common stock or our business, operations and earnings. Finally, the Company could experience increased operating costs or capital expenditures associated with complying with new disclosure-based or emissions-reduction requirements.
Any negative publicity we receive regarding sustainability, low sustainability scores or ratings, or shifts in investing priorities may adversely affect the trading price of our common stock or our business, operations and earnings. Finally, the Company could experience increased operating costs or capital expenditures associated with complying with new disclosure-based or emissions-reduction requirements.
We may be required to expend significant resources to repair system damage, pay a ransom, protect against the threat of future security breaches or to alleviate problems, including reputational harm, loss of clients and revenues and litigation, caused by any breaches. We may be found liable to our clients for any misappropriated confidential or personal information.
We may be required to expend significant resources to repair system damage, negotiate a ransom, protect against the threat of future security breaches or to alleviate problems, including reputational harm, loss of clients and revenues and litigation, caused by any breaches. We may be found liable to our clients for any misappropriated confidential or personal information.
Risk Factors Summary The following is a summary of the principal risks and uncertainties described in more detail in this annual report: Risks Relating to Market and Industry Dynamics and Competition • Global economic, political and market factors beyond our control could reduce demand for our services, and our profitability and business could suffer. • Decreases in trading volumes in the fixed-income markets generally or on our platforms would harm our business and profitability. • The industry in which we operate is rapidly evolving.
Risk Factors Summary The following is a summary of the principal risks and uncertainties described in more detail in this Annual Report on Form 10-K: Risks Relating to Market and Industry Dynamics and Competition • Global economic, political and market factors beyond our control could reduce demand for our services, and our profitability and business could suffer. • Decreases in trading volumes in the fixed-income markets generally or on our platforms would harm our business and profitability. • The industry in which we operate is rapidly evolving.
Malicious cyber-attacks, attempted cybersecurity breaches, and other adverse events affecting our operational systems or infrastructure, or those of third parties, could disrupt our businesses, result in the disclosure of confidential information, damage our reputation and cause losses or regulatory penalties.
Malicious cyber-attacks, attempted cybersecurity breaches, and other adverse events affecting our operational systems or infrastructure, or those of third parties, could disrupt our businesses, result in the disclosure of confidential information, cause system unavailability, damage our reputation and cause losses or regulatory penalties.
Adverse movements in the prices of securities that are the subject of these transactions can increase our risk. In connection with Open Trading or other anonymous protocols, we expect that the number of transactions in which we act as a matched principal will increase.
Adverse movements in the prices of securities that are the subject of these transactions can increase our risk. In connection with Open Trading or other anonymous order routing or trading protocols, we expect that the number of transactions in which we act as a matched principal will increase.
Likewise, decreases in our share of the segments of the fixed-income trading markets in which we operate, or shifts in trading volume to segments of clients which we have not penetrated, could result in lower trading volume on our platforms and, consequently, lower commission revenue.
Likewise, decreases in our share of the segments of the fixed-income trading markets in which we operate, or shifts in trading volume to segments of clients or trading protocols which we have not significantly penetrated, could result in lower trading volume on our platforms and, consequently, lower commission revenue.
In addition, the increased flexibility for our employees to work remotely post-Pandemic has amplified certain risks related to, among other things, the increased demand on our information technology resources and systems, the increased risk of phishing and other cybersecurity attacks, and the increased number of points of possible attack, such as laptops and mobile devices (both of which are now being used in increased numbers), to be secured.
Increased flexibility for our employees to work remotely has amplified certain risks related to, among other things, the increased demand on our information technology resources and systems, the increased risk of phishing and other cybersecurity attacks, and the increased number of points of possible attack, such as laptops and mobile devices (both of which are now being used in increased numbers), to be secured.
Our computer systems, software and networks (or those of our third-party vendors) may be vulnerable to unauthorized access, loss or destruction of data (including confidential and personal customer information), ransomware, unavailability or disruption of service, computer viruses, acts of vandalism, or other malicious code, cyber-attack and other adverse events that could have an adverse security impact.
Our computer systems, software and networks (or those of our third-party vendors, including cloud service providers) may be vulnerable to unauthorized access, loss or destruction of data (including confidential and personal customer information), ransomware, unavailability or disruption of service, computer viruses, acts of vandalism, or other malicious code, cyber-attack and other harmful events that could have an adverse security impact.
In connection with our Open Trading protocols, we execute certain bond transactions between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller in trades which are then settled by us or through a third-party clearing broker.
In connection with our Open Trading or order routing protocols, we execute certain transactions between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller in trades which are then settled by us or through a third-party clearing broker.
Although we intend to continue to implement industry-standard security measures, such measures may not be sufficient. Our actual or perceived failure to comply with privacy, data protection, and information security laws, regulations, and obligations could harm our business. Data privacy is subject to frequently changing rules and regulations in countries where we do business.
Although we intend to continue to implement industry-standard security measures and best practices, such measures may not be sufficient. Our actual or perceived failure to comply with privacy and data protection laws, regulations, and obligations could harm our business. Privacy and data protection is subject to frequently changing rules and regulations in countries where we do business.
During periods of increased volatility in credit markets, the use of electronic trading platforms to trade certain highly volatile or distressed bonds may decrease, such as occurred during the regional banking crisis in 2023. In addition, during rapidly moving markets, broker-dealers are less likely to post prices electronically.
During periods of increased volatility in fixed-income markets, the use of electronic trading platforms to trade certain highly volatile or distressed bonds may decrease, such as occurred during the regional banking crisis in 2023. In addition, during rapidly moving markets, broker-dealers are less likely to post prices electronically.
Individuals at broker-dealers or institutional investors may have conflicting interests, which may discourage their use of our platforms. In certain of our product areas, the growth rates for the use of our electronic trading services that we experienced in recent years have slowed and such growth rates may not resume or increase in the future.
Individuals at broker-dealers or institutional investors may have conflicting interests, which may discourage their use of our platforms. In certain of our product areas, growth rates for the use of our electronic trading services have slowed in recent years and such growth rates may not resume or increase in the future.
These providers may not be willing and/or able to (i) continue to provide these services in an efficient, cost-effective manner, if at all, (ii) adequately expand their services to meet our needs or (iii) meet the increasing regulatory requirements applicable to certain technology and data services providers to financial institutions.
These providers may not be willing and/or able to continue to provide these services in an efficient, cost-effective manner, if at all; adequately expand their services to meet our needs; or meet the increasing regulatory requirements applicable to certain technology and data services providers to financial institutions.
Self-regulatory organizations such as FINRA, along with statutory bodies, such as the SEC, the FCA, the AFM and ESMA and other international regulators, require strict compliance with their rules and regulations.
Self-regulatory organizations such as FINRA and the NFA, along with statutory bodies, such as the SEC, the CFTC, the FCA, the AFM and ESMA and other international regulators, require strict compliance with their rules and regulations.
Operating in a rapidly evolving industry involves a high degree of risk and our future success depends, in part, on our ability to: • attract and retain market participants on our platforms on a cost-effective basis; • expand and enhance reliable and cost-effective product and service offerings for our clients; • develop and introduce new features to, and new versions of, our electronic trading platforms; • respond effectively to competitive pressures; • respond effectively to the loss of any of our significant broker-dealer or institutional investor clients, including due to merger, consolidation, bankruptcy, liquidation or other cause (including, among other things, the collection of any amounts due from such clients); • operate, support, expand and develop our operations, technology, website, software, communications and other systems; • defend our trading platforms and other systems from cybersecurity threats; and • respond to regulatory changes or demands.
Operating in a rapidly evolving industry involves a high degree of risk and our future success depends, in part, on our ability to: • attract and retain market participants on our platforms on a cost-effective basis; • expand and enhance reliable and cost-effective product and service offerings for our clients; • develop and introduce new features to, and new versions of, our electronic trading platforms; • respond effectively to competitive pressures and technological advances, including the use of new or disruptive technology such as AI; • respond effectively to the loss of any of our significant broker-dealer or institutional investor clients, including due to merger, consolidation, bankruptcy, liquidation or another cause (including, among other things, the collection of any amounts due from such clients); • operate, support, expand and develop our operations, technology, website, software, communications and other systems; • defend our trading platforms and other systems from cybersecurity threats; and • respond to regulatory changes or demands.
If bank-affiliated entities reduce their trading activity and that activity is not replaced by other market participants, the level of liquidity and pricing available on our trading platforms would be negatively impacted, which could adversely affect our operating results.
If bank-affiliated broker-dealers reduce their trading activity and that activity is not replaced by other market participants, the level of liquidity and pricing available on our trading platforms would be negatively impacted, which could adversely affect our operating results.
There can be no assurance that we will be able to retain our major institutional investor clients or that such clients will continue to use our trading platform.
There can be no assurance that we will be able to retain our major institutional investor clients or that such clients will continue to use our trading platforms.
We, or our third-party providers, may experience systems failures or business interruptions in the future, as has occurred from time-to-time in the past.
We, or our third-party providers, may experience system failures or business interruptions in the future, as has occurred from time-to-time in the past.
Our current and prospective trading platform competitors are numerous and include: (1) other multi-party electronic trading platforms; (2) EMS and OMS Providers; (3) securities and futures exchanges; and (4) technology, software, and information services or other companies that have existing commercial relationships with broker-dealers or institutional investors.
Our current and prospective trading platform competitors are numerous and include: • other multi-party electronic trading platforms; • EMS and OMS providers; • securities and futures exchanges; and • technology, software, and information services or other companies that have existing commercial relationships with broker-dealers or institutional investors.
Technology, IT Systems and Cybersecurity Risks • Rapid market or technological changes may render our technology obsolete or decrease the attractiveness of our products and services to our broker-dealer and institutional investor clients. • We depend on third-party suppliers for key products and services. • Our success depends on maintaining the integrity and capacity of our electronic trading platforms, systems and infrastructure. • Systems failures, interruptions, delays in service, catastrophic events and resulting interruptions in the availability of our trading platforms could materially harm our business and reputation. • If we experience design defects, errors, failures or delays with our platforms, products or services, including our automated and algorithmic trading solutions and pricing algorithms, our business could suffer serious harm. • Malicious cyber-attacks, attempted cybersecurity breaches, and other adverse events affecting our operational systems or infrastructure, or those of third parties, could disrupt our businesses, result in the disclosure of confidential information, damage our reputation and cause losses or regulatory penalties. • Our actual or perceived failure to comply with privacy, data protection and information security laws, regulations, and obligations could harm our business. 21 Intellectual Property Risks • We may not be able to protect our intellectual property rights or technology effectively, which would allow competitors to duplicate or replicate our electronic trading platforms or any of our other current or future functionalities, products or services.
Technology, IT Systems and Cybersecurity Risks • Rapid market or technological changes may render our technology obsolete or decrease the attractiveness of our products and services to our broker-dealer and institutional investor clients. • Issues related to the development and use of AI may result in reputational harm, liability, or other adverse consequences to our business operations. • We depend on third-party suppliers for key products and services. • Our success depends on maintaining the integrity and capacity of our electronic trading platforms, systems and infrastructure. • System failures, interruptions, delays in service, catastrophic events and resulting interruptions in the availability of our trading platforms could materially harm our business and reputation. • If we experience design defects, errors, failures or delays with our platforms, products or services, including our automated and algorithmic trading solutions and pricing algorithms, our business could suffer serious harm. • Malicious cyber-attacks, attempted cybersecurity breaches, and other adverse events affecting our operational systems or infrastructure, or those of third parties, could disrupt our businesses, result in the disclosure of confidential information, cause system unavailability damage our reputation and cause losses or regulatory penalties. • Our actual or perceived failure to comply with privacy and data protection laws, regulations, and obligations could harm our business. 20 Intellectual Property Risks • We may not be able to protect our intellectual property rights or technology effectively, which would allow competitors to duplicate or replicate our electronic trading platforms or any of our other current or future functionalities, products or services.
Our future success will depend on our ability to: (1) enhance our existing products and services; (2) develop and/or license new products and technologies that address the increasingly sophisticated and varied needs of our broker-dealer and institutional investor clients and prospective clients; (3) continue to attract highly-skilled technology personnel; and (4) respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis.
Our future success will depend on our ability to: • enhance and innovate our existing products and services; • develop and/or license new products and technologies that address the increasingly sophisticated and varied needs of our broker-dealer and institutional investor clients and prospective clients; • continue to attract and retain highly-skilled technology personnel; and • respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis.
The growing divergence of the U.K. and European Union legal and regulatory requirements following Brexit could materially adversely impact our business, clients, financial condition, results of operations and prospects.
The growing divergence of the U.K. and E.U. legal and regulatory requirements following Brexit could materially adversely impact our business, clients, financial condition, results of operations and prospects.
The full impact of this change, and what effect it will have, whether positive or negative, on our industry, our clients or us is unknown at this time. 35 Further, we and/or our clients could become subject to future legislation and regulatory requirements beyond those currently proposed, adopted or contemplated in the U.S. or abroad.
While we expect this change will increase our own platform efficiency, it is still unknown at this time the full impact of this change, and what effect it will have, whether positive or negative, on our industry, our clients or us. 35 Further, we and/or our clients could become subject to future legislation and regulatory requirements beyond those currently proposed, adopted or contemplated in the U.S. or abroad.
For example, during 2022 and 2023, a significant rise in corporate bond yields contributed to a decrease in the duration of the bonds traded on our platforms, which had a negative effect on our average credit variable transaction fee per million.
For example, during recent periods, a significant rise in corporate bond yields contributed to a decrease in the duration of the bonds traded on our platforms, which had a negative effect on our average credit variable transaction fee per million.
Our disaster recovery and business continuity plans are heavily reliant on the availability of the internet and mobile phone technology, so any disruption of those systems would likely affect our ability to recover promptly from a crisis situation.
Our disaster recovery and business continuity plans are heavily reliant on the availability of cloud service providers, internet and mobile phone technology, so any disruption of those systems may affect our ability to recover promptly from a crisis situation.
We rely on our institutional investor clients to launch inquiries over our trading platforms and, increasingly, to provide liquidity through our Open Trading protocols. A limited number of such clients can account for a significant portion of our trading volume.
We could lose significant sources of revenue and trading volume if we lose any of our significant institutional investor clients. We rely on our institutional investor clients to launch inquiries over our trading platforms and, increasingly, to provide liquidity through our Open Trading protocols. A limited number of such clients can account for a significant portion of our trading volume.
Developing our electronic trading platforms and other technology entails significant technical and business risks. We may use new technologies ineffectively or we may fail to adapt our electronic trading platforms, information databases and network infrastructure to broker-dealer or institutional investor client requirements or emerging industry or regulatory standards.
Developing our electronic trading platforms and other technology entails significant technical and business risks and expenses. We may use new technologies ineffectively or we may fail to adapt our existing technologies to meet broker-dealer or institutional investor client requirements or emerging industry or regulatory standards.
Additionally, laws and our contractual terms may not be sufficient to protect our technology from use or theft by third parties. These protections may not be adequate to prevent our competitors from independently developing technologies that are substantially equivalent or superior to our technology.
Additionally, laws and our contractual terms may not be sufficient to protect our technology from use or theft by third parties, particularly with respect to the evolving use of AI technologies. These protections may not be adequate to prevent our competitors from independently developing technologies that are substantially equivalent or superior to our technology.
Accordingly, we face the risk of regulatory intervention, investigations and proceedings, any of which could involve extensive scrutiny of our activities and result in significant fines and liability. Any of these developments would require significant time and financial resources and could adversely affect our reputation, financial condition and operating results.
Accordingly, we face the risk of regulatory intervention, investigations and proceedings, particularly in emerging markets, where securities laws are developing, any of which could involve extensive scrutiny of our activities and result in significant fines and liability. Any of these developments would require significant time and financial resources and could adversely affect our reputation, financial condition and operating results.
Similarly, although some contracts with our third-party providers, such as our hosting facility providers, require adequate disaster recovery or business continuity capabilities, we cannot be certain that these will be adequate or implemented properly.
Similarly, although some contracts with our third-party providers as well as relevant law require adequate disaster recovery or business continuity capabilities, we cannot be certain that these will be adequate or implemented properly.
Based on these proposed rules, we expect that we will have to operate all of our trading protocols in compliance with Regulation ATS and we could become subject to Regulation SCI for certain parts of our business in the future.
If these rules are adopted as proposed, we expect that we will have to operate additional trading protocols in compliance with Regulation ATS and we could become subject to Regulation SCI for certain parts of our business in the future.
For example, DORA, which focuses on the security of network and information systems of financial services entities as well as ICTs is expected to become applicable to portions of our business in January 2025. DORA will, among other things, introduce significant additional ICT-related governance, risk management, resilience testing and sub-contracting requirements.
For example, DORA, which focuses on the security of network and information systems of financial services entities and ICTs, became applicable to portions of our business in January 2025. DORA has, among other things, introduced significant additional ICT-related governance, risk management, resilience testing and sub-contracting and notification requirements.
We anticipate that our average fees per million may continue to vary in the future due to changes in yield, years-to-maturity and nominal size of bonds traded on our platforms. Consequently, past trends in commissions are not necessarily indicative of future commissions.
We anticipate that our average fees per million may continue to vary in the future due to changes in yield, years-to-maturity and nominal size of bonds traded on our platforms.
If, as a result of industry consolidation, our competitors are able to offer lower cost and/or a wider range of trading venues and solutions, obtain more favorable terms from third-party providers or otherwise take actions that could increase their market share, our competitive position and therefore our business, financial condition and results of operations may be materially adversely affected. 24 Our operations also include the sale of pre- and post-trade services, analytics, and market data and index services.
If, because of industry consolidation, our competitors are able to offer lower cost and/or a wider range of trading venues and solutions, obtain more favorable terms from third-party providers or otherwise take actions that could increase their market share, our competitive position and therefore our business, financial condition and results of operations may be materially adversely affected.
Regulatory and Legal Risks • We operate in a highly regulated industry and we may face restrictions with respect to the way we conduct certain of our operations. • Our business and the trading businesses of many of our clients are subject to increasingly extensive government and other regulation, which may affect our trading volumes and increase our cost of doing business. • The growing divergence of the U.K. and European Union legal and regulatory requirements following Brexit could materially adversely impact our business, clients, financial condition, results of operations and prospects. • The extensive regulation of our business means we have ongoing exposure to potentially significant costs and penalties. • We are subject to the risks of litigation and securities laws liability.
Regulatory and Legal Risks • We operate in a highly regulated industry and we may face restrictions with respect to the way we conduct certain of our operations. • Our business and the trading businesses of many of our clients are subject to increasingly extensive government and other regulation, which may affect our trading volumes and increase our cost of doing business. • The growing divergence of the U.K. and E.U. legal and regulatory requirements following Brexit could materially adversely impact our business, clients, financial condition, results of operations and prospects. • The extensive regulation of our business means we have ongoing exposure to potentially significant costs and penalties. • We are subject to the risks of litigation and securities laws liability. • If our tax filing positions were to be challenged by federal, state and local, or foreign tax jurisdictions, we may not be wholly successful in defending our tax filing positions.
Concanon's services or that of one or more of our other executive officers or key personnel for any reason, as well as any negative market or industry perception arising from such loss or interruption, could result in our inability to manage our operations effectively and/or pursue our business strategy.
Although we have invested in succession plans and we have short-term contingency plans in place, any loss or interruption of our CEO’s services or that of one or more of our other executive officers or key personnel for any reason, as well as any negative market or industry perception arising from such loss or interruption, could result in our inability to manage our operations effectively and/or pursue our business strategy.
Conversely, certain U.S. states have restricted state-controlled funds from investing based on ESG factors.
For example, certain U.S. states have restricted state-controlled funds from investing based on sustainability factors.
For example, we are subject to the E.U.’s General Data Protection Regulations (“GDPR”) and the U.K. equivalent, which require us to comply with regulations regarding the handling of personal data irrespective of whether the processing of data takes place within the E.U. or not.
For example, we are subject to the E.U.’s General Data Protection Regulation (the “GDPR”) and the U.K. equivalent as well as other laws and regulations, which require us to comply with requirements regarding the handling and retention of personal data, including laws in relation to cookies and tracking technologies, irrespective of whether the processing of data takes place within the E.U. or not.
In addition, we may also face significant increases in our use of power and data storage and may experience a shortage of capacity and/or increased costs associated with such usage. 29 Failures of, or significant interruptions, delays or disruptions to, or security breaches affecting, our systems, networks or infrastructure have in the past, and could in the future, result in: disruption to our operations, including disruptions in service to our clients; slower response times; distribution of untimely or inaccurate market data to clients who rely on this data for their trades; delays in trade execution; incomplete or inaccurate accounting, recording or processing of trades; significant expense to repair, replace or remediate systems, networks or infrastructure; financial losses and liabilities to clients; loss of clients; legal or regulatory claims, proceedings, penalties or fines.
Failures of, or significant interruptions, delays or disruptions to our systems, networks or infrastructure have in the past, and could in the future, result in: • disruption to our operations, including disruptions in service to our clients; • slower response times; • distribution of untimely or inaccurate market data to clients who rely on this data for their trades; • delays in trade execution; incomplete or inaccurate accounting, recording or processing of trades; • significant expense to repair, replace or remediate systems, networks or infrastructure; • financial losses and liabilities to clients; • loss of clients; or • legal or regulatory claims, proceedings, penalties or fines.
McVey’s and Concannon's employment agreements with us do not require them to continue to work for us and allow them to terminate their respective employment at any time, subject to certain notice requirements and forfeiture of non-vested equity compensation awards. We do not maintain “key person” life insurance on any of our executive officers and other key personnel.
The terms of our CEO’s employment agreement with us does not require him to continue to work for us and allows him to terminate his employment at any time, subject to certain notice requirements and forfeiture of non-vested equity compensation awards. We do not maintain “key person” life insurance on any of our executive officers and other key personnel.
We deploy measures that seek to protect, detect, respond and recover from cyber threats, including identity and access controls, data protection, vulnerability management, incident response, secure product development, continuous monitoring of our networks, endpoints and systems, and maintenance of resilient backup and recovery capabilities.
We deploy measures that seek to protect, detect, respond and recover from cyber threats, including identity and access controls, data protection, vulnerability management, incident response, secure product development, continuous monitoring of our networks, endpoints and systems, and maintenance of backup and recovery capabilities. It is possible that such layered defensive measures will not be successful in mitigating a cybersecurity event.
However, as of the date of this report, MarketAxess has not experienced a cybersecurity threat or incident that has materially affected the Company in at least the last three years.
However, as of the date of this report, we have not experienced a cybersecurity threat or incident that has materially affected the Company, including our business strategy, results of operations, or financial condition, in at least the last three years.
In addition, the laws of some countries in which we now or in the future provide our services may not protect software and intellectual property rights to the same extent as the laws of the United States.
In addition, the laws of some countries in which we now or in the future provide our services may not protect software and intellectual property rights to the same extent as the laws of the United States. Furthermore, intellectual property ownership and license rights surrounding AI technologies are currently not fully addressed by courts or regulators.
We rely on a number of third parties to supply elements of our trading, information and other systems, as well as computers and other equipment, and related support and maintenance.
We depend on third-party suppliers for key products and services. We rely on several third parties to supply elements of our trading, information and other systems, as well as computers and other equipment, and related support and maintenance.
There is a high degree of competition among market data and information vendors in solutions for pre- and post-trade data, analytics and reporting, and such businesses may become more competitive in the future as new competitors emerge. Some of these companies are already in or may enter the electronic trading business.
Our operations also include the sale of pre- and post-trade services, analytics, and market data services. There is a high degree of competition among market data and information vendors in solutions for pre- and post-trade data, analytics and reporting, and such businesses may become more competitive in the future as new competitors emerge.
We are also subject to certain U.S. federal, state and foreign laws governing the protection of personal privacy and data in those jurisdictions. These laws and regulations are increasing in complexity and number.
We are also subject to certain U.S. federal, state and foreign laws governing the protection of personal privacy and data in those jurisdictions. These laws and regulations are increasing in complexity and number. In addition, many jurisdictions have enacted or are considering laws requiring companies to notify individuals and/or regulators of data security breaches involving their personal data.
Our success depends largely upon the continued services of our executive officers and other key personnel, including Richard M. McVey, our founder and Executive Chairman, and Christopher Concannon, our Chief Executive Officer. The terms of Messrs.
Our success depends largely upon the continued services of our executive officers and other key personnel, including our Chief Executive Officer (“CEO”).
Our failure to monitor or maintain our systems, networks and infrastructure, including those maintained or supported by our third-party providers, or to find a replacement for defective or obsolete components within our systems, networks and infrastructure in a timely and cost-effective manner when necessary, would have a material adverse effect on our business, financial condition and results of operations.
Our failure to monitor or maintain our systems, networks and infrastructure, including those maintained or supported by our third-party providers, or to find a replacement for defective or obsolete components within our systems, networks and infrastructure in a timely and cost-effective manner when necessary, would have a material adverse effect on our business, financial condition and results of operations. 29 While we generally have disaster recovery and business continuity plans in place for much of our business, including redundant systems, networks, computer software and hardware and data centers to address interruption to our normal course of business, our systems, networks and infrastructure may not always be fully redundant and our disaster recovery and business continuity plans may not always be sufficient or effective.
As we enter new markets, we may not be able to successfully attract clients and adapt our technology and marketing strategy for use in those markets. Our strategy includes leveraging our electronic trading platforms to enter new markets, including new asset classes, products and geographies, including markets where we have little or no operating experience.
Our strategy includes leveraging our electronic trading platforms to enter new markets, including new asset classes, products and geographies, including markets where we have little or no operating experience.
This central clearing mandate will impact certain of our participants who do not centrally clear such trades today, and some have expressed concerns about the potential impact of additional clearing costs.
Once effective, this central clearing mandate will impact certain of our participants who do not centrally clear such trades today, and some of our investor clients have expressed concerns about using platforms that will require the clearing of any resultant trades executed on such platforms.
The impact of such events could increase because of the geographical concentration of our operations and personnel in certain areas of the U.S.
The impact of such events could increase because of the geographical concentration of our operations and personnel in certain areas of the U.S., which are expected to experience higher risk levels than some other regions.
Any reduction in the use of our electronic trading platforms by our broker-dealer clients could reduce the volume of trading on our platforms, which could, in turn, reduce the use of our platforms by our institutional investor clients.
Any reduction in the use of our electronic trading platforms by our broker-dealer clients could reduce the volume of trading on our platforms, which could, in turn, reduce the use of our platforms by our institutional investor clients. The occurrence of any of the foregoing may have a material adverse effect on our business, financial condition and results of operations.
Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Because techniques used to obtain unauthorized access or to sabotage computer systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures.
Because techniques used to obtain unauthorized access or to sabotage computer systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures. 30 Our business also depends on the efficient and uninterrupted operation of our platforms, systems, networks and infrastructure.
As our operations grow in both size and scope, we will need to continually improve and upgrade our electronic trading platforms and infrastructure to accommodate potential increases in order message volume and trading volume, the trading practices of new and existing clients, regulatory changes and the development of new and enhanced trading platform features, functionalities and ancillary products and services.
We have had disruptions of service in the past, and could have additional disruptions in the future, that may lead to our clients deciding to stop using or reduce their use of our platforms, which could have a material adverse effect on our business, financial condition and results of operations. 28 As our operations grow in both size, complexity and scope, we will need to continually improve and upgrade our electronic trading platforms and infrastructure to accommodate potential increases in order message volume and trading volume, the trading practices of new and existing clients, regulatory changes and the development of new and enhanced trading platform features, functionalities and ancillary products and services.
We may also enter into strategic alliances, partnerships or joint ventures as a means to accelerate our entry into new markets, provide new solutions or enhance our existing capabilities. For example, in 2022, we made a significant minority investment in RFQ-hub, a bilateral multi-asset and multi-dealer request for quote platform.
We may also enter into strategic alliances, partnerships or joint ventures as a means to accelerate our entry into new markets, provide new solutions or enhance our existing capabilities.
These competing trading platforms may offer some features that we do not currently offer. Accordingly, there can be no assurance that such broker-dealers’ primary commitments will not be to one of our competitors.
These competing trading platforms may offer some features that we do not currently offer. Accordingly, there can be no assurance that such broker-dealers’ primary commitments will not be to one of our competitors. 25 Higher capital requirements on trading activity by bank-affiliated broker-dealers may reduce their incentives to engage in certain market making activities and may impair market liquidity.
We also may consider potential divestitures of businesses from time to time.
We also agreed to take a controlling stake in RFQ-hub in 2024. We also may consider potential divestitures of businesses from time to time.
Our revenues and profitability are likely to decline significantly during periods of stagnant economic conditions, low volatility or low trading volume in the U.S. and global financial markets. While we are expanding our businesses to new geographic areas, our business operations have historically been substantially located in the U.S. and the U.K.
Our revenues and profitability are likely to decline significantly during periods of stagnant economic conditions, low volatility or low trading volume in the U.S. and global financial markets. Decreases in trading volumes in the fixed-income markets generally or on our platforms would harm our business and profitability.
While this event did not have a material adverse effect on the Company, similar events in the future events could have a material adverse effect on our business, financial condition and results of operations. 28 We also rely, and expect in the future to continue to rely, on third parties for various computer and communications systems and services, such as telephone companies, online service providers, data processors, cloud computing and data centers, software and hardware vendors.
We also rely, and expect in the future to continue to rely, on third parties for various systems and services, such as communications providers, online service providers, data processors, cloud computing and data centers, cybersecurity service providers, software and hardware vendors.
The global financial services business is, by its nature, risky and volatile and is directly affected by many national and international factors that are beyond our control. Recently, for example, the 2023 banking crisis, rising interest rates and inflation, the Pandemic and the Russia-Ukraine war, each created significant volatility in the markets we serve and increased uncertainty and economic disruption.
Recently, for example, the 2023 regional banking crisis, rising interest rates and inflation, the COVID-19 pandemic and the Russia-Ukraine war, each created significant volatility in the markets we serve and increased uncertainty and economic disruption.
For example, with the acquisition of Pragma in 2023, we began providing algorithmic trading and quantitative execution solutions in the equities and foreign exchange markets, where we previously had little operating experience.
For example, with the acquisition of Pragma in 2023, we began providing algorithmic trading and quantitative execution solutions in the equities and foreign exchange markets, and in 2024, we agreed to acquire a majority stake in RFQ-hub, a platform specializing in ETFs and derivatives.
Our market share of the fixed-income trading markets is also impacted by a variety of other factors, including the amount of new issuances of corporate debt, the level of bond fund inflows or outflows, the percentage of volumes comprised of Rule 144A transactions, the percentage of volumes comprised of larger trades (such as block trades or portfolio trades), the level of credit spreads and credit volatility and whether the prevalent market environment is an “offer wanted” or “bid wanted” environment. 23 A decline in overall market volumes, trading volumes on our platforms or our platforms’ market share for any reason would negatively affect our commission revenue and may have a material adverse effect on our business, financial condition and results of operations.
Our market share of the fixed-income trading markets is also impacted by a variety of other factors, including the amount of new issuances of corporate debt, the level of bond fund inflows or outflows, the percentage of volumes comprised of Rule 144A transactions, the percentage of volumes comprised of larger trades (such as block trades or portfolio trades), the level of credit spreads and credit volatility and whether the prevalent market environment is an “offer wanted” or “bid wanted” environment. 22 There has been increased demand for portfolio trading workflows over the last few years, which has resulted in heightened competition among trading platforms to enhance their portfolio trading offerings and expand them across different geographies and products.
This could adversely affect our ability to compete. • Defending against intellectual property infringement or other claims could be expensive and disruptive to our business. If we are found to infringe the proprietary rights of others, we could be required to redesign our technology, pay royalties or enter into license agreements with third parties.
If we are found to infringe the proprietary rights of others, we could be required to redesign our technology, pay royalties or enter into license agreements with third parties. • Our use of open-source software could result in litigation or require us to re-engineer our platforms or use other commercial solutions.
… 88 more changes not shown on this page.
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
238 edited+51 added−56 removed165 unchanged
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
238 edited+51 added−56 removed165 unchanged
2023 filing
2024 filing
Biggest changeThe difference between the U.S. federal statutory tax rate of 21.0 % and the Company's effective tax rate is as follows: Year Ended December 31, 2023 2022 2021 U.S. federal statutory tax rate 21.0 % 21.0 % 21.0 % State and local taxes - net of federal benefit 0.8 4.6 4.4 Tax credits ( 1.0 ) ( 0.4 ) ( 0.4 ) Foreign rate differential benefit 0.9 ( 0.1 ) ( 0.2 ) Excess tax benefit from stock-based compensation 0.1 ( 0.1 ) ( 2.9 ) Other, net 0.6 1.0 0.9 Effective tax rate 22.4 % 26.0 % 22.8 % The following is a summary of the Company’s net deferred tax assets: As of December 31, 2023 2022 (In thousands) Deferred tax assets: Stock compensation expense $ 4,441 $ 3,451 Operating lease liabilities 17,128 17,842 Deferred Compensation 2,596 2,425 Other 1,015 1,774 Total deferred tax assets 25,180 25,492 Valuation allowance — — Net deferred tax assets 25,180 25,492 Deferred tax liabilities: Depreciation ( 8,617 ) ( 9,956 ) Capitalized software development costs — ( 3,923 ) Goodwill and intangible assets ( 3,987 ) ( 4,829 ) Operating lease right-of-use assets ( 13,507 ) ( 14,176 ) Other deferred tax liabilities ( 276 ) — Deferred tax (liability) asset, net $ ( 1,207 ) $ ( 7,392 ) The Company or one of its subsidiaries files U.S. federal, state and foreign income tax returns.
Biggest changeNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following is a summary of the Company’s net deferred tax assets: As of December 31, 2024 2023 (In thousands) Deferred tax assets: Stock compensation expense $ 4,880 $ 4,441 Operating lease liabilities 15,753 17,128 Deferred compensation 2,700 2,596 Capitalized software development 3,130 791 Other 1,096 224 Total deferred tax assets 27,559 25,180 Valuation allowance — — Net deferred tax assets 27,559 25,180 Deferred tax liabilities: Depreciation ( 6,990 ) ( 8,617 ) Goodwill and intangible assets ( 5,307 ) ( 3,987 ) Operating lease right-of-use assets ( 12,515 ) ( 13,507 ) Other deferred tax liabilities — ( 276 ) Deferred tax asset (liability), net $ 2,747 $ ( 1,207 ) The Company is currently under a New York State income tax examination for tax years 2015 through 2020 and a New York City income tax examination for the tax years 2016 through 2018 .
In August 2023, we entered into the 2023 Credit Agreement, which provides aggregate commitments totaling $750.0 million, including a revolving credit facility, a $5.0 million letter of credit sub-limit for standby letters of credit and a $380.0 million sub-limit for swingline loans.
In August 2023, we entered into the Credit Agreement, which provides aggregate commitments totaling $750.0 million, including a revolving credit facility, a $5.0 million letter of credit sub-limit for standby letters of credit and a $380.0 million sub-limit for swingline loans.
The hypothetical unrealized gain (loss) of $0.2 million would be recognized in accumulated other comprehensive loss on the Consolidated Statements of Financial Condition. A similar hypothetical 100 basis point increase or decrease in interest rates would decrease or increase the fair value of the trading securities portfolio by approximately $1.1 million.
The hypothetical unrealized gain or loss of $1.0 million would be recognized in accumulated other comprehensive loss on the Consolidated Statements of Financial Condition. A similar hypothetical 100 basis point increase or decrease in interest rates would decrease or increase the fair value of the trading securities portfolio by approximately $2.2 million.
Our operating subsidiaries settle such transactions using their self-clearing operations or through the use of third-party clearing brokers or settlement agents. Settlement typically occurs within one to two trading days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded.
Our operating subsidiaries settle such transactions using their self-clearing operations or through the use of third-party clearing brokers or settlement agents. Settlement typically occurs within one to two trading days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded.
Following customary adjustments for cash, debt, transaction expenses and working capital, the aggregate purchase price for the Acquisition was $ 125.0 million, comprised of approximately $ 81.2 million in cash and 224,776 shares of common stock of the Company, valued at approximately $ 43.8 million as of the closing date of the Pragma Acquisition, as described below.
Following customary adjustments for cash, debt, transaction expenses and working capital, the aggregate purchase price for the Pragma Acquisition was $ 125.0 million, comprised of approximately $ 81.2 million in cash and 224,776 shares of common stock of the Company, valued at approximately $ 43.8 million as of the closing date of the Pragma Acquisition, as described below.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MarketAxess Holdings Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MarketAxess Holdings Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MarketAxess Holdings Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MarketAxess Holdings Inc.
Based on that evaluation, the Chief Executive Officer and Interim Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by MarketAxess in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information is accumulated and communicated to our management, including the Chief Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by MarketAxess in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables, including the expected stock price volatility over the term of the awards, the risk-free interest rate, the expected dividend yield rate and the expected term.
The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including the expected stock price volatility over the term of the awards, the risk-free interest rate, the expected dividend yield rate and the expected term.
We expect that current cash and investment balances, in combination with cash flows that are generated from operations and the ability to borrow under our 2023 Credit Agreement (as defined below), will be sufficient to meet our liquidity needs and planned capital expenditure requirements for at least the next twelve months.
We expect that current cash and investment balances, in combination with cash flows that are generated from operations and the ability to borrow under our Credit Agreement (as defined below), will be sufficient to meet our liquidity needs and planned capital expenditure requirements for at least the next twelve months.
Borrowings under the 2023 Credit Agreement will bear interest at a rate per annum equal to the alternate base rate or the adjusted term SOFR rate, plus an applicable margin that varies with our consolidated total leverage ratio. The 2023 Credit Agreement requires that we satisfy certain covenants, including a requirement to not exceed a maximum consolidated total leverage ratio.
Borrowings under the Credit Agreement will bear interest at a rate per annum equal to an alternate base rate or the adjusted term SOFR rate, plus an applicable margin that varies with our consolidated total leverage ratio. The Credit Agreement requires that we satisfy certain covenants, including a requirement to not exceed a maximum consolidated total leverage ratio.
Expenses may also grow due to increased regulatory complexity, acquisitions or the continued effects of inflation. 49 Other Income (Expense) Interest Income . Interest income consists of interest income earned on our cash and cash equivalents, restricted cash, deposits and investments. Interest Expense. Interest expense consists of financing charges incurred on short-term borrowings. Equity in Earnings of Unconsolidated Affiliate.
Expenses may also grow due to increased regulatory complexity, acquisitions or the continued effects of inflation. Other Income (Expense) Interest Income . Interest income consists of interest income earned on our cash and cash equivalents, restricted cash, deposits and investments. Interest Expense. Interest expense consists of financing charges incurred on short-term borrowings. Equity in Earnings of Unconsolidated Affiliate.
We primarily compete on the basis of our client network, the liquidity provided by our dealer, and, to a lesser extent, institutional investor clients, the total transaction costs associated with our services, the breadth of products, protocols and services offered, as well as the quality, reliability, security and ease of use of our platforms.
We primarily compete on the basis of our client network, the liquidity provided by our dealer, and, to a lesser extent, institutional investor clients, the total transaction costs and fees associated with our services, the breadth of products, protocols and services offered, as well as the quality, reliability, security and ease of use of our platforms.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Management’s Report on Internal Control Over Financial Reporting 62 Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 63 Consolidated Statements of Financial Condition — As of December 31, 2023 and 2022 65 Consolidated Statements of Operations — For the years ended December 31, 2023, 2022 and 2021 66 Consolidated Statements of Comprehensive Income — For the years ended December 31, 2023, 2022 and 2021 67 Consolidated Statements of Changes in Stockholders’ Equity — For the years ended December 31, 2023, 2022 and 2021 68 Consolidated Statements of Cash Flows — For the years ended December 31, 2023, 2022 and 2021 69 Notes to Consolidated Financial Statements 71 61 M ANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of MarketAxess Holdings Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Management’s Report on Internal Control Over Financial Reporting 62 Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 63 Consolidated Statements of Financial Condition — As of December 31, 2024 and 2023 65 Consolidated Statements of Operations — For the years ended December 31, 2024, 2023 and 2022 66 Consolidated Statements of Comprehensive Income — For the years ended December 31, 2024, 2023 and 2022 67 Consolidated Statements of Changes in Stockholders’ Equity — For the years ended December 31, 2024, 2023 and 2022 68 Consolidated Statements of Cash Flows — For the years ended December 31, 2024, 2023 and 2022 69 Notes to Consolidated Financial Statements 71 61 M ANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of MarketAxess Holdings Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.
Borrowings under the 2023 Credit Agreement will bear interest at a rate per annum equal to the alternate base rate or the adjusted term Secured Overnight Financing Rate (“SOFR”) rate, plus an applicable margin that varies with the Company’s consolidated total leverage ratio.
Borrowings under the Credit Agreement will bear interest at a rate per annum equal to an alternate base rate or the adjusted term Secured Overnight Financing Rate (“SOFR”) rate, plus an applicable margin that varies with the Company’s consolidated total leverage ratio.
Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated statements of financial condition of MarketAxess Holdings Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).
Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated statements of financial condition of MarketAxess Holdings Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”).
Borrowings under these agreements will bear interest at a base rate per annum equal to the higher of the upper range of the Federal Funds Rate, 0.25% or one-month SOFR, plus 1.00%. As of December 31, 2023, the subsidiaries had no borrowings outstanding and up to $500.0 million in available uncommitted borrowing capacity under such agreements.
Borrowings under these agreements will bear interest at a base rate per annum equal to the higher of the upper range of the Federal Funds Rate, 0.25% or one-month SOFR, plus 1.00%. As of December 31, 2024, the subsidiaries had no borrowings outstanding and up to $500.0 million in available uncommitted borrowing capacity under such agreements.
The 2023 Credit Agreement will mature on August 9, 2026, with our option to request up to two additional 364-day extensions at the discretion of each lender and subject to customary conditions. As of December 31, 2023, we had $0.1 million in letters of credit outstanding and $749.9 million in available borrowing capacity under the 2023 Credit Agreement.
The Credit Agreement will mature on August 9, 2026, with our option to request up to two additional 364-day extensions at the discretion of each lender and subject to customary conditions. As of December 31, 2024, we had $0.1 million in letters of credit outstanding and $749.9 million in available borrowing capacity under the Credit Agreement.
Pursuant to the terms of the securities clearing agreements, each third-party clearing broker has the right to charge us for any losses they suffer resulting from a counterparty’s failure on any of our trades. We did not record any liabilities or losses with regard to counterparty failures for the years ended December 31, 2023 and 2022.
Pursuant to the terms of the securities clearing agreements, each third-party clearing broker has the right to charge us for any losses they suffer resulting from a counterparty’s failure on any of our trades. We did not record any liabilities or losses with regard to counterparty failures for the years ended December 31, 2024 and 2023.
As of December 31, 2023 , the Company had no borrowings outstanding and up to $ 500.0 million in available uncommitted borrowing capacity under such agreements. Short-term Financing Under arrangements with their settlement banks, certain of the Company’s U.S. and U.K. operating subsidiaries may receive overnight financing in the form of bank overdrafts.
As of December 31, 2024 , the Company had no borrowings outstanding and up to $ 500.0 million in available uncommitted borrowing capacity under such agreements. Short-term Financing Under arrangements with their settlement banks, certain of the Company’s U.S. and U.K. operating subsidiaries may receive overnight financing in the form of bank overdrafts.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP (PCAOB ID 238 ), an independent registered public accounting firm, as stated in their report which appears herein. 62 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of MarketAxess Holdings Inc.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP (PCAOB ID 238 ), an independent registered public accounting firm, as stated in their report which appears herein. 62 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of MarketAxess Holdings Inc.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.
See Note 13 to the Consolidated Financial Statements for a discussion of these agreements. Under arrangements with their settlement banks, certain of our operating subsidiaries may receive overnight financing in the form of bank overdrafts. As of December 31, 2023, we had no overdrafts payable outstanding.
See Note 13 to the Consolidated Financial Statements for a discussion of these agreements. Under arrangements with their settlement banks, certain of our operating subsidiaries may receive overnight financing in the form of bank overdrafts. As of December 31, 2024, we had no overdrafts payable outstanding.
A discussion of changes in our Financial Results and Cash Flow Comparisons from the year ended December 31, 2021 to the year ended December 31, 2022 may be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of Part II of our Annual Report on Form 10-K for the year ended December 31, 2022.
A discussion of changes in our Financial Results and Cash Flow Comparisons from the year ended December 31, 2022 to the year ended December 31, 2023 may be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023.
The Company will recognize any U.S. income tax expense the Company may incur on global intangible low-taxed income as income tax expense in the period in which the tax is incurred. 10. Stockholders’ Equity Common Stock As of December 31, 2023 , the Company had 110,000,000 authorized shares of voting common stock and 10,000,000 authorized shares of non-voting common stock.
The Company will recognize any U.S. income tax expense the Company may incur on global intangible low-taxed income as income tax expense in the period in which the tax is incurred. 10. Stockholders’ Equity Common Stock As of December 31, 2024 , the Company had 110,000,000 authorized shares of voting common stock and 10,000,000 authorized shares of non-voting common stock.
The Company did not record any liabilities or losses with regard to counterparty failures for the years ended December 31, 2023, 2022 and 2021, respectively. In the normal course of business, the Company enters into contracts that contain a variety of representations, warranties and indemnification provisions.
The Company did not record any liabilities or losses with regard to counterparty failures for the years ended December 31, 2024, 2023 and 2022 respectively. In the normal course of business, the Company enters into contracts that contain a variety of representations, warranties and indemnification provisions.
Substantially all of our open securities failed-to-deliver and securities failed-to-receive transactions as of December 31, 2023 have subsequently settled at the contractual amounts. In the normal course of business, we enter into contracts that contain a variety of representations, warranties and indemnification provisions.
Substantially all of our open securities failed-to-deliver and securities failed-to-receive transactions as of December 31, 2024 have subsequently settled at the contractual amounts. In the normal course of business, we enter into contracts that contain a variety of representations, warranties and indemnification provisions.
Adverse movements, such as a decrease in the value of these securities or a downturn or disruption in the markets for these securities, could result in a substantial loss. A 10.0% decrease in the market value of our U.S Treasuries or available-for-sale investments would result in losses of approximately $10.0 million and $2.5 million, respectively.
Adverse movements, such as a decrease in the value of these securities or a downturn or disruption in the markets for these securities, could result in a substantial loss. A 10.0% decrease in the market value of our U.S Treasuries or available-for-sale investments would result in losses of approximately $9.9 million and $5.5 million, respectively.
The Company’s lease agreements do not contain any material residual value guarantees, restrictions or covenants. The Company also has operating and finance leases for equipment with initial lease terms ranging from one-year to 5 years. 89 MARKETAXESS HOLDINGS INC.
The Company’s lease agreements do not contain any material residual value guarantees, restrictions or covenants. The Company also has operating and finance leases for equipment with initial lease terms ranging from one-year to 5 years. 90 MARKETAXESS HOLDINGS INC.
Customers are generally billed monthly, quarterly, or annually; revenues billed in advance are deferred and recognized ratably over the contract period. Post-trade Services We generate revenue from regulatory transaction reporting, trade publication and post-trade matching services. Customers are generally billed in the current month or monthly in arrears and revenue is recognized in the period that the transactions are processed.
Post-trade Services We generate revenue from regulatory transaction reporting, trade publication and post-trade matching services. Customers are generally billed in the current month or monthly in arrears and revenue is recognized in the period that the transactions are processed. Revenues billed in advance are deferred and recognized ratably over the contract period.
Contract liabilities consist of deferred revenues that the Company records when cash payments are received or due in advance of services to be performed. Deferred revenues are included in accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Financial Condition.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Contract liabilities consist of deferred revenues that the Company records when cash payments are received or due in advance of services to be performed. Deferred revenues are included in accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Financial Condition.
We have focused on the unique aspects of the credit markets we serve in the development of our platforms, working closely with our clients to provide a system that is suited to their needs. 46 Regulatory Environment Our business is subject to extensive regulations in the United States and internationally, which may expose us to significant regulatory risk and cause additional legal costs to ensure compliance.
We have focused on the unique aspects of the fixed-income markets we serve in the development of our platforms, working closely with our clients to provide a system that is suited to their needs. 46 Regulatory Environment Our business is subject to extensive regulations in the United States and internationally, which may expose us to significant regulatory risk and cause additional legal costs to ensure compliance.
Based on actual results over the past year, a hypothetical 10% increase or decrease in the U.S. dollar against all other currencies would have increased or decreased revenue by approximately $11.9 million and operating expenses by approximately $11.4 million. 59 Credit Risk Through certain of our subsidiaries, we execute securities transactions between our institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller in trades.
Based on actual results over the past year, a hypothetical 10.0% increase or decrease in the U.S. dollar against all other currencies would have increased or decreased revenue by approximately $12.9 million and operating expenses by approximately $11.7 million. 59 Credit Risk Through certain of our subsidiaries, we execute securities transactions between our institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller in trades.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 identified in connection with the evaluation thereof by our management, including the Chief Executive Officer and Interim Chief Financial Officer, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2024 identified in connection with the evaluation thereof by our management, including the Chief Executive Officer and Chief Financial Officer, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013) .
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013) .
We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Annual Performance-based Performance Shares and Performance Stock Unit Awards The Company grants performance equity awards to certain executives and certain senior managers of the firm as a component of their total compensation and in conjunction with certain new hires and for retention purposes.
Annual Performance-based Performance Stock Unit Awards The Company grants performance stock unit awards to certain executives and certain senior managers of the firm as a component of their total compensation and in conjunction with certain new hires and for retention purposes.
Our future success will depend on our ability to enhance our existing products and services, develop and/or license new products and technologies that address the increasingly sophisticated and varied needs of our existing and prospective broker-dealer and institutional investor clients and respond to technological advances and emerging industry and regulatory standards and practices on a cost-effective and timely basis.
Our future success will depend on our ability to enhance our existing products and services, develop and/or license new products and technologies that address the increasingly sophisticated and varied needs of our existing and prospective broker-dealer and institutional investor clients and respond to technological advances and emerging industry and regulatory standards and practices, including cloud and AI technologies, on a cost-effective and timely basis.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
We ended the quarter with $749.9 million in available borrowing capacity under the 2023 Credit Agreement and capital significantly in excess of our regulatory requirements. Competitive Landscape The global fixed-income securities industry generally, and the electronic financial services markets in which we engage in particular, are highly competitive, and we expect competition to intensify in the future.
We ended the year with $749.9 million in available borrowing capacity under the Credit Agreement and capital significantly in excess of our regulatory requirements. Competitive Landscape The global fixed-income securities industry generally, and the electronic financial services markets in which we engage, in particular, are highly competitive, and we expect competition to intensify in the future.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. I tem 9A. Controls and Procedures. Our management, including the Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act, as of December 31, 2023.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. I tem 9A. Controls and Procedures. Our management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act, as of December 31, 2024.
Write-offs and other charges against the allowance for credit losses were $ 0.3 million, $ 0.1 million and $ 0.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. Depreciation and Amortization Fixed assets are carried at cost less accumulated depreciation. The Company uses the straight-line method of depreciation over three to seven years .
Write-offs and other charges against the allowance for credit losses were $ 0.4 million, $ 0.3 million and $ 0.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. Depreciation and Amortization Fixed assets are carried at cost less accumulated depreciation. The Company uses the straight-line method of depreciation over three to seven years .
Certain of our U.S. subsidiaries are registered as broker-dealers and therefore are subject to the applicable rules and regulations of the SEC and FINRA. These rules contain minimum net capital requirements, as defined in the applicable regulations.
Certain of our U.S. subsidiaries are registered as broker-dealers and are subject to the applicable rules and regulations of the SEC, FINRA and the CFTC. These rules contain minimum net capital requirements, as defined in the applicable regulations.
The computation of diluted shares can vary among periods due, in part, to the change in the average price of the Company’s common stock. 88 MARKETAXESS HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13.
The computation of diluted shares can vary among periods due, in part, to the change in the average price of the Company’s common stock. 89 MARKETAXESS HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13.
That cost is expected to be recognized over a weighted-average period of 1.5 years. Employee Stock Purchase Plans The Company maintains the MarketAxess Holdings Inc. 2022 Employee Stock Purchase Plan (the “ESPP”) pursuant to which a total of 121,221 shares of the Company’s Common Stock will be made available for purchase by employees.
That cost is expected to be recognized over a weighted-average period of 1.7 years. Employee Stock Purchase Plan The Company maintains the MarketAxess Holdings Inc. 2022 Employee Stock Purchase Plan (the “ESPP”) pursuant to which a total of 121,221 shares of the Company’s Common Stock will be made available for purchase by employees.
These factors include, among others, credit market conditions, the current interest rate environment, including the volatility of interest rates and investors’ forecasts of future interest rates, the duration of bonds traded, economic and political conditions in the United States, Europe and elsewhere, and the consolidation or contraction of our broker-dealer and institutional investor clients.
These factors include, among others, fixed-income market conditions, the current interest rate environment, including the volatility of interest rates and investors’ forecasts of future interest rates, the duration of bonds traded, economic and political conditions in the United States, Europe and elsewhere, and the consolidation or contraction of our broker-dealer and institutional investor clients.
We were in compliance with all applicable covenants at December 31, 2023. See Note 13 to the Consolidated Financial Statements for a discussion of the 2023 Credit Agreement.
We were in compliance with all applicable covenants at December 31, 2024. See Note 13 to the Consolidated Financial Statements for a discussion of the Credit Agreement.
The Company incurred $ 0.1 million of interest expense on borrowings under such agreements during the each of the years ended December 31, 2023 and 2021 , and no interest expense on borrowings under such agreements during the year ended December 31, 2022.
The Company incurred $ 0.1 million of interest expense on borrowings under such agreements during the each of the years ended December 31, 2024 and 2023, and no interest expense on borrowings under such agreements during the year ended December 31, 2022.
The following discussion includes a comparison of our Financial Results, Cash Flow Comparisons and Liquidity and Capital Resources for the years ended December 31, 2023 and 2022, respectively.
The following discussion includes a comparison of our Financial Results, Cash Flow Comparisons and Liquidity and Capital Resources for the years ended December 31, 2024 and 2023, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table summarizes the Company’s unrealized and realized gains and losses on investments: Year ended December 31, 2023 2022 2021 (In thousands) Unrealized gains/(losses) Securities available-for-sale Corporate debt $ ( 11 ) $ — $ — Trading securities U.S.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table summarizes the Company’s unrealized and realized gains and losses on investments: Year Ended December 31, 2024 2023 2022 (In thousands) Unrealized gains/(losses) Securities available-for-sale Corporate debt $ ( 328 ) $ ( 11 ) $ — Trading securities U.S.
The Company’s proportionate share of RFQ–hub Holdings LLC’s net earnings was $ 0.7 million and $ 1.1 million for the years ended December 31, 2023 and 2022, respectively, and is recorded within equity in earnings of unconsolidated affiliate on the Consolidated Statements of Operations.
The Company’s proportionate share of RFQ–hub Holdings LLC’s net earnings was $ 1.4 million and $ 0.7 million for the years ended December 31, 2024 and 2023 , respectively, and is recorded within equity in earnings of unconsolidated affiliate on the Consolidated Statements of Operations.
Based on its assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2023.
Based on its assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2024.
Open Trading variable transaction fees, which represent commissions for matched principal trades, were $178.5 million for the year ended December 31, 2023. Variable transaction fees are generally calculated as a percentage of the notional dollar volume of bonds traded on the platform and vary based on the type, size, yield, maturity of the bond traded, and individual client incentives.
Open Trading variable transaction fees, which represent commissions for matched principal trades, were $178.0 million for the year ended December 31, 2024. Variable transaction fees are generally calculated as a percentage of the notional dollar volume of bonds traded on the platform and vary based on the type, size, yield, maturity of the bond traded, and individual client incentives.
See also Part I, Item 1A. - “Risk Factors, Technology, IT Systems and Cybersecurity Risks” and Part I, Item 1C – “Cybersecurity.” Trends in Our Business The majority of our revenue is derived from commissions for transactions executed on our platforms between and among our institutional investor and broker-dealer clients and monthly distribution fees.
See also Part I, Item 1A. – “Risk Factors, Technology, IT Systems and Cybersecurity Risks” and Part I, Item 1C – “Cybersecurity.” 47 Trends in Our Business The majority of our revenue is derived from commissions for transactions executed on our platforms between and among our institutional investor and broker-dealer clients.
In March 2022, the Company’s Chief Information Officer received a one-time sign-on equity award consisting, in part, of a performance stock unit award with a target of 3,986 shares. The award will vest on March 1, 2025 after certification of the performance criteria, subject to his continued employment through such date.
Other Performance Stock Unit Awards In March 2022, the Company’s Chief Information Officer received a one-time sign-on equity award consisting, in part, of a performance stock unit award with a target of 3,986 shares. The award will vest on March 1, 2025 after certification of the performance criteria, subject to his continued service through such date.
The hypothetical unrealized gain (loss) of $1.1 million would be recognized in other, net in the Consolidated Statements of Operations. We do not maintain an inventory of bonds that are traded on our platform.
The hypothetical unrealized gain or loss of $2.2 million would be recognized in other, net in the Consolidated Statements of Operations. We do not maintain an inventory of bonds that are traded on our platform.
Trading Days 249 249 Number of U.K. Trading Days 251 250 For volume reporting purposes, transactions in foreign currencies are converted to U.S. dollars at average monthly rates. The 6.8% increase in our U.S. high-grade volume was principally due to an increase in estimated market volumes, partially offset by a decrease in our estimated market share.
Trading Days 250 249 Number of U.K. Trading Days 253 251 For volume reporting purposes, transactions in foreign currencies are converted to U.S. dollars at average monthly rates. The 17.4% increase in our U.S. high-grade volume was principally due to an increase in estimated market volumes, partially offset by a decrease in our estimated market share.
(b) Trading Plans In the fourth quarter of 2023, no director or officer (as defined in Exchange Act Rule 16a-1(f)) of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement for the purchase or sale of securities of the Company, within the meaning of Item 408 of Regulation S-K, except as follows: Scott Pintoff , General Counsel & Corporate Secretary , adopted a trading arrangement intended to satisfy Rule 10b5-1(c) on December 7, 2023 , for the sale of up to 1,500 shares of the Company’s common stock, subject to certain conditions.
(b) Trading Plans In the fourth quarter of 2024 , no director or officer (as defined in Exchange Act Rule 16a-1(f)) of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement for the purchase or sale of securities of the Company, within the meaning of Item 408 of Regulation S-K, except as follows: Scott Pintoff , General Counsel & Corporate Secretary , adopted a trading arrangement intended to satisfy Rule 10b5-1(c) on December 5, 2024 , for the sale of up to 2,225 shares of the Company’s common stock, subject to certain conditions.
As of December 31, 2023, a hypothetical 100 basis point increase or decrease in interest rates would decrease or increase the fair value of the available-for-sale investment portfolio by approximately $0.2 million, assuming no change in the amount or composition of the investments.
As of December 31, 2024, a hypothetical 100 basis point increase or decrease in interest rates would decrease or increase the fair value of the available-for-sale investment portfolio by approximately $1.0 million, assuming no change in the amount or composition of the investments.
The Board may take into account such matters as general business conditions, the Company’s financial results and condition, capital requirements, contractual obligations, and legal and regulatory restrictions on the payment of dividends to the Company’s stockholders or by the Company’s subsidiaries to their respective parent entities, and any such other factors as the Board may deem relevant. 84 MARKETAXESS HOLDINGS INC.
The Board may take into account such matters as general business conditions, the Company’s financial results and condition, capital requirements, contractual obligations, and legal and regulatory restrictions on the payment of dividends to the Company’s stockholders or by the Company’s subsidiaries to their respective parent entities, and any such other factors as the Board may deem relevant. 11.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 63 Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 63 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
Over 2,000 institutional investor and broker-dealer firms use our patented trading technology to efficiently trade U.S. high-grade bonds, U.S. high-yield bonds, emerging market debt, Eurobonds, municipal bonds, U.S. government bonds and other fixed-income securities.
Approximately 2,100 institutional investor and broker-dealer firms use our patented trading technology to efficiently trade U.S. high-grade bonds, U.S. high-yield bonds, emerging market debt, Eurobonds, municipal bonds, U.S. government bonds and other fixed-income securities.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company enters into foreign currency forward contracts as an economic hedge against certain foreign currency transaction gains and losses in the Consolidated Statements of Operations. These forward contracts are for one- or three-month periods and are used to limit exposure to foreign currency exchange rate fluctuations.
The Company enters into foreign currency forward contracts as an economic hedge against certain foreign currency transaction gains and losses in the Consolidated Statements of Operations. These forward contracts are for three-month periods and are used to limit exposure to foreign currency exchange rate fluctuations.
We use this market to economically hedge our foreign exchange gains and losses on the Consolidated Statements of Operations that arise from our U.S. dollar versus British Pound Sterling exposure from the activities of our U.K. subsidiaries. As of December 31, 2023, the notional amount of our foreign currency forward contract was $61.9 million.
We use this market to economically hedge our foreign exchange gains and losses on the Consolidated Statements of Operations that arise from our U.S. dollar versus British Pound Sterling exposure from the activities of our U.K. subsidiaries. As of December 31, 2024, the notional amount of our foreign currency forward contract was $64.5 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In January 2022 and February 2023, annual performance stock units were granted with a three-year performance period that will vest based on the level of achievement by the Company of certain predetermined metrics, including pre-tax adjusted operating margin, U.S. credit market share and revenue growth excluding U.S. credit for the following three fiscal years, including the year of grant.
In January 2022, February 2023 and February 2024, annual performance stock units were granted with a three-year performance period that will vest based on the level of achievement by the Company of certain predetermined metrics, including pre-tax adjusted operating margin, U.S. credit market share and revenue growth excluding U.S. credit for the following three fiscal years, including the year of grant.
As further described under “— Critical Factors Affecting our Industry and our Company — Economic, Political and Market Factors” and “— Results of Operations — Year Ended December 31, 2023 Compared to Year Ended December 31, 2022”, in 2023, our trading volumes and our average variable transaction fee per million decreased.
As further described under “— Critical Factors Affecting our Industry and our Company — Economic, Political and Market Factors” and “— Results of Operations — Year Ended December 31, 2024 Compared to Year Ended December 31, 2023”, in 2024, our trading volumes increased and our average variable transaction fee per million decreased.
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
This U.S. broker-dealer subsidiary also maintained net capital that was $ 306.3 million in excess of the required level of $ 9.3 million.
This U.S. broker-dealer subsidiary also maintained net capital that was $ 318.9 million in excess of the required level of $ 2.3 million.
The expected term represents the period of time that options granted are expected to be outstanding based on actual and projected employee stock option exercise behavior. The weighted-average fair value for options granted during the years ended December 31, 2023, 2022 and 2021 were $ 123.47 , $ 101.38 and $ 137.66 , respectively.
The expected term represents the period of time that options granted are expected to be outstanding based on actual and projected employee stock option exercise behavior. The weighted-average fair value for options granted during the years ended December 31, 2024, 2023 and 2022 were $ 77.16 , $ 123.47 and $ 101.38 , respectively.
Retirement and Deferred Compensation Plans The Company, through its U.S. and U.K. subsidiaries, offers its employees the opportunity to invest in defined contribution plans. For the years ended December 31, 2023, 2022 and 2021, respectively, the Company contributed $ 7.6 million, $ 6.1 million and $ 5.8 million, respectively, to the plans.
Retirement and Deferred Compensation Plans The Company, through its U.S. and U.K. subsidiaries, offers its employees the opportunity to invest in defined contribution plans. For the years ended December 31, 2024, 2023 and 2022 , the Company contributed $ 11.7 million, $ 7.6 million and $ 6.1 million, respectively, to the plans.
The final awarded payout for the awards granted in 2022 and 2023 will range from zero to 200 %. Subject to the grantee’s continued service, any performance equity awarded to a participant will vest on the three-year anniversary of the grant date.
The final awarded payout for the awards granted in 2022, 2023 and 2024 will range from zero to 200 %. Subject to the grantee’s continued service, any performance stock unit award awarded to a participant will vest on the three-year anniversary of the grant date.
The Company possesses significant influence over RFQ–hub Holdings LLC and is accounting for its investment under the equity method of accounting . As of December 31, 2023 , the Company’s investment is recorded at carrying value of $ 36.3 million within prepaid expenses and other assets on the Consolidated Statements of Financial Condition.
The Company possesses significant influence over RFQ–hub Holdings LLC and is accounting for its investment under the equity method of accounting . As of December 31, 2024, the Company’s investment is recorded at carrying value of $ 34.4 million within prepaid expenses and other assets on the Consolidated Statements of Financial Condition.
These events could have a material adverse effect on our business, financial condition and results of operations. As of December 31, 2023, we had $99.7 million of investments in U.S. Treasuries that were classified as trading securities and $24.7 million of investments in corporate bonds that were classified as available-for-sale.
These events could have a material adverse effect on our business, financial condition and results of operations. As of December 31, 2024, we had $99.0 million of investments in U.S. Treasuries that were classified as trading securities and $55.1 million of investments in corporate bonds that were classified as available-for-sale.
The following table presents post-trade services revenue by timing of recognition: Year Ended December 31, 2023 2022 2021 (In thousands) Post-trade services revenue by timing of recognition Services transferred over time $ 40,061 $ 36,835 $ 38,850 Services transferred at a point in time 117 42 72 Total post-trade services revenues $ 40,178 $ 36,877 $ 38,922 Technology services – Technology services revenue primarily includes technology services revenue generated by Pragma and revenue from telecommunications line charges to broker-dealer clients.
The following table presents post-trade services revenue by timing of recognition: Year Ended December 31, 2024 2023 2022 (In thousands) Post-trade services revenue by timing of recognition Services transferred over time $ 42,170 $ 40,061 $ 36,835 Services transferred at a point in time 317 117 42 Total post-trade services revenues $ 42,487 $ 40,178 $ 36,877 Technology services – Technology services revenue primarily includes technology services revenue generated by Pragma and revenue from telecommunications line charges to broker-dealer clients.
The Company incurred $ 0.1 million and $ 0.3 million of interest expense under the 2021 Credit Agreement for the years ended December 31, 2023 and 2022, respectively.
The Company also incurred $ 0.1 million and $ 0.3 million of interest expense under a previous credit agreement for the years ended December 31, 2023 and 2022, respectively.
The 2023 Credit Agreement requires that the Company satisfy certain covenants, including a requirement not to exceed a maximum consolidated total leverage ratio. The Company incurred $ 0.1 million of interest expense under the 2023 Credit Agreement for the year ended December 31, 2023.
The Credit Agreement requires that the Company satisfy certain covenants, including a requirement not to exceed a maximum consolidated total leverage ratio. The Company incurred $ 0.2 million and $ 0.1 million of interest expense under the Credit Agreement for the years ended December 31, 2024 and 2023, respectively.
Dividends During 2023, 2022 and 2021, the Company paid quarterly cash dividends of $ 0.72 per share, $ 0.70 per share and $ 0.66 per share, respectively. Any future declaration and payment of dividends will be at the sole discretion of the Company’s Board.
Dividends During 2024, 2023 and 2022, the Company paid quarterly cash dividends of $ 0.74 per share, $ 0.72 per share and $ 0.70 per share, respectively. Any future declaration and payment of dividends will be at the sole discretion of the Board.
The value ascribed to the shares by the Company was discounted from the market value on the date of closing to reflect the non-marketability of such shares during the restriction period. Pragma is a quantitative trading technology provider specializing in algorithmic and analytical services. Pragma LLC is a registered broker-dealer.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Company was discounted from the market value on the date of closing to reflect the non-marketability of such shares during the restriction period. Pragma is a quantitative trading technology provider specializing in algorithmic and analytical services. Pragma LLC is a registered broker-dealer.
(Parent Company Only) Condensed Statements of Cash Flows (Continued) Year Ended December 31, 2023 2022 2021 (In thousands) Supplemental cash flow information: Cash paid for income taxes $ 55,784 $ 65,764 $ 41,103 Cash paid for interest 35 271 — Non-cash investing and financing activity: Exercise of stock options - cashless $ — $ 3,845 $ 2,750 Right-of-use assets obtained in exchange for operating lease liabilities 1,072 — — Treasury stock used for acquisition of business 43,841 — — 96 I tem 9.
(Parent Company Only) Condensed Statements of Cash Flows (Continued) Year Ended December 31, 2024 2023 2022 (In thousands) Supplemental cash flow information: Cash paid for income taxes $ 53,999 $ 55,784 $ 65,764 Cash paid for interest 167 35 271 Non-cash investing and financing activity: Exercise of stock options - cashless $ 1,735 $ — $ 3,845 Right-of-use assets obtained in exchange for operating lease liabilities — 1,072 — Treasury stock used for acquisition of business — 43,841 — 98 I tem 9.
Fair Value Measurements The following table summarizes the valuation of the Company’s assets and liabilities measured at fair value as categorized based on the hierarchy described in Note 2: Level 1 Level 2 Level 3 Total (In thousands) As of December 31, 2023 Assets Money market funds $ 18,634 $ — $ — $ 18,634 Securities available-for-sale Corporate debt — 24,694 — 24,694 Trading securities U.S.
Fair Value Measurements The following table summarizes the valuation of the Company’s assets and liabilities measured at fair value as categorized based on the hierarchy described in Note 2: Level 1 Level 2 Level 3 Total (In thousands) As of December 31, 2024 Assets Money market funds $ 55,473 $ — $ — $ 55,473 Securities available-for-sale Corporate debt — 55,108 — 55,108 Trading securities U.S.
… 265 more changes not shown on this page.