I recently viewed "The Trade" segment on TheStreet.com. Jack McPherson, who runs Eagle Small Cap Core Value Fund and undoubtedly has to be related to MKTX Brittanica Encyclopedia salesman Kevin McPherson, had MKTX among his top three best small cap stock selections. His logic was as follows:

"Fixed income trading has plummeted due to the credit crisis. As volumes return, there will be more electronic trading to promote transparency and since they are the leader, greater operating leverage will produce increased earnings and a higher stock price."

What Mr. McPherson would not have the luxury of knowing is the following:

1.) MKTX is the leader in odd-lot 25 clients to 4 dealers trading
2.) Timeout rates on their inquiries average about 80%
3.) Average trade size is less than $600K
4.) Their antiquated RFQ model, and cumbersome client-heavy technology is about to see an onslaught of competition
5.) MKTX is ill-equipped to fend off serious threats, since their technology release cycle is 3-6 months and the developing technologies are multiple generations ahead of what they have.
6.) MKTX has made the SAME mistake other dealer vendors have, they are now transacting business around their dealer support base (not good) and its being done manually via the phone (aren't they a technology company?)
7.) Their management may sound competent, but growth, revenue and new product advances have proven otherwise.

Here's what he does know:

1.) MKTX has $137 million to invest in new products. McVey has been hording cash like there's no tomorrow (there isn't for him). Any decline in cash balance eats into his net income.
2.) Rucker, when asked by an analyst about acquisitions, reaffirmed the company's desire to grow organically...for fear of eroding the cash position which earns 25% of the net income of the firm.
3.) The ONLY value MKTX currently has is its connectivity to key institutional clients. The recent government proposals will bring e-trading to the fore, and clients are more likely to embrace alternative technologies, especially when they are light years ahead of the MKTX horse and buggy.
4.) Management at this company CANNOT execute...period!
5.) The company's fortunes are completely tied to the rising tide of the marketplace...your better off investing in the S&P500.
6.) Not a single person who works at this organization would describe its culture as "google-like"...I think the approporiate term is "dysfunctional." Not very encouraging when human capital is so important when it comes to innovation.

Here's what I know:

If I had a choice between investing my money with Mr. McVey, Ms. Millet, and the rest of the Sherwood Forest gang versus putting into a nice fluffy Sealy Posturepedic...uh hum, no real contest. McVey has milked this company dry for years: $2.0 million in cash comp, untold millions in restricted stock and options (even "awarding" himself 405,000 restricted shares then valued at over $5 million in a year the company earned $1.5 in net income...psst: it just happened to come before a major change that would have made it difficult for him to get that stock award). Millet, and her colleague CTO Themelis, are now on the same comp gravy wagon! In the meantime, CFO Rucker keeps getting kicked in the teeth for keeping it all together (who negotiated your deal buddy?).

Their dressing this pig up with lipstick...but nobody will buy.