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Why MarketAxess Holdings' Shares Slumped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electronic trading platform service MarketAxess (Nasdaq: MKTX  ) dipped as much as 12% in early trading today after receiving an analyst downgrade before the opening bell.

So what: Brokerage firm Stifel Nicolaus is the culprit, downgrading MarketAxess to "hold" from "buy" early this morning. The brokerage cited weak August statistics, as well as valuation concerns, as the impetus for the downgrade. Just yesterday, MarketAxess reported $44.4 billion in monthly trading volume, which is down from the $47.1 billion in reported in August 2011.

Now what: First off, it's rarely worth changing your investment thesis because of a one-day bump or drop caused by an analyst call, so let's more or less ignore it completely. What is worth paying attention to is the lull in trading volumes across the board. Daily average revenue trades are a key metric for measuring brokerage firms' ability to attract new trading volume, and in July TD AMERITRADE (Nasdaq: AMTD  ) reported a 9% decline in DARTs, and Charles Schwab (NYSE: SCHW  ) reported a 2% decline. Although TD AMERITRADE and Schwab cater to a different customer than MarketAxess, there's notable weakness across the sector, and until that improves, I wouldn't expect there are enough catalysts to push any of these financial service companies higher.

Craving more input? Start by adding MarketAxess to your free and personalized Watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

Motley Fool newsletter services have recommended buying shares of TD AMERITRADE and Charles Schwab, as well as writing puts on TD AMERITRADE. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Related Tickers

10/21/2016 4:00 PM
MKTX $152.22 Up +0.82 +0.54%
MarketAxess Holdin… CAPS Rating: ****
SCHW $32.27 Up +0.10 +0.31%
Charles Schwab CAPS Rating: *****