false Q1 0001278021 --12-31 true 1 P1M P1Y P2Y 1 P12Y P12Y3M18D 0001278021 2021-01-01 2021-03-31 xbrli:shares 0001278021 2021-04-23 iso4217:USD 0001278021 2021-03-31 0001278021 2020-12-31 0001278021 us-gaap:SeriesAPreferredStockMember 2021-03-31 0001278021 us-gaap:SeriesAPreferredStockMember 2020-12-31 iso4217:USD xbrli:shares 0001278021 us-gaap:NonvotingCommonStockMember 2021-03-31 0001278021 us-gaap:NonvotingCommonStockMember 2020-12-31 0001278021 mktx:CommissionRevenueMember 2021-01-01 2021-03-31 0001278021 mktx:CommissionRevenueMember 2020-01-01 2020-03-31 0001278021 mktx:InformationServicesMember 2021-01-01 2021-03-31 0001278021 mktx:InformationServicesMember 2020-01-01 2020-03-31 0001278021 mktx:PostTradeServicesMember 2021-01-01 2021-03-31 0001278021 mktx:PostTradeServicesMember 2020-01-01 2020-03-31 0001278021 mktx:OtherRevenuesMember 2021-01-01 2021-03-31 0001278021 mktx:OtherRevenuesMember 2020-01-01 2020-03-31 0001278021 2020-01-01 2020-03-31 0001278021 us-gaap:CommonStockMember 2020-12-31 0001278021 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001278021 us-gaap:TreasuryStockMember 2020-12-31 0001278021 us-gaap:RetainedEarningsMember 2020-12-31 0001278021 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001278021 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001278021 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001278021 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001278021 us-gaap:TreasuryStockMember 2021-01-01 2021-03-31 0001278021 us-gaap:CommonStockMember 2021-03-31 0001278021 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001278021 us-gaap:TreasuryStockMember 2021-03-31 0001278021 us-gaap:RetainedEarningsMember 2021-03-31 0001278021 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001278021 us-gaap:CommonStockMember 2019-12-31 0001278021 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001278021 us-gaap:TreasuryStockMember 2019-12-31 0001278021 us-gaap:RetainedEarningsMember 2019-12-31 0001278021 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001278021 2019-12-31 0001278021 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001278021 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001278021 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001278021 us-gaap:TreasuryStockMember 2020-01-01 2020-03-31 0001278021 us-gaap:CommonStockMember 2020-03-31 0001278021 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001278021 us-gaap:TreasuryStockMember 2020-03-31 0001278021 us-gaap:RetainedEarningsMember 2020-03-31 0001278021 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001278021 2020-03-31 0001278021 mktx:MutualFundsHeldInRabbiTrustMember 2021-01-01 2021-03-31 0001278021 mktx:MutualFundsHeldInRabbiTrustMember 2020-01-01 2020-03-31 mktx:Institutional_Investor_and_Broker-dealer_Firm 0001278021 srt:MinimumMember 2021-03-31 0001278021 srt:MaximumMember 2021-01-01 2021-03-31 0001278021 srt:MinimumMember 2021-01-01 2021-03-31 0001278021 srt:MinimumMember us-gaap:SoftwareDevelopmentMember 2021-01-01 2021-03-31 mktx:Revenue 0001278021 us-gaap:USTreasurySecuritiesMember mktx:CommissionRevenueMember 2021-01-01 2021-03-31 0001278021 us-gaap:USTreasurySecuritiesMember mktx:CommissionRevenueMember 2020-01-01 2020-03-31 0001278021 mktx:InformationServicesMember us-gaap:TransferredOverTimeMember 2021-01-01 2021-03-31 0001278021 mktx:InformationServicesMember us-gaap:TransferredOverTimeMember 2020-01-01 2020-03-31 0001278021 mktx:InformationServicesMember us-gaap:TransferredAtPointInTimeMember 2021-01-01 2021-03-31 0001278021 mktx:InformationServicesMember us-gaap:TransferredAtPointInTimeMember 2020-01-01 2020-03-31 0001278021 mktx:PostTradeServicesMember us-gaap:TransferredOverTimeMember 2021-01-01 2021-03-31 0001278021 mktx:PostTradeServicesMember us-gaap:TransferredOverTimeMember 2020-01-01 2020-03-31 0001278021 mktx:PostTradeServicesMember us-gaap:TransferredAtPointInTimeMember 2021-01-01 2021-03-31 0001278021 mktx:PostTradeServicesMember us-gaap:TransferredAtPointInTimeMember 2020-01-01 2020-03-31 0001278021 mktx:InformationServicesMember 2020-12-31 0001278021 mktx:PostTradeServicesMember 2020-12-31 0001278021 mktx:InformationServicesMember 2021-03-31 0001278021 mktx:PostTradeServicesMember 2021-03-31 0001278021 2021-04-01 2021-03-31 0001278021 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember srt:MinimumMember 2021-01-01 2021-03-31 0001278021 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember srt:MaximumMember 2021-01-01 2021-03-31 0001278021 us-gaap:FairValueInputsLevel1Member 2021-03-31 0001278021 us-gaap:CorporateDebtSecuritiesMember us-gaap:FairValueInputsLevel2Member 2021-03-31 0001278021 us-gaap:CorporateDebtSecuritiesMember 2021-03-31 0001278021 mktx:MutualFundsHeldInRabbiTrustMember us-gaap:FairValueInputsLevel2Member 2021-03-31 0001278021 mktx:MutualFundsHeldInRabbiTrustMember 2021-03-31 0001278021 us-gaap:ForeignExchangeContractMember us-gaap:FairValueInputsLevel2Member 2021-03-31 0001278021 us-gaap:ForeignExchangeContractMember 2021-03-31 0001278021 us-gaap:FairValueInputsLevel2Member 2021-03-31 0001278021 us-gaap:FairValueInputsLevel1Member 2020-12-31 0001278021 us-gaap:CorporateDebtSecuritiesMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0001278021 us-gaap:CorporateDebtSecuritiesMember 2020-12-31 0001278021 mktx:MutualFundsHeldInRabbiTrustMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0001278021 mktx:MutualFundsHeldInRabbiTrustMember 2020-12-31 0001278021 us-gaap:ForeignExchangeContractMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0001278021 us-gaap:ForeignExchangeContractMember 2020-12-31 0001278021 us-gaap:FairValueInputsLevel2Member 2020-12-31 0001278021 us-gaap:CashAndCashEquivalentsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:CashAndCashEquivalentsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:CashAndCashEquivalentsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:CashAndCashEquivalentsMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:CashSegregatedUnderFederalRegulationsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:CashSegregatedUnderFederalRegulationsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:CashSegregatedUnderFederalRegulationsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:CashSegregatedUnderFederalRegulationsMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:AccountsReceivableMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:AccountsReceivableMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:AccountsReceivableMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:AccountsReceivableMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:PayablesToBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:PayablesToBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:PayablesToBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 mktx:PayablesToBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueMeasurementsNonrecurringMember 2021-03-31 0001278021 us-gaap:CashAndCashEquivalentsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:CashAndCashEquivalentsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:CashAndCashEquivalentsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:CashAndCashEquivalentsMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:CashSegregatedUnderFederalRegulationsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:CashSegregatedUnderFederalRegulationsMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:CashSegregatedUnderFederalRegulationsMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:CashSegregatedUnderFederalRegulationsMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:AccountsReceivableMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:AccountsReceivableMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:AccountsReceivableMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:AccountsReceivableMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:PayablesToBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:PayablesToBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:PayablesToBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:PayablesToBrokerDealersClearingOrganizationsAndCustomersMember us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0001278021 mktx:RegulatoryServicesGMBHOfDeutscheBorseGroupMember 2020-11-30 2020-11-30 0001278021 mktx:RegulatoryServicesGMBHOfDeutscheBorseGroupMember 2020-11-30 0001278021 mktx:RegulatoryServicesGMBHOfDeutscheBorseGroupMember srt:MaximumMember 2020-11-30 0001278021 mktx:MuniBrokersLimitedLiabilityCompanyMember us-gaap:SubsequentEventMember 2021-04-09 2021-04-09 0001278021 mktx:MuniBrokersLimitedLiabilityCompanyMember srt:MaximumMember us-gaap:SubsequentEventMember 2021-04-09 0001278021 us-gaap:IndefinitelivedIntangibleAssetsMember 2021-03-31 0001278021 us-gaap:IndefinitelivedIntangibleAssetsMember 2020-12-31 0001278021 us-gaap:CustomerRelationshipsMember 2021-03-31 0001278021 mktx:TechnologyAndOtherIntangiblesMember 2021-03-31 0001278021 us-gaap:CustomerRelationshipsMember 2020-12-31 0001278021 mktx:TechnologyAndOtherIntangiblesMember 2020-12-31 xbrli:pure 0001278021 us-gaap:EarliestTaxYearMember us-gaap:NewYorkStateDivisionOfTaxationAndFinanceMember 2021-01-01 2021-03-31 0001278021 us-gaap:LatestTaxYearMember us-gaap:NewYorkStateDivisionOfTaxationAndFinanceMember 2021-01-01 2021-03-31 0001278021 us-gaap:EarliestTaxYearMember mktx:NewYorkCityDivisionOfTaxationAndFinanceMember 2021-01-01 2021-03-31 0001278021 us-gaap:LatestTaxYearMember mktx:NewYorkCityDivisionOfTaxationAndFinanceMember 2021-01-01 2021-03-31 0001278021 mktx:EmployeeCompensationPlanMember 2021-01-01 2021-03-31 0001278021 mktx:EmployeeCompensationPlanMember 2020-01-01 2020-03-31 0001278021 mktx:NonEmployeeDirectorCompensationPlanMember 2021-01-01 2021-03-31 0001278021 mktx:NonEmployeeDirectorCompensationPlanMember 2020-01-01 2020-03-31 0001278021 mktx:EmployeeCompensationPlanMember us-gaap:RestrictedStockMember 2021-01-01 2021-03-31 0001278021 mktx:EmployeeCompensationPlanMember us-gaap:PerformanceSharesMember 2021-01-01 2021-03-31 0001278021 mktx:StockOptionsAndRestrictedStockMember 2021-01-01 2021-03-31 0001278021 mktx:StockOptionsAndRestrictedStockMember 2020-01-01 2020-03-31 0001278021 us-gaap:LetterOfCreditMember 2015-10-31 0001278021 us-gaap:LetterOfCreditMember 2015-10-01 2015-10-31 0001278021 us-gaap:LetterOfCreditMember 2020-11-13 2020-11-13 0001278021 us-gaap:RevolvingCreditFacilityMember 2020-11-13 0001278021 us-gaap:StandbyLettersOfCreditMember 2020-11-13 0001278021 us-gaap:RevolvingCreditFacilityMember 2020-11-13 2020-11-13 mktx:Extension_Option 0001278021 us-gaap:RevolvingCreditFacilityMember 2021-03-31 0001278021 us-gaap:RevolvingCreditFacilityMember 2021-01-01 2021-03-31 0001278021 us-gaap:CollateralizedDebtObligationsMember 2021-03-31 0001278021 us-gaap:CollateralizedDebtObligationsMember us-gaap:BaseRateMember 2021-03-31 0001278021 us-gaap:CollateralizedDebtObligationsMember srt:MaximumMember 2021-01-01 2021-03-31 0001278021 srt:SubsidiariesMember country:GB 2021-01-01 2021-03-31 0001278021 mktx:AccountsPayableAccruedExpensesAndOtherLiabilitiesMember srt:SubsidiariesMember country:GB 2021-03-31 0001278021 srt:MaximumMember 2021-03-31 0001278021 us-gaap:OccupancyMember 2021-01-01 2021-03-31 0001278021 us-gaap:OccupancyMember 2020-01-01 2020-03-31 0001278021 us-gaap:OtherNonoperatingIncomeExpenseMember 2021-01-01 2021-03-31 0001278021 us-gaap:OtherNonoperatingIncomeExpenseMember 2020-01-01 2020-03-31 mktx:Agreement 0001278021 mktx:PropertyOneMember 2021-01-01 2021-03-31 0001278021 mktx:PropertyTwoMember 2021-01-01 2021-03-31 0001278021 mktx:ShareRepurchaseProgramMember 2021-01-01 2021-03-31 0001278021 mktx:ShareRepurchaseProgramMember 2019-01-01 2019-01-31 0001278021 mktx:ShareRepurchaseProgramMember 2019-01-31 0001278021 mktx:ShareRepurchaseProgramMember 2021-01-31 0001278021 mktx:ShareRepurchaseProgramMember 2021-01-01 2021-01-31 mktx:Segment 0001278021 us-gaap:GeographicConcentrationRiskMember us-gaap:SalesRevenueNetMember country:GB 2021-01-01 2021-03-31 0001278021 us-gaap:GeographicConcentrationRiskMember us-gaap:SalesRevenueNetMember country:GB 2020-01-01 2020-03-31 0001278021 srt:AmericasMember 2021-01-01 2021-03-31 0001278021 srt:AmericasMember 2020-01-01 2020-03-31 0001278021 srt:EuropeMember 2021-01-01 2021-03-31 0001278021 srt:EuropeMember 2020-01-01 2020-03-31 0001278021 srt:AsiaMember 2021-01-01 2021-03-31 0001278021 srt:AsiaMember 2020-01-01 2020-03-31 0001278021 srt:AmericasMember 2021-03-31 0001278021 srt:AmericasMember 2020-12-31 0001278021 srt:EuropeMember 2021-03-31 0001278021 srt:EuropeMember 2020-12-31 0001278021 srt:AsiaMember 2021-03-31 0001278021 srt:AsiaMember 2020-12-31 0001278021 us-gaap:CashAndCashEquivalentsMember 2021-03-31 0001278021 us-gaap:CashAndCashEquivalentsMember 2020-12-31 0001278021 mktx:CashSegregatedUnderFederalAndOtherRegulationsMember 2021-03-31 0001278021 mktx:CashSegregatedUnderFederalAndOtherRegulationsMember 2020-12-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember 2021-03-31 0001278021 mktx:ReceivablesFromBrokerDealersClearingOrganizationsAndCustomersMember 2020-12-31 0001278021 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember 2021-03-31 0001278021 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember 2020-12-31

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021  

or

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number 001-34091

 

MARKETAXESS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

52-2230784

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

 

55 Hudson Yards, 15th Floor New York, New York

 

10001

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (212) 813-6000

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol

 

Name of each exchange on which registered

Common Stock, $0.003 par value

 

MKTX

 

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

Emerging growth company

 

  

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.              

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

As of April 23, 2021, the number of shares of the Registrant’s voting common stock outstanding was 37,982,694.

 

 

 


 

MARKETAXESS HOLDINGS INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

TABLE OF CONTENTS

 

 

 

  

Page

 

PART I — Financial Information

  

 

Item 1.

Financial Statements (Unaudited)

  

3

 

Consolidated Statements of Financial Condition as of March 31, 2021 and December 31, 2020

  

3

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020

  

4

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020

  

5

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020

  

6

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020

  

7

 

Notes to Consolidated Financial Statements

  

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

  

37

Item 4.

Controls and Procedures

  

38

 

PART II — Other Information

  

 

Item 1.

Legal Proceedings

  

39

Item 1A.

Risk Factors

  

39

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

  

39

Item 3.

Defaults Upon Senior Securities

  

39

Item 4.

Mine Safety Disclosures

  

40

Item 5.

Other Information

  

41

Item 6.

Exhibits

  

41

 

 

 

 

 

 

 

 

 

 

 

2


 

PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

 

As of

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(In thousands, except share

and per share amounts)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

390,915

 

 

$

460,858

 

Cash segregated under federal regulations

 

 

50,083

 

 

 

50,059

 

Investments, at fair value

 

 

24,308

 

 

 

28,111

 

Accounts receivable, net of allowance of $107 and $163 as of

   March 31, 2021 and December 31, 2020, respectively

 

 

87,452

 

 

 

79,577

 

Receivables from broker-dealers, clearing organizations and customers

 

 

564,957

 

 

 

279,915

 

Goodwill

 

 

147,388

 

 

 

147,388

 

Intangible assets, net of accumulated amortization

 

 

90,945

 

 

 

95,354

 

Furniture, equipment, leasehold improvements and capitalized

   software, net of accumulated depreciation and amortization

 

 

88,655

 

 

 

85,204

 

Operating lease right-of-use assets

 

 

75,223

 

 

 

75,924

 

Prepaid expenses and other assets

 

 

25,943

 

 

 

29,039

 

Total assets

 

$

1,545,869

 

 

$

1,331,429

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accrued employee compensation

 

$

28,223

 

 

$

62,326

 

Payables to broker-dealers, clearing organizations and customers

 

 

308,268

 

 

 

133,326

 

Income and other tax liabilities

 

 

48,193

 

 

 

42,750

 

Accounts payable, accrued expenses and other liabilities

 

 

80,202

 

 

 

44,354

 

Operating lease liabilities

 

 

92,750

 

 

 

93,612

 

Total liabilities

 

 

557,636

 

 

 

376,368

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 4,855,000 shares authorized, no shares issued and outstanding as of March 31, 2021 and December 31, 2020

 

$

 

 

$

 

Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued and outstanding as of March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock voting, $0.003 par value, 110,000,000 shares authorized, 40,830,772 shares and 40,851,100 shares issued and 37,985,818 shares and 38,005,330 shares outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

123

 

 

 

123

 

Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, no shares issued and outstanding as of March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

309,988

 

 

 

329,742

 

Treasury stock - Common stock voting, at cost, 2,844,954 and 2,845,770 shares as of March 31, 2021 and December 31, 2020, respectively

 

 

(170,043

)

 

 

(169,523

)

Retained earnings

 

 

854,747

 

 

 

799,369

 

Accumulated other comprehensive loss

 

 

(6,582

)

 

 

(4,650

)

Total stockholders' equity

 

 

988,233

 

 

 

955,061

 

Total liabilities and stockholders' equity

 

$

1,545,869

 

 

$

1,331,429

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3


 

 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

(In thousands, except per share amounts)

 

Revenues

 

 

 

 

 

 

 

Commissions

$

175,838

 

 

$

155,954

 

Information services

 

9,162

 

 

 

8,642

 

Post-trade services

 

10,261

 

 

 

4,153

 

Other

 

203

 

 

 

229

 

Total revenues

 

195,464

 

 

 

168,978

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Employee compensation and benefits

 

48,088

 

 

 

41,194

 

Depreciation and amortization

 

11,779

 

 

 

8,067

 

Technology and communications

 

10,036

 

 

 

8,161

 

Professional and consulting fees

 

9,640

 

 

 

5,675

 

Occupancy

 

3,317

 

 

 

3,474

 

Marketing and advertising

 

1,204

 

 

 

2,675

 

Clearing costs

 

4,694

 

 

 

5,510

 

General and administrative

 

3,232

 

 

 

3,133

 

Total expenses

 

91,990

 

 

 

77,889

 

Operating income

 

103,474

 

 

 

91,089

 

Other income (expense)

 

 

 

 

 

 

 

Investment income

 

107

 

 

 

1,269

 

Interest expense

 

(191

)

 

 

 

Other, net

 

(1,589

)

 

 

(656

)

Total other income (expense)

 

(1,673

)

 

 

613

 

Income before income taxes

 

101,801

 

 

 

91,702

 

Provision for income taxes

 

21,344

 

 

 

16,886

 

Net income

$

80,457

 

 

$

74,816

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

Basic

$

2.15

 

 

$

2.01

 

Diluted

$

2.11

 

 

$

1.96

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

$

0.66

 

 

$

0.60

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

 

37,470

 

 

 

37,303

 

Diluted

 

38,155

 

 

 

38,075

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

4


 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

(In thousands)

 

Net income

$

80,457

 

 

$

74,816

 

Net cumulative translation adjustment and foreign

   currency exchange hedge, net of tax of $(413) and $2,441, respectively

 

(1,932

)

 

 

(3,859

)

Net unrealized (loss) on securities available-for-sale,

   net of tax of $(155)

 

 

 

 

(491

)

Comprehensive income

$

78,525

 

 

$

70,466

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

5


 

 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

Common

Stock

Voting

 

 

Additional

Paid-In

Capital

 

 

Treasury Stock -

Common

Stock

Voting

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders'

Equity

 

 

 

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

$

123

 

 

$

329,742

 

 

$

(169,523

)

 

$

799,369

 

 

$

(4,650

)

 

$

955,061

 

Net income

 

 

 

 

 

 

 

 

 

 

 

80,457

 

 

 

 

 

 

80,457

 

Cumulative translation adjustment and foreign

   currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,932

)

 

 

(1,932

)

Stock-based compensation

 

 

 

 

 

7,424

 

 

 

 

 

 

 

 

 

 

 

 

7,424

 

Exercise of stock options

 

 

 

 

 

244

 

 

 

 

 

 

 

 

 

 

 

 

244

 

Withholding tax payments on restricted stock

   vesting and stock option exercises

 

 

 

 

 

(27,422

)

 

 

 

 

 

 

 

 

 

 

 

(27,422

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(520

)

 

 

 

 

 

 

 

 

(520

)

Cash dividend on common stock ($0.66 per share)

 

 

 

 

 

 

 

 

 

 

 

(25,079

)

 

 

 

 

 

(25,079

)

Balance at March 31, 2021

 

$

123

 

 

$

309,988

 

 

$

(170,043

)

 

$

854,747

 

 

$

(6,582

)

 

$

988,233

 

 

 

 

 

 

Common

Stock

Voting

 

 

Additional

Paid-In

Capital

 

 

Treasury Stock -

Common

Stock

Voting

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders'

Equity

 

 

 

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2020

 

$

122

 

 

$

342,541

 

 

$

(153,388

)

 

$

591,086

 

 

$

(10,270

)

 

$

770,091

 

Net income

 

 

 

 

 

 

 

 

 

 

 

74,816

 

 

 

 

 

 

74,816

 

Cumulative translation adjustment and foreign

   currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,859

)

 

 

(3,859

)

Unrealized net loss on securities available-for-sale, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(491

)

 

 

(491

)

Stock-based compensation

 

 

 

 

 

6,677

 

 

 

 

 

 

 

 

 

 

 

 

6,677

 

Exercise of stock options

 

 

 

 

 

80

 

 

 

 

 

 

 

 

 

 

 

 

80

 

Withholding tax payments on restricted stock

   vesting and stock option exercises

 

 

 

 

 

(21,243

)

 

 

 

 

 

 

 

 

 

 

 

(21,243

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(5,415

)

 

 

 

 

 

 

 

 

(5,415

)

Cash dividend on common stock ($0.60 per share)

 

 

 

 

 

 

 

 

 

 

 

(22,773

)

 

 

 

 

 

(22,773

)

Balance at March 31, 2020

 

$

122

 

 

$

328,055

 

 

$

(158,803

)

 

$

643,129

 

 

$

(14,620

)

 

$

797,883

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6


 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

(In thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

$

80,457

 

 

$

74,816

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

11,779

 

 

 

8,067

 

Amortization of operating lease right-of-use assets

 

1,664

 

 

 

1,645

 

Stock-based compensation expense

 

7,424

 

 

 

6,677

 

Deferred taxes

 

591

 

 

 

2,734

 

Other

 

(74

)

 

 

2,036

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

(Increase) in accounts receivable

 

(7,880

)

 

 

(31,640

)

(Increase) in receivables from broker-dealers, clearing organizations and customers

 

(270,491

)

 

 

 

Decrease in prepaid expenses and other assets

 

3,082

 

 

 

8,539

 

Decrease in trading investments

 

5,495

 

 

 

56,394

 

(Increase) in mutual funds held in rabbi trust

 

(1,613

)

 

 

(289

)

(Decrease) in accrued employee compensation

 

(34,103

)

 

 

(25,436

)

Increase in payables to broker-dealers, clearing organizations and customers

 

174,942

 

 

 

 

Increase in income and other tax liabilities

 

4,814

 

 

 

1,950

 

Increase in accounts payable, accrued expenses and other liabilities

 

2,599

 

 

 

16,392

 

(Decrease) in operating lease liabilities

 

(1,845

)

 

 

(1,516

)

Net cash (used in) provided by operating activities

 

(23,159

)

 

 

120,369

 

Cash flows from investing activities

 

 

 

 

 

 

 

Acquisition of business

 

 

 

 

(533

)

Available-for-sale investments

 

 

 

 

 

 

 

Proceeds from maturities and sales

 

 

 

 

45,154

 

Purchases

 

 

 

 

(8,995

)

Purchases of furniture, equipment and leasehold improvements

 

(4,257

)

 

 

(4,291

)

Capitalization of software development costs

 

(8,075

)

 

 

(6,778

)

Net cash (used in) provided by investing activities

 

(12,332

)

 

 

24,557

 

Cash flows from financing activities

 

 

 

 

 

 

 

Cash dividend on common stock

 

(25,454

)

 

 

(23,244

)

Exercise of stock options

 

244

 

 

 

80

 

Withholding tax payments on restricted stock vesting and stock option exercises

 

(27,422

)

 

 

(21,243

)

Repurchases of common stock

 

(520

)

 

 

(5,415

)

Proceeds from short-term borrowings

 

69,302

 

 

 

 

Repayments of short-term borrowings

 

(35,000

)

 

 

 

Net cash (used in) financing activities

 

(18,850

)

 

 

(49,822

)

Effect of exchange rate changes on cash and cash equivalents

 

(1,027

)

 

 

(3,360

)

Cash and cash equivalents including restricted cash

 

 

 

 

 

 

 

Net (decrease) increase for the period

 

(55,368

)

 

 

91,744

 

Beginning of period

 

608,050

 

 

 

274,253

 

End of period

$

552,682

 

 

$

365,997

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

Non-cash activity

 

 

 

 

 

 

 

Operating lease right-of-use assets obtained in exchange for operating lease liabilities

$

878

 

 

$

674

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

7


 

 

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Organization and Principal Business Activity

MarketAxess Holdings Inc. (the “Company” or “MarketAxess”) was incorporated in the State of Delaware on April 11, 2000. Through its subsidiaries, MarketAxess operates leading electronic trading platforms delivering expanded liquidity opportunities, improved execution quality and significant cost savings across global fixed-income markets. Over 1,800 institutional investor and broker-dealer firms are active users of MarketAxess’ patented trading technology, accessing global liquidity on its platforms in U.S. investment-grade bonds, U.S. high-yield bonds, U.S. Treasuries, emerging market debt, Eurobonds and other fixed-income securities. Through its Open Trading® protocols, MarketAxess executes bond trades between and among institutional investor and broker-dealer clients in the leading all-to-all anonymous trading environment for corporate bonds. MarketAxess also offers a number of trading-related products and services, including: Composite+™ pricing and other market data products to assist clients with trading decisions; auto-execution and other execution services for clients requiring specialized workflow solutions; connectivity solutions that facilitate straight-through processing; and technology services to optimize trading environments. The Company also provides a range of pre- and post-trade services, including trade matching, trade publication, regulatory transaction reporting and market and reference data across a range of fixed-income and other products.

2. Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated. These consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The consolidated financial information as of December 31, 2020 has been derived from audited financial statements not included herein. These unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) with respect to Form 10-Q and reflect all adjustments that, in the opinion of management, are normal and recurring, and that are necessary for a fair statement of the results for the interim periods presented. In accordance with such rules and regulations, certain disclosures that are normally included in annual financial statements have been omitted. Interim period operating results may not be indicative of the operating results for a full year. Certain reclassifications have been made to the prior periods’ consolidated financial statements in order to conform to the current period presentation. Such reclassifications are immaterial, individually and in the aggregate, to both current and all previously issued financial statements taken as a whole and have no effect on previously reported net income.

Accounting Pronouncements, Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (the “ASU”), which is designed to ease the potential burden in accounting for the transition away from the London Inter-bank Offered Rate (“LIBOR”). The ASU applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued and replaced with alternative reference rates as a result of reference rate reform. The ASU provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU was effective for all entities as of March 12, 2020 and can be adopted from this date through December 31, 2022. The Company does not expect adoption of this ASU to have a material impact on its Consolidated Financial Statements.

Cash and Cash Equivalents

The Company defines cash equivalents as short-term interest-bearing investments with maturities at the time of purchase of three months or less.

Investments

The Company determines the appropriate classification of securities at the time of purchase which are recorded in the Consolidated Statements of Financial Condition on the trade date. Securities are classified as available-for-sale or trading. Available-for-sale investments are carried at fair value with the unrealized gains or losses reported in accumulated other comprehensive loss in the Consolidated Statements of Financial Condition. Trading investments include investment grade corporate debt securities carried at fair value, with realized and unrealized gains or losses included in other, net in the Consolidated Statements of Operations.

 

8


 

Fair Value Financial Instruments

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” A three-tiered hierarchy for determining fair value has been established that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as Level 1 (unadjusted quoted prices for identical assets or liabilities in active markets), Level 2 (inputs that are observable in the marketplace other than those inputs classified in Level 1) and Level 3 (inputs that are unobservable in the marketplace). The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of its money market funds, securities available-for-sale, trading securities and foreign currency forward contracts. All other financial instruments are short-term in nature and the carrying amount is reported on the Consolidated Statements of Financial Condition at approximate fair value.

Receivables from and Payables to Broker-dealers, Clearing Organizations and Customers

Receivables from broker-dealers, clearing organizations and customers include amounts receivable for securities not delivered by the Company to the purchaser by the settlement date (‘‘securities failed-to-deliver’’) and cash deposits held at clearing organizations and clearing brokers to facilitate the settlement and clearance of matched principal transactions. Payables to broker-dealers, clearing organizations and customers include amounts payable for securities not received by the Company from a seller by the settlement date (‘‘securities failed-to-receive’’). Securities failed-to-deliver and securities failed-to-receive for transactions executed between and among institutional investor and broker-dealer clients on a matched principal basis where the Company serves as a counterparty to both the buyer and the seller are recorded on a settlement date basis. The Company presents its securities failed-to-deliver and securities failed-to-receive balances on a net-by-counterparty basis within receivables from and payables to broker-dealers, clearing organizations and customers. The difference between the Company’s trade-date receivables and payables for unsettled matched principal transactions reflects commissions earned and is recorded within accounts receivable, net on a trade-date basis.

Allowance for Credit Losses

All accounts receivable have contractual maturities of less than one year and are derived from trading-related fees and commissions and revenues from products and services. The Company continually monitors collections and payments from its customers and maintains an allowance for doubtful accounts. The allowance for credit losses is based on an estimate of the amount of potential credit losses in existing accounts receivable, as determined from a review of aging schedules, past due balances, historical collection experience and other specific collection issues that have been identified. Account balances are grouped for evaluation based on various risk characteristics, including billing type, legal entity, and geographic region. Additions to the allowance for credit losses are charged to bad debt expense, which is included in general and administrative expense in the Company’s Consolidated Statements of Operations. Balances that are determined to be uncollectable are written off against the allowance for credit losses.

Depreciation and Amortization

Fixed assets are carried at cost less accumulated depreciation. The Company uses the straight-line method of depreciation over three to seven years. The Company amortizes leasehold improvements on a straight-line basis over the lesser of the life of the improvement or the remaining term of the lease.

Software Development Costs

The Company capitalizes certain costs associated with the development of internal use software, including, among other items, employee compensation and related benefits and third party consulting costs at the point at which the conceptual formulation, design and testing of possible software project alternatives have been completed. Once the product is ready for its intended use, such costs are amortized on a straight-line basis over three years. The Company reviews the amounts capitalized for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable.

Cloud Computing Costs

The Company capitalizes certain costs associated with cloud computing arrangements, including, among other items, employee compensation and related benefits and third party consulting costs that are part of the application development stage. These costs are setup as a prepaid asset on the Consolidated Statement of Financial Condition and are amortized over the period of the hosting service contract. The Company reviews the amounts capitalized for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable.

 

9


 

Foreign Currency Translation and Forward Contracts

Assets and liabilities denominated in foreign currencies are translated using exchange rates at the end of the period; revenues and expenses are translated at average monthly rates. Gains and losses on foreign currency translation are a component of accumulated other comprehensive loss in the Consolidated Statements of Financial Condition. Transaction gains and losses are recorded in other, net in the Consolidated Statements of Operations.

The Company enters into foreign currency forward contracts to hedge its net investment in its U.K. subsidiaries. Gains and losses on these transactions are included in accumulated other comprehensive loss in the Consolidated Statements of Financial Condition.

Revenue Recognition

The Company’s classification of revenues in the Consolidated Statements of Operations represents revenues from contracts with customers disaggregated by type of revenue. The Company has four revenue streams as described below.

Commission Revenue The Company charges its broker-dealer clients variable transaction fees for trades executed on its platform and, under certain plans, distribution fees or monthly minimum fees to use the platform for a particular product area. Variable transaction fees are recognized on a trade date basis, are generally calculated as a percentage of the notional dollar volume of bonds traded on the platforms and vary based on the type, size, yield and maturity of the bond traded, as well as individual client incentives. Bonds that are more actively traded or that have shorter maturities generally generate lower commissions, while bonds that are less actively traded or that have longer maturities generally command higher commissions. Under the Company’s disclosed trading transaction fee plans, variable transaction fees, distribution fees and unused monthly fee commitments are invoiced and recorded on a monthly basis.

 

For Open Trading trades that the Company executes between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller, the Company earns its commission through the difference in price between the two trades. The commission is collected upon settlement of the trade, which typically occurs within one to two trading days after the trade date. For U.S. Treasury matched principal trades, commissions are invoiced and recorded on a monthly basis. The following table presents commission revenue by fee type:

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

(In thousands)

 

Commission revenue by fee type

 

 

 

 

 

 

 

Variable transaction fees

 

 

 

 

 

 

 

Disclosed trading

$

98,818

 

 

$

84,245

 

Open Trading - matched principal trading

 

46,320

 

 

 

40,358

 

U.S. Treasuries - matched principal trading

 

3,260

 

 

 

4,563

 

Total variable transaction fees

 

148,398

 

 

 

129,166

 

Distribution fees and unused minimum fees

 

27,440

 

 

 

26,788

 

Total commissions

$

175,838

 

 

$

155,954

 

 

 

 

 

 

 

 

 

 

10


 

 

 

Information services – Information services includes data licensed to the Company’s broker-dealer clients, institutional investor clients and data-only subscribers; professional and consulting services; technology software licenses; and maintenance and support services. The nature and timing of each performance obligation may vary as these contracts are either subscription-based services transferred over time, and may be net of volume-based discounts, or one-time services that are transferred at a point in time. Revenues for services transferred over time are recognized ratably over the contract period as the Company’s performance obligation is met whereas revenues for services transferred at a point in time are recognized in the period the services are provided. Customers are generally billed monthly, quarterly, or annually; revenues billed in advance are deferred and recognized ratably over the contract period. The following table presents information services revenue by timing of recognition:

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

(In thousands)

 

Information services revenue by timing of recognition

 

 

 

 

 

 

 

Services transferred over time

$

9,045

 

 

$

7,806

 

Services transferred at a point in time

 

117

 

 

 

836

 

Total information services revenues

$

9,162

 

 

$

8,642

 

 

 

 

 

 

 

 

 

 

Post-trade services – Post-trade services revenue is generated from regulatory transaction reporting, trade publication and trade matching services. Customers are generally billed in the current month or monthly in arrears and revenue is recognized in the period transactions are processed. Revenues billed in advance are deferred and recognized ratably over the contract period. The Company also generates one-time implementation fees for onboarding clients which are invoiced and recognized in the period the implementation is completed. The following table presents post-trade services revenue by timing of recognition:

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

(In thousands)

 

Post-trade services revenue by timing of recognition

 

 

 

 

 

 

 

Services transferred over time

$

10,020

 

 

$

4,150