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

Alright, well, good morning everybody. Thank you for joining us for the next session. It's my pleasure to introduce Billy Hult, Tradeweb's CEO. Tradeweb, as many of you know, is one of the largest and most diversified operators of electronic markets around the world. Over the course of 2025, Tradeweb delivered record results across many of its products, supporting industry-leading earnings growth. Over the next 30 minutes, we'll spend some time with Billy on the future of fixed income electronic markets, how he thinks about Tradeweb's growth opportunities in the year ahead and just how the market structure is evolving broadly, lots to talk about. Thank you so much for being here. Always great to see you.

Absolutely.

Why don't we start with a question on a bit of a forward given just the time of the year. As I mentioned, Tradeweb is wrapping up another really strong year, nearly high teens kind of earnings per share growth, mostly driven by revenues, of course, which is super important. Despite what's been pretty tough comps year-over-year for you guys. So as you think about the trading comps still being relatively tough this year into '26, what are kind of some of the bigger kind of top line organic drivers you're leaning into '26 that will hopefully sustain this level up?

Absolutely, Alex. Great to see you. Usually, we kind of twin with our Oura rings. I gave mine up.

I switched. Did you see that? Yes, I'm done.

Since I've gone blind, now we can kind of twin with eyeglasses. We will have an eyeglass contest. I've been doing this now with you, I think, 4 years I've been -- as everyone in here kind of knows, CEO of Tradeweb now, this is the end of my third year. Really strong growth over the last 3 years. I kind of think about sort of 11% growth in my first year as CEO, 29% growth 2 years ago. To your point, we're going to be up around kind of 17%, 18%. I kind of think about like what's that environment been like? First thing my brain goes to is the obvious, Alex, you and I talk about this a lot, like debt markets continue to grow. One of the most important kind of concepts is obviously, like the central banks have been kind of quieter in the spaces that as buyers in the space -- spaces that Tradeweb kind of lives and breathes in. Those tend to be a very good environment for our business. And then plus this kind of concept of like private sector intermediation being really back in vogue. I think those are 3 really strong principles. And then as I kind of described that kind of growth, I would say, in a very interesting way, obviously, like very different over a 3-year period, kind of rate regimes. We went from that kind of concept of like the big rate hikes, then not higher for longer. And now we're obviously like at a different moment in time now. I continue to be obviously extremely excited about the forwards of my business. As you know, I tend to be -- I think, in a really good way. I would say, like an internal optimist, I believe in the concept of behavior change all the time. And I feel like we're entering into another very, very good environment for our business, particularly on the macro rate side of the world. I was at a very interesting dinner last night, 2 of the best kind of economists in the world, an-ex central banker was in the room. And it's like the 3 smartest people I've heard talking about rates and they couldn't agree on like the direction of the next like 6 months. And as I'm hearing that, I'm like well, this is a good time to be in the rates business with that kind of indecision at the highest level around thinking. So feeling really good about this kind of continued evolution of kind of phone-based business into the electronic world. When I think about kind of the drivers kind of going forward, I would start from our perspective, clearly, with the swaps market, which has been just an incredible business for us, and I see it continuing. I think there's going to be continued micro trading protocols that will continue to pick up traditional voice trades in the swaps market. I've talked a lot about this concept of request for a market that has been a very strong protocol that we launched in Europe. It's still being implemented in the U.S., particularly with the macro hedge fund world. We think that's really good. I also like the concept of what we're doing really around electronifying noncleared swaps. So we did our first electronic swaps and trade very recently. We think there's continued path there. The international side of our swaps business is still like very early innings. And I would specifically point to areas of the market around Australia and Japan as areas of focus. And then I would kind of come back home a bit and talk about how kind of Tradeweb has always kind of lives and breathes around different pieces, as you know, Alex, in the market structure from kind of retail to wholesale to institutional -- the institutional side of our business rightly so gets a lot of play. We've always mirrored the concept of wholesale liquidity along with our institutional businesses. And I have a pretty strong feeling that there is continued opportunity in our swaps business on the wholesale side. As we kind of enter into 2026, the wholesale side of the swaps business, even with all of the regulation that's gone into the market and all of the electronification on the institutional side is still kind of like a sort of like 1996 market, very phone-based, voice-oriented market. And as these strong players arrive on the institutional side in swaps, I think there's going to be a pretty strong push to kind of unleash the wholesale side of the market and move that into a more electronic direction. So feeling quite good directionally speaking, around how the business is set up into next year and kind of highlighting a component of our international business plus our swaps business there's pretty big areas to feel good about.

Great. Awesome. Well, like why don't we double click into some of this? I did want to spend a little bit more time with you on swaps, just given the fact that's your largest and probably still your fastest-growing business, I think revenues there are up like 35% or something like that year-over-year. So quite substantial. So you talked about some of the key drivers of volumes from a structural perspective there. Maybe one, double-click into sort of the catalyst, what could drive further acceleration on that wholesale side of the market, like one particularly about client behavior that's is right for this move. And then number two, we talk a lot about volumes, but obviously, fee per million is important. And there's a time that goes into that. So I don't want to spend the next like 30 minutes talking about fee per million and swaps. But help us understand how the macro dynamic with the direction of the yield curve could impact that? And anything notable within mix on that fee per million?

That's always a tricky one. But let me kind of start with maybe like a slightly -- nothing is easy. As you guys know very well, like the swaps market was like historically, like the most back alley of all back alley markets. And Dodd-Frank and regulation kind of changed the arc of that market, took it from a noncleared kind of back alley market, trade on, keep that trade on with a counterparty and take that trade-off for the counterparty, all of those things to make electronification were difficult. As the institutional market began to go more electronic, the voice market on the wholesale side just kind of stayed quite negotiated. And what I've actually, I think in an interesting way, uncovered through a little bit of kind of old school kind of connecting the dots is as kind of new entrants continue to emerge on the institutional side, firms like Citadel, as a highlight and all of the conversations with them are about how do I increase my market share with different types of clients in the institutional world, we've begun to kind of have, I think, in-depth conversations about the faster the speed limit, the better, the more flow that I can get through the electronic pipes, the better. This is a big blueprint of our strategy. We need to unclog some of the transactions that occur in the voice world, on the wholesale side to continue with that speed limit going higher on the institutional side. So there's -- becoming this thing, which you've heard me kind of say before this kind of like light bulb moment where there is now, I think, a like-mindedness from the strongest players on the institutional side to really work with, I think, trusted partners on beginning to unleash that market. And I think it's really, really important. We've seen versions of that happen in the government bond market and then very, very specifically in the TBA mortgage market, which is also a very interesting market. So that's like a good kind of pattern recognition moment for us and an area of focus for me. We're still going to do things, Alex, because you've been always very focused on this around trying to understand our business from a fee per million perspective and compression and all of that. We're still going to do things where we can, which I described, I think, very clearly as like solving our clients' problems. And as you know, we've always kind of lived and breathed on the client side very comfortably in the asset manager world. That's been a kind of comfort zone for us. But not surprisingly, over the past bunch of years, we've really focused in on the macro world. The macro hedge fund world as being a big driver of volumes going forward. It can be more difficult for clients to, in some ways, interact with. Your going to get like one at that very quickly to solve a problem there. And we kind of view the concept of really solving for kind of compression needs as something important. And so what we've seen in swaps very specifically as we've solved for compression needs, we've created kind of workflow solutions. We earn the risk trades on the other side of it. And there's been a very strong symmetry from our perspective, kind of around that. And so not to say that I'm a genius, let's do more of that. And so we're always in there with these types of clients that tend to be difficult. They tend to like the phone. How do I make sure I hear my important counterparty at Goldman Sachs' voice? We're really into kind of solving the immediate problem, and that has been on some level, compression and then earning into risk. So hard to say exactly from a kind of compression perspective into risk, always where that goes. I would say, generally speaking, obviously, lower rate environment, steeper yield curve will be ultimately a good outcome for the fee side of our swaps business. And we think we're kind of pressing the right buttons there, most importantly in terms of the things that you can control pressing the right buttons on solving for problems and then earning into risk. I've always kind of said very clearly like it's about getting after risk trades, whether or not we're talking about rates or credit and then it's ultimately solving for how we think about complexity and negotiation. Those are the next legs of where we're going with this.

I got you. That makes sense. Before we move on from REITs, I did want to spend maybe a minute or 2 on the cash side of the business, the treasury market, there's a couple of interesting dynamics that have been going on there, right, where you talked about the market share of your platform relative to kind of the observable industry volumes. It appears like it sort of stalled out at around 20% or so. But underneath the surface, there's obviously a lot of important things going on, one of them being basis risk trading has been done mostly over the phone and therefore, that just kind of creates a bit of a denominator of noise in terms of how what you get market share. So how do you think about, one, trade of as opportunity to break into that part of the market whether or not it's in the TAM or not? And just talk to us about the sort of the organic and things like that.

It's an interesting question as I think the room knows well, government bonds like the first market that we were in like way back when. So it's like it's about as home court of a business that we could have. And so as you know, because I think you were the one that acted like as we were getting kind of questions on our last earnings call about like what's going on with your treasury market shares, the guys were like, this is our home court. What are we doing here? And I think it takes a moment for us to be very, very specific that in the past, and I'll say this like very clearly, there had been kind of moments of stress in the marketplace, moments of extreme volatility, where I would have described to the room where kind of traditional electronic business would kind of recede into a reversion into kind of phone-based business. I can't see the right prices on a screen. Let me pick up the phone and call in a kind of relationship trade. And this is kind of like the practical realities of our business. I think as we navigated through kind of a very stressful obvious marketplace in that kind of January, February, kind of March period of time, specifically around tariffs on, tariffs off, et cetera. We saw the opposite. And I want to be very clear about that. We saw a real, real stickiness of traditional electronic behavior, specifically speaking through a bunch of innovations that we've launched into the market, specifically around kind of smart searches for liquidity. That's a really important comment. But what we also saw was areas of the market where we had begun to make inroads specifically speaking to your point around kind of pieces of the base -- of the treasury basis trade which is still traditionally dominated by voice behavior, big risk trades, let me make sure I'm actually hearing the right guys' voice kind of activity that the volumes in that market really spiked. And as you know, because we've talked about kind of acquisitions that we've done, 1 of which is an acquisition that we bought called r8fin, which is an algorithmic platform that kind of lives around that space. We've identified that before that as an area of focus for us. We were just probably like in some ways, like 6 months behind being perfectly on the screws there. But as you know, I'm ambitious, and I kind of run the company in an ambitious way. So huge areas of focus. All the time for us in a home court market to really get after that kind of business because we feel that's fundamentally important with, in some ways, the biggest and most sophisticated players driving the volume. So that's a big area of focus, and I think you kind of framed it perfectly.

Got it. Okay. So why don't we spend the next several minutes on the credit business, it's your second largest business, starting with the bulk of it, which is U.S. IG and U.S. high yield. The market share for you guys, and frankly, for your largest peer as well have been kind of range-bound this year for them that have been range-bound longer than that, which is naturally back to the question, and I was like, how are we kind of done -- like have we kind of reached the ceiling in terms of what's truly electronifiable in the U.S. credit space. So one, curious to get your thoughts on that. And two, if the answer is no, there's more to go, which I'm sure that's what's going to be the answer. What are you guys are doing to sort of reaccelerate reinvigorate growth for Tradeweb in this part of the market?

Yes, it's a good question. Definitely a lot more to do. So a lot more room there, and I would have a long history around obviously kind of driving behavior change and driving kind of paper markets into electronic markets and credits are an extremely fun business for us to be in. And I think we've done over a period of time exceptionally well there. So I really would kind of not read too much into a moment in time, particularly when there's a competitive element to it. That being said, the company has more work to do to get after that next level of growth. And I see that next level of growth really coming kind of in 2 different ways. First, I would say, Alex, as you know, a lot of the cadence that is done around these electronic platforms in general tends to be done around the buy side being proactive and ultimately, the dealers, their counterparties reacting to flow. That is a very fundamentally important part of the market, but it's only part of the cadence. The other part of the cadence that I find to be extremely important, which I think very clearly is going to be fundamentally important to getting that next level of growth is the dealers being much more proactive electronically in the space, both in terms of straightforward dealer RFQs, but then I would say underneath that, something equally important, which is access and inventory. And access and inventory are important. They tend to be kind of real trading opportunities that have historically gone through kind of sales forces, how do I get something very valuable to me to my most important client or clients at the right price at the right moment. Interesting kind of problem to solve for. It's a big piece of the cadence of the market that has been under electronified. Feel very strongly that Tradeweb, as we've kind of really kind of run with that, as you know, like almost like the balance in the market. I say this like all the time, like BlackRock and PIMCO are very important clients to Tradeweb. They're not more informing clients to trade with than they are with Goldman Sachs or JPMorgan. So understand your role in the kind of ecosystem where the electronic interface between 2 important entities. And I think we've run our platform truthfully with that kind of humility around understanding these are extremely important trading relationships. And as we built things like portfolio trading, which has brought the banks back into the equation as real market makers, we've done that deliberately. And I think that puts us in a good position as the kind of industry problem solver around this next leg of flow, dealers being proactive around inventory and access, very, very important thing. Other thing I would say is just around next level of growth. The credit market like missed a stop. And when I say that, it's kind of gone in like 2 directions. It's gone. And as you know, the sort of like all trade direction or market access calls at Open Trading, which is like big anonymous giant nets of where do I find liquidity out there kind of in the universe because liquidity is hard to find. And it's also gone into something very interesting, obviously, which is like portfolio trading, which is a very tight net, more complexity and bringing the banks back into the equation. So it's gone like way over here. And then in some ways, way over here, what it has kind of missed so far is almost the out of central casting kind of traditional RFQ to view. And so ultimately, how do I start getting more comfortable around risk trades and sending them into 2 or 3 dealers have a significant amount of comfort that the information is going to be shared correctly and the dealers are going to respond back with the kind of levels where I can transact on. We've seen so much signs of progress in the market, particularly with the firm like Citadel kind of accelerating into credit and then therefore, keeping in a good way, the Goldmans and the JPs and the cities on their toes that our feeling is the market is going to find this kind of sweet spot of maybe the stop they should have hit a bunch of years ago, which is like this traditional almost like traditional RFQ business. And so I think we sit well around solving this next level of growth but fully understand, it's been a difficult year. We made so much progress kind of early. And now we see, as everybody kind of knows the behavior change comes in spurts. And that there's a patience that I would kind of describe around that, that you need.

The way you framed it, if I were to paraphrase a little bit, it feels like there is almost really increasing protocol convergence because you guys were early and incredible in portfolio trading, same thing, I would say, in sessions. And now you're kind of coming after the RFQ world the opposite is happening at some of your other competitors, which naturally begs the question about price. I mean, that's probably one of the more critical questions on top of investors' minds like aren't we going to be at a point where pricing compression will start to accelerate across this whole ecosystem. How do you think about that? How do you defend your product?

Yes, it's a really good question. So let me see if I can describe it. The way -- because I mentioned something which is like the importance of kind of understanding where you are in the totem pole and understanding these really, really seismic relationships with BlackRock, PIMCO into a Goldman, JP, that's like kind of grown up transaction world. And when you preserve that relationship after it has been disintermediated on some level, you've created a lot of value. And we've all kind of seen how the banks have, in some ways, kind of benefited from kind of coming back into the market as real counterparties, again, to their clients when it had kind of slipped away from them in some ways when you think about that concept of open trading and the disintermediation around that. And so one of my responsibilities, as you can imagine, is to make sure I am constantly ringing the bell on that value that has been created. That being said, and again, I kind of -- I say this with the bluntness that you know, court awareness around fees and the reality of this is something very, very important. So what we've worked on with the team is getting them to understand like, again, back to the totem pole, like where is the value of what we're creating. I would say from my perspective, I've been more amenable to understand that there should be -- if not few really understanding around the wholesale side of the business, which is ultimately in a lot of ways, less valuable business to our clients and be very, very strong around wallet preservation in an area of the world where we've created significant value to the community. And that's an important, I think, distinction that needs to be understood and heard. And again, as we kind of continue to do things around creating these efficiencies and the value around access and inventories and figuring out the cadence between those things and those instruments and the most important clients. My optimism in a lot of ways relies on the fact that understanding that's valuable stuff. You're into real pieces of the trading community. We're not talking about kind of nuisance oriented business that kind of collides out there in the air. And so it's important to think about that. I was -- in the conversations, Alex, that I have, especially with the buy side, it's like keep investing, keep solving problems. And that's an important principle. Like it's not -- hey, let me talk to you about where we are with the kind of few models.

Yes, I mean, it drives efficiency through the -- at the end of the day, which is how you guys approach this. So there's a lot of focus on U.S. credit, but you guys have, I think, in a really interesting story outside the U.S. as well, predominantly related to merger market credit. I think it's been an important area of growth focus for you as well. Maybe spend a couple of minutes on how you view the penetration of electronic venues and emerging market credit. What sort of role do you guys play? What are your goals there? What gives you the right to win that kind of stuff?

We've done really, really well in the EM region like in general, that's been a big, big push for us. Not surprisingly, we kind of started off like sweet spot there, which was like our rates world. EM swaps has been a big driver us there. That's allowed us to make, I think, the right version of penetration into credit so far, very, very early innings there for us. I think we still have to keep building out really strong sales engagement in that world and then beginning to see a lot of pickup in kind of like the go-to protocols that we've lived in, which I would start by saying kind of portfolio trading, that's beginning to become a kind of leading-edge driver for us around early successes that we're having. In EM Credit plus, I think probably as importantly, the concept of what we had early on as a strength, which was bringing in kind of the rates market into products that trade on spread is also a differentiator for us in the EM region. So when we think about our international business, Alex, and how well our international business quite honestly, has done I would say, kind of like focus #1 inside of that is continued acceleration in EM credit very specifically. And we think there's the same kinds of openings in that area of the world that were our original openings in the U.S. in credit.

Got it. Okay. We're going to shift gears entirely. Talk about different kind of innovation, which has been kind of all over this conference for the last 2 days, which is tokenization. So prospects of tokenization really kind of accelerated across financial markets. And I think the world is still trying to kind of figure out like what's real, what's not, what's the real use case that adds a lot of value in the near term versus what's kind up high in the sky. So how are you thinking about that ecosystem across sort of the products that you're active in, what role could Tradeweb play in that? And as part of that, maybe talk a little bit about your partnership with Canton Network, I think it's pretty important.

Yes. It's interesting. I like the way you described it is cool, we're still kind of learning there too. And you do get a lot of different opinions. We do a really interesting kind of once a year real like bringing storm session with BlackRock, and that's obviously like almost like a front and center conversation with them like not to say caution, but where is this going? A year ago, I got a phone call from Don Wilson at DRW, who we've known for a long time inside of trade. We have big rates client, a lot of activity. They were never like our best client, but huge amounts of respect for him as a practitioner and as an entrepreneur, and he called me up and he said, I think we're really on to something with Canton. I think we have like a strong odds of being the guardrails for collateral management. We kind of need you. You guys are not much like Diplomat, but like you're good at bringing in the ecosystem. You can go see Goldman, and you can see JPMorgan. You can help us kind of broaden out this network. And I was like, I think he's right a lot. So we're going to take this very seriously, and we're going to continue to learn through our investment with Canton. I am practical, as you know. And I take a half a step back and here's what I would say, which I think is actually like very interesting. We've lived in the rates complex for a long time, and we've done pretty well. We have a very, very strong from my perspective, mortgage platform, TBA mortgage platform, a combination of institutional and wholesale. As you know, Alex, that's an interesting market. There are moments in time depending on where the rates world is, where it can be like 1 or 2 or 3 steps removed from like the heat spot of fixed income and then there are moments in time where kind of rates are lower when it's like 2 of the 3 most important kind of coupons in the world and that's how that market kind of operates. It has for kind of origination reasons like very inefficient kind of settlement processes. It has a much more limited amount of participants in that world, considering how important of a market it is. It has almost no what I would describe to you guys as like algorithmic kind of driven execution or activity. It's got a lot of room to kind of change as a trading platform at a moment in time where perhaps kind of we're heading lower into rates and that market is going to become, again, a kind of front and center business. And when I think about all of that and I think about a market that is really looking for a different kind of settlement structure ultimately settles in 30 days, 60 days, 90 days. This is like -- this is -- we're not talking about going from like T+1 to T+0. I see a very, very interesting opportunity and a very pragmatic way for a company like Tradeweb, which lives and breeds around that as being a fundamentally important marketplace to play a leadership role around creating a more efficient marketplace and therefore, because we're commercial bringing in much different types of the ecosystem of the players who are big volume-oriented players in adjacent markets. And that's interesting. Like all these years later to see how a market like that has the potential to evolve really, really interesting.

The point you may hear really on the potential to evolve is key here, right? Because nobody actually really knows and there's a lot of people that are believers and there are others that are like, if anybody don't fix it.

I have lived in that. And again, it's a little bit of a more sort of dramatic version of the moment I had yesterday at the dinner where we are like the 3 smartest people in the world on the kind of rate thing, not an agreement about what's going to happen not in like 2 years in like 2 months, right? And this is a -- you got a wide range of views on it, like T+1 to real-time settlement like who cares, right?

As you think about that ecosystem, is this likely to be an organic build for you guys? Or if there's more evidence that this is becoming a more meaningful part, that's something that you might look to do something inorganically as well?

We love the beginning stages of the partnership that we've created with Canton. And those guys, we think that with a healthy dose of respect, we think they're very, very smart and they're on to something, and the way they've been able to attract really important pieces of the ecosystem into their world this year is important. There will be parts of it that we would be very obviously willing to build ourselves, and we will particularly like the execution pieces of it. But we think we're on to something with the early-stage relationship that we have with Canton. And I feel very comfortable that that's the kind of right bet for us to make at this moment in time, very clearly, Alex, with the understanding of something you said, which is like there is this kind of natural bit of back and forth, plus a natural bit of uncertainty around directionally where it's all going. It's been interesting, I also say this like to be able to be a part of this, and I think in a meaningful way, and then be able to sort of have the kind of conversations, I think that Tradeweb is known for, which is like brainstorm, idea generation and start to have conversations with the kind of players because we're in this around like where is kind of institutional crypto execution going. And is there a role for Tradeweb to play around that. And some of those doors, the conversational doors have been opened because of how we've partnered and been, I think, opportunistic around the Canton piece of it, which is cool.

All right. For my last question, maybe just bring this a little bit more closer to home here. You guys announced your monthly, I guess, a couple of days ago, for November, really good momentum in rates still. So it doesn't seem like there's a tremendous change from kind of the direction of travel you've been on. I think on the last earnings call, you talked about Q4 revenues trending something in the up 9% range year-over-year for October. Any other thoughts on kind of how Q4 is shaping out.

Only thoughts are like -- you made the point about tough comps fully hear you. October was an interesting month for us because as you know very well, like a little bit of like one hand tied behind our back around the government shutdown. We obviously flourish around payroll events, those are huge, huge volume days for us. So that was -- no one is going to feel bad for me, but that was like a frustrating kind of moment around that. I feel like when you look at kind of like November of '25 versus November of '24, where people were like vis-a-vis the election and the volatility and the buildup around that. That's like the perfect environment for your business. I feel bad for you, Billy, next year, November of '25. Like I feel like we did extremely well. Sameer gave me the stat around average daily revenue for the month average daily revenue, which doesn't roll off my tongue. I think it was like 16% or 17%, obviously, 1 less trading day in the month of November. That's like significant growth from my perspective when you're thinking about kind of what last year was like and the challenges that we've had in credit. I speak bluntly the challenges that we've had in credit over the past bunch of months in terms of moving that market share. I think it speaks to the wide range of our platform, and again, the leading edge that we have around the rates world in our macro business.

Yes, great. Well, it's a great note to end it on. Billy, thank you so much. Always great to see you. Thanks for the time.

Thank you.