MarketAxess reveals 2020 Regulatory Reporting Hub and SFTR profits and costs
28 January 2021 US
Image: MarketAxess
MarketAxess, a fixed-income trading platform and post-trade services provider, has published its full-year and Q4 2020 earnings report, revealing the first revenue from its acquisition of Deutsche Boerse鈥檚 Regulatory Reporting Hub (RRH).
The reporting business was acquired by MarketAxess鈥� wholly-owned Dutch subsidiary, Trax, in December 2020 and is understood to have earned the German stock exchange group between 鈧�10 million and 鈧�50 million.
MarketAxess' Q4 report shows that RRH, which offers reporting services under the European Market Infrastructure Regulations and the Markets in Financial Instruments Regulation, is already offsetting some of the integration costs from the deal.
Full-year revenue of $689.1 million, representing a 35 per cent year-on-year (YoY) increase, and earnings of $171.3 million for Q4, up 32 per cent YoY, included $1.3 million regulatory trade reporting revenue generated by RRH since 30 November 2020.
MarketAxess鈥� 2020 revenue from its post-trade services, which includes its regulatory reporting solutions, increased by 23 per cent to hit $19.5 million. Q4 post trade revenue reached $6.56 million, up 67.3 per cent from Q4 2019.
Expenses also increased by 5.6 per cent in the fourth quarter of 2020, to $79.6 million, compared to $68.9 million for Q4 2019.
MarketAxess says the increase reflects costs associated with the RRH transaction totalling $2.4 million, including integration costs of $1.2 million, amortisation of 鈥渁cquired intangibles expense鈥� of $800,000 and deal-related transaction costs of $400,000.
A MarketAxess spokesperson notes the RRH deal was a 鈥渟mall acquisition鈥� and these costs are expenses related to the acquisition and do not include the total purchase price.
For 2021, MarketAxess estimates full-year RRH expenses to range between $15 million and $18 million.
In addition to ongoing operating expenses, the firm says the 2021 acquisition expenses include estimated amortisation expenses on acquired intangible assets of $5 million and non-recurring integration costs of $5 million.
Speaking on the MarketAxess Q4 earnings call, Chris Concannon, president and chief operating officer, said the deal 鈥渁dds significant client penetration in continental Europe and strengthens our data capabilities鈥�.
The post-trade business now boasts almost 1,000 active clients, including more than 500 new firms brought onboard as part of the RRH deal.
Elsewhere, the firm鈥檚 麻豆传媒 Financing Transactions Regulation (SFTR) solution has brought in just under $1 million since it launched in July alongside the regulation鈥檚 delayed go live.
SFTR revenue was $900,000, including $400,00 in Q3 and $500,000 in Q4.
鈥淪trong market share gains in all core trading products drove revenue growth of 35 per cent for the year, and operating income growth of 49 per cent,鈥� says Rick McVey, chair and CEO of MarketAxess.
鈥淚n addition, we continue to expand our product pipeline for future growth with new initiatives in rates, munis, data and post-trade services," he adds. "New records were achieved in active clients trading with over 1,800 institutional investor and dealer firms now utilising our global marketplace.鈥�
The reporting business was acquired by MarketAxess鈥� wholly-owned Dutch subsidiary, Trax, in December 2020 and is understood to have earned the German stock exchange group between 鈧�10 million and 鈧�50 million.
MarketAxess' Q4 report shows that RRH, which offers reporting services under the European Market Infrastructure Regulations and the Markets in Financial Instruments Regulation, is already offsetting some of the integration costs from the deal.
Full-year revenue of $689.1 million, representing a 35 per cent year-on-year (YoY) increase, and earnings of $171.3 million for Q4, up 32 per cent YoY, included $1.3 million regulatory trade reporting revenue generated by RRH since 30 November 2020.
MarketAxess鈥� 2020 revenue from its post-trade services, which includes its regulatory reporting solutions, increased by 23 per cent to hit $19.5 million. Q4 post trade revenue reached $6.56 million, up 67.3 per cent from Q4 2019.
Expenses also increased by 5.6 per cent in the fourth quarter of 2020, to $79.6 million, compared to $68.9 million for Q4 2019.
MarketAxess says the increase reflects costs associated with the RRH transaction totalling $2.4 million, including integration costs of $1.2 million, amortisation of 鈥渁cquired intangibles expense鈥� of $800,000 and deal-related transaction costs of $400,000.
A MarketAxess spokesperson notes the RRH deal was a 鈥渟mall acquisition鈥� and these costs are expenses related to the acquisition and do not include the total purchase price.
For 2021, MarketAxess estimates full-year RRH expenses to range between $15 million and $18 million.
In addition to ongoing operating expenses, the firm says the 2021 acquisition expenses include estimated amortisation expenses on acquired intangible assets of $5 million and non-recurring integration costs of $5 million.
Speaking on the MarketAxess Q4 earnings call, Chris Concannon, president and chief operating officer, said the deal 鈥渁dds significant client penetration in continental Europe and strengthens our data capabilities鈥�.
The post-trade business now boasts almost 1,000 active clients, including more than 500 new firms brought onboard as part of the RRH deal.
Elsewhere, the firm鈥檚 麻豆传媒 Financing Transactions Regulation (SFTR) solution has brought in just under $1 million since it launched in July alongside the regulation鈥檚 delayed go live.
SFTR revenue was $900,000, including $400,00 in Q3 and $500,000 in Q4.
鈥淪trong market share gains in all core trading products drove revenue growth of 35 per cent for the year, and operating income growth of 49 per cent,鈥� says Rick McVey, chair and CEO of MarketAxess.
鈥淚n addition, we continue to expand our product pipeline for future growth with new initiatives in rates, munis, data and post-trade services," he adds. "New records were achieved in active clients trading with over 1,800 institutional investor and dealer firms now utilising our global marketplace.鈥�
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