MarketAxess Acquires MuniBrokers, Enhances Bond Market Share

MarketAxess Holdings Inc. MKTX recently inked a deal to acquire MuniBrokers, which is best known for serving municipal bond inter-dealer brokers and dealers by providing combined services of content distribution, trade processing, client connectivity and liquidity provision. Shares of MarketAxess have lost 3.1% on Sep 17, replicating the declines in the broader markets.

Subject to customary approval, the deal is anticipated to close in the fourth quarter of 2020.

Hartfield, Titus & Donnelly LLC (HTD), which is the owner of MuniBrokers, has mutually agreed with MarketAxess that HTD will still have access to the MuniBrokers platform for continually availing sufficient liquidity offered by the platform.

Moreover, the latest move highlights MarketAxess’ constant efforts to strengthen presence in the municipal bond market. In fact, MuniBrokers seems to be a perfect fit for the company’s endeavor, which has a central electronic marketplace that links 14 well-known Municipal Securities Brokers' Brokers and several other institutional traders and Broker Dealers.

Notably, MarketAxess is keen on expanding presence in the municipal bond market as it has witnessed huge US Taxable Municipal Bond trading volumes last year, which surged 53% year over year in 2019. Also, the same municipal bonds have been witnessing rising global demand amid the period of faster electronic trading adoption.

What puts these municipal bonds in demand is the dire need for new investment tools having diverse yield characteristics and wide market recognition of the US Taxable Municipal Bonds by virtue of their Environmental, Social and Governance (ESG) qualities.

In sync with the abovementioned parameters, investments made in the US Taxable Municipal Bonds should be favorable one since the bonds entail attractive yields, enhanced portfolio diversification and stronger credit credentials.

Coming back to the global demand for these municipal bonds, MarketAxess undertook another move in April of this year for expanding global access to the municipal bond market. The move involved giving access to US Taxable Municipal Bond liquidity via its regulated trading venues in the U.K., EU and Singapore.

Expanding access, in fact, has paved the way for several traders across geographies to participate through its regulated trading venues, which in turn, has increased trading volumes of the US Taxable Municipal Bond at MarketAxess.  Addition of MuniBrokers, which permits trading of taxable and tax-exempt municipal bonds of more than $400 million per day, is likely to result in further rise in trading volumes.

Shares of this Zacks Rank #3 (Hold) leading electronic platform operator have gained 30.5% in the past year against the industry’s decline of 1.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Furthermore, MarketAxess has been recording higher trading volumes on the back of its diversified product suite of the high demand U.S. high-grade floating rate and other credit bonds. Case in point, the company reported total monthly trading volume of $450 billion last month, which highlighted a whopping improvement of 160.4% year over year.

The company’s peers, namely Nasdaq, Inc. NDAQ, Intercontinental Exchange, Inc. ICE and Cboe Global Markets, Inc. CBOE reported trading volumes for the month of August. While U.S. equity options volume for Nasdaq improved 36.9% year over year to 215 million contracts, European options and futures volume declined 34.7% year over year to 4.9 million contracts.

However, Intercontinental Exchange’s futures & options ADV was 4.6 million, down 17.5% year over year. Nevertheless, CBOE Global’s average daily volume (“ADV”) in the month totaled 9.7 million contracts, which increased 10.7% year over year.

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