All right, everybody. Good morning. Let's go ahead and get started. Thanks for joining us this morning. I'm Patrick O'Shaughnessy, the Capital Markets Analyst at Raymond James. Up next, we have Tradeweb. On their behalf, we have CEO Billy Hult. Billy, thank you for joining us.
Thanks for having me.
So to kick things off, for the benefit of folks in the room who are a little bit less familiar with Tradeweb, can you spend a few minutes just describing the company as you see it today?
Yeah. And so as I'm kind of sitting here, first of all, Patrick, thank you. I'm kind of struck by how fast time goes by because I can't believe like five years ago we were about to come down, and then the pandemic hit, and then you hosted my first CEO dinner three years ago. So I appreciate that very much. When I think about and describe Tradeweb, the way I tend to describe it is we're the trusted electronic intermediary connecting the biggest banks in the world to their most important institutional clients. And those clients can be asset managers, insurance companies, hedge funds, regional dealers. The story of Tradeweb is really the story of expansion. And so we started off, maybe not surprisingly, as that trusted intermediary in the sort of the most kind of liquid market in the world, which was the global government bond market.
And from there, it was a story really of how do you become that one-stop shop for the network that I was describing. So government bonds to liquid mortgages to building out a European office to kind of climbing the big kind of global derivative mountain, then ultimately getting into credit and competing with the incumbent in the credit space. At the same time that I describe us as that kind of trusted kind of intermediary connecting the banks to their clients, I think that we had a pretty fine-tuned sense that market structure tends to shift. And so we were pretty determined to not just stay in the kind of bucket of the quote unquote institutional space, but we created mirror liquidity pools in the wholesale space and in the retail space with an understanding, again, that we could compete in those different businesses.
But at the same time, market structure tends to shift. So the behavior of how a client does business one day can shift the next. And we never want it to be, from my perspective, kind of short market structure change. So as you know very well, the story of Tradeweb is really mostly as a private company. We've been public now for almost six years. In those six years, we've more than doubled our revenue. I think the compounding growth rate is a little bit over like 17% since we've been a public company. Over 50% of the growth has come away from what Tradeweb was known the most for, which was that kind of institutional rates kind of client dealer platform. Now, as I say that, I would say it's been a great environment to be in that rates business, and we've done really well there too.
But when I highlighted that the growth came away from that, from my perspective, that's really been what we've been able to achieve in credit. To be able to kind of build a credit platform and compete with the incumbent is probably a pretty important thing to understand when you think about the kind of company we are and how we tend to kind of execute on opportunity.
Terrific. That's a good intro. Thank you.
Yeah.
What are some of Tradeweb's key priorities as you kick off 2025?
We're busy, and I say that, I think, in a good way, we're busy. We feel like we have a lot of kind of momentum behind us. This is an interesting moment in the world, for sure, interesting moment in the markets. When I think about that kind of environment, the way I describe it is debt markets continue to grow. The central banks are not buyers. Private sector intermediation is back, and we feel like the wallet continues to grow kind of in our space, and so from my perspective, it's always like, how do you make sure that you're investing the right way and have a kind of laser focus on your priorities, so we see continued kind of upside in credit globally. We feel like we've kind of developed the right formula there.
And when I describe that formula, I think from our perspective, it's really understanding the balance in the world. And we've gone out of our way to make sure that the banks have been brought back into the equation and have invested in this kind of electronification run that's happening. So credit's going to be a big focus. I think continuing to build out our EM presence is a big deal. And it's not like you just like, what's your focus? So then you name like everything. But the third thing I would mention is in our core businesses, there's still a lot to do just in terms of continuing to navigate the transition from phone-based business to the electronic world. Right now, Tradeweb has a great client that uses us all the time that's picking up the phone and doing a trade.
Maybe because that trade is big, maybe because that trade's a little bit more complex, maybe because that trade's a little bit more negotiated. And so the focus for us as a company is to find that user that's doing that voice trade and convert that usage to electronics. And that's kind of how we think about the world.
So you touched on EM as a growth initiative for Tradeweb. Why is now the right time for Tradeweb to succeed in emerging markets?
Yeah, it's a really good question. So there's a little bit from our perspective, I think, two things about that. One is I think the concept of that one-stop shop is really, really important. And I think that as we think about the EM region and we think about what we've done in rates, we feel like we have a kind of natural kind of leverage into that client base now. The other thing I would say is when we initially thought about expansion, particularly in the EM regions, the concept was, how do we begin to make the right move in that area? And so from my perspective, I think that was, what are we good at? And so kind of the leading rates platform, the leading derivatives platform, our first foray into EM was all about really kind of global swaps.
I think as we've kind of gained credibility in credit by doing a few things right, one of which is portfolio trading, the other is kind of understanding how to bring in on spread-based products, how to bring in the rates markets into the spread-based trade to create efficiencies, that playbook, I think, works really well into EM credit. We're kind of attacking it with a little bit of kind of light sort of brick and mortar presence, but mostly through the scale of our kind of offering into that sort of like that one-stop shop leverage that we have with clients.
Gotcha. So Tradeweb's expenses continue to reflect sustained investment. Can you speak to where some of those investment dollars are being allocated? Is it headcount? Where is the headcount? Is it technology? What technology initiatives would that be, et cetera?
Yeah, so it's a good time, I think, from my perspective, and we work hard on this, which is sort of like we want the best and the brightest. We'd be kind of knuckleheads to not make sure that we're manning the fort with very high-end technologists around everything that's happening with AI and machine learning. So we're continuing to invest in technologists and technology, I think, the right way, and then I'll kind of when we think about how we staff, the other thing I would say, and this won't make you laugh because you know me, we want to be likable, and I say this all the time. Tradeweb is. We're a technology company first and foremost, but we're a technology company that really kind of lives and breathes in the ethos of the space.
And so we look to hire salespeople who conduct themselves really well, kind of externally in the world of our clients. We have a lot of clients. And I think the way we think about our network is to make sure that when we're in, seeing a client, we're sort of that client's best meeting of the day. And we're not always that, but we try to be that way because I think that's an important kind of ethos in terms of how you deal in the world. So we're hiring. I don't know. My general instinct is this is a moment from my perspective of a lot of opportunity. And I had, not to say a challenging reality, but I had been at the company for almost 25 years. I was the President of the company in 2008. And then I became CEO three years ago.
And my mandate, you and I talked about this early on, was how do you really respect the traditions of a company that's done well, but ultimately really make sure you have best in class as you plot forward. And so I've been pretty determined to make sure that that's the case.
What's Tradeweb up to in the digital asset space? And is it something where you're really excited about the long-term opportunity, or you just need to make sure Tradeweb is there in case the opportunity does become real?
Yeah, it's a good question. And I wish I could almost answer it perfectly clearly, but I would kind of say it's a little bit of both is the truth. And we are sort of firmly aware that there are back to the concept of the best and the brightest. There are extremely smart practitioner minds that have kind of lived in my ecosystem, our space for a while, that are highly engaged in building out kind of blockchain companies. I would highlight a company called the Canton Network as being very strong. And so we're doing kind of two things, which is making sure that we have a little bit of the Switzerland approach, making sure that we're kind of protecting all the developments the right way and staying engaged as this continues to emerge.
And at the same time, kind of looking and seeing whether or not there's an outsized kind of commercial opportunity for us around where this is going. If someone said to me, over the next few years, where do you think that sort of the blockchain world will have the biggest impact into kind of your day job of running a marketplace, I would say most likely one of the businesses that we're in will have a straightforward change in how it settles. To me, there's too much kind of technology and energy going and dollars going into the space that some markets that used to kind of settle one way will wind up settling a different way going forward.
Across your product set, where do you think electronification has already increased transaction velocity? And where do you think there's still more opportunity to go?
So in a very kind of specific way, you can look at, for example, pieces of the market in government bonds, particularly on the kind of machine-to-machine space, the kind of the fast matching engine space, and see that there's been a kind of velocity pickup kind of there. There's a big kind of interesting question, I think, about kind of where ultimately kind of credit goes. I would say that the kind of the continued forward advancement of the alternative market makers, with the highlight being kind of Citadel kind of marching into the space as a probably lead indicator that they see that the markets are kind of headed towards more of how we think about kind of central casting velocity. Citadel's not going to be in it for kind of salespeople and complexity and relationship trades.
They're going to be in it to be able to kind of apply state-of-the-art technology with the skill set that they have around anonymous market making and equities and equity derivatives and see opportunity in the current environment and push their engines this way. So I think that credit is the market to keep a pretty strong eye on. I think some of the things that we're doing in terms of, Patrick, like portfolio trading and credit and the risk orientation leads me to think that there are types of trades that in the past weren't getting done that now are getting prices put on them, and that becomes the kind of steps toward sort of better velocity of business.
Speaking of velocity, one of the key trends that's impacted fixed income in recent years has been the rise of ETFs and fixed income. How is that impacting Tradeweb in terms of direct flow and indirect impacts in the ecosystem?
Yeah. So I kind of look at it this way. A little bit of just the lens on it is, I think, interesting. Tradeweb kind of grew up in the rates business. As everybody here kind of knows, Bloomberg was our direct competitor from basically day one. The other public company in the space, MarketAxess, kind of grew up in the credit business. From my perspective, as we kind of were kind of doing this kind of expansion thing that I was describing, rates to mortgages, like global swaps, was the natural extension from MarketAxess's perspective as they were kind of growing up and doing really well in the credit space. Like EM was their natural extension. And kind of ETFs kind of sits in the middle, almost as that out-of-central casting kind of jump ball.
I think we kind of, I think in a good way, kind of moved first there, mostly through our kind of overall connectivity with BlackRock. It was a while ago now, but I remember they basically sent us a book saying this is what an ETF is. They had a sort of embedded reason for us to want to learn about it. And so we've been kind of like the leader, obviously, in fixed income and block trading of ETFs. I think from kind of our perspective, it does sort of two things for us. A, it's a great business for us to be in. And our equities business is getting into that kind of $100 million revenue line item. I think ETFs is about 70% of that. So it's a really good business. I think there's the obvious kind of secular growth piece of it.
But it really did something maybe more important, which is it got us much closer to the kinds of firms that we really need across the board in kind of outright credit and then also outright rates, which would be firms like Jane Street, who obviously kind of live in that kind of ETF arb kind of world and flourish in that ETF arb world. And so as we've thought about and tried to sort through how do we really build a competing business in credit, which is easy for me to say on kind of sitting here talking to you, but hard to do. Part of that edge from our perspective was the connectivity that we had with those firms who are, I think, as the room knows well, very strong liquidity providers at various points in time in the high-yield piece of the credit market and also IG.
You need to have them under your hood. Without sort of our big foray into ETFs, we probably would have had passive relationships with those kind of clients.
Got it. How do you view the relevance of pricing as a competitive differentiator across your business? And is there any indication that your clients are getting more price-sensitive over time?
I would be kind of a bit naive if I didn't say price matters, and in a world, in a 2025 world, everyone's kind of aware of price. I think when I sort of talk about the fact that kind of Tradeweb grew up competing from day one with Bloomberg, I think in some ways that's code for we learned how to price our products really well early. Bloomberg was free, but no one actually thought that they were free. They were kind of a fixed cost out there into the ecosystem that everyone in this room knows really well, but we had to figure out how to kind of really explicitly charge in a world where they kind of led with free, so that became something where we were very oriented to what is the value that we're really creating.
When we went down the path of this is the moment in time for us to really compete in credit, I remember having very distinct conversations where a bunch of the sort of most important asset managers said, if you do exactly what the competitor does, the incumbent does, and just charge us less, you're going to fail. You need to do something better, different, more value-add. You need to really create something that matters to me, save me time and money. Don't talk to me about fees. So that's like a pretty interesting comment about kind of the real view. That being said, we're conscious to make sure all the time that we're kind of charging the right amount for what we do, and I think I feel pretty confident that we have the right business model in place.
Tradeweb has gotten more active in M&A in recent quarters, and it sounds like you intend to remain active. What's your criteria for evaluating potential deals right now and maybe tie that into your recent acquisition of ICD?
Yeah. So we've kind of largely gotten here through, as I was kind of talking about the expansion thing, largely gotten here through organic growth because we kind of kept seeing the opportunity to kind of leverage our technology, scale our technology into these opportunities. But over the last kind of really kind of two years, we've done essentially three kind of smaller-type M&A transactions. We bought a company called Yieldbroker, which is the kind of Tradeweb of Australia, which is an odd thing to say, but I just said it. We bought a company called r8fin, which is kind of state-of-the-art technology that lives in the kind of Treasury basis trade. And then we bought a company called ICD, which kind of lives and breathes in that kind of corporate treasury network that we didn't have.
The kind of behind-the-scenes kind of thesis around all three of those acquisitions is, is it a network that we want that we feel plays really well into our world of a global marketplace? And is it a network that we can't get on our own? And then is there a piece of technology out there that either we can't really build or we can't build more efficiently than we could acquire it, which was the kind of thesis behind r8fin? And then you've heard me say this, and I think this is really important. And is it a cultural fit? Because that, I think, is a big deal. I think a lot of deals go badly on that concept. I really do. And so is it a cultural fit?
We definitely kind of wanted to show the market, show you that we are the kind of company that can assess these kinds of situations and do well-integrated deals, and my instinct is with positive kind of organic momentum and with a little bit of now the DNA and the history of doing a deal, more doors potentially open, but not at the sort of breach of what I described before.
Maybe just drilling into that a little bit with ICD in particular, can you talk about some of the initial cross-selling momentum you have as you pushed into that corporate treasury space?
The concept of sort of sleepy behavior, we kind of describe it as paper-oriented behavior to sort of transparent or efficient or electronic behavior, is a story that we've seen play out a lot. And so to make an obvious point, we feel like that corporate kind of treasury network is an important network with a big wallet. And their access traditionally to professional marketplaces has been pretty low. And so really what we want to do is get the leading rates platform, the leading mortgage platform, the leading swaps platform into that environment and then work on kind of transitioning that behavior to a phone call to Goldman. And maybe they're covered on a different floor at Goldman, but a phone call to Goldman and a long conversation about buying $250 million five-year notes. We want to start to get that behavior to go through our pipes.
And that's going well because I think, as everyone knows, this is really a moment where sort of being on the other side of risk management, on the other side of market data, on the other side of kind of having the most investment in marketplaces is a bad idea. So I think our timing around that has been good.
Market share is obviously a frequent topic of conversation as we look at you guys. We look at MarketAxess and the group. What is the right amount of attention that investors should be paying to your market share in your key products, US credit, interest rate swaps, and Treasuries? How much attention do you pay to it?
Does that sound like an odd answer? I pay a lot of attention to it in some ways because everyone else kind of pays a lot of attention to it. I think it's important to obviously understand sort of the market share and competitive dynamics really well. And I think there's no doubt that market share becomes an indicator of where the wallet in a marketplace is going. I think sometimes it can get, as you know, it can get a little kind of short-term on the view. And I would look for sort of a little bit more of maybe a medium space on understanding and being focused on market share and then really understanding kind of where the overall trend is kind of going on something.
We look at it very kind of simply, which is how are we doing versus Bloomberg in kind of all of our kind of rates businesses? How are we doing versus kind of MarketAxess in kind of our credit businesses? But at the end of the day, I'll say this, Chris would say this, Tradeweb's biggest competitor is the phone. So that person that did a trade seven minutes ago that loves Tradeweb but still picked up the phone to do a risk trade, in some ways, that's where, from my perspective, the real opportunity is. And so I would be as oriented about what are the action steps that these kinds of companies are taking to ultimately solve for risk. Block trades, I kind of think about it as risk.
Got it. I'll take a pause here and see if there's any questions in the room. All right. Not seeing any hands raised. So maybe just one or two more from me.
Sure.
Can you talk about Tradeweb's relationship with LSEG? Owns 51% of your economics and a little bit more of your voting shares. What sort of efforts are you working on together and what sort of role do they play in helping guide your strategy?
Yeah. It's definitely, thank you. It's definitely a high-functioning relationship. I have personally a very good relationship with the CEO of LSEG. We have an open dialogue. So I think it's a high-functioning relationship. There are a couple of LSEG, actually three LSEG employees on my public board. They've been great. I describe it that way because in sort of a little bit of my kind of candidness, we didn't always have that type of relationship with Reuters over the years where it felt very kind of one way. So from a business perspective, we obviously have a very good market data relationship with them. That's been, I think, one of those things where it's worked for us and worked for them. It's worked from my perspective based on basically kind of three things.
We're able to monetize our kind of more simplified data through them in a way that financially works for us and obviously also works for them. We also have a kind of carve-out to be able to monetize on our own more complex data sets, which I think is really important. And then the third thing on market data is we obviously integrate a lot of our data into our kind of day jobs of kind of trade execution, which is maybe the most important way that we use data. So that piece of it has worked really well with LSEG. We've combined kind of in important but smaller ways around kind of FX and EM. And my instinct is in a world where kind of everyone's busy, there's going to be more for us to do with them on the sort of second thing I said.
I said voice trades happen because a lot of times of risk, real risk in the market. They also happen through more complexity and more negotiation. I think some things that LSEG is obviously working on in their Teams world maybe down the road gives us a little bit of an interesting collaboration opportunity to get more of that kind of chat trade function away from Bloomberg and onto us. The communication and the nature of the relationship is positive.
All right. Terrific. I think that's a good place to end. So we'll wrap it up there, and there's a breakout session downstairs.
Great.
Thanks, Billy.
Thanks a lot. Always. Thank you.