##### Table of Contents



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 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, 2010
TABLE OF CONTENTS
 PagePART I  Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Statements of Financial Condition as of March 31, 2010 and December 31, 2009
    
    
    3Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009
    
    
    4Consolidated Statement of Changes in Stockholders Equity and Accumulated Other
Comprehensive Loss for the Three Months Ended March 31, 2010
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009
    
    
    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
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32Item 5. Other Information
    
    
    32Item 6. Exhibits
    
    
    32EX-31.1EX-31.2EX-32.1EX-32.2
  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 31,2010
    
    
    2009(In thousands, except shareand per share amounts)ASSETSCash and cash equivalents
    
    $
    104,552
    
    
    $
    103,341Securities available-for-sale, at fair value
    
    
    63,142
    
    
    
    70,997Securities and cash provided as collateral
    
    
    4,914
    
    
    
    4,971Accounts receivable, including receivables from related parties of $3,038 and $3,431,
respectively, net of allowance of $903 and $859 as of March 31, 2010 and December 31,
2009, respectively
    
    
    26,685
    
    
    
    23,150Furniture, equipment and leasehold improvements, net of accumulated depreciation and
amortization
    
    
    9,117
    
    
    
    6,856Software development costs, net of accumulated amortization
    
    
    3,271
    
    
    
    3,420Goodwill and intangible assets, net of accumulated amortization
    
    
    37,151
    
    
    
    37,530Prepaid expenses and other assets
    
    
    3,171
    
    
    
    3,041Deferred tax assets, net
    
    
    20,628
    
    
    
    23,980Total assets
    
    $
    272,631
    
    
    $
    277,286LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesAccrued employee compensation
    
    $
    4,337
    
    
    $
    15,157Deferred revenue
    
    
    4,428
    
    
    
    4,262Accounts payable, accrued expenses and other liabilities, including payables to
related parties of $32 and $29 as of March 31, 2010 and December 31, 2009, respectively
    
    
    11,338
    
    
    
    11,050Total liabilities
    
    
    20,103
    
    
    
    30,469Commitments and Contingencies(Note 10)
    
    
    
    
    
    
    Series B Preferred Stock,$0.001 par value, 35,000 shares authorized, issued and
outstanding as of March 31, 2010 and December 31, 2009, liquidation preference of
$1,000 per share
    
    
    30,315
    
    
    
    30,315Stockholders equityPreferred stock, $0.001 par value, 4,855,000 shares authorized, no shares issued and
outstanding as of March 31, 2010 and December 31, 2009
    
    
    
    
    
    
    Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no
shares issued and outstanding as of March 31, 2010 and December 31, 2009
    
    
    
    
    
    
    Common stock voting, $0.003 par value, 110,000,000 shares authorized, 35,159,785 shares
and
34,654,957 shares issued as of March 31, 2010 and December 31, 2009, respectively
    
    
    105
    
    
    
    104Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, 2,585,654
shares
issued and outstanding as of March 31, 2010 and December 31, 2009
    
    
    9
    
    
    
    9Additional paid-in capital
    
    
    315,634
    
    
    
    313,896Receivable for common stock subscribed
    
    
    (713
    )
    
    
    (713
    )Treasury stock  Common stock voting, at cost, 2,864,120 shares as of March 31, 2010
and December 31, 2009
    
    
    (40,000
    )
    
    
    (40,000
    )Accumulated deficit
    
    
    (51,383
    )
    
    
    (55,403
    )Accumulated other comprehensive loss
    
    
    (1,439
    )
    
    
    (1,391
    )Total stockholders equity
    
    
    222,213
    
    
    
    216,502Total liabilities and stockholders equity
    
    $
    272,631
    
    
    $
    277,286
  3




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended March 31,2010
    
    
    2009(In thousands, except share and per share amounts)RevenuesCommissionsU.S. high-grade
    
    $
    19,776
    
    
    $
    13,515Eurobond
    
    
    5,492
    
    
    
    4,142Other
    
    
    4,039
    
    
    
    2,789Total commissions
    
    
    29,307
    
    
    
    20,446Technology products and services
    
    
    3,164
    
    
    
    2,023Information and user access fees
    
    
    1,634
    
    
    
    1,655Investment income
    
    
    291
    
    
    
    332Other
    
    
    488
    
    
    
    176Total revenues
    
    
    34,884
    
    
    
    24,632ExpensesEmployee compensation and benefits
    
    
    13,933
    
    
    
    11,442Depreciation and amortization
    
    
    1,616
    
    
    
    1,791Technology and communications
    
    
    2,417
    
    
    
    2,242Professional and consulting fees
    
    
    2,138
    
    
    
    1,879Occupancy
    
    
    938
    
    
    
    676Marketing and advertising
    
    
    628
    
    
    
    645General and administrative
    
    
    2,129
    
    
    
    1,226Total expenses
    
    
    23,799
    
    
    
    19,901Income before income taxes
    
    
    11,085
    
    
    
    4,731Provision for income taxes
    
    
    4,384
    
    
    
    1,892Net income
    
    $
    6,701
    
    
    $
    2,839Net income per common shareBasic
    
    $
    0.18
    
    
    $
    0.08Diluted
    
    $
    0.17
    
    
    $
    0.08Weighted average shares used to
compute net income per common shareBasic
    
    
    33,625,512
    
    
    
    33,183,476Diluted
    
    
    39,305,474
    
    
    
    37,516,962
  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, 2010
(Unaudited)
 TreasuryCommon
    
    
    
    
    
    
    Receivable
    
    
    Stock
    
    
    
    
    
    
    Accumu-
    
    
    TotalCommon
    
    
    Stock
    
    
    Additional
    
    
    for Common
    
    
    Common
    
    
    Accumu-
    
    
    lated Other
    
    
    Stock-Stock
    
    
    Non-
    
    
    Paid-In
    
    
    Stock
    
    
    Stock
    
    
    lated
    
    
    Comprehen-
    
    
    holders'Voting
    
    
    Voting
    
    
    Capital
    
    
    Subscribed
    
    
    Voting
    
    
    Deficit
    
    
    sive Loss
    
    
    Equity(In thousands)Balance at December 31, 2009
    
    $
    104
    
    
    $
    9
    
    
    $
    313,896
    
    
    $
    (713
    )
    
    $
    (40,000
    )
    
    $
    (55,403
    )
    
    $
    (1,391
    )
    
    $
    216,502Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,701
    
    
    
    
    
    
    
    6,701Cumulative translation adjustment
and foreign currency exchange
hedge, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    (193
    )Unrealized net gain on securities
available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145
    
    
    
    145Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,653Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,194
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,194Exercise of stock options and
grants of
restricted stock, net of
withholding
tax on stock vesting
    
    
    1
    
    
    
    
    
    
    
    (831
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (830
    )Cash dividend on common stock and
Series B Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,681
    )
    
    
    
    
    
    
    (2,681
    )Windfall tax benefits from
stock-based compensation
    
    
    
    
    
    
    
    
    
    
    375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375Balance at March 31, 2010
    
    $
    105
    
    
    $
    9
    
    
    $
    315,634
    
    
    $
    (713
    )
    
    $
    (40,000
    )
    
    $
    (51,383
    )
    
    $
    (1,439
    )
    
    $
    222,213
  5




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MARKETAXESS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months Ended March 31,2010
    
    
    2009(In thousands)Cash flows from operating activitiesNet income
    
    $
    6,701
    
    
    $
    2,839Adjustments to reconcile net income to net cash used in operating
activities:Depreciation and amortization
    
    
    1,616
    
    
    
    1,791Stock-based compensation expense
    
    
    2,194
    
    
    
    2,039Deferred taxes
    
    
    3,377
    
    
    
    2,144Provision for bad debts
    
    
    242
    
    
    
    98Changes in operating assets and liabilities, net of business acquired:(Increase) in accounts receivable
    
    
    (3,777
    )
    
    
    (4,732
    )(Increase) decrease in prepaid expenses and other assets
    
    
    (130
    )
    
    
    591Decrease in accrued employee compensation
    
    
    (10,820
    )
    
    
    (7,486
    )Increase (decrease) in deferred revenue
    
    
    166
    
    
    
    (73
    )Increase in accounts payable, accrued expenses and other liabilities
    
    
    350
    
    
    
    459Net cash used in operating activities
    
    
    (81
    )
    
    
    (2,330
    )Cash flows from investing activitiesAcqusition of business
    
    
    
    
    
    
    (1,368
    )Securities available-for-sale:Proceeds from maturities
    
    
    19,301
    
    
    
    7,694Purchases
    
    
    (11,209
    )
    
    
    Securities and cash provided as collateral
    
    
    57
    
    
    
    10Purchases of furniture, equipment and leasehold improvements
    
    
    (2,889
    )
    
    
    (485
    )Capitalization of software development costs
    
    
    (471
    )
    
    
    (373
    )Net cash provided by investing activities
    
    
    4,789
    
    
    
    5,478Cash flows from financing activitiesCash dividend on common stock and Series B Preferred Stock
    
    
    (2,681
    )
    
    
    Proceeds from exercise of stock options and grants of restricted stock,
net of withholding tax
    
    
    (830
    )
    
    
    (155
    )Increment (decrement) in windfall tax benefits from stock-based
compensation
    
    
    375
    
    
    
    (323
    )Other
    
    
    (62
    )
    
    
    (28
    )Net cash used in financing activities
    
    
    (3,198
    )
    
    
    (506
    )Effect of exchange rate changes on cash
    
    
    (299
    )
    
    
    (142
    )Cash and cash equivalentsNet increase for the period
    
    
    1,211
    
    
    
    2,500Beginning of year
    
    
    103,341
    
    
    
    107,323End of period
    
    $
    104,552
    
    
    $
    109,823Supplemental cash flow information:Cash paid during the year:Income taxes paid
    
    $
    493
    
    
    $
    46Non-cash activity:Capital lease obligation
    
    $
    
    
    
    $
    723
  6




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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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MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Fair Value Financial Instruments
  Securities and Cash Provided as Collateral
  Allowance for Doubtful Accounts
  Depreciation and Amortization
  Software Development Costs
  Foreign Currency Translation and Forward Contracts
   8




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MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Revenue Recognition
  Commission revenue.
 Technology products and services.
    Initial set-up fees.
 9




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Stock-Based Compensation
  Income Taxes
  Business Combinations, Goodwill and Intangible Assets
   Earnings Per Share
   Use of Estimates
  Recent Accounting Pronouncements
  10




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MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  3. Net Capital Requirements and Customer Protection Requirements
  MarketAxess
    
    
    MarketAxess
    
    
    MarketAxessCorporation
    
    
    Europe Limited
    
    
    Canada Limited(In thousands)Net capital
    
    $
    34,918
    
    
    $
    24,314
    
    
    $
    446Minimum net capital required
    
    
    939
    
    
    
    2,616
    
    
    
    271Excess net capital
    
    $
    33,979
    
    
    $
    21,698
    
    
    $
    175
  4. Fair Value Measurements
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(In thousands)As of March 31, 2010Securities available-for-saleU.S. government obligations
    
    $
    
    
    
    $
    40,538
    
    
    $
    
    
    
    $
    40,538Municipal securities
    
    
    
    
    
    
    20,555
    
    
    
    
    
    
    
    20,555Corporate bonds
    
    
    
    
    
    
    2,049
    
    
    
    
    
    
    
    2,049Foreign currency forward position
    
    
    
    
    
    
    (234
    )
    
    
    
    
    
    
    (234
    )$
    
    
    
    $
    62,908
    
    
    $
    
    
    
    $
    62,908As of December 31, 2009Securities available-for-saleU.S. government obligations
    
    $
    
    
    
    $
    40,078
    
    
    $
    
    
    
    $
    40,078Municipal securities
    
    
    
    
    
    
    28,873
    
    
    
    
    
    
    
    28,873Corporate bonds
    
    
    
    
    
    
    2,046
    
    
    
    
    
    
    
    2,046Foreign currency forward position
    
    
    
    
    
    
    (259
    )
    
    
    
    
    
    
    (259
    )$
    
    
    
    $
    70,738
    
    
    $
    
    
    
    $
    70,738
 11




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MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   As ofMarch 31, 2010
    
    
    December 31, 2009(In thousands)Notional value
    
    $
    25,141
    
    
    $
    28,040Fair value of notional
    
    
    25,375
    
    
    
    28,299Gross and net fair value liability
    
    $
    (234
    )
    
    $
    (259
    )
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    faircost
    
    
    gains
    
    
    losses
    
    
    value(In thousands)As of
March 31, 2010U.S. government obligations
    
    $
    39,844
    
    
    $
    694
    
    
    $
    
    
    
    $
    40,538Municipal securities
    
    
    20,564
    
    
    
    
    
    
    
    (9
    )
    
    
    20,555Corporate bonds
    
    
    2,036
    
    
    
    13
    
    
    
    
    
    
    
    2,049Total securities available-for-sale
    
    $
    62,444
    
    
    $
    707
    
    
    $
    (9
    )
    
    $
    63,142As of
December 31, 2009U.S. government obligations
    
    $
    39,629
    
    
    $
    469
    
    
    $
    (20
    )
    
    $
    40,078Municipal securities
    
    
    28,878
    
    
    
    4
    
    
    
    (9
    )
    
    
    28,873Corporate bonds
    
    
    2,028
    
    
    
    18
    
    
    
    
    
    
    
    2,046Total securities available-for-sale
    
    $
    70,535
    
    
    $
    491
    
    
    $
    (29
    )
    
    $
    70,997
  As ofMarch 31, 2010
    
    
    December 31, 2009(In thousands)Less than one year
    
    $
    22,606
    
    
    $
    30,919Due in 1 - 5 years
    
    
    40,536
    
    
    
    40,078Total securities available-for-sale
    
    $
    63,142
    
    
    $
    70,997
  12




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MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  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, 2010U.S. government obligations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Municipal securities
    
    
    12,013
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    12,013
    
    
    
    (9
    )Corporate bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total securities available-for-sale
    
    $
    12,013
    
    
    $
    (9
    )
    
    $
    
    
    
    $
    
    
    
    $
    12,013
    
    
    $
    (9
    )As of
December 31, 2009U.S. government obligations
    
    $
    9,944
    
    
    $
    (20
    )
    
    $
    
    
    
    $
    
    
    
    $
    9,944
    
    
    $
    (20
    )Municipal securities
    
    
    13,644
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    13,644
    
    
    
    (9
    )Corporate bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total securities available-for-sale
    
    $
    23,588
    
    
    $
    (29
    )
    
    $
    
    
    
    $
    
    
    
    $
    23,588
    
    
    $
    (29
    )
 5. Goodwill and Intangible Assets
   March 31, 2010
    
    
    December 31, 2009Accumulated
    
    
    Net Carrying
    
    
    
    
    
    
    Accumulated
    
    
    Net CarryingCost
    
    
    Amortization
    
    
    Amount
    
    
    Cost
    
    
    Amortization
    
    
    Amount(In thousands)Technology
    
    $
    4,010
    
    
    $
    (1,982
    )
    
    $
    2,028
    
    
    $
    4,010
    
    
    $
    (1,807
    )
    
    $
    2,203Customer relationships
    
    
    3,530
    
    
    
    (1,235
    )
    
    
    2,295
    
    
    
    3,530
    
    
    
    (1,119
    )
    
    
    2,411Non-competition agreements
    
    
    1,260
    
    
    
    (522
    )
    
    
    738
    
    
    
    1,260
    
    
    
    (459
    )
    
    
    801Tradenames
    
    
    590
    
    
    
    (285
    )
    
    
    305
    
    
    
    590
    
    
    
    (259
    )
    
    
    331Total
    
    $
    9,390
    
    
    $
    (4,024
    )
    
    $
    5,366
    
    
    $
    9,390
    
    
    $
    (3,644
    )
    
    $
    5,746
  13




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 6. Income Taxes
  Three Months Ended March 31,2010
    
    
    2009(In thousands)Current:Federal
    
    $
    164
    
    
    $
    State and local
    
    
    (33
    )
    
    
    Foreign
    
    
    522
    
    
    
    68Total current provision
    
    
    653
    
    
    
    68Deferred:Federal
    
    
    2,938
    
    
    
    916State and local
    
    
    721
    
    
    
    486Foreign
    
    
    72
    
    
    
    422Total deferred provision
    
    
    3,731
    
    
    
    1,824Provision for income
taxes
    
    $
    4,384
    
    
    $
    1,892
  As ofMarch 31, 2010
    
    
    December 31, 2009(In thousands)Deferred tax assets and liabilities
    
    $
    21,310
    
    
    $
    24,646Valuation allowance
    
    
    (682
    )
    
    
    (666
    )Deferred tax assets, net
    
    $
    20,628
    
    
    $
    23,980
   14




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 7. Related Parties
  As ofMarch 31, 2010
    
    
    December 31, 2009(In thousands)Cash and cash equivalents
    
    $
    100,201
    
    
    $
    101,273Securities and cash provided
as collateral
    
    
    4,035
    
    
    
    4,067Accounts receivable
    
    
    3,038
    
    
    
    3,431Accounts payable
    
    
    32
    
    
    
    29
 Three Months Ended March 31,2010
    
    
    2009(In thousands)Commissions
    
    $
    3,919
    
    
    $
    3,070Technology products and services
    
    
    7
    
    
    
    9Information and user access fees
    
    
    70
    
    
    
    61Investment income
    
    
    23
    
    
    
    90Other income
    
    
    56
    
    
    
    42General and administrative
    
    
    27
    
    
    
    18
 8. Stock-Based Compensation Plans
  Three Months Ended March 31,2010
    
    
    2009(In thousands)Employee:Stock options
    
    $
    439
    
    
    $
    772Restricted stock and
performance shares
    
    
    1,601
    
    
    
    1,1532,040
    
    
    
    1,925Non-employee directors:Stock options
    
    
    54
    
    
    
    33Restricted stock
    
    
    100
    
    
    
    81154
    
    
    
    114Total stock-based compensation
    
    $
    2,194
    
    
    $
    2,039
   15




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 9. Earnings Per Share
  Three Months Ended March 31,2010
    
    
    2009(In thousands, except share andper share amounts)Basic EPSNet income
    
    $
    6,701
    
    
    $
    2,839Amount allocable to common shareholders
    
    
    90.6
    %
    
    
    90.5
    %Net income applicable to common stock
    
    $
    6,069
    
    
    $
    2,568Common stock  voting
    
    
    31,039,858
    
    
    
    30,597,822Common stock  non-voting
    
    
    2,585,654
    
    
    
    2,585,654Basic weighted average shares outstanding
    
    
    33,625,512
    
    
    
    33,183,476Basic earnings per share
    
    $
    0.18
    
    
    $
    0.08Diluted EPSNet income
    
    $
    6,701
    
    
    $
    2,839Basic weighted average shares outstanding
    
    
    33,625,512
    
    
    
    33,183,476Effect of dilutive shares:Series B Preferred Stock
    
    
    3,500,000
    
    
    
    3,500,000Stock options, restricted stock and warrants
    
    
    2,179,962
    
    
    
    833,486Diluted weighted average shares
outstanding
    
    
    39,305,474
    
    
    
    37,516,962Diluted earnings per share
    
    $
    0.17
    
    
    $
    0.08
  10. Commitments and Contingencies
  Operating
    
    
    CapitalLeases
    
    
    Leases(In thousands)Remainder of 2010
    
    $
    1,127
    
    
    $
    2522011
    
    
    1,972
    
    
    
    3362012
    
    
    1,915
    
    
    
    3362013
    
    
    1,922
    
    
    
    3222014
    
    
    1,964
    
    
    
    422015
    
    
    2,006
    
    
    
    Thereafter
    
    
    10,976
    
    
    
    Minimum lease payments
    
    
    21,882
    
    
    
    1,288Less amount representing interest
    
    
    
    
    
    
    167$
    21,882
    
    
    $
    1,121
 16




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
       i.e.
  17




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##### Table of Contents



MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 11. Comprehensive Income
  Three Months Ended March 31,2010
    
    
    2009(In thousands)Net income
    
    $
    6,701
    
    
    $
    2,839Cumulative translation adjustment and foreign
currency exchange hedge, net of taxes
    
    
    (193
    )
    
    
    (83
    )Unrealized net gain on securities available-
for-sale, net of taxes
    
    
    145
    
    
    
    41Total comprehensive income
    
    $
    6,653
    
    
    $
    2,797
 12. Customer Concentration
  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
 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 compensation costs, other incentive compensation,
employee benefits and payroll taxes.
 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, 2010 Compared to Three Months Ended March 31, 2009
 Overview
    Revenues
  Three Months Ended March 31,2010
    
    
    2009% of
    
    
    
    
    
    
    % of
    
    
    $
    
    
    %$
    
    
    Revenues
    
    
    $
    
    
    Revenues
    
    
    Change
    
    
    Change($ in thousands)Commissions
    
    $
    29,307
    
    
    
    84.0
    %
    
    $
    20,446
    
    
    
    83.0
    %
    
    $
    8,861
    
    
    
    43.3
    %Technology products and services
    
    
    3,164
    
    
    
    9.1
    
    
    
    2,023
    
    
    
    8.2
    
    
    
    1,141
    
    
    
    56.4Information and user access fees
    
    
    1,634
    
    
    
    4.7
    
    
    
    1,655
    
    
    
    6.7
    
    
    
    (21
    )
    
    
    (1.3
    )Investment income
    
    
    291
    
    
    
    0.8
    
    
    
    332
    
    
    
    1.3
    
    
    
    (41
    )
    
    
    (12.3
    )Other
    
    
    488
    
    
    
    1.4
    
    
    
    176
    
    
    
    0.7
    
    
    
    312
    
    
    
    177.3Total revenues
    
    $
    34,884
    
    
    
    100.0
    %
    
    $
    24,632
    
    
    
    100.0
    %
    
    $
    10,252
    
    
    
    41.6
    %
 Commissions.
 Three Months Ended March 31,$
    
    
    %2010
    
    
    2009
    
    
    Change
    
    
    Change($ in thousands)Distribution feesU.S. high-grade
    
    $
    8,981
    
    
    $
    7,068
    
    
    $
    1,913
    
    
    
    27.1
    %Eurobond
    
    
    3,267
    
    
    
    2,976
    
    
    
    291
    
    
    
    9.8Total distribution fees
    
    
    12,248
    
    
    
    10,044
    
    
    
    2,204
    
    
    
    21.9Variable transaction feesU.S. high-grade
    
    
    10,795
    
    
    
    6,447
    
    
    
    4,348
    
    
    
    67.4Eurobond
    
    
    2,225
    
    
    
    1,166
    
    
    
    1,059
    
    
    
    90.8Other
    
    
    4,039
    
    
    
    2,789
    
    
    
    1,250
    
    
    
    44.8Total variable transaction fees
    
    
    17,059
    
    
    
    10,402
    
    
    
    6,657
    
    
    
    64.0Total commissions
    
    $
    29,307
    
    
    $
    20,446
    
    
    $
    8,861
    
    
    
    43.3
    %
  24




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##### Table of Contents



Change from Three Months Ended March 31, 2009U.S.High-Grade
    
    
    Eurobond
    
    
    Other
    
    
    Total(In thousands)Volume increase
    
    $
    4,318
    
    
    $
    888
    
    
    $
    1,486
    
    
    $
    6,692Variable transaction fee per million increase (decrease)
    
    
    30
    
    
    
    171
    
    
    
    (236
    )
    
    
    (35
    )Monthly distribution fees increase
    
    
    1,913
    
    
    
    291
    
    
    
    
    
    
    
    2,204Total commissions increase
    
    $
    6,261
    
    
    $
    1,350
    
    
    $
    1,250
    
    
    $
    8,861
  Three Months Ended March 31,$
    
    
    %2010
    
    
    2009
    
    
    Change
    
    
    ChangeTrading Volume Data (in millions)U.S. high-grade
    
    $
    61,511
    
    
    $
    36,839
    
    
    $
    24,672
    
    
    
    67.0
    %Eurobond
    
    
    16,019
    
    
    
    9,092
    
    
    
    6,927
    
    
    
    76.2Other
    
    
    21,672
    
    
    
    14,140
    
    
    
    7,532
    
    
    
    53.3Total
    
    $
    99,202
    
    
    $
    60,071
    
    
    $
    39,131
    
    
    
    65.1
    %Number of U.S. Trading Days
    
    
    61
    
    
    
    61Number of U.K. Trading Days
    
    
    63
    
    
    
    63
   Three Months Ended March 31,2010
    
    
    2009Average Variable Transaction Fee Per MillionU.S. high-grade
    
    $
    175
    
    
    $
    175Eurobond
    
    $
    139
    
    
    $
    128Other
    
    $
    186
    
    
    $
    197All Products
    
    $
    172
    
    
    $
    173
  25




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##### Table of Contents



Technology Products and Services.
 Information and User Access Fees.
 Investment Income.
 Other.
 Expenses
  Three Months Ended March 31,2010
    
    
    2009% of
    
    
    
    
    
    
    % of
    
    
    $
    
    
    %$
    
    
    Revenues
    
    
    $
    
    
    Revenues
    
    
    Change
    
    
    Change($ in thousands)Employee compensation and benefits
    
    $
    13,933
    
    
    
    39.9
    %
    
    $
    11,442
    
    
    
    46.5
    %
    
    $
    2,491
    
    
    
    21.8
    %Depreciation and amortization
    
    
    1,616
    
    
    
    4.6
    
    
    
    1,791
    
    
    
    7.3
    
    
    
    (175
    )
    
    
    (9.8
    )Technology and communications
    
    
    2,417
    
    
    
    6.9
    
    
    
    2,242
    
    
    
    9.1
    
    
    
    175
    
    
    
    7.8Professional and consulting fees
    
    
    2,138
    
    
    
    6.1
    
    
    
    1,879
    
    
    
    7.6
    
    
    
    259
    
    
    
    13.8Occupancy
    
    
    938
    
    
    
    2.7
    
    
    
    676
    
    
    
    2.7
    
    
    
    262
    
    
    
    38.8Marketing and advertising
    
    
    628
    
    
    
    1.8
    
    
    
    645
    
    
    
    2.6
    
    
    
    (17
    )
    
    
    (2.6
    )General and administrative
    
    
    2,129
    
    
    
    6.1
    
    
    
    1,226
    
    
    
    5.0
    
    
    
    903
    
    
    
    73.7Total expenses
    
    $
    23,799
    
    
    
    68.2
    %
    
    $
    19,901
    
    
    
    80.8
    %
    
    $
    3,898
    
    
    
    19.6
    %
 Employee Compensation and Benefits.
 Depreciation and Amortization.
 Technology and Communications.
 Professional and Consulting Fees.
 26




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##### Table of Contents



Occupancy.
 Marketing and Advertising.
 General and Administrative.
 Provision for Income Tax
  Liquidity and Capital Resources
   Three Months Ended March 31,2010
    
    
    2009(In thousands)Net cash used in operating activities
    
    $
    (81
    )
    
    $
    (2,330
    )Net cash provided by investing activities
    
    
    4,789
    
    
    
    5,478Net cash used in financing activities
    
    
    (3,198
    )
    
    
    (506
    )Effect of exchange rate changes on cash
    
    
    (299
    )
    
    
    (142
    )Net increase for the period
    
    $
    1,211
    
    
    $
    2,500
    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
    
    $
    34,918
    
    
    $
    24,314
    
    
    $
    446Minimum net capital required
    
    
    939
    
    
    
    2,616
    
    
    
    271Excess net capital
    
    $
    33,979
    
    
    $
    21,698
    
    
    $
    175
  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
   Interest Rate Risk
  Derivative Risk
  29




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##### Table of Contents



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
  i.e.
  
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 Recent Sales of Unregistered Securities
  31




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##### Table of Contents



Issuer Purchases of Equity Securities
  Total Number of
    
    
    Dollar Value ofShares Purchased as
    
    
    Shares That MayTotal Number of
    
    
    Average Price
    
    
    Part of Publicly
    
    
    Yet Be PurchasedPeriod
    
    Shares Purchased
    
    
    Paid per Share
    
    
    Announced Plans
    
    
    Under the Plans(In thousands)$January 1, 2010  January 31, 2010
    
    
    88,751
    
    
    $
    13.74
    
    
    
    
    
    
    
    February 1, 2010  February 28, 2010
    
    
    39,786
    
    
    
    13.80
    
    
    
    
    
    
    
    March 1, 2010  March 31, 2010
    
    
    1,125
    
    
    
    14.97
    
    
    
    
    
    
    
    129,662
    
    
    $
    13.77
    
    
    
    
  
 Item 3.
    
    Defaults upon Senior Securities
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 Item 5.
    
    Other Information
  
 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 30, 2010
    By:
    /s/ RICHARD M. MCVEYRichard M. McVeyChief Executive Officer
(principal executive officer)Date: April 30, 2010
    By:
    /s/ ANTONIO L. DELISEAntonio L. DeLiseChief Financial Officer(principal financial and accounting officer) 33