Nasdaq, Inc.
Oct 28, 2004

NASDAQ Announces Third Quarter 2004 Results

Total Expenses Reduced $31.0 Million from Prior Year Quarter

NASDAQ Third Quarter 2004 Financial Statements

New York, N.Y. — The Nasdaq Stock Market, Inc. ("NASDAQ®"; OTCBB: NDAQ), today reported a net loss of $5.5 million or $(0.08) per common share for the third quarter versus a net loss of loss of $38.0 million or $(0.52) per common share for the third quarter of 2003 and net income of $4.8 million or $0.02 per common share in the second quarter of 2004(1).

Total revenue in third quarter 2004 was $124.0 million versus $141.9 million for the third quarter 2003 and $120.0 million for the second quarter 2004. Gross margin for the third quarter 2004 was $114.8 million versus $141.9 million in the year ago period and $120.0 million in second quarter 2004.

Included in third quarter 2004 results are $22.4 million of pre-tax charges associated with NASDAQ's continuing efforts to improve efficiencies and reduce operating expenses. Excluding these expenses, net income calculated on a non-GAAP basis was $8.1 million versus $8.4 million for the second quarter 2004. Non-GAAP earnings per common share were $0.09 for the quarter versus $0.07 per share for the second quarter 2004.

NASDAQ's Chief Executive Officer, Robert Greifeld, commented, "NASDAQ's non-GAAP earnings for the third quarter were comparable to second quarter results despite the fact that average daily share volume decreased 10.9% from the second quarter. These results reflect the strength of our diversified business model and our continuing efforts to reduce operating expenses. Heading into the close of the year, NASDAQ is building an increasingly strong competitive position. The integration of Brut is proceeding smoothly and we recently launched the NASDAQ Opening Cross. Our goal is to provide investors, issuers and market participants with the highest quality equity market in the world. We will judge our success by the innovation and quality service we deliver in all of our businesses."

Non-Recurring Expenses

During the third quarter, NASDAQ took pre-tax charges totaling $22.4 million and expects to take additional net charges of approximately $11.0 million in the fourth quarter as part of its ongoing review to reduce operating expenses and improve the efficiency of its operations:

NASDAQ's Chief Financial Officer, David Warren, commented: "NASDAQ's real estate, technology and corporate expense actions are designed to improve productivity and streamline processes, allowing for a leaner organization and increasing our long-term earnings potential. Given our plans for further actions of this type, we anticipate continued success in our expense reduction efforts."

Q3 Financial Review

Following the transfer of NASDAQ's interest in NASDAQ Europe and the sale of IndigoMarkets in 2003, results from these subsidiaries have been reclassified as discontinued operations. The remainder of this discussion reflects results from continuing operations. Additionally, the acquisition of Brut, LLC and affiliated entities (Brut) was completed on September 7, 2004; third quarter 2004 results include Brut's operations from the date of closing.

Year-to-Date Financial Review

NASDAQ® is the largest electronic screen-based equity securities market in the United States. With approximately 3,300 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market. It is home to companies that are leaders across all areas of business including technology, retail, communications, financial services, transportation, media and biotechnology. NASDAQ is the primary market for trading NASDAQ listed stocks. For more information about NASDAQ, visit the NASDAQ Web site at www.nasdaq.com or the NASDAQ Newsroom at www.nasdaq.com/newsroom/.

Non-GAAP Information
In addition to disclosing results determined in accordance with generally accepted accounting principles ("GAAP"), NASDAQ also discloses certain Non-GAAP results of operations that exclude certain charges. Management believes that the Non-GAAP information provides investors with additional information to access NASDAQ's operating performance by excluding these costs, which are non-operational items. The Non-GAAP information may not be comparable to other companies and should not be viewed as a substitute for or superior to net loss or other data prepared in accordance with GAAP. A reconciliation table is provided at the end of this release.

Cautionary Note Regarding Forward-Looking Statements
The matters described herein may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks, uncertainties or other factors beyond the control of The NASDAQ Stock Market, Inc. (the "Company"), which could cause actual results to differ materially from historical results, performance or other expectations and from any opinions or statements expressed or implied with respect to future periods. These factors include, but are not limited to, the Company's ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors detailed in the Company's annual report on Form 10-K, and periodic reports filed with the U.S. Securities and Exchange Commission. We undertake no obligation to release any revisions to any forward-looking statements.

(1) Dividends payable to the NASD as a holder of Nasdaq's Series A Preferred Stock began accruing in March 2003. The Series A Preferred Stock carried a 7.6% dividend rate for the year commencing March 2003 and carried a 10.6% dividend rate in all subsequent years. The NASD is entitled to receive cash dividends when, as and if declared by Nasdaq's Board of Directors out of the funds legally available. On September 30, 2004, the NASD agreed to a waiver of a portion of the dividend for the third quarter of 2004 and accepted a dividend in the aggregate amount of $1.0 million (calculated based on an annual rate of 3.0%) as payment in full of the dividend for this period. Both parties are currently in discussions on an amendment to the terms of the Series A Preferred Stock.

(2) Market Center Revenues include NASDAQ's quoting, trading and trade reporting services, including execution systems previously known as SuperMontage® and Computer Assisted Execution System SM ("CAESSM ") and revenues from the trade reporting system previously known as Automated Confirmation Transaction Service ("ACT"). Also included in Market Center Revenues are revenues from Access Services, Advanced Computer Execution Systems ("ACES") and NASDAQ InterMarket. In addition, beginning September 7, 2004, with the acquisition of Brut, execution revenues from transactions executed through Brut are included in NASDAQ Market Center revenues.

Media Contact: Peter Yandle, NASDAQ
212.401.8714
Investor Contacts:
Vincent Palmiere, NASDAQ
212.401.8742

Jody Burfening/Carolyn Capaccio
Lippert/Heilshorn & Associates
212.838.3777