Earnings Call
Tradeweb Markets Inc. (TW)
Earnings Call Transcript - TW Q3 2025
Operator, Operator
Good morning, and welcome to Tradeweb's Third Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded and will be available for playback. To begin, I'll turn the call over to Head of Treasury, FP&A and Investor Relations, Ashley Serrao. Please go ahead.
Ashley Serrao, Head of Treasury, FP&A and Investor Relations
Thank you, and good morning. Joining me today for the call are our CEO, Billy Hult, who will review our business results and key growth initiatives, and our CFO, Sara Furber, who will review our financial results. We intend to use the website as a means of disclosing material, nonpublic information and complying with our disclosure obligations under Regulation FD. I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations, and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements related to, among other things, our guidance are forward-looking statements. Actual results may differ materially from these forward-looking statements. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our earnings release, earnings presentation and periodic reports filed with the SEC. In addition, on today's call, we will reference certain non-GAAP measures as well as certain market and industry data. Information regarding these non-GAAP measures, including reconciliations to GAAP measures is in our earnings release and earnings presentation. Information regarding market and industry data, including sources, is in our earnings presentation. References to year-to-date results on today's call mean results for the 9 months ended September 30, 2025. Now let me turn the call over to Billy.
William Hult, CEO
Thanks, Ashley. Good morning, everyone, and thank you for joining our third quarter earnings call. We delivered another strong quarter, surpassing $500 million in quarterly revenues for the third consecutive quarter. Year-to-date revenues as of the third quarter are up 21% or 17% organically, putting us on track for another year of double-digit revenue growth. We believe change is constant. The current macro environment is defined by historically low interest rate volatility, tight credit spreads and muted equity volatility. At the same time, geopolitical uncertainty and the rapid rise of artificial intelligence continue to reshape how we work and live. We've consistently thrived amid change, and we believe we're well positioned to keep doing so. From the emergence of decentralized finance to shifting regulatory frameworks, we believe our global fixed income platform and network put us in the catbird seat, helping our clients solve their real-world intangible challenges. While the pendulum may be swinging away from globalization, fixed income and ETF markets are becoming increasingly interconnected. Clients and major dealers are thinking globally and non-bank liquidity providers are expanding their global presence, bringing new technology and data capabilities to the ecosystem. As clients seek more time and cost-efficient ways to interact across markets, we remain focused on delivering innovative collaborative solutions that enhance liquidity and efficiency across the global fixed income ecosystem. Diving into the third quarter, despite muted volatility, strong client activity drove 13% year-over-year revenue growth on a reported basis. We produced strong third quarter revenue growth despite facing increasingly tougher year-over-year comparisons, especially in August, which last year defied the typical seasonal slowdown and was exceptionally active as macro growth fears gripped the market and the yen carry trade collapsed. Our international revenues continue to scale higher delivering 25% year-over-year growth as our strategic initiatives in EM and APAC continue to pay off. We continue to balance investing for growth and profitability as adjusted EBITDA margins expanded by 54 basis points relative to the third quarter of 2024. Turning to Slide 5. Rates produced its second highest revenue quarter driven by continued organic growth across swaps and global government bonds, while mortgages produced record revenues. Credit growth was led by strength across munis, European credit and emerging market credit. Money markets revenue growth was led by the addition of ICD and aided by record quarterly revenues across global repos. ICD continues to build back balances post the April volatility that led to some large clients drawing down their money market fund balances to tactically buy back shares in the market and increase spending ahead of potential tariffs. ICD revenues were up 7% relative to the second quarter of 2025. Equities posted another strong growth quarter with revenues up 17% year-over-year, led by growth in global ETFs and equity derivatives. Other revenues grew over 50% as we see growing contributions from our emerging digital asset initiatives. Finally, market data revenues were driven by growth in our proprietary data products. We have reached an agreement in principle to renew the LSEG market data agreement, which is up for renewal at the end of October, for an additional 3 years striking the right balance between maintaining the integrity of our platform and commercializing our rich data sets. We expect this agreement will not only generate significantly more revenue for Tradeweb, which Sara will touch on later, but it also maintains flexibility to grow our proprietary data business. We also see additional upside as we build more products to enhance the trading experience of our clients. Turning to Slide 6. This quarter saw a significant drop in intraday volatility from the off-the-chart levels seen in prior periods, specifically it was down 19% year-over-year and 30% quarter-over-quarter. All in, U.S. treasury revenues decreased slightly by 2% year-over-year as positive revenue growth across our institutional channel was more than offset by weaker wholesale trends, a business that tends to thrive when there is heightened volatility. One of the trends that has attracted a lot of attention this year is the rise of voice activity in tandem with, and not at the expense of, electronic trading. Year-to-date, electronic industry average daily volume saw a 10% increase year-over-year. We also saw a 26% increase in industry voice average daily volume. This distinction is very important. Electronic trading remains robust and should continue to rise, but we are operating with a continued paradigm of extreme market conditions, this time marked by unusually low volatility. This is driving more complex voice-centric package trades in the market, a mix shift that weighed on our U.S. treasury market share, which stood at 22% in the third quarter. However, our share is rebounding. It increased quarter-over-quarter with September reaching the highest levels since March of this year. In addition, this week, we did our first package trade with a bespoke swap versus the U.S. Treasury. This is an entry point into a world of more complex package trades across the deep liquidity we have in U.S. treasuries and swaps. Our competitive position remains strong on a relative basis, we exceeded 50% for the sixth consecutive quarter in institutional U.S. treasuries versus our main electronic competitor. During the quarter, we expanded our dealer algorithmic execution capabilities. We expect additional global dealer algos to be onboarded in the coming months, further enhancing our unified multi-dealer and multi-asset platform. Finally, attacking voice packaged trades remains a main focus for the team, and we believe we have all the solutions in-house, especially with our r8fin asset. Turning to wholesale U.S. treasuries. Revenues were down 6%, mainly driven by lower volumes across our central limit order book, partially offset by growth across our wholesale streaming protocol. Wholesale continues to be a strategic priority as we focus on expanding our network of liquidity providers and strengthening our liquidity pools in alignment with our multi-protocol platform strategy. In equities, ETFs posted strong double-digit revenue growth as we continue to deepen integration with our clients. A key differentiator with our ETF clients has been our AiEX automation solution with average daily trades increasing over 90% year-over-year. While AiEX is deeply penetrated across European ETFs, we are now seeing strong adoption across U.S. ETFs with AiEX average daily trades up 70% quarter-over-quarter. Our efforts to broaden our equity presence beyond our flagship ETF franchise continued to pay off with institutional equity derivative revenues up 16% year-over-year. Looking ahead, the pipeline remains strong as the benefits of our electronic solutions continue to resonate with our clients. Turning to Slide 7. Global Rates continue to deliver diversified revenue growth across an expanding range of products and geographies. Rates have been a core growth engine for us with year-to-date revenues up 23% year-over-year and averaging 16% annual growth since 2019 with international being a highlight. Even with our scale, the majority of Global Rates products still trade over the phone or chat. That's a significant opportunity. We are leaning into it by building more innovative electronic solutions that make markets more efficient, transparent and connected across swaps, government bonds and mortgages. We are pushing into new voice-centric markets like bilateral and multi-asset package swaps, specified pool trading and mortgages and packaged trading across global government bonds. Altogether, we estimate these initiatives to open up a revenue total addressable market of nearly $500 million annually. By capturing share from traditional voice trading and continuing to innovate with clients, we continue to strengthen our competitive position in Global Rates. Moving to Slide 8. We have spent years building our strong global interest rate swaps foundation, and it's paying off. Clients continue to shift more of their workflow from voice to electronic and we're right at the center of that change. What started as a regulatory push has evolved into a structural movement. Clients and dealers have never been so invested in building out more efficient workflow options for their voice flow. From 2019 through 2024, swaps revenues have grown at more than 20% on average. And year-to-date, we have accelerated to 40% year-over-year. Just like our broader rate franchise, the growth has been diverse, over 30% year-to-date revenue growth in European and dollar swaps, over 70% across APAC and our emerging market initiatives alone added over 500 basis points to our total swaps year-to-date revenue growth. We are seeing a client base that's deeply engaged, active, cross-currency and increasingly electronic. And while compression can sometimes mask the strength of the business, the underlying trend is clear. We continue to grow our overall risk market share. Even with all of that progress, the majority of swaps trading is still voice-driven, which means there's plenty of room ahead for continued electronification. Our team continues to innovate around that opportunity. We're expanding our presence in emerging market swaps, building multi-asset package swaps capabilities across our cleared developed market currencies and making early headway in the bilateral swap space. Each of these initiatives opens new ways for clients to connect, trade and unlock efficiency on Tradeweb. Focusing on the third quarter, global swaps delivered record revenues driven by a combination of strong client engagement, a dynamic macro backdrop, a favorable mix shift towards risk trading and a 7% year-over-year increase in weighted average duration. Altogether, global swaps revenues grew over 30% year-over-year. Core risk market share, which excludes compression trading had a record, rising over 130 basis points year-over-year. Total market share declined from 22.4% in third quarter '24 to 21.2% in third quarter 2025, largely due to a significant reduction in European client-related compression volumes, which carry much lower fee rates. The third quarter highlighted the continued global expansion of our swaps franchise. We achieved record revenues across EM and institutional dollar swaps revenues, while European swaps revenues rose nearly 30% year-over-year. Our strong performance was supported by an 8% year-over-year increase in global active users. We continue to make progress across emerging market swaps and our rapidly growing request for market protocol. Our third quarter EM swaps revenues produced another strong quarter, while our RFM protocol also saw average daily volume more than double year-over-year with adoption picking up. You can see Slide 17 of the earnings presentation for our usual global swaps disclosure. Looking ahead, we continue to believe the long-term growth potential for swaps remains significant with just 30% of the cleared swaps market currently electronified, there is substantial runway to digitize workflows alongside our clients. Our clients have stayed very engaged given the fluid global macroeconomic backdrop, and we continue to partner with them to create better workflow solutions across a growing part of the cleared markets and make inroads into the uncleared swaps market. This month, we launched the first fully electronic swaption package trading protocol in the market, a major step forward in bringing transparency efficiency and two-way pricing to a product that has historically traded almost entirely by voice. Shifting to Global Credit on Slide 9, low single-digit revenue growth for Global Credit was driven by strong double-digit revenue growth in both European credit and municipal bonds, which more than offset weakness in U.S. credit, where revenues fell year-over-year, mainly due to retail corporate credit revenues that were down nearly 30% year-over-year, primarily reflecting the better relative yields our clients were getting across money markets and munis. Automation continues to resonate with Global Credit AiEX average daily trades, increasing 5% year-over-year. U.S. credit remains a key growth initiative. We are focused on maintaining our leadership position in our pioneering portfolio and session trading protocols and increasing our block market share, perhaps most importantly, continuing to increase our RFQ share which we expect to be the #1 driver of revenue growth in U.S. credit going forward. Our deepening liquidity pool and continuously improving client experience is resonating as we attract more clients and experienced talent across the board. We achieved record block share for the quarter in fully electronic U.S. investment grade at 10%. Our volume growth was driven by continued adoption of our Portfolio Trading, RFQ and sessions protocols. Institutional RFQ average daily volume grew 13% year-over-year with double-digit growth in both IG and high yield. Our efforts to expand into RFQ are seeing continued signs of success with our IG RFQ share of overall TRACE up over 60 basis points year-over-year. Portfolio Trading average daily volume also increased over 10% year-over-year, with over 30% growth across international Portfolio Trading. During the quarter, we saw our largest line item portfolio trade at over 4,000 lines. Additionally, we saw our largest ever international portfolio trade at nearly $1.4 billion. We saw double-digit active user growth across the U.S. and international PT, and we continue to expect adoption of the Portfolio Trading solution to expand. AllTrade had a strong quarter with over $200 billion in volume with average daily volume up almost 10% year-over-year. Our all-to-all average daily volume grew over 35% year-over-year while sessions average daily volume rose by nearly 10% year-over-year. The team remains focused on expanding our network and increasing the number of responders on the AllTrade platform. We saw record responder rates across IG and we also saw strong ETF market maker participation across institutional credit with volume showing strong year-over-year gains. Moving to Slide 10. One aspect of the Tradeweb story that often doesn't get enough attention is how far we've come internationally. Over the past few years, we've built tremendous momentum outside the U.S. with international revenues growing at a 19% compound annual growth rate from 2019 through 2024. And so far this year, they're up more than 30% year-over-year. Today, over half of our overall revenue growth is coming from outside the United States and about one-fifth of that is from regions beyond Europe and the U.K., mainly Asia. Regions that were once viewed as future opportunities have now become meaningful contributors to our business. This success stems from the strength of our global presence and the deep relationships we've built with our international clients. Importantly, these clients aren't just engaging with Tradeweb for international fixed income products, they're increasingly turning to the platform for our home court U.S. products as well, underscoring the global reach and versatility of our offering. Building on the success of our international expansion, we've also seen strong early results from our emerging markets initiative, much like our broader international strategy. We've been leveraging our established developed market presence to drive growth in these regions, and we believe it is working. Traders in emerging markets are deeply engaged with Tradeweb and increasingly drawn to our multi-asset class model trading an average of more than 5 products on our platform. We're now pacing at over $100 million in annual revenue from emerging markets, nearly triple what we achieved in 2023. Yet even with this progress, we're only beginning to tap into a total addressable market exceeding $1.5 billion. Across emerging market swaps in particular, long-standing challenges such as geographic dispersion, pricing opacity and operational inefficiencies have traditionally made voice trading the default. That dynamic is changing. Tradeweb is helping to lead the shift towards electronification by providing clients with more discrete, transparent and efficient execution, innovations like our RFM protocol and AiEX are playing a key role in that evolution. Beyond swaps, we're also seeing encouraging momentum in emerging markets cash credit, where revenues are up more than 40% year-over-year. Last week, we announced the successful launch of the first electronic bond alternative trading system in Saudi Arabia, a foundational moment for a fixed income market structure in the Kingdom and a testament to our growing geographic footprint. The opportunity ahead remains significant, not only within global fixed income and ETF markets, but also as we continue to build brand recognition and expand our footprint across more countries. And with that, let me turn it over to Sara to discuss our financials in more detail.
Sara Furber, CFO
Thanks, Billy, and good morning. As I go through the numbers, all comparisons will be to the prior year period, unless otherwise noted. Slide 11 provides a summary of our quarterly earnings performance. As Billy recapped earlier, this quarter, we saw revenues of $509 million that were up 13% year-over-year on a reported basis and 11% on a constant currency basis given the weakening dollar. We derived approximately 42% of our third quarter revenues from international clients and recall that approximately 30% of our revenue base is denominated in currencies other than dollars, predominantly in euros. Our variable revenues increased by 11% and total trading revenues increased by 13%. Total fixed revenues related to our 4 major asset classes were up 28% on a reported basis and 26% on a constant currency basis. Rates fixed revenue growth was primarily driven by an increase in minimum fee floors for certain dealers and by the addition of dealers to our mortgage and U.S. government bond platforms. Credit fixed revenue growth was primarily driven by the previously disclosed introduction of minimum fee floors and the migration of certain dealers to subscription fees. Other revenues increased 52%, primarily driven by our digital initiatives. Specifically, we earned $2.3 million from our work with the Canton Network, where we are compensated in Canton Coins. This item will be variable quarter-to-quarter, reflecting fluctuations in the number of Canton Coins earned, Canton Coin prices and periodic tech enhancements for retail clients. Year-to-date adjusted EBITDA margin of 54.2% increased by 90 basis points on a reported basis when compared to our 2024 full year margins. Lastly, this quarter's GAAP results include a $15 million realized gain from the sale of Canton Coins. For the first 9 months of 2025, we also recorded unrealized gains of $50.6 million. As a reminder, realized and unrealized gains are included in GAAP EPS and excluded from non-GAAP adjusted diluted EPS. As of the end of the third quarter, we held approximately 1.7 billion Canton Coins with a fair value of approximately $56 million, which is recorded on our balance sheet under other assets. Moving on to fees per million on Slide 12, and I'll highlight some key trends for the quarter. You can see Slide 19 of the earnings presentation for additional detail regarding our fee per million performance this quarter. For cash rates products, average fees per million were down 7%, primarily due to a mix shift away from U.S. government bonds, which carry a comparatively higher fee per million and a shift towards mortgages, which carry a lower fee per million. For long-tenor swaps, average fees per million were up 21%, primarily due to a decline in compression activity. For cash credit, average fees per million decreased 15% due to the migration of certain dealers from fully variable plans to fixed plans across institutional and wholesale U.S. credit and a mix shift away from retail within the U.S. credit box which carries a higher fee per million. For cash equities, average fees per million increased 1% due to higher fee per million in EU ETFs. And finally, within money markets, average fees per million decreased 4%, primarily due to a mix shift away from retail CDs, which carry a comparatively higher fee per million. Slide 13 details our adjusted expenses. At a high level, the scalability and variable nature of our expense base allow us to continue to invest for growth and grow margins. We have maintained a consistent philosophy here. Adjusted expenses for the third quarter increased 12% on a reported basis and 11% on a constant currency basis. During the third quarter, we continued investments in tech and communications, digital assets, consulting and client relationship development. Adjusted compensation costs grew 6%, driven by a 12% year-over-year increase in headcount and higher salaries, partially offset by lower accruals for performance-related variable compensation. Technology and communication costs increased 39%, primarily due to our continued investments in data strategy and infrastructure. Adjusted professional fees grew 6%, mainly due to an increase in tech consultants as we augment our offshore technology operations and build incremental scalability. This was partially offset by lower legal fees. Occupancy expenses increased 23%, primarily from increased rent due to the move of our new New York City headquarters, including duplicate rent of $241,000 in the quarter. Excluding duplicate rent, occupancy expense grew 18%. Adjusted general and administrative costs increased 30%, primarily due to a pickup in travel and entertainment and unfavorable movements in FX. Unfavorable movements in FX resulted in a $1 million loss in the third quarter of '25 versus approximately a $400,000 gain in the third quarter of '24. Excluding FX, adjusted general and administrative costs grew 19%. Slide 14 details capital management and our guidance. On our cash position and capital return policy, we ended the third quarter in a strong position with $1.9 billion in cash and cash equivalents, and free cash flow reached approximately $987 million for the trailing 12 months. Our net interest income of $19.8 million increased due to higher cash balances despite lower interest yields and included a one-time payment of $2.4 million related to interest income from a tax refund. With this quarter's earnings, the Board declared a quarterly dividend of $0.12 per Class A and Class B shares, up 20% year-over-year. Turning to guidance for 2025. We are tightening our adjusted expense guidance to $1 billion to $1.025 billion. In the fourth quarter, we expect a similar sequential dollar increase in technology and communication expenses as we are seeing this quarter driven by continued investment in platform infrastructure, AI and data. We expect to see continued double-digit growth in technology and communications through 2026 based off the fourth quarter run rate. We expect fourth quarter professional fees to see a seasonal pickup similar to the fourth quarter of 2024. We expect adjusted G&A to rise sequentially, primarily due to an expected $4 million in FX losses based on where current FX rates are coupled with the usual seasonal rise in T&E, marketing and charity. Lastly, we estimate fourth quarter occupancy expenses to increase by $1.5 million over the third quarter, primarily due to the move to our New York City headquarters in September, along with higher data center costs. All in, with these investments in FX-related impacts, we continue to expect our 2025 adjusted EBITDA margin to exceed 2024 levels although expansion will be more modest than last year as we support our current and future organic growth. As Billy mentioned, we reached an agreement in principle to renew our market data contract with LSEG for a duration of 3 years that will see the contract increase in value by 9% annually, effective as of November 1. We are still in the process of formalizing the contract and finalizing the cadence of revenue recognition, and we'll provide an update on our fourth quarter earnings call. In the interim, for modeling purposes, you can use $22 million in revenue from the LSEG market data agreement for the fourth quarter, which is derived using the current monthly implied rate for the third quarter for October and growing that by 9% for November and December. Now I'll turn it back to Billy for concluding remarks.
William Hult, CEO
Thanks, Sara. 2025 is shaping up to be another banner year for Tradeweb even as the markets present their share of challenges. We have a data-driven Fed that reacts to each new data point and that, in turn, is influencing how our clients think about risk and express it through our platform. Across our client base, a clear theme is emerging, which I'd like to call mechanized flow. Put simply, our clients are becoming increasingly systematic and data-driven in how they trade, and that evolution aligns perfectly with how our global platform is built. That said, we're in a period where the market feels somewhat on autopilot with the lack of fresh data that makes it difficult for our clients to war game and position effectively. Low volatility and limited data are near-term headwinds, not just for us, but for the broader market. Still, we believe the setup heading into 2026 is constructive. Volatility will normalize, data will return. And when it does, our clients will once again need to hedge and reposition their global books of risk. And importantly, the firm is not standing still. We are focused on what we can control, building innovative solutions across our clients' execution workflows to win market share from the voice markets. I remain incredibly proud of what we've achieved this year and confident in the opportunities ahead as we continue to partner with our clients to help redefine how the world trades fixed income. Overall, revenue growth is trending approximately 9% higher relative to October 2024, which was exceptionally strong given the election volatility. While overall revenue growth is lower than we expected, this growth is happening in an environment of low volatility, fewer data points and without the benefit of an election year. Our international business continued its strong revenue performance with October growth of nearly 20% year-over-year. The diversity of our growth remains a theme as we are seeing double-digit volume growth across global swaps, European government bonds, U.S. high yield, European credit, munis, China bonds, global ETFs and global repo. Our IG share is tracking below September levels, while our high-yield share is tracking above September levels. Finally, I would like to thank our clients for their business and partnership in the quarter and recognize my colleagues for their efforts that contributed to the strong quarterly revenues and volumes at Tradeweb. With that, I will turn it back to Ashley for your questions.
Ashley Serrao, Head of Treasury, FP&A and Investor Relations
Thanks, Billy. Q&A will end at 10:30 a.m. Eastern Time. Operator, you can now take our first question.
Operator, Operator
Our first question comes from Chris Allen with Citi.
Christopher Allen, Analyst
I wanted to get a little bit more on rate environment. Billy, as you noted, volatility in activity levels have been low. It sounds like clients are sitting on their hands to an extent. Just wondering, from your perspective, what potential catalysts are ahead that could spark volatility and improve activity? Also, you noted the lack of data impacting activity. Is there any way to gauge the impact of the government shutdown and the lack of releases on activity levels?
William Hult, CEO
Yes, Chris, I'm doing well, thanks for your question. I want to commend you for getting through your golf round with Sameer. October marked one of the lowest rates of volatility since 2021, making your question timely and relevant. Our clients depend on data to inform their decisions about capital deployment, risk positioning, and market engagement. Part of the recent subdued activity can indeed be attributed to the lack of data points, which is closely linked to the government shutdown. Many clients operate systematically, using precise data to shape their strategies, which is vital for market makers and hedge funds in the financial ecosystem. We’ve been proactive in responding to this trend, emphasizing the importance of data as their fuel. Consequently, clients seem to be in a wait-and-see mode as they navigate the U.S. markets. Interestingly, the Fed appears to be somewhat on autopilot, which could lead to unexpected developments. The recent rate cut announcement, along with fresh data, significantly impacted the markets, resulting in a notable selloff on the short end of the curve. The Fed's decision to end quantitative tightening is viewed positively for our business, although their raised concerns regarding the future pace of rate cuts have triggered repositioning activities. New data often brings volatility. Looking ahead, we’re observing increased dissent within the Fed, affecting rate expectations and the yield curve. As we approach the midterms, the geopolitical landscape remains uncertain, which could serve as catalysts for both volatility and increased activity. And so as I say all that, what I would say also, as you know very well, we operate a global business and its business, I would say, as usual, for our international clients, they are not being weighed down by data drought at all. So as we kind of reflect a little bit on the third quarter, even with volatility, roughly, I think it's roughly 20% below long-term averages. From my perspective, we still delivered positive revenue growth in institutional treasuries, double-digit growth across mortgages. I think that's an important comment. European governments, global swaps have done well. Big picture, trends of higher global debt push for greater efficiency, leveraging electronic trading continue. That's a really important kind of comment from me. And I think the recent move lower in rates has, without question, reinvigorated our leading mortgage business where we have significant market share and has been a flagship franchise for us for a long time. It delivered record revenues. Looking ahead, and I say this like very kind of clearly, I think it's a great time to be in the macro markets, global backdrop, you have moderate growth, using inflation, but also this kind of thing I said before, Chris, which is continued uncertainty and some structural challenges, tariffs on, tariffs off. We think we've been through move a little bit. I always say this very loud and clear, control what you can control. You know that we are not a company that remotely stand still. So the focus is always going to be on expanding the electronic pie, building new solutions, continuing to compete with the voice markets, grow our overall revenue wallet. Very proud that we launched. We had our first electronic swaption trade this month for U.S. multi-asset package trade continuing to innovate and be front-footed. So good questions, Chris, and appreciate it always.
Operator, Operator
Our next question comes from the line of Jeff Schmitt with William Blair.
Jeffrey Schmitt, Analyst
Electronic market share for treasuries has been down in recent months, I think, under 60% or even 55% of industry volumes. What's driving that greater mix of voice trades? I think you've pointed out package trades in the past. Is that still the case? And do you see this as a structural issue? Or could it be more temporary?
William Hult, CEO
Yes, that's a great question. I don't see this as a structural issue, but let me elaborate. I think your perspective is spot on. We often mention that our biggest competitor is the phone. It's the outdated way of doing business from 1996, not the way the market will operate in 2026. The ultimate goal for us is to target the larger, more complex trades that are still being executed via phone. Voice trading has long been integral to the U.S. treasury market, especially for certain strategies like basis trades and asset swaps, which have historically favored voice execution. These trades are frequently more complex, involve larger amounts, and are better suited for this method. Additionally, it's important to note that clients tend to look for arbitrage opportunities within treasuries or between treasuries and futures or swaps. As a result, many of these large notional package trades remain primarily voice-driven for the time being, which is a significant focus in our rates business. Yes, to your point, parts of that market have seen voice volumes growing faster than the straightforward electronic flow that we operate in. From a positive standpoint, I believe the share you mentioned bottomed out around April and May, and we've observed a noticeable reacceleration of our share from September into October. We anticipate this trend to continue. If we look at the bigger picture, the consistent growth in investment and new technology is something we've seen developing for years. It’s challenging to predict a peak for the ongoing expansion of electronification, as it feels like a train with a lot of momentum. We will keep integrating AI into our pricing strategies, and we believe that the moves into the DeFi ecosystem, including stable coins and tokenization, are advantageous for us. In fixed income, electronic trading is expanding since it provides efficiency, competition, and transparency. It’s crucial to highlight that these benefits are difficult, if not impossible, to replicate in the voice market, which gives us optimism as we continue to address more complexities in the market. Broad adoption does take time and requires behavioral changes from clients, but at Tradeweb, we’re not complacent. We are confident that the ongoing electronification is on a clear upward path.
Sara Furber, CFO
Maybe just amplifying one of the points that you made earlier in the earlier part of this call, when we talk about the percent of electronification in U.S. treasuries and Billy said this, it sometimes gets lost. The actual electronic ADV in this treasury market is up double digits year-to-date, right? So Billy is talking about this episodic increased voice flow that we have an opportunity to help electronify around packaged traits. But not to lose sight of the underlying business, the underlying industry trend is actually up 10% year-over-year. So both things are healthy opportunities.
Operator, Operator
Our next question comes from the line of Dan Fannon.
Daniel Fannon, Analyst
I apologize for the background noise. There's a general discussion about lower rates and their impact on trading volumes, so I was wondering about your perspective on the outlook for rates, particularly in light of the current Fed funds curve and what you anticipate for the next year.
William Hult, CEO
Good question. I'll address part of this, and Sara can join in as well. Good morning to everyone on the call. Dan, we've known each other for a while. It's hard to believe I've been at the company for over 25 years now. I'm proud to say we've increased our revenues every year, regardless of the market conditions. This marks nine consecutive quarters of double-digit revenue growth, which we've achieved through various market environments by focusing on developing innovative solutions across the voice market. It's important to emphasize that this commitment has remained unchanged over the past 25 years. Regarding your question, I think the perspective around it may be somewhat oversimplified. From our standpoint, the current environment is constructive for us. We see real yields of 2% to 3% on the short end, which we believe makes fixed income quite appealing for generating income. Additionally, we view the sustained upward sloping yield curve as encouraging, as it promotes duration extension, which is beneficial for our higher duration products. Continued issuance will encourage velocity and future secondary supply. Regarding rates, it's crucial to distinguish sharply between lower rates and zero rates as these represent very different environments. Historical trends indicate that trading volumes fluctuate significantly in relation to volatility and policy expectations, not just the absolute rate levels. As rates decline, we anticipate a resurgence in private intermediation. Banks are better capitalized and stronger than ever, and client-driven activity is expected to stay active. We are beginning to observe that central banks will play a smaller role in the market compared to a few years ago, which we see as a positive environment for us. Sara, would you like to add anything?
Sara Furber, CFO
I think in addition to what Billy is talking about around what's really driving business volumes, I think it's also important to remember that lower interest rates actually impact in a positive way, 2 of our biggest businesses around swaps and cash credit fee per million. So if you think about it, and I know we've talked a little bit about this before, but if you were just to take rates and drop them by 100 basis points across the curve, swap fee per million would increase by 4% or 5%, cash credit fee per million by 2%. And as a reminder, it's because both of those businesses and fee structures operate on PV-01 or DV-01, so on the risk notional that's being traded. And then I know earlier, we talked about the shape of the curve, that also has a positive impact in terms of duration being extended in our products. And so as you think about the impact of that on fee per million, a 1-year increase in duration. So if you take it from 10 years to 11 years in a business like swaps, fee per million can go up 7% to 8% and credit a little bit less, but around 2%. So obviously, like when we think about our business, the way the business mix changes is the biggest driver of revenue. But structurally, when rates go down, there is this positive impact on fee per million holding all else constant, which I think is something sometimes people forget.
William Hult, CEO
It's impressive, Dan. Reflecting on the previous period of zero rates, which was notably different and more challenging than the lower rates Sara mentioned, we're referring to the timeframe from 2019 to 2021 when the Fed was a significant market buyer. As I've mentioned, during that time, despite the U.S. treasury industry volumes being flat, our revenues grew by 14%, as Sara pointed out. Although interest rate swaps volumes declined by 14%, our revenues increased by 23% that year, which highlights our ability to perform well in tougher environments. That's a great question, Dan, and we always appreciate it.
Operator, Operator
Our next question comes from the line of Alex Blostein with Goldman Sachs.
Alexander Blostein, Analyst
So I wanted to spend a minute on the topic of tokenized assets, obviously, quite an evolving landscape there. What are the opportunities, I guess, in risk that you see for Tradeweb on both of those fronts.
Sara Furber, CFO
Great to hear from you, Alex. I'll start and Billy can jump in as well. It's a great question, and we're definitely focusing a lot on tokenization and digital assets as a whole. Let me explain what we mean by digital assets, as different people refer to different aspects of it. For Tradeweb, when we discuss tokenization and stablecoins, we're really looking at modernizing the way financial assets are traded. This is a natural extension of what we've been doing for 25 years in electronifying voice markets, which is our strength. We're enabling the efficient transfer of risk. Our goal, like with electronifying markets, is to be a market leader and provide our clients the ability to trade tokenized assets on blockchains. It's programmable, it's interoperable. It provides huge client benefits from our standpoint, faster settlement, things like 24/7 trading, data synchronization, I would love less reconciliation personally and capital efficiency, which is probably one of the biggest drivers. So from our seat, there's a lot of opportunity here when there's so much opportunities for our clients, and we have a right to win, which is sort of the first part of what I was getting at. And we've been at it for a while. We've been at it for over 3 years, given the regulatory tailwinds that appear to be lining up. We think this is a real significant opportunity for us. And I think I say this with some appropriate humility, I think we feel we're well ahead of our peers in being able to provide both traditional and digital rails side by side for our clients at scale. So all of those components, I think, matter as we think about the forwards. We've made a number of targeted investments. I think, Alex, you've seen us do that in an effort to provide this end-to-end service, like connecting issuance, trading and settlement, being able to handle the cash leg and the asset leg as you think about tokenized assets. And so I don't need to read the laundry list, but digital asset holdings, finality, securitize and of course, our work with Canton Network. The thing that's exciting, I think, especially from my seat as a CFO is we're really generating revenue. This is having a real impact. And so obviously, early innings, but this year, we've already generated $5 million year-to-date from our work as a validator and super validator on the Canton Network. That's in addition to having 1.7 billion coins on our balance sheet, which are worth approximately $55 million. I believe there are significant financial advantages. We continue to invest in our digital business and plan to enhance our collaboration with the Canton Network, aiming to contribute to its growth and the development of trading applications. This marks the start of our digital business journey, and it's crucial to acknowledge that we've been engaged in this space for quite some time. Our investments are not merely financial; they include both inorganic and organic efforts, with our team at Tradeweb integrating these technologies into our traditional operations such as mortgages and repo. Clearly, we are enthusiastic about this endeavor while striving to maintain a balanced perspective. When addressing risks, we consider complacency to be the most substantial concern that Billy and I frequently discuss. We recognize the importance of our position within the ecosystem and do not assume we will be the sole solution or platform available. However, given our extensive experience and some unique capabilities, as well as the strategic partnerships we have formed, we believe we are well-positioned to adapt alongside the evolving market.
William Hult, CEO
It's always a good question from Alex. I think it's impossible to look at 2025 without acknowledging that crypto exposure to gold and stocks has not evolved into significant macro products. When I mention crypto, I believe it's fair to say that we view institutional-grade crypto as part of the broader macro toolkit, and we intend to play a role in that. The partnerships, particularly the Canton Network partnership that you referenced, are crucial to us as we see best-in-class opportunities there and real potential to work with partners as the marketplace evolves towards a more institutional framework. Everyone knows that the dynamics of that market are inherently 24/7. With fixed income products following suit in tokenization and providing 24/7 liquidity, we aim to take a leadership role in institutional crypto trading. This is all very important and sets the stage for the next few years of electronic marketplaces.
Operator, Operator
Our next question comes from the line of Simon Clinch with Rothschild & Company.
Simon Alistair Clinch, Analyst
Could you provide some insight into the future stages of electronification in the U.S. credit market? How is Tradeweb positioned to both lead and benefit from this trend, particularly regarding the technologies you have planned to enhance this opportunity? Additionally, how does value trading fit into this context, especially concerning block trades? Finally, what should we expect in terms of revenue growth from these opportunities?
William Hult, CEO
Sure. I mentioned before the need for focus, while also recognizing that changes in human behavior take time. The main point I want to make is that electronification and credit have never followed a straight path and likely never will. We've observed periods of gradual progress followed by sharp accelerations when key factors align: better technology, enhanced data, shifts in trading behavior, and improved post-trade processes. These elements need to come together. It’s also crucial to acknowledge that the credit market is fundamentally different from other asset classes. From our perspective, liquidity in this market can be somewhat fragile due to its fragmentation, with thousands of individual bonds and limited depth that can fluctuate rapidly under different conditions. Overall, navigating this market presents challenges, but I view these challenges as playing to Tradeweb's strengths. So in a complex market, I think there's a real difference between just what we would say is like adding technology for technology sake and building balanced real solutions and collaborations with our partners. I mean I think that is front and center, a fundamental ethos to how we partner with the buy side and with the dealers. We still feel exceptionally strong that we are right sided on Portfolio Trading. We think bringing the dealers back into the equation as market makers is a fundamentally important part of the marketplace. I would say there needs to be very strong and continued work on ultimately delivering the dealers' balance sheets and inventories to the most sophisticated, most important clients. I think that's an important endeavor that we are working on. And ultimately, as you know well, this piece of the market is going to be defined as innovations that ultimately land, again, this concept of the holy grail around risk trades. And so we have our best and brightest in the credit business, working on this all the time. I feel very, very strong and proud around how we've landed in credit, and the company is extremely focused into 2026 and continuing to make progress there.
Operator, Operator
Our next question comes from the line of Craig Siegenthaler with Bank of America.
Elias Abboud, Analyst
This is Elias Abboud on for Craig. You launched treasury trading on ICD last quarter. Can you update us on what adoption has looked like? Do you have any plans to launch more products in ICD? And then bigger picture, you're still sitting on a lot of cash. Is there more opportunities for M&A in the corporate channel going forward?
Sara Furber, CFO
It's Sara. I'll take that. I think we are really excited. We've seen early interest from our Tivo launch on ICD, which we did at the end of the second quarter, and we've already had a few clients execute their first trades this month. So good momentum and progress there. What's been encouraging even beyond that is some of the largest potential clients we have in our pipeline, those who previously passed on ICD are now more focused on reengaging because of this added ability to bring Tradeweb products onto the platform, the ICD portal. So I think holistically, we continue to see momentum around that strategy. Obviously, it takes time in long sales cycles. Beyond that, we're very focused on making the whole experience when we brought Tradeweb and ICD together to be more seamless. So there's work that we're doing to integrate straight-through processing between our organizations and platforms and obviously, a couple of aspects on the custody relationship. So more to come on that, but I think good progress. And beyond ICD, the second part of your question, just in terms of bigger picture sitting on cash and M&A. Look, I think Billy has been really clear. We are an ambitious company, and we continue to consistently evaluate buy versus build, investments, outright M&A. Just because we have the cash does not mean that we're going to be lacking in discipline. So the bar is high, and we have a number of strategic and financial objectives that anything that we deploy capital against has to meet, but I think you've heard us talk about some of the areas that we're most excited about on this call, whether it be digital, an area that we're evaluating continued investments, both inorganically and organically. Billy's talked about institutional crypto. As that world evolves, I think there are things that we can do to accelerate our technology build there and areas that are adjacent to some of our markets like private credit. So in particular, we're focused on where the biggest opportunities are the growth in the marketplace that are adjacent to what we do, where we think we have a right to win. And so I think the inorganic question is much more than just M&A from our seat. It's a combination of partnerships investments as well as looking at acquisitions. So I hope that helps.
Operator, Operator
Our next question comes from the line of Ken Worthington with JPMorgan.
Kenneth Worthington, Analyst
Maybe following up here. Sara, you highlighted in that '25 would be an investment year, remain open to evaluating M&A opportunities, like if and where appropriate, when you're looking at the product suite as it stands today, are there particular protocols, technologies, geographies that you think could better amplify Tradeweb's value proposition? And to Alex's question earlier, you spent a lot of time on digital and the Canton Network. Are there pieces particularly on the digital side, that would be helpful to fill in here.
Sara Furber, CFO
Yes, certainly. Billy, please feel free to contribute. I would say that we do not observe any significant gaps across our asset classes, protocols, or geographic areas. We consider ourselves to be highly global and well-diversified across different client channels and asset classes. However, we continuously assess where we can enhance or expedite our efforts. The areas I mentioned earlier are what we would classify as frontier markets, and I believe they present our greatest opportunity to introduce potential asset classes. For instance, when Billy discusses institutional crypto, we view that as an adjacent asset class and, in some respects, an extension of our client base, particularly among more crypto-native firms. So, that's an area I would particularly emphasize. It’s also intriguing to consider a different perspective on digital. When you inquire about life cycles, I think that adds a valuable dimension to our discussion. Some might think of Tradeweb merely in terms of matching or execution, but our offerings span from pre-trade analytics to execution and post-trade processes across various scenarios. What’s particularly compelling about some of our initiatives in the digital domain is that they could enhance our efficiency across the entire trading life cycle, benefiting both client service and capital management.
Operator, Operator
Our next question is from the line of Benjamin Budish with Barclays.
Benjamin Budish, Analyst
Billy, in your prepared remarks, you discussed the very low levels of market volatility and its impact on electronic share. I'm curious about your outlook for e-share as mentioned earlier in the Q&A. Could you share your thoughts on market volumes in general, including TRACE and U.S. Treasury? It seems that uncertainty remains quite high, the comparisons are challenging, so what do you think are the reasons for the lower market volumes? How do you see this unfolding over the next 6 to 12 months?
William Hult, CEO
It's a little bit of what I was saying before, and it's a really good question. There's been a little bit of the kind of Fed on autopilot, lack of data. Your question is a really interesting one. And as I'm kind of thinking about it, when you think about '26, you know that factors around kind of timing of rate cuts is going to be very, very important, like continued kind of fiscal developments. There's going to be macro data surprises. We know that credit risk are coming to light. That's a big deal. So we feel kind of like volatility and client activity is big time coming back into the marketplace. You know that we're going to kind of win in the storm, right? We've shown our ability to win in the storm consistently, whether or not that storm was way back when kind of COVID or the regional crisis, that storm that took place or then just very, very recently, obviously around kind of liberation moments within the marketplace. We're going to win in the storm. I feel very strongly that we're also going to win in the comp and we have been winning in the comp. And so that's where we kind of talk about this kind of concept of mechanized flow. And back to the basics around RFQ technology. These environments play very, very well for us in part because of our ability to kind of engage them with clients and to put innovations into the marketplace at periods of calm, I think, plays extremely well to our strengths down the road. So I kind of say this with a little bit of a wink. Nobody knows anything. The very strong instinct is comm markets lead to something very different and we've seen little even pieces of that as of yesterday afternoon when the market just saw something different than I had expected to see an activity kind of surge very quickly in volatility search. As a consequence of that, it's going to be a very interesting, I think, market dynamic into 2026. And I think our general feeling here is, and kind of Sara said it with humbleness, but with a tremendous amount of confidence, I think we sit extremely well positioned to be that partner to the industry. So as always, Ben, a very good question and appreciate it, thank you.
Sara Furber, CFO
You know it's interesting, I think, also in what you're saying as you think about our ability to win in the storm and in the comp, the financial model supports that as well, which I think is a really important and unique advantage. So we've had a market environment that was extremely volatile in the beginning half of the year and last year. And as you think about one of the things that we do as an organization, as a management team, we've accelerated a lot of investment to invest through the cycle, in particular, been able to deploy a lot of capital in those environments for things that are new initiatives, which I know Ash and Sameer have highlighted in some of the new slides that we put out, but new initiatives like in spec pools, in bilateral swaps and obviously, in government bonds and being able to do those through the cycle, regardless of if it's like highly volatile or not as volatile, I think, really sets that groundwork for us to perform in all different environments. So that ability to have sustained investment through the cycle, I think is a complement, a different way of looking at kind of why I think Billy's point around we can win in either environment is really backed up.
Operator, Operator
Our next question comes from the line of Alex Kramm with UBS.
Alex Kramm, Analyst
There's been a lot of questions today regarding the electronification of various markets, particularly in the long term. However, one area that hasn't been addressed is our largest business, which is interest rate swaps. Billy, you mentioned earlier that only 30% of the cleared interest rate swaps market is electronic today. I've noticed that number has remained constant for several years, even dating back to the IPO. I'm curious if this percentage is just an estimate, if there's a lack of accurate data available, or if the market hasn't transitioned to electronic trading more significantly in recent years and the growth has come solely from market expansion that you've been involved in.
William Hult, CEO
You have a good memory, Alex. And it's such a good memory, and it's just a good question and I'm definitely going to have to have Sara answer it, but I'll first by acknowledging. I thought I had a good memory until I got to know you, but it's a very good question.
Sara Furber, CFO
Actually, it's a great question because it does give us an opportunity to unpack something, which is true across a bunch of different aspects around our business because it is so nuanced and there's so many layers in it. So swaps, yes, is one of our biggest businesses, most important and growing most quickly, that 30% number, like a lot of things, is this monolithic large pie and can mask a lot of the underlying trends that are really important. So swaps and that 30% number, as an example, include compression, right? And as we've talked about every quarter, compression volumes can be really large, obviously don't come with the same amount of revenue and can distort what's going on. So if I take out compression trades and really focus on what we call risk-based swap share for electronification or some people would call like DV01 based swaps in that market, you can really see that electronification trend much more clearly. So in terms of that piece, that risk base, which really drives revenue in 2020, the total electronification was 10%. And if we compare to where we are now, that number is 19%. So that's 150 basis points per annum over that 5-year period. And I think really gets to what you're saying, which is like, oh, okay, there is some real movement and actually that movement, what moves revenue. So when you know our revenues have moved in excess of double digits, you kind of have that clearer picture. It's not the only way to look at it. I'd say the other big driver we spend a lot of time talking about, but gets buried in that 30% is emerging markets. So emerging markets in 2020 was like 1%. I don't know if you can even measure 1%, but 1% electronic, it really wasn't electronic at all. And now as we fast forward to where the market is in 2025, and we obviously view ourselves as a leader in that market, it's at 18%, so that market is growing 300 basis points year-over-year in terms of electronification. So to your point, sometimes when you're trying to cover a broad universe with a single stat, it cannot do justice to some of the underlying trends that are really important, especially when you think about what drives our revenue opportunity going forward and our investment dollars. So thanks for the question. I don't know if you want to add anything.
William Hult, CEO
That's perfect.
Operator, Operator
And our last question comes from the line of Kyle Voigt with KBW.
Kyle Voigt, Analyst
Maybe a question on capital priorities. Just given the pullback in share price, have your capital allocation priorities shifted at all? And I guess, why haven't you stepped up for purchases in light of that pullback in the share price? And then you addressed some of the inorganic investment outlook in a prior question, but also maybe you could address the priorities for organic investments from an asset class or product perspective as we're looking out over the next year.
Sara Furber, CFO
Great question. Okay. So there's a near-term view and a long-term view, and I don't want to conflate those. Long term, there's really no change in our capital management philosophy. But I think to the point and sort of the temperature around that question, given where the share price is, we do have a fundamental value on what the company is worth and don't really feel the valuation fully reflects all the opportunities we have in front of us. So we're definitely actively looking at share repurchases and being opportunistic in the market. Obviously, we have to wait till the window opens up again into your point a little bit about why we weren't active in the earlier part of the market. There are times when the window is open and isn't, and we have an active set of M&A targets and pipeline activities that we look at. So I think don't take that as we think this is where the stock should trade, I do think as we think longer-term, the waterfall isn't really any different than it's been over the last 5 years, at least since I've been here. First and foremost, organic, then M&A then share repurchases and then dividends, which we like to grow in line with earnings. On the organic front, and I think we've talked a lot about the inorganic front on this call, and Billy feel free to chime in, I think some of the areas where we continue to invest, obviously, EM has been a big focus for us. swaps and credit, really a consistent focus for us. And then increasingly, things like AI, our data infrastructure strategy and digital are areas that we're spending a lot of time all organically, even if they're complemented by inorganic strategies. So those are all things that we see large TAMs for and our ability to leverage what we do well to drive long-term growth.
William Hult, CEO
Perfectly said. I would only mess it up by adding something in, but as always a great question, thank you.
Operator, Operator
Thank you. And this will conclude our Q&A session. I will pass it back to Billy Hult for his final comments.
William Hult, CEO
Thank you all very much for joining us this morning. As always, if you have any follow-up questions, please feel free to reach out to Ashley, Sameer and the team. Have a great day, everybody, and thank you.
Operator, Operator
And with that, we conclude our conference. Thank you for participating. You may all disconnect.