So there are a number of other benchmarks in the works with a partner we already have had a good track record with. Probably worth noting, establishing a benchmark doesn’t happen overnight. So the revenue and sales cycle for this can take some time. But certainly, we see a lot of opportunity here. And we’ve already realized and continue to realize strong growth in our third-party proprietary data products, and this is just going to be enhancing through that.
Operator: Our next question will be coming from Dan Fannon of Jefferies.
Dan Fannon: Question is on high-yield. Maybe if you could talk about the current kind of market backdrop. And as you think about your market share and opportunity within that, is there anything structural that does limit your ability to grow that the way that you have in, say, the investment-grade market?
Billy Hult: Dan, so we have made steady gains in recent years in our IG market share for sure. And our progress in high yield has been slower or a little bit more uneven. But there are no structural impediments with making more significant gains. One thing to note, high yield doesn’t trade on spread. So therefore, the competitive advantage that we have in net spotting and net hedging isn’t a factor here as it is in IG. And additionally, because high yield is less liquid, clients tend to use all-to-all more where we are focused on narrowing the gap in our responder network. So what have we been doing in high yield a number of things? We’ve been investing in our client network, and we’ve been making good inroads in adding significant clients to that network that were absent in the past.
So I’m optimistic about our progress on adding large clients in ’24 that hadn’t been there in the past, which will help boost high-yield results. Additionally, we’ve been hiring credit salespeople. We hired in ’23, we are hiring more in 2024, and that will continue to move the needle in expanding our client network and delivering more from our existing clients. The third area of focus is expanding the responders on the platform, and we’ve seen very strong growth in responders and responses. For example, in high-yield, our anonymous responses were up 30% year-over-year. So we’re making gains there. And I guess the final thing I would point to is the Aladdin partnership, which should help level the playing field for us in high-yield as this comes further online in 2024, we made good progress there.
We’re working through the integration with Aladdin in 3 phases. Phase 1 completed last year that was focused on getting dealer access and inventory data into Aladdin. Phase 2, we also recently completed and that allows Aladdin clients to respond all-to-all inquiries right on the Aladdin dashboard. And in Phase 3, clients will be able to initiate an RFQ on Tradeweb right from within Aladdin and then also use our automation tools. So those Phase 2 and Phase 3, we expect to be complete over the next 12 months and with all the investments, we expect to see continued progress. So while the progress in high yield has been more limited, we do have a multi-faceted plan that we are executing on and which we’re optimistic will yield results going forward.
Operator: And our next question will be coming from Andrew Bond of Rosenblatt Securities.
Andrew Bond: Tradeweb is early and innovative in portfolio trading relative to market access and others that didn’t really see the same growth opportunity that continues to play out today. That said, given it continues to be one of the primary drivers of credit volume growth competitors are taking it more seriously. I think the protocol was mentioned more than 30 times on their last call last week, and they’re about market access is investing more heavily to try to win share. So just given the heightened competition, how do you feel about your positioning and the moat around your offering and any potential to utilize portfolio trading in other parts of your business.
Billy Hult: Andrew, so yes, portfolio trading continues to be a huge success story and growth area for us. We had — as you read and as you heard, we had record PT volumes in the fourth quarter and in January, achieved another monthly record with over $60 billion in portfolio trading volume. We’re also optimistic about the growth of PT as a market protocol, as you pointed out, a lot of the growth in the market is from PT, and we do expect PT share of the market to continue to grow given the efficiencies that it provides for clients. And remember, a lot of the gain in share is still coming from the phone. So we think that overall part of the market will grow. As far as competition, we fully expect our peers to compete and to innovate.
And overall, that’s good for clients as the market gets more efficient and moves forward. But you asked about our moat, we do think we have a competitive moat that is strong, led by our ability to connect our leading U.S. treasury business and provide net spotting to clients. It starts right there, and that’s something that saves millions for our clients. Additionally, we continue to leverage our first-mover advantage by constantly iterating on and improving the functionality that we have in PT. So I’ll give a few examples. We are in the process of revamping our entire portfolio trading list infrastructure, and we’re in the process of rolling it out right now. What does that do? That increases the speed of execution for clients. It provides greater capacity.
Right now, we can accommodate portfolio trades of 2,400 line items. That capacity will grow significantly. And we’re also going to be able to provide better client and dealer analytics. Second thing, as far as innovations, we’re expanding pre-trade data that we provide to clients. And as well as post-trade TCA analytics. So again, functionality, it’s valuable to clients that they think will make them sticky with us. And the final thing that we’re working on is providing electronic solutions around residual high-touch access that occur after a portfolio trade, where we can leverage our market-leading position in the wholesale market as well. So we call that PT residuals, think of block trades that dealers will look to execute after a PT trade goes through the market.
So we’re optimistic about the protocol overall. Yes, there is competition, but we’re optimistic also about our ability to compete and innovate and continue to provide value to clients in this protocol going forward. And Tom is making great points. The only thing I would say to follow Tom, for a quick second is I’m sure there were times where we mentioned something 30 times on the call. I know that there’s a kind of like a competitive dynamic that obviously exists. I think a connective thread on credit is the reality that I think both companies feel very strongly that the true and real competitor is the phone. And so from our perspective, like that’s always going to be where our primary focus is going to be. And we feel like really strongly that the way that we’ve developed the portfolio trading protocols has created the right balance in the market and has allowed us to play this significant leadership role.
We are not relinquishing that role, and we feel really strongly about the position that we have today.
Operator: And our next question will be coming from Alex Kramm of UBS.
Alexander Kramm: I know it’s late here. But just wanted to come back to, I think, the early part of the call. You proactively talked a lot about the cyclical outlook. And if I heard you correctly, you’re actually pretty excited about what’s in front of you on a cyclical perspective, so maybe you can just double-click on that. But more importantly, on the rate side, I think there’s a prevailing view that as rates get cut, that’s bad for rate volumes. I don’t necessarily share that view, but would like to hear your thoughts on that. And maybe for Sara on that notion, do you think about rate cuts at all as you budget kind of like your revenues? Or do you think it’s just like a negligible impact on trading revenues.
Billy Hult: Yes. We think this is a good environment for us. And I kind of — I laid out this kind of concept that I was saying before, which is like we’re into like real rate now, right? And again, directionally, if we go from here to 5% or 3.5% or 3% like we’re talking about now like real rates. I think the high-level concept of like debt is growing kind of period. And then this concept of, I think, in a significant way, the central bank is not playing that sort of counterparty role in the marketplace, I think, is a really kind of really important one. And so like we kind of cheer on the reality of sort of the private sector back as being the real kind of market risk intermediaries. We think that’s good. We love the business model of BlackRock connecting with Goldman or PIMCO connecting with JPMorgan.
We think that’s like a great end result. The curve is getting steeper. I mean, to make an obvious point, everything has evolved differently than anyone sort of expected, so you never quite know exactly where you’re going, but there’s no question from our perspective that this is a sort of environment that we think plays very, very well for us. And as the sort of the stronger whispers or the stronger feelings that a rate cut was kind of in the works, you could see how our business performed exceptionally well in the second half of last year in that sort of anticipation of all of that steeper curve, all of these things kind of, I think, working in the right way for us from a macro perspective.
Sara Furber: Yes. I mean I can translate that even a little bit. You obviously saw the really strong volumes we’ve put up in January. And that type of debate, that type of environment really does translate quite well. Probably no better place to see than in our swaps business where we’re seeing revenue growth excess of 40% in January. So it’s one month, but it does give you a sense of that environment, that type of place where we’re able to add value for clients and kind of how it translates into the business.
