Marketaxess Holdings Inc (MKTX) 2018 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

(Operator Instructions) As a reminder, this conference is being recorded today, October 24, 2018.

I would now like to turn the call over to Dave Cresci, Investor Relations Manager at MarketAxess.

Please go ahead, sir.

Good morning, and welcome to the MarketAxess Third Quarter 2018 Conference Call.

For the call, Rick McVey, Chairman and Chief Executive Officer, will review the highlights for the quarter and will provide an update on trends in our businesses; and then Tony DeLise, Chief Financial Officer, will review the financial results.

Before I turn the call over to Rick, let me remind you that today's call may include forward-looking statements.

These statements represent the company's beliefs regarding future events that, by their nature, are uncertain.

The company's actual results and financial condition may differ materially from what is indicated in those forward-looking statements.

For a discussion of some of the risks and factors that could affect the company's future results, please see the description of risk factors in our annual report on Form 10-K for the year ended December 31, 2017.

I would also direct you to read the forward-looking statement disclaimer in our quarterly earnings release, which was issued earlier this morning and is now available on our website.

Now let me turn the call over to Rick.

Good morning, and thank you for joining us to discuss our third quarter 2018 results.

This morning, we reported strong third quarter results, driven by increased market share across all of our core products and continued robust Open Trading activity.

Overall trading volume of $386 billion was up 11% compared to Q3 2017.

Our estimated U.S. high-grade market share of 17.5% was up from 17.2% last year.

Estimated high-yield market share showed strong growth and reached a record 9.2%, up from 6.9% in the same period last year.

Third quarter revenue of $101 million was up 6% compared to Q3 2017.

Operating income for the quarter was $46 million, and diluted EPS was up 13% to $1.02.

Expenses of $55 million were up 12%, including $1.9 million in duplicate rent expense for our new offices in Hudson Yards.

We expect to move into our new headquarters by the end of the year.

Open Trading adoption continues to accelerate.

Additionally, emerging market and Eurobond volumes both saw rapid growth during the quarter.

Slide 4 provides an update on market conditions.

Market conditions for credit trading were soft in the third quarter.

Credit spreads were tighter, volatility fell and core product market volumes declined, on average, 14% from the second quarter.

Overall trading conditions improved in September and into October.

The combination of higher treasury yields, widening credit spreads and elevated new issue activity has led to a much better trading environment for our business.

While market trading conditions have been mixed over recent months, share gains across products have been strong and position the company well for future growth.

Slide 5 provides an update on Open Trading.

Open Trading volume growth accelerated during the quarter and was up 58% to a near-record level of $88 billion.

Average daily volume was $1.4 billion, also up 58%.

Open Trading represented 23% of our volume in Q3, up from 16% last year.

Over 282,000 Open Trading transactions were completed in the third quarter, up from 155,000 in Q3 2017.

Open Trading liquidity providers or price makers on the platform drove approximately 1.5 million price responses, representing a 107% increase in activity in the third quarter.

During the quarter, over 750 firms provided prices through Open Trading, and over 1,000 firms completed at least 1 open trade.

Liquidity takers saved an estimated $36 million in transaction costs through Open Trading on the system, up 68% from the third quarter last year.

Participants benefited from average transaction cost savings of approximately 1.9 basis points of yield when they completed a U.S. high-grade transaction through Open Trading protocols.

Importantly, Open Trading volume is growing rapidly across all 4 core products as dealer and investor clients embrace this new source of liquidity.

We believe the breadth and depth of our global credit liquidity solution differentiates MarketAxess from the competition.

Slide 6 provides an update on our products and geographic diversification.

Our U.S. high-yield product experienced another quarter of rapid growth.

Record estimated high-yield market share of 9.2% led to a year-over-year volume increase of 27%.

Our European business continued its strong performance for the year.

MiFID II has had a positive impact on client trading behavior, leading to a 21% increase in volume with European clients.

Eurobond volumes from European clients were up 33% year-over-year, and EM volumes were up 32%.

We are continuing our preparations for Brexit in the event there is a hard exit.

We are adding senior staff to our new office in Amsterdam, and our applications with the Dutch regulator are progressing as expected.

Client documentation changes are underway to avoid trading disruptions in any exit scenario.

Global emerging market volume was up 22%, with strong growth in both external debt markets as well as the 26 local EM markets that currently trade on the platform.

We now have over 650 international client firms active on the system, representing an 18% increase in the number of institutions year-over-year.

Our growing footprint in international credit trading significantly expands the long-term growth opportunity for our shareholders.

Now let me turn the call over to Tony to discuss the financial results in greater detail.

Thank you, Rick.

Please turn to Slide 7 for a summary of our trading volume across product categories.

U.S. high-grade volumes were $206 billion for the quarter, up 3% year-over-year.

A slight increase in estimated market share accounted for the uplift in trading volume as U.S. high-grade TRACE volumes were flat year-over-year.

Year-to-date estimated U.S. high-grade market share is up 1 percentage point.

In spite of weak market volumes, our other credit category trading volumes were up 25% year-over-year.

We estimate that market volumes across European corporate bonds, emerging markets and U.S. high-yield bonds were down more than 10% in the aggregate.

Healthy market share gains were the main driver behind the 28% growth in Eurobond volume, 27% growth in high-yield volume and 22% growth in emerging market volume.

With 6 important trading days remaining in October, estimated U.S. high-grade and high-yield market volumes are more than 20% ahead of third quarter levels.

Estimated U.S. high-grade market share is running similar to the third quarter level, and estimated high-yield market share is running well ahead of the third quarter level.

On Slide 8, we provide a summary of our quarterly earnings performance.

Overall revenue was up 6% year-over-year.

The 11% increase in trading volume resulted in a 5% uplift in commissions.

New data contracts accounted for the $800,000 increase in information services revenue.

The $800,000 increase in post-trade services revenue was principally due to a combination of new MiFID II services and new customers.

Expenses were up 12% year-over-year, and operating income was flat year-over-year.

Excluding duplicate rent expense recognized during the build-out phase of the company's new corporate offices in New York City, operating income was up 4%.

The effective tax rate was 19.3% in the third quarter and 21.6% year-to-date.

During the quarter, we recognized $1.7 million of excess tax benefits related to share-based compensation awards and a $400,000 reduction to the Tax Cuts and Jobs Act provisional charge recorded in 2017.

We are updating our guidance range and now expect the effective tax rate for full year 2018 will be between 21% and 22%.

Our diluted EPS was $1.02 on a fairly stable diluted share count of 37.8 million shares.

On Slide 9, we have laid out our commission revenue trading volumes and fees per million.

Total variable transaction fees were flat year-over-year as the 11% increase in trading volume was offset by lower overall fee capture caused by several factors.

First, our new high-yield fee plan implemented in the third quarter of 2017 and several high-grade dealer migrations shifted revenue from variable transaction fees to distribution fees.

Distribution fees were up $4.2 million compared to the third quarter of 2017.

Second, lower years to maturity and higher yields caused the reduction in our U.S. high-grade fee capture.

And third, revisions to the Eurobond fee plan enacted earlier this year resulted in lower Eurobond fee capture.

That said, U.S. high-grade fee per million hasn't varied the past 3 quarters.

Years to maturity of bonds traded on the platform was unchanged sequentially, and there was no significant change in the percentage of volume in each trade size bucket.

Our other credit category fee capture was little changed on a sequential basis.

The percentage of volume in the other credit categories derived from Eurobond, emerging market and high-yield was consistent with the second quarter, and there was little change in fee capture at the individual product level.

Slide 10 provides you with the expense detail.

Sequentially, expenses were flat as higher depreciation and amortization expense on infrastructure and software investments was offset by lower advertising and trade show spend.

The year-over-year increase in expenses was 12%.

Excluding the duplicate rent charge, the expense increase was 9%.

Despite the soft market conditions, we continue to invest in people, technology and infrastructure.

Our full year 2018 expenses are projected to be near the bottom end of the guidance range of $220 million to $232 million, inclusive of approximately $7 million in duplicate rent expense.

On Slide 11, we provide balance sheet information.

Cash and investments as of September 30 were $446 million compared to $407 million at year-end 2017.

During the third quarter, we paid a quarterly cash dividend of $16 million and repurchased 32,000 shares at a cost of $6 million.

We also spent $4 million on construction associated with the build-out of the New York City office space.

Trailing 12 months free cash flow was a record $178 million.

Based on these results, our Board has approved a $0.42 regular quarterly dividend.

Now let me turn the call back to Rick for some closing comments.

Thank you, Tony.

We are pleased with the overall growth in estimated market share across all products during the quarter.

Long-term growth priorities continue to gain momentum, including high-yield, emerging markets and Open Trading.

The increase in overall credit market volumes over the last several months provides a much better foundation for growth for our business.

Now I would be happy to open the line for your questions.

(Operator Instructions) Our first question is from Patrick O'Shaughnessy with Raymond James.

So I think one of the key takeaways coming from your recent open market forum was, I think some conversations around the challenge of having complex and large trades conducted electronically.

Can you talk about some of the steps from the efforts that MarketAxess is taking to try to more aggressively go after that space?

Sure.

I think this is a continuation of changes that we've been making in the system to reduce concerns around information leakage.

So as we've talked about in the past, Patrick, we've done quite a bit of work on allowing system participants to leave access in the system and identify offsetting interest in that trade.

They can do so with any trade size and have the opportunity to work up trade sizes from there.

We are talking to market participants about different protocols in newly issued bonds that would introduce faster means of execution for highly liquid bonds in the first period of trading.

And then I think the other part to watch is the growing liquidity pool that exists in $3 million-and-under trade sizes and whether we will start to see a trend toward more of the large trades being broken down into smaller trade sizes.

Great.

And then maybe an expense question for Tony.

I know last quarter you talked about -- you were tracking at around 30 employees in the third quarter.

What was the actual period end employee count?

And how does that -- you had basically flat compensation and benefits expense quarter-to-quarter, so should we think about that as maybe lower bonus accrual given what the volume environment looked like during the quarter?

Yes.

So Patrick, two things in there on the headcount and then what happened quarter-to-quarter on the comp and benefits.

On the headcount, we ended up at 444 people, which was up right around 15 people from the end of the second quarter.

We're sitting here today with another 15 positions, where we have start dates in the fourth quarter.

So we do expect headcount to rise here through the end of the year, albeit we don't know what's going to -- what will happen with attrition.

But we are sitting on 15 additional adds.

On the comp and benefits piece, it looks like it was just a slight increase quarter-to-quarter, but you do have an increase in salaries and benefits.

It was around a $600,000 increase there, but the bonus accrual was lower.

The cash bonus accrual is formulaic.

It is tied to operating performance.

And quarter-to-quarter, that bonus accrual was down around $700,000.

And you should see that, that's reflective of the market conditions we were referring to.

So if you looked at market volumes Q2 to Q3, you saw a pretty healthy decline there.

So not necessarily apparent when you look at that line on comp and benefits, but there were some offsetting factors in there.

Our next question is from Rich Repetto with Sandler O'Neill.

Congrats on the uptick in the Open Trading percentage.

I guess, the first question is on Open Trading.

And it seemed like quarter-to-quarter, I'm not looking year-over-year or anything, but quarter-to-quarter, the biggest percentage increase was in high-yield.

The others varied, went up by like a percent-or-so, but high-yield went up more from the prior quarter, from 44% to 52%.

Can you tell us like what the market dynamics that drive -- drove that big of an increase in the high-yield bucket in Open Trading?

Yes.

A couple of things that I'd comment on there.

What we've observed in terms of Open Trading percentage by product is the less liquid markets tend to have the highest percentage of OT.

And I think that that shows that Open Trading is providing the highest value in less liquid credit product areas.

So that's been the case with high-yield and we've just seen better take-up there as our technology is connecting market participants in a very important way to reduce transaction costs in a less liquid market like high-yield.

The other thing I'd point out is we had talked with you and others, Rich, about the activity that's growing around ETF market makers in electronic trading, and they're especially relevant in high-yield.

So as those businesses continue to grow and embrace electronic trading, you do see the impact of that in terms of not only overall volumes, but also the activity in OT.

And just a follow-up on Open Trading.

I would assume that ETFs -- well, just some comments on auto-ex as well, just the trend there.

If Open Trading is picking up, I assume the auto-ex and the drivers --- one of the driver is ETFs that you would see auto-ex also increasing?

Yes.

I would actually separate those two things.

You're absolutely right about auto-execution growing, but I think it's a -- there's a slightly different driver there.

As you well know, the buy side is laser-focused on improving trading efficiency and reducing costs.

And one of the outcomes of that is that we're really seeing a new level of automation from investors in how they use the MarketAxess system.

And it's gone from high touch early on to low touch and now even moving into no touch, where the data tools that clients have are so strong that they are able to set parameters pre-trade by which they're perfectly willing to auto-execute a transaction on the system.

And I think I would look for this trend to grow because it does really help the buy side, with an important objective around trading efficiency.

It is equally relevant whether it's a disclosed trade with dealers or an open trade.

It's really about, do the price responses come back to meet the client's preset expectations and if they do, they're willing to auto-execute those trades.

Got it.

And the last question, Rick, is on the general environment.

If you look at 3Q, and I think these are from your comments, that July and August were a different tale, a story compared to September.

And then you've seen, I think, even more volatility in October.

And you may have covered this, but -- if you did, I missed it.

I know you covered the market share in October, but can you talk about the fee capture trends when you have higher volatility like September or October?

Yes.

Well, October, if you look at the TRACE volumes for high-grade and high-yield, look very much like September.

So as we approach the end of October, the September and October market volume run rate is about 22% higher than what we observed in July and August.

So we did have a very soft period during the summer months, and September and October market volumes have been significantly better.

The fee capture is going to depend primarily on product mix.

And Tony made some comments about the success that we continue to have in the high-yield market overall.

But we'll have our market volumes out at the end of October, and the product mix will really drive the fee capture.

Our next question is from Kyle Voigt with KBW.

Just a follow-up on auto-ex, but maybe more so on the Composite+ product.

I actually want to get your updated thoughts on the future of Composite+ and how this fits into the MarketAxess trading kind of ecosystem.

I think maybe it could be used to help facilitate some of these auto-ex functionalities being built into the buy side.

But are there also other revenue-generating opportunities for Composite+ as well?

Sure.

I'd be happy to take that one.

We're really pleased to see both dealer and investor clients embracing Composite Price+, which is a real-time midmarket now on about 20,000 global credit securities.

So incredibly valuable, pre-trade price indicator, price discovery tool.

And I think, right now, much like our other data products, it's primarily been used as an additional tool in the trading process.

There are many places, I think, we could go with that over time.

I think it's already starting to become relevant in our TCA analytics for clients.

And I think that you could even start to see it impact valuations and indices in some way as well.

So a lot of effort into that, and the client take-up around Composite Prices has been really encouraging.

You are absolutely right, it's one of the data tools that does give clients comfort when they are utilizing auto-execution technology.

So the more data that we can provide to our clients, the more they can use auto-execution.

So it does tie into the growing use of auto-execution that we're seeing on the system as well.

Okay.

And then just going back to the open market forum.

There were some participants that were talking about streaming price protocols and how they expect growing adoption of those protocols over time in the market.

Can you help us understand what you're developing in terms of streaming price protocols and your views of the adoption versus -- of streaming prices versus RFQ as we're looking out maybe over the next 3 to 5 years?

Sure.

We have the technology capabilities to operate streaming price markets already, which we do with CDS indices.

So the technology is there.

It's a question, really, of what do the streaming price quotes look like relative to what institutional investors are able to achieve through an RFQ.

And to date, institutional investors have stuck with RFQ because it does create a highly competitive environment for them to achieve best execution.

But as dealers get more and more sophisticated with their use of algos and those markets continue to tighten up, I do think it's possible that streaming prices, especially at the more liquid end of the market, could offer a combination of strong liquidity and greater trading efficiency.

And when the market is ready to go in that direction, we certainly are ready to go from a technology perspective.

Our next question is from Chris Shutler with William Blair.

I want to go back to a question earlier on high-yield and just make sure I understand the dynamics here.

So the high-yield Open Trading has really accelerated in the last couple of quarters.

I think it's gone up 14 percentage points in the last 2 quarters.

Previously, it had gone up 14 points over 2 years.

I heard your comments on ETFs.

I just want to understand, are the ETF market makers what has driven the vast majority of that acceleration or are there other factors?

There are other factors.

I think ETF market makers are an important new form of liquidity for investor clients on the platform.

And it's obviously creating a better liquidity environment for our buy-side clients.

But it's equally relevant to see the growth in high-yield trading overall and Open Trading adoption, specifically, from long-only investment managers.

And a year ago, we were dealing with a very benign, high-yield trading environment, which really kind of took the ETF market makers out of their relative value trading.

The environment for high-yield trading has been a lot better recently with more volatility and more movement in fund flows.

So I think it's a combination of adoption by long-only investment managers, greater involvement from the ETF market makers and then an improvement in the market trading conditions for high-yield.

Okay.

Yes, it makes sense, Rick.

And then on the some of the discussion around new functionality which I know you're kind of working on around addressing the new issue process.

When should we expect to actually see you roll out that functionality?

And just talk about kind of the discussions, the consulting that you're doing with the buy-side trading desks as you work on those developments?

Yes.

There is no set timetable.

Like anything that we do, we're out talking to both dealer and investor clients to see if we could add more value in newly issued bond trading.

And I think we're in midstream on those conversations.

And depending what we hear back in terms of new protocols around a faster, more active protocol for new issue trading, we'll be ready to roll it out.

So there is no set timetable, but the discussions are taking place.

Our next question is from Chris Allen with Compass Point.

I appreciate the commentary on the improved environment we've been seeing lately on September and October.

I just want to see if there's any commentary on how things are trending in emerging markets and Eurobonds.

Obviously, Eurobonds have been a source of strength for you guys in recent periods, and EM has been a little bit flatter looking at September to the summer period.

So any commentary there would be helpful.

So Chris, you're looking for some comments on October or for the third quarter?

Yes.

Just in terms of -- I mean, you kind of noted that things picked up in the back half of September, continued into October.

But it sounded like more of those comments were more focused on high-grade invest -- high-yield.

Just wondering how the other buckets are trending as well.

Yes.

Well, you saw it from the third quarter numbers that we had a very good quarter in both emerging markets and Eurobonds, where despite the fact that market volumes were down, we had a big tick-up in trading volumes.

All of that came from market share gain.

I think the one thing that I would point to -- and this is more particular for emerging markets than Eurobonds right now, market volumes are still struggling.

So even -- we gave some commentary that October market volumes for U.S. investment grade and high-yield are running 20% or more above the third quarter.

That's not the case for emerging markets right now.

So that one, while it is healthier than the third quarter, you're not seeing that type of volume tick up.

So that would be one thing that is different running into October.

I would add.

On the last one, Chris, Euros look, based on the estimates that we can derive from Trax and other sources, Euros look to be more similar to the increases that we talked about for U.S. high-grade and U.S. high-yield.

Got it.

And I guess just from the overall perspective, are you seeing changes in client behavior at all?

Or is it just the environment has gotten a little bit better and data activities traffic?

Just trying to think about is this going to be a period like we saw in the first quarter this year and then things are going to settle down or maybe new entrants are kind of coming in, new participants that maybe have been a little bit quieter in recent periods?

I'd separate the 2, but clearly, the broad-based gains that we're seeing in market share reflect the change in client-trading behavior.

And if you look across the 4 core products, this is shaping up to be one of our strongest years ever for market share gains overall.

And what might be a little bit unusual is the fact that it's being driven more by EM high-yield and Euros this year than it is in high-grade.

But even high-grade is up about 1 percentage share year-over-year.

And collectively, the 4 products show one of the best year-over-year share gains that we've ever had.

So that reflects the ongoing electronification of the credit markets and the change in trade behavior that's taking place by both dealers and investors.

The second part is market environment, and we obviously can't control that.

It ebbs and flows with various factors, and it hit the trough for the year in July and August.

And September and October, we've seen a rebound that looks like it's back toward more like Q2 levels.

That is why I would separate those 2 factors.

I hate to keep on jumping in on this particular point.

But if you look, these are longer-term trends across all the products where we have more clients engaged and trading across each product.

There is -- Open Trading is a bigger piece across all of our core products.

Open Trading is a bigger percentage of volume.

We have more clients and trading multiple products.

We just ended up the third quarter where we now have more than 850 clients that are trading 3 or more products.

That's up 100 clients just in the past year.

So just the network and the engagement with clients across all products is just expanding.

Our next question is from Jeremy Campbell with Barclays.

So we have kind of stable pricing in high-grade, and Tony, I think you mentioned duration of bonds was pretty stable quarter-over-quarter.

So I appreciate the update here on October volumes.

But are you guys seeing duration of traded volumes in October either extend or tighten?

And if we get a continuation of tightened duration, what's the outlook for pricing into the next quarter and next year?

Yes.

So Jeremy, it's obviously early in the quarter here.

We aren't seeing any significant change in duration right now.

We've been -- and the thing that we look at more is around years to maturity and where absolute yields are, but we're not seeing a big change in the years to maturity.

The fee capture -- and this wouldn't just be investment-grade, but the fee capture in October at the individual product level for the core 4 products is very consistent with the third quarter.

And Rick pointed out before that you make the -- a mix amongst the products.

So 1 product growing faster than the other, and that would influence overall fee capture, but at the individual product level, no change.

Got it.

And then just stepping back, a little more big picture.

I think you guys have historically kind of targeted about 150 bps of year-over-year expansion in high-grade market share.

I guess, on a go forward, what types of share gains would we -- should we expect from kind of blocking and tackling and executing on things under your control, like Open Trading and things like that, versus some of the upside potential should the macro market dynamic improve a bit?

It's a little bit of both.

I think our share gains are more evident when volatility picks up.

So if we are embarking on a new period of higher volatility, that would be helpful to our share gains.

And as you know, our share gains also ebb and flow with new issue activity, where when new issues are extremely active, there is a slice of TRACE that is in those newly issued bonds that we currently have a lower share of.

So the new issue market has that impact.

But we're playing the long game.

We take a very long-term view on this.

And the metrics that I care about, when I think about where I hope the company will be 5 or 10 years from now, really look very healthy to me, and Tony just outlined some of them.

But if you really do the work on the share momentum broadly and not just high-grade, you will see that there is a clear trend going on on the system with client behavior embracing more electronic trading across credit.

And these are very large markets.

We have an incredibly strong market position, and we're really pleased with what we see in terms of the share story.

Got it.

And then just one quick one, and I apologize if I missed this.

But Tony, I think you kind of -- you referenced the tax rate for this year is going to be 21% to 22%.

Any sense of what we should expect into '19?

Sure, Jeremy.

So we haven't completed the budget process yet for 2019.

So we're not prepared, at least today, to give you a definitive range.

But that said, I'll give you a little bit of color.

So if you looked at 2018 and you excluded windfall tax benefits from stock-based compensation, the year-to-date effective tax rate would be right around 24%.

So that's really the jumping off point for 2019.

But the difficult part, it's difficult sitting here today to predict those excess tax benefits because we don't know the share price for stock options, we don't know the timing of whether stock options will be exercised.

I can tell you this, that sitting here today, based on today's share price, that in January, when we have a round of restricted stock vesting, the tax benefit there would be around $2 million.

So the jumping off point -- and again, budget's not complete.

Jumping off point, 24%, roll in some excess tax benefits.

So it will be something less than 24%.

But when we get to the January call, we'll give you more color and try and narrow down the range for you.

Our next question is from Dan Fannon with Jefferies.

I guess, Tony, just building upon that, I know the budget is not done, but maybe if you could give us the framework to think about 2019 expenses.

You talked about some headcount that's coming on in the fourth quarter.

Is there -- if you think about the environment getting better or we look at the summer, I guess, it doesn't -- just wondering if you're looking at spending any differently on some of the new initiatives or outlook as we think about the next 12 months.

Sure, Daniel.

I'd tell you what the expenses, I mean, this is -- we are still investing for the future.

We're still investing in geographic expansion, launching new protocols.

There's some regulatory related spend as well.

And as I just said on the tax rate, we haven't completed the process yet, and we will give you more color in January.

But again, thinking about 2018, if you take the duplicate rent out -- and, even, we've had some impact from foreign exchange change, but if you pull those 2 out, the expense increase for this year is about 9%.

And then if you look longer-term the past 5 years, the compound annual growth rate has also been about 9%.

And we're going to continue.

We have plans to continue to invest in the platform, new protocols, geographic expansion in our infrastructure.

I'd suggest taking history into account, at least for modeling out some early models on 2019.

We'll give you more color in January.

But that 9%, that's where we've been, and that's probably a pretty good starting point.

Got it.

And then just a follow-up on the transaction fee per million.

And I appreciate the commentary on October.

And the resiliency in high-grade has been consistent here for the last several quarters.

But I guess, as we think about a higher rate environment, is there something different that's happening that we shouldn't think about shorter duration having a negative impact on that just because of mix?

Or is that still the right way to think of it?

Dan, if we were just isolating that one factor and realizing that years to maturity matters, trade size matters, dealer mix matters, floating rate note activity matters.

If you take those all aside and leave them constant, all we're talking about is a rising yield environment.

Yes, you're likely to see some decline in fee capture.

I'd given some sort of color or some range in the past where for every 1 percentage point change in yields across the yield curve, I think it could be something like $10 per million or $15 per million.

So again, if you're keeping everything else constant, you would see a decline in fee capture.

But there are -- as I said, there are so many things that influence fee capture around years to maturity, trade size, dealer mix, there's just a lot that goes into the mix on U.S. high-grade.

(Operator Instructions) Our next question is from Rich Repetto with Sandler O'Neill.

Yes.

My question has been asked and answered.

Thank you, and that does conclude our Q&A session for today.

I'd like to turn the call over back to Mr. Rick McVey.

Thank you very much for joining us this morning.

And we look forward to catching up with you again next quarter.

Ladies and gentlemen, thank you for your participation in today's conference call.

This does conclude today's program, and you may now disconnect.

Everyone, have a great day.