Tradeweb CEO reveals a big investor risk from AI revolution

If you've never heard of Tradeweb Markets (TW), don't be too hard on yourself—but do make a mental note for the future. This company deserves your attention, having seen its stock soar by more than 200% over the past five years, with a current market cap of approximately $26 billion.

Tradeweb Markets operates in the financial services sector, specializing in electronic trading platforms for various asset classes. At the helm is CEO Billy Hult, who has been with Tradeweb since it was founded in 1996. Hult became CEO in 2023 and has led several acquisitions to expand the company's reach.

On today's episode of Opening Bid, executive editor Brian Sozzi is joined by Hult to discuss the future of trading, how artificial intelligence is reshaping the investment landscape, and what it means to lead with purpose in today's financial world.

Video Transcript

All right, welcome to a new episode of opening bid.

I'm Yahoo, finance executive editor Brian Sazi.

Now, let's say, make some money and get a lot smarter.

And I think in order to do those things, you have to understand what in the world is happening with markets, markets, of course, hovering our record highs, but I want to be a little bit of a Debbie Downer.

I want to put a little black clouds over your sunshine and your ultimate parades here with a couple risks, three risks uh that markets are up against right now that you need to be concerned about as we get into the back half of the year.

Risk number one.

And before I do that, I have to give a shout out to Henry Allen Macro strategist at Deutsche Bank.

He uh he's the one really good note highlighting some of these risks, not that I didn't know them, but you know, I want to give Henry a shout out because he did good work first up uh risk here inflation.

Henry notes that after a lengthy period of above target inflation, investors are clearly alert to the risk of rebound that will likely even be more of the case.

Now as the FED has reduced interest rates have sent up a lot of asset prices even higher, any slight return, any sniff of return in inflation.

This market may not like that and it could sell off.

Hence, I'm calling it out a risk number two.

According to Deutsche Bank recession, investors are still convinced that a soft landing is a done deal if you're wondering what the hell is a soft landing and the economy is not going to fall off the cliff because the fed has lower rates and everything is great and the market prices that stuff in.

But recession risk is still very much top of mind for investors.

Henry noting futures expect 190 basis points of rate cuts from the fed by end of 2025 in large part because economic growth may slow down.

So that's risk too.

I hope you're hanging with me here.

Number three.

Last but not least stock valuation something nobody likes to talk about.

I like to talk about it because I was a former stock analyst.

I like punching numbers in the spreadsheet.

That's still in my soul.

Stock valuation near record highs any disappointment uh in terms of corporate fundamentals that will be likely met with stiff resistance by investors A K A Mr market.

So those are my three risks for the market you need to pay attention to.

You're very welcome.

All Right, let's say in all things, markets here and bring in trade web markets, Ceo Billy hat, Billy.

Thanks for sitting through that one with the really good.

Yeah, I didn't read these notes like this is amazing.

It's in my head.

Thanks for having me on.

No, it's good to finally see you in person.

I, I've been following trade Web for so long and I think you're one of the biggest companies in markets that not a lot of people know about.

Go to Yahoo Finance.

I go to the data paid $27 billion market cap stocks up 200% 200% in the past five years.

I mean, what are you doing?

Right.

What are you doing to begin with?

Like, we, we're, we're creating technology for the bond markets.

Sounds like, sounds kind of straightforward and it is really like, you know, the bond market traditionally, you know, the kind of like the old, like liars poker days, it was sort of like the, the, the least transparent of the markets and we've been, you know, steadily applying technology into all of these markets for 20 years at a point where there's like, you know, significant change happening now.

Um I think there's something good about being, you know, below the radar a little bit, but we're having a nice moment.

Um You know, in the last five years, we've doubled our revenue.

50% of that revenue has come away from sort of Trade Web's home Court, which has traditionally been rates.

So we've really done very, very well in ETF S very well in credit.

And, you know, hopefully the future is, um, you know, it is quite, quite bright what makes this market so lucrative because clearly you're doing a lot.

Right.

I think, I think it's very interesting.

Right.

There's a moment in time where we can kind of say debt markets are growing.

Um The central banks are playing a lesser role in the markets that trade web operates in.

Um private sector.

Intermediation is kind of back in vogue.

And I think, um you know, the wallet is considerably uh large and, and big and growing in the space.

So it's a really, really interesting kind of moment in the market and we haven't even talked about kind of, you know, the election, all the things that you mentioned around, around the fed.

Um This is, this is kind of a moment where, you know, the, the the the fixed income markets are at, at its most interesting.

What does a fed rate cut mean to a business like yours?

It's good, you know, we're gonna wind up having kind of ultimately higher rates um than we've had over the past, you know, bunch of years.

Um I think, I think having a, a real, uh you know, real rate is good for our business.

And I think at the end of the day one of the things that's great for our business is ultimately volatility and sort of indecisiveness around where we're going with the rate outlook, which is, you know, very well.

Everybody has an opinion, you know, I think, I think, you know, 70% of the people were wrong when we, when we cut by 50 basis points and we'll see where we go from here.

But it's an absolutely interesting moment, you know, in the marketplace.

What do you think?

I mean, you've been at Trey Webb, what, since day one?

Close to day, not, not quite market.

I mean, you look like still a young guy.

I mean, that's cool.

What's your take on, on, on the, on the markets here?

Do you think it is now truly off to the races because of as these rate cuts, like penetrate the system or like, are there words of caution?

You need to provide people?

I think, I mean, I think hard to know and I think, um I think you would be smart to have kind of some words of caution given the uncertainty, you know, in the geopolitical world, we have an election that's coming our way very shortly.

I think that there's a moment, uh, obviously to feel kind of bullish around, sort of the fed being very proactive and maybe hopefully, ultimately, right in a lot of ways.

But we'll see, um, you know, if anything I would say it's been, it's been interesting just to just to absolutely witness how resilient, you know, the markets would be down the tubes and we're approaching election day.

I mean, this is one of the most contested presidential elections.

I mean, I've ever seen in my lifetime and I'm, I look young but I'm not as young as I would suggest I'll present on TV.

I mean, this is, this is why I haven't, I haven't like, stopped reading about it but you have to like, you know, calibrate yourself around all of the news.

It's what makes it so resilient.

What is it about our markets that they can withstand another wild presidential election?

I think we are a, um, optimistic at the end of the day, ultimately, a very optimistic country.

And I don't say that, like, naively, I actually think we are very optimistic, but there's absolutely more kind of tension in the political system than either you or I want there to be.

Um, I'm not sure, you know, when I wa when I wake up on election day, like, how good we're gonna feel.

You just gotta look at it like this, just read the paper like this.

It's gonna be, it's gonna be a long night into a long next day.

And, you know, we'll see where we wind up.

Is it hard?

I mean, your business, of course, is regulated?

Um, but is it hard to get business done?

Now, you've been one of the few companies that have been able to make acquisitions over the past four years.

What would make life easier for you as a CEO three, we, we, we done three acquisitions in the last year.

Um And I say that because the company has largely kind of arrived at this moment, you know, or um through real kind of organic growth, right?

We felt very strongly that we could build technology and have it applied to all these different interesting markets and we would win.

So we've kind of added some, a little bit of some sprinkling around acquisitions.

I think we're gonna be focused on in a way that you would expect integrating those acquisitions in a very straightforward way.

And I think we have a tremendous amount of forward technology growth just continuing to be applied to the to the businesses that we are in whether or not that's government bonds or credit.

I make this point all the time.

And it's interesting, the number one competitor that a company like Trade Web has is the telephone.

It's the, it's, you know, it's 2024 and people still sometimes operate and deal in the market at certain moments in time.

Like it's like it's 1994.

You know, I don't know if they're still getting like pizza on the trading desk at like 930 in the way that they used to.

But there still is that kind of comfort zone around certain types of transactions getting done on the phone.

So you think that goes away.

I think, I think that there's gonna be a lot of forward progress around getting a large amount of those trades done electronically.

Will there still be a moment in time where someone, you know, five years from now picks up the phone and does it?

It's nice to hear a voice.

It is nice.

It is like, you know, we're still, like I say, this all the time.

We're, it's interesting, Brian, we're like a, you know, we're a technology company, but we're a technology company that has lived and breathed in the sort of ethos of the market for a long time.

And we really value the personal relationships kind of side of the business.

So we're not just like a faceless technology company that comes in and rolls out our technology, nobody hears from us again where, uh you know, has the regulatory environment the past four years been onerous.

That's a good question.

I would say, like, you know, specifically speaking in, in our business, you know, not so much.

Um It has not been onerous and maybe you might get a different answer from somebody living in a different kind of part of our ecosystem.

Um Generally speaking, regulation in terms of how it's been applied to fixed income and derivatives has been a sort of gateway or a door opener towards more transparency and more electronic trading.

We've been able to have a decent amount of influence in terms of if we're going down this path around regulation, here's the right way for it to be implemented.

And I think in a good way, we've been able to kind of have our voice heard.

Um, but it's a process to make an obvious point and, you know, this really, well, if you wind up applying regulation into these pretty sophisticated markets, the wrong way, you can have the unintended consequence of actually hurting liquidity more than helping liquidity.

So it's always about how it winds up getting applied.

It's a good set up for uh for this next one.

So every September, you know, I go out and spend a lot of good uh a lot of time on the West Coast uh Goldman Sachs Tech Conference, Dream Force Sales Force this year, there was just the next level of excitement and real technology in A I.

This is real stuff.

This is not BS like A I and new forms is coming to market and it's gonna be very transformation.

At least that was my takeaway.

I mean, how does that impact investing in markets?

And, and do you see unintended consequences?

Well, I think, I think we're gonna continue to see sort of data driven um execution in, in in fixed income trading and we're gonna continue to see machine learning get applied to how sort of the search for liquidity occurs in fixed income.

So without question, the sort of the next level of technology is going to be more sophisticated.

Interestingly because we were talking about relationships and we were talking about people.

Do we see people still being a big piece of the equation?

Ultimately, in terms of like how this whole world works?

I would say we do.

So I think you can have a world where the kind of client base or the ecosystem becomes more and more sophisticated around emerging technology, whether or not that's machine learning or, or traditional A I, I also think like the human kind of connection or the human factor isn't going away more risk in the system though.

It could be, it can, it can make markets, it can make markets or trades, you know, potentially more crowded.

Um, so it's something to kind of, if everybody sort of is searching for liquidity in one specific area, is there a possibility that the market can kind of get lopsided kind of here or there?

It's kind of concerning.

Yeah, a little bit.

I mean, it's something to kind of think through.

Um, it's interesting, is there any a regula regulators like attuned to this?

I mean, they, when you talk to them, hey, there could be a crowding in like these three stocks because of A I models.

Yeah, I think they are.

I mean, I don't know, you tell, I mean, it's a good question.

Iii I think that they are, I mean, I think that we're still ultimately kind of dealing with a lot of kind of very new things and I think the, the regulatory world is gonna have to keep its eye on it.

I think the interesting thing is there's a lot of thoughtful people around this that will more than happy to kind of share a view and hopefully it all gets kind of implemented.

I was, we were talking about the election.

I wasn't sort of surprised that, you know, that Trump has gone from a sort of non Bitcoin fan to a big, a big kind of Bitcoin advocate, but obviously in certain areas that we're talking about, depending on who wins the election, we might have a sort of course of direction that goes one way versus another.

These are the things that, that keep us on our toes.

You can absolutely say that or hang with this, Billy, we're gonna go off for a quick break.

We'll be right back on opening bid.

All right, welcome back to opening bid.

We're, uh, here at the NASDAQ market site right in the middle of the financial action, uh, in Times Square, New York City.

Really having, uh, an amazing conversation with trade web market.

CEO Billy Holt, Billy.

There was, um, uh, an interesting story that I didn't realize and I've been following trade Web for a while.

We've never talked before, but I've been following your story.

I didn't realize you were in the towers on September 11th.

Um, still, I mean, you know, still, you know, this, like, still like a really tough day, you know, all these years later, like I come out, uh, you know, last week.

Um, and I still look at this, first thing I do is look at the sky and my brain goes to, is it the same exact color sky that it was, you know, in 2001?

Because something about that sort of vividness of the, of the color blue will stay ingrained in my head forever and ever and ever, I kind of call it the sort of the, the wound that never heals.

It's kind of that permanent kind of wound.

They say like time heals all wounds.

I'm like, I'm not sure because of the of the impact of that day.

So we were, you know, we were on the 51st floor, we were a young company then still trying to kind of figure it out.

Um, you know, we were fortunate that the, that the company, uh we were on the 51st floor of the North Tower.

So we were really fortunate that we were all able to get out the whole, the whole team made it out as, you know, you know, everybody lost people that they cared about that day.

So it's, it's, it, it remains, you know, an incredibly sad day.

Um If I were gonna maybe mention sort of one thing that probably like will forever kind of stick out in my mind, it would be as we were coming down the staircase, you know, that morning, the, you know, the age of the, of the firemen, um, is something that I'll never forget.

They, you know, I was 30 they felt like, and looked like kids to me.

Um, they were probably in their, you know, in their mid twenties, a lot of them.

Um, so it's those kind of things that kind of, in some ways, um, you know, stick with you forever.

So I, I was, um, so I was trying to leave my college parking lot, um, on that day.

So I was not, um, in New York City.

But what do you think that did for a young company like yours to experience something?

Absolutely horrific.

It, yeah, it, it galvanized us in a way that you would expect it to.

Um, and we were very focused on making sure that the company stayed in business and the progress that we had made kind of we continued to make.

So it, without question, it galvanized us.

I'm sure on some level it also, like, put like a little bit of like life in, in like priority, you know, um, everybody kind of by definition when they're younger, you know, work so hard and put such a big priority into like, their whole work thing.

Like, what a moment where you realize, like, what really matters.

It's like the people you love your family.

Um, did you see yourself I mean, obviously not that day but like, I mean, you're 30 years old, like running trade web and that, no, no.

Like, where did you start?

I, you know, I, I was, um, at the beginning of sort of really figuring out what would wind up becoming a very interesting and great career for me.

And I was loving what I, what I did, I was really interested in how technology would be applied to the markets.

And then this concept of like, how does like behavior change over time?

Like how do you get someone from picking up the phone to wind up, kind of embracing and using technology?

That was really interesting to me.

But the concept of like what the company could actually become and maybe my, my role around it was probably not necessarily something I kind of lived with all the time.

Are there other team members that, that were able to, to leave that day?

Are they still with you?

Yeah.

There, there are a bunch of us that kind of walk down the stairs, you know, that day together that are still like at the company and it's like a, you know, it's a great group of people that have been through, you know, a lot um in terms of the company's kind of growth and direction.

Um Yeah, and so those are the kind of bonds and those are the kind of friendships in some ways that kind of like persevere you think that's what sets you apart versus competitors that you have that, that moment, that shared bond, but that fighting spirit, it's probably, it's probably, you know, it's probably one of the things that defines the company.

You know, I think there are probably hopefully like a few things that set the company apart.

I think the culture of the company, you know, all the way through, even with people that have been at the company for five years, two years and 10 years, I think the culture of the company is quite strong in part because we really believe in the concept of technology and the human experience in some ways, kind of living together.

Like you made the point that this is the first time, even though we've done things together, this is the first time we've actually been like face to face.

I'm a huge believer in the sort of benefits of it still matters of, of, of, of this moment.

Mattering.

I think it does still matter.

How do you keep that culture and pass that baton to the new folks coming into the company.

You, you are sort of relentless about the stories kind of along the way and then you live and breathe it yourself and then hopefully that winds up all getting kind of picked up.

Um Does this generation have your tenacity?

I I asked myself that question all the time.

I think some of them do and some of them don't.

And that's a, I'm just, you get the full me when you're talking, um, what's the, what's the message to the ones that, that don't, I mean, how do they, is it either they have it or they just, they're not gonna get it?

Um, I think that on the, on the edges they can be sort of in a really nice way, like, pushed in the direction of getting it.

Is it easier when that thing is kind of switched on?

Like, of course, and I, I sort of make the point a little bit, which is, you know, when I grew up in the business in a way that will make you laugh.

Like, everyone was pretty tough and pretty resilient and different.

Right.

Yeah.

And so, you know, you, you, you, you had to have those skills otherwise you were gonna be left behind, like, pretty quickly.

I think if you have that now you can go pretty far pretty quickly because I do think the competitive landscape can be a little different.

I had, you'll love this.

I had a, um, because when we were talking, uh, you know, before the, before the cameras went on, I mentioned where the company is gonna move.

And so we had a, um, we had a town hall about, uh, two or three weeks ago and one of the things in the town hall that came up was the concept that, you know, certain people in the company the thing that they were most excited about was that we would have, you know, great new offices and I was like with, with oat milk, oat milk.

And I was like, no, no time out, like, no, like that can't be the thing that we're most excited about because I grew up in a world and you'll, you'll really appreciate this.

Like, the best run firms had the worst offices.

Trust me, I've come through the right.

I've come through some and that was a, that was a badge of honor.

Like you, you went to Goldman Sachs in 2004, you know, and, and, and that firm at sort of, um, you know, within the, within, like the fixed income world was, was like top of the totem pole.

Like those offices were like in your head, I got a story for you.

So I started off as a stock analyst and we're at a college, small firm and there were times that first year I would sleep under my desk, like, I'm, I'm full stop.

This is no, this is no BS for camera purposes.

Like, but that's how I learned my crazy thinking at the time, Billy was like, all right, if I can cut out that like three hour train ride, that's more than I can do.

And I think that's like, I don't know if that's a good thing or bad thing that I slept under my desk.

But I don't know maybe it was, I don't know.

I would, I would imagine that it was like a really good thing for you.

Right.

And, and it was your choice to kind of, to, to have that level of intensity as you were kind of like building your career.

And those are the kind of things about your own, sort of experience in some ways that you'll never kind of forget.

I don't think there's anyone like sleeping under their desk web.

That is a good thing.

Like, so what is your ultimate goal?

So $27 billion market cap stocks up 200% in five years, you know, five years are you at $75 billion market cap?

I mean, what does it look like?

You know, certainly not like making any kind of like huge predictions about kind of where all this goes because because to your point, those sort of markets can be kind of you are publicly traded.

So I get it right.

But I think that like the company has tremendous opportunities, technology is continuing to kind of create um a reality where the markets are more connected than ever.

Um And Trade Web has played this kind of leadership role being in all these businesses that we are in around, you know, the clients want almost like this concept of like one stop shopping for fixed income.

And we are like very, very well positioned being in kind of the rates businesses, the derivatives businesses and having made as much success as we've had.

So, we'll stay, we'll stay, we'll stay open minded.

Um, and we'll stay, I think, extremely focused on continuing to build out our sort of organic approach to bringing technology into, into, into new markets.

That's a big one.

All right.

Well, we will have to leave it there.

I'm gonna, uh, probably maybe sleep under my desk later.

I'm just, I'm kidding.

No, I'm not doing that anymore.

Just to be in that.

I do not sleep under my desk anymore.

I go home normal time.

You made me a nap.

Uh Billy Hall, Trey Web Market CEO.

Thanks for giving us some uh time here at the NASDAQ market site in New York City.

Really appreciate it.

Appreciate your questions.

Thanks so much.

Thanks very much.

All right.

Uh That's it for the latest episode of opening bid from the NASDAQ market site in New York City.

I'm Brian Sazi.

We'll check you soon.

Are you a curious hungry investor on the hunt for the hottest market commentary?

Then join me, Yahoo Finance's executive editor, Brian Sozzi, an opening bid, a show with unrivaled insights from top money managers and analysts and intimate access to the biggest power brokers in business.

We want to build vehicles that people care about that change the world.

Since 2009, we've had 28 Pullbacks.

Every pullback comes with something it's called bad news.

Plus, we'll bring you the very best perspectives on the most important stocks in the entire market.

The goal to get you thinking differently about your investments.

The return of travel was a big trend.

Walmart is unbeatable.

Amazon saw a 12% revenue growth and the year of A I I mean, NVIDIA on fire, a lot of people are coming to this game and especially we've seen it with the meme phenomenon is that this is a get Rich quick scheme.

It is not that this is gambling, it is not watch and listen to new episodes of opening bid every Monday, Wednesday and Friday starting at 8 a.m.

Your journey to smart investing begins right here.