MarketAxess Holdings Inc (MKTX) — Q4 2020 Earnings Call Transcript

Good morning and welcome to the MarketAxess Fourth Quarter 2020 Conference Call. For the call, Rick McVey, Chairman and Chief Executive Officer, will review the highlights for the quarter and full year 2020; Chris Concannon, President and Chief Operating Officer, will discuss automation and growth initiatives; 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 belief 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, 2019, and our quarterly report on Form 10-Q for the third quarter. 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 review our fourth quarter and full year 2020 results. We finished the year strong with significant business momentum in the fourth quarter. Market share gains in core products fueled a 32% year-over-year increase in revenue and a 51% increase in operating income. Revenue for the quarter was $171 million and EPS of $1.91 was up 45% versus last year. High-grade market share reached a new high of 22.8%, and high-yield share surged to a new record of 17.1%, up from 10.6%. Open Trading volume grew 63% to $218 billion in the fourth quarter, driving estimated transaction cost savings of $225 million to our clients. We closed on the acquisition of Deutsche Borse's Regulatory Reporting Hub during the quarter, and client on-boarding and integration is underway. On the back of the strong results, our Board of Directors approved an increase in our quarterly dividend to $0.06 per share, up from $0.60. Our long-term results show consistent execution of our growth agenda with strong 5 year and 10-year compound revenue growth of 18% and compound EPS growth of 25%. For full year 2020, revenue growth was 35% and EPS growth was 45%. The results this year reflect strength in all of our core credit products with record volume and revenue in US high-grade, high yield, global EM, Eurobonds, and Munis. Total credit trading volume was up 29% in 2020 to $2.6 trillion. Active trading client firms during 2020 surpassed 1,800, about half of which are outside of the US. Open Trading grew to 33% of our traded volume, up from 26% in 2019. Estimated transaction cost savings from Open Trading skyrocketed to $1.1 billion for the full year. Investors and dealers both had record order flow into our Open Trading liquidity pool in 2020. Slide 5 provides an update on market conditions. As of year-end, high-grade credit spreads have recovered to pre-pandemic levels. Credit spread volatility has also been declining over the last several quarters. High grade and high yield bond issuance peaked in Q2 and fell back to more normal levels in Q4. As a result of the combination of lower volatility and more normal new issue activity, TRACE volume was up just 9% year-over-year in the fourth quarter. Average years to maturity for corporate bonds traded on the system remained at the high end of the historical range at 9.4 years. This is one of the factors contributing to our increase in fee capture per million in high-grade. These market conditions are normally not favorable for volume growth. However, market share grew strongly during the second half of the year, driving superior revenue and earnings growth. Slide 6 provides an update on Open Trading. Open Trading saw sustained growth even though market conditions normalized in the second half of the year, demonstrating the central role of our marketplace in today's credit market. Open Trading credit volume in the fourth quarter increased 63% and overall credit trading revenue grew 34% versus last year. For the quarter, Open Trading represented approximately 34% of our global credit trading volume, up from 27% in the fourth quarter of 2019. Dealer initiated Open Trading volume grew 70% year-over-year, and over 1,600 unique client firms completed at least one trade in Open Trading during the quarter. Open Trading volume shows strong growth trends in each of our core products. We are creating new trading and portfolio opportunities for our clients by delivering over 28,000 Open Trading orders per day, totaling $15 billion in daily notional value. During the year, we also delivered important protocol enhancements, including live markets. Our order book for actively traded corporate bonds as well as Mid-X, our sessions-based matching platform that utilizes our composite plus mid-market data. Now, let me turn the call over to Chris to provide an update on automation, information services, and post-trade.

Thank you, Rick. Slide 7 demonstrates the growing momentum of automation in credit trading. Automated trading volumes rose to $32 billion in the fourth quarter, up from $24.3 billion in the fourth quarter of 2019. Auto-X trade count grew in the quarter to 163,000, up 28% from the prior year. We are also seeing a healthy adoption of Auto-X across Eurobonds, high yield, and emerging market bonds. The average trade size conducted through Auto-X is also rising. In US investment grade, the average trade size in 2020 grew 14% compared to 2019, and 40% compared to 2018. Clients continue to increase the size of their orders as they gain comfort with the execution quality of our Auto-X solution. The use of dealer algorithms continues to grow on the platform with approximately 3.9 million Algo responses in the fourth quarter resulting in 308,000 trades. The average number of responses per inquiry remains strong, which ultimately improves the likelihood of execution across the platform. Our new automated liquidity provision solution, Auto Responder, has seen early traction. The solution allows investors to automatically respond to requests for liquidity through Open Trading. In 2020, over $10 billion in notional value was automatically made available through our Auto Responder solution. As the overall share of electronic trading grows in credit, we are seeing continued demand for our automated trading solutions. Slide 8 provides an update on product diversification. Market data and analytics has never been more in demand than today. Information services revenue reached $34.3 million for the year with a 5-year compounded growth rate of 11%. Our unique data solutions are assisting bond pricing and liquidity providers on our trading platform, thus helping to generate greater transaction volume. In the years following the implementation of MiFID II, our post-trade services business has grown substantially. Post-trade revenues were at $19.5 million in 2020, up 23% year-over-year. Reflecting our commitment to post-trade, we recently announced the completed acquisition of Deutsche Borse's Regulatory Reporting Hub, which adds significant client penetration in Continental Europe and strengthens our data capabilities. Our Rates business had a critical milestone in the fourth quarter by integrating US treasury trading capabilities within the MarketAxess platform, providing a centralized fixed income trading solution with a full click-to-trade suite of products. This allows current credit trading users to seamlessly access this unique Rates trading solution with complete post-trade integration. We also launched our net hedging solution in Q4, which supports our credit trading clients' ability to efficiently hedge their corporate bond transactions. Slide 9 provides a summary of our trading volume across product categories. Our US high-grade bonds were up 26% year-over-year to $318 billion for the quarter, largely due to market share gains, and an increase in market volumes. Estimated US high-grade market share increased by 2.8 percentage points year-over-year to 22.8%, while estimated US high-grade market volumes were up 10% year-over-year. Volumes in our other credit category were up 36% year-over-year to $321 billion for the quarter. Market share gains account for the vast majority of the 74% increase in US high-yield volume. Eurobond volumes experienced a 31% increase, and emerging market bond volume grew by 19% year-over-year. I'm also excited to report that our municipal bond volume doubled year-over-year. Our Rates business maintained its dealer-to-dealer market share compared to Q4 of 2019 in what was a difficult market environment. We believe the investment made in new trading technology, expanded product coverage, and enhanced data tools will continue to differentiate our Rates offering. Our 2020 Green Bond trading initiative was very successful with $27 billion Green bonds traded on the platform resulting in nearly 135,000 trees planted in critical regions across the world. With three trading days remaining in January, estimated US TRACE market volumes are running more than 10% above January 2020, while estimated Eurobond and emerging markets volumes are similar to January 2020. Estimated combined market share across our four core products is seasonally below the fourth quarter levels, but well above the January 2020 levels. Our month-to-date average daily trading volume in credit products is up more than 20% versus January 2020. Now, let me turn the call over to Tony to provide an update on our financials.

Thank you, Chris. On Slide 10 we provide a summary of our quarterly earnings performance. Revenue was $171 million, up 32% year-over-year. The 31% increase in credit trading volume and higher overall credit fee capture resulted in a 33% uplift in commissions. Post-trade services revenue was up 67% to $6.6 million and reflects 1 month of trade reporting activity from clients added to the Regulatory Reporting Hub acquisition. Operating income was up 51% year-over-year and operating margin reached 53.5% during the quarter. Full year 2020 operating margin was up more than 5 percentage points to 54.4%. The effective tax rate was 19.2% in the fourth quarter, and our full year effective tax rate came in at 20%, which was right at the low end of our 2020 guidance range. On Slide 11 we have laid out our commission revenue, trading volumes and fees per million. Total variable transaction fees were up 40% year-over-year driven by the increase in credit trading volume and higher US high-grade fee capture. US high-grade fee per million was down $12 versus the third quarter level, but $17 higher year-over-year. Combination of shorter duration and higher weighting to larger trade sizes accounted for the sequential decline in fee capture. Our other credit category fee capture decreased by $6 on a sequential basis, but was $11 higher year-over-year. The slight drop in sequential other credit fee capture was principally due to a mix shift with a greater weighting towards Eurobonds, emerging markets, and sovereign bonds. The sequential change in distribution fees was due to variances in unused minimum commitment fees under all variable dealer plans. Slide 12 provides you with the expense detail. The year-over-year rise in compensation and benefits was due to an increase in headcount of 79 personnel in support of our growth initiatives. The increase in professional and consulting expenses is due to a variety of factors including M&A transaction and integration costs, and consulting costs associated with our clearing and settlement transition projects. Higher depreciation and amortization reflects the continuing investment in product development and the trading platform along with the amortization of acquired intangibles. Clearing costs were up almost 50% reflecting the 63% increase in Open Trading volume. As I mentioned on the third quarter earnings call, we expect our steady state third-party clearing costs for credit trading measured as a percentage of Open Trading revenue or on a per ticket basis to decline by upwards of one-third. Excluding M&A transaction and integration costs and the amortization of intangible assets associated with the Regulatory Hub acquisition, expenses were up 12% in the fourth quarter. On Slide 13, we provide balance sheet information. Cash and investments as of December 31 were $489 million, and free cash flow reached a record $340 million in 2020. Dividends and share repurchases aggregated $150 million and capital expenditures were $46 million in 2020. With the announced increase in the quarterly dividend to $0.66 per share, we have tripled the dividend level over the past five years, which matches the growth in earnings and free cash flow generation. Our Board recently authorized a new $100 million share repurchase program to replace the plan expiring at the end of March. As has been our practice, the principal purpose of the repurchase plan is to offset dilution from employee equity grants. During the fourth quarter, we also entered into a new $500 million revolving credit facility with the syndicated banks to support our clearing activities and add financial flexibility. There were no borrowings outstanding at year-end under this facility. On Slide 14, we have laid out our 2021 guidance for expenses, capital expenditures, and the effective tax rate. We expect that total 2021 expenses will be in the range of $362 million to $382 million. Employee compensation and benefit costs are expected to represent around 50% of total expenses consistent with the trend over the past several years. We have built the plan using a sterling to US dollar exchange rate of 1.35, which has the effect of adding around $4 million to the expense guidance. This guidance range reflects a full year of operating expenses related to the Regulatory Reporting Hub acquisition including an estimated $5 million for amortization of acquired intangibles and $5 million in non-recurring integration costs. Excluding the expenses related to the Regulatory Reporting Hub, the midpoint of the guidance range would represent an approximate 13% year-over-year increase in expenses on a constant currency basis. 2021 capital expenditures are expected to range from $50 million to $55 million of which roughly two-thirds relates to capitalized software development costs resulting from the investments we are making in new protocols and enhancements to the trading platform. We expect that the effective tax rate for full year 2021 will range from 22% to 24%. The increase in the effective tax rate versus 2020 is driven by lower estimated excess tax benefits related to share-based compensation awards. Based on the expected timing for realizing the excess tax benefits, the effective tax rate will likely be in the 20% range in the first quarter, and then the 24% to 25% range in the second, third, and fourth quarters. Now, let me turn the call back to Rick.

Thank you, Tony. 2020 was an outstanding year for revenue and earnings growth. I want to thank all MarketAxess employees for their dedication that led to these terrific results. Market share momentum in the second half of 2020 positions us well for continued growth in the years ahead. We are investing heavily to grow our portfolio of products, protocols, and clients in order to continue our track record of long-term sustainable growth. We would now be happy to open the line for your questions.

Hi, thanks, good morning. My first question is for Tony regarding the expenses and the outlook. I noticed that the organic expense growth is slightly higher than what you projected at the beginning of last year. Can you discuss some specific areas of spending and any initiatives that might differ from last year? Additionally, is there any other normalization of spending we should consider, particularly related to travel and expenses associated with macroeconomic factors and COVID?

Sure, Dan. I'm happy to address that. Regarding the expense guidance, we wanted to break it down into two components: organic growth and the Regulatory Reporting Hub on top of that. We're anticipating a 13% increase in constant currency, which aligns with our historical expense growth. Over the past five to ten years, our expense compound annual growth rate has been 15%, so guiding to 13% is consistent with our history. I believe shareholders will continue to back this level of investment considering the revenue and earnings growth we've achieved over the years. When it comes to the organic aspect, we started 2021 with a comprehensive investment agenda, introducing new protocols, expanding product areas, and geographic outreach. This investment path will continue. The most significant rise in expenses will come from compensation and benefits driven by headcount increases. We added about 80 employees in 2020, and we plan to add roughly 60 more to support our growth agenda this year, so that line item will largely dominate our expense increase. Moreover, we anticipate that depreciation and amortization expenses will rise around 25% from 2020 on an organic basis, reflecting our investments in trading protocols and software development costs. There are a couple of other matters to note. We expect an increase in marketing, advertising, and general administrative expenses due to the resumption of travel and entertainment, which we project will pick back up in the latter half of the year. However, that's not the primary contributor to overall expense numbers. Additionally, we expect our clearing costs to remain flat year-over-year. There are two parts to clearing costs: those related to credit and those related to US Treasuries. Overall, we are budgeting for them to be flat. While we do anticipate savings from transitioning to self-clearing and changing settlement agents in the UK, those savings may be balanced out by higher volumes from Open Trading and increased US Treasury trading. So even though we're expecting steady-state savings of about $5 million or $6 million from this transition, we think that will be countered by increased volume. Just wanted to provide that context. That was quite a lengthy response, wasn't it?

I fell asleep.

Yes, good morning. I had a question about automated trading, but Chris answered it so well that I can skip it. So I'll move on to the detailed response that Tony provided. Regarding self-clearing, you mentioned that you reduced it by what I thought was a third. Currently, it's at 12% of Open Trading revenue, and I believed it could potentially be halved. I'm trying to understand why we didn't see any impact this quarter, especially since I thought we launched it in August. As we approach the new year, where do we stand in terms of having all the necessary capital in place?

Rich, I'm glad to address your follow-up question. It's important to consider the clearing costs in two parts. First, there are the costs related to clearing Open Trading corporate bond transactions, which involve self-clearing in the US and transitioning to the settlement agent in the UK. This is why we've mentioned a potential reduction in these clearing costs by over a third. The second component, which explains why you may not be noticing the reduction, is the clearing costs for US treasury trading where market access intermediates those trades. For the time being, we are maintaining that treasury clearing model. I've mentioned before that clearing costs for treasuries typically represent about 30% of treasury revenue, varying based on the protocol and trade size during the quarter. In the long run, we aim to streamline the broker-dealers and ultimately reassess the clearing model. However, it's crucial to examine these two components. In the fourth quarter, we did observe some improvement in clearing costs. Specifically, for credit, the clearing costs represented just over 9% of Open Trading revenue, down from a little over 11% in the previous year during the same quarter. While there was slight progress, we recognize that there were some initial challenges in the fourth quarter. We are still analyzing the 2021 expenses related to third-party clearing costs for credit, and we expect that savings will be around a third on a steady-state basis, regardless of whether it's calculated as a percentage of open trading revenue, on a per-ticket basis, or a per million traded basis, indicating around 30% in potential savings. Although this isn't immediately evident in the numbers, it relates back to the two elements of our clearing costs—corporate bonds and treasury transactions.

And Rich, to finish that thought, our self-clearing has been fully implemented in the US across all our products and operational technology. So we are completely operational. We aim to complete our conversion in Europe by the end of the first quarter. Regarding our treasury platform, everything we recently launched, including our Click to Trade solutions and our integrated Rates trading platform, operates through our self-clearing solution today. The growth in rates for 2021 as part of our unique new offering will also be self-cleared. We are examining our third-party clearing relationships concerning our current DDD platform and are considering when and if we want to self-clear. We expect to see significant developments throughout 2021 related to third-party clearing.

Yes, good morning, guys. I wanted to ask, just on the fully integrated Rates trading capability now and the net hedging. Just what kind of uptick you've seen so far, what's the client participation been like and just kind of how is the outlook on that product suite?

Sure. Great, great question. Just going back to 2020 on our Rates business, we launched auto hedging which is really a dealer solution to protect dealers on their hedging capability. Net hedging was launched late in the fourth quarter and rolled out on a pilot basis. It is now go live in Q1. And we're seeing obviously a long list of clients that have had interest in that net hedging solution for some time. So the client take up should roll out here in the first and second quarter with additional enhancements to net hedging over the first half of the year. With regard to the fully live Rates solution, couple of movements there. I think one of the more exciting things is our integrated trading solution, fully Click to Trade liquid streams and both on the run. And more importantly, our very unique off the run streaming solution, which really no other platforms have streaming off the runs to institutional clients. So that's new as part of our offering. We also plan to launch RFQ in the first half of this year. So we'd have a combined Click to trade. So for your more liquid front end of the curve would be click to trade solutions. And then, you would be able to RFQ across the curve for a larger trade size or less liquid products. And that right now is being communicated to our clients and the demand is quite high, particularly around the events of last year and the liquidity constraints that we're on, some of the other platforms offering Rates trading. So there is some excitement from our clients on providing not only a full breadth of product with unique off the run click to trade solutions, but also having a unique liquidity on the platform similar to how we run our credit trading solutions.

Hey, good morning everyone. Maybe a quick one for either Rick or Chris, on the evolution of the Muni and the EM markets. Looking at both of EM and especially Munis, they have low level of electronification, limited data and transparency. So I was hoping that you could talk about your broader strategy including initiatives including leveraging platform data and your recent acquisitions to kind of sort these inefficiencies. And if you have a sense for size of the revenue opportunity here and potential timeline of some of these structural changes to take hold. Thanks.

Yes, I'm happy to take a start at that, and I'm sure Chris will have some follow-up points. But I'm glad you pointed out two enormous growth opportunities for us and we're excited about the progress that we made in the municipal bond market during the course of 2020 and all signs are that we can add a lot of value there in terms of transaction cost savings and efficiency in the years ahead. And you're right, the institutional market really hasn't been electronic historically. So there is a lot of market share available there that is still done either through instant messaging or through phone conversations that we think will benefit from our platform. And as you know, the Muni market is the most fragmented bond market in the world. So Open Trading adds a tremendous amount of value, where we can connect all market participants into our all liquidity pool and add value in terms of connecting people and finding the other side of the trade. EM is much the same. It's been an important growth area for us for many years, but we're more excited about what's still ahead. And when you're here at MarketAxess, you don't really think all that much about the part of the market that's already electronic. You think about the 75% of global credit that's not yet electronic, and global EM is a great example of that where we are connecting not only hard currency debt in EM but 26 local markets all on one marketplace with a combination of dealer liquidity and alternative liquidity through all our Open Trading. So we think we've got a tremendous opportunity there. We're excited about the signs we see of beginning of electronic trading adoption in important areas like Asia. We are seeing really good client take up going on there and that will be an important part of our global EM strategy. But this is why we're investing the way that we are as Tony talked about earlier, is the future opportunity is just so large and Munis and global EM are just two of many examples that we're looking at right now. And just to put it in context of the whole market, if you look at the full year 2020, the top five banks alone had global FICC revenue of $68 billion. Market access had a record year at about $690 million or 1% of that revenue pie. So we see tremendous opportunity ahead as the market continues to adopt to the structural changes that are taking place, new forms of liquidity, the growth in ETF assets, the growth in portfolio trading. We're really excited about what we see is the change in the market taking place that will undoubtedly increase market turnover and velocity, and that's what really fuels our interest in continuing to invest in this business.

Hey, good morning. Thanks for taking the question. Just wanted to circle back to some of the commentary earlier around automated trading. Hearing that the size of the trades going through there is increasing. Just curious if you could add any color on the block size penetration, where that is now, how that's evolving and how you might be able to increase the block penetration on the automated trading side even further, whether it's in terms of new protocols in innovation, just how you're thinking about that?

Certainly. The automated trading solution has been primarily embraced by clients for smaller transactions. It has not been aimed at larger transactions. However, as we look to further develop our automated product offerings, we are focusing on block trades. This is especially relevant when we start integrating Auto Responder, which allows for providing liquidity to parties requesting prices, and Auto-X. By combining these products into a unified suite or a single order similar to a client algorithm, larger block trades can offer liquidity throughout the day, with Auto-X utilized at the end of the day. This approach allows us to function both as a liquidity provider and a liquidity taker in one automated solution. These are some objectives we have set for 2021 as part of our automation initiatives. Currently, in terms of client experience, the execution quality for trades around $2 million in size is quite comparable to those around $5 million. This consistency is contributing to a notable growth of 14% year-over-year in trade sizes and automation.

Hi, good morning. Maybe a bigger picture question on the high-yield business. I think when we've talked about the liquidity characteristics of that high yield market versus high-grade in the past, there is agreement that the eventual electronic penetration rate in that high yield market will be lower than the high-grade market. Just curious to hear your updated thoughts there, and if it changed at all just given that we've just seen tremendous growth in high-yield electronic trading last year. Just wondering if there is something different about the ETF market or the hedge fund adoption or growth there that's changed your long-term view on kind of the high-yield eventual electronic penetration rates.

Thanks, Kyle. This has been our best year for market share growth at MarketAxess, particularly in high yield since 2020. Several factors contribute to this success. The size of our open trading order book attracts new interest in high-yield trading, leading to excellent execution quality and transaction cost savings. This creates a positive cycle where investors are encouraged to submit more orders due to the savings they experience. Additionally, there are significant changes in the fixed income market, with active alternative market makers investing in high yield as their main method of transacting with institutional clients through our platform. Hedge funds are increasingly engaging with our high-yield platform and discovering valuable trading opportunities. We're also seeing notable growth in systematic credit trading strategies, with much activity and rebalancing in this area. All of these factors contribute to our positive outlook, and we believe there’s still considerable room for growth. Currently, we hold 17% of the market, with 83% still transacted through traditional means, indicating substantial potential left in the high yield market, and we are eager about the opportunities ahead.

Hey guys, good morning. Just another big picture question to kind of follow up on that last one. I know market share is going to vary in any given year based on the conditions in the market, but over let's say a five year horizon at this stage, what is your expectation for your market share gains in high-grade and high-yield given the acceleration we saw in 2020?

I just think that there are many favorable macro trends that are working their way through the global credit markets and leading to very positive market share trends on MarketAxess. And I've mentioned them briefly earlier, but the growth in ETF funds under management is driving a lot of activity in the underlying bonds. It's creating a lot of relative value trading activity between the ETF shares in the underlying bond market. Portfolio trading is really driving a lot of activity into our system on managing the tail risk in blocked transactions that take place. And you're seeing this huge growth in both buy-side and sell-side, new entrants and new participants in global credit markets. So it leaves me feeling like we are going to see five years of very healthy growth in market share and a significant portion of global credit over the next five to ten years is likely to be electronic. And this is why we have no hesitation about investing heavily in the business, is the majority of the business today is still conducted through traditional means. And I think the direction of travel is very clear that electronic trading percentage of the market will continue to grow because of the transaction cost benefits that we are delivering and the efficiency it brings to all market participants and the fact that it does allow everybody to participate on a level playing field. So we see many good years ahead in terms of market share gains.

When looking at the growth of electronic market share in the global credit market, it is expected to mirror the characteristics of other markets, where increased electronic market share is associated with higher turnover growth. We observed this trend in 2020 and anticipate it will persist. As the electronic segment of the market expands, with industry forecasts suggesting it could reach up to 90% of the overall market, we are likely to see higher turnover rates throughout the global corporate bond market. We are already observing some of this trend, as certain systematic hedge funds are starting to participate in the market via our platform, similar to patterns we’ve seen in other asset classes where turnover rates have risen. Therefore, it is important to understand that the electronic market share is not just a single figure; typically, increased electronic trading is accompanied by higher turnover rates in the market.

Hey guys, thanks. Thanks for taking the question. Just maybe building on that last response. Can you provide some evidence over the course of the last, call it year, maybe year and a half of where larger sized trades get broken down into smaller trades that ultimately kind of make their way into your market. I know that that's also a big part of some of the initiatives and the protocols that you guys have been putting together. I'm just trying to put some numbers around that and to see how much of that has actually been coming through.

We have observed large blocks and portfolios being transacted on TRACE, which has led to increased activity on our platform. One indication that we're benefiting from these block trades is our dealer RFQ initiative, which has shown remarkable growth throughout 2020. Dealers are approaching us for liquidating positions, often as a result of larger block trades. They may be unloading parts of those trades or liquidating other portfolio pieces. Specifically, in Q4, our dealer RFQ volume in high-yield doubled, and overall dealer RFQ grew significantly throughout the year. This suggests that while we may not be capturing the initial block trades directly, we are reaping the benefits from the liquidation of their components.

And our own view is that trading automation is still in early innings in Global Credit. And I think if that takes hold over the coming years, you're going to see more optionality among institutional investors in terms of how they execute blocks. It's not evident in terms of the percentage of block trading and TRACE yet, but I think automation will play a part of that story in the years ahead. And I think it will give another option to investors when they think about the best way to execute blocks.

Yes, I have a follow-up for Mister Automation. Looking back at 2020, it seems to have been a year of Open Trading as you mentioned earlier, Rick, which benefited high yield market share. Considering all the initiatives you have underway, such as higher block trades or high turnover portfolio trading, what do you believe will be the most impactful initiatives in 2021 over the next six to 12 months?

Well, I think, I'll start with our investment in treasuries and the Rates business, that's an area that I'm most excited about because of our unique offering. It also comes with a little bit of automation. So remember you can wrap automation around the treasuries offering that we're launching in 2021. I think I said a year ago that I loved Munis, and if you look at our performance in Munis in 2020 we're more excited about the opportunity in 2021 given our growth rate. We had a record day for Munis and in January just recently, so continue around that. Our plan for automation is quite sophisticated in how we're starting to combine Auto-X and Auto Responder together to create what are the early days of the traditional algorithm for clients to help point clients take a large block order, be passive throughout the period of the day, have a time to auto execution later in the day. So they can still see the success of the position getting executed but they can improve their execution quality throughout the day. Features where we're providing own masses with trades. It's partial trades on larger sized orders all being rolled out in 2021. So just a great deal of activity in the automation area across all of our products. And then, as I mentioned in talking points, we're seeing automation uptake across not only just high grade and high yield, but also Eurobonds, EM as well. So pretty big agenda for automation in 2021. I'm not sure if I answered your question, Rich.

Thank you, and good morning everyone. I’d like to follow up on the discussion about market share and electronic penetration. Can you explain the challenges posed by new issuances as banks mainly trade those on seasoned bonds? It would be helpful to have some insights on that segment of the market, which might be difficult to penetrate electronically, and if you could provide your view on the percentage of the market this represents.

Sure. I'm happy to address that, Brian. What you're referring to is the strong and record levels of new issuance last year and its impact on new issue activity this year. You're correct that it would be unrealistic to expect this year's new issue volume to mirror last year's. However, dealer estimates suggest it will still be an active year. Typically, last year's activity was exceptional due to many corporations needing to enhance their liquidity during the pandemic. Therefore, we should moderate our expectations for new issues and secondary trading activity this year compared to last. Nonetheless, we remain optimistic about the long-term trend towards increased market turnover and higher activity levels. The greater electronification of credit markets contributes to this trend, along with new tools for portfolio management and ETF risk transfer, and the significant rise in credit market participants. In the short term, we may experience a slight headwind from lower trading in newly issued bonds. However, we are quite positive about overall market volume and turnover in the long run. We have new protocols and live markets that focus on actively traded bonds, including newly issued ones. We believe we have a role to play in that market once these bonds transition to the secondary market, and we will continue to advance in this area as well.

Thanks. Just a follow-up on the non-transactional revenue and just kind of the outlook for info services as well as post-trade, and if you could separate out the recent acquisition and then the underlying growth rate as we kind of think about 2021.

Yes, Dan. Regarding our information services, Chris mentioned that full-year revenue increased by approximately 12%. The five-year compounded annual growth rate for this sector is around 11% to 12%. Looking ahead to 2021, we have a solid pipeline and anticipate achieving another year of double-digit revenue growth. Last year, we generated about $6.5 million in new data sales, compared to $5.5 million the previous year, and we enter 2021 with a strong pipeline. We want to emphasize that we are also leveraging data to encourage clients to engage more on our platform, which is a key purpose of the content we are collecting. Thus, we expect information services revenue to grow in double digits, which is crucial for providing clients with insights to guide their pricing decisions. On the post-trade front, we can divide it into two segments. We previously discussed the impact of the Regulatory Reporting Hub. We're forecasting around $1 million per month in revenue from that initiative, possibly slightly higher in 2021. For organic growth, we also expect double-digit growth driven by the full-year effect of SFTR reporting, which started midway through 2020, alongside the organic addition of new clients. With this combination, we anticipate double-digit organic growth, along with approximately $1 million in monthly revenue from the Regulatory Reporting Hub, which will provide a clearer picture of our expectations for 2021.

Yes, thanks guys. Dan actually asked my question. I guess, just one quick one. There has been some recent calls in Europe for consolidated bond tape. Any thoughts around the impact there and how you could participate?

Sure, happy to take that. I think it's early days in the new regulatory structure in Europe post-Brexit in terms of where this all lands. Clearly MiFID II included some commentary on consolidated trade tape. I would start by saying we are big fans of market transparency. We think the transparency increases participation and creates a fair marketplace, and Europe is lacking some of that transparency today. So we are supportive of transparency improving in the region. We obviously with our Reg reporting and our e-trading business, have a substantial amount of transaction data and we do think we have a role to play, but it's not exactly clear yet where this will all land. I think, we'll learn more about it over the next year or two, and it will take time before anything is implemented. But we do believe with the vast base of transaction data that we have, we have ways to participate in that.

Folks, thanks for taking the follow-up. Just a quick one on Green bonds for Chris. It looks like it's 1% of your volumes overall, so it's still pretty small, growing though. I guess what's your outlook for volume growth in there, maybe share of the market, maybe sort of as you see sort of it a characterization of client demand for that over the next two to three years. And I know your economics on trading aren't any significantly different than your overall revenue capture rates.

Thank you for your question about the Green bond initiative, which we have been focused on all year. The aim of the Green bond initiative is to provide our clients with better solutions as they fulfill their ESG mandates from their clients. We have significantly increased the availability of Green Bonds on our platform. A notable aspect of this initiative is our commitment to planting trees for every million dollars of Green bonds traded, resulting in over 135,000 trees planted. The issuance of Green Bonds and ESG-related bonds reached a record high in 2020, with forecasts for 2021 indicating even larger volumes. We anticipate that ESG-related bonds will constitute a more substantial portion of the new issue market in 2021, and we will continue our Green Bond trading for tree initiative. Clients will receive certificates for the trees they help plant, and we plan to recognize the top trader in this initiative with an award. Additionally, we launched a diversity dealer solution in the fourth quarter, which addresses similar ESG mandates by enabling diverse dealers to leverage our open trading marketplace. This will allow clients to select a diverse dealer while achieving optimal execution quality. I believe both the diversity dealer solution and the Green Bond initiative will be significant as we progress through 2021 and respond to the increasing ESG mandates from investors worldwide.

Thank you for joining us this morning and all the best to all of you for 2021 and stay safe and stay healthy.