All right, everyone. Next up, we're joined by Chris Kincannon, who's the CEO of Market Access, a leading electronic platform for fixed income. Excuse me. Chris has led the company since 2023 after serving as president and COO of CBOE Global Markets. Chris, thanks so much for joining us.

Thanks for having me.

All right. So you reported May metrics this morning. So before we get into the credit market share conversation, I do want to highlight, you know, what stood out to me, which has been the continued strength internationally, particularly in emerging markets. It's been a consistent bright spot for you. So could you touch on what you saw in May, how you're thinking about the international NEM opportunity, and what you're looking at as kind of the most attractive opportunities in those areas?

Sure. And again, it's great to be here. And Yeah, our international business is really a great bright spot for us. It continues to grow. The key ingredient, we have been invested in that market for many years. So it does take a sizable investment in terms of distribution, registrations around the globe. We all live in regulated worlds. What's interesting about the emerging market business is when you size it, it is equivalent in size to U.S. credit. So a lot of us spend a lot of time focused on like IG, which is one portion of U.S. credit. But the EM business is similar in size. The electronic penetration of EM is quite low. It's hard to estimate because no one really knows the total turnover of emerging markets, given local markets don't report. But we're somewhere around 10 percent of e-trading in emerging markets. So sizable TAM opportunity in EM. And when I look at the broader market of EM, it is growing. So you're seeing new issue in EM, both at the country level, but also at the credit level, the corporate level. We've just added India. We're the only platform now that is live in India, operating and trading in India, which is exciting. So we've added to the breadth of the product. And India, let's be clear, India is going to be a sizable debt market for years to come. It already is one of the largest. So, again, in terms of that TAM opportunity, it's huge. When I look at the EAM business from a competitive standpoint, we only really see one competitor. largely Bloomberg. And typically, that's more chat related than E related, but a very strong competitor in terms of distribution around the globe. The EM business, just if you look at the report, again, it grew 18% year over year. This is after a record first quarter of EM, where it grew close to 30%, which is exciting. When I evaluate the e-business in EM, we've really hit on every cylinder. If you look at some of the challenges that we've had in IG, portfolio trading, dealer to dealer, in emerging markets, we have everything fully deployed. We're the largest platform for portfolio trading in EM. We've delivered a new platform for that portfolio trading solution. We are by far the largest RFQ platform with that all-to-all embedded. That liquidity is unique in EM. Sometimes our EM liquidity is 50% of our overall market. That means somewhere there is a non-bank or bank that is facing a client that it isn't set up to face. So we deliver that unique liquidity. Our dealer-to-dealer business in May also grew after a record Q1 as well. And the most exciting thing about EM is growth of blocks. So when you look at the fixed income market, and I'm talking US credit, emerging markets, munis, what's most daunting when you think of all the AI that's replacing everybody's job here is we are facing competition from the phone. So there is more phone and chat-based market volume than there is electronic market volume on a global scale. So the market opportunity for electronic platforms is greater than what we've already conquered. And let's be clear, people are not going to be chatting and I being trades of 10 million bonds in U.S. credit and EM. In EM, that's where we're seeing growth of blocks. And so we're seeing that block market that's going from chat to platform finally cracking. And so what's exciting about that is that's really a forecast of what we see happening in the U.S. credit market as well.

Sure. All right. Well, that's a nice segue. Anyway, shifting over to the credit markets, May seemed like was decent for you from a market share perspective, up 100 basis points in high grade, I think up 30 basis points in high yield. So improving there. So can you just comment on the share drivers in May and then maybe big picture, you know, whether it's portfolio trading blocks, all to all, you know, we've seen the increased competition. How do you think about your position in credit today and what gets this business back on a sustainable market share gain trajectory?

Yeah, great question. And obviously, U.S. credit is where we've invested heavily in that market. When I look at May, I'm excited about the share gains, but I'm more excited about what's coming out this summer from a delivery perspective. We've been hard at work for the last year on a number of different products and solutions that are rolling out. But first, let me talk about U.S. credit in particular. One area that we've seen continuous growth is portfolio trading. And so some of the drivers of our share gains in May was delivered through portfolio trading, both investment grade as well as high yield. High yield, we are one of the leading portfolio trading platforms in the U.S. We came from behind and took over that spot. In investment grade, very similar growth rates. We grew our portfolio trading in the month of May. Areas where we're not going to enter into a price war is the dealer-to-dealer space. That's a space that is commoditized pricing. We've chosen not to engage in that pricing war. We're happy to sit where we are. Ultimately, our true value in this market is with the client-to-dealer business. Now, we're fully invested in the dealer-to-dealer business. We have Midex, which is slowly growing month over month. We think that's the right investment for that space. That's new revenue, new incremental revenue. Again, it comes in at a smaller fee per million because of the competitive dynamic in dealer-to-dealer. But our investment is all around U.S. credit client business. From a competitive dynamic, and we'll share these numbers, we probably provide too much transparency from my perspective, but the fee has been quite stable in our client business. So when it comes to client to dealer business, a quite stable fee, where movement of fee is really any movement in our mix of business. Portfolio trading grew in the month of May. We did exceptionally well in high yield and exceptionally well in IG. That tends to come in at a lower fee per million. Another area of excitement for May, again, we continue to add blocks to our electronic platform. That is the predictor of the future of e-trading in U.S. credit. The more blocks, remember, 50% of the investment-grade market is on phone and chat. that's truly absurd when you look at how we trade other asset classes. No other asset class, including crypto and polymarket, it's all E. That's the final legacy of trading on chat is fixed income. And we're showing you proof that the block trade is moving to the E platform. Oh, and then, sorry, I know it's a long-winded answer to a short question. What's exciting to me is what's coming. So tomorrow is the launch of our new issue platform. Again, it's client by client. We're rolling out to one client. It's going to be in pilot for a portion of the summer. But we market access after a year of work with dealers and direct books. We announced the partnership. We are now just a couple months ago. We're launching the product tomorrow, goes live with a client, but we are now part of the new issue syndicate process. We are redistributing direct book services. We don't engage in any part of the book building. We're just redistributing to our clients. This product has gotten more positive feedback than I've seen any other product at Market Access. It's an area of pain for our largest institutional investors. They have struggled with the manual processing around new issue for quite some time. We're able to deliver that through our platform. We have all the clients. We're now adding syndicate desks from our buy side clients onto our platform. So it's just an exciting new area of growth for us is getting in the middle of that new issue process. If you look at some of the competitive dynamics, we haven't historically done well in a new issue market, a vibrant new issue market. May is another example. May was the third largest May new issue we've seen in history. So it was a pretty big new issue, $163 billion in new issue. This does a couple of things. One, it puts us into the new issue process. Two, we get the data of new issue faster. Today, we wait several hours for that upload of data for people to trade on a platform. Now, with this partnership, we are getting the data at the break. So we'll have the new issue before it even prices and allows for all the different protocols on market access to be ready to trade that new issue at the time of break. What's exciting is in August, we're rolling out a new issue trading solution where, you know, when you're doing your allocation process, you never get 100 percent of your allocation. So that trader wants to trade that new issue in the open market. We will have streaming price click-to-trade solution, largely a block solution for a new issue come August in front of that client on the same platform. So you'll see revenue associated with new issue trading really coming in the latter parts of the summer. But what's exciting is the rollout happens to client by client with this new issue. This ability to participate directly off of market access into the syndicate process is all new, and no one else has that.

How much penetration do you think you can see into the new issue market? Because, I mean, it does represent a whole other thing that investors now have to think about in the market share world. So, like, if you're, I don't know what it was this month, 17% in high grade of the non-new issuance market, like, where could that market share go in new issues?

Yeah, I mean, our biggest challenge in market share is in a big new issue month. So Q1, if you look at Q1, record quarter for us, but that was just driven by large secondary trading activity and volatility. But market share gains, new issue was robust in Q1. Our opportunity, new issue, first three days of trading of a new issue is our lowest market share. It only goes up after those three to five days of trading. So there's a huge revenue opportunity for us to just trade the new issue more aggressively. What's great about this product is we'll have eyeballs trading new issue, and there'll be live trading, secondary trading. We plan to offer gray market trading in the fourth quarter as well. So we'll have both gray and live trading of new issue at the break. Sure.

All right. So another thing you mentioned there was this idea of the price war. as you put it. And, you know, your stocks come under pressure recently, you know, your biggest competitor stock has been under pressure. I talked to a lot of investors who they want to get interested, they like the names, but some of them feel like they can't get involved until this price war is over. And you're obviously a big driver of that narrative. So, you know, from your seat, when do you think this price war will be over? How much more stress do you think there will be on pricing? And what would you say to those investors who are kind of thinking that?

Well, one, there's no price war in our core business. So in the client-to-dealer business, we have maintained price. We've maintained stability of price for some time. There's noise around the price war that really we don't feel at the client level. Where prices, we see prices being cut is in the dealer-to-dealer space. Now, I'll give you portfolio trading as a perfect example. Three years ago, there was probably price movement around portfolio trading. All the platforms that have viable portfolio trading solutions set price and haven't changed. We have not changed our portfolio trading pricing for several years. It's been very stable. Now, unfortunately, it's at a very low price point relative to our core business. So when we do exceptionally well in portfolio trading like we did in May, average price per million comes down for the platform. So some people are interpreting what is mix of our business as a price adjustment. It's absolutely wrong. So there is a misunderstanding in the market around how pricing is determined on our platform. In the dealer-to-dealer space, we are saying we're not engaging in the price war anymore. We feel comfortable with our offering. At the end of the day, dealers can use our platform at a reduced price. The liquidity on our platform is a unique offering. Right now, if you look at spreads in the credit market, there's lack of dispersion. We're at the tightest credit spreads we've seen in history. So that liquidity is not valued right now. It's a little bit commoditized. So when we see the market spreads move out, that liquidity suddenly becomes a premium. And that savings that you get, we've seen dealers switch to other platforms for small savings of dealer RFQ and then come back because the liquidity was not compelling. The savings on a unique liquidity trade versus a dealer-to-dealer fee, it's immaterial relative to the spread when the spreads matter. So look, I just think we're in the client-to-dealer space. At the end of the day, moving blocks from chat and phone to our platform is our priority. And that's what we're investing in. And excitingly, that's the area of growth that we're seeing on the platform. Blocks are moving from chat, from phone onto e-trading platforms.

So stepping back for a minute, we have some market makers coming up here later today. Fixed income electronification has been one of the more compelling narratives in the fixed income world and in markets in general the last decade. How do you think about where we are in the overall electronification journey. And with some of these market makers, alternative liquidity providers coming into the space, how are they changing the structure of the credit markets in which you operate?

So I'm excited what we're seeing in terms of new entry into the credit space. They've all been working on it for some time, all at different stages of growth. I would say that the non-bank liquidity provider just continues to grow on our platform. They certainly get the benefit of our distribution. So if you're a non-bank liquidity player and you want to trade with clients well, you come to market access because we have the largest distribution with clients and we have an all-to-all market that is like no other. We've onboarded more clients globally than anyone else runs an all-to-all business. So that's the exciting piece for the non-banks. They all come to us first. What I'm seeing is non-bank liquidity. Now, I grew up with these non-bank liquidity providers. I was one for my years at Virtu. I know their business intimately well. They run one global P&L. That's the excitement. They are trading an ETF, a credit future and an underlying corporate bond. And large institutional banks, that's hard for them to do. They're all chasing that model. They just charge smaller spread. Where they get excited, where non-banks do exceptionally well is when spreads gap out, when there's an arbitrage between the ETF, the underlying, or the underlying and the credit future. What's exciting to me is credit futures are growing, you see the AUM, you see the use of these products growing, that is just another tool to introduce non-bank liquidity into the credit market. When I look at the overall credit cycle, and I spent a lot of time on this because we are at a ridiculously mature cycle, if you look at how IG is priced from a spread perspective, people think there is no defaults coming to our market for years to come. So the spread alone is mispriced, and that spread will change. History is very predictive of that. But when that spread changes, I know the non-banks are going to come in and their models are going to take off. And so we've seen a number of non-banks in high yield in particular struggle because the spread was so tight. The arbitrage between the ETF and the underlying high yield bond was very tight. As soon as that gaps out, these non-banks really feel the benefit of their kind of global reach and ability to cross-trade between ETFs, futures, and underlying corporate bonds.

Switching gears, I want to talk about tokenization. I think we talk about credit today. We talk about other aspects of the fixed income market that are still not even electronic and still getting done over the phone. So tokenization feels pretty far out for a lot of these things, but it is such a hot topic today. But, you know, where do you think tokenization fits into the credit ecosystem and what potentially could market accesses role be there if you thought about it?

Sure. I mean, tokenization, one, I just want to remind people we've been talking about tokens and blockchains since 05 in inequities. So the fact that we're finally there and we're going to see issuers doing issuing on blockchain is exciting to me. When I look at the credit market, again, I do think moving people from chat and phone to E is probably, we should do that before we tokenize it. But there's heavily investments in that. There's areas of application that I'm super excited about. One thing I didn't mention, on our new issue platform, what's exciting about that is it was designed for public debt. So it's public credit, but we also built it for private. One of the biggest challenges for private credit issuers is the new issue process. It's the most important part. So that process that we built out allows for private credit over the same solution that we're delivering public credit over. That's an exciting piece of that product that we're delivering. I think there's great application for for tokenization in things that settle inefficiency. So loans, private credit, those are all areas where there's still paper moving through the system. People are signing documents to trade private credit and loans. And that that back off it desperately needs efficiency. The area that we have to remind ourselves in public credit, in US credit in particular, there is something called the ETF underlying arbitrage. It all settles net at our clearinghouse. That net settlement allows for a non-bank or an ETF market maker to be short a billion dollars and long a billion dollars and never make payment. That is netted, and they have no margin. That is a very efficient enterprise that we run. We have reduced the settlement cycle, but that ability, that liquidity that comes from that net process is lost in blockchain or tokenization. So as long as it doesn't disrupt the liquidity that we see in the market, which is that heavily, I mean, we have so many ETFs in our market, we have so many underlying securities going into those ETFs, that is a very important component of liquidity in our market, including the corporate bond market. Remember, our corporate bonds settle and margin at NSCC where the ETFs settle and margin. So that benefit is immense. And people, they just don't under, unfortunately, I spent some time in clearing. I don't brag about that. But knowing the clearing platform and how it works, there's huge efficiency, huge leverage in our market delivered by net settlement intraday, which you lose in tokenization. Yep.

Our keynote yesterday was Frank LaSalle from DTCC. That was a topic that was brought up. I want to ask about capital allocation. The stock has, as I said, been under pressure recently. How are you thinking about capital allocation priorities in that context? And does the current valuation change the calculus between buybacks, organic investment, and M&A?

Great question. So obviously, we had launched the ASR back in December, we spent the first quarter, our priority was pay down of debt. After our first quarter, we announced what that pay down looked like we had gone, we actually accelerated that pay down. So we were excited about that level of debt that we were able to pay down after the first quarter. What that affords us is really flexibility when it comes to capital allocation. We obviously like the stock at a higher level back when we launched the ASR. We do look at our investment currently into our platform. We are rolling out new product with the current investment we've made. So we're now in product delivery mode. This summer is all product delivery mode, and that's what I'm most excited about. So in terms of capital allocation, we have a very cash-generated business. And if you look at the first quarter, even if you look at May, the margin is quite attractive for a small enterprise like ourselves. So we have fully invested in delivery. It just gives us that more flexibility to use our balance sheet where appropriate. So it's really the change from Q1, which was priority to pay down. Now we are afforded with the flexibility to deploy cash where we see most appropriate.

And then we'll end on big picture question. You laid out a three-year growth algorithm within the last six or eight months. Eight to 9% revenue growth, 75 to 125 basis points of margin expansion annually. The stock price is telling us that the market thinks you're not going to hit those targets. So what do you think that investors are most underappreciating about market access right now? And what are the catalysts that gets your business back on track?

Yeah, it's a great question. Yeah, clearly, when I look at the price of the stock, it's really not believing our targets. And when I look at the targets, our rollout was part of those targets. So the delivery that's coming this summer, the new issue platform that we're rolling out tomorrow, was all part of that plan. And I remind everyone we had record earnings, record quarter, record revenue in Q1. We had a slowdown in April with a very large new issuance. So one month did redirect the market in the wrong way. The other noise that I hear in the market is this pricing war noise where people are concerned about where pricing is going to end up. Fee per million will come down, not because we're cutting fees, but because the protocols that we're delivering come in at lower fee per million. Block trading will be an exciting endeavor for us. We're showing evidence of that block. The market thinks the blocks are going to stay on chat and phone. If you look at the model, the market is predicting chat and phone is not going away in corporate I think that is a mistaken belief, or they're believing that if they do convert, they're at a lower price level. We don't have to change price to get a client to trade a block on our platform. I see two very important components coming to market that will change block trading. One is the new issue platform. That trading of new issue is block trading related. Whenever we see a new issue pop in a quarter or a month, like we saw in May, block trading ends up being a bigger part of the market on Trace. So we're attacking the block market at the new issue, which is very exciting. The other piece of our block trading is rolling out next week, where today traders are forced to commit orders to market access. So if you're in your OMS in Aladdin or Charles River, you have to commit that order. Typically, that's a binary decision by the trader. They say, I'm going to just commit what I can. I know I'm comfortable trading and market access. That's been one issue that we've had for moving blocks over. We're launching next Friday, actually, what we call indications of interest. It allows the client, the trader on the desk to move a block into market access while managing that block on their desktop like it never left. And then we will use some of our new technology, like our Pragma technology, to find a natural match for that block and alert that client. And so they can firm up that order and trade the block. So it allows us to grow our opportunity of blocks. Again, changing how blocks are traded in U.S. credit is going to happen. We're trying to be the first mover there. The investment is all about changing, getting people off phone and chat. I'm confident that will happen.

All right. Well, I think that's all the time. We have Chris, thank you so much for joining us.

Yeah, thanks.