Alex Blostein: Okay. Thanks. And then just maybe my follow-up. I was hoping you guys could hone in a little bit more on the retail trading opportunity you see. Maybe frame what kind of the retail trading contribution is in credit today across the platform and maybe help delineate what the fee per million difference is there and how that could ultimately drive an improvement in the blended fee per million over time. Thanks.
Chris Concannon: Yes. Well, first, our primary business is the institutional credit business, the institutional fixed income business. That’s our distribution channel and has been historically. We have seen a recent rise in retail in the market, an area that we haven’t dedicated full resources to. We do see an opportunity in retail, and we’ve made headway with Axess IQ, our private bank offering in Europe. We’re seeing higher demand for that offering. We’ve launched it to a client in Asia as well. So we do see an opportunity in retail, particularly given where our execution quality sits in terms of the institutional market. If you look at the muni market, even high grade and high yield, the overall market trade size is declining from a historic level.
So we’re seeing smaller trade sizes across our platform and across the TRACE market. So we do think we have a very viable retail offering given the quality price that we can deliver with an Open Trading trade execution, just higher quality price and being able to deliver at much smaller sizes than historically. So we think there is a wonderful retail opportunity as retail reinvest in the fixed income market given the yields that this market is showing.
Alex Blostein: Awesome, thanks so much.
Operator: Thank you. We’ll go next now to Brian Bedell at Deutsche Bank.
Brian Bedell: Great. Thanks. Good morning folks. Maybe if you could just zone in a little bit on just volatility in general, thinking about obviously some of the more extreme trading in March, if we do have that type of environment off and on this year. How do you view in terms of the market share dynamic – or I should say, really more like the behavior of trading across desks? Do you tend to see more usage of the phone? Or is that more in distressed bonds like you alluded to, Chris? And what – can you talk about the education process, I guess, and the merits of the Open Trading platform and the price improvement that you can get in those types of environments? And if – is that sort of an uphill battle to try to sort of gain share? Or do you think it’s really achievable?
Chris Concannon: So first, we thrive in volatile markets. We do – if you look back at 2020, there was obviously records set across 2020. So our platform, our offering does thrive in volatile markets. More importantly, and March was evidence of this, our automation tools ran consistently throughout the disruption and volatility in March so – which is a key differentiator from prior volatile times like 2020. So we feel really good about the offering. We feel exceptionally good about the liquidity that is provided through our all-to-all during more volatile times. As I mentioned, our OT markets or Open Trading all-to-all market share did spike upwards during the most volatile times of March, reflecting alternative liquidity providers stepping into the market when traditional providers are stepping back from that market.
So we feel good if there’s volatility in the market. We feel really good about our position in the market. And – but particularly around the distressed bonds, that’s a market where – and again, they’re not frequent, but that’s a market that does tend to go to the phone or go to chat when there is a distressed bond situation. But again, we do enjoy the benefits of volatility. So if volatility comes back into the market, we would expect an offering that is quite comfortable for our clients.
Brian Bedell: Okay, great. And then a follow-up, just going back to the slide where you showed the market – where you showed the growth in the new segments or actually not new segments, but growth in particularly hedge funds and systematic strategies. Can you talk about your market share in those areas versus your overall market share? In other words, I guess, if you continue to penetrate those markets, should we expect that to be a positive contributor to your market share going forward?
Chris Concannon: Well, first of all, the new entry, particularly the systematic fund complex, I think it actually has a benefit to our market share, but overall turnover in the market. These are new strategies that are being launched into the fixed income market that we haven’t seen before. So it’s really new turnover and attractive to both us and our clients, our bank clients and our liquidity providers to interact with that kind of liquidity. So the new entry is a positive for not only the liquidity and the bond market, but also overall turnover and velocity of trading in the bond market. Obviously, the new entry takes full advantage of all-to-all, so we’re obviously favored given our all-to-all offering across all of our products from high-grade to high-yield to munis, and even our treasury product is another place where we’re seeing entry.
So super positive for the market, super positive for velocity and turnover in the fixed income market, but particularly positive for MarketAxess and our all-to-all offerings across all the products.
Brian Bedell: Great, great. Thank you so much.
Operator: Thank you. We’ll go next now to Daniel Fannon of Jefferies.
Daniel Fannon: Thanks. Good morning. I wanted to follow up, Chris, on some of your comments and your prepared remarks around the factors that impact your market share. And obviously, new issuance has always been something you’ve talked about, but I think there was also discussion around products or growth in areas that you don’t – or parts of the market that you don’t participate in. So maybe if you could expand upon what your true addressable market is within kind of high grade as we can think about what the factors or what your market share should look like based upon what you are currently in and maybe what you plan to enter in, in terms of additional markets going forward.
Chris Concannon: Sure. First, I want to point out that we had first quarter record revenues and record volumes across most of our products. We certainly – and we also had a sizable growth in share in our U.S. corporate products as well, high yield grew over three percentage points in market share. And we had records in open trading ADV across U.S. corporate bonds as well. So overall growth and records across our U.S. corporate products is quite exciting, when we look at, if we want to get granular and look at a market share of high grade, we saw across TRACE higher levels of retail. That’s a client segment that we have not chased after or spent resources on, retail clients do have connectivity to us, but the overall retail market did grow in investment grade bonds over the course of the first quarter.
And that’s explains some of the lower average trade size in the TRACE market as well. But quite frankly, we’re quite happy with record revenues and record volumes across our U.S. corporate market and quite happy with our market share growth across the U.S. corporate market.
Daniel Fannon: Understood. Okay. I guess then just a separate question, following up on the distribution fees or higher, you said there was some dealer I think new dealers as well as upgrades from existing fee plans. So maybe as we think about that good run rate from here, is the upgrade cycle something that we should think about as ongoing? Any more color that would be helpful?
Chris Concannon: Yes, Dan, it was really a combination year-over-year and sequentially both upgrades and new dealers signing on for fixed fee plans. But as you point out, it’s difficult to anticipate what that number or how it could change going forward. From a modeling perspective, we would recommend, and we’re looking at it as Q1 being the run rate, but also recognizing that there is risk to our fixed distribution fees to the extent there’s consolidation in the dealer sector, we could see fees dissipate or alternatively we could see new dealers come on board to offset that.
Operator: Thank you. We go next now to Simon Clinch of Atlantic Equities.
Simon Clinch: Hi, thanks for taking my question. I recall that I think it was last quarter you mentioned that you were looking at ways to, I guess, share in more of the value creation of open trading with your clients. And I was wondering if you could just update us on your thoughts around that, how you’d expect to, I guess, implement such a strategy over time and how meaningful that could be?
Chris Concannon: Sure. First of all, open trading continues to set records. So we had a record revenue in open trading and we obviously see saw record spikes of open trading market share of our overall market. And it also continues to deliver substantial cost savings to our clients. And as I mentioned in my open remarks, cost savings that are actually higher than our total revenue, so very attractive to our client base. The other attractive piece that open trading delivers is the ability for clients to avoid crossing spread and reduce – and improve their overall execution quality. And that’s an area of focus of ours as we encourage clients, more clients to use all open trading to provide other clients with liquidity. It’s a key ingredient to our treasury offering as well, where we’re offering open trading or all to all in the treasury market for the first time and seeing a number of very large clients taking advantage of that offering.
So exciting activities in our open trading offering in treasuries but also across open trading – across all our products, it continues to be a driver of market share in munis, in our emerging markets in high yield and high grade. So super exciting activity in the quarter on our all to all open trading offering. And we’re continuing to see clients and client behavior change to take advantage of that.
