Chris Concannon
Chief Executive Officer at MarketAxess
Good morning and thank you for joining us to review our third quarter results. As announced earlier today, Rick McVey, our Founder and Executive Chairman has informed our Board of Directors that he will be retiring from the Board at the end of the year to spend more time with his growing family and his philanthropic endeavors. Rick is a pioneer in the electronic trading arena and he is the reason why I came to MarketAxess. His vision, his innovation and his tenacity are why MarketAxess is the company it is today. Rick's years of fixed income experience has been an extraordinary resource for me and the Board. While Rick is retiring from the Board, we are very lucky to still have him as the Chairman of our International Board. I would also like to congratulate Carlos Hernandez on his appointment as our next Chairman of the Board. Carlos rejoined our Board in 2023 after concluding a highly distinguished career at JPMorgan. Throughout his career, Carlos has been passionate about electronic trading solutions and financial market structure. I am humbled by what Rick has built and I'm looking forward to continuing his work with Carlos in his new role as Chairman.
Now let's turn to the third quarter results. Turning to slide three of my strategic update. We continue to execute our strategy this quarter and deliver 20% growth in revenue, driven principally by strong growth in market volumes. We continue to be disciplined around our expense management, which helped to unlock the powerful operating leverage in our model and drove a 30% increase in diluted earnings per share. We've released our October trading metrics yesterday, which reflect continued strong growth in market volumes year-over-year. We have always guided investors to look at the longer-term trends and not read too much into the month-to-month fluctuations in our market share, as we experienced in October.
We believe the decline in our U.S. high-grade market share was driven by lower portfolio trading and a client shift to large block trading in the market. As we have mentioned before, large portfolio trades in the market and changes in the mix of client activity can generate significant short-term swings in market share without materially impacting revenue generation. We have a clear strategy to return to market share growth in US credit, while we continue to deliver growth across the global fixed income market. We continue to enhance our global portfolio trading solution and we are pleased with the early returns we are seeing in terms of market share gains.
We have now launched the key elements of our targeted block trading capability to attack the highest value client order flow, representing 40% of the U.S. high-grade market. We are on track to deliver traditional RFQ on X-Pro to our European clients in the first quarter of 2025. Last, we continue to see momentum in our emerging market offering with a block trading solution rolling out to clients this quarter. We are pleased to announce a strategic fixed income data partnership with S&P Global last week. With this partnership, we are combining our CP+ market data with S&P's global evaluated bond pricing solution.
Slide four highlights the power of our product and geographic diversification across global credit and rates as illustrated by our strong third quarter trading data. Commission revenue generated outside of US credit represented 37% of total commission revenue, up from just 25% in first quarter of 2019. Our emerging markets franchise is a key growth cylinder of this powerful diversification story.
Slide five provides more detail on the strength of our expanding emerging markets franchise. We are seeing strong growth in emerging markets trading activity across regions with record LatAm and APAC emerging markets trading volume, up 51% and 30% respectively. The EM local markets are the largest opportunity in EM from an addressable market perspective. One of our fastest growing protocols in local markets is request for market or RFM, which is helping to drive record levels of block trading in local markets. Dealer RFQ across hard and local currency is also showing strong growth, up 47%. We are very excited about the emerging markets opportunity ahead of us, which we believe is still in very early stages of electronification.
Slide six lays out our strategic priorities to grow market share. In terms of our High Touch strategy, we recently completed the initial rollout of our global PT solution in Europe. And I'm also pleased to report that we just completed an update to X-Pro to create a more intuitive interface for clients, focused on portfolio trading and our proprietary trading analytics. The client feedback has been strong. With record portfolio trading ADD in September, we delivered third quarter estimated market share of US credit portfolio trading of 20%, several hundred basis points higher than second quarter levels. We believe that the investments we have made in our new platform that supports client portfolio trading, traditional RFQ and automation are beginning to pay dividends.
In the coming months, we will begin the initial rollout of traditional RFQ on X-Pro to our European clients. While the initial focus of X-Pro and our High Touch strategy was portfolio trading, we are now leveraging the deep, enriched content and free trade analytics we have in X-Pro for block trade sizes. This targeted solution for clients streamlines the transition of block size trades from phone and chat to electronic solution, while reducing information leakage.
The two key elements of our Block strategy is our AI driven dealer selection tool and our new proprietary dataset, CP+ for Blocks. Last, in the dealer-to-dealer segment, we are seeing green shoots in that important segment as we look to expand Auto-X for dealer RFQ to emerging markets, Eurobonds and munis. We generated 28% growth in dealer RFQ and an 11-fold increase in Mid-X in Eurobonds in the third quarter.
Slide seven highlights select macro factors that we believe indicate we are moving into a more constructive operating environment. The new issue calendar has been very robust in 2024 with U.S. high-grade up 27% and US high yield up 86% year-to-date. The velocity of trading in U.S. high-grade was above 80% in the third quarter with an exit-rate of 91% in September. Yields have come down with the recent rate cuts, but remain attractive. As a result, fund flows into high-grade ETFs and mutual funds are up 158% from the prior year.
Fund flows have been one of the factors keeping credit spreads tight, but we do believe that volatility should pick-up in the coming months. Lastly, in advance of the rate cuts in September, client activity on the platform in high-grade reflected an uptick in trading in higher duration bonds, which benefited U.S. high-grade fee capture in the quarter. That client trend has continued into October as well.
Now let me turn the call over to Rich to provide you with an update on our markets.