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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 Fourth Quarter 2020 Earnings Conference Call. As a reminder, today's call is being recorded and will be available for playback.
To begin, I'll turn the call over to Head of U.S. Corporate Development and Investor Relations, 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 will dive a little deeper into some growth initiatives; and Bob Warshaw, our CFO, who will review our financial results.
Our fourth quarter's 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 2021 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. Please see our posted earnings presentation for more details.
To recap, this morning we reported GAAP earnings per diluted share of $0.28. 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 $0.34. Please see the earnings release and the Form 10-K 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 fourth quarter earnings call.
Since our inception, we have combined the creativity of our employees, power of our technology and depth of our network to collaboratively innovate with our clients to simplify their workflows across the fixed income and equity markets.
In 2020, the shockwaves created by the COVID-19 pandemic further illuminated the importance of Tradeweb as a critical marketplace, as we have helped our clients seamlessly shift their workflows remotely, often to their kitchens and bedrooms and trade more than a trillion dollars in volume on a number of days, a feat that would have been unthinkable only a few years ago.
We believe the acceleration of digitization that we saw in 2020 is here to stay and we remain excited about the opportunity ahead of us to drive further innovation across our markets. We believe the defining trends underpinning our growth, such as technological advances, globalization of debt, growth of ETFs, focus on cost reduction and data-driven trading have a long runway.
We remain laser focused on responding to these trends, as we strive to be the primary electronic price discovery and trading platform for our clients, as they look to efficiently discover the best price across rates, credit, OTC equities and money markets.
Turning to Slide 4, the acceleration of digitization I just described was on display, as we reported the strongest fourth quarter in our history hitting new market share and volume records across a number of products.
Specifically gross revenues of 233 million during the fourth quarter of '20, were up 18.1% year-on-year on a reported basis and 15.9% on a constant currency basis. The revenue growth and the resulting scale translated into improved profitability year-on-year, as our fourth quarter adjusted EBITDA margin expanded by 231 basis points to 49.2%.
Turning to Slide 5, this quarter was marked by strong performance across many of our asset classes. Credit again posted record quarterly revenue growing 36.1% year-over-year and exceeding 25% of total quarterly revenue for the first time, led by a record market share in U.S. high yield and investment grade.
Rates revenue increased 13.2%, as cash rates posted its second highest revenue and volume quarter, as record central bank issuance continues to fuel global government bond trading and low interest rates drive higher refinancing activity, thereby boosting mortgage trading.
Despite the low interest rate environment, we saw slightly increased rate volatility around the election and positive news around several COVID-19 vaccines, which helped to amplify the market share gains we have made in swaps.
Equities grew by 28.7% with strong ETF trading and our efforts to diversify beyond ETFs are paying off. Money market revenues were up 3.5%, as organic growth in institutional repo more than offset strong rate headwinds in the retail sector. Finally, market data was up 7.8% driven by growth in both our Refinitiv, redistribution license and proprietary data products.
Turning to Slide 6, our strong fourth quarter capped off a record year in 2020. Record volumes across asset classes translated into 15.1% and 14.5% revenue growth on a reported and constant currency basis, respectively.
As a result, we recorded our 21st consecutive year of record revenues. The scale generated by our strong top-line results drove approximately 336 basis points of EBITDA margin expansion and 31% earnings growth. And as our growth initiatives continued to scale, we maintained our tradition of consistent and focused organic investment.
2020 was a very busy year. In rates, we launched our enhanced specified pool mortgages platform after collaborating closely with leading mortgage originators, and in IRS, we expanded our protocol offering with RFM, client base in APAC and product offering with five new EM currencies.
In U.S. Treasuries, we continue to onboard new clients and enhance our streaming offer. In money markets, we added new repo collateral types and expanded into tri-party repo. In credit. We continue to drive innovation, as we connected our three liquidity pools by launching our latest all trade anonymous protocol, ReMatch.
We believe this could be another potential game changing protocol, built on the success session trading. We also continue to invest in enhancing our net spotting, portfolio trading and all-to-all functionality. And last week, we announced the roll out of our multi-client net spotting offering, the next generation of net spotting.
Finally, in collaboration with CFETS, we marked another milestone in our relationship by becoming the first trading platform to offer foreign investors, electronic RFQ trading in the Chinese onshore bond market through CIBM Direct. This new channel complements our existing BondConnect offering, which we launched in 2017. We are in early innings of building out CIBM Direct, together with our partners at CFETS, and are seeing strong interest from liquidity providers and clients.
Asia remains a key focus region for us. We hired James Sun, who will be based in Shanghai and lead our Asian business. And in December, we made a small minority investment in Sumscope, a fixed income information service provider for the RMB market in China. We will be integrating additional pricing analytics into our trading offering to ultimately increase foreign participation in both BondConnect and CIBM Direct.
Additionally, we executed several partnerships working with CBOE to support EFP trading on the high yield bond index futures, augmenting our Refinitiv data relationship by adding EM IRS and supplying swaps pricing data to power the ICE swap rate, a key benchmark used to price swaptions and other rate-linked structured products. These investments have not only positioned us for the future, but also helped make 2020 another banner year for Tradeweb.
Moving now to Slide 7, revenues grew by 15.1% continuing the streak of double-digit revenue growth that we have worked hard to deliver for multiple years now. Our recent revenue growth trends are very similar, and since 2016, we have averaged 14.6% growth.
One aspect of our performance since 2016 that we are very proud of and think will become increasingly important in the coming years is the rapid growth of our international business, which continued its double-digit growth in 2020, to now comprise 36% of our revenues.
Relentless innovation has been critical to our success. Throughout our history, we have prized being first, which requires constant investment. In the last five years, we have invested over $318 million in technology to help shape the future of electronic markets, growing those investments at an average of 11% since 2016.
And as our investments bear fruit, EBITDA margins have expanded substantially given the high incremental margin nature of our business model. It is these investments that have allowed us to not only rapidly grow our leading rates business, but also successfully diversify into multi-asset and global electronic trading network.
Today while the majority of our revenues come from rates, the vast majority of our growth actually comes from our other businesses. Credit in particular has been a highlight accounting for 43% of our revenue growth in 2020. In fact, with the exception of 2019, the majority of our growth since 2016 has been driven by the combination of our credit, equities, money market and data business.
Looking ahead, while our investments are heavily concentrated in rates and credit, we remain very optimistic about our growth prospects across the business, given our pipeline of innovations, the ever-increasing stock of global debt, and an improving macro backdrop.
Moving onto Slide 8, we wanted to spend some time on growth drivers behind our four asset classes. From our early roots in U.S. Treasuries, we have strategically diversified the rates franchise into global government bonds, mortgages, and more recently, interest rate swaps.
We believe there remains a lot of runway across both our cash and derivative products, which have grown revenues at a combined average annual rate of 11.5% since 2016 in a low rate environment.
We have now successfully operated in a zero rate environment for nearly a year and the Fed currently doesn't anticipate hiking rates until 2023. This environment is not new to us. The last rate cycle started in December 2008 and lasted significantly longer in the U.S. and was more challenging. Despite seeing several of our major clients merge or restructure and Lehman declare bankruptcy, we were able to grow rates revenues at 9.7% annually on average before the Fed hiked rates in 2015.
Our formula for growth has always been the same, continue to move rates markets electronic, position the firm to respond to the massive surge in stimulus given global government debt issuance and enhance our rates franchise with strategic acquisitions. This time around, the banking system is healthy, as evidenced by the Fed recently allowing buybacks and dividends, but just like the last crisis, government debt issuance continues to surge.
And as we emerge from the pandemic into a higher and more volatile interest rate environment, we believe our opportunity set is greater than ever given our mix of organic growth initiatives, and more importantly, as digitization accelerates over the next few years.
Let's move on to Slide 9. We saw a great opportunity to add more value to the wholesale U.S. treasury market and announced an agreement to acquire Nasdaq's U.S. fixed income electronic trading platform. The Nasdaq platform, formerly known as eSpeed is a fully executable central limit order book for electronic trading in on-the-run U.S. Treasuries and will become a part of Dealerweb, serving the wholesale sector.
We have a long track record of success when it comes to U.S. treasuries. In fact, institutional U.S. treasuries was the first electronic market we started at Tradeweb more than 20 years ago. Since then, we have brought a lot of innovation to the space, from RFQ in the early days, to AiEX and RFM, more recently. In the wholesale market, we have innovated with streams, which Billy will talk about in a second.
Strategically, the acquisition accelerates our efforts to grow wholesale CLOB and significantly expands the number of market participants connected to Dealerweb, which includes primary dealers, principal traders, broker dealers and hedge funds.
We are also excited to give our clients more choice with a liquid CLOB to complement their streaming activity and lower their connectivity costs. Finally, we believe we will be able to enhance our U.S. Treasury data offering with depth of book data.
Financially, this deal comes at a good price, and we believe we can improve EBITDA margins to Tradeweb's adjusted EBITDA margin or higher exiting the first year of a two year integration period.
To summarize, this acquisition will be accretive to adjusted earnings right away, accretive to our adjusted EBITDA margins, and another growth driver to our U.S. Treasury offering and also leave us with ample flexibility to pursue future transactions. Our corporate development team continues to be busy evaluating various opportunities globally.
I now want to turn it over to Billy to discuss some of our organic growth initiatives in rates and credit.
Thanks, Lee, and thank you, everyone for joining the call.
As we think about building marketplaces, we pay a lot of attention to creating great feedback loops with our clients. And a great feedback loop to us is centered on listening to our clients across sectors, protocols and geographies. It is this collaborative approach that has sparked innovation and allowed us to re-imagine client workflows to drive organic growth. And we believe our organic growth story continues to have a strong multi-year runway.
Turning to our organic opportunity set in rates on Slide 10. In U.S. treasuries, our market share increased by 150 basis points to a record 13.8% in 2020. Looking ahead, we are focused on driving our share higher across both the institutional and wholesale market. We are investing a lot of effort in driving the adoption of early stage streaming protocols that are becoming more impactful as technology advances.
Today market makers are able to manage risk across multiple liquidity books, fueling changes in client behavior. In institutional treasuries, Tradeweb plus and RFM are seeing increased client adoption complementing the great growth we are seeing in RFQ. In the wholesale market, our streaming protocol continues its strong growth, as market participants increasingly use streaming protocols to complement their CLOB activity.
Even with the rapid growth in streams, the CLOB today accounts for the majority of their electronic wholesale activity allowing market participants to passively rest orders in an order book to manage risk.
As such, the acquisition of the former eSpeed business is another example of investing to improve our feedback loop and gain another window into client behavior. Looking ahead, we are excited about the opportunity to provide our wholesale clients with a seamless offering across both the CLOB and streaming protocols.
In mortgages, we see our leading position in the TBA market as an ideal foundation from which to offer electronic specified pool trading, given the similar client and dealer set. We launched our enhanced specified pool platform last year that was designed in collaboration with leading mortgage originators.
The specified pool market traded 26 billion, a day on average in 2020. While the specified pools market is roughly one tenth the size of the TBA market, pricing in specified pools is higher than our existing mortgage franchise.
Electronification levels today are also quite low at less than 5%. Looking ahead, we believe the frequent and spreadsheet driven nature of the specified pool market makes it well suited for automation. Our solution is resonating well and we are seeing a lot of interest from existing and new clients.
In swaps, the secular growth story hasn't changed. Swaps remain a critical component of the Tradeweb story and one with considerable room for growth in innovation. The business outperformed the overall market in 2020 again as our market share increased by 140 basis points to a record 9.3% driven primarily by gains within core IRS. This is our main market of focus accounting for 80% to 85% of industry revenues.
We continue to innovate by responding to structural changes in the swaps market, be it the growth of EM swaps clearing or the transition to alternative reference rates. We are driving adoption of new protocols like RFM, new products like electronic FRAs and packaged swaps and expanding regionally in APAC.
During the fourth quarter, we facilitated the first electronic SONIA swaps package trade and recorded new market share milestones in FRAs, as we continue to expand the client base. We also saw dealers go live as liquidity providers for Hong Kong, Mexican and Indian swaps.
Finally, we are investing in our leading automated trading capability AiEX. For some of our clients, the telephone is going away and being replaced by the mouse. For others, the mouse is now being replaced with algorithms that is where AiEX comes in. We are helping our clients navigate the growing complexity involved in staging orders with rules based trading.
For years, dealers have invested in auto-quoting capability. AiEX allows the buy side to interact with dealers and smartly find the other side of the trade in an automated fashion. Since 2016, the number of AiEX trades have grown by 30% annually on average across rates with growth across all products.
As clients become more comfortable with automation, we believe they will increasingly automate more of their trades and focus on more complicated trades and client relationship management.
Turning to credit on Slide 11. Our journey from challenger in 2016 to trailblazer in recent years powered credit to become our largest growth driver in 2020 with revenues growing by 31% to nearly 60 million in the fourth quarter. Credit is another example of a powerful feedback loop driving serial innovation.
From our roots, as a leading retail venue, we have successfully diversified to serve the entire corporate credit market. In fact, institutional trading now comprises the vast majority of our market share and revenues in the U.S. Our overall electronic market share reached record levels of 10.6% in investment grade and 4.5% in high yield in December as our institutional network continues to grow and wholesale solutions continue to provide an alternative to voice trading.
While conditions have improved slightly of late, our retail business continues to face headwinds from the lower yield environment. This has reduced the attractiveness of bonds for financial advisors. However, our retail middle markets business, which caters to institutional traders transacting in smaller size continues to set new records and grow.
The growth in electronic trading on our platform is being fueled by growth in both disclosed RFQ and our innovations across our all trade, net spotting and portfolio trading offerings. These innovations proved to be a great asset to our clients during March, when volatility exploded and in the remote working aftermath. We believe our technological innovation has permanently influenced client trading behavior. But there remains more to do, as we work together with our clients to improve execution in the credit marketplace.
All trade, including all-to-all RFQ and a suite of anonymous protocols connecting liquidity between our three client sectors continues to see increased adoption. Clients traded a record 199 billion or nearly 800 million daily to optimize price discovery using all trade, an increase of 44% year-over-year.
Our investments to grow our all-to-all network and improve functionality continue to pay off, driving record volumes in 2020. Additionally, we integrated our AiEX rules based trading solution into RFQ all-to-all list trading leading to record credit AiEX volumes over the course of the year.
Session trading, another key all trade protocol continued to grow as well. We capitalized on the success of session trading to launch our latest innovation ReMatch, a protocol, which enable unmatched inquiries at the end of a wholesale session to be matched by our institutional all-to-all platform as well by offsetting retail liquidity.
Currently, less than 5% of total session trading inquiries are filled on our platform creating a tremendous opportunity for us to help our clients find the other side of the trade. ReMatch is still very early in its roll out, but early progress has been encouraging.
Another light bulb solution for Tradeweb has been our electronic spotting and net spotting offering. The ability for clients to electronically link corporate bonds with underlying treasury hedges emerged as a critical tool in the dispersed working environment of 2020.
As you can imagine, clients wanted to avoid dealing with manual errors, price slippage and delays. As a result, our advanced net spotting offering saw another record year with over 325 billion or 1.3 billion daily, up substantially from 2019, as clients increasingly eliminate the efficiencies of manual processes.
As Lee mentioned, we recently rolled out multi-client net spotting. This will greatly advance our existing offering, clients will now be able to net their hedging activity across not only dealers, but also other clients at the same time enhancing trading and operational efficiency. This is the next generation of net spotting, which we believe will extend our lead against competitors today with basic and spotting functionality.
Moving to the bottom half of the slide, portfolio trading and CDS trading, which is primarily comprised of Index CDS are two ways in which we are participating in the explosion of passive investing. Portfolio trading, in particular continues to attract more client.
Client behavior is changing, as they increasingly embrace the protocols ability to provide price discovery for numerous bonds quickly. This allows them to execute large complex trades at a competitive cost with pricing analytics and audit trails built into the process.
Tradeweb facilitated 146 billion single and multi-dealer portfolio trades in 2020 with average daily volume up 240% year-over-year. Adoption is accelerating and our October in-comp volumes were higher than all of 2019 combined.
As comfort with the protocol grows, we are seeing growth accelerating globally across Europe and EM credit. Clients are increasingly putting dealers in competition and increasing the size of their trade. As a result, the number of line items in portfolios on our platform also hit a new record.
Finally, our credit default swap business posted its strongest year on record with volumes up 59%, as we continue to gain more market share globally and benefited from higher levels of volatility in the first half of 2020. We remain focused on driving our share higher by expanding our product set. Today 99% of our volume is comprised of index CDS, but we are also seeing growing adoption of electronic single name CDS trading with volumes up 40%. We are also seeing a rise of EM sovereign CDS, with volumes up 350% from 2019.
With that, I'll turn it back to Lee to talk about equities and repo business.
Thanks, Billy.
Moving on to Slide 12, we wanted to provide you with some color on the smaller, but rapidly growing and important areas of our business. These are all great examples of how we connect the dots at Tradeweb and maximize the power of our multi-asset class network.
Billy talked about how we are responding to market structure changes in credit driven by the growth of ETFs. We are also directly capitalizing on the secular growth and passive investing globally with our RFQ ETF platform. Tradeweb's global ETF volumes have increased by 42% annually on average since 2016 led by both equity and fixed income ETFs.
Together with portfolio trading and index CDS, our passive trading electronic solution allows clients to take macro views in an efficient manner across asset classes and products. And while the shift towards passive investing is more than 20 years in the making, fixed income ETFs today only comprise approximately 20% of the 7 trillion outstanding and according to BlackRock are set to grow by more than 30% and exceed 2 trillion by 2024.
Sophistication is increasing. Today fixed income specialists oversee fixed income ETF trading. This stands in stark contrast to the days when they were traded by equity specialists. Simultaneously, non-bank market makers have also become increasingly important, as liquidity providers to ETF RFQs on our platform. ETFs have become an important instrument for both equity and fixed income traders looking to manage beta, exposure or equitize cash.
In fact, fixed income ETFs functioned as a strategic tool for institutional investors during the crisis - during the most recent crisis, given their reliable liquidity particularly in credit markets, with broker dealers and market makers routinely using fixed income ETFs to manage inventory, facilitate large client trades and hedge risk. And while we believe we are well positioned to cater to changes in market structure driven by the growth in fixed income ETFs, our solution is designed to trade any ETF.
During the fourth quarter, equity ETFs comprised 61% of our global volume with fixed income contributing 36%. Clients continue to increasingly leverage our intelligent pre-trade liquidity provider selection, robust electronic audit trails and deep integration with OMS providers. Moreover, similar to rates and credit, AiEX has also resonated strongly with European and U.S. ETF clients. We traded 74% and 44% of their trades automatically, respectively during the quarter.
We've come a long way from as recently as six years ago, when Tradeweb was a relatively unknown name on equity trading desks. Today, we are expanding our collaboration with clients and leveraging our leadership position in ETFs to selectively expand into other areas with manual flows.
There are lots of trades that are still done over chat or phone. Areas of focus include block trading for equity options, especially options on ETFs, Delta 1 and U.S. convertible bonds. In sum, our equity offering remains dynamic with a lot of room for future growth, as we benefit from secular tailwinds in the ETF industry and targeted expansion across the equity ecosystem.
Turning to repos, as the industry's leading multi-dealer to client repo trading platform, we brought much needed speed and efficiency to the repo market. The repo platform is another example of how we connect the dots at Tradeweb, as trades are primarily collateralized by U.S. treasuries and mortgages. Repos posted its strongest volume year on record, as clients show increasing interest in automating manual workflows in a post-COVID world. We believe electronification of the repo market to be at about 20% to 25%, with the U.S. actually being lower than Europe.
We continue to invest to build out a full scale institutional electronic repo offering in the U.S. and Europe. We recently launched Canadian agency and FICC sponsored repo and upgraded the user experience for our tri-party offering.
Looking ahead, we are excited about future collateral roll outs and product enhancements. We are also investing to grow our electronic wholesale repo platform by adding functionality and both growing and onboarding our pipeline of clients.
At the end of the day, it all comes down to the pursuit of efficiency. The definition of efficiency changes, as technology advances, regulation changes and market structure evolves. At Tradeweb, we are laser focused on identifying inefficiencies challenging our client base and being the first to respond to them when it makes financial sense. The wheels of innovation then continue to turn, as we focus on maintaining our thought leadership by continuously streamlining workflows to make it easier for market participants to trade. Multi-client net spotting is just the latest example of our serial innovation.
As you can hopefully tell, we have a number of initiatives underway across our asset classes and especially in rates and credit, our two biggest growth drivers that we believe positions us well for the future. And we hope to add to this by continuing to announce many more firsts for Tradeweb and electronic trading in 2021 and in the coming years.
With that, let me turn it over to Bob to discuss our quarterly financials in more detail.
Thanks, Lee, 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 our volumes on Slide 13. We reported quarterly total ADV of nearly 898 billion, up 30.9% and up 29.7% when you exclude short tenor swaps. Areas of notable growth include U.S. and European government bonds, mortgages, U.S. corporate credit, Chinese bonds, ETFs, equity derivatives and bilateral repo.
Slide 14 provides a summary of our quarterly earnings performance. The record fourth quarter volumes translated into gross revenues increasing by 18.1% on a reported and 15.9% on a constant currency basis.
We derived approximately 37% of our revenues from international customers, and recall that approximately 30% of our revenue base is denominated in currencies other than dollars predominantly in euros. Our variable revenues increased by 27% and our total trading revenue increased by 19.3%.
Total fixed revenues related to our four major asset classes continue to grow, up 6.5% and 3.7% on a constant currency basis. Credit fixed revenue growth was primarily driven by the addition of new dealers in U.S. credit and additional clients in Chinese bonds.
Equities fixed revenue growth was driven by the addition of new dealers and the impact of FX. Other trading revenues, the vast majority of which are tied to our retail business was up 4% driven in part by periodic revenues tied to technology enhancements performed for our clients. Market data increased by 7.8% led by Refinitiv, APA and proprietary data products.
Adjusted EBITDA margin came in at 49.2% and extended nicely by 231 basis points relative to the fourth quarter 2019, as we continue to benefit from scale. All in, we reported adjusted net income per diluted share of $0.34.
Moving on to fees per million on Slide 15, the trends I'm about to describe are driven by a mix of the various products within our four asset classes. In sum, our blended fees per million decreased 3% year-over-year, primarily as a result of continued growth in T-bills and institutional repos. Excluding lower fees per million short tenor swaps and futures, our blended fees per million were down 2% 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 were up 1% overall. For cash rates products, which include government bonds and TBAs, fees per million decreased 10% primarily due to growth in the institutional T-bills, which carry a lower fee per million than the cash rates average.
For long tenor swaps, fees per million were up 32% primarily due to an increase in average maturity as well as less compression activity. In other rates derivatives, which includes rates futures and short tenor swaps, average fees per million decreased 7% due to growth in OIS which carries lower fees per million than FRAs.
Continuing to credit, average fees per million for credit increased 3% overall. Drilling down on cash credit, average fees per million decreased 4% due to a record quarter for Chinese bonds, which carry significantly lower fee per million than the cash credit average.
Looking at the credit derivatives and electronically processed U.S. cash credit category, fees per million increased 3% driven by increased volumes in single name CDS, which carry a higher fee per million than the credit derivatives average.
Continuing with equities, average fees per million for equities were down 5% year-over-year overall. For cash equities, average fees per million decreased 10% due to growth in wholesale ETFs, which carry lower fees per million than institutional ETFs. Equity derivatives, average fees per million decreased 6% due to mix shifts towards U.S. options and futures, which carry lower fees per million than the equity derivatives average.
Finally, within money markets, fees per million decreased 35%. This was primarily driven by mix shift away from high fee per million retail CDs given the low interest rate environment and towards bilateral repo, which reached record levels and continues to grow rapidly. Institutional repo carries a lower fee per million than other money market products.
Slide 16 details our expenses. At a high level, we continue to invest for growth. There has been no change to our philosophy here. In the last two years, we have grown our adjusted EBITDA margins by 810 basis points all the while growing our expense base, as we invest for the future.
As a reminder, adjusted expenses excludes non-cash stock-based compensation expense related to options issued primarily as a result of the IPO, acquisition and Refinitiv related D&A and certain FX related gains and losses.
Adjusted expenses for fourth quarter increased 11.8%. Recall approximately 15% of our expense base is denominated in currencies other than dollars predominantly in sterling. Fourth quarter 2020 operating expenses were higher as compared to fourth quarter 2019 due to increased employee compensation costs and technology and communication expenses, partially offset by lower G&A.
Compensation costs were higher year-on-year due to higher headcount, as well as higher performance-related compensation. Adjusted non-comp expense increased 9.4% on a reported basis and increased 8.3% on a constant currency basis.
Specifically, technology and communication costs increased primarily due to higher clearing and data fees, as a result of higher all trade volumes in credit and streaming U.S. treasury volumes, which continue to grow. In addition, this quarter also saw the continued impact of our previously communicated investments in data strategy and cyber security.
General and administrative declined primarily due to less travel and entertainment expense, but came in slightly higher than our guidance given unfavorable movements in FX and an opportunistic increase in marketing spend to drive higher client engagement.
Slide 17 details capital management and our guidance. First, on our cash position and dividend policy. We ended fourth quarter in a strong position holding $791 million in cash and cash equivalents and free cash flow reached 400 million for the trailing 12 months.
As mentioned earlier, we will be spending $190 million of our excess cash balance to acquire Nasdaq's U.S. fixed income electronic trading platform. Our primary preference for investing excess cash remains strategic M&A.
With this quarter's earnings, the Board declared a quarterly dividend of $0.08 per Class A and Class B share and authorized a $150 million share repurchase program, which we plan to use primarily to offset annual equity grants. We have access to a $500 million revolver, that remains undrawn, as of quarter end.
CapEx and capitalized software development for the year was $42 million, a decrease of 4% year-over-year below our expectations due to timing of investment spend and COVID-19 related delays by vendors.
Turning to guidance for 2021. We will continue to invest in 2021 and are expecting adjusted expenses to range from $530 million to $560 million. Our guidance does not include any expenses tied to our recently announced acquisition. We will update our guidance following the closing of the deal. The midpoint of this range would represent an approximate 9% increase, which is in line with our average expense growth from 2016 of 9%. We believe we can drive EBITDA and operating margin expansion compared to 2020 at either end of this range.
As Lee and Billy described, we continue to invest for the future with credit and rates being key focus areas with a long runway for growth. We are investing in introducing and driving new protocol adoption, launching new products and expanding our geographic reach. Some of these investments will take some time to scale, but we continue to price, innovation leadership and have a technology pipeline that continues to grow.
We expect G&A expenses to ramp through the course of the year to 2019 levels, with the resumption of T&E in the back half of 2021 and additional targeted marketing expenditure to drive higher client engagement. We expect technology and communication expenses to grow from fourth quarter 2020 levels driven in part by $3 million in additional investments in data strategy and infrastructure. Additionally, we expect continued growth of credit all trade and our U.S. treasury streaming platform.
Our guidance incorporates FX movements, for example, the recent depreciation in the U.S. dollar. For forecasting purposes, we continue to use an assumed non-GAAP tax rate of 22% for the year. We expect CapEx and capitalized software development to be about $45 million to $50 million. Acquisition and Refinitiv transaction related D&A, which we adjust out due to the increase associated with pushdown accounting is expected to be $120 million.
Finally, on Slide 18, we've updated our quarterly share count sensitivity for 2021 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.
As many of you will attest to, 2020 was a very challenging year with a devastating health pandemic coupled with numerous political climate and social challenges. That being said, we are thankful to those on the frontline and scientists behind the vaccines, who have worked tirelessly to get us through the pandemic.
I've never been prouder of Tradeweb team, which thrived while working remotely. 2020 was another record year marked by numerous milestones for the company and our products. We continue to expand our opportunity set across all of our businesses, and we're very excited by the potential we see for Tradeweb over the next few years.
We are extremely focused on capitalizing on the various growth opportunities ahead of us and continuing to strike the right balance between investing for the future and driving margin expansion to create long-term value for our shareholders.
The markets that we operate in are fundamentally changing, as we speak. And this current pandemic further demonstrates the importance of Tradeweb, as a critical marketplace for our clients to transfer risk. We believe the digitization of fixed income is accelerating. And as we've seen in numerous times in the past, behavioral change is very sticky. There remains plenty of room for digitization to increase and this technology fueled transition will continue to play out for years to come.
Our network continues to deepen, as we innovate and connect the dots between different asset classes, sectors, protocols and regions. We believe it's this diversity that positions us well to both participate in and lead the next generation of progress. The momentum from 2020 is carried over into 2021. We've made several investments in our future to start the year investing in Asia, launching multi-client net spotting and announcing the acquisition of Nasdaq's U.S. electronic fixed income business.
Our existing organic growth initiatives continue to payoff with January volumes reaching a new record. Specifically, our volumes increased by 29% year-on-year, with broad-based growth across our four asset classes and new volume records in U.S. treasuries, mortgages, U.S. high grade, high yield credit, European credit and Chinese bonds. Additionally, we captured a record 20.5% of the entire U.S. high grade TRACE market.
I would like to conclude my remarks by thanking our clients for their business and partnership in the quarter, and I want to thank my colleagues for their efforts that contributed to our strongest fourth quarter in history and a record year for Tradeweb.
With that I will 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 around 10:40 Eastern Time.
Operator, you can now take our first question.
[Operator Instructions] And our first question comes from Rich Repetto with Piper Sandler. Your line is now open.
So the - my question is on the Nasdaq fixed income acquisition, and you certainly made a compelling case how a CLOB or a central limit order book fits with your multi-channel, your Dealerweb, but there has been a - there was a dramatic deterioration in revenues there from 100 million back in 2012 to 23 million. So I guess, given you can do a lot of things with it, but could you identify like what was the drop off because you can't - that would be important to fix too, I guess. And I heard pricing was an issue or at least in years past?
Good morning, Rich. It's Lee. I'll take a crack at that. That's a good question. Yeah. So look we're very excited about this deal. This is a space, the treasury market that we've been active in for over 20 years is where we started the business, and we have a full complement of our team between sales, product, right up to Billy and I, that have been very involved in the treasury space for many, many years.
So it's also - it's core to our focus. So without any too much analysis of what happened when it was in Nasdaq's hand, I think it's pretty clear to say that this is our sweet spot. This is one of our core markets.
And in terms of the asset itself and what we're acquiring a liquid CLOB is really complementary to everything else we're doing. We think it's important to offer our customers a variety of solutions. In fact, just about every different way they could trade their treasury. So we've now offered this central limit order book with some real liquidity there.
We've also - with the asset extended our client reach, so we're adding customers connected up. And we think as with other situations or platforms, the market is interested in competition. The market wants to have meaningful competitors in the space. So we've got the sort of breadth of the treasury offering now somewhat completed, and we're essentially now in a position, where we can offer clients a single API to connect to both the streams that we have today.
And the order book, we think that's a - cost savings and advantage for our clients. We think the multi-protocol approach to the treasury market is a key differentiator that we'll offer. It didn't exist in its former structure.
So we now complement everything else we're doing in treasuries with essentially the same - is the same marketplace, a lot of the same customers, we add customers, and we think we'll be able to really ramp this up and bring it to a competitive footprint with the leader.
I guess, I would add my own experience as soon as a long time ago, but I actually started broker tech. So I go way back in terms of this space with treasuries, as is Billy. So we have a focus on this from the absolute top of the organization and a number of individuals, who are focused on selling and product design, service to clients, in addition to the technology, right. So we've got a tech advantage here.
And then, after a couple of years, we'll be on the same CLOB that we've previously built. So there is a real efficiency play there as well. So we're pretty excited about it. We think we can turn the asset around and bring it to a very competitive footprint and really complement our whole offering in the treasury market.
Our next question comes from Ari Ghosh with Credit Suisse. Your line is now open.
Billy, maybe one for you. So there's been a lot of news flow around Bloomberg starting to charge the trading and rethinking other pricing, so they can invest more to announce their platform. Just curious what you're hearing in the market and from clients and potential implications for feedback?
Sure. Hi, Ari, how are you? I think it's been about a year since we've got a chance to meet you in person. It feels like about 15 years since that year has kind of gone by. But thanks for the question. And obviously, it's great to hear your voice.
I've kind of said this before Ari, and I know, you've heard Lee say this as well, we grew up essentially from day one competing with Bloomberg whether or not that was U.S. government bonds, European government bonds, global swaps, it's been kind of us and Bloomberg kind of shoulder to shoulder together for a long time. So we know the company well, healthy, obviously healthy respect.
Without sort of getting into sort of the absolute specifics around what their pricing change is and how it's being received, a couple of sort of high level points that I would make is always difficult to make a pricing change. So eyes wide opened, that's always a difficult thing to do.
And then I would just say, given the work from home environment and all of that it probably on the edges make some of those conversations sort of in a certain way even more difficult. So just kind of pointing that out as kind of context.
But in a specific way, Ari, we're going to continue to do kind of what we do really well, which is collaborate with the marketplace, continue to solve for problems, partner with the most important participants in the market and kind of do things that we've done to kind of get us here. So we always have or I kind of on the competitive landscape, but at the end of the day, also understand what we do best and kind of continue to do that.
The other point, I would just kind of make very quickly is, you've heard us talk very specifically around this big important kind of trend around the acceleration of the movement from low touch to no touch. And we'll continue to play a leadership role in that through AiEX, and we think that's a very important trend going forward in the marketplace. And thank you for your question.
Our next question comes from Ken Worthington with JPMorgan. Your line is now open.
The Refinitiv deal with LLC has just closed and my fingers are crossed here that this may be better allow you to comment. But given the relationship between LLC and Tradeweb now and unique capabilities at LCH, are there opportunities to trade - for Tradeweb to work with LLC and LCH to further innovate in rates. And if there are any chance you can give us some high level hints on areas, where you might see opportunities?
I'll take that. Hey Ken, how are you? Thanks for the question. Right. So the deal has closed and in some respects, our mission stays consistent right. We're trying to build the most efficient market ecosystem and provide clients with the - a full suite of pre-trade, trade and post-trade services. And we've - as part of our history, I think we've said this probably repeatedly, we work to collaborate with our stakeholders. We've been doing that for many, many years.
So whether it's Refinitiv or LLC, our motivation is to innovate, improve transparency into the financial markets and bring down the costs. So we'll be studying that and looking for ways to collaborate and work together.
We've got one thing we've done with them was the FTSE Russell, where we're producing end of day gilt reference prices. It's just an example of something that we've done with them. And I think that the broad statement is that like we've done with all of our owners in the past, when it makes sense, we're going to work to collaborate, work together to provide services and products that are best for our customers. And we're excited for that, and we're looking forward to it. And I'm sure, we'll have more to talk about in the future.
Our next question comes from Dan Fannon with Jefferies. Your line is now open.
My question is around the credit. If you could expand upon the ReMatch protocol that you highlighted in your prepared comments and just differentiate the adverse some of the other offerings you have in credit and thinking about 2021 and what have you - kind of the best potential do you think for uptick?
It's Billy. So ReMatch is great, right. Because to its core, it sort of takes advantage on some level of what we do best, which is our network. And one of the things that ReMatch does at it's very best, it takes unmatched orders from our wholesale suite business and channels those orders into both our retail network and our institutional all-to-all network.
So when we think about what Tradeweb does best, we think about our network, how do we create more liquidity because of this vast network that we have. And the early response around it is that we know the functionality, and we feel really good about where this business is going for us. It's just another example of how we're innovating in credit. And thanks for the question.
Our next question comes from Alex Blostein with Goldman Sachs. Your line is now open.
I was hoping, we could dig into the mortgage business a little bit, obviously really robust year in terms of volumes and the refi activity, obviously, is helping to some extent. Can you help us with the sensitivity to revenues, if we see - if we were to see a significant pullback in refi activity. And maybe just a reminder sort of the breakdown within the mortgage business, how much is sort of fixed versus variable? Thanks.
Bob, you want to take that one?
Nobody wants to answer that.
Bob, I think you're on mute.
Yes.
I'm sorry. I missed a little bit of the first part of the question. I'm sorry, I was on mute. [technical difficulty]
Of course. So the question is around the mortgage business and just hoping to get some sensitivity around kind of the variable part of the mortgage revenues how sensitive it is to refi volume. So if you were to see refi volume slowdown, how big a deal is that as to mortgage revenues?
Yes. Look, I think we've obviously shown growth in volume and in revenue mortgages. So I think that we have demonstrated that - that's growth. And we've actually seen more come into our non-comp side of our platform, which should it means more in-comp, and therefore, we get picked a little bit more for that given it's price discovery and the rest.
I think if refi rates slow, there is other aspects to the mortgage market that have connection as well and certainly having refis has helped to increase it. But we're also having done some initiatives in spec pools, and given the nature of that there is a large opportunity, spec pools to grow, which Billy could talk to and we're seeing that as the other side of - if one part of mortgages slows down in anyway because of albeit the rates increasing or refis changing, that would be the thing we're working on to - to be on the other side of that.
That being said, I don't think we - so far we haven't seen a sign that, that's going to be a short-term happening in terms of what we're seeing. And it's - and so I think that given the nature of our fee structure and what we see, we should see a balance of growth going forward even as the market reform slightly because the initiatives we have particularly in spec pools.
Our next question comes from Alex Kramm with UBS. Your line is now open.
Just coming back to credit for a second here. I mean, tremendous drop on innovation obviously and seems to be driving some good market share. But can you also talk about how pricing matters at all or how much of a factor that's been. I think you've under cut some of your primary incumbent competitors there. So just wondering that's a big factor or if you think pricing is going to become more of a factor, as maybe these markets evolve over time. So any update on pricing would be fantastic? Thank you.
Sure. Sure. Hey, it's Billy. So we feel very comfortable with our pricing. We're the low cost provider in the space, and we feel comfortable with that lens. That being said, in a very straightforward way, we don't lead with pricing with clients. We think that's a mistake. We lead with innovation. We lead with solving for client workflows. We lead with how we're bringing value whether that's portfolio trading or net spotting and hedging. We always lead with value.
To your question over time, do we think that our pricing model will kick in more and more and help us do something that gets more market share. Absolutely, yes. But it's not the first thing we lead with clients.
Our next question comes from Kyle Voigt with KBW. Your line is now open.
So it appears the new administration is potentially having a broad review of treasury trading and treasury market structure following your liquidity issues in March of last year, and some of the press reports noted that the administration could consider extension of primary dealers or also consider the interruption of central clearing. Just wondering, if you could provide any color on how either of those changes might impact your rates business?
I'll take that one. Thanks, Kyle for the question. So I think it's a good one. Yeah. Look, we've - the truth is, historically we benefited, as a result of change, regulatory change, tech change, these have been big drivers of the growth of our business, I should say that upfront. And we're supportive of regulators soliciting comments with respect to access the market considering central counterparty those sorts of things.
And when you have a mandate to essentially clear securities, that's been historically an e-trading accelerant for a number of obvious reasons. We really saw that happen in the swaps market most recently. It allows for new liquidity providers generally tends to increase the velocity, the turnover in the market.
So we think overall, is that what you're suggesting implies change, we've been able to really benefit from those kinds of changes historically both in terms of how much of an advocate we're in the market, but also the ability to adjust and change our systems to support the changes.
So in terms of the cost to us, we're kind of registered in a lot of different ways. We're registered as an ATS that includes our treasury business. It's hard to imagine, there would be any sort of material change to our regulatory requirements with respect to this. But it does look to us like there is going to be a lot more interest and focus on this and we welcome it. We welcome it. We think change is good. And it allows us to innovate and solve for clients issues, as these things come into play.
Our next question comes from Michael Cyprys with Morgan Stanley. Your line is now open.
Thanks for fitting me in here with the question. Just with a steeper curve that many expect here with an economic reopening later in the year prospects for a steeper curve. Just hoping you could talk a little bit about how that may impact the different parts of your business in terms of greater appetite for say different products, such as rate swaps? And also how that may impact and play through on the capture rate, would it just be seeing a mix driving the change in the fee capture or where could actually the fee rate itself actually just higher?
Yes. Thanks. Thanks, Michael. So I think what you're suggesting in your question is change. And as I was saying just before, changes though is a good thing, especially if market change or maybe more importantly, a bit of uncertainty in terms of what the actual direction is, and there is a lot of debate about what's going to be happening. And if you look at what's happening to my shoulder over just today and what's been happening last month, these types of changes that you're referring to are positive for volumes, and they are positive for Tradeweb.
Diverging views, chasing higher yields, these are all positives. Steeper yield curve is actually good for our retail business, which has been - has had some challenges, as a result of that. We've made bonds more attractive to that sector. And it's not as if these things - the macro stuff is what we've been living with for 20 years, right. Our business is dynamic. And these kinds of changes tend to be positive accelerants if in fact they occur. And I look at the January numbers, and that's an example of possibly what - what's to come.
But more importantly, then the macro stuff, which absolutely impacts our business, I don't want to say that's not important is the digitization march, right. This move towards more electronification, as clients are trying to streamline things. And I would add to that, when we're talking about the treasury market, an explosion of debt right.
So that we have an absolute explosion of debt globally, not just in the U.S., with potential for more stimulus. These are all issues that create some uncertainty and potential movement, some steepening, which is historically that's been a - that's a good thing for our business. So we - but as always, that's not - we try not to speculate on that kind of stuff because it's just - it's really unknowable from our view.
I think, maybe, I'll add to that is one of the things, obviously, we can't predict what's going to happen, you said exactly. But our fees are correlated to some extent the duration. So the shape of - of things that might happen could have a positive effect as well.
Yes. Absolutely. That's a good point, Bob.
Our next question comes from Mike Carrier with Bank of America. Your line is now open.
Good morning, and thanks for taking the question. You guys provided a lot of good detail across the different product categories and strategic initiatives, the growth there and you mentioned the strong international growth. But can you provide an update on geographies, just given the recent hire in Asia and where your current client base is today and maybe investments being made, size of the sales platform in the U.S. versus outside, and then the potential growth you see, whether it's in Asia or Europe or the U.S.? Thanks.
Okay. There is a lot there. So let me just start by saying, international growth in general, for us, it's averaged around about 20% a year since we go back four years or five years 2016 that includes Europe and Asia, when we talk about international. And we've been expanding our product offering in those areas. Obviously, we've talked about China, China bonds in our recorded comments. We've got a new hire that just started in Asia, James, who is going to be running that business. We made a investment in Sumscope - minority investment in Sumscope in December. So we're fully focused on the growth opportunities outside of the U.S. and have been for some time.
It's - I don't know, 36%, 37% of our revenues from last year, all that business ex- U.S. So it's a meaningful component, and it's a real opportunity set for us. In particular, we think, as I said, Asia and China, well, it's tough to handicap the timing of liberalization and access to the market both in and out of China, we're going to stay on the cutting edge.
We were the first ones to be in that market in 2017, allowing access for international investors and we continue to invest there locally with both talent and some complementary assets. So we're very excited about the opportunity there. It's got a ways to go in terms of electronification when we think about Asia.
And we always go back to the theme of connecting the dots and the fact that the markets are global markets, and as Billy likes to say, our network is our great strength. So adding a new region, adding new asset classes, adding new types of protocols and connecting that into our global network is a real big opportunity for us and one that we're pretty excited about.
Thank you. We can take one more question if anyone has anything. I'm not showing any further questions at this time. I would now like to turn the call back over to Lee Olesky for closing remarks.
Okay. Thank you all very much for joining us this morning. As hopefully, we were clear 2020 was a banner year for Tradeweb, and we're really excited about 2021. And at the start to the year, you can see the numbers in January. We feel we have really multi-year opportunities in front of us. And if you have any other follow-up questions, feel free to reach out to Ashley and the team, and thank you very much for joining us today.
Thank you, guys.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.