Richard M. McVey
Chairman and Chief Executive Officer at MarketAxess
Good morning, and thank you for joining us to review our second quarter results. We continue to execute our growth strategy in the second quarter and delivered strong results across our key operating metrics. Importantly, we have increased our leadership position in the global credit institutional e-trading space versus our primary competitors with strong market share momentum in corporate bonds and emerging markets. We are now moving back into a much more favorable trading environment and the investments we have made to expand our foundation for growth are paying off.
We achieved record levels of estimated market share across both credit and rates, driving a new quarterly record for global credit trading volume. Specifically, we delivered record quarterly market share in US credit, high-yield, emerging markets, Eurobonds and US Treasuries. We established a new record for global active clients and traders. The benefits of Open Trading, our differentiated liquidity pool, are coming through with the highest level of transaction cost savings for clients since the pandemic environment in 2020.
Beyond our core business and protocols, we are making excellent strides in new product areas. We achieved another record quarter with $23 billion in total portfolio trading volume. Municipal bond trading ADV was a record $371 million, with a solid mix of tax exempt and taxable muni activity and a record 342 active client firms. And US Treasuries achieved record market share this quarter with 160 active clients trading. We also made several key announcements this quarter designed to enhance our data and ETF trading capabilities with the launch of an ETF on our MarketAxess Investment Grade 400 Index, our strategic collaboration with MSCI; and our minority investment in Virtu Financial's RFQ-hub for ETF share and equity derivative trading.
In summary, strong growth in trading volume, broad-based market share gains and increasing momentum in new product areas, including US Treasuries and municipal bonds are driving significantly improved operating performance.
Slide 4 provides an update on market conditions. Just eight months ago, we predicted that an end to accommodative central bank policy and quantitative easing would drive a return to wider credit spreads and higher credit spread volatility. That is exactly what is happening today, and we are now in a much more favorable operating environment. The median bid/ask spread in high-grade has moved from 2 basis points to 4 basis points in a very short period of time, and this has been accompanied by unusually large price movements in the market, with high-grade and high-yield bond indices down approximately 15% year-to-date.
When liquidity is at a premium as it is today, more diverse sources of liquidity matter, and the price improvement opportunity over Open Trading becomes a key differentiator in the market. We believe that this is a key contributor to our broad-based market share gains across high-grade, high-yield, emerging markets dollar corporates, and Eurobonds, as reflected in our record composite corporate bond estimated market share of 20.2%, which is up from a pre-pandemic share of 15.6% in Q1 2020.
One thing we did not anticipate was the rapid change in the slope of the yield curve, which has inverted in just nine months. Central bank tightening has led to a substantial increase in short maturity yields and a reduction in average maturities traded, which has created a short-term headwind for a high-grade institutional fee capture. Over the last 30 years, the yield curve has only been inverted about 5% of the time. As a result, we expect the yield curve to return to normal when the Fed is comfortable, the inflation numbers are trending lower.
Slide 5 illustrates our expanding global client network. The depth and diversity of liquidity on our global platform is clearly shown by the addition of new active clients and traders globally. We set new records with 1,935 total active client firms, with record international active clients increasing to 982 on the platform, driven primarily by strong growth in Asia. Active investor and dealer traders also increased to new records, with over 11,000 active traders on the platform, including a record 5,300 total active international traders. Our large and growing institutional client network is our biggest asset and provides the foundation for long-term growth, as we add more products and trading protocols to our global trading platform.
Slide 6 illustrates how the improved macro backdrop and our diverse liquidity is delivering significant cost savings for our clients. Wider spreads have created an environment, where the benefits of Open Trading are coming through in the form of a significant increase in transaction cost savings for our clients. Liquidity conditions in fixed-income trading have become challenging once again, reminding all market participants of the importance of all-to-all trading liquidity. The increased activity over our platform is clearly shown in the record levels of total credit and Open Trading executed trades.
In the quarter, we delivered $238 million in estimated cost savings via Open Trading, which equates to an annual run rate savings of approximately $1 billion, well in excess of the total annual commission revenue we currently generate. The combination of transaction cost savings and significant improvements in trading and post-trade efficiency creates a strong value proposition for our clients. We believe our substantial first-mover advantage in all-to-all trading will continue to differentiate MarketAxess from our competitors for many years to come.
Slide 7 illustrates the strong year-over-year increases in estimated market share. The share gains that we achieved in the second quarter exceed the long-term average gains for the company. We believe this is the most compelling quarter we have ever had for meaningful and comprehensive market share gains across all products and regions, and 92% of our volume is conducted with institutional investor clients. According to the major global banks we recently surveyed, the MarketAxess lead in institutional client electronic credit trading has widened in all three geographic regions. To give you some historical perspective, all but one of our primary products were in the top quartile for year-over-year quarterly growth in estimated market share over the past 10 years and high-grade was in the second quartile. In the long term, market share gains are the strongest contributor to shareholder value in our DCF model.
Slide illustrates -- Slide 8 illustrates the tremendous growth opportunity that is driving our approach to investing. The strong market share gains we delivered this quarter only serve to reinforce the sizable opportunity that we have before us in terms of top line growth potential. All else equal, 1 percentage point increase in market share across all our products generates approximately $50 million in incremental revenue annually. And the total revenue opportunity in front of us is substantial, with an estimated $9 billion revenue opportunity in the fixed-income e-trading sector by 2031, assuming historical market growth rates. If you add some expectation for higher trading velocity in the years ahead, as well as a growing data opportunity, the revenue opportunity is even larger. Importantly, with our financial model, we can capture this opportunity at very attractive returns with our current return on equity of approximately 25% and our current EBITDA margins north of 50%.
Now, let me turn the call over to Chris to provide more detail on the significant progress we are making with our investments in new initiatives.
