Tradeweb Markets Inc

NASDAQ:TW

Earnings Call Analysis

Tradeweb Achieves Record Revenue Growth in Q2 2024

Tradeweb reported a record second quarter with revenues of $405 million, up 30.4% year-over-year. The growth was driven by strong client activity and share gains in global rates and credit markets, with rates alone accounting for 61% of the growth. Adjusted EBITDA margins expanded by 98 basis points. The company’s acquisitions, including Yieldbroker and Rate Fin, boosted performance, while the planned acquisition of ICD is on track. For 2024, adjusted expenses are expected to rise to $830-$860 million, reflecting ICD's integration and strong business momentum.

Tradeweb Achieves Record Second Quarter Revenues

Tradeweb experienced its best second quarter in history, driven by strong client activity, share gains, and a favorable market environment. Revenues surged by 30.4% year-over-year, reaching $405 million. The company's ability to thrive amid global macroeconomic changes, including varying inflation prints and geopolitical uncertainties, heavily contributed to this growth. Tradeweb continues to balance investing for growth and profitability, with adjusted EBITDA margins expanding by 98 basis points relative to the second quarter of 2023.

Strong Performance Across Key Sectors

Rates and credit were pivotal, accounting for 61% and 29% of the revenue growth, respectively. The rates business saw significant organic growth across global government bonds, swaps, and mortgages, supplemented by the acquisition of Yieldbroker. Credit growth was led by robust U.S. and European corporate credit performance, alongside strong growth in municipal bonds, China bonds, and credit derivatives. This sector showcased Tradeweb's comprehensive market strength across multiple asset classes.

U.S. Treasuries and ETFs Shine

The U.S. Treasuries segment posted record revenues, increasing 28% year-over-year across all client channels. Notable was the record adoption of Tradeweb's institutional streaming protocol and the growing usage of RFQs. Automation proved essential, boosting institutional U.S. Treasury average daily trades by 45% year-over-year. ETFs also contributed, showing mid-single-digit revenue growth, although challenged by lower equity market volatility.

Advancements in Technology and Market Data

Tradeweb's commitment to technology was evident in the increased investment in data strategy and infrastructure, partially driving a 29.6% rise in technology and communication costs. Market data revenues grew robustly, driven by a combination of proprietary data products and LSAG market data contracts. Emerging digital technologies, including blockchain, are areas of selective investment aiming to leverage technical expertise without heavy in-house expenditure.

Financial Outlook and Strategic Initiatives

The company announced the anticipated closing of the ICD acquisition, aiming to add $40 million in revenue over the next five months post-closing. Adjusted expense guidance for 2024 is set between $830 million and $860 million, indicating a focused strategy on maintaining operational efficiency while pursuing organic growth. Investments in technology and marketing are expected to enhance long-term profitability.

Continued Focus on Client-Centric Innovation

Tradeweb remains committed to saving clients time and money through innovative trading solutions. The integration of new protocols, such as the RFM protocol, underscores this commitment, with notable growth in user adoption and trading volumes. The company also places significant emphasis on expanding its client network and enhancing user experience through technology-driven advancements.

Capital Management and Cash Flow

Ending the second quarter with a robust $1.72 billion in cash and equivalents, Tradeweb's financial health remains strong. Free cash flow reached approximately $722 million over the trailing 12 months. The board declared a quarterly dividend of $0.10 per Class A and Class B shares, reflecting confidence in the company's continued financial stability and growth prospects.

Earnings Call Transcript 2024-Q2

[Operator]

Good morning. And welcome to Tradeweb's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] To begin, I'll turn the call over to Head of Treasury, FP&A and Investor Relations, Ashley Serrao. Please go ahead.

[Ashley Serrao, executive]

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, nonpublic 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 and the ICD acquisition 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 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.

[William Hult, executive]

Thanks, Ashley. Good morning, everyone, and thank you for joining our second quarter earnings call. This was another outstanding quarter as Central Bank step back, private sector intermediation continues to be in vogue. From evolving inflation print to snap elections across Europe and the U.K., the macro debate continues to flourish globally, and our one-stop solution is resonating with our clients.

At our core, we are a technology company that caters to the financial service industry. We have a simple job, how can we continue to save our clients time and money and provide them with more efficient means of trading in the financial markets. Change is constant and we are focused on being on the forefront of that change via technological, market structure or behavioral. As the markets and our clients evolve, we continue to position Tradeweb for the future.

After closing our acquisitions of Yieldbroker and Rate Fin, we are pleased to have announced the signing of an agreement to acquire ICD in April. We are on track to close ICD shortly, which will add corporates as our fourth client channel.

Diving into the second quarter, we achieved our best second quarter in our history. Specifically, strong client activity, share gains and risk on environment drove 30.4% year-over-year revenue growth on a reported basis. We continue to balance investing for growth and profitability as adjusted EBITDA margins expanded by 98 basis points relative to the second quarter of 2023.

Turning to Slide 5. Rates and credit led the way, accounting for 61% and 29% of our revenue growth, respectively. Specifically, the rates business was driven by continued organic growth across global government bonds, swaps and mortgages and was also supplemented by the addition of Redfin and Yieldbroker. Credit was led by strong U.S. and European corporate credit, with record quarterly market share in electronic U.S. investment grade and aided by strong growth across municipal bonds, China bonds and credit derivatives.

Money markets was led by continued growth in institutional repos, equities posted low single-digit revenue growth despite challenging industry volumes in our core ETF business. Finally, market data revenues were driven by growth in our LSAG market data contract and proprietary data products.

Turning to Slide 6. I will provide a brief update on 2 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. Record second quarter revenues increased by 28% year-over-year, led by records across all our client channels. Our institutional business saw record adoption of our streaming protocol and growing usage of our RFQs offering. The leading indicators of the institutional business remains strong.

We gained share and achieved record quarterly market share of U.S. treasuries versus Bloomberg crossing the 50% threshold for the first time, which we have maintained. Client engagement was healthy with institutional average daily trades up 45% year-over-year. Automation continues to be an important theme with institutional U.S. treasury AIX, average daily trades increasing by nearly 100% year-over-year. Our wholesale business produced record volumes led by our streaming offering. Our other protocols also saw strong growth, particularly our club, which has begun to trend higher.

Our recent acquisition of Ravin is off to a strong start, contributing approximately 2.3% to our overall U.S. Treasury market share complementing our club and streaming protocols. The team remains focused on onboarding more cloud liquidity providers over the coming quarters as they deliver on a holistic strategy across our wholesale protocols.

Within equities, our ETF revenues grew mid-single digits but faced a tougher industry backdrop given lower equity market volatility. Other initiatives to expand our equity brand beyond our flagship ETF franchise continue to bear fruit with second quarter convertible bond revenues increasing by 10% year-over-year. Looking ahead, the client pipeline remains strong as the benefits of our electronic solutions continue to resonate.

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.

Turning to Slide 7 for a closer look at another strong quarter for credit. Strong double-digit revenue growth was driven by 33% and 29% year-over-year revenue growth across U.S. and European credit, respectively. We also achieved strong double-digit growth across [indiscernible], China bonds and credit derivatives. Automation continued to surge with global credit AIX average daily trades increasing by about 45% year-over-year.

We set another fully electronic quarterly market share record in U.S. IG helped by a record IG block market share of 9%. We also achieved our second highest fully electronic market share in U.S. high yield, Our institutional business continues to scale as clients adopt our diverse set of protocols to improve liquidity, price transparency and efficiency. Our primary focus on growing institutional RFQ continues to pay off with average daily volume growing 30% year-over-year, with strong double-digit growth across both IG and high yield.

Moreover, portfolio trading average daily volume rose 100% year-over-year with IG portfolio trading reaching record levels. We continue to focus on leading with innovation and this is resonating with our clients. We saw portfolio trading users grow by over 20% year-over-year, a record number of line items traded in the quarter and our largest-ever portfolio trade in excess of $3 billion.

Retail credit revenues were up over 20% year-over-year as financial advisers continue to allocate investments towards credit to complement their buying of U.S. treasuries and retail certificate of deposits. All trade produced a solid quarter with nearly $190 billion in volume, up over 45% year-over-year. Specifically, our all-to-all volumes grew over 20% year-over-year, and our dealer RFQ offering grew over 10% year-over-year.

The team continues to be focused on broadening out our network and increasing the number of responders on the all trade platform. In the second quarter, the average number of responses per all-to-all inquiry rose by 35% year-over-year. We also continue to increase our engagement and wallet share with ETF market makers.

Finally, our sessions average daily volume grew over 60% year-over-year and produced the second highest quarterly average daily volume ever. Looking ahead, U.S. credit remains our biggest focus area, and we like the way we are positioned across our 3 client channels. We believe we have a long runway for growth with ample opportunity to innovate alongside our clients. Our strategy is focused on expanding our network, increasing our wallet share, enhancing our pre- and post-trade analytics and continuously improving our protocols and client experience.

In the second quarter, we enhanced our RFQ offering with our rollout of RFQ Edge, where we're already seeing over 25% of our RFQ users utilizing RFQ Edge. RFQ Edge takes the traditional RFQ list ticket and incorporates real-time trading data, charting functionality and execution cost analysis. We also remain very focused on chipping away at high yield, and we believe we are well positioned to replicate the success we've had in IG. Specifically, we're making progress in our Aladdin integration with the goal of improving the client experience and increasing electronification in these markets.

We're still on Phase 2, which is focused on all trade and RFQ, but our teams are already out on the road, meeting with respective clients and walking them through all the enhancements made to date. With our Aladdin integration closing a gap and providing a foundation for growth, we expect high yield growth from here to be driven by the expansion of our client network led by strategic sales hires, functionality enhancements and stronger penetration with ETF market makers.

Beyond U.S. credit, our EM expansion efforts continue with growing adoption of our portfolio trading and RFQ offerings and early positive signs across wholesale EM. On the product side, we are focused on leveraging our diverse product expertise, enhancing our integration with FXR and continuing to build out functionality for multi-asset package trading.

Moving to Slide 8. Global swaps produced record revenues driven by a combination of strong client engagement in response to the macro environment and continued market share gains. Strength here was partially offset by a 3% reduction in duration and elevated quarterly compression activity. All in, global swaps revenues grew 56% year-over-year and market share rose to 23.6% with record share across dollar, [indiscernible] and EM denominated currencies.

Central to our ethos is our focus on helping clients by connecting the dots across fixed income products. Given the heightened market volatility across money markets, our repo clients have been increasingly referencing swap curves when evaluating fixed-rate repo trades, Yet their process was cumbersome and our clients ask for a better solution.

During the quarter, we became the first electronic trading platform to make overnight index swap curves available during the repo trade negotiation process, helping institutional clients assess the price competitiveness of different repo rates across different currencies and maturities.

Finally, we continue to make progress across emerging market swaps and our rapidly growing RFM protocol. Our second quarter EM swaps revenues more than doubled year-over-year, and we believe there is still significant room to grow given the low levels of electronification.

Our RFM protocol saw average daily volume rise over 115% year-over-year with adoption picking up. Looking ahead, we believe the long-term swaps revenue growth potential is meaningful. With the market still about 30% electronified, we believe there remains a lot we can do to help digitize our clients' manual workflows while the global fixed income markets and broader swaps market grow. And with that, let me turn it over to Sara to discuss our financials in more detail.

[Sara Furber, executive]

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 second quarter revenues of $405 million that were up 30.4% year-over-year on a reported basis and 30.8% on a constant currency basis.

We derived approximately 38% of our second quarter revenues from international clients and recall that approximately 30% of our revenue base is denominated in currencies other than dollars, predominantly in euros. Our variable revenues increased by 40% and total trading revenues increased by 31%. Total fixed revenues related to our 4 major asset classes were up 4.2% on a reported and 4.5% on a constant currency basis.

Fixed revenue growth was primarily driven by previously disclosed dealer fee increases in credit that were instituted at the start of the third quarter of 2023. And other trading revenues were up 9%. As a reminder, this line fluctuates as it reflects revenues tied to periodic technology enhancements performed for our retail clients.

Year-to-date, adjusted EBITDA margin of 53.6% increased by 117 basis points on a reported basis when compared to the 2023 full year margins. Moving on to fees per million on Slide 10 and a highlight of the key trends for the quarter. You can see on Slide 16 of the earnings presentation for additional detail regarding our fee per million performance this quarter.

For cash rate products, fees per million were up 4%, primarily due to an increase in European and Australian government bond fees per million. For long-tenor swaps, fees per million were down 2%, primarily due to a slight increase in compression as well as a 3% decline in duration. For cash credit, average fees per million decreased 12% due to a mix shift away from [indiscernible] and sessions traded.

For cash equities, average fees per million were flat due to lower U.S. ETF fees per million, given an increase in notional per share traded. Recall in the U.S., we charge per share and not for notional value traded. This was offset by a mix shift towards higher fee per million EU ETFs. And finally, within money markets, average fees per million decreased 8%, driven by a mix shift away from higher fee per million U.S. CDs and towards our growing institutional repo business.

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 second quarter increased 25.8% on a reported basis and 27% on a constant currency basis. Adjusted compensation cost increased 32.2% due to increases primarily in performance-related compensation, headcount and severance. Excluding $2.9 million related to severance, compensation costs increased 29.4%. Technology and communication costs increased 29.6%, primarily due to our previously communicated investments in data strategy and infrastructure.

Adjusted professional fees increased 6%, mainly due to an increase in consulting costs. We expect professional fees to continue to grow over time as we spend more on technology consulting to support our organic growth. General and administrative costs increased due to a pickup in travel and entertainment, which on a reported basis was partially offset by FX gains year-on-year.

Favorable movements in FX resulted in a $1.7 million gain in the second quarter of '24 versus a $150,000 loss in the second quarter of '23. Slide 12 details capital management and our guidance. On our cash position and capital return policy. We ended second quarter in a strong position with a $1.72 billion in cash and cash equivalents, and free cash flow reached approximately $722 million for the trailing 12 months.

Recall, we intend to pay $785 million in cash consideration for ICD once it closes. Our net interest income of $21 million increased due to a combination of higher cash balances and interest yields. This was primarily driven by the higher interest rate environment and more efficient management of our cash. With this quarter's earnings, the Board declared a quarterly dividend of $0.10 per Class A and Class B shares.

Turning to updated guidance for 2024. In light of strong business momentum and the anticipated closing of ICD shortly, we are increasing our adjusted expense guidance from $805 million. We now expect to be in the $830 million to $860 million range for 2024. Including the anticipated closing of ICD, we are currently trending towards the midpoint of this range, which would represent an approximate 22% increase versus our 2023 adjusted expenses.

Focusing on organic growth, the midpoint of this range would represent an approximately 16% increase. Bridging the gap from $805 million to the midpoint of our new range, 63% of this increase is coming from the inclusion of ICD with 30% and 7% coming from better business momentum and the recently announced management changes, respectively.

Provided that ICD closes shortly, revenue from ICD is expected to be approximately $40 million over the next 5 months. Recall, we plan to invest in technology and marketing during the first 12 months post closing, which we expect may temporarily push ICD's adjusted EBITDA margin down to 47% to 49%. All in, primarily factoring in the better business momentum, we now expect our 2024 adjusted EBITDA margin expansion to slightly exceed 2023 levels. At the same time, we expect to capitalize on the anticipated healthy revenue environment by accelerating investments to support our current and future organic growth.

This includes infrastructure-related investments such as further enhancements to our global credit tech stack, expanding our integration capabilities to allow for cloud-based Python integration and retail platform enhancements to support the growth in trading activity we've seen in recent years. We are also selectively making small investments in emerging digital technologies such as blockchain and digital assets in order to leverage and benefit from their technical expertise without having to make significant investment to experiment in-house.

We now expect our CapEx and capitalized software development to be about $77 million to $85 million for 2024. Acquisition and Refinitiv transaction-related D&A, which we adjust out due to the increase associated with pushdown accounting is now expected to be $158 million. We continue to expect 2024 and 2025 revenues PAUSE generated under the new master data agreement with LSEG to be approximately $80 million and $90 million, respectively.

Now I'll turn it back to Billy for concluding remarks.

[William Hult, executive]

Thanks, Sara. Tradeweb thrives unchanged, and we look forward to solving complex problems. Change can happen very fast or very slowly, but we want to be that trusted partner that our clients look towards to drive innovation in the market. It's a great time to be in the risk intermediation business. I feel good about our future growth outlook.

With a couple of important month-end trading days left in July, which tend to be our strongest revenue days, average daily revenue growth is trending at a high teens growth rate relative to July 2023. The diversity of our growth remains a theme. We are seeing strong volume growth across global government bonds, mortgages, interest rate swaps, corporate credit and repos. Our IG and high-yield share are trending above 18% and 7%, respectively, in July.

I would also like to welcome Amy Clock to the team, who will be joining Tradeweb in August as Chief Administrative Officer and as a member of the Executive Committee. Amy brings more than 25 years of experience and will oversee operations, business integration risk and corporate services.

Finally, I would like to conclude my remarks by thanking our clients for their business and partnership in the quarter, and I want to thank my colleagues for their efforts that contributed to the best second quarter revenues and volumes at Tradeweb. With that, I will turn it back to Ashley for your questions.

[Ashley Serrao, executive]

Thanks, Billy. As a reminder, please limit yourself to 1 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.

[Operator]

[Operator Instructions] Our first question comes from the line of Craig Siegenthaler of Bank of America.

[Craig Siegenthaler, analyst]

We had a question on a key competitive advantage. Tradeweb's ability to provide a one-stop shop platform across multiple asset classes. So how important is the wide asset class offering to your sales pitch and ability to penetrate traders on the buy side? And also to what degree has multi-asset trading become more or less common over time..

[William Hult, executive]

Yes. Craig, good to hear your voice. [indiscernible] hear you on the question, I've been saying this like pretty clearly for a while that technology is making the markets more connected than ever, and Tradeweb is really well positioned because of our product depth as being this kind of like one-stop shop. I said it on CNBC. And actually it was like that sounds amazing, maybe just don't say shop, say, platform because this isn't like the '90s. You're not going to go home and watch signs all at night.

But the thesis, I think you understand really well. And so when we think about this for a moment, I would say kind of part of the company's history forever. So let me just say this very clearly, like for sure, being in government bonds way back when helped us get into, for example, TBA mortgages being in European government bonds helped us get into European slots. Then there's sort of like more kind of seismic moments where we wanted to get into interest rate swaps at a point in time where the Fed was cutting rates and mortgage originators became this like massive consumer of interest rate swaps and kind of -- kind of put us on the map, so you can kind of feel the history in terms of what I'm describing in terms of our commitment to multi-asset class trading.

When we think about like today for a moment, from our perspective, the stats are basically 16% of global AUM is now sitting in multi-asset bonds. That's up from about 10% in 2018, we think that's going to kind of trend continually higher. From our perspective, Craig, for a second, on a firm level, I think the stats are around 60% of our clients trade at least 2 products and about 1 in 5 trade at least 5 products. So those are pretty kind of interesting numbers.

On a trader level, it's even a little bit more interesting. 30% of our traders are now trading [indiscernible] products with us. We can understand that. If you think about like the macro businesses, that makes a lot of sense. And over 10% of our traders trade over 5 products, right? I think -- it was Sameer that gave me a stat that we actually have 1 trader who's now trading like 11 different markets with us, like I think that guy needs like at least 5 [indiscernible] from Tradeweb.

But those are the stats. And I would say just very straightforward from me, the stats matter and then there is the kind of the Ethos piece of this, which is part of how we build and grow businesses here. So when we wanted to get into credit and we saw that there was a door opener for us to compete in credit, if the question is when you walk into PIMCO and you're a partner to them in terms of building a mortgage business, does it help us make a sale into credit 100% because I think that there is a reality that credibility leads to opportunity. I think that's a straightforward comment. Credibility leads to opportunity.

And then in the balance of the world, when we think about the firm's relationships with the sell side and you think about the big banks and we think about how the firm interfaces with the [indiscernible] of the world or the Troy at JPMorgan or Ashok at Goldman, I can't leave out Andy Morton. Look, we interface really well. I think we're partly that's because we have a very strategic resonance with them when you think about the businesses that we're in. And when you think about how those businesses kind of touch their P&L. And so that's been a big advantage for us in a certain way forever.

And you kind of even heard what we're doing, for example, if you think about the money market business and how it sort of funnels through all of the markets that we are in, the ability for us to connect kind of our repo world into interest rate swaps. You're talking about 2 roles that have been kind of historically pretty sleepy. And now we're showing like massive innovation in terms of how those markets are operating. So my instinct is -- it's been a big advantage for us. And the very strong instinct is given the trend of technology in the way these markets are sort of more connected than ever, it's a further advantage for us as we continue to grow our market share and build ourselves into new markets. So that's the view. I appreciate the question, Craig. Thank you.

[Operator]

Our next question comes from the line of Ben Budish of Barclays.

[Benjamin Budish, analyst]

Billy, in your prepared remarks, you called out a number of stats on portfolio trading, the growth in ADV, increasing number of line items, the largest portfolio trade ever on your platform. I was wondering if you could talk about kind of your medium- to longer-term outlook for the protocol. How is usage changing. What are these new types of firms engaging with portfolio trades that are -- that weren't before? And how are some of the newer market makers, the large trading firms that are joining the platform recently? How are they engaging with the protocol?

[William Hult, executive]

Yes. So it's a good question, Ben. How are you -- so we're positive on portfolio trading, right? And because the thesis is -- and you guys have kind of heard me say this very clearly, we stand for balance, right? So we love the concept of ultimately, the buy side acting like the buy side and the banks acting as market makers, we think that there's going to be significant volume that goes through in that basic direction. And so from our perspective, portfolio trading now represents a little bit less than 10% of TRACE in the second quarter of '24. That's up from 5% in the second quarter of '23.

We're getting a lot of sort of opinions that, that can land in that sort of like 20% to 25% zone of total TRACE volume. I have an instinct that it can be higher. Again, thinking about the concept of balance, the banks coming back into the equation from an electronic perspective. And then the concept of of kind of risk trading really kind of entering into that protocol is a big deal, right? So when we think about the progression of it all, right, originally, if you remember, the protocol was sort of built for asset managers for kind of month or quarter end rebalancing kind of period. It's shifted and changed a lot from there, right? So now you have hedge fund clients using the protocol for how we think about risk on trade, tactical trades.

More recently, we've seen insurance firm using it for asset liability management. These are like pretty big kind of progressions in terms of behavior. Your second part of the question is quite interesting, right, because now we're seeing and we're talking about the emergence of how we think about sort of the alternative market makers. I think that's still the right way to describe them, but the alternative market makers kind of entering the space with a lot of emphasis around technology, we think about sort of the Citadels of the world, the changes of the world that are doing an excellent job in terms of warehousing risk.

[indiscernible] has been very clear about their plans. I think Doug used the word Switzerland to describe himself in terms of his relationship between Tradeweb and Market Access. I'm going to -- I always thought we were kind of Switzerland, but I'll have that conversation with him off-line. But they're very, very important players in the space, right? You have these kind of firms filling a void. You do not have the sort of legacy kind of traditional way of doing business kind of issues. And then you have companies that have significant DNA and expertise and experience on the anonymous side of the trading world getting into disclosed trading and the wallet around disclosed trading, and that's a big deal.

So my instinct is they're going to take the concept and the premise of portfolio trading very seriously. And that's a big deal for us in terms of how we partner with them going forward. So feeling quite good about directionally where we're going with portfolio trading, and thanks for the question.

[Operator]

Our next question comes from the line of Tyler Muller of William Blair.

[Unknown Analyst]

This is Tyler Mueller on for Jeff Schmidt. We were curious, what has the client response been to the rollout of RFQ Edge? Is the additional functionality in analytics helping penetration of larger block trades.

[William Hult, executive]

Sure. Tyler, good question. Well, by the way, I love the sort of RFQ Edge. I think that's a great kind of marketing protocol for the company. It's early days, and it's a good question. The initial feedback has been quite positive. From our perspective, the enhancements are all about kind of adding analytics, real-time charging into the RFQ ticket. We think that like directionally investing in clients more upstream is important. That's a very kind of strong kind of strategic move for us. RFQ Edge enhancements, they basically reflect similar analytics to what we provide to our clients across portfolio trading.

It allows you to trade with multiple dealers and the all-to-all market all at once. Again, it's all about sort of enhancing and investing into the client experience. We have a few clients who are utilizing it like a portfolio trade, where they're going to fewer dealers sending larger sized trades, fewer dealers, larger sized trades, that concept of sort of information leakage, minimizing information leakage. These are like very, very important principles and something that we've invested in for a long time, really understanding client flow, I think in a very straightforward way. That's the ultimate edge for us. So we're feeling good about that protocol early days, more to come on it and appreciate the question.

[Operator]

Our next question comes from the line of Chris Allen of Citi.

[Christopher Allen, analyst]

I want to talk about the third-party market data business a little bit. I'm wondering what the kind of key growth drivers are here. Any new products you may be able to introduce now, how are you maybe able to expand the penetration of existing products? And also, can you kind of remind us some of the mix today between different data offerings and how much they contribute.

[Sara Furber, executive]

Sure. Chris, it's Sara. Thank you for the question. Market Data has been a great business for us. And I think as we always talk about first and foremost, our top priority with utilizing market data is to improve the execution for our clients. But obviously, we have direct [indiscernible] of market data as well. In the second quarter, we had about $29 million of revenue overall for Market Data. The bulk of that, about $20 million coming from [indiscernible] and $9 million in the quarter from the third-party data line that you're asking about.

That line, obviously, a much smaller base, but it's grown really nicely for us, about 17% over the last 5 years on average. If you think about what's in that bucket, there a few components. The biggest element driving that third-party line is really pricing product. So pricing would constitute about 60% of that $9 million and it's really things like benchmark and reference products. So think about our ability to have a closing price on U.K. Gilt or U.S. treasuries. Newer products like INAV, our intraday ETF type of pricing. New AI pricing. This concept of creating benchmarks and then ultimately, in terms of a growth strategy, as they get further adopted, it adds growth in 2 ways: one, directly from licensing fees as you create indices as people consume closing and reference prices, but also increased trading flow, which obviously is great for our other lines.

That's the biggest bucket. That's the biggest growth driver, the thing we're most excited about, obviously partnered with FTSE, which is owned by [indiscernible] to do a lot of that. The other components in that line are really around analytics and some post-trade regulatory-type products, things like PCA. So I think, overall, we're quite bullish in our ability to grow the opportunity here. There's new types of licensing reference data that we can create. In some ways, it's limitless. Any asset class that we're trading, we can help create a closing price or benchmark for. It doesn't happen overnight. But you can see in terms of that model, you can create more products. And then as it gets further and further entrenched in the network, more adoption, then there's inherent growth. And we're seeing the benefit of both of those things in that line today. Thanks for the question.

[Operator]

Our next question comes from the line of Alex Blostein of Goldman Sachs.

[Alexander Blostein, analyst]

So I wanted to talk a little bit more about the interest rate swap business. I know it's a topic that come up a bunch in the past, and I've asked you guys this numerous times in the past as well. But it seems like this business just kind of continues to set new records and second quarter was an exception of that. So what drove the strength in the second quarter? That's one. And maybe you can just kind of zoom out and talk broadly how you're thinking about the revenue growth algorithm in this business over the next couple of years because it seems like it continues to do much better than what the baseline should be.

[William Hult, executive]

It's been a great kind of environment for us, obviously, Alex, and it's a very good question. So was kind of like the second quarter is almost like a perfect microcosm of like what our clients care about the most. There's geopolitical uncertainty, varying inflation prints, changing election odds, all of that stuff and our business has really been kind of clicking in.

It's primarily been a market share story for us, I would say. As you know very well, our swaps business, we think about it as sort of almost like a complementary to our global government bond business and our mortgage franchise. I made the point, and I want us to kind of keep thinking about this when the Fed gets into rate cut mood. Our instinct is that those sort of mortgage originators are really going to kind of step into the equation around swaps. But we've gained market share and growing revenue really kind of in 3 ways. It's first and foremost by adding new customers and migrating them from [indiscernible]. That's like Tradeweb kind of 101 stuff, and that's been a big driver of our market share.

I would say, second, it's always by kind of building new products and that, from our perspective, would be EM. And then I think very, very importantly, and I've used the expression before, micro trading protocols. So the example of that would be like request for market. We call it RFM, something like code words a trade web, but request for market, where a buy-side client can go to one dealer, ask for a 2-sided market and then trade on one side of the marketplace, it really ultimately replicates the exact behavior that large kind of macro funds trade big size in the market on. And those kind of trades would happen on the phone or through bluebird messaging and now they're happening through Tradeweb.

As we kind of plot the future a little bit, it's going to be about continued sort of success around EM swaps. We feel bullish on inflation swaps. I think swaptions is a very kind of interesting not to crack for us. And then there's going to be, again, we talked about sort of technology and this kind of concept of multi-asset pack swaps. So a lot more for us to do in the area and feeling really, really good about how we've continued to perform, gaining market share in swaps.

As you know, Alex, very well, and I sometimes feel like a little bit like the Tradeweb, I've made the joke to Tradeweb story. And this was the sort of back alley of all the rates markets -- of all the macro markets for a long time. And to see this business flourish in volatile and interesting environments has been quite rewarding for the company and feeling really good about where it's going from here. So thanks for the question. Thank you, Alex.

[Operator]

Our next question comes from the line of Patrick Moley of Piper Sandler.

[Patrick Moley, analyst]

So I had a question. FMX is launching in September. I understand that a lot of the conversation with FMX has been around the futures business, but they do have a club treasury business that you compete with currently. So I understand that -- it's not a huge part of your business, but I was just curious to get your thoughts on FMX broadly and what this new consortium of dealers in the rate space means for competition in the industry?

And then if I could add a follow-on to that, you mentioned in your prepared remarks that the [indiscernible] was starting to trend higher for you. I know that's been a business that you haven't been completely satisfied with since you bought it from Nasdaq a few years ago. So maybe if you could just expand on the strength you're seeing there and your expectations for that business going forward.

[William Hult, executive]

Yes. Patrick, good to hear your voice. Hope you're doing really well. Maybe a comment about sort of Switzerland before. I was watching CNBC yesterday with Mr. Duffy kind of talking about this business and thinking myself, there's like there's no Switzerland kind of in this moment. Howard is a big personality, kind of everyone knows that. I think we've known him well and we have a very respectful relationship both with him and with the [indiscernible]. My instinct is the kind of clear goal is to -- from FMX's perspective is to take on the incumbent in the futures market. And that's our business model, and we'll see how all of that will play out. I think it's going to play out a bit on TV, and it will be an interesting kind of story to watch.

We feel to make an obvious point, and it's a good question, we feel really, really good about the strength of our treasury business, both on the client side and on the wholesale side. I have a very strong message that I delivered to the company, which is be super conscious and super aware of the competitive landscape. And so to make an obvious point, very well aware of everything that Howard has done in this space and continues to try to do in this space.

Be super aware of the competitive landscape, but live and breathe with your clients and always make that the most straightforward focus. So our wholesale business on the treasury side continues to do extremely well. From your question about the cloud versus the streaming business, we continue to do exceptionally well in terms of growing our streaming business. The r8fin acquisition has been helpful to us, not surprisingly in all of that. I think we do still have work to do on the CLOB. I think that is an important piece of the market. There have been market share shifts in the CLOB world. And this company sort of executes and from our perspective, we want the company to continue to kind of click on all cylinders. And that's an area where we tend to roll up our sleeves a little bit and make sure that we're pressing the right buttons in the CLOB and investing there correctly and hiring the right people and moving that business forward.

As you know very well, this is a company that stays quite focused. And there's enough news out there is the good piece of it. We're going to stay very, very focused. We're going to kind of sit back and see what happens around the kind of futures market in terms of all of that and then stick to our knitting, stay close with our clients and continue to do really well in our wholesale business. Thanks for the question. Good to hear your voice.

[Operator]

Our next question comes from the line of Brian Bedell of Deutsche Bank.

[Brian Bedell, analyst]

Maybe just -- not to focus too much on the short term here, but just your comments for July, Billy, on investment grade and high yield market share looks like a little lower than June. Maybe just if you can comment on what you think may be driving that? Is it more of a shift in the business mix, either environmental or due to portfolio trading or within the client base dealer to institutional?

[William Hult, executive]

Yes. Good question and fully get you. Don't read too much into that -- into those numbers yet. I mean, generally speaking, we tend to kind of wind up outperforming from a market share perspective in that arena around some of those portfolio trading protocols towards the end of the month. I think we're going to wind up in a very good place when you see our all-in July numbers.

I think you're going to see continued sort of growth of portfolio trading, which is, from our perspective, our kind of go-to protocol and something that we kind of thrive in. So I don't think you're going to see a big kind of disconnect when all is said and done. Feeling really good about where we are in credit. And I think that's important to say that the Aladdin integration remains a high priority for us as a company, onboarding the right market makers in high yield when we get into the open trading environment, that's an important concept for us. We've talked about that a lot. And we're going to continue to thrive in that portfolio trading world where we talk about the balance of it all, the big buy-side clients acting like the buy side and the dealers investing in market makers, the alternative market makers arriving on the scene. From our perspective, these are quite good forward trends for our credit business, and that's where our focus is going to stay.

Good question, and thank you.

[Operator]

Our next question comes from the line of Ken Worthington from JPMorgan.

[Kenneth Worthington, analyst]

I wanted to focus on business environment, maybe part 1, as you mentioned to Alex's question, it's been election season globally, how is the election season impacted activity levels, given some changes in Europe already? And are there any clear takeaways from a Harris or Trump presidency for Tradeweb in U.S. markets? And then maybe part 2 is we've seen bond issuance in net sales into fixed income funds increased substantially in '24 versus '23 levels. How should we expect higher issuance in sales to translate into investment grade or high-yield trading volume from Tradeweb from a timing and magnitude perspective?

[William Hult, executive]

Yes. Sure, you've got it just like had like an incredible kind of 6 weeks. And I feel like the story is changing constantly. As we said before, I think healthy debate in the market is good for our business. And so obviously, we saw some record revenue days in June. We talked about the concept of geopolitical uncertainty, the different bearing inflation prints. I think -- and look, you always get the straight answer for me to start with, I'm not an economist. I think the Fed is going to cut no matter who the President is. I'll say that. I think that's going to wind up being quite good for our business.

I think you're going to get sort of different policy, obviously, but my instinct is global debt is rising. And I talk about the concept of, I think, very importantly, the Fed playing a lesser role in the markets that Tradeweb lives and breathes in. And so that leaves us with this feeling sort of no matter the election results that private sector risk intermediation is back in vogue. I do think you're going to see continued strong levels of issuance of debt issuance going forward. And my instinct is markets like high yield are going to have a pickup in volume, a pickup of activity as we get into '25. Not to make you laugh, that those are my thoughts.

I feel like I've had 10 different thoughts about what was going to happen over the last month and I'm sure kind of everyone on this call has too. So it's been a little bit in a human way I can say this. It's been a little bit of a challenging time with all the things happening in the world. And so we remind ourselves how lucky we are sometimes. But it's been a tough couple of months just in terms of all the events in the world. That's a great question. Thank you.

[Kenneth Worthington, analyst]

Appreciate your perspective.

[Operator]

Our next question comes from the line of Daniel Fannon of Jefferies.

[Daniel Fannon, analyst]

Within high yield, you mentioned in your prepared remarks, expanding your client network is kind of key to growth. Can you impact where your current strengths are today and what client segments you're targeting to actually get that future growth? And maybe how does the Aladdin partnership accelerate that?

[William Hult, executive]

Yes. So that's a good question, Dan. Straightforward strengths, probably not surprising to you at all. We would say are like the long-only asset managers. I'm going to push the team with Sara around continuing to form kind of deeper relationships with the ETF market makers. They're obviously extremely important in the high-yield business. I think we've done very well with them. They're critical. So we're going to keep kind of extremely focused there. Hedge funds and private banks in terms of like liquidity taking very important kind of institutions in the space. We're focused on Aladdin because we think it's going to help kind of round out that responder network in a way that's going to work for us and the perception around making sure that we have best-in-class liquidity in high yield.

And I say this to you because it's always sort of a two-pronged approach. As we do that, there's going to be a continued message around the benefits of portfolio trading, which we think we're going to see continued growth, particularly in the high yield area around portfolio trading. So we want to make sure we're kind of thinking about that marketplace from 2 different protocols the right way. And then we're going to be very focused always on the client base.

So deeper relationships inside of that ETF money market, ETF market maker world, and make sure we have the right responders in, which is partly why that Aladdin integration means so much to us.

[Sara Furber, executive]

And Billy maybe just one other area we've talked about in the past as well. When we think about the client base, we've spent a lot of time and energy and continue to focus on building out our EM platform. That's another area. I think we see some benefit in terms of high yield expansion. There's a big overlap there in some of those traders.

[William Hult, executive]

Yes, thank you Sara. Thanks for the question.

[Operator]

Our next question comes from the line of Kyle Voigt of KBW.

[Kyle Voigt, analyst]

So with ICD likely to close within the next week or so, just wondering if you can update us on your appetite for incremental M&A from here, especially given that we still have a significant amount of balance sheet flexibility post close. And with respect to ICD. Can you just remind us of the integration time line there? It sounds like there may be some incremental investment upfront. So how can we think about the margin trajectory after that?

[Sara Furber, executive]

Yes, that's great. So I was laughing, thinking Billy answer to this M&A question last quarter. Look, M&A -- let me start with the first part of your question. We think M&A is a tool just like organic growth as a tool, partnerships and investments are tools to implement our strategic objectives. We've done 3 acquisitions, if you include ICD in the last 18 months, and we're focused on doing those well, which means executing and integrating. So it's obviously like top of mind, and I'll talk a little bit more specifically around the plans of ICD.

That said, while we do that, we constantly are focused on achieving our strategic objectives. So we're going to be disciplined about looking at other opportunities, but we're going to continue to look at that tool and balance executing well. We will continue to be opportunistic and grow our company. We think we're on our foot. We have a great balance sheet. We have a great stock, but we're going to be very disciplined about it. Hopefully, you've seen that in the few ones that we've pursued so far.

ICD specifically, we expect to close shortly. In terms of where we are, I think we've talked a little bit about the margin expectation for ICD out of the gate is probably a little bit lower than where ours is right now, 47% to 49%, I think, is the range that we've talked about. That's really reflecting our increased investment in that platform. Strategically, the business is performing very well. And in the client dialogue that we've had, we've been really pleased that our thesis around their desire for our types of products, really, that receptivity and that strength of the client relationship, the ICD client managers have has been really strong.

So in terms of where we're headed, I think the opportunity for us in the near term and medium term is really around driving those revenue synergies, really taking our international footprint, introducing ICD into that client base and then obviously, it was going to take a little bit longer, but certainly on our 12- to 18-month technology road map and some of it will happen sooner, it's not a big bang, it's introducing connectivity to our platform. So those corporate treasurers can buy our products. They've had interest. We will likely start with U.S. treasuries, which we think we're very well placed to do.

But you can see how once you're in a mode on that portal of actually transacting and these corporate treasurers are transacting today in our products, U.S. treasuries can go to CDs, can go to CP, can go to corporate bonds, there's a whole range of outcomes that we see over the medium term, and we're quite excited about that opportunity.

[William Hult, executive]

And Sara, we talked a lot about sort of the importance of -- for the management team and the cultural fit, maybe just a minute from you just on how impressive we've been with that management team starting with Tory.

[Sara Furber, executive]

Yes. I mean the management team, starting with Tory, who's CEO of ICD, we have been able as a broader team to spend a great deal of time with not only in the diligence process, but one of the benefits I joke because it's obviously time consuming, but one of the benefits of having done these 3 acquisitions in a short time period is we've really honed our playbook and been able to connect with the management teams, ICD and [indiscernible] at every level.

So Billy mentioned Tory, but it goes from the heads of products, the CTOs, CMOs and obviously, through the finance and broader parts of the organization. So the talent that we are bringing on board as partners to grow our platform, we are really excited about. And I think having been on in part of a number of acquisitions, that cultural fit, the mindset that focus on clients that's one of the things that makes acquisitions even more successful.

So I think Billy is right to point out the talent is high, but the cultural fit in the way that we approach serving our clients is actually a tremendous fit that makes us even more enthusiastic than we were when we announced the deal.

[Operator]

Our next question comes from the line of Michael Cyprys from Morgan Stanley.

[Michael Cyprys, analyst]

Just wanted to circle back to your earlier comments on the investments you're making in emerging technology. I was hoping you could elaborate a little bit on that. What are your aspirations there? And if successful, what does that look like? I think one of the things you were articulating with blockchain. So I guess just related to that, how do you see the potential for a blockchain in your markets and your business over the long term?

[Sara Furber, executive]

Sure. Thanks for the question. I think digital assets and emerging technologies are really interesting point in the cycle. We've spent years really looking at the space and being very disciplined about how we spend our capital. But increasingly, part of our strategy is to partner and invest. Those technologies don't have to be born and created in-house for us to really avail ourselves of it. And blockchain is a perfect example.

From our seat, leveraging distributed ledger technology like blockchain obviously has a lot of impact in trading businesses in terms of eliminating manual reconciliations, reducing cost of transactions and we want to be on our front foot about figuring out how that gets leveraged and how we learn. Those things also have ecosystems just like our markets today in the more traditional space have ecosystems. And so 2 investments that we've done recently, 1 with Canton Network, which is a blockchain network, the other around alpha ledger, which is actually a blockchain infrastructure both are giving us different seats at the table and seeing how that technology can be utilized for either issuance or trading of securities in alpha ledgers cases around brokered CDs and Canton, which is like a much more well-understood network really around how that ecosystem scales and create interoperability for digital assets. So I think it's still early days around these emerging technologies, but certainly, we're positioning ourselves to be an important player as that market evolves, whether it's a digital assets trading on the blockchain or some more traditional.

[William Hult, executive]

And Michael, Sara described that perfectly, I would say, like when you build markets, you learn sort of an aspect of pragmatism pretty quickly. And so we're always sort of thinking about like how some of these things pragmatically can live and fit in our marketplace. Sara and I talk about this all the time, we're going to describe for you sort of 2 markets that feel like they have sort of the type of market or the type of settlement process that could really kind of benefit from some of these technologies that are clearly so important. And you specifically mentioned blockchain, we would sort of point out obviously, first to start with the repo market.

And then the second market that we would probably point out, and we think this market is going to become more and more important over the next couple of years is if you think about how the TBA market kind of traditionally settles. I think the feeling is there are going to be sort of blockchain technologies that could create more efficiencies in that market over time. The key and most important kind of words around that would be over time because I do think it will take time for that kind of technology to get applied pragmatically into our world, but the opportunity in a really interesting way is there. An excellent question, Michael, thanks.

[Operator]

Our next question comes from the line of Alex Kramm of UBS.

[Alex Kramm, analyst]

Just wanted to come back to portfolio trading and credits one more time. When I talk to some of your largest buy side clients, they totally agree that this protocol is going to get bigger. So that sounds great. But at the same time, obviously, you have very dominant market share in that business. And when I talk to those clients, they definitely say like, look, over time, we do like competition. We're going to have to spread all off a little bit more. So considering that, that's a very concentrated market right now, and I don't think it has as much network effect than maybe RFQ [indiscernible] has. Is that something that worries you? And how do you think you can defend that as, again, maybe it's a little bit more of a workflow than a real network liquidity.

[William Hult, executive]

That's a really good question. I mean I think like really, in a certain way, kind of agree with a lot of your thesis. First of all, with like the way that the buy-side clients are embracing that protocol. I think that's like spot on. And I think you hear me loud and clear around the importance of the sort of balance around the ecosystem. We're going to do sort of exactly what you would expect us to do, which is to sort of continue to enhance and innovate and do things around technology to enhance the clients' experience with portfolio trading.

We're also going to remind our bank partners that it's not that we created this portfolio for you guys, but absolutely, we went out of our way in a very straightforward concept to bring the big banks back into the equation, and we do think we've gotten a lot of support as we've done that. So I think the forward trend is going to be continued sort of market share growth around portfolio trading. I think we have our ways to sort of defend that forward. It's a big focus for the company to make sure we stay and we will stay as the leading venue for portfolio trading. So we're focused on it.

And my general feeling is we're going to show continued market share strength in portfolio trading.

[Operator]

Thank you. This concludes the question-and-answer session. I would now like to turn it back to CEO, Billy Hult for closing remarks.

[William Hult, executive]

Thank you all very much for joining us this morning. Great questions, as always. Any follow-up, please obviously, feel free to reach out to Ashley, Sameer and our great team. Thank you all. Have a great day. Bye-bye.

[Sara Furber, executive]

Thank you.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.