SEC Filing - Nasdaq, Inc.

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ndaq-20200930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	September 30, 2020
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: 001-38855

___________________________________

Nasdaq, Inc.

(Exact name of registrant as specified in its charter)


Delaware						52-1165937
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


151 W. 42nd Street,	New York,	New York	10036
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s telephone number, including area code: +1 212 401 8700

No Changes

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

NDAQ

The Nasdaq Stock Market

0.875% Senior Notes due 2030

NDAQ30

The Nasdaq Stock Market

1.75% Senior Notes due 2029

NDAQ29

The Nasdaq Stock Market

1.75% Senior Notes due 2023

NDAQ23

The Nasdaq Stock Market

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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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 October 27, 2020
Common Stock, $0.01 par value per share	164,037,597	shares

Nasdaq, Inc.


		Page
Part I. FINANCIAL INFORMATION

Item 1.	Financial Statements	2

	Condensed Consolidated Balance Sheets - September 30, 2020 (unaudited) and December 31, 2019	2

	Condensed Consolidated Statements of Income - Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	4

	Condensed Consolidated Statements of Changes in Stockholders' Equity - Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2020 and 2019 (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51

Item 4.	Controls and Procedures	54

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

Item 3.	Defaults Upon Senior Securities	56

Item 4.	Mine Safety Disclosures	56

Item 5.	Other Information	56

Item 6.	Exhibits	56

SIGNATURES		57

About this Form 10-Q

Throughout this Form 10-Q, 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 CXC” and “Nasdaq CX2” refer to the Canadian cash equity trading books operated by Nasdaq CXC Limited.

•“Nasdaq First North” refers to our alternative marketplaces for smaller companies and growth companies in the Nordic and Baltic regions.

•“Nasdaq GEMX” refers to the options exchange operated by Nasdaq GEMX, LLC.

•“Nasdaq ISE” refers to the options exchange operated by Nasdaq ISE, LLC.

•“Nasdaq MRX” refers to the options exchange operated by Nasdaq MRX, 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 and listing venue operated by The Nasdaq Stock Market LLC.

* * * * * *

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

401(k) Plan: Voluntary Defined Contribution Savings Plan

2017 Credit Facility: $1 billion senior unsecured revolving credit facility, which matures on April 25, 2022

2021 Notes: €600 million aggregate principal amount of 3.875% senior unsecured notes due June 7, 2021, repaid in full and terminated in March 2020

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

2029 Notes: €600 million aggregate principal amount of 1.75% senior unsecured notes due March 28, 2029

2030 Notes: €600 million aggregate principal amount of 0.875% senior unsecured notes due February 13, 2030

2050 Notes: $500 million aggregate principal amount of 3.25% senior unsecured notes due April 28, 2050

ASU: Accounting Standards Update

ASU 2016-13: Measurement of Credit Losses on Financial Instruments

AUM: Assets Under Management

CCP: Central Counterparty

EMIR: European Market Infrastructure Regulation

Equity Plan: Nasdaq Equity Incentive Plan

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

IPO: Initial Public Offering

LIBOR: London Interbank Offered Rate

NFF: Nasdaq Financial Framework; Nasdaq's end-to-end technology solutions for market infrastructure operators, buy-side firms, sell-side firms and other non-financial markets

NFX: Nasdaq Futures, Inc.

NPM: The NASDAQ Private Market, LLC

NSCC: National Securities Clearing Corporation

OCC: The Options Clearing Corporation

OTC: Over-the-Counter

PSU: Performance Share Unit

SaaS: Software as a Service

SEC: U.S. Securities and Exchange Commission

SERP: Supplemental Executive Retirement Plan

SFSA: Swedish Financial Supervisory Authority

S&P: Standard & Poor’s

S&P 500: S&P 500 Stock Index

TSR: Total Shareholder Return

U.S. GAAP: U.S. Generally Accepted Accounting Principles

* * * * * *

NASDAQ, the NASDAQ logos, and other brand, service or product names or marks referred to in this report are trademarks or service marks, registered or otherwise, of Nasdaq, Inc. and/or its subsidiaries. FINRA and TRADE REPORTING FACILITY are registered trademarks of FINRA.

* * * * * *

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q for IPOs is based on data generated internally by us; therefore, the data may not be comparable to other publicly-available IPO data. Data in this Quarterly Report on Form 10-Q for new listings of equity securities on The Nasdaq Stock Market is based on data generated internally by us, which includes issuers that switched from other listing venues, closed-end funds and ETPs. Data in this Quarterly Report on Form 10-Q for IPOs and new listings of equity securities on the Nasdaq Nordic and Nasdaq Baltic exchanges and Nasdaq First North 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. We refer you to the “Risk Factors” section in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, the “Risk Factors” section in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and the “Risk Factors” section in our most recent 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.

iii

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 Quarterly Report on Form 10-Q 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 are intended to identify forward-looking statements. These include, among others, statements relating to:

•our strategic direction;

•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 and services;

•the impact of pricing changes;

•tax matters;

•the cost and availability of liquidity and capital;

•any litigation, or any regulatory or government investigation or action, to which we are or could become a party or which may affect us; and

•the potential impact of the COVID-19 pandemic and the response of governments and other third parties on our business, operations, results of operations, financial condition, workforce or the operations or decisions of our customers, suppliers or business partners.

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 or divest sold businesses or assets, including the fact that any integration or transition may be more difficult, time consuming or costly than expected, and we may be unable to realize synergies from business combinations, acquisitions, divestitures or other transactional activities;

•loss of significant trading and clearing volumes or values, fees, market share, listed companies, market data customers or other customers;

•our ability to develop and grow our non-trading businesses, including our technology and analytics offerings;

•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 on which we rely;

•any significant error in our operational processes;

•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, or increased regulatory oversight domestically or internationally.

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 “Part II. Item 1A. Risk Factors,” in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, the “Risk Factors” section in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and more fully described in the “Risk Factors” section in our most recent 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 Quarterly Report on Form 10-Q, including “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the condensed 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.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Nasdaq, Inc.

Condensed Consolidated Balance Sheets

(in millions, except share and par value amounts)


	September 30, 2020		December 31, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	584	$	332
Restricted cash and cash equivalents	33		30
Financial investments	177		291
Receivables, net	504		422
Default funds and margin deposits	3,378		2,996
Other current assets	134		219
Total current assets	4,810		4,290
Property and equipment, net	435		384
Goodwill	6,600		6,366
Intangible assets, net	2,218		2,249
Operating lease assets	387		346
Other non-current assets	381		289
Total assets	$	14,831	$	13,924
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	145	$	148
Section 31 fees payable to SEC	63		132
Accrued personnel costs	184		188
Deferred revenue	290		211
Other current liabilities	101		161
Default funds and margin deposits	3,378		2,996
Short-term debt	—		391
Total current liabilities	4,161		4,227
Long-term debt	3,571		2,996
Deferred tax liabilities, net	513		552
Operating lease liabilities	397		331
Other non-current liabilities	175		179
Total liabilities	8,817		8,285
Commitments and contingencies
Equity
Nasdaq stockholders’ equity:
Common stock, $0.01 par value, 300,000,000 shares authorized, shares issued: 170,298,054 at September 30, 2020 and 171,075,011 at December 31, 2019; shares outstanding: 164,020,697 at September 30, 2020 and 165,094,440 at December 31, 2019	2		2
Additional paid-in capital	2,524		2,632
Common stock in treasury, at cost: 6,277,357 shares at September 30, 2020 and 5,980,571 shares at December 31, 2019	(367)		(336)
Accumulated other comprehensive loss	(1,632)		(1,686)
Retained earnings	5,484		5,027
Total Nasdaq stockholders’ equity	6,011		5,639
Noncontrolling interests	3		—
Total equity	6,014		5,639
Total liabilities and equity	$	14,831	$	13,924

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(in millions, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Revenues:
Market Services	$	958	$	690	$	2,867	$	1,995
Corporate Services	132		124		386		368
Information Services	238		198		661		585
Market Technology	86		84		251		239
Other revenues	—		—		—		10
Total revenues	1,414		1,096		4,165		3,197
Transaction-based expenses:
Transaction rebates	(518)		(349)		(1,526)		(1,012)
Brokerage, clearance and exchange fees	(181)		(115)		(524)		(296)
Revenues less transaction-based expenses	715		632		2,115		1,889
Operating expenses:
Compensation and benefits	198		175		582		518
Professional and contract services	38		31		96		99
Computer operations and data communications	39		33		109		98
Occupancy	29		24		80		72
General, administrative and other	13		40		99		95
Marketing and advertising	7		8		20		29
Depreciation and amortization	51		47		149		143
Regulatory	2		8		16		23
Merger and strategic initiatives	1		10		12		25
Restructuring charges	11		30		36		30
Total operating expenses	389		406		1,199		1,132
Operating income	326		226		916		757
Interest income	—		3		4		8
Interest expense	(24)		(29)		(77)		(97)

Net gain on divestiture of business	—		—		—		27

Other income	1		—		5		1
Net income from unconsolidated investees	54		15		97		71
Income before income taxes	357		215		945		767
Income tax provision	93		65		237		196


Net income attributable to Nasdaq	$	264	$	150	$	708	$	571
Per share information:
Basic earnings per share	$	1.61	$	0.91	$	4.31	$	3.46
Diluted earnings per share	$	1.58	$	0.90	$	4.25	$	3.42
Cash dividends declared per common share	$	0.49	$	0.47	$	1.45	$	1.38

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income	$	264	$	150	$	708	$	571
Other comprehensive income (loss):
Foreign currency translation gains (losses)	60		(121)		29		(256)
Income tax benefit (expense)(1)	23		(46)		25		(47)
Foreign currency translation, net	83		(167)		54		(303)






Comprehensive income (loss) attributable to Nasdaq	$	347	$	(17)	$	762	$	268

____________

(1) Primarily relates to the tax effect of unrealized gains and losses on Euro denominated notes.

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

(in millions)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	Shares	$		Shares	$		Shares	$		Shares	$
Common stock	164	2		165	2		165	2		165	2

Additional paid-in capital
Beginning balance		2,533			2,713			2,632			2,716
Share repurchase program	—	(34)		(2)	(150)		(2)	(186)		(2)	(200)
Share-based compensation	—	24		1	21		1	64		1	57
Stock option exercises, net	—	1		—	1		—	2		—	1
Other issuances of common stock, net	—	—		—	—		—	12		—	11
Ending balance		2,524			2,585			2,524			2,585

Common stock in treasury, at cost
Beginning balance		(367)			(327)			(336)			(297)
Other employee stock activity	—	—		—	(1)		—	(31)		—	(31)
Ending balance		(367)			(328)			(367)			(328)

Accumulated other comprehensive loss
Beginning balance		(1,715)			(1,666)			(1,686)			(1,530)
Other comprehensive income (loss)		83			(167)			54			(303)

Ending balance		(1,632)			(1,833)			(1,632)			(1,833)

Retained earnings
Beginning balance		5,301			4,829			5,027			4,558
Impact of adoption of ASU 2016-13		—			—			(12)			—
Net income		264			150			708			571

Cash dividends declared per common share		(81)			(78)			(239)			(228)
Ending balance		5,484			4,901			5,484			4,901

Total Nasdaq stockholders’ equity		6,011			5,327			6,011			5,327

Noncontrolling interests
Beginning balance		3			—			—			—
Net activity related to noncontrolling interests		—			—			3			—
Ending balance		3			—			3			—



Total Equity	164	$	6,014	164	$	5,327	164	$	6,014	164	$	5,327

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in millions)


	Nine Months Ended September 30,
	2020		2019

Cash flows from operating activities:
Net income	$	708	$	571
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	149		143
Share-based compensation	64		57
Deferred income taxes	19		(21)

Extinguishment of debt	36		11
Net gain on divestiture of business	—		(27)

Non-cash restructuring charges	10		25

Net income from unconsolidated investees	(97)		(71)
Other reconciling items included in net income	16		7
Net change in operating assets and liabilities, net of effects of divestiture and acquisitions:
Receivables, net	(109)		(7)
Other assets	43		(128)
Accounts payable and accrued expenses	(18)		(36)
Section 31 fees payable to SEC	(69)		(75)
Accrued personnel costs	(6)		(58)
Deferred revenue	70		52
Other liabilities	1		181

Net cash provided by operating activities	817		624
Cash flows from investing activities:
Purchases of securities	(252)		(384)
Proceeds from sales and redemptions of securities	372		429


Proceeds from divestiture of business	—		108

Acquisition of businesses, net of cash and cash equivalents acquired	(157)		(193)
Purchases of property and equipment	(128)		(88)
Other investing activities	8		(3)
Net cash used in investing activities	(157)		(131)
Cash flows from financing activities:
Proceeds from (repayments of) commercial paper, net	(391)		264
Repayments of borrowings under our credit commitment and debt obligations	(1,470)		(1,215)
Payment of debt extinguishment cost	(36)		(11)

Proceeds from issuances of long-term debt, net of issuance costs and utilization of credit commitment	1,928		680

Repurchases of common stock	(186)		(200)
Dividends paid	(239)		(228)
Proceeds received from employee stock activity and other issuances	14		12
Payments related to employee shares withheld for taxes	(31)		(31)

Other financing activities	3		—
Net cash used in financing activities	(408)		(729)
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents	3		(17)
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents	255		(253)
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period	362		586
Cash and cash equivalents and restricted cash and cash equivalents at end of period	$	617	$	333
Supplemental Disclosure Cash Flow Information
Cash paid for:
Interest	$	69	$	97
Income taxes, net of refund	$	218	$	189

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization and Nature of Operations

Nasdaq is a global technology company serving the capital markets and other industries. Our diverse offerings of data, analytics, software and services enables clients to optimize and execute their business vision with confidence.

We manage, operate and provide our products and services in four business segments: Market Services, Corporate Services, Information Services and Market Technology.

Market Services

Our Market Services segment includes our Equity Derivative Trading and Clearing, Cash Equity Trading, FICC and Trade Management Services businesses. 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. In November 2019, we sold NFX’s futures exchange business to a third party which acquired the core assets of NFX, including the portfolio of open interest in NFX contracts. As of June 30, 2020, all open interest was migrated to other exchanges. Also, in January 2020, management commenced an orderly wind-down of our Nordic broker services operations business. We expect this wind-down to continue through 2021.

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.

In the U.S., we operate six options exchanges and three cash equity exchanges. The Nasdaq Stock Market, the largest of our cash equities exchanges, is the largest single venue of liquidity for trading U.S.-listed cash equities. We also operate an electronic platform for trading of U.S. Treasuries and a Canadian exchange for the trading of certain Canadian-listed securities.

In Europe, we operate exchanges in Stockholm (Sweden), Copenhagen (Denmark), Helsinki (Finland), and Reykjavik (Iceland), as well as the clearing operations of Nasdaq Clearing, as Nasdaq Nordic. We also operate exchanges in Tallinn (Estonia), Riga (Latvia) and Vilnius (Lithuania) as Nasdaq Baltic. Collectively, Nasdaq Nordic and Nasdaq Baltic offer trading in cash equities, depository receipts, warrants, convertibles, rights, fund units and ETFs, as well as trading and clearing of derivatives and clearing of resale and repurchase agreements.

Nasdaq Commodities is the brand name for Nasdaq’s European commodity-related products and services. Nasdaq Commodities’ offerings include derivatives in power, natural

gas and carbon emission markets, seafood, electricity certificates and clearing services. These products are listed on Nasdaq Oslo ASA, except for seafood, which is listed on Fishpool, a third party platform.

Through our Trade Management Services business, we provide market participants with a wide variety of alternatives for connecting to and accessing our markets via a number of different protocols used for quoting, order entry, trade reporting, and connectivity to various data feeds. We also provide co-location services to market participants, whereby we offer firms cabinet space and power to house their own equipment and servers within our data centers. Additionally, we offer a number of wireless connectivity routes between select data centers using millimeter wave and microwave technology. Our broker services operations business primarily offers technology and customized securities administration solutions to financial participants in the Nordic market.

Corporate Services

Our Corporate Services segment includes our Listing Services and Corporate Solutions businesses. These businesses deliver critical capital market and governance solutions across the lifecycle of public and private companies.

Our Listing Services business includes our U.S. and European Listing Services businesses. We operate a variety of listing platforms around the world to provide multiple global capital raising solutions for private and public companies. Our main listing markets are The Nasdaq Stock Market and the Nasdaq Nordic and Nasdaq Baltic exchanges. Through Nasdaq First North, our Nordic and Baltic operations also offer alternative marketplaces for smaller companies and growth companies. Our Listing Services business also includes NPM, which provides liquidity solutions for private companies and private funds.

We continue to grow our U.S. Corporate Bond exchange for the listing and trading of corporate bonds. This exchange operates pursuant to The Nasdaq Stock Market exchange license and is powered by NFF. We also continue to grow the Nasdaq Sustainable Bond Network, a platform for increased transparency in the global sustainable bond markets.

As of September 30, 2020, there were 3,249 total listings on The Nasdaq Stock Market, including 409 ETPs. The combined market capitalization was approximately $19.2 trillion. In Europe, the Nasdaq Nordic and Nasdaq Baltic exchanges, together with Nasdaq First North, were home to 1,049 listed companies with a combined market capitalization of approximately $1.8 trillion.

Our Corporate Solutions business includes our Investor Relations Intelligence and Governance Solutions businesses, which serve both public and private companies and organizations. Our public company clients can be companies listed on our exchanges or other U.S. and global exchanges.

We help organizations enhance their ability to understand and expand their global shareholder base and improve corporate governance through our suite of advanced technology, analytics, and consultative services. We provide clients with counsel on a range of governance and sustainability-related issues. Our acquisition of OneReport in February 2020 broadened our environmental, social and governance, or ESG, offerings, which also include our ESG Advisory service and our board assessment and collaboration technology.

Information Services

Our Information Services segment includes our Market Data, Index and Investment Data & Analytics businesses.

Our Market Data business sells and distributes historical and real-time market data to the sell-side, the buy-side, retail online brokers, proprietary trading shops, other venues, internet portals and data distributors. Our market data products enhance transparency of market activity within our exchanges and provide critical information to professional and non-professional investors globally.

Our Index business develops and licenses Nasdaq-branded indexes, associated derivatives, and financial products and sells and distributes historical and real-time index data. As of September 30, 2020, we had 335 ETPs licensed to Nasdaq’s indexes which had $313 billion in AUM.

Our Investment Data & Analytics business is a leading content and analytics cloud-based solutions provider used by asset managers, investment consultants and asset owners to help facilitate better investment decisions. In March 2020, we acquired Solovis, which offers multi-asset class, public and private market portfolio management, analytics, and reporting tools used by institutional investors and consultants.

Market Technology

Powering over 100 market infrastructure operators in more than 50 countries, our Market Technology segment is a leading global technology solutions provider and partner to exchanges, clearing organizations, central securities depositories, regulators, banks, brokers, buy-side firms and corporate businesses. Our Market Technology business is the sales channel for our complete global offering to other marketplaces. Our solutions can handle a wide array of assets, including but not limited to cash equities, equity derivatives, currencies, various interest-bearing securities, commodities, energy products and digital currencies. Our solutions can also be used in the creation of new asset classes, and non-capital markets customers, including those in insurance liabilities securitization, cryptocurrencies and sports wagering. During the third quarter of 2020, we announced the launch of the cloud-deployed Nasdaq Automated Investigator, an automated solution for investigating anti-money laundering for retail and commercial banks and other financial institutions.

Nasdaq’s market technology is utilized by leading markets in the U.S., Europe and Asia as well as emerging markets in the Middle East, Latin America, and Africa. Additionally, more than 170 market participants leverage our surveillance technology globally to manage their integrity obligations and assist them in complying with market rules, regulations and internal market surveillance policies.

2. Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements are prepared in accordance with U.S. GAAP and include the accounts of Nasdaq, its wholly-owned subsidiaries and other entities in which Nasdaq has a controlling financial interest. When we do not have a controlling interest in an entity but exercise significant influence over the entity’s operating and financial policies, such investment is accounted for under the equity method of accounting. We recognize our share of earnings or losses of an equity method investee based on our ownership percentage. See “Equity Method Investments,” of Note 6, “Investments,” for further discussion of our equity method investments.

The accompanying condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results. These adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation.

As permitted under U.S. GAAP, certain footnotes or other financial information can be condensed or omitted in the interim condensed consolidated financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in Nasdaq’s Form 10-K. The year-end condensed balance sheet data was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Accounting Estimates

In preparing our condensed consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income and net income, as well as on the value of certain assets and liabilities in our condensed consolidated balance sheets. At least quarterly, we evaluate our assumptions, judgments and estimates, and make changes as deemed necessary.

Nasdaq has considered the impact of COVID-19 on the assumptions and estimates used in evaluating our assets and liabilities, including but not limited to our goodwill, intangible assets, equity method investments, equity securities and allowance for losses on accounts receivable. We determined that there were no material adverse impacts on our results of operations and financial position for the three and nine months ended September 30, 2020. In addition, there were no material impairment charges recorded

for the three and nine months ended September 30, 2020. These estimates may change as new events occur and additional information is obtained. Actual results could differ from these estimates under different assumptions or conditions.

Recently Adopted Accounting Standard

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This standard changes the impairment model for certain financial instruments. The new model is a forward looking expected loss model and applies to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees and trade receivables. For available-for-sale debt securities with unrealized losses, credit losses are measured in a manner similar to previous accounting, except that the losses are recognized as allowances rather than reductions in the amortized cost of the securities.

We adopted this standard on January 1, 2020 using the modified retrospective transition method. We recorded a $12 million non-cash cumulative effect adjustment to retained earnings on our opening Condensed Consolidated Balance Sheets as of January 1, 2020.

The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new standard to be immaterial to our net income on an on-going basis.

At the date of adoption, the adjustment impacted by the standard related primarily to an adjustment to trade receivables. We took into consideration all financial instruments held at the date of adoption which were impacted by the standard, including reverse repurchase agreements and commercial paper, and estimated the risk of loss to be immaterial. Therefore, no adjustment was recorded for these instruments.

In accordance with the new standard, Nasdaq must recognize an allowance when a receivable or contract asset is established, regardless of whether there has been an incurred loss. Our receivables are concentrated with our member firms, market data distributors, listed companies and corporate solutions and market technology customers.

In order to assess the appropriate allowance as of January 1, 2020, we disaggregated our trade receivables by business unit and the aging of receivables. We concluded that historical loss information is a reasonable starting point on which to determine expected credit losses for trade receivables held at the date of adoption as the composition of our trade receivables at adoption of the standard is materially consistent with that used in developing the historical loss percentages for each business unit. In order to incorporate our expectation of credit losses over the life of our receivables, we considered corporate default rate averages over an extended period as compared to the period covered by our historical loss data and included an adjustment to historical loss percentages for current conditions and expected future conditions at the date of adoption.

The allowance for losses is reviewed monthly and adjustments may be required if economic conditions at the measurement date reflect stronger or weaker economic performance than the historical data implies. If circumstances change (i.e., higher than expected defaults or an unexpected material adverse change in a major customer’s ability to pay), our estimates of recoverability could be reduced by a material amount. When we deem all or a portion of a receivable uncollectible the allowance for losses is reduced by the amount being written off. Any change in the allowance is included in general, administrative and other expense in the Condensed Consolidated Statements of Income.

Receivables are shown net of the allowance for losses. The total allowance netted against receivables in the Condensed Consolidated Balance Sheets was $20 million as of September 30, 2020 and $9 million as of December 31, 2019.

Subsequent Events

There have been no subsequent events through the issuance date of this Quarterly Report on Form 10-Q that would require disclosure in, or adjustment to, the condensed consolidated financial statements.

3. Revenue From Contracts With Customers

Disaggregation of Revenue

The following tables summarize the disaggregation of revenue by major product and service and by segment for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30, 2020
	Market Services		Corporate Services		Information Services		Market Technology		Consolidated
	(in millions)
Transaction-based trading and clearing, net	$	183	$	—	$	—	$	—	$	183
Trade management services	76		—		—		—		76
Listing services	—		79		—		—		79
Corporate solutions	—		53		—		—		53
Market data	—		—		107		—		107
Index	—		—		86		—		86
Investment data & analytics	—		—		45		—		45
Market technology	—		—		—		86		86
Revenues less transaction-based expenses	$	259	$	132	$	238