MarketAxess Holdings, Inc. (NASDAQ:MKTX)

MKTX has the potential to become the Archipelago of bonds. There is a tremendous growth opportunity for the bond exchanges for two reasons. First, the market should return to the fixed-income asset class as investors' risk amnesia clears. Second, as more fixed incomes fall to electronic trading, volumes should skyrocket. The inventory of highly automated U.S. Treasuries turns over every eight days; the inventory of corporate bonds turns over once a year. MarketAxess has a good business and technology design, but governance needs to become more shareholder-oriented.

There may be further upside. As the NYSE moves away from domination by specialist interests, it could acquire MarketAxess. NYSE CEO John Thain has spoken publicly about creating a retail-oriented market for bonds. Investors would have access to real-time prices on company debt, and the ability to place orders online. The MarketAxess platform offers Archipelago-like electronic trading abilities in fixed income, available for less than a third of the near billion paid for Archipelago. Acquiring MarketAxess would make NYSE a true securities exchange, not just a stock exchange.