The largest institutional investors in the market rely on this little-known service provider.
Look through The Motley Fool’s website, and you’ll find a lot of information about investing in individual stocks. That’s because for typical investors, the stock market has been one of the best ways to generate long-term wealth.
Plenty of businesses specialize in helping investors like you put their money to work. Some, like Charles Schwab (SCHW +1.03%) and Interactive Brokers (IBKR 0.43%), are publicly traded. Others, such as Fidelity and Vanguard Group, are privately held. They’re all household names with highly recognized brands.
But institutional investors have different trading needs. For many of them, an almost unknown company plays a key role in meeting those needs. Tradeweb Markets (TW +2.06%) is definitely not a household name, but it has built a business that’s essential to the smooth functioning of financial markets worldwide. That’s why the fintech stock is up for consideration for the Voyager Portfolio.
Image source: Getty Images.
Building a global electronic trading marketplace
There are several ways that investing professionals trade. Dealers that specialize in trading securities often buy from and sell to institutional investing clients. They also trade among themselves, sometimes seeking to build up inventory that they anticipate will help them serve their institutional clients better. Financial advisors who work with retail investors often seek out particular investments from dealers. And for corporate treasurers, figuring out how best to invest available cash on hand can make the difference between a profit and a loss in any given quarterly report.
Traditionally, these interested parties made these trades by getting on the phone. But technological advances made it more efficient to build and use electronic marketplaces to handle trading. That’s what Tradeweb Markets does, and it has become an essential player in many vital financial markets.
What Tradeweb does
Tradeweb has built and now operates several electronic marketplaces to serve a global network of clients interested primarily in fixed income investments. It also serves equity investors, but only through exchange-traded funds, leaving individual stock trading to others.
Tradeweb targets four asset classes. Rate-related fixed-income investments include sovereign debt, mortgage-backed bonds, and swap contracts on top interest rate indexes. Tradeweb’s credit segment handles corporate and municipal bonds as well as credit default swaps on issuers. Its equity segment trades in ETFs and related options, while its money market division trades certificates of deposit, money market funds, and repurchase agreements.
Tradeweb also offers market data for institutions. Clients need up-to-date information to make smart trading decisions, and with a range of proprietary products, Tradeweb’s market data offerings are up to the task.
How Tradeweb became a leader
Over more than 25 years, Tradeweb has developed a reputation for excellence that has built an impressive book of business. The company boasts over 3,000 clients in 85 countries around the world. They include 90% of the top 100 global asset managers and 80% of the 25 largest insurance companies. Over 45,000 financial advisor turn to Tradeweb for its services. And more than 90 central banks and sovereign government entities are on Tradeweb’s client list as well.
Today’s Change
(2.06%) $2.15
Current Price
$106.26
Key Data Points
Market Cap
$23B
Day’s Range
$103.08 – $106.34
52wk Range
$101.70 – $152.65
Volume
1.9M
Avg Vol
1.3M
Gross Margin
87.32%
Dividend Yield
0.45%
One reason why so many clients use Tradeweb is because its depth of liquidity allows for more efficient and transparent trading. Tradeweb trades more than 50 products and is the electronic market leader for key assets like government bonds, mortgage-backed securities, and interest rate swaps. On average, Tradeweb’s electronic platform handles $2.5 trillion in trades every day, helping users throughout the trading process from placing orders to executing and clearing trades and then handling reporting needs.
Tradeweb makes money by helping clients make money
It’s evident from Tradeweb’s client list that its customers have been successful using its electronic trading networks. That raises a key question, though: How much has Tradeweb shared in its clients’ success? In the next article of this three-part series for the Voyager Portfolio, you’ll learn more about Tradeweb’s own financial performance and how it has rewarded shareholders over time.