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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning and welcome to Tradeweb’s Third Quarter 2020 Earnings Conference Call. As a reminder, today’s call is being recorded and will be available for playback.
To begin the call, I’ll turn the call over to Head of US Corporate Development and Investor Relationship, Ashley Serrao. Please go ahead.
Thank you and good morning. Joining me today for the call are our CEO, Lee Olesky, who will review the highlights for the quarter and provide a business update; our President, Billy Hult, who’ll dive a little deeper into some growth initiatives; and Bob Warshaw, our CFO, who will review our financial results. Our third quarter earnings release, prepared remarks, and accompanying presentation are available on the Investor Relations portion of our website.
I’d like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations, and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements related to, among other things, our guidance, including full-year 2020 guidance, and the COVID-19 pandemic, the potential impacts of which are inherently uncertain, are forward-looking statements. Actual results may differ materially from these forward-looking statements. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our earnings release and periodic reports filed with the SEC.
In addition, on today’s call, we will reference certain non-GAAP measures. Information regarding these non-GAAP measures, including reconciliations to GAAP measures, are in our posted earnings release and presentation. Lastly, we provide certain market and industry data which is based on management’s estimates and various industry sources. See our posted earnings presentation for more details.
To recap, this morning we reported GAAP earnings per diluted share of $0.19. Excluding certain non-cash stock-based compensation expense, acquisition and Refinitiv-related D&A and certain FX items, and assuming an effective tax rate of 22%, we reported adjusted net income per diluted share of $0.30. Please see the earnings release and the Form 10-Q to be filed with the SEC for additional information regarding the presentation of our historical results.
Now, let me turn the call over to Lee.
Thanks, Ashley. Good morning, everyone, and thank you for joining our third quarter earnings call. The world remains an uncertain place amidst numerous political, climate, health, and social challenges. At Tradeweb, cyclical macro headwinds from subdued rate volatility and lower yields continue to partially mask encouraging secular and organic growth across our rates credit money market asset classes.
Our team remains focused on the future, operating purposely to execute on our growth roadmap by managing what's within our control which is relentlessly engaging clients, innovating with technology and improving trading workflows to gain share. And as we continue to focus on revenue growth we believe we are increasing our earnings power, positioning Tradeweb to eventually benefit when volatility resurfaces and secondarily when interest rates head higher.
Our message to our investors is unchanged. We remain laser focused on capitalizing on the secular tailwinds underpinning our business to drive revenue growth and margin expansion for the remainder of 2020 and 2021 and beyond To drive revenue growth and margin expansion for the remainder of 2020 -- in 2021 and beyond as both our existing and pending investment scale globally.
Turning to slide 4, we reported the strongest third quarter in our history -- hitting new market share and volume records across numerous products -- specifically gross revenues of $213 million during third quarter 2020, were up 5.9% year-on-year on a reported basis and by 4.7% on a constant currency basis. The revenue growth and the resulting scale translated into improved profitability year-over-year as our third quarter adjusted EBITDA margin expanded by 91 basis points to 47.4% .
On the investment front we continue to innovate by rolling out several early stage initiatives we launched our enhanced specified pool platform after collaborating for a year with leading mortgage originators to design a feature rich offering to automate this large market which traded $26 billion a day on average during the first nine months of 2020.
We believe this offering builds on our strength in the TBA market. The frequent high volume and spreadsheet driven nature of the specified pool market makes it well-suited for automation as we estimate electronic petition levels today are less than 5%. Similarly the combination of another yearlong project led Tradeweb to becoming the first offshore platform to offer foreign investors electronic access to the China interbank bond market or CIB direct complementing our existing bond-connect offering with the appliance access to the two most popular Northbound trading channels and nearly doubling our addressable market.
Finally, in US corporate credit we continue to lead the next generation of innovation in the space, building on the growing adoption of net spotting in portfolio trading by rolling out rematch, which connects our wholesale liquidity to our institutional and retail liquidity pools. Looking ahead, our sales team remains highly engaged in our technology scene as a busy pipeline as we look out over the next 12 months.
Turning now to slide 5, this quarter was marked by strong credit and market data growth, which more than offset flattish performance in other asset classes. Specifically credit grew by double digits at 26.9%, while rates and money markets were relatively in line with last year’s organic growth to more than offset strong rate headwinds. Our post-March performance in rates continued to be earmarked by the same mix of tailwinds and headwinds we discussed last quarter.
Cash rates posted its second highest revenue and volume quarter as record central bank issuance fueled institutional government bond trading and low interest rates sparked higher refinancing activity, thereby boosting mortgage trade. On the other hand subdued rate volatility took its toll on most of the rates franchise, with interest rate swaps seeing the most pressure. Equities fell 3.9% against an exceptional third quarter 2019 comparison and market data grew by 10%.
Moving on now to slide 6, let me provide a brief update on our four main focus areas. Global interest rate swaps, US Treasuries, US credit and global ETS. So starting with interest rate swaps a tough macro environment characterized by low volatility continue to pressure our volumes which fell 36% year-on-year, but outpaced industry volumes as measured by Clarus.
Our main focus area and higher fee per million longer duration swaps held up relatively better falling only 17%. All in our market share hit a new record eclipsing 10% for the first time as we continue to focus on what we can control -- deepening our client wallet share and scaling new products and protocols because we unlocks new electronic options for clients.
We believe we gain meaningful share versus our closest competitor Bloomberg both the US and Europe. Longer term we remain excited by the opportunity here as the rate cycle improves and the market continues to electronfiy. Billy will give you an update on our strategy momentarily. So moving on to US Treasuries our volumes increased 6% year-on-year led by the institutional business pushing market share to record levels exceeding 15% of the US Treasury market.
Amidst the backdrop of heavy stimulus driven issuance the composition of the US Treasury market has shifted towards the institutional sector as client activity served while wholesale activity slowed. At Tradeweb share gains within institutional have been driven by existing clients doing more business competitive share gains versus Bloomberg and further inroads into the TVO market.
Capitalizing on the recent wave of short-dated issuance looking ahead we are also investing in driving adoption of our early stage protocols such as stack Tradeweb plus and requestor market RFM in the wholesale arena our disclosed streaming protocol registered its second best quarter as trading behavior continues to shift away from traditional central limit order books given better price discovery and reduced information leakage as clients respond positively to our proprietary technology investments relative to the competition.
Looking ahead we believe the mix of our organic growth initiatives and the growing pool of US Treasury’s outstanding courtesy of the Fed's ever expanding deficit bodes well for earnings power. As we emerge from this pandemic into a higher and more volatile interest rate environment. Shifting to credit, the asset class continued with strong growth and generated $50 million in revenues.
Our US corporate credit market share continues to rise and set new records in both investment grade and high yield driven primarily by our institutional RFQ business recent innovations like portfolio trading in that spottings and growth of our suite of anonymous trading protocols. Our wholesale session trading business rebounded back to levels seen in the first quarter with activity accelerating in September. The retail business saw significantly less activity as low yields reduced the appeal of credit products for financial advisors.
Looking ahead we continue to see a lot of opportunity in credit as our platform continues to scale. We remain focused on serving both voice and electronic workflows and electronically connecting our three pools of liquidity. Finally within equities institutional ETFs were down 8% year-on-year as volumes were hampered by subdued European market activity, especially in August which displayed a typical summer lull relative to the heightened volatility that characterized August 2019 when recession and trade war fears gripped the market.
Fundamentally, we continue to add clients globally and remain excited about the prospects for the business. Our progress was recognized when our ETF platform was recently named as the best ETF platform by ETF Express US Awards. We believe our intelligent pre-trade liquidity provider selection, robust electronic audit trails and deep integration with OMS providers continue to drive the success of our offering.
Our other initiatives to expand beyond our flagship ETF franchise are also bearing fruit with momentum continuing in equity options Delta one and convertibles. During the quarter we also announced the partnership with CBOE for EFPs, which will leverage our leading wholesale ETF platform, a primary destination for EFP trading. Looking ahead we believe we remain well-positioned to benefit from the continued growth of ETFs globally with our newer product additions and an expanding client footprint.
With that I will turn it over to Bill.
Thanks Lee. Turning to slide 7, for a closer look at swaps. Swaps remain a critical component of the trade web story and one with considerable room for growth and innovation. We continue to operate with a growth mentality investing for the future.
The broader industry backdrop in the third quarter for interest rate swaps remained cyclically challenging given low interest rate volatility. Industry volumes as measured by Claris were down 38% year-over-year during the quarter driven primarily by a 56% decline in lower fee per million overnight index swaps OIS, which were pressured by reduced speculation on the front end of the curve. The higher fee per million core IRS market fared relatively better.
Industry volumes here declined 29% year-over-year. But as Lee indicated our volumes outperformed the overall market as our targeted investments continue to pay off. Specifically, our market share increased to a record 10.2% from 9.8% last year, driven primarily by gains within core IRS, our main market of focus, where shares rose -- where share rose to a record 17.5%. We were also pleased to be recognized by global capital as the OTC trading venue of the year for our consistent ability to pioneer the next generation of tools to access liquidity and inform trading decisions.
We are continuing to innovate by responding to structural changes in the swaps market be it the growth of emerging market swaps clearing or the transition to alternative reference rates. We are launching new protocols like RFM adding new products like electronic FRAs and package swaps and expanding regionally in APAC. Specifically during the third quarter, we posted our highest single revenue day for EM swaps as large asset managers that are fully integrated into trade web for major currencies leverage the same infrastructure to trade EM currencies. Clients have now traded $386 billion over the last 12 months.
During the third quarter we added three new currencies bringing our total to 13 and completed our first Chinese interest rate swap trade. The momentum is building and today we have more than 40 clients and 15 dealers both numbers doubling since the third quarter 2019. Looking ahead we continue to add more currencies and actively onboard dealers to provide liquidity for specific currencies.
Clients are also utilizing list trading to trade risk, migrate positions from LIBOR to new risk free indices like Sonia and SOFR and switch portfolios between central park -- central counter parties in anticipation of Brexit. Like we have always done we are partnering very closely with our clients to help them navigate regulatory change.
We are also continuing to grow our electronic solutions for historically voice traded products such as swaptions and multi-asset package swaps. Clients have now traded $74 billion in multi-asset package swaps since our launch in August last year. Given the momentum we intend to add more currencies as we build this offering out.
Our efforts to build a competitive wholesale fraud offering continue and the early signs are encouraging. We traded nearly $18 billion daily, a new record during the third quarter. Protocol wise we are growing RFM or request for markets, which help clients protect their intent to buy or sell by requesting two-sided markets. We continue to on-board dealers to support this market. In some with global electrification levels and swaps hovering around 20% to 25%.
We continue to strategically collaborate with our clients to migrate more business online. Real change is rarely instantaneous, but rather a series of day to day evolutions that combine to drive behavioral change. We are focused on listening to our clients across all our products to create win-win outcomes for them and Tradeweb. One product where we have had several win-win lightbulb moments is US corporate credit on slide 8. We continue to invest to build a franchise that supports both electronic and voice workflows by leveraging our unique and diverse liquidity pool shared across our wholesale, retail and institutional sectors.
Our value proposition is resonating strongly with our clients as our network continues to grow with more than 720 clients signed up to trade on Tradeweb at the end of the third quarter. As a result market share and block share continue to increase both our IG and high yield offering as our liquidity pool demons. In terms of drivers, the composition of our share continues to be led by our institutional franchise, which helped drive trade high yield market share to a monthly record of 5.3% in September and high grade market share to a record 18.2% in August.
Clients continue to increase their engagement with our pioneering innovations like portfolio trading and net spotting and are also ramping up their disclosed and all to our RQ activity on the platform. Portfolio trading continues to see increased adoption as clients across a variety of financial institutions championed the protocols efficient price discovery, faster risk transfer, greater certainty of execution and reduced information leakage.
Specifically we estimate portfolio trading has increased to compromise approximately 3% to 3.5% of trades from about 2% at the end of the second -- at the end of 2019. And Tradeweb accounted for to $28 billion single and multi-dealer portfolio trades in the third quarter alone.
Behaviorally, as comfort with the protocol grows, clients are increasingly putting dealers in competition and increasing the size and complexity of their trades. As a result the number of line items in portfolios on our platform also hit a new record. Our advanced net spotter net spotting offering saw another healthy quarter with $73 billion of activity and over $225 billion year-to-date as clients increasingly comingle electronic and voice trades to maximize savings and eliminate the inefficiencies of manual processes.
We estimate we see clients over $50 per million during the third quarter. We also continue to invest in creating the broadest anonymous trading offering in the market. Trading volume here rose to over $50 billion driven by growth in our all-to-all volumes which have doubled over the last year to record levels as liquidity continues to build along with our network of responders. We're also pleased to be included as an all-to-all counterparty for the New York Fed secondary market corporate credit facility building on our existing relationship for disclosed trading.
As Lee mentioned, we are very focused on connecting our three pools of liquidity. To this end, our effort to incorporate retail streaming order book liquidity into institutional RFQ trading continues to see increased adoption and we recently launched a rematch protocol which will enable unmatched wholesale inquiries to interact with the liquidity on trade web.
We are very focused on leveraging our technology and sector wide presence to optimize price discovery and maximize matches by connecting inquiries across sectors and we believe we are in the early innings of this story.
We are also heavily investing and expanding our leading automated trading capability AiEX within credit. We recently rolled out an enhanced offering giving traders more control over the degree of automation and we saw record levels of activity in September. We also continue to invest in increasing the coverage of AI price, or evaluated pricing offering in credit which today prices more than 20,000 bonds.
Turning to the rest of our credit business we believe one of our strategic advantages lies in the diversity and liquidity of our products. As such we are pleased to offer our insight on the corporate and municipal bond market at the SEC’s Fixed Income Market Structure Advisory Committee meeting. Our credit default swap business posted the strongest third quarter to-date as we continue to gain more market share in both the US and Europe and our China bond volumes hit a new record.
Municipal activity declined year-over-year given by -- driven by reduced buying in the retail sector. However our effort to build an institutional offering continues with double-digit average daily volume growth putting us on course for a record year. In sum, we believe our credit business has tremendous room for growth and we have an exciting roadmap to lead the innovation across the credit markets. We are arming execution traders across the market with a variety of protocols to intelligently find liquidity and optimize their execution objectives.
And with that let me turn it over to Bob to discuss our financials in more detail.
Thanks, Billy and good morning. As I go through the numbers all comparisons will be to the prior year period unless otherwise noted. Let me begin with an overview of volumes on slide 9. We reported quarterly total average daily volumes of $780 billion, down 4.5% but up 5.4% when you exclude short tenure swaps. Areas of notable growth include mortgages, US corporate credit, global CDS, Chinese bonds, equity derivatives and bilateral repo. Slide 10 provides summary of our quarterly earnings performance.
Despite the lower volumes which were mainly driven by short tenure swaps third quarter volumes translated into gross revenues increasing by 5.9% on an reported basis and 4.7% on a constant currency basis. We derived approximately 36% of our revenues from international customers. Recall that approximately 30% of our revenue base is denominated in currencies other than dollars, predominantly in euros. Our variable revenues increased by 7.1% and our total treaty review increased by 5.5%. Total fixed revenues related to our four major asset classes continue to grow as expected up 3% year-over-year and 1% on a constant currency basis.
Credit fixed revenue growth was primarily driven by the addition of new dealers in US credit and additional clients in Chinese bonds. Rates fixed revenue growth was driven by the addition of new dealers and swaps and the impact of FX. Market data increased by 10% year-over-year led by Refinitiv, APA and proprietary data products. Adjusted EBITDA margin came in at 47.4% and expanded by 91 basis points relative to third quarter 2019 as we continue to benefit from scale. All in, we reported adjusted net income per diluted share of $0.30.
Moving on to fees per million on slide 11. The trends I'm about to describe are driven by a mix of the various projects within our four asset classes. In some our blended fees per million increased 12% year-over-year, primarily as a result of mix shift away from lower fee per million short-tenor swaps and towards higher fees per million high grade and high yield credit. Excluding lower fees per million short-tenor swaps and futures, our blended fees per million was up 1% year-over-year.
Let’s review the underlying trends by asset class. All trends will be discussed on a year-over-year basis. Starting with rates, average fees per million for rates was up 14% year-over-year overall. For cash rate products, which include government bonds and TBAs, fees per million decreased 6% primarily due to a mix shift in mortgages which carry a lower fees per million than the cash rates average.
For long-tenor swaps, fees per million was up 12% year-over-year due to an increase in average maturity and less compression activity. In other rates derivatives, which includes rates futures and short-tenor swaps, average fees per million increased substantially year-over-year due to growth in bonds which carry a higher fees per million than overnight index swaps.
Continuing to credit, average fees per million for credit increased 13% year-over-year overall, going down on cash credit average fees per million increased 9% due to a positive mix shift towards US high grade and high yield activity, which carry a higher fees per million than the cash credit average. Looking at the credit derivatives and electronically processed US Cash Credit category, fees per million decreased 4% on higher electronically processed high yield volumes and more role activity in CGS.
Continuing with equities, average fees per million for equities is down 23% year-over-year overall. For cash equities, average fees per million decreased 27% due to mix shift towards wholesale ETFs which carry lower fees per million than mix shift towards wholesale ETS, which carry lower fees per $1 million than institutional ETS.
Equity driven is average fees per $1 million increase 2% due to regional mix shift towards US options, which carry a higher fees per $1 million in the equity derivatives average. Finally within money markets fees per $1 million decreased 17%. This was primarily driven by mix shift away from high fee per $1 million retail CDA -- CDs given the low interest rate environment and towards bilateral repo, which reached record levels and carries lower fees per $1 million than other money market products.
Slide 12 details our expenses, at a high level we continue to invest for growth. There's been no change for our philosophy here. As a reminder adjusted expenses excludes non-cash stock based compensation expense related to options issued primarily as result of the IPO. Acquisition and refinitive related DNA and certain FX related gains and losses. Adjusted expenses for third quarter increased 4.2% recall approximately 15% of our expense basis nominated in currencies other than dollars predominantly in sterling.
Third quarter 2020 operating expenses were higher as compared to third quarter 2019 due to increased employee compensation costs and technology communication expenses partially offset by lower G&A. Compensation costs for higher year-on-year due to higher headcount as well as higher performance related compensation adjusted non-comp expense decreased to 1.2% on a reported basis and increased 1.4% on a constant currency basis.
Specifically G&A declined primarily due to less travel and entertainment expense. We continue to expect $7 million to $8 million in expense during the fourth quarter. Longer term we are reviewing our level of spend. Technology and communication costs increased primarily due to higher clearing and data fees as a result of higher trading volumes as our anonymous credit volumes and streaming US Treasury trading volumes, as our non-risk credit volumes and assuming US Treasury volumes continue to grow. In addition this quarter also saw the impact of our previously communicated investments in data strategy and cybersecurity. Recall our guidance embeds a $4 million to $5 million increase versus 2019 which we expect to continue ramped going forward.
Slide 13 details capital Management and our guidance. First on our cash position and dividend policy. We ended third quarter in a strong position -- improving $677 million in cash and cash equivalents and free cash flow reached $280 million for the trailing 12 months. We have access to a $500 million revolver that remains undrawn as at quarter-end.
CapEx and capitalized software development for the quarter was $10.2 million a decrease of 16% year-over-year primarily due to timing of investment spend. We continue to expect capital expenditures -- and capitals -- capitalized software to be in the range of $45 million to $50 million for the full year with this quarter's earnings the board declared a quarterly dividend of $0.08 per class A and Class B share.
Turning to other guidance items for 2020 we now expect adjusted expenses to trend in the lower half of our previous $495 million to $505 million range for 2020. We continue to believe we can drive operating margin expansion compared to 2019 at either end of this range. For forecasting purposes we continue to use an assumed non-GAAP tax rate of 22% for the year. Finally, we've updated our quarterly share count for 2020 to help you calibrate your models for fluctuations in our share price.
Now I'll turn it back to Lee for concluding remarks.
Thanks Bob. In sum despite macro challenges market share gains and volume increases continue to drive growth today continue to drive growth today. And we believe it increase our future earnings potential. The secular trends powering electronic application and automation remain intact. We continue to operate with a growth mindset and we're focused on collaborating with our clients to capitalize on the various opportunities ahead of us across asset classes.
The regional products and asset class diversity of our revenues was on display with another strong quarter for credit with rates, equities and money markets having multiple growth levers, despite the noted macro challenges. In addition to organic growth we continue to spend a lot of time evaluating potential M&A opportunities that we believe would further augment our growth as cash builds on our balance sheet.
With a couple of important month end trading days left in October, firm wide volumes are up double digits relative to October 2019. We are happy to provide more detail during the Q&A.
I'd like to conclude my remarks by thanking our clients for their business and partnership in the quarter. And I want to especially thank my colleagues for their efforts that contributed to our strongest third quarter in our history.
With that, I'll turn it back to Ashley for your questions.
Thanks, Lee. As a reminder, please limit yourself to one question only. Feel free to hop back in the queue and ask additional questions at the end. Q&A will end at 10:00 AM Eastern Time. Operator, you can now take our first question.
Our first question comes from Ari Ghosh with Credit Suisse. Your line is open.
Hi. Thank you. Good morning, everyone. So Lee, the rates business right now has an obvious macro challenges, plus they also seem to be like several pockets of opportunity as we look at the overall business. So can you talk about maybe the structural deal wins and new initiatives that perhaps a less impacted by the low quality backdrop as you look out over the next 12 months.
Thanks Ari, good morning. Yeah that's a, it's an important question and I do think it merits spending a little bit of time on, on this one. One of the one of the aspects of our race rates business that we believe is still underappreciated by the market is our, our products that is not as mature despite we've been doing this for over 20 years. So behavior is still changing.
Our products are still electrifying which is why our volumes are able to outperform the more mature rate sectors like futures and cash rate venues. Our biggest competitor [indiscernible] always stated when we started off and I think it's still largely the case. Our biggest competitor is actually the phone and the cultural change to get people to go electronic.
The other point I'd make is that you know our rates business it isn't one product or one client sector, right, we have treasuries we have European government bonds we have mortgages we have interest rate swaps. And the diversity is important because lower volatility in rates hit these products differently, right. So you know some you might have more issuance or prescriptive monetary policy messaging which creates both tailwinds and headwinds for our product set.
But you can't lose sight of the fact that we are primarily an institutional marketplace between the buy side and sell side which is a bit different from futures markets or the inner dealer markets which we're also in. But are not as large a part of our business. So it's this combination of being levered to institutional growth the diversity of our product set and our organic investments that drive behavior change that really allows processing the growth so to be more specific right.
With respect to government bonds where we're hitting new market share records here we're focusing on building our share onboarding new clients we've got things like AIX growing our streaming protocols in both wholesale and institutional these are all engines of growth. Structurally behavioral change towards streaming protocols, especially in wholesale and potentially the market composition change in larger institutional versus wholesale sector, which is what we've seen a shift to in this last quarter. Our themes, themes to watch. So on our other cash products we have things in rates.
We have things like mortgages which have been benefiting from the higher refinancing activity and pretty good housing market, which sort of bodes well for origination and TBA activity. So in this space we're focused on the specified pool market broadening our base of liquidity providers and spec pools. We said this in the prepared remarks that's a market that's less than 5% electronic.
And finally we get to the derivative products swaps are more sensitive to interest rate volatility in the shape of the yield curve. So activity has slowed in the home market, which week we pointed out. But we have seen our clients reacting to bouts of volatility in some of the days in September and October trading significant volumes at levels that were similar to or higher than actually 2019. So swaps were focused on electronic buying traditionally voice traded markets like multi-asset swaps and FRAs broadening our product set.
We've moved into emerging markets broadening our product set, we've moved into emerging markets expanding into cross-currency swaps -- you know growing the RFM protocol -- and Neil our view is as clearing houses more currencies to -- into their clearinghouses will tend to benefit on the execution front.
So I know that was long winded, but I think you can tell the macro matters right, we're not -- we're not saying that, but we're not as captive to macro as some of our peers and our volumes are showing that we continue to operate with this growth mentality and see plenty of opportunities to drive change and nudge the electrification higher in the rate space while we're winning on a competitive basis.
Thank you. Our next question comes from Rich Repetto with Piper Sandler. Your line is open.
I'm sorry to stay on the rates question, but it does drive so much of your revenue. So this is the first quarter that you had single-digit year-over-year percentage revenue growth -- you know because of the rates? And I guess I sort of want to get the benefit of your experience here -- clearly you've been through cycles before. So could you talk about -- any time in history you know where the growth has slow and you had growth opportunities which you outlined dramatically on the call -- is the growth opportunity bigger -- is this slowdown more or -- and that's one part of the question.
And you also mentioned that fintech in the prepared remarks -- you know they just put in some new proposal for our rules on Treasury trading platforms tend to regulate them as ATS and et cetera and whether that will have an impact on the different platforms you have in great Treasury.
Right. So let me take a crack at this. I think the first part was have we seen slowdowns like this before historically and I don't know if this is just a reflection of my years of doing this. Of course, we have been doing this over 20 years. And there are periods when we have a slowdown. I mean, we haven't seen this exact set of circumstances obviously with the coronavirus and the zero interest rate environment.
But this is over time, while this is an extreme situation for everybody on so many different levels. It's not unprecedented to see this sort of activity. And I think what we would stress here is look at the diversity of our business. We had the credit business grew 27% in the last quarter, which I would say is a leader across the board in terms of growth percentage wise, so now a $50 million business in the last quarter alone. So certain markets are going to be more active than other markets and we think this is one of the reasons.
There's many reasons for being diverse, but this is one of the reasons to be diverse. You have different situations. The rates market, we've seen a surge of government bond activity of issuance and focus even though we have a very low rate environment. But derivatives have slowed because of the volatility in the way derivatives are often traded. So I don't think that we should be overly concerned with a few weeks or a quarter or even up a slightly longer period of time.
The most critical thing has been really this secular trend of moving markets electronically even of the slightly longer period of time, the most critical thing has been really the secular trend of moving markets electronically and in many of our markets we are still you know barely at the halfway point in terms of the percentage of the markets that are electronic and derivatives is a good example of that, but we have many other markets like that.
So, we stay very optimistic about future growth recognizing we're going to have given how the first our different product offering is we're going to have different products that will over perform or underperform based on what's happening in the particular market. So, we're -- we continue to be very excited about our rates business.
On the second part of your question, it was the FIMSAC thing. So, we -- we had a -- the last public meeting for FIMSAC focused on the events that occurred in March and April. And without getting into too much detail you know Tradeweb spoke about the you know what was happening in the corporate bond market, what was happening in the muni market. And the way I would characterize it really is just to say we all had surges and obviously more people were incredibly challenging moments when in a matter of days we had literally tens of thousands of clients going home and needed to log in to remotely to work from home.
I would characterize it as an incredible performance of the -- of the infrastructure of the market during that period. We had massive volatility, surges of volume that were in terms of data and trading absolutely unprecedented. We had one day we traded a $1.5 trillion worth of activity. And I think March averaged about a $1 trillion a day.
So, it was an incredible surge at a time when everybody went remote essentially at the same time and I’ll take some credit for Tradeweb and that we, we handle that incredibly well our team, or 1,000 people went home and performed and connected up the clients. But it was well beyond Tradeweb, the entire market functioned incredibly well given, given the stresses.
In terms of some of the regulatory stuff that was starting to come out. I would characterize that really as you know a bit of a, and FIMSAC has been doing this quite admirably focusing on the fixed income markets and you know where we can improve some of some of the situation. I would say our biggest comment on that is really just getting a common regulatory framework, right with regulators and ATF as a broker dealer as a result of you know the different regulatory structures, it affects a number of things.
And I think it is it would be useful to get some, some things in sync so that it would just be a little easier to interpret a number of things in a little bit smoother in terms of you know having a common regulatory platform because things have changed so much in terms of the fixed income platforms and electronic trading. I think it's worth a new focus to kind of modernize that and sync it up.
Thank you. Our next question comes from Mike Carrier with Bank of America. Your line is open.
Hey guys this is Dean Stephan on for Mike Carrier. My question is for Billy, given attractive volume growth in 3Q, can you update us on the outlook for both portfolio trading and net spotting. Have you guys seen any significant shifts in either client behavior or utilization? And then finally what are your thoughts on the competitive landscape given new launches and collaborations from several competitors?
Thanks.
Yeah. Sure. That's a great question. Thanks. Thank you for that. Lee, described really well this kind of this big thing that happened around work from home. And I think in a certain way, if we could design a perfect product around the work from home environment it might be something around portfolio trading, where it kind of solves these issues around you know execution leakage, around information leakage. It solves these issues or uncertainty of execution. It's almost like a perfectly designed product for this moment in time. And we're seeing very clearly the results kind of following that.
We've talked a lot on these calls around net spotting and net hedging in the way that we've kind of created this lightbulb moment for clients. And we feel really good about the efficiencies and the dollar savings that we've provided for our clients. So as we've made this growth in credit that Lee has described, I would say for sure net spotting and hedging and portfolio trading, and then on some level we feel also equally excited about this rematch that we described, which is again we've always felt like from a market structure perspective create optionality, get into the wholesale business, get into the retail business because the market structures tend to change quickly. And we never want to be kind of left out in the cold as these changes happen. So we're going to be in front of all of this stuff.
And so these are the kind of thought processes and innovations I think that have helped us kind of grow the way we have in credit. So we feel ultimately to your question, we feel really good about where we stand around that. Listen around the competitive landscape and specifically maybe for a second in credit we've said very consistently that the market you know we feel like the market wants competition in this space and over -- the past you know period of time obviously we have built a significant business and we are clearly a competitive threat and a force in credit.
And I think I think there’s some version of kind of acknowledgment around that as we will see more entities getting into the credit space because it is as lucrative as it is -- it's as big as it is and I think we're going to see more entrants coming in. But we're going to focus always on what we do best which is problem solve -- with clients -- fill deficiencies for clients and get in businesses the right way. And thanks for the question.
Thank you. Our next question comes from Jeremy Campbell with Barclays. Your line is open.
Hey, thanks Lee -- I know you spent some time on rates already at a high level in response to Ari's question earlier but I just wanted to dig in a little bit on MBS since low rates puts MBS prepays into focus. Can you remind us first -- how overall refie originations and MBM prepayments correlate with the total MBA trading volume on the trading platform?
And then maybe second -- we spent some time spec tools with their low prepay characteristics and they're currently in demand -- I know you mentioned that that market was less than 5% electronic and you recently enhanced your electronic platform -- just wondering if you could provide some color around the client and demand for that enhanced platform and any you know goals and how quickly that platform could get some traction to meaningfully move that needle up from 5% electronic in that subsector?
Hey, thanks, Jeremy. You know what since Billy builds our mortgage business -- I’m going to let him take -- take this one and just chime in. But I -- you know I think we've got sort of the foremost expert on I think we’ve got sort of the four most expert on that space, on the call with us my partner Billy [indiscernible] can tackle that.
Yeah, I mean sure, sure, the question is a really good one, you described it really well. And what we are we have this really strong TBA mortgage trading franchise. We are very hooked into the originator community, the more refi the better. And this is a moment in time that kind of plays to that business very well. As we kind of move forward in mortgages around specified pools, what's interesting in some ways is that you know clearly our TBA focus and our TBA franchise is going to help us dramatically because we have the clients we have the end users, we’re connected we have the brand we have the credibility.
But what I would also say is in an obvious way specified pools trade on spread in a very similar way that corporate bonds trade on spread. And so the domain understanding of how these securities trade is very, very helpful to us as we kind of build out this specified pool platform going forward. We have all the kind of pieces of the puzzle and we're putting them together. And so are feeling or very confident as we kind of move forward with our specified pool platform.
Our next question comes from Alex Kramm with UBS. Your line is open.
Hey good morning everyone. Lee, I guess you mentioned or gave a, gave a quick look about October I think double digits overall was the comment you made since nobody else has ask I would be interested what additional color you can give us by, by asset class and cash versus derivatives. So we have a better idea how things are trending so forth in the fourth quarter? Thank you.
Oh, thanks Alex, always a tricky one right. So let me just say we still have a couple of very important month and trading days for October at a particularly interesting time for everybody. But the one comment I'd make is October is trending close to double digits in terms of revenue growth just rather than getting into the detail of volumes, which are can be confusing. I'm not going to get specifically into volumes we’ll release that next week.
We believe we continue to gain share across many of our products. Rates have seen a continuation of the themes that characterize the third quarter. Swaps are better but remain challenged. Mortgages and government bonds continue to grow. The credit space with IG and high yield those markets are running higher than September 2020 at really record levels for us. The acceleration was all network and other things. Money markets is particularly strong month growth in Repo.
Client focus on that. Equities is a good month for the ETF and derivative space. Overall our team our client onboarding and sales team has really been very busy engaging clients and our technology team of 300 plus are it is rolled out another software release recently and are continuing to crank out new features new functionality. And are working hard on the next set of innovations and enhancements so we're feeling pretty good about October, but we have two more days to go here. And but things have been as I said sort of in this trending towards a close to double digit revenue growth.
Thank you. Our next question comes from Ken Worthington with JP Morgan. Your line is open.
Hi, It’s Ken Worthington. Thank you for taking my question here. I wanted to ask maybe on the transition from LIBOR to other benchmarks like SONIA and [indiscernible]. To what extent is that having an impact on trading activity, are these transitions having any bearing on either usage or adoption of your trading, you're trading tools and products? Thank you.
I'll take that Ken. One of the challenges of solving in different locations is…
We can't look at each other…
…look at each other. Say, you’re going to -- and I’m going to take that one. So I'll start off and leave room for anyone to chime in on our team. So it's we've been the first in so many things. And I think we've clearly been preparing for this for some time as the market has. We just executed one of the first trades in SONIA. There was a link trade.
It's moving along. I think that you know we are -- we're ready, we're ready for this transition. The market is starting to make the changes over. And it's interesting because there's just so many other things happening in this market. It's probably not getting the attention it would in another scenario between the markets and the politics and everything else, but we are -- you know we are confident this is I don’t see this as a fundamental change for our business, it’s a pretty big change in general for sure, but we are well prepared for it.
I think the clients are by and large prepared for it, you know it’s like a lot of things that the larger firms are all over this and as you get to a smaller organizations they’re ready or getting ready, but there are some of them are a little bit further behind the firms that have a lot more to invest in -- in attention on these kinds of issues. But I don't see this as a material issue for Tradeweb and I think ultimately for the markets too. But I don't know if anyone wants to add anything from our team. We’re running out of time.
Okay. Thank you very much. I appreciate the response.
Thank you. And our next question comes from Ken Hill with Loop Capital. Your line is open.
Yeah. Thanks for taking the question. Lee, I just wanted to follow up at the end of your prepared remarks you mentioned you're spending a lot of time evaluating potential M&A opportunities. That’s hoping you kind of flushed that out a little bit maybe talk about what capabilities or opportunities you see in the market right now that might look more attractive given the cash build you guys have on your balance sheet. Thanks.
Sure. Well, look I mean the bottom line is we do spend a fair amount of time on this. We have a whole team that is focused on -- on M&A and you know the nonorganic side of things and we continue to look at a number of things where we're kind of given some direction on what we focus on. We're obviously going to be focused on what we think is strategically sensible, what fits our business.
You know we have as you mentioned we were very well aware of you know the cash building and the excess cash we’re sitting on. We believe the space is going to continue to consolidate. There will be a number of opportunities, we're always looking and this is a bit of a repeat from what I've said on, on areas where we can expand our network of customers. You know in the past week that's how we got into retail and the wholesale side.
We’re very focused on adjacent markets and expanding into adjacent markets new geographies and you know adding spec capability which as everyone is well aware you know there's a huge premium on tech talent across the board. So you know M&A is a way of getting a little bit more tech talent in the door so work we’re focused on that as well. Rob I don't know if you want to add anything in terms of M&A side?
Sure. Yeah sure I think one of things to that and you mentioned that it was we are building cash. We have we have a lot of credits, there’s $500 million that we haven’t drawn down. We certainly think we could go as 3.5 times maybe four times EBITDA and then in a net debt basis. All of that is to say that we think it’s really important at this moment given all the change to marketplace, we talk about consolidation and some other things over time that we in effect be ready for when we, when we want to pull the trigger that we have the right assets and capabilities to do that.
And it's part of what we're doing and we talked internally a lot about this is let's make sure that it meets what we describe as the things we're trying to grow but also meets all of the performance criteria that we need to meet in terms of understanding how we make an acquisition accretive as well. And so it's a bit of -- a lot of we're sort of ready and armed and spending a lot of time understanding what the opportunities might be.
Got it. Thanks for all the detail there, Bob and Lee.
Thank you. Our next question comes from Alex Blostein with Goldman Sachs. Your line is open.
Thanks for squeezing my question here. And I was hoping you guys could comment on the new approval you received with respect to your bank line business in China. You know maybe speak to what extent this improves the addressable market for you -- ultimately kind of the framework of thinking how that could translate into better revenue growth and the impact on the kind of profitability of that business? Thanks.
: Sure and thanks for that question. Yeah well -- look -- let me just set the stage where we're still in the early stages of evolution of the market. Such as -- you know more foreign institutions are connecting to bond-connect via a Tradeweb -- remember we start -- we were the first ones right. So we were over there many years ago, but really was 2017 that we opened up this channel for our customer base and we now have -- I don't know close to 400 institutions and over 1,700 funds.
The newest initiative you know the access to the CIBM the China interbank bond market -- you know that -- that's a relatively new channel northbound channel -- which gives all of our clients the electronic access for price discovery -- transparency efficiency and for prices coverage addition that’s going well. We think the opportunity is very exciting.
China is the third largest bond market in the world, $13 trillion of debt and yet is less than 3% in foreign hands and when you compare that to the US, which is like 30%. So we've invested with boots on the ground. We've got our office opened in Shanghai to capitalize on this first mover advantage. We got streaming prices we’re really kind of getting our feet underneath us with respect to China and we see it as a really big considerable opportunity, it's about innovating. So it's not just that we were the first in 2017.
But now we've got a messaging tool that's integrated as the index inclusion grows. We see Chinese bonds becoming increasingly more part of the global benchmark. We've got Putsy Russell in. So I think this is a huge opportunity. But as I've said before it's a little challenging to forecast timelines. A lot of it will be down to liberalization and from the Government in China. And the market's acceptance of this huge amount of debt. But we can -- we continue to invest there. We continue to see it grow and think it's a very significant opportunity for us.
Thank you. And our last question comes from Kyle Voigt with KBW. Your line is open.
Hi thanks for taking my question. Maybe just a question on credit trading. I think one of your private competitors is seeing significant success in new issue trading and you’re the largest public competitors also launching a CLOB like offering to address that more liquid part of the corporate bond market. So just wondering if we can, can update on the strategy for attacking that more liquid part of the market and also wondering if you're seeing any institutional client demand for a CLOB or CLOB like trading for US credit.
Hey it's Billy, so, so listen you know I'll make the joke that we're not going to give away too many kind of company secrets exactly in this form. But we’re, we're watching all, all of the developments around new issuance in the way that you would expect us to. And it's certainly a business that we've that we've looked at and that we're sizing up and that that we are very well aware of.
In terms of your question which is a good one around sort of you know the central limit order book pricing in credit that's a little bit kind of if you think about it that's a little bit out of our rates playbook. And it's a type of business that we know extremely well. So again kind of eyes wide open we are very well aware of how things are developing in that space.
We are going to kind of continue to do what we sort of are focused on in credit and some of those things I would describe around kind of continued innovation around portfolio trading. We love the concept of access and inventory and credit and we are going to have kind of eyes wide opened around potential kind of changes in the market structure around credit. And we are certainly aware of everything that's happening around from pricing.
Thank you. And at this time I would like to hand the call back over to Mr. Lee Olesky for any further comments.
So I would just, I thank you guys all for just joining us this morning and for your thoughtful questions and we look forward to talking to you after our fourth quarter and we are through some really interesting period of time here, especially in the US and also in Europe. So stay well and thanks for joining us this morning. Take care.
Ladies and gentlemen this concludes today's conference call. Thank you for your participation. You may now disconnect everyone have a wonderful day.