MarketAxess Holdings Inc. (MKTX – Free Report) recently partnered with Tradeweb Markets Inc. (TW – Free report) and Bloomberg to develop a consolidated band for fixed income securities in the European Union. Companies should apply to become the one-price feeder for corporate and government bonds through the public procurement process organized by the European Securities and Markets Authority.
The consolidated tape should act as an efficient pool of organized data from multiple exchanges and market makers to provide a uniform data system. As Europe has different platforms and various regulatory jurisdictions, this leads to higher bond data costs. Over the past five years, bond data costs have increased by 50%. Switching from MarketAxess, Tradeweb and Bloomberg is likely to reduce costs and make the process more efficient.
The companies are the largest fixed income data providers in the European Union. The last attempt can make it the main supplier of the block. The move comes at a time when economic volatility is pushing investors toward a safe haven in bonds. However, continued inflation is dampening returns. However, rising interest rates may somewhat remedy the situation.
Once the mandate is won, a joint venture (JV) of the companies – independent of their respective businesses – will ensure transparency in the fixed income markets. The JV will be authorized and supervised by the European Securities and Markets Authority. This will help tame the fragmented nature of the fixed income market.
MarketAxess complements its organic growth by forging strategic alliances that help tap into new markets and deliver new products or services. Some of the notable agreements won to this end are the strategic partnership with BlackRock, which has enhanced the range of business relationships available to global credit market participants, and an agreement with S&P Dow Jones Indices to jointly develop indices to track most liquid segments of the US corporate bond market. MKTX has also partnered with the China Foreign Exchange Trade System to give its global investors better access to China’s onshore bond market.
If the collaboration with Tradeweb and Bloomberg to develop the consolidated strip materializes, it will add another feather to the ceiling of MarketAxess. MKTX introduces new products and modifies existing products to expand its product portfolio, which leads to increased bond trading volumes and in turn fuels growth.
MarketAxess shares are down 41.6% in the past year compared to the 25% drop in the industry it belongs to.
Image source: Zacks Investment Research
Zacks ranking and key picks
MarketAxess currently has a Zacks rank #3 (Hold). Some stocks that rank higher in the broader financial space are Alerus Financial Corporation (ALRS – free report) and PhoenixFIN Corporation (PFX – Free Report), each carrying a Zacks Rank #2 (Buy) at present. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alerus Financial offers financial products and services to businesses and consumers. Based in Grand Forks, ND, ALRS’ 2022 bottom line has seen three upward revisions and no movement in the opposite direction in the past 60 days. ALRS earnings have exceeded estimates in each of the past four quarters, averaging 34.6%.
PhenixFIN invests in debt and equity securities of small and medium-sized companies. The consensus rating for PFX earnings in 2022 has improved by 132.8% over the past 60 days. New York-based PFX has beaten earnings in each of the past four quarters.