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Why MarketAxess Soars 32% YTD: More Upside Potential Left?

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MarketAxess Holdings Inc. (MKTX - Free Report) has seen market share gains, robust credit market volumes and a global shift among dealers and investors toward fixed income trading automation.

The company is witnessing a record new issue activity, which is contributing to higher market volumes.

Year to date, the stock has gained 32% compared with its industry’s growth of 4.6%.

The price performance looks stronger when compared with the other companies’ stock movements in the same space, such as Intercontinental Exchange Inc. (ICE - Free Report) and Nasdaq, Inc. (NDAQ - Free Report) which have rallied 13.4% and 23.7%, respectively. Meanwhile, CME Group Inc. (CME - Free Report) has lost 12.7% during the same time frame.

It is expected that spread volatility will remain higher than normal in the quarters ahead due to the increased economic uncertainty that is likely to stay for a while now. This, in turn, should boost bond trading, creating brisk business for the company.

The company is also gaining traction from Open Trading marketplace where trading volumes are rising. This robust all-to-all marketplace substantially improves the fixed income market structure. Unlike the challenging experience in credit trading during 2008, the market turnover was actually better in the recent credit event, demonstrating that innovations in the fixed income markets are adding important new tools for risk transfer in the secondary markets.

The growing momentum of automation and credit trading inflated the average trade size. The company’s Auto-X functionality led to efficient trading, thus luring both investors and dealer clients.

It witnessed expanded trading volumes across each of its product categories, namely the U.S. high grade, the U.S. high yield, the emerging markets and euro bond as well as the municipal bonds.

The company also successfully launched its quick-to-trade client solution during the second quarter of 2020 and client onboarding for this unique service has been very encouraging too.

It further plans to introduce its net hedging solution during the third quarter.
Recently, MarketAxess completed the acquisition of LiquidityEdge, a leading U.S. treasuries trading venue. This buyout adds streaming treasury liquidity and trading capabilities to the company’s portfolio. This purchase also supports the company’s further extension of its treasury hedging capabilities.

The company’s solid progress with core products, superior financial model, a large and widening addressable market, significant operating leverage and an expanded suite of electronic trading protocols poise it well for long-term growth.

MarketAxess currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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