Great. Well, thank you. Good afternoon, everybody. Thanks for joining us. Thank you for sticking around with us. It's my pleasure to introduce Billy Hult, Tradeweb CEO. Tradeweb is one of the largest and most diversified electronic trading platforms in the market, with lots of structural tailwinds across credit, fixed income broadly as well, and equities, of course, also. Over the course of 2024, Tradeweb delivered record results across many of its products, closed a new acquisition, and continued to expand margins, supporting industry-leading EPS growth. This is an incredibly dynamic market. So, Billy, I always look forward to chatting with you about fixed income market structure, the role Tradeweb plays in these markets, and what's in store for 2025 given this time of the year. Thank you for being here. Great to see you.
Thank you for having me.
Great. Look, I want to start with a question on 2025. Tradeweb is wrapping up, obviously, an excellent year. I think if you look at consensus numbers, earnings are tracking something like 30% up year over year, something in that range, and importantly, driven largely by revenue growth. Comps are high. You guys had a good year. But what do you expect to be the biggest drivers of the firm's top-line growth into next year?
We're onto almost like onto next year already, sort of. I know. Usually, I'm kind of used to hearing your voice in a conference room, like on an earnings call. You're equally intimidating in person.
I don't know about that.
It's close. 50-50.
It's the room, really.
It's just the room, yeah. A couple of things I would say. When you and I first met, before right as kind of Tradeweb was going public, we were a rates company. And Tradeweb was known for being a kind of government bond, interest rate client dealer firm. And as you know, Alex, really well, I like to say this with some pride, in the last kind of five and a half years, the company's doubled its revenue. 50% of that growth has come away from rates. It's been sort of like a double-down bet that our client base wants that one-stop shop to do electronic trading. And that ultimately, the electronification of it all was going to drive the markets to be more connected than ever.
And I think that thesis has proven out to be quite a good one. For sure, kind of like feeling good about kind of how 2024 went, but to my point before, like onto 2025, and to your question, my general instinct is still feeling quite kind of strong and positive about where we're going with our global swaps business, which I know we'll talk about down the road. When I think about the global swaps business, I think about the fact that the bilateral market is really two times as big as the cleared market in swaps.
It's largely voice-driven. I think about the fact that we still have relatively low market share in things like interest rate inflation. I think about EM swaps, and I think about the kind of reality that Tradeweb's biggest competitor is still the phone. When I say that, I kind of like our chances, if that makes sense, and so I start with swaps. Everybody's always very interested, obviously, in credit, a more competitive landscape in credit.
But we're feeling quite good about what we've done in credit in terms of bringing the dealers back into the equation, creating more balance in the marketplace. We love what we're doing with portfolio trading in terms of bringing real risk trading back into vogue and credit. So, feeling quite optimistic about credit. And then the last thing I'll say is my instinct is, and I think I said this to you exactly a year ago, and I still believe it in a very strong way, it's a good time to be in the government bond business. Debt markets are growing. The central banks are not buyers. Private sector intermediation is back in vogue. And the wallet is growing. And those are good, kind of pretty big kind of frameworks for that marketplace.
So, I'm kind of like picking between all the children and kind of saying them all. And at the same time, I'm also focused on the APAC Region, which I think is very interesting. And how does the company keep connecting dots around all of these marketplaces? How do we show a tenaciousness around connecting dots as these markets continue to develop? So a lot to be quite honestly excited for as we get to 2025.
Yeah. It sounds like it. Let's maybe take it actually in that order so let's talk about swaps. Tradeweb's global swaps business remains its largest revenue source, to your point, and obviously a huge growth driver. I think revenue growth here is tracking up like 50% year over year or something close to that. One of the most common questions that we get from investors, and frankly, it's not that different than the question we got around the IPO many years ago, cyclical versus structural, like lots of volume in rate markets over the last couple of years. You guys clearly benefited from that.
One of the interesting stats you did highlight is that 60% of rate swaps revenue growth was not related to macro factors. That's what we talked about in the last call, which I guess implies maybe like 30-ish % kind of organic growth in the business. So how sustainable do you think that is? And if you think about the multi-year growth algo in the swaps market, what does that look like for you guys?
Yeah. So really good environment to be in the interest rate swap business last year, or this year, I should say. And as we kind of head into 2025, given the state of the world and some of the things I was describing before, we still think it's going to be a really good environment for that business. So I start with kind of like good environment.
Inside of the environment, what I would say is micro trading protocols that our very smart team at Tradeweb has put into the market to migrate what we think about as risk-oriented business. I think the risk volume in 2024 was up sort of 50%. How do you capture real risk trades? And that's by creating micro trading protocols that really fit the eye of the most kind of sophisticated users that are out there.
And so things that we've done around request for market have worked. Those kind of protocols we feel really good about. And then it's just like further investment and expansion into things that are working really well. And I mentioned quickly inflation swaps, emerging market swaps. Those kind of things give us a lot of kind of feeling that we still have a ton of room for growth and innovation in the marketplace. And so it's not to say that we're still scratching the surface in terms of what we're doing in swaps.
But I would say is, as I talk about things like AiEX trading and the ability for clients to, in a more sophisticated way, find liquidity in the markets. And that's an overall kind of theme that we've been focused on as a company for a while. Still relatively underinvested in, Alex, underused in the swaps market. Our general feeling is like really good market environment as we hit 2025. And then these bets that we put on the table, the way that we continue to migrate phone-based business onto the e-platform makes us pretty confident that growth is going to continue at a strong rate.
Yeah. So that's the volume side of the ledger. Let's talk about fee per million in that business as well. And that's been a bit volatile. And there's a lot going on underneath the surface that's mostly due to mix. There's compression trading. And we could probably spend 40 minutes on that alone. But there's compression trading to different currencies. There are differences in duration. You've given a bit of a framework to the market how to think about it, at least with respect to duration. But looking where you are today, how do you think about the fee per million evolution over the next couple of years, call it, not to pin you down to anything?
Yeah, no, no. But so compression trading and getting into that type of workflow into sort of a pretty sophisticated type of client base was a technique. It was like, let's get into a workflow that makes this client life easier. And then we're going to play for the risk trades. And so what we found is through compression trading, the types of clients that we would do compression trades with would sort of do like 80% volume growth on risk. So as we kind of think about sort of 2025, what I would say is from an environment perspective, if you think about the concept of a steeper yield curve, lower rates, extending duration, those kind of like tenets in the marketplace, my instinct is kind of fee per million is going to improve.
I think that's like kind of a good thing for us to kind of look at from that perspective. That being said, we make this point all the time. If we can find a client that we're not engaged with and create that connectivity around compression to get to that kind of risk trade, we'll do it. So we don't view compression as a bad thing. We view it as a good thing. We know it makes the sort of modeling world in some ways sometimes more challenging. But trust me when I say, Alex, the focus on the company has been and will continue to be, how do we get into these risk trades that ultimately define real growth for us? And then you're really into that kind of client's workflow in a big way.
Yeah. Based on the experience you guys had in that over the last year and a half, really, since compression trading started to become a bigger part of the overall mix, any evidence you can provide how much has converted into risk trades directly from your compression trading?
We've had multiple clients that did no business with us. It was like, OK, I'm going to work with you guys. I kind of like you build functionality for us around compression because it kind of makes my life easier. I still like the phone. Yeah. Over time, as you get into that client's system and workflow, the risk trades turn on. I think the point that I made was that for clients that we have put compression trading protocols in place with, their volumes grew like 80% to us. That's like a big deal. It keeps the banks kind of obviously front-footed with us. I'm always oriented towards around the evolution of these markets. What are the kind of sort of moments when a marketplace goes from smaller type of trades? It's a big deal.
Obviously, we'll talk about this in credit, but what are the moments when a marketplace goes from like smaller, nuisance-oriented, I need your help on this kind of trades to like, oh, now we're talking about risk? Now I have everybody's attention because I'm a really important macro fund, and I'm going to channel risk through this platform electronically. All of a sudden, attention is there.
Yeah. I gotcha. Let's wrap up on rates. Let's talk about kind of the rest of the complex outside of swaps, really, with cash Treasuries and Mortgages being kind of the biggest two other lanes for you guys. Both are a bit more competitive. So like different dynamics in that market versus swaps. So maybe just hit on some key idiosyncratic opportunities you see in those markets for Tradeweb to gain market share against your competitors.
It's interesting. It's like an interesting moment to kind of have this. I see Amy over there. Hi, Amy. How are you? We largely compete on the institutional side, as you know, Alex, really well with Bloomberg. My instinct there is in treasuries, Bloomberg has been quite slow moving around what I was describing before, which is that AiEX functionality, the ability for a client through algorithms to connect with liquidity, like not on the terminal, and my instinct is kind of Bloomberg has been a little bit overly wedded, understandably, but overly wedded to the terminal as the AiEX kind of revolution has occurred.
I think 40% of our treasury users are now AiEX users, which is a pretty big stat, but also shows you there's actually still considerably more room to go there, so it's pretty kind of sticky. I think on the Wholesale Side, where we obviously, as you know, compete on both Order Books and Stream Liquidity with CME and with FMX, my instinct is I've been, and I'll say this kind of in a very clear way, because you know me, I'm pretty blunt.
I'm very impressed with what Mr. Lutnick was able to do through FMX in terms of picking up market share and the initiative that he's had in place. It'll be interesting to see in the new world how much it changes with him going from being in the business to out of the business. That's something that I certainly have my eye on. I think CME has been holding on to market share. But the strong view on the wholesale side is that we have an ability to pick up more market share there.
We've always had, to the mortgage point, we've always had a very, very strong presence in mortgages for a long time. We've actually gotten some interesting competition on the specified pool side. But on the Liquid Side of TBAs, we've been kind of like that industry leader for a while.
The mortgage market goes from being at a certain rate environment, like two coupons, or all of a sudden the most interesting coupons globally in the marketplace, to a sleepy market, and it's been a little sleepy, obviously, with rates high and where they are higher in the mortgage market for the last few years. I've been sort of thinking as rates would go down, like that origination volume would pick up, and the mortgage market where we're kind of have this big market share and all these big users would really, really pick up. We'll see.
The instinct is maybe there's some structural issues happening in housing that have kept rates high. But in a way that you and I kind of understand, like nobody knows anything about these evolutions. So it sometimes happens in different ways than you expect. We have an exceptionally strong kind of business there. And by the way, those end users, those consumers of liquid mortgages have, for a variety of reasons, been big players for us through the years on the interest rate swap side, which is back a little bit to my concept around connecting these dots around liquidity. It's a nice kind of point around the power of the network that Tradeweb has. But I think the mortgage market still has that. We're up like 20% in volume in 2024, basically 25% on a variable number.
Like my instinct is in a lower rate environment, those volumes should pick up.
Yeah. So cyclically, that should be telling. That makes sense. OK, let's switch gears. Talk about credit. Super important for you guys. It was, again, critical from the day you went public. I think there were quite a lot of skeptics on how much market share you could achieve in credit. And you guys have done quite well in IG. I think you're about the same size now as MarketAxess, give or take kind of 17%-18% sort of market share. In high yield, you're still tracking below. You're in kind of high single digits. Portfolio trading has been a huge tailwind to that.
That's been no doubt a big driver of the share gains. All that said, things feel like they stalled out a little bit. If I kind of look at the trends over the last six months, we've kind of been hovering around these market share levels. Why is that? And I guess, what do you think ultimately needs to happen to reaccelerate the momentum there?
So I kind of, I would say I agree with your frame. You said that very nicely, by the way. Everything Tradeweb does, everything MarketAxess does, for the most part, everything Bloomberg tries to do relies on the concept of sort of the buy side, the most important buy side clients being proactive in the market, asking for liquidity, and the dealers and the market makers providing liquidity.
As everybody kind of in this room sort of knows, that's like part of the activity of a trading day. But it's not the entire activity of a trading day. A lot of activity is about dealers getting their axes, inventories in front of their most important clients at the right time, at the right price. And my instinct is, and this is why we have a very kind of talented credit team, I will say that.
My instinct is the next evolution of growth in credit is really going to be about working with the banks and getting their most important line items, their axes, directly to their most important clients in a streamlined way. I think that's a big new leg of growth. We don't sort of exist in the sort of like Trojan Horse Business. But you were making a point, I think, about sort of what we've done around portfolio trading. And I agree with you that obviously that's been a big thing that we've brought into the market. The logic behind it was, yes, it's going to work. And yes, it's something that will create efficiencies for the most important clients.
But the other piece of the logic was, how do we bring the banks back in the game as market makers in a world where in credit, as everybody kind of knows, the market had shifted into this kind of all-to-all environment where BlackRock sends out an inquiry and Fidelity responds to it. So how do we bring the banks back into the game? And that was part of the tactics that we had around launching portfolio trading. My instinct is bringing the banks back in the game has knock-on effects for us that are positive. So for example, in credit, our straightforward RFQ Business in November was kind of the highest market share that we've had.
To me, those are little kind of breadcrumbs or signposts that there's a little bit of an amplifier to bringing the banks back into the equation, launching protocols that they are capable of flourishing in. Then you're starting to see in credit now the pickup of volume in what I would say is like more straightforward business, like regular basic kind of RFQ business. In an interesting way, if you think about credit, it kind of like for a while almost like missed that stop. It went into a sort of complicated large net dynamic with Open Trading and all-to-all trading. Let me send out a bid list to like 4,000 users. Or let me do something more sophisticated, which is using algorithms and sending out sort of portfolio trading and then relying on somewhat complex and complicated pricing.
but whatever happened to basic, straightforward? I'm Wellington. I want a price. I'm going to send it to Goldman, J.P. Morgan, and Morgan Stanley. and this doesn't have to be all that complicated. That type of volume is like 100% picking up in credit, which I think is a good sign in terms of the arc of the electronification of where kind of credit is going.
I gotcha. Does the evolution of that type of trading have a negative impact on fee per million to you guys at all or no?
No, it's actually the opposite. It's the opposite, and the other point, and you and I have kind of discussed this a variety of times, is like the Citadel and those types of firms who are kind of entering into the credit business. To make an obvious point, they're not coming into credit to price things anonymously. They want to live and breathe in like a disclosed world where they know or they understand that BlackRock, Fidelity, or Wellington is sending them a trade. The information that firms like that and firms like Goldman, who are more sophisticated in terms of their ability to kind of machine learn between markets, is extraordinarily valuable, so I've kind of said this.
If you want to understand on some way where the evolution of credit is going in terms of this concept of sort of bringing the market makers back into the equation and the benefits of almost like straightforward disclosed business, see who's accelerating in the space. And again, that's like the more sophisticated banks, the Goldmans and the J.P.s. And now you have the kind of the entrance of a firm like Citadel. Those are pretty interesting characteristics.
Yeah. That's interesting. Let's stay on the credit topic for a couple of minutes. I did want to zone in on portfolio trading, just again how important it is for you guys and how important it's been to the growth. The space is getting a little bit more competitive. I think when you look at MarketAxess, they have an offering out there. They were kind of maybe in a little bit of denial about the importance of the protocol a couple of years ago. But like now they're fully in. Trumid's got an offering out there as well. You guys certainly have the early mover advantage. But how do you think about that competitive moat for you? And what drives that competitive moat versus what others bring to the table?
Feeling like it's a good question, and you're right again, Alex. It's definitely feeling quite good that we have our hands around kind of leadership around that protocol, which is, again, a couple of different things, one of which is how we bring in net spotting and net hedging into the portfolio trades. We feel good about sort of our leadership around that. I would come back to something that I said before, which I think is really important, which is how do the dealers, how do the market makers become ultimately more proactive into the market with AiEX? And how do they recycle risk when they take down a large trade to their most important clients?
So one of the things that we're going to be and are very focused on is working with the banks around the concept of when they do a large portfolio trade with us. What's the best way for them to reach their most important clients on risk that they want to move to their client? And I think figuring that piece of it out is actually, and maybe I'm saying this to like everyone because it's not necessarily a secret. But I think it's a very important kind of next movement in the evolution around portfolio trading. Like how do I get outsized risk off of my book out to my most important clients? That's where this is headed.
I see.
I think our ability, because we were the ones that brought the banks back into the equation in credit, I think our ability to be the kind of leader around that, I feel quite confident in. The other thing is like back to what I was saying about the RFQ stuff, Alex. What's the right way to say it? The market pays you back. So what we've definitely experienced is for big, large buy side clients that we've gone in there and kind of created that innovation around portfolio trading, what we're now getting is a little bit of the rewards around that, which is like the straightforward kind of easier business, which is back to my concept around the rise of kind of RFQ, which fueled a bunch of our strong kind of November numbers in credit.
It's always a little bit of a kind of recipe around this. We're focused big time on maintaining our advantage in portfolio trading a few different ways and feel good that the client base understands the value that we've created there.
Yeah. All right. One more on credit, and I do want to get to a couple of other topics, but Aladdin, that's been another important topic and accomplishment for the firm. You guys are, I think, in the process of onboarding to Aladdin. And maybe we could just talk about where you are in that journey. And what does that actually mean from an end user perspective? How does their experience change from the back of what you're ultimately out there?
Yeah.
What are you ultimately thinking?
There's nothing from BlackRock here, although we are on tape. But it's an interesting exercise for us to work with a company when we don't have complete control over the development landscape in a way that you can understand. So patience is a virtue. And we've been kind of patient the right way on this. And we've done a really nice job of helping deliver BlackRock into us as a good client. We have a great relationship. Even though I'm on tape, I will say this. We have a great relationship with BlackRock. They're amazing. Capital A, amazing. They're watching. What I would say is high yield. What was that market share that you quoted on high yield? It's like 7% or something.
7%, 8%.
Really low, and so from our perspective, onboarding those Aladdin market makers onto our high yield platform is the key for us shifting that market share from that kind of low number, 7%, to a higher number, so as we think about the Aladdin project and we say patience is a kind of a virtue, the focus for us is really on how do we get the right level of market makers onto our platform. The market in high yield still feels like it doesn't quite trust portfolio trading. It doesn't quite trust traditional RFQ, and it still kind of shifts over into this giant wide net, and I need as many eyeballs on this because it's illiquid and hard to price, and I'm stubborn.
Sorry, so I'm going to use this giant wide net, and we need more market makers. That's basically the goal for us on the Aladdin. I think we're kind of getting. I don't quite put the screws to Izzy on this. I think we're kind of like somewhere like 50%-60% and getting closer there.
Gotcha. Well, to be fair, BlackRock has also been busy with acquisitions this year.
That's true.
Yeah.
Good point.
OK. Speaking of acquisitions, let's touch on ICD for a couple of minutes when you guys. We've got four or five minutes left on the clock. But an important deal for you guys gives you an interesting new kind of lane of growth. Update us on what the integration has been like so far, any kind of key milestone in terms of revenues and expense objectives you have for 2025 for this business. And from the cyclical perspective, the question that comes up a lot is like money market funds could start to see some outflows. Maybe. There's other ways to apply that in the rest of your business. But how big of a risk is that?
I mean, so basically, as you know, since I became CEO, we've done three deals. ICD being the biggest. It was a creative kind of day one for us. You and I talked about this last year. It's kind of early days. Love that corporate treasury universe, that network. Love that corporate treasury network. It's underserved. The access to technology has traditionally kind of like not been there. All of the early numbers around ICD have been like on the screws for us and really good. I think that that's like a good first step for us around that treasury world.
We'll see where we go from there. But it's early for me to make kind of big statements around how all of that will perfectly go. But my very strong sort of point to you, Alex, would be a very good acquisition for us. Gives us this big network of kind of underserved clients in a way that has fit our business model well, and I think the team's very focused and is going to continue to execute there.
Great. All right. Well, my last question is around investment spend and margins. And you guys have always had margin expansion as part of the framework. That's been, again, a key point since day one. But you definitely dial things up and dialing down based on the environment, right? So right now, revenue growth is really strong. So you're really kind of leaning in. We've seen expense growth accelerate throughout the year, but still with a focus on delivering upward leverage. Where are you in the investment cycle? When do you expect the pace of investments to maybe normalize a bit? And how important is margin expansion in the context of Tradeweb?
We're investing in part because you heard my enthusiasm around sort of how I feel about where we're going from a revenue perspective and a growth perspective in 2025. We see opportunity. And I made the point around kind of we've kind of a little bit reinvented ourselves around this one stop, one shop stop. And that takes kind of like further investment. And we're going to do that. Now, as we feel confident about 2025, what I would say is we feel confident we can make the right investments. And Sara's not here, so she can't kick me. But continue to grow margins in a good way. That's not like out of central casting our first priority.
Our first priority is to continue to grow and kind of make the right types of investments that allow us to pick up market share both from the phone and from the competitors in these markets that we live and breathe in. And I think the opportunity, if you think about what the landscape is like, the shift of behavior, and then I think the very interesting market environment that we continue to head towards is quite good. We're humbled the right way. But we feel good about kind of the reality that the electronification of these markets still has a lot of room to grow. And we're in a really good place around all of that because of this very interesting network that we live in.
Yeah. Great. Well, I guess we'll leave it there. Billy, thank you very much for coming.
Thank you.
Thanks for joining us, as always.
Always good to see you.
Thanks.