MarketAxess Holdings, Inc.
MARKETAXESS HOLDINGS INC (Form: DEF 14A, Received: 04/23/2014 16:31:24)
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No.         )

Filed by the Registrant  þ

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to § 240.14a-12

MarketAxess Holdings Inc.

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

þ No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies:

  

 

 

  (2) Aggregate number of securities to which transaction applies:

  

 

 

  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

  

 

 

  (4) Proposed maximum aggregate value of transaction:

  

 

 

  (5) Total fee paid:

  

 

 

¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount Previously Paid:

  

 

 

  (2) Form, Schedule or Registration Statement No.:

  

 

 

  (3) Filing Party:

  

 

 

  (4) Date Filed:

  

 


Table of Contents

 

LOGO

MarketAxess Holdings Inc.

299 Park Avenue, 10th Floor

New York, New York 10171

April 23, 2014

To the Stockholders of MarketAxess Holdings Inc.:

You are invited to attend the 2014 Annual Meeting of Stockholders (the “ Annual Meeting ”) of MarketAxess Holdings Inc. (the “ Company ”) scheduled for Thursday, June 5, 2014 at 10:00 a.m., Eastern Daylight Time, at the InterContinental New York Barclay Hotel, 111 East 48th Street, New York, New York 10017. The Company’s Board of Directors and management look forward to seeing you.

Details of the business to be conducted at the Annual Meeting are given in the attached Notice of Annual Meeting and Proxy Statement, which you are urged to read carefully.

We are pleased to take advantage of the Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders on the Internet. We believe these rules allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. On April 24, 2014, we expect to mail to our stockholders a Notice containing instructions on how to access our Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2013 and vote online. The Notice contains instructions on how you can receive a paper copy of the Proxy Statement, proxy card and Annual Report if you only received a Notice by mail.

Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, your shares should be represented and voted. After reading the enclosed Proxy Statement, please cast your vote via the Internet or telephone or complete, sign, date and return the proxy card in the pre-addressed envelope that we have included for your convenience. If you hold your shares in a stock brokerage account, please check your proxy card or contact your broker or nominee to determine whether you will be able to vote via the Internet or by telephone.

On behalf of the Board of Directors, thank you for your continued support.

Sincerely,

 

LOGO

Richard M. McVey

Chairman and Chief Executive Officer


Table of Contents

MarketAxess Holdings Inc.

299 Park Avenue, 10th Floor

New York, New York 10171

NOTICE OF

2014 ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders of MarketAxess Holdings Inc.:

NOTICE IS HEREBY GIVEN that the 2014 Annual Meeting of Stockholders (the “ Annual Meeting ”) of MarketAxess Holdings Inc., a Delaware corporation (the “ Company ”), will be held on Thursday, June 5, 2014, at 10:00 a.m., Eastern Daylight Time, at the InterContinental New York Barclay Hotel, 111 East 48th Street, New York, New York 10017.

At the Annual Meeting we will:

1.  vote to elect the 11 nominees named in the attached Proxy Statement as members of the Company’s Board of Directors for terms expiring at the 2015 Annual Meeting of Stockholders;

2.  vote to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2014;

3.  hold an advisory vote on the compensation of the Company’s named executive officers as disclosed in the attached Proxy Statement; and

4.  transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

These items are more fully described in the Company’s Proxy Statement accompanying this Notice.

The record date for the determination of the stockholders entitled to notice of, and to vote at, the Annual Meeting, or any adjournment or postponement thereof, was the close of business on April 8, 2014. You have the right to receive this Notice and vote at the Annual Meeting if you were a stockholder of record at the close of business on April 8, 2014. Please remember that your shares cannot be voted unless you cast your vote by one of the following methods: (1) vote via the Internet or call the toll-free number as indicated on the proxy card; (2) sign and return a paper proxy card; or (3) vote in person at the Annual Meeting.

By Order of the Board of Directors,

 

LOGO

Scott Pintoff

General Counsel and Corporate Secretary

New York, New York

April 23, 2014

 

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY AND COMPLETE AND SUBMIT YOUR PROXY CARD VIA THE INTERNET OR SIGN AND DATE YOUR PAPER PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE. ALTERNATIVELY, YOU MAY BE ABLE TO SUBMIT YOUR PROXY BY TOUCH-TONE PHONE AS INDICATED ON THE PROXY CARD.


Table of Contents

TABLE OF CONTENTS

 

GENERAL INFORMATION

     1   

SOLICITATION OF PROXIES

     2   

VOTING

     2   

AVAILABILITY OF CERTAIN DOCUMENTS

     4   

PROPOSAL 1 — ELECTION OF DIRECTORS

     5   

CORPORATE GOVERNANCE AND BOARD MATTERS

     11   

PROPOSAL 2 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     17   

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

     19   

PROPOSAL 3 — ADVISORY VOTE ON EXECUTIVE COMPENSATION

     21   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     22   

EXECUTIVE OFFICERS

     24   

COMPENSATION DISCUSSION AND ANALYSIS

     25   

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

     44   

COMPENSATION RISK ASSESSMENT

     45   

EXECUTIVE COMPENSATION

     47   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     58   

OTHER MATTERS

     58   


Table of Contents

MarketAxess Holdings Inc.

299 Park Avenue, 10th Floor

New York, New York 10171

PROXY STATEMENT for the

2014 ANNUAL MEETING OF STOCKHOLDERS

To Be Held On June 5, 2014

GENERAL INFORMATION

This Proxy Statement is furnished in connection with a solicitation of proxies by the Board of Directors (the “ Board ” or “ Board of Directors ”) of MarketAxess Holdings Inc., a Delaware corporation (“ MarketAxess ”, the “ Company ”, “ we ” or “ our ”), to be used at our 2014 Annual Meeting of Stockholders (the “ Annual Meeting ”) scheduled for Thursday, June 5, 2014, at 10:00 a.m., Eastern Daylight Time, at the InterContinental New York Barclay Hotel, 111 East 48th Street, New York, New York 10017.

This Proxy Statement, the accompanying Notice of Annual Meeting of Stockholders and proxy card are first being mailed to stockholders on or about April 24, 2014. Whenever we refer in this Proxy Statement to the “Annual Meeting,” we are also referring to any meeting that results from any postponement or adjournment of the June 5, 2014 meeting.

Holders of record of our Common Stock, par value $0.003 per share (“ Common Stock ”), at the close of business on April 8, 2014 (the “ Record Date ”) are entitled to notice of, and to vote at, the Annual Meeting. On that date, there were 37,253,056 shares entitled to be voted.

We encourage you to vote your shares, either by voting in person at the Annual Meeting or by granting a proxy ( i.e. , authorizing someone to vote your shares). If you vote via the Internet or telephone or execute the attached paper proxy card, the individuals designated will vote your shares according to your instructions. If any matter other than Proposals 1, 2 or 3 listed in the Notice of Annual Meeting of Stockholders is presented at the Annual Meeting, the designated individuals will, to the extent permissible, vote all proxies in the manner that the Board may recommend or, in the absence of such recommendation, in the manner they perceive to be in the best interests of the Company.

If you indicate when voting via the Internet that you wish to vote as recommended by the Board or if you execute the enclosed paper proxy card but do not give instructions, your proxy will be voted as follows: FOR the election of the nominees for director named herein, FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2014, FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in this Proxy Statement, and in accordance with the best judgment of the persons appointed as proxies with respect to any other matters that properly come before the Annual Meeting. If your shares are held in a stock brokerage account or by a bank or other nominee, see the information under the heading Voting — Broker authority to vote .

Information on how you may vote at the Annual Meeting (such as granting a proxy that directs how your shares should be voted, or attending the Annual Meeting in person), as well as how you can revoke a proxy, is contained in this Proxy Statement under the headings Solicitation of Proxies and Voting.

We are furnishing proxy materials to our stockholders primarily via the Internet. On April 24, 2014, we expect to mail beneficial owners of our Common Stock a Notice of Internet Availability containing instructions on how to access our proxy materials, including this Proxy Statement and our Annual Report. The Notice of Internet Availability also instructs you on how to vote via the Internet or by telephone. Other stockholders, in accordance with their prior requests, received e-mail notification of how to access our proxy materials and vote via the Internet, or have been mailed paper copies of our proxy materials and a proxy card or voting form. All beneficial owners will have the ability to access the proxy materials, including this Proxy Statement and our Annual Report, on the website referred to in the Notice.

Internet distribution of our proxy materials is designed to provide our stockholders with the information they need, while lowering costs of delivery and reducing the environmental impact of our Annual Meeting. However, if you would prefer to receive paper copies of proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.

Important Notice Regarding the Availability of Proxy Materials

for the Stockholder Meeting to be held on June 5, 2014

Our Proxy Statement and 2013 Annual Report to Stockholders are available at

https://materials.proxyvote.com/57060D

 

1


Table of Contents

SOLICITATION OF PROXIES

General

The attached proxy card allows you to instruct the designated individuals how to vote your shares. You may vote in favor of, against, or abstain from voting on any proposal. In addition, with respect to Proposal 1 (the election of directors), you may, if you desire, indicate on the proxy card that you are not authorizing the designated individuals to vote your shares for one or more of the nominees.

Solicitation

We will bear the entire cost of solicitation, including the preparation, assembly, printing and mailing of a Notice of Internet Availability of Proxy Materials, this Proxy Statement, the proxy card and any additional soliciting materials furnished to stockholders. Copies of solicitation materials will be furnished to brokerage houses, fiduciaries and custodians holding shares in their names that are beneficially owned by others so that they may forward the solicitation materials to such beneficial owners. In addition, we may reimburse such persons for their costs of forwarding the solicitation materials to such beneficial owners. The original solicitation of proxies by mail may be supplemented by solicitation by telephone or other means by our directors, officers, employees or agents. No additional compensation will be paid to these individuals for any such services. Except as described above, we do not presently intend to solicit proxies other than by mail.

VOTING

Stockholders entitled to vote and shares outstanding

Each stockholder is entitled to one vote for each share of Common Stock held on each matter submitted to a vote at the Annual Meeting. As of the Record Date, 37,253,056 shares of Common Stock were outstanding and entitled to be voted at the Annual Meeting.

How to vote

Submitting a proxy via mail, the Internet or telephone

If you hold your shares through a stock broker, nominee, fiduciary or other custodian, you may vote by calling the toll-free telephone number listed on the proxy card or visiting the website address listed on the proxy card. If you choose to submit your proxy with voting instructions by telephone or through the Internet, you will be required to provide your assigned control number noted on the Notice before your proxy will be accepted. In addition to the instructions that appear on the Notice, step-by-step instructions will be provided by recorded telephone message or at the designated website on the Internet. Votes submitted by telephone or via the Internet must be received by 11:59 p.m., EDT, on June 4, 2014 in order for them to be counted at the Annual Meeting.

If you are a stockholder of record, or otherwise received a printed copy of the proxy materials, you may submit your proxy with voting instructions by mail by following the instructions set forth on the proxy card included with the proxy materials. Specifically, if you are a stockholder of record on the Record Date, you may vote by mailing your proxy card, with voting instructions, to the address listed on your proxy card.

Voting your shares in person at the Annual Meeting

For Shares Directly Registered in the Name of the Stockholder:     You may vote in person at the Annual Meeting; however, we encourage you to vote by proxy card or the Internet even if you plan to attend the meeting. If you plan to attend the Annual Meeting, you will need to bring proof of your ownership of our Common Stock as of the close of business on April 8, 2014, the Record Date.

For Shares Registered in the Name of a Brokerage Firm or Bank:     You may vote in person at the Annual Meeting; however, you will need to bring an account statement or other acceptable evidence of ownership of Common Stock as of the close of business on April 8, 2014. Alternatively, in order to vote, you may contact the person in whose name your shares are registered and obtain a proxy from that person and bring it to the Annual Meeting.

 

2


Table of Contents

Revoking a proxy

A proxy that was submitted via the Internet or by telephone may be revoked at any time before it is exercised by (1) executing a later-dated proxy card via the Internet or by telephone or (2) attending the Annual Meeting and voting in person by ballot.

A proxy that was submitted by mail may be revoked at any time before it is exercised by (1) giving written notice revoking the proxy to our General Counsel and Corporate Secretary at MarketAxess Holdings Inc., 299 Park Avenue, 10th Floor, New York, NY 10171, (2) subsequently sending another proxy bearing a later date or (3) attending the Annual Meeting and voting in person by ballot.

If your shares are registered in the name of a brokerage firm or bank, you must contact your brokerage firm or bank to change your vote or obtain a proxy to vote your shares if you wish to cast your vote in person at the meeting.

Your attendance at the Annual Meeting in and of itself will not automatically revoke a proxy that was submitted via the Internet, by telephone or by mail.

Broker authority to vote

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered to be the beneficial owner of shares held in street name. These proxy materials are being forwarded to you by your broker or nominee, who is considered to be the holder of record with respect to your shares. As the beneficial owner, you have the right to direct your broker or nominee how to vote by filling out the voting instruction form provided by your broker or nominee. Telephone and Internet voting options may also be available to beneficial owners. As a beneficial owner, you are also invited to attend the Annual Meeting, but you must obtain an account statement or other acceptable evidence of ownership of our Common Stock or a proxy from the holder of record of your shares in order to vote in person at the Annual Meeting.

If your shares are held in street name, your broker or nominee will ask you how you want your shares to be voted. If you provide voting instructions, your shares must be voted as you direct. If you do not furnish voting instructions, one of two things can happen, depending upon whether a proposal is “routine.” Under the rules that govern brokers that have record ownership of shares beneficially owned by their clients, brokers have discretion to cast votes only on routine matters, such as the ratification of the appointment of independent registered public accounting firms, without voting instructions from their clients. Brokers are not permitted, however, to cast votes on “non-routine” matters without such voting instructions, such as the election of directors. A “broker non-vote” occurs when a beneficial owner has not provided voting instructions, and the broker holding shares for the beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that proposal and has not received voting instructions from the beneficial owner.

Quorum

A quorum is required for the conduct of business at the meeting. The presence at the meeting, in person or by proxy, of the holders of shares having a majority of the voting power represented by all outstanding shares entitled to vote on the Record Date will constitute a quorum, permitting us to conduct the business of the meeting. Proxies received but marked as abstentions, if any, and broker non-votes (as described above) will be included in the calculation of the number of shares considered to be present at the meeting for quorum purposes. If we do not have a quorum, we will be forced to reconvene the Annual Meeting at a later date.

Votes necessary to approve each proposal

Election of Directors.     Our Bylaws include a majority voting standard for the election of directors in uncontested elections, which are generally defined as elections in which the number of nominees does not exceed the number of directors to be elected at the meeting. In the election of directors (Proposal 1), you may either vote “FOR,” “AGAINST” or “ABSTAIN” as to each nominee. Cumulative voting is not permitted. Under the majority voting standard, in uncontested elections of directors, such as this election, each director must be elected by the affirmative vote of a majority of the votes cast by the shares present in person or represented by proxy and

 

3


Table of Contents

entitled to vote. A majority of the votes cast means that the number of votes cast “FOR” a candidate for director exceeds the number of votes cast “AGAINST” that candidate for director. Brokers do not have discretionary authority to vote for directors. Abstentions and broker non-votes will not count as a vote cast “FOR” or “AGAINST” a nominee’s election and thus will have no effect in determining whether a director nominee has received a majority of the votes cast.

Other Items.     For the ratification of our independent registered public accounting firm (Proposal 2) and the adoption of a resolution approving on a non-binding, advisory basis the compensation of the Company’s named executive officers (Proposal 3), the proposals will be decided by the affirmative vote of the holders of a majority of the shares present in person or represented by proxy. Abstentions will be counted for purposes of determining the number of votes cast on these proposals and will have the same effect as negative votes. Broker non-votes will not be counted as shares present and entitled to vote.

Certain stockholder-related matters

We do not know of any stockholder proposals that may be properly presented at the Annual Meeting. For information regarding inclusion of stockholder proposals in our 2015 Annual Meeting of Stockholders, see the information in this Proxy Statement under the section heading Other Matters — Stockholder proposals for 2015 Annual Meeting.

AVAILABILITY OF CERTAIN DOCUMENTS

Householding of Annual Meeting materials

Some banks, brokers and other nominee record holders may participate in the practice of “householding” proxy statements and their accompanying documents. This means that only one copy of our Proxy Statement is sent to multiple stockholders in your household. We will promptly deliver a separate copy of these documents to you upon written or oral request to our Investor Relations Department at MarketAxess Holdings Inc., 299 Park Avenue, 10th Floor, New York, NY 10171 or 212-813-6000. If you want to receive separate copies of our proxy statements in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address and phone number.

Additional information

We are required to file annual, quarterly and current reports, proxy statements and other reports with the SEC. Copies of these filings are available through our Internet website at www.marketaxess.com or the SEC’s website at www.sec.gov . We will furnish copies of our SEC filings (without exhibits), including our Annual Report on Form 10-K for the year ended December 31, 2013, without charge to any stockholder upon written or oral request to our Investor Relations Department at MarketAxess Holdings Inc., 299 Park Avenue, 10th Floor, New York, NY 10171 or 212-813-6000.

 

4


Table of Contents

PROPOSAL 1 — ELECTION OF DIRECTORS

The first proposal to be voted on at the Annual Meeting is the election of directors. Our Board currently consists of 11 directors, 10 of whom are not our employees. Each of the nominees for director was elected by the Company’s stockholders on June 6, 2013, except for Lesley Daniels Webster, Jane Chwick and William F. Cruger, who were appointed to the Board on July 17, 2013, October 16, 2013 and November 1, 2013, respectively. All of the directors will be elected for a term that begins at the Annual Meeting and ends at the 2015 Annual Meeting of Stockholders. Each director will hold office until such director’s successor has been elected and qualified, or until such director’s earlier resignation or removal.

Your vote

If you sign the enclosed proxy card and return it to the Company, your proxy will be voted FOR all directors, for terms expiring at the 2015 Annual Meeting of Stockholders, unless you specifically indicate on the proxy card that you are casting a vote against one or more of the nominees or abstaining from such vote.

A majority of the votes cast by stockholders entitled to vote at the Annual Meeting is required for the election of directors. Accordingly, the directorships to be filled at the Annual Meeting will be filled by the nominees receiving a majority of votes for their election. In the election of directors, stockholders will be given the choice to cast votes for or against the election of directors or to abstain from such vote. The number of shares voted for a director must exceed the number of votes cast against that director. Abstentions and broker non-votes will be excluded entirely from the vote and will have no effect on the outcome of the vote.

Board recommendation

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE FOLLOWING NOMINEES:

Richard M. McVey

Steven L. Begleiter

Stephen P. Casper

Jane Chwick

William F. Cruger

David G. Gomach

Carlos M. Hernandez

Ronald M. Hersch

John Steinhardt

James J. Sullivan

Lesley Daniels Webster

Each of these nominees is currently serving as a director on our Board, and each nominee has agreed to continue to serve on the Board if he or she is elected at the Annual Meeting. If any nominee is unable (or for whatever reason declines) to serve as a director at any time before the Annual Meeting, proxies may be voted for the election of a qualified substitute designated by the current Board, or else the size of the Board will be reduced accordingly. Biographical information about each of the nominees is included below under Director information .

Qualifications for director nominees

The minimum qualifications for Board consideration are:

 

   

substantial experience working as an executive officer for, or serving on the board of, a public company; or

 

   

significant accomplishment in another field of endeavor related to the strategic running of our business; and

 

   

an ability to make a meaningful contribution to the oversight and governance of a company having a scope and size similar to our Company.

 

5


Table of Contents

A director must have an exemplary reputation and record for honesty in his or her personal dealings and business or professional activity. All directors must demonstrate strong leadership skills and should possess a basic understanding of financial matters; have an ability to review and understand the Company’s financial and other reports; and be able to discuss such matters intelligently and effectively. He or she also needs to exhibit qualities of independence in thought and action. A candidate should be committed first and foremost to the interests of the stockholders of the Company. Persons who represent a particular special interest, ideology, narrow perspective or point of view would not, therefore, generally be considered good candidates for election to our Board. The key experience, qualifications and skills each of our directors brings to the Board that are important in light of our business are included in their individual biographies below.

Our Board does not have a formal written policy with regard to the consideration of diversity in identifying director nominees. Our Corporate Governance Guidelines, however, require the Board’s Nominating and Corporate Governance Committee to review the qualifications of the directors and the composition of the Board as a whole. This assessment includes not only the independence of the directors, but consideration of required minimum qualifications, skills, expertise and experience in the context of the needs of the Board and its ability to oversee the Company’s business.

Director information

At the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the persons named below to serve as directors of the Company for a term beginning at the Annual Meeting and ending at the 2015 Annual Meeting of Stockholders.

 

Richard M. McVey

Director since April 2000

   Richard M. McVey (54) has been Chief Executive Officer and Chairman of our Board of Directors since our inception. As an employee of J.P. Morgan & Co., one of our founding broker-dealers, Mr. McVey was instrumental in the founding of MarketAxess in April 2000. Prior to founding MarketAxess, Mr. McVey was Managing Director and Head of North America Fixed-Income Sales at JPMorgan, where he managed the institutional distribution of fixed-income securities to investors, from 1996 until April 2000. In that capacity, he was responsible for developing and maintaining senior client relationships across all market areas, including fixed-income, equities, emerging markets, foreign exchange and derivatives. From 1992 to 1996, Mr. McVey led JPMorgan’s North America Futures and Options Business, including institutional brokerage, research, operations, finance and compliance. He previously served on the board of directors of Blue Mountain Credit Alternatives L.P., an asset management fund focused on the credit markets and equity derivatives markets. Mr. McVey received a B.A. in Finance from Miami (Ohio) University and an M.B.A. from Indiana University.
   Mr. McVey’s role as one of our founders and his service as our Chief Executive Officer for over a decade give him deep knowledge and understanding of all aspects of the business and operations of MarketAxess. Mr. McVey’s extensive experience in the financial services industry, including significant leadership roles at JPMorgan, has provided comprehensive knowledge of the financial markets that we serve and the institutions and dealers that are our clients.

 

6


Table of Contents

Steven L. Begleiter

Director since April 2012

  

Steven L. Begleiter (52) has been a Senior Principal at Flexpoint Ford, LLC, a private equity group focused on investments in financial services and healthcare, since October 2008. Prior to joining Flexpoint Ford, Mr. Begleiter spent 24 years at Bear Stearns & Co., serving first as an investment banker in the Financial Institutions Group and then as Senior Managing Director and member of its Management and Compensation Committee from 2002 to September 2008. Mr. Begleiter also served as head of Bear Stearns’ Corporate Strategy Group. Mr. Begleiter currently serves on the board of directors of WisdomTree Investments, Inc. Mr. Begleiter received a B.A. in Economics from Haverford College.

 

Mr. Begleiter brings many years of leadership experience in the financial services and private equity industries to the Board. Mr. Begleiter also has extensive industry knowledge and perspectives on mergers and acquisitions and capital formation.

Stephen P. Casper

Director since April 2004

   Stephen P. Casper (64)  is retired. Mr. Casper was the President of TRG Management L.P., the investment manager of the TRG Global Opportunity Master Fund, Ltd., from April 2010 to August 2012. From September 2008 to April 2010, Mr. Casper was a partner of Vastardis Capital Services, which provides fund administration and securities processing outsourcing services to hedge funds, funds of funds and private equity funds and their investment management sponsors. Prior to this, Mr. Casper was Chairman and Chief Executive Officer of Charter Atlantic Corporation, the holding company of Fischer Francis Trees & Watts, Inc. (“FFTW”), a specialist manager of U.S., global and international fixed-income portfolios for institutional clients, and Malbec Partners, a manager of single-strategy hedge funds. From April 2004 to January 2008, Mr. Casper was the President and CEO of FFTW. Mr. Casper joined FFTW as Chief Financial Officer in 1990 and was appointed Chief Operating Officer in May 2001. From 1984 until 1990, Mr. Casper was Treasurer of the Rockefeller Family Office. Mr. Casper has been a member of the Board of Directors of the KLS Diversified Fund, the KS Rates Fund and the KLS Credit Opportunities Fund, all of which are fixed income hedge funds, since July 2012. Mr. Casper is a member of the Investment Committee of the Brooklyn Museum. Mr. Casper is a Certified Public Accountant and received a B.B.A. in accounting from Baruch College, from which he graduated magna cum laude, Beta Gamma Sigma, and an M.S. in finance and accounting from The Wharton School at the University of Pennsylvania.
   Mr. Casper’s experience in the fixed-income markets and financial services industry and his experience in financial reporting and accounting roles bring extensive public accounting, financial reporting, risk management and leadership skills to the Board.

Jane Chwick

Director since October 2013

   Jane Chwick (51)  was most recently an advisory director at The Goldman Sachs Group, Inc., a position in which she served through December 2013. Prior to this role, she was the Co-Chief Operating Officer of the Technology Division of Goldman Sachs where she was responsible for financial and business planning, technical strategy and ongoing management of an 8,000-person organization until her retirement in April 2013. Previously, Ms. Chwick held a number of

 

7


Table of Contents
   senior positions at Goldman Sachs, including Managing Director and Global Head of Technology in the Securities Division and Global Head of Derivatives Technology. During her tenure, she drove the design, build and integration of technology across all of Goldman Sachs’ derivatives businesses, including fixed income, commodities, currencies and equities. Ms. Chwick also serves as a board member of the Queens College Foundation. Ms. Chwick received a B.A. in Mathematics from Queens College and an M.B.A. from St. Johns University with a concentration in MIS and Quantitative Analysis.
   Ms. Chwick’s extensive technology leadership experience gained in a global financial services firm, combined with her depth of market knowledge and industry insight, bring valuable skills and strategic perspective to the Board.

William F. Cruger

Director since November 2013

  

William F. Cruger (55)  was most recently Vice Chairman of Investment Banking at JP Morgan and Co. where he was responsible for key client relationships on a global basis until his retirement in August 2013. Previously, Mr. Cruger held a number of senior positions at JP Morgan, including Managing Director in the Financial Institutions group from 1996 to 2011. During this time, he oversaw the rationalization of the firm’s private equity investments in trading platforms and related ventures at LabMorgan from 2000 to 2001. Prior to this, Mr. Cruger ran the firm’s investment banking practices in Japan from 1991 to 1996, Latin America from 1989 to 1991 and Emerging Asia from 1984 to 1988. He currently serves as a board member of Virtu Financial, Inc. and has previously served on the boards of Archipelago, Credittrade and Capital IQ. Mr. Cruger received a B.A. from Clark University and an M.B.A. from Columbia University.

 

Mr. Cruger’s diverse experience in investment banking at a global financial services firm, his extensive knowledge of financial institutions and financial markets, his leadership roles as a director of other financial services firms, and his international business experience bring critical skills and strategic insight to the Board.

David G. Gomach

Director since February 2005

   David G. Gomach (55) is retired. Mr. Gomach was the Chief Financial Officer and Treasurer of School Specialty, Inc. from September 2006 through June 2007, having joined as Executive Vice President - Finance in August 2006. Prior to School Specialty, Mr. Gomach held various positions at the Chicago Mercantile Exchange (“CME”) from 1987 to 2004. From June 1997 until his retirement from the CME in November 2004, he served as Chief Financial Officer. From 1996 until 1997, Mr. Gomach served as Vice President, Internal Audit and Administration. Also, during his tenure at the CME, he was a Senior Director and Assistant Controller. Prior to joining the CME, Mr. Gomach held positions at Perkin-Elmer, Singer Corporation and Mercury Marine, a subsidiary of Brunswick Corporation. From April 2011 to October 2012, Mr. Gomach served as a director and member of the audit committee for Eladian Partners, a privately held multi-asset class trading company. Mr. Gomach is a Certified Public Accountant and received a B.S. from the University of Wisconsin-LaCrosse and an M.B.A. from Roosevelt University.

 

8


Table of Contents
   Mr. Gomach brings to the Board leadership experience from his prior roles and deep knowledge of public accounting, financial reporting and risk management matters facing public companies in the financial services industry, including internal controls and Sarbanes-Oxley compliance.

Carlos M. Hernandez

Director since February 2006

   Carlos M. Hernandez (52) is Co-Head of Global Banking at JPMorgan, serves on the JPMorgan Chase Executive Committee and is a member of the Corporate & Investment Bank’s leadership team. Prior to this position, Mr. Hernandez was Global Head of Investor Services and led JPMorgan’s Global Equities and Prime Services business. He previously managed the Origination and Distribution business for the Americas, Institutional Equities for the Americas and Global Equity Capital Markets at JPMorgan. Before joining the Equities division, Mr. Hernandez was head of Investment Banking, Latin America.
  

Mr. Hernandez has been with JPMorgan since 1986, working on a wide array of advisory and financing transactions for both corporations and governments, across various product groups and geographic regions.

Mr. Hernandez currently serves on the boards of The Brunswick School in Connecticut and John Hopkins School of Sciences in Maryland. In 2005, he served on the board of the Securities Industries Association. Mr. Hernandez has a B.S. in Business from the State University of New York and an M.B.A. from Columbia University.

   Mr. Hernandez has a broad range of leadership experience and a deep understanding of the global financial markets and financial services and securities industries, including the particular needs of an international corporation. Mr. Hernandez also has a unique understanding of and experience with our broker-dealer clients and their needs, particularly in the context of recent regulatory reform.

Ronald M. Hersch

Director since July 2000

   Ronald M. Hersch (66) was a Senior Managing Director at Bear Stearns and Co. Inc. from June 1992 until his retirement in April 2007. Mr. Hersch was responsible for directing the firm’s futures business, as well as coordinating eCommerce activities and initiatives within the Fixed-Income Division. Mr. Hersch is a former Chairman of the Futures Industry Association. He has previously served on the board of directors of Bond Desk Group, LLC, the Chicago Board of Trade, and the National Futures Association, the self-regulatory organization responsible for futures industry oversight. Mr. Hersch received a B.A. from Long Island University.
   Mr. Hersch’s experience with regulatory and policy issues gives him valuable insight into strategies for negotiating the regulatory matters affecting the financial services industry generally and the Company in particular. Mr. Hersch also brings significant leadership experience to the Board and a deep understanding of the fixed-income and derivatives markets.

John Steinhardt

Director since April 2000

   John Steinhardt (60) is a founder, and has been a Managing Partner, Co-Chief Executive Officer and Co-Chief Investment Officer, of KLS Diversified Asset Management since July 2007. From July 2006 until July 2007, Mr. Steinhardt managed a private investment portfolio. Mr. Steinhardt was the founder, Chief Executive Officer and Chief Investment Officer of Spectrum Investment Group from January 2005

 

9


Table of Contents
   to July 2006. Until October 2004, Mr. Steinhardt was Head of North American Credit Markets for JPMorgan Chase & Co. and a member of the Management Committee of the Investment Banking Division of JPMorgan Chase & Co. Prior to the merger of J.P. Morgan & Co. and the Chase Manhattan Bank, Mr. Steinhardt was the Head of U.S. Securities at Chase Securities Inc. and a member of the Management Committee from 1996 to 2000. He currently serves on the board of directors of the 92nd Street Y and the board of trustees of the Central Park Conservancy. Mr. Steinhardt received a B.S. in Economics from St. Lawrence University and an M.B.A from Columbia University.
   Mr. Steinhardt brings substantial leadership experience at a number of financial institutions and extensive experience in the financial markets that we serve. Mr. Steinhardt also has a deep knowledge and understanding of the requirements of operating in a highly regulated industry.

James J. Sullivan

Director since March 2012

  

James J. Sullivan (54) is Senior Managing Director and Head of Fixed Income at Prudential Investment Management, a global investment management firm, a position he has held since 1999. Mr. Sullivan is responsible for all investment management, operations, and business development efforts for Prudential Fixed Income. He joined Prudential in 1981 and has extensive experience in managing fixed income bond portfolios for insurance, pension and mutual fund clients. He is Chairman of Prudential Trust Company and President of the Board of Good Shepherd Services in New York, a charitable organization dealing with the most “at risk” youth in New York City. Mr. Sullivan received both a B.A. and an M.B.A. from Iona College.

   Mr. Sullivan brings extensive buy-side experience in the financial services industry, specifically in the fixed-income markets that we serve, and a deep knowledge and understanding of the issues faced by the institutional investors who operate in those markets.

Lesley Daniels Webster

Director since July 2013

  

Lesley Daniels Webster (62)  has been the founder and President of Daniels Webster Capital Advisors, which provides expertise in enterprise risk management, since 2005. From 2000 until 2005, Ms. Daniels Webster was Executive Vice President, Market Risk & Fiduciary Risk Management at J.P. Morgan Chase & Co. Prior to that, she was Global Head of Market Risk Management at Chase Manhattan/Chemical Bank from 1994 to 2000; and Managing Director, Head of Proprietary & Arbitrage Trading Desk, Global Head of US Dollar Derivatives at UBS Securities from 1990 to 1994. Ms. Daniels Webster also serves as a board member of Manulife Financial. Ms. Daniels Webster received a B.A. in Economics from the University of Illinois and an M.S. and Ph.D. in Economics from Stanford University.

 

Ms. Daniels Webster brings her pioneering experience in enterprise and fiduciary risk management and extensive financial services industry knowledge to the Board. She has significant executive and operational experience with multiple international financial institutions, designing and implementing capital allocation structures and corporate governance systems, as well as leading complex credit evaluations.

 

10


Table of Contents

CORPORATE GOVERNANCE AND BOARD MATTERS

Director independence

The Board of Directors has determined that each of our nominees for director, other than Mr. McVey, currently meet the independence requirements contained in the NASDAQ listing standards and applicable tax and securities rules and regulations. None of these non-employee nominees for director has a relationship with the Company or its subsidiaries that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

In compliance with the NASDAQ listing standards, we have a Board of Directors comprised of a majority of independent directors. The NASDAQ listing standards have both objective tests and a subjective test for determining who is an “independent director.” The objective tests state, for example, that a director is not considered independent if he is an employee of the Company or is a partner in or executive officer of an entity to which the Company made, or from which the Company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year. The subjective test states that an independent director must be a person who lacks a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

None of the non-employee directors were disqualified from “independent” status under the objective tests. In assessing independence under the subjective test, the Board took into account the standards in the objective tests, and reviewed and discussed additional information provided by the directors and the Company with regard to each director’s business and personal activities as they may relate to MarketAxess’ management. Based on all of the foregoing, as required by the NASDAQ listing standards, the Board made a substantive determination as to each of the 10 independent directors that no relationship exists which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

The Board has not established categorical standards or guidelines to make these subjective determinations, but considers all relevant facts and circumstances.

In addition to Board-level standards for director independence, the directors who serve on the Audit Committee and the Compensation Committee each satisfy standards established by the SEC and the NASDAQ listing rules providing that to qualify as “independent” for purposes of membership on the Audit Committee or the Compensation Committee, members of such committees may not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company other than their director compensation. Also, each of the directors who serve on the Compensation Committee has been determined to be a “non-employee director” for purposes of the applicable SEC rules and regulations and an “outside director” for purposes of the applicable tax rules.

In making its independence determinations, the Board considered transactions occurring since the beginning of 2011 between the Company and entities associated with the independent directors or members of their immediate family. In each case, the Board determined that, because of the nature of the director’s relationship with the entity and/or the amount involved, the relationship did not impair the director’s independence. The Board’s independence determinations included reviewing the relationship of certain of our directors who are or, for a portion of the past three years, were senior employees of broker-dealer and institutional investor clients, each of which accounted for less than 5% of the Company’s annual revenue in each of the past three years. In addition, Mr. Hernandez is the Co-Head of Global Banking at JPMorgan Chase & Co. (“ JPMorgan ”), which is the administrative agent and sole lender under our credit agreement, provides cash management services to the Company and operates our share repurchase program.

How nominees to our Board are selected

Candidates for election to our Board of Directors are nominated by our Nominating and Corporate Governance Committee and ratified by our full Board of Directors for nomination to the stockholders. The Nominating and Corporate Governance Committee operates under a charter, which is available on our corporate website at www.marketaxess.com .

 

11


Table of Contents

The Nominating and Corporate Governance Committee will give due consideration to candidates recommended by stockholders. Stockholders may recommend candidates for the Nominating and Corporate Governance Committee’s consideration by submitting such recommendations directly to the Nominating and Corporate Governance Committee by mail or electronically. In making recommendations, stockholders should be mindful of the discussion of minimum qualifications set forth above under Qualifications for director nominees . However, just because a recommended individual meets the minimum qualification standards does not imply that the Nominating and Corporate Governance Committee will necessarily nominate the person so recommended by a stockholder. The Nominating and Corporate Governance Committee may also engage outside search firms to assist in identifying or evaluating potential nominees.

Board leadership structure

Our Chief Executive Officer (“ CEO ”) also serves as the Chairman of the Board (the “ Chairman ”), and we have a Lead Independent Director who is responsible, among other things, for consulting with the Chairman regarding the agenda for each Board meeting and coordinating the activities of the non-employee directors, including presiding over the executive sessions of non-employee directors. We believe that this structure is appropriate for the Company because it allows one person to speak for and lead the Company and the Board, while also providing for effective oversight by an independent Board through a Lead Independent Director. Our CEO, as the individual with primary responsibility for managing the Company’s strategic direction and day-to-day operations, is in the best position to provide Board leadership that is aligned with our stockholders’ interests as well as the Company’s needs. Our overall corporate governance policies and practices, combined with the strength of our independent directors, minimize any potential conflicts that may result from combining the roles of CEO and Chairman.

Mr. Casper currently serves as the Lead Independent Director. The full Board, by majority vote, elects the Lead Independent Director.

The Board has established other structural safeguards that serve to preserve the Board’s independent oversight of management. First, the Board is comprised almost entirely of independent directors who are highly qualified and experienced, and who exercise a strong, independent oversight function. The Board’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are comprised entirely of, and are chaired by, independent directors. Second, independent oversight of our CEO’s performance is provided through a number of Board and committee processes and procedures, including regular executive sessions of non-employee directors and annual evaluations of our CEO’s performance against pre-determined goals. The Board believes that these safeguards preserve the Board’s independent oversight of management and provide a balance between the authority of those who oversee the Company and those who manage it on a day-to-day basis.

Board committees

The Audit Committee of our Board of Directors reviews, acts on and reports to our Board of Directors with respect to various auditing and accounting matters, including the recommendation of our independent registered public accounting firm, the scope of the annual audits, the fees to be paid to the independent registered public accounting firm, the performance of the independent registered public accounting firm and our accounting practices. The Audit Committee currently consists of Messrs. Gomach (Chair), Cruger and Sullivan. Mr. Casper’s tenure on the Audit Committee ended following completion of the Audit Committee Report for 2013 included in this Proxy Statement. The Board of Directors has determined that each member of the Audit Committee is an independent director in accordance with NASDAQ listing standards and an Audit Committee financial expert, as defined by SEC guidelines and as required by the applicable NASDAQ listing standards. For information regarding the experience and qualifications of our Audit Committee financial experts, see the information in this Proxy Statement under the section heading Proposal 1 — Election of Directors — Director information .

The Compensation Committee of the Board of Directors recommends, reviews and oversees the salaries, benefits and equity incentive plans for our employees, consultants, directors (other than non-employee directors)

 

12


Table of Contents

and other individuals whom we compensate. The Compensation Committee also administers our compensation plans. The Compensation Committee currently consists of Messrs. Steinhardt (Chair), Begleiter and Hersch. The Board of Directors has determined that each member of the Compensation Committee is an “independent director” in accordance with NASDAQ listing standards, a “non-employee director” under the applicable SEC rules and regulations and an “outside director” under the applicable tax rules. The Compensation Committee may form subcommittees and delegate authority to such subcommittees or individuals as it deems appropriate.

The Nominating and Corporate Governance Committee of the Board of Directors selects nominees for director positions to be recommended by our Board of Directors for election as directors and for any vacancies in such positions, develops and recommends for our Board of Directors the Corporate Governance Guidelines of the Company and oversees the annual review of the performance of the Board of Directors, each director and each committee. The Nominating and Corporate Governance Committee currently consists of Messrs. Hersch (Chair), Casper and Cruger. The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is an independent director in accordance with NASDAQ listing standards.

The Investment Committee assists the Board in monitoring whether the Company has adopted and adheres to a rational and prudent investment and capital management policy; whether management’s investment and capital management actions are consistent with attainment of the Company’s investment policy, financial objectives and business goals; the Company’s compliance with legal and regulatory requirements pertaining to investment and capital management; the competence, performance and compensation of the Company’s external money managers; and such other matters as the Board or Investment Committee deems appropriate. The Investment Committee currently consists of Messrs. Steinhardt (Chair), Hernandez and Sullivan.

The Mergers and Acquisitions Committee of the Board of Directors assists our Board of Directors in reviewing and assessing potential acquisitions, strategic investments, joint ventures and divestitures, and provides guidance to management with respect to the Company’s transaction strategies and the identification and evaluation of strategic transactions. The Mergers and Acquisitions Committee currently consists of Messrs. McVey (Chair), Begleiter, Cruger, Gomach and Hernandez.

The Board established a Risk Committee in April 2014. The Committee’s primary purpose will be to assist the Board with its oversight of the Company’s risk management activities, with particular responsibility for overseeing designated areas of risk that are not the primary responsibility of another committee of the Board or retained for the Board’s direct oversight. The Committee will begin its oversight responsibilities in the third quarter of 2014 and its members are expected to initially be Ms. Daniels Webster (Chair), Mr. Casper and Ms. Chwick.

Meetings and attendance

During the year ended December 31, 2013, the full Board held six meetings; the Audit Committee held six meetings; the Compensation Committee held three meetings; the Nominating and Corporate Governance Committee held three meetings; the Investment Committee held two meetings; and the Mergers and Acquisitions Committee held one meeting. The non-management directors met in executive session without management directors or employees at each of the five regularly-scheduled meetings of the Board during 2013. We expect each director to attend each meeting of the full Board and of the committees on which he or she serves and to attend the annual meeting of stockholders. All directors attended at least 75% of the meetings of the full Board and the meetings of the committees on which they served. Messrs. McVey, Begleiter, Casper, Gomach, Hernandez, Hersch, Steinhardt and Sullivan attended our 2013 annual meeting of stockholders.

Board involvement in risk oversight

The Company’s management is responsible for defining the various risks facing the Company, formulating risk management policies and procedures, and managing the Company’s risk exposures on a day-to-day basis. The Board’s responsibility is to monitor the Company’s risk management processes by informing itself of the Company’s material risks and evaluating whether management has reasonable controls in place to address the material risks. The Board is not responsible, however, for defining or managing the Company’s various risks.

 

 

13


Table of Contents

The Board of Directors monitors management’s responsibility for risk oversight through regular reports from management to the Audit Committee and the full Board. Furthermore, the Audit Committee reports on the matters discussed at the committee level to the full Board. The Audit Committee and the full Board focus on the material risks facing the Company, including strategic, operational, market, credit, liquidity, legal and regulatory risks, to assess whether management has reasonable controls in place to address these risks. In addition, the Compensation Committee is charged with reviewing and discussing with management whether the Company’s compensation arrangements are consistent with effective controls and sound risk management. Finally, risk management is a factor that the Board and the Nominating and Corporate Governance Committee consider when determining who to nominate for election as a director of the Company and which directors serve on the Audit Committee. The Board believes this division of responsibilities provides an effective and efficient approach for addressing risk management.

The Company’s management-level Risk Committee assists management’s efforts to assess and manage risk. The Risk Committee is chaired by the Company’s Head of Risk and is comprised of department heads and other managers. The Risk Committee assesses the Company’s business strategies and plans and insures that appropriate policies and procedures are in place for identifying, evaluating, monitoring, managing and measuring significant risks. The Risk Committee regularly prepares updates and reports for the Audit Committee and the Board of Directors.

Code of Conduct, Code of Ethics and other governance documents

The Board has adopted a Code of Conduct that applies to all officers, directors and employees, and a Code of Ethics for the CEO and Senior Financial Officers. Both the Code of Conduct and the Code of Ethics for the CEO and Senior Financial Officers, as well as any amendments to, or waivers under, the Code of Ethics for the CEO and Senior Financial Officers, can be accessed in the Investor Relations — Corporate Governance section of our website at www.marketaxess.com .

You may also obtain a copy of these documents by writing to MarketAxess Holdings Inc., 299 Park Avenue, 10th Floor, New York, New York 10171, Attention: Investor Relations.

Copies of the charters of our Board’s Audit Committee, Compensation Committee, Investment Committee and Nominating and Corporate Governance Committee, as well as a copy of the Company’s Corporate Governance Guidelines, can be accessed in the Investor Relations — Corporate Governance section of our website.

Communicating with our Board members

Although our Board of Directors has not adopted a formal process for stockholder communications with the Board, we make every effort to ensure that the views of stockholders are heard by the Board or by individual directors, as applicable, and we believe that this has been an effective process to date. Stockholders may communicate with the Board by sending a letter to the MarketAxess Holdings Inc. Board of Directors, c/o General Counsel, 299 Park Avenue, 10th Floor, New York, New York 10171. The General Counsel will receive the correspondence and forward it to the Chairman of the Board or to any individual director or directors to whom the communication is directed, as appropriate. Notwithstanding the above, the General Counsel has the authority to discard or disregard any communication that is unduly hostile, threatening, illegal or otherwise inappropriate or to take any other appropriate actions with respect to such communications.

In addition, any person, whether or not an employee, who has a concern regarding the conduct of the Company or our employees, including with respect to our accounting, internal accounting controls or auditing issues, may, in a confidential or anonymous manner, communicate that concern in writing by addressing a letter to the Chairman of the Audit Committee, c/o Corporate Secretary, at our corporate headquarters address, which is 299 Park Avenue, 10th Floor, New York, New York 10171, or electronically, at our corporate website, www.marketaxess.com under the heading Investor Relations — Corporate Governance — Overview, by clicking the Confidential Ethics Web Form link .

 

14


Table of Contents

Director compensation

Our Board of Directors recommends, reviews and oversees the compensation, including equity awards, for our non-employee directors. All directors, other than Mr. McVey, are regarded as non-employee directors. Mr. McVey receives no additional compensation for his service as a director. Each non-employee director receives an annual cash retainer of $55,000. In addition, the Lead Independent Director (“Lead Director”) receives a supplemental annual retainer of $40,000. In 2013, the Company gave the Lead Director the choice to have the supplemental retainer paid all in cash or half in cash and half awarded as restricted stock. The Lead Director chose for half (or $20,000) to be awarded in the form of restricted stock, which equated to 383 shares based on the average closing price of our Common Stock for the ten trading days up to and including the grant date. One-half of the award vested on November 30, 2013 and the balance is scheduled to vest on May 31, 2014. All equity awards to all non-employee directors were made under the Company’s 2012 Incentive Plan. The chairs of the Audit, Compensation, Nominating and Corporate Governance, and Investment Committees receive a supplemental annual retainer of $15,000, $10,000, $7,500 and $5,000, respectively. In addition, each non-employee director receives $1,500 for each meeting of our Board of Directors, $2,000 for each meeting of the Audit Committee, and $1,000 for each meeting of the Compensation Committee, the Nominating and Corporate Governance Committee, the Investment Committee and the Mergers and Acquisitions Committee that the director attends. In July 2013, we granted 1,627 shares of restricted stock to each non-employee director. One-half of the award vested on November 30, 2013 and the balance is scheduled to vest on May 31, 2014. The number of shares of restricted stock granted was determined on the date of grant by dividing the equity grant value of $85,000 by the closing price of our Common Stock for the ten trading days up to and including the grant date. We expect to continue to compensate our non-employee directors with a combination of cash and equity awards.

The Company and the Board of Directors believe that equity-based awards are an important factor in aligning the long-term financial interest of the non-employee directors and stockholders. As such, the Board of Directors adopted stock ownership guidelines for the non-employee directors. These guidelines, which were most recently revised in January 2014, require that non-employee directors hold not less than a number of shares of Common Stock equal in value to three times the annual base cash retainer payable to a director, or $165,000, calculated using the average price of our Common Stock in the ten trading days up to and including the effective date of the then revised policy, which was $30.77. The designated level of ownership generally must be achieved within five years after the director has become a Board member and must be maintained throughout the non-employee director’s service with the Company. All shares of Common Stock beneficially owned by the director, including shares purchased and held personally, vested and unvested restricted shares, vested and unvested restricted stock units, settled performance shares, and shares deferred under a non-qualified deferred compensation arrangement, count toward the minimum ownership requirement; vested and unvested stock options are excluded. Additionally, non-employee directors must hold all shares granted for service for a minimum of five years from the date of grant, and a non-employee director cannot dispose of more than 50% of the total number of shares granted for service until after such director’s retirement from the Board. Directors are also required, for a period of six months following his or her departure from the Board, to comply with the provisions of the Company’s Insider Trading Policy that, among other things, prohibit trading in the Company’s securities during specified blackout periods. All of our non-employee directors have either achieved the designated level of ownership or are in the five year period following their appointment or election to the Board during which they are expected to achieve compliance.

The Compensation Committee has retained the services of Grahall LLC (“ Grahall ”) as its independent compensation consultant. Grahall reports directly to the Compensation Committee in its role and has conducted an annual review of director compensation levels and a bi-annual review of director pay structure and practices, and in each event, shares the results of those reviews with the Compensation Committee. The Compensation Committee then submits any proposed changes in pay level or program structure to the full Board for its consideration, and if appropriate, approval.

 

15


Table of Contents

Director compensation for fiscal 2013

 

Name

   Fees Earned or
Paid in Cash
($)
     Stock Awards
($)(1)(2)
     Total
($)
 

Steven L. Begleiter

     64,750         85,352         150,102   

Stephen P. Casper

     107,000         105,445         212,445   

Jane Chwick

             64,905         64,905   

William F. Cruger

             63,359         63,359   

David G. Gomach

     102,750         85,352         188,102   

Carlos M. Hernandez

     65,750         85,352         151,102   

Ronald M. Hersch

     96,250         85,352         181,602   

John Steinhardt

     83,250         85,352         168,602   

James J. Sullivan

     69,750         85,352         155,102   

Lesley Daniels Webster

     12,832         85,352         98,184   

 

 

(1) The amounts represent the aggregate grant date fair value of stock awards granted by the Company in 2013, computed in accordance with FASB ASC Topic 718. For further information on how we account for stock-based compensation, see Note 10 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 24, 2014.

 

(2) The table below sets forth information regarding the aggregate number of stock awards and the aggregate number of option awards outstanding at the end of fiscal year 2013 for each non-employee director: All options are vested.

 

     Aggregate Number
of Stock Awards
Outstanding at
Fiscal Year End
(#)
     Aggregate Number
of Option Awards
Outstanding at
Fiscal Year End
(#)
 

Steven L. Begleiter

     814           

Stephen P. Casper

     1,006         29,912   

Jane Chwick

     987           

William F. Cruger

     974           

David G. Gomach

     814         19,912   

Carlos M. Hernandez

     814         3,187   

Ronald M. Hersch

     814         19,912   

John Steinhardt

     814         29,912   

James J. Sullivan

     814           

Lesley Daniels Webster

     814           

 

16


Table of Contents

PROPOSAL 2 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

The Audit Committee of our Board has appointed the firm of PricewaterhouseCoopers LLP (“ PwC ”) as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2014, and the Board is asking stockholders to ratify that selection. Although current law, rules and regulations, as well as the charter of the Audit Committee, require our independent registered public accounting firm to be engaged, retained and supervised by the Audit Committee, the Board considers the selection of our independent registered public accounting firm to be an important matter of stockholder concern and considers a proposal for stockholders to ratify such selection to be an important opportunity for stockholders to provide direct feedback to the Board on an important issue of corporate governance. In the event that stockholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain PwC, but may ultimately determine to retain PwC as our independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee, in its sole discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and its stockholders.

Your vote

Unless proxy cards are otherwise marked, the persons named as proxies will vote FOR the ratification of PwC as the Company’s independent registered public accounting firm for the year ending December 31, 2014. Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock present in person or represented by proxy and entitled to vote on the proposal.

Board recommendation

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF PWC AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2014.

Information about our independent registered public accounting firm

PwC has audited our consolidated financial statements each year since our formation in 2000. Representatives of PwC will be present at our Annual Meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions from stockholders.

In 2011, the Company, in the ordinary course of its business, entered into a bulk data agreement with PwC for the purpose of supporting valuation conclusions reached by PwC in the normal course of PwC’s audit and other work for its clients. Pursuant to the agreement, the Company provides bond pricing data to PwC on terms consistent with the terms of similar data sales agreements entered into by the Company. The aggregate annual revenue to the Company from the services is $200,000. Prior to entering into the agreement, the Audit Committee evaluated the effect of such agreement on the independence of PwC and concurred with the opinion of the Company and PwC that the arrangement constitutes an “arm’s-length” transaction that would not affect PwC’s independence.

 

17


Table of Contents

Audit and other fees

The aggregate fees billed by our independent registered public accounting firm for professional services rendered in connection with the audit of our annual financial statements set forth in our Annual Report on Form 10-K for the years ended December 31, 2013 and 2012 and the audit of our broker-dealer subsidiaries’ annual financial statements, as well as fees paid to PwC for tax compliance and planning and other services, are set forth below.

Except as set forth in the following sentence, the Audit Committee, or a designated member thereof, pre-approves 100% of all audit, audit-related, tax and other services rendered by PwC to the Company or its subsidiaries. The Audit Committee has authorized the CEO and the Chief Financial Officer to purchase permitted non-audit services rendered by PwC to the Company or its subsidiaries up to, and including, a limit of $10,000 per service and an annual aggregate limit of $20,000 for all such services.

Immediately following the completion of each fiscal year, the Company’s independent registered public accounting firm shall submit to the Audit Committee (and the Audit Committee shall request from the independent registered public accounting firm), as soon as possible, a formal written statement describing: (i) the independent registered public accounting firm’s internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, peer review or annual inspection by the Public Company Accounting Oversight Board of the independent registered public accounting firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the independent registered public accounting firm, and any steps taken to deal with any such issues; and (iii) all relationships between the independent registered public accounting firm and the Company, including at least the matters set forth in Independence Standards Board Standard No. 1 (Independence Discussion with Audit Committees) , in order to assess the independent registered public accounting firm’s independence.

Immediately following the completion of each fiscal year, the independent registered public accounting firm also shall submit to the Audit Committee (and the Audit Committee shall request from the independent registered public accounting firm), a formal written statement of the fees billed by the independent registered public accounting firm to the Company in each of the last two fiscal years for each of the following categories of services rendered by the independent registered public accounting firm: (i) the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q or services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements; (ii) assurance and related services not included in clause (i) that are reasonably related to the performance of the audit or review of the Company’s financial statements, in the aggregate and by each service; (iii) tax compliance, tax advice and tax planning services, in the aggregate and by each service; and (iv) all other products and services rendered by the independent registered public accounting firm, in the aggregate and by each service.

Set forth below is information regarding fees paid by the Company to PwC during the fiscal years ended December 31, 2013 and 2012.

 

Fee Category

   2013      2012  

Audit Fees(1)

   $ 1,541,721       $ 1,195,279   

Audit Related Fees

             223,000   

All Other Fees

     3,593         3,593   
  

 

 

    

 

 

 

Total

   $ 1,545,314       $ 1,421,872   

 

 

(1) The aggregate fees incurred include amounts for the audit of the Company’s consolidated financial statements (including fees for the audit of our internal controls over financial reporting) and the audit of our broker-dealer subsidiaries’ annual financial statements.

 

18


Table of Contents

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The Audit Committee currently consists of Messrs. Gomach (Chair), Casper, Cruger and Sullivan. Mr. Casper’s tenure on the Audit Committee will terminate following the submission of this Audit Committee Report. Each member of the Audit Committee is independent, as independence is defined for purposes of Audit Committee membership by the listing standards of NASDAQ and the applicable rules and regulations of the SEC. The Board has determined that each member of the Audit Committee is financially literate, in other words, is able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement and cash flow statement, as required by NASDAQ rules. In addition, the Board has determined that each member of the Audit Committee satisfies the NASDAQ rule requiring that at least one member of our Board’s Audit Committee have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background that results in the member’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. The Board has also determined that each member of the Audit Committee is a “financial expert” as defined by the SEC.

The Audit Committee appoints our independent registered public accounting firm, reviews the plan for and the results of the independent audit, approves the fees of our independent registered public accounting firm, reviews with management and the independent registered public accounting firm our quarterly and annual financial statements and our internal accounting, financial and disclosure controls, reviews and approves transactions between the Company and its officers, directors and affiliates, and performs other duties and responsibilities as set forth in a charter approved by the Board of Directors. A copy of the Audit Committee charter is available in the Investor Relations — Corporate Governance — Overview section of the Company’s website.

During fiscal year 2013, the Audit Committee met six times, including five regular meetings. The Company’s senior financial management and independent registered public accounting firm were in attendance at such regular meetings. Following each of its regular meetings during 2013, the Audit Committee conducted a private session with the independent registered public accounting firm, without the presence of management.

The management of the Company is responsible for the preparation and integrity of the financial reporting information and related systems of internal controls. The Audit Committee, in carrying out its role, relies on the Company’s senior management, including particularly its senior financial management, to prepare financial statements with integrity and objectivity and in accordance with generally accepted accounting principles, and relies upon the Company’s independent registered public accounting firm to review or audit, as applicable, such financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“ PCAOB ”).

We have reviewed and discussed with senior management the Company’s audited financial statements for the year ended December 31, 2013 which are included in the Company’s 2013 Annual Report on Form 10-K. Management has confirmed to us that such financial statements (i) have been prepared with integrity and objectivity and are the responsibility of management and (ii) have been prepared in conformity with generally accepted accounting principles.

In discharging our oversight responsibility as to the audit process, we have discussed with PwC, the Company’s independent registered public accounting firm, the matters required to be discussed by PCAOB AU 380 Communication with Audit Committees , as currently in effect, which requires our independent registered public accounting firm to provide us with additional information regarding the scope and results of their audit of the Company’s financial statements, including: (i) their responsibilities under generally accepted auditing standards, (ii) significant accounting policies, (iii) management judgments and estimates, (iv) any significant accounting adjustments, (v) any disagreements with management and (vi) any difficulties encountered in performing the audit.

We have received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding PwC’s communications with us concerning independence, and have discussed with PwC their independence.

 

19


Table of Contents

Based upon the foregoing review and discussions with our independent registered public accounting firm and senior management of the Company, we have recommended to our Board that the financial statements prepared by the Company’s management and audited by its independent registered public accounting firm be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, for filing with the SEC. The Committee also has appointed PwC as the Company’s independent registered public accounting firm for the year ending December 31, 2014.

As specified in its Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and in accordance with generally accepted accounting principles. These are the responsibilities of the Company’s management and independent registered public accounting firm. In discharging our duties as a Committee, we have relied on (i) management’s representations to us that the financial statements prepared by management have been prepared with integrity and objectivity and in conformity with generally accepted accounting principles and (ii) the report of the Company’s independent registered public accounting firm with respect to such financial statements.

Submitted by the Audit Committee of the

Board of Directors:

David G. Gomach — Chair

Stephen P. Casper

William F. Cruger

James J. Sullivan

 

20


Table of Contents

PROPOSAL 3 — ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act and the related rules of the SEC (“ Dodd-Frank ”)), the Company is providing its stockholders the opportunity to cast an advisory vote on the compensation of its named executive officers. This proposal, commonly known as a “say-on-pay” proposal, gives the Company’s stockholders the opportunity to express their views on the named executive officers’ compensation. We will include an advisory vote on executive compensation on an annual basis at least until the next shareholder advisory vote on the frequency of such votes.

As described in detail in the Compensation Discussion and Analysis below, the Company’s named executive officer compensation program is designed to attract, reward and retain the caliber of officers needed to ensure the Company’s continued growth and profitability. The primary objectives of the program are to:

 

   

align and reward Company and individual performance and decision-making with stockholder value creation and prudent risk management;

 

   

drive long-term growth objectives, thereby creating long-term value for our stockholders; and

 

   

provide rewards that are cost-efficient, equitable to our named executive officers and stockholders, and competitive with organizations that compete for executives with similar skill sets, thereby encouraging high-potential individuals with significant and unique market experience to build a career at the Company.

The Company seeks to accomplish these goals in a manner that is aligned with the long-term interests of the Company’s stockholders. The Company believes that its named executive officer compensation program achieves this goal with its emphasis on long-term equity awards and performance-based compensation, in addition to short-term (annual) incentive awards, specifically cash incentives, which has enabled the Company to successfully motivate and reward its named executive officers. The Company believes that its ability to retain its current high-performing team of seasoned executive officers is critical to its continuing financial success and that its focus on the long-term interests of its named executive officers aligns with the interests of its stockholders.

For these reasons, the Board recommends a vote in favor of the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s proxy statement for the 2014 Annual Meeting, pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

As an advisory vote, this proposal is not binding upon the Company, our Board or our Compensation Committee. Notwithstanding the advisory nature of this vote, our Board and the Compensation Committee, which is responsible for designing and administering the Company’s named executive officer compensation program, value the opinions expressed by stockholders in their vote on this proposal, and will consider the outcome of the vote when making future compensation decisions for named executive officers. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock present in person or represented by proxy and entitled to vote is required to approve this Proposal 3.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.

 

21


Table of Contents

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of April 8, 2014 by (i) each person or group of affiliated persons known by us to beneficially own more than five percent of our Common Stock, (ii) each of our named executive officers, (iii) each of our directors and nominees for director and (iv) all of our directors and executive officers as a group.

The following table gives effect to the shares of Common Stock issuable within 60 days of April 8, 2014 upon the exercise of all options and other rights beneficially owned by the indicated stockholders on that date. Beneficial ownership is determined in accordance with Rule 13d-3 promulgated under Section 13 of the Securities Exchange Act of 1934, as amended, and includes voting and investment power with respect to shares. Percentage of beneficial ownership is based on 37,253,056 shares of Common Stock outstanding at the close of business on April 8, 2014. Except as otherwise noted below, each person or entity named in the following table has sole voting and investment power with respect to all shares of our Common Stock that he, she or it beneficially owns.

Unless otherwise indicated, the address of each beneficial owner listed below is c/o MarketAxess Holdings Inc., 299 Park Avenue, 10th Floor, New York, New York 10171.

 

     Number of
Shares
Beneficially
Owned
     Percentage
of Stock
Owned
 

5% Stockholders

     

BlackRock, Inc.(1)

     3,368,127         9.04

Wells Fargo & Company(2)

     2,985,739         8.01

The Vanguard Group(3)

     2,340,082         6.28

Kornitzer Capital Management, Inc.(4)

     2,171,439         5.83

Named Executive Officers and Directors

     

Richard M. McVey(5)

     1,400,487         3.70

Steven Begleiter(6)

     4,180         *   

Stephen P. Casper(7)

     63,341         *   

Jane Chwick(8)

     987         *   

William F. Cruger(9)

     974         *   

David G. Gomach(10)

     56,788         *   

Carlos M. Hernandez(11)

     19,338         *   

Ronald M. Hersch(12)

     50,089         *   

John Steinhardt(13)

     52,313         *   

James Sullivan(6)

     4,180         *   

Lesley Daniels Webster(14)

     1,627         *   

Antonio L. DeLise(15)

     60,546         *   

Nicholas Themelis(16)

     96,403         *   

All Executive Officers and Directors as a Group (13 persons)(17)

     1,811,253         4.77

 

 

    * Less than 1%.

 

  (1) Information regarding the number of shares beneficially owned by BlackRock, Inc. was obtained from a Schedule 13G filed by BlackRock, Inc. with the SEC. The principal business address of BlackRock, Inc. is 40 East 52nd Street, New York, NY 10022.

 

  (2) Information regarding the number of shares beneficially owned by Wells Fargo & Company was obtained from a Schedule 13G filed by Wells Fargo & Company with the SEC. The principal business address of Wells Fargo & Company is 420 Montgomery Street, San Francisco, CA 94104.

 

  (3) Information regarding the number of shares beneficially owned by The Vanguard Group was obtained from a Schedule 13G filed by The Vanguard Group with the SEC. The principal business address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.

 

  (4)

Information regarding the number of shares beneficially owned by Kornitzer Capital Management, Inc. was obtained from a Schedule 13G filed by Kornitzer Capital Management, Inc. with the SEC. The principal business address of Kornitzer Capital Management, Inc. is 5420 West 61st Place, Shawnee Mission, KS 66205.

 

22


Table of Contents
  (5) Consists of (i) 805,300 shares of Common Stock owned individually; (ii) 38,207 shares of unvested restricted stock; and (iii) 556,980 shares of Common Stock issuable pursuant to stock options granted to Mr. McVey that are or become exercisable within 60 days. Does not include (i) 389,600 shares of Common Stock issuable pursuant to stock options and deferred restricted stock units that are not exercisable within 60 days or (ii) 17,392 performance shares.

 

  (6) Consists of (i) 3,366 shares of Common Stock owned individually; and (ii) 814 shares of unvested restricted stock.

 

  (7) Consists of (i) 32,423 shares of Common Stock owned individually; (ii) 814 shares of unvested restricted stock; and (iii) 29,912 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days.

 

  (8) Consists of 987 shares of unvested restricted stock.

 

  (9) Consists of 974 shares of unvested restricted stock.

 

(10) Consists of (i) 36,062 shares of Common Stock owned individually; (ii) 814 shares of unvested restricted stock; and (iii) 19,912 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days.

 

(11) Consists of (i) 15,337 shares of Common Stock owned individually; (ii) 814 shares of unvested restricted stock; and (iii) 3,187 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days.

 

(12) Consists of (i) 29,363 shares of Common Stock owned individually; (ii) 814 shares of unvested restricted stock; and (iii) 19,912 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days.

 

(13) Consists of (i) 21,587 shares of Common Stock owned individually; (ii) 814 shares of unvested restricted stock; and (iii) 29,912 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days.

 

(14) Consists of (i) 813 shares of Common Stock owned individually; and (ii) 814 shares of unvested restricted stock.

 

(15) Consists of (i) 7,094 shares of Common Stock; (ii) 3,452 shares of unvested restricted stock; and (iii) 50,000 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days. Does not include (i) 1,630 performance shares or (ii) 33,125 restricted stock units that are unvested.

 

(16) Consists of (i) 37,877 shares of Common Stock owned in joint tenancy with his spouse; (ii) 10,089 shares of unvested restricted stock; and (iii) 48,437 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days. Does not include (i) 4,348 performance shares or (ii) 20,063 restricted stock units that are unvested.

 

(17) Consists of (i) 992,588 shares of Common Stock; (ii) 60,413 shares of unvested restricted stock; and (iii) 758,252 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days. Does not include (i) 82,489 shares of Common Stock issuable pursuant to stock options that are not exercisable within 60 days; (ii) 23,370 performance shares that are unvested or (iii) 360,299 restricted stock units that are unvested.

 

23


Table of Contents

EXECUTIVE OFFICERS

Set forth below is information concerning our executive officers as of April 8, 2014.

 

Name

   Age    

Position

Richard M. McVey

     54      Chief Executive Officer and Chairman of the Board of Directors

Antonio L. DeLise

     52      Chief Financial Officer

Nicholas Themelis

     50      Chief Information Officer

Richard M. McVey has been Chief Executive Officer and Chairman of our Board of Directors since our inception. See Proposal 1 — Election of Directors — Director information for a discussion of Mr. McVey’s business experience.

Antonio L. DeLise has been Chief Financial Officer since March 2010. From July 2006 until March 2010, Mr. DeLise was the Company’s Head of Finance and Accounting, where he was responsible for financial regulatory compliance and oversight of all controllership and accounting functions. Prior to joining us, Mr. DeLise was Chief Financial Officer of PubliCard, Inc., a designer of smart card solutions for educational and corporate sites, from April 1995 to July 2006. Mr. DeLise also served as Chief Executive Officer of PubliCard from August 2002 to July 2006, President of PubliCard from February 2002 to July 2006, and a director of PubliCard from July 2001 to July 2006. Prior to PubliCard, Mr. DeLise was employed as a senior manager with the firm of Arthur Andersen LLP from July 1983 through March 1995.

Nicholas Themelis has been Chief Information Officer since March 2005. From June 2004 through February 2005, Mr. Themelis was the Company’s Head of Technology and Product Delivery. From March 2004 to June 2004, Mr. Themelis was the Company’s Head of Product Delivery. Prior to joining us, Mr. Themelis was a Principal at Promontory Group, an investment and advisory firm focused on the financial services sector, from November 2003 to March 2004. From March 2001 to August 2003, Mr. Themelis was a Managing Director, Chief Information Officer for North America and Global Head of Fixed-Income Technology at Barclays Capital. From March 2000 to March 2001, Mr. Themelis was the Chief Technology Officer and a member of the board of directors of AuthentiDate Holdings Corp., a start-up focused on developing leading-edge content and encryption technology. Prior to his tenure at AuthentiDate, Mr. Themelis spent nine years with Lehman Brothers, ultimately as Senior Vice President and Global Head of the E-Commerce Technology Group.

 

24


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Discussion and Analysis (“ CD&A ”) explains our pay for performance methodology, describes and analyzes our compensation programs and practices, and details the specific amounts of compensation paid for fiscal year 2013 to our named executive officers. Our named executive officers for fiscal year 2013 were Mr. McVey, our Chief Executive Officer (“CEO”) and Chairman of the Board, Mr. DeLise, our Chief Financial Officer (“ CFO ”), and Mr. Themelis, our Chief Information Officer (“ CIO ”, and collectively with the CEO and CFO, the “ NEOs ”).

Executive Summary

2013 Performance

Our organic growth initiatives resulted in increased trading volume and market share which, together with our acquisition of Xtrakter Limited (“ Xtrakter ”) in February 2013, were the main drivers behind the Company’s fifth sequential year of record revenues and earnings. Highlights of our financial performance during 2013 as compared to 2012, adjusted for our divestiture of Greenline Financial Technologies, Inc. in October 2013, include the following:

 

   

Revenues: For the fifth consecutive year, annual revenues reached an all-time high, increasing 25% to $238.7 million, from $190.8 million in 2012.

 

   

Operating Income: Record operating income for 2013 of $107.3 million, an increase of 20% from $89.4 million in 2012.

 

   

Earnings per share: Adjusted earnings per share (“ EPS ”) increased 25% to an all-time high of $1.81 in 2013 from $1.44 in 2012.

 

   

Stock Price: The Company’s stock closed at $66.93 at the end of 2013, an increase of 89% from $35.30 at year-end 2012.

 

   

Trading Volume: Total trading volume increased 17% to $694 billion in 2013 from $590 billion in 2012.

 

   

Market Share: Our full-year estimated U.S. high-grade market share for 2013 increased to 13.8% as compared to 12.4% for 2012. Our full-year estimated U.S. high-yield trading volume market share increased to 5.2% in 2013 as compared to 3.0% for 2012.

 

   

Relative Performance: For 2013, we ranked in the top third of our peer group (see How We Determine Pay Levels — Peer Group below) in year-over-year revenue, EPS, and earnings before interest, taxes, depreciation and amortization (“ EBITDA ”) growth. Further, for 2013 we ranked:

 

   

second in share price growth (December 31, 2013 vs. December 31, 2012);

 

   

first in three year total stockholder return, as determined pursuant to ISS guidelines (“ TSR ”); and

 

   

second in total stockholder value created (as measured by the year over year increase in market capitalization).

How 2013 Performance Affected Executive Compensation

 

   

Based on our cash accruals, market data, and performance, the aggregate annual cash incentive payments to the NEOs increased by 8.5% to $3.85 million in 2013 from $3.55 million in 2012 (see Annual Variable Performance Awards Payable in Cash below).

 

   

We increased the value of the equity awards granted to the NEOs in 2013, thereby increasing aggregate Total Direct Compensation (“ TDC ”) to the NEOs by 8.4% for 2013 as compared to 2012 (see Total Direct Compensation below).

 

   

As we achieved 105% of our internal operating income goal for 2013, our performance-based share awards paid out 108% of the targeted award amount for 2013 (see Long-term Incentives — Equity-based Awards below).

 

25


Table of Contents

Changes/Key Actions in 2013

In 2013, the following changes/key decisions with respect to our executive management and rewards architecture were implemented to assure that the program continues to balance rewards and retention of our key executives with the short-term and long-term interests of our stockholders:

 

   

Annual Incentive Design — We continued to manage our profitability and increase operating margins by reducing the percentage of operating income allocated to the annual cash incentive performance awards payable to our employees (the “ Bonus Accrual ”) (see Annual Variable Performance Awards Payable in Cash below).

 

   

Modifications to the Performance Incentive Plan — We reduced the minimum amount of the Bonus Accrual allocable to the 2013 annual incentive pool under our 2009 Code Section 162(m) Executive Performance Incentive Plan (as amended and restated effective June 7, 2012) (the “ Performance Incentive Plan ”), in which only our CEO and CIO participate, to 15% of the Bonus Accrual vs. 15.75% in 2012. In addition, we implemented a variable (increasing) allocation rate to the Performance Incentive Plan based on financial performance, with a maximum allocation rate of 18% of a Bonus Accrual of up to $25 million, to facilitate a level of pool funding sufficient to enable the Compensation Committee to appropriately reward the CEO and CIO for superior performance (see Performance Incentive Plan below).

Advisory Vote on Executive Compensation

At our 2013 Annual Meeting of Stockholders, 98.7% of the votes cast on the non-binding advisory vote on executive compensation proposal were in favor of our NEO compensation as disclosed in the proxy statement for the 2013 Annual Meeting of Stockholders. In evaluating the compensation of our NEOs for 2013, the Compensation Committee reviewed these final vote results and took into consideration the strong support of our stockholders for our compensation policies. Although it determined that no changes to our executive compensation policies were necessary, the Compensation Committee continues to review our NEO compensation program and the compensation goals set forth in the CD&A on an annual basis.

Overview of Compensation Objectives and Strategy for Our NEOs

Our NEO pay philosophy is tied to our belief that compensation should directly correlate with business results, including financial business results. Our executive compensation program is designed to attract, reward and retain the caliber of executives we need to ensure our continued growth and profitability. The program’s primary objectives are:

 

   

Alignment: align and reward Company and individual performance and decision-making with stockholder value creation while providing for prudent risk management;

 

   

Value Creation : drive long-term growth objectives, thereby creating long-term value for our stockholders; and

 

   

Cost-Effectiveness : provide rewards that are cost-efficient, equitable to both our NEOs and stockholders, and competitive with organizations that compete for executives with similar skill sets, thereby encouraging high-potential individuals with significant and unique market experience to build a career at the Company.

We have certain unique operating characteristics that directly impact our compensation philosophy and the way we attract, reward and retain key management talent:

 

   

We are a hybrid company whose NEOs must combine an expertise of the fixed-income securities market with the knowledge and ability to create, implement and deliver technology-driven market solutions. Accordingly, we compete with the financial services industry and the software development industry for executive talent. With the global market changes and regulatory reform (such as the ongoing regulatory changes resulting from Dodd-Frank in the U.S. and EMIR and MiFID II in Europe), there is increased demand for the expertise and skills of our NEOs.

 

26


Table of Contents
   

We are a relatively small company with low overhead in support positions, and we maintain a relatively flat organization; therefore, our NEOs must have the ability and desire to manage tactical details and effectively communicate with and lead broad teams of employees across all levels of the organization.

 

   

We are unique in the financial technology market as no other publicly traded company solely and directly competes with us. Therefore, our NEOs must be innovative as they help set the Company’s direction and determine the role it plays in the financial markets.

In implementing the Company’s compensation programs and arriving at individual pay decisions, the Compensation Committee considers that other organizations (such as broker-dealers) may provide their executives with compensation components similar to ours, but within compensation structures that are increasingly different than ours. These structures provide their executives with earnings opportunities that may exceed what we can afford to pay. For example, we are aware that many organizations currently offer higher base salaries than we do, the effect of which can be to improve the consistency of pay realized by their executives. This differs from what our NEOs receive under our current program, which emphasizes lower base salaries and more performance-based incentives.

To assess the financial impact of our compensation programs, the Compensation Committee focuses on managing our aggregate compensation and benefits expense expressed as a percentage of our total annual revenues (“ C&B Ratio ”). The Compensation Committee believes that monitoring this measure improves our overall profitability (please refer to the discussion about our C&B Ratio below in How We Determine Pay Levels ) and provides a normalized efficiency measure by which we can compare our compensation structures to those maintained by our peers and other financial and technology industry companies.

We believe that continuity of the leadership team benefits the Company. As such, we promote long-term commitments from our NEOs. To support these objectives, we provide our NEOs with a mix of both short-term incentives (base salary and performance-based annual cash awards), long-term (three- to five-year) equity incentives, and where appropriate, contractual protection (which agreements may also contain provisions that support a long-term commitment to the Company). Ultimately, the value realized by our NEOs from our equity incentive awards depends on several factors: our financial performance and changes in our stock price, satisfaction of an award’s vesting schedule, and compliance with any on-going employment or post-termination covenants. Taken together, we believe these factors help create a comprehensive scheme that reinforces our long-term performance-based orientation.

Factors Determining Compensation

Role of the Compensation Committee

The compensation programs for our NEOs are administered by the Compensation Committee with assistance from management and our independent compensation advisors. The Compensation Committee reviews all components of remuneration and decides which elements of compensation, if any, should be adjusted or paid based on corporate and individual performance results and competitive benchmark data. This approach supports our “pay for performance” culture and our intention to offer compensation that is highly correlated with each NEO’s individual responsibilities and performance, corporate financial performance and return for stockholders. The Compensation Committee:

 

   

has developed and continually reviews and revises our NEO compensation policies and benefits strategy and provides guidance for the implementation of those policies and strategies;

 

   

determines and recommends to the Board the amounts and elements of compensation for our CEO, Mr. McVey; and

 

   

works closely with Mr. McVey in recommending to the Board the amounts and elements of compensation for our other NEOs.

The Compensation Committee’s function is more fully described in its Board-approved charter, which is available on our corporate website at www.marketaxess.com under the Investor Relations — Corporate Governance caption.

 

27


Table of Contents

In performing its duties, the Compensation Committee:

 

   

annually reviews competitive compensation data, recent compensation trends and any other relevant market data obtained by the compensation consultant;

 

   

reviews all compensation, including equity holdings (both vested and unvested amounts) earned by each NEO;

 

   

consults with the compensation consultant regarding market data and the full Board regarding performance data when considering decisions concerning Mr. McVey’s compensation; and

 

   

considers the recommendations of Mr. McVey relating to performance and the recommendations of the compensation consultant relating to market data and compensation trends when considering decisions concerning the compensation of our other NEOs.

All compensation decisions related to cash incentives or equity grants for our NEOs are determined by the Compensation Committee and ratified by the Board.

Use of Outside Advisors

In making its determinations with respect to compensation of our NEOs, the Compensation Committee currently retains the services of Grahall LLC (“ Grahall ”) as its independent compensation consultant, which reports directly to the Compensation Committee. During 2013, Grahall provided the following services with respect to NEO compensation:

 

   

Pay Analysis — Reviewed and benchmarked competitive market pay levels and conducted retention analyses with respect to 2013 compensation for our NEOs;

 

   

Proxy Disclosure — Assisted in the preparation of the Company’s CD&A included in the proxy statement for our 2013 Annual Meeting of Stockholders;

 

   

Share Ownership Guidelines — Assisted management and the Compensation Committee in the oversight of our ongoing share ownership guidelines applicable to our NEOs and certain other senior employees and members of the Board; and

 

   

General Advice — Provided other compensation-related recommendations and performed other services, including providing advice regarding regulatory and advisory compliance issues, the design and management of our annual incentive plan, and the Company’s equity awards and usage of authorized shares ( i.e. , “burn rate”), as well as an ongoing review and composition of our peer group (as discussed below in Peer Group ).

Grahall also provided services during 2013 relating to the compensation of our directors as discussed above in Director Compensation .

The Compensation Committee has the sole authority to retain, terminate and set the terms of the relationship with any outside advisors who assist the Compensation Committee in carrying out its responsibilities.

How We Determine Pay Levels

Given our unique position in our industry, we believe that reviewing benchmark data is a vital part of the process by which the Compensation Committee determines relevant pay ranges and TDC for our senior executives. Grahall independently researches the financial performance (year-over-year growth) and pay practices of a targeted peer group of financial services and financial technology companies, as well as a broader group of financial services companies relatively similar in size to us based on market capitalization, annual revenues, assets, and number of employees. Data from each of these sources is used to calibrate market pay for our NEOs. This process compares market pay of similar positions at our peers, as well as positions where the skillsets and experiences of the incumbents are similar to those of our NEOs and uses statistical modeling to help insure internal consistency among positions. This research is augmented with multiple sources of applicable financial services and financial technology survey data to validate compensation levels and practices and develop a general understanding of how our compensation practices, programs and pay levels compare to our industry and the general market. Grahall uses this information to assist in preparing recommended pay ranges and presents them to the Compensation Committee

 

28


Table of Contents

for its consideration and approval. Moreover, as part of our standard methodology to help ameliorate year-to-year data volatility — particularly in the financial services and financial technology industries — Grahall aggregates data over multiple years, with an emphasis on the most recent periods.

As in previous years, for 2013, Grahall worked with Mr. McVey and our other managers to gather pertinent Company information, including employee and officer lists, corporate financial performance and the budget for equity grant expense, thereby enabling Grahall to help design compensation programs appropriate for our financial performance and our size. Additionally, through our formal semi-annual planning, goal-setting and feedback process, Mr. McVey provides Grahall and the Compensation Committee with performance feedback for each NEO, other than himself. The Compensation Committee then determines target individual pay ranges for each NEO based on corporate financial performance; the NEO’s role, responsibilities, expertise, institutional knowledge and individual performance; the NEO’s contribution to, and achievement of, corporate strategic goals and financial performance; and the level of competition that exists within the market for a given position. As these factors change over time, we do not use any numerical or fixed formula to weight these items consistently from year to year. Rather, the Compensation Committee uses its judgment (with the compensation consultant’s assistance) to establish appropriate market ranges.

In determining incentive pay ranges for our NEOs, the Compensation Committee also assesses the impact of the proposals on our targeted C&B Ratio. The Compensation Committee believes focusing on the C&B Ratio is both appropriate and typical in the financial services industry, as it provides a highly relevant and normalized data point regarding the efficiency of our compensation programs both year-to-year and on a comparative basis versus our peers or other companies in our industry. Since the NEOs’ annual incentive payments are a component of aggregate compensation expense, the Compensation Committee reserves the right to reduce the NEOs’ incentives to reduce C&B Ratio if our C&B Ratio is high relative to our peers or exceeds our internal target. Given our focus on improving operating margins and stockholder returns, the Compensation Committee has and will continue to pursue a reduction of the C&B Ratio, which declined almost 50 basis points from 2012 to 2013, almost 100 basis points from 2011 to 2012, and is currently at its lowest levels since our initial public offering. After consideration of all the foregoing factors, the Compensation Committee determines each NEO’s TDC level within the appropriate range. The Compensation Committee then determines an ideal “pay mix” — the relative amount of TDC for each NEO that should be delivered as base salary, annual cash incentives and long-term equity incentive awards — based on specific market comparisons as well as an individual executive’s forfeitable equity, and calibrates our annual flex share equity awards for each NEO in accordance with that analysis.

Peer Group

We use peer group information in setting competitive market levels for the NEOs. The firms that best fit our definition of a competitive peer are private firms for which financial results and compensation data are generally unavailable. We therefore rely on comparisons to a broader base of public financial services and technology companies. While they may differ from us in terms of size (whether measured by market capitalization or annual revenues) and core business, in that none provide the multi-dealer electronic trading platform for credit products that we provide, they are the closest matches available to us in terms of a comparable business model. Each provides technology solutions to the financial markets, and some provide electronic trading platforms similar to ours, albeit in other asset classes.

At the Compensation Committee’s direction, Grahall performs an annual review of companies for potential inclusion in our peer group, with priority given to companies that compete or can compete with us for customers, as well as executive or other employee talent, and whose operations involve a similar asset class or product offering. Grahall augments this approach by considering companies included in industry research reports prepared by investment advisors, “peers of peers” (companies listed as peers by our peers in their proxy statements). Grahall also assesses and collects data on a broader group of companies which satisfy the definition of appropriate peers by stockholder advisory services. Finally, for purposes of reviewing our award structure (but not award payout levels), Grahall reviews the pay practices of larger firms in our industry.

After development of a list of companies, Grahall develops a subset of target peers and reviews public disclosure regarding the business model being pursued by each company. This allows us to assess alignment with our industry and our strategic approach.

 

29


Table of Contents

Our peer group for 2013 comprised the following firms:

 

Peer

  

Description

 

Client Base

  Products   Revenue     Operating Income   MarketCap  
                 MMs     MMs   (1)  

MarketAxess Holdings Inc.

   Electronic trading platform for the trading of corporate bonds and other fixed income products   Institutional   Fixed Income   $ 239      $107   $ 2.06B   

BGC Partners, Inc.

   Provides brokerage services to the wholesale financial markets across a broad array of products via voice, hybrid, and fully-electronic solutions.   Institutional   Various   $ 1,700      -$448   $ 1.47B   

CBOE Holdings, Inc.

   Operation of markets for the trading of listed options contracts as well as futures and options on futures products, integrating electronic trading with traditional trading.   Institutional   Listed options
and futures
  $ 572      $286   $ 4.42B   

Gain Capital Holdings

   Global provider of on-line trading services specializing in foreign exchange, precious metals, and contracts-for-difference (“CFD”)   Institutional and Retail   FX, Metals,
CFD
  $ 266      $43   $ 404MM   

GFI Group Inc.

   Provides wholesale brokerage and clearing services, electronic execution and trading support products for global financial markets   Institutional   Various   $ 871      -$30   $ 438MM   

Interactive Brokers

   Automated global electronic broker and market maker specializing in routing orders, executing and processing trades in securities, futures, foreign exchange instruments, bonds, and mutual funds.   Institutional   Various   $ 1,080      $451   $ 1.20B   

Intercontinental Exchange, Inc.

   Operator of global electronic futures exchanges, over-the-counter markets, derivatives clearing houses, and post-trade services.   Institutional   Various   $ 1,670      $790   $ 22.08B   

Investment Technology Group, Inc.

   Independent research and execution broker providing institutional liquidity, execution services, analytical tools and proprietary research globally.   Institutional   Equities   $ 528      $43   $ 712MM   

KCG Holdings, Inc.

   Provides access to capital markets and electronic agency-based trading across multiple asset classes to institutional clients and corporations   Institutional and Corporate   Various   $ 238      $18   $ 1.26B   

MSCI, Inc.

   Global provider of investment decision support tools and analytics across diverse markets, asset classes, geographies, and clients.   Various, including Institutional   Various   $ 1,036      $372   $ 4.97B   

SWS Group, Inc.(2)

   Diversified financial services delivering investment banking, commercial banking, and related services to institutional, corporations and individuals. Also provides integrated trade execution, clearing and account processing services.   Various, including Institutional   Various   $ 269      -$10   $ 261MM   

 

(1) Market Cap as reported close of business on April 8, 2014

(2) SWS Year-End: June 30, 2013

 

30


Table of Contents

The 2013 peer group was substantially the same as the 2012 peer group, although Knight Capital Group, Inc., which was acquired in July 2013, now reports as KCG Holdings (“ KCG ”). We intend to use KCG as an ongoing peer as it conducts substantially the same business activities as its predecessor.

Performance Evaluations

Mr. McVey — CEO

In assessing Mr. McVey’s performance, the Compensation Committee credited him with:

 

   

Leading the Company’s achievement of record financial performance, including trading volume, market share, revenues and operating income, and continued outperformance of peers in long term stockholder returns;

 

   

Driving the effort to develop new and innovative trading protocols to address liquidity challenges in credit markets caused by financial market regulatory reform;

 

   

Managing the negotiations that culminated in the development of a strategic alliance with BlackRock Aladdin;

 

   

Leading the Company’s strategy discussions with the Board, and leading the execution of that strategy with the Global Management Team;

 

   

Actively promoting the Company’s strategy and capabilities through senior investor and dealer relationship management, industry conferences, regulatory hearings and trade associations;

 

   

Recruiting to add valuable depth to the Global Management Team and the Board; and

 

   

Expanding Company capabilities in Europe, a primary strategic objective, both organically and through the acquisition of Xtrakter.

Mr. DeLise — CFO

In determining Mr. DeLise’s 2013 incentive compensation, the Compensation Committee and Mr. McVey focused on our corporate financial performance and credited him with:

 

   

Working closely with our business executives and the Board in developing and executing immediate and long-term strategic decisions, including new products, acquisition and disposition activity and capital management decisions;

 

   

Integrating Xtrakter into the Company’s financial management, reporting and internal control environment;

 

   

Driving the divestiture of Greenline Financial Technologies, Inc., including coordination of buyer diligence, negotiating the stock purchase agreement and developing the transaction and tax structuring;

 

   

Implementing continued improvements in our internal and external financial reporting, which resulted in more detailed and accurate forecasts and shorter timetables required for regulatory reporting;

 

   

Completing both U.S. and international tax structuring optimization projects; and

 

   

Further strengthening the Company’s investor relations program and relationship with sell-side analysts and stockholders through targeted outreach and clear messaging, which improves transparency to our stockholders.

Mr. Themelis — CIO

Mr. Themelis and his team are instrumental to our revenue generation efforts in that they provide unique, stable, world-class technology to the credit markets. In this capacity during 2013, he was credited with:

 

   

Maintaining a highly stable and reliable trading application while deploying four major, four minor and 15 maintenance releases;

 

31


Table of Contents
   

Building custom enhancements for and integration of our open trading initiatives with Blackrock’s Aladdin platform;

 

   

Ensuring that our trading platform complies with new CFTC regulations for swap trading;

 

   

Ensuring the corporate data center was relocated on time and within budget, as well as leading our London office moves; and

 

   

Providing oversight on evaluating the merits of each systems enhancement request initiated and working with the product management team on functionality and workflow solutions.

In addition, Mr. Themelis was credited with working together with the Head of North American Sales in running the day-to-day business for U.S. traded products which delivered a record revenue year for our core U.S. business.

Pay for Performance Alignment — Realized Compensation

To assess our pay-for-performance alignment, the Compensation Committee and Grahall reviewed all compensation realized (“ Realized Compensation ”) by Mr. McVey relative to our total stockholder return (“ TSR ”) for the three-year period ended December 31, 2012 (the most recent period for which peer compensation data is available at the time of filing this proxy statement) against our peer group. For purposes of this review, Realized Compensation was determined by adding the following elements together:

 

   

Sum of three years’ base salary;

 

   

Sum of three years’ actual annual incentive payments;

 

   

Intrinsic (“in-the-money”) value of stock options awarded during the three year period (using December 31, 2012 closing price);

 

   

Sum of three years’ grant date value of restricted stock awards;

 

   

Sum of all performance awards made during the three year period as settled (not target); and

 

   

Any other payments or form of wealth received by the executive as reported in the compensation table for the applicable three-year period.

 

32


Table of Contents

The Company believes the structure of our program — which minimizes fixed costs and emphasizes appropriate performance leverage — has fairly and competitively compensated our NEOs (including our CEO) for our above market performance realized during this time period, and exhibited strong and stockholder-favorable alignment. The graph below compares the three-year Realized Compensation and the Company’s TSR against our current peers for this period on a percentile basis. Alignment is defined as relative pay and relative performance percentiles being within 25 percentile points of each other. The graph reflects three different zones as defined below.

Relative Performance/Compensation 3 Year TSR (2010-2012)

 

LOGO

 

33


Table of Contents

The charts below compare Mr. McVey’s TDC (base salary attributed to each fiscal year, cash and equity award value granted at the end of the same fiscal year, and annual value of any multi-year/retention grants still outstanding at the end of the fiscal year) to the Company’s stock price appreciation and in the context of the Company’s performance versus various indices for the five-year period ended December 31, 2013, and against operating income for the same five-year period:

 

LOGO

Mr. McVey’s TDC (as determined by the Compensation Committee and Grahall using multi-year annualization of retention awards) has totaled $3.89 million in 2008, $4.695 million in 2009, $5.09 million in 2010, $6.087 million in 2011, $6.0 million in 2012, and $6.5 million in 2013. These figures differ from those shown in the Summary Compensation Table in Executive Compensation , as that table reflects the full grant date value of the retention award received by Mr. McVey in 2011, as required by the SEC. The Compensation Committee uses these internal figures to assess Mr. McVey’s (as well as the other NEOs’) pay levels from year to year as it believes that these figures provide a more accurate illustration of pay levels than the figures required by the SEC in the Summary Compensation Table.

Tally Sheets

The Compensation Committee uses “tally sheets” to review compensation levels for the NEOs on an annual basis. Prepared by management with Grahall’s assistance, tally sheets summarize historical compensation, financial results and equity holdings for each NEO, as well as applicable company performance. Because the Company does not have extensive retirement benefits, perquisites or other elaborate compensation programs under which significant value can be accumulated, the benefits of using tally sheets are to provide historical perspective for each NEO regarding the elements of pay and equity holdings which facilitate analysis of wealth opportunity and wealth realization. The Compensation Committee and Grahall also use tally sheets to conduct sensitivity analysis regarding each NEO’s forfeitable (due to vesting and/or clawback rights) and non-forfeitable equity at different stock prices to help facilitate the effectiveness of our retention efforts. In this way, the Compensation Committee’s decisions reflect a more informed perspective regarding prior equity grants and incentive opportunities and consider the retention value of all existing awards as a whole. For further discussion of our equity-based awards, see Long-term Incentives — Equity-based Awards below.

Details of the Company’s Compensation Structure for our NEOs

Pay Elements — Overview

We utilize four main components of compensation for our NEOs:

 

   

Base salary that reflects compensation for the NEO’s role and responsibilities, experience, expertise and individual performance;

 

   

Annual cash incentives that are designed to reward attainment of annual corporate financial goals and individual performance, which will fluctuate upward or downward, as appropriate, based on actual individual and corporate performance;

 

   

Equity incentives that are designed to retain NEOs and tie NEO compensation to long-term stockholder value creation; and

 

34


Table of Contents
   

Other benefits that are provided to all employees, including healthcare benefits, life insurance, retirement savings plans and disability plans.

Though our plan architecture may vary with respect to level of pay and/or fixed-to-variable pay leverage, the individual pay elements we use to compensate our NEOs are generally similar to the pay elements used in the broker-dealer and software development compensation markets. While we may not be able to pay our executives on par with larger broker-dealers, our pay structure is influenced by the pay levels and practices of these companies. We believe that our program’s elements and leverage characteristics have allowed us to attract and retain executive talent from the broker-dealer and software development markets, while maintaining appropriate cost control.

Mr. McVey is subject to an employment agreement that provides for certain payments and benefits in the event of certain terminations of his employment or a change in control of the Company, as well as certain covenants which restrict his behavior during and after his employment with us. Our other NEOs are eligible for severance in the event of certain terminations of their employment under our Severance Pay Plan. See Executive Compensation — Employment agreements and severance arrangements with our NEOs and Executive Compensation — Potential termination or change in control payments and benefits for additional details.

Pay Mix

While lower variability in compensation through higher relative base salaries may reduce risk-taking, we believe that the perceived benefits of higher base salaries must be balanced against appropriate levels of variable compensation which helps facilitate the achievement of our growth objectives. The Compensation Committee believes performance awards motivate our NEOs and promotes decision-making that is aligned with our stockholders’ interests. A lower base of fixed costs (including base salary) allows us to better manage expenses which helps improve profitability. We also believe that our program design (including the Flex Share program discussed below) provides balance among pay components that helps mitigate incentives to focus on short-term results that could result in increased or inappropriate risk (see Compensation Risk Assessment below). An overview of the elements of pay provided to each NEO for fiscal year 2013 can be found below.

 

LOGO   LOGO
LOGO    

 

35


Table of Contents

In 2013, all NEOs received at least 30% of their annual compensation value in equity, which was intended to align each NEO’s interests with that of our stockholders. As CEO, Mr. McVey receives the highest percentage of TDC in the form of equity compensation. See Long-term Incentives — Equity-based Awards below for a discussion about the goals of our long-term compensation programs.

Pay Elements — Details

Base Salary

Consistent with our compensation policy to carefully manage fixed expenses, we do not provide automatic annual salary increases, and we target our NEOs’ base salaries to levels significantly lower than the applicable median base pay levels suggested by the benchmark data. We believe this offers the Company improved cost control, as lower base salaries enable us to better manage fixed compensation costs, reduce benefits costs and increase our emphasis on variable pay, which results in improved alignment between our compensation and our financial performance in any given period. Accordingly, the Compensation Committee believes that keeping base salaries below market median is an effective method to reinforce our pay-for-performance philosophy.

For 2013, we targeted the base salaries for our NEOs at approximately the 25 th percentile of our market. As a result, no adjustments were made to the base salaries for our NEOs for 2013.

Annual Variable Performance Awards Payable in Cash

We maintain two annual cash incentive performance award plans. Messrs. McVey and Themelis, whose compensation is subject to the limitations on deductibility under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “ Code ”) and associated tax exclusions (see Impact of Tax Accounting below), participate in the Performance Incentive Plan, which is structured in a manner intended to meet the requirements for awarding “performance-based compensation” under Code Section 162(m). As our CFO, Mr. DeLise’s compensation is not subject to Code Section 162(m) and therefore, Mr. DeLise participates in the general employee annual cash incentive pool adopted under our 2009 Employee Performance Incentive Plan (the “ Employee Plan ”). The Employee Plan is substantially similar to the Performance Incentive Plan other than with respect to meeting Code Section 162(m) requirements.

For the purposes of funding the Bonus Accrual for the 2013 performance year, the Compensation Committee set an accrual rate based on our annual pre-tax operating income goal (determined on a pre-incentive basis, before interest income, interest expense and effects of financing activities) (“ Adjusted Operating Income ”) determined as follows:

 

Level of 2013 Adjusted
Operating Income Achieved
  Accrual Rate

Below $0:

  0%

Up to and including $121.84 million (“ Target Adjusted Operating Income ”):

  17.24%

Amounts between Target Adjusted Operating Income and 110% of Target Adjusted Operating Income:

  17.24%

For each 5% achieved in excess of 110% of Target Adjusted Operating Income:

  Reduce Accrual Rate by 0.05%, with straight-line interpolation between thresholds

The Compensation Committee, however, has the authority to reduce the Bonus Accrual and, as discussed below, did so for 2013.

The accrual rate of 17.24% for the 2013 Bonus Accrual at Target Adjusted Operating Income was lower than the accrual rate of 18.94% of our target adjusted operating income level in 2012. This change supports the Compensation Committee’s long-term objective to improve operating margins by reducing the C&B Ratio as the Company grows its revenues and profits. The targeted 2013 Bonus Accrual was determined based on our target

 

36


Table of Contents

financial plan, staffing plans and the aggregate amount needed to pay employees consistent with the median of market data. The 2013 Bonus Accrual was finalized and approved prior to our acquisition of Xtrakter, which closed on February 28, 2013. Accordingly, neither the performance targets nor the financial results used to determine the 2013 Bonus Accrual included the financial performance of Xtrakter.

For 2013, the Company achieved Adjusted Operating Income of $127.503 million, which exceeded Target Adjusted Operating Income by 5.3%. However, upon reviewing performance, market data, and staffing levels, and in order to meet its operating income and C&B Ratio goals, the Compensation Committee reduced the accrual rate for the 2013 Bonus Accrual from 17.24% to 16.52% of our Adjusted Operating Income, which resulted in a 2013 Bonus Accrual of just under $21.1 million.

We believe that the Bonus Accrual method strengthens the link to corporate financial performance and further ties NEO and employee compensation to our financial results, while insuring that an increasing amount of profits from financial outperformance is realized by our stockholders. We believe that our approach to determining the annual Bonus Accrual creates a fair balance among (a) creating appropriate annual performance incentives to retain and reward high performers, (b) expense management, since any incremental cash incentive expense is a direct result of incremental financial out-performance, thereby helping us to meet our ongoing objective of reducing our C&B Ratio, and (c) risk management, where payout percentages decrease when there is over-achievement against target performance, thereby creating less additional incentive to make short-term decisions for short-term profit. Given that the Compensation Committee has the authority to reduce the Bonus Accrual and apply negative discretion to reduce final payouts under the Performance Incentive Plan, in 2013, as in prior years, there were no minimum (guaranteed) accruals. Furthermore, given the direct relationship between Adjusted Operating Income and the Bonus Accrual, the Company must be profitable in order for there to be a Bonus Accrual for a performance year.

Employee Plan

For the 2013 performance year, the cash incentive pool under the Employee Plan (the “ Employee Incentive Pool ”) (in which Mr. DeLise participates) was equal to the 2013 Bonus Accrual less any amount of the 2013 Bonus Accrual allocated to, and paid under, the Performance Incentive Plan, as discussed below. Incentives awarded from the Employee Incentive Pool are entirely discretionary and take into consideration the employees’ roles, responsibilities and performance, as well as the overall performance of their respective work units or departments. The Compensation Committee, with input from the CEO, awarded Mr. DeLise a discretionary payment under the Employee Plan for 2013 as disclosed below.

Performance Incentive Plan — 2013

The Compensation Committee set the minimum incentive pool allocation for 2013 under the Performance Incentive Plan, in which Messrs. McVey and Themelis were the only participants (the “ Executive Incentive Pool ”), at an amount equal to 15.00% of the 2013 Bonus Accrual, resulting in a minimum allocation to the Executive Incentive Pool at Target Adjusted Operating Income of $3.15 million. The allocation percentage was down from a minimum allocation of 15.75% of the Bonus Accrual for 2012, which reflected the Compensation Committee’s desire to continue to reduce our C&B Ratio. 62% of the Executive Incentive Pool was allocated to the CEO (up from 61% in 2012) and 38% was allocated to the CIO (down from 39% in 2012). This slight shift in allocation allowed for similar percentage changes between 2012 actual cash bonus and 2013 targeted cash bonus (at plan) for both NEOs and was appropriate based on benchmark data and internal pay considerations.

The Compensation Committee set a maximum allocation to the Executive Incentive Pool equal to 18% of the 2013 Bonus Accrual, but not to include any amount of the 2013 Bonus Accrual in excess of $25 million. The result was a maximum allocation to the Executive Incentive Pool of $4.76 million. If the 2013 Bonus Accrual exceeded $25 million, no portion of that additional accrual could be allocated to the 2013 Executive Incentive Pool. The allocation rate of the 2013 Bonus Accrual for the 2013 Executive Incentive Pool between the minimum (15%) and the maximum (18%) was interpolated between results. At the maximum allocation, the maximum awards to Messrs. McVey and Themelis from the Executive Incentive Pool were approximately $2.95 million and $1.81 million, respectively.

 

37


Table of Contents

Based on 2013 financial results, the actual allocation rate to the Executive Incentive Pool was 15.04% of the 2013 Bonus Accrual, resulting in an incentive payment to Mr. McVey of $1.964 million and to Mr. Themelis of $1.204 million. The Compensation Committee, however, exercised negative discretion and modified the amounts paid to the Messrs. McVey and Themelis to $1.950 million and $1.200 million, respectively.

The Compensation Committee believes that the allocation process for the Executive Incentive Pool was appropriate based upon the individual and aggregate data it had reviewed and internal pay level considerations. The actual payout under the Executive Incentive Pool that could be awarded to each of Mr. McVey or Mr. Themelis was subject to the Compensation Committee’s right to exercise downward discretion, thereby potentially reducing the actual amount paid to each NEO. The amount allocated to the Executive Incentive Pool that was not paid was reallocated to the Employee Incentive Pool.

As discussed in conjunction with the Bonus Accrual, given the direct relationship between Adjusted Operating Income and the Executive Incentive Pool, the Company must be profitable in order for there to be an accrual under the Executive Incentive Pool for a performance year.

The Compensation Committee believes that limiting cash incentives as a result of the changes to the accrual methodology for the Employee Incentive Pool and the Executive Incentive Pool are consistent with the goal of motivating plan participants without encouraging excessive risk-taking. We believe that our NEOs will be appropriately rewarded by short-term incentives and motivated to adopt a long-term perspective that aligns with their equity holdings and with our stockholders’ outlook. The Compensation Committee reviews the NEO incentive compensation program design annually, and may change it at any time.

The table below shows the calculations of the 2013 Incentive Program and the amounts paid to each NEO:

 

Calendar Year 2013

   Financial Results  
     (’000’s)  

Revenues

   $ 238,732   

Expenses

   $ 131,451   

Operating Income (before taxes)

   $ 107,281   

Adjusted Operating Income

   $ 127,503   

Bonus Accrual Percentage

     16.52

Bonus Accrual

   $ 21,058   

Executive Incentive Pool Allocation

     15.04

Incentive Pool

   $ 3,168  

 

Executive Incentive Pool Allocations

   Percentage
Allocated
    Amount Payable Based
on Results
     Actual Amount Paid  
           (’000’s)      (’000’s)  

McVey, CEO

     62   $ 1,964       $ 1,950   

Themelis, CIO

     38   $ 1,204       $ 1,200   

Total

     $ 3,168       $ 3,150   

As the above table shows, Messrs. McVey’s and Themelis’ actual payments were reduced from the amounts payable based on actual results. Mr. DeLise was paid a discretionary bonus of $700,000 from the Employee Incentive Pool based on his performance and contributions as previously discussed.

 

38


Table of Contents

Set forth below is a comparison of the 2013 and 2012 performance awards paid to all NEOs:

 

Financial Comparison

   2012 Actual      2013 Actual      Year-over-Year
Percentage
Change
 
     (’000’s)      (’000’s)         

Op Inc (before taxes)

   $ 89,370       $ 107,281         20.0

Adjusted EPS

   $ 1.44       $ 1.81         25.7

Incentive Payments

   2012 Actual      2013 Actual      Year-over-Year
Percentage
Change
 
     (’000’s)      (’000’s)         

McVey, CEO

   $ 1,800       $ 1,950         8.3

DeLise, CFO

   $ 650       $ 700         7.7

Themelis, CIO

   $ 1,100       $ 1,200         9.1

Aggregate

   $ 3,550       $ 3,850         8.5

Performance Incentive Plan — 2014

For 2014, the Compensation Committee has adopted an allocation methodology under the Performance Incentive Plan for Messrs. McVey and Themelis that is structurally similar to the Executive Incentive Pool for 2013, but with a lower minimum accrual rate at Target Adjusted Operating Income (14%) and a lower maximum Bonus Accrual allocation rate (17%). Under the 2014 Executive Incentive Pool, the allocation of the Bonus Accrual at Target Adjusted Operating Income would result in an Executive Incentive Pool of $3.5 million, while the maximum allocation to the Executive Incentive Pool is $4.76 million. Regardless of the actual amount allocated for 2014, the Compensation Committee retains downward discretion.

Long-term Incentives — Equity-based Awards

The Compensation Committee regularly evaluates the use of equity-based awards and intends to continue to use such awards as part of designing and administering the Company’s compensation program. Equity awards have traditionally been granted to our NEOs at the time of hire (“new hire” awards), annually (as part of our on-going compensation scheme), and upon contract renewal. The Compensation Committee believes that delivering an appropriate portion of an executive’s equity as a multi-year equity award (at employment commencement, upon a contract renewal, or for retention purposes) can be an effective method of providing an executive with significant additional incentives. Moreover, in anticipation of an increasing share price, this structure can also reduce the equity expense incurred by the Company over the multi-year period relative to similar awards made on an annual basis.

With respect to annual awards, our policy is to grant all awards on January 15 (or the preceding business day if January 15 is not a business day). This helps to insure that the timing of any option grants and the setting of the exercise price, which is the closing price per share of our Common Stock on the NASDAQ Stock Market on the date of grant (“ Stock Price ”), will not be subject to manipulation.

The value of the annual equity awards to each NEO and grants to new executive officers is approved by the Compensation Committee prior to grant and is part of the process in determining TDC for each NEO. The amount awarded is based upon market data, the Company’s desire to maintain appropriate upside leverage in our annual incentive program while managing risk, share ownership guidelines, and our desire to retain our NEOs.

The average closing price of our Common Stock for the ten business days leading up to and including January 15 (or the preceding business day if January 15 is not a business day) is used to convert the compensation equity value to shares. This average pricing methodology is intended to smooth out any significant swings in the Stock Price during the first business days of the new year.

In January 2013, for performance during 2012, our NEOs were awarded equity-based awards in the form of restricted stock units (“ RSUs ”) that will settle in shares of our Common Stock and performance shares. The

 

39


Table of Contents

awards serve as a long-term reward and retention tool, helping to balance short-term cash incentive payments. Equity awards permit the Compensation Committee to increase retention of key executives because a NEO only profits if he continues his employment with the Company and satisfies the award’s applicable vesting period. Ultimately, the executive maximizes the value realized from the award when the Company’s share price increases and loses relative value when the Company’s share price declines, providing alignment with the Company’s stockholders. For Mr. McVey, the value of equity awards granted in 2013 was determined after considering an average annualized value of $1.25 million that reflected a portion of the $5 million retention grant made to him in January 2011 in consideration for his entering into a new employment agreement. This award was designed to provide incentive and retention value over a four-year period. Similarly, for Mr. DeLise, the value of his award in 2013 was determined after considering an annualized value of $200,000, which reflected the $1 million retention grant made to him in January 2012 which was designed to provide incentive and retention value over a five-year period.

Flex Share Program

Equity awards are made pursuant to our “Flex Share” program that permits our NEOs to have input into the composition of their equity compensation, subject to a general framework and limitations imposed by the Compensation Committee. The Compensation Committee believes that the Flex Share program allows the Company to deliver more individualized awards with greater perceived value to the NEOs without incurring additional expense or accounting cost to the Company. In 2013, for performance year 2012, minimums for annual grants were set at 35% for performance awards and 50% for RSUs. NEOs could also have chosen to receive the remaining 15% of their award in performance shares, RSUs or stock options (for 2013, at a ratio of one RSU to 2.2 stock options, such ratio set to equal the relative accounting cost of each award component on the date of the award). All NEOs elected to be awarded 35% of their Flex Share award as performance shares, with the balance received as RSUs.

For 2013, the Compensation Committee required that at least 50% of each NEO’s equity award be designated in RSUs to increase the retention nature of the NEOs’ current equity holdings. The Compensation Committee also believes that RSUs may help promote a more balanced risk/reward profile than sole reliance on stock options which, when improperly structured (i.e., comprising the bulk of an executive’s holdings), may promote excessive risk-taking in search of potential short-term results at the expense of long-term price appreciation.

The settlement of RSUs may be deferred at the election of the NEO, which provides an added benefit of allowing the NEO to maintain additional upside leverage in our shares of Common Stock through delayed taxation. Generally, deferring RSUs has no impact on an RSU’s vesting schedule, except that the initial vesting date for an RSU deferred in the year of grant must occur at least 13 months after the grant date in accordance with Section 409A of the Code. For the 2013 RSU grant, Mr. McVey elected to defer the settlement of his full award.

For the performance share awards granted in January 2013, the award agreements provide for the grant of a target number of performance shares (further detailed below) that are earned based on the Company’s level of achievement of the Board-approved pre-tax operating income plan target in fiscal year 2013 of $101.485 million (before interest income, interest expense, effects of financing activities and expenses incurred in connection with the grant of all performance share awards for performance in 2013). The 2013 performance share targets were finalized and approved prior to our acquisition of Xtrakter, which closed on February 28, 2013. Accordingly, neither the performance targets nor the financial results used to determine performance in 2013 include the financial performance of Xtrakter.

For each performance share earned (possible outcomes ranging from 0% to 150% of target), a participant receives one share of restricted stock that vests in equal 50% installments on each of the second and third anniversaries of the original performance share grant date. Certain portions of the performance shares or the restricted stock may also vest upon certain terminations of a participant’s employment, or after the occurrence of a qualifying change in control.

 

40


Table of Contents

An aggregate of 33,538 performance shares and performance awards were granted to the NEOs at target in January 2013. The actual amount that could be earned was based on the level of our achievement of the performance goal during 2013, as follows:

 

Achievement (percentage of target

pre-tax operating income)

   Below
Threshold
(Under 80%)
  Threshold (80%+)   Target (100%)   Maximum (130%+)
Payout (percentage of shares)    0%   50%   100%   150%

Payout results are interpolated on a straight-line basis between actual performance and target performance and maximum payouts are capped at 150% of target. If the minimum threshold performance level is not achieved, no portion of the performance share awards will be earned.

Performance for calendar year 2013 under the performance awards was 105% of the established target, which resulted in operating income of $106.859 versus $101.485 million (after the adjustments discussed above); therefore, the performance awards settled at 108% achievement. This resulted in the conversion of the performance awards to an aggregate 36,220 shares of restricted stock awarded to the NEOs (see table below). These shares will vest in two equal annual installments on January 15, 2015 and January 15, 2016.

The table below provides a summary of the equity awards granted to the NEOs in January 2013 in respect to the 2012 performance period and the subsequent settlement of those grants based on 2013 performance:

 

    Total Value
Granted
    Percentage
Allocated as
RSUs
    RSUs Granted
on Jan 15, 2013
    Percentage
Allocated as
Performance
Shares
    Units Granted on
Jan 15, 2013
    Value on the
Date of
Grant(1)
    Settlement of
Performance
Shares on Jan 30,
2014
    Value of Grant
on Date of
Settlement(2)
 
    (’000’s)                             (’000’s)           (’000’s)  

McVey, CEO

  $ 2,450        65     44,882        35     24,167      $ 870        26,100      $ 1,652   

DeLise, CFO

  $ 250        65     4,580        35     2,466      $ 89        2,663      $ 169   

Themelis, CIO

  $ 700        65     12,823        35     6,905      $ 248        7,457      $ 472   

Total

        62,285          33,538      $ 1,207        36,220      $ 2,293   

 

(1) Based on the closing price on January 15, 2013 (Grant Date) of $35.98

 

(2) Based on the closing price on January 30, 2014 (Settlement Date) of $63.31

The difference in value and amount of performance shares targeted on the grant date and awarded on the settlement date illustrates the link between variable pay and performance as well as the link between performance and share price. For more information regarding the specific equity awards that were granted to the NEOs in fiscal year 2013, see below under Grants of plan-based awards . The Compensation Committee will continue to evaluate the mix of performance shares, RSUs, stock options and other stock-based awards to align rewards for personal performance with stockholder value creation.

2014 Grants for 2013 Performance

In 2014, for performance during 2013, the value of Mr. McVey’s equity awards was determined after considering a value of $1.25 million per year that reflects a portion of the $5 million retention grant made to him in January 2011 in consideration for his entering into a new employment agreement. For Mr. DeLise, the value of equity awards granted in 2014 was determined after considering a value of $200,000 per year, which reflected a portion of the $1 million retention grant made to him in January 2012 annualized over five years.

In 2014, under the Flex Share program, performance share minimums were set at 40% for the CEO and 35% for other NEOs and 50% of the award value for RSUs. NEOs could also have chosen to receive the balance of their award in performance shares, RSUs or stock options (at a ratio of one RSU to 1.97 stock options). The CFO and CIO elected to be awarded 35% of their award as performance shares, with the balance received as RSUs and the CEO elected 40% of his award as performance shares, with the balance received as RSUs.

The minimum percentage for performance awards for the CEO was increased from 35% for the grant dated January 2013 to 40% for the grant dated January 2014 to further link his compensation to company performance.

 

41


Table of Contents

Under the Flex Share program, our NEOs received the following equity awards on January 15, 2014:

 

     Total Value
Granted
     Percentage
Allocated as
RSUs
    RSUs Granted
on Jan 15, 2014
     Percentage
Allocated as
Performance
Shares
    Units Granted on
Jan 15, 2014
 
     (’000’s)                            

McVey, CEO

   $ 2,800         60     26,087         40     17,392   

DeLise, CFO

   $ 300         65     3,028         35     1,630   

Themelis, CIO

   $ 800         65     8,075         35     4,348   

Total

          37,190           23,370   

Total Direct Compensation (TDC)

In recognition of the Company’s results and individual performance, the NEOs’ TDC levels for 2013 increased over 2012 levels. A summary of the mix of 2013 TDC, financial results and market data follows:

 

Financial Comparison

   2012
Actual
     2013
Actual
     Year-over-Year
Percentage
Change
 
     (’000’s)      (’000’s)         

Op Inc (before taxes)

   $ 89,370       $ 107,281         20.0

Adjusted EPS

   $ 1.44       $ 1.81         25.7

 

    Base Salary   Bonus   Total Cash   Equity   TDC
    Actual   Market
Positioning
  Actual   Actual   Market
Positioning
  Equity Value
Granted(1)
  Residual Multi-
Year Value(2)
  2013   Market
Positioning
  2012   Change
2013 vs. 2012
    (’000’s)       (’000’s)   (’000’s)       (’000’s)   (’000’s)   (’000’s)       (’000’s)    

McVey, CEO

  $500   Below 25th   $1,950   $2,450   Between Median
and 75th
  $2,800   $1,250   $6,500   Above 75th   $6,000   8%

DeLise, CFO

  $300   Below 25th   $700   $1,000   Between Median
and 75th
  $300   $200   $1,500   Between Median
and 75th
  $1,400   7%

Themelis, CIO

  $300   Below 25th   $1,200   $1,500   Above 75th   $800   $0   $2,300   Above 75th   $2,100   10%

 

(1) Represents Equity value granted on January 15, 2014 for 2013 performance

 

(2) See discussion in regards to CEO and CFO retention awards granted in January 2011 and January 2012, respectively

When making compensation determinations for our NEOs, the Compensation Committee considered that the Company delivered record revenues, operating income and EPS for the fifth consecutive year, the Company’s consistent outperformance of its peers in many financial metrics, and the rate of increase in year-over-year compensation of the NEOs versus the year-over-year increase in the Company’s revenues and operating income. As the above charts show, the percentage increase in the NEOs’ year-over-year cash compensation and TDC was less — individually and in aggregate — than the growth of revenues and operating income.

Stock Ownership Guidelines

The Company and the Compensation Committee believe that equity-based awards are an important factor in aligning the long-term financial interest of our NEOs and our stockholders. As such, we maintain stock ownership guidelines for our NEOs that were last revised on October 23, 2012. Generally, under the guidelines, Mr. McVey is required to own not less than a number of shares of Common Stock equal to six times his base salary using a value of the average price of the Common Stock for the ten days up to and including October 23, 2012. The other NEOs are required to own not less than three times their base salary as in effect on such date. Newly-appointed NEOs will be subject to the same guidelines and will be required to be in compliance within five years of commencement of service. Under our ownership guidelines, shares purchased and held beneficially, vested and unvested RSUs and restricted shares and settled performance shares count toward the minimum ownership requirement. Vested and unvested options and unsettled performance shares are not counted toward the ownership requirement. Compliance with the stock ownership guidelines is reviewed by our Board’s Nominating and Corporate Governance Committee (the “ Governance Committee ”) every three years or more often at the discretion of the Board or Governance Committee. All of our NEOs are currently in compliance with the guidelines.

 

42


Table of Contents

Incentive Compensation Claw-Back

We maintain a claw-back provision that allows the Company to recoup all or part of the year-end incentive paid to NEOs in the event of a misstatement of financial results discovered within 12 months of December 31 st of the respective performance year. The claw-back is structured so that funds that were accrued under the Employee Incentive Pool or 2013 Incentive Program as a result of a misstatement of financial results may be recaptured by the Company. In addition, included in Mr. McVey’s employment agreement is our right to recapture all compensation paid, whether in the form of cash, Common Stock or any other form of property, to the extent required by Dodd-Frank and the Remuneration Code published by the U.K. Financial Conduct Authority.

Disclosure of Employee Hedging

NEOs and all other employees are prohibited from using the Company’s stock for hedging purposes. The most readily available and complete hedge is shorting the stock, which is expressly prohibited under the Company’s Insider Trading Policy. All employees (including NEOs) are subject to this policy.

Other Benefits

We provide our NEOs with the same benefits offered to all other employees. The cost of these benefits constitutes a small percentage of each NEO’s total compensation. In the U.S., key benefits include paid vacation; premiums paid for life insurance and short-term and long-term disability policies; a matching contribution to the NEO’s 401(k) plan account; and the payment of 80% of the NEO’s healthcare premiums in fiscal year 2013 (reduced to 75% in fiscal year 2014). We review these other benefits on an annual basis and make adjustments as warranted based on competitive practices and our performance. Comparable benefits are offered to employees in other geographic locations in which we operate, including Europe and Asia.

Compensation Committee Discretion

The Compensation Committee retains the discretion to decrease or eliminate all forms of incentive awards based on its performance assessment, whether individual or Company-based. Likewise, the Compensation Committee retains the discretion to provide additional payouts and/or consider special awards for significant achievements, including but not limited to achieving superior operating results, strategic accomplishments and/or consummation of partnerships, acquisitions or divestitures.

Severance and Change in Control Arrangements

In hiring and retaining executive level talent, the Compensation Committee believes that providing the executive with a level of security in the event of an involuntary termination of employment or in the event of a change in control is an important and competitive part of the executive’s compensation package. We entered into an employment agreement with Mr. McVey that provides for severance payments and benefits in the event of the termination of his employment under certain circumstances. In addition, the terms of our annual equity grant award agreements with Mr. McVey provide for accelerated vesting of his equity awards in the event of termination of his employment under certain circumstances or upon a change in control of the Company. While retention grants also accelerate upon certain terminations of employment after a qualifying change in control event, accelerated vesting is limited to 24 months, as the Compensation Committee did not feel it necessary to provide full acceleration of the retention grants. The other NEOs are entitled to severance payments and benefits in the event of termination of their employment under certain circumstances pursuant to the terms of the MarketAxess Severance Pay Plan.

While Mr. McVey’s employment agreement is designed to protect him in the event of a change in control, it does not provide for “single-trigger” protection, nor does the Company provide any 280G protection or “gross-up” for excise taxes that may be imposed under Code Section 4999. The agreement does provide that if any payments or benefits paid or provided to him would be subject to, or result in, the imposition of the excise tax imposed by Code Section 4999, then the amount of such payments will be automatically reduced to one dollar less than the amount that subjects such payment to the excise tax, unless he would, on a net after-tax basis, receive less compensation than if the payment were not so reduced. Unlike a “gross-up”, this provision allows the executive to maximize their total severance payments without the Company incurring any additional expense.

 

43


Table of Contents

See below under Executive Compensation — Potential termination or change in control payments and benefits for information regarding these payments and benefits.

Impact of Tax and Accounting

As a general matter, the Compensation Committee reviews and considers the tax and accounting implications of using the various forms of compensation employed by the Company.

When determining the size of grants to our NEOs and other employees under the Company’s stock incentive plans, the Compensation Committee examines the accounting cost associated with the grants. Under FASB ASC Topic 718, grants of stock options, restricted stock, RSUs, performance shares and other share-based payments result in an accounting charge for the Company. The accounting charge is equal to the fair value of the instruments being issued. For restricted stock, RSUs and performance shares, the cost is equal to the fair value of the stock on the date of grant times the number of shares or units granted. For stock options, the cost is equal to the fair value determined using an option pricing model. This expense is amortized over the requisite service or performance period.

Code Section 162(m) generally prohibits any publicly-held corporation from taking a Federal income tax deduction for compensation paid in excess of $1 million in any taxable year to the chief executive officer and any other executive officer (other than the chief financial officer) employed on the last day of the taxable year whose compensation is required to be disclosed to stockholders under SEC rules. Exceptions include qualified performance-based compensation, among other things. It is the Compensation Committee’s policy to maximize the effectiveness of our executive compensation plans in this regard. Nonetheless, the Compensation Committee retains the discretion to grant awards (such as restricted stock with time-based vesting) that will not comply with the performance-based exception of 162(m) if it is deemed in the best interest of the Company to do so.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis to be included in this Proxy Statement. Based on the reviews and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Submitted by the Compensation Committee of the

Board of Directors:

John Steinhardt — Chair

Steven L. Begleiter

Ronald M. Hersch

 

44


Table of Contents

COMPENSATION RISK ASSESSMENT

NEOs and Senior Management Team

Our independent compensation consultant, Grahall, annually reviews and presents compensation recommendations for our NEOs and certain other employees of the Company. Specifically, the Compensation Committee is presented with benchmark data and compensation recommendations made by Mr. McVey (excluding for himself), in conjunction with Grahall, for our senior management team. In 2013, in addition to providing market data for our NEOs, Grahall provided market data for the following positions comprising the senior management team (each, a “ Senior Manager ” and collectively “ Senior Management ”):

 

   

General Counsel

 

   

Head of Human Resources

 

   

Credit and Risk Officer

 

   

Head of MarketAxess Europe and Xtrakter

 

   

Head of North American Sales

 

   

Head of Marketing and Communications

 

   

Product Manager, Open Trading

Grahall also provided the Compensation Committee with summary benchmark and compensation data for all other employees of the Company in the aggregate.

The compensation recommendations for Senior Management are reviewed by the Compensation Committee and factor into the Compensation Committee’s decision-making process in the same manner as decisions concerning compensation for the NEOs (other than Mr. McVey). The Compensation Committee believes that the Company has the right pay mix in place to mitigate a short-term orientation and short-term risk-taking. While a significant portion of executive compensation is performance-based and provides significant award potential, we believe that our compensation program as a whole is sound and does not encourage excessive risk-taking. Specifically:

 

   

Use of long-term incentives — A meaningful portion of the equity compensation received by our NEOs and Senior Managers vests over a three-year or longer period. Therefore, Senior Managers are encouraged to have a long-term outlook, which mitigates short-term risk. Given their equity holdings, poor performance that decreases our stock price negatively impacts the senior management team and our stockholders alike.

 

   

Detrimental Activity Clause — Each equity award made by the Company is done so pursuant to a written agreement that contains a clause prohibiting certain activities that are detrimental to the Company. Pursuant to this clause, detrimental activity by an equity award recipient can result in the Company’s enforcement of a claw-back of equity granted to that employee.

 

   

Share ownership guidelines — The Company has adopted share ownership guidelines, which require our NEOs to hold a portion of their annual base salary in shares of stock of the Company. This ensures that each executive will maintain a significant amount of wealth in our stock, and when the stock price declines, executives will lose value as stockholders do. As a significant portion of each NEO’s compensation is awarded in equity, we believe the stock ownership guidelines motivate the NEOs to align personal performance and decision-making with stockholder value creation and improvement of our financial results on a long-term basis. Other Senior Managers generally have the same portion of TDC allocated to equity as the NEOs.

 

   

Performance shares — To realize value on any grant of performance shares, Senior Managers and NEOs must satisfy performance criteria, and then hold the performance shares until they are fully vested. 50% of the shares ultimately earned are not available until the second anniversary of the grant date and the other 50% of the shares ultimately earned are not available until the third anniversary of the grant date (in each

 

45


Table of Contents
 

case, absent a termination event after a qualifying change in control). This additional holding period requires NEOs and Senior Managers to remain employed with the Company and exposes the shares to additional market risk during the holding period, thus aligning their interests with those of our stockholders.

 

   

Claw-backs for restatements — We maintain a claw-back policy regarding cash incentives for our NEOs that provides that if our financial results were restated within 12 months of December 31 st of the respective performance year — whether through mistake or wrongdoing — the Company has the legal right to recapture an appropriate portion of any bonuses paid. This claw-back policy was based upon, but exceeded the requirements of, the model presented in the Sarbanes Oxley Act of 2002. In addition, Mr. McVey’s employment agreement includes the Company’s right to recapture all compensation paid to him, whether in the form of cash, the Company’s Common Stock or any other form of property, as required by Dodd-Frank and the Remuneration Code published by the Financial Conduct Authority (formerly the U.K. Financial Services Authority).

 

   

Limited maximum opportunity — Additionally, our annual incentive pool for NEOs subject to Section 162(m) is capped and we have implemented a decreasing accrual rate for the incentive pool and our Employee Plan. This reduces the likelihood of the NEOs and Senior Managers taking unnecessary risk for short-term gains.

Other Employees

Our senior management team regularly reviews our compensation practices to determine whether they create appropriate incentives for our broader employee base and do not motivate imprudent risk taking. In addition, our Risk Committee, chaired by our Chief Risk Officer, is comprised of department heads and other managers and assesses our business strategies and plans to insure that the appropriate policies and procedures are in place for identifying, evaluating, measuring, monitoring and managing significant risks. The Risk Committee regularly prepares updates and reports for the Audit Committee and the Board.

Conclusion

Based on our internal analysis and the controls that are in place, the Compensation Committee, the Risk Committee and the Audit Committee believe that the Company’s compensation policies and practices for its employees do not encourage excessive risk-taking or fraud and are not reasonably likely to have a material adverse effect on the Company.

 

46


Table of Contents

EXECUTIVE COMPENSATION

Summary compensation table

The following table sets forth all compensation received during fiscal years 2011, 2012 and 2013 by our (i) Chief Executive Officer, (ii) Chief Financial Officer, and (iii) Chief Information Officer. These executives are referred to as our “named executive officers” or “NEOs” elsewhere in this Proxy Statement.

 

Name and Principal

Position

  Year      Salary
($)
     Bonus
($)
     Stock
Awards
($)(1)
     Option
Awards
($)(1)
     Non- Equity
Incentive Plan
Compensation
($)(2)
     All Other
Compen-
sation
($)(3)
     Total ($)  

Richard M. McVey

    2013         500,000                 2,484,383                 1,950,000         7,000         4,941,383   

Chief Executive Officer

    2012         500,000                 2,351,000                 1,800,000         7,000         4,658,000   
    2011         400,000                 4,673,930         2,499,552         2,050,000         7,000         9,630,481   

Antonio L. DeLise

    2013         300,000                 253,515                 700,000         7,000         1,260,515   

Chief Financial Officer

    2012         300,000                 1,145,875                 650,000         7,000         2,102,875   
    2011         241,667                 314,394                 700,000         7,000         1,263,061   

Nicholas Themelis

    2013         300,000                 709,813                 1,200,000         7,000         2,216,813   

Chief Information Officer

    2012         300,000                 505,149                 1,100,000         7,000         1,912,149   
    2011         270,833         40,000         576,410                 1,260,000         7,000         2,154,243   

 

(1) The amounts represent the aggregate grant date fair value of stock and option awards granted by the Company in 2011, 2012 and 2013, computed in accordance with FASB ASC Topic 718. For further information on how we account for stock-based compensation, see Note 10 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 24, 2014. These amounts reflect the Company’s accounting expense for these awards and do not correspond to the actual amounts, if any, that will be recognized by the named executive officers. As discussed in the CD&A, for 2011 with respect to Mr. McVey and 2012 with respect to Mr. DeLise, the amount reflects a retention grant for which a portion will be annualized over a four-year period for Mr. McVey and a five-year period for Mr. DeLise and will reduce the size of any annual awards that will be made to such NEO during such period (For more information in regards to these retention grants, please see Compensation Discussion and Analysis — Long Term Incentives — Equity-based Awards ).

 

(2) These amounts represent amounts earned under the Performance Incentive Plan with respect to Messrs. McVey and Themelis and under the Employee Plan with respect to Mr. DeLise.

 

(3) These benefits represent employer matching contributions to the Company’s 401(k) defined contribution plan.

 

47


Table of Contents

Grants of plan-based awards

The following table summarizes the grants of performance shares, performance awards and restricted stock units we made to the named executive officers in 2013 as well as potential payouts pursuant to certain performance-based compensation arrangements. There can be no assurance that the grant date fair value of stock awards will ever be realized.

 

                Estimated
Future
Payouts
Under
Non-
Equity
Incentive
Plan
Awards(1)
    Estimated Future Payouts Under
Equity Incentive Plan  Awards(2)
    All Other
Stock
Awards:
Number

of Shares
of Stock
or Units

(#)(3)
    All Other
Option
Awards:
Number of

Securities
Underlying
Options

(#)
    Exercise
or Base
Price of
Option
Awards
($ / Sh)
    Grant
Date
Fair
Value of

Stock
and
Option
Awards
($)(4)
 

Name

  Grant
Date
    Approval
Date
    Target
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
         

Richard M. McVey

    1/15/2013        1/15/2013        1,817,127                                                    
    1/15/2013        1/15/2013                                    44,882                      1,614,854   
    1/15/2013        1/15/2013               12,084        24,167        36,251                             869,529   

Antonio L. DeLise(5)

    1/15/2013        1/15/2013                                    4,580                      164,788   
    1/15/2013        1/15/2013               1,233        2,466        3,699                             88,727   

Nicholas Themelis

    1/15/2013        1/15/2013        1,113,723                                                    
    1/15/2013        1/15/2013                                    12,823                      461,372   
    1/15/2013        1/15/2013               3,453        6,905        10,358                             248,442   

 

 

(1) Represents the grant of a cash incentive award pursuant to the Performance Incentive Plan for the 2013 performance period. As such awards do not have a threshold or maximum payout, the amounts disclosed in the table reflect the amounts that would have been payable to Messrs. McVey and Themelis if the award had been in effect during the 2012 performance period.

 

(2) Reflects the number of performance shares that would vest based on the level of achievement by the Company of pre-tax operating income targets for the 2013 calendar year performance period. For each performance share earned, a participant would be awarded an equal number of shares of restricted stock that would vest and cease to be restricted stock in equal 50% installments on each of the second and third anniversaries of the date of grant of the applicable performance share, subject to the participant’s continued service. For 2013, the pay-out achievement of the performance shares was 108% of target.

 

(3) Reflects restricted stock units that will vest in three equal annual installments beginning on the first anniversary date of the grant, subject to the participant’s continued service.

 

(4) The value of a performance share or restricted stock unit is based on the fair value of such award, computed in accordance with FASB ASC Topic 718. For further information on how we account for stock-based compensation, see Note 10 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 24, 2014.

 

(5) Mr. DeLise was eligible for a cash incentive under our Employee Plan for the 2013 performance period. As discussed in the CD&A, the amount of any such award was discretionary and therefore no amount is disclosed in the table. Refer to the Summary Compensation table above for the award amount.

 

48


Table of Contents

Outstanding equity awards at fiscal year end

The following table summarizes unexercised stock options and shares of restricted stock and restricted stock units that had not vested and related information for each of our named executive officers as of December 31, 2013. The market value of restricted stock awards and restricted stock units is based on the closing price of the Company’s Common Stock on December 31, 2013 of $66.93.

 

           Option Awards      Stock Awards  

Name

         Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable(1)
     Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
     Option
Exercise
Price
($)
     Option
Expiration
Date
     Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(2)
     Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
 

Richard M. McVey

       12,500                 15.60         1/6/2015         
       120,000                 12.96         1/12/2017         
       287,000                 10.93         1/15/2018         
       82,488         137,481         21.56         1/19/2021         
     (3                 21,117         1,413,361   
     (3                 22,428         1,501,106   
     (4                 74,729         5,001,612   
     (5                 32,411         2,169,268   
     (6                 24,215         1,620,710   
     (7                 44,882         3,003,952   
                        

Antonio L. DeLise

       50,000            9.95         8/1/2016         
     (3                 3,167         211,967   
     (3                 3,398         227,428   
     (5                 2,115         141,557   
     (6                 1,579         105,682   
     (7                 4,580         306,539   
     (8                 26,016         1,741,251   

Nicholas Themelis

       2,538            15.60         1/6/2015         
       8,646            11.18         1/9/2016         
       1,403            12.96         1/12/2017         
       35,850            10.93         1/15/2018         
     (3                 5,807         388,663   
     (3                 6,230         416,974   
     (5                 7,047         471,656   
     (6                 5,264         352,320   
     (7                 12,823         858,243   

 

 

(1) 54,992 of the “unexercisable” stock options shown for Mr. McVey vested on January 15, 2014 and the remaining stock options will vest as follows: 54,992 stock options on January 15, 2015 and 27,497 stock options on January 15, 2016, subject to his continued employment through the vesting date. The stock options will also vest and become exercisable in the event of certain terminations of his employment. See Executive Compensation — Potential termination or change in control payments and benefits for additional information.

 

(2) Each share of restricted stock and each restricted stock unit represents one share of the Company’s Common Stock that is subject to forfeiture if the applicable vesting requirements are not met. Generally, vesting is subject to the NEOs continued employment through the vesting date, except that shares of restricted stock and restricted stock units will vest in the event of certain terminations of employment and in certain circumstances may vest upon a change in control. See Executive Compensation — Potential termination or change in control payments and benefits for additional information.

 

49


Table of Contents
(3) These restricted shares and restricted stock units became fully vested on January 15, 2014.

 

(4) 29,892 restricted stock units vested on January 15, 2014. 29,891 will vest on January 15, 2013 and 14,946 will vest on January 15, 2016.

 

(5) For Mr. McVey, 16,205 restricted stock units vested on January 15, 2014, and 16,206 units will vest on January 15, 2015. For Mr. DeLise, 1,057 restricted stock units vested on January 15, 2014, and 1,058 units will vest on January 15, 2015. For Mr. Themelis, 3,523 restricted stock units vested on January 15, 2014, and 3,524 units will vest on January 15, 2015.

 

(6) For Mr. McVey, 12,108 restricted shares vested on January 15, 2014, and 12,107 shares will vest on January 15, 2015. For Mr. DeLise, 790 restricted shares vested on January 15, 2014, and 789 shares will vest on January 15, 2015. For Mr. Themelis, 2,632 shares vested on January 15, 2014, and 2,632 shares will vest on January 15, 2015.

 

(7) For Mr. McVey, 15,259 restricted stock units vested on February 15, 2014, 14,811 will vest on January 15, 2015 and 14,812 will vest on January 15, 2016. For Mr. DeLise, 1,557 restricted stock units vested on January 15, 2014, 1,511 will vest on January 15, 2015 and 1,512 will vest on January 15, 2016. For Mr. Themelis, 4,359 restricted stock units vested on January 15, 2014, 4,232 will vest each on January 15, 2015 and 2016.

 

(8) 6,504 restricted stock units vested on January 15, 2014 and 6,504 units will vest each on January 15, 2015, 2016 and 2017.

Option exercises and stock vested

The following table summarizes each exercise of stock options, each vesting of restricted stock and related information for each of our named executive officers on an aggregated basis during 2013.

 

     Option Awards      Stock Awards  

Name

   Number of Shares
Acquired on Exercise
(#)
     Value Realized
on Exercise
($)(1)
     Number of Shares
Acquired on Vesting
(#)
     Value Realized
on Vesting
($)(2)
 

Richard M. McVey

     42,500         1,845,350         152,529         5,558,647   

Antonio L. DeLise

     25,000         1,511,892         20,537         753,100   

Nicholas Themelis

     27,477         1,522,724         31,587         1,136,500   

 

 

(1) Value realized represents the market value on the date of exercise in excess of the exercise price.

 

(2) Value realized represents the market value on the date of vesting.

Nonqualified Deferred Compensation

The following table sets forth information with respect to vested RSUs held by Messrs. McVey and DeLise as of December 31, 2013, for which they have elected to defer the delivery of the underlying shares until the earlier of (i) separation of service (within the meaning of Code Section 409A), subject to the six-month delay required under Code Section 409A, (ii) a change of control of the Company and (iii) the calendar year in which the fifth anniversary following vesting occurs. All NEOs were eligible to elect to defer the settlement of the RSUs awarded in whole or in part (see Long-term incentives — Equity-based Awards above).

 

Name

   Executive
Contributions
in Last Fiscal Year
($)(1)
     Registrant
Contributions
in Last
Fiscal Year
($)
     Aggregate
Earnings
in Last
Fiscal Year
($)(2)
     Aggregate
Withdrawals /
Distributions
($)
     Aggregate
Balance at
Last Fiscal
Year-End
($)(3)
 

Richard M. McVey

   $ 2,674,176       $ 0       $ 3,309,105       $ 0       $ 7,406,388   

Antonio L. DeLise

   $ 136,844       $ 0       $ 88,162       $ 0       $ 225,006   

Nicholas Themelis

   $ 0       $ 0       $ 0       $ 0       $ 0   

 

 

(1) For Mr. McVey, reflects the market value of the Common Stock underlying 52,318 RSUs that vested on January 15, 2013 and 16,205 RSUs that vested on February 15, 2013 based on the closing price of our Common Stock on such dates of $35.98 and $40.34, respectively. In addition, it includes the value as of such dates of amounts accrued and unpaid under dividend equivalent rights in 2011 and 2012, respectively, which amounts are equal to any ordinary cash dividends paid the holders of our Common Stock in 2011 and 2012. Such amounts will be paid at the same time the applicable RSU is paid. The amount reported as “Executive Contributions” is not reflected in the Summary Compensation Table for fiscal 2013 as such RSUs were granted in fiscal 2011 and 2012 and are reflected in the “Stock Awards” column of the Summary Compensation Table for such year.

 

    

For Mr. DeLise, reflects the market value of Common Stock underlying 3,252 RSUs that vested on February 15, 2013 based on the closing price of our Common Stock on such date of $40.34. In addition, it includes the value as of such date of amounts accrued and unpaid under dividend equivalent rights in 2012, which amounts are equal to any ordinary cash dividends paid the holders of our Common Stock in 2012. Such amounts will be paid at the same time the applicable RSU is paid. The amount reported as “Executive

 

50


Table of Contents
  Contributions” is not reflected in the Summary Compensation Table for fiscal 2013 as such RSUs were granted in fiscal 2012 and are reflected in the “Stock Awards” column of the Summary Compensation Table for such year.

 

(2) Aggregate Earnings with respect to vested and undelivered RSUs includes changes in the market value of the shares of Common Stock underlying the RSUs based on the difference of the closing price of our Common Stock on December 31, 2013 of $66.93 and the closing price at the time of vesting (see (1) above) and the value of amounts accrued under a dividend equivalent right in 2013 that were unpaid as of December 31, 2013, which amounts are equal to any ordinary cash dividends paid the holders of our Common Stock in 2013. Such amounts will be paid at the same time the applicable RSU is paid. Additionally, Aggregate Earnings include the difference in value of shares of Common Stock underlying the RSUs deferred in 2011 at Fiscal Year End 2013 versus Fiscal Year End 2012 as well as the value of accrued but unpaid dividend equivalents. These amounts are not included in the Summary Compensation table because plan earnings were not preferential or above market.

 

(3) The vested and undelivered RSUs were previously reported in the “Stock Awards” column of the Summary Compensation Table for fiscal year 2012, in accordance with SEC rules. The value of the Aggregate Balance at Last Fiscal Year End for the RSUs were determined as follows: i) multiplying the number of RSUs by $66.93, the closing price per share of our Common Stock on December 31, 2013, and adding the value of accrued but unpaid dividend equivalents for RSUs deferred in 2012; ii) calculating the difference in value at Fiscal Year End 2013 versus Fiscal Year End 2012, and adding the value of accrued but unpaid dividend equivalents for 2013 for RSUs deferred in 2011; plus iii) the Aggregate Balance at Last Fiscal Year-End as previously reported for year-end 2012 ($1,423,107 for McVey).

Employment agreements and severance arrangements with our named executive officers

Richard M. McVey Employment Agreement

On January 19, 2011, effective February 1, 2011, Mr. McVey and the Company entered into an amended and restated employment agreement (the “ CEO Employment Agreement ”) providing for an initial four-year term with successive one-year automatic renewals unless either party elects not to extend the term at least 90 days prior to the last day of the term.

The CEO Employment Agreement provides that Mr. McVey will be employed by us as Chief Executive Officer and Chairman of the Board of Directors, and his employment may be terminated by him or by the Company at any time. Mr. McVey’s annual base salary under the CEO Employment Agreement is $500,000 per year.

Under the CEO Employment Agreement, Mr. McVey is eligible to receive an annual bonus in accordance with the Company’s annual performance incentive plan as in effect from time to time and is entitled to participate in all benefit plans and programs available to our other senior executives, at a level commensurate with other senior management of the Company.

The CEO Employment Agreement provides for severance payments and benefits (subject to Mr. McVey’s execution of a waiver and general release) if Mr. McVey’s employment is terminated under various conditions. See below under Executive Compensation — potential termination or change in control payments and benefits for a description of such payments and benefits.

The CEO Employment Agreement provides that any award gains and annual incentive awards received by Mr. McVey will be subject to potential claw-back under policies adopted by the Company to comply with applicable law, rules or other regulatory requirements.

For purposes of the CEO Employment Agreement, “Cause” generally means Mr. McVey’s:

 

   

willful misconduct or gross negligence in the performance of his duties;

 

   

conviction of, or plea of guilty or nolo contendere to, a crime relating to us or any of our affiliates, or any felony; or

 

   

material breach of his employment agreement or any other material written agreement with us.

For purposes of the CEO Employment Agreement, “Good Reason” generally means:

 

   

Mr. McVey’s no longer holding the title of Chief Executive Officer, or the failure of the Board to nominate him as a director or, once elected to the Board, the failure of the Board to elect him as Chairman;

 

51


Table of Contents
   

a material diminution in his duties, authorities or responsibilities or the assignment of duties or responsibilities materially adversely inconsistent with his then-current position (other than as a result of his ceasing to be a director);

 

   

our material breach of his employment agreement;

 

   

a relocation of his principal place of business of more than 50 miles; or

 

   

our failure to obtain a reasonably satisfactory written agreement from any successor to all or substantially all of our assets to assume and agree to perform our obligations under his employment agreement.

For purposes of the CEO Employment Agreement, “Change in Control” generally means:

 

   

an acquisition representing 50% or more of the combined voting power of our then outstanding securities;

 

   

a change in the majority of the members of our Board during any two-year period, unless such members are approved by two-thirds of the Board members who were members at the beginning of such period or members whose nominations were so approved;

 

   

our merger or consolidation, other than (a) a transaction resulting in our voting securities outstanding immediately prior thereto continuing to represent more than 50% of the combined voting power of the voting securities of such surviving entity immediately after such transaction or (b) a transaction effected to implement a recapitalization (or similar transaction) in which no person acquires more than 50% of the combined voting power of our then outstanding securities; or

 

   

our stockholders’ approval of a plan of complete liquidation or the consummation of the sale or disposition of all or substantially all of our assets other than (a) the sale or disposition of all or substantially all of our assets to a beneficial owner of 50% or more of the combined voting power of our outstanding voting securities at the time of the sale or (b) pursuant to a spinoff type transaction of such assets to our stockholders.

Severance Pay Plan

Messrs. DeLise and Themelis do not have employment agreements with us but are entitled to severance payments and benefits under the Company’s Severance Pay Plan (the “ Severance Plan ”) in the event their employment is terminated by us for any reason other than a termination for Cause. The Severance Plan provides for up to 24 weeks of continued base salary and continued healthcare coverage based on the number of years of an employee’s consecutive service with us prior to termination.

“Cause” is generally defined in the Severance Plan as (i) an employee’s act or omission resulting or intended to result in personal gain at our expense; (ii) an employee’s misconduct; (iii) performance of duties by an employee in a manner we deem to be materially unsatisfactory; (iv) “cause” (or words of like import) as defined in an agreement between us and the employee; or (v) an employee’s improper disclosure of proprietary or confidential information or trade secrets, or intellectual property that we are under a duty to protect.

As of December 31, 2013, the following executives were entitled to the severance payments if terminated by the Company without Cause:

 

Executive

   Years of Service      Severance Entitlement*  

DeLise

     7         24 weeks   

Themelis

     9         24 weeks   

 

 

* Represents continued base salary and healthcare coverage

Proprietary Information and Non-Competition Agreements

Each of the NEOs has entered into, and is subject to the terms of, a Proprietary Information and Non-Competition Agreement with us that contains, among other things, (i) certain provisions prohibiting disclosure of our confidential information without our prior written consent, (ii) certain non-competition provisions that

 

52


Table of Contents

restrict their engaging in certain activities that are competitive with us during their employment and for one year thereafter for the CEO, and six months thereafter for the CFO and CIO, and (iii) certain non-solicitation provisions that restrict their recruiting, soliciting or hiring our nonclerical employees or consultants, or soliciting any person or entity to terminate, cease, reduce or diminish their relationship with us, during their employment and for two years thereafter.

Potential termination or change in control payments and benefits

Mr. McVey is entitled to certain payments and benefits pursuant to his employment agreement and other agreements entered into between us and him upon a termination of his employment in certain circumstances or in the event of a Change in Control of the Company. Messrs. Themelis and DeLise do not have employment agreements with us but are entitled to severance payments and benefits under the Severance Plan and pursuant to certain equity grants.

The following tables estimate the payments we would be obligated to make to each of our NEOs as a result of his termination or resignation under the circumstances shown or because of a Change in Control, in each case assuming such event had occurred on December 31, 2013. We have calculated these estimated payments to meet SEC disclosure requirements. The estimated payments are not necessarily indicative of the actual amounts any of our NEOs would receive in such circumstances. The table excludes (i) compensation amounts accrued through December 31, 2013 that would be paid in the normal course of continued employment, such as accrued but unpaid salary, and (ii) vested account balances under our 401(k) Plan that are generally available to all of our salaried employees. Where applicable, the information in the table uses a price per share for our Common Stock of $66.93, the closing price on December 31, 2013. In addition, where applicable, the amounts listed for bonuses reflect the actual amounts paid to the NEOs for 2013, since the hypothetical termination or Change in Control date is the last day of the fiscal year for which the bonus is to be determined.

 

53


Table of Contents

Payments and Benefits for Mr. McVey

 

    Base
Salary
(1)($)
    Bonus(2)
($)
    Health
Benefits(3)

($)
    Restricted
Stock
Acceleration(4)(5)
($)
    Performance
Award

Acceleration(6)
($)
    Stock
Option
Acceleration(7)
($)
    Restricted
Stock
Unit
Acceleration(8)(9)
($)
    Payment
Reduction(10)
($)
    Total
($)
 

Termination Without Cause or for Good Reason Outside a Change in Control Protection Period (“CCPP”)

    1,000,000        3,866,667        32,742        1,517,102               2,494,987        2,000,672               10,912,170   

Termination Without Cause, for Good Reason, Death or by the Company due to Disability, during a CCPP, but prior to a Change in Control

    1,000,000        3,866,667        32,742        1,517,102        1,746,873        4,989,974        4,001,276               17,154,635   

Termination Without Cause, for Good Reason, Death or by the Company due to Disability, upon or within 18 months following a Change in Control

    1,000,000        3,866,667        32,742        3,034,071        1,746,873        4,989,974        7,671,650               22,341,977   

Award is not continued, assumed or has no new rights substituted upon a Change in Control (no termination)

                         3,034,071        1,746,873               8,671,986               13,452,930   

Termination for Cause or Without Good Reason

                                                              

Death, or by the Company due to Disability, outside of CCPP

    500,000        1,933,333        21,828        3,034,071        873,503        3,118,779        9,175,166               18,656,681   

 

 

(1) The CEO Employment Agreement provides that Mr. McVey will receive continued payment of his base salary for 24 months following termination if (i) his employment is terminated outside of a Change in Control Protection Period (as defined below) for any reason other than his death, his voluntary resignation without Good Reason (including due to his providing a notice of non-extension of the term of the agreement at least 90 days prior to the end of the term (a “ Non-Extension Notice ”)), due to our providing a Non-Extension Notice, or by us as a result of his having a disability or for Cause (an “ Enhanced Non-Change in Control Termination ”), or (ii) he resigns for Good Reason or his employment is terminated for any reason other than his resignation without Good Reason (including due to his providing a Non-Extension Notice), or by us for Cause, in any case, within three months prior to a “change in control event” within the meaning of Section 409A of the Code, or within 18 months after a Change in Control as defined in the agreement (such period a “ Change in Control Protection Period  ” or “ CCPP ” and any such termination a “ Change in Control Termination ”).

 

  The CEO Employment Agreement provides that Mr. McVey will receive continued payment of his base salary for 12 months following termination if his employment is terminated outside of a Change in Control Protection Period due to his death, due to our providing a Non-Extension Notice, or by us as a result of his having a disability (a “ Standard Non-Change in Control Termination ”).

 

(2) The CEO Employment Agreement provides that Mr. McVey will receive an amount equal to two times his average annual cash bonus for the three years prior to termination (payable in 24 equal monthly installments) in the event of an Enhanced Non-Change in Control Termination or a Change in Control Termination.

 

  The CEO Employment Agreement provides that Mr. McVey will receive an amount equal to his average annual cash bonus for the three years prior to termination (payable in 12 equal monthly installments) in the event of a Standard Non-Change in Control Termination.

 

(3) The CEO Employment Agreement provides that we will pay the cost of continuation health coverage for up to 18 months following an Enhanced Non-Change in Control Termination or a Change in Control Termination.

 

  The CEO Employment Agreement provides that we will pay the cost of continuation health coverage for up to 12 months following a Standard Non-Change in Control Termination.

 

54


Table of Contents
(4) Pursuant to the Performance Share Agreements between us and Mr. McVey dated January 31, 2011 and February 15, 2012:

 

   

all unvested shares of restricted stock granted to Mr. McVey upon settlement of his performance shares (the “ McVey Settlement Shares ”) will fully vest upon his death or disability;

 

   

in the event of a termination of employment without Cause or for Good Reason, 50% of the unvested McVey Settlement Shares will fully vest; and

 

   

in the event of a Change in Control within three months following Mr. McVey’s resignation for Good Reason, a termination without Cause within 24 months following a Change in Control, or if prior to a Change in Control it is determined that the McVey Settlement Shares will not be continued, assumed or have new rights substituted therefor in accordance with the applicable incentive plans, all unvested McVey Settlement Shares will fully vest. The table above assumes that the McVey Settlement Shares would have become fully vested upon a Change in Control.

 

(5) Pursuant to the Performance Award Agreement between us and Mr. McVey dated January 15, 2013:

 

   

in the event of termination of employment due to death or disability prior to the settlement date (which occurred in the first fiscal quarter of 2014) (the “ Settlement Date ”), then he would have been entitled to receive 50% of the shares of restricted stock that he would have received had he been employed on the Settlement Date, based on the actual achievement of the performance goal, which shares would have been fully vested on the Settlement Date; and

 

   

the Compensation Committee had discretion to determine the treatment of the performance shares upon a Change in Control occurring prior to the Settlement Date based on the likely level of achievement of the performance goal on the Settlement Date. For the purposes of the table above, we have assumed that the Compensation Committee would have granted Mr. McVey the number of shares of restricted stock that would have become fully vested upon a Change in Control based on actual performance.

 

(6) Pursuant to the Stock Option Agreement between us and Mr. McVey dated January 19, 2011:

 

   

in the event of termination of employment due to death or disability, 50% of the unvested portion of the option will become fully vested and exercisable;

 

   

in the event of termination of employment without Cause or for Good Reason, (i) outside of a CCPP, any portion of the option that would have become vested in the 12-month period following such termination will become fully vested and exercisable and (ii) during a CCPP, any portion of the option that would have become vested in the 24-month period following such termination will become fully vested and exercisable; and

 

   

in the event of termination of employment as a result of our providing a Non-Extension Notice under his employment agreement, the unvested portion of the option will continue to vest following such termination as if such termination had not occurred.

 

(7) If, prior to a Change in Control, the Compensation Committee determines that the restricted stock units granted to Mr. McVey under the Restricted Stock Unit Agreements between us and him dated January 14, 2011 and January 13, 2012 will not be continued, assumed or have new rights substituted therefore, all unvested restricted stock units will fully vest upon the Change in Control. If such awards do not vest upon a Change in Control, then in the event of a termination of employment without Cause upon or within 24 months of a Change in Control, 100% of the restricted stock units granted to Mr. McVey will vest. All of the unvested shares of restricted stock units will vest upon his death or disability.

 

(8) Pursuant to the Restricted Stock Unit Agreement between us and Mr. McVey dated January 19, 2011:

 

   

in the event of termination of employment due to death or disability, 50% of the unvested RSUs will become immediately vested;

 

   

in the event of termination of employment without Cause or for Good Reason, (i) outside of a CCPP, any portion of the RSUs that would have become vested in the 12-month period following such termination will become immediately vested and (ii) during a CCPP, any portion of the RSUs that would have become vested in the 24-month period following such termination will become immediately vested; and

 

   

in the event of termination of employment as a result of our providing a Non-Extension Notice under his employment agreement, the unvested portion of the RSUs will continue to vest following such termination as if such termination had not occurred.

 

(9) Mr. McVey’s employment agreement provides that if any payments or benefits paid or provided to him would be subject to, or result in, the imposition of the excise tax imposed by Section 4999 of the Code, then the amount of such payments will be automatically reduced to one dollar less than the amount that subjects such payment to the excise tax, unless he would, on a net after-tax basis, receive less compensation than if the payment were not so reduced.

 

55


Table of Contents

Payments and Benefits for Mr. DeLise

 

    Base
Salary(1)
($)
    Health
Benefits(2)
($)
    Restricted Stock
Acceleration(3)
($)
    Performance
Share
Acceleration(4)
($)
    Restricted
Stock Unit
Acceleration(5)
($)
    Total
($)
 

Termination Without Cause

    138,462        14,133                             152,595   

Termination Without Cause within 24 months following a Change in Control

    138,462        14,133        317,650        178,235        2,416,775        3,065,254   

Award is not continued, assumed or has no new rights substituted upon a Change in Control

                  317,650        178,235        2,416,775        2,912,660   

Death/Disability

                  158,825        89,117        1,208,388        1,456,330   

 

 

(1) In accordance with the Severance Plan, Mr. DeLise is entitled to 24 weeks of continued base salary upon a termination of his employment without Cause.
(2) In accordance with the Severance Plan, Mr. DeLise is entitled to 24 weeks of continued healthcare coverage upon a termination of his employment without Cause.

 

(3) Pursuant to the Performance Share Agreements between us and Mr. DeLise dated January 28, 2011 and January 13, 2012:

 

   

50% of the unvested shares of restricted stock granted to Mr. DeLise upon settlement of his performance shares (the “ DeLise Settlement Shares ”) will fully vest upon his death or disability; and

 

   

in the event of a termination without Cause within 24 months following a Change in Control, or if, prior to a Change in Control, it is determined that the DeLise Settlement Shares will not be continued, assumed or have new rights substituted therefor in accordance with the applicable incentive plans, all unvested DeLise Settlement Shares will fully vest. The table above assumes that the DeLise Settlement Shares would have become fully vested upon a Change in Control.

 

(4) Pursuant to the Performance Share Agreement between us and Mr. DeLise dated January 15, 2013, in the event of termination of employment due to death or disability prior to the settlement date (which occurred in the first fiscal quarter of 2014) (the “ Settlement Date ”), then he would have been entitled to receive 50% of the shares of restricted stock that he would have received had he been employed on the Settlement Date, based on the actual achievement of the performance goal, which shares would have been fully vested on the Settlement Date. In addition, the Compensation Committee had discretion to determine the treatment of the performance shares upon a Change in Control occurring prior to the Settlement Date based on the likely level of achievement of the performance goal on the Settlement Date. For the purposes of the table above, we have assumed that the Compensation Committee would have granted Mr. DeLise the maximum number of shares of restricted stock which would have become fully vested upon a Change in Control based on actual performance.

 

(5) If prior to a Change in Control, the Compensation Committee determines that the restricted stock units granted to Mr. DeLise under the Restricted Stock Unit Agreements between us and him dated January 14, 2011, January 13, 2012, and January 15, 2013 will not be continued, assumed or have new rights substituted therefore, all unvested restricted stock units will fully vest upon the Change in Control. If such awards do not vest upon a Change in Control, then in the event of a termination of employment without Cause upon or within 24 months of a Change in Control, 100% of the restricted stock units granted to Mr. DeLise will vest. Fifty percent of the unvested shares of restricted stock units will vest upon his death or disability.

 

56


Table of Contents

Payments and Benefits for Mr. Themelis

 

    Base
Salary(1)
($)
    Health
Benefits(2)
($)
    Restricted Stock
Acceleration(3)(4)
($)
    Performance
Share
Acceleration(5)
($)
    Restricted
Stock Unit
Acceleration(6)
($)
    Total
($)
 

Termination Without Cause

    138,462        14,133                             152,595   

Termination Without Cause within 24 months following a Change in Control

    138,462        14,133        740,982        499,097        1,746,873        3,139,547   

Award is not continued, assumed or has no new rights substituted upon a Change in Control

                  740,982        499,097        1,746,873        2,986,952   

Death/Disability

                  370,491        249,549        873,437        1,493,476   

 

 

(1) In accordance with the Severance Plan, Mr. Themelis is entitled to 24 weeks of continued base salary upon a termination of his employment without Cause.

 

(2) In accordance with the Severance Plan, Mr. Themelis is entitled to 24 weeks of continued healthcare coverage upon a termination of his employment without Cause.

 

(3) Pursuant to the Performance Share Agreements between us and Mr. Themelis dated January 28, 2011 and February 15, 2012:

 

   

50% of the unvested shares of restricted stock granted to Mr. Themelis upon settlement of his performance shares (the “ Themelis Settlement Shares ”) will fully vest upon his death or disability; and

 

   

in the event of a termination without Cause within 24 months following a Change in Control, or if prior to a Change in Control it is determined that the Themelis Settlement Shares will not be continued, assumed or have new rights substituted therefor in accordance with the applicable incentive plans, all unvested Themelis Settlement Shares will fully vest. The table above assumes that the Themelis Settlement Shares would have become fully vested upon a Change in Control.

 

(4) Pursuant to the Performance Award Agreement between us and Mr. Themelis dated January 15, 2013, in the event of termination of employment due to death or disability prior to the settlement date (which occurred in the first fiscal quarter of 2014) (the “ Settlement Date ”), then he would have been entitled to receive 50% of the shares of restricted stock that he would have received had he been employed on the Settlement Date, based on the actual achievement of the performance goal, which shares would have been fully vested on the Settlement Date. In addition, the Compensation Committee had discretion to determine the treatment of the performance shares upon a Change in Control occurring prior to the Settlement Date based on the likely level of achievement of the performance goal on the Settlement Date. For the purposes of the table above, we have assumed that the Compensation Committee would have granted Mr. Themelis the maximum number of shares of restricted stock that would have become fully vested upon a Change in Control based on actual performance.

 

(5) If prior to a Change in Control, the Compensation Committee determines that the restricted stock units granted to Mr. Themelis under the Restricted Stock Unit Agreements between us and him dated January 14, 2011, January 13, 2012, and January 15, 2013 will not be continued, assumed or have new rights substituted therefore, all unvested restricted stock units will fully vest upon the Change in Control. If such awards do not vest upon a Change in Control, then in the event of a termination of employment without Cause upon or within 24 months of a Change in Control, 100% of the restricted stock units granted to Mr. Themelis will vest. Fifty percent of the unvested shares of restricted stock units will vest upon his death or disability.

Compensation plans

For information with respect to the securities authorized for issuance under equity compensation plans, see Equity Compensation Plan Information in Item 12 of our Annual Report on Form 10-K for the year ended December 31, 2013, which is incorporated herein by reference and has been delivered to you with this Proxy Statement.

Compensation Committee interlocks and insider participation

No member of our Board’s Compensation Committee has served as one of our officers or employees at any time. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board of Directors. None of our executive officers serves as a member of the board of directors of any other company that has an executive officer serving as a member of our Board’s Compensation Committee.

 

57


Table of Contents

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Review and approval of related party transactions

Our related parties include our directors, director nominees, executive officers and holders of more than five percent of the outstanding shares of our Common Stock. We review relationships and transactions in which the Company and our related parties or their immediate family members are participants to determine whether such related persons have a direct or indirect material interest. As required under SEC rules, transactions that are determined to be directly or indirectly material to the Company or to a related party are disclosed in this Proxy Statement. In addition, the Audit Committee reviews and approves any related party transaction that is required to be disclosed. Set forth below is information concerning transactions with our related parties that is required to be disclosed under SEC rules.

Transactions with our 5% Stockholders

Each of the 5% stockholders that are listed above under Security Ownership of Certain Beneficial Owners and Management or their affiliated entities is a party to a user agreement or dealer agreement that governs their access to, and activity on, our electronic trading platform. These agreements were each entered into in the normal course of business and provide for the fees and expenses to be paid by such entities for the use of the platform.

Indemnification agreements

We have entered into an indemnification agreement with each of our outside directors. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.

OTHER MATTERS

Section 16(a) beneficial ownership reporting compliance

The members of our Board of Directors, our executive officers and persons who hold more than 10% of our outstanding Common Stock are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, which requires them to file reports with respect to their ownership of our Common Stock and their transactions in such Common Stock. Based solely upon a review of (i) the copies of Section 16(a) reports that MarketAxess has received from such persons for transactions in our Common Stock and their Common Stock holdings for the 2013 fiscal year and (ii) the written representations of such persons that no annual Form 5 reports were required to be filed by them for the fiscal year, the Company believes that all reporting requirements under Section 16(a) for such fiscal year were met in a timely manner by its directors, executive officers and beneficial owners of more than 10% of its Common Stock.

Other matters

As of the date of this Proxy Statement, the Company knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed proxy card to vote the shares they represent as such persons deem advisable. Discretionary authority with respect to such other matters is granted by the execution of the enclosed proxy card.

Stockholder proposals for 2015 Annual Meeting

In order to be considered for inclusion in the Company’s proxy statement and proxy card relating to the 2015 Annual Meeting of Stockholders, any proposal by a stockholder submitted pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended, must be received by the Company at its principal executive offices in New York, New York, on or before December 24, 2014. In addition, under the Company’s bylaws, any proposal for consideration at the 2015 Annual Meeting of Stockholders submitted by a stockholder other than pursuant to Rule 14a-8 will be considered timely if it is received by the Secretary of the Company at its principal executive offices between the close of business on November 24, 2014 and the close of business on December 24, 2014 and is otherwise in compliance with the requirements set forth in the Company’s bylaws.

 

58


Table of Contents

 

 

 

MARKETAXESS HOLDINGS INC.

299 PARK AVENUE

NEW YORK, NY 10171

      VOTE BY INTERNET - www.proxyvote.com        
      Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.        
     

 

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

       
     

 

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

       
     

 

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

 

       

 

    TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

 

  

 

M73306-P46695                     KEEP THIS PORTION FOR YOUR RECORDS

 

DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

 

  MARKETAXESS HOLDINGS INC.                                                            
   

 

The Board of Directors recommends you vote FOR the following:

                   
                                     
    1.   Election of Directors                                  
     

 

Nominees:

 

 

For

 

 

Against

 

 

Abstain

                         
     

 

1a.  Richard M. McVey

 

 

¨

 

 

   ¨

 

 

¨

                 

 

For

 

 

Against

 

 

Abstain

   
     

 

1b.  Steven L. Begleiter

 

 

¨

 

 

   ¨

 

 

¨

       

 

1i.   John Steinhardt

         

 

¨

 

 

   ¨

 

 

¨

   
     

 

1c.  Stephen P. Casper

 

 

¨

 

 

   ¨

 

 

¨

       

 

1j.   James J. Sullivan

         

 

¨

 

 

   ¨

 

 

¨

   
     

 

1d.  Jane Chwick

 

 

¨

 

 

   ¨

 

 

¨

       

 

1k.  Lesley Daniels Webster

         

 

¨

 

 

   ¨

 

 

¨

   
     

 

1e.  William F. Cruger

 

 

¨

 

 

   ¨

 

 

¨

     

 

The Board of Directors recommends you vote FOR the following proposals:

         
     

 

1f.  David G. Gomach

 

 

¨

 

 

   ¨

 

 

¨

     

 

2.

 

 

To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2014.

 

 

¨

 

 

   ¨

 

 

¨

   
     

 

1g.  Carlos M. Hernandez

 

 

¨

 

 

   ¨

 

 

¨

                 
     

 

1h.  Ronald M. Hersch

 

 

¨

 

 

   ¨

 

 

¨

     

 

3.

 

 

To approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the 2014 Proxy Statement.

 

 

¨

 

 

   ¨

 

 

¨

   
                               
                   

 

 

NOTE: UNLESS OTHERWISE SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR LISTED ABOVE AND FOR PROPOSALS 2 AND 3, AND WILL BE VOTED BY THE PROXYHOLDERS AT THEIR DISCRETION AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING OR AT ANY POSTPONEMENT OR ADJOURNMENT THEREOF. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS, JUST SIGN BELOW - NO BOXES NEED BE CHECKED.

         
                             
                             
                             
                             
                             
                             
                           
    For address changes/comments, mark here. (see reverse for instructions)   ¨                
                     
                     
   

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.

 

         
                                                
     

Signature [PLEASE SIGN WITHIN BOX]

 

 

Date

 

                 

Signature (Joint Owners)

 

 

Date

 

                   


Table of Contents

2014 ANNUAL MEETING OF STOCKHOLDERS OF MARKETAXESS HOLDINGS INC.

JUNE 5, 2014

Please date, sign and mail

your proxy card in the

envelope provided as soon

as possible.

 

 

 

 

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com .

 

 

M73307-P46695

 

 

 

MARKETAXESS HOLDINGS INC.

 

The undersigned hereby appoints Richard M. McVey, Antonio L. DeLise and Scott Pintoff, jointly and severally, as proxies and attorneys of the undersigned, with full power of substitution and resubstitution, to vote all shares of stock which the undersigned is entitled to vote at the Annual Meeting of Stockholders of MarketAxess Holdings Inc. to be held on Thursday, June 5, 2014, or at any postponement or adjournment thereof.

 

You are encouraged to indicate your choices by marking the appropriate boxes, as specified on the reverse side, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations.

 

        
          
          
          
          
    Address Changes/Comments:       
   

 

 

 

 

 

        
     

(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)

 

Continued and to be signed on reverse side