Richard McVey -- Chairman and Chief Executive Officer
Good morning, and thank you for joining us to discuss our third quarter 2018 results. This morning, we reported strong third quarter results driven by increased market share across all of our core products and continued robust open trading activity. Overall, trading volume of $386 billion was up 11% compared to Q3, 2017. Our estimated US high-grade market share of 17.5% was up from 17.2% last year. Estimated high-yield market share shows strong growth and reached the record 9.2%, up from 6.9% in the same period last year. Third quarter revenue of $101 million was up 6% compared to Q3, 2017. Operating income for the quarter was $46 million and diluted EPS was up 13% to $1.02. Expenses of $55 million were up 12% including $1.9 million in duplicate rent expense for our new offices in Hudson Yards. We expect to move into our new headquarters by the end of the year. Open trading adoption continues to accelerate. Additionally, emerging market and Eurobond volumes, both saw a rapid growth during the quarter.
Slide four provides an update on market conditions. Market conditions for credit trading were soft in the third quarter. Credit spreads were tighter, volatility fell and core product market volumes declined on average 14% from the second quarter. Overall, trading conditions improved in September and into October. The combination of higher treasury yields, widening credit spreads and elevated new issue activity has led to a much better trading environment for our business. While market trading conditions have been mixed over recent months, share gains across products have been strong and position the company well for future growth .
Slide five provides an update on open trading. Open trading volume growth accelerated during the quarter and was up 58% to a near record level of $88 billion. Average daily volume was $1.4 billion also up 58%. Open trading represented 23% of our volume in Q3, up from 16% last year. Over 282,000 open trading transactions were completed in the third quarter, up from 155,000 in Q3, 2017. Open trading liquidity providers or price makers on the platform drove approximately 1.5 million price responses, representing a 107% increase in activity in the third quarter. During the quarter, over 750 firms provided prices through open trading and over a 1,000 firms completed at least one open trade.
Liquidity takers saved an estimated $36 million in transaction costs for open trading on the system, up 68% from the third quarter last year. Participants benefited from average transaction cost savings of approximately 1.9 basis points of yield when they completed a US high-grade transaction through open trading protocols. Importantly, open trading volume is growing rapidly across all four core products as dealer and investor clients embrace this new source of liquidity. We believe the breadth and depth of our global credit liquidity solution differentiates MarketAxess from the competition.
Slide six provides an update on our products and geographic diversification. Our US high-yield product experienced another quarter of rapid growth. Record estimated high-yield market share of 9.2% led to a year-over-year volume increase of 27%. Our European business continued its strong performance for the year. MiFID II has had a positive impact on client trading behavior leading to a 21% increase in volume with European clients. Eurobond volumes from European clients were up 33% year-over-year and EM volumes were up 32%. We are continuing our preparations for Brexit in the event there is a hard exit. We are adding senior staff to our new office in Amsterdam and our applications with the Dutch regulator are progressing as expected. Client documentation changes are under way to avoid trading disruptions in any exit scenario. Global emerging market volume was up 22% with strong growth in both external debt markets as well as the 26 local EM markets that currently trade on the platform. We now have over 650 international client firms active on this system representing an 18% increase in the number of institutions year-over-year. Our growing footprint in international credit trading significantly expands the long-term growth opportunity for our shareholders.
Now let me turn the call over to Tony to discuss the financial results in greater detail.
Antonio DeLise -- Chief Financial Officer
Thank you, Rick . Please turn to slide seven for a summary of our trading volume across product categories. US high-grade volumes were $206 billion for the quarter, up 3% year-over-year, a slight increase in estimated market share accounted for the uplift in trading volume as US high-grade TRACE volumes were flat year-over-year. Year-to-date estimated US high-grade market share is up 1 percentage point. In spite of weak market volumes or other credit category trading volumes were up 25% year-over-year. We estimate that market volumes across European corporate bonds, emerging markets in US high-yield bonds were down more than 10% in the aggregate. Healthy market share gains were the main driver behind the 28% growth in Eurobond volumes, 27% growth in high yield volume and 22% growth in emerging markets volume. With six important trading days remaining in October, estimated US high-grade and high-yield market volumes are more than 20% ahead of third quarter levels. Estimated US high-grade market share is running similar to the third quarter level, and estimated high-yield market share is running well ahead of the third quarter level.
On slide eight, we provide a summary of our quarterly earnings performance. Overall revenue was up 6% year-over-year. A 11% increase in trading volume resulted in a 5% uplift in commissions. New data contract accounted for the $800,000 increase in Information Services revenue. The $800,000 increase in post-trade services revenue was principally due to a combination of new MiFID II services and new customers. Expenses were up 12% year-over-year and operating income was flat year-over-year. Excluding duplicate rent expense recognized during the build-out phase of the companys new corporate offices in New York City, operating income was up 4%. The effective tax rate was 19.3% in the third quarter and 21.6% year to date. During the quarter, we recognized $1.7 million of excess tax benefits related to share-based compensation awards and a $400,000 reduction to the Tax Cuts and Jobs Act provisional charge recorded in 2017. We are updating our guidance range and now expect the effective tax rate for full year 2018 will be between 21% and 22%. Our diluted EPS was $1.02 on a fairly stable diluted share count of 37.8 million shares.
On slide nine, we have laid out our commission revenue, trading volumes and fees per million. Total variable transaction fees were flat year-over-year as the 11% increase in trading volume was offset by lower overall fee capture caused by several factors. First, our new high-yield fee plan implemented in the third quarter of 2017 and several high-grade dealer migrations shifted revenue from variable transaction fees to distribution fees. Distribution fees were up $4.2 million compared to the third quarter of 2017. Second, lower years to maturity and higher yields caused the reduction in our US high-grade fee capture. And third, revisions to the Eurobond fee plan enacted earlier this year resulted in lower Eurobond fee capture.
That said, US high-grade fee per million hasn't varied the past three quarters. Years to maturity of bonds traded on the platform was unchanged sequentially and there was no significant change in the percentage of volume in these trade size bucket. Our other credit category fee capture was little changed on a sequential basis. The percentage of volume in the other credit category derived from Eurobonds, emerging markets and high-yield was consistent with the second quarter and there was little change in fee capture at the individual product levels.
Slide 10 provides you with the expense detail. Sequentially, expenses were flat as higher depreciation and amortization expense on infrastructure and software investments was offset by lower advertising and trade show spend. The year-over-year increase in expenses were 12%. Excluding the duplicate rent charge, the expense increase was 9%. Despite the soft market conditions, we continue to invest in people, technology and infrastructure. Our full year 2018 expenses are projected to be near the bottom end of the guidance range of $220 million to $232 million inclusive of approximately $7 million in duplicate rent expense.
On slide 11, we provide balance sheet information. Cash and investments as of September 30 were $446 million compared to $407 million at year-end 2017. During the third quarter, we had a quarterly cash dividend of $16 million and repurchased 32,000 shares at a cost of $6 million. We also spent $4 million on construction associated with the build-out of the New York City office space. Trailing 12-months free cash flow was a record $178 million. Based on these results, our board has approved a $0.42 regular quarterly dividend.
Now let me turn the call back to Rick for some closing comments.
Richard McVey -- Chairman and Chief Executive Officer
Thank you, Tony. We are pleased with the overall growth and estimated market share across all products during the quarter. Long-term growth priorities continue to gain momentum, including high yield, emerging markets and open trading. The increase in overall credit market volumes over the last several months, provides a much better foundation for growth for our business.
MarketAxess Holdings Inc (MKTX) Q3 2018 Earnings Conference Call Transcript -- The Motley Fool
