the dominant online corporate bond-trading marketplace, is expanding into the $16 trillion market for U.S. government bonds with the acquisition of LiquidityEdge, a platform that controls about 5% of electronic Treasurys trading.
MarketAxess has agreed to pay $100 million in cash and $50 million in stock to purchase LiquidityEdge from its founder and owner, David Rutter, and other minority shareholders.
“This is all about making a strategic move for MarketAxess into the Treasury market,” said its president and chief operating officer,
“We are building a network for our fixed income clients and to complete that global network, we need a global product set.”
An average of $589 billion of bonds trade daily in the Treasury market, compared with about $24 billion in the U.S. investment-grade corporate bond market, according to data from the Securities Industry and Financial Markets Association.
The transaction puts MarketAxess in direct competition with Bloomberg LP,
which collectively control 81% of electronic Treasurys trading, according to data from Greenwich Associates.
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LiquidityEdge holds a comparatively small market share but is a far younger company—Mr. Rutter founded it in 2015—with nascent penetration among investment firms. The platform offers a variety of trading options but focuses on a protocol allowing investors to receive and trade on streaming bond prices from counterparties that they select.
That makes the company a good fit for MarketAxess, which has been building an extensive client base among asset managers since it was founded in 2000, said MarketAxess founder and Chief Executive
“We think we can accelerate [LiquidityEdge’s] growth in the future by providing them to the 1600 institutional investors on MarketAxess,” he said.
MarketAxess plans to start using LiquidityEdge in the fourth quarter of 2019 to help clients buy and sell Treasurys to hedge interest-rate risk tied to corporate-bond trades and will roll out non-hedging trade of Treasurys next year, Mr. Concannon said.
The purchase is the first significant deal by MarketAxess since January, when Mr. McVey recruited Mr. Concannon, a pioneer of electronic trading in equity markets, in part to identify strategic acquisitions for the firm. While stocks have traded electronically for more than two decades, electronification has only recently caught on in bond markets, lifting valuations of trading platform operators and triggering a flurry of deals.
Tradeweb launched an IPO in April, following Intercontinental Exchange Inc.’s purchase last year of corporate bond trading venue BondPoint and municipal bond platform TMC Bonds.
The trend has also lifted MarketAxess’s stock price 72% year-to-date to $363, giving the company more firepower to use in future acquisitions.
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