Good morning and welcome to Tradeweb's Third Quarter 2022 Earnings Conference Call. As a reminder, today's call is being recorded and will be available for playback. To begin, I'll turn the call over to Head of Treasury, FP&A & Investor Relations, Ashley Serrao. Please go ahead.

Thank you and good morning. Joining me today for the call are our Chairman and CEO, Lee Olesky, who will review the highlights for the quarter and provide a brief business update, our CEO Elect and President, Billy Hult, who will dive a little deeper into some growth initiatives and our CFO, Sara Furber, who will review our financial results. We intend to use the website as a means of disclosing material, non-public information and complying with disclosure obligations under SEC regulation FD. I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations, and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements related to, among other things, our guidance are forward-looking statements. Actual results may differ materially from these forward-looking statements. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our earnings release and periodic reports filed with the SEC. In addition, on today's call we will reference certain non-GAAP measures. Information regarding these non- GAAP measures, including reconciliations to GAAP measures are in our posted earnings release and presentation. To recap, this morning we reported GAAP earnings per diluted share of $0.33. Excluding certain non-cash stock-based compensation expense, acquisition-related transaction costs, acquisition- and Refinitiv-related D&A and certain FX items, and assuming an effective tax rate of 22%, we reported Adjusted Net Income per diluted share of $0.45. Please see the earnings release and the Form 10-Q to be filed with the SEC for additional information regarding the presentation of our historical results. Now, let me turn the call over to Lee.

Thanks, Ashley. Good morning everyone, and thank you for joining our third quarter earnings call. As I take part in my last Tradeweb earnings call, I sit back and reflect upon this startup that I co-founded over 25 years ago with $10 million in capital. The core approach was simple. Listen to our clients and build services, products, protocols and functionalities that enhance their trading workflows. Over those 25 years, the talented Tradeweb employees have grown this institutional U.S. Treasury startup into a global, multi-asset class, multi-client and multi-protocol business. One of the crowning achievements was the 2019 IPO, followed by the tremendous growth the team has produced as a public company. In fact, from 2004 through 2021, we have averaged 12.9% annual revenue growth. In the first three quarters of 2022, we generated revenues of $896 million, up 55% from the first three quarters of 2019 or an average growth of 16% per year despite the material FX headwinds we are currently facing in 2022. The lion's share of this growth has been organic as a result of relentless focus on innovation and collaboration that continues to be the North Star of our company, as we help clients trade as efficiently as possible. This strategy sounds simple, yet success requires perseverance. Our team has dedicated the time and focus to link different liquidity pools and markets, to deliver holistic, global, multi-asset class solutions - something we call connecting the dots. This incessant focus on moving markets forward has allowed us to develop a diversified business model that allows the company to drive strong revenue growth even when facing a challenging macro environment in some of our products and client channels. I'm thrilled to pass the baton to my long-time friend and partner, Billy. I am excited to see him,…

Thanks, Lee and congratulations on a terrific run at Tradeweb. As Lee highlighted in his opening, we have methodically grown our asset class, geographic and client footprint over the last 25 years. One thing that has been constant at Tradeweb is our singular focus on collaborating with our clients to drive change in the fixed income markets. Despite all the success we've had to-date, I believe the best is yet to come. In fact, we just completed an offsite where we gathered our senior leaders and discussed our growth outlook for the next few years. The energy and optimism around the durability of our growth was remarkable-we expect credit and swaps to continue to be the backbone of our growth, but will also be expanding our EM and muni footprint in a meaningful way. As you might expect, we are also working on a few more initiatives that we will reveal in due course. I am truly excited about the team that we have assembled and our ability to deepen our competitive advantage across our people, network and technology. On that note, I'd like to officially welcome Tom Pluta, who joined as President-elect at the beginning of the month and I believe he will be a valuable addition as we look to grow Tradeweb's footprint over the coming years. Turning to slide 7 for a closer look at Credit. We quite often talk about the diversity of the business across asset classes, but the diversity within each asset class shines in moments like this. Corporate credit faced a mixed industry volume backdrop given the elevated volatility, continued fee per million pressures across institutional IG due to a reduction in duration and tougher market share conditions across High Yield. However, the elevated volatility and wider spreads continued to boost our CDS…

Thanks Billy and good morning. As I go through the numbers, all comparisons will be to the prior year period, unless otherwise noted. Let me begin with an overview of our volumes on Slide 9. We reported record third quarter average daily volume of nearly $1.1 trillion, up 14% year-over-year, and up 12% when excluding short tenor swaps. Among the 22 product categories that we include in our monthly activity report, 10 of the 22 product areas produced year-over-year volume growth of more than 20%. Areas of strong growth include European government bonds, global swaps, U.S. investment grade credit, munis, credit swaps and global ETFs. Slide 10 provides a summary of our quarterly earnings performance. The third quarter volume growth translated into gross revenues increasing by 13.1% on a constant currency basis, continuing our track record of double-digit revenue growth. FX headwinds of 490 basis points led to reported growth of 8.2%. We derived approximately 36% of our revenue from international customers and recall that approximately 30% of our revenue base is denominated in currencies other than dollars, predominantly in Euros. Our variable revenues increased by 14.8% and our total trading revenue increased by 8.6%. Total fixed revenues related to our four major asset classes were down 5.1% but were flat on a constant currency basis. Rates fixed revenues were down given the migration of certain European government bond clients from fixed to variable contracts at the end of last year and the impact of FX. Money Markets fixed revenue growth was driven by global repos. Other trading revenues were down 2%. As a reminder, this line does fluctuate as it is affected by periodic revenues tied to technology enhancements performed for our retail clients. Market data increased by 3.4% due to growth in Refinitiv and our proprietary data products.…

Thanks, Sara. Following the positive third quarter results, we believe we are on track for another great year at Tradeweb and for our 23rd consecutive year of record revenues. That level of consistent absolute revenue growth speaks to the resilience of our business model, and the team remains laser-focused on the things in our control, maximizing the power of our network to drive further innovation into the marketplace. While the ongoing FX environment act as headwinds to the core growth and earnings power of the business, we believe our competitive position has never been stronger, a testament to the impressive talent and network we have at Tradeweb. With a couple of important month-end trading days left in October which tend to be our strongest revenue days, we are seeing double-digit volume growth across Credit, Equities and Money Markets relative to October 2021. The diversity of our growth remains a theme as we continue to see double-digit average daily volume growth across U.S. high grade credit, munis, CDS, global ETFs, equity derivatives, repos, and retail certificates of deposit. We are seeing record average daily volumes in our muni business. Our IG share is in line with third quarter levels while High Yield share is stronger than September levels.

I would like to conclude my remarks by thanking our clients for their business and partnership in the quarter and I want to thank my colleagues for their efforts that contributed to the record quarterly revenues and volumes at Tradeweb. As I sign off for my last earnings call, I want to also thank all the investors and sell side analysts that I have had the great pleasure to meet over the last few years. With that, I will turn it back to Ashley for your questions.

Thanks Lee. As a reminder, please limit yourself to one question only. Feel free to hop back in the queue and ask additional questions at the end. Q&A will end at 10:30 am Eastern time. Operator, you can now take our first question.

[Operator Instructions] Our first question comes from the line of Richard Repetto from Piper Sandler. Your line is open.

Yeah, good morning, Lee and good morning, Lee, Billy and Sara. First, Lee, I just want to congratulate you. You had a great run. You’ve been resilient and unflappable. I think I’ve used that word to describe you before. But well deserved great run. My question is, what are you going to do now? Now my question is actually for Billy and you as well. But as you go through the transition, what will be your focus, Billy and what things you – are you taken from Lee to – as really the mantra to lead Tradeweb going forward?

It's great question, Rich. Thank you for asking. Lee has obviously been great through this transition. I'm looking forward to working with him as Chairman of the Board. I would probably be a little bit more emotional and flowery in terms of what I was saying if like every analyst in the community plus all of these people weren't dialed in at this exact moment, so I'll leave that sentiment between Lee and I behind the closed doors. The groundwork has already obviously begun, and we're kind of hitting the ground running. We had -- and I referenced this in my prepared remarks, Rich, we had an excellent, excellent management offsite meeting at the end of the summer. When you have real engagement, you feel it and I think the team is, obviously, very charged up for the opportunities that lie ahead for the company. My areas of focus, I think, obviously, you would understand exceptionally well. It's going to be talent development both myself and Lee have always kind of historically talked about like the power and the importance of the people. So we're going to make sure that talent development stays first and foremost as a priority. Installing an executive leadership team, from my perspective, deepening our network with partnerships and acquisitions, these are like major priorities. It is, obviously, from my perspective, a great moment to have Tom Pluta on board. He'll be President of the company as of January 1. Both Lee and I have a long history and relationship with Tom. He's going to be an excellent addition to the management team. It's always sort of awkward saying nice things about people while they are kind of looking across for me. Sara has been like absolutely strong partner and an amazing CFO. So I feel personally really good about kind of where we are at this moment in time. To your great question about like what I'm going to kind of take from Lee, as much as I can. At the end of the day, obviously, we're all kind of different people and different personalities. So I am going to be myself as the next CEO of the company in a way that I think will make Lee proud and the company proud and we're going to move on into this next chapter and succeed and do our best. But I appreciate your question, Rich. I think one thing for us to sort of determine is how I am going to still participate in your infamous kind of President's panel. Maybe Tom and I can kind of arm wrestle and figure out who is going to be the one that participates in that because I know that's like a big kind of historic ratings hit, but we appreciate your question always, Rich. So thank you.

I think you move up a slide, Billy, but anyway, Lee, great run, and congrats. Thank you.

Thanks, Rich. I am just going to say something really quickly, and that is I think the company is in such good hands. I think the investors have a lot to look forward to. This is under Billy's leadership with Tom joining and Sara being here and the rest of the team, it's incredibly well positioned. And aside from the sort of opportunity of a company, the people who are in place are the same people who have been running this business for decades. Tom is new, Sara is relatively new, but I think we are so well positioned and I'm excited to watch them excel and grow the business and grow as leaders. Thanks for the kind remarks.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Kyle Voigt from KBW. Your line is open.

Hi, good morning. Maybe a question for Billy. There has been a sizable buy side market participant in the U.S. treasury market that's been pretty vocal about wanting all-to-all solutions for the market. Can you just talk about the concept of all-to-all in U.S. treasuries? And how you see the market structure potentially changing over time from what is still a relatively bifurcated market structure today?

Yes, sure. Great question, Kyle. How are you? So first thing you just ask like maybe like a quick, it's a good question, just like as a quick kind of point of kind of context to make a sort of strong point and kind of an important one. Obviously, the U.S. treasury market is different than the credit market. It significantly start with, it's significantly more electronic. We have the estimates of the government bond market at around 60% versus kind of credit, which is around 45%. But I would say, more importantly, 80% of the activity in government bonds happens in like seven of the most actively traded issues versus credit, which you know well, Kyle, has, I think, like something like 13,000 kind of CUSIPs, right? So there is a significant difference between those two businesses. That being said, I think you’ve kind of nailed it in your question. First of all, the PIMCO kind of the white paper that they wrote, I think, was like significantly important. PIMCO is a very influential, very important customer. It was a very thoughtful and very well written white paper on some liquidity challenges in the government bond market. And so, we're going to be in a way that you would expect like exceptionally responsive. So I think we have a team literally at PIMCO kind of as we speak. We're going to engage with them directly, get their perspective on things. If we were going to kind of chart out some of our views on the evolution of it all, I think there is absolutely an aspect of all-to-all trading that makes sense in the sort of deeper areas of the off-the-run marketplace. We can also kind of imagine a world, I think pretty easily where more and more of the buy side has access to what we describe as the central limit order book world, which is why it's been very important for us from a strategic perspective to be in that business. So we feel like we are kind of really well set up around this evolution and there is an interesting kind of back-and-forth debate on this and I think, ultimately, at the end of the day, as we move forward around this, it's important to remember that there is not necessarily at all kind of one trading protocol that fits one marketplaces. So we do feel like there is a role potentially for all-to-all trading and government bonds, just like there's obviously always going to be a significant and sizable role around RFQ trading, request for market trading, disclosed stream trading. There are a bunch of very important protocols in the government bond market that will make this a continued vibrant and important marketplace. But this is a topic that fits us like a glove and we're going to play a leadership role around it, I think, in a way that you would expect us to. So thanks very much for the question.

No. Thank you.

One moment for our next question. Our next question comes from the line of Craig Siegenthaler from Bank of America. Your line is open.

Hey, good morning, everyone. And I don't know if you guys heard, but it's Craig Siegenthaler from Bank of America, it cut out on me.

Hi, Craig.

Hey, Craig.

So my question is on portfolio trading. What were the major drivers of the sequential decline in international portfolio trading other than FX? And also, can you just put this in a context of the longer-term growth trajectory of portfolio trading adoption outside of the U.S.?

Yes, I mean, I think we're fully trading is going to fit really well into that European community in credit. They tend to be very focused on I think, two of the most important kind of principles around portfolio trading, which is, from our perspective, information leakage and certainty of execution and the feeling that we have is that it's going to become more and more of a risk transfer trading tool for those European customers. There is going to be kind of ebbs and flows on a month-to-month basis around some of these market share numbers. General feeling, obviously, is that portfolio trading works better and right now has more what we would describe as sort of straightforward acceptance in high grade than sort of the less liquid areas of the credit market, but this is a fundamentally important protocol in the credit markets globally. And we feel like the European community is generally very supportive of what we're building and where we're arriving with our portfolio trading. And thanks very much for the question.

Craig, I'd just add that, obviously, as you alluded to, FX does play a role in terms of that comparison, whether you're looking at the year-over-year period, third-quarter-for-third-quarter, or nine months FX, particularly the Euro is down quite a bit.

Thank you.

And one moment for our next question. Our next question comes from the line of Michael Cyprys from Morgan Stanley. Your line is open.

Great. Thanks. Good morning. Hey, just curious your perspectives on the SEC's recent proposal for the central clearing of treasuries. What sort of potential impacts could we see in the marketplace? What sort of opportunity do you see in this for Tradeweb how you might sort of quantify that? And what sort of actions might you need to take to best capture the opportunity?

Yes, a great question. It's interesting. I mentioned the PIMCO white paper and I do think it resonated really strongly within the community. It's interesting. They are not a proponent really of central clearing. So, I mentioned that because you do really get a sort of like interesting kind of debate back and forth around the benefits. Our general perspective is it's good for our business. In a straightforward way it reduces our capital requirements and we have learned a bunch of lessons around how central clearing was applied to the global swaps market and how that accelerated the electronification of that market from really sort of a little bit of a negotiated back-alley market into this really strong electronified market that exists today. So we are proponents of it. What we would say is, as the first question I got around government bonds was really about the liquidity of the market. We want to be exceptionally thoughtful that by embracing central clearing, we are not affecting the liquidity of the government bond markets where there can be a perspective that certain players who are important in the market today would find an expense level too high to be as active participants in a market going forward. So, we want to be thoughtful about how this winds up getting applied. We are going to be kind of heard on this issue, I think, in a way that you would expect us to be heard. We have a lot of credibility, obviously, as the leading electronic venue in government bonds. So we're going to come out with our own, I think, strong view. But it's going to take into effect a lot of the nuances that I was kind of mentioning before. But general feeling is like it's good for us and we're set up well for it. I think the debate on this will continue for a little while. And thanks for the question.

Thank you.

One moment for our next question. Our next question comes from the line of Andrew Bond from Rosenblatt Securities. Your line is open.

Hey, good morning. Following up on that portfolio trading, September was a record month for portfolio trading at Tradeweb despite some concerns at higher levels of volatility to limit growth and more volume would shift to all-to-all protocols. Do you think portfolio trading continue to grow meaningfully if markets remain highly volatile or is there a limit to some of the growth in this environment?

No, it's going to keep growing, right? It's getting more applied, for sure, into the IG world, into the investment-grade world than high yield, which still has, I think, some of the history and some of the behavior habits around the all-to-all kind of trading style. But I think the one thing that we have, I think, decided in a pretty strong way, is that the all-to-all environment is not necessarily the most conducive environment for real kind of risk transfer trades and so one of the things I think that makes us really strongly positive on the value of portfolio trading is the way that portfolio trading has from our perspective, become a real risk transfer mechanic or mechanism around that and that's important. So we feel like it behaves really well in volatile markets. Right now, it's kind of being applied more to IG than high yield. Some of that is behavior. As you know, the behavior change kind of takes time and I think some of the behavior around high yield still goes into that all-to-all environment, if that makes sense and thanks for the question.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Alexander Blostein from Goldman Sachs. Your line is open.

Hi, good morning, guys. Thanks for taking the question. Hey, Billy, I wanted to spend a couple of minutes maybe on some of the competitive dynamics in credit trading and really just kind of maybe you zoning in on some of the convergence we are seeing between different protocols that you and MarketAxess are starting to zone in on. So on the one hand, you guys have been leading in portfolio trading. MarketAxess is now doing more portfolio trading as you guys are pushing more aggressively into RFQ with some of the innovation you mentioned as well as all-to-all. So, as these two kind of Venn diagrams start to converge, what are your views on pricing? Is it reasonable to think we'll start to see more pricing pressure in the space or really more competitive dynamics on pricing, I guess? And then, just a reminder, how do you guys compare to the incumbent in the space in terms of apples-to-apples kind of comparison on pricing. Whether or not you guys will be able willing to kind of lean into that a little bit more?

It's a great question, Alex and thanks very much. I kind of have made this point before pretty strongly that as we have entered into the credit space and shown our ability to really compete in the credit space at a very high level, we've never kind of led with price. I think that's an important thing. We've led with innovations and creating efficiencies for our clients and we feel at a very – in a very strong way that the market is really supportive and wants kind of this competition in a way that you just described because they benefited from it. And I've always been, I think you know in a very straightforward way, like a complementary of MarketAxess from the perspective of having gotten a lot of things right. I think they were a little bit late around portfolio trading and have done a very good job recently of understanding how important that protocol is and doing better in it. One of the things for sure that we found is, as we delivered innovations into our customers, specifically speaking, around portfolio trading or around net spotting and net hedging, we are able to get more of their kind of traditional RFQ business as a consequence. So in the exact way that you described, I do think there is some convergence of where we are all competing. That being said, again, high level and in a really important way, the market really does want to support and have this kind of competition in the space. As you know exceptionally well, we grew up competing in a lot of the markets that we are in, Alex, with Bloomberg from essentially day one. So that competitive dynamic has kind of existed for us always and I think it makes both firms better and I think the clients wind up winning as we continue to innovate. I don't know, Sara, if you have -- if you want to add any comment around kind of pricing?

Yeah, I would say, look, we were a newer entrant into the credit space. I think generally, it's hard to be apples-to-apples, but generally apples-to-apples but I think our pricing is a little bit lower. But as Billy said, I think the more important point is we compete through innovation and we compete differently. Our business mix in terms of different client channels is also a differentiator between retail, institutional and wholesale.

Thanks for the question, Alex. Good to hear your voice.

Thank you. One moment for our next question. Our next question comes from the line of Daniel Fannon from Jefferies. Your line is open.

Thanks. Good morning. I had a question on high yields and just kind of the market share dynamics more recently. Is this – can you describe it more to some of the volatility? Just trying to think about the longer-term trajectory of – as you think about market share, is there something structurally different about this market and your ability to kind of grow share over time versus say, high grade and talk a little bit more specifically about some of the near term dynamics?

I think it's a combination really of, sort of volatility in the market. It's a good question. I think it's a combination of sort of volatility in the market at a moment in time, plus the reality that high yield tends to be ultimately, less liquid that tends to have strong behavior in that marketplace around all-to-all trading. And our network has come a long way from when we were first answering these questions from you guys, thoughtful questions from you guys back in March of 2020 around our high-yield responder network. But at the end of the day, MarketAxess still has the sort of default liquidity in that high-yield network and as that market kind of stays all to all a little bit, they wind up winning. That being said, we had an excellent month so far in our market share around portfolio trading, specifically speaking, in high yield. So these things kind of have their own life form and can kind of turn pretty quickly. We are really strong on selling the benefits of portfolio trading to our clients around maintaining their relationship with the market makers, the benefits around cost, the benefits around information leakage, minimizing information leakage and the benefit around executable trading on one level. So we feel really good that that message continues to resonate. And at the end of the day, that's kind of what we care about. So I think we're well positioned there.

Thank you. One moment for the next question. Our next question comes from the line of Gautam Sawant from Credit Suisse. Your line is open.

Yes, good morning and thank you for taking my question. Can you please share your perspective on the impact that rise of fixed income ETFs is having on industry market structure and fixed income turnover velocity? And also, can you touch upon your future growth initiatives within the ETF marketplace and how the Tradeweb platform is positioned relative to competitors?

I mean, I think in the most straightforward way, right, we have an exceptionally strong ETF business both in the U.S. and Europe. So we have this great global ETF business that has had exceptional success throughout this year and specifically speaking over the last quarter. One of the things I think that's really important is that the traditional ETF market makers are playing a larger and larger role around market making in credit. We do feel like that has given us a little bit of an advantage as we've continued to kind of march forward in our credit offering as the significant kind of ETF players also become standalone important market makers in credit. So that kind of helps kind of round out or kind of put the pieces of the puzzle together for us around ETFs and credit. Our perspective is, this ETF business is going to continue to grow. It's obviously benefited in a very strong way from the volatility in the equity markets and we have a really strong team globally around our ETF business. So I feel really good about how we are positioned in ETFs and also feel really good about how that has given us an edge in terms of how we built out our credit business as well. And thank you - thanks a lot for the question.

One moment for our next question. Our next question comes from the line of Alex Kramm from UBS. Your line is open.

Yeah, hey. Good morning, everyone. Not to be too overly focused on the monthly minutia, but when you gave your update for October, I know with a couple of days left, the one business that was noticeably absent, which is the biggest business is interest rate swaps. So just trying to get a feel what's happening there? I mean if you look at some of the data that we track intra-month, it looks like that business is actually down year-over-year. Some of this may be FX. But after seeing a nice trajectory during the third quarter, we are kind of hoping 4Q could kind of reaccelerate here. And just wondering if anything is weighing on this and what needs to change for that business to kind of accelerate to historical growth rates again? Thanks.

Hey, Alex, it's Billy. You are allowed to get into the minutia in any way that you want. So we really appreciate the question. Like the European swap story for us has been like a significant, significant success, right? It's been really kind of the lead horse for us in our entire rates complex. To your exact and specific question, it's taking – the European swaps market is taking a little breather in these few weeks in October. So the volumes are down a little bit. I think it's been through, obviously, a significant amount of volatility and some of the players who have been like actively involved throughout this year are taking a little bit of a half a step back. Big picture, we feel exceptionally strong about how we're positioned in that business. We have built out really important protocols around request for market, which have landed squarely with our most important hedge fund clients in Europe. There is going to be a continued sort of onboardment of clients into the MiFID world in Europe and so we feel really strongly that we're positioned very well around our European swaps business going forward. So you are correctly identifying something, but I wouldn't read too much into it, Alex, but completely appreciate your question and your attention to detail. Thank you.

Sir will you be taking more questions at this time?

Yes, we'll take two more.

One moment for our next question. Our next question comes from the line of Ken Worthington from JPMorgan. Your line is open.

Hi, thanks for squeezing me in. We talked a lot about innovation and I think Lee kicked off with listen to your clients, build products, connect the dots. What happens to innovation at Tradeweb in more challenging or more extreme environments like we've seen in recent months and quarters? Do you get more actual ideas and more opportunity to execute? Is this really the time when innovation takes off or is it the opposite and things start to stall because you're too busy? And then you highlighted swaps and credit as the backbone for growth and EM and munis is having a lot of opportunities, where does new innovation really need to be for you to deliver on these growth opportunities?

So, good question, Ken. You – in a very sort of reasonable way, in a way that you are describing, you have to be sort of aware of the environment. So I am going to say that in a very clear way. You have to have kind of good court awareness. So when to make an obvious point, when the long bond is up a point or two points, you have to be a little bit careful around your 3:30 meeting that is scheduled, right? We thrive on these kind of sort of one-on-one meetings and the sort of like approach around the white paper and let's idea generate and let's solve things. So you have to be aware. To your question around the moment in time in the marketplace, and I think we're really good at that. We're really good at understanding what our clients are going through and what their lives, what their business lives are like. That being said, in a really interesting way to your question, I think the stakes get really high around the innovations, right? So a tweak here or a tweak there around how portfolio trading works or a tweak around the response time around request for markets that I talked about around European swaps. These have like real market and real life consequences at a point in time where the markets are extremely volatile and challenging. So I think the stakes get higher. I think our credibility of kind of having been that partner around innovation, I think, matters more when the markets get more challenging. Our pipeline is as strong as ever. The idea generation kind of continues. But you are right, you have to be kind of aware that there are moments where a Friday morning is free and then all of a sudden, it's not free. So you have to pick and choose your spots when you are dealing with and talking with high-level market professionals, the team is really good at that and really good at understanding that. So that's how I would kind of understand - that's how I would describe that point to you.

And I'd just chime in, I think kind as a complement to that mindset which is, we have a really strong track record of continuing to make investments in all market conditions and so you mentioned EM and munis. And I think it's not a need to invest in those initiatives. That's just our core philosophy on innovation and growth and so we've been able to do that. This year is a really good example. We've been able to invest in these new areas, in our technology and our data and infrastructure while also delivering margin improvement. And so part of the beauty of the operating model is that strategy of constantly being close to your clients to innovate in the near term around acute volatility, in the long term around having fundamental growth drivers is something that we had a really good strong track record of.

Thank you.

Thanks for the question, Ken.

One moment for our next question. Our next question comes from the line of Chris Allen from Citi. Your line is open.

Good morning, everyone and thanks for taking my question. Maybe just following up on Sara's comments around delivering margin improvement, can you maybe talk about your ability to manage expenses and provide some details on some of the puts and takes with FX, travel entertainment, inflation and variable comp moving forward?

Sure. Thanks. It's a great question. I think at the highest level, I think a really helpful way to think about it is sort of a rule of thumb. About 50% of our overall expense base is either variable or discretionary. But the highest level we have a real amount of flexibility in terms of how we manage our expenses through various market conditions and be able to still deliver margin expansion. Obviously, we've talked about a very consistent philosophy of balancing that margin expansion with driving and investing in long-term revenue growth. You asked specifically, which is like a more near-term question around puts and takes and where we're managing inflation. I think this year is a really good sample set. Inflation for us really comes down to people costs. The vast majority of our expense base is people and we feel like we've done a really effective job in managing those trends, while still investing in hiring and being able to compete really effectively for talent while still delivering on the margin and we expect to continue to do that. The last piece is FX, which is obviously not completely in our control as it was FX has been a headwind. This quarter is somewhat unprecedented and we put in the earnings and I think it's at Page 11 to break it out a little bit in terms of how FX moves on the revenue line. On the expense line, roughly, the rule of thumb there is about 15% of that expense base is correlated to sterling. Sterling, if you looked at this quarter is down 14% versus the dollar. So that has a positive impact on the quarter. Overall, in that same time period, euro is much more of a correlation on revenues, that's a 30% correlation and that's also been a drag. And so net, net FX has diluted to our EBITDA margin. We do have a hedging strategy that dilutes that impact and that volatility quite a bit on the cash flow. But FX certainly has offset and sort of dampened the expense growth from a reported basis. But overall, as we view with, I think, the comments that we've made, we like our flexibility. We like our ability to make consistent and continuous investments to overall make sure that we're making smart decisions that help support that double-digit revenue growth opportunity over the long term. It won't be linear, but I think that consistent philosophy has really served us well.

Thank you. One moment for our last question. Our last question come from the line of Brian Bedell from Deutsche Bank. Your line is open.

Great. Thanks so much for squeezing me in. I appreciate it. A question for Billy. Maybe talk about the interest rate swap market. I mean, that and credit obviously, you've identified as the two biggest growth areas, but you did say the interest rate swap market for Tradeweb is an underappreciated growth story. So maybe just the credit business obviously gets all the hype given we can see your direct competitor there. Maybe talk about what you see between those two businesses as sort of the better, say five year growth opportunity for Tradeweb in particular and why that would be the case for NIM?

Yes. I mean it's an interesting story around interest rate swaps and it's a great question, right? The interest rate swap market historically was sort of the most resistant towards the electronification of markets of kind of any of the markets that we ever got into and not to bring Lee down memory lane as the call is ending, but he remembers that the best. So, part of our success there came with a lot of hard work around behavior change. The other part of our success there came really around playing a leadership role around regulation as that market, obviously, went electronic around Dodd-Frank in the U.S. and then kind of MiFID in Europe. I would argue the combination of the dollar swap market and the European swap market are two of the most important markets in the world in terms of everything that's been happening in the rates complex over the past six months. We feel exceptionally good around how we're positioned kind of competitively in that space and we also feel exceptionally good around the kind of wallet that's historically been attached to that space. And we love the fact that our clients are getting more sophisticated using our products like AiEX more frequently and we kind of click I think, really, really well in that marketplace. Obviously, considering we've had this leadership role in global government bonds, TBA mortgages for a long time. So it fits us like a glove and our general feeling is this marketplace is going to continue to be exceptionally important going forward and we are going to have that leadership role. And that's some of the kind of foundation about why we feel very confident there. And thanks a lot for the question, Brian.

Now I turn the call over to Lee Olesky for any closing remarks. End of Q&A:

Okay. Yes. Thank you. Let me just say quickly, I really wanted to thank all of the investors and analysts, anyone who's still on the line for all the support over the years. Our interactions have always been great. I am so proud really of the team. I think you can hear it in the remarks today. I feel like I am going out leaving you in the best possible hands with Billy and Sara and the rest of the team here and Tom, who's still is in the room. We're going to let him talk maybe next time. And have a great day. Obviously, if you have any questions, don't hesitate to reach out to Ashley or anyone on the team Sameer, and thanks a lot for joining. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.