Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# (Mark	One)

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

For	the	fiscal	year	ended	December	31,	2012

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

# MARKETAXESS	HOLDINGS	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	of	incorporation)

299	Park	Avenue,	New	York,	New	York

(Address	of	principal	executive	offices)

(IRS	Employer	Identification	No.)

(Zip	Code)

(Registrant's	telephone	number,	including	area	code)

# SECURITIES	REGISTERED	PURSUANT	TO	SECTION	12(b)	OF	THE	ACT:

Title	of	each	class:

Common	Stock,	par	value	$0.003	per	share

Name	of	each	exchange	on	which	registered:

NASDAQ	Global	Select	Market

# SECURITIES	REGISTERED	PURSUANT	TO	SECTION	12(g)	OF	THE	ACT:	None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.				Yes		x				No		¨

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	15(d)	of	the	Act.				Yes		¨				No		x

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

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	website,	if	any,	every	Interactive	Data	File	required	to	be submitted	and	posted	pursuant	to	Rule	405	of	Regulation	S-T	(§232.405	of	this	chapter)	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was required	to	submit	and	post	such	files).				Yes		x				No		¨

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	(§229.405	of	this	chapter)	is	not	contained	herein,	and	will	not	be contained,	to	the	best	of	the	registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any amendment	to	this	Form	10-K.				¨

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

Large	accelerated	filer 	 x

Non-accelerated	filer 	 ¨		(Do	not	check	if	a	smaller	reporting	company)

		 Accelerated	filer

		 Smaller	reporting	company

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

The	aggregate	market	value	of	the	shares	of	common	stock	held	by	non-affiliates	of	the	registrant	as	of	June	29,	2012	(the	last	business	day	of	the	registrant's most	recently	completed	second	fiscal	quarter)	was	approximately	$934.9	million	computed	by	reference	to	the	last	reported	sale	price	on	the	NASDAQ	Global	Select Market	on	that	date.	For	purposes	of	this	calculation,	affiliates	are	considered	to	be	officers,	directors	and	holders	of	10%	or	more	of	the	outstanding	common	stock	of the	registrant	on	that	date.	The	registrant	had	37,269,685	shares	of	common	stock,	2,174,470	of	which	were	held	by	affiliates	outstanding	on	that	date.

At	February	20,	2013,	the	aggregate	number	of	shares	of	the	registrant's	common	stock	outstanding	was	37,379,876.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	registrant's	definitive	proxy	statement	for	the	2013	Annual	Meeting	of	Stockholders	are	incorporated	by	reference	into	Items	10,	11,	12,	13	and	14 of	Part	III	of	this	Form	10-K.

|  | MARKETAXESS	HOLDINGS	INC.<br>2012	FORM	10-K	ANNUAL	REPORT<br>TABLE	OF	CONTENTS<br>PART	I | Page |
| :--- | :--- | :--- |
| Item\t1: | Business | 3 |
| Item\t1A: | Risk\tFactors | 22 |
| Item\t1B: | Unresolved\tStaff\tComments | 39 |
| Item\t2: | Properties | 39 |
| Item\t3: | Legal\tProceedings | 39 |
| Item\t4: | Mine\tSafety\tDisclosures | 39 |
|  | PART\tII |  |
| Item\t5: | Market\tfor\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | 40 |
| Item\t6: | Selected\tFinancial\tData | 42 |
| Item\t7: | Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 44 |
| Item\t7A: | Quantitative\tand\tQualitative\tDisclosures\tabout\tMarket\tRisk | 64 |
| Item\t8: | Financial\tStatements\tand\tSupplementary\tData | 65 |
| Item\t9: | Changes\tin\tand\tDisagreements\twith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | 90 |
| Item\t9A: | Controls\tand\tProcedures | 90 |
| Item\t9B: | Other\tInformation | 90 |
|  | PART\tIII |  |
| Item\t10: | Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance | 91 |
| Item\t11: | Executive\tCompensation | 91 |
| Item\t12: | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | 91 |
| Item\t13: | Certain\tRelationships\tand\tRelated\tTransactions\tand\tDirector\tIndependence | 91 |
| Item\t14: | Principal\tAccounting\tFees\tand\tServices | 91 |
|  | PART\tIV |  |
| Item\t15: | Exhibits\tand\tFinancial\tStatement\tSchedules | 92 |

# PART	I

# Forward-Looking	Statements

This	report	contains	certain	"forward-looking	statements"	within	the	meaning	of	the	Private	Securities	Litigation	Reform	Act	of	1995.	Forward-looking statements	may	be	identified	by	words	such	as	"expects,"	"intends,"	"anticipates,"	"plans,"	"believes,"	"seeks,"	"estimates,"	"will,"	or	words	of	similar	meaning	and include,	but	are	not	limited	to,	statements	regarding	the	outlook	for	our	future	business	and	financial	performance.	Forward-looking	statements	are	based	on management's	current	expectations	and	assumptions,	which	are	subject	to	inherent	uncertainties,	risks	and	changes	in	circumstances	that	are	difficult	to	predict.	It	is routine	for	our	internal	projections	and	expectations	to	change	as	the	year	or	each	quarter	in	the	year	progresses,	and	therefore	it	should	be	clearly	understood	that	the internal	projections	and	beliefs	upon	which	we	base	our	expectations	may	change	prior	to	the	end	of	each	quarter	or	the	year.	Although	these	expectations	may	change, we	are	under	no	obligation	to	revise	or	update	any	forward-looking	statements	contained	in	this	report.	Our	company	policy	is	generally	to	provide	our	expectations	only once	per	quarter,	and	not	to	update	that	information	until	the	next	quarter.	Actual	future	events	or	results	may	differ,	perhaps	materially,	from	those	contained	in	the projections	or	forward-looking	statements.	Factors	that	could	cause	or	contribute	to	such	differences	include	those	discussed	below	and	elsewhere	in	this	report, particularly	in	Item	1A	"Risk	Factors."

# Item	1.	Business.

MarketAxess	Holdings	Inc.	(the	"Company"	or	"MarketAxess")	operates	a	leading	electronic	trading	platform	that	allows	investment	industry	professionals	to efficiently	trade	corporate	bonds	and	other	types	of	fixed-income	instruments.	Our	approximately	1,000	active	institutional	investor	clients	(firms	that	executed	at	least one	trade	in	U.S.	or	European	fixed-income	securities	through	our	electronic	trading	platform	during	2012)	include	investment	advisers,	mutual	funds,	insurance companies,	public	and	private	pension	funds,	bank	portfolios,	broker-dealers	and	hedge	funds.	Our	87	broker-dealer	market-maker	clients	provide	liquidity	on	the platform	and	include	most	of	the	leading	broker-dealers	in	global	fixed-income	trading.	Through	our	Corporate	BondTicker 	service,	we	provide	fixed-income	market data,	analytics	and	compliance	tools	that	help	our	clients	make	trading	decisions.	In	addition,	we	provide	FIX	(Financial	Information	eXchange)	message	management tools,	connectivity	solutions	and	ancillary	technology	services	that	facilitate	the	electronic	communication	of	order	information	between	trading	counterparties.	Our revenues	are	primarily	generated	from	the	trading	of	U.S.	high-grade	corporate	bonds. TM

Our	multi-dealer	trading	platform	allows	our	institutional	investor	clients	to	simultaneously	request	competing,	executable	bids	or	offers	from	our	broker-dealer clients	and	execute	trades	with	the	broker-dealer	of	their	choice	from	among	those	that	choose	to	respond.	We	offer	our	broker-dealer	clients	a	solution	that	enables them	to	efficiently	reach	our	institutional	investor	clients	for	the	distribution	and	trading	of	bonds.	In	addition	to	U.S.	high-grade	corporate	bonds,	European	high-grade corporate	bonds	and	emerging	markets	bonds,	including	both	investment-grade	and	non-investment	grade	debt,	we	also	offer	our	clients	the	ability	to	trade	crossover	and high-yield	bonds,	agency	bonds,	asset-backed	and	preferred	securities	and	credit	default	swaps	("CDS").

The	majority	of	our	revenues	are	derived	from	monthly	distribution	fees	and	commissions	for	trades	executed	on	our	platform	that	are	billed	to	our	broker-dealer clients	on	a	monthly	basis.	We	also	derive	revenues	from	technology	products	and	services,	information	and	user	access	fees,	investment	income	and	other	income.	Our expenses	consist	of	employee	compensation	and	benefits,	depreciation	and	amortization,	technology	and	communication	costs,	professional	and	consulting	fees, occupancy,	marketing	and	advertising	and	general	and	administrative	expenses.

Traditionally,	bond	trading	has	been	a	manual	process,	with	product	and	price	discovery	conducted	over	the	telephone	between	two	or	more	parties.	This traditional	process	has	a	number	of	shortcomings	resulting	primarily	from	the	lack	of	a	central	trading	facility	for	these	securities,	which	creates	difficulty	matching buyers	and	sellers	for	particular	issues.	Many	corporate	bond	trading	participants	use	e-mail	and	other	electronic	means	of	communication	for	trading	corporate	bonds. While	this	has	addressed	some	of	the	shortcomings	associated	with	traditional	corporate	bond	trading,	we	believe	that	the	process	is	still	hindered	by	limited	liquidity, limited	price	transparency,	significant	transaction	costs,	compliance	and	regulatory	challenges,	and	difficulty	in	executing	numerous	trades	at	one	time.

Through	our	disclosed	multi-dealer	Request	For	Quote	("RFQ")	trading	functionality,	our	institutional	investor	clients	can	determine	prices	available	for	a security,	a	process	called	price	discovery,	as	well	as	trade	securities	directly	with	our	broker-dealer	clients.	The	price	discovery	process	includes	the	ability	to	view indicative	prices	from	the	broker-dealer	clients'	inventory	available	on	our	platform,	access	to	real-time	pricing	information	and	analytical	tools	(including	spread-to- Treasury	data,	search	capabilities	and	independent	third-party	credit	research)	available	on	our	Corporate	BondTicker 	service	and	the	ability	to	request	executable	bids and	offers	simultaneously	from	up	to	58	of	our	broker-dealer	clients	during	the	trade	process.	On	average,	institutional	investor	clients	receive	several	bids	or	offers from	broker-dealer	clients	in	response	to	trade	inquiries.	However,	some	trade	inquiries	may	not	receive	any	bids	or	offers. TM

Our	services	relating	to	trade	execution	include	single	and	multiple-dealer	inquiries;	list	trading,	which	is	the	ability	to	request	bids	and	offers	on	multiple	bonds at	the	same	time;	and	swap	trading,	which	is	the	ability	to	request	an	offer	to	purchase	one	bond	and	a	bid	to	sell	another	bond,	in	a	manner	such	that	the	two	trades	will be	executed	simultaneously,	with	payment	based	on	the	price	differential	of	the	bonds.	Once	a	trade	is	completed	on	our	platform,	the	broker-dealer	client	and institutional	investor	client	may	settle	the	trade	with	the	assistance	of	our	automated	post-trade	messaging,	which	facilitates	the	communication	of	trade	acknowledgment and	allocation	information	between	our	institutional	investor	and	broker-dealer	clients.

Typically,	we	are	not	a	party	to	the	trades	that	occur	on	our	platform	between	institutional	investor	clients	and	broker-dealer	clients;	rather,	we	serve	as	an intermediary	between	broker-dealers	and	institutional	investors,	enabling	them	to	meet,	agree	on	a	price	and	then	transact	with	each	other.	However,	we	also	execute certain	bond	transactions	between	and	among	institutional	investor	and	broker-dealer	clients	on	a	riskless	principal	basis	by	serving	as	counterparty	to	both	the	buyer	and the	seller	in	matching	back-to-back	trades,	which	are	then	settled	through	a	third-party	clearing	organization.

Our	broker-dealer	clients	accounted	for	approximately	95%	of	the	underwriting	of	newly-issued	U.S.	corporate	bonds	and	approximately	72%	of	the	underwriting of	newly	issued	European	corporate	bonds	in	2012.	We	believe	these	broker-dealers	also	represent	the	principal	source	of	secondary	market	liquidity	in	the	other	markets in	which	we	operate.	Secondary	market	liquidity	refers	to	the	ability	of	market	participants	to	buy	or	sell	a	security	quickly	and	in	large	volume	subsequent	to	the	original issuance	of	the	security,	without	substantially	affecting	the	price	of	the	security.	In	addition	to	trading	fixed-income	securities	by	traditional	means,	including	the telephone	and	e-mail,	our	broker-dealer	clients	use	proprietary	single-dealer	systems	and	other	trading	platforms	as	well	as	our	electronic	trading	platform.	We	believe that	the	traditional	means	of	trading	remain	the	manner	in	which	the	majority	of	bonds	are	traded	between	institutional	investors	and	broker-dealers.

Our	volume	in	U.S.	high-grade	corporate	bonds	represented	approximately	12.4%	of	the	total	U.S.	high-grade	corporate	bond	volume,	excluding	convertible bonds,	for	2012,	as	reported	by	the	Financial	Industry	Regulatory	Authority	("FINRA")	Trade	Reporting	and	Compliance	Engine	("TRACE"),	which	includes	inter- dealer	and	retail	trading	as	well	as	trading	between	institutional	investors	and	broker-dealers.

On	October	26,	2012,	we	entered	into	an	agreement	to	acquire	all	of	the	outstanding	shares	of	Xtrakter	Limited	("Xtrakter")	from	Euroclear	S.A./N.V.	Xtrakter	is a	U.K.-based	provider	of	regulatory	transaction	reporting,	financial	market	data	and	trade	matching	services	to	the	European	securities	markets.	The	acquisition	of Xtrakter	will	provide	us	with	an	expanded	set	of	technology	solutions	ahead	of	incoming	regulatory	mandates	in	Europe.

The	aggregate	purchase	price	is	£26.0	million	(approximately	$40.5	million)	in	cash,	plus	transaction	costs,	and	is	subject	to	a	post-closing	adjustment	based	on the	net	working	capital	of	Xtrakter	on	the	closing	date.	The	purchase	price	will	be	funded	from	available	cash	on	hand.	We	received	Financial	Service	Authority	("FSA") approval	of	the	change	in	control	on	February	18,	2013	and	expect	to	complete	the	acquisition	of	Xtrakter	on	or	about	February	28,	2013.

# Industry	Background

Fixed-income	securities	are	issued	by	corporations,	governments	and	other	entities,	and	pay	a	pre-set	absolute	or	relative	rate	of	return.	As	of	September	30,	2012, the	most	recent	date	available,	there	were	approximately	$37.7	trillion	principal	amount	of	fixed-income	securities	outstanding	in	the	U.S.	market,	including	$8.6	trillion principal	amount	of	U.S.	corporate	bonds,	according	to	the	Securities	Industry	and	Financial	Markets	Association	("SIFMA").	The	estimated	average	daily	trading volume	of	U.S.	corporate	bonds	(investment	grade	and	high-yield),	as	measured	by	TRACE,	was	$16.3	billion	in	2012.

The	U.S.	and	European	credit	markets	experienced	a	period	of	significant	turmoil	beginning	during	the	third	quarter	of	2007,	especially	in	short-term	funding	and floating	rate	note	instruments.	A	widespread	retrenchment	in	the	credit	markets	resulted	in	increased	credit	spreads	and	significantly	higher	credit	spread	volatility	across a	wide	range	of	asset	classes.	The	U.S.	credit	markets	demonstrated	significant	improvement	since	2008.	In	addition,	primary	dealer	holdings	of	corporate	bonds	due	in more	than	one	year	as	reported	by	the	Federal	Reserve	Bank	of	New	York	declined	from	approximately	$218	billion	as	of	December	31,	2007	to	$57	billion	as	of December	31,	2012.	The	trading	volume	of	U.S.	high-grade	corporate	bonds	as	reported	by	TRACE	has	remained	approximately	$2.9	trillion	for	each	of	the	four calendar	years	in	the	period	ended	December	31,	2012,	after	declining	to	$2.0	trillion	for	the	year	ended	December	31,	2008.	After	demonstrating	improved	conditions during	2009,	the	European	credit	markets	have	deteriorated	due	in	part	to	continuing	sovereign	debt	credit	concerns.

# U.S.	High-Grade	Corporate	Bond	Market

The	U.S.	corporate	bond	market	consists	of	three	broad	categories	of	securities:	investment-grade	debt	(so-called	"high-grade"),	which	typically	refers	to	debt rated	BBB-	or	better	by	Standard	&	Poor's	or	Baa3	or	better	by	Moody's	Investor	Service;	debt	rated	below	investment-grade	(so-called	"high-yield"),	which	typically refers	to	debt	rated	lower	than	BBB-	by	Standard	&	Poor's	or	Baa3	by	Moody's	Investor	Service;	and	debt	convertible	into	equity	(so-called	"convertible	debt").	We	use the	terms	high-grade	debt	and	investment-grade	debt	interchangeably	in	this	Annual	Report	on	Form	10-K.

The	U.S.	high-grade	corporate	bond	market,	which	represents	the	largest	subset	of	the	U.S.	corporate	bond	market,	has	undergone	significant	change	over	the	last decade,	which	has	been	driven	by	a	number	of	factors,	including:

•Improved	price	transparency	—	In	2002,	FINRA	adopted	TRACE	reporting,	which	requires	FINRA	members	to	report	secondary	market	transactions	in certain	fixed-income	securities	to	FINRA.	The	list	of	TRACE-eligible	bonds	includes	30,000	unique	securities,	representing	the	majority	of	the	daily trading	volume	of	high-grade	bonds.

•Introduction	of	electronic	trading	platforms	—	Electronic	trading	platforms	act	as	central	facilities	to	bring	together	buyers	and	sellers.	The	actions	of participants	on	these	platforms	are	facilitated	by	an	electronic	medium	that	improves	some	of	the	manual	processes	that	might	otherwise	be	required,	such as	searching	for	securities	with	specific	characteristics,	the	coordination	of	multiple	bilateral	telephone	calls	or	electronic	communications,	the	sorting	and analysis	of	competing	bids	or	offers,	and	the	entry	of	orders	into	the	trading	system	after	verbal	or	e-mail	trade	agreement.	As	a	result,	these	platforms typically	provide	a	lower-cost	and	more	efficient	means	of	enhanced	distribution	and	trade	execution	than	previously	possible.

•Introduction	of	credit	derivatives	—	Credit	derivatives	can	provide	increased	flexibility	and	liquidity	for	investors	and	lenders	to	diversify	their	credit exposures.	The	notional	amount	of	outstanding	CDS	transactions	grew	rapidly	between	2002	and	2007.	However,	activity	in	the	CDS	market	has	since fallen	substantially	due	to	concern	over	the	risks	associated	with	these	products,	in	particular	the	counterparty	credit	risks,	and	uncertainty	regarding	the effect	of	changes	to	the	market	resulting	from	implementation	of	the	Dodd-Frank	Wall	Street	Reform	and	Consumer	Protection	Act	(the	"Dodd-Frank Act"),	which	was	enacted	during	2010.

•Total	amount	of	debt	issued	—	High-grade	corporate	bond	issuance	of	$664	billion	during	2008	was	33%	below	the	2007	level,	as	risk	aversion	among corporate	bond	investors	limited	the	ability	of	issuers	across	a	wide	range	of	industries,	in	particular	those	in	the	financial	services	industry,	to	issue	new corporate	bonds.	New	issues	of	high-grade	corporate	bonds	were	relatively	stable	over	the	three	years	ended	December	31,	2011.	U.S.	high-grade	issuance exceeded	$1.0	trillion	in	2012.

# European	High-Grade	Corporate	Bond	Market

The	European	high-grade	corporate	bond	market	consists	of	a	broad	range	of	products,	issuers	and	currencies.	We	define	the	European	high-grade	corporate	bond market	generally	to	consist	of	bonds	intended	to	be	distributed	to	European	investors,	primarily	bonds	issued	by	European	corporations,	excluding	bonds	that	are	issued by	corporations	domiciled	in	an	emerging	markets	country	and	excluding	most	government	bonds	that	trade	in	Europe.	Examples	include:

•bonds	issued	by	European	corporations,	denominated	in	any	currency;

•bonds	generally	denominated	in	Euros,	U.S.	dollars	or	Pounds	Sterling,	excluding	bonds	that	are	issued	by	corporations	domiciled	in	an	emerging market;

•bonds	issued	by	supra-national	organizations	(entities	that	include	a	number	of	central	banks	or	government	financial	authorities,	such	as	the World	Bank),	agencies	and	governments	located	in	Europe,	generally	denominated	in	Euros,	U.S.	dollars	or	Pounds	Sterling,	provided	that	such currency	is	not	the	currency	of	the	country	where	the	bond	was	issued;	and

•floating-rate	notes	issued	by	European	corporations.

We	believe	that	the	European	high-grade	corporate	bond	market	is	impacted	by	many	of	the	same	factors	as	the	U.S.	high-grade	corporate	bond	market.	In addition,	we	believe	the	following	factors	are	unique	to	the	European	high-grade	corporate	bond	market:

•Sovereign	credit	issues	—The	global	financial	crisis	has	led	to	a	significant	rise	in	sovereign	debt	relative	to	GDP.	Increased	government	deficits and	debt	levels	along	with	ratings	downgrades	continue	to	spark	fears	of	default	among	Euro	zone	nations,	leading	to	increased	yields	on government	bonds,	making	a	more	difficult	trading	environment	for	European	corporate	bonds.

•	 Common	liquidity	pool	—	The	larger	capital	pool	created	by	the	common	currency	and	changes	in	the	regulatory	environment	have	facilitated bond	issuance	by	European	corporations.

# Emerging	Markets	Bond	Market

We	define	the	emerging	markets	bond	market	generally	to	include	U.S.	dollar,	Euro	or	local	currency	denominated	bonds	issued	by	sovereign	entities	or corporations	domiciled	in	a	developing	country.	These	issuers	are	typically	located	in	Latin	America,	Asia,	or	Central	and	Eastern	Europe.	Examples	of	countries	we classify	as	emerging	markets	include:	Argentina,	Brazil,	Colombia,	Mexico,	Peru,	the	Philippines,	Russia,	Turkey	and	Venezuela.

The	institutional	investor	base	for	emerging	markets	bonds	includes	many	crossover	investors	from	the	high-yield	and	high-grade	investment	areas.	Institutional investors	have	been	drawn	to	emerging	markets	bonds	by	their	high	returns	and	high	growth	potential.	The	average	daily	trading	volume	of	emerging	markets	external and	local	markets	debt	as	reported	by	the	Emerging	Markets	Trade	Association	for	the	quarter	ended	September	30,	2012	was	$6.8	billion	and	$14.0	billion, respectively.

# Crossover	and	High-Yield	Bond	Market

We	define	the	high-yield	bond	market	generally	to	include	all	debt	rated	lower	than	BBB-	by	Standard	&	Poor's	or	Baa3	by	Moody's	Investor	Service.	We	define the	crossover	market	to	include	any	debt	issue	rated	below	investment	grade	by	one	agency	but	investment	grade	by	the	other.	The	total	amount	of	high-yield	corporate bonds	yearly	issuance	as	reported	by	SIFMA	declined	by	68%	to	$43.0	billion	during	2008	from	$136.0	billion	in	2007,	primarily	due	to	the	risk	aversion	among corporate	bond	investors	that	severely	limited	the	ability	of	high-yield	issuers	to	raise	new	debt.	The	high-yield	corporate	bond	markets	demonstrated	significant improvement	beginning	in	2009,	with	new	issuance	for	the	year	ended	December	31,	2012	increasing	to	$328.7	billion	as	reported	by	SIFMA.

FINRA	publicly	disseminates	real-time	price	information	on	over	5,000	high-yield	corporate	bond	issues	and	disseminates	price	information	about	certain	other transactions	on	a	delayed	basis.	Trades	in	bonds	rated	BB	and	lower	are	subject	to	immediate	dissemination	if	the	trade	size	is	less	than	$1	million,	or	greater	than	$1 million	and	the	bond	trades	an	average	of	once	or	more	a	day.

The	average	daily	trading	volume	of	high-yield	bonds	as	measured	by	TRACE	for	the	year	ended	December	31,	2012	was	approximately	$4.3	billion.

# Agency	Bond	Market

We	define	the	agency	bond	market	to	include	debt	issued	by	a	U.S.	government-sponsored	enterprise.	Some	prominent	issuers	of	agency	bonds	are	the	Federal National	Mortgage	Association	("Fannie	Mae")	and	Federal	Home	Loan	Mortgage	Corporation	("Freddie	Mac").	The	total	amount	of	U.S.	agency	bonds	outstanding was	approximately	$2.4	trillion	as	of	December	31,	2012	as	reported	by	SIFMA.	The	average	daily	trading	volume	of	agency	bonds	(excluding	mortgage-backed securities)	as	measured	by	TRACE	for	the	year	ended	December	31,	2012	was	approximately	$10.8	billion.

# Credit	Default	Swap	Market

Credit	default	swaps	are	contracts	on	an	underlying	asset	that	transfer	risk	and	return	from	one	party	to	another	without	transferring	ownership	of	the	underlying asset,	allowing	market	participants	to	obtain	credit	protection	or	assume	credit	exposure	associated	with	a	broad	range	of	issuers	of	fixed-income	securities	and	other debt	obligations.	The	trading	volumes	and	notional	amount	outstanding	in	CDS	transactions	grew	rapidly	between	2002	and	2007.	Following	counterparty	credit concerns	beginning	in	2007,	trading	activity	in	the	CDS	market	declined	substantially	and	the	industry	focused	on	netting	down	counterparty	positions.	The	notional amount	of	CDS	outstanding	declined	to	$26.9	trillion	as	of	June	30,	2012	from	$62.2	trillion	as	of	December	31,	2007.	To	address	the	counterparty	credit	concerns, structural	changes	began	to	occur	in	the	CDS	market	that	included	the	creation	of	CDS	clearing	houses	in	2009	that	serve	as	central	counterparties	for	certain	CDS transactions.	In	2010,	in	response	to	the	financial	crisis,	the	U.S.	Congress	passed	the	Dodd-Frank	Act,	which	is	intended	to	bring	comprehensive	reform	to	the regulation	of	swaps,	including	CDS.	Among	the	most	significant	provisions	of	the	derivatives	section	of	the	Dodd-Frank	Act	are:	mandatory	clearing,	through	regulated central	clearing	organizations,	of	all	swaps	that	the	U.S.	Commodity	Futures	Trading	Commission	("CFTC")	or	the	U.S.	Securities	and	Exchange	Commission	("SEC") has	determined	should	be	cleared	("clearable	swaps");	and	mandatory	trading	of	clearable	swaps	on	a	board	of	trade	designated	as	a	contract	market	or	a	securities exchange	or	through	a	"swap	execution	facility,"	or	SEF	(in	each	case,	subject	to	certain	key	exceptions).	While	we	expect	that	the	CFTC	and	SEC	will	adopt	rules	that detail	the	new	regulatory	regime	regarding	the	swaps	market	place	in	2013,	no	assurance	can	be	given	regarding	when,	or	whether,	such	rules	will	be	finalized	and implemented.	Subject	to	such	rulemaking,	we	intend	to	establish,	register	and	operate	a	swap	execution	facility	and/or	a	security-based	swap	execution	facility.	We believe	that	the	introduction	of	the	clearing	mandates	is	likely	to	result	in	more	standardized	contracts	and	greater	price	transparency	in	the	CDS	markets.

Although	the	European	regulators	have	not	yet	introduced	legislation	concerning	regulation	of	the	European	derivatives	markets,	the	European	Parliament	and	the EU	Council	of	Ministers	endorsed	an	agreement	that	will,	among	other	things,	require	central	clearing	of	standardized	OTC	derivatives	and	the	reporting	of	all derivatives	(OTC	or	otherwise)	to	trade	repositories.	However,	it	is	not	yet	clear	whether	there	will	be	any	requirement	in	the	EU	to	trade	standardized	derivative contracts	on	regulated	exchanges	or	trading	platforms.

# Asset-Backed	Securities

Asset-backed	securities	are	ownership	interests	in	a	pool	of	receivables	sold	by	originators	into	a	special	purpose	vehicle.	These	securities	are	typically	secured	by pools	of	homogeneous	assets	with	relatively	predictable	cash	flows.	The	assets	are	legally	separated	from	the	seller,	which	limits	the	investor's	exposure	to	the	credit quality	of	the	seller.	In	2012,	approximately	$180.0	billion	in	U.S.	consumer-based	asset-backed	securities	(defined	as	including	auto,	credit	cards,	equipment	and student	loans)	and	non-agency	residential	and	commercial	mortgage-backed	securities	were	issued.	New	issuance	declined	from	over	$1.0	trillion	in	2007	as	the	asset- backed	securities	market	was	significantly	impacted	by	the	credit	and	housing	market	crisis.	The	total	amount	of	consumer-based	asset-backed	and	non-agency residential	and	commercial	mortgage-backed	securities	outstanding	at	December	31,	2012	was	$2.5	trillion,	as	reported	by	SIFMA.

# Preferred	Securities

Preferred	securities	are	equity	ownership	securities	that	carry	additional	rights	above	and	beyond	those	conferred	by	common	shares.	The	additional	rights typically	include	preference	in	dividends	and	seniority	in	assets	vis-à-vis	common	stock	in	the	event	of	liquidation.	Other	typical	features	include	convertibility	into common	stock,	callable	at	the	option	of	the	corporation	and	no	voting	rights.

# Our	Competitive	Strengths

Our	electronic	trading	platform	provides	solutions	to	some	of	the	shortcomings	of	traditional	bond	trading	methods.	The	benefits	of	our	solution	are	demonstrable throughout	the	trading	cycle:

•Pre-trade	—	gathering	real-time	and	historical	pricing	information,	identifying	interested	buyers	and	sellers	in	a	particular	security,	and	obtaining research	and	analysis;

•Trade	—	single	and	multiple	security	trade	execution;	and

•Post-trade	—	trade	detail	matching,	account	allocation	and	automated	audit	trail.

We	believe	that	we	are	well	positioned	to	strengthen	our	market	position	in	electronic	trading	in	our	existing	products	and	to	extend	our	presence	into	new products	and	services	by	capitalizing	on	our	competitive	strengths,	including:

# Significant	Trading	Volumes	with	Participation	by	Leading	Broker-Dealers	and	Institutional	Investors

Our	electronic	trading	platform	provides	access	to	the	liquidity	provided	through	the	participation	on	our	platform	of	87	broker-dealer	market-making	clients, including	substantially	all	of	the	leading	broker-dealers	in	global	fixed-income	trading,	and	approximately	1,000	active	institutional	investor	firms.	We	believe	these broker-dealers	represent	the	principal	source	of	secondary	market	liquidity	for	U.S.	high-grade	corporate	bonds,	European	high-grade	corporate	bonds,	emerging	markets bonds	and	the	other	markets	in	which	we	operate.	Our	broker-dealer	clients	are	motivated	to	continue	to	utilize	our	platform	due	to	the	presence	on	the	platform	of	our large	network	of	institutional	investor	clients.	We	believe	that	our	net	addition	of	38	new	broker-dealer	market-making	clients	since	the	third	quarter	of	2008	has improved	and	will	continue	to	improve	the	liquidity	on	our	electronic	trading	platform	for	institutional	investors,	further	motivating	them	to	use	our	platform.	The number	of	our	active	institutional	investor	clients	for	the	past	five	years	has	been	as	follows:

Our	total	trading	volume	increased	from	$226.4	billion	in	2008	to	$589.6	billion	in	2012.	We	believe	that	our	trading	volumes	in	2008	and	2009	reflect	the	turmoil and	resultant	lack	of	liquidity	in	the	credit	markets	beginning	in	the	third	quarter	of	2007.	Our	total	trading	volume	over	the	past	five	years	is	indicated	below:

Our	volume	in	U.S.	high-grade	corporate	bonds	was	approximately	6.6%	of	total	U.S.	high-grade	corporate	bond	volume,	excluding	convertible	bonds,	in	2008	as reported	by	TRACE,	which	includes	inter-dealer	and	retail	trading	as	well	as	trading	between	institutional	investors	and	broker-dealers.	Following	the	credit	market turmoil,	our	estimated	market	share	declined	to	approximately	6.2%	for	the	full	year	2009.	Our	estimated	share	of	total	U.S.	high-grade	corporate	bond	volume	for	2012 was	approximately	12.4%,	double	the	estimated	market	share	in	2009,	due	in	part	to	improved	U.S.	credit	market	conditions,	increased	client	order	flow	and	higher	order execution	rates.	Our	estimated	market	share	from	2008	to	2012	is	shown	in	the	chart	below:

# Execution	Benefits	to	Clients

# Benefits	to	Institutional	Investor	Clients

We	believe	we	provide	numerous	benefits	to	our	institutional	investor	clients	over	traditional	fixed-income	trading	methods,	including:

Competitive	Prices.	By	enabling	institutional	investors	to	simultaneously	request	bids	or	offers	from	our	broker-dealer	clients,	we	believe	our	electronic	trading platform	creates	an	environment	that	motivates	our	broker-dealer	clients	to	provide	competitive	prices	and	gives	institutional	investors	confidence	that	they	are obtaining	a	competitive	price.	For	typical	MarketAxess	multi-dealer	corporate	bond	inquiries,	the	range	of	competitive	spread-to-Treasury	responses	is,	on	average, approximately	10	basis	points	(a	basis	point	is	1/100	of	1%	in	yield).	As	an	example	of	the	potential	cost	savings	to	institutional	investors,	a	one	basis	point	savings	on	a $1	million	face	amount	trade	of	a	bond	with	10	years	to	maturity	translates	to	aggregate	savings	of	approximately	$800.00.

Transparent	Pricing	on	a	Range	of	Securities.	The	commingled	multi-dealer	inventory	of	bonds	posted	by	our	broker-dealer	clients	on	our	platform	consists	of	a daily	average	of	more	than	$45	billion	in	indicative	bids	and	offers.	Subject	to	applicable	regulatory	requirements,	institutional	investors	can	search	bonds	in	inventory based	on	any	combination	of	issuer,	issue,	rating,	maturity,	spread-to-Treasury,	size	and	dealer	providing	the	listing,	in	a	fraction	of	the	time	it	takes	to	do	so	manually. Institutional	investor	clients	can	also	request	executable	bids	and	offers	on	our	electronic	trading	platform	on	any	debt	security	in	a	database	of	U.S.	and	European corporate	bonds,	although	there	can	be	no	assurance	as	to	the	number	of	broker-dealers	who	will	choose	to	provide	an	executable	price.	Our	platform	transmits	bid	and offer	requests	in	real-time	to	broker-dealer	clients,	who	may	respond	with	executable	prices	within	the	time	period	specified	by	the	institutional	investor.	Institutional investors	may	also	elect	to	display	live	requests	for	bids	or	offers	anonymously	to	all	other	users	of	our	electronic	trading	platform,	in	order	to	create	broader	visibility	of their	inquiry	among	market	participants	and	increase	the	likelihood	that	the	request	results	in	a	trade.	We	believe	that	broader	participation	in	client	inquiries	will	result in	more	trade	matches	and	lower	transaction	costs.

Improved	Cost	Efficiency.	We	believe	that	we	provide	improved	efficiency	by	reducing	the	time	and	labor	required	to	conduct	broad	product	and	price	discovery. Single-security	and	multi-security	(bid	or	offer	lists)	inquiries	can	be	efficiently	conducted	with	multiple	broker-dealers.	In	addition,	our	Corporate	BondTicker eliminates	the	need	for	manually-intensive	phone	calls	or	e-mail	communication	to	gather,	sort	and	analyze	information	concerning	historical	transaction	prices. TM

# Benefits	to	Broker-Dealer	Clients

We	also	provide	substantial	benefits	to	our	broker-dealer	clients	over	traditional	fixed-income	trading	methods,	including:

Greater	Sales	Efficiency.	We	offer	our	broker-dealer	clients	broad	connectivity	with	our	institutional	investor	clients.	Through	this	connectivity,	our	broker-dealer clients	are	able	to	efficiently	display	their	indications	of	interest	to	buy	and	sell	various	securities.	We	also	enable	broker-dealers	to	broaden	their	distribution	by participating	in	transactions	to	which	they	otherwise	may	not	have	had	access.	In	addition,	the	ability	to	post	prices	and	electronically	execute	on	straightforward	trades enables	bond	sales	professionals	at	broker-dealer	firms	to	focus	their	efforts	on	more	profitable	activities,	such	as	higher	value-added	trades	and	more	complex transactions.

More	Efficient	Inventory	Management.	The	posting	of	inventory	to,	and	the	ability	to	respond	to	inquiries	from,	a	broad	pool	of	institutional	investors,	creates	an increased	opportunity	for	broker-dealers	to	identify	demand	for	their	inventory,	particularly	in	less	liquid	securities.	As	a	result,	we	believe	they	can	achieve	enhanced bond	inventory	turnover,	which	may	limit	credit	exposure.

# Benefits	to	Both	Institutional	Investor	and	Broker-Dealer	Clients

We	offer	additional	benefits	over	traditional	fixed-income	trading	methods	that	are	shared	by	both	institutional	investor	and	broker-dealer	clients,	including:

Greater	Trading	Accuracy.	Our	electronic	trading	platform	includes	verification	mechanisms	at	various	stages	of	the	execution	process	which	result	in	greater accuracy	in	the	processing,	confirming	and	clearing	of	trades	between	institutional	investor	and	broker-dealer	clients.	These	verification	mechanisms	are	designed	to ensure	that	our	broker-dealer	and	institutional	investor	clients	are	sending	accurate	trade	messages	by	providing	multiple	opportunities	to	verify	they	are	trading	the correct	bond,	at	the	agreed-upon	price	and	size.	Our	platform	assists	our	institutional	investor	clients	in	automating	the	transmittal	of	order	tickets	from	the	portfolio manager	to	the	trader,	and	from	the	trader	to	back-office	personnel.	This	automation	provides	more	timely	execution	and	a	reduction	in	the	likelihood	of	errors	that	can result	from	manual	entry	of	information	into	different	systems.

Efficient	Risk	Monitoring	and	Compliance.	Institutional	investors	and	their	regulators	are	increasingly	focused	on	ensuring	that	best	execution	is	achieved	for fixed-income	trades.	Our	electronic	trading	platform	offers	both	institutional	investors	and	broker-dealers	an	automated	audit	trail	for	each	stage	in	the	trading	cycle. This	enables	compliance	personnel	to	review	information	relating	to	trades	more	easily	and	with	greater	reliability.	Trade	information	including	time,	price	and	spread- to-Treasury	is	stored	securely	and	automatically	on	our	electronic	trading	platform.	This	data	represents	a	valuable	source	of	information	for	our	clients'	compliance personnel.	Importantly,	we	believe	the	automated	audit	trail,	together	with	the	competitive	pricing	that	is	a	feature	of	our	electronic	trading	platform,	gives	fiduciaries	the ability	to	demonstrate	that	they	have	achieved	best	execution	on	behalf	of	their	clients.

# Other	Service	Offerings

In	addition	to	services	directly	related	to	the	execution	of	trades,	we	offer	our	clients	several	other	services,	including:

Information	Services.	The	information	and	analytical	tools	we	provide	to	our	clients	help	them	make	investment	and	trading	decisions.	Our	Corporate BondTicker 	provides	access	to	real-time	and	historical	price,	yield	and	MarketAxess	estimated	spread-to-Treasuries	for	publicly	disseminated	TRACE-eligible	bonds. Corporate	BondTicker 	combines	publicly-available	TRACE	data	with	the	prices	for	trades	executed	on	our	U.S.	high-grade	electronic	trading	platform,	integrating	the two	data	sources	and	providing	real-time	TRACE	data	with	associated	analytical	tools	that	are	not	otherwise	available.	Our	electronic	trading	platform	allows institutional	investors	to	compile,	sort	and	use	information	to	discover	investment	opportunities	that	might	have	been	difficult	or	impossible	to	identify	using	a	manual information-gathering	process	or	other	electronic	services. TM TM

We	offer	a	comprehensive	set	of	reports	designed	to	review	and	monitor	credit	trading	activity	for	institutional	investor	clients.	These	reports	utilize	extensive TRACE	information	and	are	accessible	by	means	of	a	flexible	interface	to	run	and	save	reports	in	a	variety	of	formats	for	both	compliance	and	management	reporting. For	example,	the	best	execution	report	provides	a	view	of	the	savings	generated	by	trading	on	our	electronic	trading	platform	and	offers	a	quantitative	measure	of	the value	of	price	discovery	from	multiple	dealers.	The	report	allows	clients	to	monitor	performance	against	their	own	best	execution	policy.	Our	compliance	product provides	a	printed	history	of	each	inquiry	submitted	through	the	MarketAxess	trading	platform.

Straight-Through	Processing.	Straight-through	processing	("STP")	refers	to	the	integration	of	systems	and	processes	to	automate	the	trade	process	from	end-to- end	—	trade	execution,	confirmation	and	settlement	—	without	the	need	for	manual	intervention.	Our	electronic	trading	platform	provides	broker-dealers	and institutional	investors	with	the	ability	to	automate	portions	of	their	transaction	processing	requirements,	improving	accuracy	and	efficiency.	Through	electronic messaging,	institutional	investors	can	submit	inquiries	to,	and	receive	electronic	notices	of	execution	from	us,	in	industry	standard	protocols,	complete	with	all	relevant trade	details.	Institutional	investors	can	download	trade	messages,	allocate	trades	to	the	sub-accounts	on	whose	behalf	the	trades	were	made	and	send	the	allocations	to broker-dealers	for	confirmation.

Technology	Products	and	Services.	We	provide	integration,	testing	and	management	solutions	for	FIX-related	products	and	services	designed	to	optimize	the electronic	trading	of	fixed-income,	equity	and	other	exchange-based	products.	We	also	provide	technology	consulting	and	customized	development	services	to	our clients	that	leverage	our	trading	technology	expertise	and	our	existing	technology	solutions.	In	addition,	we	provide	gateway	adapters	to	connect	order	management	and trading	systems	to	fixed-income	trading	venues.

# Robust,	Scalable	Technology

We	have	developed	proprietary	technology	that	is	highly	secure,	fault-tolerant	and	provides	adequate	capacity	for	our	current	operations,	as	well	as	for	substantial growth.	Our	highly	scalable	systems	are	designed	to	accommodate	additional	volume,	products	and	clients	with	relatively	little	modification	and	low	incremental	costs.

# Proven	Innovator	with	an	Experienced	Management	Team

Since	our	inception,	we	have	been	an	innovator	in	the	fixed-income	securities	markets.	The	members	of	our	management	team	average	more	than	20	years	of experience	in	the	securities	industry.	We	have	consistently	sought	to	benefit	participants	in	the	markets	we	serve	by	attempting	to	replicate	the	essential	features	of	fixed- income	trading,	including	the	existing	relationships	between	broker-dealers	and	their	institutional	investor	clients,	while	applying	technology	to	eliminate	weaknesses	in traditional	trading	methods.	In	2012,	MarketAxess	was	named	"Best	OTC	Derivatives	Platform"	in	Wall	Street	Letter's	Annual	Institutional	Trading,	and	was	listed among	Risk	magazine's	"25	Firms	of	the	Future."	Most	recently,	MarketAxess	was	recognized	as	one	of	the	"100	Fastest	Growing	Companies"	by	Fortune.

Some	of	the	innovations	we	have	introduced	to	electronic	trading	include:

•the	first	multi-dealer	disclosed	trading	platform	for	U.S.	high-grade	corporate	bonds;

•the	first	electronic	Treasury	benchmarking	for	U.S.	high-grade	corporate	bond	trades;

•	 Corporate	BondTicker ,	our	information	services	product,	combining	TRACE	bond	data	with	MarketAxess	data	and	analytical	tools; TM

•bid	and	offer	list	technology	for	corporate	bond	trading,	enabling	institutional	investors	to	request	executable	prices	for	multiple	securities simultaneously;

•the	first	disclosed	client	to	multi-dealer	trading	platform	for	CDS	indices;	and

•public	Market	Lists	for	corporate	bonds,	giving	institutional	investors	the	ability	to	display	their	bid	and	offer	lists	anonymously	to	the	entire MarketAxess	trading	community.

# Our	Strategy

Our	objective	is	to	provide	the	leading	global	electronic	trading	platform	for	fixed-income	securities,	connecting	broker-dealers	and	institutional	investors	more easily	and	efficiently,	while	offering	a	broad	array	of	information,	trading	and	technology	services	to	market	participants	across	the	trading	cycle.	The	key	elements	of our	strategy	are:

# Enhance	the	Liquidity	of	Securities	Traded	on	Our	Platform	and	Broaden	Our	Client	Base	in	Our	Existing	Markets

We	intend	to	further	enhance	the	liquidity	of	securities	traded	on	our	leading	electronic,	multi-dealer	to	client	fixed-income	platform.	Our	ability	to	innovate	and efficiently	add	new	functionality	and	product	offerings	to	the	MarketAxess	platform	will	help	us	deepen	our	market	share	with	our	existing	clients,	as	well	as	expand	our client	base,	which	we	believe	will,	in	turn,	lead	to	even	further	increases	in	the	liquidity	of	the	securities	provided	by	our	broker-dealer	clients	and	available	on	our platform.	We	will	seek	to	increase	the	amount	of	cross-regional	activity	by	our	institutional	investor	clients	on	our	electronic	trading	platform,	subject	to	regulatory requirements.

# Leverage	our	Existing	Technology	and	Client	Relationships	to	Expand	into	New	Sectors	of	the	Fixed-Income	Securities	Market

We	intend	to	leverage	our	technology,	as	well	as	our	strong	broker-dealer	and	institutional	investor	relationships,	to	deploy	our	electronic	trading	platform	into additional	product	segments	within	the	fixed-income	securities	markets	and	deliver	fixed-income	securities-related	technical	services	and	products.	Due	in	part	to	our highly	scalable	systems,	we	believe	we	will	be	able	to	enter	new	markets	efficiently.	As	an	example,	we	have	developed	technology	and	trading	protocols	to	trade	CDS in	anticipation	of	implementation	of	the	Dodd-Frank	Act	and,	subject	to	such	rulemaking,	we	currently	expect	to	establish	and	operate	a	swap	execution	facility	and/or	a security-based	swap	execution	facility.

# Leverage	our	Existing	Technology	and	Client	Relationships	to	Expand	into	New	Client	Segments

We	intend	to	leverage	our	technology	and	client	relationships	to	deploy	our	electronic	trading	platform	into	new	client	segments.	As	an	example,	we	have expanded	the	base	of	broker-dealers	on	our	platform	to	include	both	regional	and	diversity	dealers.

# Continue	to	Strengthen	and	Expand	our	Trade-Related	Service	Offerings

We	plan	to	continue	building	our	existing	service	offerings	so	that	our	electronic	trading	platform	is	more	fully	integrated	into	the	workflow	of	our	broker-dealer and	institutional	investor	clients.	We	also	plan	to	continue	to	add	functionality	to	enhance	the	ability	of	our	clients	to	achieve	a	fully	automated,	end-to-end	straight- through	processing	solution	(automation	from	trade	initiation	to	settlement).	We	are	continually	considering	the	introduction	of	new	trading	techniques.

# Expand	our	Data	and	Information	Services	Offerings

We	regularly	add	new	content	and	analytical	capabilities	to	Corporate	BondTicker 	in	order	to	improve	the	value	of	the	information	we	provide	to	our	clients. We	intend	to	continue	to	widen	the	user	base	of	our	data	products	and	to	continue	adding	new	content	and	analytical	capabilities.	As	the	use	of	our	electronic	trading platform	continues	to	grow,	we	believe	that	the	amount	and	value	of	our	proprietary	trading	data	will	also	increase,	further	enhancing	the	value	of	our	information services	offerings	to	our	clients. TM

# Expand	our	Technology	Services	Offerings

We	intend	to	leverage	our	technology	expertise	and	our	client	relationships	to	provide	technology	solutions	to	our	clients	that	enhance	their	electronic	trading capabilities	and	facilitate	the	electronic	communication	of	order	information	with	their	trading	counterparties.

# Pursue	Select	Acquisitions	and	Strategic	Alliances

We	plan	to	continue	to	increase	and	supplement	our	internal	growth	by	entering	into	strategic	alliances,	or	acquiring	businesses	or	technologies,	that	will	enable	us to	enter	new	markets,	provide	new	products	or	services,	or	otherwise	enhance	the	value	of	our	platform	to	our	clients.

On	October	26,	2012,	we	entered	into	an	agreement	to	acquire	all	of	the	outstanding	shares	of	Xtrakter	from	Euroclear	S.A./N.V.	Xtrakter	is	a	U.K.-based provider	of	regulatory	transaction	reporting,	financial	market	data	and	trade	matching	services	to	the	European	securities	markets.	The	acquisition	of	Xtrakter	will provide	us	with	an	expanded	set	of	technology	solutions	ahead	of	incoming	regulatory	mandates	in	Europe.

# MarketAxess	Electronic	Trading	Platform

# Key	Trading	Functionalities

The	key	trading	functionalities	are	detailed	below.

# Single	Inquiry	Trading	Functionality

We	currently	offer	institutional	investors	the	ability	to	request	bids	or	offers	in	a	single	inquiry	from	an	unlimited	number	of	our	broker-dealer	clients	for	U.S. high-grade	corporate	bonds,	from	up	to	six	of	our	broker-dealer	clients	for	European	high-grade	corporate	bonds	and	from	up	to	12	of	our	broker-dealer	clients	in emerging	markets	bonds.	Institutional	investors	can	obtain	bids	or	offers	on	any	security	posted	in	inventory	or	included	in	the	database	available	on	our	platform.

# ASAP	and	Holding	Bin	Trading	Functionalities

We	provide	both	ASAP	("as	soon	as	possible")	and	Holding	Bin	trading	protocols.	In	the	Holding	Bin	trading	protocol,	institutional	investor	clients	set	the	time when	they	would	like	all	of	the	broker-dealers'	prices	or	spreads	returned	to	them,	in	order	to	have	the	ability	to	see	all	executable	prices	available	at	the	same	time.	In the	ASAP	trading	protocol,	institutional	investor	clients	see	each	broker-dealer's	price	or	spread	as	soon	as	it	is	entered	by	the	broker-dealer.

# List	Trading	Functionality

We	currently	offer	institutional	investors	the	ability	to	request	bids	or	offers	on	a	list	of	up	to	40	bonds	depending	on	the	market.	This	facilitates	efficient	trading for	institutional	investors	such	as	investment	advisors,	mutual	funds	and	hedge	funds.	Institutional	investors	are	able	to	have	multiple	lists	executable	throughout	the trading	day,	enabling	them	to	manage	their	daily	cash	flows,	portfolio	duration,	and	credit	and	sector	exposure.

# Swap	Trading	Functionality

We	currently	offer	institutional	investors	the	ability	to	request	an	offer	to	purchase	one	bond	and	a	bid	to	sell	another	bond,	in	a	manner	such	that	the	two	trades will	be	executed	simultaneously,	with	payment	based	on	the	price	or	yield	differential	of	the	securities.

# Market	Lists

We	offer	institutional	investors	the	ability	to	display	live	requests	for	bids	and	offers	anonymously	to	the	entire	MarketAxess	trading	community	through	our Market	List	functionality,	thereby	creating	broader	visibility	of	their	inquiry	among	market	participants	and	increasing	the	likelihood	that	the	request	results	in	a	trade.

# Inventory	and	Axes

The	price	discovery	process	includes	the	ability	to	view	indications	of	interest	from	both	broker-dealer	clients	and,	beginning	in	2012,	institutional	investor	clients inventory	on	our	platform.	Through	the	aggregated	indication	of	interest	inventory,	clients	can	search	for	bonds	of	interest	and	engage	in	electronic	transactions.

# Click-to-Trade

We	have	enhanced	our	trading	system	to	provide	pre-trade	price	discovery	and	fast-track	execution	for	European	bonds.	Click-to-trade	functionality	streams attributable	pricing	in	European	credit	and	rates	instruments,	submitted	by	our	pool	of	European	dealers.	Investor	clients	are	able	to	initiate	an	inquiry	with	a	single	click on	the	stacks	of	distinctly	displayed	dealer	bids	and	offers.	Click-to-trade	is	offered	alongside	our	existing	Request	for	Quote	product.	Although	currently	limited	to European	credit	and	rate	instruments,	click-to-trade	functionality	may	be	applied	to	trading	of	other	market	sectors.

# Central	Limit	Order	Book

We	have	offered	central	limit	order	book	("CLOB")	style	trading	for	bonds	and	CDS	in	the	past.	While	the	characteristics	of	the	corporate	bond	market	have	not been	conducive	to	continuous	trading	(as	in	equity	markets),	we	believe	there	is	a	sub-set	of	actively	traded	bonds	and	CDS	that	could	benefit	from	CLOB	trading.	We expect	to	re-introduce	CLOB	trading	in	2013.

# Client-to-Dealer	Trading

# U.S.	High-Grade	Corporate	Bonds

Our	U.S.	high-grade	corporate	bond	business	consists	of	U.S.	dollar-denominated	investment-grade	debt	issued	by	corporations	for	distribution	in	the	U.S.	Both domestic	and	foreign	institutional	investors	have	access	to	U.S.	high-grade	corporate	bond	trading	on	our	electronic	trading	platform.	Our	2012	trading	volume	in	the U.S.	high-grade	corporate	bond	market	was	$367.7	billion.

In	the	U.S.	high-grade	corporate	bond	market,	58	broker-dealers	utilize	our	platform,	including	all	of	the	top	20	broker-dealers	as	ranked	by	2012	U.S.	corporate bond	new-issue	underwriting	volume.	Our	broker-dealer	clients	accounted	for	approximately	95%	of	the	underwriting	of	newly-issued	U.S.	corporate	bonds	in	2012.

We	offer	our	institutional	investor	clients	access	to	a	broad	inventory	of	U.S.	high-grade	corporate	bonds,	which	is	provided	and	updated	daily	by	our	broker- dealer	clients.	Our	electronic	trading	platform	allows	institutional	investors	to	view	bids	and	offers	from	one	or	more	of	our	broker-dealer	clients	while	permitting	each party	to	know	the	identity	of	its	counter-party	throughout	the	trading	process.	Our	disclosed	inquiry	trading	functionality	combines	the	strength	of	existing	offline client/dealer	relationships	with	the	efficiency	and	transparency	of	an	electronic	trading	platform.	This	enables	institutional	investors	to	instantly	direct	trade	inquiries	and negotiations	to	their	traditional	broker-dealer	or	to	any	of	the	substantial	majority	of	the	world's	leading	broker-dealers	who	provide	liquidity	in	these	securities. Through	our	Market	List	functionality,	we	also	offer	institutional	investors	the	ability	to	display	their	live	requests	for	bid	and	offer	lists	anonymously	to	the	entire MarketAxess	trading	community	as	a	means	of	creating	broader	visibility	of	their	inquiry	among	market	participants	and	increasing	the	likelihood	that	the	request	results in	a	trade.

Institutional	investors	have	access	to	the	commingled	inventory	of	our	broker-dealer	clients,	representing	indicative	bids	and	offers.	Each	line	item	of	inventory represents	an	indicative	bid	and/or	offer	on	a	particular	bond	issue	by	a	particular	broker-dealer	client.	Institutional	investor	clients	are	not	restricted	to	trading	only	the bonds	posted	as	inventory,	although	many	of	the	trades	conducted	on	our	platform	are	made	from	the	posted	inventory.	To	transact	in	a	specific	bond	that	does	not appear	in	inventory,	institutional	investors	can	easily	search	our	database	and	submit	an	online	inquiry	to	their	chosen	broker-dealers,	who	can	respond	with	live, executable	prices.	While,	on	average,	institutional	investor	clients	receive	several	bids	or	offers	from	broker-dealers	in	response	to	trade	inquiries,	some	inquiries	may not	receive	any	bids	or	offers.

# Eurobonds

MarketAxess	Europe	Limited,	our	wholly-owned	U.K.	subsidiary,	offers	European	secondary	trading	functionality	in	U.S.	dollar-	and	Euro-denominated European	corporate	bonds	to	our	broker-dealer	and	institutional	investor	clients.	We	also	offer	our	clients	the	ability	to	trade	in	other	European	high-grade	corporate bonds,	including	bonds	issued	in	Pounds	Sterling,	floating	rate	notes,	European	government	bonds	and	bonds	denominated	in	non-core	currencies.	We	offered	the	first platform	in	Europe	with	a	multi-dealer	disclosed	counterparty	trading	capability	for	corporate	bonds.	In	2009,	MarketAxess	Europe	Limited	received	FSA	regulatory approval	to	trade	on	a	riskless	principal	basis.	In	2010,	we	launched	a	click-to-trade	protocol	for	the	European	market.

In	the	Eurobond	credit	market,	defined	as	including	European	high-grade,	high-yield	and	government	bonds,	23	broker-dealers	utilize	our	platform,	including	17 of	the	top	20	broker-dealers	as	ranked	by	2012	European	corporate	new-issue	underwriting	volume.	On	a	typical	day,	institutional	investors	on	our	European	corporate bond	trading	platform	have	access	to	over	120,000	lines	of	streaming	pre-trade	price	indications	on	over	14,000	individual	instruments	covered	on	both	the	bid	and	offer side	of	the	market.	In	a	single	inquiry,	institutional	investors	can	request	bids	or	offers	from	up	to	six	of	the	broker-dealers	who	participate	on	the	European	platform. While	many	of	the	trades	conducted	on	our	platform	are	made	from	the	posted	inventory,	institutional	investor	clients	are	not	restricted	to	trading	only	the	bonds	posted as	inventory.	To	transact	in	a	specific	bond	that	does	not	appear	in	inventory,	institutional	investors	can	easily	search	our	database	and	submit	an	online	inquiry	to	their chosen	broker-dealers,	who	can	respond	with	live,	executable	prices.	While,	on	average,	institutional	investor	clients	receive	several	bids	or	offers	from	broker-dealers in	response	to	trade	inquiries,	some	inquiries	may	not	receive	any	bids	or	offers.	Our	2012	trading	volume	in	the	Eurobond	market	was	$34.5	billion.

# Emerging	Markets	Bonds

Fifty-nine	of	our	U.S.	broker-dealer	clients	use	our	platform	to	trade	emerging	markets	bonds.	Four	hundred	ninety-three	active	institutional	investor	clients utilized	our	electronic	trading	platform	to	trade	emerging	markets	bonds	in	2012.	These	institutional	investor	clients	are	predominantly	located	in	the	U.S.	and	Europe. The	emerging	markets	countries	whose	bonds	were	most	frequently	traded	on	our	platform	in	2012	were	Brazil,	Mexico,	Venezuela,	Russia	and	Argentina.

We	also	allow	our	institutional	investor	clients	to	transact	Euroclear-eligible	local	currency	denominated	bonds	issued	by	sovereign	entities	or	corporations	in countries	that	include	Argentina,	Brazil	and	Mexico.

# Crossover	and	High-Yield	Bonds

Fifty-nine	of	our	U.S.	broker-dealer	clients	use	our	platform	to	trade	crossover	and	high-yield	bonds.	Trading	in	crossover	and	high-yield	bonds	uses	many	of	the same	features	available	in	our	U.S.	high-grade	corporate	bond	offering.

# Agency	Bonds

Forty-one	of	our	U.S.	broker-dealer	clients	use	our	platform	to	trade	agency	bonds.	Trading	in	agency	bonds	uses	many	of	the	same	features	available	in	our	U.S. high-grade	corporate	bond	offering.

# Credit	Default	Swaps

We	offer	trading	on	our	platform	for	CDS	indices,	index	options	and	single-names	in	both	the	U.S.	and	Europe	through	our	traditional	RFQ	protocol.	We	are streaming	executable	dealer	markets	in	CDS	and	European	indices.	Ten	of	our	broker-dealer	clients	are	providing	streaming,	executable	CDS	index	prices.	We	have incorporated	the	request-for-market	protocol	and	the	streaming	markets/click-to-trade	protocol	into	an	updated	single-screen	user	interface,	giving	clients	full	flexibility in	their	means	of	execution.	With	these	features,	we	believe	that	we	have	developed	much	of	the	core	technology	needed	to	meet	the	anticipated	regulatory	requirements under	the	Dodd-Frank	Act.

In	2011,	we	introduced	trading	in	consumer-based	asset-backed	securities	and	non-agency	residential	and	commercial	mortgage-backed	securities.	Twelve	of	our U.S.	broker-dealer	clients	use	our	platform	to	trade	asset-backed	securities.	Trading	in	asset-backed	securities	uses	many	of	the	same	features	available	in	our	U.S.	high- grade	corporate	bond	offerings.

In	November	2010,	we	introduced	trading	in	preferred	securities.	Seventeen	of	our	U.S.	broker-dealer	clients	use	our	platform	to	trade	preferred	securities. Trading	in	preferred	securities	uses	many	of	the	same	features	available	in	our	U.S.	high-grade	corporate	bond	offering.

# Dealer-to-Dealer	Trading

Through	our	DealerAxess ®	platform,	our	broker-dealer	clients	can	access	liquidity	provided	by	over	100	global,	regional	and	specialist	dealers.	In	addition	to fully-disclosed	RFQ	trading,	we	offer	an	anonymous	RFQ	trading	protocol	for	inter-dealer	trading,	helping	dealers	more	efficiently	manage	their	bond	inventory.	We offer	trading	across	a	wide	range	of	fixed	income	products	including	high-grade,	high-yield,	emerging	markets	and	U.S.	agency	bonds.	Dealers	active	on	our	client-to- dealer	platform	benefit	from	existing	trade	routing	rules	and	books,	straight-through	processing	connectivity	and	trading	APIs.	Bond	trades	on	DealerAxess ®	executed pursuant	to	the	anonymous	protocol	are	conducted	with	MarketAxess	as	riskless	principal	and	cleared	and	settled	by	an	independent	clearing	broker.

# Information	and	Analytical	Tools

Corporate	BondTicker TM

Corporate	BondTicker 	provides	real-time	TRACE	data	and	enhances	it	with	MarketAxess	trade	data	and	analytical	tools	in	order	to	provide	professional	market participants	with	a	comprehensive	set	of	corporate	bond	price	information.	The	data	include	trade	time	and	sales	information,	including	execution	prices,	as	well	as MarketAxess-estimated	spread-to-Treasuries,	for	trades	disseminated	by	the	TRACE	system.	The	data	also	include	actual	execution	prices	and	spread-to-Treasury	levels for	U.S.	high-grade	corporate	bond	trades	executed	on	the	MarketAxess	platform. TM

Corporate	BondTicker 	allows	institutional	investors	to	search	for	and	sort	bonds	based	upon	specific	criteria,	such	as	volume,	time/date	of	transaction,	spread change,	issuer	or	security.	This	search	function	allows	institutional	investors	to	compile	information	relating	to	potential	securities	trades	in	a	fraction	of	the	time	that	it takes	to	manually	compile	this	information	from	disparate	sources	or	other	electronic	databases,	including	direct	TRACE	feeds. TM

TRACE	facilitates	the	mandatory	reporting	of	over-the-counter	secondary	market	transactions	in	eligible	fixed-income	securities.	All	broker-dealers	that	are FINRA	member	firms	have	an	obligation	to	report	transactions	in	corporate	bonds	to	TRACE	under	a	set	of	rules	approved	by	the	SEC.	FINRA	then	publicly disseminates	a	portion	of	this	data,	which	is	available	free	of	charge	on	a	delayed	basis	through	the	FINRA	website	or	available	immediately	for	a	set	fee.

Corporate	BondTicker 	is	integrated	directly	into	the	MarketAxess	electronic	trading	platform	and	can	be	seamlessly	accessed,	either	when	viewing	securities inventory	or	when	launching	an	inquiry.	Corporate	BondTicker 	is	also	available	through	the	Internet	for	non-trading	professional	market	participants,	including, among	others,	research	analysts	and	rating	agencies,	who	can	log	in	and	access	the	information	via	an	easy-to-use	browser-based	interface. TM TM

We	provide	Corporate	BondTicker 	as	an	ancillary	service	to	our	trading	clients	and	also	to	other	industry	participants.	We	derive	revenues	from	our	Corporate BondTicker 	service	by	charging	for	seat	licenses	per	user	at	our	broker-dealer	and	institutional	investor	clients,	through	distribution	agreements	with	other	information service	providers	and	through	bulk	data	sales	to	third	parties.	Seat	license	fees	are	waived	for	clients	that	transact	a	sufficient	volume	of	trades	through	MarketAxess. TM TM

Additional	analytical	capabilities	of	our	information	services	offerings	aim	to	provide	clients	with	more	information	regarding	bond	prices	and	market	activity, including	asset	swap	spreads,	turnover	percentage	and	liquidity	ratios.	These	statistics	measure	a	security's	trading	activity	relative	to	its	amount	outstanding	and	relative to	the	overall	market,	respectively,	providing	an	additional	perspective	on	relative	liquidity.	In	addition,	we	provide	pricing	measures	to	help	institutional	investors	better assess	the	relative	value	of	a	corporate	bond,	providing	more	consistent	relative	pricing	information	for	institutional	investors,	such	as	offering	spread	data	versus	the interest	rate	swap	curve	and	versus	the	U.S.	Treasury	curve.	Users	are	also	able	to	download	a	variety	of	MarketAxess-compiled	trade	reports	containing	a comprehensive	review	of	trading	activity.	Corporate	BondTicker 	is	currently	the	source	of	corporate	bond	trading	information	for	The	Wall	Street	Journal. TM

We	also	offer	a	comprehensive	set	of	reports	designed	to	review	and	monitor	credit	trading	activity	for	institutional	investor	clients.	These	reports	utilize	extensive TRACE	information	and	have	a	flexible	interface	to	run	and	save	in	a	variety	of	formats	for	both	compliance	and	management	reporting.	For	example,	the	best execution	report	provides	a	view	of	the	savings	generated	by	trading	on	our	electronic	trading	platform	and	offers	a	quantitative	measure	of	the	value	of	price	discovery from	multiple	dealers.	The	report	allows	clients	to	monitor	performance	against	their	own	best	execution	policy.	Our	compliance	product	provides	a	printed	history	of each	inquiry	submitted	through	the	MarketAxess	trading	platform.

# My	Portfolio

Institutional	investors	are	able	to	upload	their	corporate	bond	portfolio	to	our	electronic	trading	platform	utilizing	the	"My	Portfolio"	trading	feature.	Institutional investors	who	utilize	"My	Portfolio"	benefit	from	the	ability	to	automatically	match	inventory	on	our	platform	to	bonds	held	in	their	portfolio,	allowing	them	to	more efficiently	launch	an	inquiry	and	transact	in	these	securities.	Users	of	this	feature	can	also	directly	access	Corporate	BondTicker 	to	obtain	the	trading	history	of	the securities	in	their	portfolio. TM

# Straight-Through	Processing

Straight-through	processing	refers	to	the	integration	of	systems	and	processes	to	automate	the	trade	process	from	end-to-end	—	trade	execution,	confirmation	and settlement	—	without	the	need	for	manual	intervention.	There	are	two	elements	of	straight-through	processing:	internal	straight-through	processing	and	external	straight- through	processing.	Internal	straight-through	processing	relates	to	the	trade	and	settlement	processes	that	are	internal	to	an	industry	participant.	For	example,	in	the	case of	an	institutional	investor,	this	includes	authorization	of	orders,	placement	of	orders	with	broker-dealers,	receipt	of	execution	details	and	allocation	of	trades.	External straight-through	processing	refers	to	connecting	seamlessly	to	all	external	counterparts	in	the	trading	and	settlement	process.

Automation	by	way	of	straight-through	processing	improves	efficiency	throughout	the	trade	cycle.	We	provide	broker-dealers	and	institutional	investors	with	a range	of	tools	that	facilitate	straight-through	processing,	including	order	upload,	easy-to-use	online	allocation	tools	and	pre-	and	post-trade	messaging	features	that enable	institutional	investors	to	communicate	electronically	between	front-	and	back-office	systems,	thereby	integrating	the	order,	portfolio	management	and	accounting systems	of	our	broker-dealer	and	institutional	investor	clients	in	real	time.	Our	straight-through	processing	tools	can	be	customized	to	meet	specific	needs	of	clients.	We continue	to	build	industry	partnerships	to	assist	our	clients	in	creating	connectivity	throughout	the	trade	cycle.	Through	these	partnerships,	we	are	increasingly	providing solutions	that	can	quickly	be	deployed	within	our	clients'	trading	operations.

Usage	of	our	straight-through	processing	tools	increased	significantly	during	the	last	several	years.	The	number	of	investor	client	STP	connections	increased	from 180	as	of	December	31,	2008	to	325	as	of	December	31,	2012.

# Dealer	API

We	offer	Application	Programming	Interface	("API")	services	to	our	broker-dealer	clients	for	pre-trade,	trade	negotiation	and	post-trade	services.	This	allows	for straight-through	processing,	which	improves	efficiency	and	reduces	errors	in	processing.

# Technology	Services

Through	our	Greenline	Financial	Technologies,	Inc.	("Greenline")	subsidiary,	we	provide	integration,	testing	and	management	solutions	for	FIX-related	products and	services.	The	FIX	protocol	is	a	messaging	standard	developed	specifically	for	the	real-time	electronic	exchange	of	securities	transaction	information.	Greenline's CertiFIX	product	enables	firms	to	provide	a	reliable	FIX	certification	environment	for	their	trading	counterparties.	The	VeriFIX	product	is	a	testing	suite	that	allows firms	to	thoroughly	test	counterparty	FIX	interfaces,	protocol	formats	and	supported	messages.	Greenline's	MagniFIX	product	allows	firms	to	monitor	their	enterprise- wide	FIX	installations	on	a	real-time	basis.	In	addition,	Greenline	provides	strategic	consulting	and	custom	development	for	its	clients.

We	also	provide	technology	consulting	and	customized	development	services	to	our	clients	that	leverage	our	trading	technology	expertise	and	our	existing technology	solutions.	Fees	for	such	services	are	based	on	the	complexity	and	extent	of	the	services	provided.	In	addition,	we	provide	gateway	adapters	to	connect	order management	and	trading	systems	to	fixed-income	trading	venues.

# Sales	and	Marketing

We	promote	our	products	and	services	using	a	variety	of	direct	and	indirect	sales	and	marketing	strategies.	Our	sales	force	is	responsible	for	client	acquisition activity	and	for	increasing	use	of	our	platform	by	our	existing	clients.	Their	goal	is	to	train	and	support	existing	and	new	clients	on	how	to	use	the	system	and	to	educate them	as	to	the	benefits	of	utilizing	an	electronic	fixed-income	trading	platform.	We	employ	various	strategies,	including	advertising,	direct	marketing,	promotional mailings	and	participation	in	industry	conferences,	to	increase	awareness	of	our	brand	and	our	electronic	trading	platform.	For	example,	we	have	worked	with	The	Wall Street	Journal	to	establish	Corporate	BondTicker 	as	the	source	of	information	for	its	daily	corporate	bond	and	high-yield	tables. TM

# Competition

The	electronic	trading	industry	is	highly	competitive	and	we	expect	competition	to	intensify	in	the	future.	We	face	five	main	areas	of	competition:

•Telephone	—	We	compete	with	bond	trading	business	conducted	over	the	telephone	between	broker-dealers	and	their	institutional	investor	clients. Institutional	investors	have	historically	purchased	fixed-income	securities	by	telephoning	bond	sales	professionals	at	one	or	more	broker-dealers and	inquiring	about	the	price	and	availability	of	individual	bonds.	This	remains	the	manner	in	which	the	majority	of	corporate	bonds	are	still	traded between	institutional	investors	and	broker-dealers.

•E-mail	—	We	compete	with	bond	trading	business	conducted	via	e-mail	between	broker-dealers	and	their	institutional	investor	clients.	E-mail provides	an	efficient	means	of	initiating	product	and	price	discovery	with	a	large	universe	of	potential	trading	partners.

•	 Other	electronic	trading	platforms	—	There	are	numerous	other	electronic	trading	platforms	currently	in	existence.	Among	others,	Thomson TradeWeb	and	Bloomberg	operate-	multi-dealer	to	institutional	investor	trading	platforms	for	both	fixed	income	securities	and	derivatives.	The New	York	Stock	Exchange	also	offers	exchange-style	trading	for	corporate	bonds.	In	addition,	some	broker-dealers	and	institutional	investors operate	proprietary	electronic	trading	systems	that	enable	institutional	investors	to	trade	directly	with	a	broker-dealer,	and/or	with	other	institutional investors	over	an	electronic	medium.	Additionally,	as	we	expand	our	business	into	new	products,	we	will	likely	come	into	more	direct	competition with	other	electronic	trading	platforms	or	firms	offering	traditional	services.

•	 Market	data	and	information	vendors	—	Several	large	market	data	and	information	providers	currently	have	a	data	and	analytics	relationship	with virtually	every	institutional	firm.	Some	of	these	entities,	including	Bloomberg,	currently	offer	varying	forms	of	electronic	trading	of	fixed-income securities,	mostly	on	a	single-dealer	basis.	Some	of	these	entities	have	announced	their	intention	to	expand	their	electronic	trading	platforms	or	to develop	new	platforms.	These	entities	are	currently	direct	competitors	to	our	information	services	business	and	already	are	or	may	in	the	future become	direct	competitors	to	our	electronic	trading	platform.

•Technology	vendors	—	We	compete	with	numerous	providers	of	FIX	message	management	tools	and	connectivity	solutions.	The	market	for	our technology	products	and	services	is	fragmented	and	includes	FIX	engine	providers,	testing,	monitoring,	certification	and	professional	services firms	and	in-house	technology	and	development	groups	at	virtually	every	institutional	firm.

Competitors,	including	companies	in	which	some	of	our	broker-dealer	clients	have	invested,	have	developed	electronic	trading	platforms	or	have	announced	their intention	to	explore	the	development	of	electronic	trading	platforms	that	compete	or	will	compete	with	us.	Furthermore,	our	broker-dealer	clients	have	made,	and	may	in the	future	continue	to	make	investments	in	or	enter	into	agreements	with	other	businesses	that	directly	or	indirectly	compete	with	us.

In	general,	we	compete	on	the	basis	of	a	number	of	key	factors,	including:

•broad	network	of	broker-dealer	and	institutional	investor	clients	using	our	electronic	trading	platform;

•liquidity	provided	by	the	participating	broker-dealers;

•	 magnitude	and	frequency	of	price	improvement;

•enhancing	the	quality	and	speed	of	execution;

•compliance	benefits;

•total	transaction	costs;

•technology	capabilities,	including	the	reliability	and	ease	of	use	of	our	electronic	trading	platform;	and

•range	of	products	and	services	offered.

We	believe	that	our	ability	to	grow	volumes	and	revenues	will	largely	depend	on	our	performance	with	respect	to	these	factors.

Our	competitive	position	is	also	enhanced	by	the	familiarity	and	integration	of	our	broker-dealer	and	institutional	investor	clients	with	our	electronic	trading platform	and	other	systems.	We	have	focused	on	the	unique	aspects	of	the	credit	markets	we	serve	in	the	development	of	our	platform,	working	closely	with	our	clients to	provide	a	system	that	is	suited	to	their	needs.

Our	broker-dealer	clients	have	invested	in	building	API's	with	us	for	inventory	contributions,	electronic	trading,	government	bond	benchmark	pricing	and	post- trade	messaging.	We	believe	that	we	have	successfully	built	deep	roots	with	our	broker-dealer	clients,	increasing	our	level	of	service	to	them	while	at	the	same	time increasing	their	commitment	to	our	services.

Furthermore,	325	of	our	institutional	investor	clients	have	built	interfaces	to	enable	them	to	communicate	electronically	between	our	platform	and	their	order, portfolio	management	and	accounting	systems.	We	believe	that	this	increases	the	reliance	of	these	institutional	investor	clients	on	our	services	and	creates	significant competitive	barriers	to	entry.

# Technology

The	design	and	quality	of	our	technology	products	are	critical	to	our	growth	and	our	ability	to	execute	our	business	strategy.	Our	electronic	trading	platform	has been	designed	with	secure,	scalable	client-server	architecture	that	makes	broad	use	of	distributed	computing	to	achieve	speed,	reliability	and	fault	tolerance.	The platform	is	built	on	industry-standard	technologies	and	has	been	designed	to	handle	many	multiples	of	our	current	trading	volume.

All	critical	server-side	components,	primarily	our	networks,	application	servers	and	databases,	have	backup	equipment	running	in	the	event	that	the	main equipment	fails.	This	offers	fully	redundant	system	capacity	to	maximize	uptime	and	minimize	the	potential	for	loss	of	transaction	data	in	the	event	of	an	internal	failure. We	also	seek	to	minimize	the	impact	of	external	failures	by	automatically	recovering	connections	in	the	event	of	a	communications	failure.	The	majority	of	our	broker- dealer	clients	have	redundant	dedicated	high-speed	communication	paths	to	our	network	in	order	to	provide	fast	data	transfer.	Our	security	measures	include	industry- standard	communications	encryption.

We	have	designed	our	application	with	an	easy-to-use,	Windows-based	interface.	Our	clients	are	able	to	access	our	electronic	trading	platform	through	a	secure, single	sign-on.	Clients	are	also	able	to	execute	transactions	over	our	platform	directly	from	their	order	management	systems.	We	provide	users	an	automatic	software update	feature	that	does	not	require	manual	intervention.

# Intellectual	Property

We	rely	upon	a	combination	of	copyright,	patent,	trade	secret	and	trademark	laws,	written	agreements	and	common	law	to	protect	our	proprietary	technology, processes	and	other	intellectual	property.	Our	software	code,	elements	of	our	electronic	trading	platform,	website	and	other	proprietary	materials	are	protected	by copyright	laws.	We	have	been	issued	11	patents,	including	five	patents	issued	in	2009	covering	our	most	significant	trading	protocols	and	other	aspects	of	our	trading system	technology,	and	additional	patents	are	pending.

The	written	agreements	upon	which	we	rely	to	protect	our	proprietary	technology,	processes	and	intellectual	property	include	agreements	designed	to	protect	our trade	secrets.	Examples	of	these	written	agreements	include	third	party	nondisclosure	agreements,	employee	nondisclosure	and	inventions	assignment	agreements,	and agreements	with	customers,	contractors	and	strategic	partners.	Other	written	agreements	upon	which	we	rely	to	protect	our	proprietary	technology,	processes	and intellectual	property	take	many	forms	and	contain	provisions	related	to	patent,	copyright,	trademark	and	trade	secret	rights.

We	have	obtained	U.S.	federal	registration	of	the	MarketAxess ®	name	and	logo,	and	the	same	mark	and	logo	have	been	registered	in	several	foreign	jurisdictions. In	addition,	we	have	obtained	U.S.	federal	registration	for	the	marks	AutoSpotting ®,	FrontPage ®,	Actives ®,	DealerAxess ®	and	associated	designs	and	have	a	number	of other	registered	trademarks	and	service	marks.	Corporate	BondTicker 	is	a	trademark	we	use,	but	it	has	not	been	registered. TM

In	addition	to	our	efforts	to	register	our	intellectual	property,	we	believe	that	factors	such	as	the	technological	and	creative	skills	of	our	personnel,	new	product and	service	developments,	frequent	enhancements	and	reliability	with	respect	to	our	services	are	essential	to	establishing	and	maintaining	a	technology	and	market leadership	position.

# Government	Regulation

The	securities	industry	and	financial	markets	in	the	U.S.	and	elsewhere	are	subject	to	extensive	regulation.	As	a	matter	of	public	policy,	regulatory	bodies	in	the U.S.	and	the	rest	of	the	world	are	charged	with	safeguarding	the	integrity	of	the	securities	and	other	financial	markets	and	with	protecting	the	interests	of	investors participating	in	those	markets.	Our	active	broker-dealer	subsidiaries	fall	within	the	scope	of	their	regulations.

# Regulation	of	the	U.S.	Securities	Industry	and	Broker-Dealers

In	the	U.S.,	the	SEC	is	the	governmental	agency	responsible	for	the	administration	of	the	federal	securities	laws.	One	of	our	U.S.	subsidiaries,	MarketAxess Corporation,	is	registered	with	the	SEC	as	a	broker-dealer.	It	is	also	a	member	of	FINRA,	a	self-regulatory	organization	to	which	most	broker-dealers	belong.	In addition,	MarketAxess	Corporation	is	a	member	of	the	Securities	Investor	Protection	Corporation,	which	provides	certain	protection	for	clients'	accounts	in	the	event	of a	liquidation	of	a	broker-dealer	to	the	extent	any	such	accounts	are	held	by	the	broker-dealer.

Additionally,	MarketAxess	Corporation	is	registered	with	certain	states	and	the	District	of	Columbia	as	a	broker-dealer.	The	individual	states	and	the	District	of Columbia	are	responsible	for	the	administration	of	their	respective	"blue	sky"	laws,	rules	and	regulations.

In	July	2010,	the	Dodd-Frank	Act	was	signed	into	law.	U.S.	financial	regulators	are	in	the	midst	of	an	intense	period	of	rulemaking	that	is	required	to	implement the	provisions	of	the	Dodd-Frank	Act,	and	market	participants	will	need	to	make	strategic	decisions	in	an	environment	of	regulatory	uncertainty.	Among	the	most significant	aspects	of	the	derivatives	section	of	the	Dodd-Frank	Act	are	mandatory	clearing	of	certain	derivatives	transactions	("swaps")	through	regulated	central clearing	organizations	and	mandatory	trading	of	those	swaps	through	either	regulated	exchanges	or	swap	execution	facilities,	in	each	case,	subject	to	certain	key exceptions.	As	with	other	parts	of	the	Dodd-Frank	Act,	many	of	the	details	of	the	new	regulatory	regime	relating	to	swaps	are	left	to	the	regulators	to	determine	through rulemaking.	While	we	expect	that	the	CFTC	and	SEC	will	adopt	rules	that	detail	the	new	regulatory	regime	regarding	the	swaps	market	place	in	2013,	no	assurance	can be	given	regarding	when,	or	whether,	such	rules	will	be	finalized	and	implemented.	Subject	to	such	rulemaking,	we	currently	expect	to	establish	and	operate	a	swap execution	facility	and/or	a	security-based	swap	execution	facility.

# Regulation	of	the	Non-U.S.	Securities	Industries	and	Investment	Service	Providers

The	securities	industry	and	financial	markets	in	the	U.K.,	the	European	Union	and	elsewhere	are	subject	to	extensive	regulation.	MarketAxess	Europe	Limited may	fall	within	the	scope	of	those	regulations	depending	on	the	extent	to	which	it	is	characterized	as	providing	a	regulated	investment	service.

Our	principal	regulator	in	the	U.K.	is	the	FSA.	Our	subsidiary,	MarketAxess	Europe	Limited,	is	registered	as	a	Multilateral	Trading	Facility	("MTF")	dealer	with the	FSA.	Xtrakter	Limited	is	registered,	and	upon	consummation	of	the	pending	acquisition	will	continue	to	be	registered,	as	an	Approved	Reporting	Mechanism	with the	FSA.	Xtrakter	also	has	"recognized	status"	in	France,	the	Netherlands	and	Belgium	in	connection	with	the	submission	of	transaction	reports	to	regulators.

The	securities	industry	in	the	member	states	of	the	European	Union	is	regulated	by	agencies	in	each	member	state.	European	Union	measures	provide	for	the mutual	recognition	of	regulatory	agencies	and	of	prudential	supervision	making	possible	the	grant	of	a	single	authorization	for	providers	of	investment	services,	which, in	general,	is	valid	throughout	the	European	Union.	As	an	FSA	approved	MTF,	MarketAxess	Europe	Limited	receives	the	benefit	of	this	authorization.

Similar	to	the	U.S.,	regulatory	bodies	in	Europe	and	elsewhere	are	developing	new	rules	for	derivatives	trading.	For	example,	the	European	Parliament	and	the EU	Council	of	Ministers	endorsed	an	agreement	that	will,	among	other	things,	require	central	clearing	of	standardized	OTC	derivatives	and	the	reporting	of	all derivatives	(OTC	or	otherwise)	to	trade	repositories.	However,	it	is	not	yet	clear	whether	there	will	be	any	requirement	in	the	EU	to	trade	standardized	CDS	contracts	on regulated	exchanges	or	trading	platforms.

Our	Canadian	subsidiary,	MarketAxess	Canada	Limited,	is	registered	as	an	Alternative	Trading	System	dealer	under	the	Securities	Act	of	Ontario	and	is	a member	of	the	Investment	Industry	Regulatory	Organization	of	Canada.

# Employees

As	of	December	31,	2012,	we	had	240	employees,	194	of	whom	were	based	in	the	U.S.	and	46	of	whom	were	based	outside	of	the	U.S.,	principally	in	the	U.K. None	of	our	employees	is	represented	by	a	labor	union.	We	consider	our	relationships	with	our	employees	to	be	good	and	have	not	experienced	any	interruptions	of operations	due	to	labor	disagreements.

# Company	Information

MarketAxess	was	incorporated	in	Delaware	in	April	2000.	Our	Internet	website	address	is	www.marketaxess.com.	Through	our	Internet	website,	we	will	make available,	free	of	charge,	the	following	reports	as	soon	as	reasonably	practicable	after	electronically	filing	them	with,	or	furnishing	them	to,	the	SEC:	our	annual	report on	Form	10-K;	our	quarterly	reports	on	Form	10-Q;	our	current	reports	on	Form	8-K;	and	amendments	to	those	reports	filed	or	furnished	pursuant	to	Section	13(a)	of	the Securities	Exchange	Act	of	1934,	as	amended.	Our	Proxy	Statements	for	our	Annual	Meetings	are	also	available	through	our	Internet	website.	Our	Internet	website	and the	information	contained	therein	or	connected	thereto	are	not	intended	to	be	incorporated	into	this	Annual	Report	on	Form	10-K.	You	may	also	obtain	copies	of	our reports	without	charge	by	writing	to:

299	Park	Avenue

Attn:	Investor	Relations

Our	Board	of	Directors	has	standing	Audit,	Compensation,	Investment,	and	Nominating	and	Corporate	Governance	Committees.	Each	of	these	committees	has	a written	charter	approved	by	our	Board	of	Directors.	Our	Board	of	Directors	has	also	adopted	a	set	of	Corporate	Governance	Guidelines.	Copies	of	each	committee charter,	along	with	the	Corporate	Governance	Guidelines,	are	also	posted	on	our	website.

You	may	read	and	copy	any	document	we	file	with	the	SEC	at	the	SEC's	public	reference	room	at	100	F	Street,	NE,	Room	1580,	Washington,	DC	20549.	Please call	the	SEC	at	1-800-SEC-0330	for	information	on	the	public	reference	room.	The	SEC	maintains	an	Internet	website	that	contains	annual,	quarterly	and	current reports,	proxy	and	information	statements	and	other	information	that	issuers	(including	the	Company)	file	electronically	with	the	SEC.	The	SEC's	internet	website	is www.sec.gov.

We	have	obtained	federal	registration	of	the	MarketAxess ®	name	and	logo,	as	well	as	for	the	marks	Auto-Spotting ,	BondLink ®,	Actives ®,	FrontPage ®	and DealerAxess ®.	We	also	have	a	number	of	other	registered	trademarks,	service	mark	applications	and	trademark	applications.	Other	trademarks	and	service	marks appearing	in	this	Annual	Report	on	Form	10-K	are	the	property	of	their	respective	holders. ®

# Item	1A.	Risk	Factors.

# Risks	Related	to	Our	Business

# Global	economic,	political	and	market	factors	beyond	our	control	could	reduce	demand	for	our	services,	and	our	profitability	and	business	could	suffer.

The	global	financial	services	business	is,	by	its	nature,	risky	and	volatile	and	is	directly	affected	by	many	national	and	international	factors	that	are	beyond	our control.	Any	one	of	these	factors	may	cause	a	substantial	decline	in	the	U.S.	and/or	global	financial	services	markets,	resulting	in	reduced	trading	volume.	These	events could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.	These	factors	include:

•economic	and	political	conditions	in	the	United	States,	Europe	and	elsewhere;

•adverse	market	conditions,	including	unforeseen	market	closures	or	other	disruptions	in	trading;

•broad	trends	in	business	and	finance;

•consolidation	or	contraction	in	the	number	of	broker-dealers;

•actual	or	threatened	acts	of	war	or	terrorism	or	other	armed	hostilities;

•concerns	over	inflation	and	weakening	consumer	confidence	levels;

•the	availability	of	cash	for	investment	by	mutual	funds	and	other	wholesale	and	retail	investors;

•the	level	and	volatility	of	interest	and	foreign	currency	exchange	rates;

•concerns	over	credit	default	or	bankruptcy	of	one	or	more	sovereign	nations	or	corporate	entities;	and

•legislative	and	regulatory	changes.

Any	one	or	more	of	these	factors	may	contribute	to	reduced	activity	and	prices	in	the	securities	markets	generally.	Our	revenues	and	profitability	are	likely	to decline	significantly	during	periods	of	stagnant	economic	conditions	or	low	trading	volume	in	the	U.S.	and	global	financial	markets.

# Decreases	in	trading	volumes	in	the	fixed-income	markets	generally	or	on	our	platform	would	harm	our	business	and	profitability.

We	have	experienced	significant	decreases	in	overall	trading	volume	in	the	past	and	may	experience	similar	decreases	in	trading	volume	in	the	future.	Declines	in the	overall	volume	of	fixed-income	securities	trading	and	in	market	liquidity	generally,	as	well	as	declines	in	interest	rate	volatility,	could	result	in	lower	revenues	from commissions	for	trades	executed	on	our	electronic	trading	platform	and	fees	generated	from	related	activities.

Likewise,	decreases	in	our	share	of	the	segments	of	the	fixed-income	trading	markets	in	which	we	operate,	or	shifts	in	trading	volume	to	segments	of	clients	which we	have	not	penetrated,	could	result	in	lower	trading	volume	on	our	platform	and,	consequently,	lower	commissions	and	other	revenue.	During	periods	of	increased volatility	in	credit	markets,	the	use	of	electronic	trading	platforms	by	market	participants	may	decrease	dramatically	as	institutional	investors	seek	to	obtain	additional information	during	the	trade	process	through	conversations	with	broker-dealers.	In	addition,	during	rapidly	moving	markets,	broker-dealers	are	less	likely	to	post	prices electronically.

A	decline	in	trading	volumes	on	our	platform	for	any	reason	would	negatively	affect	our	commission	revenue	and	may	have	a	material	adverse	effect	on	our business,	financial	condition	and	results	of	operations.

# We	face	substantial	competition	that	could	reduce	our	market	share	and	harm	our	financial	performance.

The	fixed-income	securities	industry	generally,	and	the	electronic	financial	services	markets	in	which	we	operate	in	particular,	are	highly	competitive,	and	we expect	competition	to	intensify	in	the	future.	We	will	continue	to	compete	with	bond	trading	conducted	directly	between	broker-dealers	and	their	institutional	investor clients	over	the	telephone	or	electronically.	In	addition,	our	current	and	prospective	competitors	are	numerous	and	include:

•other	multi-dealer	trading	companies;

•	 market	data	and	information	vendors;

•securities	and	futures	exchanges;

•inter-dealer	brokerage	firms;

•electronic	communications	networks;

•technology,	software,	information	and	media	or	other	companies	that	have	existing	commercial	relationships	with	broker-dealers	or	institutional investors;	and

•other	electronic	marketplaces	that	are	not	currently	in	the	securities	business.

Many	of	our	current	and	potential	competitors	are	more	established	and	substantially	larger	than	we	are	and	have	substantially	greater	market	presence,	as	well	as greater	financial,	technical,	marketing	and	other	resources.	These	competitors	may	aggressively	reduce	their	pricing	to	enter	into	market	segments	in	which	we	have	a leadership	position	today,	potentially	subsidizing	any	losses	with	profits	from	trading	in	other	fixed-income	or	equity	securities.	In	addition,	many	of	our	competitors offer	a	wider	range	of	services,	have	broader	name	recognition	and	have	larger	customer	bases	than	we	do.	Some	of	them	may	be	able	to	respond	more	quickly	to	new	or evolving	opportunities,	technologies	and	customer	requirements	than	we	can	and	may	be	able	to	undertake	more	extensive	promotional	activities.

Any	combination	of	our	competitors	may	enter	into	joint	ventures	or	consortia	to	provide	services	similar	to	those	provided	by	us.	Current	and	new	competitors can	launch	new	platforms	at	a	relatively	low	cost.	Others	may	acquire	the	capabilities	necessary	to	compete	with	us	through	acquisitions.	We	expect	that	we	will potentially	compete	with	a	variety	of	companies	with	respect	to	each	product	or	service	we	offer.	If	we	are	not	able	to	compete	successfully	in	the	future,	our	business, financial	condition	and	results	of	operations	would	be	adversely	affected.

# Neither	the	sustainability	of	our	current	level	of	business	nor	any	future	growth	can	be	assured.	Even	if	we	do	experience	growth,	we	cannot	assure	you	that	we	will grow	profitably.

The	success	of	our	business	strategy	depends,	in	part,	on	our	ability	to	maintain	and	expand	the	network	of	broker-dealer	and	institutional	investor	clients	that	use our	electronic	trading	platform.	Our	business	strategy	also	depends	on	increasing	the	use	of	our	platform	by	these	clients.	Individuals	at	broker-dealers	or	institutional investors	may	have	conflicting	interests,	which	may	discourage	their	use	of	our	platform.

Our	growth	is	also	dependent	on	our	ability	to	diversify	our	revenue	base.	We	currently	derive	approximately	60%	of	our	revenues	from	secondary	trading	in	U.S. high-grade	corporate	bonds.	Our	long-term	business	strategy	is	dependent	on	expanding	our	service	offerings	and	increasing	our	revenues	from	other	fixed-income products	and	other	sources.	We	cannot	assure	you	that	our	efforts	will	be	successful	or	result	in	increased	revenues	or	continued	profitability.	We	have	experienced significant	growth	in	trading	volumes,	revenues	and	profitability	over	the	past	three	years.	We	cannot	assure	you	that	our	business	will	continue	to	grow	at	a	similar	rate, if	at	all.

# Because	we	operate	in	a	rapidly	evolving	industry,	it	is	difficult	to	evaluate	our	business	and	prospects.

We	face	risks	and	difficulties	frequently	experienced	by	companies	operating	in	rapidly	evolving	industries,	such	as	the	electronic	financial	services	industry.

These	risks	and	difficulties	include,	but	are	not	limited	to,	our	ability	to:

•attract	and	retain	broker-dealers	and	institutional	investors	on	a	cost-effective	basis;

•respond	effectively	to	the	loss	of	any	of	our	broker-dealer	clients	due	to	merger,	consolidation,	bankruptcy,	liquidation	or	other	cause,	including,

among	other	things,	the	collection	of	any	amounts	due	from	such	clients;

•expand	and	enhance	reliable	and	cost-effective	product	and	service	offerings	to	our	clients;

•respond	effectively	to	competitive	pressures;

•diversify	our	sources	of	revenues;

•	 maintain	adequate	control	of	our	expenses;

•operate,	support,	expand	and	develop	our	operations,	technology,	website,	software,	communications	and	other	systems;

•	 manage	growth	in	personnel	and	operations;

•increase	awareness	of	our	brand	or	market	positioning;

•expand	our	sales	and	marketing	programs;

•take	advantage	of	acquisitions,	strategic	alliances	and	other	opportunities;	and

•respond	to	regulatory	changes	or	demands.

If	we	are	unsuccessful	in	addressing	these	risks	or	in	executing	our	business	strategy,	our	business,	financial	condition	and	results	of	operations	may	suffer.

# We	may	enter	into	new	fee	plans,	the	impact	of	which	may	be	difficult	to	evaluate.

From	time	to	time	we	have	and	may	introduce	new	fee	plans	for	the	U.S.	high-grade	corporate	bond,	Eurobond	and	other	market	segments	in	which	we	operate. Any	new	fee	plan	may	include	different	fee	structures	or	provide	volume	incentives.	We	cannot	assure	you	that	any	new	fee	plans	will	result	in	an	increase	in	the volume	of	transactions	effected	on	our	platform	or	that	our	revenues	will	increase	as	a	result	of	the	implementation	of	any	such	fee	plans.	It	is	possible	that	our	broker- dealer	or	institutional	investor	clients	could	respond	to	a	new	fee	plan	by	either	reducing	the	amount	of	their	business	conducted	on	our	platform	or	terminating	their contractual	relationship	with	us,	which	could	have	an	adverse	impact	on	our	fees	and	otherwise	have	a	material	adverse	effect	on	our	business,	financial	condition	and results	of	operations.

# We	are	exposed	to	risks	resulting	from	non-performance	by	counterparties	to	certain	transactions	executed	between	our	clients	in	which	we	act	as	an	intermediary in	matching	back-to	back	bond	trades.

We	execute	certain	bond	transactions	between	and	among	institutional	investor	and	broker-dealer	clients	on	a	riskless	principal	basis	by	serving	as	counterparty	to both	the	buyer	and	the	seller	in	matching	back-to-back	trades,	which	are	then	settled	through	a	third-party	clearing	organization.	MarketAxess	Corporation,	our	U.S. subsidiary,	and	MarketAxess	Europe	Limited,	our	U.K.	subsidiary,	act	as	intermediary	on	a	riskless	principal	basis	in	these	bond	transactions	by	serving	as	counterparty to	the	two	clients	involved.	Settlement	typically	occurs	within	one	to	three	trading	days	after	the	trade	date.	Cash	settlement	of	the	transaction	occurs	upon	receipt	or delivery	of	the	underlying	instrument	that	was	traded.

We	are	exposed	to	credit	risk	in	our	role	as	trading	counterparty	to	our	clients	executing	bond	trades	on	our	platform.	We	are	exposed	to	the	risk	that	third	parties that	owe	us	money,	securities	or	other	assets	will	not	perform	their	obligations.	These	parties	may	default	on	their	obligations	to	us	due	to	bankruptcy,	lack	of	liquidity, operational	failure	or	other	reasons.	Adverse	movements	in	the	prices	of	securities	that	are	the	subject	of	these	transactions	can	increase	our	risk.	Where	the	unmatched position	or	failure	to	deliver	is	prolonged	there	may	also	be	regulatory	capital	charges	required	to	be	taken	by	us.	There	can	be	no	assurance	that	the	policies	and procedures	we	use	to	manage	this	credit	risk	will	effectively	mitigate	our	credit	risk	exposure.

We	have	policies	and	procedures	in	place	to	identify	and	manage	our	credit	risk.	There	can	be	no	assurance	that	the	policies	and	procedures	we	use	to	manage this	credit	risk	will	effectively	mitigate	our	credit	risk	exposure.	Some	of	our	risk	management	procedures	are	reliant	upon	the	evaluation	of	information	regarding	the fixed	income	markets,	our	clients	or	other	relevant	matters	that	are	publicly	available	or	otherwise	acquired	from	third	party	sources.	Such	information	may	not	be accurate,	complete,	or	properly	assessed	and	interpreted	by	us.	If	our	risk	management	procedures	fail,	our	business,	financial	condition	and	results	of	operations	may	be adversely	affected.	Furthermore,	our	insurance	policies	may	not	provide	full	protection	from	such	risk.

# We	are	dependent	on	our	broker-dealer	clients,	who	are	not	restricted	from	buying	and	selling	fixed-income	securities,	directly	or	through	their	own	proprietary	or third-party	platforms,	with	institutional	investors.

We	rely	on	our	broker-dealer	clients	to	provide	product	and	liquidity	on	our	electronic	trading	platform	by	posting	bond	prices	on	our	platform	for	bonds	in	their inventory	and	responding	to	institutional	investor	client	inquiries.	The	contractual	obligations	of	our	broker-dealer	clients	to	us	are	minimal,	non-exclusive	and terminable	by	such	clients.	Our	broker-dealer	clients	buy	and	sell	fixed-income	securities	through	traditional	methods,	including	by	telephone	and	e-mail	messaging,	and through	other	electronic	trading	platforms.	Some	of	our	broker-dealer	clients	have	developed	electronic	trading	networks	that	compete	with	us	or	have	announced	their intention	to	explore	the	development	of	such	electronic	trading	networks,	and	most	of	our	broker-dealer	and	institutional	investor	clients	are	involved	in	other	ventures, including	other	electronic	trading	platforms	or	other	distribution	channels,	as	trading	participants	and/or	as	investors.	These	competing	trading	platforms	may	offer	some features	that	we	do	not	currently	offer.	Accordingly,	there	can	be	no	assurance	that	such	broker-dealers'	primary	commitments	will	not	be	to	one	of	our	competitors.	In addition,	there	has	been	significant	consolidation	among	firms	in	the	banking	and	financial	services	industries	over	the	past	several	years.	Further	consolidation, instability,	and	layoffs	in	the	financial	services	industry	could	result	in	a	smaller	client	base	and	heightened	competition.

Any	reduction	in	the	use	of	our	electronic	trading	platform	by	our	broker-dealer	clients	could	reduce	the	number	of	different	bond	issues	and	the	volume	of trading	in	those	bond	issues	on	our	platform,	which	could,	in	turn,	reduce	the	use	of	our	platform	by	our	institutional	investor	clients.	The	occurrence	of	any	of	the foregoing	may	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.

# We	could	lose	significant	sources	of	revenue	and	trading	volume	if	we	lose	any	of	our	significant	institutional	investor	clients.

We	rely	on	our	institutional	investor	clients	to	launch	inquiries	over	our	trading	platform.	A	limited	number	of	such	clients	can	account	for	a	significant	portion	of our	trading	volume.	One	institutional	investor	client	accounted	for	approximately	13.5%,	14.6%	and	15.8%	of	trading	volumes	during	the	years	ended	December	31, 2012,	2011	and	2010,	respectively.	This	institutional	investor	client	also	beneficially	owns	approximately	7%	of	the	outstanding	shares	of	our	common	stock.	The contractual	obligations	of	our	institutional	investor	clients	to	us	are	minimal,	non-exclusive	and	terminable	by	such	clients.	Our	institutional	investor	clients	buy	and	sell fixed-income	securities	through	traditional	methods,	including	by	telephone	and	e-mail	messaging,	and	through	other	electronic	trading	platforms.

There	can	be	no	assurance	that	we	will	be	able	to	retain	our	major	institutional	investor	clients	or	that	such	clients	will	continue	to	use	our	trading	platform.	The loss	of	any	major	institutional	investor	client	or	any	reduction	in	the	use	of	our	electronic	trading	platform	by	such	clients	could	have	a	material	adverse	effect	on	our business,	financial	condition	and	results	of	operations.

# If	we	experience	significant	fluctuations	in	our	operating	results	or	fail	to	meet	revenue	and	earnings	expectations,	our	stock	price	may	fall	rapidly	and	without advance	notice.

Our	revenues	and	operating	results	may	fluctuate	due	to	a	number	of	factors,	including:

•the	unpredictability	of	the	financial	services	industry;

•difficulty	in	quickly	adjusting	our	expense	base	if	revenues	fall	short	of	expectations;

•our	ability	to	retain	existing	broker-dealer	and	institutional	investor	clients	and	attract	new	broker-dealer	and	institutional	investor	clients;

•our	ability	to	drive	an	increase	in	use	of	our	electronic	trading	platform	by	new	and	existing	broker-dealer	and	institutional	investor	clients;

# •changes	in	our	pricing	policies;

•the	introduction	of	new	features	on	our	electronic	trading	platform;

•the	effectiveness	of	our	sales	force;

•new	product	and	service	introductions	by	our	competitors;

•fluctuations	in	overall	market	trading	volume;

•technical	difficulties	or	interruptions	in	our	service;

•general	economic	conditions	in	our	geographic	markets;

•additional	investment	in	our	services	or	operations;	and

•regulatory	compliance	costs.

As	a	result,	our	operating	results	may	fluctuate	significantly	on	a	quarterly	basis,	which	could	result	in	decreases	in	our	stock	price.

# We	may	not	be	able	to	introduce	enhanced	versions	of	our	electronic	trading	platform,	new	services	and/or	service	enhancements	in	a	timely	or	acceptable	manner, which	could	harm	our	competitive	position.

Our	business	environment	is	characterized	by	rapid	technological	change,	changing	and	increasingly	sophisticated	client	demands	and	evolving	industry standards.	Our	future	will	depend	on	our	ability	to	develop	and	introduce	new	features	to,	and	new	versions	of,	our	electronic	trading	platform.	The	success	of	new features	and	versions	depends	on	several	factors,	including	the	timely	completion,	introduction	and	market	acceptance	of	the	feature	or	version.	In	addition,	the	market for	our	electronic	trading	platform	may	be	limited	if	prospective	clients	require	customized	features	or	functions	that	we	are	unable	or	unwilling	to	provide.	If	we	are unable	to	anticipate	and	respond	to	the	demand	for	new	services,	products	and	technologies	and	develop	new	features	and	enhanced	versions	of	our	electronic	trading platform	that	achieve	widespread	levels	of	market	acceptance	on	a	timely	and	cost-effective	basis,	it	could	have	a	material	adverse	effect	on	our	business,	financial condition	and	results	of	operations.

# As	we	enter	new	markets,	we	may	not	be	able	to	successfully	attract	clients	and	adapt	our	technology	and	marketing	strategy	for	use	in	those	markets.

Our	strategy	includes	leveraging	our	electronic	trading	platform	to	enter	new	markets.	We	cannot	assure	you	that	we	will	be	able	to	successfully	adapt	our proprietary	software	and	technology	for	use	in	other	markets.	Even	if	we	do	adapt	our	software	and	technology,	we	cannot	assure	you	that	we	will	be	able	to	attract clients	and	compete	successfully	in	any	such	new	markets.	We	cannot	assure	you	that	our	marketing	efforts	or	our	pursuit	of	any	of	these	opportunities	will	be successful.	If	these	efforts	are	not	successful,	we	may	realize	less	than	expected	earnings,	which	in	turn	could	result	in	a	decrease	in	the	market	value	of	our	common stock.	Furthermore,	these	efforts	may	divert	management	attention	or	inefficiently	utilize	our	resources.

# Rapid	market	or	technological	changes	may	render	our	technology	obsolete	or	decrease	the	attractiveness	of	our	products	and	services	to	our	broker-dealer	and institutional	investor	clients.

We	must	continue	to	enhance	and	improve	our	electronic	trading	platform.	The	electronic	financial	services	industry	is	characterized	by	significant	structural changes,	increasingly	complex	systems	and	infrastructures,	changes	in	clients'	needs	and	preferences	and	new	business	models.	If	new	industry	standards	and	practices emerge	and	our	competitors	release	new	technology	before	us,	our	existing	technology,	systems	and	electronic	trading	platform	may	become	obsolete	or	our	existing business	may	be	harmed.	Our	future	success	will	depend	on	our	ability	to:

•enhance	our	existing	products	and	services;

•develop	and/or	license	new	products	and	technologies	that	address	the	increasingly	sophisticated	and	varied	needs	of	our	broker-dealer	and institutional	investor	clients	and	prospective	clients;

•continue	to	attract	highly-skilled	technology	personnel;	and

•respond	to	technological	advances	and	emerging	industry	standards	and	practices	on	a	cost-effective	and	timely	basis.

Developing	our	electronic	trading	platform	and	other	technology	entails	significant	technical	and	business	risks.	We	may	use	new	technologies	ineffectively	or	we may	fail	to	adapt	our	electronic	trading	platform,	information	databases	and	network	infrastructure	to	broker-dealer	or	institutional	investor	client	requirements	or emerging	industry	standards.	For	example,	our	electronic	trading	platform	functionality	that	allows	searches	and	inquiries	on	bond	pricing	and	availability	is	a	critical part	of	our	service,	and	it	may	become	out-of-date	or	insufficient	from	our	broker-dealer	clients'	or	institutional	investor	clients'	perspective	and	in	relation	to	the	inquiry functionality	of	our	competitors'	systems.	If	we	face	material	delays	in	introducing	new	services,	products	and	enhancements,	our	broker-dealer	and	institutional investor	clients	may	forego	the	use	of	our	products	and	use	those	of	our	competitors.

Further,	the	adoption	of	new	Internet,	networking	or	telecommunications	technologies	may	require	us	to	devote	substantial	resources	to	modify	and	adapt	our services.	We	cannot	assure	you	that	we	will	be	able	to	successfully	implement	new	technologies	or	adapt	our	proprietary	technology	and	transaction-processing	systems to	client	requirements	or	emerging	industry	standards.	We	cannot	assure	you	that	we	will	be	able	to	respond	in	a	timely	manner	to	changing	market	conditions	or	client requirements.

# We	depend	on	third-party	suppliers	for	key	products	and	services.

We	rely	on	a	number	of	third	parties	to	supply	elements	of	our	trading,	information	and	other	systems,	as	well	as	computers	and	other	equipment,	and	related support	and	maintenance.	We	cannot	assure	you	that	any	of	these	providers	will	be	able	to	continue	to	provide	these	services	in	an	efficient,	cost-effective	manner,	if	at all,	or	that	they	will	be	able	to	adequately	expand	their	services	to	meet	our	needs.	If	we	are	unable	to	make	alternative	arrangements	for	the	supply	of	critical	products	or services	in	the	event	of	a	malfunction	of	a	product	or	an	interruption	in	or	the	cessation	of	service	by	an	existing	service	provider,	our	business,	financial	condition	and results	of	operations	could	be	materially	adversely	affected.

In	particular,	we	depend	on	a	third-party	vendor	for	our	corporate	bond	reference	database.	Disruptions	in	the	services	provided	by	that	third	party	to	us,	including as	a	result	of	their	inability	or	unwillingness	to	continue	to	license	products	that	are	critical	to	the	success	of	our	business,	could	have	a	material	adverse	effect	on	our business,	financial	condition	and	results	of	operations.

We	also	rely,	and	expect	in	the	future	to	continue	to	rely,	on	third	parties	for	various	computer	and	communications	systems,	such	as	telephone	companies,	online service	providers,	data	processors,	and	software	and	hardware	vendors.	Other	third	parties	provide,	for	instance,	our	data	center,	telecommunications	access	lines	and significant	computer	systems	and	software	licensing,	support	and	maintenance	services.	Any	interruption	in	these	or	other	third-party	services	or	deterioration	in	their performance	could	impair	the	quality	of	our	service.	We	cannot	be	certain	of	the	financial	viability	of	all	of	the	third	parties	on	which	we	rely.

We	license	software	from	third	parties,	much	of	which	is	integral	to	our	electronic	trading	platform	and	our	business.	We	also	hire	contractors	to	assist	in	the development,	quality	assurance	testing	and	maintenance	of	our	electronic	trading	platform	and	other	systems.	Continued	access	to	these	licensors	and	contractors	on favorable	contract	terms	or	access	to	alternative	software	and	information	technology	contractors	is	important	to	our	operations.	Adverse	changes	in	any	of	these relationships	could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.

We	attempt	to	negotiate	favorable	pricing,	service,	confidentiality	and	intellectual	property	ownership	or	licensing	and	other	terms	in	our	contracts	with	our service	providers.	These	contracts	usually	have	multi-year	terms.	However,	there	is	no	guarantee	that	these	contracts	will	not	terminate	and	that	we	will	be	able	to negotiate	successor	agreements	or	agreements	with	alternate	service	providers	on	competitive	terms.	Further,	the	existing	agreements	may	bind	us	for	a	period	of	time	to terms	and	technology	that	become	obsolete	as	our	industry	and	our	competitors	advance	their	own	operations	and	contracts.

# Our	success	depends	on	maintaining	the	integrity	of	our	electronic	trading	platform,	systems	and	infrastructure;	our	computer	systems	may	suffer	failures,	capacity constraints	and	business	interruptions	that	could	increase	our	operating	costs	and	cause	us	to	lose	clients.

In	order	to	be	successful,	we	must	provide	reliable,	secure,	real-time	access	to	our	electronic	trading	platform	for	our	broker-dealer	and	institutional	investor clients.	If	our	electronic	trading	platform	is	hampered	by	slow	delivery	times,	unreliable	service	or	insufficient	capacity,	our	broker-dealer	and	institutional	investor clients	may	decide	to	stop	using	our	platform,	which	would	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.

As	our	operations	grow	in	both	size	and	scope,	we	will	need	to	improve	and	upgrade	our	electronic	trading	platform	and	infrastructure	to	accommodate	potential increases	in	order	message	volume	and	trading	volume,	the	trading	practices	of	new	and	existing	clients,	regulatory	changes	and	the	development	of	new	and	enhanced trading	platform	features,	functionalities	and	ancillary	products	and	services.	The	expansion	of	our	electronic	trading	platform	and	infrastructure	has	required,	and	will continue	to	require,	substantial	financial,	operational	and	technical	resources.	These	resources	will	typically	need	to	be	committed	well	in	advance	of	any	actual	increase in	trading	volumes	and	order	messages.	We	cannot	assure	you	that	our	estimates	of	future	trading	volumes	and	order	messages	will	be	accurate	or	that	our	systems	will always	be	able	to	accommodate	actual	trading	volumes	and	order	messages	without	failure	or	degradation	of	performance.	Furthermore,	we	use	new	technologies	to upgrade	our	established	systems,	and	the	development	of	these	new	technologies	also	entails	technical,	financial	and	business	risks.	We	cannot	assure	you	that	we	will successfully	implement	new	technologies	or	adapt	our	existing	electronic	trading	platform,	technology	and	systems	to	the	requirements	of	our	broker-dealer	and institutional	investor	clients	or	to	emerging	industry	standards.	The	inability	of	our	electronic	trading	platform	to	accommodate	increasing	trading	volume	and	order messages	would	also	constrain	our	ability	to	expand	our	business.

We	cannot	assure	you	that	we,	or	our	third	party	service	providers,	will	not	experience	systems	failures.	Our	electronic	trading	platform,	computer	and communication	systems	and	other	operations	are	vulnerable	to	damage,	interruption	or	failure	as	a	result	of,	among	other	things:

•irregular	or	heavy	use	of	our	electronic	trading	platform	during	peak	trading	times	or	at	times	of	unusual	market	volatility;

•power	or	telecommunications	failures,	hardware	failures	or	software	errors;

•human	error;

•computer	viruses,	acts	of	vandalism	or	sabotage	(and	resulting	potential	lapses	in	security),	both	internal	and	external;

•natural	disasters,	fires,	floods	or	other	acts	of	God;

•acts	of	war	or	terrorism	(including	cyberterrorism)	or	other	armed	hostility;

•cybersecurity	breaches;	and

•loss	of	support	services	from	third	parties,	including	those	to	whom	we	outsource	aspects	of	our	computer	infrastructure	critical	to	our	business.

In	the	event	that	any	of	our	systems,	or	those	of	our	third-party	providers,	fail	or	operate	slowly,	it	may	cause	any	one	or	more	of	the	following	to	occur:

•unanticipated	disruptions	in	service	to	our	clients;

•distribution	of	untimely	or	inaccurate	market	data	to	customers	who	rely	on	this	data	for	their	trades;

•slower	response	times	or	delays	in	our	clients'	trade	execution;

•incomplete	or	inaccurate	accounting,	recording	or	processing	of	trades;

•financial	losses	and	liabilities	to	clients;

•litigation	or	other	claims	against	us,	including	formal	complaints	to	industry	regulatory	organizations;	and

•regulatory	inquiries,	proceedings	or	sanctions.

Any	system	failure	that	causes	an	interruption	in	service	or	decreases	the	responsiveness	of	our	service,	including	failures	caused	by	client	error	or	misuse	of	our systems,	could	damage	our	reputation,	business	and	brand	name	and	lead	our	broker-dealer	and	institutional	investor	clients	to	decrease	or	cease	their	use	of	our electronic	trading	platform.

In	these	circumstances,	our	redundant	systems	or	disaster	recovery	plans	may	not	be	adequate.	Similarly,	although	many	of	our	contracts	with	our	service providers	require	them	to	have	disaster	recovery	plans,	we	cannot	be	certain	that	these	will	be	adequate	or	implemented	properly.	In	addition,	our	business	interruption insurance	may	not	adequately	compensate	us	for	losses	that	may	occur.

We	also	cannot	assure	you	that	we	have	sufficient	personnel	to	properly	respond	to	system	problems.	We	internally	support	and	maintain	many	of	our	computer systems	and	networks,	including	those	underlying	our	electronic	trading	platform.	Our	failure	to	monitor	or	maintain	these	systems	and	networks	or,	if	necessary,	to	find a	replacement	for	this	technology	in	a	timely	and	cost-effective	manner	would	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of operations.

# Our	systems	and	those	of	our	third	party	service	providers	may	be	vulnerable	to	cybersecurity	risks.	If	our	security	measures	are	breached	and	unauthorized	access is	obtained	to	our	electronic	trading	platform,	our	business	could	suffer	a	material	adverse	effect.

Our	electronic	trading	platform	involves	the	storage	and	transmission	of	our	clients'	proprietary	information.	The	secure	storage	and	transmission	of	confidential information	over	public	networks	is	a	critical	element	of	our	operations.	Cyber	attacks	on	our	systems	or	the	systems	of	our	third	party	service	providers	could	expose	us to	a	risk	of	misappropriation	of	this	information,	leading	to	litigation	and	possible	liability.	If	our	security	measures	are	breached	as	a	result	of	third-party	action, employee	error,	malfeasance	or	otherwise,	and,	as	a	result,	someone	obtains	unauthorized	access	to	trading	or	other	confidential	information,	our	reputation	could	be damaged,	our	business	may	suffer	and	we	could	incur	significant	liability.	Any	such	breach	could	compromise	our	networks	and	the	information	stored	there	could	be accessed,	publicly	disclosed,	lost	or	stolen.	Because	techniques	used	to	obtain	unauthorized	access	or	to	sabotage	computer	systems	change	frequently	and	generally	are not	recognized	until	launched	against	a	target,	we	may	be	unable	to	anticipate	these	techniques	or	to	implement	adequate	preventive	measures.	Any	cybersecurity	breach may	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.	A	cyber	attack	or	security	breach	on	our	system	or	that	of	a	third	party service	provider	could	manifest	in	different	ways	and	could	lead	to	any	number	of	harmful	consequences,	including	but	not	limited	to:

•	 misappropriation	of	financial	assets,	intellectual	property	or	sensitive	information	belonging	to	us,	our	clients	or	our	third	party	service	providers;

•corruption	of	data	or	causing	operational	disruption	through	computer	viruses	or	phishing;	and

•denial	of	service	attacks	to	prevent	users	from	accessing	our	platform.

Our	remediation	costs	and	lost	revenues	could	be	significant	if	we	fall	victim	to	a	cyber	attack.	If	an	actual,	threatened	or	perceived	breach	of	our	security	occurs, the	market	perception	of	the	effectiveness	of	our	security	measures	could	be	harmed	and	could	cause	our	broker-dealer	and	institutional	investor	clients	to	reduce	or	stop their	use	of	our	electronic	trading	platform.	We	may	be	required	to	expend	significant	resources	to	repair	system	damage,	protect	against	the	threat	of	future	security breaches	or	to	alleviate	problems,	including	reputational	harm,	loss	of	clients	and	revenues	and	litigation,	caused	by	any	breaches.	We	may	be	found	liable	to	our	clients for	any	stolen	assets	or	misappropriated	confidential	information.	Although	we	intend	to	continue	to	implement	industry-standard	security	measures,	we	cannot	assure you	that	those	measures	will	be	sufficient.

# We	may	not	be	able	to	protect	our	intellectual	property	rights	or	technology	effectively,	which	would	allow	competitors	to	duplicate	or	replicate	our	electronic trading	platform.	This	could	adversely	affect	our	ability	to	compete.

Intellectual	property	is	critical	to	our	success	and	ability	to	compete,	and	if	we	fail	to	protect	our	intellectual	property	rights	adequately,	our	competitors	might gain	access	to	our	technology.	We	rely	primarily	on	a	combination	of	patent,	copyright,	trademark	and	trade	secret	laws	in	the	United	States	and	other	jurisdictions,	as well	as	license	agreements,	third-party	non-disclosure	and	other	agreements	and	other	contractual	provisions	and	technical	measures	to	protect	our	intellectual	property rights.	We	attempt	to	negotiate	beneficial	intellectual	property	ownership	provisions	in	our	contracts	and	also	require	employees,	consultants,	advisors	and	collaborators to	enter	into	confidentiality	agreements	in	order	to	protect	the	confidentiality	of	our	proprietary	information.	We	have	received	11	patents	and	have	filed	patent applications	covering	aspects	of	our	technology	and/or	business,	but	can	give	no	assurances	that	any	such	patents	will	protect	our	business	and	processes	from competition	or	that	the	patents	applied	for	will	be	issued.	Additionally,	laws	and	our	contractual	terms	may	not	be	sufficient	to	protect	our	technology	from	use	or	theft by	third	parties.	For	instance,	a	third	party	might	reverse	engineer	or	otherwise	obtain	and	use	our	technology	without	our	permission	and	without	our	knowledge, thereby	infringing	our	rights	and	allowing	competitors	to	duplicate	or	replicate	our	products.	Furthermore,	we	cannot	assure	you	that	these	protections	will	be	adequate to	prevent	our	competitors	from	independently	developing	technologies	that	are	substantially	equivalent	or	superior	to	our	technology.

We	may	have	legal	or	contractual	rights	that	we	could	assert	against	illegal	use	of	our	intellectual	property	rights,	but	lawsuits	claiming	infringement	or misappropriation	are	complex	and	expensive,	and	the	outcome	would	not	be	certain.	In	addition,	the	laws	of	some	countries	in	which	we	now	or	in	the	future	provide	our services	may	not	protect	software	and	intellectual	property	rights	to	the	same	extent	as	the	laws	of	the	United	States.

# Defending	against	intellectual	property	infringement	or	other	claims	could	be	expensive	and	disruptive	to	our	business.	If	we	are	found	to	infringe	the	proprietary rights	of	others,	we	could	be	required	to	redesign	our	products,	pay	royalties	or	enter	into	license	agreements	with	third	parties.

In	the	technology	industry,	there	is	frequent	litigation	based	on	allegations	of	infringement	or	other	violations	of	intellectual	property	rights.	As	the	number	of participants	in	our	market	increases	and	the	number	of	patents	and	other	intellectual	property	registrations	increases,	the	possibility	of	an	intellectual	property	claim against	us	grows.	Although	we	have	never	been	the	subject	of	a	material	intellectual	property	dispute,	we	cannot	assure	you	that	a	third	party	will	not	assert	in	the	future that	our	technology	or	the	manner	in	which	we	operate	our	business	violates	its	intellectual	property	rights.	From	time	to	time,	in	the	ordinary	course	of	our	business,	we may	become	subject	to	legal	proceedings	and	claims	relating	to	the	intellectual	property	rights	of	others,	and	we	expect	that	third	parties	may	assert	intellectual	property claims	against	us,	particularly	as	we	expand	the	complexity	and	scope	of	our	business,	the	number	of	electronic	trading	platforms	increases	and	the	functionality	of	these platforms	further	overlaps.	Any	claims,	whether	with	or	without	merit,	could:

•be	expensive	and	time-consuming	to	defend;

•prevent	us	from	operating	our	business,	or	portions	of	our	business;

•cause	us	to	cease	developing,	licensing	or	using	all	or	any	part	of	our	electronic	trading	platform	that	incorporates	the	challenged	intellectual property;

•require	us	to	redesign	our	products	or	services,	which	may	not	be	feasible;

•result	in	significant	monetary	liability;

•divert	management's	attention	and	resources;	and

•require	us	to	pay	royalties	or	enter	into	licensing	agreements	in	order	to	obtain	the	right	to	use	necessary	technologies,	which	may	not	be	possible on	commercially	reasonable	terms.

We	cannot	assure	you	that	third	parties	will	not	assert	infringement	claims	against	us	in	the	future	with	respect	to	our	electronic	trading	platform	or	any	of	our other	current	or	future	products	or	services	or	that	any	such	assertion	will	not	require	us	to	cease	providing	such	services	or	products,	try	to	redesign	our	products	or services,	enter	into	royalty	arrangements,	if	available,	or	engage	in	litigation	that	could	be	costly	to	us.	Any	of	these	events	could	have	a	material	adverse	effect	on	our business,	financial	condition	and	results	of	operations.

# If	we	acquire	or	invest	in	other	businesses,	products	or	technologies,	we	may	be	unable	to	integrate	them	with	our	business,	our	financial	performance	may	be impaired	or	we	may	not	realize	the	anticipated	financial	and	strategic	goals	for	any	such	transactions.

We	have	in	the	past	and	may	in	the	future	acquire	or	invest	in	companies,	products	or	technologies	that	we	believe	are	strategic.	On	October	26,	2012,	we	entered into	an	agreement	to	acquire	all	of	the	outstanding	shares	of	Xtrakter.	We	may	not	be	able	to	identify,	negotiate	or	finance	any	future	acquisition	or	investment successfully.	Even	if	we	do	succeed	in	acquiring	or	investing	in	a	business,	product	or	technology,	such	acquisitions	and	investments,	including	the	pending	Xtrakter acquisition,	may	involve	a	number	of	risks,	including:

•	 we	may	find	that	the	acquired	company	or	assets	do	not	further	our	business	strategy,	or	that	we	overpaid	for	the	company	or	assets,	or	the economic	conditions	underlying	our	acquisition	decision	may	change;

•	 we	may	have	difficulty	integrating	the	acquired	technologies	or	products	with	our	existing	electronic	trading	platform,	products	and	services;

•	 we	may	have	difficulty	integrating	the	operations	and	personnel	of	the	acquired	business,	or	retaining	the	key	personnel	of	the	acquired	business;

•there	may	be	client	confusion	if	our	services	overlap	with	those	of	the	acquired	company	and	we	may	have	difficulty	retaining	key	customers, vendors	and	other	business	partners	of	the	acquired	business;

•our	ongoing	business	and	management's	attention	may	be	disrupted	or	diverted	by	transition	or	integration	issues	and	the	complexity	of	managing geographically	or	culturally	diverse	enterprises;

•	 we	may	have	difficulty	maintaining	uniform	standards,	controls,	procedures	and	policies	across	locations;

•significant	decrease	in	our	cash	reserves;

•entry	into	markets	in	which	we	have	limited	experience	and	where	competitors	hold	stronger	market	positions;

•inability	to	achieve	the	financial	and	strategic	goals	for	the	acquired	and	combined	businesses;

•inability	to	take	advantage	of	anticipated	tax	benefits;

•incurring	unanticipated	acquisition-related	costs	or	amortization	costs	for	acquired	intangible	assets	that	could	impact	our	operating	results;

•potential	additional	exposure	to	fluctuations	in	currency	exchange	rates;

•potential	failure	of	the	due	diligence	processes	to	identify	significant	problems,	liabilities	or	other	challenges	of	an	acquired	company	or	product, including	but	not	limited	to,	issues	with	the	acquired	company's	intellectual	property,	product	quality	or	product	architecture,	data	back-up	and security	(including	security	from	cyber-attacks),	privacy	practices,	revenue	recognition	or	other	accounting	practices,	employee,	customer	or partner	issues	or	legal	and	financial	contingencies;

•exposure	to	litigation	or	other	claims	in	connection	with,	or	inheritance	of	claims	or	litigation	risk	as	a	result	of,	an	acquisition,	including	but	not limited	to,	claims	from	terminated	employees,	customers,	former	stockholders	or	other	third	parties;

•incurring	significant	exit	charges	if	acquired	products	or	services	are	unsuccessful;

•potential	inability	to	certify	that	internal	controls	over	financial	reporting	are	effective;

•potential	inability	to	obtain,	or	obtain	in	an	efficient	manner,	approvals	from	applicable	governmental	authorities,	which	could	delay	or	prevent such	acquisitions;	and

•potential	incompatibility	of	business	cultures.

These	factors	could	have	a	material	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and	cash	flows,	particularly	in	the	case	of	a	larger acquisition	or	multiple	acquisitions	in	a	short	period	of	time.	From	time	to	time,	we	may	enter	into	negotiations	for	acquisitions	or	investments	that	are	not	ultimately consummated.	Such	negotiations	could	result	in	significant	diversion	of	management	time,	as	well	as	out-of-pocket	costs.

The	consideration	paid	in	connection	with	an	investment	or	acquisition	also	affects	our	financial	results.	If	we	were	to	proceed	with	one	or	more	significant acquisitions	in	which	the	consideration	included	cash,	we	could	be	required	to	use	a	substantial	portion	of	our	available	cash	to	consummate	any	acquisition.	To	the extent	we	issue	shares	of	capital	stock	or	other	rights	to	purchase	capital	stock,	including	options	or	other	rights,	existing	stockholders	may	be	diluted	and	earnings	per share	may	decrease.	In	addition,	acquisitions	may	result	in	the	incurrence	of	debt,	large	one-time	write-offs,	such	as	of	acquired	in-process	research	and	development costs,	and	restructuring	charges.

# We	may	be	required	to	recognize	impairments	of	our	goodwill	or	other	intangible	assets,	which	could	adversely	affect	our	results	of	operations	or	financial condition.

The	determination	of	the	value	of	goodwill	and	other	intangible	assets	requires	management	to	make	estimates	and	assumptions	that	affect	our	consolidated financial	statements.	We	test	for	impairment	of	goodwill	on	an	annual	basis	or	more	frequently	if	there	are	changed	circumstances.	We	assess	intangible	assets	for impairment	when	events	or	circumstances	indicate	the	existence	of	a	possible	impairment.

Determining	the	fair	value	of	certain	assets	acquired	and	liabilities	assumed	is	judgmental	in	nature	and	requires	management	to	use	significant	estimates	and assumptions,	including	assumptions	with	respect	to	future	cash	flows,	discount	rates,	growth	rates	and	asset	lives.	Any	future	acquisition	may	result	in	goodwill	and	other intangible	assets	that	are	subject	to	impairment	tests,	which	could	result	in	future	impairment	charges.

# We	are	dependent	on	our	management	team,	and	the	loss	of	any	key	member	of	this	team	may	prevent	us	from	implementing	our	business	plan	in	a	timely	manner.

Our	success	depends	largely	upon	the	continued	services	of	our	executive	officers	and	other	key	personnel,	particularly	Richard	M.	McVey,	Chief	Executive Officer	and	Chairman	of	our	Board	of	Directors.	The	terms	of	Mr.	McVey's	employment	agreement	with	us	do	not	require	him	to	continue	to	work	for	us	and	allow	him to	terminate	his	employment	at	any	time,	subject	to	certain	notice	requirements	and	forfeiture	of	non-vested	equity	compensation	awards.	Any	loss	or	interruption	of Mr.	McVey's	services	or	that	of	one	or	more	of	our	other	executive	officers	or	key	personnel	could	result	in	our	inability	to	manage	our	operations	effectively	and/or pursue	our	business	strategy.

# Because	competition	for	our	employees	is	intense,	we	may	not	be	able	to	attract	and	retain	the	highly	skilled	employees	we	need	to	support	our	business.

We	strive	to	provide	high-quality	services	that	will	allow	us	to	establish	and	maintain	long-term	relationships	with	our	broker-dealer	and	institutional	investor clients.	Our	ability	to	provide	these	services	and	maintain	these	relationships,	as	well	as	our	ability	to	execute	our	business	plan	generally,	depends	in	large	part	upon	our employees.	We	must	attract	and	retain	highly	qualified	personnel.	Competition	for	these	personnel	is	intense,	especially	for	software	engineers	with	extensive	experience in	designing	and	developing	software	and	Internet-related	services,	hardware	engineers,	technicians,	product	managers	and	senior	sales	executives.

The	market	for	qualified	personnel	is	increasingly	competitive	as	the	financial	industry	continues	to	recover	from	the	financial	crisis	and	as	electronic	commerce continues	to	experience	strong	growth.	Many	of	the	companies	with	which	we	compete	for	experienced	personnel	have	greater	resources	than	we	have	and	are	longer established	in	the	marketplace.	In	addition,	in	making	employment	decisions,	particularly	in	the	Internet,	high-technology	and	financial	services	industries,	job candidates	often	consider	the	total	compensation	package	offered,	including	the	value	of	the	stock-based	compensation	they	are	to	receive	in	connection	with	their employment.	Significant	volatility	in	the	price	of	our	common	stock	may	adversely	affect	our	ability	to	attract	or	retain	key	employees.	The	expensing	of	stock-based compensation	may	discourage	us	from	granting	the	size	or	type	of	stock-based	compensation	that	job	candidates	may	require	to	join	our	company.

We	cannot	assure	you	that	we	will	be	successful	in	our	efforts	to	recruit	and	retain	the	required	personnel.	The	failure	to	attract	new	personnel	or	to	retain	and motivate	our	current	personnel	may	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.

# Our	business	is	subject	to	increasingly	extensive	government	and	other	regulation	and	our	relationships	with	our	broker-dealer	clients	may	subject	us	to	increasing regulatory	scrutiny,	which	may	affect	our	trading	volumes	and	increase	our	cost	of	doing	business.

The	financial	industry	is	extensively	regulated	by	many	governmental	agencies	and	self-regulatory	organizations,	including	the	SEC	and	FINRA.	As	a	matter	of public	policy,	these	regulatory	bodies	are	responsible	for	safeguarding	the	integrity	of	the	securities	and	other	financial	markets	and	protecting	the	interests	of	investors in	those	markets.	These	regulatory	bodies	have	broad	powers	to	promulgate	and	interpret,	investigate	and	sanction	non-compliance	with	their	laws,	rules	and regulations.

Most	aspects	of	our	broker-dealer	subsidiaries	are	highly	regulated,	including:

•the	way	we	deal	with	our	clients;

•our	capital	requirements;

•our	financial	and	regulatory	reporting	practices;

•required	record-keeping	and	record	retention	procedures;

•the	licensing	of	our	employees;	and

•the	conduct	of	our	directors,	officers,	employees	and	affiliates.

We	cannot	assure	you	that	we	and/or	our	directors,	officers	and	employees	will	be	able	to	fully	comply	with	these	laws,	rules	and	regulations.	If	we	fail	to	comply with	any	of	these	laws,	rules	or	regulations,	we	may	be	subject	to	censure,	fines,	cease-and-desist	orders,	suspension	of	our	business,	suspensions	of	personnel	or	other sanctions,	including	revocation	of	our	membership	in	FINRA	and	registration	as	a	broker-dealer.

We	have	two	major	operating	subsidiaries,	MarketAxess	Corporation	and	MarketAxess	Europe	Limited.	MarketAxess	Corporation	and	MarketAxess	Europe Limited	are	subject	to	U.S.	and	U.K.	regulations	as	a	registered	broker-dealer	and	as	a	multilateral	trading	facility,	respectively,	which	prohibit	repayment	of	borrowings from	the	Company	or	affiliates,	paying	cash	dividends,	making	loans	to	the	Company	or	affiliates	or	otherwise	entering	into	transactions	that	result	in	a	significant reduction	in	regulatory	net	capital	or	financial	resources,	without	prior	notification	to	or	approval	from	such	subsidiary's	principal	regulator.	Xtrakter	is	registered,	and upon	consummation	of	the	pending	acquisition	will	continue	to	be	registered,	as	an	Approved	Reporting	Mechanism	with	the	FSA.	Xtrakter	also	has	"recognized	status" in	France,	the	Netherlands	and	Belgium	in	connection	with	the	submission	of	transaction	reports	to	regulators.

In	addition,	as	a	result	of	the	global	financial	crisis	and	other	recent	events	in	the	financial	industry,	there	is	a	greater	likelihood	of	legislative	and	regulatory action	to	increase	government	oversight	of	the	financial	services	industry.	For	example,	during	2010	the	Dodd-Frank	Act	was	signed	into	law.	The	Dodd-Frank	Act creates	an	entirely	new	structure	for	the	trading	of	over-the-counter	derivatives,	a	market	in	which	we	currently	operate.	Among	other	things,	the	Dodd-Frank	Act mandates	that	clearable	swaps	trade	on	a	board	of	trade	designated	as	a	contract	market	or	a	securities	exchange	or	through	a	"swap	execution	facility,"	or	SEF	(in	each case,	subject	to	certain	key	exceptions).	While	we	expect	that	the	CFTC	and	SEC	will	adopt	rules	that	detail	the	new	regulatory	regime	regarding	the	swaps	market	place in	2013,	no	assurance	can	be	given	regarding	when,	or	whether,	such	rules	will	be	finalized	and	implemented.	Subject	to	such	rulemaking,	we	intend	to	establish, register	and	operate	a	swap	execution	facility	and/or	a	security-based	swap	execution	facility.

We	have	incurred	significant	costs	to	prepare	for	compliance	with	the	new	regulatory	requirements.	We	developed	new	technology	and	trading	protocols	to	trade CDS	in	anticipation	of	the	SEC	and	CFTC's	implementation	of	the	Dodd-Frank	Act.	However,	despite	our	efforts,	there	is	no	assurance	that	we	will	qualify	as	a registered	SEF	or	that	our	compliance	systems	will	be	effective.	If	we	do	not	qualify	as	a	SEF,	we	will	no	longer	be	able	to	support	CDS	trades	and	our	business, financial	condition	and	results	of	operations	could	materially	suffer	as	a	result.	If	we	qualify	as	a	SEF,	the	registration	and	additional	oversight	that	we	will	need	to comply	with	the	regulation	will	increase	the	costs	of	our	operations	and	the	costs	of	using	our	products	for	our	clients.	Furthermore,	we	are	unable	to	predict	how	the markets	will	respond	to	the	new	regulatory	regime.

Any	changes	in	laws	or	regulations	or	in	governmental	policies,	including	the	rules	relating	to	the	maintenance	of	specific	levels	of	net	capital	applicable	to	our broker-dealer	subsidiaries,	could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.	Our	industry	has	been	and	is	subject	to continuous	regulatory	changes	and	may	become	subject	to	new	regulations	or	changes	in	the	interpretation	or	enforcement	of	existing	regulations,	which	could	require	us to	incur	significant	compliance	costs	or	cause	the	development	of	affected	markets	to	become	impractical.	In	addition,	as	we	expand	our	business	into	new	markets,	it	is likely	that	we	will	be	subject	to	additional	laws,	rules	and	regulations.	The	proposed	Volcker	Rule	section	of	the	Dodd-Frank	Act	bans	proprietary	trading	by	banks	and their	affiliates.	The	Volcker	Rule	could	adversely	affect	our	bank-affiliated	broker-dealer	clients'	ability	to	make	markets	in	a	variety	of	fixed-income	securities,	thereby negatively	impacting	the	level	of	liquidity	and	pricing	available	on	our	trading	platform.	We	cannot	predict	the	extent	to	which	any	future	regulatory	changes	may adversely	affect	our	business	and	operations.

Our	disclosed	trading	system	has	not	been	subjected	to	regulation	as	an	alternative	trading	system	under	Regulation	ATS.	A	determination	by	the	SEC	to	treat	our trading	platform	as	an	alternative	trading	system	subject	to	Regulation	ATS	would	subject	us	to	additional	reporting	obligations	and	other	limitations	on	the	conduct	of our	business,	many	of	which	could	be	material.	Our	anonymous	dealer-to-dealer	trading	service,	DealerAxess ®,	is	regulated	as	an	alternative	trading	system	subject	to Regulation	ATS.

The	activities	and	consequences	described	above	may	result	in	significant	distractions	to	our	management	and	could	have	a	material	adverse	effect	on	our business,	financial	condition	and	results	of	operations.

# We	may	face	increasing	economic	and	regulatory	challenges	in	our	growing	international	operations	that	we	may	not	be	able	to	meet	in	the	future.

We	operate	an	electronic	trading	platform	in	Europe	and	we	plan	to	further	expand	our	operations	throughout	Europe	and	other	regions.	There	are	certain	risks inherent	in	doing	business	in	international	markets,	particularly	in	the	financial	services	industry,	which	is	heavily	regulated	in	many	jurisdictions.	These	risks	include:

•less	developed	technological	infrastructures	and	generally	higher	costs,	which	could	result	in	lower	client	acceptance	of	our	services	or	clients having	difficulty	accessing	our	trading	platform;

•difficulty	in	obtaining	the	necessary	regulatory	approvals	for	planned	expansion,	if	at	all,	and	the	possibility	that	any	approvals	that	are	obtained may	impose	restrictions	on	the	operation	of	our	business;

•the	inability	to	manage	and	coordinate	the	various	regulatory	requirements	of	multiple	jurisdictions	that	are	constantly	evolving	and	subject	to unexpected	change;

•difficulties	in	staffing	and	managing	foreign	operations;

•fluctuations	in	exchange	rates;

•reduced	or	no	protection	for	intellectual	property	rights;

•seasonal	reductions	in	business	activity;	and

•potentially	adverse	tax	consequences.

Our	international	operations	are	also	subject	to	the	legal,	economic	and	market	risks	associated	with	geopolitical	uncertainties	in	other	regions	of	the	world, including	but	not	limited	to	the	risk	of	war,	inter	and	intra	national	conflict,	economic	crises	and	terrorism.	For	example,	the	sovereign	debt	crisis	in	Europe	may	have	a material	adverse	effect	on	our	business.	Increased	government	deficits	and	debt	levels	along	with	ratings	downgrades	sparked	fears	in	the	global	financial	markets	of default	by	Euro	zone	nations,	leading	to	increased	yields	on	government	bonds	and	resulting	in	a	more	difficult	trading	environment	for	European	corporate	bonds.	Due, in	part,	to	the	crisis	and	competitive	environment	in	Europe,	trading	volume	in	our	Eurobond	product	has	significantly	decreased.	We	reduced	the	monthly	distribution fees	paid	by	our	European	broker-dealer	market	makers	effective	March	1,	2012	in	order	to	encourage	Eurobond	trading,	which	resulted	in	decreased	monthly distribution	fee	revenues.	Despite	our	efforts,	Eurobond	trading	volumes	continued	to	decline.	There	is	no	assurance	that	Eurobond	trading	volumes	and	revenues	will not	continue	to	decline	despite	this	change	and	any	other	efforts	we	may	undertake.

In	addition,	we	must	comply	with	the	laws,	regulations	and	registration	rules	of	the	Financial	Services	Authority	in	the	U.K.	and	foreign	governments	and regulatory	bodies	for	each	country	in	which	we	conduct	business.	Similar	to	the	U.S.,	regulatory	bodies	in	Europe	and	elsewhere	are	developing	new	rules	for	derivatives trading.	For	example,	the	European	Parliament	and	the	EU	Council	of	Ministers	endorsed	an	agreement	that	will,	among	other	things,	require	central	clearing	of standardized	OTC	derivatives	and	the	reporting	of	all	derivatives	(OTC	or	otherwise)	to	trade	repositories.	However,	it	is	not	yet	clear	whether	there	will	be	any requirement	in	the	EU	to	trade	standardized	CDS	contracts	on	regulated	exchanges	or	trading	platforms.

We	cannot	predict	what	future	actions	the	U.S.,	U.K.	and	other	regulatory	bodies	might	take,	or	the	impact	that	any	such	actions	may	have	on	our	business.	Our compliance	with	these	changing	laws	and	regulations	may	be	costly	and	time-consuming	and	may	have	a	material	adverse	effect	on	our	clients'	trading	activities	on	our platform.

Further,	we	may	face	unexpected	challenges	in	our	international	operations	due	to	global	competitors,	established	local	markets,	and	economic	and	political instability.	Our	inability	to	manage	these	risks	effectively	could	adversely	affect	our	business	and	limit	our	ability	to	expand	our	international	operations,	which	could have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.

# We	cannot	assure	you	that	our	compliance	and	risk	management	methods	will	be	effective	and	our	financial	condition	and	results	of	operations	may	be	adversely affected	if	they	fail.

Our	success	in	complying	with	complex	and	changing	laws	and	navigating	risks	in	various	jurisdictions	and	markets	depends	on	our	maintenance	of	compliance, auditing	and	reporting	systems	and	risk	management	procedures,	as	well	as	our	ability	to	recruit	and	retain	qualified	compliance	and	risk	management	personnel.	While we	have	developed	policies	and	procedures	to	identify,	monitor	and	manage	our	legal,	regulatory	and	market	risks,	we	cannot	assure	you	that	our	systems	will	always	be effective	in	monitoring	or	evaluating	the	risks	to	which	we	are	exposed.

In	addition,	the	regulators	in	the	jurisdictions	in	which	we	operate	have	broad	powers	to	censure,	fine,	issue	cease-and-desist	orders	or	keep	us	from	engaging	in some	of	our	operations.	We	face	the	risk	of	regulatory	intervention,	investigations	and	proceedings,	any	of	which	could	involve	extensive	scrutiny	of	our	activities	and result	in	significant	fines	and	liability.	Any	of	these	developments	would	require	significant	time	and	financial	resources	and	could	adversely	affect	our	reputation, financial	condition	and	operating	results.

# Our	growth	initiatives	may	place	significant	strain	on	management	and	other	resources.

We	have	expanded	our	business	activities	and	operations	over	the	last	several	years.	Continued	growth,	both	domestic	and	international,	will	require	further investment	in	management	and	new	personnel,	infrastructure	and	compliance	systems.	The	expansion	of	our	international	operations	involves	risks	that	may	have	an adverse	effect	on	our	business	and	operations,	such	as	the	challenge	of	effectively	managing	and	staffing	our	international	operations,	complying	with	increased	and varied	regulatory	requirements	and	entering	new	markets.	In	particular,	we	may	not	be	successful	in	implementing	all	of	the	necessary	processes	to	support	and	manage the	pending	Xtrakter	acquisition.	For	a	detailed	discussion	of	the	risks	associated	with	our	pending	acquisition	of	Xtrakter,	see	the	Risk	Factor	captioned	"If	we	acquire or	invest	in	other	businesses,	products	or	technologies,	we	may	be	unable	to	integrate	them	with	our	business,	our	financial	performance	may	be	impaired	or	we	may not	realize	the	anticipated	financial	and	strategic	goals	for	any	such	transactions."

We	may	not	be	able	to	manage	our	growth	efficiently,	which	could	result	in	our	expansion	costs	increasing	at	a	faster	rate	than	our	revenues	and	distracting management	from	our	core	business	and	operations.	If	we	cannot	successfully	implement	the	necessary	processes	to	support	and	manage	new	initiatives,	our	business, financial	condition	and	results	of	operations	may	suffer.

# In	the	event	of	employee	error	or	misconduct,	our	business	may	be	harmed.

Employee	misconduct	or	error	could	expose	us	to	significant	liability,	financial	losses,	regulatory	sanctions	and	reputational	harm.	Over	the	past	few	years,	there have	been	several	high-profile	cases	involving	fraud	or	misconduct	by	employees	of	financial	services	firms.	Our	employees	could	carry	out	improper	activities	on behalf	of	our	clients,	or	use	proprietary	client	or	company	information	for	personal	or	other	improper	or	illegal	uses.	Employee	errors	also	expose	us	to	the	risk	of material	loss	until	such	errors	are	detected	and	unauthorized	transactions	or	improper	activities	are	reversed.

Errors	and	misconduct	by	our	current	or	former	employees	could	cause	us	to	suffer	financial	losses,	regulatory	sanctions	and	reputational	harm.	The	precautions we	take	to	monitor	and	prevent	employee	errors	and	misconduct	may	not	be	effective	in	all	cases.

# We	cannot	predict	our	future	capital	needs	or	our	ability	to	obtain	additional	financing	if	we	need	it.

Our	business	is	dependent	upon	the	availability	of	adequate	funding	and	regulatory	capital	under	applicable	regulatory	requirements.	Although	we	believe	that our	available	cash	resources	and	borrowing	capacity	under	our	credit	facility	are	sufficient	to	meet	our	presently	anticipated	liquidity	needs	and	capital	expenditure requirements	for	at	least	the	next	12	months,	we	may	in	the	future	need	to	raise	additional	funds	to,	among	other	things:

•support	more	rapid	growth	of	our	business;

•develop	new	or	enhanced	services	and	products;

•fund	operating	losses;

•respond	to	competitive	pressures;

•acquire	complementary	companies	or	technologies;

•enter	into	strategic	alliances;

•increase	the	regulatory	net	capital	necessary	to	support	our	operations;	or

•respond	to	unanticipated	or	changing	capital	requirements.

We	expect	that	debt	financing,	if	available	at	all,	would	likely	be	pursuant	to	the	terms	of	our	credit	agreement	with	JPM,	which	includes	restrictive	covenants with	respect	to	dividends,	issuances	of	additional	capital	and	other	financial	and	operational	matters	related	to	our	business.	For	a	detailed	discussion	of	the	risks associated	with	our	credit	agreement,	see	the	Risk	Factor	captioned	"Our	credit	agreement	contains	restrictive	and	financial	covenants	that	limit	our	operating flexibility,	and	we	may	incur	additional	debt	in	the	future	that	may	include	similar	or	additional	restrictions."

In	the	future,	we	may	not	be	able	to	obtain	additional	financing,	if	needed,	in	amounts	or	on	terms	acceptable	to	us,	if	at	all.	If	sufficient	funds	are	not	available	or are	not	available	on	terms	acceptable	to	us,	our	ability	to	fund	our	expansion,	take	advantage	of	acquisition	opportunities,	develop	or	enhance	our	services	or	products,	or otherwise	respond	to	competitive	pressures	would	be	significantly	limited.	These	limitations	could	have	a	material	adverse	effect	on	our	business,	financial	condition and	results	of	operations.

# Our	credit	agreement	contains	restrictive	and	financial	covenants	that	could	limit	our	operating	flexibility,	and	we	may	incur	additional	debt	in	the	future	that	may include	similar	or	additional	restrictions.

We	are	party	to	a	credit	agreement	with	JPMorgan	that	provides	for	revolving	loans	and	letters	of	credit	up	to	an	aggregate	of	$50.0	million.	Subject	to satisfaction	of	certain	specified	conditions,	we	are	permitted	to	upsize	the	credit	agreement	by	an	additional	$50.0	million	in	total.	Our	credit	agreement	contains	certain covenants	that,	among	other	things,	restrict	our	ability	to	take	certain	actions,	even	if	we	believe	them	to	be	in	our	best	interests.	These	covenants	restrict	or	prohibit, among	other	things,	our	ability	to:

•incur	or	guarantee	additional	debt;

•create	or	incur	liens;

•change	our	line	of	business;

•sell	or	transfer	assets;

•	 make	certain	investments	or	acquisitions;

•pay	dividends	or	distributions,	redeem	or	repurchase	our	equity	or	make	certain	other	restricted	payments;

•consummate	a	merger	or	consolidation;

•enter	into	certain	swap,	derivative	or	similar	transactions;

•enter	into	certain	transactions	with	affiliates;	and

•incur	restrictions	on	our	ability	to	grant	liens	or,	in	the	case	of	subsidiaries,	pay	dividends	or	other	distributions.

We	are	also	required	by	our	credit	agreement	to	maintain	a	maximum	consolidated	leverage	ratio	and	a	minimum	consolidated	interest	coverage	ratio.	We	cannot assure	you	that	we	will	be	able	to	meet	these	requirements	or	satisfy	these	covenants	in	the	future.	A	breach	of	any	of	these	covenants	or	the	inability	to	comply	with	the required	financial	covenants	could	result	in	an	event	of	default	under	the	credit	agreement.	If	any	such	event	of	default	occurs,	the	lender	under	the	credit	agreement could	elect	to	declare	all	amounts	outstanding	and	accrued	and	unpaid	interest	under	the	credit	agreement	to	be	immediately	due	and	payable,	and	could	foreclose	on	the assets	securing	the	credit	agreement.	The	lender	would	also	have	the	right	in	these	circumstances	to	terminate	any	commitments	it	has	to	provide	further	credit extensions.	We	may	incur	other	indebtedness	in	the	future	that	may	contain	financial	or	other	covenants	more	restrictive	than	those	applicable	to	the	credit	agreement.

# We	are	subject	to	the	risks	of	litigation	and	securities	laws	liability.

Many	aspects	of	our	business,	and	the	businesses	of	our	clients,	involve	substantial	risks	of	liability.	Dissatisfied	clients	may	make	claims	regarding	quality	of trade	execution,	improperly	settled	trades,	mismanagement	or	even	fraud	against	their	service	providers.	We	and	our	clients	may	become	subject	to	these	claims	as	the result	of	delays,	failures	or	malfunctions	of	our	electronic	trading	platform	and	services	provided	by	us.	We	could	incur	significant	legal	expenses	defending	claims,	even those	without	merit.	An	adverse	resolution	of	any	lawsuits	or	claims	against	us	could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of operations.

# If	the	use	of	electronic	trading	platforms	does	not	increase,	we	may	not	be	able	to	achieve	our	business	objectives.

The	success	of	our	business	plan	depends	in	part	on	our	ability	to	create	an	electronic	trading	platform	for	a	wide	range	of	fixed-income	products.	Historically, fixed-income	securities	markets	operated	through	telephone	communications	between	institutional	investors	and	broker-dealers.	The	utilization	of	our	products	and services	depends	on	the	acceptance,	adoption	and	growth	of	electronic	means	of	trading	securities.	We	cannot	assure	you	that	the	growth	and	acceptance	of	electronic means	of	trading	securities	will	continue.

# Fluctuations	in	foreign	currency	exchange	rates	may	adversely	affect	our	financial	results.

We	conduct	operations	in	several	different	countries,	including	the	U.S.	and	the	U.K.,	and	substantial	portions	of	our	revenues,	expenses,	assets	and	liabilities	are denominated	in	U.S.	dollars,	pounds	sterling	and	euros.	Since	our	consolidated	financial	statements	are	presented	in	U.S.	dollars,	we	must	translate	revenues,	income and	expenses,	as	well	as	assets	and	liabilities,	into	U.S.	dollars	at	exchange	rates	in	effect	during	or	at	the	end	of	each	reporting	period.	Accordingly,	increases	or decreases	in	the	value	of	the	U.S.	dollar	against	the	other	currencies	will	affect	our	net	operating	revenues,	operating	income	and	the	value	of	balance	sheet	items denominated	in	foreign	currencies.

Although	we	have	entered	into	foreign	currency	forward	contracts	to	hedge	the	exposure	to	variability	in	foreign	currency	cash	flows	and	may	enter	into	additional hedging	transactions	in	the	future	to	help	mitigate	our	foreign	exchange	risk	exposure,	these	hedging	arrangements	may	not	be	effective,	particularly	in	the	event	of inaccurate	forecasts	of	the	levels	of	our	non-U.S.	denominated	assets	and	liabilities.	Accordingly,	if	there	are	adverse	movements	in	exchange	rates,	we	may	suffer significant	losses,	which	would	adversely	affect	our	operating	results	and	financial	condition.

# As	a	public	company,	we	are	subject	to	certain	financial	and	corporate	governance	requirements	that	may	be	difficult	for	us	to	satisfy	and	may	divert	management's attention	from	our	business.

We	are	subject	to	the	requirements	of	Section	404	of	the	Sarbanes-Oxley	Act	of	2002	("SOX")	and	the	related	SEC	rules	and	regulations	that	call	for	our management	to	conduct	an	annual	assessment	and	report	on	the	effectiveness	of	our	internal	controls	over	financial	reporting.	Our	independent	registered	public accounting	firm	must	also	issue	an	annual	report	addressing	the	operating	effectiveness	of	the	Company's	internal	controls	over	financial	reporting.

While	our	internal	controls	over	financial	reporting	currently	meet	the	standards	set	forth	in	SOX,	failure	to	maintain	an	effective	internal	control	environment could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.	We	cannot	be	certain	of	our	ability	to	continue	to	comply	with	the requirements	of	SOX.	If	we	are	unable	to	continue	to	comply	with	the	requirements	of	SOX	in	an	efficient	manner,	we	may	be	subject	to	regulatory	action.	In	addition, in	the	event	that	we	identify	a	material	weakness,	there	can	be	no	assurance	that	we	would	be	able	to	remediate	such	material	weakness	in	an	efficient	manner.

Moreover,	if	we	are	unable	to	assert	that	our	internal	control	over	financial	reporting	is	effective	in	any	future	period	(or	if	our	auditors	are	unable	to	issue	an	opinion	on the	effectiveness	of	our	internal	controls),	we	could	suffer	reputational	harm	and	incur	significant	expenses	to	restructure	our	internal	controls	over	financial	reporting, which	may	have	a	material	adverse	effect	on	us.

# Risks	Related	to	Our	Common	Stock

# Market	volatility	and	future	sales	of	our	shares	by	significant	stockholders	may	cause	our	stock	price	and	the	value	of	your	investment	to	decline.

The	market	price	of	our	common	stock	may	be	significantly	affected	by	volatility	in	the	markets	in	general.	The	market	price	of	our	common	stock	likely	will continue	to	fluctuate	in	response	to	factors	including	the	following:

•the	other	risk	factors	described	in	this	Annual	Report	on	Form	10-K;

•prevailing	interest	rates;

•the	market	for	similar	securities;

•additional	issuances	of	common	stock;

•general	economic	conditions;	and

•our	financial	condition,	performance	and	prospects,	including	our	ability	or	inability	to	meet	analyst	expectations.

Most	of	these	factors	are	beyond	our	control.	In	addition,	the	stock	markets	in	general,	including	the	NASDAQ	Global	Select	Market,	have	experienced	and continue	to	experience	significant	price	and	volume	fluctuations.	These	fluctuations	have	resulted	in	volatility	in	the	market	prices	of	securities	for	companies	such	as ours	that	often	has	been	unrelated	or	disproportionate	to	changes	in	the	operating	performance	of	the	affected	companies.	These	broad	market	and	industry	fluctuations may	affect	adversely	the	market	price	of	our	common	stock	regardless	of	our	operating	performance.

In	addition,	future	sales	of	our	common	stock,	or	the	perception	of	potential	future	sales,	may	adversely	impact	the	market	price	of	our	common	stock.	If	any	one or	more	of	our	existing	stockholders	were	to	sell	a	large	number	of	shares,	the	market	price	of	our	common	stock	could	be	negatively	affected.	Also,	if	we	issue	a	large number	of	shares	of	our	common	stock	in	connection	with	a	public	offering,	future	acquisition,	strategic	alliance,	third-party	investment	and	private	placement	or otherwise,	the	market	price	of	our	common	stock	could	decline	considerably.	Furthermore,	our	stockholders	may	be	diluted	by	such	future	sales.

# We	may	not	pay	dividends	on	our	common	stock	in	the	future.

We	initiated	a	regular	quarterly	dividend	on	our	common	stock	in	2009.	However,	there	is	no	assurance	that	we	will	continue	to	pay	any	dividends	to	holders	of our	common	stock	in	the	future.	If	we	were	to	cease	paying	dividends,	investors	would	need	to	rely	on	the	sale	of	their	common	stock	after	price	appreciation,	which may	never	occur,	as	the	only	way	to	realize	any	future	gains	on	their	investment.

# If	securities	analysts	do	not	publish	research	or	reports	about	our	business	or	if	they	downgrade	our	common	stock,	the	price	of	our	common	stock	could	decline.

The	trading	market	for	our	common	stock	relies	in	part	on	the	research	and	reports	that	industry	or	financial	analysts	publish	about	us	or	our	business.	These analysts	work	independently	of	us.	If	one	or	more	analysts	who	cover	us	downgrade	our	stock,	our	stock	price	could	decline	rapidly.	If	one	or	more	of	these	analysts cease	coverage	of	our	company,	we	could	lose	visibility	in	the	market,	which	in	turn	could	cause	our	stock	price	to	decline.

# Provisions	in	our	organizational	documents	and	Delaware	law	might	discourage,	delay	or	prevent	a	change	of	control	of	our	company	or	changes	in	our

# management,	and	therefore,	depress	the	trading	price	of	our	common	stock.

Provisions	of	our	certificate	of	incorporation	and	bylaws	may	make	it	substantially	more	difficult	for	a	third	party	to	acquire	control	of	us	and	may	prevent changes	in	our	management,	including	provisions	that:

•prevent	stockholders	from	calling	special	meetings;

•allow	the	directors	to	amend	the	bylaws	without	stockholder	approval;	and

•set	forth	advance	notice	procedures	for	nominating	directors	and	submitting	proposals	for	consideration	at	stockholders'	meetings.

Provisions	of	Delaware	law	may	also	inhibit	potential	acquisition	bids	for	us	or	prevent	us	from	engaging	in	business	combinations.	In	addition,	we	have	a severance	agreement	with	one	employee	and	a	change	of	control	severance	plan	that	could	require	an	acquiror	to	pay	a	higher	price.	Either	collectively	or	individually, these	provisions	may	prevent	holders	of	our	common	stock	from	benefiting	from	what	they	may	believe	are	the	positive	aspects	of	acquisitions	and	takeovers,	including the	potential	realization	of	a	higher	rate	of	return	on	their	investment	from	these	types	of	transactions.

# Item	1B.	Unresolved	Staff	Comments.

# None.

# Item	2.	Properties.

Our	corporate	headquarters	and	principal	U.S.	offices	are	located	at	299	Park	Avenue,	New	York,	New	York,	where	we	lease	27,900	square	feet	under	sequential leases	expiring	in	February	2022.	We	also	collectively	lease	approximately	21,600	square	feet	for	our	other	office	locations	in	the	U.S.,	United	Kingdom,	Brazil,	Hong Kong	and	Singapore	under	various	leases	expiring	between	September	2013	and	November	2020.

# Item	3.	Legal	Proceedings.

We	assess	liabilities	and	contingencies	in	connection	with	outstanding	legal	proceedings,	if	any,	utilizing	the	latest	information	available.	For	matters	where	it	is probable	that	we	will	incur	a	material	loss	and	the	amount	can	be	reasonably	estimated,	we	would	establish	an	accrual	for	the	loss.	Once	established,	the	accrual	would be	adjusted	to	reflect	any	relevant	developments.	When	a	loss	contingency	is	not	both	probable	and	estimable,	we	would	not	establish	an	accrual.

On	January	2,	2013,	a	former	employee	filed	a	complaint	against	us	with	the	U.S.	Department	of	Labor	alleging	retaliatory	employment	practices	in	violation	of the	whistleblower	provisions	of	the	Sarbanes-Oxley	Act.	The	relief	sought	includes,	among	other	things,	reinstatement,	back	pay	and	compensatory	and	punitive damages.

We	believe	the	complaint	is	without	merit	and	we	intend	to	vigorously	defend	against	the	allegations.	Given	the	preliminary	stage	and	the	inherent	uncertainty	of the	potential	outcome	of	such	proceedings,	we	cannot	estimate	the	reasonably	possible	range	of	loss	at	this	time.	Based	on	the	available	information,	we	believe	that	the low	end	of	the	reasonably	possible	range	of	loss	is	zero	and,	accordingly,	no	loss	accrual	has	been	provided	in	our	accompanying	financial	statements.

# Item	4.	Mine	Safety	Disclosures.

Not	applicable.

# PART	II

# Item	5.	Market	for	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities.

# Price	Range

Our	common	stock	trades	on	the	NASDAQ	Global	Select	Market	under	the	symbol	"MKTX".	The	range	of	closing	price	information	for	our	common	stock,	as reported	by	NASDAQ,	was	as	follows:

| 2012: | High | Low |
| :--- | :--- | :--- |
| January\t1,\t2012\tto\tMarch\t31,\t2012 | $37.79 | $29.26 |
| April\t1,\t2012\tto\tJune\t30,\t2012 | $37.65 | $26.22 |
| July\t1,\t2012\tto\tSeptember\t30,\t2012 | $34.00 | $26.88 |
| October\t1,\t2012\tto\tDecember\t31,\t2012 | $35.30 | $29.00 |

| 2011: | High | Low |
| :--- | :--- | :--- |
| January\t1,\t2011\tto\tMarch\t31,\t2011 | $24.19 | $19.78 |
| April\t1,\t2011\tto\tJune\t30,\t2011 | $25.22 | $21.00 |
| July\t1,\t2011\tto\tSeptember\t30,\t2011 | $30.75 | $23.41 |
| October\t1,\t2011\tto\tDecember\t31,\t2011 | $31.16 | $24.57 |

On	February	20,	2013,	the	last	reported	closing	price	of	our	common	stock	on	the	NASDAQ	Global	Select	Market	was	$39.60.

# Holders

There	were	33	holders	of	record	of	our	common	stock	as	of	February	20,	2013.

# Dividend	Policy

We	initiated	a	regular	quarterly	dividend	in	the	fourth	quarter	of	2009.	During	2012	and	2011,	we	paid	quarterly	cash	dividends	of	$0.11	per	share	and	$0.09	per share,	respectively.	On	December	27,	2012,	we	paid	a	special	dividend	of	$1.30	per	share.	In	January	2013,	our	Board	of	Directors	approved	a	quarterly	cash	dividend of	$0.13	per	share	payable	on	February	28,	2013	to	stockholders	of	record	as	of	the	close	of	business	on	February	14,	2013.	Any	future	declaration	and	payment	of dividends	will	be	at	the	sole	discretion	of	our	Board	of	Directors.	The	Board	of	Directors	may	take	into	account	such	matters	as	general	business	conditions,	our financial	results,	capital	requirements,	and	contractual,	legal,	and	regulatory	restrictions	on	the	payment	of	dividends	to	our	stockholders	or	by	our	subsidiaries	to	the parent	and	any	other	such	factors	as	the	Board	of	Directors	may	deem	relevant.

# Recent	Sales	of	Unregistered	Securities

# Securities	Authorized	for	Issuance	Under	Equity	Compensation	Plans

Please	see	the	section	entitled	"Equity	Compensation	Plan	Information"	in	Item	12.

# Issuer	Purchases	of	Equity	Securities

During	the	quarter	ended	December	31,	2012,	we	repurchased	the	following	shares	of	common	stock:

In	October	2011,	the	Board	of	Directors	of	the	Company	authorized	a	share	repurchase	program	for	up	to	$35.0	million	of	the	Company's	common	stock.	As	of December	31,	2012,	a	total	of	955,342	shares	were	repurchased	at	an	aggregate	cost	of	$29.2	million,	including	717,344	shares	repurchased	in	2012.	Shares	repurchased under	the	program	will	be	held	in	treasury	for	future	use.	The	share	repurchase	program	has	an	expiration	date	of	January	1,	2014.

# STOCK	PERFORMANCE	GRAPH

The	following	graph	shows	a	comparison	from	December	31,	2007	through	December	31,	2012	of	the	cumulative	total	return	for	(i)	our	common	stock,	(ii)	the NASDAQ	Composite	Index	and	(iii)	the	Dow	Jones	US	Financial	Services	Index.	The	performance	graph	and	related	information	shall	not	be	deemed	"soliciting material"	or	to	be	"filed"	with	the	SEC,	nor	shall	such	information	be	incorporated	by	reference	into	any	future	filing	under	the	Securities	Act	of	1933	or	the	Securities Exchange	Act	of	1934,	each	as	amended,	except	to	the	extent	that	the	Company	specifically	incorporates	it	by	reference	into	such	filing.

The	figures	in	this	graph	assume	an	initial	investment	of	$100	in	our	common	stock	and	in	each	index	on	December	31,	2007,	and	that	all	quarterly	dividends were	reinvested.	The	returns	illustrated	below	are	based	on	historical	results	during	the	period	indicated	and	should	not	be	considered	indicative	of	future	stockholder returns.

# Item	6.	Selected	Financial	Data.

The	selected	statements	of	operations	data	for	each	of	the	years	ended	December	31,	2012,	2011	and	2010	and	the	selected	balance	sheet	data	as	of	December	31, 2012	and	2011	have	been	derived	from	our	audited	financial	statements	included	elsewhere	in	this	Annual	Report	on	Form	10-K.	The	selected	statements	of	operations data	for	the	years	ended	December	31,	2009	and	2008,	and	the	balance	sheet	data	as	of	December	31,	2010,	2009	and	2008	have	been	derived	from	our	audited	financial statements	not	included	in	this	Annual	Report	on	Form	10-K.

| Commissions	(1) | $174,199				 $155,444				 $122,180				 $ | $174,199				 $155,444				 $122,180				 $ | $174,199				 $155,444				 $122,180				 $ | 96,132				 $ | 73,528 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Technology\tproducts\tand\tservices\t(2) | 12,351 | 14,310 | 13,648 | 9,778 | 8,555 |
| Information\tand\tuser\taccess\tfees | 7,435 | 7,199 | 6,681 | 6,252 | 6,025 |
| Interest\tincome | 1,058 | 1,229 | 1,192 | 1,222 | 3,478 |
| Other\t(3) | 3,161 | 2,917 | 2,527 | 1,055 | 1,499 |
| Total\trevenues | \t 198,204 | \t 181,099 | \t 146,228 | \t 114,439 | 93,085 |
| Expenses |  |  |  |  |  |
| Employee\tcompensation\tand\tbenefits | 60,361 | 58,786 | 56,446 | 50,274 | 43,810 |
| Depreciation\tand\tamortization | 8,233 | 6,781 | 6,350 | 6,790 | 7,879 |
| Technology\tand\tcommunications | 12,766 | 10,912 | 9,982 | 8,436 | 8,311 |
| Professional\tand\tconsulting\tfees | 13,081 | 10,138 | 8,503 | 6,869 | 8,171 |
| Occupancy | 3,012 | 2,921 | 2,997 | 3,129 | 2,891 |
| Marketing\tand\tadvertising | 5,470 | 4,882 | 3,075 | 2,882 | 3,032 |
| General\tand\tadministrative | 8,595 | 7,946 | 7,965 | 6,010 | 6,157 |
| Total\texpenses | \t 111,518 | \t 102,366 | 95,318 | 84,390 | 80,251 |
| Income\tbefore\tincome\ttaxes | 86,686 | 78,733 | 50,910 | 30,049 | 12,834 |
| Provision\tfor\tincome\ttaxes\t(4) | 26,617 | 31,029 | 19,482 | 13,947 | 4,935 |
| Net\tincome | \t\t $60,069\t\t\t\t $ | 47,704\t\t\t\t $ | 31,428\t\t\t\t $ | 16,102\t\t\t\t $ | 7,899 |
| Net\tincome\tper\tcommon\tshare: |  |  |  |  |  |
| Basic | \t\t $1.65\t\t\t\t $ | 1.29\t\t\t\t $ | 0.86\t\t\t\t $ | 0.44\t\t\t\t $ | 0.23 |
| Diluted\t(4) | \t\t $1.59\t\t\t\t $ | 1.20\t\t\t\t $ | 0.80\t\t\t\t $ | 0.42\t\t\t\t $ | 0.22 |
| Weighted\taverage\tnumber\tof\tshares\tof\tcommon\tstock\toutstanding: |  |  |  |  |  |
| Basic | 36,516 | 37,006 | 33,159 | 33,264 | 32,831 |
| Diluted | 37,816 | 39,608 | 39,051 | 38,082 | 35,737 |
| Cash\tdividends\tper\tshare | \t\t $1.74\t\t\t\t $ | 0.36\t\t\t\t $ | 0.28\t\t\t\t $ | 0.07\t\t\t\t $ | — |

(1) Commissions	include	monthly	distribution	fees	and	commissions	from	the	trading	of	U.S.	high-grade	bonds	and	Eurobonds,	emerging	markets	bonds,	crossover and	high-yield	bonds,	agency	bonds,	asset-backed	securities	and	preferred	stock.

(2) Technology	products	and	services	include	software	licenses,	maintenance	and	support	services	and	professional	consulting	services.	Revenues	are	principally derived	from	Greenline,	acquired	in	March	2008.

(3) Other	revenues	consist	primarily	of	telecommunications	line	charges	to	broker-dealer	clients,	initial	set-up	fees	and	other	miscellaneous	revenues.

(4) In	2012,	we	recognized	a	favorable	income	tax	adjustment	of	$6.7	million,	or	$0.18	per	share,	relating	to	certain	previously	unrecognized	tax	benefits.

(5) Working	capital	is	defined	as	current	assets	minus	current	liabilities.	Current	assets	consist	of	cash	and	cash	equivalents,	securities	available-for-sale,	accounts receivable	and	prepaid	and	other	expenses	(excludes	cash	provided	as	collateral).	Current	liabilities	consist	of	accrued	employee	compensation,	deferred	revenue, and	accounts	payable,	accrued	expenses	and	other	liabilities.

# Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations.

You	should	read	the	following	discussion	and	analysis	of	our	financial	condition	and	results	of	operations	in	conjunction	with	"Selected	Financial	Data"	and	our consolidated	financial	statements	and	related	notes	included	elsewhere	in	this	Annual	Report	on	Form	10-K.	In	addition	to	historical	information,	this	discussion	and analysis	contains	forward-looking	statements	relating	to	future	events	and	the	future	performance	of	MarketAxess	that	are	based	on	our	current	expectations, assumptions,	estimates	and	projections	about	us	and	our	industry.	These	forward-looking	statements	involve	risks	and	uncertainties.	Our	actual	results	and	timing	of various	events	could	differ	materially	from	those	anticipated	in	such	forward-looking	statements	as	a	result	of	a	variety	of	factors,	as	more	fully	described	in	this section,	in	"Item	1A.	—	Risk	Factors"	and	elsewhere	in	this	Annual	Report	on	Form	10-K.	We	undertake	no	obligation	to	update	publicly	any	forward-looking statements	for	any	reason,	even	if	new	information	becomes	available	or	other	events	occur	in	the	future.

# Executive	Overview

MarketAxess	operates	a	leading	electronic	trading	platform	that	allows	investment	industry	professionals	to	efficiently	trade	corporate	bonds	and	other	types	of fixed-income	instruments.	Our	approximately	1,000	active	institutional	investor	clients	(firms	that	executed	at	least	one	trade	in	U.S.	or	European	fixed-income	securities through	our	electronic	trading	platform	during	2012)	include	investment	advisers,	mutual	funds,	insurance	companies,	public	and	private	pension	funds,	bank	portfolios, broker-dealers	and	hedge	funds.	Our	87	broker-dealer	market-maker	clients	provide	liquidity	on	the	platform	and	include	most	of	the	leading	broker-dealers	in	global fixed-income	trading.	The	Company	also	executes	certain	bond	transactions	between	and	among	institutional	investor	and	broker-dealer	clients	on	a	riskless	principal basis	by	serving	as	counterparty	to	both	the	buyer	and	the	seller	in	matching	back-to-back	trades,	which	then	settle	through	a	third-party	clearing	organization.	Through our	Corporate	BondTicker™	service,	we	provide	fixed-income	market	data,	analytics	and	compliance	tools	that	help	our	clients	make	trading	decisions.	In	addition,	we provide	FIX	(Financial	Information	eXchange)	message	management	tools,	connectivity	solutions	and	ancillary	technology	services	that	facilitate	the	electronic communication	of	order	information	between	trading	counterparties.	Our	revenues	are	primarily	generated	from	the	trading	of	U.S.	high-grade	corporate	bonds.

Our	multi-dealer	trading	platform	allows	our	institutional	investor	clients	to	simultaneously	request	competing,	executable	bids	or	offers	from	our	broker-dealer clients	and	execute	trades	with	the	broker-dealer	of	their	choice	from	among	those	that	choose	to	respond.	We	offer	our	broker-dealer	clients	a	solution	that	enables them	to	efficiently	reach	our	institutional	investor	clients	for	the	distribution	and	trading	of	bonds.	In	addition	to	U.S.	high-grade	corporate	bonds,	European	high-grade corporate	bonds	and	emerging	markets	bonds,	including	both	investment-grade	and	non-investment	grade	debt,	we	also	offer	our	clients	the	ability	to	trade	crossover	and high-yield	bonds,	agency	bonds,	asset-backed	and	preferred	securities	and	credit	default	swaps.

The	majority	of	our	revenues	are	derived	from	monthly	distribution	fees	and	commissions	for	trades	executed	on	our	platform	that	are	billed	to	our	broker-dealer clients	on	a	monthly	basis.	We	also	derive	revenues	from	technology	products	and	services,	information	and	user	access	fees,	investment	income	and	other	income.	Our expenses	consist	of	employee	compensation	and	benefits,	depreciation	and	amortization,	technology	and	communication	costs,	professional	and	consulting	fees, occupancy,	marketing	and	advertising	and	other	general	and	administrative	expenses.

•to	innovate	and	efficiently	add	new	functionality	and	product	offerings	to	the	MarketAxess	platform	that	we	believe	will	help	to	increase	our	market	share with	existing	clients,	as	well	as	expand	our	client	base;

•to	leverage	our	technology,	as	well	as	our	strong	broker-dealer	and	institutional	investor	relationships,	to	deploy	our	electronic	trading	platform	into additional	product	segments	within	the	fixed-income	securities	markets,	deliver	fixed-income	securities-related	technical	services	and	products,	and	deploy our	electronic	trading	platform	into	new	client	segments;

•to	continue	building	our	existing	service	offerings	so	that	our	electronic	trading	platform	is	fully	integrated	into	the	workflow	of	our	broker-dealer	and institutional	investor	clients	and	to	continue	to	add	functionality	to	allow	our	clients	to	achieve	a	fully	automated	end-to-end	straight-through	processing solution	(automation	from	trade	initiation	to	settlement);

•to	add	new	content	and	analytical	capabilities	to	Corporate	BondTicker™	in	order	to	improve	the	value	of	the	information	we	provide	to	our	clients;	and •to	continue	to	supplement	our	internal	growth	by	entering	into	strategic	alliances,	or	acquiring	businesses	or	technologies	that	will	enable	us	to	enter	new markets,	provide	new	products	or	services,	or	otherwise	enhance	the	value	of	our	platform	to	our	clients.	On	October	26,	2012,	we	entered	into	an agreement	to	acquire	all	of	the	outstanding	shares	of	Xtrakter	Limited	("Xtrakter")	from	Euroclear	S.A./N.V.	Xtrakter	is	a	U.K.-based	provider	of regulatory	transaction	reporting,	financial	market	data	and	trade	matching	services	to	the	European	securities	markets.	The	acquisition	of	Xtrakter	will provide	us	with	an	expanded	set	of	technology	solutions	ahead	of	incoming	regulatory	mandates	from	the	Markets	in	Financial	Instruments	Directive	in Europe.

# Critical	Factors	Affecting	Our	Industry	and	Our	Company

# Economic,	Political	and	Market	Factors

The	global	fixed-income	securities	industry	is	risky	and	volatile	and	is	directly	affected	by	a	number	of	economic,	political	and	market	factors	that	may	result	in declining	trading	volume.	These	factors	could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.	These	factors	include,	among others,	credit	market	conditions,	the	current	interest	rate	environment,	including	the	volatility	of	interest	rates	and	investors'	forecasts	of	future	interest	rates,	economic and	political	conditions	in	the	United	States,	Europe	and	elsewhere,	and	consolidation	or	contraction	of	broker-dealers.

# Competitive	Landscape

The	global	fixed-income	securities	industry	generally,	and	the	electronic	financial	services	markets	in	which	we	engage,	in	particular,	are	highly	competitive,	and we	expect	competition	to	intensify	in	the	future.	Sources	of	competition	for	us	will	continue	to	include,	among	others,	bond	trading	conducted	directly	between	broker- dealers	and	their	institutional	investor	clients	over	the	telephone	or	electronically	and	other	multi-dealer	trading	companies.	Competitors,	including	companies	in	which some	of	our	broker-dealer	clients	have	invested,	have	developed	electronic	trading	platforms	or	have	announced	their	intention	to	explore	the	development	of	electronic platforms	that	may	compete	with	us.

In	general,	we	compete	on	the	basis	of	a	number	of	key	factors,	including,	among	others,	the	liquidity	provided	on	our	platform,	the	magnitude	and	frequency	of price	improvement	enabled	by	our	platform	and	the	quality	and	speed	of	execution.	We	believe	that	our	ability	to	grow	volumes	and	revenues	will	largely	depend	on	our performance	with	respect	to	these	factors.

# Regulatory	Environment

Our	industry	has	been	and	is	subject	to	continuous	regulatory	changes	and	may	become	subject	to	new	regulations	or	changes	in	the	interpretation	or	enforcement of	existing	regulations,	which	could	require	us	to	incur	significant	costs.

Our	U.S.	subsidiary,	MarketAxess	Corporation,	is	a	registered	broker-dealer	with	the	SEC	and	is	a	member	of	FINRA.	Our	U.K.	subsidiary,	MarketAxess	Europe Limited,	is	registered	as	a	multilateral	trading	facility	dealer	with	the	FSA	in	the	U.K.	MarketAxess	Canada	Limited,	a	Canadian	subsidiary,	is	registered	as	an Alternative	Trading	System	dealer	under	the	Securities	Act	of	Ontario	and	is	a	member	of	the	Investment	Industry	Regulatory	Organization	of	Canada.	Relevant regulations	prohibit	repayment	of	borrowings	from	these	subsidiaries	or	their	affiliates,	paying	cash	dividends,	making	loans	to	us	or	our	affiliates	or	otherwise	entering into	transactions	that	result	in	a	significant	reduction	in	regulatory	net	capital	or	financial	resources,	without	prior	notification	to	or	approval	from	such	regulated	entity's principal	regulator.

In	July	2010,	the	Dodd-Frank	Wall	Street	Reform	and	Consumer	Protection	Act	(the	"Dodd-Frank	Act")	was	signed	into	law.	U.S.	financial	regulators	are	in	the midst	of	an	intense	period	of	rulemaking	that	is	required	to	implement	the	provisions	of	the	Dodd-Frank	Act,	and	market	participants	will	need	to	make	strategic decisions	in	an	environment	of	regulatory	uncertainty.	Among	the	most	significant	aspects	of	the	derivatives	section	of	the	Dodd-Frank	Act	are	mandatory	clearing	of certain	derivatives	transactions	("swaps")	through	regulated	central	clearing	organizations	and	mandatory	trading	of	those	swaps	through	either	regulated	exchanges	or swap	execution	facilities,	in	each	case,	subject	to	certain	key	exceptions.	As	with	other	parts	of	the	Dodd-Frank	Act,	many	of	the	details	of	the	new	regulatory	regime relating	to	swaps	are	left	to	the	regulators	to	determine	through	rulemaking.	While	the	U.S.	Commodity	Futures	Trading	Commission	and	the	SEC	have	adopted	a number	of	rules	that	implement	certain	aspects	of	the	new	regulatory	regime	regarding	the	swaps	market	place,	no	assurance	can	be	given	regarding	when,	or	whether, the	remaining	rules,	including,	among	others,	the	rules	regarding	swap	execution	facilities	and	security-based	swap	execution	facilities,	will	be	finalized	or implemented.	Subject	to	such	rulemaking,	we	currently	expect	to	establish	and	operate	a	swap	execution	facility	and/or	a	security-based	swap	execution	facility.

The	proposed	Volcker	Rule	section	of	the	Dodd-Frank	Act	bans	proprietary	trading	by	banks	and	their	affiliates.	The	Volcker	Rule	could	adversely	affect	our bank-affiliated	broker-dealer	clients'	ability	to	make	markets	in	a	variety	of	fixed-income	securities,	thereby	negatively	impacting	the	level	of	liquidity	and	pricing available	on	our	trading	platform.	We	cannot	predict	the	extent	to	which	any	future	regulatory	changes	may	adversely	affect	our	business	and	operations.

# Rapid	Technological	Changes

We	must	continue	to	enhance	and	improve	our	electronic	trading	platform.	The	electronic	financial	services	industry	is	characterized	by	increasingly	complex systems	and	infrastructures	and	new	business	models.	Our	future	success	will	depend	on	our	ability	to	enhance	our	existing	products	and	services,	develop	and/or	license new	products	and	technologies	that	address	the	increasingly	sophisticated	and	varied	needs	of	our	broker-dealer	and	institutional	investor	clients	and	prospective	clients and	respond	to	technological	advances	and	emerging	industry	standards	and	practices	on	a	cost-effective	and	timely	basis.	We	have	received	11	patents	covering	our most	significant	trading	protocols	and	other	aspects	of	our	trading	system	technology	and	additional	patents	are	pending.

# Trends	in	Our	Business

The	majority	of	our	revenues	are	derived	from	monthly	distribution	fees	and	commissions	for	transactions	executed	on	our	platform	between	our	institutional investor	and	broker-dealer	clients.	We	believe	that	there	are	five	key	variables	that	impact	the	notional	value	of	such	transactions	on	our	platform	and	the	amount	of commissions	and	distribution	fees	earned	by	us:

•the	number	of	institutional	investor	clients	that	participate	on	the	platform	and	their	willingness	to	originate	transactions	through	the	platform;

•the	number	of	broker-dealer	clients	on	the	platform	and	the	frequency	and	competitiveness	of	the	price	responses	they	provide	to	the	institutional	investor clients;

•the	number	of	markets	for	which	we	make	trading	available	to	our	clients;

•the	overall	level	of	activity	in	these	markets;	and

•the	level	of	commissions	that	we	collect	for	trades	executed	through	the	platform.

We	believe	that	overall	corporate	bond	market	trading	volume	is	affected	by	various	factors	including	the	absolute	levels	of	interest	rates,	the	direction	of	interest rate	movements,	the	level	of	new	issues	of	corporate	bonds	and	the	volatility	of	corporate	bond	spreads	versus	U.S.	Treasury	securities.	Because	a	significant	percentage of	our	revenue	is	tied	directly	to	the	volume	of	securities	traded	on	our	platform,	it	is	likely	that	a	general	decline	in	trading	volumes,	regardless	of	the	cause	of	such decline,	would	reduce	our	revenues	and	have	a	significant	negative	impact	on	profitability.

# Commission	Revenue

Commissions	are	generally	calculated	as	a	percentage	of	the	notional	dollar	volume	of	bonds	traded	on	our	platform	and	vary	based	on	the	type,	size,	yield	and maturity	of	the	bond	traded.	The	commission	rates	are	based	on	a	number	of	factors,	including	fees	charged	by	inter-dealer	brokers	in	the	respective	markets,	average bid-offer	spreads	in	the	products	we	offer	and	transaction	costs	through	alternative	channels	including	the	telephone.	Under	our	transaction	fee	plans,	bonds	that	are more	actively	traded	or	that	have	shorter	maturities	are	generally	charged	lower	commissions,	while	bonds	that	are	less	actively	traded	or	that	have	longer	maturities generally	command	higher	commissions.

U.S.	High-Grade	Corporate	Bond	Commissions.	Our	U.S.	high-grade	corporate	bond	fee	plans	for	fully	electronic	trades	generally	incorporate	monthly distribution	fees	and	variable	transaction	fees	billed	to	our	broker-dealer	clients	on	a	monthly	basis.	Certain	dealers	participate	in	fee	programs	that	do	not	contain monthly	distribution	fees	and	instead	incorporate	additional	per	transaction	execution	fees	and	minimum	monthly	fee	commitments.	Under	the	fee	plans,	we electronically	add	the	transaction	fee	to	the	spread	quoted	by	the	broker-dealer	client.	The	U.S.	high-grade	transaction	fee	is	generally	designated	in	basis	points	in	yield and,	as	a	result,	is	subject	to	fluctuation	depending	on	the	duration	of	the	bond	traded.	The	average	U.S.	high-grade	fees	per	million	may	vary	in	the	future	due	to changes	in	yield	and	years-to-maturity	of	bonds	traded	on	our	platform.

Eurobond	Commissions.	Similar	to	the	U.S.	high-grade	plans,	our	European	fee	plan	incorporates	monthly	distribution	fees	as	well	as	variable	transaction	fees.	In June	2010,	we	launched	a	click-to-trade	protocol	in	the	European	market.	Click-to-trade	is	offered	alongside	our	request-for-quote	product	and	consists	of	streamed indicative	pricing	in	credit	and	rates	products.	Clients	have	the	ability	to	request	a	trade	at	the	displayed	price	with	the	indicated	dealer.	In	connection	with	the	launch,	the Eurobond	fee	plan	was	revised	and	a	standard	commission	rate	was	established	across	most	types	of	bonds.	Prior	to	this	change,	the	variable	transaction	fee	was dependent	on	the	type	of	bond	traded	and	the	maturity	of	the	issue.

Other	Commissions.	Commissions	for	other	bond,	asset-backed	and	preferred	securities	trades	generally	vary	based	on	the	type	and	the	maturity	of	the	instrument traded.	We	generally	operate	using	standard	fee	schedules	that	may	include	both	transaction	fees	and	monthly	distribution	fees	that	are	charged	to	the	participating dealers.

For	trades	that	we	execute	between	and	among	institutional	investor	and	broker-dealer	clients	on	a	riskless	principal	basis	by	serving	as	counterparty	to	both	the buyer	and	the	seller,	we	earn	our	commission	through	the	difference	in	price	between	the	two	back-to-back	trades.

We	anticipate	that	average	fees	per	million	may	change	in	the	future.	Consequently,	past	trends	in	commissions	are	not	necessarily	indicative	of	future commissions.

# Other	Revenue

In	addition	to	the	commissions	discussed	above,	we	earn	revenue	from	technology	products	and	services,	information	services	fees	paid	by	institutional	investor and	broker-dealer	clients,	income	on	investments	and	other	income.

Technology	Products	and	Services.	Technology	products	and	services	includes	software	licenses,	maintenance	and	support	services	and	professional	consulting services.

Information	and	User	Access	Fees.	We	charge	information	services	fees	for	Corporate	BondTicker 	to	our	broker-dealer	clients,	institutional	investor	clients	and data-only	subscribers.	The	information	services	fee	is	a	flat	monthly	fee,	based	on	the	level	of	service.	We	also	generate	information	services	fees	from	the	sale	of	bulk data	to	certain	institutional	investor	clients	and	data-only	subscribers.	Institutional	investor	clients	trading	U.S.	high-grade	corporate	bonds	are	charged	a	monthly	user access	fee	for	the	use	of	our	platform.	The	fee,	billed	quarterly,	is	charged	to	the	client	based	on	the	number	of	the	client's	users.	To	encourage	institutional	investor clients	to	execute	trades	on	our	platform,	we	reduce	these	information	and	user	access	fees	for	such	clients	once	minimum	quarterly	trading	volumes	are	attained. TM

# Investment	Income.	Investment	income	consists	of	income	earned	on	our	investments.

Other.	Other	revenues	include	fees	from	telecommunications	line	charges	to	broker-dealer	clients,	initial	set-up	fees	and	other	miscellaneous	revenues.

# Expenses

In	the	normal	course	of	business,	we	incur	the	following	expenses:

Employee	Compensation	and	Benefits.	Employee	compensation	and	benefits	is	our	most	significant	expense	and	includes	employee	salaries,	stock-based compensation	costs,	other	incentive	compensation,	employee	benefits	and	payroll	taxes.

Depreciation	and	Amortization.	We	depreciate	our	computer	hardware	and	related	software,	office	hardware	and	furniture	and	fixtures	and	amortize	our capitalized	software	development	costs	on	a	straight-line	basis	over	three	to	seven	years.	We	amortize	leasehold	improvements	on	a	straight-line	basis	over	the	lesser	of the	life	of	the	improvement	or	the	remaining	term	of	the	lease.	Intangible	assets	with	definite	lives,	including	purchased	technologies,	customer	relationships	and	other intangible	assets,	are	amortized	over	their	estimated	useful	lives,	ranging	from	five	to	ten	years.	Intangible	assets	are	assessed	for	impairment	when	events	or circumstances	indicate	a	possible	impairment.

Technology	and	Communications.	Technology	and	communications	expense	consists	primarily	of	costs	relating	to	maintenance	on	software	and	hardware,	our internal	network	connections,	data	center	hosting	costs	and	data	feeds	provided	by	outside	vendors	or	service	providers.	The	majority	of	our	broker-dealer	clients	have dedicated	high-speed	communication	lines	to	our	network	in	order	to	provide	fast	data	transfer.	We	charge	our	broker-dealer	clients	a	monthly	fee	for	these	connections, which	is	recovered	against	the	relevant	expenses	we	incur.

Professional	and	Consulting	Fees.	Professional	and	consulting	fees	consist	primarily	of	accounting	fees,	legal	fees	and	fees	paid	to	information	technology	and non-information	technology	consultants	for	services	provided	for	the	maintenance	of	our	trading	platform	and	information	services	products.

Occupancy.	Occupancy	costs	consist	primarily	of	office	and	equipment	rent,	utilities	and	commercial	rent	tax.

Marketing	and	Advertising.	Marketing	and	advertising	expense	consists	primarily	of	print	and	other	advertising	expenses	we	incur	to	promote	our	products	and services.	This	expense	also	includes	costs	associated	with	attending	or	exhibiting	at	industry-sponsored	seminars,	conferences	and	conventions,	and	travel	and entertainment	expenses	incurred	by	our	sales	force	to	promote	our	trading	platform	and	information	services.

General	and	Administrative.	General	and	administrative	expense	consists	primarily	of	general	travel	and	entertainment,	board	of	directors'	expenses,	charitable contributions,	provision	for	doubtful	accounts,	and	various	state	franchise	and	U.K.	value-added	taxes.

Expenses	may	grow	in	the	future,	notably	in	employee	compensation	and	benefits,	primarily	due	to	investment	in	new	products	and	geographic	expansion. However,	we	believe	that	operating	leverage	can	be	achieved	by	increasing	volumes	in	existing	products	and	adding	new	products	without	substantial	additions	to	our infrastructure.

# Critical	Accounting	Estimates

This	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	discusses	our	Consolidated	Financial	Statements,	which	have	been prepared	in	accordance	with	accounting	principles	generally	accepted	in	the	United	States,	also	referred	to	as	U.S.	GAAP.	The	preparation	of	these	financial	statements requires	management	to	make	estimates	and	assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	and	the	reported	amounts	of	income	and	expenses during	the	reporting	periods.	We	base	our	estimates	and	judgments	on	historical	experience	and	on	various	other	factors	that	we	believe	are	reasonable	under	the circumstances.	Actual	results	may	differ	from	these	estimates	under	varying	assumptions	or	conditions.	Note	2	of	the	Notes	to	our	Consolidated	Financial	Statements includes	a	summary	of	the	significant	accounting	policies	and	methods	used	in	the	preparation	of	our	Consolidated	Financial	Statements.

# Use	of	Estimates

On	an	ongoing	basis,	management	evaluates	its	estimates	and	judgments,	particularly	as	they	relate	to	accounting	policies	that	management	believes	are	critical. That	is,	these	accounting	policies	are	most	important	to	the	portrayal	of	our	financial	condition	and	results	of	operations	and	they	require	management's	most	difficult, subjective	or	complex	judgments,	often	as	a	result	of	the	need	to	make	estimates	about	the	effect	of	matters	that	are	inherently	uncertain.

# Allowance	for	Doubtful	Accounts

All	accounts	receivable	have	contractual	maturities	of	less	than	one	year	and	are	derived	from	trading-related	fees	and	commissions	and	revenues	from	products and	services.	We	continually	monitor	collections	and	payments	from	our	customers	and	maintain	an	allowance	for	doubtful	accounts.	The	allowance	for	doubtful accounts	is	based	upon	the	historical	collection	experience	and	specific	collection	issues	that	have	been	identified.

# Software	Development	Costs

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

# Revenue	Recognition

The	majority	of	our	revenues	are	derived	from	monthly	distribution	fees	and	commissions	for	trades	executed	on	our	platform	that	are	billed	to	our	broker-dealer clients	on	a	monthly	basis.	We	also	derive	revenues	from	technology	products	and	services,	information	and	user	access	fees,	investment	income	and	other	income.

Commission	revenue.	Commissions	are	generally	calculated	as	a	percentage	of	the	notional	dollar	volume	of	bonds	traded	on	the	platform	and	vary	based	on	the type	and	maturity	of	the	bond	traded.	Under	our	transaction	fee	plans,	bonds	that	are	more	actively	traded	or	that	have	shorter	maturities	are	generally	charged	lower commissions,	while	bonds	that	are	less	actively	traded	or	that	have	longer	maturities	generally	command	higher	commissions.	For	trades	that	we	execute	between	and among	institutional	investor	and	broker-dealer	clients	on	a	riskless	principal	basis	by	serving	as	counterparty	to	both	the	buyer	and	the	seller,	we	earn	the	commission through	the	difference	in	price	between	the	two	back-to-back	trades.	Fee	programs	for	certain	products	include	distribution	fees	which	are	recognized	monthly.

Technology	products	and	services.	We	generate	revenues	from	technology	software	licenses,	maintenance	and	support	services	(referred	to	as	post-contract technical	support	or	"PCS")	and	professional	consulting	services.	Revenue	is	generally	recognized	when	persuasive	evidence	of	an	arrangement	exists,	delivery	has occurred,	the	fee	is	fixed	or	determinable	and	collection	is	considered	probable.	We	generally	sell	software	licenses	and	PCS	together	as	part	of	multiple-element arrangements.	We	also	enter	into	contracts	for	technology	integration	consulting	services	unrelated	to	any	software	product.

For	arrangements	that	include	multiple	elements,	generally	software	licenses	and	PCS,	we	allocate	and	defer	revenue	for	the	undelivered	items	based	on	vendor specific	objective	evidence	("VSOE")	of	the	fair	value	of	the	undelivered	elements	and	recognize	the	difference	between	the	total	arrangement	fee	and	the	amount deferred	for	the	undelivered	items	as	license	revenue.	The	VSOE	of	each	element	is	based	on	historical	evidence	of	stand-alone	sales	of	these	elements	to	third	parties	or the	stated	renewal	rate	for	the	undelivered	elements.	When	VSOE	does	not	exist	for	undelivered	items,	the	entire	arrangement	fee	is	recognized	ratably	over	the performance	period.	For	PCS,	the	term	is	typically	one	year	and	revenue	is	recognized	over	the	duration	of	the	arrangement	on	a	straight-line	basis.

Professional	consulting	services	are	generally	separately	priced	and	are	typically	not	essential	to	the	functionality	of	the	software	products.	Revenues	from	these services	are	recognized	separately	from	the	license	fee.	Generally,	revenue	from	time-and-materials	consulting	contracts	is	recognized	as	services	are	performed.

Revenues	from	contracts	for	technology	integration	consulting	services	are	recognized	on	the	percentage-of-completion	method.	Percentage-of-completion accounting	involves	calculating	the	percentage	of	services	provided	during	the	reporting	period	compared	to	the	total	estimated	services	to	be	provided	over	the	duration of	the	contract.	If	estimates	indicate	that	a	contract	loss	will	occur,	a	loss	provision	is	recorded	in	the	period	in	which	the	loss	first	becomes	probable	and	reasonably estimable.	Contract	losses	are	determined	to	be	the	amount	by	which	the	estimated	direct	and	indirect	costs	of	the	contract	exceed	the	estimated	total	revenues	that	will be	generated	by	the	contract.	Revenues	recognized	in	excess	of	billings	are	recorded	as	unbilled	services	within	other	assets.	Billings	in	excess	of	revenues	recognized are	recorded	as	deferred	revenues	until	revenue	recognition	criteria	are	met.

Initial	set-up	fees.	We	enter	into	agreements	with	our	broker-dealer	clients	pursuant	to	which	we	provide	access	to	our	platform	through	a	non-exclusive	and	non- transferable	license.	Broker-dealer	clients	may	pay	an	initial	set-up	fee,	which	is	typically	due	and	payable	upon	execution	of	the	broker-dealer	agreement.	The	initial set-up	fee,	if	any,	varies	by	agreement.	Revenue	is	recognized	over	the	initial	term	of	the	agreement,	which	is	generally	two	years.

# Stock-Based	Compensation

We	measure	and	recognize	compensation	expense	for	all	share-based	payment	awards	based	on	their	estimated	fair	values	measured	as	of	the	grant	date.	These costs	are	recognized	as	an	expense	in	the	Consolidated	Statements	of	Operations	over	the	requisite	service	period,	which	is	typically	the	vesting	period,	with	an offsetting	increase	to	additional	paid-in	capital.

# Income	Taxes

Income	taxes	are	accounted	for	using	the	asset	and	liability	method.	Deferred	income	taxes	reflect	the	net	tax	effects	of	temporary	differences	between	the financial	reporting	and	tax	bases	of	assets	and	liabilities	and	are	measured	using	the	enacted	tax	rates	and	laws	that	will	be	in	effect	when	such	differences	are	expected to	reverse.	The	effect	on	deferred	tax	assets	and	liabilities	of	a	change	in	tax	rates	is	recognized	in	income	in	the	period	that	includes	the	enactment	date.	A	valuation allowance	is	recognized	against	deferred	tax	assets	if	it	is	more	likely	than	not	that	such	assets	will	not	be	realized	in	future	years.	We	recognize	interest	and	penalties related	to	unrecognized	tax	benefits	in	general	and	administrative	expenses	in	the	Consolidated	Statements	of	Operations.

# Business	Combinations,	Goodwill	and	Intangibles	Assets

Business	combinations	are	accounted	for	under	the	purchase	method.	The	total	cost	of	an	acquisition	is	allocated	to	the	underlying	net	assets	based	on	their respective	estimated	fair	values.	The	excess	of	the	purchase	price	over	the	estimated	fair	values	of	the	net	assets	acquired	is	recorded	as	goodwill.	Determining	the	fair value	of	certain	assets	acquired	and	liabilities	assumed	is	judgmental	in	nature	and	often	involves	the	use	of	significant	estimates	and	assumptions,	including assumptions	with	respect	to	future	cash	flows,	discount	rates,	growth	rates	and	asset	lives.

We	perform	an	impairment	review	of	goodwill	on	an	annual	basis	and	more	frequently	if	circumstances	change.	Intangible	assets	with	definite	lives,	including purchased	technologies,	customer	relationships	and	other	intangible	assets,	are	amortized	on	a	straight-line	basis	over	their	estimated	useful	lives,	ranging	from	five	to ten	years.	Intangible	assets	are	assessed	for	impairment	when	events	or	circumstances	indicate	a	possible	impairment.

# Segment	Results

As	an	electronic,	multi-dealer	platform	for	trading	fixed-income	securities,	our	operations	constitute	a	single	business	segment.	Because	of	the	highly	integrated nature	of	the	financial	markets	in	which	we	compete	and	the	integration	of	our	worldwide	business	activities,	we	believe	that	results	by	geographic	region,	products	or types	of	clients	are	not	necessarily	meaningful	in	understanding	our	business.

# Results	of	Operations

# Overview

Total	revenues	increased	by	$17.1	million	or	9.4%	to	$198.2	million	for	the	year	ended	December	31,	2012	from	$181.1	million	for	the	year	ended	December	31, 2011.	This	increase	in	total	revenues	was	primarily	due	to	an	increase	in	commissions	of	$18.8	million.

Total	expenses	increased	by	$9.2	million	or	8.9%	to	$111.5	million	for	the	year	ended	December	31,	2012	from	$102.4	million	for	the	year	ended	December	31, 2011.	The	increase	was	primarily	due	to	higher	professional	and	consulting	fees	of	$2.9	million,	technology	and	communications	expense	of	$1.9	million,	employee compensation	and	benefits	expense	of	$1.6	million	and	amortization	and	depreciation	expenses	of	$1.5	million.

# Revenues

Our	revenues	for	the	years	ended	December	31,	2012	and	2011,	and	the	resulting	dollar	and	percentage	changes,	were	as	follows:

|  | 2012 |  | 2011 |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | %\tof |  | %\tof | $% |  |
|  | $Revenues | $Revenues | $Revenues | $Revenues | Change | Change |
|  |  |  | ($\tin\tthousands) |  |  |  |
| Commissions | $174,199 | 87.9% | $155,444 | 85.8% | $18,755 | 12.1% |
| Technology\tproducts\tand\tservices | 12,351 | 6.2 | 14,310 | 7.9 | (1,959) | \t (13.7) |
| Information\tand\tuser\taccess\tfees | 7,435 | 3.8 | 7,199 | 4.0 | 236 | 3.3 |
| Investment\tincome | 1,058 | 0.5 | 1,229 | 0.7 | (171) | \t (13.9) |
| Other | 3,161 | 1.6 | 2,917 | 1.6 | 244 | 8.4 |
| Total\trevenues | $198,204 | 100.0% | $181,099 | 100.0% | $17,105 | 9.4% |

Commissions.	Our	commission	revenues	for	the	years	ended	December	31,	2012	and	2011,	and	the	resulting	dollar	and	percentage	changes,	were	as	follows:

|  | 2012 | 2011 | $%<br>Change | Change |
| :--- | :--- | :--- | :--- | :--- |
|  |  | ($\tin\tthousands) |  |  |
| Variable\ttransaction\tfees |  |  |  |  |
| U.S.\thigh-grade | $72,272 | $59,351 | $12,921 | 21.8% |
| Eurobond | 2,521 | 3,650 | (1,129) | \t (30.9) |
| Emerging\tmarkets,\thigh-yield\tand\tother | 40,088 | 28,714 | \t 11,374 | 39.6 |
| Total\tvariable\ttransaction\tfees | \t 114,881 | 91,715 | \t 23,166 | 25.3 |
| Distribution\tfees |  |  |  |  |
| U.S.\thigh-grade | 49,691 | 49,580 | 111 | 0.2 |
| Eurobond | 9,627 | 14,149 | (4,522) | \t (32.0) |
| Total\tdistribution\tfees | 59,318 | 63,729 | (4,411) | (6.9) |
| Total\tcommissions | $174,199 | $155,444 | $18,755 | 12.1% |

Due	in	part	to	the	continuing	sovereign	debt	concerns	and	the	competitive	environment	in	Europe,	trading	volume	in	our	Eurobond	product	significantly decreased	over	the	past	several	years.	Monthly	distribution	fees	paid	by	most	of	our	European	broker-dealer	market	makers	were	reduced	effective	March	1,	2012,	but the	dealer	variable	fee	schedule	remained	unchanged.	Several	additional	European	broker-dealer	market-makers	remain	on	the	original	fee	plan	and	may	move	to	the new	fee	plan	in	the	future.

The	following	table	shows	the	extent	to	which	the	increase	in	commissions	for	the	year	ended	December	31,	2012	was	attributable	to	changes	in	transaction volumes,	variable	transaction	fees	per	million	and	distribution	fees:

|  |  | Change	from	Year	Ended	December	31,	2011 | Change	from	Year	Ended	December	31,	2011 |  |
| :--- | :--- | :--- | :--- | :--- |
|  | U.S. | Emerging\tMarkets, | Emerging\tMarkets, |  |
|  | High-Grade | Eurobond | High-Yield\tand\tOther | Total |
|  |  | (In\tthousands) |  |  |
| Volume\tincrease\t(decrease) | $8,095 | $(237) | $3,989 | $11,847 |
| Variable\ttransaction\tfee\tper\tmillion\tincrease\t(decrease) | 4,826 | (892) | 7,385 | \t 11,319 |
| Monthly\tdistribution\tfees\tincrease\t(decrease) | 111 | (4,522) | — | (4,411) |
| Total\tcommissions\tincrease\t(decrease) | $13,032 | $(5,651) | $11,374 | $18,755 |

Our	trading	volume	for	each	of	the	years	presented	was	as	follows:

|  | 2012 | 2011 | $%<br>Change | Change |
| :--- | :--- | :--- | :--- | :--- |
| Trading\tVolume\tData\t(in\tmillions) |  |  |  |  |
| U.S.\thigh-grade—fixed\trate | $355,087 | $311,758 | $43,329 | 13.9% |
| U.S.\thigh-grade—floating\trate | 12,603 | 11,802 | 801 | 6.8 |
| Total\tU.S.\thigh-grade | \t 367,690 | \t 323,560 | \t 44,130 | 13.6 |
| Eurobond | 34,538 | 36,933 | (2,395) | (6.5) |
| Emerging\tmarkets,\thigh-yield\tand\tother | \t 187,368 | \t 164,514 | \t 22,854 | 13.9 |
| Total | $589,596 | $525,007 | $64,589 | 12.3% |
| Number\tof\tU.S.\tTrading\tDays | 248 | 250 |  |  |
| Number\tof\tU.K.\tTrading\tDays | 252 | 251 |  |  |

For	volume	reporting	purposes,	transactions	in	foreign	currencies	are	converted	to	U.S.	dollars	at	average	monthly	rates.	The	13.6%	increase	in	U.S.	high-grade volume	was	principally	due	to	an	increase	in	the	Company's	estimated	market	share	of	total	U.S.	high-grade	corporate	bond	volume	as	reported	by	TRACE	from	11.1% for	the	year	ended	December	31,	2011	to	12.4%	for	the	year	ended	December	31,	2012.	Estimated	TRACE	U.S.	high-grade	volume	for	the	year	ended	December	31, 2012	was	$3.0	trillion,	an	increase	of	approximately	1.6%	from	the	year	ended	December	31,	2011.	Our	Eurobond	volumes	decreased	by	6.5%	for	the	year	ended December	31,	2012	compared	to	the	year	ended	December	31,	2011	due,	in	part,	to	unfavorable	market	conditions	in	the	European	region.	Emerging	markets,	high-yield and	other	volume	increased	by	13.9%	for	the	year	ended	December	31,	2012	compared	to	the	year	ended	December	31,	2011,	primarily	due	to	higher	emerging	markets and	high-yield	bond	volumes.

Our	average	variable	transaction	fee	per	million	for	the	years	ended	December	31,	2012	and	2011	was	as	follows:

|  | 2012 | 2011 |
| :--- | :--- | :--- |
| Average\tVariable\tTransaction\tFee\tPer\tMillion |  |  |
| U.S.\thigh-grade—fixed\trate | $202 | $190 |
| U.S.\thigh-grade—floating\trate | 34 | 22 |
| Total\tU.S.\thigh-grade | 197 | 183 |
| Eurobond | 73 | 99 |
| Emerging\tmarkets,\thigh-yield\tand\tother | 214 | 175 |
| Total | 195 | 175 |

The	U.S.	high-grade	average	variable	transaction	fee	per	million	increased	to	$197	per	million	for	the	year	ended	December	31,	2012	from	$183	per	million	for the	year	ended	December	31,	2011.	The	change	was	primarily	due	to	an	increase	in	the	duration	of	bonds	traded.	Eurobond	average	variable	transaction	fee	per	million decreased	to	$73	per	million	for	the	year	ended	December	31,	2012	from	$99	per	million	for	the	year	ended	December	31,	2011.	Emerging	markets,	high-yield	and other	average	variable	transaction	fee	per	million	increased	to	$214	per	million	for	the	year	ended	December	31,	2012	from	$175	per	million	for	the	year	ended December	31,	2011,	primarily	due	to	a	larger	percentage	of	volume	in	products	that	carry	higher	fees	per	million,	principally	emerging	markets	and	high-yield	bonds.

Technology	Products	and	Services.	Technology	products	and	services	revenues	decreased	by	$2.0	million	or	13.7%	to	$12.4	million	for	the	year	ended December	31,	2012	from	$14.3	million	for	the	year	ended	December	31,	2011.	The	decrease	was	primarily	a	result	of	lower	technology	integration	consulting	services and	lower	software	license	sales	primarily	due	to	a	shift	to	a	rental	software	license	model.

Information	and	User	Access	Fees.	Information	and	user	access	fees	increased	by	$0.2	million	or	3.3%	to	$7.4	million	for	the	year	ended	December	31,	2012	from $7.2	million	for	the	year	ended	December	31,	2011.

Investment	Income.	Investment	income	decreased	by	$0.1	million	or	13.9%	to	$1.1	million	for	the	year	ended	December	31,	2012	from	$1.2	million	for	the	year ended	December	31,	2011.

Our	expenses	for	the	years	ended	December	31,	2012	and	2011,	and	the	resulting	dollar	and	percentage	changes,	were	as	follows:

|  | 2012 |  | 2011 |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | %\tof |  | %\tof |  | $% |  |
|  | $Revenues | $Revenues | $Revenues | $Revenues | Change | Change |
|  |  |  | ($\tin\tthousands) |  |  |  |
| Expenses |  |  |  |  |  |  |
| Employee\tcompensation\tand\tbenefits | $60,361 | 30.5% | $58,786 | 32.5% | $1,575 | 2.7% |
| Depreciation\tand\tamortization | 8,233 | 4.2 | 6,781 | 3.7 | $1,452 | 21.4 |
| Technology\tand\tcommunications | 12,766 | 6.4 | 10,912 | 6.0 | $1,854 | 17.0 |
| Professional\tand\tconsulting\tfees | 13,081 | 6.6 | 10,138 | 5.6 | $2,943 | 29.0 |
| Occupancy | 3,012 | 1.5 | 2,921 | 1.6 | $91 | 3.1 |
| Marketing\tand\tadvertising | 5,470 | 2.8 | 4,882 | 2.7 | $588 | 12.0 |
| General\tand\tadministrative | 8,595 | 4.3 | 7,946 | 4.4 | $649 | 8.2 |
| Total\texpenses | $111,518 | 56.3% | $102,366 | 56.5% | $9,152 | 8.9% |

Employee	Compensation	and	Benefits.	Employee	compensation	and	benefits	increased	by	$1.6	million	or	2.7%	to	$60.4	million	for	the	year	ended	December	31, 2012	from	$58.8	million	for	the	year	ended	December	31,	2011.	This	increase	was	primarily	attributable	to	higher	wages	and	employment	taxes	and	benefits	aggregating $1.8	million	and	higher	stock-based	compensation	expense	of	$1.5	million,	offset	by	increased	wage	capitalization	related	to	software	development	of	$1.3	million.	The increase	in	stock-based	compensation	expense	was	principally	due	to	the	cancelation	of	unvested	stock	options,	restricted	stock	and	performance	shares	related	to	the June	2011	resignation	of	the	Company's	president.	The	total	number	of	employees	increased	to	240	as	of	December	31,	2012	from	232	as	of	December	31,	2011.	As	a percentage	of	total	revenues,	employee	compensation	and	benefits	expense	decreased	to	30.5%	for	the	year	ended	December	31,	2012	from	32.5%	for	the	year	ended December	31,	2011.

Depreciation	and	Amortization.	Depreciation	and	amortization	expense	increased	by	$1.5	million	or	21.4%	to	$8.2	million	for	the	year	ended	December	31,	2012 from	$6.8	million	for	the	year	ended	December	31,	2011.	The	increase	was	primarily	due	to	an	increase	in	amortization	of	software	development	costs	of	$0.9	million and	an	increase	in	depreciation	for	production	hardware	equipment	of	$0.4	million.	For	the	years	ended	December	31,	2012	and	2011,	we	capitalized	$5.2	million	and $4.1	million,	respectively,	of	software	development	costs.	For	the	years	ended	December	31,	2012	and	2011,	we	capitalized	$5.2	million	and	$3.2	million,	respectively, of	equipment	and	leasehold	improvements.	The	higher	equipment	purchases	were	primarily	due	to	the	build-out	of	a	replacement	disaster	recovery	data	center.

Technology	and	Communications.	Technology	and	communications	expense	increased	by	$1.9	million	or	17.0%	to	$12.8	million	for	the	year	ended December	31,	2012	from	$10.9	million	for	the	year	ended	December	31,	2011.	The	increase	was	primarily	attributable	to	higher	expenses	associated	with	our	new	data center	and	increased	market	data,	production	data	and	telecommunication	costs.

Professional	and	Consulting	Fees.	Professional	and	consulting	fees	increased	by	$2.9	million	or	29.0%	to	$13.1	million	for	the	year	ended	December	31,	2012 from	$10.1	million	for	the	year	ended	December	31,	2011.	The	increase	was	principally	due	to	higher	legal	expense	of	$0.8	million,	audit	and	tax	services	of	$0.6 million	and	IT	consulting	of	$0.6	million.	Transaction	costs	related	to	the	Xtrakter	acquisition,	mainly	legal,	audit	and	tax	fees,	amounted	to	approximately	$1.1	million in	2012.

Marketing	and	Advertising.	Marketing	and	advertising	expense	increased	by	$0.6	million	or	12%	to	$5.5	million	for	the	year	ended	December	31,	2012	from	$4.9 million	for	the	year	ended	December	31,	2011.	The	increase	was	principally	due	to	higher	advertising	costs	of	$0.2	million	and	public	relations	of	$0.3	million.

General	and	Administrative.	General	and	administrative	expense	increased	by	$0.6	million	or	8.2%	to	$8.6	million	for	the	year	ended	December	31,	2012	from $7.9	million	for	the	year	ended	December	31,	2011.	The	increase	was	due	to	an	increase	in	state	and	local	sales	tax	and	VAT	tax	of	$1.3	million,	offset	by	a	decrease	of $0.7	million	in	charges	for	doubtful	accounts.	In	2011,	we	recognized	a	credit	of	$1.0	million	resulting	from	the	settlement	of	a	reimbursement	claim	on	a	previously paid	sales	tax.	In	2011,	we	also	recorded	a	charge	for	doubtful	accounts	of	$0.9	million	relating	to	the	MF	Global	Inc.	liquidation	proceeding	and	a	write-off	of	a minority	investment	of	$0.6	million.

# Provision	for	Income	Tax

We	recorded	an	income	tax	provision	of	$26.6	million	and	$31.0	million	for	the	years	ended	December	31,	2012	and	2011,	respectively.	The	decrease	in	the	2012 tax	provision	was	primarily	attributable	to	a	non-recurring	favorable	income	tax	adjustment	of	$6.7	million,	offset	by	an	increase	in	pre-tax	income.

Our	consolidated	effective	tax	rate	for	the	twelve	months	ended	December	31,	2012	was	30.7%,	compared	to	39.4%	for	the	twelve	months	ended	December	31, 2011.	The	2012	provision	includes	a	favorable	income	tax	adjustment	of	$6.7	million	relating	to	certain	previously	unrecognized	tax	benefits.	We	updated	the recognition	of	certain	acquired	net	operating	loss	carryforwards	in	response	to	a	private	letter	ruling	received	from	the	Internal	Revenue	Service.	Our	consolidated effective	tax	rate	can	vary	from	period	to	period	depending	on,	among	other	factors,	the	geographic	and	business	mix	of	our	earnings	and	changes	in	tax	legislation	and tax	rates.

As	of	December	31,	2012,	we	had	restricted	U.S.	federal	net	operating	loss	carryforwards	of	approximately	$17.1	million.	The	utilization	of	our	U.S.	net	operating loss	carryforwards	is	subject	to	an	annual	limitation	as	determined	by	Section	382	of	the	Internal	Revenue	Code.

Total	revenues	increased	by	$34.9	million	or	23.8%	to	$181.1	million	for	the	year	ended	December	31,	2011	from	$146.2	million	for	the	year	ended December	31,	2010.	This	increase	in	total	revenues	was	primarily	due	to	an	increase	in	commissions	of	$33.3	million.

Total	expenses	increased	by	$7.0	million	or	7.4%	to	$102.4	million	for	the	year	ended	December	31,	2011	from	$95.3	million	for	the	year	ended	December	31, 2010.	The	increase	was	primarily	due	to	higher	employee	compensation	and	benefits	of	$2.3	million,	professional	and	consulting	fees	of	$1.6	million	and	marketing	and advertising	costs	of	$1.8	million.

Our	revenues	for	the	years	ended	December	31,	2011	and	2010,	and	the	resulting	dollar	and	percentage	changes,	were	as	follows:

|  | 2011 |  | 2010 |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | %\tof |  | %\tof | $% |  |
|  | $Revenues | $Revenues | $Revenues | $Revenues | Change | Change |
|  |  |  | ($\tin\tthousands) |  |  |  |
| Commissions | $155,444 | 85.8% | $122,180 | 83.6% | $33,264 | 27.2% |
| Technology\tproducts\tand\tservices | 14,310 | 7.9 | 13,648 | 9.3 | 662 | 4.9 |
| Information\tand\tuser\taccess\tfees | 7,199 | 4.0 | 6,681 | 4.6 | 518 | 7.8 |
| Investment\tincome | 1,229 | 0.7 | 1,192 | 0.8 | 37 | 3.1 |
| Other | 2,917 | 1.6 | 2,527 | 1.7 | 390 | 15.4 |
| Total\trevenues | $181,099 | 100.0% | $146,228 | 100.0% | $34,871 | 23.8% |

Commissions.	Our	commission	revenues	for	the	years	ended	December	31,	2011	and	2010,	and	the	resulting	dollar	and	percentage	changes,	were	as	follows:

|  | 2011 | 2010 | $%<br>Change | Change |
| :--- | :--- | :--- | :--- | :--- |
|  |  | ($\tin\tthousands) |  |  |
| Variable\ttransaction\tfees |  |  |  |  |
| U.S.\thigh-grade | $59,351 | $46,329 | $13,022 | 28.1% |
| Eurobond | 3,650 | 5,963 | (2,313) | \t (38.8) |
| Emerging\tmarkets,\thigh-yield\tand\tother | 28,714 | 19,728 | 8,986 | 45.5 |
| Total\tvariable\ttransaction\tfees | 91,715 | 72,020 | \t 19,695 | 27.3 |
| Distribution\tfees |  |  |  |  |
| U.S.\thigh-grade | 49,580 | 37,467 | \t 12,113 | 32.3 |
| Eurobond | 14,149 | 12,693 | 1,456 | 11.5 |
| Total\tdistribution\tfees | 63,729 | 50,160 | \t 13,569 | 27.1 |
| Total\tcommissions | $155,444 | $122,180 | $33,264 | 27.2% |

The	$13.6	million	increase	in	distribution	fees	for	the	year	ended	December	31,	2011	compared	to	the	year	ended	December	31,	2010	was	due	principally	to	the migration	of	seven	U.S.	broker-dealer	market	makers	in	the	prior	15	months	from	an	all-variable	fee	plan	to	a	plan	that	incorporates	a	combination	of	a	monthly distribution	fee	and	variable	transaction	fees	and	the	addition	of	several	new	U.S.	and	European	broker-dealer	market	makers	to	the	platform.

|  |  | Change	from	Year	Ended	December	31,	2010 | Change	from	Year	Ended	December	31,	2010 |  |
| :--- | :--- | :--- | :--- | :--- |
|  | U.S.\nHigh-Grade | Eurobond | Emerging\tMarkets,\nHigh-Yield\tand\tOther | Total |
|  |  | (In\tthousands) |  |  |
| Volume\tincrease\t(decrease) | $15,259 | $(1,580) | $10,154 | $23,833 |
| Variable\ttransaction\tfee\tper\tmillion\t(decrease) | (2,237) | (733) | (1,168) | (4,138) |
| Monthly\tdistribution\tfees\tincrease | 12,113 | 1,456 | — | \t 13,569 |
| Total\tcommissions\tincrease\t(decrease) | $25,135 | $(857) | $8,986 | $33,264 |

|  | 2011 | 2010 | $%<br>Change | Change |
| :--- | :--- | :--- | :--- | :--- |
| Trading\tVolume\tData\t(in\tmillions) |  |  |  |  |
| U.S.\thigh-grade—fixed\trate | $311,758 | $235,698 | $76,060 | 32.3% |
| U.S.\thigh-grade—floating\trate | 11,802 | 7,698 | 4,104 | 53.3 |
| Total\tU.S.\thigh-grade | \t 323,560 | \t 243,396 | 80,164 | 32.9 |
| Eurobond | 36,933 | 50,251 | (13,318) | \t (26.5) |
| Emerging\tmarkets,\thigh-yield\tand\tother | \t 164,514 | \t 108,610 | 55,904 | 51.5 |
| Total | $525,007 | $402,257 | $122,750 | 30.5% |
| Number\tof\tU.S.\tTrading\tDays | 250 | 250 |  |  |
| Number\tof\tU.K.\tTrading\tDays | 251 | 253 |  |  |

For	volume	reporting	purposes,	transactions	in	foreign	currencies	are	converted	to	U.S.	dollars	at	average	monthly	rates.	The	32.3%	increase	in	U.S.	high-grade volume	was	principally	due	to	an	increase	in	the	Company's	estimated	market	share	of	total	U.S.	high-grade	corporate	bond	volume	as	reported	by	TRACE	from	8.4% for	the	year	ended	December	31,	2010	to	11.1%	for	the	year	ended	December	31,	2011.	Estimated	TRACE	U.S.	high-grade	volume	for	the	year	ended	December	31, 2011	was	$2.9	trillion	and	increased	approximately	1.0%	from	the	year	ended	December	31,	2010.	Our	Eurobond	volumes	decreased	by	26.5%	for	the	year	ended December	31,	2011	compared	to	the	year	ended	December	31,	2010.	We	believe	that	the	decline	in	Eurobond	volumes	was	due,	in	part,	to	continuing	sovereign	debt concerns	which	negatively	impacted	market	conditions	and	the	competitive	environment	in	Europe.	Emerging	markets,	high-yield	and	other	volume	increased	by	51.5% for	the	year	ended	December	31,	2011	compared	to	the	year	ended	December	31,	2010,	primarily	due	to	higher	agency	volumes.

Our	average	variable	transaction	fee	per	million	for	the	years	ended	December	31,	2011	and	2010	was	as	follows:

|  | 2011 | 2010 |
| :--- | :--- | :--- |
| Average\tVariable\tTransaction\tFee\tPer\tMillion |  |  |
| U.S.\thigh-grade—fixed\trate | $190 | $196 |
| U.S.\thigh-grade—floating\trate | 22 | 28 |
| Total\tU.S.\thigh-grade | 183 | 190 |
| Eurobond | 99 | 119 |
| Emerging\tmarkets,\thigh-yield\tand\tother | 175 | 182 |
| Total | 175 | 179 |

The	U.S.	high-grade	average	variable	transaction	fee	per	million	decreased	to	$183	per	million	for	the	year	ended	December	31,	2011	from	$190	per	million	for the	year	ended	December	31,	2010.	The	decline	was	primarily	due	to	the	migration	of	seven	U.S.	broker-dealer	market	makers	from	an	all-variable	plan	to	a	plan	that incorporates	a	combination	of	a	monthly	distribution	fee	and	variable	transaction	fees.	The	decline	was	partially	offset	from	an	increase	in	the	percentage	of	volume derived	from	broker-dealer	clients	on	an	all-variable	plan.	Eurobond	average	variable	transaction	fee	per	million	decreased	to	$99	per	million	for	the	year	ended December	31,	2011	from	$119	per	million	for	the	year	ended	December	31,	2010.	In	June	2010,	we	launched	a	click-to-trade	protocol	in	the	European	market.	In connection	with	the	launch,	the	Eurobond	fee	plan	was	generally	revised	downward.	Emerging	markets,	high-yield	and	other	average	variable	transaction	fee	per	million decreased	to	$175	per	million	for	the	year	ended	December	31,	2011	from	$182	per	million	for	the	year	ended	December	31,	2010,	primarily	due	to	a	higher	percentage of	volume	in	products	that	carry	lower	fees	per	million,	principally	agency	bonds.

Technology	Products	and	Services.	Technology	products	and	services	revenues	increased	by	$0.7	million	or	4.9%	to	$14.3	million	for	the	year	ended December	31,	2011	from	$13.6	million	for	the	year	ended	December	31,	2010.	The	increase	was	primarily	a	result	of	higher	technology	integration	consulting	services.

Information	and	User	Access	Fees.	Information	and	user	access	fees	increased	by	$0.5	million	or	7.8%	to	$7.2	million	for	the	year	ended	December	31,	2011	from $6.7	million	for	the	year	ended	December	31,	2010.

Investment	Income.	Investment	income	was	$1.2	million	for	each	of	the	years	ended	December	31,	2011	and	December	31,	2010.

Other.	Other	revenues	increased	by	$0.4	million	or	15.4%	to	$2.9	million	for	the	year	ended	December	31,	2011	from	$2.5	million	for	the	year	ended December	31,	2010.	The	increase	was	primarily	a	result	of	higher	initial	set-up	fees	from	broker-dealer	clients.

Our	expenses	for	the	years	ended	December	31,	2011	and	2010,	and	the	resulting	dollar	and	percentage	changes,	were	as	follows:

|  | 2011 |  | 2010 |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | %\tof\n$Revenues | %\tof\n$Revenues | %\tof\n$Revenues | %\tof\n$Revenues | $%\nChange | Change |
|  |  |  | ($\tin\tthousands) |  |  |  |
| Expenses |  |  |  |  |  |  |
| Employee\tcompensation\tand\tbenefits | $58,786 | 32.5% | $56,446 | 38.6% | $2,340 | 4.1% |
| Depreciation\tand\tamortization | 6,781 | 3.7 | 6,350 | 4.3 | 431 | 6.8 |
| Technology\tand\tcommunications | 10,912 | 6.0 | 9,982 | 6.8 | 930 | 9.3 |
| Professional\tand\tconsulting\tfees | 10,138 | 5.6 | 8,503 | 5.8 | \t 1,635 | 19.2 |
| Occupancy | 2,921 | 1.6 | 2,997 | 2.0 | (76) | (2.5) |
| Marketing\tand\tadvertising | 4,882 | 2.7 | 3,075 | 2.1 | \t 1,807 | 58.8 |
| General\tand\tadministrative | 7,946 | 4.4 | 7,965 | 5.4 | (19) | (0.2) |
| Total\texpenses | $102,366 | 56.5% | $95,318 | 65.2% | $7,048 | 7.4% |

Employee	Compensation	and	Benefits.	Employee	compensation	and	benefits	increased	by	$2.3	million	or	4.1%	to	$58.8	million	for	the	year	ended	December	31, 2011	from	$56.4	million	for	the	year	ended	December	31,	2010.	This	increase	was	primarily	attributable	to	higher	incentive	compensation	of	$2.3	million	due	to improved	operating	performance	and	higher	wages	and	employment	taxes	and	benefits	aggregating	$2.2	million,	offset	by	a	decline	in	stock-based	compensation expense	of	$2.1	million.	The	lower	stock-based	compensation	expense	was	principally	due	to	the	cancelation	of	unvested	stock	options,	restricted	stock	and	performance shares	related	to	the	June	2011	resignation	of	the	Company's	President.	The	total	number	of	employees	increased	to	232	as	of	December	31,	2011	from	227	as	of December	31,	2010.	As	a	percentage	of	total	revenues,	employee	compensation	and	benefits	expense	decreased	to	32.5%	for	the	year	ended	December	31,	2011	from 38.6%	for	the	year	ended	December	31,	2010.

Depreciation	and	Amortization.	Depreciation	and	amortization	expense	increased	by	$0.4	million	or	6.8%	to	$6.8	million	for	the	year	ended	December	31,	2011 from	$6.4	million	for	the	year	ended	December	31,	2010.	The	increase	was	primarily	due	to	higher	depreciation	of	production	and	office	hardware	costs	of	$0.4	million. For	the	years	ended	December	31,	2011	and	2010,	we	capitalized	$4.1	million	and	$1.9	million,	respectively,	of	software	development	costs,	and	$3.2	million	and	$5.2 million,	respectively,	of	equipment	and	leasehold	improvements.	The	2010	equipment	and	leasehold	improvement	expenditures	included	$3.0	million	associated	with the	move	of	our	corporate	offices	to	new	premises	in	New	York	City	in	the	first	quarter	of	2010.

Technology	and	Communications.	Technology	and	communications	expense	increased	by	$0.9	million	or	9.3%	to	$10.9	million	for	the	year	ended	December	31, 2011	from	$10.0	million	for	the	year	ended	December	31,	2010.	The	increase	was	primarily	attributable	to	higher	expenses	associated	with	production	data	and telecommunication	costs.

Professional	and	Consulting	Fees.	Professional	and	consulting	fees	increased	by	$1.6	million	or	19.2%	to	$10.1	million	for	the	year	ended	December	31,	2011 from	$8.5	million	for	the	year	ended	December	31,	2010.	The	increase	was	principally	due	to	higher	technology	consulting	costs	of	$1.2	million	and	legal	expense, principally	in	connection	with	proposed	swap	execution	facility-related	regulation,	of	$0.9	million.

Marketing	and	Advertising.	Marketing	and	advertising	expense	increased	by	$1.8	million	or	58.8%	to	$4.9	million	for	the	year	ended	December	31,	2011	from $3.1	million	for	the	year	ended	December	31,	2010.	The	increase	was	principally	due	to	higher	advertising	costs	of	$0.9	million	associated	with	our	credit	default	swaps trading	capabilities	and	travel	and	entertainment	expenses	related	to	sales	activities	of	$0.6	million.

General	and	Administrative.	General	and	administrative	expense	was	$7.9	million	for	each	of	the	years	ended	December	31,	2011	and	2010.	During	2011,	a credit	of	$1.0	million	resulting	from	the	settlement	of	a	reimbursement	claim	on	a	previously	paid	sales	tax	was	offset	by	a	higher	charge	for	doubtful	accounts	of	$0.6 million	and	a	write-off	of	a	minority	investment	of	$0.6	million.	During	the	fourth	quarter	of	2011,	MF	Global	Inc.,	a	broker-dealer	market	maker	on	our	platform, entered	a	liquidation	proceeding.	In	connection	with	the	proceeding,	we	recorded	a	100%	allowance	against	outstanding	receivables	amounting	to	$0.9	million.

We	recorded	an	income	tax	provision	of	$31.0	million	and	$19.5	million	for	the	years	ended	December	31,	2011	and	2010,	respectively.	The	increase	in	the	tax provision	was	primarily	attributable	to	the	$27.8	million	increase	in	pre-tax	income.	With	the	exception	of	certain	foreign	and	state	and	local	taxes,	the	provision	for income	taxes	was	largely	a	non-cash	expense	since	we	had	net	operating	loss	and	tax	credit	carryforwards	available	to	offset	the	majority	of	U.S.	taxable	income.	We fully	utilized	the	balance	of	our	unrestricted	U.S.	federal	net	operating	loss	carryforward	during	2011,	which	we	expect	will	result	in	an	increase	in	cash	paid	for	income taxes	in	subsequent	years.

Our	consolidated	effective	tax	rate	for	the	year	ended	December	31,	2011	was	39.4%	compared	to	38.3%	for	the	year	ended	December	31,	2010.	Our	consolidated effective	tax	rate	can	vary	from	period	to	period	depending	on,	among	other	factors,	the	geographic	and	business	mix	of	our	earnings	and	changes	in	tax	legislation	and tax	rates.

As	of	December	31,	2011,	we	had	restricted	U.S.	federal	net	operating	loss	carryforwards	of	approximately	$12.3	million.	The	utilization	of	our	U.S.	net	operating loss	carryforwards	is	subject	to	an	annual	limitation	of	approximately	$2.1	million	as	determined	by	Section	382	of	the	Internal	Revenue	Code.

# Quarterly	Results	of	Operations

Our	quarterly	results	have	varied	significantly	as	a	result	of:

•changes	in	trading	volume	due	to	market	conditions,	changes	in	the	number	of	trading	days	in	certain	quarters,	and	seasonality	effects	caused	by	slow- downs	in	trading	activity	during	certain	periods;

•changes	in	the	number	of	broker-dealers	and	institutional	investors	using	our	trading	platform	as	well	as	variation	in	usage	by	existing	clients;

•expansion	of	the	products	we	offer	to	our	clients;	and

•variance	in	our	expenses,	particularly	employee	compensation	and	benefits.

The	following	table	sets	forth	certain	unaudited	consolidated	quarterly	income	statement	data	for	the	eight	quarters	ended	December	31,	2012.	In	our	opinion,	this unaudited	information	has	been	prepared	on	a	basis	consistent	with	our	annual	financial	statements	and	includes	all	adjustments	(consisting	only	of	normal	recurring adjustments)	necessary	for	a	fair	statement	of	the	unaudited	quarterly	data.	This	information	should	be	read	in	conjunction	with	our	Consolidated	Financial	Statements and	related	Notes	included	in	this	Annual	Report	on	Form	10-K.	The	results	of	operations	for	any	quarter	are	not	necessarily	indicative	of	results	that	we	may	achieve for	any	subsequent	periods.

| Commissions | $44,228				 $42,379				 $42,690				 $44,902				 $38,761				 $39,822				 $39,076				 $37,785 | $44,228				 $42,379				 $42,690				 $44,902				 $38,761				 $39,822				 $39,076				 $37,785 | $44,228				 $42,379				 $42,690				 $44,902				 $38,761				 $39,822				 $39,076				 $37,785 | $44,228				 $42,379				 $42,690				 $44,902				 $38,761				 $39,822				 $39,076				 $37,785 | $44,228				 $42,379				 $42,690				 $44,902				 $38,761				 $39,822				 $39,076				 $37,785 | $44,228				 $42,379				 $42,690				 $44,902				 $38,761				 $39,822				 $39,076				 $37,785 | $44,228				 $42,379				 $42,690				 $44,902				 $38,761				 $39,822				 $39,076				 $37,785 | $44,228				 $42,379				 $42,690				 $44,902				 $38,761				 $39,822				 $39,076				 $37,785 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Technology\tproducts\tand\tservices | 3,244 | 2,979 | 3,220 | 2,908 | 3,439 | 3,779 | 3,984 | 3,108 |
| Information\tand\tuser\taccess\tfees | 1,878 | 1,896 | 1,790 | 1,871 | 1,960 | 1,831 | 1,719 | 1,689 |
| Interest\tincome | 236 | 251 | 268 | 303 | 317 | 303 | 310 | 299 |
| Other | 801 | 752 | 857 | 751 | 658 | 829 | 702 | 728 |
| Total\trevenues | \t 50,387 | \t 48,257 | \t 48,825 | \t 50,735 | \t 45,135 | \t 46,564 | \t 45,791 | \t 43,609 |
| Expenses |  |  |  |  |  |  |  |  |
| Employee\tcompensation\tand\tbenefits | \t 14,579 | \t 14,636 | \t 15,305 | \t 15,841 | \t 13,707 | \t 13,707 | \t 15,104 | \t 16,268 |
| Depreciation\tand\tamortization | 2,337 | 2,081 | 1,961 | 1,854 | 1,793 | 1,799 | 1,627 | 1,562 |
| Technology\tand\tcommunications | 3,534 | 3,262 | 3,015 | 2,955 | 2,916 | 2,772 | 2,724 | 2,500 |
| Professional\tand\tconsulting\tfees | 4,018 | 3,202 | 2,837 | 3,024 | 2,354 | 2,247 | 2,665 | 2,872 |
| Occupancy | 764 | 732 | 757 | 759 | 726 | 721 | 708 | 766 |
| Marketing\tand\tadvertising | 1,224 | 1,067 | 1,732 | 1,447 | 1,380 | 1,280 | 1,248 | 974 |
| General\tand\tadministrative | 2,402 | 2,068 | 2,018 | 2,107 | 3,393 | 1,742 | 1,810 | 1,001 |
| Total\texpenses | \t 28,858 | \t 27,048 | \t 27,625 | \t 27,987 | \t 26,269 | \t 24,268 | \t 25,886 | \t 25,943 |
| Income\tbefore\tincome\ttaxes | \t 21,529 | \t 21,209 | \t 21,200 | \t 22,748 | \t 18,866 | \t 22,296 | \t 19,905 | \t 17,666 |
| Provision\tfor\tincome\ttaxes\t(1) | 1,064 | 7,727 | 8,571 | 9,255 | 7,323 | 8,852 | 7,968 | 6,886 |

(1) In	the	fourth	quarter	of	2012,	the	Company	recognized	a	favorable	income	tax	adjustment	of	$6.7	million,	or	$0.18	per	share,	relating	to	certain	previously unrecognized	tax	benefits.

The	following	tables	set	forth	trading	volume	and	average	variable	transaction	fee	per	million	traded	for	the	eight	quarters	ended	December	31,	2012.

|  |  |  |  | Three	Months	Ended | Three	Months	Ended |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Dec\t31,\n2012 | Sep\t30,\n2012 | Jun\t30,\n2012 | Mar\t31,\n2012 | Dec\t31,\n2011 | Sep\t30,\n2011 | Jun\t30,\n2011 | Mar\t31,\n2011 |
|  |  |  |  | (In\tmillions) | (In\tmillions) |  |  |  |
| Trading\tVolume\tData |  |  |  |  |  |  |  |  |
| U.S.\thigh-grade—fixed\trate | $89,211 | $83,193 | $87,686 | $94,997 | $73,181 | $79,233 | $77,077 | $82,267 |
| U.S.\thigh-grade—floating\trate | 3,499 | 2,795 | 2,984 | 3,325 | 2,278 | 2,761 | 3,825 | 2,938 |
| Total\tU.S.\thigh-grade | 92,710 | 85,988 | 90,670 | 98,322 | 75,459 | 81,994 | 80,902 | 85,205 |
| Eurobond | 7,995 | 6,016 | 7,793 | 12,734 | 8,042 | 7,580 | 9,998 | 11,313 |
| Emerging\tmarkets,\thigh-yield\tand\tother | 48,373 | 45,748 | 46,313 | \t 146,934 | 41,699 | 42,092 | 42,061 | 38,661 |
| Total | $149,078 | $137,752 | $144,776 | $157,990 | $125,200 | $131,666 | $132,961 | $135,179 |

|  | Dec	31,<br>2012 | Sep	30,<br>2012 | Jun	30,<br>2012 | Three	Months	Ended<br>Mar	31,<br>2012 | Dec	31,<br>2011 | Sep	30,<br>2011 | Jun	30,<br>2011 | Mar	31,<br>2011 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Average\tVariable\tTransaction\tFee\tPer\tMillion |  |  |  |  |  |  |  |  |
| U.S.\thigh-grade—fixed\trate | $200 | $209 | $208 | $194 | $195 | $195 | $192 | $178 |
| U.S.\thigh-grade—floating\trate | 45 | 37 | 28 | 25 | 27 | 24 | 22 | 17 |
| Total\tU.S.\thigh-grade | 193 | 203 | 202 | 188 | 190 | 189 | 184 | 172 |
| Eurobond | 80 | 79 | 74 | 65 | 92 | 108 | 95 | 101 |
| Emerging\tmarkets,\thigh-yield\tand\tother | 232 | 216 | 205 | 202 | 166 | 175 | 182 | 176 |
| Total | 200 | 202 | 196 | 183 | 175 | 180 | 177 | 167 |
| Number\tof\tU.S.\ttrading\tdays | 60 | 63 | 63 | 62 | 61 | 64 | 63 | 62 |
| Number\tof\tU.K.\ttrading\tdays | 64 | 64 | 60 | 64 | 63 | 65 | 60 | 63 |

# Liquidity	and	Capital	Resources

During	the	past	three	years,	we	have	met	our	funding	requirements	through	cash	on	hand	and	internally	generated	funds.	Cash	and	cash	equivalents	and	securities available-for-sale	totaled	$180.1	million	at	December	31,	2012.

On	January	14,	2013,	we	entered	into	a	three-year	credit	agreement	that	provides	for	revolving	loans	and	letters	of	credit	up	to	an	aggregate	of	$50.0	million. Subject	to	satisfaction	of	certain	specified	conditions,	we	are	permitted	to	upsize	the	credit	facility	by	an	additional	$50.0	million	in	total.

Our	cash	flows	were	as	follows:

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2012 | 2011 | 2010 |
|  |  | (In\tthousands) |  |
| Net\tcash\tprovided\tby\toperating\tactivities | $81,582 | $65,478 | $64,146 |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting\tactivities | 15,030 | (8,576) | (7,720) |
| Net\tcash\t(used\tin)\tfinancing\tactivities | (136,175) | (11,199) | (33,849) |
| Effect\tof\texchange\trate\tchanges\ton\tcash\tand\tcash\tequivalents | (1,149) | (1,077) | (924) |
| Net\t(decrease)\tincrease\tfor\tthe\tperiod | $(40,712) | $44,626 | $21,653 |

We	define	free	cash	flow	as	cash	flow	from	operating	activities	less	expenditures	for	furniture,	equipment	and	leasehold	improvements	and	capitalized	software development	costs.	For	the	years	ended	December	31,	2012,	2011	and	2010,	free	cash	flow	was	$71.2	million,	$58.3	million	and	$57.0	million,	respectively.	Free	cash flow	is	a	non-GAAP	financial	measure.	We	believe	that	this	non-GAAP	financial	measure,	when	taken	into	consideration	with	the	corresponding	GAAP	financial measures,	is	important	in	gaining	an	understanding	of	our	financial	strength	and	cash	flow	generation.

# Cash	Flows	for	the	Year	Ended	December	31,	2012	Compared	to	Year	Ended	December	31,	2011

Net	cash	provided	by	operating	activities	was	$81.6	million	for	the	year	ended	December	31,	2012	compared	to	$65.5	million	for	the	year	ended	December	31, 2011.	The	$16.1	million	increase	was	due	to	higher	net	income	of	$12.4	million	and	an	increase	in	cash	provided	by	working	capital	of	$17.5	million,	offset	by	a decrease	in	deferred	taxes	of	$16.8	million.	We	fully	utilized	the	balance	of	our	unrestricted	U.S.	federal	net	operating	loss	carryforward	during	2011,	which	resulted	in an	increase	in	cash	paid	for	income	taxes	in	2012.	During	2012,	cash	paid	for	income	taxes	was	$15.1	million	compared	to	$10.2	million	in	2011.

Net	cash	provided	by	investing	activities	was	$15.0	million	for	the	year	ended	December	31,	2012	compared	to	net	cash	used	in	investing	activities	of	$8.6	million for	the	year	ended	December	31,	2011.	The	$23.6	million	increase	was	primarily	due	to	net	sales	and	maturities	of	securities	available-for-sale	of	$25.4	million	in	2012 compared	to	net	purchases	of	securities	available-for-sale	of	$4.9	million	for	the	year	ended	December	31,	2011.	Capital	expenditures	were	$10.4	million	and	$7.2 million	for	the	years	ended	December	31,	2012	and	2011,	respectively.	The	increase	in	capital	expenditures	was	primarily	due	to	the	build-out	of	a	replacement	disaster recovery	data	center	in	2012.

Net	cash	used	in	financing	activities	was	$136.2	million	for	the	year	ended	December	31,	2012	compared	to	$11.2	million	for	the	year	ended	December	31,	2011. The	$125.0	million	increase	in	net	cash	used	in	financing	activities	was	principally	due	to	an	increase	in	repurchases	of	our	common	stock	of	$68.2	million,	which included	$52.8	million	acquired	from	JPMorgan	Chase	&	Co.	("JPM"),	an	increase	in	withholding	tax	payments	on	restricted	stock	vesting	and	stock	option	exercises of	$15.6	million	and	an	increase	in	cash	dividends	paid	in	2012	on	our	common	stock	of	$50.4	million,	offset	by	an	increase	in	excess	tax	benefits	from	stock-based compensation	of	$7.5	million	and	the	exercise	of	stock	options	of	$1.7	million.	We	paid	a	special	dividend	on	our	common	stock	in	December	2012	of	$47.6	million.

# Cash	Flows	for	the	Year	Ended	December	31,	2011	Compared	to	Year	Ended	December	31,	2010

Net	cash	provided	by	operating	activities	was	$65.5	million	for	the	year	ended	December	31,	2011	compared	to	$64.1	million	for	the	year	ended	December	31, 2010.	The	$1.3	million	increase	in	net	cash	provided	by	operating	activities	was	primarily	due	to	an	increase	in	net	income	of	$16.3	million,	offset	by	a	decrease	in	cash used	for	working	capital	of	$14.6	million	and	lower	non-cash	stock	based	compensation	expense	of	$2.1	million.	We	fully	utilized	the	balance	of	our	unrestricted	U.S. federal	net	operating	loss	carryforward	during	2011,	which	resulted	in	an	increase	in	cash	paid	for	income	taxes	in	2011.	During	2011,	cash	paid	for	income	taxes	was $10.2	million	compared	to	$2.2	million	in	2010.

Net	cash	used	in	investing	activities	was	$8.6	million	for	the	year	ended	December	31,	2011	compared	to	$7.7	million	for	the	year	ended	December	31,	2010.	Net purchases	of	securities	available-for-sale	were	$4.9	million	in	2011	compared	to	$0.6	million	in	December	31,	2010.	Capital	expenditures	were	$7.2	million	and	$7.1 million	for	the	years	ended	December	31,	2011	and	2010,	respectively.	Securities	and	cash	provided	as	collateral	decreased	by	$3.5	million	in	2011.

Net	cash	used	in	financing	activities	was	$11.2	million	for	the	year	ended	December	31,	2011	compared	to	$33.8	million	for	the	year	ended	December	31,	2010. The	$22.7	million	decrease	in	net	cash	used	in	financing	activities	was	principally	due	to	a	reduction	in	repurchases	of	our	common	stock	of	$23.1	million	and	an increase	in	windfall	tax	benefits	on	stock-based	compensation	of	$5.7	million,	offset	by	an	increase	of	$2.4	million	in	withholding	tax	payments	on	restricted	stock vesting	and	stock	option	exercises	and	an	increase	of	$3.1	million	in	cash	dividends	paid	in	2011	on	common	stock.

# Other	Factors	Relating	to	Liquidity	and	Capital	Resources

We	are	dependent	on	our	broker-dealer	clients	who	are	not	restricted	from	buying	and	selling	fixed-income	securities	with	institutional	investors,	either	directly	or through	their	own	proprietary	or	third-party	platforms.	None	of	our	broker-dealer	clients	is	contractually	or	otherwise	obligated	to	continue	to	use	our	electronic	trading platform.	The	loss	of,	or	a	significant	reduction	in	the	use	of	our	electronic	platform	by,	our	broker-dealer	clients	could	reduce	our	cash	flows,	affect	our	liquidity	and have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.

We	believe	that	our	current	cash	resources	and	borrowing	capacity	under	our	credit	facility	are	adequate	to	meet	our	liquidity	needs	and	capital	expenditure requirements	for	at	least	the	next	12	months.	However,	our	future	liquidity	and	capital	requirements	will	depend	on	a	number	of	factors,	including	expenses	associated with	product	development	and	expansion	and	new	business	opportunities	that	are	intended	to	further	diversify	our	revenue	stream.	We	may	also	acquire	or	invest	in technologies,	business	ventures	or	products	that	are	complementary	to	our	business.	In	addition,	we	fully	utilized	the	balance	of	our	unrestricted	U.S.	federal	net operating	loss	carryforward	during	2011,	which	resulted	in	an	increase	in	cash	paid	for	income	taxes	in	2012,	and	we	expect	further	increases	in	subsequent	years.	In	the event	we	require	any	additional	financing,	it	will	take	the	form	of	equity	or	debt	financing.	Any	additional	equity	offerings	may	result	in	dilution	to	our	stockholders. Any	debt	financings,	if	available	at	all,	would	likely	be	pursuant	to	the	terms	of	our	credit	facility	with	JPM,	which	includes	restrictive	covenants	with	respect	to dividends,	issuances	of	additional	capital	and	other	financial	and	operational	matters	related	to	our	business.

We	have	three	regulated	subsidiaries,	MarketAxess	Corporation,	MarketAxess	Europe	Limited	and	MarketAxess	Canada	Ltd.	MarketAxess	Corporation	is	a registered	broker-dealer	in	the	U.S.,	MarketAxess	Europe	Limited	is	a	registered	multilateral	trading	facility	dealer	in	the	U.K.	and	MarketAxess	Canada	Ltd.	is	a registered	Alternative	Trading	System	dealer	in	the	Province	of	Ontario.	As	such,	they	are	subject	to	minimum	regulatory	capital	requirements	imposed	by	their respective	market	regulators	that	are	intended	to	ensure	general	financial	soundness	and	liquidity	based	on	certain	minimum	capital	requirements.	The	relevant regulations	prohibit	a	registrant	from	repaying	borrowings	from	its	parent	or	affiliates,	paying	cash	dividends,	making	loans	to	its	parent	or	affiliates	or	otherwise entering	into	transactions	that	result	in	a	significant	reduction	in	its	regulatory	net	capital	position	without	prior	notification	to	or	approval	from	its	principal	regulator. The	capital	structures	of	our	subsidiaries	are	designed	to	provide	each	with	capital	and	liquidity	consistent	with	its	business	and	regulatory	requirements.	Subject	to rulemaking	pursuant	to	the	Dodd-Frank	Act,	we	currently	expect	to	establish	and	operate	a	swap	execution	facility	and/or	a	security-based	swap	execution	facility	and we	will	be	required	to	maintain	an	additional	amount	of	minimum	net	capital	in	connection	with	such	facilities.	The	following	table	sets	forth	the	capital	requirements, as	defined,	that	the	Company's	subsidiaries	were	required	to	maintain	as	of	December	31,	2012:

|  | MarketAxess | MarketAxess | MarketAxess |
| :--- | :--- | :--- | :--- |
|  | Corporation | Europe\tLimited | Canada\tLimited |
|  |  | (In\tthousands) |  |
| Net\tcapital | $63,624 | $13,151 | $479 |
| Minimum\tnet\tcapital\trequired | 2,266 | 2,943 | 277 |
| Excess\tnet\tcapital | $61,358 | $10,208 | $202 |

We	execute	certain	bond	transactions	between	and	among	institutional	investor	and	broker-dealer	clients	on	a	riskless	principal	basis	by	serving	as	counterparty	to both	the	buyer	and	the	seller	in	matching	back-to-back	trades,	which	are	then	settled	through	a	third-party	clearing	organization.	We	act	as	intermediary	on	a	riskless principal	basis	in	these	bond	transactions	by	serving	as	counterparty	to	the	two	clients	involved.	Settlement	typically	occurs	within	one	to	three	trading	days	after	the trade	date.	Cash	settlement	of	the	transaction	occurs	upon	receipt	or	delivery	of	the	underlying	instrument	that	was	traded.	Under	securities	clearing	agreements	with	the independent	third	party,	we	maintain	collateral	deposits	with	the	clearing	broker	in	the	form	of	cash.	As	of	December	31,	2012,	the	amount	of	the	collateral	deposits included	in	prepaid	expenses	and	other	assets	in	the	Consolidated	Statements	of	Financial	Condition	was	$0.9	million.	We	are	exposed	to	credit	risk	in	the	event	a counterparty	does	not	fulfill	its	obligation	to	complete	a	transaction.	Pursuant	to	the	terms	of	the	securities	clearing	agreements	between	us	and	the	independent	clearing broker,	the	clearing	broker	has	the	right	to	charge	us	for	losses	resulting	from	a	counterparty's	failure	to	fulfill	its	contractual	obligations.	The	losses	are	not	capped	at	a maximum	amount	and	apply	to	all	trades	executed	through	the	clearing	broker.	At	December	31,	2012,	we	had	not	recorded	any	liabilities	with	regard	to	this	right.

In	the	ordinary	course	of	business,	we	enter	into	contracts	that	contain	a	variety	of	representations,	warranties	and	general	indemnifications.	Our	maximum exposure	from	any	claims	under	these	arrangements	is	unknown,	as	this	would	involve	claims	that	have	not	yet	occurred.	However,	based	on	past	experience,	we	expect the	risk	of	loss	to	be	remote.

In	October	2011,	our	Board	of	Directors	authorized	a	share	repurchase	program	for	up	to	$35.0	million	of	our	common	stock.	As	of	December	31,	2012,	a	total	of 955,342	shares	were	repurchased	at	an	aggregate	cost	of	$29.2	million.	Shares	repurchased	under	the	program	are	held	in	treasury	for	future	use.	Through	February	20, 2013,	no	additional	shares	have	been	repurchased	under	this	plan.

In	January	2013,	our	Board	of	Directors	approved	a	quarterly	cash	dividend	of	$0.13	per	share	payable	on	February	28,	2013	to	stockholders	of	record	as	of	the close	of	business	on	February	14,	2013.	Any	future	declaration	and	payment	of	dividends	will	be	at	the	sole	discretion	of	our	Board	of	Directors.	The	Board	of	Directors may	take	into	account	such	matters	as	general	business	conditions,	our	financial	results,	capital	requirements,	contractual,	legal,	and	regulatory	restrictions	on	the payment	of	dividends	to	our	stockholders	or	by	our	subsidiaries	to	the	parent	and	any	such	other	factors	as	the	Board	of	Directors	may	deem	relevant.

On	October	26,	2012,	we	entered	into	an	agreement	to	acquire	all	of	the	outstanding	shares	of	Xtrakter	from	Euroclear	S.A./N.V.	The	aggregate	purchase	price	is £26.0	million	(approximately	$40.5	million)	in	cash,	plus	transaction	costs,	and	is	subject	to	a	post-closing	adjustment	based	on	the	net	working	capital	of	Xtrakter	on the	closing	date.	The	purchase	price	will	be	funded	from	available	cash	on	hand.	We	received	FSA	approval	of	the	change	in	control	on	February	18,	2013	and	expect	to complete	the	acquisition	of	Xtrakter	on	or	about	February	28,	2013.

# Effects	of	Inflation

Because	the	majority	of	our	assets	are	liquid	in	nature,	they	are	not	significantly	affected	by	inflation.	However,	the	rate	of	inflation	may	affect	our	expenses,	such as	employee	compensation,	office	leasing	costs	and	communications	expenses,	which	may	not	be	readily	recoverable	in	the	prices	of	our	services.	To	the	extent	inflation results	in	rising	interest	rates	and	has	other	adverse	effects	on	the	securities	markets,	it	may	adversely	affect	our	financial	position	and	results	of	operations.

# Contractual	Obligations	and	Commitments

As	of	December	31,	2012,	we	had	the	following	contractual	obligations	and	commitments:

|  |  | Less	than |  |  | More	than |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Total | 1\tyear | 1\t-\t\t3\tyears | 3\t-\t5\tyears | 5\tyears |
|  |  |  | (In\tthousands) |  |  |
| Operating\tleases | $17,831 | $1,796 | $3,789 | $4,991 | $7,255 |
| Capital\tleases | 364 | 322 | 42 | — | — |
| Foreign\tcurrency\tforward\tcontract | \t 15,809 | \t 15,809 | — | — | — |
|  | $34,004 | $17,927 | $3,831 | $4,991 | $7,255 |

We	enter	into	foreign	currency	forward	contracts	to	hedge	the	exposure	to	variability	in	foreign	currency	cash	flows	resulting	from	the	net	investment	in	our	U.K. subsidiary.	As	of	December	31,	2012,	the	notional	value	of	the	foreign	currency	forward	contract	outstanding	was	$15.8	million	and	the	gross	and	net	fair	value	liability was	$17,000.

In	January	2013,	our	Board	of	Directors	approved	a	quarterly	dividend	to	be	paid	to	the	holders	of	the	outstanding	shares	of	capital	stock.	A	cash	dividend	of $0.13	per	share	of	voting	and	non-voting	common	stock	outstanding	will	be	payable	on	February	28,	2013	to	stockholders	of	record	as	of	the	close	of	business	on February	14,	2013.	We	expect	the	total	amount	payable	to	be	approximately	$4.9	million.

# Recent	Accounting	Pronouncements

See	Note	2	to	the	Consolidated	Financial	Statements	included	in	Item	8	of	this	Annual	Report	on	Form	10-K	for	a	discussion	of	recent	accounting pronouncements.

# Item	7A.	Quantitative	and	Qualitative	Disclosures	About	Market	Risk.

Market	risk	is	the	risk	of	the	loss	resulting	from	adverse	changes	in	market	rates	and	prices,	such	as	interest	rates	and	foreign	currency	exchange	rates.

# Market	Risk

The	global	financial	services	business	is,	by	its	nature,	risky	and	volatile	and	is	directly	affected	by	many	national	and	international	factors	that	are	beyond	our control.	Any	one	of	these	factors	may	cause	a	substantial	decline	in	the	U.S.	and	global	financial	services	markets,	resulting	in	reduced	trading	volume	and	revenues. These	events	could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results	of	operations.

As	of	December	31,	2012,	we	had	a	$51.2	million	investment	in	securities	available-for-sale.	Adverse	movements,	such	as	a	10%	decrease	in	the	value	of	these securities	or	a	downturn	or	disruption	in	the	markets	for	these	securities,	could	result	in	a	substantial	loss.	In	addition,	principal	gains	and	losses	resulting	from	these securities	could	on	occasion	have	a	disproportionate	effect,	positive	or	negative,	on	our	financial	condition	and	results	of	operations	for	any	particular	reporting	period.

See	also	Item	1A.	Risk	Factors,	"Risks	Related	to	Our	Industry—Economic,	political	and	market	factors	beyond	our	control	could	reduce	demand	for	our services	and	harm	our	business,	and	our	profitability	could	suffer."

# Interest	Rate	Risk

Interest	rate	risk	represents	our	exposure	to	interest	rate	changes	with	respect	to	the	money	market	instruments,	U.S.	Treasury	obligations	and	fixed-income securities	in	which	we	invest.	As	of	December	31,	2012,	our	cash	and	cash	equivalents	and	securities	available-for-sale	amounted	to	$180.1	million	and	were	primarily invested	in	money	market	instruments,	U.S.	government	obligations	and	municipal	securities.	We	do	not	maintain	an	inventory	of	bonds	that	are	traded	on	our	platform.

# Derivative	Risk

Our	limited	derivative	risk	stems	from	our	activities	in	the	foreign	currency	forward	contract	market.	We	use	this	market	to	mitigate	our	U.S.	dollar	versus Pound	Sterling	exposure	that	arises	from	the	activities	of	our	U.K.	subsidiary.	As	of	December	31,	2012,	the	notional	value	of	our	foreign	currency	forward	contract	was $15.8	million.	In	October	2012,	we	purchased	a	foreign	exchange	call	option	to	economically	hedge	the	Xtrakter	purchase	price	of	£26.0	million.	We	do	not	speculate	in any	derivative	instruments.

# Credit	Risk

We	act	as	a	riskless	principal	through	MarketAxess	Corporation	and	MarketAxess	Europe	Limited	in	certain	transactions	that	we	execute	between	clients.	We	act as	an	intermediary	in	these	transactions	by	serving	as	counterparty	to	both	the	buyer	and	the	seller	in	matching	back-to-back	bond	trades,	which	are	then	settled	through a	third-party	clearing	organization.	Settlement	typically	occurs	within	one	to	three	trading	days	after	the	trade	date.	Cash	settlement	of	the	transaction	occurs	upon	receipt or	delivery	of	the	underlying	instrument	that	was	traded.

We	are	exposed	to	credit	risk	in	our	role	as	trading	counterparty	to	our	clients.	We	are	exposed	to	the	risk	that	third	parties	that	owe	us	money,	securities	or	other assets	will	not	perform	their	obligations.	These	parties	may	default	on	their	obligations	to	us	due	to	bankruptcy,	lack	of	liquidity,	operational	failure	or	other	reasons. Adverse	movements	in	the	prices	of	securities	that	are	the	subject	of	these	transactions	can	increase	our	risk.	Where	the	unmatched	position	or	failure	to	deliver	is prolonged,	there	may	also	be	regulatory	capital	charges	required	to	be	taken	by	us.	There	can	be	no	assurance	that	the	policies	and	procedures	we	use	to	manage	this credit	risk	will	effectively	mitigate	our	credit	risk	exposure.

Cash	and	cash	equivalents	includes	cash	and	money	market	instruments	that	are	primarily	maintained	at	one	major	global	bank.	Given	this	concentration	we	are exposed	to	certain	credit	risk.

# Item	8.	Financial	Statements	and	Supplementary	Data.

# INDEX	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

| MARKETAXESS	HOLDINGS	INC. |  |
| :--- | :--- |
| INDEX\tTO\tCONSOLIDATED\tFINANCIAL\tSTATEMENTS |  |
| Management's\tReport\ton\tInternal\tControl\tOver\tFinancial\tReporting | \t66 |
| Audited\tConsolidated\tFinancial\tStatements |  |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | \t67 |
| Consolidated\tStatements\tof\tFinancial\tCondition\t—\tAs\tof\tDecember\t31,\t2012\tand\t2011. | \t68 |
| Consolidated\tStatements\tof\tOperations\t—\tFor\tthe\tyears\tended\tDecember\t31,\t2012,\t2011\tand\t2010 | \t69 |
| Consolidated\tStatements\tof\tComprehensive\tIncome\t—\tFor\tthe\tyears\tended\tDecember\t\t31,\t2012,\t2011\tand\t2010 | \t70 |
| Consolidated\tStatements\tof\tChanges\tin\tStockholders'\tEquity\t—\tFor\tthe\tyears\tended\tDecember\t\t31,\t2012,\t2011\tand\t2010 | \t71 |
| Consolidated\tStatements\tof\tCash\tFlows\t—\tFor\tthe\tyears\tended\tDecember\t31,\t2012,\t2011\tand\t2010 | \t72 |
| Notes\tto\tConsolidated\tFinancial\tStatements | \t73 |

The	unaudited	supplementary	data	regarding	consolidated	quarterly	income	statement	data	are	incorporated	by	reference	to	the	information	set	forth	in	Item	7, "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations,"	in	the	section	captioned	"Quarterly	Results	of	Operations."

# MANAGEMENT'S	REPORT	ON	INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

Management	of	MarketAxess	Holdings	Inc.	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting	as	defined	in	Rules 13a-15(f)	and	15d-15(f)	under	the	Securities	Exchange	Act	of	1934.	The	Company's	internal	control	over	financial	reporting	is	designed	to	provide	reasonable	assurance regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	U.S.	generally	accepted	accounting principles.	The	Company's	internal	control	over	financial	reporting	includes	those	policies	and	procedures	that:

(i)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the Company;

(ii)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	Company	are	being	made	only	in	accordance	with	authorizations	of	management	and directors	of	the	Company;	and

(iii)	provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use	or	disposition	of	the	Company's	assets	that could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the policies	or	procedures	may	deteriorate.

Management	assessed	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting	as	of	December	31,	2012.	In	making	this	assessment, management	used	the	criteria	set	forth	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	in	Internal	Control	—	Integrated	Framework.

Based	on	our	assessment	and	those	criteria,	management	concluded	that	the	Company	maintained	effective	internal	control	over	financial	reporting	as	of December	31,	2012.

The	effectiveness	of	our	internal	control	over	financial	reporting	as	of	December	31,	2012	has	been	audited	by	PricewaterhouseCoopers	LLP,	an	independent registered	public	accounting	firm,	as	stated	in	their	report	which	appears	herein.

# Report	of	Independent	Registered	Public	Accounting	Firm

To	Board	of	Directors	and	Stockholders	of	MarketAxess	Holdings	Inc.:

In	our	opinion,	the	accompanying	consolidated	statements	of	financial	condition	and	related	consolidated	statements	of	operations,	consolidated	statements	of other	comprehensive	income,	consolidated	statements	of	changes	in	stockholders'	equity,	and	consolidated	statements	of	cash	flows,	present	fairly,	in	all	material respects,	the	financial	position	of	MarketAxess	Holdings	Inc.	and	its	subsidiaries	at	December	31,	2012	and	December	31,	2011,	and	the	results	of	their	operations	and their	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2012	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	of America.	Also	in	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	December	31,	2012,	based	on criteria	established	in	Internal	Control—Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO).	The Company's	management	is	responsible	for	these	financial	statements,	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the effectiveness	of	internal	control	over	financial	reporting,	included	in	the	accompanying	"Management's	Report	on	Internal	Control	over	Financial	Reporting."	Our responsibility	is	to	express	opinions	on	these	financial	statements	and	on	the	Company's	internal	control	over	financial	reporting	based	on	our	integrated	audits.	We conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan	and perform	the	audits	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement	and	whether	effective	internal	control	over financial	reporting	was	maintained	in	all	material	respects.	Our	audits	of	the	financial	statements	included	examining,	on	a	test	basis,	evidence	supporting	the	amounts and	disclosures	in	the	financial	statements,	assessing	the	accounting	principles	used	and	significant	estimates	made	by	management,	and	evaluating	the	overall	financial statement	presentation.	Our	audit	of	internal	control	over	financial	reporting	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing the	risk	that	a	material	weakness	exists,	and	testing	and	evaluating	the	design	and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk.	Our	audits	also included	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinions.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal	control	over	financial reporting	includes	those	policies	and	procedures	that	(i)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and dispositions	of	the	assets	of	the	company;	(ii)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of management	and	directors	of	the	company;	and	(iii)	provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

/s/	PricewaterhouseCoopers	LLP

# CONSOLIDATED	STATEMENTS	OF	FINANCIAL	CONDITION

| Cash	and	cash	equivalents | $ 128,908 | $169,620 |
| :--- | :--- | :--- |
| Securities\tavailable-for-sale | 51,208 | 78,110 |
| Accounts\treceivable,\tnet\tof\tallowance\tof\t$75\tand\t$1,086\tas\tof\tDecember\t31,\t2012\tand\t2011,\trespectively | 31,044 | 36,170 |
| Deferred\ttax\tassets,\tnet | 9,442 | 8,089 |
| Goodwill\tand\tintangible\tassets,\tnet\tof\taccumulated\tamortization | 33,134 | 34,544 |
| Capitalized\tsoftware,\tfurniture,\tequipment\tand\tleasehold\timprovements,\tnet\tof\taccumulated\tdepreciation\tand\tamortization | 18,009 | 14,460 |
| Prepaid\texpenses\tand\tother\tassets | 8,096 | 8,465 |
| Total\tassets | $ 279,841 | $349,458 |
| LIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY |  |  |
| Liabilities |  |  |
| Accrued\temployee\tcompensation | $19,916 | $19,425 |
| Deferred\trevenue | 4,864 | 5,326 |
| Accounts\tpayable,\taccrued\texpenses\tand\tother\tliabilities | 12,344 | 12,268 |
| Total\tliabilities | 37,124 | 37,019 |
| Commitments\tand\tContingencies\t(Note\t12) | — | — |
| Stockholders'\tequity |  |  |
|  | — | — |
| and\t2011 | — | — |
| 37,407,135\tshares\tand\t36,183,655\tshares\toutstanding\tas\tof\tDecember\t31,\t2012\tand\t2011,\trespectively | 118 | 113 |
| as\tof\tDecember\t31,\t2012\tand\t2011,\trespectively | — | 9 |
| Additional\tpaid-in\tcapital | 283,609 | 340,716 |
| Treasury\tstock—Common\tstock\tvoting,\tat\tcost,\t1,495,159\tshares\tand\t1,541,739\tshares\tas\tof\tDecember\t31,\t2012\tand\t2011, |  |  |
| respectively | (32,273) | (25,933) |
| Accumulated\tdeficit | (5,644) | (584) |
| Accumulated\tother\tcomprehensive\tloss | (3,093) | (1,882) |
| Total\tstockholders'\tequity | 242,717 | 312,439 |
| Total\tliabilities\tand\tstockholders'\tequity | $ 279,841 | $349,458 |

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

# CONSOLIDATED	STATEMENTS	OF	OPERATIONS

| Commissions | $174,199 | $155,444 | $ 122,180 |
| :--- | :--- | :--- | :--- |
| Technology\tproducts\tand\tservices | 12,351 | 14,310 | 13,648 |
| Information\tand\tuser\taccess\tfees | 7,435 | 7,199 | 6,681 |
| Investment\tincome | 1,058 | 1,229 | 1,192 |
| Other | 3,161 | 2,917 | 2,527 |
| Total\trevenues | 198,204 | 181,099 | 146,228 |
| Expenses |  |  |  |
| Employee\tcompensation\tand\tbenefits | 60,361 | 58,786 | 56,446 |
| Depreciation\tand\tamortization | 8,233 | 6,781 | 6,350 |
| Technology\tand\tcommunications | 12,766 | 10,912 | 9,982 |
| Professional\tand\tconsulting\tfees | 13,081 | 10,138 | 8,503 |
| Occupancy | 3,012 | 2,921 | 2,997 |
| Marketing\tand\tadvertising | 5,470 | 4,882 | 3,075 |
| General\tand\tadministrative | 8,595 | 7,946 | 7,965 |
| Total\texpenses | 111,518 | 102,366 | 95,318 |
| Income\tbefore\tincome\ttaxes | 86,686 | 78,733 | 50,910 |
| Provision\tfor\tincome\ttaxes | 26,617 | 31,029 | 19,482 |
| Net\tincome | $60,069 | $47,704 | $31,428 |
| Net\tincome\tper\tcommon\tshare |  |  |  |
| Basic | $1.65 | $1.29 | $0.86 |
| Diluted | $1.59 | $1.20 | $0.80 |
| Cash\tdividends\tdeclared\tper\tcommon\tshare | $1.74 | $0.36 | $0.28 |
| Weighted\taverage\tshares\toutstanding |  |  |  |
| Basic | 36,516 | 37,006 | 33,159 |
| Diluted | 37,816 | 39,608 | 39,051 |

# CONSOLIDATED	STATEMENTS	OF	COMPREHENSIVE	INCOME

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2012 | 2011 | 2010 |
|  |  | (In\tthousands) |  |
| Net\tincome | $60,069 | $47,704 | $31,428 |
| Cumulative\ttranslation\tadjustment\tand\tforeign\tcurrency\texchange\thedge,\tnet\tof\ttax | (748) | (634) | (564) |
| Unrealized\tnet\t(loss)\tgain\ton\tsecurities\tavailable-for-sale,\tnet\tof\ttax | (463) | 403 | 304 |
| Comprehensive\tIncome | $58,858 | $47,473 | $31,168 |

# CONSOLIDATED	STATEMENTS	OF	CHANGES	IN	STOCKHOLDERS'	EQUITY

|  |  |  |  | Receivable | Treasury |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Commo\nStock\nVoting | Commo\nStock\nNon\t-\nVoting | Additional\nPaid-In\nCapital | for\nCommon\nStock\nSubscribed | Stock\t-\nCommo\nStock\nVoting | Accumulated\nDeficit | Accumulated\nOther\nComprehen-\nsive\tLoss | Total\nStockholders'\nEquity |
|  |  |  |  |  | (In\tthousands) |  |  |  |
| Balance\tat\tDecember\t31,\t2009 | $104 | $9 | $313,896 | $(713) | $ (40,000) | $(55,403) | $(1,391) | $216,502 |
| Net\tincome | — | — | — | — | — | 31,428 | — | 31,428 |
| Cumulative\ttranslation\tadjustment\tand\tforeign\tcurrency\texchange |  |  |  |  |  |  |  |  |
| hedge,\tnet\tof\ttax | — | — | — | — | — | — | (564) | (564) |
| Unrealized\tnet\tgain\ton\tsecurities\tavailable-for-sale,\tnet\tof\ttax | — | — | — | — | — | — | 304 | 304 |
| Stock-based\tcompensation | — | — | 8,969 | — | — | — | — | 8,969 |
| Exercise\tof\tstock\toptions | 4 | — | 6,757 | — | — | — | — | 6,761 |
| Withholding\ttax\tpayments\ton\trestricted\tstock\tvesting\tand\tstock |  |  |  |  |  |  |  |  |
| option\texercises | — | — | (2,055) | — | — | — | — | (2,055) |
| Tax\tbenefit\tfrom\tthe\texercise\tof\twarrants\tin\tprior\tyears | — | — | 11,429 | — | — | — | — | 11,429 |
| Excess\ttax\tbenefits\tfrom\tstock-based\tcompensation | — | — | 1,619 | — | — | — | — | 1,619 |
| Repayment\tof\tpromissory\tnotes | — | — | — | 713 | — | — | — | 713 |
| Purchase\tof\ttreasury\tstock | — | — | — | — | (30,000) | — | — | (30,000) |
| Cash\tdividend\ton\tcommon\tstock\tand\tSeries\tB\tPreferred\tStock | — | — | — | — | — | (10,630) | — | (10,630) |
| Balance\tat\tDecember\t31,\t2010 | 108 | 9 | 340,615 | — | (70,000) | (34,605) | (1,651) | 234,476 |
| Net\tincome | — | — | — | — | — | 47,704 | — | 47,704 |
| Cumulative\ttranslation\tadjustment\tand\tforeign\tcurrency\texchange |  |  |  |  |  |  |  |  |
| hedge,\tnet\tof\ttax | — | — | — | — | — | — | (634) | (634) |
| Unrealized\tnet\tgain\ton\tsecurities\tavailable-for-sale,\tnet\tof\ttax | — | — | — | — | — | — | 403 | 403 |
| Stock-based\tcompensation | — | — | 6,859 | — | — | — | — | 6,859 |
| Exercise\tof\tstock\toptions | 4 | — | 6,803 | — | — | — | — | 6,807 |
| Withholding\ttax\tpayments\ton\trestricted\tstock\tvesting\tand\tstock |  |  |  |  |  |  |  |  |
| option\texercises |  |  | (4,415) |  |  |  |  | (4,415) |
| Conversion\tof\tSeries\tB\tPreferred\tstock\tto\tcommon\tstock\tvoting | 1 | — | (20,688) | — | 51,002 | — | — | 30,315 |
| Tax\tbenefit\tfrom\tthe\texercise\tof\twarrants\tin\tprior\tyears | — | — | 4,237 | — | — | — | — | 4,237 |
| Excess\ttax\tbenefits\tfrom\tstock-based\tcompensation | — | — | 7,305 | — | — | — | — | 7,305 |
| Purchase\tof\ttreasury\tstock | — | — | — | — | (6,935) | — | — | (6,935) |
| Cash\tdividend\ton\tcommon\tstock | — | — | — | — | — | (13,683) | — | (13,683) |
| Balance\tat\tDecember\t31,\t2011 | 113 | 9 | 340,716 | — | (25,933) | (584) | (1,882) | 312,439 |
| Net\tincome | — | — | — |  | — | 60,069 | — | 60,069 |
| Cumulative\ttranslation\tadjustment\tand\tforeign\tcurrency\texchange |  |  |  |  |  |  |  |  |
| hedge,\tnet\tof\ttax | — | — | — | — | — | — | (748) | (748) |
| Unrealized\tnet\t(loss)\ton\tsecurities\tavailable-for-sale,\tnet\tof\ttax | — | — | — | — | — | — | (463) | (463) |
| Stock-based\tcompensation | — | — | 8,385 | — | — | — | — | 8,385 |
| Exercise\tof\tstock\toptions | 3 | — | 8,522 | — | — | — | — | 8,525 |
| Withholding\ttax\tpayments\ton\trestricted\tstock\tvesting\tand\tstock |  |  |  |  |  |  |  |  |
| option\texercises | — | — | (20,003) | — | — | — | — | (20,003) |
| Excess\ttax\tbenefits\tfrom\tstock-based\tcompensation | — | — | 14,775 | — | — | — | — | 14,775 |
| Conversion\tof\tcommon\tstock\tnon-voting\tto\tcommon\tstock\tvoting | 2 | (2) | (15,878) | — | 15,878 | — | — | — |
| Repurchases\tof\tcommon\tstock | — | (7) | (52,908) | — | (22,218) | — | — | (75,133) |
| Cash\tdividend\ton\tcommon\tstock | — | — | — | — | — | (65,129) | — | (65,129) |
| Balance\tat\tDecember\t31,\t2012 | $118 | $— | $283,609 | $— | $ (32,273) | $(5,644) | $(3,093) | $242,717 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2012 | 2011 | 2010 |
|  |  | (In\tthousands) |  |
| Cash\tflows\tfrom\toperating\tactivities |  |  |  |
| Net\tincome | $60,069 | $47,704 | $31,428 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 8,233 | 6,781 | 6,350 |
| Stock-based\tcompensation\texpense | 8,385 | 6,859 | 8,969 |
| Deferred\ttaxes | (643) | 16,129 | 15,767 |
| Provision\tfor\tbad\tdebts | 519 | 1,177 | 602 |
| Other | 685 | — | (411) |
| Changes\tin\toperating\tassets\tand\tliabilities: |  |  |  |
| Decrease\t(increase)\tin\taccounts\treceivable | 4,607 | (11,665) | (3,134) |
| Decrease\t(increase)\tin\tprepaid\texpenses\tand\tother\tassets | 412 | (4,074) | 57 |
| Increase\tin\taccrued\temployee\tcompensation | 491 | 1,634 | 2,634 |
| (Decrease)\tincrease\tin\tdeferred\trevenue | (462) | 755 | 309 |
| (Decrease)\tincrease\tin\taccounts\tpayable,\taccrued\texpenses\tand\tother\tliabilities | (714) | 178 | 1,575 |
| Net\tcash\tprovided\tby\toperating\tactivities | 81,582 | 65,478 | 64,146 |
| Cash\tflows\tfrom\tinvesting\tactivities |  |  |  |
| Securities\tavailable-for-sale: |  |  |  |
| Proceeds\tfrom\tsales | 23,663 | — | 15,377 |
| Proceeds\tfrom\tmaturities | 18,313 | 27,419 | 49,988 |
| Purchases | (16,543) | (32,302) | (66,008) |
| Securities\tand\tcash\t(provided)\treceived\tas\tcollateral | (43) | 3,532 | 32 |
| Purchases\tof\tfurniture,\tequipment\tand\tleasehold\timprovements | (5,153) | (3,160) | (5,205) |
| Capitalization\tof\tsoftware\tdevelopment\tcosts | (5,207) | (4,065) | (1,904) |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting\tactivities | 15,030 | (8,576) | (7,720) |
| Cash\tflows\tfrom\tfinancing\tactivities |  |  |  |
| Cash\tdividend\ton\tcommon\tstock\tand\tSeries\tB\tPreferred\tStock | (64,041) | (13,683) | (10,630) |
| Exercise\tof\tstock\toptions | 8,525 | 6,807 | 6,761 |
| Excess\ttax\tbenefits\tfrom\tstock-based\tcompensation | 14,775 | 7,305 | 1,619 |
| Withholding\ttax\tpayments\ton\trestricted\tstock\tvesting\tand\tstock\toption\texercises | (20,003) | (4,415) | (2,055) |
| Repurchase\tof\tcommon\tstock | (75,133) | (6,935) | (30,000) |
| Other | (298) | (278) | 456 |
| Net\tcash\t(used\tin)\tfinancing\tactivities | (136,175) | (11,199) | (33,849) |
| Effect\tof\texchange\trate\tchanges\ton\tcash\tand\tcash\tequivalents | (1,149) | (1,077) | (924) |
| Cash\tand\tcash\tequivalents |  |  |  |
| Net\t(decrease)\tincrease\tfor\tthe\tperiod | (40,712) | 44,626 | 21,653 |
| Beginning\tof\tperiod | 169,620 | \t 124,994 | \t 103,341 |
| End\tof\tperiod | $128,908 | $169,620 | $124,994 |
| Supplemental\tcash\tflow\tinformation: |  |  |  |
| Cash\tpaid\tduring\tthe\tyear |  |  |  |
| Cash\tpaid\tfor\tincome\ttaxes | $15,102 | $10,177 | $2,228 |
| Non-cash\tactivity |  |  |  |
| Conversion\tof\tSeries\tB\tPreferred\tStock\tto\tcommon\tstock | $— | $30,315 | $— |
| Conversion\tof\tcommon\tstock\tnon-voting\tto\tcommon\tstock\tvoting | 15,880 | — | — |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# 1.	Organization	and	Principal	Business	Activity

MarketAxess	Holdings	Inc.	(the	"Company")	was	incorporated	in	the	State	of	Delaware	on	April	11,	2000.	Through	its	subsidiaries,	the	Company	operates	an electronic	trading	platform	for	corporate	bonds	and	other	types	of	fixed-income	instruments	through	which	the	Company's	institutional	investor	clients	can	access	the liquidity	provided	by	its	broker-dealer	clients.	The	Company's	multi-dealer	trading	platform	allows	its	institutional	investor	clients	to	simultaneously	request competitive,	executable	bids	or	offers	from	multiple	broker-dealers,	and	to	execute	trades	with	the	broker-dealer	of	their	choice.	The	Company	offers	its	clients	the ability	to	trade	U.S.	high-grade	corporate	bonds,	European	high-grade	corporate	bonds,	credit	default	swaps,	agencies,	high-yield	and	emerging	markets	bonds	and	asset- backed	and	preferred	securities.	The	Company	also	executes	certain	bond	transactions	between	and	among	institutional	investor	and	broker-dealer	clients	on	a	riskless principal	basis	by	serving	as	counterparty	to	both	the	buyer	and	the	seller	in	matching	back-to-back	trades,	which	then	settle	through	a	third-party	clearing	organization. Through	its	Corporate	BondTicker™	service,	the	Company	provides	fixed-income	market	data,	analytics	and	compliance	tools	that	help	its	clients	make	trading decisions.	In	addition,	the	Company	provides	FIX	(Financial	Information	eXchange)	message	management	tools,	connectivity	solutions	and	ancillary	technology services	that	facilitate	the	electronic	communication	of	order	information	between	trading	counterparties.

For	2011	and	2010,	JPMorgan	Chase	&	Co.	("JPM")	was	the	Company's	sole	stockholder	broker-dealer	client.	During	the	first	quarter	of	2012,	JPM	sold	its shares	of	the	Company's	common	stock	and	is	no	longer	considered	a	related	party.	See	Note	8,	"Related	Parties."

# 2.	Significant	Accounting	Policies

# Basis	of	Presentation

The	consolidated	financial	statements	include	the	accounts	of	the	Company	and	its	subsidiaries.	All	intercompany	transactions	and	balances	have	been eliminated.

# Cash	and	Cash	Equivalents

Cash	and	cash	equivalents	includes	cash	and	money	market	instruments	that	are	primarily	maintained	at	one	major	global	bank.	Given	this	concentration,	the Company	is	exposed	to	certain	credit	risk.	The	Company	defines	cash	equivalents	as	short-term	interest-bearing	investments	with	maturities	at	the	time	of	purchase	of three	months	or	less.

# Securities	Available-for-Sale

The	Company	classifies	its	marketable	securities	as	available-for-sale	securities.	Unrealized	marketable	securities	gains	and	losses,	net	of	taxes,	are	reflected	as	a net	amount	under	the	caption	of	accumulated	other	comprehensive	loss	on	the	Consolidated	Statements	of	Financial	Condition.	Realized	gains	and	losses	are	recorded	in the	Consolidated	Statements	of	Operations	in	other	revenues.	For	the	purpose	of	computing	realized	gains	and	losses,	cost	is	determined	on	a	specific	identification basis.

The	Company	assesses	whether	an	other-than-temporary	impairment	loss	on	the	investments	has	occurred	due	to	declines	in	fair	value	or	other	market	conditions. The	portion	of	an	other-than-temporary	impairment	related	to	credit	loss	is	recorded	as	a	charge	in	the	Consolidated	Statements	of	Operations.	The	remainder	is recognized	in	other	comprehensive	loss	if	the	Company	does	not	intend	to	sell	the	security	and	it	is	more	likely	than	not	that	the	Company	will	not	be	required	to	sell	the security	prior	to	recovery.	No	charges	for	other-than-temporary	losses	were	recorded	during	2012,	2011	or	2010.

# Fair	Value	Financial	Instruments

Fair	value	is	defined	as	"the	price	that	would	be	received	to	sell	an	asset	or	paid	to	transfer	a	liability	in	an	orderly	transaction	between	market	participants	at	the measurement	date."	A	three-tiered	hierarchy	for	determining	fair	value	has	been	established	that	prioritizes	inputs	to	valuation	techniques	used	in	fair	value	calculations. The	three	levels	of	inputs	are	defined	as	Level	1	(unadjusted	quoted	prices	for	identical	assets	or	liabilities	in	active	markets),	Level	2	(inputs	that	are	observable	in	the marketplace	other	than	those	inputs	classified	in	Level	1)	and	Level	3	(inputs	that	are	unobservable	in	the	marketplace).	The	Company's	financial	assets	and	liabilities measured	at	fair	value	on	a	recurring	basis	consist	of	its	money	market	funds,	securities	available-for-sale	portfolio,	one	foreign	currency	forward	contract	and	one foreign	currency	option	contract.

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	–	(Continued)

All	accounts	receivable	have	contractual	maturities	of	less	than	one	year	and	are	derived	from	trading-related	fees	and	commissions	and	revenues	from	products and	services.	The	Company	continually	monitors	collections	and	payments	from	its	customers	and	maintains	an	allowance	for	doubtful	accounts.	The	allowance	for doubtful	accounts	is	based	upon	the	historical	collection	experience	and	specific	collection	issues	that	have	been	identified.	Additions	to	the	allowance	for	doubtful accounts	are	charged	to	bad	debt	expense,	which	is	included	in	general	and	administrative	expense	in	the	Company's	Consolidated	Statements	of	Operations.

The	allowance	for	doubtful	accounts	was	$0.1	million,	$1.1	million	and	$0.4	million	as	of	December	31,	2012,	2011	and	2010,	respectively.	The	provision	for	bad debts	was	$0.5	million,	$1.2	million	and	$0.6	million	for	the	years	ended	December	31,	2012,	2011	and	2010,	respectively.	During	the	fourth	quarter	of	2011,	MF Global	Inc.,	a	broker-dealer	market	maker	on	the	Company's	platform,	entered	a	liquidation	proceeding.	In	connection	with	the	proceeding,	the	Company	recorded	a 100%	allowance	against	outstanding	receivables	amounting	to	$0.9	million.	Write-offs	and	other	charges	against	the	allowance	for	doubtful	accounts	were	$1.4	million, $0.2	million	and	$0.7	million	for	the	years	ended	December	31,	2012,	2011	and	2010,	respectively.

# Depreciation	and	Amortization

Fixed	assets	are	carried	at	cost	less	accumulated	depreciation.	The	Company	uses	the	straight-line	method	of	depreciation	over	three	to	seven	years.	Leasehold improvements	are	stated	at	cost	and	are	amortized	using	the	straight-line	method	over	the	lesser	of	the	life	of	the	improvement	or	the	remaining	term	of	the	lease.

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

# Cash	Provided	as	Collateral

Cash	is	provided	as	collateral	for	electronic	bank	settlements	and	broker-dealer	clearance	accounts.	Cash	provided	as	collateral	is	included	in	prepaid	expenses and	other	assets	in	the	Consolidated	Statements	of	Financial	Condition.

# Foreign	Currency	Translation	and	Forward	Contracts

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

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

The	majority	of	the	Company's	revenues	are	derived	from	monthly	distribution	fees	and	commissions	for	trades	executed	on	its	platform	that	are	billed	to	its broker-dealer	clients	on	a	monthly	basis.	The	Company	also	derives	revenues	from	technology	products	and	services,	information	and	user	access	fees,	investment income	and	other	income.

Commission	revenue.	Commissions	are	generally	calculated	as	a	percentage	of	the	notional	dollar	volume	of	bonds	traded	on	the	platform	and	vary	based	on	the type	and	maturity	of	the	bond	traded.	Under	the	Company's	transaction	fee	plans,	bonds	that	are	more	actively	traded	or	that	have	shorter	maturities	are	generally charged	lower	commissions,	while	bonds	that	are	less	actively	traded	or	that	have	longer	maturities	generally	command	higher	commissions.	For	trades	that	the Company	executes	between	and	among	institutional	investor	and	broker-dealer	clients	on	a	riskless	principal	basis	by	serving	as	counterparty	to	both	the	buyer	and	the seller,	the	Company	earns	the	commission	through	the	difference	in	price	between	the	two	back-to-back	trades.	Fee	programs	for	certain	products	include	distribution fees	which	are	recognized	monthly.

Technology	products	and	services.	The	Company	generates	revenues	from	technology	software	licenses,	maintenance	and	support	services	(referred	to	as	post- contract	technical	support	or	"PCS")	and	professional	consulting	services.	Revenue	is	generally	recognized	when	persuasive	evidence	of	an	arrangement	exists,	delivery has	occurred,	the	fee	is	fixed	or	determinable	and	collection	is	considered	probable.	The	Company	generally	sells	software	licenses	and	PCS	together	as	part	of	multiple- element	arrangements.	The	Company	also	enters	into	contracts	for	technology	integration	consulting	services	unrelated	to	any	software	product.

For	arrangements	that	include	multiple	elements,	generally	software	licenses	and	PCS,	the	Company	allocates	and	defers	revenue	for	the	undelivered	items	based on	vendor	specific	objective	evidence	("VSOE")	of	the	fair	value	of	the	undelivered	elements	and	recognizes	the	difference	between	the	total	arrangement	fee	and	the amount	deferred	for	the	undelivered	items	as	license	revenue.	The	Company's	VSOE	of	each	element	is	based	on	historical	evidence	of	stand-alone	sales	of	these elements	to	third	parties	or	the	stated	renewal	rate	for	the	undelivered	elements.	When	VSOE	does	not	exist	for	undelivered	items,	the	entire	arrangement	fee	is recognized	ratably	over	the	performance	period.	For	PCS,	the	term	is	typically	one	year	and	revenue	is	recognized	over	the	duration	of	the	arrangement	on	a	straight-line basis.

Professional	consulting	services	are	generally	separately	priced	and	are	typically	not	essential	to	the	functionality	of	the	Company's	software	products.	Revenues from	these	services	are	recognized	separately	from	the	license	fee.	Generally,	revenue	from	time-and-materials	consulting	contracts	is	recognized	as	services	are performed.

Revenues	from	contracts	for	technology	integration	consulting	services	are	recognized	on	the	percentage-of-completion	method.	Percentage-of-completion accounting	involves	calculating	the	percentage	of	services	provided	during	the	reporting	period	compared	to	the	total	estimated	services	to	be	provided	over	the	duration of	the	contract.	If	estimates	indicate	that	a	contract	loss	will	occur,	a	loss	provision	is	recorded	in	the	period	in	which	the	loss	first	becomes	probable	and	reasonably estimable.	Contract	losses	are	determined	to	be	the	amount	by	which	the	estimated	direct	and	indirect	costs	of	the	contract	exceed	the	estimated	total	revenues	that	will be	generated	by	the	contract.	There	were	no	contract	loss	provisions	recorded	as	of	December	31,	2012,	2011	and	2010.	Revenues	recognized	in	excess	of	billings	are recorded	as	unbilled	services	within	other	assets.	Billings	in	excess	of	revenues	recognized	are	recorded	as	deferred	revenues	until	revenue	recognition	criteria	are	met.

Initial	set-up	fees.	The	Company	enters	into	agreements	with	its	broker-dealer	clients	pursuant	to	which	the	Company	provides	access	to	its	platform	through	a non-exclusive	and	non-transferable	license.	Broker-dealer	clients	may	pay	an	initial	set-up	fee,	which	is	typically	due	and	payable	upon	execution	of	the	broker-dealer agreement.	The	initial	set-up	fee,	if	any,	varies	by	agreement.	Revenue	is	recognized	over	the	initial	term	of	the	agreement,	which	is	generally	two	years.	Initial	set-up fees	are	reported	in	other	income	in	the	Consolidated	Statements	of	Operations.

The	Company	measures	and	recognizes	compensation	expense	for	all	share-based	payment	awards	based	on	their	estimated	fair	values	measured	as	of	the	grant date.	These	costs	are	recognized	as	an	expense	in	the	Consolidated	Statements	of	Operations	over	the	requisite	service	period,	which	is	typically	the	vesting	period,	with an	offsetting	increase	to	additional	paid-in	capital.

Income	taxes	are	accounted	for	using	the	asset	and	liability	method.	Deferred	income	taxes	reflect	the	net	tax	effects	of	temporary	differences	between	the financial	reporting	and	tax	bases	of	assets	and	liabilities	and	are	measured	using	the	enacted	tax	rates	and	laws	that	will	be	in	effect	when	such	differences	are	expected to	reverse.	The	effect	on	deferred	tax	assets	and	liabilities	of	a	change	in	tax	rates	is	recognized	in	income	in	the	period	that	includes	the	enactment	date.	A	valuation allowance	is	recognized	against	deferred	tax	assets	if	it	is	more	likely	than	not	that	such	assets	will	not	be	realized	in	future	years.	The	Company	recognizes	interest	and penalties	related	to	unrecognized	tax	benefits	in	general	and	administrative	expenses	in	the	Consolidated	Statements	of	Operations.

# Business	Combinations,	Goodwill	and	Intangible	Assets

Business	acquisitions	are	accounted	for	under	the	purchase	method	of	accounting.	The	total	cost	of	an	acquisition	is	allocated	to	the	underlying	net	assets	based	on their	respective	estimated	fair	values.	The	excess	of	the	purchase	price	over	the	estimated	fair	values	of	the	net	assets	acquired	is	recorded	as	goodwill.	Determining	the fair	value	of	certain	assets	acquired	and	liabilities	assumed	is	judgmental	in	nature	and	often	involves	the	use	of	significant	estimates	and	assumptions,	including assumptions	with	respect	to	future	cash	flows,	discount	rates,	growth	rates	and	asset	lives.

An	impairment	review	of	goodwill	is	performed	on	an	annual	basis	and	more	frequently	if	circumstances	change.	Intangible	assets	with	definite	lives,	including purchased	technologies,	customer	relationships	and	other	intangible	assets,	are	amortized	on	a	straight-line	basis	over	their	estimated	useful	lives,	ranging	from	five	to ten	years.	Intangible	assets	are	assessed	for	impairment	when	events	or	circumstances	indicate	the	existence	of	a	possible	impairment.

# Earnings	Per	Share

For	2010,	earnings	per	share	("EPS")	was	calculated	using	the	two-class	method.	Basic	EPS	is	computed	by	dividing	the	net	income	attributable	to	common	stock by	the	weighted-average	number	of	shares	of	common	stock	outstanding	for	the	period,	including	consideration	of	the	two-class	method	to	the	extent	that	participating securities	were	outstanding	during	the	period.	Under	the	two-class	method,	undistributed	net	income	is	allocated	to	common	stock	and	participating	securities	based	on their	respective	right	to	share	in	dividends.	The	Series	B	Preferred	Stock	was	convertible	into	shares	of	common	stock	and	also	included	a	right	whereby,	upon	the declaration	or	payment	of	a	dividend	or	distribution	on	the	common	stock,	a	dividend	or	distribution	must	also	be	declared	or	paid	on	the	Series	B	Preferred	Stock	based on	the	number	of	shares	of	common	stock	into	which	such	securities	were	convertible	at	the	time.	Due	to	these	rights,	the	Series	B	Preferred	Stock	was	considered	a participating	security	requiring	the	use	of	the	two-class	method	for	the	computation	of	basic	EPS.

In	January	2011,	all	of	the	shares	of	the	Series	B	Preferred	Stock	were	mandatorily	and	automatically	converted	into	shares	of	common	stock.	For	2011	and	2012, basic	EPS	is	computed	by	dividing	the	net	income	attributable	to	common	stock	by	the	weighted-average	number	of	shares	of	common	stock	outstanding	during	the period.

Diluted	EPS	is	computed	using	the	more	dilutive	of	the	(a)	if-converted	method	or	(b)	two-class	method.	Since	the	Series	B	Preferred	Stock	participated	equally with	the	common	stock	in	dividends	and	unallocated	income,	diluted	EPS	under	the	if-converted	method	was	and	is	equivalent	to	the	two-class	method.	The	weighted- average	shares	outstanding	of	common	stock	reflects	the	dilutive	effect	that	could	occur	if	convertible	securities	or	other	contracts	to	issue	common	stock	were	converted into	or	exercised	for	common	stock.

The	preparation	of	financial	statements	in	conformity	with	U.S.	generally	accepted	accounting	principles	requires	management	to	make	estimates	and	assumptions that	affect	the	reported	amounts	of	assets	and	liabilities	and	disclosure	of	contingent	assets	and	liabilities	at	the	date	of	the	financial	statements	and	the	reported	amounts of	revenues	and	expenses	during	the	reporting	period.	Actual	results	could	differ	from	those	estimates.

In	2011,	the	Financial	Accounting	Standards	Board	("FASB")	issued	new	accounting	guidance	that	simplifies	goodwill	impairment	tests.	The	new	guidance	states that	a	"qualitative"	assessment	may	be	performed	to	determine	whether	further	impairment	testing	is	necessary.	This	accounting	standard	is	effective	for	fiscal	years beginning	on	or	after	December	15,	2011.	The	Company	adopted	the	new	guidance	effective	January	1,	2012	and	there	was	no	material	impact	on	the	Company's Consolidated	Financial	Statements.

In	2011,	the	FASB	issued	new	disclosure	guidance	related	to	the	presentation	of	the	Statement	of	Comprehensive	Income.	This	guidance	eliminates	the	current option	to	report	other	comprehensive	income	and	its	components	in	the	Consolidated	Statement	of	Changes	in	Stockholders'	Equity.	The	requirement	to	present reclassification	adjustments	out	of	accumulated	other	comprehensive	income	on	the	face	of	the	Consolidated	Statement	of	Operations	has	been	deferred.	This	accounting standard	is	effective	for	fiscal	years	beginning	on	or	after	December	15,	2011.	The	Company	adopted	the	new	guidance	effective	January	1,	2012	and	has	presented	a separate	Statement	of	Comprehensive	Income	in	the	Company's	Consolidated	Financial	Statements.

# 3.	Net	Capital	Requirements	and	Customer	Protection	Requirements

MarketAxess	Corporation,	a	U.S.	subsidiary,	is	a	registered	broker-dealer	with	the	Securities	and	Exchange	Commission	("SEC")	and	is	a	member	of	the Financial	Industry	Regulatory	Authority	("FINRA").	MarketAxess	Corporation	claims	exemption	from	SEC	Rule	15c3-3,	as	it	does	not	hold	customer	securities	or funds	on	account,	as	defined.	Pursuant	to	the	Uniform	Net	Capital	Rule	under	the	Securities	Exchange	Act	of	1934,	MarketAxess	Corporation	is	required	to	maintain minimum	net	capital,	as	defined,	equal	to	the	greater	of	$100,000	or	6	2/3%	of	aggregate	indebtedness.	MarketAxess	Europe	Limited,	a	U.K.	subsidiary,	is	registered	as a	Multilateral	Trading	Facility	dealer	with	the	Financial	Services	Authority	("FSA")	in	the	U.K.	MarketAxess	Canada	Limited,	a	Canadian	subsidiary,	is	registered	as	an Alternative	Trading	System	dealer	under	the	Securities	Act	of	Ontario	and	is	a	member	of	the	Investment	Industry	Regulatory	Organization	of	Canada.	MarketAxess Europe	Limited	and	MarketAxess	Canada	Limited	are	subject	to	certain	financial	resource	requirements	of	the	FSA	and	the	Ontario	Securities	Commission,	respectively. The	following	table	sets	forth	the	capital	requirements,	as	defined,	that	the	Company's	subsidiaries	were	required	to	maintain	as	of	December	31,	2012:

|  | MarketAxess<br>Corporation | MarketAxess<br>Europe	Limited | MarketAxess<br>Canada	Limited |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands) |  |
| Net\tcapital | $63,624 | $13,151 | $479 |
| Minimum\tnet\tcapital\trequired | 2,266 | 2,943 | 277 |
| Excess\tnet\tcapital | $61,358 | $10,208 | $202 |

The	Company's	regulated	subsidiaries	are	subject	to	U.S.,	U.K.	and	Canadian	regulations	which	prohibit	repayment	of	borrowings	from	the	Company	or affiliates,	paying	cash	dividends,	making	loans	to	the	Company	or	affiliates	or	otherwise	entering	into	transactions	that	result	in	a	significant	reduction	in	regulatory	net capital	or	financial	resources,	respectively,	without	prior	notification	to	or	approval	from	such	regulated	entity's	principal	regulator.

# 4.	Fair	Value	Measurements

The	following	table	summarizes	the	valuation	of	the	Company's	assets	and	liabilities	measured	at	fair	value	as	categorized	based	on	the	hierarchy	described	in Note	2.

|  | Level	1 | Level	2 | Level	3 | Total |
| :--- | :--- | :--- | :--- | :--- |
|  |  | (In\tthousands) |  |  |
| As\tof\tDecember\t31,\t2012 |  |  |  |  |
| Money\tmarket\tfunds | $83,519 | $— | $ — | $83,519 |
| Securities\tavailable-for-sale |  |  |  |  |
| U.S.\tgovernment\tobligations | — | \t 31,104 | \t — | 31,104 |
| Municipal\tsecurities | — | \t 17,947 | \t — | 17,947 |
| Corporate\tbonds | — | 2,157 | \t — | 2,157 |
| Foreign\tcurrency\tforward\tand\toption\tcontracts | — | 15 | \t — | 15 |
|  | $83,519 | $51,223 | $ — | $134,742 |
| As\tof\tDecember\t31,\t2011 |  |  |  |  |
| Money\tmarket\tfunds | $111,256 | $— | $ — | $111,256 |
| Securities\tavailable-for-sale |  |  |  |  |
| U.S.\tgovernment\tobligations | — | \t 55,460 | \t — | 55,460 |
| Municipal\tsecurities | — | \t 20,612 | \t — | 20,612 |
| Corporate\tbonds | — | 2,038 | \t — | 2,038 |
| Foreign\tcurrency\tforward\tcontract | — | 155 | \t — | 155 |
|  | $111,256 | $78,265 | $ — | $189,521 |

Securities	classified	within	Level	2	were	valued	using	a	market	approach	utilizing	prices	and	other	relevant	information	generated	by	market	transactions involving	comparable	assets.	The	foreign	currency	forward	and	options	contracts	are	classified	within	Level	2	as	the	valuation	inputs	are	based	on	quoted	market	prices. There	were	no	financial	assets	classified	within	Level	3	during	2012	and	2011.

The	Company	enters	into	foreign	currency	forward	contracts	to	hedge	the	exposure	to	variability	in	foreign	currency	cash	flows	resulting	from	the	net	investment in	the	Company's	U.K.	subsidiary.	The	Company	assesses	each	foreign	currency	forward	contract	to	ensure	that	it	is	highly	effective	at	reducing	the	exposure	being hedged.	The	Company	designates	each	foreign	currency	forward	contract	as	a	hedge,	assesses	the	risk	management	objective	and	strategy,	including	identification	of	the hedging	instrument,	the	hedged	item	and	the	risk	exposure	and	how	effectiveness	is	to	be	assessed	prospectively	and	retrospectively.	These	hedges	are	for	a	one-month period	and	are	used	to	limit	exposure	to	foreign	currency	exchange	rate	fluctuations.	Gains	or	losses	on	foreign	currency	forward	contracts	designated	as	hedges	are included	in	accumulated	other	comprehensive	loss	in	the	Consolidated	Statements	of	Financial	Condition.	The	gross	and	net	fair	value	liability	as	of	December	31,	2012 is	included	in	accounts	payable	and	the	gross	and	net	fair	value	asset	as	of	December	31,	2011	is	included	in	accounts	receivable,	in	the	Consolidated	Statements	of Financial	Condition.

A	summary	of	the	foreign	currency	forward	contracts	is	as	follows:

|  | As	of	December	31, | As	of	December	31, |
| :--- | :--- | :--- |
|  | 2012 | 2011 |
|  | (In\tthousands) |  |
| Notional\tvalue | $15,792 | $28,671 |
| Fair\tvalue\tof\tnotional | \t 15,809 | \t 28,516 |
| Gross\tand\tnet\tfair\tvalue\t(liability)\tasset | $(17) | $155 |

In	October	2012,	the	Company	purchased	a	foreign	exchange	call	option	to	economically	hedge	the	£26.0	million	purchase	price	of	Xtrakter	Limited	("Xtrakter") (See	Note	16,	"Acquisition").	As	of	December	31,	2012,	the	fair	value	of	the	call	option	was	$32,000.	A	mark-to-market	loss	of	$0.3	million	was	included	in	general	and administrative	expense	in	the	Consolidated	Statement	of	Operations	for	the	year	ended	December	31,	2012.

The	following	is	a	summary	of	the	Company's	securities	available-for-sale:

|  |  | Gross | Gross | Estimated |
| :--- | :--- | :--- | :--- | :--- |
|  | Amortized\ncost | unrealized\ngains | unrealized\nlosses | fair\nvalue |
|  |  | (In\tthousands) |  |  |
| As\tof\tDecember\t31,\t2012 |  |  |  |  |
| U.S.\tgovernment\tobligations | $ 30,255 | $849 | $— | $31,104 |
| Municipal\tsecurities | 17,941 | 10 | (4) | \t 17,947 |
| Corporate\tbonds | 2,159 | — | (2) | 2,157 |
| Total\tsecurities\tavailable-for-sale | $ 50,355 | $859 | $(6) | $51,208 |
| As\tof\tDecember\t31,\t2011 |  |  |  |  |
| U.S.\tgovernment\tobligations | $ 53,832 | $1,628 | $— | $55,460 |
| Municipal\tsecurities | 20,613 | 7 | (8) | \t 20,612 |
| Corporate\tbonds | 2,028 | 10 | — | 2,038 |
| Total\tsecurities\tavailable-for-sale | $ 76,473 | $1,645 | $(8) | $78,110 |

The	following	table	summarizes	the	contractual	maturities	of	securities	available-for-sale:

|  | As	of	December	31, | As	of	December	31, |
| :--- | :--- | :--- |
|  | 2012 | 2011 |
|  | (In\tthousands) |  |
| Less\tthan\tone\tyear | $10,870 | $31,554 |
| Due\tin\t1—5\tyears | \t 40,338 | \t 46,556 |
| Total\tsecurities\tavailable-for-sale | $51,208 | $78,110 |

Proceeds	from	the	sales	and	maturities	of	securities	available-for-sale	during	2012,	2011	and	2010	were	$42.0	million,	$27.4	million	and	$65.4	million, respectively.

The	following	table	provides	fair	values	and	unrealized	losses	on	securities	available-for-sale	and	by	the	aging	of	the	securities'	continuous	unrealized	loss position:

|  | Less	than	Twelve	Months | Less	than	Twelve	Months | Twelve	Months	or	More | Twelve	Months	or	More | Total |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Estimated\nfair\nvalue | Gross\nunrealized\nlosses | Estimated\nfair\nvalue | Gross\nunrealized\nlosses | Estimated\nfair\nvalue | Gross\nunrealized\nlosses |
|  |  |  | (In\tthousands) |  |  |  |
| As\tof\tDecember\t31,\t2012 |  |  |  |  |  |  |
| U.S.\tgovernment\tobligations | $— | $— | $— | $— | $— | $— |
| Municipal\tsecurities | 2,780 | (4) | — | — | 2,780 | (4) |
| Corporate\tbonds | 2,157 | (2) | — | — | 2,157 | (2) |
| Total | $4,937 | $(6) | $— | $— | $4,937 | $(6) |
| As\tof\tDecember\t31,\t2011 |  |  |  |  |  |  |
| U.S.\tgovernment\tobligations | $— | $— | $— | $— | $— | $— |
| Municipal\tsecurities | 9,529 | (8) | — | — | 9,529 | (8) |
| Corporate\tbonds | — | — | — | — | — | — |
| Total | $9,529 | $(8) | $— | $— | $9,529 | $(8) |

# 5.	Goodwill	and	Intangible	Assets

Goodwill	and	intangible	assets	principally	relate	to	the	acquisitions	of	Greenline	Financial	Technologies,	Inc.	("Greenline")	in	2008	and	Trade	West	Systems, LLC	in	2007.	Goodwill	was	$31.8	million	as	of	both	December	31,	2012	and	December	31,	2011.	Intangible	assets	that	are	subject	to	amortization,	including	the	related accumulated	amortization,	are	comprised	of	the	following:

|  |  | December	31,	2012 |  |  | December	31,	2011 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Cost | Accumulated\nAmortization | Net\tCarrying\nAmount | Cost | Accumulated\nAmortization | Net\tCarrying\nAmount |
|  |  |  | (In\tthousands) | (In\tthousands) |  |  |
| Technology | $4,010 | $(3,892) | $118 | $4,010 | $(3,202) | $808 |
| Customer\trelationships | \t 3,530 | (2,364) | 1,166 | \t 3,530 | (1,999) | 1,531 |
| Non-competition\tagreements | \t 1,260 | (1,214) | 46 | \t 1,260 | (962) | 298 |
| Tradenames | 590 | (570) | 20 | 590 | (467) | 123 |
| Total | $9,390 | $(8,040) | $1,350 | $9,390 | $(6,630) | $2,760 |

Amortization	expense	associated	with	identifiable	intangible	assets	was	$1.4	million	and	$1.5	million,	respectively,	for	the	years	ended	December	31,	2012	and 2011.	Estimated	total	amortization	expense	is	$0.5	million	for	2013,	$0.3	million	for	2014,	$0.2	million	for	each	of	2015	and	2016	and	$0.1	million	for	2017.

# 6.	Capitalized	Software,	Furniture,	Equipment	and	Leasehold	Improvements

Capitalized	software	development	costs,	furniture,	equipment	and	leasehold	improvements,	net	of	accumulated	depreciation	and	amortization,	are	comprised	of the	following:

|  | As	of	December	31,<br>2012 | 2011 |
| :--- | :--- | :--- |
|  | (In\tthousands) |  |
| Software\tdevelopment\tcosts | $29,662 | $24,440 |
| Computer\thardware\tand\trelated\tsoftware | 15,702 | 11,126 |
| Office\thardware | 2,125 | 1,832 |
| Furniture\tand\tfixtures | 1,479 | 1,446 |
| Leasehold\timprovements | 4,709 | 4,667 |
| Computer\thardware\tunder\tcapital\tlease | 1,419 | 1,419 |
| Accumulated\tdepreciation\tand\tamortization | (37,087) | (30,470) |
| Total\tcapitalized\tsoftware,\tfurniture,\tequipment\tand\tleasehold\timprovements,\tnet\tof\naccumulated\tdepreciation\tand\tamortization | $18,009 | $14,460 |

During	the	years	ended	December	31,	2012,	2011	and	2010,	software	development	costs	totaling	$5.2	million,	$4.1	million	and	$1.9	million,	respectively,	were capitalized.	Non-capitalized	software	costs	and	routine	maintenance	costs	are	expensed	as	incurred	and	are	included	in	employee	compensation	and	benefits	and professional	and	consulting	fees	in	the	Consolidated	Statements	of	Operations.

The	provision	for	income	taxes	consists	of	the	following:

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2012 | 2011 | 2010 |
|  |  | (In\tthousands) |  |
| Current: |  |  |  |
| Federal | $12,981 | $3,605 | $— |
| State\tand\tlocal | 2,138 | 2,793 | 355 |
| Foreign | 1,315 | 1,194 | 1,348 |
| Total\tcurrent\tprovision | \t 16,434 | 7,592 | 1,703 |
| Deferred: |  |  |  |
| Federal | 8,951 | \t 20,531 | \t 14,494 |
| State\tand\tlocal | 1,238 | 2,890 | 3,170 |
| Foreign | (6) | 16 | 115 |
| Total\tdeferred\tprovision | \t 10,183 | \t 23,437 | \t 17,779 |
| Provision\tfor\tincome\ttaxes | $26,617 | $31,029 | $19,482 |

The	difference	between	the	Company's	reported	provision	for	income	taxes	and	the	U.S.	federal	statutory	rate	of	35%	is	as	follows:

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2012 | 2011 | 2010 |
| U.S.\tfederal\ttax\tat\tstatutory\trate | \t35.0% | \t35.0% | \t35.0% |
| State\tand\tlocal\ttaxes—net\tof\tfederal\tbenefit | 2.4 | 5.2 | 4.6 |
| Release\tof\tpreviously\tunrecognized\ttax\tbenefits | \t(7.8) | \t — | \t — |
| Other,\tnet | 1.1 | \t(0.8) | \t(1.4) |
| Provision\tfor\tincome\ttaxes | \t30.7% | \t39.4% | \t38.3% |

The	following	is	a	summary	of	the	Company's	net	deferred	tax	assets:

|  | As	of	December	31, | As	of	December	31, |
| :--- | :--- | :--- |
|  | 2012 | 2011 |
|  | (In\tthousands) |  |
| Deferred\ttax\tassets |  |  |
| U.S\tnet\toperating\tloss\tcarryforwards | $7,175 | $4,589 |
| Foreign\tnet\toperating\tloss\tcarryforwards | 160 | 165 |
| Stock\tcompensation\texpense | 5,296 | 5,312 |
| Other | 2,839 | 3,280 |
| Total\tdeferred\ttax\tassets | \t 15,470 | \t 13,346 |
| Valuation\tallowance | (727) | (287) |
| Net\tdeferred\ttax\tassets | \t 14,743 | \t 13,059 |
| Deferred\ttax\tliabilities |  |  |
| Depreciation\tand\tamortization | (2,025) | (1,905) |
| Capitalized\tsoftware\tdevelopment\tcosts | (2,752) | (1,980) |
| Intangible\tassets | (524) | (1,085) |
| Deferred\ttax\tassets,\tnet | $9,442 | $8,089 |

As	of	December	31,	2012,	the	Company	had	deferred	tax	assets	associated	with	stock-based	compensation	of	approximately	$5.3	million.	There	is	a	risk	that	the ultimate	tax	benefit	realized	upon	the	exercise	of	stock	options	or	vesting	of	restricted	stock	could	be	less	than	the	tax	benefit	previously	recognized	and	exhaust	the additional-paid-in-capital	pool.	If	this	should	occur,	any	excess	tax	benefit	previously	recognized	would	be	reversed,	resulting	in	an	increase	in	tax	expense.	Since	the tax	benefit	to	be	realized	in	the	future	is	unknown,	it	is	not	currently	possible	to	estimate	the	impact	on	the	deferred	tax	balance.	As	of	December	31,	2012,	the	additional paid-in-capital	pool,	which	is	determined	under	a	one	pool	approach	for	employee	and	non-employee	awards,	was	approximately	$42.9	million.	The	additional	paid-in- capital	pool	is	currently	sufficient	to	absorb	a	complete	write-off	of	the	stock-based	compensation	deferred	tax	asset.

As	of	December	31,	2012,	the	Company	had	restricted	U.S.	federal	net	operating	loss	carryforwards	of	approximately	$17.1	million,	which	begin	to	expire	in 2021,	and	$0.7	million	of	foreign	loss	carryforwards,	which	begin	to	expire	in	2025.	In	2001	and	2000,	MarketAxess	Holdings	Inc.	and	MarketAxess	Corporation	had an	ownership	change	within	the	meaning	of	Section	382	of	the	Internal	Revenue	Code.	Net	operating	loss	carryforwards	relating	to	this	ownership	change	were	$25.6 million	as	of	December	31,	2012	of	which	$10.6	million	is	deemed	utilizable	and	recognized	as	a	net	operating	loss	carryforward.	Greenline	experienced	an	ownership change	within	the	meaning	of	Section	382	of	the	Internal	Revenue	Code	in	2008.	The	Company	does	not	believe	that	this	ownership	change	significantly	impacts	the ability	to	utilize	acquired	net	operating	loss	carryforwards,	which	amounted	to	$6.5	million	as	of	December	31,	2012.	In	addition,	the	Company's	net	operating	loss carryforwards	may	be	subject	to	additional	annual	limitations	if	there	is	a	50%	or	greater	change	in	the	Company's	ownership,	as	determined	over	a	rolling	three-year period.

The	Company	issued	warrants	to	certain	broker-dealer	stockholders	at	the	time	that	they	made	an	equity	investment	in	the	Company.	All	of	the	warrants	were exercised	prior	to	2008.	Through	December	31,	2009,	the	tax	benefit	on	a	portion	of	the	tax	deduction	generated	on	the	exercise	of	the	warrants	had	not	yet	been recorded.	During	2010,	the	Company	recognized	a	portion	of	the	tax	benefits	amounting	to	$11.4	million	as	an	increase	to	additional	paid-in-capital	due	to	the	utilization of	the	related	tax	loss	carryforwards	of	$31.0	million.	During	the	first	quarter	of	2011,	the	Company	recognized	the	remaining	portion	of	the	tax	benefit,	amounting	to $4.2	million,	as	an	increase	to	additional	paid-in-capital	due	to	the	expected	utilization	of	the	related	tax	loss	carryforwards	of	$10.4	million.

The	ultimate	realization	of	deferred	income	tax	assets	is	dependent	upon	the	generation	of	future	taxable	income	during	the	periods	in	which	the	temporary differences	become	deductible.	If	it	is	not	more	likely	than	not	that	some	portion	or	all	of	the	gross	deferred	income	tax	assets	will	be	realized	in	future	years,	a valuation	allowance	is	recorded.	As	of	December	31,	2012,	the	valuation	allowance	relates	to	certain	foreign	and	state	tax	loss	carryforwards	that	are	not	expected	to	be realized.	A	summary	of	the	changes	in	the	valuation	allowance	follows:

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2012 | 2011 | 2010 |
|  |  | (In\tthousands) |  |
| Valuation\tallowance\tat\tbeginning\tof\tyear | $287 | $249 | $666 |
| Increase\t(decrease)\tto\tvaluation\tallowance\tattributable\tto: |  |  |  |
| Net\toperating\tlosses | \t 440 | 38 | (132) |
| Tax\tcredits | \t — | \t — | (285) |
| Valuation\tallowance\tat\tend\tof\tyear | $727 | $287 | $249 |

The	Company	or	one	of	its	subsidiaries	files	U.S.	federal,	state	and	foreign	income	tax	returns.	No	income	tax	returns	have	been	audited,	with	the	exception	of New	York	city	(through	2003)	and	state	(through	2006)	and	Connecticut	state	(through	2003)	tax	returns.	An	examination	of	the	Company's	New	York	state	franchise tax	returns	for	2007	through	2009	is	currently	underway.	The	Company	cannot	estimate	when	the	examination	will	conclude.

In	the	fourth	quarter	of	2012,	the	Company	recorded	a	reduction	to	the	income	tax	provision	of	$6.7	million.	The	Company	updated	the	recognition	of	certain acquired	net	operating	loss	carryforwards	in	response	to	a	private	letter	ruling	received	from	the	Internal	Revenue	Service.	As	a	result,	the	reserve	for	unrecognized	tax benefits	amounting	to	$3.6	million	was	reversed	and	deferred	tax	assets	were	increased	by	$3.1	million	to	recognize	additional	tax	loss	carryforwards.	A	reconciliation	of the	unrecognized	tax	benefits	is	as	follows	(in	thousands):

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2012 | 2011 | 2010 |
|  |  | (In\tthousands) |  |
| Balance\tat\tbeginning\tof\tyear | $3,647 | $3,329 | $2,924 |
| Additions\tfor\ttax\tpositions\tof\tprior\tyears | — | 366 | 277 |
| Additions\tfor\ttax\tpositions\tof\tcurrent\tyear | — | — | 128 |
| Reductions\tfor\ttax\tpositions\tof\tprior\tyears | (3,598) | (48) | — |
| Balance\tat\tend\tof\tyear | $49 | $3,647 | $3,329 |

# 8.	Related	Parties

On	February	28,	2012,	the	Company	completed	a	registered	underwritten	secondary	public	offering	of	3,597,333	shares	of	common	stock	held	by	JPM.	The Company	did	not	receive	any	of	the	proceeds	of	the	offering.	In	addition,	the	Company	repurchased	1,821,730	shares	of	non-voting	common	stock	held	by	JPM	(see Note	9,	"Stockholders'	Equity").	After	February	28,	2012,	JPM	no	longer	holds	shares	of	common	stock	in	the	Company	and	is	not	considered	a	related	party.

The	Company	generates	commissions,	technology	products	and	services	revenues,	information	and	user	access	fees,	investment	income	and	other	income	and related	accounts	receivable	balances	from	JPM	and	its	affiliates.	In	addition,	JPM	acts	in	a	custodial	and	cash	management	capacity	for	the	Company.	The	Company	also maintains	an	account	with	and	paid	commissions	to	JPM	in	connection	with	the	Company's	share	repurchase	program.	The	Company	also	incurs	bank	fees	in connection	with	these	arrangements.	As	of	the	dates	and	for	the	periods	indicated	below,	the	Company	had	the	following	balances	and	transactions	with	JPM	and	its affiliates:

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2012 | 2011 | 2010 |
|  |  | (In\tthousands) |  |
| Commissions | $1,480 | $7,045 | $5,541 |
| Technology\tproducts\tand\tservices | 35 | 167 | 16 |
| Information\tand\tuser\taccess\tfees | 24 | 176 | 132 |
| Investment\tincome | 20 | 90 | 113 |
| Other\tincome | 11 | 66 | 63 |
| General\tand\tadministrative | 7 | 73 | 27 |

# 9.	Stockholders'	Equity

# Common	Stock

As	of	December	31,	2012	and	2011,	the	Company	had	110,000,000	authorized	shares	of	common	stock	and	10,000,000	authorized	shares	of	non-voting	common stock.	Common	stock	entitles	the	holder	to	one	vote	per	share	of	common	stock	held.

In	June	2010,	the	Board	of	Directors	of	the	Company	authorized	a	share	repurchase	program	for	up	to	$30.0	million	of	the	Company's	common	stock.	The	share repurchase	program	was	completed	in	December	2010.	A	total	of	1,939,620	shares	were	repurchased	at	an	aggregate	cost	of	$30.0	million	over	the	life	of	the	repurchase program.	Shares	repurchased	under	the	program	are	held	in	treasury	for	future	use.

On	February	28,	2012,	the	Company	repurchased	1,821,730	shares	of	the	Company's	non-voting	common	stock	from	JPM	at	a	cost	of	$52.9	million.	Shares repurchased	from	JPM	were	cancelled	by	the	Company.	JPM	also	converted	763,924	shares	of	non-voting	common	stock	to	voting	common	stock	on	February	28,	2012.

# Series	B	Preferred	Stock	Conversion

In	2008,	the	Company	entered	into	a	Securities	Purchase	Agreement	(the	"Purchase	Agreement")	with	two	funds	managed	by	Technology	Crossover	Ventures (the	"Purchasers"),	pursuant	to	which	the	Company	sold	to	the	Purchasers	(i)	35,000	shares	of	the	Company's	Series	B	Preferred	Stock,	which	shares	were	convertible into	an	aggregate	of	3,500,000	shares	of	common	stock,	and	(ii)	warrants	(the	"Warrants"	and,	together	with	the	Series	B	Preferred	Stock,	the	"Securities")	to	purchase an	aggregate	of	700,000	shares	of	common	stock	at	an	exercise	price	of	$10.00	per	share,	for	an	aggregate	purchase	price	of	$35.0	million.	The	net	proceeds,	after	the placement	agent	fee	and	legal	fees,	were	$33.5	million.	The	Warrants	were	exercisable	for	cash	or	on	a	net	exercise	basis.	The	Warrants	were	to	expire	on	the	tenth anniversary	of	the	date	they	were	first	issued	and	were	subject	to	customary	anti-dilution	adjustments	in	the	event	of	stock	splits,	reverse	stock	splits,	stock	dividends	and similar	transactions.

The	shares	of	Series	B	Preferred	Stock	were	convertible	at	any	time	by	the	holders	thereof	at	a	conversion	price	of	$10.00	per	share,	subject	to	certain	anti- dilution	adjustments	and	also	were	subject	to	automatic	conversion	into	shares	of	common	stock	if	the	closing	price	of	the	common	stock	was	at	least	$17.50	on	each trading	day	for	a	period	of	65	consecutive	trading	days.	In	January	2011,	all	of	the	shares	of	the	Series	B	Preferred	Stock	were	mandatorily	and	automatically	converted into	3,499,999	shares	of	common	stock.	In	November	2011,	a	total	of	455,465	shares	of	common	stock	were	issued	upon	the	exercise	of	the	Warrants	on	a	net	exercise basis.

# Dividends

The	Company	initiated	a	regular	quarterly	dividend	in	the	fourth	quarter	of	2009.	In	January	2013,	the	Company's	Board	of	Directors	approved	a	quarterly	cash dividend	of	$0.13	per	share	payable	on	February	28,	2013	to	stockholders	of	record	as	of	the	close	of	business	on	February	14,	2013.	On	December	27,	2012,	the Company	paid	a	special	dividend	of	$1.30	per	share.	Any	future	declaration	and	payment	of	dividends	will	be	at	the	sole	discretion	of	the	Company's	Board	of Directors.	The	Board	of	Directors	may	take	into	account	such	matters	as	general	business	conditions,	the	Company's	financial	results,	capital	requirements,	contractual, legal,	and	regulatory	restrictions	on	the	payment	of	dividends	to	the	Company's	stockholders	or	by	the	Company's	subsidiaries	to	the	parent	and	any	such	other	factors as	the	Board	of	Directors	may	deem	relevant.

# 10.	Stock-Based	Compensation	Plans

The	Company	has	two	stock	incentive	plans	which	provide	for	the	grant	of	stock	options,	stock	appreciation	rights,	restricted	stock,	performance	shares, performance	units,	or	other	stock-based	awards	as	incentives	and	rewards	to	encourage	employees,	consultants	and	non-employee	directors	to	participate	in	the	long- term	success	of	the	Company.	As	of	December	31,	2012,	there	were	5,116,163	shares	available	for	grant	under	the	stock	incentive	plans.

Total	stock-based	compensation	expense	was	as	follows:

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2012 | 2011 | 2010 |
|  |  | (In\tthousands) |  |
| Employee: |  |  |  |
| Restricted\tstock\tand\tperformance\tshares | $7,046 | $5,856 | $6,588 |
| Stock\toptions | 668 | 324 | \t 1,728 |
|  | \t 7,714 | \t 6,180 | \t 8,316 |
| Non-employee\tdirectors: |  |  |  |
| Restricted\tstock | 671 | 679 | 570 |
| Stock\toptions | — | — | 83 |
|  | 671 | 679 | 653 |
| Total\tstock-based\tcompensation | $8,385 | $6,859 | $8,969 |

The	Company	records	stock-based	compensation	expense	for	employees	in	employee	compensation	and	benefits	and	for	non-employee	directors	in	general	and administrative	expenses	in	the	Consolidated	Statements	of	Operations.

# Stock	Options

The	exercise	price	of	each	option	granted	is	equal	to	the	market	price	of	the	Company's	common	stock	on	the	date	of	grant.	Generally,	option	grants	have provided	for	vesting	over	a	three	or	five-year	period.	Options	expire	ten	years	from	the	date	of	grant.	The	fair	value	of	each	option	award	is	estimated	on	the	date	of	grant using	the	Black-Scholes	option-pricing	model.	The	determination	of	fair	value	of	share-based	payment	awards	on	the	date	of	grant	using	an	option-pricing	model	is affected	by	the	Company's	stock	price	as	well	as	assumptions	regarding	a	number	of	highly	complex	and	subjective	variables,	including	the	expected	stock	price volatility	over	the	term	of	the	awards,	the	risk-free	interest	rate	and	the	expected	term.	Expected	volatilities	are	based	on	historical	volatility	of	the	Company's	stock	and a	peer	group.	The	risk-free	interest	rate	is	based	on	U.S.	Treasury	securities	with	a	maturity	value	approximating	the	expected	term	of	the	option.	The	expected	term represents	the	period	of	time	that	options	granted	are	expected	to	be	outstanding	based	on	actual	and	projected	employee	stock	option	exercise	behavior.

The	weighted-average	fair	value	for	options	granted	during	2012,	2011	and	2010	was	$12.26,	$11.29	and	$5.45,	respectively.	The	following	table	represents	the assumptions	used	for	the	Black-Scholes	option-pricing	model	to	determine	the	per	share	weighted-average	fair	value	for	options	granted	for	the	three	years	ended December	31,	2012:

|  | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
| Expected\tlife\t(years) | 5.0 | 9.9 | 5.0 |
| Risk-free\tinterest\trate | 0.7% | 3.3% | 2.2% |
| Expected\tvolatility | 48.2% | 48.0% | 50.0% |
| Expected\tdividend\tyield | 1.2% | 1.3% | 2.0% |

The	following	table	reports	stock	option	activity	during	the	three	years	ended	December	31,	2012	and	the	intrinsic	value	as	of	December	31,	2012:

|  |  |  | Remaining |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Number\tof | Weighted-Average | Contractual |  |
|  | Shares | Exercise\tPrice | Term | Intrinsic\tValue |
|  |  |  |  | (In\tthousands) |
| Outstanding\tat\tDecember\t31,\t2009 | \t 5,166,558 | $9.10 |  |  |
| Granted | 8,239 | $14.10 |  |  |
| Canceled | (12,575) | $13.85 |  |  |
| Exercised | (758,660) | $9.17 |  |  |
| Outstanding\tat\tDecember\t31,\t2010 | \t 4,403,562 | $9.09 |  |  |
| Granted | 340,771 | $21.60 |  |  |
| Canceled | (211,323) | $16.16 |  |  |
| Exercised | \t(1,605,273) | $10.21 |  |  |
| Outstanding\tat\tDecember\t31,\t2011 | \t 2,927,737 | $9.42 | 8.1 |  |
| Granted | 13,292 | $32.45 |  |  |
| Canceled | — | $— |  |  |
| Exercised | \t(1,511,207) | $5.64 |  | $41,310 |
| Outstanding\tat\tDecember\t31,\t2012 | \t 1,429,822 | $13.62 | 4.5 | $31,002 |
| Exercisable\tat\tDecember\t31,\t2012 | \t 1,214,099 | $12.10 | 4.0 | $28,172 |

The	intrinsic	value	is	the	amount	by	which	the	closing	price	of	the	Company's	common	stock	on	December	31,	2012	of	$35.30	or	the	price	on	the	day	of	exercise exceeds	the	exercise	price	of	the	stock	options	multiplied	by	the	number	of	shares.	As	of	December	31,	2012,	there	was	$1.8	million	of	total	unrecognized	compensation cost	related	to	non-vested	stock	options.	That	cost	is	expected	to	be	recognized	over	a	weighted-average	period	of	3.0	years.

# Restricted	Stock	and	Performance	Shares

Shares	of	restricted	stock	generally	vest	over	a	period	of	three	years.	Compensation	expense	is	measured	at	the	grant	date	and	recognized	ratably	over	the	vesting period.	Performance	share	awards	are	granted	to	certain	senior	managers.	Each	performance	share	award	is	earned	or	forfeited	based	on	the	level	of	achievement	by	the Company	of	pre-tax	operating	income	on	a	per	share	basis	before	performance	share	and	cash	bonus	expense.	The	pay-out	ranges	from	zero	to	150%	of	the	performance share	award.	For	each	performance	share	earned,	a	participant	is	awarded	an	equal	number	of	shares	of	restricted	stock.	Any	restricted	stock	awarded	to	a	participant vests	and	ceases	to	be	restricted	stock	in	two	equal	installments	on	each	of	the	second	and	third	anniversaries	of	the	date	of	grant	of	the	applicable	performance	share award.	Compensation	expense	for	performance	shares	is	measured	at	the	grant	date	and	recognized	on	a	graded	basis	over	the	vesting	period.	The	pay-out	achievement was	92.5%,	146%	and	150%	of	the	performance	award	for	2012,	2011	and	2010,	respectively.	The	following	table	reports	performance	share	activity	for	the	three	years ended	December	31,	2012:

|  | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
| Performance\tyear |  |  |  |
| Share\tpay-out\tat\tplan,\tnet\tof\tforfeitures\tof\t14,563\tfor\t2011 | \t 44,843 | \t 63,102 | 87,035 |
| Actual\tshare\tpay-out\tin\tfollowing\tyear | \t 41,481 | \t 94,653 | \t 130,552 |
| Fair\tvalue\tper\tshare\ton\tgrant\tdate | $30.64 | $21.56 | $14.29 |

The	following	table	reports	restricted	stock	and	performance	share	activity	during	the	three	years	ended	December	31,	2012:

As	of	December	31,	2012,	there	was	$9.7	million	of	total	unrecognized	compensation	expense	related	to	non-vested	restricted	stock	and	performance	shares.	That cost	is	expected	to	be	recognized	over	a	weighted-average	period	of	1.7	years.

The	following	table	sets	forth	the	computation	of	basic	and	diluted	earnings	per	common	share:

|  | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
|  | (In\tthousands,\texcept\tper\tshare | (In\tthousands,\texcept\tper\tshare |  |
|  |  | amounts) |  |
| Basic\tEPS |  |  |  |
| Net\tincome | $60,069 | $47,704 | $31,428 |
| Amount\tallocable\tto\tcommon\tshareholders | 100.0% | 100.0% | 90.5% |
| Net\tincome\tapplicable\tto\tcommon\tstock | $60,069 | $47,704 | $28,427 |
| Common\tstock—voting | \t 36,101 | \t 34,420 | \t 30,573 |
| Common\tstock—non-voting | 415 | 2,586 | 2,586 |
| Basic\tweighted\taverage\tshares\toutstanding | \t 36,516 | \t 37,006 | \t 33,159 |
| Basic\tearnings\tper\tshare | $1.65 | $1.29 | $0.86 |
| Diluted\tEPS |  |  |  |
| Net\tincome | $60,069 | $47,704 | $31,428 |
| Basic\tweighted\taverage\tshares\toutstanding | \t 36,516 | \t 37,006 | \t 33,159 |
| Effect\tof\tdilutive\tshares: |  |  |  |
| Series\tB\tPreferred\tStock | — | — | 3,500 |
| Stock\toptions,\trestricted\tstock\tand\twarrants | 1,300 | 2,602 | 2,392 |
| Diluted\tweighted\taverage\tshares\toutstanding | \t 37,816 | \t 39,608 | \t 39,051 |
| Diluted\tearnings\tper\tshare | $1.59 | $1.20 | $0.80 |

Stock	options,	restricted	stock	and	warrants	totaling	0.1	million	shares,	0.3	million	shares	and	0.4	million	shares	for	the	years	ended	December	31,	2012,	2011 and	2010,	respectively,	were	excluded	from	the	computation	of	diluted	earnings	per	share	because	their	effect	would	have	been	antidilutive.	The	computation	of	diluted shares	can	vary	among	periods	due,	in	part,	to	the	change	in	the	average	price	of	the	Company's	common	stock.

# 12.	Commitments	and	Contingencies

The	Company	leases	office	space	and	equipment	under	non-cancelable	lease	agreements	expiring	at	various	dates	through	2022.	Office	space	leases	are	subject	to escalation	based	on	certain	costs	incurred	by	the	landlord.	Minimum	rental	commitments	as	of	December	31,	2012	under	such	operating	and	capital	leases	were	as follows:

|  | Operating | Capital |
| :--- | :--- | :--- |
|  | Leases | Leases |
| Year\tEnding\tDecember\t31, | (In\tthousands) |  |
| 2013 | $1,796 | $322 |
| 2014 | 1,763 | 42 |
| 2015 | 2,026 | — |
| 2016 | 2,039 | — |
| 2017 | 2,952 | — |
| 2018\tand\tthereafter | 7,255 | — |
| Minimum\tlease\tpayments | 17,831 | 364 |
| Less\tamount\trepresenting\tinterest | — | 15 |
|  | $17,831 | $349 |

Rental	expense	for	the	years	ended	December	31,	2012,	2011	and	2010	was	$2.6	million,	$2.5	million	and	$2.7	million,	respectively,	and	is	included	in	occupancy expense	in	the	Consolidated	Statements	of	Operations.	Rental	expense	has	been	recorded	based	on	the	total	minimum	lease	payments	after	giving	effect	to	rent abatement	and	concessions,	which	are	being	amortized	on	a	straight-line	basis	over	the	life	of	the	lease.	The	Company	is	contingently	obligated	for	standby	letters	of credit	amounting	to	$1.5	million	that	were	issued	to	landlords	for	office	space.

In	2008,	the	Company	assigned	the	lease	agreement	on	a	leased	property	to	a	third	party.	The	Company	is	contingently	liable	should	the	assignee	default	on	future lease	obligations	through	the	November	2015	lease	termination	date.	The	aggregate	amount	of	future	lease	obligations	under	this	arrangement	is	$1.1	million	as	of December	31,	2012.

The	Company,	through	two	regulated	subsidiaries,	executes	certain	bond	transactions	between	and	among	institutional	investor	and	broker-dealer	clients	on	a riskless	principal	basis	by	serving	as	counterparty	to	both	the	buyer	and	the	seller	in	matching	back-to-back	trades,	which	are	then	settled	through	a	third-party	clearing organization.	The	Company	acts	as	intermediary	on	a	riskless	principal	basis	in	these	bond	transactions	by	serving	as	counterparty	to	the	two	clients	involved.	Settlement typically	occurs	within	one	to	three	trading	days	after	the	trade	date.	Cash	settlement	of	the	transaction	occurs	upon	receipt	or	delivery	of	the	underlying	instrument	that was	traded.	Under	securities	clearing	agreements	with	the	independent	third	party,	the	Company	maintains	a	collateral	deposit	with	the	clearing	broker	in	the	form	of cash.	As	of	December	31,	2012,	the	amount	of	the	collateral	deposit	included	in	securities	and	cash	provided	as	collateral	in	the	Consolidated	Statements	of	Financial Condition	was	$0.9	million.	The	Company	is	exposed	to	credit	risk	in	the	event	a	counterparty	does	not	fulfill	its	obligation	to	complete	a	transaction.	Pursuant	to	the terms	of	the	securities	clearing	agreements	between	the	Company	and	the	independent	clearing	broker,	the	clearing	broker	has	the	right	to	charge	the	Company	for	losses resulting	from	a	counterparty's	failure	to	fulfill	its	contractual	obligations.	The	losses	are	not	capped	at	a	maximum	amount	and	apply	to	all	trades	executed	through	the clearing	broker.	At	December	31,	2012,	the	Company	had	not	recorded	any	liabilities	with	regard	to	this	right.

In	the	normal	course	of	business,	the	Company	enters	into	contracts	that	contain	a	variety	of	representations,	warranties	and	general	indemnifications.	The Company's	maximum	exposure	under	these	arrangements	is	unknown,	as	this	would	involve	future	claims	that	may	be	made	against	the	Company	that	have	not	yet occurred.	However,	based	on	experience,	the	Company	expects	the	risk	of	loss	to	be	remote.

# 13.	Segment	Information

As	an	electronic	multi-dealer	platform	for	the	trading	of	fixed-income	securities,	the	Company's	operations	constitute	a	single	business	segment.	Because	of	the highly	integrated	nature	of	the	financial	markets	in	which	the	Company	competes	and	the	integration	of	the	Company's	worldwide	business	activities,	the	Company believes	that	results	by	geographic	region	or	client	sector	are	not	necessarily	meaningful	in	understanding	its	business.

# 14.	Retirement	Savings	Plans

The	Company,	through	its	U.S.	and	U.K.	subsidiaries,	offers	its	employees	the	opportunity	to	invest	in	defined	contribution	plans.	For	the	years	ended December	31,	2012,	2011	and	2010,	the	Company	contributed	$1.1	million,	$1.2	million	and	$0.9	million,	respectively,	to	the	plans.

# 15.	Customer	Concentration

During	the	years	ended	December	31,	2012,	2011	and	2010,	no	single	client	accounted	for	more	than	10%	of	total	revenue.	One	institutional	investor	client accounted	for	approximately	13.5%,	14.6%	and	15.8%	of	trading	volumes	during	the	years	ended	December	31,	2012,	2011	and	2010,	respectively.	This	institutional investor	client	also	beneficially	owns	approximately	7%	of	the	outstanding	shares	of	the	Company's	common	stock.

# 16.	Acquisition

On	October	26,	2012,	the	Company	entered	into	an	agreement	to	acquire	all	of	the	outstanding	shares	of	Xtrakter	from	Euroclear	S.A./N.V.	Xtrakter	is	a	U.K.- based	provider	of	regulatory	transaction	reporting,	financial	market	data	and	trade	matching	services	to	the	European	securities	markets.	The	acquisition	of	Xtrakter	will provide	the	Company	with	an	expanded	set	of	technology	solutions	ahead	of	incoming	regulatory	mandates	from	Europe.

The	aggregate	purchase	price	is	£26.0	million	(approximately	$40.5	million)	in	cash,	plus	transaction	costs,	and	is	subject	to	a	post-closing	adjustment	based	on the	net	working	capital	of	Xtrakter	on	the	closing	date.	The	purchase	price	will	be	funded	from	available	cash	on	hand.	The	Company	received	FSA	approval	of	the change	in	control	on	February	18,	2013	and	expects	to	complete	the	acquisition	of	Xtrakter	on	or	about	February	28,	2013.

# 17.	Subsequent	Events

# Credit	Facility

On	January	14,	2013,	the	Company	entered	into	a	three-year	credit	agreement	("Credit	Agreement")	which	provides	for	revolving	loans	and	letters	of	credit	up	to an	aggregate	of	$50.0	million	("Credit	Facility").	Subject	to	satisfaction	of	certain	specified	conditions,	the	Company	is	permitted	to	upsize	the	Credit	Facility	by	an additional	$50.0	million	in	total.

Borrowings	under	the	Credit	Facility	will	bear	interest	at	a	rate	per	annum	equal	to	either	of	the	following,	as	designated	by	the	Company	for	each	borrowing: (A)	the	sum	of	(i)	the	greatest	of	(a)	the	prime	rate,	as	defined,	(b)	the	federal	funds	effective	rate	plus	0.50%	and	(c)	one	month	adjusted	LIBOR	plus	1.00%	plus (ii)	0.50%	or	(B)	the	sum	of	(i)	adjusted	LIBOR	plus	(ii)	1.50%.	Default	interest	is	2.00%	per	annum	in	excess	of	the	rate	otherwise	applicable	in	the	case	of	any overdue	principal	or	any	other	overdue	amount.	The	Company	is	also	required	to	pay	a	commitment	fee	to	the	lenders	under	the	Credit	Facility	in	respect	of	unutilized revolving	loan	commitments	at	a	rate	of	0.30%	per	annum.

The	Company's	existing	and	future	domestic	subsidiaries	(other	than	any	broker-dealer	subsidiary)	have	guaranteed	the	Company's	obligations	under	the	Credit Agreement.	Subject	to	customary	exceptions	and	exclusions,	the	Credit	Facility	is	collateralized	by	first	priority	pledges	(subject	to	permitted	liens)	of	substantially	all	of the	Company's	personal	property	assets	and	the	personal	property	assets	of	the	Company's	domestic	subsidiaries	that	have	guaranteed	the	Credit	Facility,	including	the equity	interests	of	the	Company's	domestic	subsidiaries	and	the	equity	interests	of	certain	of	the	Company's	foreign	subsidiaries	(limited,	in	the	case	of	the	voting	equity interests	of	the	foreign	subsidiaries,	to	a	pledge	of	65%	of	those	equity	interests).	Each	of	the	Company	and	the	guarantors	will	also	be	required	to	provide	mortgages	on any	real	property	owned	by	it.

The	Credit	Agreement	requires	that	the	Company's	consolidated	total	leverage	ratio	tested	on	the	last	day	of	each	fiscal	quarter	not	exceed	2.5	to	1.0.	The	Credit Agreement	also	requires	that	the	Company's	consolidated	interest	coverage	ratio	tested	on	the	last	day	of	each	fiscal	quarter	not	exceed	3.5	to	1.0.

If	an	event	of	default	occurs,	including	failure	to	pay	principal	or	interest	due	on	the	loan	balance,	a	voluntary	or	involuntary	proceeding	seeking	liquidation, change	in	control	of	the	Company,	or	one	or	more	judgments	against	the	Company	in	excess	of	$10	million,	the	lenders	would	be	entitled	to	accelerate	the	facility	and take	various	other	actions,	including	all	actions	permitted	to	be	taken	by	a	secured	creditor.	If	certain	bankruptcy	events	of	default	occur,	the	facility	will	automatically accelerate.

# Employee	Matter

The	Company	assesses	its	liabilities	and	contingencies	in	connection	with	outstanding	legal	proceedings,	if	any,	utilizing	the	latest	information	available.	For matters	where	it	is	probable	that	the	Company	will	incur	a	material	loss	and	the	amount	can	be	reasonably	estimated,	the	Company	would	establish	an	accrual	for	the loss.	Once	established,	the	accrual	would	be	adjusted	to	reflect	any	relevant	developments.	When	a	loss	contingency	is	not	both	probable	and	estimable,	the	Company does	not	establish	an	accrual.

On	January	2,	2013,	a	former	employee	of	the	Company	filed	a	complaint	against	the	Company	with	the	U.S.	Department	of	Labor	alleging	retaliatory employment	practices	in	violation	of	the	whistleblower	provisions	of	the	Sarbanes-Oxley	Act.	The	relief	sought	includes,	among	other	things,	reinstatement,	back	pay and	compensatory	and	punitive	damages.

The	Company	believes	the	complaint	is	without	merit	and	intends	to	vigorously	defend	itself	against	the	allegations.	Given	the	preliminary	stage	and	the	inherent uncertainty	of	the	potential	outcome	of	such	proceedings,	the	Company	cannot	estimate	the	reasonably	possible	range	of	loss	at	this	time.	Based	on	the	available information,	the	Company	believes	that	the	low	end	of	the	reasonably	possible	range	of	loss	is	zero	and,	accordingly,	no	loss	accrual	has	been	provided	in	the Company's	accompanying	financial	statements.

# Item	9.	Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure.

# Item	9A.	Controls	and	Procedures.

Our	management,	including	the	Chief	Executive	Officer	and	Chief	Financial	Officer,	evaluated	the	effectiveness	of	our	"disclosure	controls	and	procedures,"	as that	term	is	defined	in	Rule	13a-15(e)	and	Rule	15d-15(e)	promulgated	under	the	Securities	Exchange	Act	of	1934,	as	amended	(the	"Exchange	Act"),	as	of December	31,	2012.	Based	on	that	evaluation,	the	Chief	Executive	Officer	and	Chief	Financial	Officer	concluded	that	the	disclosure	controls	and	procedures	are effective	to	ensure	that	information	required	to	be	disclosed	by	MarketAxess	in	the	reports	that	we	file	or	submit	under	the	Exchange	Act	is	recorded,	processed, summarized	and	reported	within	the	time	periods	specified	in	the	SEC's	rules	and	forms,	and	to	ensure	that	information	is	accumulated	and	communicated	to	our management,	including	the	Chief	Executive	Officer	and	Chief	Financial	Officer,	as	appropriate	to	allow	timely	decisions	regarding	required	disclosure.

There	were	no	changes	in	our	internal	control	over	financial	reporting	(as	defined	in	Rule	13a-15(f)	and	Rule	15d-15(f)	under	the	Exchange	Act)	during	the quarter	ended	December	31,	2012	identified	in	connection	with	the	evaluation	thereof	by	our	management,	including	the	Chief	Executive	Officer	and	Chief	Financial Officer,	that	materially	affected,	or	are	reasonably	likely	to	materially	affect,	our	internal	control	over	financial	reporting.

Management's	annual	report	on	internal	control	over	financial	reporting	and	the	report	of	our	independent	registered	public	accounting	firm	appears	in	Part	II, Item	8.	"Financial	Statements	and	Supplementary	Data"	of	this	Annual	Report	on	Form	10-K.

# Item	9B.	Other	Information.

# PART	III

# Item	10.	Directors,	Executive	Officers	and	Corporate	Governance.

The	information	required	by	this	item	is	incorporated	herein	by	reference	to	the	sections	entitled	"Proposal	1	—	Election	of	Directors,"	"Corporate	Governance and	Board	Matters,"	"Executive	Officers"	and	"Other	Matters	—	Section	16(a)	beneficial	ownership	reporting	compliance"	in	the	Company's	definitive	Proxy	Statement (the	"Proxy	Statement")	for	the	Annual	Meeting	of	Stockholders	to	be	held	in	the	second	quarter	of	2013.	The	Company	intends	to	file	the	Proxy	Statement	within	120 days	after	the	end	of	its	fiscal	year	(i.e.,	on	or	before	April	30,	2013).	The	Company's	Code	of	Conduct	applicable	to	directors	and	all	employees,	including	senior financial	officers,	is	available	on	the	Company's	website	at	www.marketaxess.com.	If	the	Company	makes	any	amendments	to	its	Code	of	Conduct	that	is	required	to	be disclosed	pursuant	to	the	Exchange	Act,	the	Company	will	make	such	disclosures	on	its	website.

# Item	11.	Executive	Compensation.

The	information	required	by	this	item	is	incorporated	herein	by	reference	to	the	sections	entitled	"Compensation	Discussion	and	Analysis,"	"Report	of	the Compensation	Committee	of	the	Board	of	Directors,"	"Executive	Compensation"	and	"Corporate	Governance	and	Board	Matters	–	Directors'	compensation"	in	the Company's	Proxy	Statement.

# Item	12.	Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters.

The	information	required	by	this	item	with	respect	to	the	security	ownership	of	certain	beneficial	owners	and	management	is	incorporated	herein	by	reference	to the	section	entitled	"Security	Ownership	of	Certain	Beneficial	Owners	and	Management"	in	the	Company's	Proxy	Statement.

# Equity	Compensation	Plan	Information

The	following	table	provides	certain	information	regarding	common	stock	authorized	for	issuance	under	the	Company's	equity	compensation	plans	as	of December	31,	2012:

| Number	of	Securities	to	be<br>Issued	upon	Exercise	of<br>Outstanding	Options,<br>Warrants	and	Rights<br>(a) | Weighted-Average	Exercise<br>Price	of	Outstanding	Options,<br>Warrants	and	Rights<br>(b) | Number	of	Securities<br>Remaining	Available	for<br>Future	Issuance	under<br>Equity	Compensation<br>Plans	(Excluding<br>Securities	Reflected	in<br>Column	(a))<br>(c) |
| :--- | :--- | :--- |
| 1,429,822 | $13.62 | 5,116,163 |

(1) These	plans	consist	of	the	Company's	2012	Incentive	Plan	and	2001	Stock	Incentive	Plan.

# Item	13.	Certain	Relationships	and	Related	Transactions,	and	Director	Independence.

The	information	required	by	this	item	is	incorporated	herein	by	reference	to	the	section	entitled	"Certain	Relationships	and	Related	Party	Transactions"	in	the Company's	Proxy	Statement.

# Item	14.	Principal	Accounting	Fees	and	Services.

The	information	required	by	this	item	is	incorporated	herein	by	reference	to	the	section	entitled	"Proposal	2	–	Ratification	of	Selection	of	Independent	Registered Public	Accounting	Firm	–	Audit	and	other	fees"	in	the	Company's	Proxy	Statement.

# PART	IV

# Item	15.	Exhibits	and	Financial	Statement	Schedules.

# (a)	Financial	Statements	and	Schedules

The	financial	statements	are	set	forth	under	Item	8	of	this	Annual	Report	on	Form	10-K.	Financial	statement	schedules	have	been	omitted	since	they	are	either not	required,	not	applicable,	or	the	information	is	otherwise	included.

# (b)	Exhibit	Listing

10.5(b) Form	of	Restricted	Stock	Agreement	for	Employees	other	than	Richard	M.	McVey	pursuant	to	the	MarketAxess	Holdings	Inc.	2012	Incentive	Plan (incorporated	by	reference	to	Exhibit	10.3	to	the	registrant's	Current	Report	on	Form	8-K	dated	January	15,	2008)#

10.6(b) Form	of	Restricted	Stock	Unit	Agreement	for	employees	other	than	Richard	M.	McVey	pursuant	to	the	MarketAxess	Holdings	Inc.	2012	Incentive Plan	(incorporated	by	reference	to	Exhibit	10.4	to	the	registrant's	Current	Report	on	Form	8-K	dated	January	19,	2011)#

10.6(c) Guidelines	for	Restricted	Stock	Units	granted	under	the	MarketAxess	Holdings	Inc.	2012	Incentive	Plan	(incorporated	by	reference	to	Exhibit	10.1	to the	registrant's	Current	Report	on	Form	8-K	dated	January	19,	2011)#

10.7(a) Form	of	Performance	Share	Award	Agreement	for	Richard	M.	McVey	pursuant	to	the	MarketAxess	Holdings	Inc.	2012	Incentive	Plan	(incorporated by	reference	to	Exhibit	10.1	to	the	registrant's	Current	Report	on	Form	8-K	dated	January	15,	2008)#

10.7(b) Form	of	Performance	Share	Award	Agreement	for	Employees	other	than	Richard	M.	McVey	pursuant	to	the	MarketAxess	Holdings	Inc.	2012 Incentive	Plan	(incorporated	by	reference	to	Exhibit	10.2	to	the	registrant's	Current	Report	on	Form	8-K	dated	January	15,	2008)#

10.8(a) Form	of	Incentive	Stock	Option	Agreement	for	Mr.	McVey	pursuant	to	the	MarketAxess	Holdings	Inc.	2012	Incentive	Plan	(incorporated	by	reference to	Exhibit	10.5	to	the	registrant's	Current	Report	on	Form	8-K	dated	January	15,	2008)#

10.8(b) Form	of	Incentive	Stock	Option	Agreement	for	Employees	other	than	Richard	M.	McVey	pursuant	to	the	MarketAxess	Holdings	Inc.	2012	Incentive Plan	(incorporated	by	reference	to	Exhibit	10.4	to	the	registrant's	Current	Report	on	Form	8-K	dated	January	15,	2008)#

10.8(c) Form	of	Non	Qualified	Stock	Option	Agreement	pursuant	to	the	MarketAxess	Holdings	Inc.	2012	Incentive	Plan	(incorporated	by	reference	to Appendix	C	to	the	registrant's	Proxy	Statement	for	its	Annual	Meeting	of	Stockholders	held	on	June	7,	2006,	filed	on	May	1,	2006)#

10.9(a) MarketAxess	Severance	Pay	Plan,	effective	August	1,	2006	(incorporated	by	reference	to	Exhibit	10.28(a)	to	the	registrant's	Form	10-K	for	the	year ended	December	31,	2009	filed	on	March	3,	2009)#

10.10(a) Letter	Agreement,	dated	January	19,	2011,	by	and	between	MarketAxess	Holdings	Inc.	and	Richard	M.	McVey	(incorporated	by	reference	to	Exhibit 10.4	to	the	registrant's	Current	Report	on	Form	8-K	dated	January	14,	2011)#

101.SCH** XBRL	Taxonomy	Extension	Schema	Document

101.LAB** XBRL	Taxonomy	Extension	Label	Linkbase	Document

101.PRE** XBRL	Taxonomy	Extension	Presentation	Linkbase	Document

101.DEF** XBRL	Taxonomy	Extension	Definition	Linkbase	Document

* Filed	herewith.

** Attached	as	Exhibit	101	to	this	Annual	Report	on	Form	10-K	are	the	following	materials,	formatted	in	XBRL	(eXtensible	Business	Reporting	Language): (i)	Consolidated	Statements	of	Financial	Condition	as	of	December	31,	2012	and	December	31,	2011;	(ii)	Consolidated	Statements	of	Operations	for	the	Years Ended

December	31,	2012,	2011	and	2010;	(iii)	Consolidated	Statements	of	Comprehensive	Income	for	the	Years	Ended

Pursuant	to	Rule	406T	of	Regulation	S-T,	the	Interactive	Data	Files	on	Exhibit	101	hereto	are	deemed	not	filed	or	part	of	a	registration	statement	or	prospectus	for purposes	of	Sections	11	or	12	of	the	Securities	Act	of	1933,	as	amended,	are	deemed	not	filed	for	purposes	of	Section	18	of	the	Securities	and	Exchange	Act	of 1934,	as	amended,	and	otherwise	are	not	subject	to	liability	under	those	sections.

# Management	contract	or	compensatory	plan	or	arrangement.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by the	undersigned,	thereunto	duly	authorized.

By: /s/	RICHARD	M.	MCVEY

	 Richard	M.	McVey

	 Chief	Executive	Officer

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	by	the	following	persons	on	behalf	of	the	registrant	and	in	the capacities	and	on	the	dates	indicated:



Question: by how much did the low of mktx stock increase from 2011 to march 2012?
Calculation: high_2012 = 29.26
low_2012 = 24.57
percent_change = (high_2012 - low_2012) / low_2012
answer = percent_change * 100
Answer: 19.1%