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Tradeweb Markets(NASDAQ: TW)
Q3 2024 Earnings Call
Oct 30, 2024, 9:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning and welcome to Tradeweb's third-quarter 2024 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 treasury, FP&A, and investor relations, Ashley Serrao. Please go ahead.
Ashley Serrao -- Head of Treasury, FP&A, and Investor Relations
Thank you, and good morning. Joining me today for the call are our, CEO, Billy Hult, who will review our business results and key growth initiatives and our CFO, Sara Furber, who will review our financial results. We intend to use the website as a means of disclosing material non-public information and complying with our disclosure obligations under Regulation FD. I would remind you that certain statements in this presentation and during the 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 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, earnings presentation, and periodic reports filed with the SEC. In addition, on today's call we will reference certain non-GAAP measures as well as certain market industry data.
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Information regarding these non-GAAP measures including reconciliations to GAAP measures is in our earnings release and earnings presentation. Information regarding market and industry data including sources is in our earnings presentation. Now let me turn the call over to Billy.
Billy Hult -- Chief Executive Officer
Thanks, Ashley. Good morning, everyone and thank you for joining our third-quarter earnings call. This was another record quarter with revenue surpassing our previous best by nearly 10% to approach almost $450 million in revenue. Stepping back, the themes driving our results over the last few years remain unchanged.
First, we continue to drive our market share higher in many of our markets as we collaborate with our clients to electronify and change behavior, be it our flagship swaps, surging U.S. credit or rapidly expanding EM offerings. Second, we continue to capitalize on the trend of multi-asset class trading. Almost 50% of our revenue growth continues to be generated away from our cornerstone rates business.
And third, we continue to accelerate growth with targeted acquisitions and strong execution. On this note, we close the ICD acquisition in August and formerly welcomed the ICD team to the Tradeweb family. They have hit the ground running and early client feedback has been resoundingly positive. Both yield broker and rate fin revenues are tracking ahead of plan and we completed the integration of yield broker this month, five months ahead of schedule.
We continue to think it's a great time to be in the risk intermediation business. A central banks retreat from our markets. Global monetary policies diverge, elections loom and fixed-income markets continue to grow. This creates lots of opportunities for our clients to trade and make money, while the environment fluctuates, we remain focused on driving durable growth by investing in our future by hiring the best talent, deepening our client relationships, and enhancing our technology.
Diving into the third quarter, strong client activity, share gains, and a risk on environment drove 36.7% year-over-year revenue growth on a reported basis. We continued to balance investing for growth and profitability as adjusted EBITDA margins expanded by 154 basis points relative to the third quarter of 2023. Turning to Slide 5, our rates business was driven by continued organic growth across swaps, global government bonds and mortgages and was also supplemented by the addition of rate fin and yield broker. Credit was led by strength in U.S.
and European corporate bonds with our second highest quarterly market share across electronic U.S. high grade and high yield, and was aided by strong growth across credit derivatives, municipal bonds, and China bonds. Money markets was led by the addition of ICD and aided by continued growth in U.S. and European repos.
Equities posted double-digit revenue growth, primarily led by growth in our global ETF business, whereas our equity derivatives business also posted solid growth. Finally, market data revenues were driven by growth in our LSEG market data contract and proprietary data products. Turning to Slide 6, I will provide a brief update on two of our focus areas, U.S. treasuries, and ETFs, and then I will dig deeper into U.S.
credit and global interest rate swaps. Starting with U.S. treasuries. Record third-quarter revenues increased by 33% year over year led by records across our institutional and wholesale client channels.
Our institutional business saw growing adoption of our streaming and RFQ plus protocols, while the leading indicators of the institutional business remains strong, we gained share and achieved record quarterly market share of over 50% in U.S. treasuries versus Bloomberg, our second consecutive quarter above 50%. Automation continues to be an important theme with institutional U.S. treasury AiEX average daily trades increasing by nearly 30% year over year.
The wholesale space remains a key area of focus and we continue to prioritize onboarding more liquidity providers and enhancing our various liquidity pools as we deliver on our holistic strategy. The wholesale business produced record volumes led by record streaming volumes and growing adoption of our sessions, protocol and the contribution of r8fin. Other protocols also saw double-digit volume growth, particularly our club, which continues to trend higher. Within equities, our ETF revenues grew over 20% year over year, our efforts to expand our equity brand beyond our flagship ETF franchise continue to bear fruit with third-quarter institutional equity derivative revenues increasing nearly 20% year over year.
Looking ahead, we continue to make inroads by integrating new clients and the client pipeline remains strong, as the benefits of our electronic solutions continue to resonate. We believe we are well-positioned to capitalize on the long-term secular ETF growth story, not just inequities, but across our fixed-income business. Turning to Slide 7 for a closer look at another strong quarter for credit. Strong double-digit revenue growth was driven by 37% and 14% year-over-year revenue growth across U.S.
and European credit respectively. We also achieved strong double-digit revenue growth across credit derivatives, Munis and China bonds. Automation continues to surge with global credit AiEX average daily trades increasing over 25% year over year. We achieved our second highest fully electronic market share across U.S.
IG helped by IG block market share of over 8%. We also achieved our second-highest fully electronic high yield market share with record high yield block market share of nearly 5%. During the quarter, we achieved a new monthly high yield record of 9% in July. Our institutional business continues to scale as clients adopt our diverse set of protocols.
Year to date, we estimate over 40% of our U.S. institutional variable revenue growth was driven by non-market factors, mainly market share. Our primary focus on growing institutional RFQ continues to pay off with average daily volume growing over 45% year over year with strong double-digit growth across both IG and high yield. Moreover, portfolio trading average daily volume rose over 50% year over year with growth of over 70% across IG portfolio trading and over 20% growth across high yield.
We continue to focus on leading with innovation and this is resonating with our clients leading to user growth of over 20% year over year. Retail credit revenues were up over 15% year over year as financial advisors continue to allocate investments toward credit to compliment their buying of U.S. treasuries and retail certificates of deposits. All trade produced a solid quarter with over $185 billion in volume, up over 35% year over year.
Specifically, our all-to-all average daily volume grew over 20% year over year and our dealer RFQ offering grew over 25% year over year. The team continues to be focused on broadening out our network and increasing the number of responders on the all trade platform. In the third quarter, the average number of responses per all-to-all inquiry rose over 10% year over year. We also continue to increase our engagement and wallet share with ETF market makers with average daily volume up over 45% year over year.
Finally, our session's average daily volume grew over 45% year over year. Looking ahead, U.S. credit remains a key focus area and we like the way we are positioned across our three client channels. We believe we have a long runway for growth with ample opportunity to innovate alongside our clients.
During the quarter, we enhanced our multi-client net spotting offering based on client feedback, expanded our PT offering to include auto send capabilities and continue to see growing adoption of our RFQ Edge offering. In light of Basel III considerations, we're also focused on partnering with our dealer clients to help them more efficiently recycle their own balance sheet risk and earn more money. We also remain very focused on chipping away at high yield and we believe we are well-positioned to replicate the success we've had in IG. We're making progress on sales hiring efforts and we have a strong pipeline of asset managers, hedge funds, ETF market makers, and insurance companies that we are focused on.
With Aladdin, we're still in phase 2 of the integration, which is focused on the responding and initiating of all to all and RFQ inquiries on the Aladdin screen. Early client feedback has been positive, particularly around the enhanced integration that allows our clients to more easily monitor all to all and dealer liquidity opportunities. Beyond U.S. credit, our EM expansion efforts continue with early client success across Latin America and the Middle East.
As we enter each region, our global product offering is proving to be a key way to develop relationships with clients and dealers. On the product side, we remain focused on leveraging our diverse product expertise, enhancing our integration with FX all and continuing to build out our holistic emerging market functionality. Moving to Slide 8, global swaps produced record revenues driven by a combination of strong client engagement in response to the macro environment, continued market share gains and a better mix shift toward risk trading. Strength here was partially offset by a 1% reduction in weighted average duration that we are seeing positive signs on that front given the changing macro environment.
All in global swaps revenues grew 51% year over year and market share rose to 22.4% with record share across G-11 and EM denominated currencies. The global macro backdrop continues to be in flux. During the Q3, we saw global yields fall given the expectations for central bank rate cuts. For example, U.S., German and Japanese 10-year yields fell 20 basis points to 60 basis points during the quarter.
Yet in October, we have seen those same yields rise significantly from the end of the third quarter. This level of uncertainty continues to drive strong client engagement across our global suite of currencies across our global suite of currencies and continued market share gains with our clients continue to pay off. During the third quarter, we had 11 swaps currencies that saw year-over-year volume growth of over 100%. We had another 12 swaps currencies that saw volume growth between 50% and 100%.
In addition to the favorable macro year to date, we estimate that over 60% of our institutional variable swaps revenue growth was driven by non-market factors mainly market share. As short-term rates are expected to fall further and as the yield curve steepens, this should provide a tailwind to our risk based volume fee per million. As a reminder, our pricing is based on the amount of DV01 or the risk decline is putting through the platform, which is driven by two factors. The level of yields and duration.
As rates fall or duration increases the DV01 of a trade increases, based on the current rate environment. If we saw a 100 basis point drop in rates, this could lead to a risk-based fee per million increasing by 5% to 6%. Additionally, our current risk based duration is about six years. Based on the historical fee per million levels, when our duration was about seven years, we could see a 6% to 7% increase in our risk based fee per million if duration extends by about a year.
Finally, we continue to make progress across emerging market swaps and our rapidly growing RFM protocol. Our third-quarter EM swaps revenues rose over 80% year over year, and we believe there is still significant room to grow given the low levels of electronification. Our RFM protocol saw average daily volume rise nearly 150% year over year with adoption picking up. Looking ahead, we believe the long-term swaps revenue growth potential is meaningful.
We are looking forward to providing solutions for more parts of the swaps market. The team is actively partnering with key buy side and sell side clients to make further inroads into the cleared swaps market and initial inroads into the bilateral swaps market. With the overall swaps market still about 30% electrified, we believe there remains a lot we can do to help digitize our client's manual workflows while the global fixed-income markets and broader swaps market grow. And with that, let me turn it over to Sara to discuss our financials in more detail.
Sara Furber -- Chief Financial Officer
Thanks, Billy, and good morning. As I go through the numbers, all comparisons will be to the prior year period, unless otherwise noted. Slide 9 provides a summary of our quarterly earnings performance. As Billy recapped earlier, this quarter we saw record revenues of $449 million that were up 36.7% year over year on a reported basis and 36.5% on a constant currency basis.
We derived approximately 38% of our third-quarter revenues from international clients and recall that approximately 30% of our revenue base is denominated in currencies other than dollars, predominantly in Euros. Our variable revenues increased by 50% and total trading revenues increased by 37%. Total fixed revenues related to our four major asset classes were up to 2.4% on a reported and constant currency basis. Credit fixed revenue growth was primarily driven by increases to our subscription fees and by the addition of new dealers this year, and other trading revenues were up 4%.
As a reminder, this line fluctuates as it reflects revenues tied to periodic technology enhancements performed for our retail clients. Year-to-date adjusted EBITDA margin of 53.5% increased 111 basis points on a reported basis when compared to our 2023 full-year margins. Moving on to fees per million on Slide 10 and a highlight of the key trends for the quarter. You can see Slide 16 of the earnings presentation for additional detail regarding our fee per million performance this quarter.
For cash rates products, average fees per million were up 1%, primarily due to an increase in Australian government bonds fee per million. For long-tenure swaps, average fees per million were up 17%, primarily due to a decline in compression activity. Duration in Q3, 2024 was relatively in line with the Q3 of 2023. For cash credit, average fees per million decreased 6% due to a mix shift away from Munis.
For cash equities, average fees per million increased 9% due to a mix shift toward EU ETFs, which carry a relatively higher fee per million. Finally, within money markets, average fees per million increased 55% due to the inclusion of ICD and a slight increase in U.S. repo fee per million. Slide 11 details our adjusted expenses.
At a high level, the scalability and variable nature of our expense base allows us to continue to invest for growth and grow margins. We have maintained a consistent philosophy here. Adjusted expenses for the third quarter increased 30.4% on a reported basis and 31.5% on a constant currency basis. Adjusted compensation costs grew 36%, the vast majority related to variable or discretionary spending.
Just over 50% of the increase was performance related expense and nearly 20% from new hires in 2024 and the addition of ICD. Technology and communication costs increased 23%, primarily due to our previously communicated investments in data strategy and infrastructure, which we intend to accelerate to support our technology efforts as we continue to grow. Adjusted professional fees grew 26% mainly due to an increase in tech consultants as we augment our technology operations and build incremental scalability. We expect professional fees to continue to grow over time as we spend more on technology consulting to support our overall growth.
Adjusted general and administrative costs increased 22% due to a pickup in travel and entertainment and marketing expenses, which was offset by favorable movements in FX that resulted in an approximately $400,000 gain in the third quarter of 2024 versus a $1.5 million loss in the Q3 of 2023. Slide 12 details capital management and our guidance. On our cash position and capital return policy, we ended the third quarter in a strong position with $1.2 million in cash and cash equivalents and free cash flow reached approximately $800 million for the trailing 12 months. Our net interest income of $15.2 million decreased due to lower cash balances, as we funded our recent acquisition of ICD with $771 million of cash on hand.
Additionally, our net interest income was impacted by $970,000 in accrued interest expense related to a TRA payment. Excluding this interest expense, which occurs sporadically based on the timing of TRA payments, our net interest income would have been $16.2 million and our adjusted EPS would have been $0.76. With this quarter's earnings, the board declared a quarterly dividend of $0.10 per Class A and Class B shares. Turning to updated guidance for 2024.
In light of the continued strong business momentum, we are increasing our adjusted We are increasing our adjusted expense guidance to $855 million to $875 million. We are currently trending toward the midpoint of the range. Overall, we are seeing increased opportunity to invest for future growth and continue to expect accelerated investments going forward. All in with these investments, we continue to expect our 2024 adjusted EBITDA margin expansion to exceed 2023 levels.
We continue to expect our capex and capitalized software development to be about $77 million to $85 million for 2024. Acquisition and Refinitiv transaction related D&A, which we adjust out due to the increase associated with push down accounting is now expected to be $158 million. We continue to expect 2024 and 2025 revenues generated under the new master data agreement with LSEG to be approximately $80 million and $90 million respectively. Last quarter, we signed a 16-year lease for our new New York City headquarters, which is expected to commence in July of 2025, including expected double rent from our existing New York City office and other anticipated leasing activity in the second half of 2025.
We expect our occupancy expenses to be approximately $7 million higher than the second half of 2024. Now, I'll turn it back to Billy for concluding remarks.
Billy Hult -- Chief Executive Officer
Thanks Sara. As a technology company focused on the financial markets, we thrive in change and complexity. We believe in a strategy of evolution and balance, not revolution. We are excited about the opportunities to engage with our clients to expand our multi-asset class footprint and we feel good about our long-term future growth outlook.
With a couple of important month-end trading days left in October, which tend to be our strongest revenue days. October revenues are trending at record levels up approximately 30% relative to October, 2023. The diversity of our growth remains a theme. We are seeing strong volume growth across global government bonds, mortgages, repos and corporate credit.
Our October IG and high yield share are both trending lower than September levels. Our IG and high yield share are mainly being impacted by lower levels of industry PT so far in October. I would also like to welcome Daniel Maguire to our Board of Directors. Dan brings more than 25 years of experience in financial services.
Having known Dan for a long time, I think very highly of him. I am confident that he will make a significant impact as we expand our footprint and broaden the boundaries of innovation at Tradeweb. Finally, 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 the record quarterly revenues and volumes at Tradeweb. With that, I will turn it back to Ashley for your questions.
Ashley Serrao -- Head of Treasury, FP&A, and Investor Relations
Thanks, Billy. [Operator instructions] Operator, you can now take our first question. Thank you.
Questions & Answers:
Operator
[Operator instructions] Our first question comes from Chris Allen of Citi. Your line is now open.
Christopher Allen -- Analyst
Good morning, everyone, thanks for taking the question. Just wanted to ask on credit. We've had increasing questions as to how Tradeweb's platform has been evolving from here relative to market access, it was called out specific new developments on their platform just in terms of their enhanced algo suite, enhanced deal of protocols, improved trading front end. Some of these developments look like catch ups to Tradeweb, others look to position them for increased block penetration.
So it'd be great to hear how Tradeweb stacking up here and how they -- are how you are positioned for increased block penetration moving forward?
Billy Hult -- Chief Executive Officer
Sure. Hey, Chris. How are you? It's Billy. Yankees won last night, so I'm in a good mood or most of us at Tradeweb are in good moods.
When I kind of think about sort of the markets Chris that we're in, I always kind of describe it as sort of we're on this continuous journey of learning. That's how I think about and describe our business. And when we think about the journey around our credit business, I think the beginning of that journey kind of started kind of four or five years ago from our perspective with some open questions, can we really compete in credit? Do we understand the credit business the right way? And then you kind of like flash forward to today, when really we're kind of neck and neck in the IG business as a market leader in the space. And I think that says a lot like over the last two years, when you think about the protocols that we're in, our RFQ, volume is up over 200%, 210%.
Our portfolio trading, these are like massive numbers up over 700%. Our all-to-all is up over 130% and our session's business, our suite business also has done extremely well. So the approach from our perspective remains unchanged. We do something I think that I'm very proud of.
We respond to client feedback very, very well. And so from our perspective in credit that's launching what we call RFQ edge, which offers really top-tier analytics, dealer upsize, which promotes block trading, and we continue to enhance our portfolio trading workflows. So it's a process and I kind of say this, I think in a very clear way, while we are very strong leaders around innovation, from our perspective, sometimes adoption is crucial. And so the block and tackling of sort of delivering what we've built to our most important clients continues.
And as we do that, obviously there's this kind of dual approach around improving our technology, our user interface providing advanced analytics and doing the kind of hard work around delivering best in class technology. Team, Chris, like super focused, really, really proud of them and we're going to continue to stay focused in this area and perform really well. So appreciate the question and thanks very much.
Operator
Thanks. One moment for our next question. Our next question comes from Bill Katz of TD Cowen. Your line is now open.
Bill Katz -- TD Cowen -- Analyst
OK. Thank you very much for taking the questions and good morning, everybody. Appreciate all the disclosure. Maybe just I know one question, but just one clarification.
Just Billy, in terms of your commentary around fee per million, given the duration and the curve, so I want to make sure that's all both incremental. So it will be 5% to 6% plus 6% to 7%, so I want to make sure I heard that correctly. And then the broader question I have just sticking on competition for a moment. I guess one of your competitors market access has linked up with ICE to potentially expand their trading in credit as well.
I was just wondering if you could address that. And maybe the broader question is, as private markets continue to get a bigger role in capital markets, how does that affect the long-term algorithm for growth?
Billy Hult -- Chief Executive Officer
Sure. Good -- all good questions. Sara you take the first one, I just want to make sure we clarify that to you.
Sara Furber -- Chief Financial Officer
Yes. It's you heard it accurately. So the fee per million you heard is correct, and then maybe you want to go to private credit.
Billy Hult -- Chief Executive Officer
Yes. Listen, I don't really have a huge comment on what kind of -- what market access is doing with ICE, I mean, we obviously, I think have levered our retail business and that's given us an advantage into credit for a long time. Feel really good about that. I've always kind of like thought and taken the approach, like really like live and breathe and understand your clients obviously be super aware of the competitive landscape, but I really don't have a massive comment on what they're doing with ICE.
But it's a good question. And so kind of like on that theme, just in terms of private credit for a moment, focus on existing business stay in front of of clients on their most important themes and then execute really well. And then how do you kind of pivot into creating new opportunities in adjacent markets like this evolution from kind of paper markets to more transparent markets. That's the sort of like lines on this company's hands that's kind of like who we are.
So from our perspective, I think, in the private market area, lots of headlines and I think one of the developments for sure that we have our eye on is Apollo's launch of an ETF. It combines kind of public and private credit in conjunction with State Street. I think that's sort of like worth following, apart from the worlds of kind of private and public credit converging, which is a first, it's especially interesting around what we would say is Apollo's commitment to provide liquidity intraday in the form of executable firm bids. That's worth watching and worth kind of saying.
And so, as I say that, I think what I'm describing sounds very similar to the markets that Tradeweb kind of lives and breathes in and what we have seen happen multiple times in the fixed income markets and where we have tended to play a leading role in collaborating with our clients to develop and improve secondary market trading. So what you get from us is this day in and day out rigor on our existing businesses and existing marketplaces and then the kind of eyes on expansion. And so we're clearly watching what's happening in that space with open eyes. All good questions and appreciate it.
Bill Katz -- TD Cowen -- Analyst
Thank you.
Operator
Thank you. One moment for your next question. Our next question comes from Richard Fellinger of Autonomous. Your line is now open.
Richard Fellinger -- Autonomous Research -- Analyst
Hey. Good morning. I wanted to ask about expenses. Adjusted EBITDA margin expansion remains pretty solid year to date versus the 50 basis points last year.
May maybe just on the longer-term outlook, could you remind us how you think about expense growth and margin expansion as we start to think about the next few years? Thanks.
Sara Furber -- Chief Financial Officer
Sure. It's Sara. When we talk about expenses, I think it's always helpful to take a multi-year view, and so if you look at our historical growth just as a baseline from 16 to 23, we'll take this year out for a second. We averaged about 10% year-over-year growth.
If you looked at that period, you would know and obviously we spent a lot of time on this, it's not linear and it depends, that expense growth really depends on what the revenue growth environment is, the business investments that we're making. And so within that average of 10%, we've seen lows of 4% in certain years and 19% as an example and highs of 15% based on environment and also things like acquisition. So when we're looking forward, like, bring it forward to the current quarter, no better example, I think. We've seen expense growth about 25%, well above our historical average, but really make sense given the strong environment that we're in, the strong top-line performance and then you factor in two acquisitions that we've made this year and some of the accelerated investments we've talked about previously.
So I think one of the big things as you think about going forward that's helpful to unpack is the biggest driver of our expense growth is typically comp. If you take this quarter, 70% of the comp growth as an example is discretionary or variable. So you really see the flexibility in our operating model, whether it's performance related compensation or new hiring that's at our discretion and obviously the inclusion of ICD. We typically give our guidance out next quarter and we'll continue to follow that cadence.
But there are a couple of things as you're thinking about 2025 worth calling out some of which we did call out in our prepared remarks. One is ICD. Obviously, there's seven months of incremental expense around that acquisition. That's about $35 million to factor into your models.
And then the second is higher occupancy expense. We are moving our New York headquarters next year and given the overlap in rent and the larger footprint that it will have, we've highlighted about $7 million in the second half of next year to expect as an uptick in those lines. Beyond that, what I will say is given the operating leverage of the business, we do expect to have margin expansion. We're still committed to that.
We obviously want to balance investing for growth with scaling the platform. I would expect that margin expansion to be slightly more muted given some of the things I just called out, but we've maintained a lot of flexibility and we've kind of demonstrated that track record throughout the years. So hopefully that helps and we'll obviously formalize expense guidance next quarter.
Richard Fellinger -- Autonomous Research -- Analyst
Great. Thank you.
Operator
Thank you. One moment for our next question. Our next question comes from Alex Blostein of Goldman Sachs. Your line is now open.
Alex Blostein -- Analyst
Hey. Good morning, everybody. Thank you for the question. I wanted to talk for a minute about fee per million trends in the interest rate swap business.
There are a number of crosscurrents in that business obviously, volumes clearly very strong, duration shifting around a little bit and compression trading can kind of swing things up and down as well. So but all in, you guys put up over $3 in fee per million and swaps over one year. How do you think about I guess the trajectory there from here and maybe a broader comment on revenue growth algorithm in this business over the next one to two years?
Billy Hult -- Chief Executive Officer
So maybe like starting point, I would say, very confident about the long-term growth potential of that business, like starting with that. Only 30% of the market is currently electrified. And so from our perspective, out of central casting that kind of leaves plenty of room for how we think about expansion there. So big area of focus for the company.
Driving revenue growth by further electrifying existing client flows is like out of our playbook and continuing to onboard new clients globally. I don't want to say like rather than be concerned with the fluctuations into your question, because they're really good question as you're understanding our business but like that sort of becomes the kind of focus of the company. And so several organic growth initiatives that I would kind of highlight for you. First, I would say the inroads and the success that we've had in EM.
Second thing I would say that request for market protocol that micro protocol RFM is a big one. I give the international team a tremendous amount of credit for that. It's really understanding the most sophisticated client's workflow and then replicating that in a way that works for them and works for us. That's a pretty big deal.
Interestingly, I think these kinds of growth initiatives carry a higher fee per million, so I would kind of like link it back to you that way. To address maybe for a second, your specific question about the kind of the fee per million outlook on a macro level, I think several factors obviously could influence that moving forward. And I kind of called some of them out in my prepared remarks, Alex, but what I would say is, clients continue to focus on the shorter end of the curve and we haven't observed a sort of increase in duration yet. If interest rates decline, my instinct is and I think the house view instinct is we may see clients trading more at the longer end of the curve, potentially boosting duration.
So I would kind of highlight that to you. And then obviously additionally the rate outlook and duration are negatively correlated. So as rates fall, the duration of the same bond or tenor increases, I don't want to go into like bond 101, but you know that better than I do. I think maybe, maybe one of the more important things I could say is we are seeing strong risk trading so far in October with swaps seeing revenue growth in excess of over 40% year over year.
So I want to make sure I kind of like describe that to you in a very straightforward way. So continue to stay kind of very optimistic about the outlook heading into 2025. This we talked a lot about kind of compression trades throughout sort of '24. That was a strategic move on our part to get into certain clients and kind of get into more of their kind of risk trading flow.
And so from our perspective, the way that we've been able to do that has worked. So we don't kind of back away from the strategy of making sure that we handle those kind of trades when the market sort of dictates that, that's a real tactical move from us that I think has paid off. Feeling good about the trajectory of that business, Alex, and appreciate the questions. Hopefully, I answered them well.
Sara Furber -- Chief Financial Officer
Alex, I'd just add, because I think Billy made this point in his remarks, but it helps just quantify kind of what Billy's highlighting as this algorithm. If you think about that duration increase and he talked about rate drops. If one year increase in duration in our global swaps business, maybe going from 10% to 11% increases fee per million by 9%. So gives you some sense of magnitude.
And similarly, which he mentioned I think in his prepared remarks, that drop of rates by a 100 basis points, 5% to 6%. So you can see the flexibility and sort of the underlying strength going forward around those moves.
Alex Blostein -- Analyst
Yeah. That's super helpful. Thank you, both.
Billy Hult -- Chief Executive Officer
Thanks, Alex.
Operator
Thank you. Our next question comes from Michael Cyprys of Morgan Stanley. Your line is now open.
Michael Cyprys -- Analyst
Hey. Good morning. Thanks for taking the question. Just wanted to ask about ICD with the deal now closed.
I was hoping you could elaborate a bit on how you expect this to contribute to revenue and earnings as you look out over the next couple years. What sort of steps might you be able to take to help accelerate the growth of the ICD business over the next couple of years? What might be some of the low hanging fruit versus what aspects might be a bit harder or take a bit longer to achieve? And then just more near-term, what might be some of the opportunities to offset any potential slower demand from money funds with rate path expected to move lower?
Sara Furber -- Chief Financial Officer
Look to reiterate and I know we said this last quarter, we're so pleased to have ICD be part of the Tradeweb family and in particular really pleased with the collaboration of that management team with our management team. It's been a seamless transition since we closed the deal. Opportunities to accelerate, we've talked about this but I think it really falls into two buckets. In the low hanging fruit or sort of the more near-term bucket, we see an opportunity to really expand ICD's reach globally given our footprint and our sales force to really penetrate more clients internationally as well as domestically across financial firms.
So I'd say that is probably if there is low hanging fruit, the low hanging fruit because it's not dependent on technology build. So that's more near-term and obviously that's already underway. The second piece is really expanding ICD's product offering on their portal and tapping into cross sell where we're putting our Tradeweb products and making them available. So things like U.S.
treasuries would be the first that we're going to start with that build is underway. We expect that to go live in the first half of next year. So that's a little bit longer because you do want to wait for that technology build. The good news is the dialogue with the clients is robust and actually quite specific.
There have been a number of flash surveys that we've done. 65% of ICD clients have expressed interest in buying U.S. treasury. So we're not building it and hoping that they're interested.
We're really building it based on an informed dialogue that both teams are having on a coordinated basis with the client base. So I'd say those are maybe the two biggest pockets to highlight around opportunities to accelerate. The second part of your question is, how do you feel about the rate moves, rates coming down, which obviously does mute growth. I think there are a couple of interesting trends, sometimes a little bit counterintuitive.
One is, we expect and what you'd see if you look back on industry trends, the demand for money markets actually increases as rates decline. This is because typically corporate treasurers are making a decision between money markets and bank deposits around the short-term liquidity. And as those rates get cut, the premium that money market funds offer relative to bank deposits actually is higher. The deposits reprice lower faster is another way of saying it and money market funds have a longer duration.
So we actually see money markets typically acquire AUM and be more attractive in that declining rate environment. But obviously, as rates are lower that does mute some of the impact. I think fundamentally on a secular basis, corporate cash is probably the biggest driver of how this business performs and we think that's healthy. We see corporates having excess cash generation and we think the demand for money markets is pretty stable.
It's typically the go to option around liquidity and yield and we think the underlying health of the corporates are there. So I think overall, obviously, really excited but eyes wide open on the environment. I think we have a lot of levers to pursue.
Michael Cyprys -- Analyst
Great. Thanks so much.
Sara Furber -- Chief Financial Officer
Thanks, Michael.
Operator
Thank you. Our next question comes from Dan Fannon of Jefferies LLC. Your line is now open.
Dan Fannon -- Analyst
Thanks. Good morning. Billy a question on portfolio trading. Competition within this protocol has been increasing.
You have some industry participants doing certain trades for free, while pricing hasn't changed at a headline level. How are you thinking about pricing pressure over time?
Billy Hult -- Chief Executive Officer
Yes. We would say competition is good for the market when we were the ones chasing. And now that we're the ones being chased, we say competition is good for the market, there is that expression kind of you get better through competition. And I think that the competitive landscape and most importantly the clients win.
I don't know, it's like iron sharpens iron, kind of like that's how we think about the world. So no areas of competition kind of catches us off guard. And our brand as you know very well, I think is built on value creation and innovation. And that's how we aim to lead and win share.
I think, maybe the important thing for a moment to appreciate is that obviously like prices and everything and we've learned that in the rates based competing against Bloomberg and charging for the value we create. Maybe stating the obvious a little bit. I think, when the landscape uses fee holidays or they rely on fee holidays, we think that's a short-term fix. In portfolio trading, we have been, I think from my perspective quite thoughtful about pricing and we have clients that are very willing to pay for what we would describe to you as unique workflow customization, unique functionality like net spotting, unique technology such as being able to execute the most line items in a trade.
So we feel good about where our pricing model is Dan to say that very straightforward. Maybe kind of deep down, I would say my instinct is the competitive landscape is -- will eventually kind of rationalize their pricing and kind of grow out of these fee holidays. I think that's what we would kind of expect. And so the important thing I think is to appreciate that from our perspective, portfolio trading is here to stay and poised to increase significantly.
So there's going to be plenty of volume to be shared in a competitive market. It's that expression about the bigger the pie gets, and I think our instinct is our slice is going to be quite big. So we feel good about our position, obviously laser, like continue to focus on the future end state of portfolio trading, which from our perspective is going to be more about this kind of, like, I said like in the last question, like adoption continued work around adoption, better analytics and advancements in kind of the use cases of it all. Good to hear your voice and good question.
Thanks.
Dan Fannon -- Analyst
Thank you.
Operator
Thank you. Our next question comes from Kyle Voigt of KBW. Your line is now open.
Kyle Voigt -- Analyst
Hey. Good morning. So with ICD now closed, you still have excess cash in the balance sheet, no debt capital flexibility. As we're thinking about the future for capital deployment M&A, can you talk about your willingness to execute on M&A while still in the process of integrating ICD and also if you could share whether there are any notable asset classes or client segments where you feel like there you are still underpenetrated, but where there could also be synergy with the broader trade web platform.
Billy Hult -- Chief Executive Officer
That's going to kind of be sort of a little bit of me and then Sara, you're going to follow me on this. First thing I want to say is I want to give Sara like a ton of credit for adding like a tremendous amount of rigor through the organization over the last couple of years as we've done kind of three different acquisitions and really worked sort of very hard at integrating them in a way that kind of works for us. And I think doing those kind of things leads to more opportunities. So I would start with kind of saying as our organic growth remains really obviously M&A is going to continue to be our kind of preferred use of cash.
And so I think we are maybe quietly or a little bit beneath the surface building quite a solid track record of executing on these deals efficiently and creating value. And so that's my point around a dimension that Sara has added to the company. Whether or not that's the yield broker integration, which is ahead of schedule, I think Ratefin is a big one for us. And that integration is also progressing faster than we expected.
So Sara mentioned, obviously, like, excited to close the ICD acquisition this past quarter, the teams have very quickly ramped up efforts to expand ICD's sales business long-term. I think it's crucial to continue to make these kind of, like, strategic bets to enhance client experience. Those bets are kind of very important bets for the company and that's about kind of propelling future growth. Something that we feel very strongly about.
Let me hand it maybe to you for a second.
Sara Furber -- Chief Financial Officer
I would say we remain active exploring deals in the market. It is an active market. We're very focused on integration, but we think we can obviously do both at the same time. I'd also highlight that on an inorganic basis, we look at things beyond outright acquisitions.
We continue to explore several minority investments that we've completed, particularly in the digital space and partnerships there. So I think there are a lot of levers and we have the bandwidth to execute well on all of those. But obviously our focus is on integrating what we thought really well in the near-term, more broadly, just in terms of capital management. There's really no change.
I feel like I'm a broken record. So there's no change in our philosophy here. First priority is investing organically in the business opportunities that we see and those we've talked about. M&A second top priority for cash.
And then we follow it with buybacks and dividends. On the buyback, same philosophy, we typically use that to offset dilution. From stock based compensation, we've said we will continue to be opportunistic with repurchases with an eye toward EPS accretion dilution. Obviously want to be thoughtful there.
And then I guess just on the dividend over the last couple years we've increased our dividend by 25% given our strong earnings and free cash flow growth. And I expect the board continues to evaluate that based on a number of factors, but clearly will factor in our earnings and free cash flow growth as they look at that strategy going forward. Thank you so much.
Kyle Voigt -- Analyst
Thank you.
Operator
Thank you. Next question comes from Patrick Moley of Piper Sandler. Your line is now open.
Patrick Moley -- Analyst
Yes. Good morning. Thanks for taking the question. I just had one on the rates business, Billy, you talked in your prepared remarks and a little bit here in Q&A on the strength you're seeing in swaps.
So we're just hoping you could expand on that and talk about maybe what you're seeing across the rest of the rates franchise. And then additionally, just broadly given the environment and the rate outlook, would you say that you're seeing velocity pick up across your markets?
Billy Hult -- Chief Executive Officer
So like, I think it's a good time to be in the REITs business. And we kind of say that in a very clear way you have a real rate environment. Then you kind of think about the fact obviously that the debt markets are growing, central banks are not the kind of buyers in the market that they were. And so private sector intermediation is back while it is growing.
And so we think that's a good environment for us. And so I think it was like third-quarter '24, our treasury market volumes are up over 30%, variable revenues up over -- up close to 50%. Interest rate swap market volumes up 30% with those variable revenues up over 60%, mortgage market volumes, which I think is an important thing for us to continue to track up 20%, variable revenues up 25%. These are very strong indicators of why it's good to be in the rates business or the risk intermediation business if you're one of the banks.
I would make around the velocity of it all. I would make a sort of continued point around obviously the strength of the alternative market makers continuing to play a significant role in these businesses. I've highlighted firms like Citadel in the past. My instinct is we're going to continue to have more of that and then a sort of more modernized version of the strongest players in the space, historically, which are the big banks.
From our perspective, that's a convergence that's going to continue to lead into more velocity. Plus you factor in obviously a continue and growing level of sophistication with the buy side community, which has obviously been the kind of like gas in the engine around our AiEX protocol. These are like pretty strong signs that velocity is going to continue to amplify and increase in the space. Thanks a lot for the question.
Patrick Moley -- Analyst
Thank you.
Operator
Thank you. Our next question comes from Benjamin Budish of Barclays. Your line is now open.
Ben Budish -- Analyst
Hi. Good morning and thanks for taking the question. I wanted to ask about the mortgage business. So rates have generally been falling.
We've seen the business come to life a little bit. Can you kind of talk about what you're seeing there under the surface and then how important are sort of continued decline in rates to growth in that business? As you see it, it looks like in October at least the sort of average 30 year rate is picking back up. So do you think that is that important or what other -- what are the other kind of important drivers to think about for mortgages in particular?
Billy Hult -- Chief Executive Officer
Two things, Ben. It's kind of like as rates drop or when rates drop more, I think we want to think about it as kind of straightforward. Obviously, our expectation is that straightforward mortgage volume will increase. And obviously, as you know very well, that's a business that we have a very strong kind of leadership role in, whether or not that's in the client dealer channel or the wholesale channel.
And then maybe what I would say is as importantly, I think you kind of enter into the zone of how we describe or think about convexity hedging. And so we would expect to see a further increase in volume from kind of mortgage end users into the swaps market. And we think that has a sort of driving force for our swap volumes going forward. So it's a little bit of a combination of straightforward mortgage volume plus maybe a amplification into the swap space.
And then I would say maybe kind of like in a world where you try to hit on all cylinders. But obviously you guys know better than I do, that can be a hard thing to do. I think as a company we're going to have a continued effort around specified pools, which we think is an important piece of that market. There are a lot of aspects of that market that from our perspective have some sort of ability to replicate what we've done in credit.
They tend to trade on bid lists and offer lists. There's a concept around portfolio trading that from our perspective exists around pools more work for us as a company to do there. And we think of that as an opportunity given the strong, strong foundation and reputation that we have in the overall mortgage business.
Ben Budish -- Analyst
You got it. Thank you very much.
Billy Hult -- Chief Executive Officer
Yeah, thanks
Operator
Thank you. Our next question comes from Ken Worthington of J.P. Morgan. Your line is now open.
Ken Worthington -- Analyst
Hi. Good morning. Thanks for taking the question. So it's been a great year for activity levels.
Maybe another great year across your major asset classes. How are you seeing the potential for rates, high grade, high yield activity for next year. Is greater industry activity levels, do you see it as being possible? Is it likely? Which of your flagship products do you think you have the greatest conviction that you can see better industry volumes in for next year? And if activity levels become more challenged, where do you see the potential for increased market share from here to be able to most likely offset any potential for weaker activity levels?
Sara Furber -- Chief Financial Officer
Yes. I mean, I think it's interesting. I'll start with the back half of your question. I'm not great at forecasting markets, so I don't want to be in that business.
But what we do spend a lot of time on is making sure the portfolio of businesses we have performs and gains market share in any kind of environment. I think one of the things that gives us a lot of confidence in this and I know Billy mentioned it in terms of his remarks, which kind of go through different asset classes, the rates business as an example, it's been a tremendous market environment for our rates business and in particular swap. That said, when you look at the growth, the numbers that we put up in terms of swap, 60% of that growth has come from what we would say increases in market share through either adding new clients, existing client increasing penetration as opposed to just market volumes. And so that's when we think about the algorithm of how we grow this business, we start to try to unpack what's happening just purely in the market versus what's causing us and how can we increase our market share above and beyond industry volumes.
And so you could do that analogy in credit as well. I think that's probably about 40% away from those healthy market volumes. And so I think that gives us a lot of confidence. Obviously, the growth rates we put up are quite significant.
And so 40% or 60% depending on the range is still an incredibly high well over that double-digit growth rate that we target on a long-term basis.
Billy Hult -- Chief Executive Officer
I think that's spot on answer. I'd say like a little bit can sort of in a way that we would think about it, like feeling pretty strong that as we get into next year sort of more continued amplification of volume in the mortgage business? And then a little bit to your kind of question around like where's the market share if the volumes slow down? I think Sara hit that. I think when you think about the all in interest rate swap, electronification still being pretty low and then the history for the company around doing these kinds of micro innovations that take phone use on to Tradeweb, we feel pretty confident there. Other thing I would say is, both Sara and I mentioned sort of the r8fin integration, which we think critical around both our institutional treasury business plus an amplification into our wholesale treasury business.
We think we're going to pick up market share in that space sort of regardless of where industry volumes go. So that would be a little bit of a sort of blueprint for us around where we think we have the ability to continue to pick up market share both competitively plus that phone based market share.
Sara Furber -- Chief Financial Officer
And then I'd say like one of the areas I just call out specifically that we're extremely confident about just take a crystal ball, that's the only one I want to talk about. We have seen a consistent track record in terms of the electronification of those markets, particularly EM swaps, which is at the core of our franchise. So we're run rating that business at $60 million, but that market is clearly going in one direction. Regardless of what happens with rates or inflation, the electronification in that space and our investment in that space, we're extremely confident.
We'll capitalize on where that market is headed.
Ken Worthington -- Analyst
Great. Wonderful. Thank you so much.
Operator
Thank you. Next question comes from Alex Kramm of UBS. Your line is now open.
Alex Kramm -- Analyst
Yes. Hey. Good morning, everyone. I know it's late in the call.
Actually one quick housekeeping question before, I don't know if you've clarified, but the 30% increase in revenue in October that you talked about, is that an organic number? Because I think ICD adds, I think high-single-digits. So maybe clarify that, but then just coming back to the credit commentary, I know a lot of detail on what you're doing earlier in the call but I just want to bring it back to the numbers for a second, because if I look over the last five, six quarters or so, yes, your market share and credit is up a little bit, but it seems to have all come from PT and that's obviously a little bit more under attack. And if you look at your RFQ, your all trade those market shares have been really flattish. So given that you're signing up new institutional investors or clients, I think up almost 10%.
Like are those people not really contributing or why is the take up in those traditional segments not really happening outside of PT?
Sara Furber -- Chief Financial Officer
Sure. It's Sara, I'll take the housekeeping question. So the 30% that we highlighted in our remarks is an all in revenue growth rate, but even if you strip out acquisitions, we're looking at 25% organic growth rates. So it's still strong in October.
And then maybe I'll transition to Billy on the other part.
Billy Hult -- Chief Executive Officer
I said Alex, when we opened up the call that I was in a good mood because the Yankees won. And that's a very good question. It's certainly not going to put me in anything other than even an equally good mood. Look, you're asking a really good question and I made an interesting point, I think around how we view competition in the space.
What I would say to you in a very straightforward way is that the kind of inroads that we make are never perfectly kind of straight lines. So I don't want you to kind of overread one month versus the next month and then kind of form a theory on that. I think the track record around kind of innovation is obviously quite good. And I think the way that we are able to kind of present into the market these different protocols, I think works period.
We have a very strong view that the credit market wants a more balanced environment. I think we've done a very good job of bringing the banks back into the equation. Obviously, we've differentiated ourselves along the way through portfolio trading, through net spotting and hedging. And I think we're going to have further room to grow and succeed in some of these kind of traditional protocols that you mentioned.
If I were going to sort of tell on myself for a moment, maybe what I would say is, we're always looking for sort of like the things that aren't working as well as that we want them to work. I mean, always as a company, I think that's a really important ethos that kind of Sara and I kind of live by. Bring me your problems, what's not working. And so continuing to build out our responder network in the all-to-all market will remain a big focus for us as a company.
And I think we're coming now from a position of strength, where we feel quite comfortable that we're going to able to put the resource into the market to allow us to continue to succeed at a high rate. We welcome competition. Obviously, we think that's going to continue. And I think the buy side client continues to benefit from the way that we're putting resource into the market and look forward to how things will continue to develop and feel good about it.
Great questions as always and thank you.
Alex Kramm -- Analyst
Fair enough. Thanks very much for the additional color.
Operator
Thank you. We have run over the 60 minutes. So this will conclude the question-and-answer session. I would now like to turn it back to Billy Hult, CEO, for closing remarks.
Billy Hult -- Chief Executive Officer
Great. Thank you all very much for joining us this morning. Great questions from a great group. As always, if you have any follow-up questions, feel free to reach out to Ashley, Sameer and the team.
Go, Yankees. Have a great day, everyone. Thank you.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Ashley Serrao -- Head of Treasury, FP&A, and Investor Relations
Billy Hult -- Chief Executive Officer
Sara Furber -- Chief Financial Officer
Christopher Allen -- Analyst
Bill Katz -- TD Cowen -- Analyst
Richard Fellinger -- Autonomous Research -- Analyst
Alex Blostein -- Analyst
Michael Cyprys -- Analyst
Mike Cyprys -- Analyst
Dan Fannon -- Analyst
Kyle Voigt -- Analyst
Patrick Moley -- Analyst
Ben Budish -- Analyst
Ken Worthington -- Analyst
Alex Kramm -- Analyst
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