Welcome to Tradeweb's first quarter 2026 earnings conference call. As a reminder, today's call is being recorded and will be available for playback. To begin, I'll turn the call over to Head of Treasury, FP&A, and Investor Relations, Ashley Serrao. Please go ahead.
Thank you and good morning. Joining me today for the call are our CEO, Billy Hult, who will review our business results and key growth initiatives, and our CFO, Sara Furber, who will review our financial results. We intend to use the website as a means of disclosing material, non-public information and complying with our disclosure obligations under Regulation FD.
I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations, and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements related to, among other things, our guidance are forward-looking statements.
Actual results may differ materially from these forward-looking statements. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our earnings release, earnings presentation, and periodic reports filed with the SEC.
In addition, on today's call, we will reference certain non-GAAP measures as well as certain market and industry data. Information regarding these non-GAAP measures, including reconciliations to GAAP measures, is in our earnings release and earnings presentation. Information regarding market and industry data, including sources, is in our earnings presentation. Now, let me turn the call over to Billy.
Thanks, Ashley. Good morning, everyone, and thank you for joining our first quarter earnings call. We delivered another record quarter, surpassing $600 million in quarterly revenue for the first time in our history.
As I noted last quarter, we entered the year with a constructive macro backdrop featuring strong private sector intermediation, robust global issuance, and elevated levels of market debate alongside early signs of diversification away from U.S. assets.
That backdrop evolved quickly. What began as a market conversation centered on the pace of rate cuts in 2026 shifted meaningfully as geopolitical tensions in the Middle East drove an increase in oil prices and renewed concerns around inflation across the global economy. Our clients actively repositioned risk and navigated this dynamic environment, driving record quarterly average daily volumes on the platform, including 17 of our 22 products that we report in our monthly activity report.
While periods of elevated volatility tend to naturally drive wider bid-ask spreads, markets remained orderly throughout the quarter. Our clients engaged with the platform at record levels and increasingly capitalized on our automation solution, AiEX. Equally important, our dealer partners flourished as our continued investment in consistent two-way electronic liquidity benefited clients during heightened market stress.
We move into the aftermath of the volatility spike, history has shown that activity can moderate as clients digest the forward outlook. More importantly, this macro shock has left our clients in a healthy position, and we expect them to resume trading actively across our global franchise. Diving into the first quarter, strong client activity and a risk-on environment drove 21.2% year-over-year revenue growth on a reported basis.
Our international business continued to set new records with 29% revenue growth as our strategic initiatives across Europe, APAC, and EM continued to pay off. We continued to balance investing for growth and profitability as Adjusted EBITDA margins expanded by 40 basis points relative to the first quarter of 2025.
Our international business really continued to fire on all cylinders for us this quarter, contributing to nearly 60% of our overall revenue growth. Importantly, that strength was broad-based as we saw double-digit growth across all four asset classes with our international clients. Even though international clients are naturally focused on non-U.S. products, they're increasingly trading outside their home markets. That really speaks to the strength of our platform.
To put some numbers around it, our international clients drove 60% of our dollar swaps growth, and we also saw double-digit contributions from them across U.S. Treasuries, cash credit, CDS, and ETFs. On the product side, internationally, we had double-digit growth across European, Aussie, and Japanese government bonds. European swaps was a standout, but we also saw a very strong performance across APAC and EM swaps.
It wasn't just rates, as our European credit and CDS produced strong revenue growth. Not to be overshadowed, we also saw over 20% growth in both our European ETF and repo businesses. On the flip side, it's not just international clients driving this activity. Our U.S. clients are increasingly active in international products, contributing over 20% of our international product revenue growth.
When you step back, what you're really seeing is the flywheel of the platform at work, where our global clients are trading across regions and asset classes, and we believe this advantage will only grow as we expand our presence across regions. Turning to slide 5, our rates business produced a record revenue quarter driven by continued organic growth across swaps, global government bonds, and mortgages.
Record credit revenues were led by strength across global corporate bonds and credit derivatives. Money markets revenue growth was led by record quarterly revenues across global repos and ICD.
Equities also produced record revenues led by growth in global ETFs and equity derivatives. Other revenues grew over 56% year-over-year, driven by our digital assets initiatives. Finally, market data revenues were down approximately 5% year-over-year, driven by a timing shift in how certain historical data sets are delivered under our amended LSEG agreement.
Recall, we recorded $8 million in January of 2025 tied to the delivery of data sets to LSEG. The revenue recognition of these data sets in 2026 shifted to $2 million being recognized in the first month of every quarter. Adjusting for the timing difference, market data revenues grew 13% year-over-year, driven by growth in our recently renewed LSEG market data contract and proprietary data products.
Turning to slide 6, I will provide a brief update on two of our focus areas, U.S. Treasuries and ETFs, and then I will dig deeper into U.S. credit and global interest rate swaps. Starting with U.S. Treasuries, after 8 months of below-average intraday volatility, we saw a significant pickup in March intraday volatility. While March volatility rose over 50% from the December lows, it was still nearly 40% below what we saw in April of 2025.
Our first quarter market share of 22% drove record revenues, up nearly 10% year-over-year, as double-digit revenue growth in our institutional channel was partially offset by weaker retail trends. Market share was down year-over-year, mainly due to lower wholesale market share, we remain optimistic on a re-acceleration in our U.S. Treasury business as we penetrate additional parts of the voice market, coupled with continued strong government debt issuance.
Our competitive position remains strong. On a relative basis, we exceeded 50% share for the eighth consecutive quarter in electronic institutional U.S. Treasuries versus our main electronic competitor. Wholesale remains a strategic priority with continued focus on expanding our liquidity network, deepening client relationships, and driving growth through differentiated protocols and products across our integrated platform.
Turning to equities, this year marks the 10-year anniversary of our institutional U.S. ETF platform, an important milestone that reflects both the evolution of the ETF ecosystem and Tradeweb's role at its center. Since launch, our platform has scaled significantly, surpassing $4 trillion in notional traded, including more than $1 trillion in the past 12 months alone.
What began with just a handful of participants a decade ago has grown into a broad and diverse global network of close to 200 institutional clients and over 20 dealers. Our ETF business posted revenue growth in excess of 35% year-over-year as we continue to deepen integration with our clients, coupled with a pickup in market volatility.
Our AiEX automation solution continues to be a key differentiator with our ETF clients, with average daily trades increasing over 70% year-over-year, with double-digit growth across European and U.S. ETFs.
Our efforts to broaden our equity presence beyond our flagship ETF franchise continue to pay off, with record institutional equity derivatives revenues up nearly 20% year-over-year. Looking ahead, the pipeline remains strong as the benefits of our electronic solutions continue to resonate with our clients.
We believe we are well-positioned to capitalize on the long-term secular ETF growth story, not just in equities, but across our fixed income business. Shifting to global credit on slide 7, double-digit revenue growth for global credit was driven by strong double-digit revenue growth in European credit, EM credit, and credit derivatives, which more than offset weakness in municipal bonds.
U.S. credit produced low single-digit revenue growth led by strong double-digit revenue growth in our institutional business, but partially offset by continued weakness in our retail corporate credit channel, where revenues were down over 20% year-over-year, primarily reflecting the better relative yields our clients were getting outside of U.S. credit. U.S. credit remains a key growth priority, and we are focused on expanding our penetration within RFQ markets to complement our leadership in portfolio and session-based trading.
Despite more than one decade of innovation, RFQ continues to be the primary execution protocol for institutional clients in U.S. credit, driven by its transparency and competitive pricing dynamics. However, clients are often reluctant to expose larger trades broadly, given the trade-off between minimizing information leakage and achieving optimal pricing. In response, we are focused on enhancing workflows that better align with client needs.
To that end, we have continued to invest in our enhanced dealer selection tool, SNAP+, which enables our clients to dynamically target dealers most likely to engage and win a given inquiry based on both historical and real-time trading data. This innovation builds on our broader strategy of expanding the range of pre-trade execution and post-trade solutions we offer.
We remain focused on the block market, with overall U.S. credit block share up 20 basis points year-over-year in the first quarter, with block average daily volume growth of over 30% year-over-year across IG and high yield. Our volume growth was driven by continued adoption of our portfolio trading, RFQ, and sessions protocols. Institutional RFQ average daily volume grew over 30% year-over-year, with double-digit growth in both IG and high yield.
Our efforts to expand into RFQ are seeing continued signs of success, with our RFQ share of overall TRACE up over 50 basis points year-over-year. Portfolio trading produced record average daily volume increasing over 30% year-over-year with double-digit growth across both U.S. and international PT. AllTrade had a strong quarter with over $230 billion in volume, with average daily volume up over 5% year-over-year.
Our all-to-all average daily volume grew over 65% year-over-year. Our dealer RFQ average daily volume grew over 40% year-over-year. We saw record responder rates in high yield as the team remains focused on expanding our network and increasing the number of responders on the AllTrade platform. Electronification remains a key focus, especially in U.S. credit, where underlying trends are strong.
Investment-grade volumes have been increasingly impacted by affiliate trades, which are internal transfers within a dealer that occur after a transaction in the institutional market. These are double-counted, non-economic trades that don't interact with electronic platforms, distorting reported market share and electronification and creating artificial pressure on both.
If you adjust for that activity, the underlying picture looks better. Based on our estimates, first quarter market share in IG would have increased 5 basis points versus our reported decline of 33 basis points, and electronification also would have moved higher. The core trend hasn't changed, electronification in U.S. credit is continuing to build, and we feel very good about our positioning as that plays out. Looking ahead, global credit remains a key area of focus with a long runway for growth.
While U.S. credit continues to anchor performance through ongoing innovation, differentiated liquidity, and investment in our platform, we are also scaling European credit by expanding RFQ adoption and liquidity and advancing munis through increased electronification, transparency, and connectivity in a fragmented market.
In EM credit, where we are still early in our expansion, we are building momentum by leveraging our established presence in developed markets alongside a holistic EM product offering across rates and credit. Our EM credit revenues grew over 40% year-over-year in the first quarter, signaling strong momentum.
Moving to slide 8, over the past two decades, electronic interest rate swaps trading has evolved from an emerging concept into an ecosystem defined by transparency, efficiency, and ongoing innovation. That continued evolution was evident this quarter, including in moments of heightened volatility where clients leaned further into electronic workflows.
Global swaps delivered record quarterly revenues up over 45% year-over-year, driven by strong client engagement across our global suite of currencies. Our quarterly core risk market share, which drives revenues and excludes compression trading, reached a record rising 190 basis points year-over-year. Total market share increased from 21% in the first quarter 2025 to 24.1% in the first quarter 2026, reflecting a combination of strong risk and compression volume growth.
During the quarter, we achieved record share across sterling and other G11 currencies and our second-highest share across EM-denominated currencies. First quarter performance was driven by record revenues across U.S., Europe, APAC, and emerging markets. This quarter underscored the value of our breadth across the swaps market, particularly as clients' interest can ebb and flow across products over time.
Specifically, as inflation concerns re-emerged and rate expectations shifted this quarter, activity picked up in our inflation swaps business, driving record volumes. It is a product area we entered in 2017, where adoption was initially gradual, but where the opportunity in the market expanded materially after 2020, and we currently hold over 95% electronic market share.
That trajectory makes periods like this especially meaningful as they reinforce the value of our continuous investments towards building a more holistic swaps offering across products and geographies over time. Beyond inflation swaps, the nature of trading we saw in March evidenced a broader pattern in how electronic trading continues to evolve.
Even as market conditions became more challenging, automation remained robust. We saw clients not only lean into inherently electronic protocols, but use them in a more sophisticated way through sending their trades out to multiple dealers amidst an environment where we have historically seen that pullback. It's a testament to the sophistication clients have built into their workflows and to the growing value of electronic trading across market conditions.
Overall, our RFM protocol saw average daily volume growth of over 150% year-over-year in the first quarter, with growth accelerating in March. We continue to make progress across emerging market swaps. Our first quarter EM swaps revenues delivered another strong growth period, delivering another record. We believe there remains significant runway given the still relatively low levels of electronification. Looking ahead, we continue to see significant long-term growth potential in swaps.
On a DV01 basis, electronification has grown at an average annual rate of 160 basis points since the first quarter 2020 as dealers and clients move a greater share of their workflows electronically.
That progress is reflected in the continued strong revenue performance of our swaps business, and we see substantial opportunity to further digitize workflows alongside our clients. In collaboration with them, we expect to drive continued workflow innovation across both cleared and bilateral swaps markets. With that, let me turn it over to Sara to discuss our financials in more detail.
Thanks, Billy, and good morning. As I go through the numbers, all comparisons will be to the prior year period, unless otherwise noted. Slide 9 provides a summary of our quarterly earnings performance. As Billy recapped earlier, this quarter, we saw record revenues of $618 million that were up 21.2% year-over-year on a reported basis, and 17.5% on a constant currency basis, given the weakening dollar.
We derived approximately 44% of our first quarter revenues from international clients and recall that approximately 30% of our revenue base is denominated in currencies other than dollars, predominantly in euros. Total trading revenues increased 23%, comprised of 25% variable trading revenue growth and 14% growth across fixed trading revenue.
Rate fixed revenue growth was primarily driven by an increase in minimum fee floors for certain dealers and by the addition of dealers to our mortgage and U.S. government bond platforms. Credit fixed revenue growth was primarily driven by the previously disclosed introduction of minimum fee floors and the migration of certain dealers to subscription fees.
Other revenues of $10 million for the first quarter increased by 56%, primarily driven by growth in our digital initiatives related to our commercial relationship with the Canton Network.
Overall, the other revenue line will remain variable quarter to quarter, reflecting fluctuations in a number of variables, including the number of Canton Coins earned, Canton Coin value, the number of super validators in the network, and periodic tech enhancements for our retail clients.
We expect total other revenues in 2026 to be roughly in line with 2025. First quarter Adjusted EBITDA margin of 55% increased by 101 basis points on a reported basis when compared to our 2025 full year margins. Our net interest income of approximately $17 million increased due to higher cash balances, which offset lower interest yields.
Lastly, this quarter's GAAP results were impacted by both realized and unrealized gains and losses across our strategic investments. Specifically, we recorded $1.2 million in net loss this quarter, including $2.9 million of unrealized losses reflecting the mark-to-market of our Canton Coins holdings. As a reminder, these losses are only included in GAAP EPS and are excluded from our non-GAAP adjusted diluted EPS.
Moving on to fees per million on slide 10, we provide a highlight of the key trends for the quarter. You can see slide 17 of the earnings presentation for the full detail regarding our fee per million performance this quarter. That said, I will spend more time talking about cash credit fee per million, given the movements are slightly more nuanced. Cash credit fee per million decreased 15% this quarter based largely on 2 drivers, the prior introduction of variable and fixed fee mix changes and business mix changes.
Specifically, the introduction of minimum fee floors and migration of certain dealers from fully variable to more fixed plans in 2025, a mix shift away from municipal bonds and retail this quarter, which carry a relatively higher fee per million, as well as a mix shift towards non-comp PT, which carries a relatively lower fee per million.
Excluding the impact of our previously disclosed fee changes and this quarter's impact of product protocol mix shifts, fee per million would be down approximately 1%. Slide 11 details our adjusted expenses. At a high level, the scalability and variable nature of our expense base allows us to continue to invest for growth and grow margins. We have maintained a consistent philosophy here. Adjusted expenses for the first quarter increased 20.2% on a reported basis and 15.3% on a constant currency basis.
During the first quarter, we continued investments in tech and communications, digital assets, consulting, and client relationship development. Adjusted compensation costs grew 12%, with nearly 30% of the increase from higher discretionary and performance-related compensation, more than 25% due to higher headcount, which was up 11.4% year-over-year, and 25% due to higher payroll taxes.
Technology and communication costs increased 37.7%, primarily due to our continued investments in data strategy and infrastructure and increased software costs. Approximately $5 million of the increase was driven by higher reference data costs and investments in our data and infrastructure strategy, both of which began in the second half of 2025. Adjusted professional fees grew 18.8% due to an increase in tech consultants as we continue to augment our offshore technology operations.
Occupancy expenses increased 61.5%, primarily from increased rent due to the move to our new New York City headquarters, which came into effect in the third quarter of 2025. Adjusted general and administrative costs increased 85.2%, primarily due to $8.1 million of unfavorable movements in FX and a pickup in travel and entertainment.
Unfavorable movements in FX resulted in a $5.1 million loss in the first quarter of 2026 versus approximately a $2.9 million gain in the first quarter of 2025. Excluding FX, adjusted general and administrative costs grew 11.4%. Slide 12 details capital management and our guidance.
On our cash position and capital return policy, we ended the first quarter in a strong position with approximately $1.9 billion in cash and cash equivalents, and free cash flow exceeding $1 billion for the trailing 12 months, representing strong year-over-year growth of approximately 31%.
We also held 1.6 billion Canton Coins with a fair value of approximately $243 million. With this quarter's earnings, the board declared a quarterly dividend of $0.14 per Class A and Class B shares, up 17% year-over-year. During the quarter, we repurchased approximately 483,000 shares for $51 million. There is $523 million of aggregate share repurchase authorization remaining. Turning to guidance for 2026.
In light of continued strong business momentum, we now expect adjusted expenses to trend towards the top half of the initial guidance range of $1.1 billion-$1.16 billion. We believe we can drive Adjusted EBITDA and operating margin expansion compared to 2025 at either end of this range.
Although we expect the incremental margin expansion to be more muted as we continue to focus on balancing margin expansion with investing for the future. Specifically, we continue to invest in credit, rates, international markets, ICD, and digital assets as key focus areas with a long runway for growth.
We also continue to invest in technology that allows us to sustain and build on our leading platform. Some of these investments will take time to scale, but we continue to prize innovation and create durable long-term revenue growth opportunities. I'll turn it back to Billy for concluding remarks.
Thanks, Sara. Before I get into the broader outlook, I want to spend a minute on some of our frontier markets. We've made solid progress there in a relatively short period of time through targeted partnerships and investments. From our work with the Canton Network, to our new partnerships with Kalshi in prediction markets, to Crossover Markets in crypto execution, these partnerships build directly on what we've already established, a broad network, execution infrastructure, and a central role in trading activity.
With tokenization, we're focused on the evolution of settlement, particularly around capital efficiency and collateral mobility. We've already executed trades in this space alongside a variety of market participants utilizing Canton's distributed ledger infrastructure. We are working alongside both existing and new clients who are driving demand for instant settlement.
In institutional crypto, the opportunity is to bring more standardized electronic execution to a market where demand is growing, but broadly adopted infrastructure remains nascent. Alongside our investment and partnership with Crossover Markets, we are building a more comprehensive execution offering, including over time, leveraging Ratefin's technology to incorporate spreading functionality.
In prediction markets, through our partnership with Kalshi, we're working to integrate event-driven data into our rates and credit platforms while working with market participants to support the longer-term development of an institutional-grade execution environment.
Across all three, the focus is on extending our network and execution capabilities while closely partnering with our clients and the broader ecosystem as these markets evolve. The environment to start the year has been defined by a lot of debate, and if anything, that uncertainty has only increased as we move forward.
We did see clients take a bit of a breather in April as they stepped back and recalibrated their forward strategies, but importantly, what came through clearly was the durability of our business. Intraday volatility in April to date was down more than 50% year-over-year. This was not an easy backdrop. Even after a record 1st quarter, April 25 still ranks as the 3rd-best revenue month in our history after clients rapidly repositioned their portfolios post the announcement of tariffs.
Looking ahead to April of 2026, despite a tougher comparison and a different volatility environment, we are trending toward another top 5 revenue month based on internal estimates. I think that really underscores what we've been talking about for some time now. The breadth of the model and the strength of the recurring activity we're able to build irrespective of the volatility environment.
As we focus on delivering more durable, workflow-driven solutions for our clients, we're seeing that translate into sustained engagement. In fact, April average daily volume is currently running ahead of April 2025, which tells you that while the mix of activity may shift, the level of client connectivity on our platform remains very healthy.
With two important month-end trading days left in April, which tend to be some of our strongest revenue days, overall and average daily revenues are trending down by a low single-digit percentage relative to April 2025.
The diversity of our growth remains a theme as we are seeing preliminary positive average daily volume growth across global swaps, mortgages, European government bonds, European credit, EM credit, CDS, equity derivatives, repos, and ICD. Our IG share is tracking in line with March levels, while our high-yield share is tracking above.
I would like to conclude my remarks by thanking our clients for their business and partnership in the quarter. I want to thank my colleagues for their efforts that contributed to the record quarterly revenues and volumes at Tradeweb. With that, I will turn it back to Ashley for your questions.
Thanks, Billy. As a reminder, please limit yourself to one question only. Feel free to hop back in the queue and ask additional questions at the end. Q&A will end at 10:30 A.M. Eastern time. Operator, you can now take our first question.
Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Craig Siegenthaler of Bank of America. Your line is now open.
Good morning, Billy, Sara. Hope everyone's doing well. Sorry about that. I just switched to speaker because the headset was a little messy. Good morning, Billy, Sara. Hope you guys are doing well.
Morning.
Our question is on swaps, and congrats on that 45% year in your growth. We wanted your perspective on the good versus bad volatility debate in the swaps market, given recent strength, and especially curious on what you saw in Europe.
Yeah. Craig, how are you? Can you hear me loud and clear? Glad you're doing well. It's a good question. You know, as I kinda think about that for a quick second, and like maybe before I kinda parse like the kinda the porridge is too hot, the porridge is too cold, you know, around volatility for a second, just like a moment maybe just like on the environment in general, 'cause I remember you kinda heard me loud and clear on the last earnings call say, you know, I was really, you know, very amped about the macro and the setup.
You know, the truth is, and the reality is, I think a couple of months later, the world changes really quick, like still, like really, really amped. We're still really amped here at Tradeweb. I think, you know, from my perspective, we are in how we would describe like a really sweet spot for our business.
When I say that, to make an obvious point, that doesn't mean that we don't have, as you know very well, like complex and difficult things ultimately to get right. When you just step back for a quick second and you think about the combination of, you know, fiscal stimulus, monetary stimulus, debate on Fed timing, you know, we're in this like technology, obviously, investment super cycle, this like big deregulatory unwind.
You know, the legacy banks, the partner banks of Tradeweb had a great quarter in the global markets business. The numbers from Jane Street were like off the charts, obviously, this week. We're in like a, you know, a pretty, you know, prime environment. I wanna start with that.
When we think about, you know, to your question, how we parse kind of good volatility and then bad volatility, like think about obviously always like good volatility as like, you know, strong two-way markets, active price discovery, you know, from our perspective, something really important, which is like that AiEX algorithmic searches like running really well.
You know, we're realists, so we always understand there's always this concept of like markets moving into more of a bad vol market. Think about that as obviously like a dislocated market environment, thinner liquidity, less liquid areas of the market, you know, generally, kind of parts of the off-the-run Treasury market sometimes fit that description perfectly.
To your kind of point, I would say like, you know, the volatility across the, you know, the sterling and European markets, I think they were 2 times higher than the U.S. rates market, you know, in March. Given that rapid repricing of rate cuts, you know, to potential rate hikes, I think the markets moved, you know, extremely orderly and consistent with how we think about, you know, healthy price discovery process rather than how we think about like stresses in the system.
You know, from my perspective, I think I would say something important, which I think it speaks to how these markets have evolved. I think that's an important kind of comment. You know, both buy-side and dealer communities today are just like significantly better ultimately positioned to navigate these environments electronically, you know, stress or no stress. That's important.
I think we saw that in the data, increased usage of electronic protocols, you know, particularly, RFM and Incomp trading. This protocol, Craig, that we've launched in Europe, our request for market got up to like 45% of flow. In comp trading moved north of 80%. That's kind of what you wanna see, you know, very specifically in periods like this.
As the shift becomes more automated, you know, from our perspective, protocol-driven trading tends to make ultimately something very, very important, which is liquidity becomes, you know, more resilient even as volatility rises. That's kinda how we think about the context.
I think in a very interesting way, you know, the distinction almost between how we think about and talk about good and bad volatility, the porridge is too hot, the porridge is too cold, becomes almost, I don't wanna say irrelevant, but I think in a certain way it becomes kind of less relevant because the market structure today is much more kind of designed ultimately to perform and generate activity across a wide range of conditions. That from our perspective, I think is a really important point.
You've heard me because you know me well, you've heard me talk about sort of like this kind of like how we talk about sort of like the light switch moment, when a client behaviors change, they go from using or engaging the market one way to a better way, like this kind of like light switch moment.
I think increasingly we're thinking about volatility in a certain way as its own version of a light switch moment, where ultimately, you know, technology allows the participants to thrive. I think that's a really important and kind of interesting concept. From my perspective, when I think about thriving, which is like what we're in the business to do, which is to thrive, as you know very well, we have our own version of a really high bar.
One thing I would kind of say as we're thinking about context and where we're going from here, you know, if you take April—this past April, revenues, this month of April revenues, and you look at it versus May and June of this past year, you know, we're up over 10%. That's an important stat, an important, I think stat for me to make sure I get very clear to you.
That makes me feel, I think, quite optimistic. We for sure think about macro volatility as a tailwind. From my perspective, I think more importantly, as you know very well, you know, the electronic runway remains quite significant in our space. You add those things together, and you feel like you're in this kind of sweet spot moment. Thanks as always for the question. Good to hear your voice, Craig.
Thank you, Billy.
Thank you. Our next question comes from the line of Michael Cyprys of Morgan Stanley.
Hey, good morning, Billy, Sara. Thanks for taking the question. Just curious to hear your views around how you're thinking about AI's role in increasing automation across workflows, particularly in credit and rates, and what are some of the KPIs you think we should be tracking?
Great question. Super timely, Michael Cyprys. Appreciate it as always. I thought for a second when I was listening to my recording, I thought it was like an AI version of my voice or something. It sounded so different, which is kind of funny. Great question, timely. You know, for one quick moment, like core principle, like, I want to say this just like very loud and clear, like Tradeweb Markets, as you know very well, we're in the business of serving our clients, period.
Everything we do around AI always has to be kind of triggered off that. Our goal and Sara Furber's goal and my goal and the management team's goal at Tradeweb Markets, as you know, is to be the most client-centric firm in the electronic marketplace, period.
I think in a really interesting and exciting way, AI gives us that opportunity constantly to prove that. You know, not that we're all like historians, but I would say like the history of technology, as you know very well, is that it tends to make smart people smarter, right? Productive people more productive, right?
Without question, you know, big picture AI is this like massive accelerant of all of that, right? Expanding the scope, you know, of what people do, expanding people's impact. That's like really, really kind of like, you know, important stuff. We have a very strong feeling that data is the moat. I think that's an important kind of thing to say.
Our proprietary data, which we draw, as you know very well, from like live markets, executable pricing, RFQ behavior, execution outcomes, client decision-making protocols across all of these assets, I think gives our AI foundation something that maybe, you know, competitors can't quite come as close to.
I say that like humbly. I think that's an advantage for us. You know, on the generative AI side, our goal is, you know, pretty simple. You know, move clients from data retrieval into this thing that's really important, which is like insight generation.
You know, in markets that obviously like never slow down, that's important. We did something I think really cool, very proud of. We have our own kind of AI-powered assistant named, we're calling it Terra. I think we have to kind of keep thinking about the name.
It's kind of a cool name, but it's , you know, Tradeweb AI research assistant, which is in beta with our clients, some of our smartest, most important clients. We're on track to launch that in 2Q, which gives traders like a single natural conversation to surface insights around liquidity conditions, market participation, historical execution behavior, and relative pricing dynamics.
These are like really, really important things, and you can hear from me the focus that we have as a company. On the predictive side, we're tracking, tackling and working on, I think one of the fixed income's probably hardest problems, which is price discovery. We're launching what we call Ai-Price 2.0 at the end of 2Q.
As you know very well, corporate bonds can go hours or days without a print, and the true economics of a transaction can be obscured by like this complexity piece of it all. I think it's worth as a company, us, you know, spending a lot of time on that in that setting.
You know, in its simplest form, and I like to take the kind of like half step back as you know really well, it's gonna be always about, you know, getting really smart people access to this amazing technology inside of the company, and really proud of how many smart people work at Tradeweb, like expanding, you know, productiveness.
I'll say this just like very clearly and maybe like a little bit personally, like as CEO, what's interesting to me is not just, you know, doing more with less people. It's not just like saving money. Sara and I are always like just like amazingly on the same page around all of this. It's about like reimagining like process really, right?
How do we have the ability to continue to invest, you know, more in our future of growth? cause we have a lot of potential out there, and we're really excited about that. And that's a pretty cool thing. All of this stuff has to be top-down all of the time. I think we're still in a very important way at the beginning.
You know this very well, you know, dealing with this at your own firm. I think there's going to be some hard choices kind of along the way around all of this. Data advantage, I think reinforces network effects, and I think that opens up new revenue opportunities. Smarter, faster ways for our clients to trade and execute in the marketplace, and that's the focus and I think the intensity that we're bringing to the space around all of that. Thanks very much for the question.
Thank you. Our next question comes from the line of Simon Clinch of Rothschild & Co Redburn. Your line is now open.
Hi. Hi, Billy. Hi, Sara. Thanks for taking my question. Actually, this one's probably more for Sara. Following on nicely from the last question about AI investments generally for growth, Sara, could you expand on your philosophy for expense growth in terms of the flexibility and willingness you have to adjust investment up or down in environments of volume upside or in fact downside? How we should be thinking about that kind of flex, please? That'd be great. Thanks.
Sure. Hi, Simon. Great question. Definitely sort of a good follow on from a conversation Billy just had. Look, regardless of whether we're in a high or low volume environment, and I know we've said this before, we believe and I think we've evidenced we have significant operating leverage and expense flexibility in our model.
Big picture, roughly 55% of our expenses are fixed and 45% are variable or discretionary. Specifically in your question when you're asking about volume-driven expenses, within that variable bucket, most of those expenses are more directly tied to revenue or EBITDA growth versus volume. Think of things like performance-driven comp, commissions.
There are some smaller components that correlate more directly to pure volume, such as exchange and clearing fees and those are pretty small, like in terms of the total expense base we have, call it low single digits, like something like 3% of our total expense base, which leaves us a lot of flexibility in terms of how we manage expenses and deliver operating leverage.
More broadly, I would say when you think about higher volume as a proxy for higher revenue environments, you should think about our expense growth as really following our track record of, as you were kind of getting at, accelerating discretionary spend while still delivering margin expansion. I think we have this flexibility to accelerate and decelerate. You know, if you looked at last year, top line grew 19%, expenses grew 17%.
I've talked before how that probably wasn't our budget at the beginning of the year, but we accelerated discretionary spend and still delivered 64 basis points of margin improvement. If you contrast that with, you know, an environment like 2023 where we had multiple quarters of single-digit top line growth, we still delivered margin expansion of just under 50 basis points while investing in our platform.
That shows two things. It shows our ability, but also our willingness, to your point, to accelerate and decelerate. You know, this quarter's another example. We delivered almost 100 basis points of margin improvement on a constant currency basis, including facing, you know, significant step-ups or swings from FX and step-ups from the office and other data infrastructure spend. I think we've seen in any environment, we have the ability to manage our expense base.
I'd say, you know, at the highest level, the great thing about our business is that as revenue and our business keeps scaling, we continue to see natural operating leverage, and that allows us to calibrate expenses while still delivering margin, but still being able to invest for discretionary and opportunistic things like Billy was just talking about, whether it be AI or opportunities in EM. That, you know, for us is like our North Star in being able to deliver durable long-term revenue growth, that ability to invest through the cycle. Thanks so much.
Thank you. Our next call comes from the line of Jeff Schmitt of William Blair. Your line is now open.
Hi. Good morning. You've talked about EM and EM swaps in particular being one of your key revenue growth opportunities. You know, I know it's still a small part of the mix, but could you talk about what you're doing on that front and what type of growth you're seeing?
Yeah. Good question. You know, it is a small part of our growth, but it's a growing and a really important kind of story for us. I think it was like 6% of our revenues in the first quarter of 2026, and that's basically up from like almost like, you know, a little bit over 1% in 2022.
We're still scratching the surface of it, right? Like, find the wallet, that's really kind of an important thing, right? I think the overall EM revenue wallet exceeds like a little bit over $1.5 billion annually, so it's a big market, significant kind of opportunity for us there.
It's not to say that you have to pick your day job, but I think it's a little bit of a continuation that I was saying before, just about like, you know, how do you wind up servicing your clients, around the focus of, you know, building solutions.
This efficient search for liquidity and, you know, on some level, that holds true for whatever market we're talking about. We think we have a really strong leadership position across obviously our legacy, you know, U.S. and European businesses. We're really proud of what we've been able to accomplish in a short period of time as a public company, you know, in EM. Start with this.
It's a, you know, from our perspective, and we talk about like plotting for growth, it's a multi-year growth opportunity rather than how we think about, and Sara described this perfectly, like a single investment cycle. I do think we're building on this like pretty strong foundation in place, you know, vis-à-vis the developed marketplaces.
If we were thinking about the EM swaps market for one second, I think similar structural growth around that EM countries continue to finance their growth through this like very big, healthy global debt issuance. We're starting to see something really important, which is the velocity of these markets increase. I would point out something I think just like very important, which is the cleared EM swaps market has grown at an over 20% CAGR over the last five years.
It's still only 20% electronified. The market is only a fraction of the size of the dollar and euro and sterling markets. I probably just mangled that, which is okay. You guys hear, as I describe that, the beginning of a market really picking up velocity and beginning to go electronic, which is one of the reasons why we're so focused, you know, in this area.
I think we're starting to see very early success from our perspective around EM hard and local currency credit. That's still, I think, from my perspective, a bigger lift. Excited about kind of how we're thinking, our participation in the Middle East. Index inclusion in markets like Saudi Arabia are important. There's obviously continuing evolving, you know, clearing frameworks happening there.
Something very important, which is increasing participation from both kind of global and regional investors there. We're busy. Recent launches, we've done like Mexican repos, asset swaps. I think those are good examples of how something that we really focus on, which is how do you deploy capital ultimately incrementally, do something very, very important, which is establish liquidity, and then ultimately do this thing, which is the magic around it, which is scale participation across dealers and clients, quote-unquote, buy-in.
You know, really important stuff. A lot more work to do, you know, but we feel pretty good about the trajectory. Feel really, really good about the forward opportunity, the wallet, the general trend of direction there. I think, focused on something that's important, which is the long-term health of our EM franchise. That's what you're going to get from us. Thanks for the question.
Thank you. Our next question comes from the line of Patrick Moley of Piper Sandler. Your line is now open.
Yes, good morning. Thanks for taking the question. The DTCC's tokenized Treasury pilot is going to go live on Canton in the next couple of months. It's a network that you've obviously been running infrastructure on for some time.
How are you thinking about the potential impact of real-time intraday collateral mobility on fixed income volumes and rates in particular? If you could maybe just talk about the broader opportunity and risks as it relates to tokenization and, you know, anything you could also share maybe on client conversations and client demand for this type of tokenized trading. Thanks.
Yes. How are you, Patrick? Good to hear your voice. Sometimes I feel like we're like the best spokesperson out there in the world for Canton, and I say that in a good way. You know, because, you know, we're behind them, and we think that they're onto something really important. I think you nailed it in your question, around the DTCC pilot and how important and meaningful that is.
Maybe like not a half step back, a quarter step back. I think for a second, let's just understand ultimately what tokenization is an upgrade to market infrastructure. It does a few things that are very important. It makes settlement faster, more transparent, and ultimately has the potential to enable kind of real-time 24/7, you know, collateral movement. Those are like really important kind of concepts.
I say this again, I think the pilot's like meaningful step because it's bringing U.S. Treasuries on-chain within a trusted market structure. I think that concept of market, a trusted market structure is important. There's no question that, like, once you do that, you're starting to do something important, which is like broader industry momentum.
These things are kind of coming together. You know, we've been active in the space, to your point, through our tokenized repo activity on our friends at Canton. I think that participant set is continuing to grow and becoming more diverse.
I would say, not that Tradeweb needs to have a, you know, a big sales pitch around this, but, you know, we do bring our own role, you know, around this, I think, in terms of helping the industry feel comfort around, you know, change. I think we bring a lot of credibility into this. We're excited about it and excited to do it. It doesn't disintermediate us.
We see risks everywhere, as you would expect us to. We're in the business of always seeing risks, but I don't see the disintermediation around this for us here. I think the execution layer always is going to remain ultimately the most valuable part of the market, that's where, as you know very well, liquidity is formed, prices discovered, and that's where we operate and live and thrive.
As assets become tokenized, think about it this way. As assets become tokenized, they're gonna continue to trade through these, like, electronic workflows, and that execution is, you know, our bread and butter. Excited about it.
I've made the point before, I'm, you know, I'm trying to get that light bulb to ring off with our friends at Canton. I think the mortgage market, given how important that market is, has a settlement process that has the ability to really change. That's gonna be a marketplace that we're gonna stay focused on.
We're always looking to have markets have more participants in them, and when you think about a more streamlined and efficient settlement process, that's one of those things that allows, you know, more participants to flourish in this kinda changing world and changing market environment. Thanks a lot for the question, Patrick.
Thank you. Our next question comes from the line of Benjamin Budish of Barclays. Your line is now open.
Hey, good morning, and thank you for taking the question. I wanted to ask about ICD. I think it's been about two years, or almost two years since you completed that acquisition. I was wondering if you could just give us an update. You know, where are you in terms of cross-selling? What do balances look like? You know, what's on the product roadmap after the addition of T-bills? Any update there would be helpful. Thank you.
Sure. Hey, good morning. We're really pleased with how ICD has performed. You know, we think it's performed well, and it's definitely complemented our overall business. It's been a good fit, I'd say, culturally, strategically, and financially. Specifically this quarter, ICD delivered, and I think we said this in the script, record revenues and balances, year-over-year growth around 8%.
Even in April, we're seeing revenue and average daily balance growth rates that are trending higher than that figure in the first quarter. It's certainly volatile times in terms of, like, we're seeing large issuances by corporates, and then obviously quite a bit of spending. That generally has benefited the business because we're seeing those large corporate issuances translate to those balances on ICD. Away from that activity, generally, like corporate cash, you know, corporates remain healthy, momentum and new client wins.
We're seeing that high client retention, which was really important to us when we did the acquisition, remain. In terms of, like, our original thesis, certainly around cross-selling, we had two focus areas. One was cross-selling our products to ICD clients on their portal, taking the ICD offering to our client base, particularly internationally.
That international opportunity has proven compelling. In Asia, in particular, we think is a white space long-term for us. Corporates are sitting on a lot of cash there, we think we have a great brand. You know, as we think about where we've put our resources, we've completed our Singapore regulatory approvals, we've moved more salespeople into that market.
As we continue to expand our presence, which Billy's been talking about in Asia and EM more broadly, we think ICD is a complementary and other high-quality product to sell into those relationships. That's, you know, one of the pieces we're really excited about. On T-bills, which has been on our roadmap, we completed that last year, and cross-selling, you know, generally speaking, other Tradeweb products.
We've completed the core functionality to be able to do that, and we're working through some of the adjacent integrations with things like client treasury management platforms to drive easier adoption. It's been slower, but we're making steady progress. Overall, I'd say just in terms of the cross-selling, we think the international opportunity is probably more in focus for us right now on the roadmap.
One other point, what I was alluding to is one of our original thesis points was around creating enhanced durability for Tradeweb and how ICD has this hedge-like quality when you think about our portfolio across different market environments.
Whether that be risk-off environments where people are, you know, more apt to keep cash, we see benefits on ICD. In the corporate bond examples that I was talking about where we've seen heavy issuance, that historically weighed on something like our U.S. credit business, where we saw more muted near-term trading activity.
When you put all those things together through ICD, at that same time you might see more muted trading activity, you're seeing larger cash balances on the platform, and it's nice to see that hedge-like impact happen as we think about building a really durable portfolio from which we grow. Overall, I'd say we feel really good about how ICD has performed, and we're looking forward to continuing to drive growth ahead.
Thank you. Our next call comes from the line of Alexander Blostein of Goldman Sachs. Your line is now open.
Good morning, everyone. Thanks for taking the question. Billy, I was hoping to go back to one of the comments you made around Kalshi and sort of some of the innovation you guys are pursuing there. Interesting partnership.
You gave us sort of a high-level view of what that could look like, but any more specificity you could provide on the revenue opportunities for your firm over time when it comes to Kalshi and prediction markets, as well as how you guys might deal with regulatory uncertainty that keeps kind of popping up related to this market?
Yeah. Good question, Alex. Missed you in Boca. It's good to hear your voice. I hear your question. I think I'll answer it, like, in, in the blunt way that you know me. I think it's still early. I think that's important for me to say. I think there's momentum, but it's early, and I wanna make sure I kinda say that the right way.
I have a very strong view that I think all predictive markets are not created equally. We are, you know, exceptionally interested and oriented towards financially oriented predictive markets. You know, when Taylor Swift does or doesn't get married is less of an interesting data point to us, as you know. They're incredible marketers, though, by the way.
Like, they're just kind of everywhere in terms of their marketing. What I would say, just, like, extremely specifically, is interest is there, and when you see it's pretty impressive. We are seeing, like, just very genuinely, very broad interest between, you know, this combination of hedge funds, the systematic shops, Alex, that you would expect, non-bank liquidity providers.
I think we're starting to get actually, like, very real interest from some of the long-only investors. They're kind of asking about visibility into these contracts. I think some of the timing's been honestly helped by some of the Fed research, the demand was already building. I have a very strong view that you know very well, which is I think the definition of macro markets in general is continuing to evolve.
I think clients are looking at prediction markets, crypto markets, other non-traditional sources to support their core macro strategies in very, very different ways than they were a year ago. We're gonna be on top of that trend from the beginning. We started simple, and I think we are quite early.
We're launching a free viewer in the second quarter, and having clients see select economic and financial event contracts in real time, right alongside swaps and treasuries, and we think that's, like, the absolute correct first start. It's pretty low friction, and ultimately it's about discovery and kinda learning. And I think that's important. The feedback's been positive. The next step I think is super important, which is, like, this normalized.
basically a normalized API feed. Clients can pull this data directly into their OMS, EMS, and analytics kind of workflows. When we have a bank pricing risk, Alex, on our platform in the forward curve, they're gonna be using data that's important around some of these predictive markets to price that risk.
I think we have a very strong view that that's how the market is going to evolve. From my perspective, let's stay kind of thoughtful and, and disciplined on this. I think there's, you know, a lot of headlines, as you know very well, you know, particularly on the regulatory side, and we're gonna have to see how things play out.
I have a, you know, I have a core belief that these are the kind of partnerships that lead to, you know, strong innovation, and we're the kinda company that are gonna place the right bets, you know, around these evolutions, and I'm very, very willing to kinda continue down that path. Thanks a lot, Alex. Good question. Good to hear your voice.
Thank you. Our next question comes from the line of Chris Allen of KBW. Your line is now open.
Yeah. Morning, everyone. I think most stuff has been covered. Wanted to ask quickly just on the February announcement of the partnership with MAXEX within U.S. resi mortgages. Wondering if you're seeing any early returns so far? Zooming out a bit, how does the go forward look in mortgage MBS trading into the back half of this year in 2027?
Yeah. It's the same theme, and you guys are kinda like hearing this from Sara and I, like, I think, like, loud and clear. You know, we're placing bets on further evolution, and we're doing that, you know, with a clear eye, and I think the right amount of discipline and a good vision for how things are gonna continue to evolve in the future, and I think that's really important. MAXEX is a big piece of this.
It's early still and feeling really good about a very different kind of partnership now that we're talking with MAXEX versus, you know, Alex's question in predictive. You know, we entered into this like, commercial collaboration with this, I think, very straightforward objective of helping to expand, you know, institutional access across the, you know, U.S. residential, you know, private credit, you know, marketplace. MAXEX has this great reputation.
They've been a leading digital exchange for whole loans, you know, for a long time, and they connect this very broad network of originators within the, within the institutional buyers of the centralized clearinghouse, which is unique in a highly fragmented market. They're the kind of company that we like to partner with. I think the mortgage market, and you guys have heard me say this, I think the mortgage market stands out there as this extremely important market within the rates complex.
You know, you guys heard about, obviously, Jamie Dimon talking about a bond crisis yesterday and talking about the treasury market. You know, the importance of the mortgage market, as everyone on this call knows, is a big deal. We're gonna continue to invest in that area of the marketplace.
You know, more participants, more velocity of trading, more investments around changing the settlement of that asset class. We have a historic leadership position in the mortgage market that I think is something that the company is quite proud of, and we're gonna take that leadership position into further innovation because that's what makes us excited and charged constantly as a company.
A lot of focus on MAXEX, also I think a lot of, you know, forward bullishness on the continued evolution and the velocity of trading that exists within one of our very first market, markets. I made the joke on the last call that was my favorite child. It still is my favorite child.
We're, like, entering into that child going to a really good college. The market is doing, you know, quite well from a, from an activity perspective. We're excited about all of that. Thanks, thanks a lot for your question.
Thank you. This concludes the question and answer session. I would now like to turn it back to Billy Hult for closing remarks.
Thank you all very much for joining us this morning. Appreciate the questions as always. Any follow-ups, as always, please feel free to reach out to Ashley, Samir, and the amazing team that we have. Thank you all. Have a great day.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.