[]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-34091

MARKETAXESS HOLDINGS INC.

(Exact name of registrant as specified in its charter)


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

~~299 Park Avenue, 10th~~55 Hudson Yards, 15th FloorNew York, New York		~~10171~~10001
(Address of principal executive offices)		(Zip Code)

~~(212) 813-6000~~

(Registrant’s telephone number, including area ~~code)~~code: (212) 813-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol

Name of each exchange on which registered

Common Stock, $0.003 par value

MKTX

NASDAQ Global Select Market

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☑ 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☑ No ☐

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


Large accelerated filer	☑☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
~~Non-accelerated filer~~	~~☐ (Do not check if a smaller reporting company)~~	~~Smaller reporting company~~	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☑

As of October ~~26, 2017,~~21, 2021, the number of shares of the Registrant’s voting common stock outstanding was ~~37,536,939.~~38,026,483.

MARKETAXESS HOLDINGS INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, ~~2017~~2021

TABLE OF CONTENTS


		Page
PART I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Financial Condition as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020	5
	Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, ~~2017~~2021 and 2020	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020	78
	Notes to Consolidated Financial Statements	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2024
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3644
Item 4.	Controls and Procedures	3745
PART II — Other Information
Item 1.	Legal Proceedings	3846
Item 1A.	Risk Factors	3846
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3846
Item 3.	Defaults Upon Senior Securities	3846
Item 4.	Mine Safety Disclosures	3947
Item 5.	Other Information	3948
Item 6.	Exhibits	3948

P~~ART~~

PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)


	As of
	September 30, 2021			December 31, 2020
	(In thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents	$	432,715		$	460,858
Cash segregated under federal regulations		50,134			50,059
Investments, at fair value		35,767			28,111
Accounts receivable, net of allowance of $82 and $163 as of September 30, 2021 and December 31, 2020, respectively		67,766			79,577
Receivables from broker-dealers, clearing organizations and customers		551,841			279,915
Goodwill		154,789			147,388
Intangible assets, net of accumulated amortization		119,797			95,354
Furniture, equipment, leasehold improvements and capitalized software, net of accumulated depreciation and amortization		95,575			85,204
Operating lease right-of-use assets		72,586			75,924
Prepaid expenses and other assets		30,948			29,039
Total assets	$	1,611,918		$	1,331,429

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accrued employee compensation	$	49,046		$	62,326
Payables to broker-dealers, clearing organizations and customers		303,439			133,326
Income and other tax liabilities		44,871			42,750
Accounts payable, accrued expenses and other liabilities		69,300			44,354
Operating lease liabilities		89,963			93,612
Total liabilities		556,619			376,368

Commitments and Contingencies (Note 13)

Stockholders' equity
Preferred stock, $0.001 par value, 4,855,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020		—			—
Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020		—			—
Common stock voting, $0.003 par value, 110,000,000 shares authorized, 40,907,339 shares and 40,851,100 shares issued and 38,026,483 shares and 38,005,330 shares outstanding as of September 30, 2021 and December 31, 2020, respectively		123			123
Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020		—			—
Additional paid-in capital		323,631			329,742
Treasury stock - Common stock voting, at cost, 2,880,856 and 2,845,770 shares as of September 30, 2021 and December 31, 2020, respectively		(187,715	)		(169,523	)
Retained earnings		929,853			799,369
Accumulated other comprehensive loss		(10,593	)		(4,650	)
Total stockholders' equity		1,055,299			955,061
Total liabilities and stockholders' equity	$	1,611,918		$	1,331,429

As of

September 30, 2017

December 31, 2016

(In thousands, except share
and per share amounts)

ASSETS

Cash and cash equivalents
$
138,992

$
168,243

Investments, at fair value

237,221

194,404

Accounts receivable, net of allowance of $71 and $82 as of
   September 30, 2017 and December 31, 2016, respectively

63,027

50,668

Goodwill and intangible assets, net of accumulated amortization

63,155

63,443

Furniture, equipment, leasehold improvements and capitalized
   software, net of accumulated depreciation and amortization

35,321

31,104

Prepaid expenses and other assets

16,174

11,618

Deferred tax assets, net

8,457

8,562

Total assets
$
562,347

$
528,042

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Accrued employee compensation
$
31,027

$
34,783

Income and other tax liabilities

4,507

7,582

Deferred revenue

3,191

2,515

Accounts payable, accrued expenses and other liabilities

12,714

15,149

Total liabilities

51,439

60,029

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, 2017 and
   December 31, 2016

—

—

Series A Preferred Stock, $0.001 par value, 110,000 shares authorized,
   no shares issued and outstanding as of September 30, 2017 and
   December 31, 2016

—

—

Common stock voting, $0.003 par value, 110,000,000 shares
  authorized, 40,296,774 shares and 40,106,360 shares issued
  and 37,547,951 shares and 37,543,775 shares outstanding as of
  September 30, 2017 and December 31, 2016, respectively

121

120

Common stock non-voting, $0.003 par value, 10,000,000 shares
   authorized, no shares issued and outstanding as of
   September 30, 2017 and December 31, 2016

—

—

Additional paid-in capital

342,113

342,311

Treasury stock - Common stock voting, at cost, 2,748,823 and
   2,562,585 shares as of September 30, 2017 and
   December 31, 2016, respectively

(153,682
)

(117,330
)
Retained earnings

332,506

255,140

Accumulated other comprehensive loss

(10,150
)

(12,228
)
Total stockholders' equity

510,908

468,013

Total liabilities and stockholders' equity
$
562,347

$
528,042

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

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,						Nine Months Ended September 30,
	2017		2016		2017		2016		2021			2020			2021			2020
	(In thousands, except share and per share amounts)								(In thousands, except per share amounts)
Revenues
Commissions	$	86,270	$	81,456	$	267,307	$	246,788	$	142,826		$	150,586		$	475,095		$	478,632
Information and post-trade services		8,372		7,322		24,460		23,687
Investment income		964		534		2,551		1,469
Information services										9,608			8,501			28,614			25,570
Post-trade services										9,444			4,689			29,553			12,896
Other		1,095		959		3,588		3,539		215			230			629			681
Total revenues		96,701		90,271		297,906		275,483		162,093			164,006			533,891			517,779

Expenses
Employee compensation and benefits		25,595		23,914		78,417		74,256		40,878			37,583			129,698			120,413
Depreciation and amortization		4,583		4,325		14,066		13,546		13,964			9,032			38,840			25,404
Technology and communications		5,035		4,245		14,442		12,826		10,665			8,417			31,245			25,170
Professional and consulting fees		5,547		4,342		13,912		12,449		10,847			8,269			31,191			22,009
Occupancy		1,795		1,220		4,621		3,606		3,265			3,445			9,882			10,205
Marketing and advertising		2,089		2,140		6,757		5,742		1,821			1,148			6,153			5,633
Clearing costs		1,476		1,035		4,320		4,754		3,269			4,838			12,335			16,061
General and administrative		3,364		2,696		8,974		7,029		3,381			3,467			9,893			9,853
Total expenses		49,484		43,917		145,509		134,208		88,090			76,199			269,237			234,748
Operating income										74,003			87,807			264,654			283,031
Other income (expense)
Investment income										108			344			322			2,327
Interest expense										(314	)		(1,046	)		(676	)		(1,046	)
Other, net										697			860			(1,952	)		(242	)
Total other income (expense)										491			158			(2,306	)		1,039
Income before income taxes		47,217		46,354		152,397		141,275		74,494			87,965			262,348			284,070
Provision for income taxes		13,087		15,436		37,781		48,268		16,536			20,189			56,645			57,624
Net income	$	34,130	$	30,918	$	114,616	$	93,007	$	57,958		$	67,776		$	205,703		$	226,446

Net income per common share
Basic	$	0.93	$	0.84	$	3.11	$	2.52	$	1.54		$	1.81		$	5.49		$	6.06
Diluted	$	0.90	$	0.82	$	3.01	$	2.46	$	1.52		$	1.78		$	5.40		$	5.94

Cash dividends declared per common share	$	0.33	$	0.26	$	0.99	$	0.78	$	0.66		$	0.60		$	1.98		$	1.80

Weighted average shares outstanding
Basic		36,865		36,889		36,856		36,847		37,529			37,386			37,502			37,343
Diluted		38,019		37,792		38,069		37,738		38,084			38,160			38,114			38,129

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

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,					Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017		2016			2021			2020			2021			2020
	(In thousands)											(In thousands)
Net income	$	34,130		$	30,918		$	114,616	$	93,007		$	57,958		$	67,776		$	205,703		$	226,446
Net cumulative translation adjustment and foreign currency exchange hedge, net of tax of $(953), $346, $(2,586) and $4,448, respectively		1,102			(1,052	)		2,061		(5,093	)
Net unrealized gain (loss) on securities available-for-sale, net of tax of $16, $(27), $10 and $109, respectively		26			(44	)		17		177
Net cumulative translation adjustment and foreign currency exchange hedge, net of tax of $554, $1,654, $8, and $(908), respectively													(5,149	)		4,423			(5,943	)		213
Net unrealized gain on securities available-for-sale, net of tax of $0, $(276), $0 and $(172), respectively													—			(871	)		—			(542	)
Comprehensive income	$	35,258		$	29,822		$	116,694	$	88,091		$	52,809		$	71,328		$	199,760		$	226,117
			��

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

MARKETAXESS HOLDINGS INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock Voting		Additional Paid-In Capital			Treasury Stock - Common Stock Voting			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	(In thousands, except per share amounts)
Balance at January 1, 2021	$	123	$	329,742		$	(169,523	)	$	799,369		$	(4,650	)	$	955,061
Net income		—		—			—			80,457			—			80,457
Cumulative translation adjustment and foreign currency exchange hedge, net of tax		—		—			—			—			(1,932	)		(1,932	)
Stock-based compensation		—		7,424			—			—			—			7,424
Exercise of stock options		—		244			—			—			—			244
Withholding tax payments on restricted stock vesting and stock option exercises		—		(27,422	)		—			—			—			(27,422	)
Repurchases of common stock		—		—			(520	)		—			—			(520	)
Cash dividend on common stock ($0.66 per share)		—		—			—			(25,079	)		—			(25,079	)
Balance at March 31, 2021		123		309,988			(170,043	)		854,747			(6,582	)		988,233
Net income		—		—			—			67,288			—			67,288
Cumulative translation adjustment and foreign currency exchange hedge, net of tax		—		—			—			—			1,138			1,138
Stock-based compensation		—		6,134			—			—			—			6,134
Exercise of stock options		—		4,421			—			—			—			4,421
Withholding tax payments on restricted stock vesting and stock option exercises		—		(6,860	)		—			—			—			(6,860	)
Repurchases of common stock		—		—			(13,436	)		—			—			(13,436	)
Cash dividend on common stock ($0.66 per share)		—		—			—			(25,058	)		—			(25,058	)
Balance at June 30, 2021		123		313,683			(183,479	)		896,977			(5,444	)		1,021,860
Net income		—		—			—			57,958			—			57,958
Cumulative translation adjustment and foreign currency exchange hedge, net of tax		—		—			—			—			(5,149	)		(5,149	)
Stock-based compensation		—		6,754			—			—			—			6,754
Exercise of stock options		—		2,283			—			—			—			2,283
Withholding tax payments on restricted stock vesting and stock option exercises		—		911			—			—			—			911
Repurchases of common stock		—		—			(4,236	)		—			—			(4,236	)
Cash dividend on common stock ($0.66 per share)		—		—			—			(25,082	)		—			(25,082	)
Balance at September 30, 2021	$	123	$	323,631		$	(187,715	)	$	929,853		$	(10,593	)	$	1,055,299

Common
Stock
Voting

Additional
Paid-In
Capital

Treasury Stock -
Common
Stock
Voting

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Stockholders'
Equity

(In thousands)

Balance at December 31, 2016
$
120

$
342,311

$
(117,330
)

$
255,140

$
(12,228
)

$
468,013

Net income

—

—

—

114,616

—

114,616

Cumulative translation adjustment and foreign
   currency exchange hedge, net of tax

—

—

—

—

2,061

2,061

Unrealized net gain on securities available-for-sale,
   net of tax

—

—

—

—

17

17

Stock-based compensation

—

10,989

—

—

—

10,989

Exercise of stock options

1

1,639

—

—

—

1,640

Withholding tax payments on restricted stock
   vesting and stock option exercises

—

(12,906
)

—

—

—

(12,906
)
Repurchases of common stock

—

—

(36,352
)

—

—

(36,352
)
Cumulative effect of change in accounting for
   employee share-based payments

—

80

—

(51
)

—

29

Cash dividend on common stock

—

—

—

(37,199
)

—

(37,199
)
Balance at September 30, 2017
$
121

$
342,113

$
(153,682
)

$
332,506

$
(10,150
)

$
510,908

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

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock Voting		Additional Paid-In Capital			Treasury Stock - Common Stock Voting			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	(In thousands, except per share amounts)
Balance at January 1, 2020	$	122	$	342,541		$	(153,388	)	$	591,086		$	(10,270	)	$	770,091
Net income		—		—			—			74,816			—			74,816
Cumulative translation adjustment and foreign currency exchange hedge, net of tax		—		—			—			—			(3,859	)		(3,859	)
Unrealized net loss on securities available-for-sale, net of tax		—		—			—			—			(491	)		(491	)
Stock-based compensation		—		6,677			—			—			—			6,677
Exercise of stock options		—		80			—			—			—			80
Withholding tax payments on restricted stock vesting and stock option exercises		—		(21,243	)		—			—			—			(21,243	)
Repurchases of common stock		—		—			(5,415	)		—			—			(5,415	)
Cash dividend on common stock ($0.60 per share)		—		—			—			(22,773	)		—			(22,773	)
Balance at March 31, 2020		122		328,055			(158,803	)		643,129			(14,620	)		797,883
Net income		—		—			—			83,854			—			83,854
Cumulative translation adjustment and foreign currency exchange hedge, net of tax		—		—			—			—			(351	)		(351	)
Unrealized net gain on securities available-for-sale, net of tax		—		—			—			—			820			820
Stock-based compensation		—		5,791			—			—			—			5,791
Exercise of stock options		—		659			—			—			—			659
Withholding tax payments on restricted stock vesting and stock option exercises		—		(6,535	)		—			—			—			(6,535	)
Repurchases of common stock		—		—			(5,873	)		—			—			(5,873	)
Cash dividend on common stock ($0.60 per share)		—		—			—			(22,764	)		—			(22,764	)
Balance at June 30, 2020		122		327,970			(164,676	)		704,219			(14,151	)		853,484
Net income		—		—			—			67,776			—			67,776
Cumulative translation adjustment and foreign currency exchange hedge, net of tax		—		—			—			—			4,423			4,423
Unrealized net gain on securities available-for-sale, net of tax		—		—			—			—			(871	)		(871	)
Stock-based compensation		—		6,451			—			—			—			6,451
Exercise of stock options		—		9			—			—			—			9
Withholding tax payments on restricted stock vesting and stock option exercises		—		(6,784	)		—			—			—			(6,784	)
Repurchases of common stock		—		—			(4,165	)		—			—			(4,165	)
Cash dividend on common stock ($0.60 per share)		—		—			—			(22,784	)		—			(22,784	)
Balance at September 30, 2020	$	122	$	327,646		$	(168,841	)	$	749,211		$	(10,599	)	$	897,539

Nine Months Ended September 30,

2017

2016

(In thousands)

Cash flows from operating activities

Net income
$
114,616

$
93,007

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

14,066

13,546

Stock-based compensation expense

10,989

10,636

Deferred taxes

326

(1,387
)
Other

1,290

10,044

Changes in operating assets and liabilities:

(Increase) in accounts receivable

(12,535
)

(16,439
)
(Increase) in prepaid expenses and other assets

(4,503
)

(2,151
)
Decrease (increase) in corporate debt trading investments

8,338

(74,535
)
(Increase) in mutual funds held in rabbi trust

(1,730
)

(1,328
)
(Decrease) in accrued employee compensation

(3,756
)

(750
)
(Decrease) in income and other tax liabilities

(3,277
)

(843
)
Increase in deferred revenue

676

694

(Decrease) increase in accounts payable, accrued expenses and other liabilities

(2,917
)

2,646

Net cash provided by operating activities

121,583

33,140

Cash flows from investing activities

Available-for-sale investments

Proceeds from maturities and sales

146,295

32,025

Purchases

(196,810
)

(42,495
)
Purchases of furniture, equipment and leasehold improvements

(7,245
)

(4,754
)
Capitalization of software development costs

(10,094
)

(9,058
)
Other

(53
)

383

Net cash (used in) investing activities

(67,907
)

(23,899
)
Cash flows from financing activities

Cash dividend on common stock

(36,717
)

(28,914
)
Exercise of stock options

1,640

2,172

Withholding tax payments on restricted stock vesting and stock option exercises

(12,906
)

(5,929
)
Repurchases of common stock

(36,352
)

(13,874
)
Net cash (used in) financing activities

(84,335
)

(46,545
)
Effect of exchange rate changes on cash and cash equivalents

1,408

(980
)
Cash and cash equivalents

Net (decrease) for the period

(29,251
)

(38,284
)
Beginning of period

168,243

199,728

End of period
$
138,992

$
161,444

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

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2021			2020
	(In thousands)
Cash flows from operating activities
Net income	$	205,703		$	226,446
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		38,840			25,404
Amortization of operating lease right-of-use assets		5,055			5,146
Stock-based compensation expense		20,312			18,919
Deferred taxes		3,038			8,655
Other		(46	)		727
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		11,820			(20,232	)
(Increase) in receivables from broker-dealers, clearing organizations and customers		(288,107	)		(304,023	)
(Increase) decrease in prepaid expenses and other assets		(1,915	)		521
(Increase) decrease in trading investments		(5,569	)		62,636
(Increase) in mutual funds held in rabbi trust		(1,914	)		(1,819	)
(Decrease) increase in accrued employee compensation		(13,280	)		3,561
Increase in payables to broker-dealers, clearing organizations and customers		170,113			138,120
(Decrease) increase in income and other tax liabilities		(914	)		10,098
(Decrease) increase in accounts payable, accrued expenses and other liabilities		(1,418	)		7,379
(Decrease) in operating lease liabilities		(5,338	)		(4,669	)
Net cash provided by operating activities		136,380			176,869
Cash flows from investing activities
Acquisitions, net of cash and cash equivalents acquired		(17,078	)		(527	)
Available-for-sale investments
Proceeds from maturities and sales		0			170,657
Purchases		0			(32,865	)
Purchases of furniture, equipment and leasehold improvements		(14,567	)		(13,022	)
Capitalization of software development costs		(24,650	)		(21,124	)
Net cash (used in) provided by investing activities		(56,295	)		103,119
Cash flows from financing activities
Cash dividend on common stock		(74,999	)		(68,104	)
Exercise of stock options		6,948			748
Withholding tax payments on restricted stock vesting and stock option exercises		(33,371	)		(34,562	)
Repurchases of common stock		(18,192	)		(15,453	)
Proceeds from short-term borrowings		70,348			478,356
Repayments of short-term borrowings		(70,348	)		(478,356	)
Net cash (used in) financing activities		(119,614	)		(117,371	)
Effect of exchange rate changes on cash and cash equivalents		(4,720	)		431
Cash and cash equivalents including restricted cash
Net (decrease) increase for the period		(44,249	)		163,048
Beginning of period		608,050			274,253
End of period	$	563,801		$	437,301

Supplemental cash flow information
Cash paid for income taxes	$	48,669		$	38,488
Cash paid for interest		676			1,046
Non-cash activity
Contingent consideration payable assumed in connection with acquisitions		26,898			0
Exercise of stock options - cashless		2,750			10,288
Operating lease right-of-use assets obtained in exchange for operating lease liabilities		1,891			705

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

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Principal Business Activity

MarketAxess Holdings Inc. (the “Company” or “MarketAxess”) was incorporated in the State of Delaware on April 11, ~~2000.~~ 2000.Through its subsidiaries, MarketAxess operates a leading electronic trading ~~platform that enables~~platforms delivering expanded liquidity opportunities, improved execution quality and significant cost savings across global fixed-income ~~market participants to efficiently trade corporate bonds and other types of fixed-income instruments using MarketAxess' patented trading technology.~~markets. Over ~~1,300~~1,800 institutional investor and broker-dealer firms are active users of ~~the MarketAxess~~MarketAxess’ patented trading ~~platform,~~technology, accessing global liquidity on its platforms in U.S. ~~high-grade corporate~~investment-grade bonds, ~~emerging markets and~~U.S. high-yield bonds, ~~European bonds,~~ U.S. ~~agency bonds, municipal bonds, credit default swaps~~Treasuries, emerging market debt, Eurobonds and other fixed-income securities. Through its Open ~~Trading™~~Trading® protocols, MarketAxess executes ~~certain~~ bond ~~transactions~~trades between and among institutional investor and broker-dealer clients ~~on a matched principal basis by serving as counterparty to both~~in the ~~buyer and the seller in trades which then settle through a third-party clearing broker.~~leading all-to-all anonymous trading environment for corporate bonds. MarketAxess also offers a number of trading-related products and services, including: Composite+™ pricing and other market data products to assist clients with trading decisions; auto-execution and other execution services for clients requiring specialized workflow solutions; connectivity solutions that facilitate straight-through processing; and technology services to optimize trading ~~environments; and execution services for exchange-traded fund managers and other clients. Through its Trax® division, MarketAxess~~environments. The Company also ~~offers~~provides a range of pre- and post-trade services, including trade matching, trade publication, regulatory transaction reporting and market and reference data across a range of fixed-income and other products.

2. Significant Accounting Policies

Basis of Presentation

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, ~~2016.~~2020. The consolidated financial information as of December 31, ~~2016~~2020 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.

~~Accounting Pronouncements, Recently Adopted~~

~~Effective January 1, 2017, the Company adopted ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects related~~ Certain reclassifications have been made to the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. Beginning January 1, 2017, the tax effects related to share-based payments are recorded through the income tax provision and the Company has elected to account for forfeitures as they occur. The adoption of ASU 2016-09 will cause volatilityprior periods’ consolidated financial statements in the Company’s net income, effective tax rate and diluted earnings per share. The volatility in future periods will depend on the Company’s stock price at the vest date for restricted stock awards or exercise date for stock options and the number of awards that vest or are exercised in each period. Under the new guidance, excess tax benefits from share-based compensation are included as an operating activity in the Company’s Consolidated Statements of Cash Flows. Prior period cash flows have been adjustedorder to conform to the ~~new~~current period presentation. Such reclassifications are immaterial, individually and in the aggregate, to both current and all previously issued financial statements taken as a whole and have no effect on previously reported net income.

Accounting Pronouncements, Not Yet Adopted

In ~~May 2014,~~March 2020, the Financial Accounting Standards Board (“FASB”) issued ~~Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“~~ASU ~~2014-09”~~2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (the “ASU”) ~~requiring an entity~~, which is designed to ~~recognize revenue~~ease the potential burden in accounting for the ~~transfer of goods~~transition away from the London Inter-bank Offered Rate (“LIBOR”). The ASU applies to contracts, hedging relationships, and other transactions that reference LIBOR or ~~services equal to the amount that it expects~~another reference rate expected to be ~~entitled~~discontinued and replaced with alternative reference rates as a result of reference rate reform. The ASU provides optional expedients and exceptions for applying U.S. GAAP to ~~receive for those goods or services.~~contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ~~Company intends to adopt the new guidance using the modified retrospective method beginning January 1, 2018. The Company’s~~ implementation efforts include the identification of revenue streams within the scope of the guidance, the evaluation of certain revenue contracts underlying the revenue streams, discussions with our advisory consultants, and periodic discussions with our audit committee. The Company’s evaluation of the impact of this accounting guidance is ongoing although it does not expect this guidance to have a material effect on its Consolidated Financial Statements or disclosures.

~~In February 2016, the FASB issued~~ ASU 2016-02, “Leases” (“ASU 2016-02”) requiring lessees to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. ASU 2016-02 will bewas effective for ~~the Company beginning January 1, 2019~~all entities as of March 12, 2020 and ~~early adoption is permitted and should~~can be applied prospectively. The Company is currently evaluating the potential adoption impact and expects to recognize lease assets and lease liabilities in its Consolidated Statements of Financial Condition.adopted from this date through December 31, 2022. The Company does not expect ~~material changes to the recognition of operating lease expense in its Consolidated Statements of Operations.~~

In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other” (“ASU 2017-04”). ASU 2017-04 simplifies the testing for goodwill impairment. The guidance will be effective for the Company beginning January 1, 2020 and early adoption is permitted and should be applied prospectively. The adoption of this ~~guidance is not expected~~ASU to have a material ~~effect~~impact on ~~the Company’s~~its Consolidated Financial Statements.

Cash and Cash Equivalents

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.

Investments

~~Investments~~

The Company determines the appropriate classification of securities at the time of purchase which are recorded in the Consolidated Statements of Financial Condition on the trade date. Securities are classified as available-for-sale or trading. ~~The Company’s available-for-sale investments are comprised of municipal bonds and investment grade corporate debt securities.~~ Available-for-sale investments are carried at fair value with the unrealized gains or losses reported in accumulated other comprehensive loss in the Consolidated Statements of Financial Condition. Trading investments ~~primarily~~ include investment grade corporate debt securities ~~and are~~ carried at fair value, with realized and unrealized gains or losses included in other, ~~income~~net in the Consolidated Statements of Operations.

The Company assesses whether an other-than-temporary impairment loss on the available-for-sale 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, 2017 and 2016.9

Fair Value Financial Instruments

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, trading securities, ~~and~~ foreign currency forward ~~contracts.~~contracts, and contingent consideration payable associated with acquisitions. All other financial instruments are short-term in nature and the carrying amount is reported on the Consolidated Statements of Financial Condition at approximate fair value.

Receivables from and Payables to Broker-dealers, Clearing Organizations and Customers

Receivables from broker-dealers, clearing organizations and customers include amounts receivable for securities not delivered by the Company to the purchaser by the settlement date (‘‘securities failed-to-deliver’’) and cash deposits held at clearing organizations and clearing brokers to facilitate the settlement and clearance of matched principal transactions. Payables to broker-dealers, clearing organizations and customers include amounts payable for securities not received by the Company from a seller by the settlement date (‘‘securities failed-to-receive’’). Securities failed-to-deliver and securities failed-to-receive for transactions executed between and among institutional investor and broker-dealer clients on a matched principal basis where the Company serves as a counterparty to both the buyer and the seller are recorded on a settlement date basis. The Company presents its securities failed-to-deliver and securities failed-to-receive balances on a net-by-counterparty basis within receivables from and payables to broker-dealers, clearing organizations and customers. The difference between the Company’s trade-date receivables and payables for unsettled matched principal transactions reflects commissions earned and is recorded within accounts receivable, net on a trade-date basis.

Allowance for ~~Doubtful Accounts~~Credit Losses

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~~credit losses is based ~~upon~~on an estimate of the amount of potential credit losses in existing accounts receivable, as determined from a review of aging schedules, past due balances, historical collection experience and other specific collection issues that have been identified. Account balances are grouped for evaluation based on various risk characteristics, including billing type, legal entity, and geographic region. Additions to the allowance for ~~doubtful accounts~~credit losses are charged to bad debt expense, which is included in general and administrative expense in the Company’s Consolidated Statements of Operations. Balances that are determined to be uncollectable are written off against the allowance for credit losses.

Depreciation and Amortization

Fixed assets are carried at cost less accumulated depreciation. The Company uses the straight-line method of depreciation over three to seven ~~years.~~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.

Software Development Costs

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.~~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.

Cloud Computing Costs

~~Cash Provided~~The Company capitalizes certain costs associated with cloud computing arrangements, including, among other items, employee compensation and related benefits and third party consulting costs that are part of the application development stage. These costs are setup as ~~Collateral~~

~~Cash is provided as collateral for broker-dealer clearing accounts. Cash provided as collateral is included in~~a prepaid ~~expenses and other assets in~~asset on the Consolidated ~~Statements~~Statement of Financial ~~Condition.~~Condition and are amortized over the period of the hosting service contract. 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.

Foreign Currency Translation and Forward Contracts

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~~other, net 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.

Revenue Recognition

The ~~majority~~Company’s classification of revenues in the ~~Company’s~~Consolidated Statements of Operations represents revenues ~~are derived~~ from ~~commissions~~contracts with customers disaggregated by type of revenue. The Company has 4 revenue streams as described below.

Commission Revenue – The Company charges its broker-dealer clients variable transaction fees for trades executed on its ~~platform~~platforms and, under certain plans, distribution fees ~~that~~or monthly minimum fees to use the platforms for a particular product area. Variable transaction fees are ~~billed to its broker-dealer clients~~recognized 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~~trade date basis, are generally calculated as a percentage of the notional dollar volume of bonds traded on the ~~platform~~platforms and vary based on the type, size, yield and maturity of the bond ~~traded. Under the Company’s transaction fee plans, bonds~~traded, as well as individual client incentives. Bonds that are more actively traded or that have shorter maturities ~~are~~ generally ~~charged~~generate lower commissions, while bonds that are less actively traded or that have longer maturities generally command higher commissions. Under the Company’s disclosed trading transaction fee plans, variable transaction fees, distribution fees and unused monthly fee commitments are invoiced and recorded on a monthly basis.

For Open Trading 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~~its commission through the difference in price between the two trades. The commission is collected upon settlement of the trade, which typically occurs within one to two trading days after the trade date. For U.S. Treasury matched principal ~~trades. Fee programs for certain products include distribution fees which~~trades, commissions are ~~recognized monthly.~~invoiced and recorded on a monthly basis. The following table presents commission revenue by fee type:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In thousands)
Commission revenue by fee type
Variable transaction fees
Disclosed trading	$	75,044	$	80,354	$	258,443	$	260,233
Open Trading - matched principal trading		34,356		40,565		120,557		128,296
U.S. Treasuries - matched principal trading		2,748		2,264		8,645		9,851
Total variable transaction fees		112,148		123,183		387,645		398,380
Distribution fees and unused minimum fees		30,678		27,403		87,450		80,252
Total commissions	$	142,826	$	150,586	$	475,095	$	478,632

Information ~~and post-trade services.~~ ~~The Company generates revenue from information~~ services ~~provided~~– Information services includes data licensed to ~~our~~the Company’s broker-dealer clients, institutional investor clients and data-only ~~subscribers. Information~~subscribers; professional and consulting services; technology software licenses; and maintenance and support services. The nature and timing of each performance obligation may vary as these contracts are either subscription-based services transferred over time, and may be net of volume-based discounts, or one-time services that are ~~invoiced monthly, quarterly or annually. When billed~~transferred at a point in ~~advance,~~time. Revenues for services transferred over time are recognized ratably over the contract period as the Company’s performance obligation is met, whereas revenues ~~are deferred and recognized monthly on~~for services transferred at a ~~straight-line basis. The Company also generates revenue from regulatory transaction reporting and trade matching services. Revenue is~~point in time are recognized in the period the services are provided.

~~Technology products~~ Customers are generally billed monthly, quarterly, or annually; revenues billed in advance are deferred and ~~services.~~ The Company generates revenues from professional consulting services, technology software licenses and maintenance and support services. Revenue from professional consulting services is recognized as services are performed and software license subscription revenue and maintenance and support services are recognized ratably over the contract period. ~~Technology products and~~The following table presents information services revenue by timing of recognition:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In thousands)
Information services revenue by timing of recognition
Services transferred over time	$	9,389	$	8,227	$	27,946	$	23,852
Services transferred at a point in time		219		274		668		1,718
Total information services revenues	$	9,608	$	8,501	$	28,614	$	25,570

Post-trade services – Post-trade services revenue is ~~reported in other income~~generated from regulatory transaction reporting, trade publication and trade matching services. Customers are generally billed in the ~~Consolidated Statements~~current month or monthly in arrears and revenue is recognized in the period transactions are processed. Revenues billed in advance are deferred and recognized ratably over the contract period. The Company also generates one-time implementation fees for onboarding clients which are invoiced and recognized in the period the implementation is completed. The following table presents post-trade services revenue by timing of ~~Operations.~~ recognition:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In thousands)
Post-trade services revenue by timing of recognition
Services transferred over time	$	9,444	$	4,557	$	29,544	$	12,655
Services transferred at a point in time		—		132		9		241
Total post-trade services revenues	$	9,444	$	4,689	$	29,553	$	12,896

Other revenues – Other revenues primarily includes revenue from telecommunications line charges to broker-dealer clients.

Contract liabilities consist of deferred revenues that the Company records when cash payments are received or due in advance of services to be performed. The revenue recognized from contract liabilities and the remaining balance is shown below:


	December 31, 2020		Payments received in advance of services to be performed		Revenue recognized for services performed during the period			Foreign Currency Translation			September 30, 2021
	(In thousands)
Information services	$	3,203	$	8,064	$	(7,614	)	$	—		$	3,653
Post-trade services		1,045		11,810		(11,740	)		(15	)		1,100
Total deferred revenue	$	4,248	$	19,874	$	(19,354	)	$	(15	)	$	4,753

The majority of the Company’s contracts are short-term in nature with durations of less than one year. For contracts with original durations extending beyond one year, the aggregate amount of the transaction price allocated to remaining performance obligations was $18.1 million as of September 30, 2021. The Company expects to recognize revenue associated with the remaining performance obligations over the next 32 months.

Stock-Based Compensation

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. ~~Effective upon the Company’s adoption of ASU 2016-09, the Company accounts for forfeitures~~Forfeitures are recognized as they occur. ~~Prior to the adoption of ASU 2016-09, expected forfeitures were included in determining share-based compensation expense.~~

Income Taxes

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~~the provision for income taxes in the Consolidated Statements of Operations. ~~Effective upon the Company’s adoption of ASU 2016-09,~~ ~~all~~All tax effects related to share-based payments are recorded ~~through tax expense~~in the provision for income taxes in the periods during which the awards are exercised or vest.

Business Combinations, Goodwill and Intangible Assets

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~~requires judgment 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~~Following 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~~which range from ~~three to15 years.~~one to 15 years using either a straight-line or accelerated amortization method based on the pattern of economic benefit the Company expects to realize from such assets. Intangible assets are assessed for impairment when events or circumstances indicate the existence of a possible impairment.

Earnings Per Share

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.

Use of Estimates

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.

~~Out-of-Period Adjustments~~

During the first quarter of 2016, the Company determined that it had incorrectly recorded deferred taxes for the cumulative translation adjustment (“CTA”) that arises from converting the local currency financial statements into U.S. dollars. Upon making a permanent reinvestment assertion on unremitted earnings from foreign subsidiaries effective January 1, 2013, the Company should have eliminated any deferred tax balances derived from the CTA balance. The Company also determined that gains and losses on the foreign currency forward contracts used to hedge the net investment in certain foreign subsidiaries were not appropriately considered as taxable income or expense in the consolidated tax returns. The Company assessed these errors and determined that they were not material to previous reporting periods. Therefore, the Company recorded these items as out-of-period adjustments in the three months ended March 31, 2016 by decreasing deferred tax assets by $3.1 million, decreasing other comprehensive income by $2.1 million and increasing prepaid expenses and other assets by $1.0 million in the Consolidated Statements of Financial Condition.

~~Reclassifications~~

Certain reclassifications have been made to the prior period’s Consolidated Financial Statements in order to conform to the current year presentation. Such reclassifications had no effect on previously reported net income.

3. ~~Net~~Regulatory Capital Requirements

Certain U.S. subsidiaries of the Company are registered as a broker-dealer or swap execution facility (“SEF”) and therefore are subject to the applicable rules and regulations of the SEC, the Financial Industry Regulatory Authority (“FINRA”) and the Commodity Futures Trading ~~Commission.~~Commission (“CFTC”). These rules contain minimum net capital requirements, as defined in the applicable regulations, and also may require that 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 (“FCA”) in the U.K. or other foreign regulators and must maintain financial resources, as defined in the applicable regulations, in excess of the applicable financial resources requirement. As of September 30, ~~2017,~~2021, 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, ~~2017,~~2021, the Company’s subsidiaries maintained aggregate net capital and financial resources that ~~was $128.2~~were $577.3 million in excess of the required levels of ~~$12.6~~$23.2 million.

One of the Company’s U.S. broker-dealer subsidiaries is required to segregate funds in a special reserve bank account for the benefit of customers pursuant to Rule 15c3-3 of the Securities Exchange Act of 1934. As of September 30, 2021, the broker-dealer subsidiary had a balance of $50.1 million in its special reserve bank account. This broker-dealer subsidiary also maintained net capital that was $381.4 million in excess of the required level of $3.4 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.

4. Fair Value Measurements

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 2.2:

	Level 1		Level 2			Level 3		Total
	(In thousands)										Level 1		Level 2		Level 3		Total
As of September 30, 2017
											(In thousands)
As of September 30, 2021
Assets
Money market funds	$	25,213	$	—		$	—	$	25,213		$	4,454	$	—	$	—	$	4,454
Securities available-for-sale
Corporate debt		—		168,278			—		168,278
Trading securities
U.S. Treasuries												—		24,964		—		24,964
Mutual funds held in rabbi trust												—		10,803		—		10,803
Foreign currency forward position												—		1,813		—		1,813
Total assets											$	4,454	$	37,580	$	—	$	42,034

Liabilities
Contingent consideration payable											$	—	$	—	$	41,084	$	41,084

As of December 31, 2020
Assets
Money market funds											$	20,856	$	—	$	—	$	20,856
Trading securities
Corporate debt		—		65,885			—		65,885			—		19,222		—		19,222
Mutual funds held in rabbi trust		—		3,058			—		3,058			—		8,889		—		8,889
Total assets											$	20,856	$	28,111	$	—	$	48,967

Liabilities
Contingent consideration payable											$	—	$	—	$	15,026	$	15,026
Foreign currency forward position		—		591			—		591			—		805		—		805
Total	$	25,213	$	237,812		$	—	$	263,025

As of December 31, 2016
Money market funds	$	58,573	$	—		$	—	$	58,573
Securities available-for-sale
Corporate debt		—		118,870			—		118,870
Trading securities
Corporate debt		—		74,207			—		74,207
Mutual funds held in rabbi trust		—		1,327			—		1,327
Foreign currency forward position		—		(266	)		—		(266	)
Total	$	58,573	$	194,138		$	—	$	252,711

Total liabilities											$	—	$	805	$	15,026	$	15,831

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. The mutual funds held in a rabbi trust represent investments associated with the Company’s deferred cash incentive ~~plan (see Note 14). There were no financial assets~~plan.

Liabilities classified within Level 3 ~~during~~reflect contingent consideration payable assumed as part of acquisitions. During the nine months ended September 30, ~~2017~~2021, $26.9 million of contingent consideration payable was recognized in connection with a business combination and ~~2016.~~a revaluation related to an asset acquisition. Significant unobservable inputs used in the valuation of contingent consideration payable include estimates of client retention, electronic order flow and license fees over periods of 18 to 24 months from the acquisition dates. The following table summarizes the change in the Company's Level 3 liabilities for the nine months ended September 30, 2021:


	December 31, 2020		Additions - acquisitions		Revaluations		Foreign Currency Translation			September 30, 2021
	(In thousands)
Contingent consideration payable	$	15,026	$	22,500	$	4,448	$	(890	)	$	41,084

The table below presents the carrying value, fair value and fair value hierarchy category of the Company's financial assets and liabilities that are not measured at fair value on the Consolidated Statement of Financial Condition. The carrying values of the Company's financial assets and liabilities not measured at fair value categorized in the fair value hierarchy as Level 1 and Level 2 approximate fair value due to the short-term nature of the underlying assets and liabilities.


	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
	(In thousands)
As of September 30, 2021
Financial assets not measured at fair value:
Cash and cash equivalents	$	432,715	$	432,715	$	432,715	$	—	$	—	$	432,715
Cash segregated under federal regulations		50,134		50,134		50,134		—		—		50,134
Accounts receivable, net of allowance		67,766		67,766		—		67,766		—		67,766
Receivables from broker-dealers, clearing organizations and customers		551,841		551,841		80,862		470,979		—		551,841
Total	$	1,102,456	$	1,102,456	$	563,711	$	538,745	$	—	$	1,102,456

Financial liabilities not measured at fair value:
Payables to broker-dealers, clearing organizations and customers	$	303,439	$	303,439	$	—	$	303,439	$	—	$	303,439

As of December 31, 2020
Financial assets not measured at fair value:
Cash and cash equivalents	$	460,858	$	460,858	$	460,858	$	—	$	—	$	460,858
Cash segregated under federal regulations		50,059		50,059		50,059		—		—		50,059
Accounts receivable, net of allowance		79,577		79,577		—		79,577		—		79,577
Receivables from broker-dealers, clearing organizations and customers		279,915		279,915		97,043		182,872		—		279,915
Total	$	870,409	$	870,409	$	607,960	$	262,449	$	—	$	870,409

Financial liabilities not measured at fair value:
Payables to broker-dealers, clearing organizations and customers	$	133,326	$	133,326	$	—	$	133,326	$	—	$	133,326

The Company enters into foreign currency forward contracts to hedge 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 for a one-month period and are used to limit exposure to foreign currency exchange rate fluctuations. The fair value of the asset is included in prepaid expenses and other assets and the fair value of the liability is included in accounts payable, accrued expenses and other liabilities 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 following table summarizes the Company’s foreign currency forward ~~position is as follows:~~position:


	As of
	September 30, 2021		December 31, 2020
	(In thousands)
Notional value	$	198,299	$	157,057
Fair value of notional		196,486		157,862
Fair value of the asset (liability)	$	1,813	$	(805	)

As of

September 30, 2017

December 31, 2016

(In thousands)

Notional value
$
89,035

$
66,972

Fair value of notional

88,444

67,238

Fair value of the asset (liability)
$
591

$
(266
)

The following ~~is a summary of~~table summarizes the Company’s investments:


	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In thousands)
As of September 30, 2021
Trading securities
U.S. Treasuries	$	24,989	$	-	$	(25	)	$	24,964
Mutual funds held in rabbi trust		9,941		862		—			10,803
Total investments	$	34,930	$	862	$	(25	)	$	35,767

As of December 31, 2020
Trading securities
Corporate debt	$	19,081	$	141	$	—		$	19,222
Mutual funds held in rabbi trust		7,680		1,209		—			8,889
Total investments	$	26,761	$	1,350	$	—		$	28,111

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair
value

(In thousands)

As of September 30, 2017

Securities available-for-sale

Corporate debt
$
168,455

$
18

$
(195
)

$
168,278

Trading securities

Corporate debt

65,940

67

(122
)

65,885

Mutual funds held in rabbi trust

2,729

329

—

3,058

Total trading securities

68,669

396

(122
)

68,943

Total investments
$
237,124

$
414

$
(317
)

$
237,221

As of December 31, 2016

Securities available-for-sale

Corporate debt
$
119,073

$
13

$
(216
)

$
118,870

Trading securities

Corporate debt

74,394

47

(234
)

74,207

Mutual funds held in rabbi trust

1,212

115

—

1,327

Total trading securities

75,606

162

(234
)

75,534

Total investments
$
194,679

$
175

$
(450
)

$
194,404

The following table summarizes the fair value of the investments based upon the contractual maturities:


	As of				As of
	September 30, 2017		December 31, 2016		September 30, 2021		December 31, 2020
	(In thousands)				(In thousands)
Less than one year	$	133,207	$	117,904	$	10,803	$	18,290
Due in 1 - 5 years		104,014		76,500		24,964		9,821
Total	$	237,221	$	194,404	$	35,767	$	28,111

Proceeds from the sales and maturities of investments during the nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 were ~~$170.1~~$19.4 million and ~~$48.1~~$252.2 million, respectively.

~~The following table provides fair values~~

5. Receivables from and ~~unrealized losses on investments~~Payables to Broker-dealers, Clearing organizations and ~~by the aging~~Customers

Receivables from and payables to broker-dealers, clearing organizations and customers consisted of the ~~securities’ continuous unrealized loss position~~following:


	September 30, 2021		December 31, 2020
Receivables from broker-dealers, clearing organizations and customers:	(In thousands)
Securities failed-to-deliver - broker-dealers	$	216,916	$	93,294
Securities failed-to-deliver - customers		250,016		87,685
Deposits with clearing organizations and broker-dealers		80,862		97,043
Other		4,047		1,893
Total	$	551,841	$	279,915

Payables to broker-dealers, clearing organizations and customers:
Securities failed-to-receive - broker-dealers		184,755		70,917
Securities failed-to-receive - customers		110,930		60,784
Other		7,754		1,625
Total	$	303,439	$	133,326

6. Acquisitions

On April 9, 2021, the Company acquired MuniBrokers LLC, a central electronic venue serving municipal bond brokers and dealers. The purchase price consists of $17.1 million in cash paid at closing and up to $25.0 million of contingent consideration payable within approximately two years of the acquisition date. The Company is accounting for the transaction as a business combination and utilized an independent third-party to assist in determining the fair value of the acquired intangible assets. The accounting purchase price was $39.6 million, comprised of $17.1 million of cash and $22.5 million of contingent consideration payable, which is included within accounts payable, accrued expenses and other liabilities on the Consolidated Statement of Financial Condition. The Company recorded $32.0 million of amortizable intangible assets and $7.4 million of goodwill as of ~~September~~the acquisition date.The acquired intangible assets consist of customer relationships and technology and have useful lives ranging from 1 to 15 years.

On November 30, ~~2017~~2020, the Company acquired Regulatory Services GmbH, the pan-European regulatory reporting business of Deutsche Börse Group. The purchase price consists of $22.5 million in cash paid at closing and ~~December 31, 2016:~~up to $24.6 million in contingent consideration payable in cash within 18 months of the closing. The Company is accounting for the transaction as a purchase of assets and recorded $37.4 million in amortizable intangible assets and $14.7 million of contingent consideration payable as of the acquisition date. In 2021, the Company recognized an increase of $4.4 million to the contingent consideration payable and the cost basis of the acquired intangible assets as a result of updated projections of the expected final contingent consideration payments.

Less than Twelve Months

Twelve Months or More

Total

Estimated
fair
value

Gross
unrealized
losses

Estimated
fair
value

Gross
unrealized
losses

Estimated
fair
value

Gross
unrealized
losses

(In thousands)

As of September 30, 2017

Corporate debt
$
173,000

$
(284
)

$
5,426

$
(33
)

$
178,426

$
(317
)

As of December 31, 2016

Corporate debt
$
136,667

$
(449
)

$
2,000

$
(1
)

$
138,667

$
(450
)

5.7. Goodwill and Intangible Assets

Goodwill and intangible assets with indefinite lives was ~~$59.7~~$154.8 million and $147.4 million as of ~~both~~ September 30, ~~2017~~2021 and December 31, ~~2016.~~2020, respectively. Intangible assets that are subject to amortization, including the related accumulated amortization, are comprised of the following:

September 30, 2017

December 31, 2016

Cost

Accumulated
amortization

Net carrying
amount

Cost

Accumulated
amortization

Net carrying
amount

(In thousands)

Technology
$
5,770

$
(5,770
)

$
—

$
5,770

$
(5,770
)

$
—

Customer relationships

5,645

(2,203
)

3,443

5,628

(1,897
)

3,731

Non-competition agreements

380

(380
)

—

380

(380
)

—

Tradenames

370

(370
)

—

370

(370
)

—

Total
$
12,165

$
(8,723
)

$
3,443

$
12,148

$
(8,417
)

$
3,731


	September 30, 2021							December 31, 2020
	Cost		Accumulated amortization			Net carrying amount		Cost		Accumulated amortization			Net carrying amount
	(In thousands)

Customer relationships	$	132,094	$	(16,570	)	$	115,524	$	102,696	$	(7,369	)	$	95,327
Technology and other intangibles		11,430		(7,157	)		4,273		6,550		(6,523	)		27
Total	$	143,524	$	(23,727	)	$	119,797	$	109,246	$	(13,892	)	$	95,354

Amortization expense associated with identifiable intangible assets was ~~$0.3~~$9.8 million and ~~$0.6~~$2.0 million for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively. ~~Estimated~~Annual estimated total amortization expense is ~~$0.4~~$13.3 million, $17.1 million, $17.5 million, $15.4 million and $12.3 million, respectively, for ~~each year from 2017~~2021 through ~~2021.~~2025.

6.8. Income Taxes

The Company's provision for income taxes ~~consists~~includes U.S. federal, state and local, and foreign taxes. The Company's effective tax rate was 22.2% and 23.0% for the three months ended September 30, 2021 and 2020, respectively, and 21.6% and 20.3% for the nine months ended September 30, 2021 and 2020, respectively. The Company's effective tax rate can vary from period to period depending on geographic mix of our earnings, changes in tax legislation and tax rates and the ~~following:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(In thousands)

Current:

Federal
$
11,331

$
13,273

$
28,676

$
30,898

State and local

1,651

1,895

4,579

5,055

Foreign

1,191

1,714

4,234

4,599

Total current provision

14,173

16,882

37,489

40,552

Deferred:

Federal

(930
)

(918
)

130

6,895

State and local

(158
)

(154
)

(64
)

964

Foreign

2

(374
)

226

(143
)
Total deferred provision

(1,086
)

(1,446
)

292

7,716

Provision for income taxes
$
13,087

$
15,436

$
37,781

$
48,268

Theamount and timing of excess tax benefits related to share-based payments, among other factors. The Company recognized excess tax benefits on share-based payments of $3.81.7 million and $14.85.9 million through the provision for income taxes for the three months ended September 30, 2021 and 2020, respectively, and $11.4 million and $17.9 million for the nine months ended September 30, ~~2017,~~2021 and 2020, respectively.

The Company or one of its subsidiaries files U.S. federal, state and foreign income tax returns. ~~Income tax returns for U.S. Federal (through 2013), New York City (through 2003) and state (through 2009) and Connecticut state (through 2003) have been audited. An examination of the Company’s~~The Company is currently under a New York State income tax ~~returns~~examination for the tax years 2010 through ~~2013 is currently underway. The~~2017 and a New York City income tax examination for the tax years 2016 through 2018. At this time, the Company cannot estimate when the ~~examination~~examinations will conclude or the impact such ~~examination~~examinations will have on the Company’s Consolidated Financial Statements, if any. Generally, other than New York City and State, the Company is no longer subject to tax examinations by tax authorities for years prior to 2017.

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

7.18

9. Stock-Based Compensation Plans

~~Stock-based~~Total stock-based compensation expense ~~for the three and nine months ended September 30, 2017 and 2016~~ was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2021		2020		2021		2020
	(In thousands)								(In thousands)
Employees	$	3,280	$	3,387	$	10,273	$	9,963	$	6,444	$	6,133	$	19,467	$	18,044
Non-employee directors		241		312		716		673		310		318		845		875
Total stock-based compensation	$	3,521	$	3,699	$	10,989	$	10,636	$	6,754	$	6,451	$	20,312	$	18,919

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

During the nine months ended September 30, ~~2017,~~2021, the Company granted to employees ~~and directors~~ a total of ~~65,462~~42,623 shares of restricted stock or restricted stock units,17,897 options to purchase shares of common stock and performance-based shares with an expected pay-out at target of ~~22,338 shares of common stock and 54,838 options to purchase~~13,255 shares of common stock. The fair value of the restricted stock and performance-based share awards was based on a weighted-average fair value per share at the grant date of ~~$156.79~~$521.52 and ~~$168.89,~~$518.74, respectively. Based on the Black-Scholes option pricing model, the weighted-average fair value for each option granted was ~~$40.08~~$137.66 per share.

As of September 30, ~~2017,~~2021, the total unrecognized compensation cost related to all non-vested awards was ~~$26.7~~$42.6 million. That cost is expected to be recognized over a weighted-average period of ~~2.1~~1.8 years.

8.10. Earnings Per Share

The following table sets forth ~~the computation of~~ basic and diluted weighted average shares outstanding used to compute earnings per ~~common~~ share:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		Three Months Ended September 30,				Nine Months Ended September 30,
	(In thousands, except per share amounts)								2021		2020		2021		2020
Net income	$	34,130	$	30,918	$	114,616	$	93,007
									(In thousands, except per share amounts)
Basic weighted average shares outstanding		36,865		36,889		36,856		36,847		37,529		37,386		37,502		37,343
Dilutive effect of stock options and restricted stock		1,154		903		1,213		891		555		774		612		786
Diluted weighted average shares outstanding		38,019		37,792		38,069		37,738		38,084		38,160		38,114		38,129

Basic earnings per share	$	0.93	$	0.84	$	3.11	$	2.52	$	1.54	$	1.81	$	5.49	$	6.06
Diluted earnings per share	$	0.90	$	0.82	$	3.01	$	2.46		1.52		1.78		5.40		5.94

Stock options and restricted stock totaling ~~10,729~~30,037 shares and ~~6,480~~753 shares for the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively, and ~~40,485 shares~~39,899 and ~~112,004~~27,606 shares for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, 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.

11. Credit Agreements and Short-term Financing

9.Prior Revolving Credit Agreement

In October 2015, the Company entered into ~~a two-year~~an amended and restated credit agreement (the ~~“Credit~~“2015 Credit Agreement”) that provided for revolving loans and letters of credit up to an aggregate of ~~$100.0~~$100.0 million. ~~As of September 30, 2017,~~The 2015 Credit Agreement matured on November 13, 2020, when the Company ~~had $0.9~~entered into a new one-year credit agreement.

Revolving Credit Agreement

On November 13, 2020, the Company entered into a credit agreement (the “2020 Credit Agreement”) with a syndicate of lenders and JPMorgan Chase Bank, N.A., as administrative agent, that provided aggregate commitments totaling $500.0 million, inconsisting of a revolving credit facility and a $5.0 million letter of credit sub-limit for standby letters of ~~credit outstanding and $99.1 million in available borrowing capacity under~~credit. The 2020 Credit Agreement replaced the 2015 Credit Agreement. The Company amended the Credit Agreement in October 2017 and extended the maturity date to October 2018. The amended Credit Agreement also provides for two additional one-year extension options and modified certain borrowing terms and covenants. Subject to satisfaction of certain specified conditions, the Company iswas permitted to upsize the 2020 Credit

Agreement by up to $250.0 million in total. As of September 30, 2021, the Company had $1.0 million in letters of credit outstanding and $499.0 million in available borrowing capacity under the 2020 Credit ~~Agreement by an additional $50.0 million.~~Agreement.

Borrowings under the 2020 Credit Agreement ~~will bear~~bore interest at a rate per annum equal to the base rate or adjusted LIBOR plus an applicable margin that varies with the Company’s consolidated total leverage ratio. The 2020 Credit Agreement ~~requires~~required that the Company ~~satisfies~~satisfy certain covenants, which ~~includes~~include leverage ratios and minimum earnings before interest, tax, and depreciation and amortization (“EBITDA”) requirements. The Company was in compliance with all applicable covenants at September 30, ~~2017 and December 31, 2016.~~

2021. The Company’s existing and future domestic subsidiaries (other than any regulated subsidiary and MarketAxess Colombia Corporation so long as its assets and revenues remain below an agreed threshold) have guaranteed the Company’s obligationsCompany incurred 0 interest expense under the ~~Credit Agreement. Subject to customary exceptions and exclusions, the Company’s borrowings under the~~2020 Credit Agreement are 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 Agreement, 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).

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 material judgments against the Company in excess of $10.0 million, the lenders would be entitled to accelerate the borrowings under the Credit Agreement and take various other actions, including all actions permitted to be taken by a secured creditor. If certain bankruptcy events of default occur, the borrowings under the Credit Agreement will automatically accelerate.

~~10. Commitments and Contingencies~~

~~Lease Commitments~~

The Company leases office space under non-cancelable lease agreements expiring at various dates through 2033. Office space leases are subject to escalation based on certain costs incurred by the landlord. Minimum rental commitments as of September 30, 2017 under such operating leases were as follows (in thousands):

Remainder of 2017
$
1,266

2018

4,815

2019

9,464

2020

10,577

2021

10,129

2022 and thereafter

108,247

$
144,498

~~Rental expense was $4.1 million and $3.1 million~~ for the nine months ended September 30, ~~2017~~2021.

On October 15, 2021, the Company refinanced its credit facility to replace the 2020 Credit Agreement with a new three-year revolving credit facility (the “2021 Credit Agreement”) provided by a syndicate of lenders and ~~2016, respectively,~~JPMorgan Chase Bank, N.A., as administrative agent. See Note 17 to the Consolidated Financial Statements for a discussion of the 2021 Credit Agreement.

Collateralized Agreement

In connection with its self-clearing operations, one of the Company’s U.S. broker-dealer subsidiaries entered into an agreement (the “Collateralized Agreement”) with its settlement bank to provide loans to the subsidiary in amounts up to an aggregate of $200.0 million on an uncommitted basis. Borrowings under the Collateralized Agreement are collateralized by securities pledged by the Company’s broker-dealer subsidiary to the settlement bank, subject to applicable haircuts and ~~is included~~concentration limits. Borrowings under the Collateralized Agreement will bear interest at a rate per annum equal to the Federal Funds Rate plus 1.00%. The Company incurred less than $0.1 million of interest expense on borrowings under the Collateralized Agreement during the nine months ended September 30, 2021. As of September 30, 2021, the Company had 0 borrowings outstanding and $200.0 million in ~~occupancy expense~~available borrowing capacity under the Collateralized Agreement.

Short-term Financing

Under arrangements with their settlement banks, certain of the Company’s U.S. and U.K. operating subsidiaries may receive overnight financing in the ~~Consolidated Statements~~form of ~~Operations. Rental~~bank overdrafts. The Company incurred interest expense on such overnight financing of $0.7 million during the nine months ended September 30, 2021. As of September 30, 2021, the Company had 0 overdrafts payable outstanding.

12. Leases

The Company has ~~been recorded~~operating leases for corporate offices with initial lease terms ranging from one year to 15 years. Certain leases contain options to extend the initial term at the Company’s discretion. The Company accounts for the option to extend when it is reasonably certain of being exercised. The Company’s lease agreements do not contain any material residual value guarantees, restrictions or covenants.

The following table presents the components of lease expense:


		Three Months Ended September 30,						Nine Months Ended September 30,
Lease cost:	Classification	2021			2020			2021			2020
		(In thousands)
Operating lease cost	Occupancy	$	3,269		$	3,432		$	9,939		$	10,238
Operating lease cost for subleased/assigned properties	Other, net		507			609			1,548			1,780
Variable lease costs	Occupancy		2			3			9			26
Sublease income subleased/assigned properties	Other, net		(512	)		(605	)		(1,559	)		(1,776	)
Net lease cost		$	3,266		$	3,439		$	9,937		$	10,268

The Company determines whether an arrangement is, or includes, a lease at contract inception. Operating lease right-of-use assets and liabilities are recognized at commencement date and are initially measured based on the ~~total minimum~~present value of lease payments ~~after giving effect to rent abatement and concessions, which are being amortized on a straight-line basis~~ over the ~~life of~~defined lease term. As the ~~lease. The Company is contingently obligated for standby letters of credit amounting to $0.9 million that were issued to landlords for office space.~~

~~During 2016,~~Company's leases do not provide an implicit rate, the Company ~~entered into a~~used its incremental borrowing rate based on the information available at the adoption date in determining the present value of lease ~~agreement for our new global headquarters in New York City.~~ payments.

The ~~Company expects to relocate its headquarters to approximately 83,000 square feet~~weighted average remaining lease term (in years) and weighted average discount rate are as follows:


	As of
Lease Term and Discount Rate	September 30, 2021			December 31, 2020
Weighted average remaining lease term (in years)		11.6			12.3
Weighted average discount rate		5.9	%		5.9	%

The following table presents the maturity of ~~newly built office space at 55 Hudson Yards upon the building’s completion in late 2018. The fifteen-year~~ lease ~~for the new headquarters will commence when the Company receives possession~~liabilities as of ~~the premises, which is currently expected in the first quarter of 2018.~~September 30, 2021:


	(In thousands)
Remainder of 2021	$	3,049
2022		11,031
2023		10,790
2024		11,252
2025		11,079
2026 and thereafter		79,031
Total lease payments		126,232
Less: interest		36,269
Operating lease liabilities	$	89,963

The Company has ~~assigned a~~entered into agreements that sublease or assign the Company’s lease ~~agreement~~obligations on ~~a leased property~~2 properties to a third ~~party~~parties and is contingently liable should the ~~assignee~~third parties default on future lease obligations through the ~~November 2020~~ lease termination ~~date.~~dates of February 2022 and May 2022. The aggregate amount of the future lease ~~obligation~~obligations under ~~this arrangement~~these arrangements is ~~approximately $0.9~~$0.8 million as of September 30, ~~2017.~~ 2021.

~~Legal~~

13. Commitments and Contingencies

Legal

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 will establish an accrual for the loss. Once established, the accrual will 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.

Other

The Company, through ~~two regulated~~ certain of itssubsidiaries, executes ~~certain~~ bond transactions between ~~and among~~its 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~~trades. One of the Company’s U.S. broker-dealer subsidiaries operates under a self-clearing model for the settlement of such transactions. The Company’s other U.S. and U.K. subsidiaries settle their transactions through third-party clearing ~~brokers.~~brokers or settlement agents. Settlement typically occurs within one to two trading days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded. ~~For~~Under both the ~~nine months ended September 30, 2017~~self-clearing and ~~2016, revenues from matched principal trading were approximately $34.4 million and $26.6 million, respectively. Under securities~~the third-party clearing ~~agreements with third party clearing brokers,~~models, the Company maintains collateral deposits with each clearing broker in the form of cash. As of September 30, 2017 and 2016, the amount of the collateral deposits included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition was $1.2 million and $1.1 million, respectively. For the nine months ended September 30, 2017 and 2016, clearing expenses associated with matched principal transactions were $4.3 million and $4.8

~~million, respectively, and are classified under clearing costs on the Consolidated Statements of Operations. The Company is~~may be exposed to credit risk in the event a counterparty does not fulfill its obligation to complete a transaction or if there is ~~a miscommunication or other~~an error in executing a matched principal transaction. Pursuant to the terms of the securities clearing agreements, each third-party clearing broker has the right to charge the Company for any losses they suffer resulting from a counterparty’s failure on any of the Company’s trades. The Company did not record any liabilities or losses with regard to ~~this right~~counterparty failures for the nine months ended September 30, ~~2017~~2021 and ~~2016.~~2020.

In the normal course of business, the Company enters into contracts that contain a variety of representations, warranties and ~~general indemnifications.~~indemnification provisions. 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.

~~11. Customer Concentration~~

During both the nine months ended September 30, 2017 and 2016, no single client accounted for more than 10% of total revenue. One institutional investor client accounted for 12.8% and 14.6% of trading volumes during the nine months ended September 30, 2017 and 2016, respectively.

~~12.~~14. Share Repurchase Program

In January ~~2016,~~2019, the Board of Directors authorized a two-year share repurchase program for up to ~~$25.0~~$100.0 million ~~of the Company’s common stock.~~that commenced in April 2019 and expired on March 31, 2021. In ~~October 2016,~~January 2021, the Board of Directors ~~approved~~authorized a ~~$50.0~~new share repurchase program for up to $100.0 million ~~increase in the size of the repurchase program.~~that commenced on April 1, 2021. For the nine months ended September 30, ~~2017,~~2021, the Company repurchased ~~191,394~~38,940 shares of common stock at a cost of ~~$36.4~~$18.2 million. In September 2017, the existing share repurchase plan was terminated and the Board of Directors authorized a new fifteen-month share repurchase program for up to $100 million commencing in October 2017. Shares repurchased under each program will be held in treasury for future use.

~~13.~~15. Segment and Geographic Information

The Company operates an electronic ~~multi-party platform~~platforms 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~~products 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, ~~2017~~2021 and ~~2016,~~2020, the U.K. was the only individual foreign country in which the Company had a subsidiary that accounted for ~~10%~~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. ~~Information regarding revenue~~Revenues for the three and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 and long-lived assets as of September 30, ~~2017~~2021 and December 31, ~~2016 was~~2020 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In thousands)
Revenues
Americas	$	131,306	$	138,938	$	434,664	$	440,420
Europe		25,991		20,556		83,852		65,061
Asia		4,796		4,512		15,375		12,298
Total	$	162,093	$	164,006	$	533,891	$	517,779


	As of
	September 30, 2021		December 31, 2020
	(In thousands)
Long-lived assets, as defined
Americas	$	75,361	$	68,707
Europe		20,023		16,491
Asia		191		6
Total	$	95,575	$	85,204

16. Cash and Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents together with restricted or segregated cash as reported within the Consolidated Statements of Financial Condition to the sum of the same such amounts shown in the Consolidated Statements of Cash Flows.


	Statement of Financial Condition Location	September 30, 2021		December 31, 2020
		(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	432,715	$	460,858
Cash segregated for regulatory purposes	Cash segregated under federal regulations		50,134		50,059
Deposits with clearing organizations and broker-dealers	Receivables from broker-dealers, clearing organizations and customers		80,862		97,043
Other deposits	Prepaid expenses and other assets		90		90
Total		$	563,801	$	608,050

17. Subsequent Event

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(In thousands)

Revenues

United States
$
82,076

$
77,571

$
252,485

$
235,078

United Kingdom

14,250

12,433

44,277

39,165

Other

375

267

1,144

1,240

Total
$
96,701

$
90,271

$
297,906

$
275,483

As of

September 30, 2017

December 31, 2016

(In thousands)

Long-lived assets, as defined

United States
$
25,602

$
23,370

United Kingdom

9,700

7,713

Other

19

21

Total
$
35,321

$
31,104

~~14. Retirement~~On October 15, 2021, the Company refinanced its credit facility to replace the 2020 Credit Agreement with the 2021 Credit Agreement, which provides aggregate commitments totaling $500.0 million, consisting of a revolving credit facility and ~~Deferred Compensation Plans~~

a $5.0 million letter of credit sub-limit for standby letters of credit. The ~~Company offers a non-qualified deferred cash incentive plan~~2021 Credit Agreement will mature on October 15, 2024, with the Company’s option to ~~certain officers and other employees. Under the plan, eligible employees may defer~~request up to ~~100%~~2 additional 364-day extensions at the discretion of ~~their annual cash incentive pay. The Company has elected to fund its deferred compensation obligations through a rabbi trust. The rabbi trust is~~each lender and subject to ~~creditor claims~~customary conditions. Subject to satisfaction of certain specified conditions, the Company is permitted to upsize the 2021 Credit Agreement by up to $250.0 million in total.

Borrowings under the ~~event of insolvency but such assets are not available for general corporate purposes. Assets held in~~2021 Credit Agreement will bear interest at a rate per annum equal to the ~~rabbi trust are invested in mutual funds, as selected by~~base rate or adjusted LIBOR plus an applicable margin that varies with the ~~participants,~~Company’s consolidated total leverage ratio. The 2021 Credit Agreement requires that the Company satisfy certain covenants, which are designated as trading securities and carried at fair value. As of September 30, 2017 and 2016, the fair value of the mutual fund investments and deferred compensation obligations were $3.1 million and $1.3 million, respectively. Changes in the fair value of securities held in the rabbi trust are recognized as trading gains and losses and included in other revenues and offsetting increases or decreases in the deferred compensation obligation will be recorded in employee compensation and benefits. For the nine months ended September 30, 2017 and 2016, the trading gains and compensation expense were $0.3 million and $0.2 million, respectively.include a leverage ratio.

I~~tem~~

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

Forward-Looking Statements

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~~undertake no obligation to revise or update any forward-looking statements contained in this ~~report.~~report, except to the extent required by applicable law. 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.”

Executive Overview

MarketAxess operates a leading electronic trading ~~platform that enables~~platforms delivering expanded liquidity opportunities, improved execution quality and significant cost savings across global fixed-income ~~market participants to efficiently trade corporate bonds and other types of fixed-income instruments using our patented trading technology.~~markets. Over ~~1,300~~1,800 institutional investor and broker-dealer firms are active users of our patented trading ~~platform,~~technology, accessing global liquidity on our platforms in U.S. ~~high-grade corporate~~investment-grade bonds, ~~emerging markets and~~U.S. high-yield bonds, ~~European bonds,~~ U.S. ~~agency bonds, municipal bonds, credit default swaps~~Treasuries, emerging market debt, Eurobonds and other ~~fixed-income~~fixed income securities. Through our Open ~~Trading™~~ Trading® protocols, we execute bond trades ~~in certain bonds~~ between and among institutional investor and broker-dealer clients in anthe leading all-to-all anonymous trading environment ~~on a matched principal basis.~~for corporate bonds. We also offer a number of trading-related products and services, including: Composite+TM pricing and other market data products to assist clients with trading decisions; auto-execution and other execution services for clients requiring specialized workflow solutions; connectivity solutions that facilitate straight-through processing; and technology services to optimize trading ~~environments; and execution services for exchange-traded fund managers and other clients. Through our Trax® division,~~environments. In addition, we ~~also offer~~provide a range of pre- and post-trade services, including trade matching, trade publication, regulatory transaction reporting and market and reference data across a range of fixed-income and other products.

Our ~~platform’s~~platforms’ 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. Our traditional request-for-quote (“RFQ”) model 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. Our Open ~~Trading™~~Trading protocols complement our ~~request-for-quote~~RFQ model by increasing the number of potential counterparties and improving liquidity by allowing all participants to interact anonymously in an all-to-all trading environment. ~~Our platform also provides~~Clients can use our ~~broker-dealer clients~~auto-execution technology with both our traditional RFQ and Open Trading protocols, thereby using rules-based execution to connect to diverse sources of liquidity while reducing trading inefficiencies and human errors. Leveraging the benefits of our Open Trading marketplace, we launched Live Markets, an order book that will create a ~~solution that enables them to efficiently reach our institutional investor clients~~single view of two-way, actionable prices for the ~~distribution~~most active bonds, including newly issued debt, benchmark issues and news-driven securities. We expect that Open Trading participants will improve their trading ~~of bonds.~~capacity through the Live Markets order book, by more efficiently trading liquid names in larger size and accessing integrated real-time market data, such as Composite+.

~~The majority of our revenues are derived~~We derive revenue 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~~services, post-trade services ~~technology products and services, investment income~~ and other ~~income.~~revenues. Our expenses consist of employee compensation and benefits, depreciation and amortization, technology and communication expenses, professional and consulting fees, occupancy, marketing and advertising, clearing costs and other general and administrative expenses.

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



to ~~innovate~~use our broad network of over 1,800 active institutional investor and ~~efficiently add new functionality~~broker-dealer participants to drive more clients to our leading electronic fixed-income trading platforms;



to increase the secondary market liquidity on our trading platforms by deploying innovative technology solutions, such as our Open Trading protocols, to increase the number of potential trading counterparties on our platforms and ~~product~~to address different trade sizes, bond liquidity characteristics and trading preferences;



to continue to develop innovative next-generation technologies that will allow our clients to further automate and improve the performance of their trading desks through increased liquidity, enhanced trading efficiencies and the ability to identify trends within the bond market;



to expand and strengthen our existing service, data and analytical offerings tothroughout the ~~MarketAxess platform~~trading cycle so that we ~~believe will help to increase~~are more fully integrated into the workflow of our ~~market share with existing clients, as well as to expand our client base;~~

broker-dealer and institutional investor clients; and

•

to leverage our existing client network and technology to increase the number of potential counterparties and improve liquidity by developing and deploying a wide range of electronic trading protocols to complement our traditional request-for-quote model and allowing broker-dealers and institutional investors to interact in our all-to-all Open Trading^TM ~~environment;~~



to leverage our existing technology and client relationships to deploy our electronic trading platform into additional product segments within the fixed-income securities markets and deliver fixed-income securities-related technical services and products;

•

to continue building our existing service offerings so that our electronic trading platform is more fully integrated into the workflow of our broker-dealer and institutional investor clients and to continue to add functionality to allow our clients to achieve a fully automated end-to-end straight-through processing solution (automation from trade initiation to settlement);

•

to add new content and analytical capabilities to BondTicker™ and expand Axess All™, the first intra-day trade tape for the European fixed-income market, and the other data service offerings provided by Trax^® ~~to improve the value of the information we provide to our clients; and~~

~~to continue~~ to increase and supplement our internal growth by entering into strategic alliances, or acquiring businesses or technologies that will enable us to enter new markets, provide new products or services, or otherwise enhance the value of our platform to our clients. ~~For example,~~We acquired Regulatory Services GmbH, the pan-European regulatory reporting business of Deutsche Börse Group (“Regulatory Reporting Hub”) in ~~recent years, we entered into,~~November 2020, and ~~expanded~~MuniBrokers LLC, a strategic alliance with BlackRock, Inc. (“BlackRock”) to combine BlackRock’s order flow with our Open Trading™ solution to improve the range of trading connections available to global credit market participants. In 2016, we entered into an agreement with S&P Dow Jones Indices to jointly develop indices that will track the most liquid segments of the U.S. corporatecentral electronic venue serving municipal bond ~~market.~~

inter-dealer brokers and dealers in April 2021.

Critical Factors Affecting Our Industry and Our Company

Economic, Political and Market Factors

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.~~and institutional investor clients.

The global economic and credit market environments during the nine months ended September 30, 2021 were markedly different as compared to 2020. During 2020, the global economy experienced a period of significant turmoil and deteriorating economic conditions due to the outbreak of the COVID-19 pandemic (the “Pandemic”). The steep drop in economic activity in 2020 impacted global credit markets and resulted in sharp credit spread widening and an increase in credit market volumes. During the nine months ended September 30, 2021, however, the improving economic conditions resulted in lower volatility, credit spreads tightening to historical lows for a prolonged period of time, a rising interest rate environment and a decline in U.S. credit market volumes. In the nine months ended September 30, 2021, market volumes in U.S. high-grade and U.S. high-yield corporate bonds as reported by Financial Industry Regulatory Authority’s Trade Reporting and Compliance Engine (“TRACE”) decreased 7.0% and 8.0%, respectively, compared to the nine months ended September 30, 2020. We believe that the benign credit market conditions in 2021 have negatively impacted trading velocity and activity conducted over our platforms.

As a result of the Pandemic, we have continued to experience significant changes in our daily operations. In mid-March 2020, we successfully implemented a global work from home mandate for all our employees and we were able to continue to provide our trading platforms and other services to our clients without interruption. In particular, we believe that Open Trading liquidity was essential to the functioning of credit markets during the Pandemic, and MarketAxess played a valuable role keeping our clients connected to the market as traders moved from their centralized trading floors to home offices. While we remain confident that we can continue to maintain business continuity, serve our clients and provide efficient execution in a virtual environment as necessary, as local public health conditions have improved in some locations, we have recently re-opened our primary offices.

We expect that current cash and investment balances, in combination with cash flows that are generated from operations and the ability to borrow under our 2021 Credit Agreement, will be sufficient to meet our liquidity needs and planned capital expenditure requirements for at least the next twelve months, including during any future disruptions caused by the Pandemic. We ended the quarter with a strong balance sheet, no borrowings under our 2020 Credit Agreement and with capital significantly in excess of our regulatory requirements.

Competitive Landscape

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 or all-to-all trading platforms. 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 or information networks 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 ~~level of commissions charged for trades executed on our platform, the~~ magnitude and frequency of price improvement enabled by our ~~platform~~platforms, total transaction costs 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 unique liquidity provided by our Open Trading functionalities and 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.

Regulatory Environment

Our ~~industry has been and~~business is subject to ~~continuous regulatory changes and may become subject to new~~extensive 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 called for increased regulation~~internationally, which may expose us to significant regulatory risk and cause additional legal costs to ensure compliance. The existing legal framework that governs the financial markets is periodically reviewed and amended, resulting in the enactment and enforcement of new laws and regulations that apply to our business. For example, the new administration elected in the 2020 U.S. presidential election may enact regulatory changes that may affect our business. The SEC has recently solicited public comment to obtain information about fixed income electronic trading platforms in order to help the SEC and other regulators evaluate potential regulatory gaps that may exist among such platforms with respect to access to markets, system integrity, surveillance, and transparency, ~~in the over-the-counter markets. As a result, the Dodd-Frank Act was signed into law in 2010 and,~~ among other ~~things, mandated the clearing~~things. The impact of ~~certain derivative instruments (“swaps”) through regulated central clearing organizations~~any of these reform efforts on us and ~~mandatory trading of those instruments through either regulated exchanges or swap execution facilities (“SEFs”), in each case, subject to certain key exceptions.~~ our operations remains uncertain.

Various rules promulgated since the financial crisis could also 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, while the Volcker Rule does not apply directly to us, the Volcker Rule bans proprietary trading by banks and their affiliates. In addition, ~~enhanced leverage ratios applicable~~the U.K. ceased 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.

~~Following President Trump’s election in November 2016, he has pursued~~be a ~~path of financial deregulation, including by signing an executive order that requires the Treasury Department to review the provisions~~member of the ~~Dodd-Frank Act. As~~E.U. on January 31, 2020, triggering a ~~result, the Treasury Department has begun a process of reviewing existing U.S. capital markets regulations, and has issued a report with recommendations to improve corporate bond liquidity.~~

~~Similar to the U.S., regulatory bodies~~transition period in Europe are developing new rules for the fixed-income markets. MiFID II and MiFIR were approved in June 2014 and introduce significant changes in market structure designed to: (i) enhance pre- and post-trade transparency for fixed-income instruments with the scope of 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. MiFID II and MiFIR are expected to take effect in January 2018 and the final rules may have an adverse effect on our operations or our ability to provide our electronic trading platform in a manner that can successfully compete against other types of regulated and non-regulated venues for the fixed-income trading needs of our clients. In addition, MiFID II is expected to cause us to expend significantly more compliance, business and technology resources, incur additional operational costs and create additional regulatory exposure for our trading and post-trade businesses. While we generally believe the net impact of the rules and regulations may be positive for our businesses, unintended consequences of the rules and regulations may adversely affect us in ways yet to be determined.

~~In March 2017,~~which the U.K. ~~notified the European Council of its intention~~continued to ~~leave the European Union~~observe applicable E.U. regulations through December 31, 2020 (commonly referred to as “Brexit”). ~~By invoking Article 50 of~~In preparation for Brexit, we obtained authorizations from the ~~Lisbon Treaty,~~Netherlands Authority for the ~~U.K. is currently set to leave the European Union in March 2019. Depending on the terms agreed between E.U. member states and the U.K. as part of the exit negotiations,~~Financial Markets for our U.K. subsidiaries may not be able to rely on the existence of a “passporting” regime that allows immediate access to the single E.U. market. Accordingly, we have begun the process of establishing one or more new regulated subsidiaries in the Netherlands in 2019. Following Brexit, we now provide regulated services to our clients within the E.U. in ~~order~~reliance on the cross-border services passport held by our Dutch subsidiaries. Brexit has led to ~~provide~~legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate, which has made it more difficult and costly to comply with the extensive government regulation to which we are subject. In addition, the cost and complexity of operating across increasingly divergent regulatory regimes has increased and is likely to continue to increase following Brexit.

Compliance with regulations may require us to dedicate additional financial and operational resources, which may adversely affect our ~~trading platform~~profitability. However, we believe new regulations may also increase demand for our platforms and ~~certain post-trade services~~we believe we are well positioned to ~~clients in~~benefit from those regulatory changes that cause market participants to seek electronic platforms that meet the ~~E.U. following Brexit.~~various regulatory requirements and help them comply with their regulatory obligations.

~~Rapid Technological Changes~~Technology Environment

We must continue to enhance and improve our electronic trading ~~platform.~~platforms. 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~~plan to continue to focus on technology infrastructure initiatives and continually improve our ~~most significant~~platforms to further enhance our leading market position. We expect that our transition to agile software development processes will help us continue to be a market leader in developing the technology solutions for our clients’ trading ~~protocols~~needs.

As the overall share of electronic trading grows in global credit products, we are experiencing continued demand for, and ~~other aspects~~growth in, our automated trading solutions. Automated trading volumes rose to $42.3 billion in the third quarter of 2021, up 39.1% from $30.4 billion in the third quarter of 2020. In addition, the use of dealer algorithms is continuing to grow on our ~~trading system technology.~~platforms, with approximately 4.4 million algorithmic responses in the third quarter of 2021, up 17.4% from the same period last year.

We experience cyber-attacks and attempted security breaches. Cybersecurity incidents could impact revenue and operating income and increase costs. We therefore continue to make investments in our cybersecurity infrastructure and training of employees, which may result in increased costs, to strengthen our cybersecurity measures.

Trends in Our Business

The majority of our ~~revenues are~~revenue is derived from commissions for transactions executed on our ~~platform~~platforms between and among 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~~platforms and the amount of commissions and distribution fees earned by us:

~~the number of participants on our platform and their willingness to originate transactions through the platform;~~

~~the number of institutional investor and broker-dealer clients on the platform and the frequency and competitiveness of the price responses they provide on our platform;~~

~~the number of markets for which we make trading available to our clients;~~26

~~the overall level of activity in these markets; and~~


	•	the number of participants on our platforms and their willingness to originate transactions through the platforms;
	•	the frequency and competitiveness of the price responses by participants on our platforms;
	•	the number of markets that are available for our clients to trade on our platforms;
	•	the overall level of activity in these markets; and
	•	the level of commissions that we collect for trades executed through the platforms.

~~the level of commissions that we collect for trades executed through the platform.~~

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,~~platforms, 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.

Commission Revenue

Commissions are recognized on a trade date basis, are generally calculated as a percentage of the notional dollar volume of bonds traded on our ~~platform~~platforms and vary based on the type, size, yield and maturity of the bond ~~traded. Under our transaction fee plans, bonds~~traded, as well as individual client incentives. 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 Open Trading 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~~For U.S. Treasury matched principal trades, commissions are invoiced and recorded on a monthly ~~fee commitments under our variable fee plans.~~basis.

U.S. High-Grade Corporate Bond Commissions. Our U.S. high-grade corporate bond fee plans generally incorporate variable transaction fees and fixed 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 these 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.~~platforms. Distribution fees include any unused monthly fee commitments under our variable fee plans.

Other Credit Commissions. Other credit includes Eurobonds, emerging markets bonds, high-yield bonds, municipal bonds and ~~municipal bonds.~~leveraged loans. Commissions for other credit products generally vary based on the type of the instrument traded using standard fee schedules. ~~During the third quarter of 2017, we changed our~~Our high-yield fee plan ~~structure. Similar~~structure is similar to our U.S. high-grade fee ~~plans, certain~~plans. Certain dealers ~~now~~ participate in a high-yield fee plan that incorporates a variable transaction fee and fixed distribution fee, ~~and~~while other dealers participate in a plan that does not contain a monthly distribution ~~fee~~fees and instead incorporates additional per transaction execution fees and minimum monthly fee commitments. Prior to the fee plan change, our high-yield fee plan options generally consisted solely of variable transaction fees. During the fourth quarter of 2016, our Eurobond fee plan structure was changed to contain standardized minimum monthly commitments and variable transaction fees. Prior to the fee plan change, our European fee plans generally incorporated some combination of monthlyOther credit distribution fees ~~and variable transaction fees.~~include subscription revenues associated with the MuniBrokers platform. The average other credit fees per million may vary in the future due to changes in product mix or trading protocols.

~~Liquid Products~~Rates Commissions. ~~Liquid products~~Rates includes U.S. Treasury, U.S. agency, European government bonds and credit derivatives. Commissions for ~~liquid~~rates products generally vary based on the type of the instrument ~~traded using standard~~traded. U.S. Treasury fee ~~schedules.~~plans are typically volume tiered and can vary based on the trading protocol. The average rates fee per million may vary in the future due to changes in product mix or trading protocols.

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

~~Other Revenue~~Information Services

~~In addition to the commissions discussed above, we earn revenue from information and post-trade services, investment income and other income.~~

~~Information and post-trade services.~~ We generate revenue from ~~information services provided~~data licensed to our broker-dealer clients, institutional investor clients and data-only ~~subscribers. Information services are invoiced monthly, quarterly or annually. When billed in advance,~~subscribers; professional and consulting services; technology software licenses; and maintenance and support services. These revenues are ~~deferred~~either for subscription-based services transferred over time, and may be net of volume-based discounts, or one-time services. Revenues for services transferred over time are recognized ~~monthly on~~ratably over the contract period while revenues for services transferred at a ~~straight-line basis. We also generate revenue from trade matching and regulatory transaction reporting services. Revenue is~~point in time are recognized in the period the services are provided. Customers are generally billed monthly, quarterly, or annually; revenues billed in advance are deferred and recognized ratably over the contract period.

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

~~Other.~~ ~~Other revenues include~~27

Post-trade Services

We generate revenue from ~~professional consulting services, technology software licenses~~regulatory transaction reporting, trade publication and ~~maintenance~~trade matching services. Customers are generally billed in the current month or monthly in arrears and ~~support services,~~revenue is recognized in the period that the transactions are processed. Revenues billed in advance are deferred and recognized ratably over the contract period. We also generate one-time implementation fees for onboarding clients which are invoiced and recognized in the period the implementation is complete.

Other Revenue

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

Expenses

In the normal course of business, we incur the following expenses:

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~~which range from ~~three~~one to 15 ~~years.~~years, using either a straight-line or accelerated amortization method based on the pattern of economic benefit that we expect to realize from such assets. 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.~~providers and U.S. treasuries technology platform licensing fees. 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,~~platforms, information and post-trade services products and other services.

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~~platforms, information services and post-trade services.

Clearing Costs. Clearing costs consist of fees that we are charged by third-party clearing brokers and depositories for the clearing and settlement of matched principal ~~trades.~~trades, regulatory reporting fees and variable transaction fees assessed by the provider of our third-party middle office system.

General and Administrative. General and administrative expense consists primarily of general travel and entertainment, board of directors’ expenses, charitable contributions, provision for doubtful accounts ~~foreign currency transaction gains (losses)~~ and various state franchise and U.K. value-added taxes.

Expenses may grow in the future, notably in employee compensation and benefits ~~primarily~~as we increase headcount to support investment in new products, operational support and geographic expansion, depreciation and amortization due to increased investment in new products and geographic expansion. We also expect occupancy expense to increase in 2018 as a result of the new office space for our global headquarters in New York City. See Item 2 of the Annual Report on Form 10-K for a discussion of our properties. However, we believe that operating leverage can be achieved by increasing volumes in existing products and adding new products without substantial additionsenhancements to our ~~infrastructure.~~trading platforms, and technology and communication costs. Expenses may also grow due to acquisitions.

Other Income (Expense)

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

Interest Expense. Interest expense consists of financing charges incurred on short-term borrowings.

Other, Net. Other, net consists of unrealized gains or losses on trading security investments, realized gains or losses on investments, foreign currency transaction gains or losses, investment advisory fees, credit facility administrative fees and other miscellaneous revenues and expenses.

Critical Accounting Policies and Estimates

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, ~~2017,~~2021, 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, ~~2016.~~2020.

Recent Accounting Pronouncements

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

Segment Results

We operate an electronic ~~multi-party platform~~platforms 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 1315 to the Consolidated Financial Statements for certain geographic information about ~~the Company’s~~our business required by U.S. GAAP.

Results of Operations

Three Months Ended September 30, ~~2017~~2021 Compared to Three Months Ended September 30, ~~2016~~2020

~~Overview~~

~~Total revenues increased by $6.4 million or 7.1% to $96.7 million~~The following table summarizes our financial results for the three months ended September 30, ~~2017, from $90.3 million~~2021 and 2020. Results for the three months ended September 30, ~~2016. This increase in total revenues was primarily due to higher commissions~~2021 include Regulatory Reporting Hub and MuniBrokers related revenue of ~~$4.8~~$4.6 million and ~~information~~expenses of $5.5 million, including amortization of acquired intangibles expense of $2.5 million.


	Three Months Ended September 30,
	2021		2020		$ Change			% Change
	($ in thousands, except per share amounts)
Revenues	$	162,093	$	164,006	$	(1,913	)		(1.2	)	%
Expenses		88,090		76,199		11,891			15.6
Operating income		74,003		87,807		(13,804	)		(15.7	)
Other income		491		158		333			210.8
Income before income taxes		74,494		87,965		(13,471	)		(15.3	)
Provision for income taxes		16,536		20,189		(3,653	)		(18.1	)
Net income	$	57,958	$	67,776	$	(9,818	)		(14.5	)	%

Net income per common share - Diluted	$	1.52	$	1.78	$	(0.26	)		(14.6	)	%

A 5.0% change in the average foreign currency exchange rates of the British pound sterling compared to the U.S. dollar had the effect of increasing revenues and ~~post-trade services revenue of $1.1 million.~~

~~Total~~ expenses ~~increased~~ by ~~$5.6~~$1.0 million ~~or 12.7% to $49.5~~and $0.9 million, respectively, for the three months ended September 30, 2017, from $43.9 million for the three months ended September 30, 2016. This increase was primarily due to higher employee compensation and benefits of $1.7 million, professional and consulting fees of $1.2 million, technology and communication costs of $0.8 million, general and administrative costs of $0.7 million and occupancy costs of $0.6 million.2021.

Income before taxes increased by $0.9 million or 1.9% to $47.2 million for the three months ended September 30, 2017, from $46.4 million for the three months ended September 30, 2016. Net income increased by $3.2 million or 10.4% to $34.1 million for the three months ended September 30, 2017, from $30.9 million for three months ended September 30, 2016.

Revenues

Our revenues for the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020, and the resulting dollar and percentage changes, were as follows:


	Three Months Ended September 30,															Three Months Ended September 30,
	2017					2016										2021					2020
	($ in thousands)															($ in thousands)
	$		% of Revenues			$		% of Revenues			$ Change		% Change					% of Revenues					% of Revenues			$ Change			% Change
Commissions	$	86,270		89.2	%	$	81,456		90.2	%	$	4,814		5.9	%	$	142,826		88.2	%	$	150,586		91.8	%	$	(7,760	)		(5.2	)	%
Information and post-trade services		8,372		8.7			7,322		8.1			1,050		14.3
Investment income		964		1.0			534		0.6			430		80.5
Information services																	9,608		5.9			8,501		5.2			1,107			13.0
Post-trade services																	9,444		5.8			4,689		2.9			4,755			101.4
Other		1,095		1.1			959		1.1			136		14.2			215		0.1			230		0.1			(15	)		(6.5	)
Total revenues	$	96,701		100.0	%	$	90,271		100.0	%	$	6,430		7.1	%	$	162,093		100.0	%	$	164,006		100.0	%	$	(1,913	)		(1.2	)	%

Commissions. Our commission revenues for the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020, and the resulting dollar and percentage changes, were as follows:


	Three Months Ended September 30,											Three Months Ended September 30,
	2017		2016		$ Change			% Change				2021		2020		$ Change			% Change
	($ in thousands)											($ in thousands)
Variable transaction fees
U.S. high-grade	$	34,020	$	33,765	$	255			0.8		%	$	45,848	$	60,861	$	(15,013	)		(24.7	)	%
Other credit		31,381		30,181		1,200			4.0				62,475		59,131		3,344			5.7
Liquid products		545		798		(253	)		(31.7	)
Total credit													108,323		119,992		(11,669	)		(9.7	)
Rates													3,825		3,191		634			19.9
Total variable transaction fees		65,946		64,744		1,202			1.9				112,148		123,183		(11,035	)		(9.0	)
Distribution fees
U.S. high-grade		16,305		15,077		1,228			8.1				22,257		20,760		1,497			7.2
Other credit		3,844		1,466		2,378			162.2				8,352		6,586		1,766			26.8
Liquid products		175		169		6			3.6
Total credit													30,609		27,346		3,263			11.9
Rates													69		57		12			21.1
Total distribution fees		20,324		16,712		3,612			21.6				30,678		27,403		3,275			12.0
Total commissions	$	86,270	$	81,456	$	4,814			5.9		%	$	142,826	$	150,586	$	(7,760	)		(5.2	)	%

~~Variable Transaction Fees~~

~~The following table shows the extent~~U.S. high-grade variable transaction fees decreased $15.0 million due to ~~which the~~a 9.0% decrease in trading volume and a 17.2% decrease in average variable transaction fee per million. Other credit variable transaction fees increased $3.3 million due to a 12.4% increase in trading volume offset by a 6.0% decrease in the average variable transaction fee per million. Open Trading credit volume totaled $188.0 billion during the three months ended September 30, 2021, down 4.6%, and represented 30.5% and 32.7% of variable transaction fees for the three months ended September 30, ~~2017 was attributable to changes~~2021 and 2020, respectively. The 19.9% increase in ~~transaction volumes and~~ variable transaction fees ~~per million:~~for rates was mainly attributable to higher U.S. Treasury trading volume.

Change from the Three Months Ended September 30, 2016

U.S. High-Grade

Other Credit

Liquid Products

Total

($ in thousands)

Volume increase (decrease)
$
4,234

$
2,687

$
(332
)

$
6,589

Variable transaction fee per million (decrease) increase

(3,979
)

(1,487
)

79

(5,387
)
Total increase (decrease) in variable commissions
$
255

$
1,200

$
(253
)

$
1,202

U.S. high-grade distribution fees increased $1.5 million mainly due to the migration of certain dealers from all-variable fee plans to plans that incorporate a monthly distribution fee and higher unused monthly minimum commitment fees. Other credit distribution fees increased $1.8 million mainly due to subscription revenues associated with the MuniBrokers platform of $1.2 million.

Our trading volumes for the three months ended September 30, ~~2017~~2021 and ~~2016~~2020 were as follows:

	Three Months Ended September 30,
	2017		2016		$ Change			% Change				Three Months Ended September 30,
	($ in millions)											2021		2020		$ Change			% Change
Trading Volume Data
												($ in millions)
Trading volume data
U.S. high-grade - fixed rate	$	192,092	$	172,006	$	20,086			11.7		%	$	268,671	$	295,781	$	(27,110	)		(9.2	)	%
U.S. high-grade - floating rate		8,734		6,442		2,292			35.6				9,166		9,450		(284	)		(3.0	)
Total U.S. high grade		200,826		178,448		22,378			12.5				277,837		305,231		(27,394	)		(9.0	)
Other credit		133,757		122,821		10,936			8.9				319,209		283,920		35,289			12.4
Liquid products		12,189		20,880		(8,691	)		(41.6	)
Total	$	346,772	$	322,149	$	24,623			7.6		%
Total credit												$	597,046	$	589,151	$	7,895			1.3		%

Rates													929,734		760,676		169,058			22.2		%

Number of U.S. Trading Days		63		64									64		64
Number of U.K. Trading Days		64		65									65		65

For volume reporting purposes, transactions in foreign currencies are converted to U.S. dollars at average monthly rates. The ~~12.5% increase~~9.0% decrease in our U.S. high-grade volume was principally due to ~~an increase~~a decrease in ~~our~~overall market volume. Estimated U.S. high-grade TRACE volume decreased by 5.8% to $1.3 trillion for the three months ended September 30, 2021. Our estimated market share of total U.S. high-grade corporate bond volume ~~as reported by Financial Industry Regulatory Authority (“FINRA”) Trade Reporting and Compliance Engine (“TRACE”)~~decreased to ~~17.2%~~21.4% for the three months ended September 30, ~~2017~~2021 from ~~16.0%~~22.2% for the three months ended September 30, 2016, coupled with an increase in overall market volume as measured by TRACE. U.S. high-grade TRACE volume increased 4.5% to $1.2 trillion for the three months ended September 30, 2017 from $1.1 trillion for the three months ended September 30, 2016.2020.

Other credit volumes increased by ~~8.9% for the three months ended September 30, 2017~~12.4% due to increases of 22.1% in Eurobonds volume, 19.0% in emerging markets bond volume, and 92.4% in municipal bonds volume, offset by a decrease of 6.4% in high-yield bond volume. Estimated emerging markets volumes increased 0.6% whereas estimated U.S. high-yield and Eurobond market volumes decreased 2.6% and 10.4%, respectively, compared to the three months ended September 30, ~~2016,~~2020. Rates trading volume increased 22.2% primarily due to an increase of 21.8% in emerging markets bond volume, offset by a decrease of 7.8% in high-yield bond volume. Liquid products volume (excluding credit derivatives) decreased by 41.6% for the three months ended September 30, 2017 compared to the three months ended September 30, 2016, due mainly to a 38.4% decrease in U.S. ~~agency bond market volume as reported by TRACE.~~treasuries dealer-to-dealer estimated average daily trading volume.

Our average variable transaction fee per million for the three months ended September 30, ~~2017~~2021 and ~~2016~~2020 was as follows:

	Three Months Ended September 30,
	2017		2016		Three Months Ended September 30,
Average Variable Transaction fee per million
					2021		2020		$ Change			% Change
Average variable transaction fee per million
U.S. high-grade - fixed rate	$	174	$	195	$	169.13	$	204.24	$	(35.11	)		(17.2	)	%
U.S. high-grade - floating rate		67		38		44.58		47.75		(3.17	)		(6.6	)
Total U.S. high-grade		169		189		165.02		199.39		(34.37	)		(17.2	)
Other credit		235		246		195.72		208.27		(12.55	)		(6.0	)
Liquid products		45		38
Total		190		201
Total credit						181.43		203.67		(22.24	)		(10.9	)

Rates						4.11		4.19		(0.08	)		(1.9	)

Total U.S. high-grade average variable transaction fee per million decreased 17.2% to ~~$169~~$165.02 per million for the three months ended September 30, ~~2017 from $189 per million for the three months ended September 30, 2016, mainly~~2021 due to a decrease in the duration of bonds traded ~~an increase in the number of larger sized trades~~on our platforms and the migration of certain of our broker-dealer clients from an all-variable fee ~~plan~~plans to ~~a plan~~plans that ~~incorporates~~incorporate a monthly distribution fee. Other credit average variable transaction fee per million decreased 6.0% to ~~$235~~$195.72 per million for the three months ended September 30, ~~2017 from $246 million for the three months ended September 30, 2016,~~2021 mainly due to a larger percentage of trading volume in emerging market bonds and Eurobonds that command lower fees per million, as well as a decrease in high-yield average variable fee per million as a result of the change in the structure of our high-yield fee plan options implemented in August 2017. The decrease in other credit average variable transaction fee per million was partially offset by an increase in Eurobond fees per million as a result of the change in structure of our Eurobond fee plan which was implemented in the fourth quarter of 2016.million.

~~Distribution Fees~~

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 $2.4 million increase in Other credit distribution fees principally relates to a $3.3 million increase in distribution fees under the high-yield fee plan structure implemented in August 2017 that allows our broker-dealer clients to elect a plan that incorporates a monthly distribution fee. This was offset by a decline of $1.0 million relating to the change in the Eurobond fee plan implemented in the fourth quarter of 2016.

Information ~~and Post-Trade~~ Services. Information ~~and post-trade~~ services revenue increased $1.1 million for the three months ended September 30, ~~2017 principally~~2021 mainly due to ~~higher~~net new data contract revenue of ~~$0.8~~$0.9 million and ~~an increase in post-trade~~the positive impact of foreign exchange of $0.2 million.

Post-Trade Services. Post-trade services revenue ~~of $0.3 million related to MiFID II implementation services. Our transaction reporting business processed 247 million transactions for the three months ended September 30, 2017 compared to 302~~increased $4.8 million for the three months ended September 30, ~~2016.~~

~~Investment Income.~~ ~~Investment income increased by $0.4 million primarily~~2021 principally due to ~~higher investment balances and an increase in interest rates in 2017.~~

~~Other.~~ ~~Other income~~additional regulatory transaction reporting revenue of $3.4 million generated by Regulatory Reporting Hub, which was acquired on November 30, 2020, new post-trade services contract revenue of $1.1 million and ~~$1.0 million for~~ the ~~three months ended September 30, 2017 and 2016, respectively.~~positive impact of foreign exchange of $0.3 million.

~~Expenses~~

~~Our~~

Expenses

The following table summarizes our expenses for the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020. Expenses for the three months ended September 30, 2021 include $5.5 million of expenses related to Regulatory Reporting Hub and MuniBrokers, including amortization of acquired intangibles expense of $2.5 million.


	Three Months Ended September 30,
	2021		2020		$ Change			% Change
	($ in thousands)
Expenses
Employee compensation and benefits	$	40,878	$	37,583	$	3,295			8.8		%
Depreciation and amortization		13,964		9,032		4,932			54.6
Technology and communications		10,665		8,417		2,248			26.7
Professional and consulting fees		10,847		8,269		2,578			31.2
Occupancy		3,265		3,445		(180	)		(5.2	)
Marketing and advertising		1,821		1,148		673			58.6
Clearing costs		3,269		4,838		(1,569	)		(32.4	)
General and administrative		3,381		3,467		(86	)		(2.5	)
Total expenses	$	88,090	$	76,199	$	11,891			15.6		%

Employee compensation and benefits increased by $3.3 million, primarily due to higher salaries, taxes and benefits on higher employee headcount.

Depreciation and amortization increased by $4.9 million primarily due to higher amortization of acquired intangibles expense of $3.2 million and amortization of software development costs of $1.6 million. For the three months ended September 30, 2021 and 2020, $4.8 million and $3.8 million, respectively, of equipment purchases and leasehold improvements and $8.2 million and $8.1 million, respectively, of software development costs were capitalized.

Technology and communications expenses increased by $2.2 million primarily due to higher software subscription costs of $1.1 million, higher platform technology licensing costs of $0.5 million, and higher market data costs of $0.4 million.

Professional and consulting fees increased $2.6 million mainly due to higher acquisition-related integration consulting fees of $1.1 million, higher IT consulting fees of $0.9 million and higher recruiting fees of $0.5 million.

Marketing and advertising expense increased $0.7 million due to the resumption of certain advertising and travel and entertainment costs which had been reduced in 2020 due to the Pandemic.

Clearing costs decreased by $1.6 million primarily due to the benefits from our conversion to self-clearing. While Open Trading credit volumes decreased 4.6% compared to the three months ended September 30, 2020, clearing costs decreased 32.4%. Clearing costs as a percentage of Open Trading matched principal trading revenue from credit products decreased from 9.8% to 6.6%. U.S. Treasuries matched principal clearing costs increased $0.2 million due to higher U.S. Treasuries volume.

Other Income (Expense)

Our other income (expense) for the three months ended September 30, 2021 and 2020, and the resulting dollar and percentage changes, were as follows:

Three Months Ended September 30,

2017

2016

($ in thousands)

$

% of
Revenues

$

% of
Revenues

$
Change

%
Change
Expenses

Employee compensation and benefits
$
25,595

26.5

%

$
23,914

26.5

%

$
1,681

7.0

%
Depreciation and amortization

4,583

4.7

4,325

4.8

258

6.0

Technology and communications

5,035

5.2

4,245

4.7

790

18.6

Professional and consulting fees

5,547

5.7

4,342

4.8

1,205

27.8

Occupancy

1,795

1.9

1,220

1.4

575

47.1

Marketing and advertising

2,089

2.2

2,140

2.4

(51
)

(2.4
)

Clearing costs

1,476

1.5

1,035

1.1

441

42.6

General and administrative

3,364

3.5

2,696

3.0

668

24.8

Total expenses
$
49,484

51.2

%

$
43,917

48.7

%

$
5,567

12.7

%


	Three Months Ended September 30,
	2021			2020			$ Change			% Change
	($ in thousands)
Investment income	$	108		$	344		$	(236	)		(68.6	)	%
Interest expense		(314	)		(1,046	)		732			(70.0	)
Other, net		697			860			(163	)		(19.0	)
Total other income (expense)	$	491		$	158		$	333			210.8		%

~~Employee Compensation and Benefits.~~ ~~Employee compensation and benefits increased~~Investment income decreased by ~~$1.7~~$0.2 million primarily due to ~~an increase of $1.9 million in salaries and benefits, principally as a result of higher employee headcount.~~lower investment balances.

~~Depreciation and Amortization.~~ ~~Depreciation and amortization increased~~Interest expense decreased by $0.3 million. For the three months ended September 30, 2017 and 2016, $1.5 million and $0.8 million, respectively, of equipment purchases and leasehold improvements and $3.4 million and $2.9 million, respectively, of software development costs were capitalized.

~~Technology and Communications.~~ ~~Technology and communication expenses increased by $0.8~~$0.7 million due to lower financing activity related to our clearing arrangements.

Other, net decreased by $0.2 million primarily due to lower realized gains on the sale of investments of $1.6 million and higher ~~software subscription~~credit facility administration costs of $0.4 million, ~~and technology maintenance and support costs~~partially offset by higher foreign exchange gains of ~~$0.3~~$1.7 million.

~~Professional and Consulting Fees.~~ ~~Professional and consulting fees increased by $1.2 million primarily due to fees related to various regulatory initiatives of $0.8 million.~~

~~Occupancy.~~ ~~Occupancy increased by $0.6 million due to an increase in rent expense of $0.3 million for additional space to accommodate our increased headcount and a non-recurring lease expense of $0.3 million.~~

~~Marketing and Advertising.~~ ~~Marketing and advertising expenses were $2.1 million for both the three months ended September 30, 2017 and 2016.~~

~~Clearing Costs~~. Clearing costs increased by $0.4 million primarily due to higher trading volume. Third-party clearing costs as a percentage of matched principal trading revenue increased from 10.2% for the three months ended September 30, 2016 to 13.1% for the three months ended September 30, 2017.

~~General and Administrative.~~ General and administrative expenses increased by $0.7 million principally due to an increase in general travel and entertainment expenses of $0.3 million and employee relocation expenses of $0.3 million.

Provision for Income ~~Tax. Our consolidated~~Taxes

The provision for income taxes and effective tax rate for the three months ended September 30, ~~2017 was 27.7%, compared~~2021 and 2020 were as follows:


	Three Months Ended September 30,
	2021			2020			$ Change			% Change
	($ in thousands)
Provision for income taxes	$	16,536		$	20,189		$	(3,653	)		(18.1	)	%

Effective tax rate		22.2	%		23.0	%

The provision for income taxes reflected $1.7 million and $5.9 million of excess tax benefits related to ~~33.3% for~~share-based compensation awards that vested or were exercised during the three months ended September 30, 2016. The tax provision for the three months ended September 30, 2017 includes excess tax benefits of $3.8 million relating to a new standard for share-based payments accounting adopted effective January 1, 2017.2021 and 2020, respectively. Our consolidated effective tax rate can vary from period to period depending on ~~the~~ geographic mix of our earnings, changes in tax legislation and tax rates and the amount and timing of excess tax benefits related to share-based payments, among other factors.

Nine Months Ended September 30, ~~2017~~2021 Compared to Nine Months Ended September 30, ~~2016~~2020

~~Overview~~

~~Total revenues increased by $22.4 million or 8.1% to $297.9 million~~The following table summarizes our financial results for the nine months ended September 30, ~~2017, from $275.5 million~~2021 and 2020. Results for the nine months ended September 30, ~~2016. This increase in total revenues was primarily due to higher commissions~~2021 include Regulatory Reporting Hub and MuniBrokers related revenue of ~~$20.5~~$13.5 million and expenses of $14.1 million, including amortization of acquired intangibles expense of $5.8 million. An


	Nine Months Ended September 30,
	2021			2020		$ Change			% Change
	($ in thousands, except per share amounts)

Revenues	$	533,891		$	517,779	$	16,112			3.1		%
Expenses		269,237			234,748		34,489			14.7
Operating income		264,654			283,031		(18,377	)		(6.5	)
Other income (expense)		(2,306	)		1,039		(3,345	)		(321.9	)
Income before income taxes		262,348			284,070		(21,722	)		(7.6	)
Provision for income taxes		56,645			57,624		(979	)		(1.7	)
Net income	$	205,703		$	226,446	$	(20,743	)		(9.2	)	%

Net income per common share - Diluted	$	5.40		$	5.94	$	(0.54	)		(9.1	)	%

A 8.2% change in the average foreign currency exchange rates of the British ~~Pound Sterling~~pound sterling compared to the U.S. dollar ~~from the nine months ended September 30, 2016 to the nine months ended September 30, 2017~~ had the effect of ~~decreasing~~increasing each of revenues and expenses by ~~$3.2 million.~~

~~Total expenses increased by $11.3~~$5.0 million ~~or 8.4% to $145.5~~and $4.9 million, respectively, for the nine months ended September 30, 2017, from $134.2 million for the nine months ended September 30, 2016. This increase was primarily due to higher employee compensation and benefits of $4.2 million, general and administrative costs of $1.9 million, technology and communications expenses of $1.6 million, professional and consulting fees of $1.5 million, and $1.0 million in both occupancy costs and marketing and advertising costs. The change in average foreign currency exchange rates had the effect of decreasing expenses by $3.3 million in the nine months ended September 30, 2017. 2021.

Income before taxes increased by $11.1 million or 7.9% to $152.4 million for the nine months ended September 30, 2017, from $141.3 million for the nine months ended September 30, 2016. Net income increased by $21.6 million or 23.2% to $114.6 million for the nine months ended September 30, 2017, from $93.0 million for nine months ended September 30, 2016.

Revenues

~~Revenues~~

Our revenues for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, and the resulting dollar and percentage changes, were as follows:


	Nine Months Ended September 30,															Nine Months Ended September 30,
	2017					2016										2021					2020
	($ in thousands)															($ in thousands)
	$		% of Revenues			$		% of Revenues			$ Change		% Change					% of Revenues					% of Revenues			$ Change			% Change
Commissions	$	267,307		89.7	%	$	246,788		89.6	%	$	20,519		8.3	%	$	475,095		89.0	%	$	478,632		92.4	%	$	(3,537	)		(0.7	)	%
Information and post-trade services		24,460		8.2			23,687		8.6			773		3.3
Investment income		2,551		0.9			1,469		0.5			1,082		73.7
Information services																	28,614		5.4			25,570		4.9			3,044			11.9
Post-trade services																	29,553		5.5			12,896		2.5			16,657			129.2
Other		3,588		1.2			3,539		1.3			49		1.4			629		0.1			681		0.2			(52	)		(7.6	)
Total revenues	$	297,906		100.0	%	$	275,483		100.0	%	$	22,423		8.1	%	$	533,891		100.0	%	$	517,779		100.0	%	$	16,112			3.1		%

Commissions. Our commission revenues for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, and the resulting dollar and percentage changes, were as follows:


	Nine Months Ended September 30,											Nine Months Ended September 30,
	2017		2016		$ Change			% Change				2021		2020		$ Change			% Change
	($ in thousands)											($ in thousands)
Variable transaction fees
U.S. high-grade	$	102,411	$	101,104	$	1,307			1.3		%	$	167,617	$	194,039	$	(26,422	)		(13.6	)	%
Other credit		110,221		94,928		15,293			16.1				208,448		191,718		16,730			8.7
Liquid products		1,746		2,096		(350	)		(16.7	)
Total credit													376,065		385,757		(9,692	)		(2.5	)
Rates													11,580		12,623		(1,043	)		(8.3	)
Total variable transaction fees		214,378		198,128		16,250			8.2				387,645		398,380		(10,735	)		(2.7	)
Distribution fees
U.S. high-grade		47,985		43,598		4,387			10.1				64,600		60,369		4,231			7.0
Other credit		4,506		4,437		69			1.6				22,651		19,573		3,078			15.7
Liquid products		438		625		(187	)		(29.9	)
Total credit													87,251		79,942		7,309			9.1
Rates													199		310		(111	)		(35.8	)
Total distribution fees		52,929		48,660		4,269			8.8				87,450		80,252		7,198			9.0
Total commissions	$	267,307	$	246,788	$	20,519			8.3		%	$	475,095	$	478,632	$	(3,537	)		(0.7	)	%

~~Variable Transaction Fees~~

~~The following table shows the extent~~U.S. high-grade variable transaction fees decreased $26.4 million due to ~~which the~~a 8.1% decrease in trading volume and a 6.1% decrease in average variable transaction fee per million. Other credit variable transaction fees increased $16.7 million due to a 12.1% increase in trading volume offset by a 3.0% decrease in the average variable transaction fee per million. Open Trading credit volume totaled $650.6 billion during the nine months ended September 30, 2021, up 1.2%, and represented 30.9% and 32.0% of variable transaction fees for the nine months ended September 30, ~~2017 was attributable to changes~~2021 and 2020, respectively. The 8.3% decrease in ~~transaction volumes and~~ variable transaction fees ~~per million:~~for rates was mainly attributable to lower U.S. Treasury trading volume.

Change from the Nine Months Ended September 30, 2016

U.S. High-Grade

Other Credit

Liquid Products

Total

($ in thousands)

Volume increase (decrease)
$
14,514

$
17,169

$
(510
)

$
31,173

Variable transaction fee per million (decrease) increase

(13,207
)

(1,876
)

160

(14,923
)
Total increase (decrease) in variable commissions
$
1,307

$
15,293

$
(350
)

$
16,250

U.S. high-grade distribution fees increased $4.2 million mainly due to the migration of certain dealers from all-variable fee plans to plans that incorporate a monthly distribution fee and higher unused monthly minimum commitment fees. Other credit distribution fees increased $3.1 million due to subscription revenues associated with the MuniBrokers platform of $2.3 million.

Our trading volumes for the nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 were as follows:

	Nine Months Ended September 30,
	2017		2016		$ Change			% Change				Nine Months Ended September 30,
	($ in millions)											2021		2020		$ Change			% Change
Trading Volume Data
												($ in millions)
Trading volume data
U.S. high-grade - fixed rate	$	599,783	$	525,331	$	74,452			14.2		%	$	931,345	$	1,005,975	$	(74,630	)		(7.4	)	%
U.S. high-grade - floating rate		24,024		20,169		3,855			19.1				33,946		43,830		(9,884	)		(22.6	)
Total U.S. high grade		623,807		545,500		78,307			14.4				965,291		1,049,805		(84,514	)		(8.1	)
Other credit		438,055		370,963		67,092			18.1				1,055,092		940,939		114,153			12.1
Liquid products		40,840		53,982		(13,142	)		(24.3	)
Total	$	1,102,702	$	970,445	$	132,257			13.6		%
Total credit												$	2,020,383	$	1,990,744	$	29,639			1.5		%

Rates													2,938,869		3,161,148		(222,279	)		(7.0	)

Number of U.S. Trading Days		188		189									188		189
Number of U.K. Trading Days		189		190									189		190

For volume reporting purposes, transactions in foreign currencies are converted to U.S. dollars at average monthly rates. The ~~14.4% increase~~8.1% decrease in our U.S. high-grade volume was principally due to ~~an increase~~a decrease in ~~our~~overall market volume. Estimated U.S. high-grade TRACE volume decreased by 7.0% to $4.6 trillion for the nine months ended September 30, 2021. Our estimated market share of total U.S. high-grade corporate bond volume ~~as reported by TRACE to 16.7%~~was 21.0% and 21.2% for the nine months ended September 30, 2017 from 15.6% for the nine months ended September 30, 2016, coupled with an increase in overall market volume as measured by TRACE. U.S. high-grade TRACE volume increased 7.2% to $3.7 trillion for the nine months ended September 30, 2017 from $3.5 trillion for the nine months ended September 30, 2016.2021 and 2020, respectively.

Other credit volumes increased by ~~18.1% for the nine months ended September 30, 2017~~12.1% due to increases of 17.5% in Eurobonds volume, 15.9% in emerging markets bond volume and 85.2% in municipal bonds volume. Estimated emerging markets and high-yield market volumes were down 9.1% and 8.0%, respectively, compared to the nine months ended September 30, ~~2016. Emerging markets bond~~2020. Estimated Eurobond market volume ~~increased 41.6%, while high-yield and Eurobond~~was up 0.9% year-over-year. Rates trading volume decreased by 2.8% and 0.5%, respectively. Liquid products volume (excluding credit derivatives) decreased by 24.3% for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016,7.0% primarily due ~~mainly~~ to a ~~30.3% decrease~~decline in estimated U.S. ~~agency bond~~treasuries dealer-to-dealer market ~~volume as reported by TRACE.~~volumes.

Our average variable transaction fee per million for the nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 was as follows:

	Nine Months Ended September 30,
	2017		2016		Nine Months Ended September 30,
Average Variable Transaction fee per million
					2021		2020		$ Change			% Change
Average variable transaction fee per million
U.S. high-grade - fixed rate	$	168	$	191	$	178.44	$	190.68	$	(12.24	)		(6.4	)	%
U.S. high-grade - floating rate		62		37		42.11		50.60		(8.49	)		(16.8	)
Total U.S. high-grade		164		185		173.64		184.83		(11.19	)		(6.1	)
Other credit		252		256		197.56		203.75		(6.19	)		(3.0	)
Liquid products		43		39
Total		194		204
Total credit						186.14		193.78		(7.64	)		(3.9	)

Rates						3.94		3.99		(0.05	)		(1.3	)

Total U.S. high-grade average variable transaction fee per million decreased 6.1% to ~~$164~~$173.64 per million for the nine months ended September 30, ~~2017 from $185 per million for the nine months ended September 30, 2016, mainly~~2021 due to a decrease in the duration of bonds traded ~~an increase in the number of larger sized trades~~on our platforms and the migration of certain of our broker-dealer clients from an all-variable fee ~~plan~~plans to ~~a plan~~plans that ~~incorporates~~incorporate a monthly distribution fee. Other credit average variable transaction fee per million decreased 3.0% to ~~$252~~$197.56 per million for the nine months ended September 30, ~~2017 from $256 million for the nine months ended September 30, 2016,~~2021 mainly due to a larger percentage of trading volume in emerging market bonds and Eurobonds that command lower fees per million, as well as a decrease in high-yield fee per million as a result of the change in structure of our high-yield fee plan implemented in August 2017. The decrease in other credit average variable transaction fee per million was partially offset by an increase in Eurobond fees per million as a result of the change in structure of our Eurobond fee plan which was implemented in the fourth quarter of 2016.million.

~~Distribution Fees~~

U.S. high-grade distribution fees increased $4.4 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 $0.1 million increase in Other credit distribution fees was due to a $3.3 million increase in distribution fees under the high-yield fee plan implemented during the third quarter of 2017, a $0.2 million increase in emerging markets minimum fees, partially offset by a decline of $3.5 million relating to the change in the Eurobond fee plan implemented in the fourth quarter of 2016.

Information ~~and Post-Trade~~ Services. Information ~~and post-trade~~ services revenue increased ~~by $0.8~~$3.0 million for the nine months ended September 30, ~~2017. The negative~~2021 mainly due to net new data contract revenue of $2.9 million and the positive impact of foreign exchange of ~~$1.5~~$1.2 million, ~~was~~ offset by ~~a $2.2 million increase in~~lower non-recurring data sales of $1.1 million.

Post-Trade Services. Post-trade services revenue ~~from new data contracts. Our transaction reporting business processed 770 million transactions for the nine months ended September 30, 2017 compared to 892~~increased $16.7 million for the nine months ended September 30, ~~2016.~~

~~Investment Income.~~ ~~Investment income increased by $1.1 million primarily~~2021 principally due to ~~higher investment balances and an increase in interest rates in 2017.~~

~~Other.~~ ~~Other income~~additional regulatory transaction reporting revenue of $11.2 million generated by Regulatory Reporting Hub, which was ~~$3.6~~acquired on November 30, 2020, net new post -trade services contract revenue of $4.2 million and ~~$3.5 million for~~ the ~~nine months ended September 30, 2017 and 2016, respectively.~~positive impact of foreign exchange of $1.3 million.

~~Expenses~~

~~Our~~

Expenses

The following table summarizes our expenses for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020. Expenses for the nine months ended September 30, 2021 include $14.1 million of expenses related to Regulatory Reporting Hub and MuniBrokers, including amortization of acquired intangibles expense of $5.8 million.


	Nine Months Ended September 30,
	2021		2020		$ Change			% Change
	($ in thousands)
Expenses
Employee compensation and benefits	$	129,698	$	120,413	$	9,285			7.7		%
Depreciation and amortization		38,840		25,404		13,436			52.9
Technology and communications		31,245		25,170		6,075			24.1
Professional and consulting fees		31,191		22,009		9,182			41.7
Occupancy		9,882		10,205		(323	)		(3.2	)
Marketing and advertising		6,153		5,633		520			9.2
Clearing costs		12,335		16,061		(3,726	)		(23.2	)
General and administrative		9,893		9,853		40			0.4
Total expenses	$	269,237	$	234,748	$	34,489			14.7		%

Employee compensation and benefits increased by $9.3 million, primarily due to higher salaries, taxes and benefits on higher employee headcount of $12.6 million and higher stock-based compensation expense of $1.3 million, offset by lower employee incentive compensation of $4.6 million.

Depreciation and amortization increased by $13.4 million primarily due to higher amortization of acquired intangibles expense of $7.9 million and amortization of software development costs of $4.6 million. For the nine months ended September 30, 2021 and 2020, $14.6 million and $13.0 million, respectively, of equipment purchases and leasehold improvements and $24.7 million and $21.1 million, respectively, of software development costs were capitalized.

Technology and communications expenses increased by $6.1 million primarily due to higher software subscription costs of $3.1 million, higher market data costs of $1.2 million, higher cloud hosting costs of $0.8 million and higher platform technology licensing costs of $0.9 million.

Professional and consulting fees increased $9.2 million mainly due to higher acquisition-related integration consulting fees of $3.5 million, higher consulting fees associated with self-clearing of $1.4 million, higher IT consulting fees of $2.1 million, higher other consulting fees of $1.2 million and higher insurance fees of $0.8 million.

Clearing costs decreased by $3.7 million primarily due to lower clearing expenses due to the benefits from our conversion to self-clearing. While Open Trading credit volume increased 1.2% compared to the nine months ended September 30, 2020, clearing costs decreased by 23.2%. Clearing costs as a percentage of Open Trading matched principal trading revenue from credit products decreased from 9.9% to 7.4%.

Other Income (Expense)

Our other income (expense) for the nine months ended September 30, 2021 and 2020, and the resulting dollar and percentage changes, were as follows:


	Nine Months Ended September 30,
	2021			2020			$ Change			% Change
	($ in thousands)
Investment income	$	322		$	2,327		$	(2,005	)		(86.2	)	%
Interest expense		(676	)		(1,046	)		370			(35.4	)
Other, net		(1,952	)		(242	)		(1,710	)	NM
Total other income (expense)	$	(2,306	)	$	1,039		$	(3,345	)		(321.9	)	%

Nine Months Ended September 30,

2017

2016

($ in thousands)

$

% of
Revenues

$

% of
Revenues

$
Change

%
Change
Expenses

Employee compensation and benefits
$
78,417

26.3

%

$
74,256

27.0

%

$
4,161

5.6

%
Depreciation and amortization

14,066

4.7

13,546

4.9

520

3.8

Technology and communications

14,442

4.8

12,826

4.7

1,616

12.6

Professional and consulting fees

13,912

4.7

12,449

4.5

1,463

11.8

Occupancy

4,621

1.6

3,606

1.3

1,015

28.1

Marketing and advertising

6,757

2.3

5,742

2.1

1,015

17.7

Clearing costs

4,320

1.5

4,754

1.7

(434
)

(9.1
)

General and administrative

8,974

3.0

7,029

2.6

1,945

27.7

Total expenses
$
145,509

48.8

%

$
134,208

48.7

%

$
11,301

8.4

%

~~Employee Compensation and Benefits.~~ ~~Employee compensation and benefits increased~~Investment income decreased by ~~$4.2~~$2.0 million primarily due to ~~a $3.9 million increase in salaries and benefits, principally as a result of higher employee headcount, and a $0.3 million increase in stock-based compensation.~~lower investment balances.

~~Depreciation and Amortization.~~ ~~Depreciation and amortization increased~~Interest expense decreased by ~~$0.5 million primarily due to a $0.6 million increase in amortization expense of leasehold improvements and higher amortization of software development costs of $0.5 million offset by a~~ $0.4 million decrease in production hardware depreciation expense. For the nine months ended September 30, 2017 and 2016, $7.2 million and $4.8 million, respectively, of equipment purchases and leasehold improvements and $10.1 million and $9.1 million, respectively, of software development costs were capitalized.

~~Technology and Communications.~~ ~~Technology and communication expenses increased by $1.6~~ million due to ~~higher software subscription costs of $0.8 million, technology maintenance and support costs of $0.3 million and market data costs of $0.3 million.~~lower financing activity related to our clearing arrangements.

~~Professional and Consulting Fees.~~ ~~Professional and consulting fees~~Other, net increased by ~~$1.5 million primarily due to fees related to various regulatory initiatives of $1.3 million and new systems implementations of $0.5 million, offset by lower risk consulting fees of $0.4 million.~~

~~Occupancy.~~ ~~Occupancy costs increased by $1.0~~$1.7 million primarily due to an increase in ~~rent expense of $0.7 million for additional space to accommodate our increased headcount~~credit facility fees and ~~a non-recurring lease expense of $0.3 million.~~ administration costs.

~~Marketing and Advertising.~~ ~~Marketing and advertising expenses increased by $1.0 million due to higher advertising costs of $0.4 million associated with our Open Trading~~™ ~~protocols and travel and entertainment expenses related to sales activities of $0.4 million.~~

~~Clearing Costs~~. Clearing costs decreased by $0.4 million. During the third quarter of 2016, we amended the terms of our agreements with our third-party clearing brokers which resulted in a reduction in transaction and other clearing costs. Third-party clearing costs as a percentage of matched principal trading revenue decreased from 17.9% for the nine months ended September 30, 2016 to 12.5% for the nine months ended September 30, 2017.

~~General and Administrative.~~ General and administrative expenses increased by $1.9 million principally due to a decrease in foreign currency transaction gains of $0.6 million, an increase in general travel and entertainment expenses of $0.6 million and an increase of $0.3 million in employee relocation expenses.

Provision for Income ~~Tax. Our consolidated~~Taxes

The provision for income taxes and effective tax rate for the nine months ended September 30, ~~2017 was 24.8%, compared~~2021 and 2020 were as follows:


	Nine Months Ended September 30,
	2021			2020			$ Change			% Change
	($ in thousands)
Provision for income taxes	$	56,645		$	57,624		$	(979	)		(1.7	)	%

Effective tax rate		21.6	%		20.3	%

The provision for income taxes reflected $11.4 million and $17.9 million of excess tax benefits related to ~~34.2% for~~share-based compensation awards that vested or were exercised during the nine months ended September 30, 2016. The tax provision for the nine months ended September 30, 2017 includes excess tax benefits of $14.8 million relating to a new standard for share-based payments accounting adopted effective January 1, 2017.2021 and 2020, respectively. Our consolidated effective tax rate can vary from period to period depending on ~~the~~ geographic mix of our earnings,

changes in tax legislation and tax rates and the amount and timing of excess tax benefits related to share-based payments, among other factors.

Liquidity and Capital Resources

During the ~~past three years,~~nine months ended September 30, 2021, we have met our funding requirements through cash on hand, ~~and~~ internally generated ~~funds.~~funds and short-term borrowings. Cash and cash equivalents and investments totaled ~~$376.2~~$468.5 million atas of September 30, ~~2017.~~2021. Our investments are generally invested in investment-grade securities. We limit the amounts that can be invested in any single issuer and invest in short- to intermediate-term instruments whose fair values are less sensitive to interest rate changes.

In October ~~2015,~~2021, we entered into the 2021 Credit Agreement provided by a ~~two-year amended~~syndicate of lenders and ~~restated~~JPMorgan Chase Bank, N.A., as administrative agent, that provides aggregate commitments totaling $500.0 million, consisting of a revolving credit ~~agreement (the “Credit Agreement”) that increased~~facility and a $5.0 million letter of credit sub-limit for standby letters of credit. The 2021 Credit Agreement replaced the 2020 Credit Agreement and will mature on October 15, 2024, with our ~~borrowing capacity~~option to anrequest up to two additional 364-day extensions at the discretion of each lender and subject to customary conditions. The 2020 Credit Agreement, which also provided aggregate ~~of $100.0 million.~~commitments totaling $500.0 million, replaced the 2015 Credit Agreement. As of September 30, ~~2017,~~2021, we had ~~$0.9~~$1.0 million in letters of credit outstanding and ~~$99.1~~$499.0 million in available borrowing capacity under the 2020 Credit Agreement. ~~In October 2017, we amended~~See Note 11 to the Consolidated Financial Statements for a discussion of the 2020 Credit Agreement and ~~extended~~Note 17 to the ~~maturity date~~Consolidated Financial Statements for a discussion of the 2021 Credit Agreement.

In connection with its self-clearing operations, one of our U.S. broker-dealer subsidiaries entered into an agreement (the “Collateralized Agreement”) with its settlement bank to ~~October 2018. The amended Credit~~provide loans up to an aggregate of $200.0 million on an uncommitted basis. Borrowings under the Collateralized Agreement ~~also provides for two additional one-year extension options~~are collateralized by securities pledged by the broker-dealer subsidiary to the settlement bank, subject to applicable haircuts and ~~modified certain borrowing terms~~concentration limits. As of September 30, 2021, the broker-dealer subsidiary had no borrowings outstanding and ~~covenants. Subject to satisfaction of certain specified conditions, we are permitted to upsize the~~$200.0 million in available borrowing capacity under the ~~Credit Agreement by an additional $50.0~~Collateralized Agreement. See Note 11 to the Consolidated Financial Statements for a discussion of the Collateralized Agreement.

Under arrangements with their settlement banks, certain of our U.S. and U.K. operating subsidiaries may receive overnight financing in the form of bank overdrafts. We incurred interest expense such overnight financing of $0.7 million during the nine months ended September 30, 2021. As of September 30, 2021, we had no overdrafts payable outstanding.

As a result of our self-clearing and settlement activities, we are required to finance certain transactions, maintain deposits with various clearing organizations and clearing broker-dealers and maintain a special reserve bank account for the benefit of customers pursuant to SEC Rule 15c3-3. As of September 30, 2021, the aggregate amount of the positions financed, deposits and customer reserve balances associated with our self-clearing and settlement activities was $293.8 million. These requirements can fluctuate based on trading activity, market volatility or other factors which may impact our liquidity or require us to use our capital resources.

Our cash flows were as follows:


	Nine Months Ended September 30,
	2021			2020			$ Change			% Change
	($ in thousands)
Net cash provided by operating activities	$	136,380		$	176,869		$	(40,489	)		(22.9	)	%
Net cash (used in) provided by investing activities		(56,295	)		103,119			(159,414	)		(154.6	)
Net cash (used in) financing activities		(119,614	)		(117,371	)		(2,243	)		1.9
Effect of exchange rate changes on cash and cash equivalents		(4,720	)		431			(5,151	)	NM
Net (decrease) increase for the period	$	(44,249	)	$	163,048		$	(207,297	)		(127.1	)	%

Nine Months Ended September 30,

2017

2016

$
Change

%
Change

($ in thousands)

Net cash provided by operating activities
$
121,583

$
33,140

$
88,443

266.9

%
Net cash (used in) investing activities

(67,907
)

(23,899
)

(44,008
)

184.1

Net cash (used in) financing activities

(84,335
)

(46,545
)

(37,790
)

81.2

Effect of exchange rate changes on cash and cash equivalents

1,408

(980
)

2,388

(243.7
)

Net (decrease) for the period
$
(29,251
)

$
(38,284
)

$
9,033

(23.6
)
%

The ~~$88.4~~$40.5 million ~~increase~~decrease in net cash provided by operating activities was primarily due to lower proceeds from net sales of trading investments of $68.2 million and a decrease in net income of $20.7 million, offset by a decrease in the change in net receivables from broker-dealers, clearing organizations and customers associated with our clearing activities of $47.9 million.

The $159.4 million decrease in net cash flows from investing activities was primarily due to a decrease in net sales of available-for-sale investments of $137.8 million, an increase in net ~~income~~cash used in acquisitions of ~~$21.6~~$16.6 million ~~a decrease~~and an increase in capitalization of software costs and purchases of furniture, equipment and leasehold improvements of $5.1 million.

The $2.2 million increase in net ~~purchases~~cash (used in) financing activities was principally due to increases in cash dividends paid on common stock of ~~corporate debt trading investments~~$6.9 million and repurchases of ~~$82.9~~common stock of $2.7 million, offset by an increase in ~~working capital~~exercises of ~~$9.5 million.~~

~~The $44.0~~stock options of $6.2 million ~~increase in net cash used in investing activities was primarily due to increases of $40.0 million in net purchases of available-for-sale investments and capital expenditures of $3.5 million.~~

The $37.8 million increase in net cash used in financing activities was principally due to an increase of $22.5 million in repurchases of our common stock, a $7.8 million increase in the cash dividend paid on common stock and a ~~$7.0 million increase~~decrease in withholding tax payments on restricted stock vesting and stock option ~~exercises.~~exercises of $1.2 million.

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.

~~Non-GAAP Financial Measures~~

In addition to cash flow from operating activities in accordance with GAAP, we use a non-GAAP financial measures called “Free Cash Flow”. Free Cash Flow is defined as cash flow from operating activities excluding net purchases of corporate debt trading investments less expenditures for furniture, equipment and leasehold improvements and capitalized software development costs. We believe this non-GAAP financial measure is important in gaining an understanding of our financial strength and cash flow generation.

~~The table set forth below presents a reconciliation of our cash flow from operating activities to Free Cash Flow, as defined, for the twelve months ended September 30, 2017 and 2016:~~

Twelve months ended September 30,

2017

2016

(In thousands)

Cash flow from operating activities
$
177,898

$
67,832

Add: Net (sales) purchases of corporate debt trading investments

(8,678
)

74,535

Add: Excess tax benefits from share-based compensation previously recorded under financing activities

292

9,274

Less: Purchases of furniture, equipment and leasehold improvements

(8,876
)

(5,819
)
Less: Capitalization of software development costs

(13,154
)

(12,130
)
Free Cash Flow
$
147,482

$
133,692

Other Factors Influencing Liquidity and Capital Resources

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 liquidity requirements associated with our self-clearing operations and 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, FINRA and the CFTC. These rules contain minimum net capital requirements, as defined in the applicable regulations, and also may require that 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~~FCA in the U.K. or other foreign regulators and must maintain financial resources, as defined in the applicable regulations, in excess of the applicable financial resources requirement. As of September 30, ~~2017,~~2021, 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, ~~2017,~~2021, our subsidiaries maintained aggregate net capital and financial resources that were ~~$128.2~~$577.3 million in excess of the required levels of ~~$12.6~~$23.2 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, ~~2017,~~2021, the amount of unrestricted cash held by our non-U.S. subsidiaries was ~~$85.7~~$125.0 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~~our 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~~trades. One of our U.S. broker-dealer subsidiaries operates under a self-clearing model for the settlement of such transactions. Our other U.S. and U.K subsidiaries settle their transactions through third-party clearing ~~brokers.~~brokers or settlement agents. Settlement typically occurs within one to two trading days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded. ~~For~~Under both the ~~nine months ended September 30, 2017~~self-clearing and ~~2016, revenues from matched principal trading were approximately $34.4 million and $26.6 million, respectively. Under securities clearing agreements with~~the third-party clearing ~~brokers,~~models, we maintain collateral deposits with each clearing broker in the form of cash. As of September 30, 2017 and 2016, the amount of the collateral deposits included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition was $1.2 million and $1.1 million, respectively. For the nine months ended September 30, 2017, and 2016, clearing expenses associated with matched principal transactions were $4.3 million and $4.8 million, respectively, and are classified under clearing costs on our Consolidated Statements of Operations. We aremay be exposed to credit risk in the event a counterparty does not fulfill its obligation to complete a transaction or if there is ~~a miscommunication or other~~an error in executing a matched principal transaction.

Pursuant to the terms of the securities clearing agreements, each third-party clearing broker has the right to charge us for any losses they suffer resulting from a counterparty’s failure on any of our trades. We did not record any liabilities or losses with regard to ~~this right~~counterparty failures for the nine months ended September 30, ~~2017~~2021 and ~~2016.~~2020.

In the normal course of business, we enter into contracts that contain a variety of representations, warranties and ~~general indemnifications.~~indemnification provisions. 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 ~~2016, our~~2019, the Board of Directors authorized a two-year share repurchase program for up to ~~$25.0~~$100.0 million ~~of our common stock.~~that commenced in April 2019 and expired on March 31, 2021. In ~~October 2016, our Board of Directors approved a $50.0 million increase in~~January 2021, the ~~size of the share repurchase program. In September 2017, the existing share repurchase plan was terminated and our~~ Board of Directors authorized a new ~~fifteen-month~~ share repurchase program for up to ~~$100~~$100.0 million ~~commencing in October 2017.~~that commenced on April 1, 2021. Shares repurchased under each program will be held in treasury for future use.

In October ~~2017,~~2021, our Board of Directors approved a quarterly cash dividend of ~~$0.33~~$0.66 per share payable on November ~~22, 2017~~17, 2021 to stockholders of record as of the close of business on November ~~8, 2017.~~3, 2021. 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 any such other factors as the Board of Directors may deem relevant.

On November 30, 2020 we acquired Regulatory Services GmbH, the pan-European regulatory reporting business of Deutsche Börse Group. The purchase price consists of $22.5 million in cash paid at closing and up to $24.6 million in contingent consideration payable in cash within 18 months of the closing. On April 9, 2021 we acquired MuniBrokers LLC, a central electronic venue serving municipal bond brokers and dealers. The purchase price consists of $17.1 million in cash paid at closing and up to $25.0 million in contingent consideration payable in cash within approximately two years of the closing.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, we use certain non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization (“EBITDA”) and free cash flow (“FCF”). As a result of our conversion to self-clearing in the third quarter of 2020, we redefined FCF as cash flow from operating activities excluding the net change in trading investments and net change in securities failed-to-deliver and securities failed-to-receive from broker-dealers, clearing organizations and customers, less expenditures for furniture, equipment and leasehold improvements and capitalized software development costs. We believe these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, are important in understanding our operating results. EBITDA and FCF are not measures of financial performance or liquidity under GAAP and therefore should not be considered an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity. We believe that EBITDA and FCF provide useful additional information concerning profitability of our operations and business trends and the cash flow available to pay dividends, repurchase stock and meet working capital requirements.

The table set forth below presents a reconciliation of our net income to EBITDA:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	($ in thousands)
Net income	$	57,958	$	67,776	$	205,703	$	226,446
Add back:
Interest expense		314		1,046		676		1,046
Provision for income taxes		16,536		20,189		56,645		57,624
Depreciation and amortization		13,964		9,032		38,840		25,404
Earnings before interest, taxes, depreciation and amortization	$	88,772	$	98,043	$	301,864	$	310,520

The table set forth below presents a reconciliation of our cash flow from operating activities to FCF:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
	($ in thousands)
Net cash provided by operating activities	$	62,813		$	(48,353	)	$	136,380		$	176,869
Exclude: Net change in trading investments		—			638			5,569			(62,636	)
Exclude: Net change in fail-to-deliver/receive from broker-dealers, clearing organizations and customers		55,195			164,797			121,969			164,797
Less: Purchases of furniture, equipment and leasehold improvements		(4,758	)		(3,758	)		(14,567	)		(13,022	)
Less: Capitalization of software development costs		(8,191	)		(8,121	)		(24,650	)		(21,124	)
Free Cash Flow	$	105,059		$	105,203		$	224,701		$	244,884

Effects of Inflation

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.

Contractual Obligations and Commitments

As of September 30, ~~2017,~~2021, we had the following contractual obligations and commitments:


	Payments due by period										Payments due by period
	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 - years		Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
	(In thousands)										($ in thousands)
Operating leases	$	144,498	$	4,907	$	18,571	$	19,695	$	101,325	$	126,232	$	3,049	$	21,821	$	22,331	$	79,031
Foreign currency forward contract		88,444		88,444		—		—		—		196,486		196,486		—		—		—
	$	232,942	$	93,351	$	18,571	$	19,695	$	101,325	$	322,718	$	199,535	$	21,821	$	22,331	$	79,031

During 2016, we entered into a lease agreement for our new global headquarters in New York City. We expect to relocate our headquarters to approximately 83,000 square feet of newly built office space at 55 Hudson Yards upon the building’s completion in late 2018. The fifteen-year lease for the new headquarters will commence when we receive possession of the premises, which is currently expected to occur in the first quarter of 2018.

We enter into foreign currency forward contracts to hedge our exposure to variability in certain foreign currency cash flows resulting from the net investment in our U.K. subsidiaries. As of September 30, ~~2017,~~2021, the notional value of the only foreign currency forward contract outstanding was ~~$88.4~~$198.3 million and the fair value of the asset was ~~$0.6~~$1.8 million.

I~~tem~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Market Risk

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, ~~2017,~~2021, we had ~~$234.2~~$25.0 million of investments ~~which~~in U.S Treasuries that were ~~invested in corporate bonds and~~ classified as ~~securities available-for-sale or~~ trading securities. 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

Interest rate risk represents our exposure to interest rate changes with respect to our cash, cash equivalents and investments. As of September 30, ~~2017,~~2021, our cash and cash equivalents and investments amounted to ~~$376.2~~$468.5 million. A hypothetical ~~five~~100 basis point ~~decrease~~increase in ~~short-term~~ interest rates would ~~decrease~~increase our ~~annual pre-tax earnings~~interest income by approximately ~~$0.2~~$4.7 million, assuming no change in the amount or composition of our cash and cash ~~equivalents and investments.~~equivalents.

As of September 30, 2017, a hypothetical 100 basis point increase or decrease in interest rates would decrease or increase the fair value of the available-for-sale investment portfolio by approximately $1.4 million, assuming no change in the amount or composition of the investments. The hypothetical unrealized gain (loss) of $1.4 million would be recognized in other comprehensive income on the Consolidated Statements of Financial Condition.

A similar hypothetical 100 basis point increase or decrease in interest rates would decrease or increase the fair value of the trading securities portfolio by approximately $0.8 million. The hypothetical unrealized gain (loss) of $0.8 million would be recognized in other income in the Consolidated Statements of Operations.

We do not maintain an inventory of bonds that are traded on our platform.

Foreign Currency Exchange Rate Risk

We conduct operations in several different countries outside of the U.S., most notably the U.K., and substantial portions of our revenues, expenses, assets and liabilities are generated and denominated in non U.S. dollar currencies. Since our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Accordingly, increases or decreases in the value of the U.S. dollar against the other currencies will affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies.

During the twelve months ended September 30, ~~2017,~~2021, approximately ~~12.7%~~16.3% of our revenue and ~~27.0%~~31.0% of our expenses were denominated in currencies other than the U.S. dollar, most notably the British Pound Sterling. Based on actual results over the past year, a hypothetical 10% increase or decrease in the U.S. dollar against all other currencies would have increased or decreased revenue by approximately ~~$5.0~~$11.5 million and operating expenses by approximately ~~$5.1~~$10.7 million.

Derivative Risk

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 British Pound Sterling exposure that arises from the activities of our U.K. subsidiaries. As of September 30, ~~2017,~~2021, the fair value of the notional amount of our foreign currency forward contract was ~~$88.4~~$196.5 million. We do not speculate in any derivative instruments.

Credit Risk

~~Two~~Through certain of our subsidiaries, ~~MarketAxess Corporation~~we execute bond transactions between our institutional investor and ~~MarketAxess Capital Limited, act as~~broker-dealer clients on a matched principal ~~counterparty in connection with the Open Trading~~™ ~~transactions that we execute between clients. We act as an intermediary in these transactions~~basis by serving as counterparty to both the buyer and the seller in ~~trades which then~~trades. One of our U.S. broker-dealer subsidiaries operates under a self-clearing model for the settlement of such transactions. Our other U.S. and U.K subsidiaries settle their transactions through a third-party clearing ~~broker.~~brokers or settlement agents. Settlement typically occurs within one to two trading days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded.

We are exposed to credit and performance risks in our role as matched principal trading counterparty to our ~~Open Trading~~™ clients executing bond trades on our platform, including the risk that counterparties that owe us money or securities will not perform their obligations. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. Adverse movements in the prices of securities that are the subject of these transactions can increase our risk. In connection with Open Trading™ or other anonymous protocols, we expect that the number of transactions in which we act as a matched principal will increase.

We have policies, procedures and ~~procedures~~automated controls in place to identify and manage our credit risk. ~~In connection with the recent growth of our Open Trading~~™ ~~protocols, we have implemented additional automated controls to help us manage our credit risk exposure.~~ There can be no assurance that ~~the~~these 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~~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~~three major global ~~bank.~~banks. Given this concentration, we are exposed to certain credit risk in relation to our deposits at ~~this bank.~~these banks.

Item 4. Controls and Procedures

(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, ~~2017.~~2021. 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, ~~2017~~2021 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.

P~~ART~~PART II — Other Information

Item 1. Legal Proceedings

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 will establish an accrual for the loss. Once established, the accrual will 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.See Note 13 to the Consolidated Financial Statements for a discussion of our commitments and contingencies.

Item 1A. Risk Factors

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, ~~2016.~~2020. For a discussion of the risk factors affecting the Company, see “Risk Factors” in Part I, Item 1A of our ~~2016~~2020 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

During the quarter ended September 30, ~~2017,~~2021, 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

(In thousands)

July 1, 2017 - July 31, 2017

47,137

$
200.45

20,000

$
23,030

August 1, 2017 - August 31, 2017

22,916

197.24

22,700

18,552

September 1, 2017 - September 30, 2017

22,400

182.41

20,800

—

92,453

$
195.28

63,500


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
							(In thousands)
July 1, 2021 - July 31, 2021		9,257	$	461.00		9,189	$	82,554
August 1, 2021 - August 31, 2021		163		475.92		—		82,554
September 1, 2021 - September 30, 2021		—		—		—		82,554
Total		9,420	$	461.26		9,189

During the three months ended September 30, ~~2017,~~2021, we repurchased ~~92,453~~9,420 shares of common stock. The repurchases included ~~28,953~~9,189 shares repurchased in connection with our share repurchase program and 231 shares surrendered by employees to us to satisfy the withholding tax obligations upon the exercise of stock options and vesting of restricted ~~shares and 63,500 shares repurchased in connection with our share repurchase program.~~shares.

In January ~~2016, our~~2019, the Board of Directors authorized a two-year share repurchase program for up to ~~$25.0~~$100.0 million ~~of our common stock.~~that commenced in April 2019 and expired on March 31, 2021. In ~~October 2016, our Board of Directors approved a $50.0 million increase in~~January 2021, the ~~size of the current share repurchase program. In September 2017, the existing share repurchase plan was terminated and our~~ Board of Directors authorized a new ~~fifteen-month~~ share repurchase program for up to ~~$100~~$100.0 million ~~commencing in October 2017.~~that commenced on April 1, 2021. Shares repurchased under each program will be held in treasury for future use.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Listing:

Number

Description

10.1*10.1

~~Amendment,~~Severance Protection Agreement, dated as of August ~~14, 2017, to the Restricted Stock Agreement, dated April 1, 2017,~~12, 2021, by and between MarketAxess Holdings Inc. and ~~Christophe Roupie~~Christopher N. Gerosa (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated August 12, 2021)#

10.2*10.2

Credit Agreement, dated as of October 15, 2021, among MarketAxess Holdings Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form ~~of Indemnification Agreement for Directors~~8-K dated October 20, 2021)

31.1*

Certification by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~101.INS*

Inline XBRL Instance Document**Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document

~~101.SCH~~101.SCH*

Inline XBRL Taxonomy Extension Schema Document**Document

~~101.CAL~~101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document**Document

~~101.LAB~~101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document**Document

~~101.PRE~~101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document**Document

~~101.DEF~~101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document**Document

104

~~Filed herewith.~~

~~Attached as Exhibit 101 to this~~

The cover page from the Company’s Quarterly ~~Report~~report on Form 10-Q ~~are~~for the ~~following materials,~~quarter ended September 30, 2021 has been formatted in Inline XBRL ~~(eXtensible Business Reporting Language): (i) Consolidated Statements of Financial Condition as of September 30, 2017~~ and December 31, 2016; (ii) Consolidated Statements of Operations for the Three and Nine months Ended September 30, 2017 and 2016; (iii) Consolidated Statements of Comprehensive Income for the Three and Nine months Ended September 30, 2017 and 2016; (iv) Consolidated Statement of Stockholders’ Equity for the Nine months Ended September 30, 2017; (v) Consolidated Statements of Cash Flows for the Nine months Ended September 30, 2017 and 2016; and (vi) Notes to the Consolidated Financial Statements.is included in Exhibits 101.


*	Filed herewith.
#		Management contract or compensatory plan or agreement.

~~SIGNATURES~~

SIGNATURES

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.


	MARKETAXESS HOLDINGS INC.

Date: October ~~27, 2017~~26, 2021	By:	/s/ RICHARD M. MCVEY
		Richard M. McVey
		Chief Executive Officer
		(principal executive officer)

Date: October ~~27, 2017~~26, 2021	By:	/s/ ~~ANTONIO L. DELISE~~CHRISTOPHER N. GEROSA
		~~Antonio L. DeLise~~Christopher N. Gerosa
		Chief Financial Officer
		(principal financial and accounting officer)

4049

	Less than Twelve Months					Twelve Months or More					Total
	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses
	(In thousands)
As of September 30, 2017
Corporate debt	$	173,000	$	(284	)	$	5,426	$	(33	)	$	178,426	$	(317	)

As of December 31, 2016
Corporate debt	$	136,667	$	(449	)	$	2,000	$	(1	)	$	138,667	$	(450	)


Remainder of 2017	$	1,266
2018		4,815
2019		9,464
2020		10,577
2021		10,129
2022 and thereafter		108,247
	$	144,498

	Twelve months ended September 30,
	2017			2016
	(In thousands)
Cash flow from operating activities	$	177,898		$	67,832
Add: Net (sales) purchases of corporate debt trading investments		(8,678	)		74,535
Add: Excess tax benefits from share-based compensation previously recorded under financing activities		292			9,274
Less: Purchases of furniture, equipment and leasehold improvements		(8,876	)		(5,819	)
Less: Capitalization of software development costs		(13,154	)		(12,130	)
Free Cash Flow	$	147,482		$	133,692