Prepared remarks
Good morning, and welcome to Tradeweb's Second Quarter 2026 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.
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 nonpublic information and complying with our disclosure obligations under Regulation FD. I'd like to 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 and industry data. 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.
Thanks, Ashley. Good morning, and thank you for joining our second quarter earnings call. We delivered another outstanding quarter, generating the second highest quarterly revenue in our history and building on the record performance we achieved last quarter. Through the first half of the year, we've generated nearly $1.2 billion of revenue, almost matching what we delivered in all of 2022. Just as importantly, our growth accelerated as the quarter progressed, with June revenue increasing more than 20% year-over-year. Unlike prior periods, this performance wasn't driven by a single episode of elevated market volatility. Instead, it reflects something more durable, deeper client engagement, broader adoption of electronic trading across our markets, and the benefits of investments we have made over many years in technology, workflows and connectivity to capitalize on structural opportunities.
The backdrop of our business remains constructive. Even as the macro environment continues to be debated, clients are navigating a world shaped by changing interest rate expectations, persistent fiscal deficits, geopolitical developments, elections, regulation and rapid technological innovation. Primary issuance remained healthy across the U.S., Asia, Australia, the Middle East and South America, while Europe is showing encouraging signs of renewed activity. At the same time, there remains considerable uncertainty around the path of monetary policy, the global economy and increasingly, the role that artificial intelligence will play across industries. Markets continue to process these questions, and that ongoing debate is exactly what creates opportunity for our clients to manage risk, reposition portfolios and access liquidity through our global network. Looking ahead, we believe the future of Tradeweb will continue to be defined by evolution rather than disruption.
Our leadership positions across multiple asset classes provide a unique foundation to embed greater intelligence across the trade life cycle. We believe AI, automation and data will accelerate the continued electronification of financial markets by helping clients discover liquidity more effectively, make better decisions and operate with greater efficiency. Data is becoming increasingly valuable, not simply as an input into algorithms, but as a foundation for better insights before, during and after every trade. We are continuing to invest across analytics, execution and post-trade workflows while exploring new opportunities at the intersection of traditional finance, emerging technologies and evolving market structure. Regardless of how markets evolve, our objective remains unchanged. We are focused on helping clients navigate increasingly complex markets with technology that simplifies workflows, enhances decision-making and delivers better outcomes.
Diving into the second quarter, strong client activity and a risk-on environment drove 9% year-over-year revenue growth on a reported basis. Our international revenues continue to scale higher with 14% revenue growth as our strategic initiatives across Europe, APAC and EM continued to pay off. International really continued to fire on all cylinders for us this quarter, contributing 65% of our overall revenue growth. And importantly, that strength was broad-based as we saw growth across all 4 asset classes from our international clients. We continue to balance investing for growth and profitability as adjusted EBITDA margins expanded by 24 basis points relative to the second quarter of 2025. Turning to Slide 5. We produced the second highest quarterly revenues in our history across rates, credit and equities and market data. Our rates revenues were driven by continued organic growth across swaps, global government bonds and mortgages.
Credit revenues were led by strength across global corporate bonds and credit derivatives. Money markets revenue growth was led by global repos and ICD. Equities were led by growth in global ETFs and equity derivatives. Finally, market data revenues were up over 20% year-over-year, driven by our market data contract with a major provider and proprietary data products. Turning to Slide 6. I will provide a brief update on a few 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. Following the pickup in average intraday volatility in March, market conditions began to moderate in the second quarter with volatility down 20% from March levels. Even in a more measured trading environment, we continue to outperform. Our second quarter market share increased to 22.5%, up 100 basis points year-over-year, leading to mid-single-digit revenue growth that outpaced overall industry volume growth by roughly 300 basis points.
Looking ahead, we remain constructive on the long-term opportunity. Structural tailwinds continue to strengthen from sustained government debt issuance to the steady electronification of trading workflows. As clients increasingly migrate from voice to electronic execution across both our institutional and wholesale channels, we believe Tradeweb is exceptionally well positioned to capture that growth. Institutional U.S. Treasuries were once again a standout performer, with revenues increasing nearly 15% year-over-year, reflecting deeper client engagement and continued adoption of electronic workflows. Our competitive position remains strong. We surpassed 50% share in electronic institutional U.S. Treasuries for the ninth consecutive quarter and further widened our lead during the period. Our strategy is straightforward. First, we look to continue to win wallet share from clients trading electronically by demonstrating the value of our workflow, data and automation capabilities with AiEX serving as a key differentiator.
Second, we are expanding our electronic addressable markets by bringing historically voice-based trading activity onto our platform. We're particularly encouraged by the momentum we are seeing in basis and multi-leg trades, two large and strategically important workflows that have traditionally remained predominantly voice-driven. Combined, average daily volume across these initiatives grew in excess of 40% year-over-year in the second quarter. And with a strong pipeline of clients and dealers, we believe momentum will continue to compound over time. Our wholesale U.S. Treasury saw revenues decline 1% as strength across our sweep protocol was more than offset by softness in our wholesale streaming offering. While competition remains intense, wholesale continues to remain a strategic priority for us. We believe our opportunity extends well beyond competing on price alone. By broadening our execution capabilities, introducing new protocols, expanding our liquidity network and deepening client relationships, we are building a more differentiated platform that we believe positions us well for long-term share gains.
Turning to equities. We continue to see clients embrace more automated trading workflows as they seek to improve execution quality, efficiency and consistency. As ETFs become an increasingly important vehicle for portfolio construction and risk transfer, institutional investors are looking for solutions that can seamlessly combine liquidity, automation and intelligent execution across a broad range of market conditions. We believe that continues to be a meaningful opportunity for Tradeweb. Against that backdrop, ETFs posted revenue growth in excess of 10% year-over-year despite a normalization in market volatility. Client engagement continues to increase, and our AiEX automation solution continues to be a key differentiator. AiEX average daily trades were up over 45% year-over-year with triple-digit growth in U.S. ETFs and double-digit growth in European ETFs. Our efforts to broaden our equity presence beyond our flagship ETF franchise continue to pay off with record institutional equity derivative revenues up 20% year-over-year.
Looking ahead, the pipeline remains strong as the benefits of our electronic solutions continue to resonate with our clients. We believe we are well positioned to capitalize on the long-term secular ETF growth story, not only directly within our equity offering, but also beyond it as ETFs change behavior indirectly across our fixed income business. We believe this differentiated position will become increasingly valuable over time. Turning to global credit on Slide 7. The business delivered low single-digit revenue growth during the quarter. That performance reflected continued strength across many of our strategic growth areas, including strong double-digit growth in international credit and U.S. institutional credit. Strength here was offset by weakness across municipal bonds and our retail credit channel, where revenues were down 22% year-over-year, primarily reflecting better relative yields available in other products.
We continue to believe U.S. credit represents one of our most significant long-term growth opportunities. While portfolio trading and sessions remain important differentiators, we see considerable runway to expand our RFQ presence as a larger share of institutional credit trading migrates to electronic execution. As adoption continues to broaden across the market, we think our competitive advantage is increasingly being defined by workflow, data and automation rather than connectivity alone. Clients today are looking for technology that helps them source liquidity intelligently, minimize information leakage and achieve better execution outcomes. That is exactly where we continue to invest. During the quarter, we continued to enhance SNAP+, which leverages predictive analytics and proprietary trading data to help clients identify the most appropriate liquidity providers for each trade. We also introduced TARA, our AI-powered trading assistant, which combines Tradeweb proprietary data, liquidity insights and artificial intelligence to help clients quickly transform market information into actionable trading intelligence.
This is a step change improvement from navigating multiple screens and manual workflows. Early feedback has been very encouraging, and we expect TARA's capabilities to continue expanding as we incorporate client feedback and further embed AI across our platform. Our position within block trading also continues to strengthen, with record overall U.S. credit block share up over 115 basis points year-over-year in the second quarter with block average daily volume growth of over 30% year-over-year across IG and high-yield. Growth was broad-based across portfolio trading, RFQ and sessions, demonstrating the value of our multi-protocol approach. Just as importantly, our efforts to expand into RFQ are seeing continued signs of success, reaching another quarterly market share record, reinforcing the progress we're making in one of the largest opportunities within electronic credit. Specifically, institutional RFQ average daily volume grew 15% year-over-year with double-digit growth in both IG and high-yield.
Portfolio trading also delivered another record quarter with average daily volume increasing more than 30% year-over-year with strong double-digit growth across both U.S. and international portfolio trading. Meanwhile, AllTrade generated the second best quarter in our history with over $225 billion in volume with average daily volume up over 13% year-over-year. Our all-to-all average daily volume grew over 25% year-over-year, and our DRFQ average daily volume grew nearly 30% year-over-year. We also continue to expand network participation, driving record responder rates in high-yield as we broaden liquidity across the platform. Looking ahead, we remain confident in the long-term outlook for global credit. Electronic trading continues to evolve beyond simply digitizing execution. Clients increasingly expect intelligent workflows that seamlessly combine liquidity, data, analytics and automation.
We believe Tradeweb is uniquely positioned to deliver that integrated experience across protocols, products and regions. We are seeing that opportunity play out across our business. During the quarter, we launched electronic spread trading across European credit, further expanding our workflow offering in a differentiated fashion. We are also seeing strong momentum in EM credit, where revenues grew 20% year-over-year in the second quarter. While electronification in EM credit remains in its early stages, we continue to build on our established global network and broad EM product suite to support growing client adoption. Together, we believe these initiatives position us well to capture the increased adoption of electronic trading and credit. Moving to Slide 8. Global swaps delivered its second highest quarterly revenues, up 13% year-over-year. The performance was driven by a combination of strong client engagement across our global suite of currencies.
Just as importantly, our core risk market share, which excludes compression activity and is the best indicator of our underlying franchise, reached another record, rising 207 basis points year-over-year. Total market share moved from 22.5% in the second quarter '25 to 24.1% in the second quarter '26. One of the strengths of swaps is its diversification. While it's often viewed as a monolithic product, it is really a collection of different currencies, instruments and protocols, each responding to its own macro and client dynamics. This quarter was a case in point. As central banks around the world, including the Federal Reserve, the ECB and Bank of Japan turned hawkish and reshaped monetary policy expectations, clients remained highly engaged in managing interest rate risk. Emerging markets extended their momentum, while our developed market franchise also stayed active, contributing to our second highest quarterly revenues overall.
Taking a step back, the long-term picture has been one of steady structural growth. Over the past decade, the swaps market has expanded along two important dimensions: first, the amount of risk outstanding as measured by open interest has roughly doubled to a record; second, that risk changes hands approximately twice as frequently as it did 10 years ago. Together, these two trends have compounded into roughly 14% average annual growth in swap volumes over the past decade. Looking ahead, we believe those structural trends remain firmly in place. As governments and corporations continue to issue debt, the stock of outstanding risk should continue to grow. And with only around 30% of the swaps market trading electronically today, there is substantial room for growth as we look ahead. Tradeweb has steadily gained share in the global swaps market. Over the past 10 years, our swaps revenue has grown by more than 20% annually as we have expanded across emerging market swaps, strengthened our developed market franchise and continue to innovate across both the cleared and bilateral swaps market.
Our RFM protocol continues to gain traction, and we're investing across automation, workflow and execution tools to help clients trade more intelligently and efficiently. Taken together, we believe global swaps remains one of our largest, diversified and most durable long-term growth opportunities across our business. Turning to Slide 10. Technology is helping to make financial markets more connected, more intelligent and more automated than at any point in their history. If there is a single thread running through our franchise, it is that our clients are increasingly relying on technology to make better decisions and execute with greater speed, precision and scale. We believe that trend is still in its early innings. Our best example of that evolution is AiEX, our intelligent automation platform. Since launching AiEX in 2012, automated trading activity has grown meaningfully. And today, 45% of all institutional trades executed on Tradeweb flow through AiEX.
Adoption continues to broaden across regions and products, particularly in markets that historically have been less automated. What's exciting is that we believe automation itself is evolving. Historically, automation has been rules-based. Clients define the parameters, the AiEX executes those instructions with consistency and precision. More recently, we've introduced dynamic capabilities that adapt to changing market conditions in real time while remaining within those client-defined guardrails. The next chapter is even more compelling. We see AI moving beyond simply automating workflows to augmenting judgment. Rather than just executing predefined instructions, we believe AI has the potential to help clients answer increasingly complex questions. When is the optimal moment to trade? Which protocol is most likely to achieve the best outcome? How many dealers should participate? How should a portfolio be sequenced across products and markets?
These are decisions that have traditionally relied on years of human experience, but increasingly can be informed by data, context and machine intelligence. This is where Tradeweb's competitive advantage becomes even more powerful. Every day, our network connects thousands of institutional participants across rates, credit, mortgages, ETFs, money markets and equities around the world, which creates one of the richest and most diverse sets of market intelligence anywhere in global fixed income and electronic trading. As AI becomes more capable, we believe the breadth of our network, the quality of our data and the trust our clients place in us will become increasingly valuable. And with that, let me turn it over to Sara to discuss our financials in more detail.
Thanks, Billy, and good morning. As I go through the numbers, all comparisons will be to the prior year period, unless otherwise noted. Slide 11 provides a summary of our quarterly earnings performance. As Billy recapped earlier, this quarter, we saw our second highest revenues of $559 million that were up 9% year-over-year on a reported basis and 8.3% on a constant currency basis given the weakening dollar. Notably, we delivered that growth even while lapping a difficult April comparison. Recall that April 2025 was one of our strongest months on record, benefiting from the exceptional volatility that followed the implementation of tariffs. Even with April revenues down low single digits against that backdrop, the quarter still compounded to 9% growth, underscoring the durability of the business across environments and the accelerating growth we saw through the quarter. We derived approximately 44% of our second quarter revenue from international clients and recall that approximately 30% of our revenue base is denominated in currencies other than dollars, predominantly in euros.
Total trading revenues increased 8%, comprised of 9% variable trading revenue growth and 5% growth across fixed trading revenue. Rate fixed revenue growth was driven by the addition of dealers to our mortgage, swaps and U.S. government bond platforms, as well as existing dealers opting for higher fixed fee plans and some increases in minimum fee floors. Credit fixed revenue declined slightly due to a smaller dealer stepping away from the credit market. Other revenues of $7.9 million for the second quarter increased 1% year-over-year, driven by an increase from ICD-related marketing partnership revenue, which was partially offset by a slight decline in revenue tied to periodic technology enhancements performed for our retail clients, along with slightly lower super validator fees associated with our commercial relationship with the Canton Network. As a reminder, our other revenue line will remain variable from quarter-to-quarter, reflecting fluctuations in a number of factors, including the number of Canton Coins earned, the value of Canton Coins, the number of super validators in the network and periodic technology enhancements for retail clients.
For modeling purposes, we believe the second quarter is a reasonable quarterly run rate for the remainder of the year, as super validator fees are expected to moderate with the addition of new validators to the Canton Network, reflecting the continued expansion and strengthening of the network. Second quarter adjusted EBITDA margin of 54.4% increased by 43 basis points on a reported basis when compared to our 2025 full year margins. Our net interest income of approximately $18 million increased due to higher cash balances, which offset lower interest yields. Lastly, GAAP results this quarter reflected a $7.3 million net gain from unrealized gains and losses across our strategic investments. As a reminder, this portfolio is designed to invest in emerging areas like digital assets, tokenization and prediction markets. So results here will fluctuate from quarter-to-quarter. Moving on to fees per million on Slide 12, we provide a highlight of the key trends for the quarter.
You can see Slide 18 of the earnings presentation for the full detail regarding our fee per million performance this quarter. For long tenor swaps, average fees per million were down 10.3%, primarily due to mix shift within our currencies and lower duration. For cash credit, average fees per million decreased 11.4%, primarily due to a mix shift away from higher fee per million munis and retail credit and towards lower fee per million European credit and portfolio trading. Slide 13 details our adjusted expenses. At a high level, the scalability and variable nature of our expense base allow us to continue to invest for growth and grow margins. We have maintained a consistent philosophy here. Adjusted expenses for the second quarter increased 9.4% on a reported basis and 9.9% on a constant currency basis. During the second quarter, we continued investments in tech and communications, digital assets, tech consulting and client relationship development.
Adjusted compensation costs grew 1.6% as higher headcount, which was up 10.3% year-over-year and higher equity-based compensation were largely offset by lower discretionary and performance-related compensation. Technology and communication costs increased 38.9%, primarily due to our continued investments in data strategy and infrastructure and increased software costs, including AI. Approximately $5.2 million of the increase was driven by investments in our data infrastructure strategy and higher reference data costs, both of which began in the second half of 2025. Adjusted professional fees grew 17.9% due to an increase in tech consultants as we continue to augment our offshore technology operations. Occupancy expenses increased 39.1%, primarily from increased rent due to the move to our new New York City headquarters, which came into effect in the third quarter of '25 and data center rent expense.
Adjusted general and administrative costs increased 4.9%, primarily due to a pickup in travel and entertainment, but partially offset by favorable FX movements. Favorable movements in FX resulted in a $0.7 million gain in the second quarter of '26 versus approximately a $2.2 million loss in the second quarter of '25. Excluding FX, adjusted general and administrative costs grew 22.2%. Slide 14 details capital management and our guidance. On our cash position and capital return policy, we ended second quarter in a strong position with approximately $2.1 billion in cash and cash equivalents, and free cash flow exceeding $1 billion for the trailing 12 months, representing strong year-over-year growth of approximately 13%. We also held approximately 1.6 billion Canton Coins with a fair value of approximately $230 million. With this quarter's earnings, the Board declared a quarterly dividend of $0.14 per Class A and Class B shares, up 16.7% year-over-year.
During the quarter, we stepped up our share repurchases, buying back approximately 1.9 million shares for $189 million as we took advantage of the dislocation in our stock price. There was $334 million of aggregate share repurchase authorization remaining as of June 30. Turning to guidance for 2026. In light of our continued strong business momentum, we are maintaining our guidance for the adjusted expenses to trend toward the top half of the initial guidance range of $1.1 billion to $1.16 billion. We believe we can drive adjusted EBITDA and operating margin expansion compared to 2025 at either end of this range, although we expect the incremental margin expansion to be more muted as we continue to focus on balancing margin expansion with investing for the future. Specifically, we continue to invest in frontier markets and opportunities to expand electronification across Asia and emerging markets, as well as AI-related credit initiatives.
We also continue to invest in technology that allows us to sustain and build on our leading platform. Some of these investments will take time to scale, but we continue to prize innovation and creating durable long-term growth opportunities. Now I'll turn it back to Billy for concluding remarks.
Thanks, Sara. As we close out the first half of the year, I want to step back and talk about where the franchise stands. Our clients have navigated a lot over the last six months. And through all of it, Tradeweb hasn't just held its ground, we've extended it, deepening relationships across many of the asset classes we serve. We tend to come out of complicated periods more relevant to our clients than when we went in because the harder the market gets, the more they lean into innovation. And the ways we can help them are only expanding, especially with AI. This is still a young shift, but clients are moving from experimenting with these tools to building them into their day-to-day faster than we could have expected even a year ago. My conviction is that the firms that pair the deepest liquidity with the smartest technology will set the pace from here, and we intend to be at the front of it.
The same drivers that powered the first half, deeper client engagement and broader adoption of electronic trading are already carrying into the third quarter. With two important month-end trading days left in July, which tend to be some of our strongest revenue days, average daily revenue growth is up low teens relative to July 2025. The diversity of our growth remains a theme, as we are seeing a preliminary strong double-digit growth across rates, credit and equities. Specifically, we are seeing double-digit volume growth year-over-year across global government bonds, global interest rate and credit default swaps, fully electronic IG credit and global equities. Our IG and high-yield share is tracking below June levels. I would like to conclude my remarks by thanking our clients for their business and partnership in the quarter. I want to thank my colleagues for their efforts that contributed to the second highest quarterly revenues in our history. With that, I will turn it back to Ashley for your questions.
Q&A will end at 10:30 a.m. Eastern Time. Operator, you can now take our first question.
Questions and answers
And the first question is going to come from Alex Blostein with Goldman Sachs.
So I appreciate it's obviously early, but I was hoping to get your perspective on potential shifts in the competitive landscape for your products from the announced acquisition of MarketAxess by ICE. In particular, curious if you think about both opportunities that could come on the back of any dislocation and customer moves whenever there is an integration versus potential risks, I guess, both in credit and to some degree, in rates.
Interesting times. Thanks for the question. Yes, so it's early. You're right about that. And obviously, as you know very well, we know ICE. I like Jeff; he actually texted me this morning and said, sorry about this news coming out kind of as your great earnings are also coming out. So I accept your apology for the record, Jeff. I'm sure you're reading the transcript anyway. We see it as a validation of the fee pool and credit to start with, Alex. And we do welcome very clearly rational and commercial competition in the space. Ultimately, I think we feel very confident in our role as the trusted market venue that really understands the role that data plays in the relationship between the most important clients globally and their counterparties. And I think that's a really important thing to say. We're in a sweet spot from my perspective, and I think that makes us all super excited at Tradeweb.
We're in a sweet spot around credit, right? As you know very well, the hyperscalers continue to sell bonds, central banks are less active in the space. The traditional banks have had just lights out kind of earnings. At the same time, these nonbank liquidity providers are arriving en masse and in force in the credit space. That's a pretty good environment. And so as you know, market volumes have been growing. The pace of electronification continues to keep up and is increasing across the board. And not surprisingly, what that means is competition is here and has been arriving. And as always, there have been and there will be winners and losers around competition. And you know this very well, the ethos of this company is we are market share takers, period. And so we see two things from my perspective. I think we see the opportunity inside of credit for the wallet to be restored. We think we have a tremendous amount of opportunity to continue to invest in credit around the next chapter of growth, which we see as the use of technology, access to data and ultimately something really important, which is the scalability of decision-making by our clients.
We're going to be into a very interesting next chapter that I think will be defined by a few things. It's going to be the continued rise of the nonbank liquidity providers, the systematic players in credit. But that rise needs to be balanced with something super important, which is the traditional partner banks, the legacy banks in the space. And those are the keys to ultimately risk trading and has been a historic advantage from my perspective of Tradeweb. The impact of technology inside of credit isn't anything to be diminished. So to start with, protocol innovations matter, and the market is becoming more sophisticated and ultimately more model driven. I think that plays to our strength. Do we get to a place where we get into this concept of power law domination where winner takes most? I think so. And I think we're really, really well positioned to be that venue from my perspective as we get to this virtuous cycle of data, automation, solution and liquidity where liquidity begets liquidity.
And I think this is a really important moment for us. I say this very clearly. Ultimately, those who create a better value proposition are going to get the share. And I can say that with perfect confidence. And I think in an optimistic way, around what's happening in our world, Alex, there's no fighting technology. Everything in credit is pointing towards ultimately more transparency. And ultimately, I think that's the direction of travel. And from our perspective, that's the thing that makes us extremely excited about where we are in credit. So thanks a lot. Good to hear your voice. Interesting morning, as always.
And the next question is going to come from Tyler Mulier with William Blair.
There have been concerns around perpetuals potentially disrupting parts of the fixed income market. Are there any areas where you see genuine displacement risks and any areas where you could actually benefit?
Yes. It's a good question. I think the short answer is no; we don't view it as disruptive across our core financing and hedging markets that we live in. We love innovation. A perpetual is really ultimately a levered bet on price with no end date. Bonds are essentially the opposite: a bond has an end date, and much of the returns comes from getting it shorter as it ages, something a constant maturity perpetual can't capture. It doesn't solve a problem for asset managers whose mandates are written in maturity buckets. Hedges have a lineup against actual bonds and swaps, which already give elongated exposure without a roll. So we don't see it as a threat to our institutional business. We are open to innovation and will consider opportunities where it makes sense. We see potential in the retail world and are excited about that. But we don't view it fundamentally as relevant inside of the institutional fixed income markets. It could be an opportunity to expand our footprint if demand arises in the retail segment, which continues to grow in sophistication.
And the next question will come from Craig Siegenthaler with Bank of America.
We wanted to see if you have any metrics to help us evaluate the engagement levels with both, one, TARA, your brand-new AI assistant and also two, your new dedicated Kalshi pricing page. And I know you just launched them both in the back half of June, but we're curious on early engagement levels and also where you expect them to go to.
Yes. It's a great question. Good to hear your voice, Craig. And the timeliness around TARA is interesting given the news today. Definitely still early days. Let me take a half step back. We are going to be the most ambitious company that we can be. Part of that ambition relies on our ability to lead in core businesses and place important bets in frontier space. We've had extremely strong client conversations this quarter on both TARA and Kalshi. Right now, our focus is engaging with clients and proving value. The problem TARA solves is pulling the signal out of a large and growing data set fast enough to act on it. TARA will move clients from data retrieval into insight generation, instantly inside their workflow across liquidity, pricing and historical context. TARA starts in credit and will expand across product lines over the medium term. Early adoption in credit has been encouraging, although this is new and clients are revisiting compliance rules around agentic tools.
Kalshi has generated the best conversations we're having with clients. The Kalshi page puts real-time event probabilities next to swaps and treasuries in an easy, accessible way. It's intentionally low friction to encourage discovery and learning. Clients are returning and personalizing workflows through filters and watch lists. Prediction markets today are essentially retail, but our opportunity is to build an institutional-grade version with standardization, connectivity, execution quality and size that sophisticated institutions expect. It's the same playbook we've run across fixed income for 25 years: use our broad network, execution infrastructure and seat on how activity trades. So two big initiatives, different but connected by the same strategy: lead with the client, prove the engagement, then monetize.
And the next question is going to come from Dan Fannon with Jefferies.
Sara, I heard you on the guidance for expenses, but I was hoping to get a little more detail on the incremental spend and where that's being directed. And then if we think about a revenue environment that maybe is less constructive, how do we think about expense flexibility in that type of scenario?
Great. Specifically, we're directing our incremental investments this year versus last year in two big buckets. The first grouping is around longer-term investments and horizons that are fueling what we think are the next legs of growth and innovation for Tradeweb. There are three specific things I'd call out: one, data infrastructure and strategy. This quarter, we had a $5 million increase from last year as we stepped up our spend significantly in the back half of last year. Those investments support AI readiness, increased performance demands with the volumes we're seeing and a lot of our expansion, particularly internationally. Second, AI client-facing innovation, which includes areas like TARA and Ai-Price, and improvements in protocols like SNAP+ and AiEX, which we believe are driving next levels of electronification in our biggest markets like credit and treasuries. These include people and non-comp investments.
Third, digital and frontier markets, which include organic efforts in tokenized trading such as intraday repo, crypto capabilities as well as Kalshi-related initiatives. That's the longer-term bucket. The second bucket is nearer-term return areas we've been investing in that have clear traction and acceleration of revenue growth, like swaps and emerging markets in Asia. On flexibility, about 45% of our expense base remains variable and discretionary. We continue to see operating leverage and remain confident in our ability to show margin improvement. In the first half, expense grew 14.8% and margins expanded over 30 basis points. At the top half of our range, adjusted expenses would grow between 11% and 14% for the full year. We expect the second half to show slower expense growth relative to prior year comparisons. Given our priorities, we're continuing to invest, but we absolutely have the flexibility to slow down the pace of investments in different environments.
And the next question comes from Ken Worthington with JPMorgan.
I wanted to follow up on Alex's earlier question. Where might Sprecher as a new owner and leader of MarketAxess make it a more formidable competitor in credit? So part of the pitch that Jeff made this morning is that having a fully integrated front-to-back ecosystem and leveraging economies of scale can increase activity and market share. So Billy, does the pitch make sense to you? And do they have the pieces for that front-to-back ecosystem? And how does Tradeweb adjust here? I was going to say you've got plenty of cash on the balance sheet, you can fill in the pieces that you need. But ultimately, what's the response here?
Yes, that's a good question. I don't want to be dismissive. My strong reaction is that we have our playbook and can be opportunistic, but I'm reluctant to say we have to adjust. What you're describing is a strategy we've been building for nearly 30 years around STP, data, execution and post-trade TCA. We have a strong worldview around the power of technology, user experience and sales. Part of that sales effort is aligning interests with the biggest, most important banks in the world, including JPMorgan. I'm not certain how the announced transaction will immediately solve certain competitive gaps. I'll be watching it closely. We feel quite good about our playbook in credit, which is focused on solving for more complexity and risk trades. The nonbank liquidity providers are arriving in force inside credit. The nuance required to solve for both those firms and to keep the largest banks onside is everything. Tradeweb's ability to solve for that has been a historic advantage and remains central to our strategy. So we remain optimistic about where credit is going, and today's news validated the importance of the space.
The next question comes from Michael Cyprys with Morgan Stanley.
I wanted to ask on rates swaps. Curious what you see as the biggest barriers to further electronification and swaps from here? And where are you seeing the fastest progress so far? And where can Tradeweb do to accelerate adoption as you look out?
Yes. It's a really good question. The swaps market is awash in complexity, and that's where we thrive. Electronification hasn't been linear; it moves in phases as market structure, regulation, liquidity and client behavior align. The biggest barrier is behavioral: moving large, real risk electronically requires trust and changes to long-held workflows. In more complex corners, better data and more efficient post-trade processes are crucial. It's less a technological barrier and more an adoption curve, which is an area where sales and client engagement matter a lot. Where progress is fastest: emerging market swaps is a standout; we've helped drive it to roughly 20% electronification and account for the majority of that activity. We're also breaking new ground in uncleared parts of the market with industry-first electronic trades. The next frontier is wholesale. The institutional market is moving faster; the wholesale market is slower. As dealers manage more risk electronically, their need for efficient tools and the ability to recycle and warehouse risk electronically grows, and we have the connectivity to win as that market moves. So our focus is wholesale as the next big opportunity in swaps.
And the next question comes from Christian Bolu with Autonomous.
A couple of quick questions on your capital management strategy. You're sitting on north of $2 billion of cash. The stock is near its lowest relative multiple since the IPO. Yet you've only purchased about $250 million worth of shares this year. So just curious why you're not leaning in harder into share repurchases. And then maybe longer term, strategically, after you've done the Crossover and the Kalshi minority interest investments this year, is sort of the next leg of the TAM story crypto execution or prediction markets? And what would make you move from just doing minority investments to doing full-scale acquisitions?
Great. We continuously evaluate the size of our cash position relative to our capital needs and investment opportunities. It's a good problem to have as we've grown; our business excels in generating cash. Organic initiatives remain our top capital management priority, and we're actively investing in frontier markets and tokenization, AI and international expansion. Of the $2 billion on the balance sheet, about $500 million is earmarked for regulatory risk capital and working capital, leaving roughly $1.5 billion of excess cash. We've already stepped up our share repurchases and you can expect us, barring M&A and any restrictions, to continue to lean in at these price levels. We have deployed about $200 million and a little over $300 million remains in our current authorization. The caveat is that while buybacks are accretive at current levels, some M&A opportunities in our pipeline would be even more accretive.
We're evaluating multiple inorganic opportunities, and having a clean balance sheet allows us to be nimble. We remain disciplined on acquisitions and want them to be near-term EPS accretive without unnecessary execution complexity. Regarding frontier markets like crypto and prediction markets: we see these as potentially large and transformational TAMs. Our minority investments in Kalshi and Crossover give us optionality and a seat at the table without heavy upfront capital. Institutional crypto TAM may develop sooner than prediction markets; we're seeing client interest and the necessary mechanisms—custody, execution and clearing—are developing. Our current strategy lets us be efficient while regulation and these markets mature. For us to move from minority investments to full acquisitions, we'd want clarity on regulatory dynamics and attractive financial returns, just like any other M&A opportunity.
And the next question is going to come from Patrick Moley with Piper Sandler.
Just maybe a question on the outlook. You mentioned that revenues in July were trending up low teens year-over-year. I would love to hear how you're thinking about the setup for the rest of the quarter and into the back half of the year. And then maybe more specifically, with the new Fed leadership, maybe just your comments on how you see that benefiting the industry and Tradeweb moving forward.
Good question, Patrick. I think Kevin is a gift for our rates business in a basic way. A market that has to form its own view is a better market for us. Dispersion of views widens: instead of everyone trading off the same signal, you get a genuine two-sided debate. Price discovery migrates from scheduled meetings to the economic calendar, so every print matters more. That's a steadier drumbeat of activity rather than one big macro moment. We don't rely on volatility to drive our story; growth accelerated through the quarter and June revenue was up more than 20% year-over-year even as treasury intraday volatility fell about 20% from March levels. A livelier policy debate is an upside on the base case. A handful of themes drive client activity: growing issuance globally across government bonds and corporate debt, diverging central bank rate outlooks, stronger banks, global de-dollarization pushing more activity into non-dollar rates (boosting our European swaps business), and increasing ETF usage for risk expression.
More collateral has to move, which accelerates our financing business. Swaps are the purest expression of policy debate: record risk market share and a long electronification runway. Money markets are underappreciated; balance sheet runoff will drive U.S. repo growth. Overall, the pace of electronification continues to grow and the backdrop looks strong for the business.
And the next question will come from Simon Clinch with Rothschild & Company.
I was wondering, Billy, if you could talk about the opportunity in mortgages, particularly as you're sort of making strides into new areas like the specified pools. What kind of innovations, protocol launches would help electronic trading there? And how does that impact the overall fee per million sort of dynamic as well?
Yes. Great question. Given our historic role in the mortgage industry, it's an important business for us. Year-to-date, mortgage revenues are up almost 14% with institutional specified pool revenue growing more than 40% year-to-date. I was bullish on mortgages as 2026 started; seeing the business perform well in a higher rate environment speaks to the maturity of our franchise and our strength in the TBA market. Specified pools are different: only about 20% to 25% of institutional trading in pools is electronic today, which implies a long runway. We've been a leader in driving that transition and we hold the leading share of institutional electronic pool market. Pools trade on spread and often utilize bid and offer lists, so there's a lot of innovation and transparency we can bring to pools. We have the clients, connectivity to the most important dealers, and the reputation we need on both wholesale and institutional sides. Pool fee per million is higher because it's a less liquid instrument than TBAs, and that makes it commercially attractive. We'll continue to apply a leading-edge lens to pools as part of our broader rates focus.
Thank you. And this does conclude our Q&A session. And I will now turn the call back over to Billy for closing remarks.
Busy morning. Thank you all for joining us. As always, super appreciated. Any follow-up questions, obviously, feel free always to reach out to Ashley, Sameer and the team. Hope everyone has a great day. Thank you all so much.
This concludes today's conference call. Thank you for participating, and you may now disconnect.