$68.24
$249.90
bear $68.24
base $137.98
bull $249.90
margin of safety $90.00
market price* $164.64
MarketAxess runs electronic marketplaces where institutional investors and dealers trade bonds: mainly U.S. investment-grade (high-grade) and high-yield corporate bonds, plus emerging-market debt, Eurobonds, municipal bonds and U.S. Treasuries. Commissions made up 87% of 2025 revenue of $846 million. They come as per-trade fees that rise and fall with volume, plus fixed monthly distribution fees paid by dealers. The rest is bond pricing data (CP+), post-trade reporting (Trax) and technology services. It bought Pragma, which provides algorithmic equity and FX trading, in 2023, and in 2025 it bought a majority stake in RFQ-hub, a multi-asset request-for-quote platform. Clients in the United States produce about 67% of revenue, the United Kingdom about 21%, and other countries the remaining 12%. Earning power. We measure the cash the business produces for its owners. We start with operating cash flow and remove short-term swings in working capital. For this company those swings are mostly large, offsetting balances owed to and by clearing brokers, which it carries because it clears its own trades. We then subtract stock-based pay, which we treat as a real cost, and the spending needed to keep its trading platforms current, mainly about $50 million a year of capitalized software development. On that basis, owner earnings were $264M in 2021, $246M in 2022, $274M in 2023, $298M in 2024 and $290M in 2025, or $6.93, $6.53, $7.26, $7.92 and $7.81 per share. We leave out 2020 ($8.21 per share) because pandemic-era turmoil in bond markets produced record volumes that did not repeat. The 2021-2025 median is $273M. In 2025 the company spent $420 million buying back stock, which cut diluted shares from about 37.1 million to 35.2 million by mid-2026. After deducting the interest that cash had been earning, our starting point is about $7.41 per share on today's share count. We add back roughly $20M a year of amortization on acquired intangibles, because the ongoing cost of keeping that technology current is already charged through the capitalized software spending. Recent results. 2025 was held down by a $26.9 million reserve for uncertain tax positions, plus severance costs. First-half 2026 net income was $146 million, up from $86 million a year earlier, on revenue up 5.6%. First-half 2026 operating cash flow was negative $49 million. That was not a loss of earning power: receivables from clearing brokers and customers rose by $187 million more than the matching payables at the end of June, which is a settlement-timing effect. The central tension. Bond trading volume keeps growing and keeps moving onto screens, but MarketAxess is losing share and earning less per trade. Its estimated share of U.S. high-grade volume fell from 21.3% in 2022 to 18.4% in 2025. In 2025 alone, high-yield share slipped from 13.2% to 12.5% and municipal share from 7.4% to 5.9%. Credit fees per million dollars traded fell 7.6% in 2025 as lower-fee protocols such as portfolio trading grew, so a 10% rise in credit volume produced only a 1.6% rise in credit transaction fees. Owner earnings still grew about 5% a year from 2022 to 2025. Market volumes expanded (U.S. high-grade volume reported to TRACE rose 8% in 2025), and emerging markets, Eurobonds, Treasuries and the acquired businesses grew. The company estimates that only about 60% of U.S. high-grade and 30% of high-yield trading is electronic, which leaves room for volume to keep migrating. Base case, $138 per share. Owner earnings rise about 8% in the first year. That is above 2025's 1.4% per-share decline because 2025 absorbed the one-time tax reserve and first-half 2026 results already run above that level. Growth is then 4% a year through year five and 3% a year through year ten, as volume growth and buybacks outpace continued fee compression and share loss, matching the 2021-2025 pattern. After year ten, earnings stay flat for twenty more years, supported by the network of dealers and investors the platform has built over 25 years. We assign nothing beyond that, because we do not assume any trading platform holds its position forever. Bear case, $68 per share. Share losses and fee compression continue at 2025's pace while market volume growth slows to ordinary levels. Owner earnings fall 3% a year for a decade, to about $5.46 per share, then 5% a year for fifteen more years, and then stop. Lower interest rates would also shrink interest income, which was $24 million in 2025. Debt is modest, with $116 million of short-term borrowings at June 30, 2026 against $1.24 billion of equity, so leverage does not deepen this case. Bull case, $250 per share. We start from the earnings rate shown from mid-2025 to mid-2026, about $8.50 per share. Electronic trading keeps taking a larger share of the high-yield and high-grade markets, MarketAxess's share stabilizes, and the newer businesses scale. Owner earnings per share grow 7% a year for ten years, below the 8.8% annual rate achieved from 2016 to 2025, then 3% a year for ten more years, then stay flat for twenty. All values use a 6% discount rate. The case is most exposed to the pace of share loss in U.S. high-grade bonds. If share keeps falling about a point a year, fees per million keep dropping 7% or more, and market volume growth stalls, results would track the bear case. The margin-of-safety price is $90, about 35% below the base value. That margin is wider than for a steady business because the competitive erosion is documented in the company's own figures. At $90, the bear value sits about 25% below that price, and the starting owner-earnings yield is about 8%.