Prospectus Summary
This summary highlights information contained elsewhere in this prospectus. While we have highlighted what we believe is the most important information about us and this offering in this summary, you should read the entire prospectus carefully, including the “Risk Factors” and “Special Note Regarding Forward-Looking Statements” sections and our consolidated financial statements and the notes to those financial statements before making an investment decision. As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our” and “MarketAxess” refer to the consolidated operations of MarketAxess Holdings Inc., and its primary operating subsidiaries, MarketAxess Corporation and MarketAxess Europe Limited.
Our Business
MarketAxess operates the leading electronic, multi-dealer to client platform for U.S. and European high-grade corporate and emerging markets bond trading. Our proprietary technology enables us to deliver efficient and reliable price discovery and trade execution services to our institutional investor and broker-dealer clients. We offer institutional fixed-income investors the ability to trade a broad range of credit securities; access to a deep pool of liquidity; the opportunity for price improvement through real-time, competitive price discovery and trade execution; and automated post-trade messaging. We offer broker-dealers a solution that enables them to achieve broader and more efficient distribution, lower their overall transaction costs and increase turnover of their bond inventory relative to traditional bond trading methods.
Our client base includes 19 of the largest broker-dealers in global fixed-income trading and approximately 575 institutional investor firms, including 80 of the top 100 global holders of U.S. corporate bonds, as measured by Thomson Financial. Our broker-dealer clients accounted for approximately 98% of the underwriting of newly-issued U.S. high-grade corporate bonds and approximately 59% of the underwriting of newly-issued European corporate bonds in 2003, and include 9 of the top 10 broker-dealers as ranked by 2003 new-issue underwriting volume of European corporate bonds. We believe these broker-dealers also represent the principal source of secondary market liquidity in such securities, as well as in emerging markets bonds.
Since the commercial launch of our electronic trading platform in January 2001, we have experienced significant growth in trading volume and strengthened our market position. Our annual trading volume has grown from $11.6 billion in 2001, to $48.4 billion in 2002 and $192.2 billion in 2003, representing a compound annual growth rate, or CAGR, of over 300%. As a result of this growth in trading volume, our revenues have increased from $6.6 million in 2001, to $18.7 million in 2002 and $41.2 million for the nine months ended September 30, 2003, and our net income has increased from a loss of $62.7 million in 2001, to a loss of $32.6 million in 2002 and to income of $4.7 million for the nine months ended September 30, 2003.
Our Market Opportunity
The global fixed-income market is large and has experienced significant growth in trading volume and amount of debt outstanding over the last several years. In the U.S. fixed-income market, for example, there were approximately $22 trillion of fixed-income securities outstanding, including over $4.3 trillion of U.S. corporate bonds, as of September 30, 2003. We are currently active in three segments of the global fixed-income securities market: U.S. high-grade corporate, European credit and emerging markets. We believe that trading activity in these markets is growing. For example, the average daily trading volume of U.S. corporate bonds grew from $18.9 billion in 2002 (the first calendar year for which such data are available) to $20.7 billion in 2003. We believe the markets in which we are active will continue to grow strongly as a result of many factors, including, among others, improved price transparency, the introduction of centralized electronic marketplaces, growth in credit derivatives, increasing amounts of total debt outstanding, growth of the European Union and the globalization of the world economy.
Traditionally, bond trading has been a manual process driven by voice communication between two or more parties. This traditional process has a number of shortcomings resulting primarily from the lack of a central trading facility for fixed-income securities, which creates difficulty matching buyers and sellers for particular issues. The lack of a liquid, centralized marketplace results in significant operating costs for both broker-dealers and institutional investors. In the case of broker-dealers, the resulting low inventory turnover significantly increases their credit risk. Likewise, institutional investors may have difficulty locating counterparties for the trades that best match their risk and return objectives and that allow them to better diversify their portfolios. Additionally, the lack of a central facility creates information inefficiencies, as investors lack the consolidated pricing information and analytics that would enable them to determine the best security for their needs and the competitiveness of the prices they are quoted. Furthermore, the traditional trading process entails compliance and regulatory risks and creates multiple opportunities for errors. Broker-dealers and institutional investors spend significant time and money to remedy these inefficiencies.
Electronic trading has emerged as an appealing alternative to traditional marketplaces due to the efficiencies that it brings to securities markets. In an electronic marketplace, substantially all of the participants’ actions are facilitated through an electronic medium, such as a private electronic network or over the Internet, which reduces the need for face-to-face or voice-to-voice participant interaction. We believe our electronic trading platform has established itself as the leading solution to the shortcomings of traditional corporate and emerging markets bond trading methods.
Our Solution
We offer our institutional investor clients access to a broad inventory of U.S. high-grade corporate bonds, European credit securities and emerging markets bonds, provided and updated daily by our broker-dealer clients. Our electronic trading platform is a multi-dealer disclosed counter-party model, which allows institutional investors to view multiple bids and offers from our broker-dealer clients. In contrast to the anonymous trading model, the disclosed model permits each party to know the identity of its counter-party throughout the trading process, thereby combining the strength of existing client/dealer relationships with the efficiency and transparency of an electronic trading platform. Our platform enables institutional investors to instantly direct trade inquiries and negotiations to leading broker-dealers providing liquidity in corporate and emerging markets bonds. Our commingled multi-dealer inventory of bonds includes over 16,000 line items, representing approximately $90 billion in indicative bids and offers. Additionally, investors can search a comprehensive database of U.S. and European corporate bonds to determine the best security for their objectives and directly solicit executable quotes on the security from competing broker-dealers. Corporate BondTickerTM, our information services product, offers a comprehensive set of bond price information and is integrated with our platform, providing professional market participants with an integrated solution with which they can both analyze securities and execute trades.
Our Competitive Strengths
Our Strategy
Our objective is to provide the leading global electronic trading platform for fixed-income securities, connecting broker-dealers and institutional investors to enable them to communicate and trade more easily and efficiently. We believe that our strong competitive position, our large, established network of clients and our proven ability to introduce new products and services that anticipate and respond to client needs will enable us to achieve this goal. The key elements of our strategy include:
Company Information
Our business was incorporated in the State of Delaware on April 11, 2000. Our principal executive offices are located at 140 Broadway, 42nd Floor, New York, New York 10005. Our telephone number is (212) 813-6000. The address of our website is www.marketaxess.com. The information contained on our website does not constitute a part of this prospectus.
We have obtained federal registration of the MarketAxess® name and logo, as well as for the marks Auto-Spotting® and BondLink®, and have applied for federal registration of the mark ActivesTM. Other trademarks and service marks appearing in this prospectus are the property of their respective holders.
The Offering
Except as otherwise indicated, whenever we present the number of shares of our common stock outstanding, we have:
Summary Consolidated Financial and Other Data
The following tables set forth, for the periods and at the dates indicated, our summary consolidated financial data. Historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year. You should read this data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our financial statements and the notes to those financial statements appearing elsewhere in this prospectus.