Nasdaq, Inc.
NASDAQ, INC. (Form: 10-K, Received: 03/01/2017 12:06:28)
 
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2016
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE   ACT OF 1934
 
For the transition period from  ________ to ________
Commission file number: 000-32651
___________________________________
Nasdaq, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
52-1165937
(I.R.S. Employer
Identification No.)
 
 
One Liberty Plaza, New York, New York
(Address of Principal Executive Offices)
10006
(Zip Code)
Registrant’s telephone number, including area code:
+1 212 401 8700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $.01 par value per share
The Nasdaq Stock Market
Securities registered pursuant to Section 12(g) of the Act:
None
_______________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ☐    No  ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
 
 
 
 
Non-accelerated filer
☐  (Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No   ☒ 
As of June 30, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $7.4 billion (this amount represents approximately 114.8 million shares of Nasdaq, Inc.’s common stock based on the last reported sales price of $64.67 of the common stock on The Nasdaq Stock Market on such date). 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
Class
Outstanding at February 22, 2017
Common Stock, $.01 par value per share
166,747,494 shares
____________________________________   
DOCUMENTS INCORPORATED BY REFERENCE
Document
Parts Into Which Incorporated
Certain portions of the Definitive Proxy Statement for the 2017 Annual Meeting of Stockholders
Part III


 
Table of Contents

TABLE OF CONTENTS
 
 
 
Page    
Part I.
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 1B.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
Item 7.
 
 
 
Item 7A.
 
 
 
Item 8.
 
 
 
Item 9.
 
 
 
Item 9A.
 
 
 
Item 9B.
 
 
 
Part III.
 
 
 
 
 
Item 10.
 
 
 
Item 11.
 
 
 
Item 12.
 
 
 
Item 13.
 
 
 
Item 14.
 
 
 
Part IV.
 
 
 
 
 
Item 15.
 
 
 
Item 16.

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About This Form 10-K
Throughout this Form 10-K, unless otherwise specified:
“Nasdaq,” “we,” “us” and “our” refer to Nasdaq, Inc.  
“Nasdaq Baltic” refers to collectively, Nasdaq Tallinn AS, Nasdaq Riga, AS, and AB Nasdaq Vilnius.
“Nasdaq BX” refers to the cash equity exchange operated by NASDAQ BX, Inc.
“Nasdaq BX Options” refers to the options exchange operated by NASDAQ BX, Inc.
“Nasdaq Clearing” refers to the clearing operations conducted by Nasdaq Clearing AB.  
“Nasdaq GMNI” refers to the options exchange operated by ISE Gemini, LLC.
“Nasdaq ISE” refers to the options exchange operated by International Securities Exchange, LLC.
“Nasdaq MCRY” refers to the options exchange operated by ISE Mercury, LLC.
“Nasdaq Nordic” refers to collectively, Nasdaq Clearing AB, Nasdaq Stockholm AB, Nasdaq Copenhagen A/S, Nasdaq Helsinki Ltd, and Nasdaq Iceland hf.  
“Nasdaq PHLX” refers to the options exchange operated by NASDAQ PHLX LLC.
“Nasdaq PSX” refers to the cash equity exchange operated by NASDAQ PHLX LLC.
“The Nasdaq Options Market” refers to the options exchange operated by The NASDAQ Stock Market LLC.
“The Nasdaq Stock Market” refers to the cash equity exchange operated by The NASDAQ Stock Market LLC.
* * * * * *

Nasdaq also provides the following list of abbreviations and acronyms as a tool for the reader that are used throughout this Annual Report on Form 10-K.

401(k) Plan: Voluntary Defined Contribution Savings Plan
2014 Credit Facility: $750 million senior unsecured revolving credit commitment which matures on November 25, 2019
2016 Credit Facility: $400 million senior unsecured term loan facility which matures on November 25, 2019
2018 Notes: $370 million aggregate principal amount of 5.25% senior unsecured notes due January 16, 2018
2020 Notes: $600 million aggregate principal amount of 5.55% senior unsecured notes due January 15, 2020
2021 Notes: €600 million aggregate principal amount of 3.875% senior unsecured notes due June 7, 2021
2023 Notes: €600 million aggregate principal amount of 1.75% senior unsecured notes due May 19, 2023
2024 Notes: $500 million aggregate principal amount of 4.25% senior unsecured notes due June 1, 2024
2026 Notes: $500 million aggregate principal amount of 3.85% senior unsecured notes due June 30, 2026
ASC: Accounting Standards Codification
ASU: Accounting Standards Update
ATS: Alternative Trading System
 
BWise: BWise Beheer B.V. and its subsidiaries
CCP: Central Counterparty
CFTC: U.S. Commodity Futures Trading Commission
DEA: Designated Examining Authority
DWA: Dorsey, Wright & Associates, LLC
EMIR: European Market Infrastructure Regulation
Equity Plan: Nasdaq Equity Incentive Plan
eSpeed: Certain assets and certain liabilities of the eSpeed business that were acquired or assumed from BGC Partners, Inc. and certain of its affiliates
ESPP: Nasdaq Employee Stock Purchase Plan
ETF: Exchange Traded Fund
ETP: Exchange Traded Product
Exchange Act: Securities Exchange Act of 1934, as amended
FASB: Financial Accounting Standards Board
FICC: Fixed Income and Commodities Trading and Clearing
FINRA: Financial Industry Regulatory Authority

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IPO: Initial Public Offering
ISE: U.S. Exchange Holdings, Inc. and its subsidiaries
LIBOR: London Interbank Offered Rate
MiFID II: Update to the Markets in Financial Instruments Directive
MiFIR: Markets in Financial Instruments Regulation
MTF: Multilateral Trading Facility
NFX: Nasdaq Futures, Inc.
NPM: The Nasdaq Private Market, LLC
NSCC: National Securities Clearing Corporation
OCC: The Options Clearing Corporation
OTC: Over-the-Counter
Proxy Statement: Nasdaq’s Definitive Proxy Statement for the 2017 Annual Meeting of Stockholders
PSU: Performance Share Unit
Regulation NMS: Regulation National Market System
Regulation SCI: Regulation Systems Compliance and Integrity
SEC: U.S. Securities and Exchange Commission
SecondMarket: SecondMarket Solutions, Inc.
 
SERP: Supplemental Executive Retirement Plan
SFSA: Swedish Financial Supervisory Authority
SMARTS: SMARTS Group Holdings Pty
S&P: Standard & Poor’s
S&P 500: S&P 500 Stock Index
SRO: Self-regulatory Organization
SSMA: Swedish Securities Markets Act 2007:528
TR Corporate businesses: The Investor Relations, Public Relations and Multimedia Solutions businesses of Thomson Reuters
TSR: Total Shareholder Return
U.S. GAAP: U.S. Generally Accepted Accounting Principles
UTP: Unlisted Trading Privileges
UTP Plan: Joint SRO Plan Governing the Collection, Consolidation, and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on a UTP Basis
VAT: Value Added Tax
VSOE: Vendor Specific Objective Evidence of Fair Value

* * * * * *
The following is a non-exclusive list of registered trademarks, registered service marks, or trademarks or service marks of Nasdaq or its subsidiaries, in the United States and/or other countries or jurisdictions:

@TRADE®, ACES, AT-TRADE®, AGGREGATION, TRANSPARENCY, CONTROL®, AUTO WORKUP®, AXE®, BOARDVANTAGE, BWISE®, BWISE BUSINESS IN CONTROL®, BWISE RAPID DEPLOYMENT SOLUTION®, BX VENTURE MARKET®, E MARKET®, CANADIAN DIVIDEND ACHIEVERS®, CCBN®, CCN®, CCN NEWSNET DESIGN, CCNMATTHEWS®, CLICK XT®, CONDICO®, CYBER SECURITY®, D.A.L.I®, DATAXPRESS®, DEFENSE OF INTERNATIONAL MARKETS AND EXCHANGES SYMPOSIUM®, DIMES®, DIRECTORS DESK®, DIRECTORSDESK®, DIVIDEND ACHIEVERS®, DORSEY WRIGHT®, DREAM IT. DO IT.®, DWA®, DWA MATRIX®, DX®, EQQQ, E (design), E-SPEED®, E SPEED (device), ESPEED®, ESPEEDOMETER®, EXACTEQUITY®, EXIGO, FINQLOUD®, FINQLOUD REGULATORY RECORDS RETENTION® FIRST NORTH®, FONDSBØRSEN®, FTEN®, GENIUM®, GIDS®, GLOBE NEWSWIRE®, GO! POWERED BY MARKETWIRE®, HACK®, IGNITE YOUR AMBITION®, INET®, INVESTOR WORLD®, IPOWORLD®, ISE BIG DATA®, ISE MOBILE PAYMENTS® ISSUERWORLD®, ITCH®, KFXAKTIEINDEX®, LIQUIDITYXPRESS®, LONGITUDE®, MARKET INTELLIGENCE DESK®, MARKET LINQUIDITY,MARKET MECHANICS®, MARKETSITE®, MARKETWIRE BEYOND WORDS®, MARKETWIRE RESONATE®, MARKETWIRE®, MARKETWIRE GO! ®, MARKETWIRED RESONATE®, MARKETWIRED®, MW®, MW MARKET WIRED®, MW MARKETWIRED THE POWER OF INFLUENCE®, MY CCBN®, MYMEDIAINFO®, NASDAQ®, NASDAQ 100 INDEX®, NASDAQ - FINANCIAL®, NASDAQ BIOTECHNOLOGY INDEX®, NASDAQ CANADA®, NASDAQ CANADA COMPOSITE INDEX®, NASDAQ CANADA INDEX®, NASDAQ CAPITAL MARKET®, NASDAQ COMPOSITE®, NASDAQ COMPOSITE INDEX®, NASDAQ COMPUTER INDEX®, NASDAQ DIVIDEND ACHIEVERS®, NASDAQ DUBAI®, NASDAQ EUROPE®, NASDAQ EUROPE COMPOSITE INDEX®, NASDAQ FINANCIAL-100 INDEX®, NASDAQ FX®, NASDAQ GLOBAL MARKET®, NASDAQ GLOBAL SELECT MARKET®, NASDAQ INDUSTRIAL INDEX®, NASDAQ INTERACT®, NASDAQ INTERNET INDEX®, NASDAQ IQ FUND®,

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NASDAQ JAPAN®, NASDAQ MARKET ANALYTIX®, NASDAQ MARKET CENTER®, NASDAQ MARKET FORCES®, NASDAQ MARKET VELOCITY®, NASDAQ MARKETSITE®, NASDAQ MAX®, NASDAQ MAX MARKET ANALYTIX®, NASDAQ NATIONAL MARKET®, NASDAQ OMX®, NASDAQ OMX ALPHA INDEXES®, NASDAQ OMX GREEN ECONOMY INDEX®, NASDAQ OMX NORDIC®, NASDAQ PRIVATE MARKET®, NASDAQ Q-50 INDEX®, NASDAQ TELECOMMUNICATIONS INDEX®, NASDAQ TOTALVIEW®, NASDAQ TRADER®, NASDAQ TRANSPORTATION INDEX®, NASDAQ US ALL MARKET®, NASDAQ VOLATILITY GUARD®, NASDAQ WORKSTATION®, NASDAQ WORKSTATION II®, NASDAQ WORLD®, NASDAQ-100®, NASDAQ-100 EUROPEANFUND®, NASDAQ-100 EUROPEAN TRACKER®, NASDAQ-100 EUROPEAN TRACKER FUND®, NASDAQ-100 INDEX®, NASDAQ-100 INDEX EUROPEAN TRACKER FUND®, NASDAQ-100 INDEX TRACKING STOCK®, NDX®, NEWS RELEASE EXPRESS®, NFX WORLD CURRENCY FUTURES®, NLX®, NOIS®, NORDIX®, OMX COPENHAGEN 20®, OMX HELSINKI 25®, OMX STIBOR FUTURE®, OMX STOCKHOLM 30®, OMXH25®, OMXS30®, OMXS3FUT®, OMX TECHNOLOGY®, ON THE WIRE®, OTW® , OVERUNDER®, PHILADELPHIA STOCK EXCHANGE®, PHLX®, PHLX XL®, PIXL®, PORTAL ALLIANCE®, PRECISE TRADE®, PRF®, Q THE NEXT GREAT THING®, QQQ®, QTARGET®, QVIEW®, R3®, RE-THINK®, RISKWAY®, RISKWRAPPER®, RISKXPOSURE®, RX®, S.A.X.E.S®, SECONDMARKET®, SECONDMARKET ECOSYSTEM®, SIDECAR®, SIGNALXPRESS®, SIGNALXPRESS SX®, SMARTS®, SMARTSONLINE®, STINA®, STRUCTURED LIQUIDITY PROGRAM®, THE NASDAQ STOCK MARKET®, THE STOCK MARKET FOR THE NEXT 100 YEARS®, TOTAL EQUITY SOLUTION®, TRADEGUARD®, TRADEXAMINER®, TRDS®, TX®, ULL®, ULTRA LOW LATENCY®, ULTRAFEED®, VX PROXY®, WIZER®, XDE®, XO DORSEY WRIGHT & ASSOCIATES®, ÖVERUNDER®

To the extent a name, logo or design does not appear on the above list, such lack of appearance does not constitute a waiver of any intellectual property rights that Nasdaq has established in its product or service names or logos, or in product configurations or designs, all of which rights are expressly reserved.
FINRA® and TRADE REPORTING FACILITY® are registered trademarks of FINRA.
All other trademarks and service marks used herein are the property of their respective owners.
* * * * * *
This Annual Report on Form 10-K includes market share and industry data that we obtained from industry publications and surveys, reports of governmental agencies and internal company surveys. Industry publications and surveys generally state that the information they contain has been obtained from sources believed to be reliable, but we cannot assure you that this information is accurate or complete. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Statements as to our market position are based on the most currently available market data. For market comparison purposes, The Nasdaq Stock Market data in this Annual Report on Form 10-K for IPOs is based on data generated internally by us, which includes best efforts underwritings; therefore, the data may not be comparable to other publicly-available IPO data. Data in this Annual Report on Form 10-K for new listings of equity securities on The Nasdaq Stock Market is based on data generated internally by us, which includes best efforts underwritings, issuers that switched from other listing venues, closed-end funds and ETPs. Data in this Annual Report on Form 10-K for IPOs and new listings of equity securities on the Nasdaq Nordic and Nasdaq Baltic exchanges also is based on data generated internally by us. IPOs and new listings data is presented as of period end. While we are not aware of any misstatements regarding industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed in “Item 1A. Risk Factors” in this Annual Report on Form 10-K.
 
 * * * * * *
Nasdaq intends to use its website, ir.nasdaq.com, as a means for disclosing material non-public information and for complying with SEC Regulation FD and other disclosure obligations. These disclosures will be included on Nasdaq’s website under “Investor Relations.”
 

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Forward-Looking Statements
The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Annual Report on Form 10-K contains these types of statements. Words such as “may,” “will,” “could,” “should,” “anticipates,” “envisions,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words or terms of similar substance used in connection with any discussion of future expectations as to industry and regulatory developments or business initiatives and strategies, future operating results or financial performance, and other future developments identify forward-looking statements. These include, among others, statements relating to:
our 2017 outlook;
the integration of acquired businesses, including accounting decisions relating thereto;
the scope, nature or impact of acquisitions, divestitures, investments, joint ventures or other transactional activities;
the effective dates for, and expected benefits of, ongoing initiatives, including transactional activities and other strategic, restructuring, technology, de-leveraging and capital return initiatives;
our products, order backlog and services;
the impact of pricing changes;
tax matters;
the cost and availability of liquidity and capital; and
any litigation, or any regulatory or government investigation or action, to which we are or could become a party.
Forward-looking statements involve risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, the following:
our operating results may be lower than expected;
our ability to successfully integrate acquired businesses, including the fact that such integration may be more difficult, time consuming or costly than expected, and our ability to realize synergies from business combinations and acquisitions;
loss of significant trading and clearing volumes or values, fees, market share, listed companies, data products customers or other customers;
our ability to keep up with rapid technological advances and adequately address cybersecurity risks;
economic, political and market conditions and fluctuations, including interest rate and foreign currency risk, inherent in U.S. and international operations;
the performance and reliability of our technology and technology of third parties;
our ability to continue to generate cash and manage our indebtedness; and
adverse changes that may occur in the litigation or regulatory areas, or in the securities markets generally.
 
Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the uncertainty and any risk related to forward-looking statements that we make. These risk factors are discussed under the caption “Item 1A. Risk Factors,” in this Annual Report on Form 10-K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. You should carefully read this entire Annual Report on Form 10-K, including “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and the related notes. Except as required by the federal securities laws, we undertake no obligation to update any forward-looking statement, release publicly any revisions to any forward-looking statements or report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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Part I
Item 1. Business 
Overview
Nasdaq, Inc. is a leading provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services. Our global offerings are diverse and include trading and clearing across multiple asset classes, trade management services, data products, financial indexes, capital formation solutions, corporate solutions, and market technology products and services. Our technology powers markets across the globe, supporting equity derivative trading, clearing and settlement, cash equity trading, fixed income trading and many other functions.
History
Nasdaq was founded in 1971 as a wholly-owned subsidiary of FINRA. Beginning in 2000, FINRA restructured and broadened ownership in Nasdaq by selling shares to FINRA members, investment companies and issuers listed on The Nasdaq Stock Market. In connection with this restructuring, FINRA fully divested its ownership of Nasdaq in 2006, and The Nasdaq Stock Market became fully operational as an independent registered national securities exchange in 2007. In 2006, Nasdaq also reorganized its operations into a holding company structure.
In February 2008, Nasdaq and OMX AB combined their businesses. This transformational combination resulted in the expansion of our business from a U.S.-based exchange operator to a global exchange company offering technology that powers our own exchanges and markets as well as many other marketplaces around the world. In connection with this acquisition, we changed our corporate name to The NASDAQ OMX Group, Inc. We operated under this name until we rebranded our business as Nasdaq, Inc. in 2015.
Since 2008, in addition to growing organically, we have executed multiple acquisitions that have expanded our operations globally and increasingly diversified our product and service offerings. These acquisitions included, among others, the Philadelphia Stock Exchange, Inc. in 2008, SMARTS in 2010, eSpeed and the TR Corporate businesses in 2014 and ISE in 2016.
Products and Services
We manage, operate and provide our products and services in four business segments: Market Services, Corporate Services, Information Services and Market Technology. In 2016, due to changes in our executive leadership and to better reflect how our chief operating decision maker views the businesses, we realigned our reportable segments to integrate the Corporate Solutions and Listing Services businesses into our new Corporate Services segment. Market Technology is now a separate reportable segment. Prior to this change, our Corporate Solutions and Market Technology businesses were part of our Technology Solutions segment. All prior period segment
 
disclosures have been recast to reflect our change in reportable segments.
See Note 1, “Organization and Nature of Operations,” and Note 19, “Business Segments,” to the consolidated financial statements for additional financial information about our reportable segments and geographic data.
Market Services
Our Market Services segment includes our Equity Derivative Trading and Clearing, Cash Equity Trading, FICC and Trade Management Services businesses. Our FICC business was formerly referred to as fixed income, currency and commodities trading and clearing, and our Trade Management Services business was formerly referred to as access and broker services.
We operate multiple exchanges and other marketplace facilities across several asset classes, including derivatives, commodities, cash equity, debt, structured products and ETPs. In addition, in some countries where we operate exchanges, we also provide broker services, clearing, settlement and central depository services. Our transaction-based platforms provide market participants with the ability to access, process, display and integrate orders and quotes. The platforms allow the routing and execution of buy and sell orders as well as the reporting of transactions, providing fee-based revenues.
Equity Derivative Trading and Clearing
Following our acquisition of ISE, we now operate six electronic options exchanges in the U.S.: Nasdaq PHLX, The Nasdaq Options Market, Nasdaq BX Options, Nasdaq ISE, Nasdaq GMNI and Nasdaq MCRY. These exchanges facilitate the trading of equity options, ETF options, index options and foreign currency options. For the year ended December 31, 2016, our options exchanges had a combined matched market share of 31.6% in the U.S. equity options market, consisting of 16.0% at Nasdaq PHLX, 7.8% at The Nasdaq Options Market, 0.8% at Nasdaq BX Options, 5.8% at Nasdaq ISE, 1.1% at Nasdaq GMNI and 0.1% at Nasdaq MCRY. Together, our combined market share represented the largest share of the U.S. market for multiply-listed options on equities and ETFs. Our options trading platforms provide trading opportunities to both retail investors, algorithmic trading firms and market makers, who tend to prefer electronic trading, and institutional investors, who typically pursue more complex trading strategies and often trade on the floor.
In Europe, Nasdaq offers trading in derivatives, such as stock options and futures, index options and futures and fixed-income options and futures. Nasdaq Clearing offers clearing services for fixed-income options and futures, stock options and futures, index options and futures, and interest rate swaps by serving as the CCP. Nasdaq Clearing also operates a clearing service for the resale and repurchase agreement market.
Cash Equity Trading
In the U.S., we operate three cash equity exchanges: The Nasdaq Stock Market, Nasdaq BX and Nasdaq PSX. The Nasdaq Stock

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Market is the largest single venue of liquidity for trading U.S.-listed cash equities. For the year ended December 31, 2016, our cash equity exchanges had a combined matched market share of 17.4% in the U.S. cash equity market, consisting of 14.0% at The Nasdaq Stock Market, 2.4% at Nasdaq BX and 1.0% at Nasdaq PSX.
Our U.S. cash equity exchanges offer trading of both Nasdaq-listed and non-Nasdaq-listed securities. Market participants include market makers, broker-dealers, ATSs and registered securities exchanges.
In February 2016, we acquired Chi-X Canada ATS Limited, a leading alternative market in Canada for the trading of Canadian-listed securities. With this acquisition, which expanded Nasdaq’s Cash Equity Trading business in North America, Nasdaq offers two lit markets and one dark market for the trading of Canadian-listed securities. Effective June 1, 2016, we changed the name of Chi-X Canada to Nasdaq CXC.
In Europe, Nasdaq operates exchanges in Stockholm (Sweden), Copenhagen (Denmark), Helsinki (Finland), and Reykjavik (Iceland). We also operate exchanges in Tallinn (Estonia), Riga (Latvia) and Vilnius (Lithuania). Nasdaq owns Nasdaq Tallinn and has a majority ownership in Nasdaq Vilnius and Nasdaq Riga. In addition, Nasdaq owns the central securities depositories in Estonia, Latvia and Lithuania.
Collectively, the Nasdaq Nordic and Nasdaq Baltic exchanges offer trading in cash equities and depository receipts, warrants, convertibles, rights, fund units and exchange traded funds. Our platform allows the exchanges to share the same trading system, which enables efficient cross-border trading and settlement, cross membership and a single source for Nordic data products. Settlement and registration of cash equity trading takes place in Sweden, Finland, Denmark and Iceland via the local central securities depositories.
FICC
Our FICC business includes the Nasdaq Fixed Income business, NFX and Nasdaq Commodities.
In early 2017, we announced a new fixed income strategy under new leadership. The repositioning, which is designed to enhance the customer experience, brings our U.S. and European fixed income products and services together under a single brand called Nasdaq Fixed Income.
The U.S. portion of Nasdaq Fixed Income includes the business formerly known as eSpeed, an electronic platform for trading U.S. Treasuries that we acquired in June 2013. The electronic trading platform provides real-time institutional trading of benchmark U.S. Treasury securities. Through this business, we provide trading access to the U.S. Treasury securities market with an array of trading instruments to meet various investment goals across the fixed income spectrum.
The European portion of Nasdaq Fixed Income provides a wide range of products and services, such as listing, trading, and clearing, for fixed income products in Sweden, Denmark, Finland and Iceland. Nasdaq Stockholm is the largest bond listing venue in the Nordics, with more than 8,300 listed retail
 
and institutional bonds. In addition, Nasdaq Nordic facilitates the trading and clearing of Nordic fixed income derivatives in a unique market structure. Buyers and sellers agree to trades in fixed income derivatives through bilateral negotiations and then report those trades to Nasdaq Clearing for CCP clearing. Nasdaq Clearing acts as the counterparty to both the buyer and seller.
Nasdaq Commodities is the brand name for Nasdaq’s worldwide suite of commodity-related products and services. Nasdaq Commodities’ offerings include oil, power, natural gas and carbon emission markets, tanker and dry cargo freight, seafood derivatives, iron ore, electricity certificates and clearing services. The products are listed on two of Nasdaq’s derivatives exchanges.
Nasdaq Oslo ASA, which is authorized by the Norwegian Ministry of Finance and supervised by the Norwegian Financial Supervisory Authority, is the commodity derivatives exchange for European products and freight. All trades with Nasdaq Oslo ASA are subject to clearing with Nasdaq Clearing, which is a CCP authorized under EMIR by the SFSA to conduct clearing operations.
We also operate NFX, our U.S. based energy derivatives market. NFX, which is a designated contract market authorized by the CFTC, offers cash-settled energy derivatives based on key energy benchmarks including oil, natural gas and U.S. power. All trades with NFX are subject to clearing with OCC.
Trade Management Services
We provide market participants with a wide variety of alternatives for connecting to and accessing our markets for a fee. Shifting connectivity from proprietary networks to third-party networks has significantly reduced technology and network costs and increased our systems’ scalability while maintaining performance and reliability.
Our marketplaces may be accessed via a number of different protocols used for quoting, order entry, trade reporting, DROP functionality and connectivity to various data feeds. We also offer the Nasdaq Workstation, a browser-based, front-end interface that allows market participants to view data and enter orders, quotes and trade reports. In addition, we offer a variety of add-on compliance tools to help firms comply with regulatory requirements.
We provide co-location services to market participants, whereby firms may lease cabinet space and power to house their own equipment and servers within our data centers. These participants are charged monthly fees for cabinet space, connectivity and support. Additionally, we offer a number of wireless connectivity routes between select data centers using millimeter wave and microwave technology. We also earn revenues from annual and monthly exchange membership and registration fees.
Our broker services operations offer technology and customized securities administration solutions to financial participants in the Nordic market. Broker services provides services through a registered securities company that is regulated by the SFSA. Services primarily consist of flexible

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back-office systems, which allow customers to entirely or partly outsource their company’s back-office functions.
We offer customer and account registration, business registration, clearing and settlement, corporate action handling for reconciliations and reporting to authorities. Available services also include direct settlement with the Nordic central securities depositories, real-time updating and communication via the Society for Worldwide Interbank Financial Telecommunication to deposit banks.
Corporate Services
Corporate Solutions
Our Corporate Solutions business serves corporate clients, including companies listed on our exchanges and private companies. We help organizations manage the two-way flow of information with their key constituents, including their board members and investors, and with clients and the public through our suite of advanced technology, analytics, and consultative services. In 2013, we acquired the TR Corporate businesses, which were integrated into our Corporate Solutions business.
We provide Corporate Solutions products and services in the following key areas:
Investor Relations . We offer investor relations content, analytics, advisory services and communications tools, including investor relations webcasting, press release services, and websites. Our solutions make it easier for companies to interact and communicate with analysts and investors while meeting corporate governance and disclosure requirements. In early 2016, we launched Nasdaq IR Insight, our new investor relations platform.
Public Relations. We offer solutions to help clients identify, reach, monitor and measure their public relations program. We provide traditional and social media contacts databases, backed by our internal research analysts. Our press release distribution network allows clients to reach global audiences cost-effectively. Our suite of technology solutions and expert analysts help clients monitor key news media for their brand, reputation, products, as well as industry competitors, and measure the success of their communications programs. In February 2016, we acquired Marketwired, a global newswire operator and press release distributor that is being integrated into this business.
Multimedia Solutions.  We offer a platform and services which enable our customers to produce webcasts for a wide range of applications, including investor relations, public relations, marketing and internal communications.
Governance. We offer a secure collaboration platform for boards of directors or any team collaborating on confidential initiatives. Our solutions protect sensitive data and facilitate productive collaboration, so board members and teams can work faster and more effectively. In May 2016, we acquired Boardvantage, a leading provider of collaboration and meeting productivity tools for boards of directors and executive leadership teams. This acquisition is being integrated into our governance business.
 
We currently have approximately 18,000 Corporate Solutions clients.
Listing Services
We operate a variety of listing platforms around the world to provide multiple global capital raising solutions for private and public companies. Companies listed on our markets represent a diverse array of industries including, among others, health care, consumer products, telecommunication services, information technology, financial services, industrials and energy. Our main listing markets are The Nasdaq Stock Market and the Nasdaq Nordic and Nasdaq Baltic exchanges.
Companies seeking to list securities on The Nasdaq Stock Market must meet minimum listing requirements, including specified financial and corporate governance criteria. Once listed, companies must meet continued listing standards. The Nasdaq Stock Market currently has three listing tiers: The Nasdaq Global Select Market, The Nasdaq Global Market and The Nasdaq Capital Market. All three market tiers maintain rigorous listing and corporate governance standards (both initial and ongoing).
As of December 31, 2016, a total of 2,897 companies listed securities on The Nasdaq Stock Market, with 1,443 listings on The Nasdaq Global Select Market, 783 on The Nasdaq Global Market and 671 on The Nasdaq Capital Market.
We aggressively pursue new listings from companies, including those undergoing IPOs as well as companies seeking to switch from alternative exchanges. In 2016, The Nasdaq Stock Market attracted 283 new listings, including 91 IPOs, 73% of U.S. IPOs in 2016. The new listings were comprised of the following:
Switches from the New York Stock Exchange LLC, or NYSE, and NYSE MKT LLC, or NYSE MKT
20

IPOs
91

Upgrades from OTC
37

ETPs and Other Listings
135

  Total
283

The 20 NYSE- or NYSE MKT-listed companies that switched to The Nasdaq Stock Market, represented approximately $61 billion in market capitalization. Notable switches included IHS Markit Ltd., Imperva, Inc., OPKO Health, Inc. and Scripps Networks Interactive, Inc.
We also offer listings on the exchanges that comprise Nasdaq Nordic and Nasdaq Baltic. For smaller companies and growth companies, we offer access to the financial markets through the Nasdaq First North alternative marketplaces. As of December 31, 2016, a total of 900 companies listed securities on our Nordic and Baltic exchanges and Nasdaq First North.
Our European listing customers include companies, funds and governments. Customers issue securities in the form of cash equities, depository receipts, warrants, ETPs, convertibles, rights, options, bonds or fixed-income related products. In 2016, a total of 88 new companies listed on our Nordic and

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Baltic exchanges and Nasdaq First North. In addition, seven companies upgraded their listings from Nasdaq First North to the Nordic and Baltic exchanges.
Our Listing Services business also includes NPM, which provides services for private companies.
Information Services
Our Information Services segment includes our Data Products and our Index Licensing and Services businesses.
Data Products
Our Data Products business sells and distributes historical and real-time quote and trade information to market participants and data distributors. Our data products enhance transparency of the market activity within the exchanges that we operate and provide critical information to professional and nonprofessional investors globally.
We collect, process and create information and earn revenues as a distributor of our own, as well as select, third-party content. We provide varying levels of quote and trade information to market participants and to data distributors, who in turn provide subscriptions for this information. Our systems enable distributors to gain access to our market depth, index values, mutual fund valuation, order imbalances, market sentiment and other analytical data.
We distribute this proprietary market information to both market participants and non-participants through a number of proprietary products, including Nasdaq TotalView, our flagship market depth quote product. TotalView shows subscribers quotes, orders and total anonymous interest at every price level in The Nasdaq Stock Market for Nasdaq-listed securities and critical data for the opening, closing, halt and IPO crosses. We also offer TotalView products for our Nasdaq BX, Nasdaq PSX, Nasdaq Fixed Income and Nordic markets.
We operate several other proprietary services and data products to provide market information, including Nasdaq Basic, a low cost alternative to the industry Level 1 feed, Ultrafeed, a normalized high speed, consolidated data feed offering, and DWA’s web-based advisor tools. We also provide options, futures, commodities, U.S. Treasury, indexes and mutual fund data.
Our Data Products business also includes revenues from U.S. tape plans. The Nasdaq Stock Market acts as the processor and administrator for the UTP Plan. The UTP Plan administrator sells quotation and last sale information for all transactions in Nasdaq-listed securities, whether traded on The Nasdaq Stock Market or other exchanges, to market participants and to data distributors, who then provide the information to subscribers. After deducting costs, as permitted under the revenue sharing provision of the UTP Plan, the UTP Plan administrator distributes the tape revenues to the respective UTP Plan participants, including The Nasdaq Stock Market, Nasdaq BX and Nasdaq PSX, based on a formula required by Regulation NMS that takes into account both trading and quoting activity. In addition, much like Nasdaq-listed securities, all quotes and
 
trades in NYSE- and NYSE MKT-listed securities are reported and disseminated in real-time, and as such, we share in the tape revenues for information on NYSE- and NYSE MKT-listed securities.
The Nasdaq Nordic and Nasdaq Baltic exchanges, as well as Nasdaq Commodities, also offer data products and services. These data products and services provide critical market transparency to professional and non-professional investors who participate in European marketplaces and, at the same time, give investors greater insight into these markets.
Much like the U.S. products, European data products and services are based on trading information from the Nasdaq Nordic and Nasdaq Baltic exchanges, as well as Nasdaq Commodities, for the following classes of assets: cash equities, bonds, derivatives and commodities. We provide varying levels of quote and trade information to market participants and to data distributors, who in turn provide subscriptions for this information.
In addition, the ISE options exchanges and Nasdaq CXC have data businesses that Information Services now manages and distributes.
Significant European data products include Nordic Equity TotalView, Nordic Derivative TotalView, and Nordic Fixed Income TotalView, Level 2, Analytics and Fixings.
Finally, we provide index data products based on Nasdaq indexes. Index data products include our Global Index Data Service, which delivers real-time index values throughout the trading day, and Global Index Watch/Global Index File Delivery Service, which delivers weightings and components data, corporate actions and a breadth of additional data.
Index Licensing and Services
Our Index Licensing and Services business is a leading index provider that develops and licenses Nasdaq branded indexes, associated derivatives and financial products. We also provide custom calculation services for third-party clients. License fees for our trademark licenses vary by product based on a percentage of underlying assets, dollar value of a product issuance, number of products or number of contracts traded. We also license cash-settled options, futures and options on futures on our indexes.
As of December 31, 2016, we had 298 ETPs licensed to Nasdaq’s indexes which had over $124 billion of assets under management. Our flagship index, the Nasdaq-100 Index, includes the top 100 non-financial securities listed on The Nasdaq Stock Market.
We also operate the Nasdaq Global Index Family, which includes more than 40,000 indexes. The Nasdaq Global Index Family represents more than 98% of the global equity investable marketplace. The family consists of global securities broken down by market segment, region, country, size and sector. The Nasdaq Global Index Family covers 45 countries and approximately 9,000 securities.

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DWA, a market leader in data analytics, passive indexing and smart beta strategies, adds to Nasdaq’s robust index portfolio, bringing model-based strategies and analysis to support the financial advisor community, and further strengthens Nasdaq’s position as a leading smart beta index provider in the U.S. As of December 31, 2016, there are $54 billion in assets under management in ETPs that track Nasdaq smart beta indexes.    
Market Technology
Powering more than 85 marketplaces in 50 countries, our Market Technology business is a leading global technology solutions provider and partner to exchanges, clearing organizations, central securities depositories, regulators, banks, brokers and corporate businesses. Our Market Technology business is the sales channel for our complete global offering to other marketplaces.
During 2016, we launched the Nasdaq Financial Framework to deliver to our Market Technology clients a single operational core that ties together Nasdaq’s portfolio of technology offerings across the trade lifecycle. This portfolio includes technology solutions for trading, clearing, settlement, surveillance and information dissemination to markets with wide-ranging requirements, from the leading markets in the U.S., Europe and Asia to emerging markets in the Middle East, Latin America and Africa. Our marketplace solutions can handle a wide array of assets, including cash equities, equity derivatives, currencies, various interest-bearing securities, commodities and energy products.
Our trading and data solutions are utilized by exchanges, alternative-trading venues, banks and securities brokers with marketplace offerings of their own. In the post-trade stage, we offer integrated systems solutions for clearing (risk management) and settlement (settlement and delivery) of both cash equities and derivatives to clearing organizations around the world.
Nasdaq’s market technology is utilized by, among others, ASX Limited, Bolsa de Valores de Colombia, Borsa Istanbul A.Ş., Borse Dubai Limited, Bursa Malaysia Berhad, Egyptian Exchange, Hong Kong Exchanges and Clearing Limited, Japan Exchange Group, Inc., NEX Group plc, SBI Japannext Co., Ltd., Singapore Exchange Ltd., SIX Swiss Exchange Ltd and Tokyo Commodity Exchange, Inc.
A central part of many projects is facility management and systems integration. Through our integration services, we can assume responsibility for projects involving migration to a new system and the establishment of entirely new marketplaces. We also offer operation and support for the applications, systems platforms, networks and other components included in a turn-key information technology solution, as well as advisory services.
We also offer broker services through SMARTS. SMARTS is a managed service designed for brokers and other market participants to assist them in complying with market rules, regulations and internal market surveillance policies.
 
Finally, through BWise, we offer enterprise governance, risk management and compliance software and services to help companies track, measure and manage key organizational risks.
Competition
Market Services
We face intense competition in North America and Europe in businesses that comprise our Market Services segment. We seek to provide market participants with greater functionality, trading system stability, speed of execution, high levels of customer service, and efficient pricing. In both North America and Europe, our competitors include other exchange operators, operators of non-exchange (less-heavily regulated) trading systems and banks and brokerages that operate their own internal trading pools and platforms.
Examples of registered exchanges that compete with our options markets in the U.S. include: Bats BZX Exchange, Inc., or Bats BZX; Bats EDGX Exchange, Inc., or Bats EDGX; BOX Options Exchange LLC; Chicago Board Options Exchange, Incorporated, or CBOE; C2 Options Exchange, Incorporated; Miami International Securities Exchange; MIAX Pearl, LLC, or MIAX Pearl; NYSE Arca, Inc., or NYSE Arca; and NYSE MKT, which operates the NYSE Amex options business. Examples of registered exchanges competing with our cash equities markets in the U.S. include: Bats BYX Exchange, Inc., or Bats BYX; Bats BZX; Bats EDGA Exchange, Inc., or Bats EDGA; Bats EDGX; NYSE; NYSE Arca; NYSE MKT; and The Investors Exchange LLC. In addition to competition from these exchanges, we face competition from ATSs and other less-heavily regulated broker-owned systems, some of which are also known as “dark pools,” and from other types of OTC trading.
Registered exchanges that compete with our cash equities markets in Europe include: BATS Trading Limited; Euronext N.V.; Deutsche Börse A.G.; and London Stock Exchange Group plc, or LSE. We also intensely compete with MTFs, such as that operated by Turquoise Global Holdings Limited. Examples of our competitors in the trading and clearing of options and futures on European equities include: the Eurex Group companies operated by Deutsche Börse A.G., or Eurex; ICE Futures Europe; and the MTF operated by Turquoise Global Holdings Limited. Competition among exchanges for trading European equity derivatives tends to occur where there is competition in the trading of the underlying equities. In addition to exchange-based competition, we face competition from OTC derivative markets.
The implementation of MiFID II and MiFIR over the next several years is expected to lead to further competitive pressure on our European trading business. MTFs are already attracting a significant share of electronically matched volume. With the regulatory environment likely to become more favorable to alternative trading venues, we expect such venues to compete aggressively for the trading of equity securities listed on our Nordic exchanges. Electronic trading systems pursuing block business will also remain active in Europe. In responding to

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current and potential competition, we constantly review our pricing and product offerings.
Our FICC business also operates in an intensely competitive environment. Our trading platform for benchmark U.S. treasuries faces competition from both long-established and newly emerging electronic and voice brokerages, and the operating environment remains extremely challenging. Our European fixed income products and services are subject to relentless competitive pressure from OTC dealers as well as exchanges. Our suite of commodity-related products and services is in many cases designed to challenge the more established players.
Our Trade Management Services business competes with other exchange operators, extranet providers, and data center providers.
Corporate Services
In our corporate solutions business, competition is varied and can be fragmented. In investor relations services, there are many regional competitors and relatively few global providers. Other exchange operators are partnering with firms that have capabilities in this area and seeking to acquire relevant assets in order to provide investor relations services to customers alongside listing services. The competitive landscape for public relations services includes large providers of traditional wire services, full-service providers, who offer wire distribution along with audience targeting, monitoring and analytics services, and a large number of regional and niche providers. In multimedia solutions and webhosting, competition is fragmented and includes firms that address enterprise buyers, offering them either managed or self-service capabilities. The competitive landscape for governance solutions varies by sector and geography. Most vendors in the market offer software-as-a-service solutions that are supported by a data center strategy. Many vendors offer specialized services that focus on a niche sector while the larger players in the market may offer additional services around corporate governance. Customers frequently seek single-source providers that are able to address a broad range of needs within a single platform.
Our listing services in both the U.S. and Europe are a means of facilitating capital formation through public capital markets. There are competing ways of raising capital, and we seek to demonstrate the benefits of listing shares on an exchange. Our primary competitor for larger company stock share listings in the U.S. is NYSE. The Nasdaq Stock Market also competes with NYSE MKT for listing of shares of smaller companies. In addition, Bats BZX competes for ETP listings. The Nasdaq Stock Market also competes with local and international markets located outside the U.S. for listings of equity securities of both U.S. and non-U.S. companies that choose to list (or dual-list) outside of their home country. For example, The Nasdaq Stock Market competes for listings with exchanges in Europe and Asia, such as LSE and The Stock Exchange of Hong Kong Limited.
The listings business in Europe is characterized by a large number of exchanges competing for new or secondary listings.
 
Each country has one or more national exchanges, which are often the first choice of companies in each respective country. For those considering an alternative, examples of competing European exchanges that frequently attract many listings from outside their respective home countries include LSE, Euronext N.V. and Deutsche Börse A.G. In addition to the larger exchanges, companies seeking capital or liquidity from public capital markets are able to raise capital without a regulated market listing and can consider trading their shares on smaller markets and quoting facilities.
Information Services
Our Data Products business in the U.S. includes both proprietary and consolidated data products. Proprietary data products are made up exclusively of data derived from each exchange’s systems. Consolidated data products are distributed by SEC-mandated consolidators (one for Nasdaq-listed stocks and another for NYSE and other-listed stocks) that share the revenue among the exchanges that contribute data. In Europe, all data products are proprietary as there is no official data consolidator. Competition in the data business is intense and is influenced by rapidly changing technology and the creation of new product and service offerings.
The sale of our proprietary data products in both the U.S. and Europe is under competitive threat from alternative exchanges and trading venues that offer similar products. Our data business competes with other exchanges and third party vendors to provide information to market participants. Examples of our competitors in proprietary data products are: Intercontinental Exchange, Inc., or ICE; Bats Global Markets, Inc., or BATS; S&P Global Inc.; and Dow Jones & Company.
The consolidated data business is under competitive pressure from other securities exchanges that trade Nasdaq-listed securities. In addition, The Nasdaq Stock Market similarly competes for the tape fees from the sale of information on securities listed on other markets.
Our Index Licensing and Services business faces competition from providers of various competing financial indexes. For example, there are a number of indexes that aim to track the technology sector and thereby compete with the Nasdaq-100 Index and the Nasdaq Composite Index. We face competition from investment banks, dedicated index providers, markets and other product developers.
Market Technology
The traditional model, where each exchange or exchange-related business developed its own technology internally, sometimes aided by consultants, has changed, as many operators have recognized the cost-savings made possible by buying technology from third parties. As a result, two types of competitors have emerged in our Market Technology segment: exchange operators and technology providers unaffiliated with exchanges. These organizations make available a range of off-the-shelf technology, including trading, clearing, market surveillance, settlement, depository and information dissemination, and offer customization and operation expertise.

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There is a wide range of providers that compete with us in surveillance, as well as governance, risk and compliance solutions. In surveillance, standardization of products and budget pressures drive customers to focus on pricing. In governance, risk and compliance, our products must compete with solutions that are often part of larger suites, such as those related to information technology management or general business management.
Market conditions in this segment are evolving rapidly, which makes continuous investment and innovation a necessity.
Technology
Technology plays a key role in ensuring the growth, reliability and regulation of financial markets. We have established a technology risk program to consider the resiliency of critical systems. This program is focused on (i) identifying areas for improvement in systems and (ii) implementing changes and upgrades to technology and processes to minimize future risk. We have continued our focus on improving the security of our technology with an emphasis on employee awareness through training, targeted phishing campaigns, and new tool deployment for our securities operations team. In 2016, we expanded this program to include recently acquired companies.
Core Technology. The foundation for Nasdaq’s core technology is INET. The INET technology is used across our U.S. and European markets. INET is also a key building block of our Market Technology offerings, Genium INET and X-stream INET. Genium INET and X-stream INET both combine innovative functionality with a modular approach to manage change and create new advantages for existing and new customers.
We continuously improve our core technology with a focus on improving capacity, reliability, resiliency and market integrity.
Data Centers . Nasdaq utilizes data center facilities in key global regions to support our markets, technology services, disaster recovery capabilities and operations centers. In 2016, we continued to migrate systems to our facility in Chicago as well as completed migration to a new data center in Sweden.
Blockchain Initiatives . During 2016, we continued to develop Nasdaq Linq, a solution based on blockchain-enabled technology, that may be used to expand and enhance issuers’ equity management capabilities. We also are completing work on a proof of concept for proxy voting in Estonia and announced the incorporation of blockchain services into the new Nasdaq Financial Framework.
Intellectual Property
We own or have licensed rights to trade names, trademarks, domain names and service marks that we use in conjunction with our operations and services. We have registered many of our most important trademarks in the U.S. and in foreign countries. For example, our primary “NASDAQ” mark is a registered trademark in the U.S. and in over 50 other countries worldwide.
 
To support our business objectives and benefit from our investments in research and development, we actively seek protection for our innovations by filing patent applications to protect inventions arising from investments in products, systems, software and services. We believe that our patents and patent applications are important for maintaining the competitive differentiation of our products, systems, software and services, enhancing our ability to access technology of third parties and maximizing our return on research and development investments.
Over time, we have accumulated a robust portfolio of issued patents in the U.S., Europe and in other parts of the world. We currently hold rights to patents relating to certain aspects of our products, systems, software and services, but we primarily rely on the innovative skills, technical competence and marketing abilities of our personnel. Hence, no single patent is in itself essential to us as a whole or any of our principal business areas.
We also maintain copyright protection in our Nasdaq-branded materials.
Corporate Venture Practice
In 2017, Nasdaq expects to establish a corporate venture practice to invest primarily in financial technology companies. Nasdaq envisions that investments made through the venture practice will further our organic research and development efforts, and accelerate our path to commercial viability, in the same way previous investments have supported our blockchain and machine intelligence initiatives. Nasdaq expects that the capital invested will be modest and will not have a material impact on our consolidated financial statements or existing capital return or deployment priorities.
Regulation
We are subject to extensive regulation in the U.S., Canada and Europe.
U.S. Regulation
U.S. federal securities laws establish a system of cooperative regulation of securities markets, market participants and listed companies. SROs conduct the day-to-day administration and regulation of the nation’s securities markets under the close supervision of, and subject to extensive regulation, oversight and enforcement by, the SEC. SROs, such as national securities exchanges, are registered with the SEC.
This regulatory framework applies to our U.S. business in the following ways:
regulation of our registered national securities exchanges; and
regulation of our U.S. broker-dealer subsidiaries.
The rules and regulations that apply to our business are focused primarily on safeguarding the integrity of the securities markets and of market participants and investors generally. Accordingly, our board of directors, officers, and employees must give due regard to the preservation of the independence of the self-

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regulatory function of each of our SROs and to their obligations to investors and the general public, and may not take any actions that would interfere with the effectuation of decisions by the boards of directors of any of our SROs relating to their regulatory functions, or that would interfere with the ability of any of our SROs to carry out their responsibilities under the Exchange Act. Although the rules and regulations that apply to our business are not focused on the protection of our stockholders, we believe that regulation improves the quality of exchanges and, therefore, our company. U.S. federal securities laws and the rules that govern our operations are subject to frequent change.
National Securities Exchanges. SROs in the securities industry are an essential component of the regulatory scheme of the Exchange Act for providing fair and orderly markets and protecting investors. The Exchange Act and the rules thereunder, as well as each SRO’s own rules, impose on the SROs many regulatory and operational responsibilities, including the day-to-day responsibilities for market and broker-dealer oversight. Before it may permit the registration of a national securities exchange as an SRO, the SEC must determine, among other things, that the exchange has a set of rules that is consistent with the requirements of the Exchange Act. Moreover, an SRO is responsible for enforcing compliance by its members, and persons associated with its members, with the provisions of the Exchange Act, the rules and regulations thereunder, and the rules of the SRO, including rules and regulations governing the business conduct of its members.
Nasdaq currently operates three cash equity and six options markets in the U.S. We operate The Nasdaq Stock Market and The Nasdaq Options Market pursuant to The Nasdaq Stock Market’s SRO license; Nasdaq BX and Nasdaq BX Options pursuant to Nasdaq BX’s SRO license; Nasdaq PSX and Nasdaq PHLX pursuant to Nasdaq PHLX’s SRO license; and Nasdaq ISE, Nasdaq GMNI and Nasdaq MCRY, each under their own SRO license. As SROs, each entity has separate rules pertaining to its broker-dealer members and listed companies. Broker-dealers that choose to become members of our exchanges are subject to the rules of those exchanges.
All of our U.S. national securities exchanges are subject to SEC oversight, as prescribed by the Exchange Act, including periodic and special examinations by the SEC. Our exchanges also are potentially subject to regulatory or legal action by the SEC or other interested parties at any time in connection with alleged regulatory violations. We also are subject to Section 17 of the Exchange Act, which imposes record-keeping requirements, including the requirement to make records available to the SEC for examination. We have been subject to a number of routine reviews and inspections by the SEC or external auditors in the ordinary course, and we have been and may in the future be subject to SEC enforcement proceedings. To the extent such actions or reviews and inspections result in regulatory or other changes, we may be required to modify the manner in which we conduct our business, which may adversely affect our business.
 
Section 19 of the Exchange Act provides that our exchanges must submit to the SEC proposed changes to any of the SROs’ rules, practices and procedures, including revisions to provisions of our certificate of incorporation and by-laws that constitute SRO rules. The SEC will typically publish such proposed changes for public comment, following which the SEC may approve or disapprove the proposal, as it deems appropriate. SEC approval requires a finding by the SEC that the proposal is consistent with the requirements of the Exchange Act and the rules and regulations thereunder. Pursuant to the requirements of the Exchange Act, our exchanges must file with the SEC, among other things, all proposals to change their pricing structure.
Pursuant to regulatory services agreements between FINRA and our SROs, FINRA provides certain regulatory services to our markets, including the regulation of trading activity and surveillance and investigative functions. Nevertheless, we have a direct regulatory role in conducting certain real-time market monitoring, certain equity surveillance not involving cross-market activity, most options surveillance, most rulemaking and some membership functions through our MarketWatch department. We refer suspicious trading behavior discovered by our regulatory staff to FINRA for further investigation. Our SROs retain ultimate regulatory responsibility for all regulatory activities performed under regulatory agreements by FINRA, and for fulfilling all regulatory obligations for which FINRA does not have responsibility under the regulatory services agreements.

In addition to its other SRO responsibilities, The Nasdaq Stock Market, as a listing market, also is responsible for overseeing each listed company’s compliance with The Nasdaq Stock Market’s financial and corporate governance standards. Our listing qualifications department evaluates applications submitted by issuers interested in listing their securities on The Nasdaq Stock Market to determine whether the quantitative and qualitative listing standards have been satisfied. Once securities are listed, the listing qualifications department monitors each issuer’s on-going compliance with The Nasdaq Stock Market’s continued listing standards.
Broker-dealer regulation. Nasdaq’s broker-dealer subsidiaries are subject to regulation by the SEC, the SROs and the various state securities regulators. Nasdaq Execution Services, LLC, or Nasdaq Execution Services, currently operates as our routing broker for sending orders from Nasdaq’s U.S. cash equity exchanges and three of our six options exchanges to other venues for execution. Execution Access LLC, or Execution Access, operates as the broker-dealer for our fixed income business, including Nasdaq Fixed Income’s registered ATS for U.S. Treasuries. NPM Securities, LLC operates an ATS involving primary and secondary transactions in unregistered securities (i.e., securities not listed on a registered securities exchange and not registered under Section 12 of the Exchange Act), including acting as the buyer’s and seller’s agent to facilitate private placement transactions on the ATS. SMTX, LLC, or SMTX, also operates as a broker-dealer for NPM. Finally, Nasdaq Capital Markets Advisory LLC, or Nasdaq

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Capital Markets Advisory, acts as a third-party advisor to privately-held or publicly-traded companies during IPOs and various other offerings.
Nasdaq Execution Services is registered as a broker-dealer with the SEC and in all 50 states, the District of Columbia and Puerto Rico. It is also a member of FINRA and most of the registered national securities exchanges in the U.S.
Execution Access is registered as a broker-dealer with the SEC and in 22 states and the U.S. Virgin Islands based on business requirements. Additionally, Execution Access is a FINRA member organization. Execution Access operates an SEC registered ATS, which is part of Nasdaq Fixed Income, to trade in U.S. Treasury securities. Execution Access is an introducing broker for trades matched on this ATS. The trades, once matched, are submitted to our fully disclosed clearing broker for clearance and settlement.
NPM Securities is registered as a broker-dealer with the SEC and in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Additionally, NPM Securities is a FINRA member organization. NPM Securities does not hold funds or securities. Funds may be delivered by the buyer to the issuer directly or wired into an escrow account, depending on the requirements of the offering. The issuer or its transfer agent (or other corporate recordkeeper) will provide the buyer with a stock certificate in either physical or book entry form.
SMTX is registered as a broker-dealer with the SEC and in 48 states and the District of Columbia based on business requirements. Additionally, SMTX is a FINRA member organization. NPM provides the technological tools and website hosting on a platform that issuers may use for administrative purposes, document execution, handling and storage, and to facilitate communications with participants of tender offers and merger and acquisition transactions. SMTX’s role is to act as information agent with regard to onboarding potential participants, a depositary agent to receive tender of securities and transaction closing funds, and a paying agent to wire funds to participants at the closing.
Nasdaq Capital Markets Advisory is registered as a broker-dealer with the SEC and the State of New York based on business requirements. Additionally, Nasdaq Capital Markets Advisory is a FINRA member organization. Nasdaq Capital Markets Advisory acts as a third-party advisor to privately-held or publicly-traded companies during their initial public offerings, follow-on equity offerings, at-the-market equity offerings, private placement offerings and Regulation A equity offerings. Nasdaq Capital Markets Advisory’s role is limited to providing a company, or an investment bank on behalf of a company, with reports, profiles and other pertinent advisory information. Nasdaq Capital Markets Advisory does not act as an underwriter, syndicate group member or placement agent for any company, select underwriters or syndicate group members, hold funds or securities, accept investor indications of interest, solicit investors or decide which investors receive securities on behalf of a company. 
 
The SEC, FINRA and the exchanges adopt rules and examine broker-dealers and require strict compliance with their rules and regulations. The SEC, SROs and state securities commissions may conduct administrative proceedings which can result in censures, fines, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, its officers or employees. The SEC and state regulators may also institute proceedings against broker-dealers seeking an injunction or other sanction. The SEC and SRO rules cover many aspects of a broker-dealer’s business, including capital structure and withdrawals, sales methods, trade practices among broker-dealers, use and safekeeping of customers’ funds and securities, record-keeping, the financing of customers’ purchases, broker-dealer and employee registration and the conduct of directors, officers and employees. All broker-dealers have an SRO that is assigned by the SEC as the broker-dealer’s DEA. The DEA is responsible for examining a broker-dealer for compliance with the SEC’s financial responsibility rules. FINRA is the current DEA for Nasdaq Execution Services, Execution Access, NPM Securities, SMTX and Nasdaq Capital Markets Advisory.
As registered broker-dealer subsidiaries, Nasdaq Execution Services, Execution Access, NPM Securities, SMTX and Nasdaq Capital Markets Advisory are subject to regulatory requirements intended to ensure their general financial soundness and liquidity, which require that they comply with certain minimum capital requirements. The SEC and FINRA impose rules that require notification when net capital falls below certain predefined criteria, dictate the ratio of debt to equity in the regulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business under certain circumstances. Additionally, the SEC’s Uniform Net Capital Rule and FINRA rules impose certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC and FINRA for certain withdrawals of capital.
As of December 31, 2016, Nasdaq Execution Services, Execution Access, NPM Securities, SMTX and Nasdaq Capital Markets Advisory were in compliance with all of the applicable capital requirements.
Regulatory contractual relationships with FINRA .   Our SROs have signed a series of regulatory service agreements covering the services FINRA provides to the respective SROs. Under these agreements, FINRA personnel act as our agents in performing the regulatory functions outlined above, and FINRA bills us a fee for these services. These agreements have enabled us to reduce our headcount while ensuring that the markets for which we are responsible are properly regulated. However, our SROs retain ultimate regulatory responsibility for all regulatory activities performed under these agreements by FINRA.
Exchange Act Rule 17d-2 permits SROs to enter into agreements, commonly called Rule 17d-2 agreements, approved by the SEC with respect to enforcement of common rules relating to common members. Our SROs have entered into several such agreements under which FINRA assumes

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regulatory responsibility for specifics covered by the agreement, including:
agreements with FINRA covering the enforcement of common rules, the majority of which relate to the regulation of our SROs and their members;
joint industry agreements with FINRA covering responsibility for enforcement of insider trading rules;
joint industry agreement with FINRA covering enforcement of rules related to cash equity sales practices and certain other non-market related rules; and
joint industry agreement covering enforcement of rules related to options sales practices.
Regulation NMS and Options Intermarket Linkage Plan. We are subject to Regulation NMS for our cash equity markets, and our options markets have joined the Options Intermarket Linkage Plan. These are designed to facilitate the routing of orders among exchanges to create a national market system as mandated by the Exchange Act. One of the principal purposes of a national market system is to assure that brokers may execute investors’ orders at the best market price. Both Regulation NMS and the Options Intermarket Linkage Plan require that exchanges avoid trade-throughs, locking or crossing of markets and provide market participants with electronic access to the best prices among the markets for the applicable cash equity or options order.
In addition, Regulation NMS requires that every national securities exchange on which an NMS stock is traded and every national securities association act jointly pursuant to one or more national market system plans to disseminate consolidated information, including a national best bid and national best offer, on quotations for transactions in NMS stocks, and that such plan or plans provide for the dissemination of all consolidated information for an individual NMS stock through a single plan processor.
The UTP Plan was filed with and approved by the SEC as a national market system plan in accordance with the Exchange Act and Regulation NMS to provide for the collection, consolidation and dissemination of such information for Nasdaq-listed securities. The Nasdaq Stock Market serves as the processor for the UTP Plan pursuant to a contract that was extended for a five-year term beginning in October 2015. The Nasdaq Stock Market also serves as the administrator for the UTP Plan. As the processor, The Nasdaq Stock Market performs and discharges regulatory functions and responsibilities that are necessary for the members of the UTP Plan to discharge the regulatory functions related to the operation of a national market system that have been delegated to them under the Exchange Act and Regulation NMS. To fulfill its obligations as the processor, The Nasdaq Stock Market has designed, implemented, maintained, and operated a data processing and communications system, hardware, and software and communications infrastructure to provide processing for the UTP Plan. As the administrator, The Nasdaq Stock Market manages the distribution of market data, the collection of the
 
resulting market data revenue, and the dissemination of that revenue to plan members.
Regulation SCI. Effective as of November 2015, Regulation SCI is a set of rules designed to strengthen the technology infrastructure of the U.S. securities markets. Regulation SCI applies to national securities exchanges, operators of certain ATSs, market data information providers and clearing agencies, subjecting these entities to extensive new compliance obligations, with the goals of reducing the occurrence of technical issues that disrupt the securities markets and improving recovery time when disruptions occur.   We implemented an inter-disciplinary program to ensure compliance with Regulation SCI. New Regulation SCI policies and procedures were created, internal policies and procedures were updated, and an information technology governance program was rolled out to ensure compliance.
Regulation of Registered Investment Advisor Subsidiary. Our subsidiary DWA is an investment advisor registered with the SEC under the Investment Advisors Act of 1940. In this capacity, DWA is subject to oversight and inspections by the SEC. Among other things, registered investment advisors like DWA must comply with certain disclosure obligations, advertising and fee restrictions and requirements relating to client suitability and custody of funds and securities. Registered investment advisors are also subject to anti-fraud provisions under both federal and state law.
CFTC Regulation.  We also operate NFX, a designated contract market under the Commodity Exchange Act that is subject to regulatory oversight by the CFTC, an independent agency with the mandate to regulate commodity futures and options markets in the U.S. The National Futures Association provides regulatory services to NFX pursuant to a regulatory services agreement.
As a designated contract market, NFX is required to comply on an ongoing basis with 23 Core Principles set forth in Section 5(d) of the Commodity Exchange Act and with Part 38 of the CFTC’s regulations. NFX is also subject to the requirements of Part 40 of the CFTC’s regulations with respect to the adoption of new rules or rule amendments and the listing of new products. NFX is subject to CFTC rule enforcement reviews conducted by the CFTC’s Division of Market Oversight. Rule enforcement reviews may examine a designated contract market’s audit trail, trade practice surveillance, disciplinary and dispute resolution programs for compliance with the relevant Core Principles.
The Dodd-Frank Wall Street Reform and Consumer Protection Act also has resulted in increased CFTC regulation of our use of certain regulated derivatives products, as well as the operations of some of our subsidiaries outside the U.S. and their customers.
Canadian Regulation
Regulation of Nasdaq CXC and its three markets in Canada is performed by the Canadian Securities Administrators, an umbrella organization of Canada’s provincial and territorial securities regulators. Operating in Ontario, Nasdaq CXC’s lead regulator is the Ontario Securities Commission. As an approved

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ATS, Nasdaq CXC is subject to the Marketplace Rules (National Instrument 21-101 and National Instrument 23-101), which include requirements for fair access, transparency of operations, systems and confidentiality of trading information. As an ATS, Nasdaq CXC is also a member of the Investment Industry Regulatory Organization of Canada and must comply with its dealer member rules. In December 2016, Nasdaq CXC also filed an application to operate as an exchange in Canada which is pending regulatory approval.
European Regulation
Regulation of our markets in the European Union and European Economic Area focuses on issues relating to financial services, listing and trading of securities, clearing and market abuse. In mid-2012, EMIR, a regulation relating to CCP services and OTC derivatives transactions, was adopted. As a consequence of EMIR, Nasdaq Clearing, like other European CCPs, applied to reauthorize its CCP operations. Nasdaq Clearing was the first European CCP to be authorized as EMIR-compliant when the SFSA approved its application as a CCP under EMIR in 2014.
MiFID II and MiFIR were adopted in 2014. These regulations will primarily affect our European trading businesses as they are implemented over the next few years. Many of the provisions of MiFID II and MiFIR will be implemented through technical standards drafted by the European Securities and Markets Authority and approved by the European Commission. Implementation is ongoing and both MiFID II and MiFIR will apply to the European Union member states by early 2018. In addition, in 2016, the European Union adopted legislation on governance and control of the production and use of benchmark indexes. The so-called Benchmark Regulation will apply in the European Union by early 2018. As the regulatory environment continues to change and related opportunities arise, we intend to continue product development, and ensure that the exchanges and clearinghouses that comprise Nasdaq Nordic and Nasdaq Baltic maintain favorable liquidity and offer efficient trading.
The entities that operate trading venues in the Nordic and Baltic countries are each subject to local regulations. In Sweden, general supervision of the Nasdaq Stockholm exchange is carried out by the SFSA, while Nasdaq Clearing’s role as CCP in the clearing of derivatives is overseen by the SFSA and the Swedish central bank (Riksbanken). Additionally, as a function of the Swedish two-tier supervisory model, certain surveillance in relation to the exchange market is carried out by us, acting through our surveillance division.
Nasdaq Stockholm’s exchange activities are regulated primarily by the SSMA, which sets up basic requirements regarding the board of the exchange and its share capital, and which also outlines the conditions on which exchange licenses are issued. The SSMA also provides that any changes to the exchange’s articles of association following initial registration must be approved by the SFSA. Nasdaq Clearing holds the license as a CCP under EMIR.
With respect to ongoing operations, the SSMA requires exchanges to conduct their activities in an honest, fair and
 
professional manner, and in such a way as to maintain public confidence in the securities markets. When operating a regulated market, an exchange must apply the principles of free access (i.e., that each person which meets the requirements established by law and by the exchange may participate in trading), neutrality (i.e., that the exchange’s rules for the regulated market are applied in a consistent manner to all those who participate in trading) and transparency (i.e., that the participants must be given speedy, simultaneous and correct information concerning trading and that the general public must be given the opportunity to access this information). Additionally, the exchange operator must identify and manage the risks that may arise in its operations, use secure technical systems and identify and handle the conflicts of interest that may arise between the exchange or its owners’ interests and the interest in safeguarding effective risk management and secure technical systems. Similar requirements are set up by EMIR in relation to clearing operations.
The SSMA also contains the framework for both the SFSA’s supervisory work in relation to exchanges and clearinghouses and the surveillance to be carried out by the exchanges themselves. The latter includes the requirement that an exchange should have “an independent surveillance function with sufficient resources and powers to meet the exchange’s obligations.” That requires the exchange to, among other things, supervise trading and price information, compliance with laws, regulations and good market practice, participant compliance with trading participation rules, financial instrument compliance with relevant listing rules and the extent to which issuers meet their obligation to submit regular financial information to relevant authorities.
The regulatory environment in the other Nordic and Baltic countries in which a Nasdaq entity has a trading venue is broadly similar to the regulatory environment in Sweden. Since 2005, there has been cooperation between the SFSA and the main supervisory authorities in Iceland, Norway, Denmark and Finland, which looks to safeguard effective and comprehensive supervision of the exchanges comprising Nasdaq Nordic and the systems operated by it, and to ensure a common supervisory approach.
Confidence in capital markets is paramount for trading to function properly. Nasdaq Nordic carries out market surveillance through an independent unit that is separate from the business operations. The surveillance work is organized into two functions: one for the listing of instruments and surveillance of companies (issuer surveillance) and one for surveillance of trading (trading surveillance). The real-time trading surveillance for the Finnish, Icelandic, Danish and Swedish markets has been centralized to Stockholm. In addition, there are special personnel who carry out surveillance activities at each of the three Baltic exchanges. In Denmark and Finland, decisions to list new companies are made by the president of the exchange, a duty delegated by the board of each exchange.
If there is suspicion that a listed company or member has acted in breach of exchange regulations, the matter is dealt with by the market regulation division. Serious breaches are considered

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by the respective disciplinary committee in Sweden and Finland. In Denmark, all matters are dealt with by the surveillance department. In Iceland, enforcement committees handle all breaches of exchange regulations, while disciplinary committees handle the determination of fines. Suspected insider trading is reported to the appropriate authorities in the respective country or countries.
Employees
As of December 31, 2016 , Nasdaq had 4,325 employees.
Nasdaq Website and Availability of SEC Filings
We file periodic reports, proxy statements and other information with the SEC. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (such as us). The address of that site is http://www.sec.gov.
Our website is www.business.nasdaq.com. Information on our website is not a part of this Form 10-K. We make available free of charge on our website, or provide a link to, our Forms 10-K, Forms 10-Q and Forms 8-K and any amendments to these documents, that are filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. To access these filings, go to Nasdaq’s website and click on “Investor Relations,” then under “Financial Information” click on “SEC Filings.”
Item 1A. Risk Factors.
The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. If any of the following risks actually occur, our business, financial condition, or operating results could be adversely affected.
Risks Relating to our Business
Economic conditions and market factors, which are beyond our control, may adversely affect our business and financial condition.
Our business performance is impacted by a number of factors, including general economic conditions in both the U.S. and Europe, market volatility, changes in investment patterns and priorities, and other factors that are generally beyond our control. To the extent that global or national economic conditions weaken, our business is likely to be negatively impacted. Adverse market conditions could reduce customer demand for our services and the ability of our customers, lenders and other counterparties to meet their obligations to us. Poor economic conditions may result in a decline in trading volumes or values, deterioration of the economic welfare of our listed
 
companies and a reduction in the demand for our products, including our data, index, corporate solutions and market technology products. Trading volumes and values are driven primarily by general market conditions and declines in trading volumes or values may affect our market share and impact our pricing. In addition, our Market Services businesses receive revenues from a relatively small number of customers concentrated in the financial industry, so any event that impacts one or more customers or the financial industry in general could impact our revenues.
The number of listings on our markets is primarily influenced by factors such as investor demand, the global economy, available sources of financing, and tax and regulatory policies. Adverse conditions may jeopardize the ability of our listed companies to comply with the continued listing requirements of our exchanges.
Information Services revenues also may be significantly affected by global economic conditions. Professional subscriptions to our data products are at risk if staff reductions occur in financial services companies, which could result in significant reductions in our professional user revenue. In addition, adverse market conditions may cause reductions in the number of non-professional investors with investments in the market and in ETP assets under management tracking Nasdaq indexes.
Finally, there may be less demand for our Corporate Solutions or Market Technology products if global economic conditions are weak.
A reduction in trading volumes or values, market share of trading, the number of our listed companies, or demand for Information Services, Corporate Solutions or Market Technology products due to economic conditions or other market factors could adversely affect our business, financial condition and operating results.
Our industry is highly competitive.
We face intense competition from other exchanges and markets for market share of trading activity and listings. In addition, our Data Products, Index Licensing and Services, Corporate Solutions and Market Technology businesses face significant competition from other market participants. This competition includes both product and price competition. Increased competition may result in a decline in our share of trading activity, listings and demand for the products we offer, thereby adversely affecting our operating results.
The liberalization and globalization of world markets has resulted in greater mobility of capital, greater international participation in local markets and more competition. As a result, both in the U.S. and in other countries, the competition among exchanges and other execution venues has become more intense. In the last several decades, many marketplaces in both Europe and the U.S. have demutualized to provide greater flexibility for future growth. Marketplaces in both Europe and the U.S. have also merged to achieve greater economies of scale

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and scope. The proposed mergers of the LSE with Deutsche Börse A.G. and of CBOE with BATS are two current examples of pending consolidation among marketplaces.
Regulatory changes, such as MiFID, also have facilitated the entry of new participants in the European Union that compete with our European markets. The regulatory environment, both in the U.S. and in Europe, is structured to maintain this environment of intense competition. In addition, a high proportion of business in the securities markets is becoming concentrated in a smaller number of institutions and our revenue may therefore become concentrated in a smaller number of customers.
We also compete globally with other regulated exchanges and markets, ATSs, MTFs and other traditional and non-traditional execution venues. Some of these competitors also are our customers. Competitors may develop market trading platforms that are more competitive than ours. Competitors may enter into strategic partnerships, mergers or acquisitions that could make their trading, listings, clearing, data or technology businesses more competitive than ours.
If we are unable to compete successfully in this environment, our business, financial condition and operating results will be adversely affected.
Price competition has affected and could continue to affect our business.
We face intense price competition in all areas of our business. In particular, the trading industry is characterized by intense price competition. We have in the past lowered prices, and in the U.S., increased rebates for trade executions to attempt to gain or maintain market share. These strategies have not always been successful and have at times hurt operating performance. Additionally, we have also been, and may once again be, required to adjust pricing to respond to actions by competitors, which could adversely impact operating results. We are also subject to potential price competition from new competitors and from new and existing competitors. We also compete with respect to the pricing of data products and with respect to products for pre-trade book data and for post-trade last sale data. In the future, our competitors may offer rebates for quotes and trades on their systems. In addition, pricing in our Corporate Services, Index Licensing and Services and Market Technology businesses is subject to competitive pressures. If we are unable to compete successfully in respect to the pricing of our services and products, our business, financial condition and operating results may be adversely affected.
System limitations or failures could harm our business.
Our businesses depend on the integrity and performance of the technology, computer and communications systems supporting them. If our systems cannot expand to cope with increased demand or otherwise fail to perform, we could experience unanticipated disruptions in service, slower response times and delays in the introduction of new products and services. These consequences could result in service outages, lower trading volumes or values, financial losses, decreased customer service
 
and satisfaction and regulatory sanctions. Our markets and the markets that rely on our technology have experienced systems failures and delays in the past and could experience future systems failures and delays.
Although we currently maintain and expect to maintain multiple computer facilities that are designed to provide redundancy and back-up to reduce the risk of system disruptions and have facilities in place that are expected to maintain service during a system disruption, such systems and facilities may prove inadequate. If trading volumes increase unexpectedly or other unanticipated events occur, we may need to expand and upgrade our technology, transaction processing systems and network infrastructure. We do not know whether we will be able to accurately project the rate, timing or cost of any increases, or expand and upgrade our systems and infrastructure to accommodate any increases in a timely manner.

While we have programs in place to identify and minimize our exposure to vulnerabilities and work in collaboration with the technology industry to share corrective measures with our business partners, we cannot guarantee that such events will not occur in the future. Any system issue that causes an interruption in services, decreases the responsiveness of our services or otherwise affects our services could impair our reputation, damage our brand name and negatively impact our business, financial condition and operating results.

We must continue to introduce new products, initiatives and enhancements to maintain our competitive position.
We intend to launch new products and initiatives and continue to explore and pursue opportunities to strengthen our business and grow our company. We may spend substantial time and money developing new products and initiatives. If these products and initiatives are not successful, we may not be able to offset their costs, which could have an adverse effect on our business, financial condition and operating results.
In our technology operations, we have invested substantial amounts in the development of system platforms and in the rollout of our platforms. Although investments are carefully planned, there can be no assurance that the demand for such platforms will justify the related investments and that the future levels of transactions executed on these platforms will be sufficient to generate an acceptable return on such investments. If we fail to generate adequate revenue from planned system platforms, or if we fail to do so within the envisioned timeframe, it could have an adverse effect on our results of operations and financial condition. In addition, clients may delay purchases in anticipation of new products or enhancements.
A decline in trading and clearing volumes or values or market share will decrease our trading and clearing revenues.
Trading and clearing volumes and values are directly affected by economic, political and market conditions, broad trends in business and finance, unforeseen market closures or other disruptions in trading, the level and volatility of interest rates, inflation, changes in price levels of securities and the overall level of investor confidence. In recent years, trading and

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clearing volumes and values across our markets have fluctuated significantly depending on market conditions and other factors beyond our control. Current initiatives being considered by regulators and governments could have a material adverse effect on overall trading and clearing volumes or values. Because a significant percentage of our revenues is tied directly to the volume or value of securities traded and cleared on our markets, it is likely that a general decline in trading and clearing volumes or values would lower revenues and may adversely affect our operating results if we are unable to offset falling volumes or values through pricing changes. Declines in trading and clearing volumes or values may also impact our market share or pricing structures and adversely affect our business and financial condition.
If our total market share in securities continues to decrease relative to our competitors, our venues may be viewed as less attractive sources of liquidity. If growth in overall trading volume or value of these securities does not offset continued declines in our market share, or if our exchanges are perceived to be less liquid, then our business, financial condition and operating results could be adversely affected.
Since some of our exchanges offer clearing services in addition to trading services, a decline in market share of trading could lead to a decline in clearing revenues. Declines in market share also could result in issuers viewing the value of a listing on our exchanges as less attractive, thereby adversely affecting our listing business. Finally, declines in market share of Nasdaq-listed securities could lower The Nasdaq Stock Market’s share of tape pool revenues under the consolidated data plans, thereby reducing the revenues of our Data Products business.
Our role in the global marketplace may place us at greater risk for a cyberattack or other security incidents.
Our systems and operations are vulnerable to damage or interruption from security breaches, hacking, data theft, denial of service attacks, human error, natural disasters, power loss, fire, sabotage, terrorism, computer viruses, intentional acts of vandalism and similar events. Given our position in the global securities industry, we may be more likely than other companies to be a direct target, or an indirect casualty, of such events.
While we continue to employ resources to monitor our systems and protect our infrastructure, these measures may prove insufficient depending upon the attack or threat posed. Any system issue, whether as a result of an intentional breach or a natural disaster, could damage our reputation and cause us to lose customers, experience lower trading volumes or values, incur significant liabilities or otherwise have a negative impact on our business, financial condition and operating results. Any system breach may go undetected for an extended period of time. We also could incur significant expense in addressing any of these problems and in addressing related data security and privacy concerns.
The success of our business depends on our ability to keep up with rapid technological and other competitive changes affecting our industry. Specifically, we must complete
 
development of, successfully implement and maintain platforms that have the functionality, performance, capacity, reliability and speed required by our business and our regulators, as well as by our customers.
The markets in which we compete are characterized by rapidly changing technology, evolving industry and regulatory standards, frequent enhancements to existing products and services, the adoption of new services and products and changing customer demands. We may not be able to keep up with rapid technological and other competitive changes affecting our industry. For example, we must continue to enhance our platforms to remain competitive as well as to address our regulatory responsibilities, and our business will be negatively affected if our platforms or the technology solutions we sell to our customers fail to function as expected. If we are unable to develop our platforms to include other products and markets, or if our platforms do not have the required functionality, performance, capacity, reliability and speed required by our business and our regulators, as well as by our customers, we may not be able to compete successfully. Further, our failure to anticipate or respond adequately to changes in technology and customer preferences or any significant delays in product development efforts, could have a material adverse effect on our business, financial condition and operating results.
We may not be able to successfully integrate acquired businesses, which may result in an inability to realize the anticipated benefits of our acquisitions.

We must rationalize, coordinate and integrate the operations of our acquired businesses, including ISE, Nasdaq CXC, Marketwired and Boardvantage. This process involves complex technological, operational and personnel-related challenges, which are time-consuming and expensive and may disrupt our business. The difficulties, costs and delays that could be encountered may include:

difficulties, costs or complications in combining the companies’ operations, including technology platforms, which could lead to us not achieving the synergies we anticipate or customers not renewing their contracts with us as we migrate platforms;

incompatibility of systems and operating methods;

reliance on a deal partner for transition services, including billing services;

inability to use capital assets efficiently to develop the business of the combined company;

difficulties of complying with government-imposed regulations in the U.S. and abroad, which may be conflicting;


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resolving possible inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures;

the diversion of management’s attention from ongoing business concerns and other strategic opportunities;

difficulties in operating acquired businesses in parallel with similar businesses that we operated previously;

difficulties in operating businesses we have not operated before;

difficulties of integrating multiple acquired businesses simultaneously;

the retention of key employees and management;

the implementation of disclosure controls, internal controls and financial reporting systems at non-U.S. subsidiaries to enable us to comply with U.S. GAAP and U.S. securities laws and regulations, including the Sarbanes Oxley Act of 2002, required as a result of our status as a reporting company under the Exchange Act;

the coordination of geographically separate organizations;

the coordination and consolidation of ongoing and future research and development efforts;

possible tax costs or inefficiencies associated with integrating the operations of a combined company;

pre-tax restructuring and revenue investment costs;

the retention of strategic partners and attracting new strategic partners; and

negative impacts on employee morale and performance as a result of job changes and reassignments.

For these reasons, we may not achieve the anticipated financial and strategic benefits from our acquisitions and initiatives. Any actual cost savings and synergies may be lower than we expect and may take a longer time to achieve than we anticipate, and we may fail to realize the anticipated benefits of acquisitions.
We will need to invest in our operations to maintain and grow our business and to integrate acquisitions, and we may need additional funds, which may not be readily available.
We depend on the availability of adequate capital to maintain and develop our business. Although we believe that we can meet our current capital requirements from internally generated funds, cash on hand and available borrowings under our revolving credit facility, if the capital and credit markets experience volatility, access to capital or credit may not be available on terms acceptable to us or at all. Limited access to
 
capital or credit in the future could have an impact on our ability to refinance debt, maintain our credit rating, meet our regulatory capital requirements, engage in strategic initiatives, make acquisitions or strategic investments in other companies or react to changing economic and business conditions. If we are unable to fund our capital or credit requirements, it could have an adverse effect on our business, financial condition and operating results.
In addition to our debt obligations, we will need to continue to invest in our operations for the foreseeable future to integrate acquired businesses and to fund new initiatives. If we do not achieve the expected operating results, we will need to reallocate our cash resources. This may include borrowing additional funds to service debt payments, which may impair our ability to make investments in our business or to integrate acquired businesses.
Should we need to raise funds through issuing additional equity, our equity holders will suffer dilution. Should we need to raise funds through incurring additional debt, we may become subject to covenants even more restrictive than those contained in our credit facilities, the indentures governing our notes and our other debt instruments. Furthermore, if adverse economic conditions occur, we could experience decreased revenues from our operations which could affect our ability to satisfy financial and other restrictive covenants to which we are subject under our existing indebtedness.
We operate in a highly regulated industry and may be subject to censures, fines and enforcement proceedings if we fail to comply with regulatory obligations that can be ambiguous and can change unexpectedly.
We operate in a highly regulated industry and are subject to extensive regulation in the U.S., Europe and Canada. The securities trading industry is subject to significant regulatory oversight and could be subject to increased governmental and public scrutiny in the future that can change in response to global conditions and events.
Our ability to comply with complex and changing regulation is largely dependent on our establishment and maintenance of compliance, audit and reporting systems that can quickly adapt and respond, as well as our ability to attract and retain qualified compliance and other risk management personnel. While we have policies and procedures to identify, monitor and manage our risks and regulatory obligations, we cannot assure you that our policies and procedures will always be effective or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed. 
Our regulated markets are subject to audits, investigations, administrative proceedings and enforcement actions relating to compliance with applicable rules and regulations. Regulators have broad powers to impose fines, penalties or censure, issue cease-and-desist orders, prohibit operations, revoke licenses or registrations and impose other sanctions on our exchanges, broker-dealers and markets for violations of applicable requirements.

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For example, during 2016, the SFSA and the other Nordic financial supervisory authorities conducted investigations of cybersecurity processes at our Nordic exchanges and clearinghouse. In December 2016, we were issued a $6 million fine by the SFSA as a result of findings in connection with its investigation. The SFSA’s conclusions related to governance issues rather than systems and platform security. We have appealed the SFSA’s decision, including the amount of the fine.
In the future, we could be subject to SEC or other regulatory investigations or enforcement proceedings that could result in substantial sanctions, including revocation of our operating licenses. Any such investigations or proceedings, whether successful or unsuccessful, could result in substantial costs, the diversion of resources, including management time, and potential harm to our reputation, which could have a material adverse effect on our business, results of operations or financial condition. In addition, our exchanges could be required to modify or restructure their regulatory functions in response to any changes in the regulatory environment, or they may be required to rely on third parties to perform regulatory and oversight functions, each of which may require us to incur substantial expenses and may harm our reputation if our regulatory services are deemed inadequate.
The regulatory framework under which we operate and new regulatory requirements or new interpretations of existing regulatory requirements could require substantial time and resources for compliance, which could make it difficult and costly for us to operate our business.
Under current U.S. federal securities laws, changes in the rules and operations of our securities markets, including our pricing structure, must be reviewed and in many cases explicitly approved by the SEC. The SEC may approve, disapprove, or recommend changes to proposals that we submit. In addition, the SEC may delay either the approval process or the initiation of the public comment process. Any delay in approving changes, or the altering of any proposed change, could have an adverse effect on our business, financial condition and operating results. We must compete not only with ATSs that are not subject to the same SEC approval process but also with other exchanges that may have lower regulation and surveillance costs than us. There is a risk that trading will shift to exchanges that charge lower fees because, among other reasons, they spend significantly less on regulation. In addition, favorable SEC rulings and interpretations can be challenged in and reversed by federal courts of appeals, reducing or eliminating the value of such prior interpretations.
In addition, our registered broker-dealer subsidiaries are subject to regulation by the SEC, FINRA and other SROs. These subsidiaries are subject to regulatory requirements intended to ensure their general financial soundness and liquidity, which require that they comply with certain minimum capital requirements. The SEC and FINRA impose rules that require notification when a broker-dealer’s net capital falls below certain predefined criteria, dictate the ratio of debt to equity in the regulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business
 
under certain circumstances. Additionally, the SEC’s Uniform Net Capital Rule and FINRA rules impose certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC and FINRA for certain withdrawals of capital. Any failure to comply with these broker-dealer regulations could have a material adverse effect on the operation of our business, financial condition and operating results.
Our non-U.S. business is subject to regulatory oversight in all the countries in which we operate regulated businesses, such as exchanges, clearinghouses or central securities depositories. The non-U.S. countries in which we currently operate or share ownership in regulated businesses include Canada, Sweden, Finland, Denmark, Iceland, Estonia, Lithuania, Latvia, Norway, Armenia, the Netherlands and the United Kingdom. In all the aforementioned countries, we have received authorization from the relevant authorities to conduct our regulated business activities. The authorities may revoke this authorization if we do not suitably carry out our regulated business activities. The authorities are also entitled to request that we adopt measures in order to ensure that we continue to fulfill the authorities’ requirements.
Furthermore, certain of our customers operate in a highly regulated industry. Regulatory authorities could impose regulatory changes that could impact the ability of our customers to use our exchanges. The loss of a significant number of customers or a reduction in trading activity on any of our exchanges as a result of such changes could have a material adverse effect on our business, financial condition and operating results.
Regulatory changes and changes in market structure could have a material adverse effect on our business.
Regulatory changes adopted by the SEC or other regulators of our markets, and regulatory changes that our markets may adopt in fulfillment of their regulatory obligations, could materially affect our business operations. In recent years, there has been increased regulatory and governmental focus on issues affecting the securities markets, including market structure and technological oversight. The SEC, FINRA and the national securities exchanges have introduced several initiatives to ensure the oversight, integrity and resilience of markets.
In 2015, the SEC created an Equity Market Structure Advisory Committee to consider and opine on market structure issues relevant to Nasdaq’s three U.S. equities markets. Within the past year, the Advisory Committee held three meetings and discussed a wide range of issues, including order routing, best execution, access fees and maker-taker pricing, market data fees, and securities information processors. The Advisory Committee has recommended that the SEC conduct an Access Fee Pilot that could limit the ability of Nasdaq’s three cash equities exchanges to assess fees and could impact the overall revenue of these exchanges. Additionally, the SEC recently extended the announced sunset of this Advisory Committee from February 2017 to August 2017, and further extensions are possible. While these discussions may impact Nasdaq’s

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business in the future, it is too early to determine which, if any, of the Advisory Committee recommendations the Commission will propose, adopt and implement.
Future MiFID II and MiFIR rules could affect our operations in Europe. In addition, actions on any of the specific regulatory issues currently under review in the U.S. and Europe could have a material impact on our business.
While we support regulatory efforts to review and improve the structure, resilience and integrity of the markets, the adoption of these proposed regulatory changes and future reforms could impose significant costs and obligations on the operation of our exchanges and processor systems and have other impacts on our business.
Regulatory changes or future court rulings may have an adverse impact on our revenue from proprietary data products.
Regulatory and legal developments could reduce the amount of revenue that we earn from our proprietary data products. In the U.S., we generally are required to file with the SEC to establish or modify the fees that we charge for our data products. In recent years, certain industry groups have objected to the ability of exchanges to charge for certain data products. We have defeated two challenges in federal appeals court and an additional challenge at the administrative level within the SEC. However, the industry challengers have sought additional review of that administrative decision by the full SEC. That SEC review remains pending and, when resolved, it may be appealed to a federal court of appeals. If the results of the full SEC review and any subsequent appeal are detrimental to our U.S. exchanges’ ability to charge for data products, there could be a negative impact on our revenues. We cannot predict whether, or in what form, any regulatory changes will be implemented, or their potential impact on our business. A determination by the SEC, for example, to link data fees to marginal costs, to take a more active role in the data rate-setting process, or to reduce the current levels of data fees could have an adverse effect on our Data Products revenues.
In Canada, all new marketplace fees and changes to existing fees, including trading and data fees, must be filed with and approved by the Ontario Securities Commission. In 2016, the Canadian Securities Administrators approved amendments that impose a fee cap for trading fees and the adoption of a Data Fees Methodology that restricts the total amount of fees that can be charged by all marketplaces to a reference level that is not yet defined. Until this reference is established, increases in market data fees will not be permitted. When a reference is established, all marketplaces will be subject to annual reviews of their market data fees tying market data revenues to market share.
Our European exchanges currently offer data products to customers on a non-discriminatory and reasonable commercial basis. It is expected that the future MiFID II rules will result in a definition of the term “reasonable commercial basis.” There is a risk that the final wording of this definition may influence
 
the fees for European data products adversely. In addition any future actions by the European Commission or European court decisions could affect our ability to offer data products in the same manner that we do today thereby causing an adverse effect on our Data Products revenues.
Technology issues relating to our role as exclusive processor for Nasdaq-listed stocks could affect our business.
On August 22, 2013, we experienced an outage in the exclusive processor system we maintain and operate on behalf of all exchanges that trade Nasdaq-listed stocks that resulted in a market-wide trading halt lasting approximately three hours. Following this system outage, the SEC and others evaluated all infrastructure that is critical to the national market system, including the processor systems. Nasdaq, as technology provider to the UTP Operating Committee, proposed, received approval for, and implemented measures to enhance the resiliency of the existing processor system. Additionally, the UTP Operating Committee recently approved Nasdaq’s proposal to transfer the processor technology from its current enhanced platform to Nasdaq’s INET platform. The migration, which was completed in late 2016, further enhanced the resiliency of the processor systems. If, despite these improvement measures, future outages occur or the processor systems fail to function properly while we are operating the systems, it could have an adverse effect on our business, reputation, financial condition or operating results.
Stagnation or decline in the listings market could have an adverse effect on our revenues.
The market for listings is dependent on the prosperity of companies and the availability of risk capital. Although the market for listings over the past couple of years was strong, stagnation or decline in the number of new listings on The Nasdaq Stock Market and the Nasdaq Nordic and Nasdaq Baltic exchanges will impact our revenues. We recognize revenue from new listings on The Nasdaq Stock Market on a straight-line basis over an estimated six-year service period. As a result, a stagnant market for listings could cause a decrease in revenues for future years. Furthermore, a prolonged decrease in the number of listings could negatively impact the growth of our transactions revenues. Our Corporate Solutions business is also impacted by declines in the listings market or increases in acquisitions activity as there will be fewer publicly-traded customers that need our products.
Any reduction in our credit rating could increase the cost of our funding from the capital markets.
Our long-term debt is currently rated investment grade by two of the major rating agencies. These rating agencies regularly evaluate us and their ratings of our long-term debt are based on a number of factors, including our financial strength and corporate development activity as well as factors not entirely within our control, including conditions affecting the financial services industry generally. There can be no assurance that we will maintain our current ratings. Our failure to maintain those ratings could adversely affect the cost and other terms upon which we are able to obtain funding and increase our cost of

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capital. A reduction in credit ratings would also result in increases in the cost of our outstanding debt as the interest rate on the outstanding amounts under our credit facilities and most tranches of our senior notes fluctuates based on our credit ratings.
Damage to our reputation or brand name could have a material adverse effect on our businesses.
One of our competitive strengths is our strong reputation and brand name. Various issues may give rise to reputational risk, including issues relating to:

our ability to maintain the security of our data and systems;

the quality and reliability of our technology platforms and systems;

the ability to fulfill our regulatory obligations;

the ability to execute our business plan, key initiatives or new business ventures and the ability to keep up with changing customer demand;

the representation of our business in the media;

the accuracy of our financial statements and other financial and statistical information;

the accuracy of our financial guidance or other information provided to our investors;

the quality of our corporate governance structure;

the quality of our products, including the reliability of our transaction-based, Corporate Solutions and Market Technology products, the accuracy of the quote and trade information provided by our Data Products business and the accuracy of calculations used by our Index Licensing and Services business for indexes and unit investment trusts;

the quality of our disclosure controls or internal controls over financial reporting, including any failures in supervision;

extreme price volatility on our markets;

any negative publicity surrounding our listed companies; and

any misconduct, fraudulent activity or theft by our employees or other persons formerly or currently associated with us.
Damage to our reputation could cause some issuers not to list their securities on our exchanges, as well as reduce the trading volumes or values on our exchanges or cause us to lose
 
customers in our Data Products, Index Licensing and Services, Corporate Solutions or Market Technology businesses. This, in turn, may have a material adverse effect on our business, financial condition and operating results.
We may be required to recognize impairments of our goodwill, intangible assets or other long-lived assets in the future.
Our business acquisitions typically result in the recording of goodwill and intangible assets, and the recorded values of those assets may become impaired in the future. As of December 31, 2016, goodwill totaled approximately $6.0 billion and intangible assets, net of accumulated amortization, totaled approximately $2.1 billion. The determination of the value of such goodwill and intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements.
We assess goodwill and intangible assets, as well as other long-lived assets, including equity and cost method investments, and property and equipment for impairment on an annual basis or more frequently if indicators of impairment arise. We estimate the fair value of such assets by assessing many factors, including historical performance, capital requirements and projected cash flows. Considerable management judgment is necessary to project future cash flows and evaluate the impact of expected operating and macroeconomic changes on these cash flows. The estimates and assumptions we use are consistent with our internal planning process. However, there are inherent uncertainties in these estimates.
As discussed in “Intangible Asset Impairment Charges,” of Note 5, “Goodwill and Acquired Intangible Assets,” to the consolidated financial statements, we recorded an indefinite-lived intangible asset impairment charge of $578 million in 2016 and $119 million in 2015. In addition, we recorded asset impairment charges of $49 million in 2014.
We may experience future events that may result in asset impairments. Future disruptions to our business, prolonged economic weakness or significant declines in operating results at any of our reporting units or businesses, may result in impairment charges to goodwill, intangible assets or other long-lived assets. A significant impairment charge in the future could have a material adverse effect on our operating results.
For additional discussion of our goodwill, indefinite-lived intangible assets and other long-lived assets, including related impairment, see “Goodwill and Related Impairment,” “Indefinite-Lived Intangible Assets and Related Impairment,” and “Other Long-Lived Assets and Related Impairment,” of “Critical Accounting Policies and Estimates,” of Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Goodwill and Indefinite-Lived Intangible Assets,” and “Valuation of Other Long-Lived Assets,” of Note 2, “Summary of Significant Accounting Policies,” and Note 5, “Goodwill and Acquired Intangible Assets,” to the consolidated financial statements.

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We may experience fluctuations in our operating results, which may adversely affect the market price of our common stock.
The financial services industry is risky and unpredictable and is directly affected by many national and international factors beyond our control, including:

economic, political and geopolitical market conditions;

natural disasters, terrorism, war or other catastrophes;

broad trends in industry and finance;

changes in price levels and volatility in the stock markets;
the level and volatility of interest rates;

changes in government monetary or tax policy;

the perceived attractiveness of the U.S. or European capital markets; and

inflation.
Any one of these factors could have a material adverse effect on our business, financial condition and operating results by causing a substantial decline in the financial services markets and reducing trading volumes or values. In particular, our U.S. business operations are heavily concentrated on the East Coast, and our European business operations are heavily concentrated in Stockholm. Any event that affects either of those geographic areas could potentially affect our ability to operate our businesses.
Additionally, since borrowings under our credit facilities bear interest at variable rates, any increase in interest rates on debt that we have not fixed using interest rate hedges will increase our interest expense, reduce our cash flow or increase the cost of future borrowings or refinancings. Other than variable rate debt, we believe our business has relatively large fixed costs and low variable costs, which magnifies the impact of revenue fluctuations on our operating results. As a result, a decline in our revenue may lead to a relatively larger impact on operating results. A substantial portion of our operating expenses will be related to personnel costs, regulation and corporate overhead, none of which can be adjusted quickly and some of which cannot be adjusted at all. Our operating expense levels will be based on our expectations for future revenue. If actual revenue is below management’s expectations, or if our expenses increase before revenues do, both revenues less transaction-based expenses and operating results would be materially and adversely affected. Because of these factors, it is possible that our operating results or other operating metrics may fail to meet the expectations of stock market analysts and investors. If this happens, the market price of our common stock may be adversely affected.
We are exposed to credit risk from third parties, including customers, counterparties and clearing agents.
 
We are exposed to credit risk from third parties, including customers, counterparties and clearing agents. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons.
We clear or stand as riskless principal to a range of equity-related and fixed-income-related derivative products, commodities and resale and repurchase agreements. We assume the counterparty risk for all transactions that are cleared through our markets and guarantee that our cleared contracts will be honored. We enforce minimum financial and operational criteria for membership eligibility, require members and investors to provide collateral, and maintain established risk policies and procedures to ensure that the counterparty risks are properly monitored and pro-actively managed; however, none of these measures provides absolute assurance against experiencing financial losses from defaults by our counterparties on their obligations. No guarantee can be given that the collateral provided will at all times be sufficient. Although we maintain clearing capital resources to serve as an additional layer of protection to help ensure that we are able to meet our obligations, these resources may not be sufficient.
In addition, one of our broker-dealer subsidiaries, Execution Access, has a clearing arrangement with Cantor Fitzgerald & Co., or Cantor Fitzgerald. As of December 31, 2016, we have contributed $20 million of clearing deposits to Cantor Fitzgerald in connection with this clearing arrangement. Some of the trading activity in Execution Access is cleared by Cantor Fitzgerald through the Fixed Income Clearing Corporation. Execution Access assumes the counterparty risk of clients that do not clear through the Fixed Income Clearing Corporation. Counterparty risk of clients exists for Execution Access between the trade date and settlement date of the individual transactions, which is one business day. All of Execution Access’ obligations under the clearing arrangement with Cantor Fitzgerald are guaranteed by Nasdaq. Counterparties that do not clear through the Fixed Income Clearing Corporation are subject to a credit due diligence process and may be required to post collateral, provide principal letters, or provide other forms of credit enhancement to Execution Access for the purpose of mitigating counterparty risk. Although we believe that the potential for us to be required to make payments under these arrangements is mitigated through the pledged collateral and our risk management policies, no guarantee can be provided that these arrangements will at all times be sufficient.
We also have credit risk related to transaction and subscription-based revenues that are billed to customers on a monthly or quarterly basis, in arrears.
Credit losses such as those described above could adversely affect our consolidated financial position and results of operations.
Our leverage limits our financial flexibility, increases our exposure to weakening economic conditions and may adversely affect our ability to obtain additional financing.

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Our indebtedness as of December 31, 2016 was approximately $3.6 billion. We also may borrow up to an additional $749 million under our revolving credit facility.
Our leverage could:
reduce funds available to us for operations and general corporate purposes or for capital expenditures as a result of the dedication of a substantial portion of our consolidated cash flow from operations to the payment of principal and interest on our indebtedness;

increase our exposure to a continued downturn in general economic conditions;

place us at a competitive disadvantage compared with our competitors with less debt; and

affect our ability to obtain additional financing in the future for refinancing indebtedness, acquisitions, working capital, capital expenditures or other purposes.
In addition, we must comply with the covenants in our credit facilities. Among other things, these covenants restrict our ability to grant liens, incur additional indebtedness, pay dividends, dispose of assets and conduct transactions with affiliates. Failure to meet any of the covenant terms of our credit facilities could result in an event of default. If an event of default occurs, and we are unable to receive a waiver of default, our lenders may increase our borrowing costs, restrict our ability to obtain additional borrowings and accelerate all amounts outstanding. Our credit facilities allow us to pay cash dividends on our common stock as long as certain leverage ratios are maintained.
We are subject to litigation risks and other liabilities.
Many aspects of our business potentially involve substantial liability risks. Although under current law we are immune from private suits arising from conduct within our regulatory authority and from acts and forbearances incident to the exercise of our regulatory authority, this immunity only covers certain of our activities in the U.S., and we could be exposed to liability under national and local laws, court decisions and rules and regulations promulgated by regulatory agencies.
Some of our other liability risks arise under the laws and regulations relating to the tax, intellectual property, anti-money laundering, technology export, foreign asset controls and foreign corrupt practices areas. Liability could also result from disputes over the terms of a trade, claims that a system failure or delay cost a customer money, claims we entered into an unauthorized transaction or claims that we provided materially false or misleading statements in connection with a securities transaction. As we intend to defend any such litigation actively, significant legal expenses could be incurred. Although we carry insurance that may limit our risk of damages in some cases, we still may sustain uncovered losses or losses in excess of available insurance that would affect our financial condition and results of operations.
 
We have self-regulatory obligations and also operate for-profit businesses, and these two roles may create conflicts of interest.
We have obligations to regulate and monitor activities on our markets and ensure compliance with applicable law and the rules of our markets by market participants and listed companies. In the U.S., some have expressed concern about potential conflicts of interest of “for-profit” markets performing the regulatory functions of an SRO. Although our U.S. cash equity and options exchanges outsource a substantial portion of their market regulation functions to FINRA, we do perform regulatory functions and bear regulatory responsibility related to our listed companies and our markets. Any failure by us to diligently and fairly regulate our markets or to otherwise fulfill our regulatory obligations could significantly harm our reputation, prompt SEC scrutiny and adversely affect our business and reputation.
Our Nordic and Baltic exchanges also monitor trading and compliance with listing standards. They monitor the listing of cash equities and other financial instruments. The prime objective of such monitoring activities is to promote confidence in the exchanges among the general public and to ensure fair and orderly functioning markets. The monitoring functions within the Nasdaq Nordic and Nasdaq Baltic exchanges are the responsibility of the surveillance departments or other surveillance personnel. The surveillance departments or personnel are intended to strengthen the integrity of and confidence in these exchanges and to avoid conflicts of interest. Any failure to diligently and fairly regulate the Nordic and Baltic exchanges could significantly harm our reputation, prompt scrutiny from regulators and adversely affect our business and reputation.
Failure to protect our intellectual property rights, or allegations that we have infringed on the intellectual property rights of others, could harm our brand-building efforts and ability to compete effectively.
To protect our intellectual property rights, we rely on a combination of trademark laws, copyright laws, patent laws, trade secret protection, confidentiality agreements and other contractual arrangements with our affiliates, clients, strategic partners and others. The protective steps that we take may be inadequate to deter misappropriation of our proprietary information. We may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights.
We have registered, or applied to register, our trademarks in the United States and in over 50 foreign jurisdictions and have pending U.S. and foreign applications for other trademarks. We also maintain copyright protection on our branded materials and pursue patent protection for software products, inventions and other processes developed by us. We also hold a number of patents, patent applications and licenses in the United States and other foreign jurisdictions. Effective trademark, copyright, patent and trade secret protection may not be available in every country in which we offer our services. Failure to protect our

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intellectual property adequately could harm our brand and affect our ability to compete effectively. Further, defending our intellectual property rights could result in the expenditure of significant financial and managerial resources.
Third parties may assert intellectual property rights claims against us, which may be costly to defend, could require the payment of damages and could limit our ability to use certain technologies, trademarks or other intellectual property. Any intellectual property claims, with or without merit, could be expensive to litigate or settle and could divert management resources and attention. Successful challenges against us could require us to modify or discontinue our use of technology or business processes where such use is found to infringe or violate the rights of others, or require us to purchase licenses from third parties, any of which could adversely affect our business, financial condition and operating results.
We rely on third parties to perform certain functions, and our business could be adversely affected if these third parties fail to perform as expected.
We rely on third parties for regulatory, data center, data storage, data content, clearing and other services. To the extent that any of our vendors or other third-party service providers experiences difficulties, materially changes their business relationship with us or is unable for any reason to perform their obligations, our business or our reputation may be materially adversely affected.

We also rely on members of our trading community to maintain markets and add liquidity. To the extent that any of our largest members experiences difficulties, materially changes its business relationship with us or is unable for any reason to perform market making activities, our business or our reputation may be materially adversely affected.
We are a holding company that depends on cash flow from our subsidiaries to meet our obligations, and any restrictions on our subsidiaries’ ability to pay dividends or make other payments to us may have a material adverse effect on our results of operations and financial condition.
As a holding company, we require dividends and other payments from our subsidiaries to meet cash requirements. Minimum capital requirements mandated by regulatory authorities having jurisdiction over some of our regulated subsidiaries indirectly restrict the amount of dividends paid upstream.
In addition, unremitted earnings of subsidiaries outside of the U.S. are used to finance our international operations and are generally considered to be indefinitely reinvested. It is not our current intent to change this position. However, the majority of cash held outside the U.S. is available for repatriation, but under
current law, could subject us to additional U.S. income taxes,
less applicable foreign tax credits.
If our subsidiaries are unable to pay dividends and make other payments to us when needed, we may be unable to satisfy our
 
obligations, which would have a material adverse effect on our business, financial condition and operating results.
Future acquisitions, investments, partnerships and joint ventures may require significant resources and/or result in significant unanticipated losses, costs or liabilities.
Over the past several years, acquisitions have been significant factors in our growth. Although we cannot predict our rate of growth as the result of acquisitions with complete accuracy, we believe that additional acquisitions and investments or entering into partnerships and joint ventures will be important to our growth strategy. Such transactions may be material in size and scope. Many of the other potential purchasers of assets in our industry have greater financial resources than we have. Therefore, we cannot be sure that we will be able to complete future transactions on terms favorable to us.
We may finance future acquisitions by issuing additional equity and/or debt. The issuance of additional equity in connection with any such transaction could be substantially dilutive to existing shareholders. In addition, announcement or implementation of future transactions by us or others could have a material effect on the price of our common stock. The issuance of additional debt could increase our leverage substantially. We could face financial risks associated with incurring additional debt, particularly if the debt results in significant incremental leverage. Additional debt may reduce our liquidity, curtail our access to financing markets, impact our standing with credit agencies and increase the cash flow required for debt service. Any incremental debt incurred to finance an acquisition could also place significant constraints on the operation of our business.
Furthermore, any future acquisitions or investments in businesses or facilities could entail a number of additional risks, including:

problems with effective integration of operations;

the inability to maintain key pre-acquisition business relationships;

increased operating costs;

the diversion of our management team from other operations;

problems with regulatory bodies;

declines in the value of investments;

exposure to unanticipated liabilities;

difficulties in realizing projected efficiencies, synergies and cost savings; and

changes in our credit rating and financing costs.

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Changes in tax laws, regulations or policies could have a material adverse effect on our financial results.
Like other corporations, we are subject to taxes at the federal, state and local levels, as well as in non-U.S. jurisdictions. Changes in tax laws, regulations or policies could result in us having to pay higher taxes, which would in turn reduce our net income.
In addition, some of our subsidiaries are subject to tax in the jurisdictions in which they are organized or operate. In computing our tax obligation in these jurisdictions, we take various tax positions. We cannot assure you that upon review of these positions the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on our subsidiaries.
Our non-U.S. business operates in various international markets, particularly emerging markets that are subject to greater political, economic and social uncertainties than developed countries.
The operations of our non-U.S. business are subject to the risk inherent in international operations, including but not limited to, risks with respect to operating in Iceland, the Baltics, the Middle East, Africa and Asia. Our expansion into lower cost locations, such as Lithuania, India and the Philippines, may increase operational risk. Some of these economies may be subject to greater political, economic and social uncertainties than countries with more developed institutional structures. Political, economic or social events or developments in one or more of these countries could adversely affect our operations and financial results.
Because we have operations in several countries, we are exposed to currency risk.
We have operations in the U.S., the Nordic and Baltic countries, the U.K., Australia and many other foreign countries. We therefore have significant exposure to exchange rate movements between the Euro, Swedish Krona and other foreign currencies towards the U.S. dollar. Significant inflation or disproportionate changes in foreign exchange rates with respect to one or more of these currencies could occur as a result of general economic conditions, acts of war or terrorism, changes in governmental monetary or tax policy or changes in local interest rates. These exchange rate differences will affect the translation of our non-U.S. results of operations and financial condition into U.S. dollars as part of the preparation of our consolidated financial statements.
If our risk management methods are not effective, our business, reputation and financial results may be adversely affected.
We have methods to identify, monitor and manage our risks, including oversight of risk management by Nasdaq’s Global Risk Steering Committee, which is comprised of employees and is responsible for regularly reviewing risks for materiality and referring significant risks to the board of directors or specific board committees. However, these methods may not be fully effective. Some of our risk management methods may
 
depend upon evaluation of information regarding markets, customers or other matters. That information may not in all cases be accurate, complete, up-to-date or properly evaluated. If our methods are not effective or we are not successful in monitoring or evaluating the risks to which we are or may be exposed, our business, reputation, financial condition and operating results could be materially adversely affected.
Charges to earnings resulting from acquisition, restructuring and integration costs may materially adversely affect the market value of our common stock.
In accordance with U.S. GAAP, we are accounting for the completion of our acquisitions using the acquisition method of accounting. We are allocating the total estimated purchase prices to net tangible assets, amortizable intangible assets and indefinite-lived intangible assets, and based on their fair values as of the date of completion of the acquisitions, recording the excess of the purchase price over those fair values as goodwill. Our financial results, including earnings per share, could be adversely affected by a number of financial adjustments required by U.S. GAAP including the following:

we may incur additional amortization expense over the estimated useful lives of certain of the intangible assets acquired in connection with acquisitions during such estimated useful lives;

we may have additional depreciation expense as a result of recording acquired tangible assets at fair value, in accordance with U.S. GAAP, as compared to book value as recorded;

to the extent the value of goodwill or intangible assets becomes impaired, we may be required to incur material charges relating to the impairment of those assets; and

we may incur certain adjustments to reflect the financial condition and operating results under U.S. GAAP and U.S. dollars.
Risks Relating to an Investment in Our Common Stock
Decisions to declare future dividends on our common stock will be at the discretion of our board of directors based upon a review of relevant considerations. Accordingly, there can be no guarantee that we will pay future dividends to our stockholders.
Since 2013, our board of directors has declared quarterly cash dividend payments on our outstanding common stock. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by Nasdaq’s board of directors. The board’s determination to declare dividends will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law and other factors that the board deems relevant. Based on an evaluation of these factors, the board of directors may determine not to declare future dividends at all or to declare future dividends at a reduced amount.

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Accordingly, there can be no guarantee that we will pay future dividends to our stockholders.
Provisions of our certificate of incorporation, by-laws, exchange rules (including provisions included to address SEC concerns) and governing law could delay or prevent a change in control of us and entrench current management.
Our organizational documents place restrictions on the voting rights of certain stockholders. The holders of our common stock are entitled to one vote per share on all matters to be voted upon by the stockholders except that no person may exercise voting rights in respect of any shares in excess of 5% of the then outstanding shares of our common stock. Any change to the 5% voting limitation would require SEC approval.
In response to the SEC’s concern about a concentration of our ownership, the rules of our U.S. exchanges include a rule prohibiting any member or any person associated with a member of the exchange from beneficially owning more than 20% of our outstanding voting interests. SEC consent would be required before any investor could obtain more than a 20% voting interest in us. The rules of our U.S. exchanges also require the SEC’s approval of any business ventures with one of our members, subject to exceptions.
Our organizational documents contain provisions that may be deemed to have an anti-takeover effect and may delay, deter or prevent a change of control of us, such as a tender offer or takeover proposal that might result in a premium over the market price for our common stock. Additionally, certain of these provisions make it more difficult to bring about a change in the composition of our board of directors, which could result in entrenchment of current management.
 
Our certificate of incorporation and by-laws:

do not permit stockholders to act by written consent;

require certain advance notice for director nominations and actions to be taken at annual meetings; and

authorize the issuance of undesignated preferred stock, or “blank check” preferred stock, which could be issued by our board of directors without stockholder approval.
Section 203 of the Delaware General Corporation Law imposes restrictions on mergers and other business combinations between us and any holder of 15% or more (or, in some cases, a holder who previously held 15% or more) of our common stock. In general, Delaware law prohibits a publicly held corporation from engaging in a “business combination” with an “interested stockholder” for three years after the stockholder becomes an interested stockholder, unless the corporation’s board of directors and stockholders approve the business combination in a prescribed manner.

Finally, many of the European countries where we operate regulated entities require prior governmental approval before an investor acquires 10% or greater of our common stock.
Item 1B. Unresolved Staff Comments.
None.

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Item 2. Properties.  
The following is a description of our principal properties.
Location
 
Use
 
Size
(approximate,
in square feet)
Stockholm, Sweden
 
European headquarters
 
294,000
 
New York, New York
 
U.S. headquarters
 
113,000
 
Philadelphia, Pennsylvania
 
Location of Nasdaq PHLX
 
83,000
 
Philadelphia, Pennsylvania
 
General office space
 
74,000
 
New York, New York
 
General office space
 
64,000
 
Bengaluru, India
 
General office space
 
63,000
 
New York, New York
 
General office space
 
53,000
 
Vilnius, Lithuania
 
General office space
 
51,000
 
Rockville, Maryland
 
General office space
 
48,000
 
Manila, Philippines
 
General office space
 
36,000
 
London, England
 
General office space
 
31,000
 
Shelton, Connecticut
 
General office space
 
29,000
 
Sydney, Australia
 
General office space
 
29,000
 
Toronto, Canada
 
General office space
 
27,000
 
Philadelphia, Pennsylvania
 
General office space
 
26,000
 
New York, New York
 
Location of MarketSite
 
25,000
 

Outside the U.S, we also maintain leased locations in Belgium, China, Denmark, Estonia, Finland, France, Germany, Hong Kong, Iceland, Italy, Japan, Latvia, Netherlands, Norway, Singapore, South Korea, Spain, Turkey and the United Arab Emirates. In some countries, we maintain multiple locations.
Within the U.S., we also maintain leased locations in California, Colorado, Illinois, Massachusetts, Missouri, New Jersey, Oregon, Texas, Virginia and Washington, DC. In some states, we maintain multiple locations.
Generally, our properties are not earmarked for use by a particular segment. Instead, most of our properties are used by two or more segments. We believe the facilities we occupy are adequate for the purposes for which they are currently used and are well-maintained.
As of December 31, 2016, approximately 198,000 square feet of space in our facilities was available for sublease.
Item 3. Legal Proceedings.
For further discussion, see “Litigation,” of Note 18, “Commitments, Contingencies and Guarantees,” to the consolidated financial statements, which is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
Part II
 
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock has been listed on The Nasdaq Stock Market since February 10, 2005, under the ticker symbol “NDAQ.”
The following chart lists the quarterly high and low sales prices for shares of our common stock for fiscal years 2016 and 2015. These prices are between dealers and do not include retail markups, markdowns or other fees and commissions and may not represent actual transactions.
 
High
 
Low
Fiscal 2016
 
 
 
Fourth quarter
$
68.94

 
$
63.23

Third quarter
71.01

 
63.99

Second quarter
65.16

 
60.84

First quarter
66.09

 
54.73

Fiscal 2015
 
 
 
Fourth quarter
$
59.70

 
$
52.39

Third quarter
53.81

 
47.42

Second quarter
51.88

 
47.58

First quarter
50.22

 
44.27

As of February 22, 2017 , we had approximately 319 holders of record of our common stock. As of February 22, 2017 , the closing price of our common stock was $71.24. 

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Cash Dividends on Common Stock
The following table shows quarterly cash dividends declared per common share on our outstanding common stock:
 
December 31,
 
2016
 
2015
First quarter
$
0.25

 
$
0.15

Second quarter
0.32

 
0.25

Third quarter
0.32

 
0.25

Fourth quarter
0.32

 
0.25

Total
$
1.21

 
$
0.90

See “Cash Dividends on Common Stock,” of Note 13, “Nasdaq Stockholders’ Equity,” to the consolidated financial statements for further discussion of the dividends.
 
Issuer Purchases of Equity Securities
Share Repurchase Program
See “Share Repurchase Program,” of Note 13, “Nasdaq Stockholders’ Equity,” to the consolidated financial statements for further discussion of our share repurchase program.
Employee Transactions
During the fiscal quarter ended December 31, 2016 , we purchased shares from employees in connection with the settlement of employee tax withholding obligations arising from the vesting of restricted stock and PSUs. 

The table below represents repurchases made by or on behalf of us or any “affiliated purchaser” of our common stock during the fiscal quarter ended December 31, 2016 :
Period
 
(a) Total Number of Shares Purchased
 
(b) Average Price Paid Per Share
 
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
(d) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in millions)
October 2016
 
 
 
 

 
 
 
 

Share repurchase program
 

 
$

 
 
$
429

Employee transactions
 
1,944

 
$
67.15

 
N/A
 
N/A

 
 
 
 
 
 
 
 
 
November 2016
 
 
 
 

 
 
 
 

Share repurchase program
 

 
$

 
 
$

Employee transactions
 
1,916

 
$
65.32

 
N/A
 
N/A

 
 
 
 
 
 
 
 
 
December 2016
 
 
 
 

 
 
 
 

Share repurchase program
 

 
$

 
 
$

Employee transactions
 
97,715

 
$
67.76

 
N/A
 
N/A

 
 
 
 
 
 
 
 
 
Total Quarter Ended December 31, 2016
 
 
 
 

 
 
 
 

Share repurchase program
 

 
$

 
 
$
429

Employee transactions
 
101,575

 
$
67.70

 
N/A
 
N/A

There were no shares of common stock repurchased under our share repurchase program during the quarter ended December 31, 2016.

26

 
Table of Contents

PERFORMANCE GRAPH
The following graph compares the total return of our common stock to the Nasdaq Composite Stock Index, the S&P 500 and a selected peer group for the past five years. The peer group includes ASX Limited, CBOE, CME Group Inc., Deutsche Börse A.G., ICE, LSE, and TMX Group Limited. Information for the indices and the peer group is provided from December 31, 2011 through December 31, 2016 . The figures represented below assume an initial investment of $100 in the common stock or index at the closing price on December 31, 2011 and the reinvestment of all dividends.
 

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
NDAQ123120_CHART-42055.JPG
*$100 invested on 12/31/11 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.



 
12/11  
 
 
12/12  
 
 
12/13  
 
 
12/14  
 
 
12/15  
 
 
12/16  
 
Nasdaq, Inc.
$
100.00

 
$
103.69

 
$
167.76

 
$
205.03

 
$
253.02

 
$
297.27

Nasdaq Composite
100.00

 
116.41

 
165.47

 
188.69

 
200.32

 
216.54

S&P 500
100.00

 
116.00

 
153.58

 
174.60

 
177.01

 
198.18

Peer Group
100.00

 
114.04

 
179.21

 
198.12

 
219.60

 
260.60






Copyright© 2017 Standard & Poor’s, a division of S&P Global. All rights reserved.


27

 
Table of Contents

Item 6. Selected Financial Data.
The following table sets forth selected financial data on a historical basis for Nasdaq. The following information should be read in conjunction with the consolidated financial statements and notes thereto of Nasdaq included elsewhere in this Form 10-K. We completed several acquisitions during the years ended December 31, 2016, 2015, 2013 and 2012 and included the financial results of such acquisitions in our consolidated financial statements from the respective acquisition dates.
Selected Financial Data
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
 
2013
 
2012
 
 
(in millions, except share and per share amounts)
Statements of Income Data:
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
3,705

 
$
3,403

 
$
3,500

 
$
3,211

 
$
3,120

Transaction-based expenses
 
(1,428
)
 
(1,313
)
 
(1,433
)
 
(1,316
)
 
(1,446
)
Revenues less transaction-based expenses
 
2,277

 
2,090

 
2,067

 
1,895

 
1,674

Total operating expenses
 
1,438

 
1,370

 
1,313

 
1,207

 
984

Operating income
 
839

 
720

 
754

 
688

 
690

Net income attributable to Nasdaq
 
108

 
428

 
414

 
385

 
352

Per share information:
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.65

 
$
2.56

 
$
2.45

 
$
2.30

 
$
2.09

Diluted earnings per share
 
$
0.64

 
$
2.50

 
$
2.39

 
$
2.25

 
$
2.04

       Cash dividends declared per common share
 
$
1.21

 
$
0.90

 
$
0.58

 
$
0.52

 
$
0.39

Weighted-average common shares outstanding for earnings per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
165,182,290

 
167,285,450

 
168,926,733

 
166,932,103

 
168,254,653

Diluted
 
168,800,997

 
171,283,271

 
173,018,849

 
171,266,146

 
172,587,870



 
 
December 31,
 
 
2016
 
2015
 
2014
 
2013
 
2012
 
 
(in millions)
Balance Sheets Data:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents and financial investments
 
$
648

 
$
502

 
$
601

 
$
587

 
$
720

Total assets
 
14,150

 
11,861

 
12,071

 
12,563

 
9,122

Total long-term liabilities
 
4,638

 
3,332

 
3,297

 
3,579

 
2,895

Total Nasdaq stockholders' equity
 
5,430

 
5,609

 
5,794

 
6,184

 
5,209

 
Total assets increased $2.3 billion (with a corresponding increase in current liabilities) at December 31, 2016 as compared with December 31, 2015 primarily due to new regulatory rules in 2016 that require all collateral pledged by members of our Nasdaq Clearing business to be recorded on the balance sheet and an increase in goodwill associated with our 2016 acquisitions, partially offset by a pre-tax, non-cash intangible asset impairment charge of $578 million to write off the full value of a trade name. Total assets increased $3.4 billion (with a corresponding increase in current liabilities) at December 31, 2013 compared with December 31, 2012, primarily due to an increase in default funds and margin deposits, reflecting the implementation of our collateral management process for our Nasdaq Clearing business in 2013 and an increase in goodwill and intangible assets associated with the acquisitions of the TR Corporate businesses and eSpeed in 2013.


28

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the financial condition and results of operations of Nasdaq should be read in conjunction with our consolidated financial statements and related notes included in this Form 10-K, as well as the discussion under “Item 1A. Risk Factors.”
Business Overview
We are a leading provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services. Our global offerings are diverse and include trading and clearing across multiple asset classes, trade management services, data products, financial indexes, capital formation solutions, corporate solutions, and market technology products and services. Our technology powers markets across the globe, supporting equity derivative trading, clearing and settlement, cash equity trading, fixed income trading and many other functions.
For further discussion of our business, see “Item 1. Business.”
Business Environment
We serve listed companies, market participants and investors by providing derivative, commodities, cash equity, and fixed income markets, thereby facilitating economic growth and corporate entrepreneurship. We provide market technology to exchanges, clearing organizations and central securities depositories around the world. We also offer companies and other organizations access to innovative products, software solutions and services that increase transparency, mitigate risk, improve board efficiency and facilitate better corporate governance. In broad terms, our business performance is impacted by a number of drivers including macroeconomic events affecting the risk and return of financial assets, investor sentiment, government and private sector demands for capital, the regulatory environment for capital markets, changing technology, particularly in the financial services industry, and changes in investment patterns and priorities. Our future revenues and net income will continue to be influenced by a number of domestic and international economic trends including, among others:
Trading volumes and values in equity derivative, cash equity and FICC, which are driven primarily by overall macroeconomic conditions;
The number of companies seeking equity financing, which is affected by factors such as investor demand, the global economy, and availability of diverse sources of financing, as well as tax and regulatory policies;
The demand for information about, or access to, our markets, which is dependent on the products we trade, our importance as a liquidity center, and the quality and pricing of our data and trade management services;
 
 
The demand by companies and other organizations for the products sold by our Corporate Solutions business, which is largely driven by the overall state of the economy and the attractiveness of our offerings;
The demand for licensed ETPs and other financial products based on our indexes as well as changes to the underlying assets associated with existing licensed financial products;
The challenges created by the automation of market data consumption, including competition and the quickly evolving nature of the data business;
The outlook of our technology customers for capital market activity;
Continuing pressure in transaction fee pricing due to intense competition in the U.S. and Europe;
Competition related to pricing, product features and service offerings;
Regulatory changes relating to market structure or affecting certain types of instruments, transactions, pricing structures or capital market participants; and
Technological advances and members’ and customers’ demand for speed, efficiency, and reliability.
Currently our business drivers are defined by investors and companies which have a wait and see posture about the pace of future global economic growth. The current consensus forecast for gross domestic product growth for the U.S. is 1.6% in 2016 and 2.3% in 2017 and the Eurozone is 1.6% in 2016 and 1.4% in 2017. Forecasts for both regions have been experiencing downward revisions over the last year as the outlook for growth deteriorates with significant downward revisions for the Eurozone following Brexit. Very recent forecasts for the U.S., however, have speculated that U.S. economic growth may be stronger than baseline forecasts depending on the fiscal priorities of the new administration. While we expect continued modest annual growth in many of our non-trading segments (Corporate Services, Information Services, and Market Technology), we recognize that there are a number of significant structural and political issues continuing to impact the global economy. Consequently, sustained instability could return at any time, resulting in an increased level of market volatility, oscillating trading volumes, and a more cautious outlook by the clients of our non-trading segments. Following elevated volatility levels in the second half of 2015, market volatility remained high in the first quarter of 2016 before declining into the second quarter. Volatility remained at a moderate level throughout the remainder of the year except for two spikes following the results of the Brexit vote and the U.S. presidential election.
Volatility and market uncertainty in 2016 led to the worst year for the number of U.S. IPO listings since 2012. Additional impacts on our business drivers include the international enactment and implementation of new legislative and regulatory initiatives, the evolution of market participants’ trading and investment strategies, and the continued rapid progression and deployment of new technology in the financial

29

 

services industry. The business environment that influenced our financial performance for 2016 may be characterized as follows:
Intense competition among U.S. exchanges and dealer-owned systems for cash equity trading volume and strong competition between MTFs and exchanges in Europe for cash equity trading volume;
Globalization of exchanges, customers and competitors extending the competitive horizon beyond national markets;
Headwinds in fund flows and market performance negatively impacted new business and assets under management of existing business in our Index Licensing and Services business during the first half of 2016. However, performance began to improve during the latter part of 2016, with assets under management ending the year higher versus 2015. In addition, we had solid growth in our Data Products business; and
Market trends requiring continued investment in technology to meet customers’ and regulators’ demands as markets and participants adapt to a global financial industry, as increasing numbers of new companies are created, and as emerging countries show ongoing interest in developing their financial markets.
2017 Outlook
Our strategy continues to include identifying organic growth within our core business units and developing adjacent opportunities within our core businesses. In addition, our strategy includes identifying acquisitions that both, complement our strengths and extend our capabilities, and offer opportunities for revenue and expense synergies and increased shareholder value.
During 2017, we expect changes in both the competitive and regulatory environments. In the U.S., in 2016, The Investors Exchange LLC became a registered exchange, CBOE and BATS announced their intent to merge as did Deutsche Börse A.G. and LSE. In February 2017, Miami International Securities Exchange launched a second options exchange. We expect intense competition among U.S. equity and options marketplaces to continue and new entrants will be part of our competitive environment. While the willingness of new entrants to commence operations can be taken as a positive sign of good health in the trading industry, as these organizations implement their strategies, they have the potential to affect the competitive environment we face.
European regulators are currently moving forward on a number of new policies affecting the operation and infrastructure of the financial markets. The implementation of EMIR is changing the way we structure and operate the Nordic clearinghouse. MiFID II, as well as the new regulations in MiFIR, will change the way our trading business operates and will create both challenges in our existing businesses, as well as new opportunities for growth. Full implementation of these
 
regulations may be delayed and consequently create an uncertain environment for our businesses.
The following discusses our 2017 outlook for each of our segments:
Market Services
Economic and political uncertainty continue to weigh on the global economy and the debate over future fiscal and monetary policy in the U.S. and Europe continues. We believe that our diversified businesses position us well to compete in an uncertain market environment. If increased levels of market volatility persist in 2017, many of the asset classes within our Market Services segment and our Data Products business will continue to benefit.
NFX continues to experience growth in its energy derivative products. We enter 2017 with a clear opportunity to increase the number of clients running on the NFX platform, and we continue to identify additional products to bring to market.
We expect global markets to continue to be marked by significant change in 2017, driven primarily by regulatory initiatives in the U.S. and Europe as recently adopted regulations and legislation continue to be implemented. These changes could result in the continued fragmentation of cash equity markets, and trading could continue to migrate from exchanges to OTC systems, particularly in the U.S. Conversely, trading in OTC derivatives could begin to move onto exchanges and other execution facilities.
Information Services
As we look toward the future, we continue to make progress to leverage emerging technologies to expand the ways we serve clients, with our launch of the trading and analytics product suite, which just begins to leverage machine intelligence in its logic.
We also continue to make strides in expanding our Index Licensing and Services business, in particular in our smart-beta products, which make up a strong portion of our growing assets under management total. An example of this was launching the first fixed income product leveraging the DWA relative strength methodology, in partnership with State Street Corporation.
Corporate Services
In 2016, our Corporate Solutions business launched Nasdaq IR Insight, our investor relations platform. During 2016, we made significant progress to enhance the client experience. In doing both of these, we created an architectural foundation for our next generation corporate solutions products going forward. In addition, we continued to invest in our Public Relations and Governance businesses through our acquisitions of Marketwired and Boardvantage.
Growth in our Corporate Services segment will depend on a positive economic outlook and a lower level of merger and acquisition transactions.
Volatility in the markets will have a negative impact on the pace of IPOs and consequently on the opportunities for revenue

30

 

growth in our Listing Services and Corporate Solutions businesses.
Market Technology
In 2016, we announced the Nasdaq Financial Framework, which is our new, modular architecture that will provide next generation capital markets capabilities, including the integration of blockchain technology across the issuance and settlement of securities, as well as cloud-enabled trading and clearing. We expect this next generation platform to contribute meaningfully to our order intake in 2017 and beyond.
In Summary
We believe that our future will continue to be determined by our ability to satisfy our customer's evolving needs and to allocate resources in strategic areas which will yield attractive returns.
Consistent with our long-term strategy, we will continue to leverage our technology strengths and offer new products that expand and strengthen our relationships with existing and new customers.
We believe that our continued focus on meeting our cost, revenue and technology objectives will enable us to benefit from any improving economic conditions in the future. We will continue to look for opportunities to further diversify our business with enhanced product offerings and/or acquisitions that are complementary to our existing businesses. 
Business Segments
We manage, operate and provide our products and services in four business segments: Market Services, Corporate Services, Information Services and Market Technology.  In 2016, due to changes in our executive leadership and to better reflect how our chief operating decision maker views the businesses, we realigned our reportable segments to integrate the Corporate Solutions and Listing Services businesses into our new Corporate Services segment. Market Technology is now a separate reportable segment. Prior to this change, our Corporate Solutions and Market Technology businesses were part of our Technology Solutions segment. All prior period segment disclosures have been recast to reflect our change in reportable segments. See Note 1, “Organization and Nature of Operations,” and Note 19, “Business Segments,” to the consolidated financial statements for further discussion of our reportable segments and additional financial information about geographic data, as well as how management allocates resources, assesses performance and manages these businesses as four separate segments.
Sources of Revenues and Transaction-Based Expenses
See “Revenue Recognition and Transaction-Based Expenses,” of Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements for further discussion of our sources of revenues and transaction-based expenses.

31

 

Nasdaq’s Operating Results
Key Drivers
The following table includes key drivers for our Market Services, Corporate Services, Information Services and Market Technology segments. In evaluating the performance of our business, our senior management closely evaluates these key drivers.
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
Market Services
 
 
 
 
 
 
Equity Derivative Trading and Clearing
 
 
 
 
 
 
U.S. equity options
 
 
 
 
 
 
Total industry average daily volume (in millions)
 
14.4

 
14.8

 
15.3

Nasdaq PHLX matched market share
 
16.0
%
 
16.7
%
 
16.0
%
The Nasdaq Options Market matched market share
 
7.8
%
 
7.7
%
 
10.0
%
Nasdaq BX Options matched market share
 
0.8
%
 
0.8
%
 
0.9
%
Nasdaq ISE matched market share (1)
 
5.8
%
 
%
 
%
Nasdaq GMNI matched market share (1)
 
1.1
%
 
%
 
%
Nasdaq MCRY matched market share (1)
 
0.1
%
 
%
 
%
Total matched market share executed on Nasdaq’s exchanges
 
31.6
%
 
25.2
%
 
26.9
%
Nasdaq Nordic and Nasdaq Baltic options and futures
 
 
 
 
 
 
Total average daily volume of options and futures contracts (2)
 
376,730

 
380,725

 
358,141

Cash Equity Trading
 
 
 
 
 
 
Total U.S.-listed securities
 
 
 
 
 
 
Total industry average daily share volume (in billions)
 
7.35

 
6.91

 
6.41

Matched share volume (in billions)
 
321.6

 
327.7

 
326.0

Matched market share executed on The Nasdaq Stock Market
 
14.0
%
 
15.8
%
 
17.1
%
Matched market share executed on Nasdaq BX
 
2.4
%
 
2.0
%
 
2.5
%
Matched market share executed on Nasdaq PSX
 
1.0
%
 
1.0
%
 
0.6
%
Total matched market share executed on Nasdaq’s exchanges
 
17.4
%
 
18.8
%
 
20.2
%
Market share reported to the FINRA/Nasdaq Trade Reporting Facility
 
33.1
%
 
31.8
%
 
30.3
%
Total market share (3)
 
50.5
%
 
50.6
%
 
50.5
%
Nasdaq Nordic and Nasdaq Baltic securities
 
 
 
 
 
 
Average daily number of equity trades executed on Nasdaq’s exchanges
 
472,428

 
437,285

 
351,772

Total average daily value of shares traded (in billions)
 
$
5.0

 
$
5.1

 
$
4.8

Total market share executed on Nasdaq’s exchanges
 
63.4
%
 
68.5
%
 
71.5
%
FICC
 
 
 
 
 
 
Fixed Income
 
 
 
 
 
 
U.S. fixed income notional trading volume (in billions)
 
$
21,504

 
$
29,234

 
$
37,594

Total average daily volume of Nasdaq Nordic and Nasdaq Baltic fixed income contracts
 
89,252

 
108,708

 
98,948

Nasdaq commodities
 
 
 
 
 
 
Power contracts cleared (TWh) (4)
 
1,658

 
1,496

 
1,564

Corporate Services
 
 
 
 
 
 
Initial public offerings
 
 
 
 
 
 
The Nasdaq Stock Market
 
91

 
143

 
189

Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic
 
62

 
78

 
47

Total new listings
 
 
 
 
 
 
The Nasdaq Stock Market (5)
 
283

 
274

 
327

Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic (6)
 
88

 
91

 
72

Number of listed companies
 
 
 
 
 
 
The Nasdaq Stock Market (7)
 
2,897

 
2,859

 
2,782

Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic (8)
 
900

 
852

 
792

Information Services
 
 
 
 
 
 
Number of licensed exchange traded products
 
298

 
222

 
166

ETP assets under management tracking Nasdaq indexes (in billions)
 
$
124

 
$
114

 
$
99

Market Technology
 
 
 
 
 
 
Order intake (in millions) (9)
 
$
276

 
$
271

 
$
320

Total order value (in millions) (10)
 
$
777

 
$
788

 
$
716

____________


32

 

(1)  
For the year ended December 31, 2016, matched market share for Nasdaq ISE, Nasdaq GMNI, and Nasdaq MCRY is included since the closing of the ISE acquisition on June 30, 2016.
(2)  
Includes Finnish option contracts traded on EUREX Group.
(3)  
Includes transactions executed on The Nasdaq Stock Market’s, Nasdaq BX’s and Nasdaq PSX’s systems plus trades reported through the FINRA/Nasdaq Trade Reporting Facility.
(4)  
Transactions executed on Nasdaq Commodities or OTC and reported for clearing to Nasdaq Commodities measured by Terawatt hours (TWh).
(5)  
New listings include IPOs, including those completed on a best efforts basis, issuers that switched from other listing venues, closed-end funds and separately listed ETPs.
(6)  
New listings include IPOs and represent companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges and companies on the alternative markets of Nasdaq First North.
(7)  
Number of listed companies for The Nasdaq Stock Market at period end, including separately listed ETPs.
(8)  
Represents companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges and companies on the alternative markets of Nasdaq First North at period end.
(9)  
Total contract value of orders signed during the period.
(10)  
Represents total contract value of signed orders that are yet to be recognized as revenue. Market technology deferred revenue, as discussed in Note 8, “Deferred Revenue,” to the consolidated financial statements, represents consideration received that is yet to be recognized as revenue for these signed orders.


33

 

Financial Summary
The following table summarizes our financial performance for the year ended December 31, 2016 when compared with the same period in 2015, and for the year ended December 31, 2015 when compared with the same period in 2014.  The comparability of our results of operations between reported periods is impacted by the acquisitions of Nasdaq CXC and Marketwired in February 2016, Boardvantage in May 2016, ISE in June 2016, and DWA in January 2015. See “2016 Acquisitions” and “2015 Acquisitions,” of Note 4, “Acquisitions,” to the consolidated financial statements for further discussion. For a detailed discussion of our results of operations, see "Segment Operating Results" below.
 
 
Year Ended December 31,
 
Percentage Change
 
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
 
 
(in millions, except per share amounts)
 
 
 
 
Revenues less transaction-based expenses
 
$
2,277

 
$
2,090

 
$
2,067

 
8.9
 %
 
1.1
 %
Operating expenses
 
1,438

 
1,370

 
1,313

 
5.0
 %
 
4.3
 %
Operating income
 
839

 
720

 
754

 
16.5
 %
 
(4.5
)%
Interest expense
 
(135
)
 
(111
)
 
(117
)
 
21.6
 %
 
(5.1
)%
Asset impairment charges
 
(578
)
 

 
(49
)
 
100.0
 %
 
(100.0
)%
Income before income taxes
 
136

 
630

 
594

 
(78.4
)%
 
6.1
 %
Income tax provision
 
28

 
203

 
181

 
(86.2
)%
 
12.2
 %
Net income attributable to Nasdaq
 
$
108

 
$
428

 
$
414

 
(74.8
)%
 
3.4
 %
Diluted earnings per share
 
$
0.64

 
$
2.50

 
$
2.39

 
(74.4
)%
 
4.6
 %
Cash dividends declared per common share
 
$
1.21

 
$
0.90

 
$
0.58

 
34.4
 %
 
55.2
 %
 
 
 
 
 
 
 
 
 
 
 
In countries with currencies other than the U.S. dollar, revenues and expenses are translated using monthly average exchange rates. Impacts on our revenues less transaction-based expenses and operating income associated with fluctuations in foreign currency are discussed in more detail under “Item 7A. Quantitative and Qualitative Disclosures about Market Risk.”

* * * * * *
Segment Operating Results
The following table shows our revenues by segment, transaction-based expenses for our Market Services segment and total revenues less transaction-based expenses:
 
 
Year Ended December 31,
 
Percentage Change
 
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
 
 
(in millions)
 
 
 
 
Market Services
 
$
2,255

 
$
2,084

 
$
2,229

 
8.2
%
 
(6.5
)%
Transaction-based expenses
 
(1,428
)
 
(1,313
)
 
(1,433
)
 
8.8
%
 
(8.4
)%
Market Services revenues less transaction-based expenses
 
827

 
771

 
796

 
7.3
%
 
(3.1
)%
Corporate Services
 
635

 
562

 
552

 
13.0
%
 
1.8
 %
Information Services
 
540

 
512

 
473

 
5.5
%
 
8.2
 %
Market Technology
 
275

 
245

 
246

 
12.2
%
 
(0.4
)%
Total revenues less transaction-based expenses
 
$
2,277

 
$
2,090

 
$
2,067

 
8.9
%
 
1.1
 %







34

 

The following charts show our Market Services, Corporate Services, Information Services and Market Technology segments as a percentage of our total revenues less transaction-based expenses of $2,277 million in 2016, $2,090 million in 2015 and $2,067 million in 2014:
NDAQ123120_CHART-41835.JPG


NDAQ123120_CHART-42985.JPG
 
NDAQ123120_CHART-43981.JPG



 

35

 

MARKET SERVICES
The following table shows total revenues, transaction-based expenses, and total revenues less transaction-based expenses from our Market Services segment:
 
 
Year Ended December 31,
 
Percentage Change
 
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
 
 
(in millions)
 
 
 
 
Market Services Revenues:
 
 
 
 
 
 
 
 
 
 
Equity Derivative Trading and Clearing Revenues (1)
 
$
541

 
$
432

 
$
525

 
25.2
 %
 
(17.7
)%
Transaction-based expenses:
 
 
 
 
 
 
 
 
 
 
Transaction rebates
 
(288
)
 
(223
)
 
(285
)
 
29.1
 %
 
(21.8
)%
Brokerage, clearance and exchange fees (1)
 
(25
)
 
(21
)
 
(32
)
 
19.0
 %
 
(34.4
)%
Equity derivative trading and clearing revenues less transaction-based expenses
 
228

 
188

 
208

 
21.3
 %
 
(9.6
)%
Cash Equity Trading Revenues (2)
 
1,349

 
1,315

 
1,335

 
2.6
 %
 
(1.5
)%
Transaction-based expenses:
 
 
 
 
 
 
 
 

 
 

Transaction rebates
 
(785
)
 
(756
)
 
(780
)
 
3.8
 %
 
(3.1
)%
Brokerage, clearance and exchange fees (2)
 
(309
)
 
(306
)
 
(332
)
 
1.0
 %
 
(7.8
)%
Cash equity trading revenues less transaction-based expenses
 
255

 
253

 
223

 
0.8
 %
 
13.5
 %
FICC Revenues
 
99

 
98

 
130

 
1.0
 %
 
(24.6
)%
Transaction-based expenses:
 
 
 
 
 
 
 
 

 
 

Transaction rebates
 
(19
)
 
(4
)
 

 
375.0
 %
 
100.0
 %
Brokerage, clearance and exchange fees
 
(2
)
 
(3
)
 
(4
)
 
(33.3
)%
 
(25.0
)%
FICC revenues less transaction-based expenses
 
78

 
91

 
126

 
(14.3
)%
 
(27.8
)%
Trade Management Services Revenues
 
266

 
239

 
239

 
11.3
 %
 
 %
        Total Market Services revenues less
transaction-based expenses
 
$
827

 
$
771

 
$
796

 
7.3
 %
 
(3.1
)%
____________
(1)  
Includes Section 31 fees of $24 million in 2016, $19 million in 2015 and $28 million in 2014. Section 31 fees are recorded as equity derivative trading and clearing revenues with a corresponding amount recorded in transaction-based expenses.  
(2)  
Includes Section 31 fees of $290 million in 2016, $282 million in 2015 and $306 million in 2014. Section 31 fees are recorded as cash equity trading revenues with a corresponding amount recorded in transaction-based expenses.   
Equity Derivative Trading and Clearing Revenues
Equity derivative trading and clearing revenues and equity derivative trading and clearing revenues less transaction-based expenses increased in 2016 compared with 2015 and decreased in 2015 compared with 2014. 
The increases in 2016 were primarily due to:
the inclusion of revenues from our acquisition of ISE, partially offset by;
lower U.S. industry trading volumes; and
lower market share at Nasdaq PHLX.
The decreases in 2015 were primarily due to:
a decline in overall market share at our three U.S. options exchanges;
a decrease in U.S. industry trading volumes; and
 
an unfavorable impact from foreign exchange of $10 million, partially offset by;
an increase in trading volumes in European stock options and index futures products.
Further impacting the decrease in equity derivative trading and clearing revenues in 2015 was a decrease in the U.S. average revenue capture rate and a decline in Section 31 pass-through fee revenue. Further impacting the decrease in equity derivative trading and clearing revenues less transaction-based expenses in 2015 was a decrease in the U.S. average net capture rate.
Section 31 fees are recorded as equity derivative trading and clearing revenues with a corresponding amount recorded as transaction-based expenses. In the U.S., we are assessed these fees from the SEC and pass them through to our customers in the form of incremental fees. Pass-through fees can increase or decrease due to rate changes by the SEC, our percentage of the overall industry volumes processed on our systems, and

36

 

differences in actual dollar value of shares traded. Since the amount recorded in revenues is equal to the amount recorded as transaction-based expenses, there is no impact on our revenues less transaction-based expenses. The increase in 2016 compared with 2015 was primarily due to the inclusion of Section 31 fees from our acquisition of ISE. The decrease in 2015 compared with 2014 was primarily due to lower rates and lower dollar value traded.
Transaction rebates, in which we credit a portion of the per share execution charge to the market participant, increased in 2016 compared with 2015 and decreased in 2015 compared with 2014.
The increase in 2016 was primarily due to:
the inclusion of rebates associated with our acquisition of ISE, partially offset by;
lower U.S. industry trading volumes; and
lower market share at Nasdaq PHLX.
The decrease in 2015 was primarily due to a:
decrease in the average rebate rate;
decline in overall market share at our three U.S. options exchanges; and
decrease in U.S. industry trading volumes. 
Brokerage, clearance and exchange fees increased in 2016 compared with 2015 and decreased in 2015 compared with 2014. The increase in 2016 was primarily due to higher Section 31 pass-through fees due to the inclusion of Section 31 fees from our acquisition of ISE. The decrease in 2015 was primarily due to lower Section 31 pass-through fees and a decrease in routing costs due to a decline in volume routed.
Cash Equity Trading Revenues
Cash equity trading revenues and cash equity trading revenues less transaction-based expenses increased in 2016 compared with 2015. The increases in 2016 were primarily due to:
the inclusion of revenues associated with our acquisition of Nasdaq CXC; and
higher U.S. and European industry trading volumes, partially offset by a;
decrease in our overall U.S. and European matched market share executed on Nasdaq’s exchanges.
The increase in cash equity trading revenues less transaction-based expenses in 2016 was also unfavorably impacted by a decrease in the U.S. average net capture rate.
Cash equity trading revenues decreased in 2015 compared with 2014 primarily due to:
a decrease in our overall U.S. matched market share executed on Nasdaq’s exchanges;
a decline in Section 31 pass-through fee revenue; and
 
an unfavorable impact from foreign exchange of $18 million, partially offset by;
higher U.S. and European industry trading volumes; and
an increase in the U.S. average revenue capture rate. 
Cash equity trading revenues less transaction-based expenses increased in 2015 compared with 2014 primarily due to:
higher U.S. and European industry trading volumes; and
an increase in the average net capture rate, partially offset by;
a decrease in our overall U.S. matched market share executed on Nasdaq’s exchanges; and
an unfavorable impact from foreign exchange of $18 million.
Similar to equity derivative trading and clearing, in the U.S. we record Section 31 fees as cash equity trading revenues with a corresponding amount recorded as transaction-based expenses. We are assessed these fees from the SEC and pass them through to our customers in the form of incremental fees. Since the amount recorded as revenues is equal to the amount recorded as transaction-based expenses, there is no impact on our revenues less transaction-based expenses. The increase in 2016 compared with 2015 was primarily due to higher dollar value traded on Nasdaq’s exchanges and higher SEC fee rates. The decrease in 2015 compared with 2014 was primarily due to lower SEC fee rates, partially offset by higher dollar value traded on Nasdaq’s exchanges.
For The Nasdaq Stock Market, Nasdaq PSX and Nasdaq CXC, we credit a portion of the per share execution charge to the market participant that provides the liquidity and for Nasdaq BX, we credit a portion of the per share execution charge to the market participant that takes the liquidity. These transaction rebates increased in 2016 compared with 2015 and decreased in 2015 compared with 2014.
The increase in 2016 was primarily due to:
higher U.S. industry trading volumes; and
the inclusion of rebates associated with our acquisition of Nasdaq CXC, partially offset by a;
decrease in our overall U.S. matched market share executed on Nasdaq’s exchanges.
The decrease in 2015 was primarily due to a:
decrease in our overall U.S. matched market share executed on Nasdaq’s exchanges; and a
decline in the average rebate rate, partially offset by an;
increase in U.S. industry trading volumes.
Brokerage, clearance and exchange fees increased in 2016 compared with 2015 and decreased in 2015 compared with 2014. The increase in 2016 was primarily due to an increase in Section 31 pass-through fees. The decrease in 2015 was primarily due to a decline in Section 31 pass-through fees.

37

 

FICC Revenues
FICC revenues increased slightly in 2016 compared with 2015 and decreased in 2015 compared with 2014. FICC revenues less transaction-based expenses decreased both in 2016 compared with 2015 and in 2015 compared with 2014. The decrease in FICC revenues less transaction-based expenses in 2016 was primarily due to the impact of NFX trading incentives and a decline in U.S. fixed income revenues, partially offset by higher commodities revenues. The decrease in FICC revenues and FICC revenues less transaction-based expenses in 2015 was primarily due to volume declines in U.S. fixed income products and European commodities products, a decrease related to a scheduled contract termination of a technology licensing customer, and an unfavorable impact from foreign exchange of $11 million, partially offset by lower trading incentives at Nasdaq NLX, our former London-based multilateral trading venue.
Trade Management Services Revenues
Trade management services revenues increased in 2016 compared with 2015 primarily due to an increase in customer demand for network connectivity and the inclusion of revenues from our acquisition of ISE. Trade management services revenues were flat in 2015 compared with 2014 as an increase in customer demand for network connectivity was offset by an unfavorable impact from foreign exchange of $8 million.
CORPORATE SERVICES
The following table shows revenues from our Corporate Services segment:
 
Year Ended December 31,
 
Percentage Change
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
 
(in millions)
 
 
 
 
Corporate Services:
Corporate Solutions
$
363

 
$
298

 
$
314

 
21.8
%
 
(5.1
)%
Listing Services
272

 
264

 
238

 
3.0
%
 
10.9
 %
Total Corporate Services
$
635

 
$
562

 
$
552

 
13.0
%
 
1.8
 %
Corporate Solutions Revenues
Corporate solutions revenues increased in 2016 compared with 2015 primarily due to the inclusion of revenues associated with the acquisitions of Marketwired and Boardvantage. See “Acquisition of Marketwired,” and “Acquisition of Boardvantage,” of Note 4, “Acquisitions,” to the consolidated financial statements for further discussion of the Marketwired and Boardvantage acquisitions. Corporate solutions revenues decreased in 2015 compared with 2014 primarily due to a decline in the demand for our investor relations products and an unfavorable impact from foreign exchange of $9 million.
 
Listing Services Revenues
Listing services revenues increased both in 2016 compared with 2015 and in 2015 compared with 2014. The increase in 2016 was primarily due to an increase in European revenues due to new company listings. The increase in 2015 was primarily due to an increase in U.S. listing services revenues, partially offset by a decrease in European listing services revenues. The increase in U.S. listing services revenues was primarily due to an increase in annual listing fees as a result of pricing actions and an increase in the number of listed companies. The decrease in European listing services revenues was primarily due to an unfavorable impact from foreign exchange of $12 million, partially offset by an increase in the number of listed companies and higher annual renewal fees.
INFORMATION SERVICES
The following table shows revenues from our Information Services segment:
 
 
Year Ended December 31,
 
Percentage Change
 
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
 
 
(in millions)
 
 
 
 
Information Services:
Data Products
 
$
427

 
$
399

 
$
384

 
7.0
%
 
3.9
%
Index Licensing and Services
 
113

 
113

 
89

 
%
 
27.0
%
Total Information Services
 
$
540

 
$
512

 
$
473

 
5.5
%
 
8.2
%
Data Products Revenues
Data products revenues increased both in 2016 compared with 2015 and in 2015 compared with 2014. The increase in 2016 was primarily due to growth in proprietary data products revenues, the inclusion of revenues associated with the acquisitions of ISE and Nasdaq CXC, and higher index data products revenues. The increase in 2015 was primarily due to the inclusion of revenues associated with the acquisition of DWA, higher revenues from shared tape revenue plans, and higher customer demand for U.S. proprietary data products, partially offset by an unfavorable impact from foreign exchange of $14 million.    
Index Licensing and Services Revenues
Index licensing and services revenues were flat in 2016 compared with 2015 as an increase in revenues associated with the acquisition of ISE was offset by a decrease in average fees on ETPs tracking to Nasdaq indexes and a decrease in the value of underlying assets associated with non-ETP Nasdaq-licensed products.
Index licensing and services revenues increased in 2015 compared with 2014 due to an increase in the value of underlying assets associated with Nasdaq-licensed ETFs and other financial products due to product growth and newly executed product licenses. The increase in 2015 was also due to our acquisition of DWA.

38

 

See “Acquisition of ISE,” “Acquisition of Nasdaq CXC,” and “Acquisition of DWA,” of Note 4, “Acquisitions,” to the consolidated financial statements for further discussion of our ISE, Nasdaq CXC and DWA acquisitions.
MARKET TECHNOLOGY
The following table shows revenues from our Market Technology segment:
 
 
Year Ended December 31,
 
Percentage Change
 
 
2016
 
2015
 
2014
 
2016 vs. 2015
 
2015 vs. 2014
 
 
(in millions)
 
 
 
 
Market Technology
 
$
275

 
$
245

 
$
246

 
12.2
%
 
(0.4
)%
 
Market Technology Revenues
The increase in 2016 was primarily due to an increase in revenues from software, licensing and support as well as surveillance products. The decrease in 2015 was primarily due to an unfavorable impact from foreign exchange of $17 million and lower software license and support revenues, partially offset by operational increases in software as a service revenues and change request revenues, reflecting increased customer demand.
 
Total Order Value
Total order value, which represents the total contract value of orders signed that are yet to be recognized as revenues, was $777 million as of December 31, 2016, $788 million as of December 31, 2015 and $716 million as of December 31, 2014. As of December 31, 2016, market technology deferred revenue of $185 million represents consideration received that is yet to be recognized as revenue for these signed orders. See Note 8, “Deferred Revenue,” to the consolidated financial statements for further discussion. The recognition and timing of these revenues depends on many factors, including those that are not within our control. As such, the following table of market technology revenues to be recognized in the future represents our best estimate:
 
Total Order Value
 
(in millions)
Fiscal year ended:
 
2017
$
224

2018
181

2019
117

2020
107

2021
72

2022 and thereafter
76

Total
$
777

* * * * * *
Expenses
Operating Expenses
The following table shows our operating expenses:
 
 
Year Ended December 31,
 
Percentage Change
 
 
2016