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NASDAQ OMX Reports Third Quarter 2012 Results

The non-GAAP information is not prepared in accordance with GAAP and may not be comparable to non-GAAP information used by other companies. The non-GAAP information should not be viewed as a substitute for, or superior to, other data prepared in accordance with GAAP.

Cautionary Note Regarding Forward-Looking Statements

Information set forth in this communication contains forward-looking statements that involve a number of risks and uncertainties. NASDAQ OMX cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information. Such forward-looking statements include, but are not limited to (i) projections about our future financial results, growth, trading volumes, tax benefits and achievement of synergy targets, (ii) statements about the implementation dates and benefits of certain strategic and capital return initiatives, (iii) statements about our integrations of our recent acquisitions and (iv) other statements that are not historical facts. Forward-looking statements involve a number of risks, uncertainties or other factors beyond NASDAQ OMX's control. These factors include, but are not limited to, NASDAQ OMX's ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors detailed in NASDAQ OMX's filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 10-K and quarterly reports on Form 10-Q which are available on NASDAQ OMX's website at http://www.nasdaqomx.com and the SEC's website at www.sec.gov . NASDAQ OMX undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

NDAQF

 The NASDAQ OMX Group, Inc. 
 Consolidated Statements of Income 
 (in millions, except per share amounts) 
 (unaudited) 
       
   Three Months Ended 
   September 30,   June 30,   September 30, 
   2012   2012   2011 
 Revenues:       
 Market Services   $ 603  $ 688  $ 808
 Cost of revenues:       
 Transaction rebates   (250)  (299)  (390)
 Brokerage, clearance and exchange fees   (84)  (100)  (118)
 Total cost of revenues   (334)  (399)  (508)
       
 Total Market Services revenues less transaction rebates, brokerage, clearance and exchange fees   269  289  300
       
 Issuer Services   93  91  90
 Market Technology   47  44  46
       
 Revenues less transaction rebates, brokerage, clearance and exchange fees   409  424  436
 Operating Expenses:       
 Compensation and benefits   113  113  118
 Marketing and advertising   6  6  4
 Depreciation and amortization   26  25  28
 Professional and contract services   24  23  21
 Computer operations and data communications   18  17  17
 Occupancy   22  23  23
 Regulatory   8  9  9
 Merger and strategic initiatives   (3)  1  3
 Restructuring charges   10  17  -- 
 General, administrative and other   15  15  18
 Total operating expenses   239  249  241
       
 Operating income   170  175  195
       
 Interest income   2  2  3
 Interest expense   (24)  (24)  (30)
 Loss on sale of business   (14)  --   -- 
 Asset impairment charges   --   (28)  -- 
 Income from unconsolidated investees, net   --   --   1
 Dividend and investment income    --   --   1
       
 Income before income taxes   134  125  170
 Income tax provision    45  33  61
 Net income   89  92  109
       
 Net loss attributable to noncontrolling interests   --   1  1
 Net income attributable to NASDAQ OMX   $ 89  $ 93  $ 110
       
 Basic and diluted earnings per share:       
 Basic earnings per share   $ 0.53  $ 0.55  $ 0.62
 Diluted earnings per share   $ 0.52  $ 0.53  $ 0.61
  Cash dividends declared per common share   $ 0.13  $ 0.13  $ -- 
       
 Weighted-average common shares outstanding for earnings per share:       
 Basic    166.2  169.4  177.1
 Diluted   170.5  173.4  180.9
 
 
The NASDAQ OMX Group, Inc.
Revenue Detail
(in millions)
(unaudited)
 
   Three Months Ended 
   September 30,   June 30,   September 30, 
   2012   2012   2011 
       
 MARKET SERVICES      
 Transaction Services        
 Cash Equity Trading Revenues:     
 U.S. cash equity trading   $ 297  $ 373  $ 481
 Cost of revenues:       
 Transaction rebates   (193)  (246)  (327)
 Brokerage, clearance and exchange fees   (75)  (94)  (111)
 Total U.S. cash equity cost of revenues   (268)  (340)  (438)
 Net U.S. cash equity trading revenues  29  33  43
 European cash equity trading   18  19  24
 Total net cash equity trading revenues  47  52  67
       
 Derivative Trading and Clearing Revenues:   
 U.S. derivative trading and clearing   110  103  121
 Cost of revenues:       
 Transaction rebates   (57)  (53)  (63)
 Brokerage, clearance and exchange fees   (9)  (6)  (7)
 Total U.S. derivative trading and clearing cost of revenues   (66)  (59)  (70)
 Net U.S. derivative trading and clearing revenues  44  44  51
 European derivative trading and clearing   28  26  33
 Total net derivative trading and clearing revenues  72  70  84
       
 Access Services Revenues   61  61  60
       
 Total Transaction Services revenues less transaction rebates, brokerage, clearance and exchange fees   180  183  211
       
 Market Data Revenues:       
 Net U.S. tape plans   28  31  30
 U.S. market data products   38  38  33
 European market data products   18  21  20
       
 Total Market Data revenues  84  90  83
       
 Broker Services Revenues   5  5  5
       
 Other Market Services Revenues   --   11  1
 Total Market Services revenues less transaction rebates, brokerage, clearance and exchange fees   269  289  300
       
 ISSUER SERVICES      
 Global Listing Services Revenues:       
 Annual renewal   28  28  30
 Listing of additional shares   10  10  10
 Initial listing   5  4  5
 Total U.S. listing services   43  42  45
 European listing fees   12  12  14
 Corporate Solutions   24  22  18
 Total Global Listing Services revenues  79  76  77
       
 Global Index Group Revenues   14  15  13
 Total Issuer Services revenues  93  91  90
       
 MARKET TECHNOLOGY      
 License, support and facility management   27  26  28
 Delivery project   7  8  6
 Change request, advisory and broker surveillance   13  10  12
 Total Market Technology revenues   47  44  46
       
  Total revenues less transaction rebates, brokerage, clearance and exchange fees  $ 409  $ 424  $ 436
 
 
The NASDAQ OMX Group, Inc.
Consolidated Balance Sheets 
(in millions)
     
   September 30,  December 31,
   2012  2011
Assets (unaudited)  
Current assets:    
Cash and cash equivalents  $ 438  $ 506
Restricted cash  81  34
Financial investments, at fair value  157  279
Receivables, net  327  308
Deferred tax assets  16  16
Default funds and margin deposits  194  17
Open clearing contracts:  
Derivative positions, at fair value  --   1,566
Resale agreements, at contract value  --   3,745
Other current assets  116  110
Total current assets  1,329  6,581
Non-current restricted cash  25  97
Property and equipment, net  203  193
Non-current deferred tax assets  303  392
Goodwill  5,286 5,061
Intangible assets, net  1,645  1,648
Other non-current assets  129  119
Total assets  $ 8,920  $ 14,091
     
Liabilities     
Current liabilities:    
Accounts payable and accrued expenses  $ 149  $ 164
Section 31 fees payable to SEC  24  106
Accrued personnel costs  86  132
Deferred revenue  165  124
Other current liabilities  115  112
Deferred tax liabilities  27  27
Default funds and margin deposits  194  17
Open clearing contracts:  
Derivative positions, at fair value  --   1,566
Repurchase agreements, at contract value  --   3,745
Current portion of debt obligations  45  45
Total current liabilities  805  6,038
Debt obligations  1,941  2,072
Non-current deferred tax liabilities  686  670
Non-current deferred revenue  160  154
Other non-current liabilities  192  171
Total liabilities  3,784  9,105
     
Commitments and contingencies   
Equity    
NASDAQ OMX stockholders' equity:  
Common stock  2  2
Additional paid-in capital  3,804  3,793
Common stock in treasury, at cost  (1,063)  (860)
Accumulated other comprehensive loss  (222)  (350)
Retained earnings  2,614  2,391
Total NASDAQ OMX stockholders' equity  5,135  4,976
Noncontrolling interests  1  10
Total equity  5,136  4,986
Total liabilities and equity  $ 8,920  $ 14,091
 
 
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP Net Income, Diluted Earnings Per Share, Operating Income, Revenues and Operating Expenses 
to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, Revenues and Operating Expenses
(in millions, except per share amounts)
(unaudited)
       
   Three Months Ended 
  September 30, June 30, September 30,
   2012   2012   2011 
GAAP net income attributable to NASDAQ OMX:  $ 89  $ 93  $ 110
Non-GAAP adjustments:      
       
Income from open positions relating to the operations of the Exchange  --   (11)  -- 
Asset impairment charges  --   28  -- 
Loss on sale of business  14  --   -- 
Restructuring charges  10  17  -- 
Merger and strategic initiatives  (3)  1  3
Extinguishment of debt  --   --   6
Special legal expenses  4  --   -- 
Other  --   2  -- 
Total non-GAAP adjustments  25  37  9
Adjustment to the income tax provision to reflect non-GAAP adjustments (1)  (10)  (13)  (3)
Significant tax adjustments, net  1  (6)  5
Total non-GAAP adjustments, net of tax  16  18  11
       
Non-GAAP net income attributable to NASDAQ OMX:  $ 105  $ 111  $ 121
       
GAAP diluted earnings per common share:  $ 0.52  $ 0.53  $ 0.61
Total adjustments from non-GAAP net income above  0.10  0.11  0.06
Non-GAAP diluted earnings per common share:  $ 0.62  $ 0.64  $ 0.67
       
   Three Months Ended 
  September 30, June 30, September 30,
   2012   2012   2011 
       
GAAP operating income:  $ 170  $ 175  $ 195
Non-GAAP adjustments:      
       
Income from open positions relating to the operations of the Exchange  --   (11)  -- 
Restructuring charges  10  17  -- 
Merger and strategic initiatives  (3)  1  3
Extinguishment of debt  --   --   6
Special legal expenses  4  --   -- 
Other  --   2  -- 
Total non-GAAP adjustments  11  9  9
       
Non-GAAP operating income: $ 181 $ 184 $ 204
       
 
     
Total Non-GAAP revenues less transaction rebates, brokerage, clearance and exchange fees   $ 409  $ 413  $ 436
       
Non-GAAP operating margin (2) 44% 45% 47%
 
 
(1) We determine the tax effect of each item based on the tax rules in the respective jurisdiction where the transaction occurred. 
(2) Non-GAAP operating margin equals non-GAAP operating income divided by total revenues less transaction rebates, brokerage, clearance and exchange fees. 
 
 
The NASDAQ OMX Group, Inc.
Reconciliation of GAAP Net Income, Diluted Earnings Per Share, Operating Income, Revenues and Operating Expenses 
to Non-GAAP Net Income, Diluted Earnings Per Share, Operating Income, Revenues and Operating Expenses
(in millions)
(unaudited)
       
   Three Months Ended 
  September 30, June 30, September 30,
   2012   2012   2011 
       
GAAP revenues less transaction rebates, brokerage, clearance and exchange fees:  $ 409  $ 424  $ 436
       
Non-GAAP adjustments:      
       
Income from open positions relating to the operations of the Exchange  --   (11)  -- 
Total non-GAAP adjustments  --   (11)  -- 
       
Non-GAAP revenues less transaction rebates, brokerage, clearance and exchange fees:  $ 409  $ 413  $ 436
       
       
   Three Months Ended 
  September 30, June 30, September 30,
   2012   2012   2011 
       
GAAP operating expenses:  $ 239  $ 249  $ 241
       
Non-GAAP adjustments:      
       
Restructuring charges  (10)  (17)  -- 
Merger and strategic initiatives  3  (1)  (3)
Extinguishment of debt  --   --   (6)
Special legal expenses  (4)  --   -- 
Other  --   (2)  -- 
Total non-GAAP adjustments  (11)  (20)  (9)
       
Non-GAAP operating expenses:  $ 228  $ 229  $ 232
 
 
 
The NASDAQ OMX Group, Inc.
Quarterly Key Drivers Detail
(unaudited)
       
  Three Months Ended
   September 30,   June 30,   September 30, 
   2012   2012   2011 
Market Services      
Cash Equity Trading      
NASDAQ securities      
Total average daily share volume (in billions) 1.66 1.80 2.18
Matched market share executed on NASDAQ 25.2% 27.3% 28.0%
Matched market share executed on NASDAQ OMX BX 2.7% 2.9% 2.5%
Matched market share executed on NASDAQ OMX PSX 1.2% 1.6% 1.2%
Market share reported to the FINRA/NASDAQ       
Trade Reporting Facility 31.5% 31.4% 28.6%
Total market share (1) 60.6% 63.3% 60.2%
       
New York Stock Exchange, or NYSE, securities      
Total average daily share volume (in billions) 3.39 3.86  4.78
Matched market share executed on NASDAQ 12.8% 13.7% 14.3%
Matched market share executed on NASDAQ OMX BX 2.5% 2.7% 2.5%
Matched market share executed on NASDAQ OMX PSX 0.6% 0.9% 0.6%
Market share reported to the FINRA/NASDAQ       
Trade Reporting Facility 28.6% 29.1% 25.6%
Total market share (1) 44.6% 46.4% 43.0%
       
NYSE MKT and regional securities      
Total average daily share volume (in billions) 0.94 1.19  1.80
Matched market share executed on NASDAQ 16.1% 18.3% 19.9%
Matched market share executed on NASDAQ OMX BX 3.0% 2.9% 2.1%
Matched market share executed on NASDAQ OMX PSX 1.5% 2.4% 2.0%
Market share reported to the FINRA/NASDAQ       
Trade Reporting Facility 29.5% 28.1% 24.2%
Total market share (1) 50.1% 51.8% 48.2%
       
Total U.S.-listed securities      
Total average daily share volume (in billions)  5.99  6.85  8.76
Matched share volume (in billions)  76.6  95.8  125.0
Matched market share executed on NASDAQ 16.8% 18.1% 18.9%
Matched market share executed on NASDAQ OMX BX 2.7% 2.8% 2.4%
Matched market share executed on NASDAQ OMX PSX 0.9% 1.3% 1.1%
       
NASDAQ OMX Nordic and NASDAQ OMX Baltic Securities      
Average daily number of equity trades 284,764 369,680  422,658
Total average daily share volume (in billions)  $ 3.2  $ 4.4  $ 5.1
Total market share 68.5% 67.8% 72.5%
       
Derivative Trading and Clearing      
U.S. Equity Options      
Total industry average daily volume (in millions) 13.8 14.9  18.5
NASDAQ OMX PHLX matched market share 21.4% 19.6% 22.3%
The NASDAQ Options Market matched market share 5.2% 5.6% 4.1%
NASDAQ OMX BX Options Market matched market share 0.7%  --   -- 
       
NASDAQ OMX Nordic and NASDAQ OMX Baltic      
Average daily volume:      
Options, futures and fixed-income contracts 371,230 431,154  491,968
Finnish option contracts traded on Eurex 70,211 92,616  65,716
       
NASDAQ OMX Commodities      
Clearing Turnover:      
Power contracts (TWh) (2)  384  346  416
Carbon contracts (1000 tCO2) (2)  5,009  6,951  15,511
       
Issuer Services      
Initial public offerings      
NASDAQ 17 15 16
Exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic 1  --  2
       
New listings      
NASDAQ (3) 40 29 33
Exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic (4) 4 2 5
       
Number of listed companies      
NASDAQ (5)  2,610  2,636  2,717
Exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic (6)  754  759  771
       
Market Technology      
Order intake (in millions) (7)  $ 31  $ 77  $ 35
Total order value (in millions) (8)  $ 523  $ 529  $ 473
 
(1) Includes transactions executed on NASDAQ's, NASDAQ OMX BX's and NASDAQ OMX PSX's systems plus trades reported through the FINRA/NASDAQ Trade Reporting Facility.
(2) Primarily transactions executed on Nord Pool and reported for clearing to NASDAQ OMX Commodities measured by Terawatt hours (TWh) and one thousand metric tons of carbon dioxide (1000 tCO2). 
(3) 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 ETFs.
(4) New listings include IPOs and represent companies listed on the exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic and companies on the alternative markets of NASDAQ OMX First North.
(5) Number of listed companies for NASDAQ at period end, including separately listed ETFs.
(6) Represents companies listed on the exchanges that comprise NASDAQ OMX Nordic and NASDAQ OMX Baltic and companies on the alternative markets of NASDAQ OMX First North at period end.
(7) Total contract value of orders signed during the period. 
(8) Represents total contract value of orders signed that are yet to be recognized as revenue. 
CONTACT: Media Relations:
         Joseph Christinat +1.646.441.5121
         Joseph.Christinat@NASDAQOMX.Com

         Investor Relations:
         John Sweeney +1.212.401.8737
         John.Sweeney@NASDAQOMX.Com

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