MarketAxess (MKTX) Q2 2025: Block Trading Volume Surges 20% as Protocol Expansion Accelerates
Record trading volumes and a 20% surge in block trading highlight MarketAxess’s aggressive protocol expansion and strategic push into high-touch, phone-dominated segments. While July’s market share softness in US high grade underscores ongoing channel volatility, management is betting on new hires and targeted product rollouts to capture growth in block and portfolio trading. Investors should watch for traction in US credit block adoption and the September launch of mid-ex as near-term catalysts.
Summary
- Block Trading Penetration: Adoption of targeted block protocols is driving material share gains across Eurobonds and EM.
- Dealer and Portfolio Channel Momentum: Dealer-initiated and portfolio trading channels delivered outsized growth, reinforcing the multi-protocol strategy.
- Execution Focus Shifting: Strategic hires and upcoming product launches aim to electronify legacy phone-based markets, setting the stage for further market share capture.
Performance Analysis
MarketAxess delivered record total trading volumes across both credit and rates, with total credit volume surpassing $1 trillion for the first time and rates volume reaching $2 trillion. Commission revenue rose 12%, powered by strong activity in US credit, emerging markets, and Eurobonds. Notably, over 50% of incremental revenue growth stemmed from new initiatives—block trading, portfolio trading, and dealer-initiated activity—demonstrating the effectiveness of the company’s protocol-agnostic, multi-channel approach.
Fee per million declined year over year due to protocol mix, with greater portfolio trading (which carries lower fees) offsetting some gains from higher-duration trades. Operating expenses increased 6%, reflecting disciplined investment in technology, strategic hires, and product development. The company’s balance sheet remains robust, supporting both organic investment and opportunistic share repurchases, with $145 million remaining on the buyback authorization.
- Block Trading Acceleration: Block trading activity rose over 20% year to date, with US investment grade block trading up 40% in Q2 and Eurobonds block volume up 54% in July.
- Portfolio Trading Growth: Portfolio trading average daily volume (ADD) surged 69%, driving market share gains in US high grade and high yield.
- Dealer-Initiated Expansion: Dealer-initiated ADD grew 40%, with strong momentum in municipal bonds and anticipation for the US credit mid-ex launch in September.
International product lines, especially Eurobonds and emerging markets, contributed outsized volume growth, though fee capture declined modestly due to protocol and product mix. The company’s multi-channel, protocol-agnostic model is delivering tangible results, but US high grade market share volatility remains a watchpoint as large trades continue to migrate between phone and electronic platforms depending on market conditions.
Executive Commentary
"We are delivering multiple protocols to solve our clients' different execution needs and we are giving them the automation workflow tools that they need to do more with less. We delivered record automation volume and trade count with a record number of active clients during a period of increased volatility."
Chris Kincannon, Chief Executive Officer
"We believe we are striking the right balance of investing to drive future growth, while at the same time being disciplined stewards of capital."
Eileen Fisselbieler, Chief Financial Officer
Strategic Positioning
1. Protocol-Agnostic Model Drives Market Share
MarketAxess’s protocol-agnostic approach—delivering multiple trading methods (RFQ, click-to-trade, portfolio, and block)—is broadening its addressable market. The company is targeting both traditional electronic segments and the large, phone-based block market through its new high-touch X-Pro solution. This is especially relevant as nearly half of large block trades in US high grade remain off-platform, representing a substantial untapped pool for electronification.
2. Block and Portfolio Trading as Growth Engines
Block and portfolio trading are emerging as the primary growth levers, with targeted solutions rolled out across US credit, Eurobonds, and EM. Block trading not only increased volumes but also drove market share gains, particularly in Eurobonds where enriched dealer content has accelerated adoption. Portfolio trading, while lower-fee, is becoming a larger part of client workflows, especially during low-volatility periods.
3. Dealer-Initiated Channel and Product Innovation
The upcoming mid-ex solution for US credit (midpoint matching protocol) is set to launch in September, aiming to capture dealer-to-dealer flows and further electronify the market. This complements recent record volumes in municipal bonds and the expansion of all-to-all and CP Plus pricing analytics. The company’s investment in workflow automation and analytics is designed to deepen engagement with both buy-side and dealer clients.
4. Global Expansion and Local Market Penetration
International markets, especially EM local currency and Eurobonds, are delivering double-digit volume growth. The recent execution of the first Indian government bond trade electronically positions MarketAxess as a first mover in local EM electronification, with significant runway as 85% of EM market volume remains local currency-based and largely untapped.
5. Strategic Hires and Execution Capacity
High-profile hires such as Spencer Lee and Dean Berry are reshaping product and market strategy, bringing expertise in EMS (execution management systems), data analytics, and M&A. These additions are expected to accelerate product rollout and enhance dealer and client engagement, especially in the US credit and international markets.
Key Considerations
This quarter marks a pivotal point in MarketAxess’s transformation, as new protocols and strategic hires are positioned to drive further share gains in both established and emerging markets.
Key Considerations:
- Block Market Electronification: The targeted block trading solution is gaining traction, but success in US high grade depends on onboarding more dealer content and shifting entrenched phone-based workflows.
- Fee Per Million Dynamics: Protocol mix shift toward portfolio trading is pressuring fee capture, though higher-duration trades can offset this trend.
- Operational Leverage from Automation: Investment in automation and workflow tools is intended to enable clients to do more with less, supporting volume growth without proportional cost increases.
- Capital Allocation Flexibility: The company is balancing organic investment, opportunistic share repurchases, and bolt-on acquisitions, with M&A capacity enhanced by recent leadership changes.
- International Growth Optionality: Early success in EM and Eurobonds shows the scalability of the protocol-agnostic model, with local EM markets representing a significant future opportunity.
Risks
US high grade market share remains vulnerable to macro-driven shifts in trade execution preferences, with large blocks reverting to phone or chat in low-volatility, tight-spread environments. Protocol mix changes may continue to pressure fee capture, and full realization of new product adoption depends on successful dealer and client onboarding. Competitive intensity in electronification and pricing analytics, along with regulatory changes, could disrupt current growth trajectories.
Forward Outlook
For Q3 2025, MarketAxess expects:
- Continued rollout and adoption of block trading solutions in US credit, with a focus on onboarding additional dealers.
- September launch of mid-ex solution for US credit, targeting dealer-to-dealer flows.
For full-year 2025, management reconfirmed expense guidance at the low end of the $501–521 million range (non-GAAP), reflecting measured investment and cost discipline.
- Growth to be driven by new protocol adoption, strategic hires, and international market expansion.
Management highlighted that over half of incremental revenue is now coming from new initiatives, and expects further market share gains in US credit and international markets, contingent on continued client and dealer adoption.
- Key variables include macro volatility, protocol mix, and success of upcoming product launches.
- Expense discipline and capital allocation flexibility remain priorities.
Takeaways
MarketAxess is demonstrating tangible progress in protocol expansion and market share capture, but execution risk in US high grade electronification and fee capture dynamics remain front of mind.
- Protocol Innovation Is Delivering Volume Growth: Block and portfolio trading are materially expanding the addressable market, with international products showing the strongest acceleration.
- Strategic Hires Are Expected to Accelerate Adoption: New leadership is tasked with deepening dealer relationships and driving product rollout, especially in high-touch and dealer-to-dealer segments.
- Investors Should Watch US Credit Block Adoption: The pace of dealer onboarding and client uptake in US credit block trading will be critical for sustained market share gains and margin stability.
Conclusion
MarketAxess’s Q2 results confirm the strength of its multi-protocol strategy, with record volumes and revenue growth driven by new initiatives. The next phase of execution will hinge on delivering share gains in US credit block trading and scaling new products globally, as the company seeks to electronify entrenched phone-based segments and unlock new revenue streams.
Industry Read-Through
The continued electronification of fixed income trading is accelerating, with block and portfolio trading protocols proving effective at penetrating historically phone-based markets. MarketAxess’s success in Eurobonds and emerging markets signals that scalable, protocol-agnostic platforms can capture share as dealer and client workflows modernize. Competitors in fixed income and adjacent asset classes should monitor the rapid evolution of electronic block and portfolio trading, as well as the growing importance of workflow automation and analytics in driving operational leverage and client stickiness. The pace of dealer adoption and protocol innovation will likely remain the key battlegrounds for market share and margin in the coming quarters.