So we’ve come a long way. The real — we think the real solution that our clients now are looking for is once they think they have a portfolio trade, so either they’re buying a very large portfolio where they’re selling a portfolio or their switching, they need to optimize that portfolio if they construct it, meaning they can truly impact the price of the portfolio by picking certain bonds in the portfolio deselecting or adding bonds. And our tool helps them with that portfolio construction and it does, in fact, optimize their pricing, which is quite helpful. And it’s really the pre-trade analytics that drives that portfolio construction and that bond selection once you load the overall portfolio trade that you intend on using. But to answer your question, the PT volumes, it’s largely weighted towards investment grade with about 70% in investment grade and only about 15% in high yield.
And many times, we see portfolios across both high-grade and high-yield. We would expect to see growing portfolios in Europe and in Asia as well, again, using EM or across global bond less as well. And that’s an offering that we recently put out our global PT offering. Traders were asking for really a global list of bonds to trade as a portfolio.
Michael Cyprys: Great. Thanks so much.
Operator: Your next question comes from the line of Alex Blostein from Goldman Sachs. Please go ahead.
Alexander Blostein: I wanted to ask you guys a question around just the expense management philosophy and margin trajectory. When you look at the revenue backdrop, obviously, has been challenged. And Chris, you mentioned you guys have been disappointed with how U.S. credit has performed and part of that environmental part of it is, I guess, the mix. But as you look at the expense growth, I think you suggested 8% core expense growth in 2023 ex-kind of some of the deal noise. Is that sort of the appropriate run rate for the business if revenue growth will improve maybe somewhat but doesn’t necessarily get back to the levels it used to be. And are there levers you could pull to get the company back to positive operating leverage or that’s really just going to be a function of mostly revenues and less selling expenses?
Chris Concannon: Yes. So Alex, as you know, we’ve made a lot of investments over the last three years. Chris alluded to the number of M&A activity, which contributed to the elevated levels of acquired intangibles amortization expense. So that provides for a little bit of noise, and we’ve built the teams out where it’s all come together this year from a core perspective where we’re rolling out X-Pro, we’re rolling out the final suite of our automation tools with the Adaptive Auto-X solution. So where we stand today, we’re thinking of — the future is that high single-digit expense growth rate for the core business, recognizing that roughly 17% to 18% of our operating expenses are variable. And we’ve experienced some savings due to the underperformance that we have seen this year, where our variable expenses were more or less down roughly $12 million to $13 million from what we were planning for in the beginning of the year, and that more or less was offset by the $12.5 million of M&A-related expenses.
So I would say that the levers are built into the model through the variable expenses. But as we think about our expense philosophy internally, we’re redirecting and reallocating resources to the top priorities where we think we’re going to get near-term revenue growth prospects.
Richard Schiffman: And Alex, I would just mention we’re laser focused on expenses right now. We’re also in a critical period for the company where we are introducing new technology across our tech stack. So that requires higher levels of investment, and that’s what we’ve been doing. So when you look at that expense growth, we are covering both the legacy platform and the new platform at the same time. And obviously, acquisitions like Pragma enhance that technology footprint as well. So, but these models are designed to be highly leveraged. And I think, Alex, you cover a number of companies that have great operating leverage in their system, and we look to grow that over time. One important point is that market data revenue. Remember, data is just an output.
It doesn’t really cost anything more to produce other than the sophistication of the data that you’re producing. And we see that data, our market data, as you saw in the quarter, grew over 20%, and that will help us grow our operating margin as that data revenue piece continues to grow. And again, the data that we’re rolling out now on X-Pro is not data for sale today, but could be for sale in the future. It’s really designed to grow our market share across the various products that we are trading. And so we’re going to be leveraging that data as a way to collect orders in the bond market. And over time, we’ll be able to leverage that data into hard dollars as well.
Alexander Blostein: Got it. Thanks for that.
Operator: Your next question comes from the line of Patrick O’Shaughnessy from Raymond James. Please go ahead.
Patrick O’Shaughnessy: Good morning. The innovations that you’ve been speaking to today potentially allow MarketAxess to [Technical Difficulty] block trade market?
Chris Concannon: I’m sorry, Patrick, you broke up a little bit. What was the last part of that question?
Patrick O’Shaughnessy: What’s the [Technical Difficulty] about help you better penetrate the block trade market?
Chris Concannon: Okay, block trade. So first, in EM, particularly around our local market growth, we are seeing higher levels of block activity. We have been growing our block market share there. We have rolled out a request for market, which is an important protocol that a number of clients have requested that tends to introduce the opportunity for a higher block activity. And then with the rollout of our X-Pro platform, we are introducing what we call high touch solutions in November in this quarter in the fourth quarter. And obviously, hopefully see an uptake in 2024, but that high-touch offering is really designed to attract larger order sizes that need to use pre-trade analytics to decide on protocol selection. One key ingredient to that is our AI Dealer Select data, which helps you select one to however many dealers you would choose.
