MKTX - NASDAQ

Ladies and gentlemen, thank you for standing by. Welcome to the MarketAxess Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded on August 6, 2025. I would now like to turn the call over to Steve Davidson, Head of Investor Relations at MarketAxess. Please go ahead, sir.

Good morning, and welcome to the MarketAxess Second Quarter 2025 Earnings Conference Call. For the call, Chris Concannon, Chief Executive Officer, will provide you with an update on our strategy and our trading businesses; and Ilene Fiszel Bieler, Chief Financial Officer, will review the financial results. Before I turn the call over to Chris, let me remind you that today's call may include forward-looking statements. These statements represent the company's belief regarding future events that, by their nature, are uncertain. The company's actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the company's future results, please see the description of risk factors in our annual report on Form 10-K for the year ended December 31, 2024. I would also direct you to read the forward-looking statement disclaimer in our quarterly earnings release, which was issued earlier this morning and is now available on our website. Now let me turn the call over to Chris.

Good morning, and thank you for joining us to review our record second quarter 2025 financial results. These strong results, as shown on Slide 3 of my strategic update, reflect a very strong operating environment and the progress we have made to transform our model to be more protocol agnostic, expand our addressable market and drive growth. 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. And to accelerate our delivery of product enhancements and automation tools, we have made several important strategic hires over the last several months, including Dean Berry and Spencer Lee, both of whom will be integral to driving growth. Now turning to our results in terms of revenue generation. We are very pleased with our execution in the quarter, delivering 10% revenue growth, excluding the impact of FX. We generated these strong results on record trading volume across most product areas, surpassing $1 trillion in total credit trading volume for the first time and delivering a record $2 trillion in total rates trading volume, which drove a 12% increase in commission revenue to a record $192 million. We continue to deliver strong performance in our U.S. government bond business over the last several months. We saw a benefit from the spike in volatility around tariffs, but we are also seeing strength driven by our new hedging services, new customers driving incremental revenue and institutional client adoption of our rates algo, which now represents over 10% of our trading volume. We are in the process of expanding our RFQ business, and we are looking to continue to enhance our rates algo solution as large asset managers continue to request enhancements. Underpinning these results was strong progress with our new initiatives across our 3 strategic channels. In the client-initiated channel, we generated 38% growth in block trading ADV across U.S. credit, emerging markets and Eurobonds. In the portfolio trading channel, we generated 69% increase in total portfolio trading ADV. And last, in the dealer-initiated channel, we generated a 40% increase in dealer-initiated ADV. In terms of expenses, we continue to show cost discipline with expenses up only 5%, excluding notables and FX as we continue to invest in the platform with a full slate of product deliveries coming in the next couple of quarters. Last, on the capital front, we have been more opportunistic with our share repurchases as we move beyond just offsetting dilution from stock-based compensation. Before I get into our results, I would like to address our July U.S. high-grade market share. While we are disappointed with the headline share, there have been significant swings in block volume moving between phone and electronic over the last several quarters. This has both helped and hurt us. We believe that this has been driven in part by the macro environment. In July, investment-grade spreads tightened significantly and the combination of tighter spreads and low volatility generally translates into more large trades getting done over the phone and an uptick in portfolio trading. Block trades equal to or larger than $5 million in size increased dramatically and represented 47% of the entire market in July, up from 42% in June. Additionally, our share of this market dropped to 10%, down from 12% in June. And so the bad news is that those large blocks move to the phone and to chat. The good news is that this is the very market that we're attacking with the recent launch of our high-touch strategy in U.S. credit on X-Pro. It's still early days, but it's the part of the market that we've been talking about targeting for some time, and we believe we will be successful in electronifying this segment of the market. Slide 4, 5 and 6 update you on how we are executing across the 3 strategic channels we are focused on to grow our market share. As Slide 5 clearly shows the key performance indicators across our platform are all green this quarter, reflecting the underlying fundamental strength of our business as well as the strong progress we are making with our new initiatives. Turning to Slide 6. In the client-initiated channel, we made strong progress with block trading with our targeted block solution now rolled out in emerging markets and Eurobonds and recently launched in U.S. credit. This is one of the most exciting areas of growth for us because we are delivering a click-to-trade solution where the trade is against a dealer acts or an indication of interest and the trade goes direct to the dealer without information leakage. This is also the largest segment of the market that remains largely phone based. We've registered record total block trading ADV of over $5 billion across U.S. credit, emerging markets and Eurobonds. Our share of blocks in U.S. high-grade was a record 12.5%, representing an increase of almost 200 basis points and was a key driver of the year-over-year increase in our estimated market share in U.S. high-grade. Our cumulative block trading volume since the launch of our targeted block trading solution in U.S. credit, emerging markets and Eurobonds was approximately $8 billion through July 2025. Next, in the portfolio trading channel, which is a very important part of the market, we generated record levels of total portfolio trading ADV with a strong increase in U.S. high-grade estimated market share on record ADV as well as record ADV in U.S. high yield and Eurobonds. U.S. high-grade portfolio trading market share was over 19% in the quarter, up 370 basis points over the prior year. Last, in the dealer-initiated channel, we are beginning to see progress as we prepare to launch a new Mid-X solution in September in U.S. credit. Dealer RFQ ADV was $1.6 billion with record ADV in municipal bonds. Mid-X total volume hit a new quarterly record of over $9 billion with record volume in emerging markets and Eurobonds. We are very excited about the launch of our new Mid-X solution in a few weeks. It's a very streamlined midpoint matching solution for dealers using our award-winning CP+ for pricing. Slide 7 highlights the strong growth in our international product areas, where we are executing across all 3 strategic channels. The strong growth that we generated across emerging markets and Eurobonds was driven by multiple levers at different stages of growth with different fee profiles. Growth across block trading, portfolio trading and dealer-initiated activity drove our total volume growth to over 20%. And this strong increase in trading volumes on robust market volumes and share gains was accompanied by a small 3% decline in fee capture, principally driven by protocol mix, delivering commission revenue growth of 17%. We believe that our global presence in EM local markets, as shown on Slide 8, will be a key driver of our future growth. The opportunity with local EM markets is enormous, as indicated on the right side of the slide, with 85% of the EM market made up of local currency corporates and sovereigns compared to just 15% hard currency corporates and sovereigns. And the estimated ADVs for both hard currency and local markets combined are greater than the ADVs for U.S. credit markets. Our estimate is that most local market trades take place with onshore clients, while only a small percentage of our trades are taking place with onshore clients. We believe that this is a large growth opportunity for us. We are also focused on facilitating global investing in local markets. As you saw with our press release last week, we just recently executed the first Indian Government Bond Trade Electronically. MarketAxess is the first fully electronic trading solution for foreign portfolio investors, and this launch further deepens our global EM franchise. I would like to thank our clients, BlackRock and Standard Chartered for their support in executing the first trade. In summary, we are pleased with our execution in the second quarter, where we benefited from a very supportive market backdrop and delivered strong growth across our new initiatives. The July share numbers in U.S. high-grade were disappointing, but we believe that the solution we are bringing to the market will be successful, and we now have the right team in place to help us accelerate growth in the coming quarters. Now let me turn the call over to Ilene to review our financials.

Thank you, Chris. Turning to our results. On Slide 10, we provide a summary of our second quarter financials. We delivered 11% revenue growth to a record $219 million, which includes a $2 million benefit from foreign currency fluctuations. Excluding the impact of FX, revenue growth was 10%. We reported an 11% increase in diluted earnings per share to $1.91 or $2 per share, excluding notable items, representing an increase of 16%. Notable items in the quarter included $4 million or $0.08 per share in repositioning charges and our expenses in the employee compensation and benefits line and a $600,000 or $0.01 per share acquisition-related charge included in other income. My comments on our results from this point forward will largely exclude the impact of notable items and will be on a non-GAAP basis where applicable. Looking at each of our revenue lines in turn. Commission revenue increased 12% to a record $192 million, driven by strong market volumes on an increase in volatility in the quarter as well as the strong progress we have made with our new initiatives in 2025 across our 3 strategic channels. Just over 50% of the incremental $20 million in revenue generated in the second quarter of '25 versus the second quarter of '24 was from block trading, portfolio trading and dealer-initiated activity. Services revenue increased 7% to a record $28 million. Information Services revenue of $13 million increased 4%. Info Services growth was 1%, excluding the impact of FX. Growth in the quarter was lower due to data deals that were pushed to the second half of 2025, but the pipeline remains strong with demand increasing from systematic funds and dealers. Post-trade services revenue of $11 million increased 7% versus the prior year or 1% excluding the impact of FX. Here, too, we see a healthy pipeline of new contracts and expect pricing increases in the second half of the year. Technology Services revenue of $4 million increased 16%, driven by higher license and connectivity fees and the addition of RFQ Hub. Total other income increased approximately $1 million, driven by an increase in FX gains of approximately $2 million in the current quarter, partially offset by lower interest income. For modeling purposes, with the closing of RFQ Hub in mid-May and consolidation of their revenues and expenses, the earnings of unconsolidated affiliate line will go away in 3Q, but there is a performance incentive plan underway with our noncontrolling shareholders, which had a noncash impact of approximately $900,000 in the current quarter in other net. The effective tax rate was 26.9%, up from 24.8% in the prior year, reflecting the increased accrual for the uncertain tax position reserve we established in the first quarter of '25. On Slide 11, we provide more detail on our commission revenue and our fee capture. Total commission revenue increased 12% to a record $192 million. We experienced 12% growth in credit variable commission revenue with U.S. credit up 10%, record emerging markets up 17% and record Eurobonds up 19%. These strong results were driven by market volume strength and progress with our new initiatives, partially offset by lower fee per million. The reduction in total credit fee capture year-over-year was principally due to protocol mix. On Slide 12, we provide a summary of our operating expenses. Excluding notable items, second quarter operating expenses of $124 million increased 6% compared to the prior year, 5% excluding FX. The increase in expenses was driven principally by higher employee compensation and technology and communication costs as we continue to strike the right balance between investing to drive future growth and continuing to drive increased efficiency. Higher employee comp and benefits was driven by the strategic hires we have made over the last several months that we expect to help drive our growth as well as higher variable incentive compensation driven by the strong increase in revenue in the quarter. Headcount was 881, up only 2% from 864 in the prior year and up 1% from 870 at the end of the first quarter of '25. We are reconfirming our full year 2025 expense guidance and expect to be at the low end of the previously stated expense range of $501 million to $521 million on an ex notable non-GAAP basis or on a GAAP basis, $505 million to $525 million. On Slide 13, we provide an update on our capital management and cash flow. Our balance sheet continues to be strong with cash, cash equivalents and corporate bond and U.S. treasury investments totaling $621 million as of June 30, down from $699 million at the end of 2024. We generated $360 million in free cash flow over the trailing 12 months, an increase of 5% over last quarter. We repurchased 380,000 shares year-to-date through July 2025 for a total of $80 million, including 168,000 shares repurchased during the second quarter at a cost of $37 million. As of July 31, 2025, $145 million remains on the Board's share repurchase authorization. We believe we are striking the right balance of investing to drive future growth, while at the same time being disciplined stewards of capital. Now let me turn the call back to Chris for his closing comments.

Thanks, Ilene. In summary, on Slide 14, we made solid progress with the key new initiatives that will drive improved market share in U.S. credit in the remaining quarters of 2025. We are continuing to increase the pace of innovation and execution, and we will continue to enhance our delivery of new product enhancements in the coming months. We are pleased with the performance of the platform in the quarter, which benefited from a more favorable macro environment and our new initiatives, which provided over half of our incremental revenue in the quarter. The launch of our targeted block trading solution drove record levels of block trading across U.S. high-grade, emerging markets and Eurobonds. We delivered record portfolio trading ADV and our market share in U.S. credit portfolio trading increased 240 basis points. 40% growth in dealer-initiated ADV reflects our increasing focus on this important channel. We generated record Mid-X volumes in emerging markets and Eurobonds, and we look forward to the launch of Mid-X for U.S. credit in September. We have made several very important strategic hires over the last several months, including Dean Berry and Spencer Lee that will be integral to driving future growth. In summary, we expect to drive growth namely in U.S. credit in the coming quarters through continued progress across the client-initiated portfolio trading and dealer-initiated channels, combined with our expanded leadership team. Now we would be happy to open the line for questions.

[Operator Instructions] Our first question comes from the line of Chris Allen with Citi.

I want to see if you could give some more details on the progress to date on the new initiatives, maybe some color just in terms of where you are from client penetration and adoption perspective, then the outlook you just mentioned for the rest of the year. And then if you could help us reconcile the progress you've made, the momentum we saw in 2Q versus the July volumes, specifically in market share in U.S. high-grade, that would be helpful as well.

Sure. Thanks, Chris. Yes, first of all, we -- at the beginning of the year, we promised the market that we were going to focus on really 3 key areas: the client-initiated area, particularly portfolio trading, the dealer-to-dealer business and block trades. So as of July year- to-date, our IGPT business is up 47%. Our market share in portfolio trading is up 340 basis points. Our year-to-date investment-grade dealer business is up 42%, and our market share in the dealer-to-dealer business is up 100 basis points. And that's -- our promise is also we're launching Mid-X in September. So that's without a mid-market matching solution in the dealer-to-dealer business. In high yield, our year-to-date portfolio trading business is up 42%, and our market share in high-yield portfolio trading is up 100 basis points. So again, we're showing a growth year-to-date across all of those segments. And most exciting is around our block activity. We're seeing growth across the markets that we've launched our block solution in Eurobonds, EM and obviously, U.S. credit as well. Year- to-date, our block activity is up over 20%, and our block share has increased as a result of those solutions in that market. So across the 3 initiatives, we are delivering outsized performance, and we're pretty excited about what's to come in those 3 areas. We are also excited about this Mid-X launch for U.S. credit. We do think that will have an impact on our dealer-to-dealer growth rates as a result. And that's due to go live in September. I'm also excited about our block trading solution in investment grade and in high yield. It's really just been recently launched to a number of users, and we're expanding that user base in the coming weeks as we onboard more dealer content. And then we're also rolling out -- all of this initiative was also while we were upgrading our technology. So we're seeing further rollout of that new tech into Europe with X-Pro going live in Europe just this month. And then we have some exciting new features rolling out in the coming months in our portfolio trading platform as well. So certainly, year-to-date progress that we're excited about those 3 initiatives. With regard to July, I certainly would like to cover the July market share numbers, particularly in IG. July was a very similar market dynamic that we saw in February of this year with exceptionally narrow spreads and quite low volatility. When we see that kind of market dynamic, we typically see a pickup in portfolio trading and mid-market matching solutions in the market. And certainly, portfolio trading volumes did go up in July and rose to 13% of the overall market. What's interesting is we tend to see a pickup in the mid-market matching solutions as dealers kind of recycle that higher PT volume into those midpoint matching solutions. So they tend to exit that risk using those midpoint matching solutions. And then we did see some progress in the overall market in blocks, but really the overall -- the #1 competitor in July that we saw was really phone and chat. We saw the phone and chat block market grow, as we mentioned on the opening remarks, 400 basis points to 47% market share. So that's a sizable increase that we saw in that block market that typically tends to be on phone and chat. And as you've seen in our numbers, we are addressing that very market share, that block market in particular, and showing some promise with the rollout of our block solution in both Eurobonds and EM and obviously, finishing that here in U.S. high-grade. So not a great month for us, but 1 month doesn't really make a quarter or a year. And obviously, we saw a certain market dynamic in July that is much more favorable to large PTs or sizable portfolio trades in July and really that mid-market matching solutions tend to do quite well in a stable low-vol environment.

The next question comes from Patrick Moley with Piper Sandler.

Chris, I was hoping you could just update us or maybe just elaborate on some of the drivers of the fee per million decline in the quarter. It didn't fall too much sequentially, but it was the lowest it's been in a few years. So just wondering kind of what the drivers were there and then what your expectations are going forward? It looks like it popped up a little bit in the month of July. So any color on fee per million would be great.

Patrick, it's Ilene. Thanks for the question. So I think this is probably not a surprise, right? But if you look at what the drivers have really been for us in terms of fee per million recently. It's sort of the same as you've heard from us in the past. And as you noted, for the month, we saw it pop up a little bit in terms of the sort of July '25 versus June '25. And that was really due to what we were seeing in terms of high-grade duration, right? We saw that move out to about 8.9 years. And so that was obviously a benefit, and that actually offset what we saw in portfolio trading, which was, as Chris mentioned, we saw an increase in PT volumes, and that actually goes the other way, right? So it was sort of think of that as like $4 sort of in the positive column and then $2 offset because we saw additional PT volumes. And when you think about it from the year-over-year perspective from the quarter that you asked about, and this is also true, but on a smaller level in terms of the quarter-over-quarter for the quarter, it's really more than about -- again, it's new protocols, right? And so when we see that we have more PT coming through, in particular, you're going to see that, that puts some pressure on fee per million. Now we know and as we just saw in July that when high grade moves out, when duration moves out, that's a good guy and that can help us. So the moves you saw really were based on sort of protocol and product mix within what we were seeing happening.

The next question comes from Alex Kramm with UBS.

Chris, you gave a pretty big laundry list of the initiatives earlier to Chris Allen's question. Would love for you to give a little bit more detail on the U.S. blocks. I know it's early, but I know it's also your biggest initiative for the year. And I think you said some pretty -- again, [indiscernible] timelines and how quickly you want to see really traction. So maybe [Technical Difficulty] from EM and Eurobonds that are translating into that perhaps? And yes, how should we be thinking about the time lines to really make an impact on your market share?

Sure. And unfortunately, part of your question broke up a little bit, but I'm excited to talk about block activity. I think that was certainly at the heart of the question. First, we're very excited with the success we're seeing in both emerging markets as well as Eurobonds from a block perspective. As I mentioned, our block volume year-to-date is up over 20%. More importantly, in Q2, we saw sizable performance in block trading. It increased just in IG, 40%, and we actually picked up block market share, hit as high as 12.5% in the quarter. So certainly exciting to see that in our U.S. investment-grade offering. Certainly, in the offering in EM and Eurobonds, we continue to see success in blocks. Our EM block volume was up 27% in Q2, and we saw $1.6 billion in EM block trades in Q2. So certainly, it's having an impact. We're seeing trader behavior changes, and that's exciting when you roll out a block solution because, again, we always point out the other 50% of the market is largely blocks across the credit market. And so being able to show that we have launched an offering and are finally cracking into that phone and chat market is truly exciting. We also are seeing further progress. I think our -- some of our best progress is in Eurobonds in blocks where we continue to grow market share as a result of blocks. Our block volume just in July alone was up 54% in Eurobonds. So we're having a really positive reaction from the market in that block volume across both EM and Eurobonds. In the U.S., moving to your question around investment grade and high yield, we are seeing clients enjoying the benefits of having that block tool, but it's still early days in terms of what we rolled out in the U.S. We are planning on having more dealer content come into that market. We're working with dealers closely in -- across the U.S. credit market. It's a key ingredient to have that dealer content in order to attract a block trade solution. So exciting for the progress and excited about what's to come. I look at where we have a very strong dealer content in EM and Eurobonds has really led to the success of the block tool. And I expect similar outcomes from our client traders when they see the content become more robust in U.S. credit. So exceptional performance where we have that content and very excited about overall progress in the U.S.

The next question comes from Michael Cyprys with Morgan Stanley.

Maybe just digging in a little more on the blocks, if I could. So just on Europe to start, it sounds like great success there. You were just talking about with the growth. Just curious how much of that you attribute to the new block solution? If you could maybe elaborate on what adoption looks like there. And in the U.S., it sounds like it's early days. You mentioned you're rolling out -- you're continuing to roll it out. Can you just elaborate on your sort of expectations around the pace of the rollout in the coming months and quarters, the steps you're taking to broaden adoption, how you're looking to gauge early traction? And what might success look like in the U.S. with this new high-touch solution into year-end and in '26?

Sure. Again, on the block size, our progress in Eurobonds, in particular, was certainly heavily driven by our block trading pickup. As I mentioned, in the quarter, block trading grew 31%. So we're seeing that. And here in July, in Eurobonds, our block trading grew an additional 34%. So we're certainly seeing that impact. And it's really partly because of the content that we have on the platform in Eurobonds, where we probably have most of the enriched dealer content on the platform. When it comes to EM, we also are seeing that same growth rate in EM. Again, the EM blocks have been driven partially by our new targeted solution, but also by the willingness of clients to use our all-to-all Open Trading for block size liquidity. So part of the growth has been a clients' change in behavior to put large-sized orders, particularly in EM local markets into our platform to access that unique liquidity and the all-to-all solution. With regard to the rollout here in the U.S., it's only been a handful of traders that we've rolled the solution out. We plan to increase that number in the coming weeks as we continue to onboard dealer content. It's an important part of the market. As I think about how we've addressed the market historically, we've really addressed the market, clients' needs when they have an identified set of bonds and they come to market and request price. And that's been the traditional means of adoption of electronic trading. What's exciting about this new part of the market, it's where dealers are really pushing their content or their inventory into clients and clients make decisions about selection of bonds as a result of that inventory being pushed to them. So this is a part of the market that we have historically not engaged in. And it's really opening up 2 things: one, a much better relationship with our dealer community. But two, it's really getting into areas for investors to see content in a more efficient way than over chat or phone and really ingest that content to impact their portfolio selection. That's something new for us, something that's been rolled out here. But it's an exciting part of the market because largely the block market, particularly in U.S. investment grade, is driven by this inventory push out to clients, and it's exciting to finally being tapped into that part of the market and pushing dealer inventory or dealer access into the hands of investors.

The next question comes from Simon Clinch with Redburn.

I was wondering if we could just look at the PT market for a second because your comments around how PT tends to sort of pull back in times of -- or tends to thrive in times of low vol. I used to think the reverse was the case as well, but we've seen PT penetration in both U.S. credit in high grade and high yield just continually rise this year even through some pretty ropey periods in the market. So I was wondering if you could talk about how you're seeing your clients use PT differently. Is this -- could this be a much bigger part of the market than we initially perceived maybe a year or 2 ago? I'd love your thoughts on that, please.

Sure. Well, there's definitely a pattern that we've seen the majority of the pattern is during times of low vol, even intraday low vol or weekly low vol, higher use of PT. It's easier for dealers to price a PT. It's certainly easier for clients to evaluate PT pricing. So there's definitely a trend. You do point out correctly in some of the high volatility months of the second quarter, we did see clients make use of portfolio trades, particularly in high yield, where they were obviously attracted by the liquidity and the ability to move large notional sums of bonds. So we did see ironically, the pickup in PT and high yield during some volatile times. I think that was largely driven by demand for cash by a number of the clients. But the continued use of PT is obviously an important part of the market. It's certainly -- we've been growing our PT market share as a result of rolling out new portfolio trading solutions, and we'll continue to address that part of the market because it's such an important market share driver. There has been a number of very large-sized portfolio trades in the month of July, large being over $1 billion. We've seen those portfolio trades be on platform, but also be off platform. So there's still a number of -- in these market environments, higher levels of clients coming to market with PT. And then there's obviously some very outsized PT trades that we've seen in the market from month-to-month happen somewhere in the size of $4 billion to $5 billion in PT sizes. Again, we remind everyone the market opportunity in PT is quite small relative to the bigger part of the market. We think it's in the zone of $50 million in U.S. IG in terms of revenue. These are priced at very low rates, and they're really facilitation trading solutions for clients. So exciting about market share movement in PT, but again, very low revenue opportunities in the overall PT market.

Your next question comes from Benjamin Budish with Barclays.

Chris, in your prepared remarks, you talked about a number of new strategic hires. I was wondering if you could expand on that a little bit. What are these individuals tasked with doing? What are their primary KPIs you're going to be measuring? How do you think they'll be kind of moving the needle? And if you're successful in these hires, when do you think that might translate into results?

Sure. Again, very excited about our new hires, some that have started and some are due to start in the coming months. So Spencer Lee is really overseeing all of our product in the U.S. credit market. So it's exciting to see the impact he's already had on our products and our product priorities and organizing our efforts around portfolio trading solutions. He certainly has a known brand among our clients and a known brand among the dealer community. He has been building out solutions for really larger trade sizes in his prior role. So we are excited about his input and his knowledge around our block trading solution and expect him to obviously focus on portfolio trading, block trading and our dealer solutions in the coming months. Dean Berry will be joining in late September. So we're excited about his entry to MarketAxess. He has a breadth of knowledge across markets, data and analytics and certainly skilled in M&A as well. So we're excited about Dean joining us in the coming months.

Our next question comes from the line of Kyle Voigt with KBW.

Maybe I could just ask a question on the muni business. I know it's still small, obviously, but can you just kind of update us on market share progress? What else do you need to do in terms of capability or new product rollout to kind of find the next leg of market share growth there? And then anything you can also share just regarding some of the movement on kind of implied fee capture within that bucket and how you expect that to progress moving forward?

Sure. Look, we're very excited about our muni business. The year-over-year growth in munis has been exciting. Certainly, the Q2 activity that we just published has been up quite dramatically. Our overall ADV, we hit records in Q2. Our market volume was up 23%. And what's exciting about 2Q and current performance is a lot of that growth has been driven by our tax-exempt business, which is a very unique part of the business. Within the tax-exempt business, we were up 34% in terms of record volume. And here in July, which was a much lighter month for the muni market, we were up 12% in our tax-exempt business. So we continue to see excitement around electronification of the muni market. We've rolled out portfolio trading to our muni market investors, which is an important tool for them. And a key component to that muni market is also our all-to-all solution where clients are able to access unique liquidity across that muni market. So we continue to make investments in the muni market. Our most recent investment was our CP+ for munis. The feedback on that data feed is quite exciting. Certainly, in the second quarter, clients noted that our CP+ for munis outperformed the other real-time market data solutions in the muni market. So certainly, we see further adoption as a result of that data and its performance in the market. So overall, pretty excited about our muni business. Our fee per million actually in July was up as a result of the activities across that market. So we're certainly happy about the direction of travel of fee per million overall. We also have a sizable dealer business in the muni market as well. And seeing that grow not only in the second quarter, but also here in July, it grew about 38%. So overall, I'm pleased with the muni progress we've made year-to-date and year-over-year. July was obviously a slow month from an overall secondary market turnover for us, but certainly an exciting progress across those initiatives that we continue to talk about.

The next question comes from Alexander Blostein with Goldman Sachs.

This is actually Aditya filling in for Alex. So I appreciate all the updates on block trading and PT. I was hoping to just talk about the firm's capital return priorities and importantly, where M&A stacks up in the mix.

Sure. Happy to discuss that. I think, as you know, MarketAxess over time has always really been driven by and focused a lot on the organic opportunity ahead of us, which we know we still think is really quite, quite significant. And so if you think about the priorities and our capital priorities, at the same time, you've also seen us, and we talked about this a bit in the prepared remarks. You've also seen us doing more share repurchases and being really opportunistic in that space as well. And at the same time, you've also seen us do a number of bolt-on acquisitions, right? You saw Pragma, obviously, which we've talked about. We, in the past, did muni brokers, and we just had a discussion about our muni business. We had the [ LQA rates ] acquisition and then obviously, most recently, RFQ-hub. So you've seen us do a number of bolt acquisitions. And I would actually talk about our capital priorities exactly in the way that I just described them to you, which is, first, investing organically to really capture that market opportunity we have in the global fixed income market, continuing to return capital to investors through dividends and more opportunistic share repurchases as you've seen us do. And then I would say bolt-on acquisitions like I just discussed.

And I would just add, obviously, as Ilene mentioned, our organic opportunity is quite large and quite attractive. And certainly high accretion as a result. We are -- our balance sheet is positioned certainly attractively to engage in M&A. And with the more recent executive changes here at MarketAxess, we also have executive level capacity to engage in M&A. So I'm excited about our opportunity to look at the market with a fresh balance sheet and a fresh set of eyes looking for opportunities in the M&A market.

The next question comes from the line of Eli Abboud with Bank of America.

Can you dig more into your performance in Europe? It looks like volumes are up 21% year-to-date. I know part of that is from a larger pie, but it also seems like there's been some pretty good share gains lately. What's driving those share gains? Who is it coming from? And are there any particular protocols or customer channels that have been particularly strong?

Sure. Thanks for that question. The Eurobond market has been a very exciting market in 2025. Overall market activity has continued to grow. Our investor base is quite exciting and certainly adopting a number of our new initiatives. Our block trading in the second quarter was up sizably. Our portfolio trading was also up dramatically in the second quarter. And just in July alone, our PT volume was up 64%. So we're delivering on all those initiatives, blocks, portfolio trading and the dealer initiative and client adoption is high. We're seeing outsized growth rates in those markets and market share increases. So Eurobonds happens to be a place where we have a robust block solution with all the dealer content. We have a number of key investors using that solution. We have a robust portfolio trading tool with lots of analytics and pre-trade analysis for traders to use our portfolio trading tool. And then our dealer business with the full rollout of Mid-X across the Eurobond business, we're seeing growth rates there in the dealer business as well. So it's really where we're firing on all 3 initiatives that we're seeing that very attractive growth rate across the Eurobond business.

Your next question comes from Dan Fannon with Jefferies.

Just wanted to follow up on the previous question around the hires and management changes. Just curious if you're done with that process, if there are more to go and the team that you have together is the one that you think can execute upon the goals you've outlined for this year and beyond.

Thanks for the question. Super excited about the team we have and with Dean's arrival, the team will have as early as late September. So we're excited about what that capacity brings certainly to our product knowledge and the practical knowledge of the product team. Spencer Lee came from an EMS. And as I've mentioned on these calls before, as we expand our protocols and become more protocol agnostic, we look and feel more like an EMS to our clients. So that's a key ingredient and a key skill set that he brings. He also sat in the desk of a trader. So he has that buy-side trader knowledge that he brings to MarketAxess. And those 2 components are very exciting for our product knowledge and what we're able to put out in terms of product to our investor clients. And Dean obviously has a breadth of international experience, a breadth of a large P&L management experience, M&A experience and obviously, a product and data analytics experience. So again, really helpful entries to MarketAxess as we kind of move on to our kind of next journey in this market and attack what I'm most excited about is really that large dealer-to-client block trade market and having the additional help across the globe is going to be quite exciting here in the coming months.

The final question for today comes from the line of Michael Cyprys with Morgan Stanley.

Just wanted to ask about portfolio trading in the month of July. And I know it's just a month, I don't want to overemphasize. Just curious what was driving the decline year-on-year in U.S. credit portfolio trading share. I think that was down about 160 basis points to around 15.6% U.S. credit PT share. Just curious what macro environment might we see your PT share expand. Maybe talk about some of the initiative steps you can take to drive that meaningfully higher. And then over time, what might success look like for you in portfolio trading in U.S. credit?

Sure. Great question. Obviously, we've been investing in our portfolio trading tool for some time. And as I mentioned, we are very excited about the progress we've made year-to-date in portfolio trading. Certainly, portfolio trading swings can be very client-specific. We've seen clients come to market with very large portfolio trades not regularly, but once a quarter. So it really is client-specific, and that can have a meaningful impact on your market share. And obviously, the client mix of portfolio trading in a month like July can certainly have an impact. In high yield, in particular, we did actually grow our portfolio market share in July. So we did see a pickup of 70 basis points in market share and portfolio trading market share in July. So certainly, we're seeing that client demand continue to come to use our portfolio trading solution. I think going forward, clients are really asking for additional pre-trade analytics. They want to analyze portfolios before they submit them. They really want to optimize those portfolios. So having things -- some of our proprietary market data embedded in our portfolio trading tool will help clients determine what they should put in a portfolio before they go to the market. So those are exciting items. And certainly, there's additional items that we're working with some of the dealers on when they want to show portfolios to clients. So again, that market where dealers are looking to move large baskets of bonds and show them to clients, we are now engaged in that as well. And that's an exciting new area of the portfolio market that's been developing. And so having a platform deliver a solution to both the dealer and the client is an exciting enhancement in that portfolio trading space.

All right. I will now turn the call back over to Chris Concannon for closing remarks.

Thanks, everyone, for dialing in today. We're excited about what's to come in the following months, and we'll talk to you again on our following quarterly call. Thank you.