mktx-10q_20150930.htm

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No R

As of October 22, 2015, the number of shares of the Registrant’s voting common stock outstanding was 37,291,741.

	As of
	September 30, 2015			December 31, 2014
	(In thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents	$	160,376		$	168,924
Securities available-for-sale, at fair value		95,516			64,863
Accounts receivable, net of allowance of $39 and $3 as of September 30, 2015 and December 31, 2014, respectively		49,280			33,836
Goodwill and intangible assets, net of accumulated amortization		64,712			66,419
Furniture, equipment, leasehold improvements and capitalized software, net of accumulated depreciation and amortization		31,027			32,185
Prepaid expenses and other assets		7,173			6,685
Deferred tax assets, net		8,238			6,972
Total assets	$	416,322		$	379,884

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accrued employee compensation	$	22,838		$	25,310
Income and other tax liabilities		4,410			5,940
Deferred revenue		2,215			2,465
Accounts payable, accrued expenses and other liabilities		13,388			11,961
Total liabilities		42,851			45,676

Commitments and Contingencies (Note 10)		—			—

Stockholders’ equity
Preferred stock, $0.001 par value, 4,855,000 shares authorized, no shares issued and outstanding as of September 30, 2015 and December 31, 2014		—			—
Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued and outstanding as of September 30, 2015 and December 31, 2014		—			—
Common stock voting, $0.003 par value, 110,000,000 shares authorized, 39,687,461 shares and 39,460,066 shares issued and 37,307,916 shares and 37,318,722 shares outstanding as of September 30, 2015 and December 31, 2014, respectively		120			120
Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2015 and December 31, 2014		—			—
Additional paid-in capital		317,617			307,059
Treasury stock - Common stock voting, at cost, 2,379,545 and 2,141,344 shares as of September 30, 2015 and December 31, 2014, respectively		(90,272	)		(70,247	)
Retained earnings		150,975			101,813
Accumulated other comprehensive loss		(4,969	)		(4,537	)
Total stockholders’ equity		373,471			334,208
Total liabilities and stockholders’ equity	$	416,322		$	379,884

The accompanying notes are an integral part of these consolidated financial statements.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In thousands, except per share amounts)
Revenues
Commissions	$	65,178	$	54,462	$	198,608	$	160,766
Information and post-trade services		7,671		7,600		22,982		23,641
Technology products and services		683		1,562		2,865		5,585
Investment income		248		132		621		416
Other		412		489		1,378		2,199
Total revenues		74,192		64,245		226,454		192,607

Expenses
Employee compensation and benefits		21,002		18,589		62,769		55,619
Depreciation and amortization		4,642		4,482		13,857		12,954
Technology and communications		3,891		4,359		12,196		13,300
Professional and consulting fees		3,210		3,514		9,503		10,912
Occupancy		1,246		1,127		3,470		3,318
Marketing and advertising		1,304		1,331		4,260		4,340
General and administrative		3,544		2,575		9,485		7,117
Total expenses		38,839		35,977		115,540		107,560
Income before income taxes		35,353		28,268		110,914		85,047
Provision for income taxes		12,638		10,764		39,368		31,877
Net income	$	22,715	$	17,504	$	71,546	$	53,170

Net income per common share
Basic	$	0.62	$	0.47	$	1.95	$	1.44
Diluted	$	0.60	$	0.46	$	1.90	$	1.40

Cash dividends declared per common share	$	0.20	$	0.16	$	0.60	$	0.48

Weighted average shares outstanding
Basic		36,681		36,856		36,695		36,997
Diluted		37,643		37,805		37,636		37,947

The accompanying notes are an integral part of these consolidated financial statements.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(In thousands)
Net income	$	22,715		$	17,504		$	71,546		$	53,170
Net cumulative translation adjustment and foreign currency exchange hedge, net of tax of $(69), $(96), $(229) and $(334), respectively		(105	)		(111	)		(420	)		(492	)
Net unrealized (loss) gain on securities available-for-sale, net of tax of $(4), $(16), $(7) and $16, respectively		(6	)		(27	)		(12	)		30
Less: reclassification adjustment for realized gain from securities available-for-sale included in Other revenues, net of tax of $0, $(7), $0 and $(19), respectively		—			(12	)		—			(35	)
Net change in unrealized (loss) gain on securities available-for-sale, net of tax		(6	)		(39	)		(12	)		(5	)
Comprehensive Income	$	22,604		$	17,354		$	71,114		$	52,673

The accompanying notes are an integral part of these consolidated financial statements.

						Treasury
						Stock -						Accumulated
	Common		Additional			Common						Other			Total
	Stock		Paid-In			Stock			Retained			Comprehen-			Stockholders’
	Voting		Capital			Voting			Earnings			sive Loss			Equity
	(In thousands)
Balance at December 31, 2014	$	120	$	307,059		$	(70,247	)	$	101,813		$	(4,537	)	$	334,208
Net income		—		—			—			71,546			—			71,546
Cumulative translation adjustment and foreign currency exchange hedge, net of tax		—		—			—			—			(420	)		(420	)
Unrealized net loss on securities available-for-sale, net of tax		—		—			—			—			(12	)		(12	)
Stock-based compensation		—		9,276			—			—			—			9,276
Exercise of stock options		—		1,530			—			—			—			1,530
Withholding tax payments on restricted stock vesting and stock option exercises		—		(4,450	)		—			—			—			(4,450	)
Excess tax benefits from stock-based compensation		—		4,202			—			—			—			4,202
Repurchases of common stock		—		—			(20,025	)		—			—			(20,025	)
Cash dividend on common stock		—		—			—			(22,384	)		—			(22,384	)
Balance at September 30, 2015	$	120	$	317,617		$	(90,272	)	$	150,975		$	(4,969	)	$	373,471

The accompanying notes are an integral part of these consolidated financial statements.

	Nine Months Ended September 30,
	2015			2014
	(In thousands)
Cash flows from operating activities
Net income	$	71,546		$	53,170
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		13,857			12,954
Stock-based compensation expense		9,276			7,179
Deferred taxes		(1,250	)		1,575
Other		1,638			1,482
Changes in operating assets and liabilities:
(Increase) in accounts receivable		(15,595	)		(2,321	)
(Increase) decrease in prepaid expenses and other assets		(347	)		1,245
(Decrease) in accrued employee compensation		(2,472	)		(5,617	)
(Decrease) in income and other tax liabilities		(1,309	)		(110	)
(Decrease) increase in deferred revenue		(250	)		558
Increase (decrease) in accounts payable, accrued expenses and other liabilities		1,244			(1,526	)
Net cash provided by operating activities		76,338			68,589
Cash flows from investing activities
Securities available-for-sale:
Proceeds from maturities		25,048			13,536
Purchases		(57,175	)		(4,181	)
Purchases of furniture, equipment and leasehold improvements		(3,730	)		(4,002	)
Capitalization of software development costs		(7,517	)		(7,412	)
Other		(141	)		595
Net cash (used in) investing activities		(43,515	)		(1,464	)
Cash flows from financing activities
Cash dividend on common stock		(22,201	)		(18,062	)
Exercise of stock options		1,530			1,390
Withholding tax payments on restricted stock vesting and stock option exercises		(4,450	)		(5,008	)
Excess tax benefits from stock-based compensation		4,202			3,203
Repurchases of common stock		(20,025	)		(25,442	)
Other		—			(42	)
Net cash (used in) financing activities		(40,944	)		(43,961	)
Effect of exchange rate changes on cash and cash equivalents		(427	)		(755	)
Cash and cash equivalents
Net (decrease) increase for the period		(8,548	)		22,409
Beginning of period		168,924			132,691
End of period	$	160,376		$	155,100

The accompanying notes are an integral part of these consolidated financial statements.

MarketAxess Holdings Inc. (the “Company” or “MarketAxess”) was incorporated in the State of Delaware on April 11, 2000. Through its subsidiaries, the Company operates an electronic trading platform for corporate bonds and other types of fixed-income instruments through which the Company’s institutional investor clients can access liquidity provided by its broker-dealer and other institutional clients. The Company’s multi-dealer trading platform allows its institutional investor clients to simultaneously request competitive, executable bids or offers from multiple broker-dealers, and to execute trades with the broker-dealer of their choice. The Company’s trading platform provides access to global liquidity in U.S. high-grade corporate bonds, emerging markets and high-yield bonds, European bonds, U.S. agency bonds, credit derivatives and other fixed-income securities. The Company also executes certain bond transactions between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller in trades which then settle through a third-party clearing broker. The Company provides fixed-income market data, analytics and compliance tools that help its clients make trading decisions. The Company also provides trade matching and regulatory transaction reporting services to the securities markets. In addition, the Company provides technology solutions and professional consulting services to fixed-income industry participants.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated. These consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The consolidated financial information as of December 31, 2014 has been derived from audited financial statements not included herein. These unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) with respect to Form 10-Q and reflect all adjustments that, in the opinion of management, are normal and recurring, and that are necessary for a fair statement of the results for the interim periods presented. In accordance with such rules and regulations, certain disclosures that are normally included in annual financial statements have been omitted. Interim period operating results may not be indicative of the operating results for a full year.

Cash and cash equivalents includes cash and money market instruments that are primarily maintained at one major global bank. Given this concentration, the Company is exposed to certain credit risk in relation to its deposits at this bank. The Company defines cash equivalents as short-term interest-bearing investments with maturities at the time of purchase of three months or less.

The Company classifies its marketable securities as available-for-sale securities. Unrealized marketable securities gains and losses, net of taxes, are included in accumulated other comprehensive loss in the Consolidated Statements of Financial Condition. Realized gains and losses are recorded in the Consolidated Statements of Operations in other revenues. For the purpose of computing realized gains and losses, cost is determined on a specific identification basis.

The Company assesses whether an other-than-temporary impairment loss on the investments has occurred due to declines in fair value or other market conditions. The portion of an other-than-temporary impairment related to credit loss is recorded as a charge in the Consolidated Statements of Operations. The remainder is recognized in accumulated other comprehensive loss if the Company does not intend to sell the security and it is more likely than not that the Company will not be required to sell the security prior to recovery. No charges for other-than-temporary losses were recorded during the nine months ended September 30, 2015 and 2014.

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” A three-tiered hierarchy for determining fair value has been established that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as Level 1 (unadjusted quoted prices for identical assets or liabilities in active markets), Level 2 (inputs that are observable in the marketplace other than those inputs classified in Level 1) and Level 3 (inputs that are unobservable in the marketplace). The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of its money market funds, securities available-for-sale portfolio and foreign currency forward contracts. All other financial instruments are short-term in nature and the carrying amount is reported in the Consolidated Statements of Financial Condition approximate fair value.

All accounts receivable have contractual maturities of less than one year and are derived from trading-related fees and commissions and revenues from products and services. The Company continually monitors collections and payments from its customers and maintains an allowance for doubtful accounts. The allowance for doubtful accounts is based upon the historical collection experience and specific collection issues that have been identified. Additions to the allowance for doubtful accounts are charged to bad debt expense, which is included in general and administrative expense in the Company’s Consolidated Statements of Operations.

Fixed assets are carried at cost less accumulated depreciation. The Company uses the straight-line method of depreciation over three to seven years. The Company amortizes leasehold improvements on a straight-line basis over the lesser of the life of the improvement or the remaining term of the lease.

The Company capitalizes certain costs associated with the development of internal use software, including among other items, employee compensation and related benefits and third party consulting costs at the point at which the conceptual formulation, design and testing of possible software project alternatives have been completed. Once the product is ready for its intended use, such costs are amortized on a straight-line basis over three years. The Company reviews the amounts capitalized for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable.

Cash is provided as collateral for broker-dealer clearing accounts. Cash provided as collateral is included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition.

Assets and liabilities denominated in foreign currencies are translated using exchange rates at the end of the period; revenues and expenses are translated at average monthly rates. Gains and losses on foreign currency translation are a component of accumulated other comprehensive loss in the Consolidated Statements of Financial Condition. Transaction gains and losses are recorded in general and administrative expense in the Consolidated Statements of Operations.

The Company enters into foreign currency forward contracts to hedge its net investment in its U.K. subsidiaries. Gains and losses on these transactions are included in accumulated other comprehensive loss in the Consolidated Statements of Financial Condition.

The majority of the Company’s revenues are derived from commissions for trades executed on its platform and distribution fees that are billed to its broker-dealer clients on a monthly basis. The Company also derives revenues from information and post-trade services, technology products and services, investment income and other income.

Commission revenue. Commissions are generally calculated as a percentage of the notional dollar volume of bonds traded on the platform and vary based on the type, size, yield and maturity of the bond traded. Under the Company’s transaction fee plans, bonds that are more actively traded or that have shorter maturities are generally charged lower commissions, while bonds that are less actively traded or that have longer maturities generally command higher commissions. For trades that the Company executes between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller, the Company earns the commission through the difference in price between the two matched principal trades. Fee programs for certain products include distribution fees which are recognized monthly.

Information and post-trade services. The Company generates revenue from information services provided to our broker-dealer clients, institutional investor clients and data-only subscribers. Information services are invoiced monthly, quarterly or annually. When billed in advance, revenues are deferred and recognized monthly on a straight-line basis. The Company also generates revenue from regulatory transaction reporting and trade matching services. Revenue is recognized in the period the services are provided.

Technology products and services. The Company generates revenues from professional consulting services, technology software licenses and maintenance and support services (referred to as post-contract technical support or “PCS”). Revenue is generally recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection is considered probable.

The Company enters into time and materials professional consulting contracts unrelated to any software product. Revenue for time and materials contracts is recognized as services are performed. The Company generally sells software license subscriptions on a stand-alone basis or software licenses and PCS together as part of multiple-element arrangements. Revenue for software license subscriptions is recognized ratably over the contract period. For arrangements that include multiple elements, generally software licenses and PCS, the Company allocates and defers revenue for the undelivered items based on vendor specific objective evidence (“VSOE”) of the fair value of the undelivered elements and recognizes the difference between the total arrangement fee and the amount deferred for the undelivered items as license revenue. When VSOE does not exist for undelivered items, the entire arrangement fee is recognized ratably over the performance period. For PCS, the term is typically one year and revenue is recognized over the duration of the arrangement on a straight-line basis.

Initial set-up fees. The Company enters into agreements with its broker-dealer clients pursuant to which the Company provides access to its platform through a non-exclusive and non-transferable license. Broker-dealer clients may pay an initial set-up fee, which is typically due and payable upon execution of a dealer agreement. The initial set-up fee, if any, varies by agreement. Revenue is recognized over the initial term of the agreement, which is generally two years. Initial set-up fees are reported in other income in the Consolidated Statements of Operations.

The Company measures and recognizes compensation expense for all share-based payment awards based on their estimated fair values measured as of the grant date. These costs are recognized as an expense in the Consolidated Statements of Operations over the requisite service period, which is typically the vesting period, with an offsetting increase to additional paid-in capital.

Income taxes are accounted for using the asset and liability method. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized against deferred tax assets if it is more likely than not that such assets will not be realized in future years. The Company recognizes interest and penalties related to unrecognized tax benefits in general and administrative expenses in the Consolidated Statements of Operations.

Business combinations are accounted for under the purchase method of accounting. The total cost of an acquisition is allocated to the underlying net assets based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain assets acquired and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates, growth rates and asset lives.

The Company operates as a single reporting unit. Subsequent to an acquisition, goodwill no longer retains its identification with a particular acquisition, but instead becomes identifiable with the entire reporting unit. As a result, all of the fair value of the Company is available to support the value of goodwill. An impairment review of goodwill is performed on an annual basis, at year-end, or more frequently if circumstances change. Intangible assets with definite lives, including purchased technologies, customer relationships and other intangible assets, are amortized on a straight-line basis over their estimated useful lives, ranging from three to 15 years. Intangible assets are assessed for impairment when events or circumstances indicate the existence of a possible impairment.

Basic earnings per share is computed by dividing the net income attributable to common stock by the weighted-average number of shares of common stock outstanding during the period. For purposes of computing diluted earnings per share, the weighted-average shares outstanding of common stock reflects the dilutive effect that could occur if convertible securities or other contracts to issue common stock were converted into or exercised for common stock.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

In August 2015, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2015-14, “Revenue from Contracts with Customers”, which will replace most of the existing revenue recognition guidance in GAAP. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The ASU will be effective for the Company beginning January 1, 2018 and allows for both retrospective and prospective methods of adoption. The Company is in the process of determining the method of adoption and assessing the impact of this ASU on the Company’s Consolidated Financial Statements.

Certain U.S. subsidiaries of the Company are registered as a broker-dealer or swap execution facility and therefore are subject to the applicable rules and regulations of the SEC and the Commodity Futures Trading Commission. These rules contain minimum net capital requirements, as defined in the applicable regulations, and also may require a significant part of the registrants’ assets be kept in relatively liquid form. Certain of the Company’s foreign subsidiaries are regulated by the Financial Conduct Authority in the U.K. or Ontario Securities Commission in Canada and must maintain financial resources, as defined in the applicable regulations, in excess of the applicable financial resources requirement. As of September 30, 2015, each of the Company’s subsidiaries that are subject to these regulations had net capital or financial resources in excess of their minimum requirements. As of September 30, 2015, the Company’s subsidiaries maintained aggregate net capital and financial resources that was $102.6 million in excess of the required levels of $9.0 million.

Each of the Company’s U.S. and foreign regulated subsidiaries are subject to local regulations which generally prohibit repayment of borrowings from the Company or affiliates, paying cash dividends, making loans to the Company or affiliates or otherwise entering into transactions that result in a significant reduction in regulatory net capital or financial resources without prior notification to or approval from such regulated entity’s principal regulator.

The following table summarizes the valuation of the Company’s assets and liabilities measured at fair value as categorized based on the hierarchy described in Note 2.

	Level 1		Level 2		Level 3		Total
	(In thousands)
As of September 30, 2015
Money market funds	$	51,175	$	—	$	—	$	51,175
Securities available-for-sale
Municipal securities		—		4,274		—		4,274
Corporate bonds		—		91,242		—		91,242
Foreign currency forward position		—		186		—		186
Total	$	51,175	$	95,702	$	—	$	146,877

As of December 31, 2014
Money market funds	$	62,126	$	—	$	—	$	62,126
Securities available-for-sale
Municipal securities		—		11,696		—		11,696
Corporate bonds		—		53,167		—		53,167
Foreign currency forward position		—		103		—		103
Total	$	62,126	$	64,966	$	—	$	127,092

Securities classified within Level 2 were valued using a market approach utilizing prices and other relevant information generated by market transactions involving comparable assets. The foreign currency forward contracts are classified within Level 2 as the valuation inputs are based on quoted market prices. There were no financial assets classified within Level 3 during the nine months ended September 30, 2015 and 2014.

The Company enters into foreign currency forward contracts to hedge the exposure to variability in certain foreign currency cash flows resulting from the net investment in the Company’s U.K. subsidiaries. The Company designates each foreign currency forward contract as a hedge and assesses the risk management objective and strategy, including identification of the hedging instrument, the hedged item and the risk exposure and how effectiveness is to be assessed prospectively and retrospectively. These hedges are typically for a one-month period and are used to limit exposure to foreign currency exchange rate fluctuations. The fair value of each asset is included in accounts receivable and the fair value of each liability is included in accounts payable in the Consolidated Statements of Financial Condition. Gains or losses on foreign currency forward contracts designated as hedges are included in accumulated other comprehensive loss in the Consolidated Statements of Financial Condition. A summary of the Company’s foreign currency forward position is as follows:

			Gross		Gross			Estimated
	Amortized		unrealized		unrealized			fair
	cost		gains		losses			value
	(In thousands)
As of September 30, 2015
Municipal securities	$	4,272	$	2	$	—		$	4,274
Corporate bonds		91,237		73		(68	)		91,242
Total securities available-for-sale	$	95,509	$	75	$	(68	)	$	95,516

As of December 31, 2014
Municipal securities	$	11,693	$	5	$	(2	)	$	11,696
Corporate bonds		53,146		50		(29	)		53,167
Total securities available-for-sale	$	64,839	$	55	$	(31	)	$	64,863

The following table summarizes the contractual maturities of securities available-for-sale:

Proceeds from the sales and maturities of securities available-for-sale during the nine months ended September 30, 2015 and 2014 were $25.0 million and $13.5 million, respectively.

The following table provides fair values and unrealized losses on securities available-for-sale and by the aging of the securities’ continuous unrealized loss position as of September 30, 2015 and December 31, 2014:

	Less than Twelve Months					Twelve Months or More				Total
	Estimated		Gross			Estimated		Gross		Estimated		Gross
	fair		unrealized			fair		unrealized		fair		unrealized
	value		losses			value		losses		value		losses
	(In thousands)
As of September 30, 2015
Municipal securities	$	—	$	—		$	—	$	—	$	—	$	—
Corporate bonds		37,085		(68	)		—		—		37,085		(68	)
Total	$	37,085	$	(68	)	$	—	$	—	$	37,085	$	(68	)

As of December 31, 2014
Municipal securities	$	2,139	$	(2	)	$	—	$	—	$	2,139	$	(2	)
Corporate bonds		20,487		(29	)		—		—		20,487		(29	)
Total	$	22,626	$	(31	)	$	—	$	—	$	22,626	$	(31	)

Goodwill and intangible assets with indefinite lives was $59.7 million as of both September 30, 2015 and December 31, 2014. Intangible assets that are subject to amortization, including the related accumulated amortization, are comprised of the following:

	September 30, 2015							December 31, 2014
	Cost		Accumulated Amortization			Net Carrying Amount		Cost		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Technology	$	5,770	$	(5,076	)	$	694	$	5,770	$	(3,826	)	$	1,944
Customer relationships		5,674		(1,464	)		4,210		5,682		(1,183	)		4,499
Non-competition agreements		380		(327	)		53		380		(232	)		148
Tradenames		370		(328	)		42		370		(253	)		117
Total	$	12,194	$	(7,195	)	$	4,999	$	12,202	$	(5,494	)	$	6,707

Amortization expense associated with identifiable intangible assets was $1.7 million for both the nine months ended September 30, 2015 and 2014. Estimated total amortization expense is $2.3 million for 2015, $0.7 million for 2016 and $0.4 million for each of 2017, 2018 and 2019.

	Three Months Ended September 30,						Nine Months Ended September 30,
		2015			2014			2015			2014
	(In thousands)
Current:
Federal	$	11,041		$	9,280		$	28,131		$	22,297
State and local		2,036			1,583			5,234			4,356
Foreign		1,234			227			3,189			520
Total current provision		14,311			11,090			36,554			27,173
Deferred:
Federal		(1,246	)		(354	)		2,658			3,979
State and local		(209	)		(73	)		420			512
Foreign		(218	)		101			(264	)		213
Total deferred provision		(1,673	)		(326	)		2,814			4,704
Provision for income taxes	$	12,638		$	10,764		$	39,368		$	31,877

The Company or one of its subsidiaries files U.S. federal, state and foreign income tax returns. Income tax returns for New York City (through 2003) and state (through 2009) and Connecticut state (through 2003) tax returns have been audited. Examinations of the Company’s federal tax returns for 2011 and 2012 and New York State tax returns for 2010 through 2013 are currently underway. The Company cannot estimate when the examinations will conclude or the impact such examinations will have on the Company’s Consolidated Financial Statements, if any.

The Company has determined that unremitted earnings of the Company’s foreign subsidiaries are considered indefinitely reinvested outside of the United States.

Stock-based compensation expense for the nine months ended September 30, 2015 and 2014 was as follows:

The Company records stock-based compensation for employees in employee compensation and benefits and for non-employee directors in general and administrative expenses in the Consolidated Statements of Operations.

In January 2015, the Company granted 119,981 stock options and a 116,659 performance stock award to the Company’s Chief Executive Officer in consideration for entering into a new employment agreement. The exercise price for the shares of the Company’s common stock underlying the option award is $88.25, which is equal to 125% of the fair market value of the common stock on the grant date. Subject to the Chief Executive Officer’s continued employment with the Company through the applicable vesting date, one-third of the options under the option award will vest and become exercisable on each of January 15, 2018, 2019 and 2020. The performance stock award provides that the number of performance shares earned by the Chief Executive Officer will be based on the Company’s achievement of certain performance levels. Subject to the Chief Executive Officer’s continued employment, if only the minimum performance level is achieved, then the stock will vest 100% on January 15, 2020, and if any performance level above the minimum level is achieved then the stock will vest 50% on each of January 15, 2019 and 50% on January 15, 2020. Certain performance levels above the minimum level were achieved in the second and third quarters of 2015. As a result, 70,927 shares of the performance stock will vest 50% on each of January 15, 2019 and January 15, 2020. The combined value of the awards as of the date of the grant was $8 million as determined based on valuations performed by an independent third party using a Monte Carlo simulation model.

In addition to the grants above, the Company granted to employees and non-employee directors restricted stock or restricted stock units of 111,089 shares, performance shares with an expected pay-out at target of 28,520 shares of common stock and 669 options to purchase shares of common stock during the nine months ended September 30, 2015. The fair value of the restricted stock and performance share awards was based on a weighted-average grant date fair value per share of $74.44 and $70.60, respectively. Based on the Black-Scholes option pricing model, the weighted-average fair value for each option granted was $36.46 per share. The awards vest over a three or five year period and had an aggregate grant date fair value of $8.3 million.

As of September 30, 2015, the total unrecognized compensation cost related to all non-vested awards was $20.7 million. That cost is expected to be recognized over a weighted-average period of 2.3 years.

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2015		2014		2015		2014
	(In thousands, except per share amounts)
Net income	$	22,715	$	17,504	$	71,546	$	53,170

Basic weighted average shares outstanding		36,681		36,856		36,695		36,997
Dilutive effect of stock options and restricted stock		962		949		941		950
Diluted weighted average shares outstanding		37,643		37,805		37,636		37,947

Basic earnings per share	$	0.62	$	0.47	$	1.95	$	1.44
Diluted earnings per share	$	0.60	$	0.46	$	1.90	$	1.40

Stock options and restricted stock totaling 130,112 shares and 30,036 shares for the three months ended September 30, 2015 and 2014, respectively, and 170,429 and 87,900 shares for the nine months ended September 30, 2015 and 2014, respectively, were excluded from the computation of diluted earnings per share because their effect would have been antidilutive. The computation of diluted shares can vary among periods due, in part, to the change in the average price of the Company’s common stock.

In January 2013, the Company entered into a three-year credit agreement (“Credit Agreement”) that provides for revolving loans and letters of credit up to an aggregate of $50.0 million (“Credit Facility”). As of September 30, 2015, there was $49.9 million available to borrow under the Credit Facility. Subject to satisfaction of certain specified conditions, the Company is permitted to upsize the Credit Facility by an additional $50.0 million in total.

Borrowings under the Credit Facility will bear interest at a rate per annum equal to either of the following, as designated by the Company for each borrowing: (A) the sum of (i) the greatest of (a) the prime rate, as defined, (b) the federal funds effective rate plus 0.50% and (c) one month adjusted LIBOR plus 1.00% plus (ii) 0.50% or (B) the sum of (i) adjusted LIBOR plus (ii) 1.50%. Default interest is 2.00% per annum in excess of the rate otherwise applicable in the case of any overdue principal or any other overdue amount. The Company is also required to pay a commitment fee to the lenders under the Credit Facility in respect of unutilized revolving loan commitments at a rate of 0.30% per annum.

The Company’s existing and future material domestic subsidiaries (other than any broker-dealer subsidiary) have guaranteed the Company’s obligations under the Credit Agreement. Subject to customary exceptions and exclusions, the Credit Facility is collateralized by first priority pledges (subject to permitted liens) of substantially all of the Company’s personal property assets and the personal property assets of the Company’s domestic subsidiaries that have guaranteed the Credit Facility, including the equity interests of the Company’s domestic subsidiaries and the equity interests of certain of the Company’s foreign subsidiaries (limited, in the case of the voting equity interests of the foreign subsidiaries, to a pledge of 65% of those equity interests).

The Credit Agreement requires that the Company’s consolidated total leverage ratio tested on the last day of each fiscal quarter not exceed 2.5 to 1.0. The Credit Agreement also requires that the Company’s consolidated interest coverage ratio tested on the last day of each fiscal quarter not fall below 3.5 to 1.0. The Company was in compliance with all applicable covenants at December 31, 2014 and September 30, 2015.

If an event of default occurs, including failure to pay principal or interest due on the loan balance, a voluntary or involuntary proceeding seeking liquidation, change in control of the Company, or one or more judgments against the Company in excess of $10 million, the lenders would be entitled to accelerate the facility and take various other actions, including all actions permitted to be taken by a secured creditor. If certain bankruptcy events of default occur, the facility will automatically accelerate.

The Company leases office space under non-cancelable lease agreements expiring at various dates through 2027. Office space leases are subject to escalation based on certain costs incurred by the landlord. Minimum rental commitments as of September 30, 2015 under such operating leases were as follows (in thousands):

Rental expense was $3.0 million and $2.9 million for the nine months ended September 30, 2015 and 2014, respectively, and is included in occupancy expense in the Consolidated Statements of Operations. Rental expense has been recorded based on the total minimum lease payments after giving effect to rent abatement and concessions, which are being amortized on a straight-line basis over the life of the lease. The Company is contingently obligated for standby letters of credit amounting to $1.3 million that were issued to landlords for office space.

The Company has assigned two lease agreements on leased properties to separate third parties. The Company is contingently liable should the assignees default on future lease obligations through the lease termination dates of November 2015 and November 2020. The aggregate amount of future lease obligations under these arrangements is $1.6 million as of September 30, 2015.

In the normal course of business, the Company and its subsidiaries included in the consolidated financial statements may be involved in various lawsuits, proceedings and regulatory examinations. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings, if any, utilizing the latest information available. For matters where it is probable that the Company will incur a material loss and the amount can be reasonably estimated, the Company would establish an accrual for the loss. Once established, the accrual would be adjusted to reflect any relevant developments. When a loss contingency is not both probable and estimable, the Company does not establish an accrual.

Based on currently available information, the outcome of the Company’s outstanding matters is not expected to have a material adverse impact on the Company’s financial position. It is not presently possible to determine the ultimate exposure to these matters and there is no assurance that the resolution of the outstanding matters will not significantly exceed any reserves accrued by the Company.

The Company, through two regulated subsidiaries, executes certain bond transactions between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller in trades which settle through third-party clearing brokers. Settlement typically occurs within one to three trading days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded. For the nine months ended September 30, 2015 and 2014, revenues from matched principal transactions were $11.6 million and $4.7 million, respectively. Under securities clearing agreements with the third party clearing brokers, the Company maintains a collateral deposit with each clearing broker in the form of cash. As of September 30, 2015, the amount of the collateral deposits included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition was $1.0 million. For the nine months ended September 30, 2015 and 2014, clearing expenses associated with matched principal transactions were $2.3 million and $0.9 million, respectively, and are classified under general and administrative expense on the Consolidated Statements of Operations. In its role as matched principal counterparty, the Company is exposed to the counterparty credit and settlement risk that arises from the risk that the participants that the Company trades with do not fulfill their obligations to the Company due to bankruptcy, lack of liquidity, operational failure, errors or other reasons. Pursuant to the terms of the securities clearing agreements, the clearing broker has the right to charge the Company for losses resulting from a counterparty’s failure to fulfill its contractual obligations. The losses are not capped at a maximum amount and apply to all trades executed through the clearing broker. At September 30, 2015, the Company had not recorded any liabilities with regard to this right.

In the normal course of business, the Company enters into contracts that contain a variety of representations, warranties and general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company expects the risk of loss to be remote.

During both the nine months ended September 30, 2015 and 2014, no single client accounted for more than 10% of total revenue. One institutional investor client accounted for 15.5% and 14.8% of trading volumes during the nine months ended September 30, 2015 and 2014, respectively.

In January 2014, the Board of Directors of the Company authorized a share repurchase program for up to $35.0 million of the Company’s common stock. In July 2014, the Board of Directors increased the authorization under the share repurchase program by an additional $65.0 million of the Company’s common stock. The share repurchase program will expire on December 31, 2015. For the nine months ended September 30, 2015, the Company repurchased 238,201 shares of common stock at a cost of $20.0 million. As of September 30, 2015, approximately $42.0 million remains authorized for repurchase under the program. Shares repurchased under the program will be held in treasury for future use.

The Company operates an electronic multi-party platform for the trading of fixed-income securities and provides related data, analytics, compliance tools and post-trade services. The Company considers its operations to constitute a single business segment because of the highly integrated nature of these product and services, of the financial markets in which the Company competes and of the Company’s worldwide business activities. The Company believes that results by geographic region or client sector are not necessarily meaningful in understanding its business.

For the three and nine months ended September 30, 2015 and 2014, the U.K. was the only individual foreign country in which the Company had a subsidiary that accounted for 10% or more of the total revenues or total long-lived assets of the Company. Revenues and long-lived assets are attributed to a geographic area based on the location of the particular subsidiary. Long-lived assets are defined as furniture, equipment, leasehold improvements and capitalized software, net of accumulated depreciation and amortization. Information regarding revenue for the three and nine months ended September 30, 2015 and 2014 and long-lived assets as of September 30, 2015 and December 31, 2014 was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In thousands)
Revenues
United States	$	64,098	$	54,849	$	196,488	$	163,469
United Kingdom		9,830		9,197		29,094		28,556
Other		264		199		872		582
Total	$	74,192	$	64,245	$	226,454	$	192,607

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. It is routine for our internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations may change prior to the end of each quarter or the year. Although these expectations may change, we are under no obligation to revise or update any forward-looking statements contained in this report. Our company policy is generally to provide our expectations only once per quarter, and not to update that information until the next quarter. Actual future events or results may differ, perhaps materially from those contained in the projections or forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this report, particularly in the section captioned Part II, Item 1A, “Risk Factors.”

MarketAxess operates a leading electronic trading platform that enables fixed-income market participants to efficiently trade corporate bonds and other types of fixed-income instruments using our patented trading technology. Our over 1,000 active participant firms include broker-dealer clients, investment advisers, mutual funds, insurance companies, public and private pension funds, bank portfolios and hedge funds. Our approximately 100 broker-dealer market-maker clients provide liquidity on the platform and include most of the leading broker-dealers in global fixed-income trading. We also execute certain bond transactions between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller in trades which then settle through a third-party clearing broker. We provide fixed-income market data, analytics and compliance tools that help our clients make trading decisions. We also provide trade matching and regulatory transaction reporting services to the securities markets. In addition, we provide technology solutions and professional consulting services to fixed-income industry participants.

Our multi-dealer trading platform allows our institutional investor clients to simultaneously request competing, executable bids or offers from our broker-dealer clients and execute trades with the broker-dealer of their choice from among those that choose to respond. We offer our broker-dealer clients a solution that enables them to efficiently reach our institutional investor clients for the distribution and trading of bonds. Our trading platform provides access to global liquidity in U.S. high-grade corporate bonds, emerging markets and high-yield bonds, European bonds, U.S. agency bonds, credit derivatives and other fixed-income securities.

Through our Open Trading^TM initiative, we have designed a series of protocols to allow our broker-dealers and institutional investor clients to interact in an all-to-all trading environment. These innovative technology solutions are designed to increase the number of potential trading counterparties on our electronic trading platform and create a menu of solutions to address different trade sizes and bond liquidity characteristics.

The majority of our revenues are derived from commissions for trades executed on our platform and distribution fees that are billed to our broker-dealer clients on a monthly basis. We also derive revenues from information and post-trade services, technology products and services, investment income and other income. Our expenses consist of employee compensation and benefits, depreciation and amortization, technology and communication expenses, professional and consulting fees, occupancy, marketing and advertising and other general and administrative expenses.

Our objective is to provide the leading global electronic trading platform for fixed-income securities, connecting broker-dealers and institutional investors more easily and efficiently, while offering a broad array of information, trading and technology services to market participants across the trading cycle. The key elements of our strategy are:

The global fixed-income securities industry is risky and volatile and is directly affected by a number of economic, political and market factors that may result in declining trading volume. These factors could have a material adverse effect on our business, financial condition and results of operations. These factors include, among others, credit market conditions, the current interest rate environment, including the volatility of interest rates and investors’ forecasts of future interest rates, economic and political conditions in the United States, Europe and elsewhere, and the consolidation or contraction of our broker-dealer clients.

The global fixed-income securities industry generally, and the electronic financial services markets in which we engage in particular, are highly competitive, and we expect competition to intensify in the future. Sources of competition for us will continue to include, among others, bond trading conducted directly between broker-dealers and their institutional investor clients over the telephone or electronically and other multi-dealer trading companies. Competitors, including companies in which some of our broker-dealer clients have invested, have developed or acquired electronic trading platforms or have announced their intention to explore the development of electronic platforms that may compete with us.

In general, we compete on the basis of a number of key factors, including, among others, the liquidity provided on our platform, the magnitude and frequency of price improvement enabled by our platform and the quality and speed of execution. We believe that our ability to grow volumes and revenues will largely depend on our performance with respect to these factors.

Our competitive position is also enhanced by the familiarity and integration of our broker-dealer and institutional investor clients with our electronic trading platform and other systems. We have focused on the unique aspects of the credit markets we serve in the development of our platform, working closely with our clients to provide a system that is suited to their needs.

Our industry has been and is subject to continuous regulatory changes and may become subject to new regulations or changes in the interpretation or enforcement of existing regulations, which could require us to incur significant costs.

Following the global financial crisis and other recent events in the financial industry, governments and regulators in both the United States and Europe have called for increased regulation and transparency in the over-the-counter markets. As a result, the Dodd-Frank Act was signed into law in July 2010. Among the most significant aspects of the derivatives section of the Dodd-Frank Act are mandatory clearing of many credit derivative instruments through regulated central clearing organizations and mandatory trading of those instruments through either regulated exchanges or swap execution facilities (“SEFs”), in each case, subject to certain key exceptions. In September 2013, the U.S. Commodity Futures Trading Commission (“CFTC”) granted temporary registration to MarketAxess SEF Corporation, our wholly-owned U.S. subsidiary, to operate a SEF for the trading of swaps subject to the CFTC’s jurisdiction. The CFTC’s rules relating to the trading of swaps on SEFs were implemented in October 2013 and, in February 2014, certain credit derivative indices became subject to the CFTC’s ‘made available for trade’ determination and were thereafter required to be executed on a SEF or designated contract market. The Securities and Exchange Commission (“SEC”) has not yet finalized its rules for security-based SEFs that would govern our execution of single-name credit derivatives, nor has it published a timetable for the

finalization and implementation of such rules. No assurance can be given regarding when, whether or in what form the remaining rules regarding the new regulatory regime for the swaps marketplace will be finalized or implemented.

Various rules promulgated since the financial crisis could adversely affect our bank-affiliated broker-dealer clients’ ability to make markets in a variety of fixed-income securities, thereby negatively impacting the level of liquidity and pricing available on our trading platform. For example, the Volcker Rule promulgated under the Dodd-Frank Act bans proprietary trading by banks and their affiliates. In addition, enhanced leverage ratios applicable to large banking organizations in the U.S. and Europe require such organizations to strengthen their balance sheets and may limit their ability or willingness to make markets on our trading platform. We cannot predict the extent to which these rules or any future regulatory changes may adversely affect our business and operations.

Similar to the U.S., regulatory bodies in Europe are developing new rules for the fixed-income markets. In June 2014, the final texts of MiFID II and Markets in Financial Instruments Regulation (“MiFIR”) were published in the Official Journal of the European Union. A large amount of implementation work is left to be completed and the rules of MiFID II and MiFIR will not take effect until January 2017. MiFID II introduces changes in market structure designed: (i) to enhance pre- and post-trade transparency for fixed-income instruments with the scope of the requirements calibrated for liquidity, (ii) increase and enhance post-trade reporting obligations with a requirement to submit post-trade data to Approved Reporting Mechanisms, (iii) ensure trading of certain derivatives occurs on regulated trading venues and (iv) establish a consolidated tape for trade data. We cannot predict the extent to which any of these new regulations or future regulatory changes will impact our European business and operations.

We must continue to enhance and improve our electronic trading platform. The electronic financial services industry is characterized by increasingly complex systems and infrastructures and new business models. Our future success will depend on our ability to enhance our existing products and services, develop and/or license new products and technologies that address the increasingly sophisticated and varied needs of our existing and prospective broker-dealer and institutional investor clients and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. We have been issued 13 patents covering our most significant trading protocols and other aspects of our trading system technology.

The majority of our revenues are derived from commissions for transactions executed on our platform between our institutional investor and broker-dealer clients and monthly distribution fees. We believe that there are five key variables that impact the notional value of such transactions on our platform and the amount of commissions and distribution fees earned by us:

We believe that overall corporate bond market trading volume is affected by various factors including the absolute levels of interest rates, the direction of interest rate movements, the level of new issues of corporate bonds and the volatility of corporate bond spreads versus U.S. Treasury securities. Because a significant percentage of our revenue is tied directly to the volume of securities traded on our platform, it is likely that a general decline in trading volumes, regardless of the cause of such decline, would reduce our revenues and have a significant negative impact on profitability.

Commissions are generally calculated as a percentage of the notional dollar volume of bonds traded on our platform and vary based on the type, size, yield and maturity of the bond traded. Under our transaction fee plans, bonds that are more actively traded or that have shorter maturities are generally charged lower commissions, while bonds that are less actively traded or that have longer maturities generally command higher commissions.

U.S. High-Grade Corporate Bond Commissions. Our U.S. high-grade corporate bond fee plans generally incorporate variable transaction fees and distribution fees billed to our broker-dealer clients on a monthly basis. Certain dealers participate in fee programs that do not contain monthly distribution fees and instead incorporate additional per transaction execution fees and minimum monthly

fee commitments. Under the fee plans, we electronically add the transaction fee to the spread quoted by the broker-dealer client. The U.S. high-grade transaction fee is generally designated in basis points in yield and, as a result, is subject to fluctuation depending on the duration of the bond traded. The average U.S. high-grade fees per million may vary in the future due to changes in yield, years-to-maturity and nominal size of bonds traded on our platform.

Other Credit Commissions. Other credit includes emerging markets bonds, high-yield bonds, Eurobonds and structured products bonds. Commissions for other credit products generally vary based on the type of the instrument traded using standard fee schedules. Similar to the U.S. high-grade plans, our European fee plans generally incorporate monthly distribution fees, as well as variable transaction fees.

Liquid Products Commissions. Liquid products includes U.S. agency, European government bonds and credit derivatives. Commissions for liquid products generally vary based on the type of the instrument traded using standard fee schedules.

For trades that we execute between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller, we earn our commission through the difference in price between the two trades. Distribution fees include any unused monthly fee commitments under our variable fee plans.

We anticipate that average fees per million may change in the future. Consequently, past trends in commissions are not necessarily indicative of future commissions.

In addition to the commissions discussed above, we earn revenue from information and post-trade services, technology products and services, income on investments and other income.

Information and post-trade services. We generate revenue from information services provided to our broker-dealer clients, institutional investor clients and data-only subscribers. Information services are invoiced monthly, quarterly or annually. When billed in advance, revenues are deferred and recognized monthly on a straight-line basis. We also generate revenue from trade matching and regulatory transaction reporting services. Revenue is recognized in the period the services are provided.

Technology Products and Services. We generate revenue from professional consulting services, technology software licenses and maintenance and support services.

Investment Income. Investment income consists of income earned on our investments.

Other. Other revenues include fees from telecommunications line charges to broker-dealer clients, initial set-up fees and other miscellaneous revenues.

Employee Compensation and Benefits. Employee compensation and benefits is our most significant expense and includes employee salaries, stock-based compensation costs, other incentive compensation, employee benefits and payroll taxes.

Depreciation and Amortization. We depreciate our computer hardware and related software, office hardware and furniture and fixtures and amortize our capitalized software development costs on a straight-line basis over three to seven years. We amortize leasehold improvements on a straight-line basis over the lesser of the life of the improvement or the remaining term of the lease. Intangible assets with definite lives, including purchased technologies, customer relationships and other intangible assets, are amortized over their estimated useful lives, ranging from three to 15 years. Intangible assets are assessed for impairment when events or circumstances indicate a possible impairment.

Technology and Communications. Technology and communications expense consists primarily of costs relating to maintenance on software and hardware, our internal network connections, data center hosting costs and data feeds provided by outside vendors or service providers. The majority of our broker-dealer clients have dedicated high-speed communication lines to our network in order to provide fast data transfer. We charge our broker-dealer clients a monthly fee for these connections, which is recovered against the relevant expenses we incur.

Professional and Consulting Fees. Professional and consulting fees consist primarily of accounting fees, legal fees and fees paid to information technology and other consultants for services provided for the maintenance of our trading platform and information and post-trade services products.

Occupancy. Occupancy costs consist primarily of office and equipment rent, utilities and commercial rent tax.

Marketing and Advertising. Marketing and advertising expense consists primarily of print and other advertising expenses we incur to promote our products and services. This expense also includes costs associated with attending or exhibiting at industry-sponsored seminars, conferences and conventions, and travel and entertainment expenses incurred by our sales force to promote our trading platform and information services.

General and Administrative. General and administrative expense consists primarily of general travel and entertainment, clearing costs from matched principal trades, board of directors’ expenses, charitable contributions, provision for doubtful accounts, and various state franchise and U.K. value-added taxes.

Expenses may grow in the future, notably in employee compensation and benefits and depreciation and amortization, primarily due to investment in new products and geographic expansion. However, we believe that operating leverage can be achieved by increasing volumes in existing products and adding new products without substantial additions to our infrastructure.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States, also referred to as U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting periods. We base our estimates and judgments on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under varying assumptions or conditions. Note 2 of the Notes to our Consolidated Financial Statements includes a summary of the significant accounting policies and methods used in the preparation of our Consolidated Financial Statements. There were no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2015, as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2014.

See Note 2 to the Consolidated Financial Statements for a discussion on recent accounting pronouncements.

We operate an electronic multi-party platform for the trading of fixed-income securities and provide related data, analytics, compliance tools and post-trade services. We consider our operations to constitute a single business segment because of the highly integrated nature of these product and services, of the financial markets in which we compete and of our worldwide business activities. We believe that results by geographic region or client sector are not necessarily meaningful in understanding our business. See Note 13 to the Consolidated Financial Statements for certain geographic information about the Company’s business required by U.S. GAAP.

Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014

Total revenues increased by $9.9 million or 15.5% to $74.2 million for the three months ended September 30, 2015, from $64.2 million for the three months ended September 30, 2014. This increase in total revenues was primarily due to higher commissions of $10.7 million. A 7.2% change in the foreign currency exchange rates of the Pound Sterling compared to the U.S. dollar from the three months ended September 30, 2014 to the three months ended September 30, 2015 had the effect of decreasing revenues by $0.8 million.

Total expenses increased by $2.9 million or 8.0% to $38.8 million for the three months ended September 30, 2015, from $36.0 million for the three months ended September 30, 2014. This increase was primarily due to higher employee compensation and

benefits of $2.4 million. The change in foreign currency exchange rates had the effect of decreasing expenses by $0.8 million in the three months ended September 30, 2015.

Income before taxes increased by $7.1 million or 25.1% to $35.4 million for the three months ended September 30, 2015, from $28.3 million for the three months ended September 30, 2014. Net income increased by $5.2 million or 29.8% to $22.7 million for the three months ended September 30, 2015, from $17.5 million for three months ended September 30, 2014.

Our revenues for the three months ended September 30, 2015 and 2014, and the resulting dollar and percentage changes, were as follows:

	Three Months Ended September 30,
	2015					2014
			% of					% of			$			%
	$		Revenues			$		Revenues			Change			Change
	($ in thousands)
Commissions	$	65,178		87.9	%	$	54,462		84.8	%	$	10,716			19.7		%
Information and post-trade services		7,671		10.3			7,600		11.8			71			0.9
Technology products and services		683		0.9			1,562		2.4			(879	)		(56.3	)
Investment income		248		0.3			132		0.2			116			87.9
Other		412		0.6			489		0.8			(77	)		(15.7	)
Total revenues	$	74,192		100.0	%	$	64,245		100.0	%	$	9,947			15.5		%

Commissions. Our commission revenues for the three months ended September 30, 2015 and 2014, and the resulting dollar and percentage changes, were as follows:

	Three Months Ended September 30,
					$			%
	2015		2014		Change			Change
	($ in thousands)
Variable transaction fees
U.S. high-grade	$	23,337	$	19,412	$	3,925			20.2		%
Other credit		24,091		17,948		6,143			34.2
Liquid products		598		658		(60	)		(9.1	)
Total variable transaction fees		48,026		38,018		10,008			26.3
Distribution fees
U.S. high-grade		15,376		14,475		901			6.2
Other credit		1,487		1,735		(248	)		(14.3	)
Liquid products		289		234		55			23.5
Total distribution fees		17,152		16,444		708			4.3
Total commissions	$	65,178	$	54,462	$	10,716			19.7		%

The following table shows the extent to which the increase in variable transaction fees for the three months ended September 30, 2015 was attributable to changes in transaction volumes and variable transaction fees per million:

Our trading volumes for the three months ended September 30, 2015 and 2014 were as follows:

	Three Months Ended September 30,
					$			%
		2015		2014	Change			Change
Trading Volume Data (in millions)
U.S. high-grade - fixed rate	$	132,625	$	104,143	$	28,482			27.3		%
U.S. high-grade - floating rate		7,414		5,569		1,845			33.1
Total U.S. high-grade		140,039		109,712		30,327			27.6
Other credit		84,333		56,761		27,572			48.6
Liquid products		15,353		15,665		(312	)		(2.0	)
Total	$	239,725	$	182,138	$	57,587			31.6		%

Number of U.S. Trading Days		64		64
Number of U.K. Trading Days		65		65

For volume reporting purposes, transactions in foreign currencies are converted to U.S. dollars at average monthly rates. The 27.6% increase in our U.S. high-grade volume was principally due to an increase in our estimated market share of adjusted total U.S. high-grade corporate bond volume as reported by Financial Industry Regulatory Authority (“FINRA”) Trade Reporting and Compliance Engine (“TRACE”) (as adjusted by us to eliminate the increased reporting of affiliate back-to-back trades to FINRA beginning in April 2014 and the inclusion of 144A securities in reported TRACE volumes on July 1, 2014) from 14.6 % for the three months ended September 30, 2014 to 17.3% for the three months ended September 30, 2015. Adjusted FINRA TRACE U.S. high-grade volume increased 8.0% to $810.0 billion for the three months ended September 30, 2015 from $749.9 billion for the three months ended September 30, 2014. Based on information provided by FINRA, we believe that the TRACE volumes, as adjusted by us, provide a more accurate comparison to prior period reporting. We have provided a reconciliation of the reported U.S. high-grade TRACE volumes to the adjusted U.S. high-grade TRACE volumes in the “Investor Relations” section of our website.

Other credit volumes increased by 48.6% for the three months ended September 30, 2015 compared to the three months ended September 30, 2014, primarily due to increases of 81% in Eurobond volume, 58% in high-yield bond volume and 31% in emerging markets bond volume. Liquid products volume (excluding credit derivatives) decreased by 2.0% for the three months ended September 30, 2015 compared to the three months ended September 30, 2014, due mainly to a 24% decrease in U.S. agency bond market volume, offset by a gain in our U.S. agency bond estimated market share.

Our average variable transaction fee per million for the three months ended September 30, 2015 and 2014 was as follows:

Total U.S. high-grade average variable transaction fee per million decreased $10 for the three months ended September 30, 2015 principally as a result of the migration of certain of our broker-dealer clients from an all-variable fee plan to a plan that incorporates a monthly distribution fee. The $30 decrease in Other credit average variable transaction fee per million for the three months ended September 30, 2015 was due to a larger percentage of volume in products that carry lower fees per million, principally Eurobond and emerging market sovereign bonds.

U.S. high-grade distribution fees increased $0.9 million principally due to the migration of certain of our broker-dealer clients from an all-variable fee plan to a plan that incorporates a monthly distribution fee. The $0.2 million decrease in Other credit distribution fees principally relates to the migration of certain Eurobond dealers to plans that incorporate a higher level of variable fees and lower level of monthly distribution fees.

Information and Post-Trade Services. Information and post-trade services revenues decreased by $0.1 million. The change in foreign currency exchange rates had the effect of decreasing information and post-trade services revenue by $0.4 million. Our transaction reporting business processed approximately 255 million and 258 million transactions for the three months ended September 30, 2015 and 2014, respectively. New data contracts had the effect of increasing information services revenue by $0.5 million.

Technology Products and Services. Technology products and services revenues decreased by $0.9 million principally due to the wind-down of a professional consulting service engagement.

Our expenses for the three months ended September 30, 2015 and 2014, and the resulting dollar and percentage changes were as follows:

	Three Months Ended September 30,
	2015					2014
			% of					% of			$			%
	$		Revenues			$		Revenues			Change			Change
	($ in thousands)
Expenses
Employee compensation and benefits	$	21,002		28.3	%	$	18,589		28.9	%	$	2,413			13.0		%
Depreciation and amortization		4,642		6.3			4,482		7.0			160			3.6
Technology and communications		3,891		5.2			4,359		6.8			(468	)		(10.7	)
Professional and consulting fees		3,210		4.3			3,514		5.5			(304	)		(8.7	)
Occupancy		1,246		1.7			1,127		1.8			119			10.6
Marketing and advertising		1,304		1.8			1,331		2.1			(27	)		(2.0	)
General and administrative		3,544		4.8			2,575		4.0			969			37.6
Total expenses	$	38,839		52.3	%	$	35,977		56.1	%	$	2,862			8.0		%

Employee Compensation and Benefits. Employee compensation and benefits increased by $2.4 million primarily due to higher employee incentive compensation of $1.0 million, which is tied to operating performance, a $0.7 million increase in stock-based compensation resulting from higher employee equity awards in 2015, and a $0.7 million increase in salaries and benefits due to higher employee headcount.

Depreciation and Amortization. Depreciation and amortization increased by $0.2 million primarily due to higher amortization of software development costs of $0.4 million offset by lower depreciation of production hardware costs. For the three months ended September 30, 2015 and 2014, $1.4 million and $0.2 million, respectively, of equipment purchases and leasehold improvements and $2.7 million and $2.4 million, respectively, of software development costs were capitalized.

Technology and Communications. Technology and communications expenses decreased by $0.5 million mainly due to lower data center hosting costs.

Professional and Consulting Fees. Professional and consulting fees decreased by $0.3 million mainly due to lower technology consulting costs.

Marketing and Advertising. Marketing and advertising expenses were $1.3 million for both the three months ended September 30, 2015 and 2014.

General and Administrative. General and administrative expenses increased by $1.0 million primarily due to higher clearing costs of $0.4 million and increases in other miscellaneous costs.

Provision for Income Tax. The $1.9 million increase in the tax provision was primarily attributable to higher pre-tax income offset by a lower effective tax rate. Our consolidated effective tax rate for the three months ended September 30, 2015 was 35.7%, compared to 38.1% for the three months ended September 30, 2014. The decrease was principally due to a shift in income to lower tax jurisdictions and a reduction in statutory foreign and state tax rates. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic mix of our earnings and changes in tax legislation and tax rates.

Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014

Total revenues increased by $33.8 million or 17.6% to $226.5 million for the nine months ended September 30, 2015, from $192.6 million for the nine months ended September 30, 2014. This increase in total revenues was primarily due to higher commissions of $37.8 million. An 8.2% change in the foreign currency exchange rates of the Pound Sterling compared to the U.S. dollar from the nine months ended September 30, 2014 to the nine months ended September 30, 2015 had the effect of decreasing revenues by $2.6 million.

Total expenses increased by $8.0 million or 7.4% to $115.5 million for the nine months ended September 30, 2015, from $107.6 million for the nine months ended September 30, 2014. This increase was primarily due to higher employee compensation and benefits of $7.2 million. The change in foreign currency exchange rates had the effect of decreasing expenses by $2.7 million in the nine months ended September 30, 2015.

Income before taxes increased by $25.9 million or 30.4% to $110.9 million for the nine months ended September 30, 2015, from $85.0 million for the nine months ended September 30, 2014. Net income increased by $18.4 million or 34.6% to $71.5 million for the nine months ended September 30, 2015, from $53.2 million for the nine months ended September 30, 2014.

Our revenues for the nine months ended September 30, 2015 and 2014, and the resulting dollar and percentage changes, were as follows:

	Nine Months Ended September 30,
	2015					2014
			% of					% of			$			%
	$		Revenues			$		Revenues			Change			Change
	($ in thousands)
Commissions	$	198,608		87.7	%	$	160,766		83.5	%	$	37,842			23.5		%
Information and post-trade services		22,982		10.1			23,641		12.3			(659	)		(2.8	)
Technology products and services		2,865		1.3			5,585		2.9			(2,720	)		(48.7	)
Investment income		621		0.3			416		0.2			205			49.3
Other		1,378		0.6			2,199		1.1			(821	)		(37.3	)
Total revenues	$	226,454		100.0	%	$	192,607		100.0	%	$	33,847			17.6		%

Commissions. Our commission revenues for the nine months ended September 30, 2015 and 2014, and the resulting dollar and percentage changes, were as follows:

	Nine Months Ended September 30,
					$			%
	2015		2014		Change			Change
	($ in thousands)
Variable transaction fees
U.S. high-grade	$	76,662	$	60,065	$	16,597			27.6		%
Other credit		71,321		49,938		21,383			42.8
Liquid products		1,989		2,116		(127	)		(6.0	)
Total variable transaction fees		149,972		112,119		37,853			33.8
Distribution fees
U.S. high-grade		43,410		42,218		1,192			2.8
Other credit		4,400		5,929		(1,529	)		(25.8	)
Liquid products		826		500		326			65.2
Total distribution fees		48,636		48,647		(11	)		(0.0	)
Total commissions	$	198,608	$	160,766	$	37,842			23.5		%

The following table shows the extent to which the increase in variable transaction fees for the nine months ended September 30, 2015 was attributable to changes in transaction volumes and variable transaction fees per million:

Our trading volumes for the nine months ended September 30, 2015 and 2014 were as follows:

	Nine Months Ended September 30,
					$		%
		2015		2014	Change		Change
Trading Volume Data (in millions)
U.S. high-grade - fixed rate	$	413,071	$	327,242	$	85,829		26.2	%
U.S. high-grade - floating rate		21,313		17,935		3,378		18.8
Total U.S. high-grade		434,384		345,177		89,207		25.8
Other credit		244,256		161,822		82,434		50.9
Liquid products		49,501		48,594		907		1.9
Total	$	728,141	$	555,593	$	172,548		31.1	%

Number of U.S. Trading Days		188		188
Number of U.K. Trading Days		189		189

For volume reporting purposes, transactions in foreign currencies are converted to U.S. dollars at average monthly rates. The 25.8% increase in our U.S. high-grade volume was principally due to an increase in our estimated market share of adjusted total U.S. high-grade corporate bond volume as reported by FINRA TRACE (as adjusted by us to eliminate the increased reporting of affiliate back-to-back trades to FINRA beginning in April 2014 and the inclusion of 144A securities in reported TRACE volumes on July 1, 2014) from 14.0% for the nine months ended September 30, 2014 to 16.6% for the nine months ended September 30, 2015. Adjusted

FINRA TRACE U.S. high-grade volume increased 6.2% to $2.6 trillion for the nine months ended September 30, 2015 from $2.5 trillion for the nine months ended September 30, 2014. Based on information provided by FINRA, we believe that the TRACE volumes, as adjusted by us, provide a more accurate comparison to prior period reporting. We have provided a reconciliation of the reported U.S. high-grade TRACE volumes to the adjusted U.S. high-grade TRACE volumes in the “Investor Relations” section of our website.

Other credit volumes increased by 50.9% for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014, primarily due to increases of 93% in Eurobond volume, 70% in high-yield bond volume and 27% in emerging markets bond volume. Liquid products volume (excluding credit derivatives) increased by 1.9% for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014, due mainly to a gain in our estimated market share of U.S. agency bond volume offset by an estimated 14% decrease in market volume.

Our average variable transaction fee per million for the nine months ended September 30, 2015 and 2014 was as follows:

The $17 decrease in Other credit average variable transaction fee per million for the nine months ended September 30, 2015 was due to a larger percentage of volume in products that carry lower fees per million, principally Eurobond and emerging market sovereign bonds.

U.S. high-grade distribution fees increased $1.2 million principally due to the migration of certain of our broker-dealer clients from an all-variable fee plan to a plan that incorporates a monthly distribution fee. The $1.5 million decrease in Other credit distribution fees principally relates to the migration of certain Eurobond dealers to plans that incorporate a higher level of variable fees and a lower level of monthly distribution fees. The $0.3 million increase in Liquid products distribution fees for the nine months ended September 30, 2015 was due to higher SEF-related revenues.

Information and Post-Trade Services. Information and post-trade services revenues decreased by $0.7 million. The change in foreign currency exchange rates had the effect of decreasing information and post-trade services revenue by $1.6 million. Our transaction reporting business processed approximately 787 million and 855 million transactions for the nine months ended September 30, 2015 and 2014, respectively. New data contracts had the effect of increasing information services revenue by $1.1 million.

Technology Products and Services. Technology products and services revenues decreased by $2.7 million principally due to the wind-down of a professional consulting service engagement.

Investment Income. Investment income increased by $0.2 million due to an increase in the amount of available-for-sale investments which provided higher investment yields.

Other. Other income decreased by $0.8 million due to the recognition of $0.9 million of income on the sale of certain MF Global bankruptcy claims during the nine months ended September 30, 2014.

Our expenses for the nine months ended September 30, 2015 and 2014, and the resulting dollar and percentage changes were as follows:

	Nine Months Ended September 30,
	2015					2014
			% of					% of			$			%
	$		Revenues			$		Revenues			Change			Change
	($ in thousands)
Expenses
Employee compensation and benefits	$	62,769		27.7	%	$	55,619		28.9	%	$	7,150			12.9		%
Depreciation and amortization		13,857		6.1			12,954		6.7			903			7.0
Technology and communications		12,196		5.4			13,300		6.9			(1,104	)		(8.3	)
Professional and consulting fees		9,503		4.2			10,912		5.7			(1,409	)		(12.9	)
Occupancy		3,470		1.5			3,318		1.7			152			4.6
Marketing and advertising		4,260		1.9			4,340		2.3			(80	)		(1.8	)
General and administrative		9,485		4.2			7,117		3.6			2,368			33.3
Total expenses	$	115,540		51.0	%	$	107,560		55.8	%	$	7,980			7.4		%

Employee Compensation and Benefits. Employee compensation and benefits increased by $7.2 million primarily due to higher employee incentive compensation of $4.0 million, which is tied to operating performance, an increase of $2.1 million in stock-based compensation resulting from higher employee equity awards in 2015 and a $1.0 million increase in salaries and benefits due to higher employee headcount.

Depreciation and Amortization. Depreciation and amortization increased by $0.9 million primarily due to higher amortization of software development costs of $1.2 million, offset by lower depreciation of production hardware costs. For the nine months ended September 30, 2015 and 2014, $3.7 million and $4.0 million, respectively, of equipment purchases and leasehold improvements and $7.5 million and $7.4 million, respectively, of software development costs were capitalized.

Technology and Communications. Technology and communications expenses decreased by $1.1 million primarily due to lower data center hosting costs.

Professional and Consulting Fees. Professional and consulting fees decreased by $1.4 million mainly due to a reduction of $1.0 million in technology consulting costs and a $0.2 million decline in legal fees.

Occupancy. Occupancy costs increased by $0.2 million due to rent associated with additional New York City office space.

Marketing and Advertising. Marketing and advertising expenses were $4.3 million for both the nine months ended September 30, 2015 and 2014.

General and Administrative. General and administrative expenses increased by $2.4 million primarily due to higher clearing costs of $1.4 million and increases in other miscellaneous expenses.

Provision for Income Tax. The $7.5 million increase in the tax provision was primarily attributable to higher pre-tax income offset by a lower effective tax rate. Our consolidated effective tax rate for the nine months ended September 30, 2015 was 35.5%, compared to 37.5% for the nine months ended September 30, 2014. The decrease was principally due to a shift in income to lower tax jurisdictions and a reduction in statutory foreign and state tax rates. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic mix of our earnings and changes in tax legislation and tax rates.

During the past three years, we have met our cash needs through cash on hand and internally generated funds. Cash and cash equivalents and securities available-for-sale totaled $255.9 million at September 30, 2015.

In January 2013, we entered into a three-year credit agreement that provides for revolving loans and letters of credit up to an aggregate of $50.0 million. As of September 30, 2015, there was $49.9 million available to borrow under the credit facility. Subject to satisfaction of certain specified conditions, we are permitted to upsize the credit facility by an additional $50.0 million.

	Nine Months Ended September 30,
							$			%
	2015			2014			Change			Change
	($ in thousands)
Net cash provided by operating activities	$	76,338		$	68,589		$	7,749			11.3		%
Net cash (used in) investing activities		(43,515	)		(1,464	)		(42,051	)		2,872.3
Net cash (used in) financing activities		(40,944	)		(43,961	)		3,017			(6.9	)
Effect of exchange rate changes on cash and cash equivalents		(427	)		(755	)		328			(43.4	)
Net (decrease) increase for the period	$	(8,548	)	$	22,409		$	(30,957	)		(138.1	)	%

The $7.7 million increase in net cash provided by operating activities was primarily due to an increase in net income of $18.4 million, offset by an increase in working capital of $11.0 million.

The $42.1 million increase in net cash used in investing activities was due to an increase in net purchases of securities available-for-sale of $41.5 million.

The $3.0 million decrease in net cash used in financing activities was principally due to a decrease in repurchases of our common stock of $5.4 million and lower stock-based withholding tax payments and excess tax benefits totaling $1.6 million, offset by an increase in cash dividends paid on common stock of $4.1 million.

Free cash flow is defined as cash flow from operating activities less expenditures for furniture, equipment and leasehold improvements and capitalized software development costs. For the 12 months ended September 30, 2015 and 2014, free cash flow was $103.1 million and $72.2 million, respectively. Free cash flow is a non-GAAP financial measure. We believe that this non-GAAP financial measure, when taken into consideration with the corresponding GAAP financial measures, is important in gaining an understanding of our financial strength and cash flow generation.

Past trends of cash flows are not necessarily indicative of future cash flow levels. A decrease in cash flows may have a material adverse effect on our liquidity, business and financial condition.

We believe that our current resources are adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months. However, our future liquidity and capital requirements will depend on a number of factors, including expenses associated with product development and expansion and new business opportunities that are intended to further diversify our revenue stream. We may also acquire or invest in technologies, business ventures or products that are complementary to our business. In the event we require any additional financing, it will take the form of equity or debt financing. Any additional equity offerings may result in dilution to our stockholders. Any debt financings, if available at all, may involve restrictive covenants with respect to dividends, issuances of additional capital and other financial and operational matters related to our business.

Certain of our U.S. subsidiaries are registered as a broker-dealer or a SEF and therefore are subject to the applicable rules and regulations of the SEC and the CFTC. These rules contain minimum net capital requirements, as defined in the applicable regulations, and also may require a significant part of the registrants’ assets be kept in relatively liquid form. Certain of our foreign subsidiaries are regulated by the Financial Conduct Authority in the U.K. or Ontario Securities Commission in Canada and must maintain financial resources, as defined in the applicable regulations, in excess of the applicable financial resources requirement. As of September 30, 2015, each of our subsidiaries that are subject to these regulations had net capital or financial resources in excess of their minimum requirements. As of September 30, 2015, our subsidiaries maintained aggregate net capital and financial resources that were $102.6 million in excess of the required levels of $9.0 million.

Each of our U.S. and foreign regulated subsidiaries are subject to local regulations which generally prohibit repayment of borrowings from our affiliates, paying cash dividends, making loans to our affiliates or otherwise entering into transactions that result in a significant reduction in regulatory net capital or financial resources without prior notification to or approval from such regulated entity’s principal regulator.

As of September 30, 2015, the amount of unrestricted cash held by our non-U.S. subsidiaries was $38.0 million. We have determined that unremitted earnings of our foreign subsidiaries are considered indefinitely reinvested outside of the U.S. Any repatriation of such foreign earnings by way of dividend may be subject to both U.S. federal and state income taxes, reduced by

applicable foreign tax credits. However, we do not have any current needs or foreseeable plans to repatriate cash by way of dividends from our non-U.S. subsidiaries.

We execute certain bond transactions between and among institutional investor and broker-dealer clients on a matched principal basis by serving as counterparty to both the buyer and the seller in trades which settle through third-party clearing brokers. Settlement typically occurs within one to three trading days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded. For the nine months ended September 30, 2015 and 2014, revenues from matched principal trading were approximately $11.6 million and $4.7 million, respectively. Under securities clearing agreements with third party clearing brokers, we maintain a collateral deposit with the clearing broker in the form of cash. As of September 30, 2015, the amount of the collateral deposits included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition was $1.0 million. In our role as matched principal counterparty, we are exposed to the counterparty credit and settlement risk that arises from the risk that the participants that we trade with do not fulfill their obligations to us due to bankruptcy, lack of liquidity, operational failure, errors or other reasons. Pursuant to the terms of the securities clearing agreements between us and the clearing brokers, the clearing brokers have the right to charge us for losses resulting from a counterparty’s failure to fulfill its contractual obligations. The losses are not capped at a maximum amount and apply to all trades executed through the clearing broker. As of September 30, 2015, we had not recorded any liabilities with regard to this right.

In the ordinary course of business, we enter into contracts that contain a variety of representations, warranties and general indemnifications. Our maximum exposure from any claims under these arrangements is unknown, as this would involve claims that have not yet occurred. However, based on past experience, we expect the risk of material loss to be remote.

In January 2014, our Board of Directors authorized a share repurchase program for up to $35.0 million of our common stock. In July 2014, our Board of Directors increased the authorization under the share repurchase program by an additional $65.0 million of our common stock. For the nine months ended September 30, 2015, we repurchased 238,201 shares of common stock at a cost of $20.0 million. As of September 30, 2015, approximately $42.0 million remains authorized for repurchase under the program. Shares repurchased under the program will be held in treasury for future use. The share repurchase program will expire on December 31, 2015.

In October 2015, our Board of Directors approved a quarterly cash dividend of $0.20 per share payable on November 18, 2015 to stockholders of record as of the close of business on November 4, 2015. We expect the total amount payable to be approximately $7.4 million. Any future declaration and payment of dividends will be at the sole discretion of our Board of Directors. Our Board of Directors may take into account such matters as general business conditions, our financial results, capital requirements, contractual obligations, legal, and regulatory restrictions on the payment of dividends to our stockholders or by our subsidiaries to their respective parent entities, and such other factors as the Board of Directors may deem relevant.

Because the majority of our assets are short-term in nature, they are not significantly affected by inflation. However, the rate of inflation may affect our expenses, such as employee compensation, office leasing costs and communications expenses, which may not be readily recoverable in the prices of our services. To the extent inflation results in rising interest rates and has other adverse effects on the securities markets, it may adversely affect our financial condition and results of operations.

In March 2015, we entered a lease for additional office space in New York City. The lease expires in April 2018. The total rental commitment over the lease term is approximately $1.6 million.

Other than as discussed above, our contractual obligations and commitments did not change significantly since December 31, 2014.

Market risk is the risk of loss resulting from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates.

The global financial services business is, by its nature, risky and volatile and is directly affected by many national and international factors that are beyond our control. Any one of these factors may cause a substantial decline in the U.S. and global

financial services markets, resulting in reduced trading volume and revenues. These events could have a material adverse effect on our business, financial condition and results of operations.

As of September 30, 2015, we had a $95.5 million investment in securities available-for-sale. Adverse movements, such as a 10% decrease in the value of these securities or a downturn or disruption in the markets for these securities, could result in a substantial loss. In addition, principal gains and losses resulting from these securities could on occasion have a disproportionate effect, positive or negative, on our financial condition and results of operations for any particular reporting period.

Interest rate risk represents our exposure to interest rate changes with respect to the money market instruments and fixed-income securities in which we invest. As of September 30, 2015, our cash and cash equivalents and securities available-for-sale amounted to $255.9 million and were primarily in money market instruments, corporate bonds and municipal securities. We do not maintain an inventory of bonds that are traded on our platform.

Our limited derivative risk stems from our activities in the foreign currency forward contract market. We use this market to mitigate our U.S. dollar versus Pound Sterling exposure that arises from the activities of our U.K. subsidiaries. As of September 30, 2015, the notional fair value of our foreign currency forward contract was $42.1 million. We do not speculate in any derivative instruments.

Two of our subsidiaries, MarketAxess Corporation and MarketAxess Europe Limited, act as a matched principal counterparty in certain transactions that we execute between participants on our platform in connection with our Open Trading™ or other anonymous protocols. We act as an intermediary in these transactions by serving as counterparty to both the buyer and the seller in trades which then settle through a third-party clearing broker. Settlement typically occurs within one to three trading days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded. We expect that the number of transactions in which we act as a matched principal will increase.

In our role as matched principal counterparty, we are exposed to the counterparty credit and settlement risk that arises from the risk that the participants that we trade with will not perform their obligations to us. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure, errors or other reasons. Adverse movements in the prices of securities that are the subject of these transactions can increase our risk. If a party fails to perform their settlement obligations to us for a prolonged period, there may also be financing costs or regulatory capital charges required to be taken by us.

We have policies and procedures in place to identify and manage our credit risk. In connection with the recent growth of our Open Trading™ protocols, we are also developing additional automated controls to help us manage our credit risk exposure. There can be no assurance that the policies, procedures and automated controls we use to manage this credit risk will effectively mitigate our credit risk exposure. Some of our risk management procedures are reliant upon the evaluation of information regarding the fixed- income markets, our clients or other relevant matters that are publicly available or otherwise acquired from third party sources. Such information may not be accurate, complete, up-to-date or properly assessed and interpreted by us. If our risk management procedures fail, our business, financial condition and results of operations may be adversely affected. Furthermore, our insurance policies are unlikely to provide coverage for such risks.

Cash and cash equivalents includes cash and money market instruments that are primarily maintained at one major global bank. Given this concentration, we are exposed to certain credit risk in relation to our deposits at this bank.

(a) Evaluation of Disclosure Controls and Procedures. Our management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures, ” as that term is defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2015. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by MarketAxess in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2015 identified in connection with the evaluation thereof by our management, including the Chief Executive Officer and Chief Financial Officer, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In the normal course of business, we and our subsidiaries included in the consolidated financial statements may be involved in various lawsuits, proceedings and regulatory examinations. We assess liabilities and contingencies in connection with outstanding legal proceedings, if any, utilizing the latest information available. For matters where it is probable that we will incur a material loss and the amount can be reasonably estimated, we would establish an accrual for the loss. Once established, the accrual would be adjusted to reflect any relevant developments. When a loss contingency is not both probable and estimable, we would not establish an accrual.

Based on currently available information, the outcome of our outstanding matters is not expected to have a material adverse impact on our financial position. It is not presently possible to determine our ultimate exposure to these matters and there is no assurance that the resolution of the outstanding matters will not significantly exceed any reserves accrued by us.

There have been no material changes in our risk factors from those disclosed in our most recent Form 10-K for the year ended December 31, 2014. For a discussion of the risk factors affecting the Company, see “Risk Factors” in Part I, Item 1A of our 2014 Form 10-K.

During the quarter ended September 30, 2015, we repurchased the following shares of common stock:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans and Programs		Dollar Value of Shares That May Yet Be Purchased Under the Plans and Programs

July 1, 2015 -- July 31, 2015		15,801	$	96.86		15,801	$	46,031
August 1, 2015 -- August 31, 2015		21,000		96.11		21,000		44,013
September 1, 2015 -- September 30, 2015		21,000		95.82		21,000		42,001
		57,801	$	96.21		57,801

In January 2014, our Board of Directors authorized a share repurchase program for up to $35.0 million of our common stock. In July 2014, our Board of Directors increased the authorization under the share repurchase program by an additional $65.0 million of our common stock. The share repurchase program will expire on December 31, 2015. For the nine months ended September 30, 2015, we repurchased 238,201 shares of common stock at a cost of $20.0 million. Shares repurchased under the program will be held in treasury for future use.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Delaware		52-2230784
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

299 Park Avenue, 10th Floor New York, New York		10171
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	R	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

		Page
PART I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Financial Condition as of September 30, 2015 and December 31, 2014	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014	5
	Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2015	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	34
PART II — Other Information
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	36
Item 6.	Exhibits	36

	As of
	September 30, 2015		December 31, 2014
	(In thousands)
Notional value	$	42,297	$	32,089
Fair value of notional		42,111		31,986
Fair value of the asset	$	186	$	103

	As of
	September 30, 2015			December 31, 2014
Deferred tax assets and liabilities	$	14,053		$	12,468
Valuation allowance		(7,334	)		(7,428	)
Deferred tax assets, net	$	6,719		$	5,040

Remainder of 2015	$	657
2016		3,424
2017		3,350
2018		3,076
2019		2,899
2020 and thereafter		11,757
	$	25,163

	As of
	September 30, 2015		December 31, 2014
	(In thousands)
Long-lived assets, as defined
United States	$	21,868	$	23,099
United Kingdom		9,140		9,057
Other		19		29
Total	$	31,027	$	32,185

	Change from the Three Months Ended September 30, 2014
	U.S. High-Grade			Other Credit			Liquid Products			Total
	(In thousands)
Volume increase (decrease)	$	5,366		$	8,718		$	(13	)	$	14,071
Variable transaction fee per million (decrease)		(1,441	)		(2,575	)		(47	)		(4,063	)
Total commissions increase (decrease)	$	3,925		$	6,143		$	(60	)	$	10,008

	Change from the Nine Months Ended September 30, 2014
	U.S. High-Grade		Other Credit			Liquid Products			Total
	(In thousands)
Volume increase (decrease)	$	15,523	$	25,439		$	39		$	41,002
Variable transaction fee per million increase (decrease)		1,074		(4,056	)		(166	)		(3,149	)
Total commissions increase (decrease)	$	16,597	$	21,383		$	(127	)	$	37,853

	MARKETAXESS HOLDINGS INC.

Date: October 23, 2015	By:	/s/ RICHARD M. MCVEY
		Richard M. McVey
		Chief Executive Officer
		(principal executive officer)

Date: October 23, 2015	By:	/s/ ANTONIO L. DELISE
		Antonio L. DeLise
		Chief Financial Officer
		(principal financial and accounting officer)