Tradeweb Markets Inc. (TW) Earnings Call Transcript & Summary

Welcome. Welcome back, everyone, to Piper Sandler's Global Exchange and Fintech Conference. We're very pleased to have the next company up, Tradeweb. Fortunately, for Lee, maybe his last time, but you've certainly have had an impact over it. So Lee cofounded Tradeweb back in 1996. And I'm one of the few that remember and know that you left the company goes and bounds BrokerTec, which is actually sold to ICAP and then comes back and creates Tradeweb. So Tradeweb went public in 2019, and it's been a pretty successful run. So congrats. And to our audience or whosever tuned in at isn't aware, they've already publicly announced that Lee will turn over the leadership to his partner, Billy Hult, at the end of the year and remain -- and is Chairman and will remain Chairman at Tradeweb. So we're going to have fun as we transfer.

We were both talking about how fixed income now electronic platform, you are the change in the fixed income markets, but you compare it to cryptocurrencies and it's almost like you're the state model, you're the mature model at this point. But it still has some rapid growth. So I guess, Lee, the first question is where crypto is experiencing headwinds, Fintech is experiencing headwinds and valuations, rising rates impacting inflationary fears, it could all be sort of viewed as tailwinds for you in some aspects. I guess, can you evaluate the current market conditions, how it impacts Tradeweb. And as you turn it over to Billy, is it -- is he getting an ideal sort of season to turn over the brains.

Well, first of all, let me say thank you, Rich, for everything over the years, and everyone who's here, thanks for joining us and those that are -- on the video, thanks for joining in. It's a real pleasure to be here. So yes, we -- what's going on in Tradeweb land? Well, I think the markets -- we have a combination of things that have been happening to us for years. One that's referred to as a secular kind of thing, and that's the overall electronification of the business, the digitization of the business, which is in various states depending on which market you're in, where you are in the world, but still has a considerable amount of runway. And then when you layer on top of that, the market itself, that's always a variable for our business because we are the marketplace for fixed income rating. So certainly, this kind of environment that we're in right now where you have -- I don't need to restate the obvious, but you have some real volatility, you have some significant change in the rate environment, that activity, central bank activity, that is a further catalyst for volumes in a variety of our businesses. So I guess the short answer is I would almost refer the one to the numbers, right? So if you were public on the first quarter now, we just put out our May numbers, we're having a very good year. But to put it in context, we've been having very good years for a considerable amount of time, for decades actually. So when I think about the last 5 quarters, I kind of -- it blends easily for me into the last 25 years where we've been fortunate to be in a space where innovation and digitization has been taking hold somewhat more gradually than I would have expected in 1996 when I wrote the business plan. And certainly, when we went through the dot-com boom in 2000, thought acceleration will be quicker, but there's a pace to change in markets and for fixed income, you could say it's been a somewhat gradual change over the years, but it's been steady. And I think what's exciting about the business for us at Tradeweb is there's discontinuation of creativity and innovation as we are at our core, a technology company that's delivering out software into the marketplace where there's constant change and constant innovation. And as much as relative to the crypto world, we're a more state market, a more established market. It doesn't mean the technology sits still, right? So the technology and the things that we are doing across the board just continue to get more complex, more exciting more interesting and I think will ultimately lead to more activity. So we're pretty excited about it. In terms of when is the right time to leave is a good time to hand it over to Billy, I was reading something about this the other day. They said there was some CEO who is retiring and he said, the worst times to leave are when things are really bad or when things are really good. And I thought about that and I was like, no. actually, I think the best time to leave is when things are really good.

I take that [indiscernible].

I genuinely -- I'm so excited for the new team for the new roles that we'll be playing. I see Sara sitting out there, our new CFO, and Sameer, we've got a lot of new talent, but we also have a tremendous amount of experience in the organization. Billy has been my partner for over 20 years. So I think if he's more than ready and will be an incredible CEO for the business going forward, and I look forward to watching from a little bit of a distance.

A little bit?

A little bit. I get a feeling you'll be connected to it, very connected.

But fixing -- I think you categorize it really well is that it's been more -- we saw online trade -- equity trading convert quickly. It's been a slower, but steady and there's still opportunity there. I think that's the biggest thing, even though we're talking about crypto and we're talking about equities that your conversion has been more stable, but with still big opportunities to go. And so you created a model that differentiates itself from the multichannel diversified model as well from geography, asset classes to again, channels, retail, wholesale institutional channel. So how did that sort of concept originally come about? And then how is that playing in today's markets, what you created?

Yes. So it's a good question. So it's easy when you look backwards, you can kind of put some really nice spin on things and say, "Wow, we thought about a lot of this." But the truth is it's been a step forward in adjacent markets. The markets themselves are global because our clients are global, or -- the markets are global, they're impacted. And people tend to pull back and look sort of just from a silo standpoint. So while we started with U.S. treasuries, which was a very purposeful move we thought, that is the most global product. That's a core instrument certainly in the '90s for setting rates. We just gradually kind of moved into other markets that were originally in my business plan in 1996. The thing that became really obvious to us over the years was do what you're good at, do where you have unique advantages? Do what is an adjacent step, listen to your customers. And I moved over to London for 10 years from '99 to 2009 and realized, okay, early on, Europe just did not have the same level of digitization in fixed income that the U.S. had. It kind of started a little bit more in the U.S., even though there was plenty of electronic markets in Europe. You had features on electronic first in Europe. But there was this whole wide world. And I literally opened up all of our offices around the world, sometimes successfully, sometimes not so successfully. I tell the story about I don't know when it was, early 2000s when I was sitting in London, and I realized, hey, it's important to have a domestic market. It's important to have a domestic core competence that will attract customers. And so for us, that was European government bonds on the back of treasuries, which were first, but I looked to Asia and thought, okay, let's go to Asia. And so I remember this really well. Most of them are around 2003, 2004, I went to Japan thinking, okay, that was the place to go, I don't know, 5, 6 trips, wandering around Tokyo, trying to figure out my way and realize, okay, I need someone who really understands Japan to go with me and to establish the office there. And fortunately, we had a fellow Jesper, who -- while he was Danish, was fluent Japanese. And he actually set up our first office in Japan. We opened up in Japan and Singapore and Hong Kong. Obviously, Tokyo. We've expanded to Singapore and other areas, Shanghai, et cetera. And all those openings were just very obvious steps forward in terms of what we were thinking at the time of how do we build a network, how do we establish the connectivity with anyone who might want to trade a bond. The bonds were in the first part of our run. We got into derivatives later. But that was always the goal. How can we expand this network? Because ultimately, what we're doing here is we're trying to establish a place where customers can get the best price for the size they want to trade in just about anything they want to do in fixed income. And so that led to this gradual expansion geographically and into asset classes and products. And nowadays, we trade well over $1 trillion a day. And I remember the first few trades we did in the '90s, I see Phil sitting out there. I'm sure he remembers the first few trades that they did in FX. It's amazing how quickly some respects, it happened. And yet here we are 25 years later. And now we have this incredibly comprehensive network. I don't know how many countries. We're in 70, 80 countries around the world. So in theory, someone who wants to trade a treasury in the right hour could be trading between different geographies, different customer segments and stitching this all together was really the big driver behind it. How do we establish this network so we can pull more people to our system and they can do what they're coming to our system to do, which is essentially trade and the best price.

Lee, that aligns with my -- what I would say about Lee is before they went public, I used to chase you around and try to get meetings, so we understand these new up and coming companies and you're very gracious enough to do investor meetings even prior to go on public. And the thing that I can remember, I don't remember big grandiose plans, but I do remember we're doing what makes sense. We're doing this because it's adjacent to this or it makes sense from a business model standpoint. As I look back, that's sort of what connect it made -- again, not super -- we taken a super mountain, but we're going to do what makes sense for Tradeweb.

Do what make sense. And Billy, who I think is on the later panel today, who's your next CEO, is famous for saying this because there's a lot of creativity within the company. And I would say that's one of the cultural strengths of the business is all these talented people who were trying to come up with new innovations. But anyone who brings a new innovation into the room, first question out of Billy is always, okay, which customer is going to pay us to use it right? It sounds like a great idea and there's all these great ideas out there, but give us the concrete support for why this is going to be used and will be a value to a customer. And that's really been kind of the north star, listen to the customers and deliver software that will help them become more efficient at doing their job.

You've tuned it well. That's the bar. So I do want to talk to you about the credit market share because we just talked about your diversification across channels. So -- there's been some debate or talk about market share in the institutional channel. We did some work. We also were very pointed about the fact that make money off of whether it's institutional or whether it's D2D crossing session, you make in fact it may be accretive to your per million. So I guess, how do you look at the business -- your credit business? And does it make a big difference to you? What are your thoughts on focus on certain segments of the market share? How have you looked at the business all these as you [indiscernible] all quite successful.

Yes. It goes back to that theme of -- first of all, we try to be holistic. We try to be a bit agnostic about the macro environment, and we try to provide solutions for our clients. And we don't sort of get to pigeonholed in okay, is this dealer-to-dealer? Is it dealer to customer? Is it retail? If it's something where we think we can provide value, a valuable service the clients will compensate us for, we're interested. And we're interested in a more holistic approach to these markets as opposed to what has been more traditional kind of silo. Is it institutional? Is it a customer? Is it dealer to dealer. We've taken an approach, hey, if we can come up with -- if we have a unique advantage because of our network, because of our software, because of our regulatory status and we can offer something into the market that provides a good return to the business, we're all here. And we will continue to, I think, have that approach to the business. And it's funny how it yields benefits that you sometimes don't see when you're going into things. So even the decisions we made to go into the segment of retail, at the time we did that, we did it through acquisition, acquisition of BondDesk years ago. We always thought, okay, this is going to be a bit cyclical because the retail space is very tied to the interest rate environment, and we've seen a dip over the years, and we've seen a surge. And right now, we're in one of those surge environments because fixed income is more attractive to retail. But what's funny is when you later on, as we're kind of pursuing this track, we start to see places where we can connect the dots. And that's an expression that I've used for a while, where, hey, wait a second, if there's a bunch of liquidity on the system in retail, we can redirect that into institutional. We have a bunch of liquidity in wholesale, which we have right now with our session-based trading, if there isn't a match, how do we redirect that into something else and we call that rematch now. So we're kind of tying these pieces together of the overall network between segments, between markets. And I guess we've been fortunate that's the way the world has been moving over these years. So we've been in lockstep with some of themes that you'll see on the broader base, other types of technology companies, other types of marketplaces. And that's proven to be very valuable to us over the years. And you can apply learning and you can apply software development. We often talk, okay, wait a second, do we do something like that for preferreds? Isn't it on the shelf over there? That's some code we wrote over here. We can apply it over here and see if that works in the option market. Or if it works with -- we've done that with ETFs. We saw -- we had a great model for RFQs. We saw 10 years ago, the ETF market was something that was going to have a lot of potential growth. So we stepped in and provided a solution that took an awful lot of phone-based activity for block trading in ETFs and shifted that onto an electronic model using some of the components that we've used for other marketplaces and our experience. It's an experience thing. It's a software development experience, then we have a ton of engineers have been with the company for years. And the technologists, the engineers are part of the management of the business. So we're able to apply things, which gives us an awful lot of operating leverage, right? That's how we have such great margins and still have tremendous growth, which is, I think, a unique thing for Tradeweb out there in the marketplace to have these 50% margins and yet double-digit growth consistently for decades.

Yes, my notes are correct. We had double -- we've seen double-digit growth in the sixth consecutive quarter year-over-year.

So it goes back further than that.

Your numbers people, they're saying, yes, Yes.

Okay, good.

So I have to take a -- I got to acknowledge that was the view. The view is the connected dots view. Tradeweb from the outside looking in was again, not the big grandiose plans, but you did -- you connected the dots. You use what worked in 1 market, you go to another market. And but again, in my words, what made sense. Congrats. The one -- I do want to get 2 last things like growth in issues as your Chairman -- and stepping back next year, what are you going to say, hey, Billy, what's happening? This was all set up. This is an opportunity. What's going on. I shouldn't say like that. I know you got a much better relationship what growth areas do you see that are very promising for Tradeweb.

Yes. I mean we're -- again, we're pretty fortunate to be in a place where there's so much change. There's this combination of a digitization trend, but also a big leap in the kind of algorithmic approach to trading that is just still moving rather quickly. So in terms of -- we have a number of growth areas. I mean, a good example is the swaps markets, which are just about 30% electronic, and we have a leading position really around the world. So we're trying to figure out, okay, where else can we do swaps activity. So we picked up in the EM and APAC. We're doing all sorts of them. We've got great growth there, great potential because those markets are a little less electronic, going electronic. Our international business has been for extended period of time, north of 20% growth. We think there's an awful lot of room there, whether it's in Europe or in Asia or outside of the U.S. But at our core is a U.S. fixed income business that continues to grow and get more complex, more dependent on digitization, more dependent on algorithms and features, things like we've offer with portfolio trading, with AI pricing, all sorts of connecting treasury markets to credit markets with the hedging with our net spotting. And there's all these little innovations, and sometimes they're bigger innovations that are just responding to what customers need to do in order to get through their day.

So we have 1 minute. So this maybe last time. But as you look back, I see Tradeweb a great company, $1 billion in revenue. You've taken margins to 50% or right around there. What are you -- what would you be most proud of? What would you say I instilled or I wouldn't say I instilled, but I put an emphasis on this at Tradeweb, and as you walk away, so we can say, this is the firm that you...

Well, for sure, one of the things that I set out to do was create a successful company. So that's good. We check that box. But maybe more importantly, was to build a culture within Tradeweb that I could be proud of. And that I felt like having worked at big bank for a number of years, tried to fine-tune some of the negatives that I had in my experience as a COO of a bank, a fixed income business of a bank that I didn't find this appealing. And one of those is down to culture. A culture, where there is a team, where there is an ethic, where there is a commitment to growth, innovating and treating people with respect and doing a lot of the things that now are wrapped up in some big terms that everyone is all focused on, I think we've been doing this for decades. And so I think what I'm most proud of, putting aside the financial performance of the company and the fact that we've had thousands of families and people employed around the world and we've been able to kind of grow our business around the world is the culture we have. I am incredibly proud of that. And it's funny. It changes over time. We have new people who join the culture of Tradeweb. And what I say to everyone is, as we're bringing in new talent is a big part of the job I've had over the last 25 years is recruiting and finding those people with that kind of talent is you can make a real difference inside the company. It's not set in stone. And if you come in and you have the right attitude and you treat people with respect and produce, you'll help shape the place. And I think that, that's really happened. We'll continue to happen with the team that we have in place, and that's probably what I'm most proud of.

Well, I can't say anything else except look at what the public company has done as a publicly traded company and how successful it's been. I mean I try to be like Switzerland and like the whole space. But you certainly have made a mark in fixed income. It's not going to be the same. You have to chasing you around all these years. It won't be the same.

Well, thank you. Thank you, rich.

So we're going to congratulate Lee as it has been a -- it is a great company. He leaves it. He leaves it in good hands with Billy, an inspirational leader, a fun leader as well. So thank you for your time.

Thanks, appreciate it. Thank you.

Thank you. [Break]

Good morning, and welcome back to Piper Sandler's Global Exchange and Fintech Conference. Our next panel is on -- we're calling it the changing fixed income electronics trading environment, that's a multiple right there.

It's long-winded...

It's also what I'm calling the honorary CEO panel. Because each person here is either a CEO to be, CEO now or was a CEO. I see the people in uncertainty...

Some of us got demoted.

Which is the best one to be?

Yeah, I think the future's looking pretty good. So, anyway this is going to be a fun panel. These 3 here are very knowledgable of the fixed income electronics face as well as electronics in general, leaders in their firms as well. So, I just start off with investors know about MarketAxess and Tradeweb. So I'm going to just quickly, well, we have Chris Concannon of MarketAxess and Billy Hult of Tradeweb.

Which is on the screen by the way. You can go through the intros if you want.

Thank you for doing that. I'm going to let Mike Sobel, the CEO of Trumid to talk a little bit just quickly about Trumid so we'll get people up to speed on Trumid. And these guys, they both objected to it, but we're still going to let Mike talk.

They're counting next to me here. I'm on the clock. I think a lot of people here are at least a little bit familiar with Trumid, but I will take the opportunity -- we did take a slightly different approach than these guys mostly -- because we had to. I mean we started the company, the RFQ segment of the market was very well served by both of these firms so for clients or investors, employees, nobody had very much interest in yet another RFQ platform, circa 2015. We were insiders in the bond market, corporate bond traders salespeople. So we did feel like that was a differentiator. We took -- we addressed it a slightly different segment of the market. We took a little bit of a different approach. We felt we were uniquely capable of assembling a client network. We thought we could build a differently kind of aimed mousetrap than what existed at the time. And we were -- we had the luxury of being a brand new tech stack. So we were able to bring some best practices to bear and be kind of agile and collaborative, which were really powerful early on and are still, we think, a big deal for us. So a lot of mistakes and bumps in the road later. I think we've gotten certainly some things right and evidenced by the fact that these guys are willing to let me sit up here with them.

We're having fun because I think we all enjoyed talking about the business and are excited about the business. and want to have fun while we're doing it as well. So that's the common theme. So -- but I do want to talk about, I guess, this current environment, spreads have widened, low volatility, you're all interested in getting more electronics into the fixed income markets, one way -- one protocol or another. So first, how you're adapting what's the current environment like? And how do you work together as -- is it a network effect that just one gaining market share might help the overall movement of the market further for electronics. So we talked about with Lee and Rick about how it's been a deliberate process, unlike equities and some of the other asset classes that immediately sort of get a quick material. So the question is, how are you coping with the current environment? Is it good? Is it bad? And do you work -- is there a network effect in bringing people to [indiscernible].

Yes, the current environment -- I have 16 minutes. The current environment is actually very favorable to electronic platforms. Anything that is aggregating liquidity sources of liquidity for clients. If you look at the client challenge, right, they have increasing challenges around portfolio and portfolio turnover in this environment, and they need to move that portfolio in and out and adjust. And so any type of electronic trading makes that a more efficient process. But when you think about network effects, there are big differences in the fixed income market dealer-to-client fixed income market as opposed to equities, futures and options where it's really the exchanges go to intermediaries. And so -- and it's resting liquidity versus on-demand liquidity. And so that network effect has a different impact because in the fixed income market, clients are requesting liquidity at a moment in time of the dealer community and the dealer community is responding. It's all electronic. But the true network is how many clients and how many liquidity providers, whether it's a client, a dealer or an alternative liquidity provider are on your network. The network effect is very different in our asset class than from others. So us connecting one another doesn't solve that liquidity on-demand feature. It doesn't add more liquidity to the overall bucket. Us winning electronic conversions across the market and having new adoption of electronic trading, that's favorable for all of us up here. Hopefully, us more than others.

And maybe just for a second, Rich, to your sort of question about like where do we collaborate versus where do we kind of compete -- we compete, obviously, and there are moments where I'm going to one bank or going to one asset manager and Chris or Mike have either coming or have just been there, and you know there's a moment in time where you're trying to make a really important point and you're trying to kind of win business in a very straightforward way. But there is -- and everyone can kind of sense this obviously like a friendliness to how we compete, I think I've said this before, I think there's kind of like an ethos that we all kind of share. We all have kind of similar clients. I think we go about solving problems in the same kind of way. And I think that matters a lot. I think the world wants to see us compete to compete in a friendly way. And I think the investor base kind of wins through all of that. When these guys do something well, they kind of hear it from me first. And I've kind of learned all the way, like you can learn a lot from your competitors. I think that's like an important thing for kind of everyone to kind of hear there. And then we'll kind of -- and this one will go about the kind of the job of competing again. What I think about the sort of network effective at all from Tradeweb so many different businesses when we wanted to get into interest rate swaps, we said, what's our advantage to get into interest rate swaps. We have this huge big kind of mortgage community at Tradeweb. So we knew they would be consumers of swaps. When we wanted to get into ETFs, we knew that we had a lot of those ETF consumers because of our treasury business. When we wanted to get into credit, we knew we would have some ability to compete with the all-to-all network because of our retail business that we have. So we're always kind of looking about like how do we put these kind of pieces of this puzzle together. When I think about what Tradeweb has done well traditionally, it's been about kind of establishing this big broad network all the way through. That was some of the best work the company did way back when.

Okay. And then I debated whether to keep this in, but I'm going to keep it in. And it's just a quick discussion on market share. And I thought about so why talk about market share because it tells us markets can go up and down in activity, but it says who has momentum. And again, we don't want to look at it month by month or even quarter-to-quarter, but it does give some indication of who doing well over a longer period of time. So any comments on market share in regards to how your companies look at it from an institutional or D2D or any comments on...

So I mean, you saw Rick McVey rattle off market share by product by minute, probably. So we are focused on market share. The first statement is electronic market share is going up, right? That's -- everyone supports that definition of share. It continues to rise, how you count electronic market share is always questionable, but it's clearly going up and the trend lines and the feedback from clients are, they want to do more electronic and less -- in less efficient ways. Across product, electronic market share goes up and down. Each of our market shares go up and down depending on what's happening in the environment. But generally, I look at the overall electronic market share and it is going up. The one market share I spend the most time focused on is all-to-all market share. When I think about disclosed [ ARPU ] where we're providing a network service for dealers to disclose to clients a price, that's a helpful service to the client, but our true liquidity, what we're housing in that undisclosed all-to-all environment, that's true liquidity that we built, and that's a moat around that. It's hard to build. It takes years to build. It's a network effect to get all the dealers and the clients actually show price. So that, to me, I spend the most time looking at, and that's what we report as a broker-dealer. So it's hard to actually question what those numbers are. They're all on trace, and we publish those regularly. But the one thing I'll say about market share that I grew up in an equity exchange world where market share was thrown around numbers were thrown around, we're in a client environment. We actually have clients trading securities on our platform. So we need to be very careful how we tell them about market share because we're selling a client a service. It's a different environment than talking to a broker dealer about what your market share on your exchange is. And so we just need to be mindful and not misleading around market share when we talk to clients. Slight difference.

We've gone to great lengths to frankly, we operate some platforms within -- some protocols within an ATS and some outside of it, mainly in order to report clearly and not make market share too confusing. That's probably kind of a tail wagging the dog. So how trades get reported in some of this stuff. I think these aren't hard problems. There's room for improvement that stuff will get solved. I think what is market share gets confusing because there is a broadening range of protocols and true electronic trading, I agree, is absolutely of the form that Chris described and is going up. And overall, what I might call kind of e-commerce is going up. There's plenty of things that are workflows that are not that different than they were over the phone that are being conducted electronically and pure electronic trading definitely going higher. The percentage of trades where done is being said over the phone or a chat and then the trade is being booked manually elsewhere. At some point, maybe we'll talk about the ceiling for electronic trading. If you define that as the only thing that's not electronic trading. I mean, I think that's going to something pretty near 0 over the course of the next few years because that doesn't help anyone. -- streamlining that process is genuinely beneficial for everyone involved.

A little bit, Rich, when I kind of hear -- sort of when you ask the question, what kind of goes to the back of my mind a little bit is kind of like how are you Billy like competing? How is Tradeweb competing like apples-to-apples with like Chris' great credit business? And I'll kind of describe it to you guys this way for a second. Obviously, we've made a tremendous progress. And I think the room and the community knows really well in our institutional business and our big network business in a way that you were describing it, Chris, we've done like really well through some pretty significant kind of innovations around net Spotting and net hedging. And then portfolio trading obviously had this tremendous run and actually performed really, really well during sort of difficult environments in February and March, and you've kind of heard me say that. We've also, at the same time, so we've made like really strong progress there. And at the same time, let me see if I can say this kind of clearly we've never like shied away from the fact that we are also in the electronic wholesale business. And we think that's important for us as a company to be in that business. We do really well. You were sort of like on the verge of asking me that in the last earnings call. Maybe either I hung-up on you or we just ran out of time. But we've always felt that we could kind of compete in that business back to competition look really well. And we thought that the IUDs were vulnerable in terms of that movement from voice to electronic, and we were going to build businesses that way, whether or not that was mortgage backs or government bonds or interest rate swaps. That was like a strategy for us kind of all the way through. And so as we become very successful and well-known on the credit side through our suite business, we've also worked hard on trying to figure out kind of how to connect both of those markets the right way. And I know we've all kind of talked about this concept of market structure and market structure shifting and changing what looks like on market structure one day is not the next going forward. So we never want to be short those kind of market structure pieces, if that makes sense.

The Protocols, you've mentioned different protocols, whether it be all to all what you call considered portfolio trading protocol per se. But I guess, as just briefly what has worked recently and what do you think in this environment has the opportunity to work well over the next year, 18 months, given you have a certain macro environment, the widest...

I mean, RFQ is clearly working across all assets, right? It's even working in equities if you look at the ETF market and RFQ in the ETF market is growing, happens to be growing on Tradeweb, which is a little frustrating, but it is growing. So RFQ is clearly working throughout these volatile times. All-to-all is now in a more favorable position as spreads widen out. To get that alternative liquidity, it's obviously even in RFQ, it's creating favorable outcomes for the investor clients. I do think, obviously, in the treasury market, there's both RFQ for dealer to client and order books for the dealer-to-dealer market. Our offering is really trying to bring the order book to the client market. So on the run, you have -- you actually have protocol optionality. The portfolio trading is clearly an area where Tradeweb has excelled. We're chasing them on that one and making some headway. It's a complicated trade when you look at it. It's a very expensive way to trade a large list, and I think clients are trying to figure out and dealers are trying to figure out how to actually support the portfolio trading that's going on. I do think we owe the clients more analytics around how to trade a portfolio, really how to size it, what should be in, what shouldn't be out, how they price relative to trading a line of items that they can trade in the long list. So I think most of the protocols are working right now. And obviously, you have swarms and [ midexes ] and sessions all starting to work across the board.

It's not working is kind of like old ways of doing business. Like that's not working, like the concept of kind of a client doing a voice trade and writing a trade on a bladder and then maybe having a sort of significant out trade. That world is kind of ending, and I definitely agree with you, Chris, that like all of these different types of protocols are kind of gathering momentum and are working. And you just want to make sure that you have the kind of the right ones under your tent at the right period of time and kind of press that button and move things forward. But the old way of doing things, I mean, that's just like one way to think about it, like that's just like not working. And I'm not sure any environment displayed that more than the sort of the challenging period of time that we all went through during the pandemic. If that was the perfect illustration of why the old behaviors weren't going to work as well, like that, I don't -- I can't think of anything else.

Do you think the pandemic was like a demarcation where it really -- that's the inflection again, share may not stay at that same level, but it was pointed...

There's a demarcation for a lot of things actually.

It was a point in which -- I think it was a point at which if you didn't -- if you weren't using technology in your business every single day to do everything you were doing, you were exposed and came up short. So the notion that some large institutions buy side or sell side sort of don't trade electronically. That doesn't exist anymore. And it enhanced the network effects earlier. And I think a lot of these protocols are working because this is where competition helps as well because it keeps us all sharp. The tools are better than they were a few years ago, and most of the market is now here and using them. So -- and they're getting better pretty fast. So I think most of these protocols are working. And even for the traditional way of, as I said, saying down on the phone, those are legacy workflows that have room to be electronified that doesn't disrupt the fundamental dealer-client relationship. It saves time, it saves money. Operational risk is totally unacceptable. And the period of time where credit was just kind of carved out, you have your risk procedures and all trades need to be STP, and you need to eventually demonstrate BestX and TCA and all of that and credit is sort of grandfathered well because all those trades happen over the phone. We're moving into a period of time where that's not true anymore. And I think the burden of proof to -- well, here's why I just picked up the phone and did a trade and booked it manually, it's just getting higher and higher, and that is pulling more trades towards platforms.

There was an obvious sort of period of time for a long time when I was at Tradeweb kind of early on, where there was like genuine resistance towards this kind of like march of electronification, right? I think everybody here kind of knows that. It was sort of like as the markets went more electronic, as the markets became more transparent, it's going to be harder for me as a market maker to make money. Good job doing that, please don't overdo it again sort of thing, right? And so we were always kind of up against sort of that resistance and trying to figure out the right balance as we were kind of getting into a marketplace. I think one of the most important things that's happened over the last couple of years, as the markets have gone more electronic in a significant way, in part because of what we've all gone through is the profitability of the businesses to our largest clients has stayed at such a high level. And the community is figuring out how to embrace this change and make money while they're doing it. That's a big difference between now and a bunch of years ago.

And then there was munis. And the munis are still a few, call it, a decade behind all of what we just described where that opportunity in munis is a big one, but they're still picking up the phone. It's like when your parents got their first iPhone and they're trying to figure out how to use it. That's the muni market.

There's [indiscernible] school and then there's kind of like old school. That's like the sort of the Cheeseburger at 9:00 a.m. old school.

I think we're going to hear about munis for the next 5 years from Mr. Convert Muni...

I do have a little passion for munis.

The next question is -- and with all joking aside, the 3, you have CEOs and leaders of the firm. With all joking aside, Chris is one of the most knowledgeable guys of market structure, equity or fixed income, and you sold your firm very successfully. So you deserve the honorary CEO role with all respect. So the question is, you guys are the leaders. So what -- and we try to get you to depart from if there is, but what is priorities of yours? What would you highlight to investors that's happened in that -- you place a high commitment to getting done or place emphasis on.

I'll just go very quickly. I'll sort of describe it quickly. We're going to stay on the business side, obviously, sort of laser-focused on credit. We think there's obviously a lot more room to go there, and we are kind of proud of what we've been able to achieve as a company. over the last couple of years. So that level of focus, I think, in a good way, isn't going to change away from the business, and you guys know this really well. There's a saying, I think it's culture trumps strategy. And it's a little bit simplistic. We all know how important strategy is, but you guys know this well like how important sort of the culture of a company is and being able to stay in tune with your clients during this change is at the highest level. So for me, just making sure, as a company, we stay absolutely prioritized around collaborating and listening to our clients is kind of first and foremost, one of the more important things.

Yes. I mean I think from our perspective, the operating environment has obviously changed. Risk appetites are different than they were a year ago. Growth at all cost is not as exciting as it was previously. So at the same time, the -- we've got a lot of ideas that we're very excited about kind of lined up around the corner, and we are pursuing those. The labor market is still really tight. It's hard to find talent and start to keep talent. And so we spend a lot of time focused on that. Fortunately, we've been able to hire a lot of great people throughout this period. But we -- I spend most of my time, I think, on sort of resource allocation and that's not dollars that's people's time because -- I think to Billy's point, it is more important than ever to stay focused. And we think we can deliver better results, trying to do a smaller number of things really well than just [indiscernible] all things to all people. And I think clients appreciate that.

So there's some crypto exchanges that you can hire some tech guys from out there that might be laying off people. So look, I don't know. I can't add to that. It is -- right now, our clients are going through challenges, and they're looking -- they don't have the budgets to build sophisticated trading systems in the fixed income market. And so they are technically outsourcing trading technology to the vendors that sit around them and to the banks and brokers that sit around them. And that has happened across many different markets. globally. And so we're sitting in that same unique position where there's a high demand for trading technology and trading solutions because the workflow change has to take place. And we're sitting at the forefront of that demand, and it's a 5- to 10-year run of providing that technology. So to Billy's point, in this environment where we have some people in the office, some people not in the office, we have to be in the face of the client and really distilling down what are the critical technology solutions that they need to do.

I'd tell you what has struck me in looking at other asset classes convert, fixed income still just seems more client focused. The electronics aren't alone were equities, electronics, where we pulled everybody like is sort of still a sales aspect and client relationship.

I mean, I'm curious what you guys think, I know we don't have that much time. I get asked the question once in a while, like is it still a relationship business here? We live in this electronic world. Is it still a relationship business. And my brain kind of goes to this concept that it's an experienced business for the clients, right? It's delivering the clients an experience, which is a bunch of things. Part of that experience is obviously around the electronification of it all, but the relationship component of it is for sure one of the key dimensions of the overall experience and being able to have, as Chris was describing, that real sort of back and forth with the client around idea generation, I think, is at the highest level of importance right now than ever.

It's great insight to the industry. We do have a little extra time, so disregard the [indiscernible] because you got me started -- so -- but it is the last question, too. The -- when you look at -- it has been a more deliberate asset class to go electronic. And I think we're getting the feel for wide. It's still a customer base, client-based relationship-driven, experience driven. But as we look at -- and every year, we come back and say that, and we're tracking this pretty closely. So in the next 3 years, where do you expect the gains to be made in furthering electronics? What is the fixed income electronic trading landscape look like in 3 years, let's say?

It's clearly more electronic. I'm more of a next 5 years than the next 3 years. just gives me a little more window to be wrong.

We have to wait 5 years...

Exactly. And I still won't be a CEO, by the way. No, clearly, if you look at the workflow of clients and how they are adopting electronic trading, it's clear that they started with small order size where they had lots of tickets in the fixed income market, and they're slowly ramping that, call it, low touch activity into bigger-sized tickets. And we've seen that movie before where larger-size tickets become smaller-sized tickets and are fully automated. So that trend line -- I'm shocked at how many large investment complexes have been adopted a lot of automation, a lot of automated workflow and they're just now starting. So I think there's still big penetration across the smaller ticket sizes, but I do see automation driving share and those larger blocks coming into an electronic form, either in the form of a portfolio trade, which is electronic or in a larger block trade that's managed differently in an electronic form.

I think you're seeing new players, we are seeing new players come into the space, new participants, and they're very familiar to other asset classes, systematics, broadly speaking, quantitative -- and liquidity takers. It's both sides. And they are only going to trade electronically. And there's a real -- therefore, if they're only on the platforms and the liquidity is better on the platforms than not. So there's a real symbiosis, I think, and that is once again gets the network effects, and I think gets to increased velocity in the asset class because you have more participants and better, faster, more scalable decision-making. So -- and then that generates more data that allows for some of the stuff we spoke about earlier, TCA and the things that both push and pull maturation of an asset class. And those things are absolutely underway. That's not a prophecy we're feeling it every day. And the more kind of traditional institutions in our industry, they care about that stuff. They're embracing it. They're not resistant. It just is it takes time. Their internal systems aren't ready to engage in that way. So we're all dependent on OMSs and the EMSs and internal systems and everyone's tech resources are the scarcest thing around. So it takes time, but it's all happening.

That's a good point. The story around sort of what Citadel securities in fixed income, particularly on the rate side, has been able to accomplish over the last 3 or 4 years in terms of becoming like a top rate interest rate swap dealer in an incredibly challenging and competitive environment and a top rate government bond -- global government bond dealer, is a pretty remarkable story. And so you can just keep following that story and know that it's going to replicate itself. It's going to replicate itself with sort of sophisticated entities that will pick different markets, credit being one of them, where they're going to look to compete. And I think stepping back from that, make an obvious point, all of that kind of trend is just very good for the business that we're in. And at the same time, what's kind of interesting, I kind of thought about this, Chris, when you mentioned kind of munis, there still is today -- and by the way, I think we all know this in 3 years. There still is that kind of like that guy out there who's going to pick up the phone, he's picking up the phone right now. He's doing a large trade on the phone. He's doing it like he's always done it. He's going to say, "I know this whole market is kind of gone electronic, but not me. I'm going to do business the way I've always done business." That's what kind of makes, I think, our business looks super exciting, is converting that kind of that person. And that person might be a metaphor for a sort of asset class of munis or whatever, but that's what makes this business like super exciting right now.

And then he's going out on a smoking break. So, there's hope.

There's still opportunity [indiscernible]. And it's been a deliberate process. Two things.

I thought we were done. [indiscernible] just walked in and he always critique my panel routines.

That goes back like 20 years.

20, yes.

Number one, I just want to point out, did you see my fire still burning after 3 years from 2019 -- we bring that along with all the years at the conference. So 2019 was the last time we did it physically. We appreciate these guys coming back. We appreciate all you. Next is I know this was very entertaining. This panel very informative. The next will be the lunch with SEC Chair Gensler, virtual, and it's right across the room -- directly across. So not to -- this was informative, and I was captivated myself. So I want to thank these guys. These guys are the leaders. They take their time out of their days to participate in the conference every year. And I spike the joke in -- we respect and listen to what you have to say, we try to peel through. Thank you.

Thank you, Thanks, Chris.