"Our efforts to increase investor order flow and broaden the sources of liquidity paid off with record revenues and record pre-tax income during the quarter," said Richard M. McVey, chairman and chief executive officer of MarketAxess. "The improvement in credit market conditions is driving increased demand for electronic trading. Investor orders are up 78% year over year, estimated overall market share is trending higher once again and fee capture continues to improve."

Third Quarter Results

Total revenues for the third quarter of 2009 increased 32.3% to $30.0 million, compared to $22.7 million for the third quarter of 2008. Pre-tax income was $8.5 million, compared to $2.1 million for the third quarter of 2008, an increase of 307.2%. Pre-tax margin was 28.5%, compared to 9.3% for the third quarter of 2008. Net income totaled $4.6 million, or $0.12 per share on a diluted basis, compared to $1.5 million, or $0.04 per share on a diluted basis, for the third quarter of 2008.

Commission revenue for the third quarter of 2009 totaled $25.3 million on total trading volume of $80.4 billion, compared to $17.2 million in commission revenue on total trading volume of $49.0 billion for the third quarter of 2008. U.S. high-grade trading volume as a percentage of FINRA's high-grade TRACE trading volume increased to an estimated 6.5%, compared to an estimated 6.4% for the third quarter of 2008 and 4.7% for the second quarter of 2009.

Technology products and services revenue, which includes revenue for technology licenses, support and professional services, totaled $2.6 million for both the third quarter of 2009 and the third quarter of 2008. Other revenue, which consists of information and user access fees, investment income and other revenue, decreased 24.8% to $2.1 million, compared to $2.8 million for the third quarter of 2008, due to a decline in investment income as a result of lower interest rates.

Total expenses for the third quarter of 2009 increased 4.3% to $21.5 million, compared to $20.6 million for the third quarter of 2008. The increase was primarily due to higher employee compensation and benefits expense of $2.0 million, offset by lower depreciation and amortization expenses of $0.8 million. The Company now expects total expenses for 2009 to be in the range of $83.0 million to $84.5 million. The Company now expects its full year 2009 capital spending to be in the range of $7.5 million to $8.5 million.

The effective tax rate for the third quarter of 2009 was 45.7%, compared to 27.6% for the third quarter of 2008 and 38.5% for full year 2008. The 2008 effective tax rate reflected the effect of a higher portion of earnings generated in lower tax jurisdictions and the level of foreign and domestic taxation on such overseas earnings. The 2009 third quarter effective tax rate reflects the impact on our deferred tax asset of newly enacted apportionment rules in New York City. The new rules will reduce the Company's overall tax rate in the future. The Company anticipates that the effective tax rate for the fourth quarter of 2009 will be between 42% and 44%.

Employee headcount as of September 30, 2009 was 210, compared to 185 as of September 30, 2008.

Dividend

The Company's board of directors has approved a regular quarterly dividend to be paid to the holders of the outstanding shares of capital stock. A cash dividend of $0.07 per share of common stock outstanding or issuable upon conversion of outstanding shares of non-voting common stock and Series B preferred stock will be paid on November 25, 2009 to stockholders of record as of the close of business on November 11, 2009.

"The Board has elected to pay our first regular cash dividend because we have consistently generated strong cash flow, well in excess of our anticipated capital spending needs," said James N.B. Rucker, chief financial officer of MarketAxess. "Our priority is to continue investing in the business to support long term growth while maintaining our strong financial profile."

Balance Sheet Data

As of September 30, 2009, total assets were $267.5 million and included $162.3 million in cash, cash equivalents and securities, and a deferred tax asset of $29.0 million. Total stockholders' equity, including the Series B preferred stock, as of September 30, 2009 was $242.1 million.