##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 001-34091
 MARKETAXESS HOLDINGS INC.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of incorporation or organization)
    
    52-2230784(IRS Employer Identification No.)299 Park Avenue, 10th Floor New York, New York(Address of principal executive offices)
    
    10171(Zip Code)
 (212) 813-6000  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



MARKETAXESS HOLDINGS INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011
TABLE OF CONTENTS
 PagePART I  Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Statements of Financial Condition as of March 31, 2011 and December 31, 2010
    
    
    3Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010
    
    
    4Consolidated Statement of Changes in Stockholders Equity and Accumulated Other
Comprehensive Loss for the Three Months Ended March 31, 2011
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    30PART II  Other InformationItem 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults Upon Senior Securities
    
    
    31Item 4. (Removed and Reserved)
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    32EX-31.1: CertificationEX-31.2: CertificationEX-31.2: CertificationEX-32.2: Certification
   2




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##### Table of Contents



PART I  Financial Information
 
 Item 1.
    
    Financial Statements
 MARKETAXESS HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (Unaudited)
 As ofMarch 31,
    
    
    December 31,2011
    
    
    2010(In thousands, except shareand per share amounts)ASSETSCash and cash equivalents
    
    $
    116,567
    
    
    $
    124,994Securities available-for-sale, at fair value
    
    
    79,663
    
    
    
    72,552Accounts receivable, net of allowance of $312 and $427 as of March 31, 2011 and
December 31, 2010, respectively
    
    
    30,064
    
    
    
    25,682Deferred tax assets, net
    
    
    20,241
    
    
    
    19,813Goodwill and intangible assets, net of accumulated amortization
    
    
    35,645
    
    
    
    36,012Furniture, equipment, leasehold improvements and capitalized software, net of accumulated
depreciation and amortization
    
    
    12,701
    
    
    
    12,545Prepaid expenses and other assets
    
    
    8,849
    
    
    
    7,923Total assets
    
    $
    303,730
    
    
    $
    299,521LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesAccrued employee compensation
    
    $
    5,972
    
    
    $
    17,791Deferred revenue
    
    
    4,679
    
    
    
    4,571Accounts payable, accrued expenses and other liabilities
    
    
    11,695
    
    
    
    12,368Total liabilities
    
    
    22,346
    
    
    
    34,730Commitments and Contingencies(Note 10)
    
    
    
    
    
    
    Series B Preferred Stock,$0.001 par value, 35,000 shares authorized; zero and 35,000
issued
and outstanding as of March 31, 2011 and December 31, 2010, respectively
    
    
    
    
    
    
    30,315Stockholders equityPreferred stock, $0.001 par value, 4,855,000 shares authorized, no shares issued and
outstanding as of March 31, 2011 and December 31, 2010
    
    
    
    
    
    
    Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued
and outstanding as of March 31, 2011 and December 31, 2010
    
    
    
    
    
    
    Common stock voting, $0.003 par value, 110,000,000 shares authorized, 36,585,440 shares
and
35,945,001 shares issued and 35,281,699 shares and 31,141,261 shares outstanding as of
March 31, 2011 and December 31, 2010, respectively
    
    
    109
    
    
    
    108Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, 2,585,654 shares
issued and outstanding as of March 31, 2011 and December 31, 2010
    
    
    9
    
    
    
    9Additional paid-in capital
    
    
    329,476
    
    
    
    340,615Treasury stock  Common stock voting, at cost, 1,303,741 shares and 4,803,740 shares as of
March 31, 2011 and December 31, 2010, respectively
    
    
    (18,998
    )
    
    
    (70,000
    )Accumulated deficit
    
    
    (27,213
    )
    
    
    (34,605
    )Accumulated other comprehensive loss
    
    
    (1,999
    )
    
    
    (1,651
    )Total stockholders equity
    
    
    281,384
    
    
    
    234,476Total liabilities and stockholders equity
    
    $
    303,730
    
    
    $
    299,521
   3




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended March 31,2011
    
    
    2010(In thousands, except per share amounts)RevenuesCommissionsU.S. high-grade
    
    $
    26,378
    
    
    $
    19,776Eurobond
    
    
    4,617
    
    
    
    5,492Other
    
    
    6,790
    
    
    
    4,039Total commissions
    
    
    37,785
    
    
    
    29,307Technology products and services
    
    
    3,108
    
    
    
    3,164Information and user access fees
    
    
    1,689
    
    
    
    1,634Investment income
    
    
    299
    
    
    
    291Other
    
    
    728
    
    
    
    488Total revenues
    
    
    43,609
    
    
    
    34,884ExpensesEmployee compensation and benefits
    
    
    16,268
    
    
    
    13,933Depreciation and amortization
    
    
    1,562
    
    
    
    1,616Technology and communications
    
    
    2,500
    
    
    
    2,417Professional and consulting fees
    
    
    2,872
    
    
    
    2,138Occupancy
    
    
    766
    
    
    
    938Marketing and advertising
    
    
    974
    
    
    
    628General and administrative
    
    
    1,001
    
    
    
    2,129Total expenses
    
    
    25,943
    
    
    
    23,799Income before income taxes
    
    
    17,666
    
    
    
    11,085Provision for income taxes
    
    
    6,886
    
    
    
    4,384Net income
    
    $
    10,780
    
    
    $
    6,701Net income per common shareBasic
    
    $
    0.30
    
    
    $
    0.18Diluted
    
    $
    0.27
    
    
    $
    0.17Cash dividends declared per common
share
    
    $
    0.09
    
    
    $
    0.07Weighted average common sharesBasic
    
    
    36,507
    
    
    
    33,626Diluted
    
    
    39,301
    
    
    
    39,306
   4




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 AND ACCUMULATED OTHER COMPREHENSIVE LOSS
 FOR THE THREE MONTHS ENDED MARCH 31, 2011
(Unaudited)
 TreasuryCommon
    
    
    
    
    
    
    Stock -
    
    
    
    
    
    
    Accumu-
    
    
    TotalCommon
    
    
    Stock
    
    
    Additional
    
    
    Common
    
    
    Accumu-
    
    
    lated Other
    
    
    Stock-Stock
    
    
    Non-
    
    
    Paid-In
    
    
    Stock
    
    
    lated
    
    
    Comprehen-
    
    
    holdersVoting
    
    
    Voting
    
    
    Capital
    
    
    Voting
    
    
    Deficit
    
    
    sive Loss
    
    
    Equity(In thousands)Balance at December 31. 2010
    
    $
    108
    
    
    $
    9
    
    
    $
    340,615
    
    
    $
    (70,000
    )
    
    $
    (34,605
    )
    
    $
    (1,651
    )
    
    $
    234,476Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,780
    
    
    
    
    
    
    
    10,780Cumulative translation adjustment
and foreign currency exchange
hedge, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )
    
    
    (238
    )Unrealized net loss on securities
available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (110
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,432Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,290Exercise of stock options and
grants of
restricted stock, net of
surrenders on
stock option exercises and
withholding
tax on stock vesting
    
    
    1
    
    
    
    
    
    
    
    190
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    191Cash dividend on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,388
    )
    
    
    
    
    
    
    (3,388
    )Conversion of Series B Preferred
Stock
to common stock voting
    
    
    
    
    
    
    
    
    
    
    (20,687
    )
    
    
    51,002
    
    
    
    
    
    
    
    
    
    
    
    30,315Tax benefit from the exercise of
warrants in prior years
    
    
    
    
    
    
    
    
    
    
    4,239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,239Windfall tax benefits from
stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,829
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,829Balance at March 31, 2011
    
    $
    109
    
    
    $
    9
    
    
    $
    329,476
    
    
    $
    (18,998
    )
    
    $
    (27,213
    )
    
    $
    (1,999
    )
    
    $
    281,384
   5




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MARKETAXESS HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended March 31,2011
    
    
    2010(In thousands)Cash flows from operating activitiesNet income
    
    $
    10,780
    
    
    $
    6,701Adjustments to reconcile net income to net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    1,562
    
    
    
    1,616Stock-based compensation expense
    
    
    2,290
    
    
    
    2,194Deferred taxes
    
    
    4,030
    
    
    
    3,377Provision for bad debts
    
    
    (64
    )
    
    
    242Changes in operating assets and liabilities(Increase) in accounts receivable
    
    
    (4,318
    )
    
    
    (3,777
    )(Increase) in prepaid expenses and other assets
    
    
    (898
    )
    
    
    (130
    )(Decrease) in accrued employee compensation
    
    
    (11,819
    )
    
    
    (10,820
    )Increase in deferred revenue
    
    
    108
    
    
    
    166(Decrease) increase in accounts payable, accrued expenses and other liabilities
    
    
    (605
    )
    
    
    350Net cash provided by (used in) operating activities
    
    
    1,066
    
    
    
    (81
    )Cash flows from investing activitiesSecurities available-for-sale:Proceeds from maturities
    
    
    4,331
    
    
    
    19,301Purchases
    
    
    (11,625
    )
    
    
    (11,209
    )Purchases of furniture, equipment and leasehold improvements
    
    
    (498
    )
    
    
    (2,889
    )Capitalization of software development costs
    
    
    (842
    )
    
    
    (471
    )Other
    
    
    (28
    )
    
    
    57Net cash (used in) provided by investing activities
    
    
    (8,662
    )
    
    
    4,789Cash flows from financing activitiesCash dividend on common stock and Series B Preferred Stock
    
    
    (3,388
    )
    
    
    (2,681
    )Proceeds from exercise of stock options and grants of restricted stock,
net of surrenders on stock option exercises and withholding tax on stock vesting
    
    
    191
    
    
    
    (830
    )Windfall tax benefits from stock-based compensation
    
    
    2,829
    
    
    
    375Other
    
    
    (68
    )
    
    
    (62
    )Net cash (used in) financing activities
    
    
    (436
    )
    
    
    (3,198
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (395
    )
    
    
    (299
    )Cash and cash equivalentsNet (decrease) increase for the period
    
    
    (8,427
    )
    
    
    1,211Beginning of year
    
    
    124,994
    
    
    
    103,341End of period
    
    $
    116,567
    
    
    $
    104,552Supplemental cash flow informationCash paid during the period:Income taxes paid
    
    $
    300
    
    
    $
    493Non-cash activity:Converion of Series B Preferred Stock to common stock
    
    $
    30,315
    
    
    $
    
   6




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Unaudited
 1. Organization and Principal Business Activity
   2. Significant Accounting Policies
 Basis of Presentation
   Cash and Cash Equivalents
  Securities Available-for-Sale
   7




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Fair Value Financial Instruments
  Allowance for Doubtful Accounts
  Depreciation and Amortization
  Software Development Costs
  Securities and Cash Provided as Collateral
  Foreign Currency Translation and Forward Contracts
    8




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##### Table of Contents



Revenue Recognition
  Commission revenue.
 Technology products and services.
    Initial set-up fees.
 Stock-Based Compensation
  Income Taxes
   9




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##### Table of Contents



Business Combinations, Goodwill and Intangible Assets
   Earnings Per Share
    Use of Estimates
  Recent Accounting Pronouncements
   10




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##### Table of Contents



3. Net Capital Requirements and Customer Protection Requirements
  MarketAxess
    
    
    MarketAxess
    
    
    MarketAxessCorporation
    
    
    Europe Limited
    
    
    Canada Limited(In thousands)Net capital
    
    $
    58,992
    
    
    $
    25,068
    
    
    $
    436Minimum net capital
required
    
    
    1,182
    
    
    
    3,833
    
    
    
    283Excess net capital
    
    $
    57,810
    
    
    $
    21,235
    
    
    $
    153
  4. Fair Value Measurements
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(In thousands)As of March 31, 2011Money market funds
    
    $
    89,619
    
    
    $
    
    
    
    $
    
    
    
    $
    89,619Securities available-for-sale:U.S. government obligations
    
    
    
    
    
    
    51,125
    
    
    
    
    
    
    
    51,125Municipal securities
    
    
    
    
    
    
    26,478
    
    
    
    
    
    
    
    26,478Corporate bonds
    
    
    
    
    
    
    2,060
    
    
    
    
    
    
    
    2,060Foreign currency forward
position
    
    
    
    
    
    
    240
    
    
    
    
    
    
    
    240$
    89,619
    
    
    $
    79,903
    
    
    $
    
    
    
    $
    169,522As of December 31, 2010Money market funds
    
    $
    96,661
    
    
    $
    
    
    
    $
    
    
    
    $
    96,661Securities available-for-sale:U.S. government obligations
    
    
    
    
    
    
    41,351
    
    
    
    
    
    
    
    41,351Municipal securities
    
    
    
    
    
    
    29,145
    
    
    
    
    
    
    
    29,145Corporate bonds
    
    
    
    
    
    
    2,056
    
    
    
    
    
    
    
    2,056Foreign currency forward
position
    
    
    
    
    
    
    (337
    )
    
    
    
    
    
    
    (337
    )$
    96,661
    
    
    $
    72,215
    
    
    $
    
    
    
    $
    168,876
   11




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##### Table of Contents



As ofMarch 31, 2011
    
    
    December 31, 2010(In thousands)Notional value
    
    $
    26,225
    
    
    $
    29,117Fair value of notional
    
    
    25,985
    
    
    
    29,454Gross and net fair value asset
(liability)
    
    $
    240
    
    
    $
    (337
    )
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    faircost
    
    
    gains
    
    
    losses
    
    
    value(In thousands)As of March 31, 2011U.S. government obligations
    
    $
    50,356
    
    
    $
    836
    
    
    $
    (67
    )
    
    $
    51,125Municipal securities
    
    
    26,468
    
    
    
    16
    
    
    
    (6
    )
    
    
    26,478Corporate bonds
    
    
    2,060
    
    
    
    
    
    
    
    
    
    
    
    2,060Total securities
available-for-sale
    
    $
    78,884
    
    
    $
    852
    
    
    $
    (73
    )
    
    $
    79,663As of December 31, 2010U.S. government obligations
    
    $
    40,383
    
    
    $
    968
    
    
    $
    
    
    
    $
    41,351Municipal securities
    
    
    29,150
    
    
    
    14
    
    
    
    (19
    )
    
    
    29,145Corporate bonds
    
    
    2,056
    
    
    
    
    
    
    
    
    
    
    
    2,056Total securities
available-for-sale
    
    $
    71,589
    
    
    $
    982
    
    
    $
    (19
    )
    
    $
    72,552
  As ofMarch 31, 2011
    
    
    December 31, 2010(In thousands)Less than one year
    
    $
    24,354
    
    
    $
    23,593Due in 1 - 5 years
    
    
    55,309
    
    
    
    48,959Total securities available-for-sale
    
    $
    79,663
    
    
    $
    72,552
   12




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Less than Twelve Months
    
    
    Twelve Months or More
    
    
    TotalEstimated
    
    
    Gross
    
    
    Estimated
    
    
    Gross
    
    
    Estimated
    
    
    Grossfair
    
    
    unrealized
    
    
    fair
    
    
    unrealized
    
    
    fair
    
    
    unrealizedvalue
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    losses(In thousands)As of March 31, 2011U.S. government obligations
    
    $
    15,434
    
    
    $
    (67
    )
    
    $
    
    
    
    $
    
    
    
    $
    15,434
    
    
    $
    (67
    )Municipal securities
    
    
    14,802
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    14,802
    
    
    
    (6
    )Corporate bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total securities
available-for-sale
    
    $
    30,236
    
    
    $
    (73
    )
    
    $
    
    
    
    $
    
    
    
    $
    30,236
    
    
    $
    (73
    )As of December 31, 2010U.S. government obligations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Municipal securities
    
    
    18,218
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    18,218
    
    
    
    (19
    )Corporate bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total securities
available-for-sale
    
    $
    18,218
    
    
    $
    (19
    )
    
    $
    
    
    
    $
    
    
    
    $
    18,218
    
    
    $
    (19
    )
 5. Goodwill and Intangible Assets
  March 31, 2011
    
    
    December 31, 2010Accumulated
    
    
    Net Carrying
    
    
    
    
    
    
    Accumulated
    
    
    Net CarryingCost
    
    
    Amortization
    
    
    Amount
    
    
    Cost
    
    
    Amortization
    
    
    Amount(In thousands)Technology
    
    $
    4,010
    
    
    $
    (2,680
    )
    
    $
    1,330
    
    
    $
    4,010
    
    
    $
    (2,505
    )
    
    $
    1,505Customer relationships
    
    
    3,530
    
    
    
    (1,687
    )
    
    
    1,843
    
    
    
    3,530
    
    
    
    (1,584
    )
    
    
    1,946Non-competition
agreements
    
    
    1,260
    
    
    
    (773
    )
    
    
    487
    
    
    
    1,260
    
    
    
    (710
    )
    
    
    550Tradenames
    
    
    590
    
    
    
    (389
    )
    
    
    201
    
    
    
    590
    
    
    
    (363
    )
    
    
    227Total
    
    $
    9,390
    
    
    $
    (5,529
    )
    
    $
    3,861
    
    
    $
    9,390
    
    
    $
    (5,162
    )
    
    $
    4,228
   13




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##### Table of Contents



6. Income Taxes
  Three Months Ended March 31,2011
    
    
    2010(In thousands)Current:Federal
    
    $
    
    
    
    $
    164State and local
    
    
    246
    
    
    
    (33
    )Foreign
    
    
    (206
    )
    
    
    522Total current provision
    
    
    40
    
    
    
    653Deferred:Federal
    
    
    4,460
    
    
    
    2,938State and local
    
    
    1,784
    
    
    
    721Foreign
    
    
    602
    
    
    
    72Total deferred provision
    
    
    6,846
    
    
    
    3,731Provision for income taxes
    
    $
    6,886
    
    
    $
    4,384
  As ofMarch 31, 2011
    
    
    December 31, 2010(In thousands)Deferred tax assets and liabilities
    
    $
    20,504
    
    
    $
    20,062Valuation allowance
    
    
    (263
    )
    
    
    (249
    )Deferred tax assets, net
    
    $
    20,241
    
    
    $
    19,813
     14




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##### Table of Contents



7. Related Party
  As ofMarch 31, 2011
    
    
    December 31, 2010(In thousands)Cash and cash equivalents
    
    $
    110,496
    
    
    $
    110,642Securities and cash provided as
collateral
    
    
    4,066
    
    
    
    4,049Accounts receivable
    
    
    1,245
    
    
    
    829Accounts payable
    
    
    41
    
    
    
    66
 Three Months Ended March 31,2011
    
    
    2010(In thousands)Commissions
    
    $
    1,719
    
    
    $
    1,357Technology products and services
    
    
    
    
    
    
    5Information and user access fees
    
    
    47
    
    
    
    31Investment income
    
    
    25
    
    
    
    13Other income
    
    
    17
    
    
    
    16General and administrative
    
    
    20
    
    
    
    27
 8. Stock-Based Compensation Plans
  Three Months Ended March 31,2011
    
    
    2010(In thousands)Employee:Stock options
    
    $
    295
    
    
    $
    439Restricted stock and performance shares
    
    
    1,822
    
    
    
    1,6012,117
    
    
    
    2,040Non-employee directors:Stock options
    
    
    
    
    
    
    54Restricted stock
    
    
    173
    
    
    
    100173
    
    
    
    154Total stock-based compensation
    
    $
    2,290
    
    
    $
    2,194
   15




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##### Table of Contents



9. Earnings Per Share
  Three Months Ended March 31,2011
    
    
    2010(In thousands, except per share amounts)Basic EPSNet income
    
    $
    10,780
    
    
    $
    6,701Amount allocable to common shareholders
    
    
    100.0
    %
    
    
    90.6
    %Net income applicable to common stock
    
    $
    10,780
    
    
    $
    6,069Common stock  voting
    
    
    33,921
    
    
    
    31,040Common stock  non-voting
    
    
    2,586
    
    
    
    2,586Basic weighted average shares outstanding
    
    
    36,507
    
    
    
    33,626Basic earnings per share
    
    $
    0.30
    
    
    $
    0.18Diluted EPSNet income
    
    $
    10,780
    
    
    $
    6,701Basic weighted average shares outstanding
    
    
    36,507
    
    
    
    33,626Effect of dilutive shares:Series B Preferred Stock
    
    
    
    
    
    
    3,500Stock options, restricted stock and warrants
    
    
    2,794
    
    
    
    2,180Diluted weighted average shares
outstanding
    
    
    39,301
    
    
    
    39,306Diluted earnings per share
    
    $
    0.27
    
    
    $
    0.17
   16




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##### Table of Contents



10. Commitments and Contingencies
  Operating
    
    
    CapitalLeases
    
    
    Leases(In thousands)Remainder of 2011
    
    $
    1,344
    
    
    $
    2522012
    
    
    1,810
    
    
    
    3352013
    
    
    1,794
    
    
    
    3222014
    
    
    1,760
    
    
    
    422015
    
    
    2,022
    
    
    
    2016
    
    
    2,035
    
    
    
    Thereafter
    
    
    10,191
    
    
    
    Minimum lease payments
    
    
    20,956
    
    
    
    951Less amount representing interest
    
    
    
    
    
    
    94$
    20,956
    
    
    $
    857
       17




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##### Table of Contents



11. Comprehensive Income
  Three Months Ended March 31,2011
    
    
    2010(In thousands)Net income
    
    $
    10,780
    
    
    $
    6,701Cumulative translation adjustment and foreign
currency exchange hedge, net of taxes
    
    
    (238
    )
    
    
    (193
    )Unrealized (loss) gain on securities available-for-sale, net of taxes
    
    
    (110
    )
    
    
    145Total comprehensive income
    
    $
    10,432
    
    
    $
    6,653
 12. Customer Concentration
  13. Series B Preferred Stock Conversion
    18




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 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 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 the section captioned Part II, Item 1A, Risk Factors.
 Executive Overview
     
    
    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;
  19




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##### Table of Contents




    
    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.
 Critical Factors Affecting Our Industry and Our Company
 Economic, Political and Market Factors
  Competitive Landscape
    Regulatory Environment
    20




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##### Table of Contents



Rapid Technological Changes
  Trends in Our Business
  
    
    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.
  Commission Revenue
   21




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##### Table of Contents



U.S. High-Grade Corporate Bond Commissions.
 Eurobond Commissions.
 Other Commissions.
   Other Revenue
  Technology Products and Services.
 Information and User Access Fees. TM
 Investment Income.
 Other.
 Expenses
  Employee Compensation and Benefits.
 Depreciation and Amortization.
  22




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##### Table of Contents



Technology and Communications.
 Professional and Consulting Fees.
 Occupancy.
 Marketing and Advertising.
 General and Administrative.
  Critical Accounting Estimates
  Segment Results
   23




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##### Table of Contents



Results of Operations
 Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Overview
    Revenues
  Three Months Ended March 31,2011
    
    
    2010% of
    
    
    
    
    
    
    % of
    
    
    $
    
    
    %$
    
    
    Revenues
    
    
    $
    
    
    Revenues
    
    
    Change
    
    
    Change($ in thousands)Commissions
    
    $
    37,785
    
    
    
    86.6
    %
    
    $
    29,307
    
    
    
    84.0
    %
    
    $
    8,478
    
    
    
    28.9
    %Technology products and services
    
    
    3,108
    
    
    
    7.1
    
    
    
    3,164
    
    
    
    9.1
    
    
    
    (56
    )
    
    
    (1.8
    )Information and user access fees
    
    
    1,689
    
    
    
    3.9
    
    
    
    1,634
    
    
    
    4.7
    
    
    
    55
    
    
    
    3.4Investment income
    
    
    299
    
    
    
    0.7
    
    
    
    291
    
    
    
    0.8
    
    
    
    8
    
    
    
    2.7Other
    
    
    728
    
    
    
    1.7
    
    
    
    488
    
    
    
    1.4
    
    
    
    240
    
    
    
    49.2Total revenues
    
    $
    43,609
    
    
    
    100.0
    %
    
    $
    34,884
    
    
    
    100.0
    %
    
    $
    8,725
    
    
    
    25.0
    %
 Commissions.
 Three Months Ended March 31,$
    
    
    %2011
    
    
    2010
    
    
    Change
    
    
    Change($ in thousands)Distribution feesU.S. high-grade
    
    $
    11,710
    
    
    $
    8,981
    
    
    $
    2,729
    
    
    
    30.4
    %Eurobond
    
    
    3,475
    
    
    
    3,267
    
    
    
    208
    
    
    
    6.4Total distribution fees
    
    
    15,185
    
    
    
    12,248
    
    
    
    2,937
    
    
    
    24.0Variable transaction feesU.S. high-grade
    
    
    14,668
    
    
    
    10,795
    
    
    
    3,873
    
    
    
    35.9Eurobond
    
    
    1,142
    
    
    
    2,225
    
    
    
    (1,083
    )
    
    
    (48.7
    )Other
    
    
    6,790
    
    
    
    4,039
    
    
    
    2,751
    
    
    
    68.1Total variable transaction fees
    
    
    22,600
    
    
    
    17,059
    
    
    
    5,541
    
    
    
    32.5Total commissions
    
    $
    37,785
    
    
    $
    29,307
    
    
    $
    8,478
    
    
    
    28.9
    %
   24




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##### Table of Contents



Change from Three Months Ended March 31, 2010U.S.High-Grade
    
    
    Eurobond
    
    
    Other
    
    
    Total(In thousands)Volume increase (decrease)
    
    $
    4,158
    
    
    $
    (654
    )
    
    $
    3,166
    
    
    $
    6,670Variable transaction fee per million (decrease)
    
    
    (285
    )
    
    
    (429
    )
    
    
    (415
    )
    
    
    (1,129
    )Monthly distribution fees increase
    
    
    2,729
    
    
    
    208
    
    
    
    
    
    
    
    2,937Total commissions increase (decrease)
    
    $
    6,602
    
    
    $
    (875
    )
    
    $
    2,751
    
    
    $
    8,478
  Three Months Ended March 31,$
    
    
    %2011
    
    
    2010
    
    
    Change
    
    
    ChangeTrading Volume Data (in millions)U.S. high-grade  fixed rate
    
    $
    82,267
    
    
    $
    58,666
    
    
    $
    23,601
    
    
    
    40.2
    %U.S. high-grade  floating rate
    
    
    2,938
    
    
    
    2,845
    
    
    
    93
    
    
    
    3.3Total U.S. high-grade
    
    
    85,205
    
    
    
    61,511
    
    
    
    23,694
    
    
    
    38.5Eurobond
    
    
    11,313
    
    
    
    16,019
    
    
    
    (4,706
    )
    
    
    (29.4
    )Other
    
    
    38,661
    
    
    
    21,672
    
    
    
    16,989
    
    
    
    78.4Total
    
    $
    135,179
    
    
    $
    99,202
    
    
    $
    35,977
    
    
    
    36.3
    %Number of U.S. Trading Days
    
    
    62
    
    
    
    61Number of U.K. Trading Days
    
    
    63
    
    
    
    63
   Three Months Ended March 31,2011
    
    
    2010Average Variable Transaction Fee Per MillionU.S. high-grade  fixed rate
    
    $
    178
    
    
    $
    183U.S. high-grade  floating rate
    
    
    17
    
    
    
    27Total U.S. high-grade
    
    
    172
    
    
    
    175Eurobond
    
    
    101
    
    
    
    139Other
    
    
    176
    
    
    
    186All Products
    
    
    167
    
    
    
    172
  25




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Technology Products and Services.
 Information and User Access Fees.
 Investment Income.
 Other.
 Expenses
  Three Months Ended March 31,2011
    
    
    2010% of
    
    
    
    
    
    
    % of
    
    
    $
    
    
    %$
    
    
    Revenues
    
    
    $
    
    
    Revenues
    
    
    Change
    
    
    Change($ in thousands)Employee compensation and benefits
    
    $
    16,268
    
    
    
    37.3
    %
    
    $
    13,933
    
    
    
    39.9
    %
    
    $
    2,335
    
    
    
    16.8
    %Depreciation and amortization
    
    
    1,562
    
    
    
    3.6
    
    
    
    1,616
    
    
    
    4.6
    
    
    
    (54
    )
    
    
    (3.3
    )Technology and communications
    
    
    2,500
    
    
    
    5.7
    
    
    
    2,417
    
    
    
    6.9
    
    
    
    83
    
    
    
    3.4Professional and consulting fees
    
    
    2,872
    
    
    
    6.6
    
    
    
    2,138
    
    
    
    6.1
    
    
    
    734
    
    
    
    34.3Occupancy
    
    
    766
    
    
    
    1.8
    
    
    
    938
    
    
    
    2.7
    
    
    
    (172
    )
    
    
    (18.3
    )Marketing and advertising
    
    
    974
    
    
    
    2.2
    
    
    
    628
    
    
    
    1.8
    
    
    
    346
    
    
    
    55.1General and administrative
    
    
    1,001
    
    
    
    2.3
    
    
    
    2,129
    
    
    
    6.1
    
    
    
    (1,128
    )
    
    
    (53.0
    )Total expenses
    
    $
    25,943
    
    
    
    59.5
    %
    
    $
    23,799
    
    
    
    68.2
    %
    
    $
    2,144
    
    
    
    9.0
    %
 Employee Compensation and Benefits.
 Depreciation and Amortization.
  26




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##### Table of Contents



Technology and Communications.
 Professional and Consulting Fees.
 Occupancy.
 Marketing and Advertising.
 General and Administrative.
 Provision for Income Tax
  Liquidity and Capital Resources
   Three Months Ended March 31,2011
    
    
    2010(In thousands)Net cash provided by (used in) operating activities
    
    $
    1,066
    
    
    $
    (81
    )Net cash (used in) provided by investing activities
    
    
    (8,662
    )
    
    
    4,789Net cash (used in) financing activities
    
    
    (436
    )
    
    
    (3,198
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (395
    )
    
    
    (299
    )Net (decrease) increase for the period
    
    $
    (8,427
    )
    
    $
    1,211
   27




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##### Table of Contents



Other Factors Influencing Liquidity and Capital Resources
    MarketAxess
    
    
    MarketAxess
    
    
    MarketAxessCorporation
    
    
    Europe Limited
    
    
    Canada Limited(In thousands)Net capital
    
    $
    58,992
    
    
    $
    25,068
    
    
    $
    436Minimum net capital required
    
    
    1,182
    
    
    
    3,833
    
    
    
    283Excess net capital
    
    $
    57,810
    
    
    $
    21,235
    
    
    $
    153
  28




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##### Table of Contents



Effects of Inflation
  Contractual Obligations and Commitments
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  Market Risk
   29




---



##### Table of Contents



Interest Rate Risk
  Derivative Risk
  Credit Risk
   
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control Over Financial Reporting.
  30




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##### Table of Contents



PART II  Other Information
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 Recent Sales of Unregistered Securities
  Issuer Purchases of Equity Securities
  Total Number of
    
    
    Dollar Value ofShares Purchased
    
    
    Shares That MayTotal Number of
    
    
    Average Price
    
    
    as Part of Publicly
    
    
    Yet Be PurchasedPeriod
    
    Shares Purchased
    
    
    Paid per Share
    
    
    Announced Plans
    
    
    Under the Plans(In thousands)January 1, 2011  January 31, 2011
    
    
    181,939
    
    
    $
    19.54
    
    
    
    
    
    
    $
    February 1, 2011  February 28, 2011
    
    
    54,774
    
    
    
    13.60
    
    
    
    
    
    
    
    March 1, 2011  March 31, 2011
    
    
    4,507
    
    
    
    22.04
    
    
    
    
    
    
    
    241,220
    
    
    $
    18.24
    
    
    
    
  
 Item 3.
    
    Defaults upon Senior Securities
  
 Item 4.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information
   31




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##### Table of Contents



Item 6.
    
    Exhibits
  Number
    
    Description31.1
    
    
    Certification by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    
    Certification by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    
    Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32




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SIGNATURES
  MARKETAXESS HOLDINGS INC.Date: April 28, 2011
    By:
    /s/ RICHARD M. MCVEYRichard M. McVeyChief Executive Officer
(principal executive officer)Date: April 28, 2011
    By:
    /s/ ANTONIO L. DELISEAntonio L. DeLiseChief Financial Officer
(principal financial and accounting officer)  33