MarketAxess Holdings, Inc.
MARKETAXESS HOLDINGS INC (Form: DEF 14A, Received: 04/26/2017 16:02:07)

 

 

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 

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))

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)

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MarketAxess Holdings Inc.

299 Park Avenue, 10th Floor

New York, New York 10171

April 26, 2017

To the Stockholders of MarketAxess Holdings Inc.:

You are invited to attend the 2017 Annual Meeting of Stockholders (the “ Annual Meeting ”) of MarketAxess Holdings Inc. (the “ Company ”) scheduled for Thursday, June 8, 2017 at 10:00 a.m., Eastern Daylight Time, at the InterContinental New York Barclay Hotel, 111 East 48 th 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 27, 2017, 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, 2016 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,

 

Richard M. McVey

Chairman and Chief Executive Officer

 

 


 

MarketAxess Holdings Inc.

299 Park Avenue, 10th Floor

New York, New York 10171

NOTICE OF

2017 ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders of MarketAxess Holdings Inc.:

NOTICE IS HEREBY GIVEN that the 2017 Annual Meeting of Stockholders (the “ Annual Meeting ”) of MarketAxess Holdings Inc., a Delaware corporation (the “ Company ”), will be held on Thursday, June 8, 2017, at 10:00 a.m., Eastern Daylight Time, at the InterContinental New York Barclay Hotel, 111 East 48 th Street, New York, New York 10017.

At the Annual Meeting we will:

1.   vote to elect the 10 nominees named in the attached Proxy Statement as members of the Company’s Board of Directors for terms expiring at the 2018 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, 2017;

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

4.   hold an advisory vote on the frequency of future advisory votes on the compensation of the Company’s named executive officers; and;

5.   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 11, 2017. 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 11, 2017. 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,

 

Scott Pintoff

General Counsel and Corporate Secretary

 

New York, New York

April 26, 2017

 

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

 

GENERAL INFORMATION

 

1

SOLICITATION OF PROXIES

 

3

VOTING

 

3

AVAILABILITY OF CERTAIN DOCUMENTS

 

5

PROPOSAL 1 — ELECTION OF DIRECTORS

 

6

CORPORATE GOVERNANCE AND BOARD MATTERS

 

11

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

 

18

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

 

20

PROPOSAL 3 — ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

22

PROPOSAL 4 — ADVISORY VOTE ON FREQUENCY OF SAY-ON-PAY  VOTE

 

23

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

24

EXECUTIVE OFFICERS

 

26

COMPENSATION DISCUSSION AND ANALYSIS

 

27

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

 

47

COMPENSATION RISK ASSESSMENT

 

48

EXECUTIVE COMPENSATION

 

50

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

59

OTHER MATTERS

 

59

 

 

 

 


 

MarketAxess Holdings Inc.

299 Park Avenue, 10th Floor

New York, New York 10171

PROXY STATEMENT for the

2017 ANNUAL MEETING OF STOCKHOLDERS

To Be Held On June 8, 2017

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 2017 Annual Meeting of Stockholders (the “ Annual Meeting ”) scheduled for Thursday, June 8, 2017, at 10:00 a.m., Eastern Daylight Time, at the InterContinental New York Barclay Hotel, 111 East 48 th 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 27, 2017. 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 8, 2017 meeting.

Holders of record of our Common Stock, par value $0.003 per share (“ Common Stock ”), at the close of business on April 11, 2017 (the “ Record Date ”) are entitled to notice of, and to vote at, the Annual Meeting. On that date, there were 37,088,070 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 the Proposals 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: (1) FOR the election of the nominees for director named herein, (2) FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2017, (3) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in this Proxy Statement, (4) “Once Per Year” on the frequency of our advisory vote on executive compensation, and (5) 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 27, 2017, 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. 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. The proxy card includes instructions on how to vote via the telephone. 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 of Internet Availability.

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Internet d istribution 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 otherwi se.

Important Notice Regarding the Availability of Proxy Materials

for the Stockholder Meeting to be held on June 8, 2017

Our Proxy Statement and 2016 Annual Report to Stockholders are available at

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

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SOLICITATIO N 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, 37,088,070 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

You may vote by calling the toll-free telephone number listed on the proxy card or visiting the website address listed on the Notice or 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 7, 2017 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, in addition to the methods described above, you may also 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 11, 2017, 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 11, 2017. 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.

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.

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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.

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 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 as shares present and entitled to vote 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.

With respect to the frequency of future advisory votes on the compensation of the Company’s named executive officers (Proposal 4), approval of a frequency requires votes for that frequency from the holders of a majority of the shares present in person or represented by proxy. Because stockholders have four choices (one year, two years, three years or abstain) on the advisory approval of a frequency of future votes on the compensation of the Company’s named executive officers, it is possible that no frequency will

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r eceive a majority vote. If no frequency receives the affirmative vote of a majority of the shares present in person or represented by proxy, our Board intends to regard the frequency receiving the greatest number of votes as the recommendation of our stock holders. Abstentions will be counted as shares present and entitled to vote on th is proposal and will have the same effect as a vote against each frequency . Broker non-votes will not be counted as shares present and entitled to vote. The Board and the Comp ensation Committee will consider the outcome of the vote when making their determination regarding how frequently (every one, two or three years) over the next six years the advisory vote will be held, after which period another frequency vote will be held .

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 2018 Annual Meeting of Stockholders, see the information in this Proxy Statement under the section heading Other Matters — Stockholder proposals for 2018 Annual Meeting.

AVAILABILITY OF CERTAIN DOCUMENTS

Householding of Annual Meeting materials

The Company and 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 U.S. Securities and Exchange Commission (“ 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, 2016, 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.

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PROPOSAL 1 — ELEC TION 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 7, 2016, except for Richard G. Ketchum, who was appointed to the Board as of April 1, 2017. The directors will be elected for a term that begins at the Annual Meeting and ends at the 2018 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.

Ronald M. Hersch , who has been a director since July 2000, will not stand for reelection. Mr.  Hersch ’s retirement from the Board will be effective as of the date of the Annual Meeting. Following the Annual Meeting, and assuming the election of each director nominee, our Board will consist of 10 directors, 9 of whom are not our employees.

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 2018 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 each director. 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

Richard G. Ketchum

John Steinhardt

James J. Sullivan

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 good cause 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;

 

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

 

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

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

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effectively. He or she also needs to exhibit qualities of in dependence 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, therefor e, 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 2018 Annual Meeting of Stockholders.

 

Richard M. McVey

Director since April 2000

Richard M. McVey (57) 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 J.P. Morgan, 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 J.P. Morgan’s North America Futures and Options Business, including institutional brokerage, research, operations, finance and compliance. Mr. McVey serves on the Board of Directors of Miami (Ohio) University Foundation. 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, and now serves on the board of directors for the Miami University Foundation and the Colby College Board of Trustees. 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 17 years 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 J.P. Morgan, has provided the Company with comprehensive knowledge of the financial markets that we serve and the institutions and dealers that are our clients.

 

Steven L. Begleiter

Director since April 2012

Steven L. Begleiter (55) has been employed with Flexpoint Ford, LLC, a private equity group focused on investments in financial services and healthcare, since October 2008, where he currently serves as Managing Director. 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., Great Ajax Corp. and on the board of directors of certain portfolio companies of Flexpoint Ford, LLC. Mr. Begleiter received a B.A. with Honors 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.

 

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Stephen P. Casper

Director since April 2004

Stephen P. Casper (67) 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 KLS Rates Fund and the KLS Credit Opportunities Fund, all of which are fixed income hedge funds, since July 2012. Mr. Casper is Vice-Chairman of the Board of Directors of GMO LLC, a global investment management firm providing clients with asset management solutions and services, since May 2014. 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 (54) has been Co-CEO of Trewtec, Inc., a technology advisory firm designed to help board members and CEOs evaluate the technology function in their companies, since September 2014. Prior to this role, she was a Partner and Co-Chief Operating Officer of the Technology Division of Goldman Sachs Group, Inc. 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. During her 30 year career at Goldman Sachs, Ms. Chwick held a number of senior positions, including Global Head of Technology of 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 is a member of the Board of Directors of Voya Financial, Inc. and 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 (58) was most recently Vice Chairman of Investment Banking at JPMorgan Chase & 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 J.P. 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 People’s United Financial, Inc. and 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.

 

8


 

David G. Gomach

Director since February 2005

David G. Gomach (58) 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.

 

 

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 (55) is Head of Global Banking at JPMorgan Chase & Co., 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 J.P. Morgan’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 J.P. Morgan. Before joining the Equities division, Mr. Hernandez was head of Investment Banking, Latin America. Mr. Hernandez has been with J.P. Morgan 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.

 

Richard G. Ketchum

Director since April 2017

Richard G. Ketchum (65) is retired.  Mr. Ketchum was Chief Executive Officer of the Financial Industry Regulatory Authority, Inc. (“FINRA”) from March 2009 to July 2016 and served as Chairman of FINRA’s Board of Governors from March 2009 to August 2016.  Prior to joining FINRA, Mr. Ketchum held a range of senior regulatory positions in the financial industry over twenty years, including as Chief Executive Officer of NYSE Regulation, Inc., President of the NASDAQ OMX Group Inc., a predecessor of Nasdaq, Inc., President and Chief Operating Officer of the National Association of Securities Dealers Inc., a predecessor of FINRA, and Director of the Division of Market Regulation at the SEC.  Mr. Ketchum was also the General Counsel of the Corporate and Investment Bank of Citigroup Inc.  Mr. Ketchum currently serves on the board of directors of Greystone Managed Investments, Inc.  Mr. Ketchum received a B.A. from Tufts University and a J.D. from New York University Law School.

 

 

Mr. Ketchum brings to the Board substantial regulatory experience in the securities industry and deep knowledge of the legal and compliance issues facing companies in the financial services industry.

 

 

 

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John Steinhardt

Director since April 2000

John Steinhardt (63) 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 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 (57) is retired.  Mr. Sullivan was the Executive Chairman of Prudential Fixed Income and Head of the Global Institutional Relationship Group for PGIM, the asset management business of Prudential, from January 2016 to December 2016. Prior to assuming that role, Mr. Sullivan was Senior Managing Director and Head of Fixed Income at Prudential Investment Management, a global investment management firm, a position he held since 1999. Mr. Sullivan joined Prudential in 1981and has extensive experience in managing fixed income bond portfolios for insurance, pension, and mutual fund clients. 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.

 

 

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CORPORATE GOVERNANC E AND BOARD MATTERS

Director independence

The Board of Directors has determined that each of our current directors, 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 directors 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 controlling shareholder 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 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 2014 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. In addition, the Board considered that Mr. Hernandez is the Head of Global Banking at JPMorgan Chase & Co., which accounted for approximately 5% of the Company’s consolidated gross revenue for 2016, and is the administrative agent and sole lender under our credit agreement, provides cash and investment management services to the Company and operates our share repurchase program.

We do not have a director tenure requirement, as we believe our efforts to regularly refresh the Board with new directors, as well as natural turnover, has achieved the appropriate balance between maintaining longer-term directors with deep institutional knowledge and new directors who bring new perspectives and diversity to our Board. Notwithstanding this belief and the fact that our corporate governance guidelines and NASDAQ Global Select Market rules do not deem long-tenured directors to be non-independent, our Board reviews director tenure in connection with its director independence determinations.

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 .

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 as described below under Communicating with our Board members . In making recommendations, stockholders should be mindful of the discussion of minimum

11


 

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 as sist in identifying or evaluating potential nominees.  Mr. Ketchum was recommended to the Nominating and Corporate Governance Committee of the Board of Directors by the Company’s Chief Executive Officer (“ CEO ”).

Board leadership structure

Our 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, Nominating and Corporate Governance Committee, and Risk 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), Begleiter, Cruger and Hersch. The Board of Directors has determined that each member of the Audit Committee is an independent director in accordance with NASDAQ listing standards and that Mr. Gomach and Mr. Cruger are Audit Committee financial experts, 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) 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 Mr. Cruger (Chair), Mr. Casper and Ms. Chwick. 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 Risk Committee assists 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

12


 

retained for the Board’s direct oversight. Items delegated to the Risk Committee by the Board include technology risk, credit risk and regulatory risk. The Risk Committee currently consists of Ms. Chwick (Chair), Mr. Casper and Mr. Sullivan.

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.

Meetings and attendance

The following table sets forth chairs and membership structure of the Board and each standing Board committee, and the number of Board and Board committee meetings held during 2016.

 

(1) The Audit and Risk Committees held five and four meetings, respectively, plus two joint Audit and Risk Committee meetings.

The non-management directors met in executive session without management directors or employees at each of the meetings of the Board during 2016. 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 and nine of ten directors attended our 2016 annual meeting of stockholders (not counting Mr. Ketchum who was not a director at the time of our 2016 annual meeting).

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.

The Board of Directors monitors management’s responsibility for risk oversight through regular reports from management to the Risk and Audit Committees and the full Board. Furthermore, the Risk and Audit Committees report on the matters discussed at the committee level to the full Board. The Risk and Audit Committees and the full Board focus on the material risks facing the Company, including strategic, operational, market, technology, 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 Risk and Audit Committees. The Board believes this division of responsibilities provides an effective and efficient approach for addressing risk management.

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The Company’s Global Management Team assists management’s efforts to assess and manage risk. The Gl obal Management Team is chaired by the CEO and is comprised of the Company’s senior managers with global oversight. The Global Management Team 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 Chief Risk Officer regularly prepares updates and reports for the Global Management Team, Board Risk 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, which includes Mr. DeLise, our Chief Financial Officer. 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 — Overview 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, Risk 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 and the Lead Independent Director, 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.

Director compensation

The Compensation Committee of the Board of Directors 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.

Grahall reviews and recommends compensation structure and adjustments based on the board compensation of the following:

 

Proxy peer group (updated in 2015)

 

Fluctuations in board compensation of the proxy peer group

 

ISS peer group (updated by ISS annually)

 

Industry data sources, including the National Association of Corporate 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.

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In 2016, we made the following changes to our Director compensation program:

 

increased the annual cash retainer payable to each non-employee director from $70,000 to $75,000;

 

raised the annual equity retainer value from $95,000 to $100,000; and

 

increased the Chair retainer for the Risk Committee from $10,000 to $15,000.

We believe that these increases are appropriate given the market data and result in a cash/equity mix that is consistent with market practice and desirable to ensure the alignment of the long-term financial interests of our non-employee directors with those of our stockholders.

A summary of the structure of our Director pay program is as follows:

 

 

 

 

 

 

 

 

 

Pay Structure: Director Compensation

 

 

 

Cash ($)

 

 

Restricted Stock ($)

 

Annual Retainer

 

 

75,000

 

 

 

100,000

 

Audit Chair

 

 

20,000

 

 

 

 

Compensation Committee Chair

 

 

15,000

 

 

 

 

Risk Committee Chair

 

 

15,000

 

 

 

 

Other Chair

 

 

10,000

 

 

 

 

Meeting Fees - Board

 

 

1,000

 

 

 

 

Meeting Fees - Committee

 

 

1,000

 

 

 

 

Lead Independent Director (1)

 

 

20,000

 

 

 

20,000

 

 

(1) The Lead Independent Director has the choice to receive the $40,000 retainer as 100% cash or 50% cash and 50% equity.  For 2016, the Lead Independent Director chose the cash / equity alternative.

In August 2016, we granted 636 shares of restricted stock to each non-employee director. The vesting schedule is tied to the term of the non-employee director:  one-half of the award vested on November 30, 2016 and the balance is scheduled to vest on May 31, 2017. The number of shares of restricted stock granted was determined on the grant date by dividing the equity grant value of $100,000 by $157.16, the average of 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. All equity awards to non-employee directors are made under the Company’s 2012 Incentive Plan.


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Below is a summary of the amount and form of actual compensation received by each non-employee director in 2016:

 

Director Compensation for Fiscal 2016

 

Name

 

Fees Earned

or Paid in

Cash ($)

 

 

Stock Awards

($)(1)(2)

 

 

All Other

Compensation

($)(3)

 

 

Total

($)

 

Stephen P. Casper, Lead Independent Director

 

 

105,250

 

 

 

123,408

 

 

 

714

 

 

 

229,372

 

Steven L. Begleiter

 

 

80,250

 

 

 

102,867

 

 

 

612

 

 

 

183,729

 

Jane Chwick

 

 

98,500

 

 

 

102,867

 

 

 

165

 

 

 

201,532

 

William F. Cruger

 

 

88,750

 

 

 

102,867

 

 

 

165

 

 

 

191,782

 

David G. Gomach

 

 

103,250

 

 

 

102,867

 

 

 

612

 

 

 

206,729

 

Carlos M. Hernandez

 

 

79,250

 

 

 

102,867

 

 

 

612

 

 

 

182,729

 

Ronald M. Hersch

 

 

93,750

 

 

 

102,867

 

 

 

612

 

 

 

197,229

 

John Steinhardt

 

 

106,250

 

 

 

102,867

 

 

 

612

 

 

 

209,729

 

James J. Sullivan

 

 

85,250

 

 

 

102,867

 

 

 

612

 

 

 

188,729

 

 

(1) The amounts represent the aggregate grant date fair value of stock awards granted by the Company in 2016, computed in accordance with FASB ASC Topic 718. For further information on how we account for stock-based compensation, see Note 9 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on February 21, 2017.

(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 2016 for each non-employee director.   All options are vested.

 

Equity Awards Outstanding

 

 

 

Aggregate Number

of Stock Awards

Outstanding at

Fiscal Year End

(#)

 

 

Aggregate Number

of Option Awards

Outstanding at

Fiscal Year End

(#)

 

Stephen P. Casper, Lead Independent Director

 

 

430

 

 

 

9,912

 

Steven L. Begleiter

 

 

318

 

 

 

 

Jane Chwick

 

 

318

 

 

 

 

William F. Cruger

 

 

318

 

 

 

 

David G. Gomach

 

 

318

 

 

 

9,912

 

Carlos M. Hernandez

 

 

318

 

 

 

3,187

 

Ronald M. Hersch

 

 

318

 

 

 

7,412

 

John Steinhardt

 

 

318

 

 

 

9,912

 

James J. Sullivan

 

 

318

 

 

 

 

 

(3) Represents dividends paid during fiscal year 2016 upon the vesting of restricted stock.  Ms. Chwick and Mr. Cruger elected to defer receipt of the equity award to which dividends relate; therefore, related dividends of $447.12 each were not paid.

Share Ownership & Holding Guidelines

 

To better align the interests of non-employee directors and stockholders, the Board of Directors has adopted stock ownership guidelines for our non-employee directors.  In April 2016, the Board increased the holding requirement to require that non-employee directors hold not less than 1,813 shares, which represents the number of shares of Common Stock equal in value to three times the annual base cash retainer payable to a director, or $225,000, calculated using a price of $124.08 per share, which was the average of the closing price of our Common Stock for the ten trading days up to and including the date the general ownership guidelines were last updated. The guideline must be achieved within five years after the director has become a Board member and 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 and unearned performance shares are excluded.

In addition to the ownership guidelines, all 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 must hold no less than 50% of the total number of shares granted for service until they retire 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.

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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 expec ted to achieve compliance:

 

Directors' Stock Ownership

 

 

 

 

Multiple of Cash Retainer

Name

 

Appointed

 

Requirement

 

Current Holdings

Stephen P. Casper, Lead Independent Director

 

April 2004

 

3x

 

82x

Steven L. Begleiter

 

April 2012

 

3x

 

12x

Jane Chwick

 

October 2013

 

3x

 

7x

William F. Cruger

 

November 2013

 

3x

 

7x

David G. Gomach

 

February 2005

 

3x

 

42x

Carlos M. Hernandez

 

February 2006

 

3x

 

32x

Ronald M. Hersch

 

July 2000

 

3x

 

58x

Richard Ketchum

 

April 2017

 

3x

 

0x

John Steinhardt

 

April 2000

 

3x

 

38x

James J. Sullivan

 

March 2012

 

3x

 

12x

 

Our equity plan provides for the accrual of dividends (or dividend equivalents) on unvested shares.   However, dividends are not paid and are subject to forfeiture until all restrictions on the shares have lapsed.

We do not provide any retirement benefits or other perquisites to our non-employee directors.

 

17


 

PROPOSAL 2 — RATIFICATION OF SELECTION OF I NDEPENDENT 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, 2017, 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, 2017. 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, 2017.

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 data agreement is $235,000. On an annual basis, the Audit Committee evaluates the effect of such agreement on the independence of PwC and has concurred with the opinion of the Company’s management and PwC that the arrangement constitutes an “arm’s-length” transaction that would not affect PwC’s independence.

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, 2016 and 2015 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; and (ii) 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.

18


 

Immediately following the completion of each fiscal year, the independent registered public accounting firm also sh all 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 t he 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 cla use (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, 2016 and 2015.

 

Fee Category

 

2016

 

 

2015

 

Audit Fees(1)

 

$

1,666,450

 

 

$

1,312,790

 

All Other Fees(2)

 

 

3,593

 

 

 

74,343

 

Total

 

$

1,670,043

 

 

$

1,387,133

 

 

(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.

(2)

Other Fees are comprised of advisory fees in connection with regulatory matters, the adoption of International Financial Reporting Standards and annual subscription fees for accounting related research.

19


 

REPORT OF THE AUDIT COMMITTE E OF THE BOARD OF DIRECTORS

The Audit Committee currently consists of Mr. Gomach (Chair), Mr. Begleiter, Mr. Cruger and Mr. Hersch. 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 Mr. Gomach and Mr. Cruger satisfy 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 Mr. Gomach and Mr. Cruger are “financial experts” 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 2016, the Audit Committee met five times. The Company’s senior financial management and independent registered public accounting firm were in attendance at such meetings. Following each quarterly meeting during 2016, the Audit Committee conducted a private session with the independent registered public accounting firm, without the presence of management. The Audit Committee also met jointly with the Risk Committee two times during 2016.

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, 2016 which are included in the Company’s 2016 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 AS 1301 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.

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, 2016, 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, 2017.

20


 

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 accoun ting 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 state ments.

 

Submitted by the Audit Committee of the

Board of Directors:

 

David G. Gomach — Chair

Steven L. Begleiter

William F. Cruger

Ronald M. Hersch

 

21


 

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 (the “ Dodd-Frank Act ”)), 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 2017 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.

 

22


 

PROPOSAL 4 — ADVISORY VOTE ON FREQUENCY OF SAY-ON-PAY VOTE

 

In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 (which was added by the Dodd-Frank Act), the Company is seeking the input of its stockholders on the frequency with which it will hold a non-binding, advisory vote on the compensation of its named executive officers (commonly known as a “frequency of say-on-pay” proposal). In voting on this Proposal 4, stockholders are provided with four choices. Stockholders may indicate their preference as to whether the advisory vote on the compensation of the Company’s named executive officers should occur (i) once every year, (ii) once every two years, or (iii) once every three years; or the stockholders may abstain from voting on this Proposal 4.

 

After careful consideration, it is the opinion of the Board of Directors that the frequency of the stockholder vote on the compensation of the Company’s named executive officers should be once per year. The Board of Directors recommends an annual advisory vote because an annual vote will allow stockholders to provide direct input on the Company’s compensation policies and practices, and the resulting compensation for the named executive officers, every year. Stockholders would have the opportunity to consider the Company’s most recent compensation decisions in the context of its pay for performance philosophy and focus on increasing long-term stockholder value, and to provide feedback to the Company in a timely way.

 

While the Board recommends an annual vote, stockholders are not voting to approve or disapprove of the Board’s recommendation. Rather, stockholders are being provided with the opportunity to cast an advisory vote, via the enclosed proxy card, on whether the stockholder advisory vote on named executive officer compensation should occur (i) once every year, (ii) once every two years, or (iii) once every three years, or to abstain from voting on the matter.

 

As an advisory vote, this proposal is not binding on the Company. Notwithstanding the advisory nature of this vote, the Board of Directors values the opinions expressed by stockholders in their vote on this proposal, and will consider the outcome of the vote when making a determination as to the frequency of future advisory votes on executive compensation. The alternative (every year, every two years or every three years) receiving the majority of the shares present in person or represented by proxy will be the frequency that stockholders approve. If no alternative receives a majority vote, then the majority that receives the greatest number of votes will be the frequency that stockholders approve.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR A FREQUENCY OF SAY-ON-PAY VOTE OF ONCE PER YEAR.

 

    

23


 

SECURITY OWNERSHIP OF CERTAIN B ENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of April 11, 2017 by (i) each person or group of 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 11, 2017 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 37,088,070 shares of Common Stock outstanding at the close of business on April 11, 2017. 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)

 

 

2,849,720

 

 

 

7.68

%

The Vanguard Group (2)

 

 

2,720,830

 

 

 

7.34

%

Ballie Gifford & Co (3)

 

 

2,657,408

 

 

 

7.17

%

Named Executive Officers and Directors

 

 

 

 

 

 

 

 

Richard M. McVey (4)

 

 

1,231,883

 

 

 

3.28

%

Steven Begleiter (5)

 

 

7,213

 

 

*

 

Stephen P. Casper (6)

 

 

57,780

 

 

*

 

Jane Chwick (7)

 

 

3,227

 

 

*

 

William F. Cruger (8)

 

 

3,214

 

 

*

 

David G. Gomach (9)

 

 

32,889

 

 

*

 

Carlos M. Hernandez (10)

 

 

22,550

 

 

*

 

Ronald M. Hersch (11)

 

 

34,981

 

 

*

 

Richard Ketchum

 

 

 

 

*

 

John Steinhardt (12)

 

 

30,508

 

 

*

 

James Sullivan (13)

 

 

7,392

 

 

*

 

Antonio L. DeLise (14)

 

 

22,407

 

 

*

 

Nicholas Themelis (15)

 

 

57,774

 

 

*

 

All Executive Officers and Directors as a Group (14 persons)(16)

 

 

1,511,818

 

 

 

4.02

%

 

*

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 55 East 52nd Street, New York, NY 10022.

(2)

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.

(3)

Information regarding the number of shares beneficially owned by Ballie Gifford & Co was obtained from a Schedule 13G filed by Ballie Gifford & Co with the SEC. The principal business address of Ballie Gifford & Co is Calton Square, 1 Greenside Row, Edinburgh EH1 3AN. Scotland, UK.

(4)

Consists of (i) 570,919 shares of Common Stock owned individually; (ii) 144,475 shares of unvested restricted stock; and (iii) 516,489 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) 162,978 shares of Common Stock issuable pursuant to stock options that are not exercisable within 60 days or (ii) 347,450 restricted stock units that are unvested and deferred restricted stock units or (iii) 8,296 performance shares.

(5)

Consists of (i) 6,895 shares of Common Stock owned individually; and (ii) 318 shares of unvested restricted stock.

(6)

Consists of (i) 47,486 shares of Common Stock owned individually; (ii) 382 shares of unvested restricted stock; and (iii) 9,912 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days.

(7)

Consists of (i) 2,909 shares of Common Stock owned individually; and (ii) 318 shares of unvested restricted stock. Does not include 972 deferred restricted stock units.

(8)

Consists of (i) 2,896 shares of Common Stock owned individually; and (ii) 318 shares of unvested restricted stock. Does not include 972 deferred restricted stock units.

24


 

(9)

Consists of (i) 25,159 shares of Common Stock owned individually; (ii) 318 shares of unvested restricted stock; and (iii) 7,412 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days. All shares of Common Stock, other than unvested restricted stock, are held indirectly in a trust for which Mr. Gomach is trustee.

(10)

Consists of (i) 19,045 shares of Common Stock owned individually; (ii) 318 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.

(11)

Consists of (i) 34,663 shares of Common Stock owned individually; and (ii) 318 shares of unvested restricted stock.

(12)

Consists of (i) 22,778 shares of Common Stock owned individually; (ii) 318 shares of unvested restricted stock; and (iii) 7,412 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days.

(13 )

Consists of (i) 7,074 shares of Common Stock owned individually; and (ii) 318 shares of unvested restricted stock.

(14)

Consists of (i) 21,193 shares of Common Stock; and (ii) 1,214 shares of unvested restricted stock. Does not include (i) 18,941 shares of Common Stock issuable pursuant to stock options that are not exercisable within 60 days or (ii) 28,169 restricted stock units that are unvested and deferred restricted stock units or (ii) 7,704 performance shares.

(15)

Consists of (i) 43,395 shares of Common Stock owned in joint tenancy with his spouse; (ii) 4,783 shares of unvested restricted stock; and (iii) 9,596 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days. Does not include (i) 30,695 shares of Common Stock issuable pursuant to stock options that are not exercisable within 60 days or (ii) 13,989 restricted stock units that are unvested or (iii) 12,851 performance shares.

(16)

Consists of (i) 804,412 shares of Common Stock; (ii) 153,398 shares of unvested restricted stock; and (iii) 554,008 shares of Common Stock issuable pursuant to stock options that are or become exercisable within 60 days. Does not include (i) 212,614 shares of Common Stock issuable pursuant to stock options that are not exercisable within 60 days; (ii) 391,552 restricted stock units that are unvested and deferred restricted stock units or (iii) 28,851 performance shares that are unvested.

25


 

EXECUTIVE OFFICERS

Set forth below is information concerning our executive officers as of April 11, 2017.

 

Name

 

Age

 

Position

Richard M. McVey

 

57

 

Chief Executive Officer and Chairman of the Board of Directors

Antonio L. DeLise

 

55

 

Chief Financial Officer

Christophe Roupie

 

51

 

Head of Europe and Asia

Nicholas Themelis

 

53

 

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.

Christophe Roupie has been Head of Europe and Asia since March 2017.  Prior to joining us, from October 2015 until October 2016, Mr. Roupie ran a family office as CEO of HiRock AG.  From May 2005 to October 2015, Mr. Roupie was Global Head of Trading and Securities Financing at AXA Investment Managers. While at AXA Investment Managers, he managed trading teams in Paris, London, Hong Kong and Greenwich, Connecticut across equities, fixed income, FX, derivatives, repo and stock lending.  Prior to this, Mr. Roupie was the Global Head of Fixed Income Trading at IXIS AM (now Natixis Asset Management) from October 2000 to March 2005.

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.

 

26


 

COMPENSATION DISCU SSION 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 2016 to our named executive officers. Our named executive officers for fiscal year 2016 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

Financial Performance

A significant portion of each NEO’s compensation is dependent on our financial performance.  The following chart provides a summary of our key financial performance metrics used to determine compensation.  Each of the financial metrics below reflects record results for 2016:

 

Key Financial Metrics

 

 

 

2016

 

 

2015

 

 

Change

 

Revenues (in millions)

 

$

369.9

 

 

$

303.1

 

 

 

22.0%

 

Operating Income (in millions)

 

$

191.6

 

 

$

147.9

 

 

 

29.5%

 

Diluted EPS

 

$

3.34

 

 

$

2.55

 

 

 

31.0%

 

Year-End Stock Price

 

$

146.92

 

 

$

111.59

 

 

 

31.7%

 

Trading Volume (in billions)

 

$

1,300.0

 

 

$

978.5

 

 

 

32.9%

 

Estimated Adjusted U.S. High Grade Market Share (1)

 

 

16.0

%

 

 

14.6

%

 

 

9.6%

 

 

(1)

We adjusted the reported U.S. high-grade TRACE volumes to eliminate the increased reporting of affiliate back-to-back trades by certain broker-dealers that occurred from April 2014 through October 2015 because we believe that the TRACE volumes, as adjusted by us, provide a more accurate comparison to prior period reporting.  We have provided a reconciliation in the “Investor Relations” section of our website.

Relative Performance

For 2016, we evaluated our year-over-year financial growth as compared to our Peer Group (as defined below under How We Determine Pay Levels – Peer Group), comprised of 20 companies.  Our performance rankings for the key financial metrics were as follows:

 

Full Year Growth 2016 vs. 2015

 

 

Revenue

 

Operating Income

 

EPS

 

Share Price

MarketAxess

 

22.0%

 

29.5%

 

30.9%

 

32.7%

Median

 

5.4%

 

17.7%

 

17.2%

 

11.5%

MarketAxess Rank

 

5

 

7

 

6

 

3

Our share price growth as compared to the following indices for the one-, three-, and five-year periods ended December 31, 2016 was as follows:

 

Share Price Growth

 

 

 

MKTX

 

 

Russell 2000

 

 

NASDAQ Comp.

 

 

S&P 500

 

 

S&P MidCap 400

 

 

Dow Jones US Small-Cap

 

 

S&P 500 Financial Sector

 

 

 

Stock

 

 

Stock

 

 

 

 

 

 

Stock

 

 

 

 

 

 

Stock

 

 

 

 

 

 

Stock

 

 

 

 

 

 

Stock

 

 

 

 

 

 

Stock

 

 

 

 

 

 

 

Return

 

 

Return

 

 

Alpha

 

 

Return

 

 

Alpha

 

 

Return

 

 

Alpha

 

 

Return

 

 

Alpha

 

 

Return

 

 

Alpha

 

 

Return

 

 

Alpha

 

1-year

 

 

32.7

%

 

 

19.5

%

 

 

13.2

%

 

 

7.5

%

 

 

25.2

%

 

 

9.5

%

 

 

23.2

%

 

 

18.7

%

 

 

14.0

%

 

 

12.6

%

 

 

14.8

%

 

 

20.1

%

 

 

12.6

%

3-year

 

 

125.7

%

 

 

16.6

%

 

 

109.0

%

 

 

28.9

%

 

 

96.8

%

 

 

21.1

%

 

 

104.5

%

 

 

23.7

%

 

 

102.0

%

 

 

94.5

%

 

 

109.0

%

 

 

31.2

%

 

 

94.5

%

5-year

 

 

414.0

%

 

 

83.2

%

 

 

330.9

%

 

 

106.6

%

 

 

307.4

%

 

 

78.0

%

 

 

336.0

%

 

 

88.9

%

 

 

325.1

%

 

 

293.4

%

 

 

326.6

%

 

 

120.6

%

 

 

293.4

%

In 2016, we continued to deliver long-term value for our stockholders as evidenced by ranking 40 th in five-year total shareholder return ( “TSR”) (approximately 98 th percentile) and 14 th in ten-year TSR (approximately 99 th percentile) of all 2,047 U.S. public

27


 

companies with over $1 billion in market capitalization (up from 50 th and 40 th , respectively, of 2,173 applicable companies in 2015, as reported by FactSet).

How 2016 Performance Affected Executive Compensation

The chart below shows the change in total cash and Total Direct Compensation (“ TDC ”) (which includes cash payments, annual equity awards and the annualized value of multi-year equity awards), by NEO (see Annual Variable Performance Awards in Cash and Total Direct Compensation below).   Aggregate total cash payments to the NEOs increased by 2% in 2016 from 2015 levels while TDC increased by 3%.

As discussed below, we exceeded our internal target operating income goal in 2016.  Accordingly, performance shares granted in 2016 settled at 139.2% of the targeted award amounts (see Long-Term Incentives – Equity-based Awards below).

 

 

 

Base Salary

 

 

Total Cash Compensation

 

 

Total Direct Compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

 

 

2015

 

 

Change

 

 

2016

 

 

2015

 

 

Change

 

 

2016

 

 

2015

 

 

Change

 

in ‘000’s

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

McVey, CEO

 

$

500

 

 

$

500

 

 

 

0%

 

 

$

2,600

 

 

$

2,600

 

 

 

0%

 

 

$

7,400

 

 

$

7,400

 

 

 

0%

 

DeLise, CFO

 

$

300

 

 

$

300

 

 

 

0%

 

 

$

1,200

 

 

$

1,140

 

 

 

5%

 

 

$

1,900

 

 

$

1,750

 

 

 

9%

 

Themelis, CIO

 

$

300

 

 

$

300

 

 

 

0%

 

 

$

1,700

 

 

$

1,650

 

 

 

3%

 

 

$

2,800

 

 

$

2,650

 

 

 

6%

 

Aggregate

 

 

 

 

 

 

 

 

 

 

 

 

 

$

5,500

 

 

$

5,390

 

 

 

2%

 

 

$

12,100

 

 

$

11,800

 

 

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The figures in the preceding chart differ from those shown in the Summary Compensation Table in Executive Compensation , as that table reflects the full grant date value of any multi-year Performance Equity award received by the NEOs in the year actually granted, as required by the SEC.

Changes/Key Actions in 2016

In 2016, the following changes and key decisions were implemented with respect to our executive management and rewards structure to ensure that our executive compensation programs continue to balance the reward and retention of our NEOs with the short- and long-term interests of our stockholders:

 

Annual Incentive Design – We increased our operating margins in 2016, in part, by reducing the percentage of annual operating income allocated to the annual cash incentive performance awards payable to our employees (the “Bonus Accrual”);

 

Multi-Year Awards for the CFO and CIO – In January 2016, the CFO and CIO were awarded multi-year equity awards with an aggregate grant date value of $1.8 million and $3 million, respectively (the “ NEO Multi-Year Awards ”). The value of the NEO Multi-Year Awards was offset against the NEO’s respective compensation in equal installments beginning with their compensation for year-end 2015 and the four following years. The NEO Multi-Year Awards will be fully vested five years after grant (see Use of Multi-Year Equity below).

 

Enhanced Severance for the CFO and CIO – Our Severance Pay Plan was amended to provide certain executives, excluding the CEO, with increased severance benefits in the event of a qualifying termination.  These benefits include 52 weeks of continued base salary payments and healthcare, and a severance payment equal to one times the average of the annual full-year cash bonuses received by each participant for the prior three years.  To receive the increased benefits, the participants agreed to provide us with not less than three months’ prior written notice in the event of a voluntary termination.

Action in 2017

In 2017, prior to the filing of this Proxy Statement, we expanded our executive officers.  Christophe Roupie, Head of Europe and Asia, joined the Company in March 2017 and was determined to be an executive officer upon commencement of his employment.   Kevin McPherson, Global Head of Sales, was determined to be an executive officer on April 19, 2017.   We anticipate Messrs. Roupie and McPherson will be Named Executive Officers in our 2018 Proxy Statement.

Advisory Vote on Executive Compensation

28


 

At our 2016 Annual Meeting of Stockholders, 97.7% of the votes present and entitled to vote on the non -binding advisory vote on executive compensation proposal were in favor of our 2015 NEO compensation as disclosed in the proxy statement for the 2016 Annual Meeting of Stockholders. In evaluating 2016 compensation for our NEOs, the Compensation Committee r eviewed these final vote results and took into consideration the strong support of our stockholders for our compensation policies. Although it determined that no significant changes to our executive compensation policies were necessary, the Compensation Co mmittee continues to review our NEO compensation program and the compensation goals set forth in the CD&A on an annual basis.

 

Who Determines 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. The Compensation Committee’s function is fully described in its charter, which is available on our corporate website at www.marketaxess.com under the Investor Relations – Corporate Governance caption.  

In performing its duties, the Compensation Committee:

 

annually reviews competitive compensation data, recent compensation trends and any other relevant market data obtained by its compensation consultant and considers the impact on our compensation architecture, policies and strategies;

 

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

 

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

 

considers the recommendations of Mr. McVey relating to performance of our NEOs (other than himself) and the recommendations of its compensation consultant relating to market data and compensation trends when considering decisions concerning the structure and amount of compensation of our NEOs.

All compensation decisions related to cash incentives or equity grants for our NEOs are determined by the Compensation Committee in conjunction with the CEO, except for his own awards, and are reviewed by the Board.  Unless otherwise noted, it is implicit that the Compensation Committee determined and/or reviewed any decisions or practices described in this CD&A.

Use of Outside Advisors

In making its determinations with respect to compensation of our NEOs, the Compensation Committee currently retains the services of Grahall as its independent compensation consultant.  In this capacity, Grahall reports directly to the Compensation Committee. During 2016, 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 2016 compensation for our NEOs;

 

Proxy Disclosure — Assisted in the preparation of the Company’s CD&A for performance year 2015;

 

Share Ownership Guidelines — Assisted management and the Compensation Committee in the oversight of our on-going share ownership guidelines;

 

Multi-Year Awards for NEOs — Provided assistance to the Compensation Committee and CEO regarding the structure and amount of the Multi-Year Awards for the CIO and CFO; and

 

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

In 2016, Grahall also provided services 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.

Compensation Objectives and Strategy

29


 

Our NEO pay philosophy is tied to our belief that compensation should be performance-based, directly correlate with business results (including financial results), and attract, reward and retain the caliber of executives we need to ensure our continued growth and profitability.  Additionally, alignment with stockholder returns is paramount and drives the basis for decision making for all elements of compensation.

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. This encourages high-potential individuals with significant and unique market experience to build a career at the Company.

Both our unique internal operating characteristics as well as external competition for talent directly impact the way we attract, reward and retain key management talent:

 

We are unique in the financial technology market as no other publicly traded company focuses on multi-dealer electronic trading of fixed income products. Therefore, our NEOs must be innovative as they help set the Company’s direction and determine the role it plays in the financial markets.

 

We are a relatively flat organization; therefore, our NEOs must have the ability to balance strategic decision making with tactical execution, and they must be able to effectively communicate with, and lead, broad teams of employees across all levels of the organization.

 

We are a hybrid financial technology company whose NEOs must combine an expertise of the fixed-income securities market with the knowledge and ability to conceptualize, create, implement and deliver technology-driven market solutions. Competitors for talent include newer start-up initiatives trying to compete in our markets; traditional financial services firms, especially those investing in technology solutions; and software development firms.

In implementing the Company’s compensation programs and arriving at individual pay decisions, we consider that other organizations may provide their executives with compensation elements similar to ours, but within compensation structures that may be different than ours. These structures may provide their executives with less variability in year-over-year compensation and earnings opportunities that exceed what we can afford or desire to pay.

To assess the financial impact of our compensation programs, we focus on managing our aggregate compensation and benefits expense expressed as a percentage of our total annual revenues (“ C&B Ratio ”). We believe that monitoring this measure improves our overall profitability.  The NEOs’ annual incentive payments are a component of aggregate compensation expense; therefore, we may reduce the NEOs’ incentives to reduce the C&B Ratio to meet our internal annual target.  Additionally, the C&B Ratio provides a normalized efficiency measure by which we can compare our compensation structure to those maintained by our peers and other financial and technology industry companies.  Since 2012, our C&B Ratio has been below 30%, which we believe is an appropriate target given our current revenues, employee base and strategic plans.

We believe that continuity of the leadership team benefits the Company and our stockholders. 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 that supports 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 Common 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 that is also aligned with the interests of our stockholders.


30


 

Elements of Pay Table

Our executive compensation programs are comprised of the following principle elements, each of which is described in Details of the Company’s Compensation Structure below:

 

Elements of Pay

 

Component

 

Description

 

Purpose

 

 

 

 

 

 

 

Base Salary

 

Fixed pay based on role and responsibilities, experience and expertise, and individual performance

 

Provides a consistent minimum level of compensation that is paid throughout the year at a cost-effective level for the Company

 

Annual Cash Bonus

 

Rewards attainment of annual corporate financial goals and individual performance

 

Rewards short-term performance in a framework that discourages excessive risk taking by limiting maximum award opportunities

 

Annual Equity Awards

 

Reward attainment of annual corporate financial goals and individual performance; vest over three years

 

Designed to tie compensation to stockholder value creation

 

Multi-Year Equity Awards

 

Reward performance via awards that vest over four or more years, often with back-ended vesting

 

Serve as retention tools while aligning compensation to long-term stockholder value creation

 

Other Benefits

 

Include healthcare, life insurance, disability and retirement savings plans

 

Provide assistance with healthcare related costs and income protection in the event of disability as well as a base level of replacement pay upon retirement

 

The combination of these elements enables us to offer competitive, cost effective compensation programs that balance variable, or at-risk, compensation with prudent risk taking and shareholder interests.

Pay Mix

We believe that lower base salaries and higher levels of variable performance awards motivate our NEOs, facilitate the achievement of our growth objectives and promote decision-making that is aligned with our stockholders’ interests. A lower base of fixed costs (including base salary) also allows us to better manage expenses, which helps improve profitability. We also believe that the balance among pay components in our compensation program design mitigates against a focus on short-term results and decreases the potential for excessive or inappropriate risk taking (see Compensation Risk Assessment below). An overview of the elements of pay provided to each NEO for fiscal year 2016 is as follows:

 

 

 


31


 

 

Elements of Pay

McVey, CEO

    DeLise, CFO

Themelis, CIO

 

 

In 2016, all NEOs received over a third of their annual TDC 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 (64%) in the form of equity compensation. Given Mr. McVey’s level of ownership of the Company’s Common Stock, other pay components and our strategic initiatives, we believe that Mr. McVey’s significant percentage of TDC in the form of equity is both appropriate and desirable to further the alignment between him and the Company’s shareholders.

Compensation Policies and Practices

We maintain a high standard of compensation policies and practices as illustrated below:

 

32


 

Compensation Policies and Practices

What We Do

What We Avoid

 

 

Emphasis on performance-based compensation

X   No guaranteed bonuses

Use of clawbacks

X   No pension / SERP plans

Stock ownership guidelines

X   No single-trigger Change in Control benefits

Appropriate risk management

X   No §280G excise tax “Gross-Up” Benefits

Automatic reduction of severance payments subject to §280G excise tax

X   No corporate aircraft or other excessive perquisites

 

X   No dividends on performance shares until earned

 

X   No "repricing" underwater options without Shareholder approval

 

X   No hedging of MarketAxess stock

How We Determine Pay Levels

Peer Group

The Company uses peer group information to help set competitive market levels and structure for our NEOs. Because our closest competitors include private firms with unpublished compensation data, we rely on a broader base of financial services and technology companies to facilitate our review.

While public peers may differ from us in terms of size (whether measured by market capitalization or annual revenues) and core business (in that none focus on providing the multi-dealer electronic trading platform for credit products that we provide), these companies 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.

Grahall performs an ongoing review of the composition of our peer group. Factors considered in determining the peer group include:

 

 

financial size – market cap and revenues, generally based on a methodology similar to the method used by Institutional Shareholder Services of +/- 2.5 times the Company’s most recent annual revenues and +/- 5 times the Company’s most recent market capitalization;

 

whether companies compete with us for customers, executives or other employee talent;

 

asset class or product offering;

 

peers of peers; and

 

reviewing the broader market for additional firms in financial services, IT services and software industries, based on relative revenue, market capitalization and operating income similarity.

All these factors are considered in determining which firms are most suitable for being peers ( “Peer Group” ).  

Due to the desire to broaden the number of peers and increase the focus on our international expansion efforts, the Company has included companies not listed on U.S. exchanges, but whose business models are more similar to the Company’s than some other U.S.-based alternatives.


33


 

For the 2016 compensation period, our Peer Group was comprised of the following firms:

 

Peer Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peers

 

Symbol

 

Client Base

 

Products

 

Revenue

($ in millions)

 

 

Operating Income

($ in millions)

 

 

Market Cap

($ in millions)(1)

 

 

Alliance Bernstein Holding L.P.

 

AB

 

Institutional and Retail

 

Various

 

 

239

 

 

 

239

 

 

 

2,168

 

 

BGC Partners, Inc.

 

BGCP

 

Institutional

 

Various

 

 

2,613

 

 

 

137

 

 

 

2,684

 

 

CBOE Holdings, Inc.

 

CBOE

 

Institutional

 

Listed options and futures

 

 

657

 

 

 

298

 

 

 

6,538

 

 

Cohen & Steers

 

CNS

 

Institutional

 

Various

 

 

350

 

 

 

136

 

 

 

1,781

 

 

Fidessa Group PLC (2)(5)

 

FDSA-LON

 

Institutional

 

Technology Provider

 

 

410

 

 

 

60

 

 

 

1,259

 

 

Financial Engines

 

FNGN

 

Retail

 

Various

 

 

424

 

 

 

50

 

 

 

2,501

 

 

Gain Capital Holdings

 

GCAP

 

Institutional and Retail

 

FX, Metals, CFD

 

 

412

 

 

 

58

 

 

 

395

 

 

Greenhill & Co

 

GHL

 

Institutional, Corporate, Government

 

Various

 

 

336

 

 

 

91

 

 

 

797

 

 

Hercules Technology Growth Capital, Inc.

 

HTGC

 

Institutional

 

Capital / Funding

 

 

175

 

 

 

92

 

 

 

1,239

 

 

Investment Technology Group, Inc.

 

ITG

 

Institutional

 

Equities

 

 

469

 

 

 

(41)

 

 

 

664

 

 

KCG Holdings, Inc.

 

KCG

 

Institutional and Corporate

 

Various

 

 

1,454

 

 

 

396

 

 

 

1,149

 

 

Main Street Capital

 

MAIN

 

Middle Market, Small Companies

 

Capital / Funding

 

 

178

 

 

 

116

 

 

 

2,105

 

 

MSCI, Inc.

 

MSCI

 

Various, including Institutional

 

Various

 

 

1,151

 

 

 

488

 

 

 

8,851

 

 

Northstar Asset Management (6)

 

CLNS

 

Institutional

 

Various

 

 

399

 

 

 

58

 

 

 

7,332

 

 

Oaktree Capital Group, LLC

 

OAK

 

Institutional and Retail

 

Various