Edgar Filing: NASDAQ, INC.

Document

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, 2018
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

No changes

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

_____________________________________

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 30, 2018
Common Stock, $.01 par value per share		163,957,026 shares

Nasdaq, Inc.

Form 10-Q

For the Quarterly Period Ended September 30, 2018

INDEX



		Page
Part I. FINANCIAL INFORMATION

Item 1.	Financial Statements	2

	Condensed Consolidated Balance Sheets - September 30, 2018 (unaudited) and December 31, 2017	2

	Condensed Consolidated Statements of Income - Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)	3

	Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2018 and 2017 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56

Item 4.	Controls and Procedures	59

Part II. OTHER INFORMATION		59

Item 1.	Legal Proceedings	59

Item 1A.	Risk Factors	59

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 3.	Defaults Upon Senior Securities	61

Item 4.	Mine Safety Disclosures	61

Item 5.	Other Information	61

Item 6.	Exhibits	62

SIGNATURES		63

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 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 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

2016 Credit Facility: $400 million senior unsecured term loan facility which matures on November 25, 2019

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

2019 Notes: $500 million aggregate principal amount of senior unsecured floating rate notes due March 22, 2019 with an interest rate equal to the three-month U.S. dollar LIBOR plus 0.39%

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

ASU: Accounting Standards Update

BWise: BWise Beheer B.V. and its subsidiaries

CCP: Central Counterparty

EMIR: European Market Infrastructure Regulation

Equity Plan: Nasdaq Equity Incentive Plan

ESPP: Nasdaq Employee Stock Purchase Plan

ETP: Exchange Traded Product

eVestment: eVestment, Inc. and its subsidiaries

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

ISE: U.S. Exchange Holdings, Inc. and its subsidiaries

LCH: LCH Group Holdings Limited

LIBOR: London Interbank Offered Rate

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

PSU: Performance Share Unit

Regulation NMS: Regulation National Market System

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

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

* * * * *

NASDAQ, the NASDAQ logos, and other brand, service or product names or marks referred to in this report are trademarks or services 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, which includes best efforts underwritings; 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 best efforts underwritings, 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 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, 2018, the “Risk Factors” section in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 that was filed with the SEC on August 1, 2018, the “Risk Factors” section in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 that was filed with the SEC on May 2, 2018, and the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 that was filed with the SEC on February 28, 2018.

* * * * * *

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.”

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 identify forward-looking statements. These include, among others, statements relating to:


•	our strategy, growth forecasts and 2018 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 or which may affect us.

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 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 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 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.

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, 2018, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 that was filed with the SEC on August 1, 2018, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 that was filed with the SEC on May 2, 2018, and more fully described in the “Risk Factors,” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 that was filed with the SEC on February 28, 2018. 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, 2018			December 31, 2017
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	324		$	377
Restricted cash	52			22
Financial investments, at fair value	202			235
Receivables, net	356			356
Default funds and margin deposits	4,219			3,988
Other current assets	304			235
Assets held for sale	—			297
Total current assets	5,457			5,510
Property and equipment, net	371			400
Goodwill	6,369			6,586
Intangible assets, net	2,328			2,468
Other non-current assets	330			390
Total assets	$	14,855		$	15,354
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	176		$	177
Section 31 fees payable to SEC	21			128
Accrued personnel costs	145			170
Deferred revenue	257			161
Other current liabilities	173			85
Default funds and margin deposits	4,219			3,988
Short-term debt	808			480
Liabilities held for sale	—			45
Total current liabilities	5,799			5,234
Long-term debt	3,072			3,727
Deferred tax liabilities, net	137			225
Non-current deferred revenue	91			126
Other non-current liabilities	154			162
Total liabilities	9,253			9,474
Commitments and contingencies
Equity
Nasdaq stockholders’ equity:
Common stock, $0.01 par value, 300,000,000 shares authorized, shares issued: 169,423,805 at September 30, 2018 and 172,373,432 at December 31, 2017; shares outstanding: 163,949,047 at September 30, 2018 and 167,441,030 at December 31, 2017	2			2
Additional paid-in capital	2,676			3,024
Common stock in treasury, at cost: 5,474,758 shares at September 30, 2018 and 4,932,402 shares at December 31, 2017	(291		)	(247		)
Accumulated other comprehensive loss	(1,184		)	(862		)
Retained earnings	4,399			3,963
Total Nasdaq stockholders’ equity	5,602			5,880
Total liabilities and equity	$	14,855		$	15,354

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,
	2018			2017			2018			2017

Revenues:
Market Services	$	586		$	581		$	1,968		$	1,808
Corporate Services	131			126			395			370
Information Services	179			150			528			432
Market Technology	68			62			194			176
Other revenues	—			46			56			143
Total revenues	964			965			3,141			2,929
Transaction-based expenses:
Transaction rebates	(293		)	(266		)	(947		)	(874		)
Brokerage, clearance and exchange fees	(71		)	(96		)	(312		)	(275		)
Revenues less transaction-based expenses	600			603			1,882			1,780
Operating expenses:
Compensation and benefits	164			167			534			489
Professional and contract services	33			38			105			110
Computer operations and data communications	32			32			94			91
Occupancy	23			23			72			69
General, administrative and other	28			15			73			64
Marketing and advertising	7			7			27			22
Depreciation and amortization	53			47			159			140
Regulatory	8			9			24			25
Merger and strategic initiatives	6			3			7			20
Total operating expenses	354			341			1,095			1,030
Operating income	246			262			787			750
Interest income	3			2			8			6
Interest expense	(38		)	(34		)	(112		)	(107		)
Net gain on divestiture of businesses	(8		)	—			33			—
Other investment income	—			—			7			2
Net income from unconsolidated investees	6			4			13			10
Income before income taxes	209			234			736			661
Income tax provision	46			64			234			178
Net income attributable to Nasdaq	$	163		$	170		$	502		$	483
Per share information:
Basic earnings per share	$	0.99		$	1.02		$	3.03		$	2.91
Diluted earnings per share	$	0.97		$	1.00		$	2.99		$	2.85
Cash dividends declared per common share	$	0.44		$	0.38		$	1.26		$	1.08

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(in millions)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017

Net income	$	163		$	170		$	502		$	483
Other comprehensive income (loss):
Foreign currency translation gains (losses):
Net foreign currency translation gains (losses)	22			92			(239		)	258
Income tax (expense)⁽¹⁾	(15		)	(25		)	(76		)	(104		)
Total	7			67			(315		)	154
Employee benefit plan income tax (expense)⁽¹⁾	—			—			(7		)	—
Total other comprehensive income (loss), net of tax	7			67			(322		)	154
Comprehensive income attributable to Nasdaq	$	170		$	237		$	180		$	637

____________

⁽¹⁾For the nine months ended September 30, 2018, includes the reclassification of the stranded tax effects related to the Tax Cuts and Jobs Act. See Note 17, “Income Taxes,” for further discussion.

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in millions)



	Nine Months Ended September 30,
	2018			2017

Cash flows from operating activities:
Net income	$	502		$	483
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	159			140
Share-based compensation	51			52
Deferred income taxes	(12		)	(4		)
Reversal of certain Swedish tax benefits	41			—
Net gain on divestiture of businesses	(33		)	—
Net income from unconsolidated investees	(13		)	(10		)
Other reconciling items included in net income	10			18
Net change in operating assets and liabilities, net of effects of divestiture and acquisitions:
Receivables, net	(11		)	30
Other assets	(23		)	376
Accounts payable and accrued expenses	6			(18		)
Section 31 fees payable to SEC	(107		)	(77		)
Accrued personnel costs	(22		)	(82		)
Deferred revenue	74			18
Other liabilities	46			(66		)
Net assets held for sale	—			(251		)
Net cash provided by operating activities	668			609
Cash flows from investing activities:
Purchases of trading securities	(294		)	(291		)
Proceeds from sales and redemptions of trading securities	299			334
Purchases of available-for-sale investment securities	(18		)	(12		)
Proceeds from maturities of available-for-sale investment securities	32			30
Proceeds from divestiture of businesses, net	286			—
Purchases of property and equipment	(72		)	(102		)
Other investment activities	(6		)	(32		)
Net cash provided by (used in) investing activities	227			(73		)
Cash flows from financing activities:
Proceeds from (repayments of) commercial paper, net	(170		)	154
Repayments of long-term debt	(115		)	(683		)
Payment of debt extinguishment cost	—			(9		)
Proceeds from utilization of credit commitment, net of debt issuance costs	—			10
Proceeds from issuances of senior unsecured notes, net of debt issuance costs	—			498
Cash paid for repurchase of common stock	(394		)	(175		)
Cash dividends paid	(208		)	(180		)
Proceeds received from employee stock activity	10			32
Payments related to employee shares withheld for taxes	(44		)	(65		)
Proceeds of customer funds	15			—
Net cash used in financing activities	(906		)	(418		)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(12		)	15
Net increase (decrease) in cash and cash equivalents and restricted cash	(23		)	133
Cash and cash equivalents and restricted cash at beginning of period	399			418
Cash and cash equivalents and restricted cash at end of period	$	376		$	551
Supplemental Disclosure Cash Flow Information
Cash paid for:
Interest	$	121		$	114
Income taxes, net of refund	$	195		$	126

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization and Nature of Operations

Nasdaq, Inc. is a leading provider of trading, clearing, marketplace technology, regulatory, securities listing, information and public and private company services. Our global offerings are diverse and include trading and clearing across multiple asset classes, trade management services, market data products, financial indexes, investment data and analytics, 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, trading surveillance and many other functions.

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. 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 electronic 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 NFX, a U.S. based designated contract market which lists cash-settled energy derivatives based on key energy benchmarks including oil, natural gas and U.S. power. In addition, we also operate a Canadian exchange for the trading of 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 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. These products are listed on two of Nasdaq’s derivatives exchanges, Nasdaq Oslo ASA and NFX.

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, DROP functionality and connectivity to various data feeds. We also provide data center services, including co-location to market participants, whereby firms may lease cabinet space and power to house their own equipment and servers within our data centers. Our broker services operations offer technology and customized securities administration solutions to financial participants in the Nordic market.

Corporate Services

Our Corporate Services segment includes our Corporate Solutions and Listing Services businesses.

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 April 2018, we sold our Public Relations Solutions and Digital Media Services businesses. See “2018 Divestiture,” of Note 4, “Acquisitions and Divestiture,” for further discussion. As of September 30, 2018, our Corporate Solutions business includes our investor relations, board & leadership, and governance, risk and compliance products and services.

For segment reporting purposes, we have included in corporate items the revenues and expenses of the Public Relations Solutions and Digital Media Services businesses, which were part of the Corporate Solutions business, within our Corporate Services segment, prior to the date of sale. See Note 18, “Business Segments,” for further discussion.

Earlier this year, we realigned our businesses to better serve the needs of our corporate clients. As a result, beginning in the second quarter of 2018, our BWise corporate enterprise risk management solutions are now offered as part of governance, risk and compliance products and services within our Corporate Solutions business. BWise was previously part of our Market Technology segment.

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.

As of September 30, 2018, there were 3,049 total listings on The Nasdaq Stock Market, including 390 ETPs. The combined market capitalization was approximately $13.4 trillion. In Europe, the Nasdaq Nordic and Nasdaq Baltic exchanges, together with Nasdaq First North, were home to 1,010 listed companies with a combined market capitalization of approximately $1.5 trillion.

Information Services

Beginning in the second quarter of 2018, our Information Services segment was recategorized into the following businesses:


•	Market Data;


•	Index; and


•	Investment Data & Analytics.

Prior to the second quarter, our Information Services segment was comprised of our Data Products and our Index Licensing and Services businesses.

Our Market Data business sells and distributes historical and real-time quote and trade information 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 also provides custom calculation services for third-party clients. As of September 30, 2018, we had 358 ETPs licensed to Nasdaq’s indexes which had $206 billion in assets under management.

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.

Market Technology

Our Market Technology segment 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.

Market Technology provides 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, and are currently powering more than 100 marketplaces in 50 countries. Market Technology also provides

market surveillance services to broker-dealer firms worldwide, as well as risk management solutions.

As discussed above under “Corporate Services,” as of the second quarter of 2018, our BWise business, which was previously part of our Market Technology segment, is now offered as part of our Corporate Solutions business.

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 7, “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 for the interim periods presented. 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2017 that was filed with the SEC on February 28, 2018.

Certain prior year amounts have been reclassified to conform to the current year presentation primarily due to the adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” on January 1, 2018. See Note 3, “Significant Accounting Policies Update,” for further discussion.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Subsequent Events

We have evaluated subsequent events through the issuance date of this Quarterly Report on Form 10-Q. See Note 19, “Subsequent Events,” for further discussion.

Recent Accounting Pronouncements



Accounting Standard	Description	Effective Date	Effect on the Financial Statements or Other Significant Matters
Intangibles - Goodwill and Other - Internal-Use Software In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.”	This ASU clarifies the accounting for implementation costs of a hosting arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Capitalized implementation costs should be expensed over the term of the hosting arrangement and recognized in the same line item in the statement of income as the hosted service costs. Payments for capitalized implementation costs should be classified in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. Capitalized implementation costs should be presented in the balance sheet in the same line item as a prepayment for the fees of the associated hosting arrangement.	January 1, 2020, with early adoption permitted. We early adopted this standard as of July 1, 2018.	There was no impact to the financial statements as a result of the adoption of this standard, as we are currently accounting for costs incurred in a cloud computing arrangement in accordance with the guidance provided in this standard.
Fair Value Measurements In August 2018, the FASB issued ASU 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.”	This ASU modifies the disclosure requirements on fair value measurements by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty, and adding new requirements, mainly for Level 3 fair value measurements.	January 1, 2020, with early adoption permitted. We early adopted this standard as of July 1, 2018 on a prospective basis.	There was no impact to the financial statements or our disclosures as a result of the adoption of this standard.



Accounting Standard	Description	Effective Date	Effect on the Financial Statements or Other Significant Matters
Income Statement - Reporting Comprehensive Income In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220).”	This ASU provides an election to reclassify tax effects that are stranded in accumulated other comprehensive income as a result of tax reform to retained earnings. An election is also available to reclassify other stranded tax effects that relate to the Tax Cuts and Jobs Act but do not directly relate to the change in the federal rate. Tax effects that are stranded in accumulated other comprehensive income for other reasons (e.g., prior changes in tax law, a change in valuation allowance) may not be reclassified. Previously, the effects of changes in tax rates and laws on deferred tax balances were required to be recorded as a component of tax expense related to continuing operations for the period in which the law was enacted, even if the assets and liabilities related to items of accumulated other comprehensive income. In other words, backward tracing of the income tax effects of items originally recognized through accumulated other comprehensive income was prohibited.	January 1, 2019, with early adoption permitted. We early adopted this standard as of January 1, 2018.	As a result of the adoption of this standard, in the first quarter of 2018, we recorded a reclassification of $142 million for stranded tax effects related to the Tax Cuts and Jobs Act from accumulated other comprehensive loss to retained earnings within stockholders’ equity in the Condensed Consolidated Balance Sheets. See Note 17, “Income Taxes,” for further discussion.
Goodwill In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment.”	This ASU simplifies how an entity is required to test goodwill for impairment and removes the second step of the goodwill impairment test, which required a hypothetical purchase price allocation if the fair value of a reporting unit is less than its carrying amount. Goodwill impairment will now be measured using the difference between the carrying amount and the fair value of the reporting unit and the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments in this ASU should be applied on a prospective basis.	January 1, 2020, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.	We do not anticipate a material impact on our consolidated financial statements at the time of adoption of this new standard as the carrying amounts of our reporting units have been less than their corresponding fair values in recent years. Therefore, the second step of the goodwill impairment test was not required. However, changes in future projections, market conditions and other factors may cause a change in the excess of fair value of our reporting units over their corresponding carrying amounts. We do not anticipate early adoption of this standard.
Financial Instruments - Credit Losses In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.”	This ASU changes the impairment model for certain financial instruments. The new model is a forward looking expected loss model and will apply 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 net investments in leases, as well as trade receivables. For available-for-sale debt securities with unrealized losses, credit losses will be measured in a manner similar to today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities.	January 1, 2020, with early adoption permitted as of January 1, 2019.	We expect to adopt this standard on January 1, 2020. We are currently assessing the impact that this standard will have on our consolidated financial statements. We do not anticipate early adoption of this standard.



Accounting Standard	Description	Effective Date	Effect on the Financial Statements or Other Significant Matters
Leases In February 2016, the FASB issued ASU 2016-02, “Leases.”	Under this ASU, at the commencement date, lessees will be required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. This guidance is not applicable for leases with a term of 12 months or less. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The guidance also requires certain quantitative and qualitative disclosures about leasing arrangements. Lessor accounting is largely unchanged. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.	January 1, 2019.	See discussion below.

Leases

We will adopt ASU 2016-02 on January 1, 2019. When adopted, this new standard will result in an increase in the assets and liabilities reflected on our consolidated balance sheets. In addition, we will be required to disclose key information about our leases. Nasdaq’s current operating lease portfolio is primarily comprised of real estate and data center leases. As of September 30, 2018, we had future contractual lease payment obligations of $636 million. We expect that we will elect the alternative transition approach allowed under the guidance and expect to implement new accounting policies as well as to elect certain practical expedients available under the guidance, including those related to leases with a term of 12 months or less and our application of discount rates. We do not expect the adoption of this new standard to have a material impact on our consolidated balance sheets or statements of income and it will not impact our cash flows.

3. Significant Accounting Policies Update

Our significant accounting policies are detailed in Note 2, “Summary of Significant Accounting Policies,” in our Annual Report on Form 10-K for the year ended December 31, 2017 that was filed with the SEC on February 28, 2018. Significant changes to our accounting policies as a result of adopting Topic 606 and ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” or ASU 2016-01, are discussed below.

Revenue From Contracts With Customers

On January 1, 2018, we adopted Topic 606 using the full retrospective method. The adoption of Topic 606 impacted the revenue and expense recognition for our Market Technology business and revenue recognition for our Listing Services business. However, the adoption of Topic 606 did not have a material impact on our consolidated financial statements at the

time of adoption or in any prior reporting periods. There was no impact to revenue and expense recognition for our other businesses. Additional disclosures required by Topic 606 are provided below.

Contract Balances

Substantially all of our revenues are considered to be revenues from contracts with customers. The related accounts receivable balances are recorded in our Condensed Consolidated Balance Sheets as receivables which is net of allowance for doubtful accounts of $13 million as of September 30, 2018 and $9 million as of December 31, 2017. The changes in the balance between periods were immaterial. We do not have obligations for warranties, returns or refunds to customers.

For the majority of our contracts with customers, except for our market technology and listings services contracts, our performance obligations are short-term in nature and there is no significant variable consideration.

We do not have revenues recognized from performance obligations that were satisfied in prior periods. We have elected not to provide disclosures about transaction price allocated to unsatisfied performance obligations if contract durations are less than one year. For contract durations that are one-year or greater, we do not have a material portion of transaction price allocated to unsatisfied performance obligations that are not included in deferred revenue other than for our market technology contracts which are discussed below under “Market Technology.” Deferred revenue primarily represents our contract liabilities related to our fees for annual and initial listings, market technology, corporate solutions and information services contracts. Deferred revenue is the only significant contract asset or liability impacted by our adoption of Topic 606. See Note 8, “Deferred Revenue,” for our discussion on deferred revenue balances, activity, and expected

timing of recognition. See “Revenue Recognition” below for further descriptions of our revenue contracts.

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and amortized on a straight-line basis over the period of benefit that we have determined to be the contract term or estimated service periods. Sales commissions for renewal contracts are deferred and amortized on a straight-line basis over the related contractual renewal period. Amortization expense is included in compensation and benefits expense in the Condensed Consolidated Statements of Income. The balance of deferred costs and related amortization expense are not material to our consolidated financial statements. We elected the practical expedient of recognizing sales commissions as an expense when incurred if contract durations are one year or less. We also have elected the practical expedient of excluding sales taxes from transaction prices.

Certain judgments and estimates were used in the identification and timing of satisfaction of performance obligations and the related allocation of transaction price and are discussed below. We believe that these represent a faithful depiction of the transfer of services to our customers.

Revenue Recognition

Our primary revenue contract classifications are described below. Though we discuss additional revenue details in our “Management's Discussion and Analysis of Financial Condition and Results of Operations,” the categories below best represent those that depict similar economic characteristics of the nature, amount, timing and uncertainty of our revenues and cash flows.

Market Services

Transaction-Based Trading and Clearing

Transaction-based trading and clearing includes equity derivative trading and clearing revenues, cash equity trading revenues and FICC revenues. Nasdaq charges transaction fees for trades executed on our exchanges, as well as on orders that are routed to and executed on other market venues. Nasdaq charges clearing fees for contracts cleared with Nasdaq Clearing.

In the U.S., transaction fees are based on trading volumes for trades executed on our U.S. exchanges and in Europe, transaction fees are based on the volume and value of traded and cleared contracts. In Canada, transaction fees are based on trading volumes for trades executed on our Canadian exchange.

Nasdaq satisfies its performance obligation for trading services upon the execution of a customer trade and clearing services when a contract is cleared, as trading and clearing transactions are substantially complete when they are executed and we have no further obligation to the customer at that time. Transaction-based trading and clearing fees can be variable and are based on trade volume tiered discounts. Transaction revenues, as well as any tiered volume discounts, are calculated and billed monthly in accordance with our published fee schedules. In the U.S., we also pay liquidity payments to customers based on our

published fee schedules. We use these payments to improve the liquidity on our markets and therefore recognize those payments as a cost of revenue.

The majority of our FICC trading and clearing customers are charged transaction fees, as discussed above, which are based on the volume and value of traded and cleared contracts. We also enter into annual fixed contracts with customers trading U.S. Treasury securities. The customers are charged an annual fixed fee which is billed per the agreement, on a monthly or quarterly basis. Revenues earned on fixed contracts are recognized over time on a ratable basis over the contract period beginning on the date that our service is made available to the customer since the customer receives and consumes the benefit as Nasdaq provides the service.

For U.S. equity derivative trading, we credit a portion of the per share execution charge to the market participant that provides the liquidity. For U.S. cash equity trading, for Nasdaq and Nasdaq PSX, 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. We record these credits as transaction rebates that are included in transaction-based expense in the Condensed Consolidated Statements of Income. These transaction rebates are paid on a monthly basis and the amounts due are included in accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets.

In the U.S., we pay Section 31 fees to the SEC for supervision and regulation of securities markets. We pass these costs along to our customers through our equity derivative trading and clearing fees and our cash equity trading fees. We collect the fees as a pass-through charge from organizations executing eligible trades on our options exchanges and our cash equity platforms and we recognize these amounts in transaction-based expenses when incurred. Section 31 fees received are included in cash and cash equivalents in the Condensed Consolidated Balance Sheets at the time of receipt and, as required by law, the amount due to the SEC is remitted semiannually and recorded as Section 31 fees payable to the SEC in the Condensed Consolidated Balance Sheets until paid. 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. As we hold the cash received until payment to the SEC, we earn interest income on the related cash balances.

Under our Limitation of Liability Rule and procedures, we may, subject to certain caps, provide compensation for losses directly resulting from the systems’ actual failure to correctly process an order, quote, message or other data into our platform. We do not record a liability for any potential claims that may be submitted under the Limitation of Liability Rule unless they meet the provisions required in accordance with U.S. GAAP. As such, losses arising as a result of the rule are accrued and charged to expense only if the loss is probable and estimable.

Trade Management Services

We provide market participants with a wide variety of alternatives for connecting to and accessing our markets for a fee. We also offer market participants co-location services, 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 in accordance with our published fee schedules. These fees are recognized on a monthly basis when the performance obligation is met. We also earn revenues from annual and monthly exchange membership and registration fees. Revenues for providing access to our markets, co-location services and monthly exchange membership and registration fees are recognized on a monthly basis as the service is provided. Revenues from annual fees for exchange membership and registration fees are recognized ratably over the following 12-month period since the customer receives and consumes the benefit as Nasdaq provides the service. We also offer broker services to financial participants in the Nordic market primarily providing flexible back-office systems, which allow customers to entirely or partly outsource their company’s back-office functions. Revenues from broker services are based on a fixed basic fee for administration or licensing, maintenance and operations, and an incremental fee depending on the number of transactions completed. Broker services revenues are generally billed and recognized monthly.

Corporate Solutions

As of September 30, 2018, corporate solutions revenues primarily include subscription and transaction-based income from our investor relations, board & leadership, and governance, risk and compliance products and services. In April 2018, we completed the sale of our Public Relations Solutions and Digital Media Services businesses. See “2018 Divestiture,” of Note 4, “Acquisitions and Divestiture,” for further discussion. Subscription-based revenues earned are recognized over time on a ratable basis over the contract period beginning on the date that our service is made available to the customer since the customer receives and consumes the benefit as Nasdaq provides the service. Generally, fees are billed quarterly in advance and the contract provides for automatic renewal. As part of the subscription agreements, customers can also be charged usage fees based upon actual usage of the services provided. Revenues from usage fees are recognized at a point in time upon completion of the service.

Listing Services

Listing services revenues primarily include initial listing fees and annual renewal fees. Under Topic 606, the initial listing fee is allocated to multiple performance obligations including initial and subsequent listing services and corporate solutions services (when a company qualifies to receive these services under the applicable Nasdaq rule), as well as a customer's material right to renew the option to list on our exchanges. In performing this allocation, the standalone selling price of the performance obligations is based on the initial and annual listing fees and the standalone selling price of the corporate solutions

services is based on its market value. All listing fees are billed upfront and the identified performance obligations are satisfied over time since the customer receives and consumes the benefit as Nasdaq provides the listing service. Upon adoption of Topic 606, the amount of revenue related to the corporate solutions services performance obligation is recognized ratably over a two-year period, which is based on contract terms, with the remaining revenue recognized ratably over time as customers continue to list on our exchanges, which is estimated to be over a period of six years based on our historical listing experience and projected future listing duration.

In the U.S., annual renewal fees are charged based on the number of outstanding shares of companies listed in the U.S. at the end of the prior year and are recognized ratably over the following 12-month period since the customer receives and consumes the benefit as Nasdaq provides the service. European annual renewal fees, which are received from companies listed on our Nasdaq Nordic and Nasdaq Baltic exchanges and Nasdaq First North, are directly related to the listed companies’ market capitalization on a trailing 12-month basis and are recognized ratably over the following 12-month period since the customer receives and consumes the benefit as Nasdaq provides the service.

Market Data Products

Market data products revenues are earned from U.S. and European proprietary market data products. In the U.S., we also earn revenues from U.S. shared tape plans.

We earn revenues primarily based on the number of data subscribers and distributors of our data. Market data products revenues are subscription-based and are recognized on a monthly basis net of amounts due under revenue sharing arrangements with market participants.

For U.S. tape plans, revenues are collected monthly based on published fee schedules and distributed quarterly to the U.S. exchanges based on a formula required by Regulation NMS that takes into account both trading and quoting activity. Revenues are presented on a net basis as we are acting as an agent in this arrangement.

Market Data Products Revenue Sharing

The most significant component of market data products revenues recorded on a net basis is the UTP Plan revenue sharing in the U.S. All indicators of principal versus agent reporting under U.S. GAAP have been considered in analyzing the appropriate presentation of UTP Plan revenue sharing. However, the following are the primary indicators of net reporting:


•	We are the administrator for the UTP Plan, in addition to being a participant in the UTP Plan. In our unique role as administrator, we facilitate the collection and dissemination of revenues on behalf of the UTP Plan participants. As a participant, we share in the net distribution of revenues according to the plan on the same terms as all other plan participants.


•	The operating committee of the UTP Plan, which is comprised of representatives from each of the participants, including us solely in our capacity as a UTP Plan participant, is responsible for setting the level of fees to be paid by distributors and subscribers and taking action in accordance with the provisions of the UTP Plan, subject to SEC approval.


•	Risk of loss on the revenue is shared equally among plan participants according to the UTP Plan.

The exchanges that comprise Nasdaq Nordic and Nasdaq Baltic do not have any market data products revenue sharing agreements.

Index

We develop and license Nasdaq branded indexes, associated derivatives and financial products as part of our Global Index Family. We also provide index data products and custom calculation services for third-party clients. Revenues primarily include license fees from these branded indexes, associated derivatives and financial products in the U.S. and abroad. We primarily have two types of license agreements: transaction-based licenses and asset-based licenses. Transaction-based licenses are generally renewable agreements. Customers are charged based on transaction volume or a minimum contract amount, or both. If a customer is charged based on transaction volume, we recognize revenue when the transaction occurs. If a customer is charged based on a minimum contract amount, we recognize revenue on a pro-rata basis over the licensing term since the customer receives and consumes the benefit as Nasdaq provides the service. Asset-based licenses are also generally renewable agreements. Customers are charged based on a percentage of assets under management for licensed products, per the agreement, on a monthly or quarterly basis. These revenues are recognized over the term of the license agreement since the customer receives and consumes the benefit as Nasdaq provides the service. Revenue from index data subscriptions are recognized on a monthly basis.

Investment Data & Analytics

Investment data & analytics revenues are earned from investment content and analytics products. We earn revenues primarily based on the number of content and analytics subscribers and distributors.

Subscription agreements are generally annual in term, payable in advance, and provide for automatic renewal. Subscription-based revenues are recognized over time on a ratable basis over the contract period beginning on the date that our service is made available to the customer since the customer receives and consumes the benefit as Nasdaq provides the service.

Market Technology

Market Technology provides technology solutions for trading, clearing, settlement, surveillance and information dissemination, as well as risk management solutions. Revenues primarily consist of software, license and support revenues, change request and advisory revenues, and software as a service

revenues.

In our Market Technology business, we enter into long-term contracts with customers to develop customized technology solutions, license the right to use software, and provide post-contract support and other services to our customers. We also enter into agreements to modify the system solutions sold by Nasdaq after delivery has occurred. In addition, we enter into subscription agreements which allow customers to connect to our servers to access our software.

Our long-term contracts with customers to develop customized technology solutions, license the right to use software and provide post-contract support and other services to our customers have multiple performance obligations. The performance obligations are generally: 1) software license and installation service and 2) software support. We have determined that the software license and installation service are not distinct as the license and the customized installation service are inputs to produce the combined output, a functional and integrated software system.

For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. In instances where standalone selling price is not directly observable, such as when we do not sell the product or service separately, we determine the standalone selling price predominately through an expected cost plus a margin approach.

Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in contract specifications or requirements. In most instances, contract modifications are for goods and services that are not distinct, and, therefore, are accounted for as part of the existing contract.

For our long-term contracts, payments are generally made throughout the contract life and can be dependent on either reaching certain milestones or paid upfront in advance of the service period depending on the stage of the contract. For subscription agreements, contract payment terms can be quarterly, annually or monthly, in advance. For all other contracts, payment terms vary.

We generally recognize revenue over time as our customers simultaneously receive and consume the benefits provided by our performance because our customer controls the asset for which we are creating, our performance does not create an asset with alternative use, and we have a right to payment for performance completed to date. For these services, we recognize revenue over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligation. Incurred costs represent work performed, which corresponds with, and thereby depicts, the transfer of control to the customer. Contract costs generally include labor and overhead. For software support and update services, and for subscription agreements which allow customers to connect to our servers to access our software, we generally recognize revenue ratably over the

service period beginning on the date our service is made available to the customer since the customer receives and consumes the benefit consistently over the period as Nasdaq provides the services.

Accounting for our long-term contracts requires judgment relative to assessing risks and their impact on the estimate of revenues and costs. Our estimates are impacted by factors such as the potential for schedule and technical issues, productivity, and the complexity of work performed. When adjustments in estimated total contract costs are required, any changes in the estimated revenues from prior estimates are recognized in the

current period for the effect of such change. If estimates of total costs to be incurred on a contract exceed estimates of total revenues, a provision for the entire estimated loss on the contract is recorded in the period in which the loss is determined.

Other Revenues

Other revenues include the revenues from the Public Relations Solutions and Digital Media Services businesses which were sold in April 2018. Prior to the sale date, these revenues were included in our Corporate Solutions business and were primarily transaction-based revenues.

* * * * * *

The following table summarizes the amount of the transaction price allocated to performance obligations that are unsatisfied as of September 30, 2018 and relates to our Market Technology segment:



	(in millions)
2018⁽¹⁾	$	63
2019	238
2020	157
2021	90
2022	55
2023 and thereafter	100
Total	$	703

____________

⁽¹⁾ Represents performance obligations to be recognized over the remaining three months of 2018.

Market technology deferred revenue, as discussed in Note 8, “Deferred Revenue,” to the condensed consolidated financial statements, represents consideration received that is yet to be recognized as revenue for unsatisfied performance obligations.

The following tables summarize the disaggregation of revenue by major product and service and by segment for the three months ended September 30, 2018 and 2017:



	Three Months Ended September 30, 2018
	Market Services		Corporate Services		Information Services		Market Technology		Other Revenues		Consolidated
	(in millions)
Transaction-based trading and clearing, net	$	150	$	—	$	—	$	—	$	—	$	150
Trade management services	72		—		—		—		—		72
Corporate solutions	—		59		—		—		—		59
Listing services	—		72		—		—		—		72
Market data products	—		—		95		—		—		95
Index	—		—		52		—		—		52
Investment data & analytics	—		—		32		—		—		32
Market technology	—		—		—		68		—		68
Other revenues	—		—		—		—		—		—
Revenues less transaction-based expenses	$	222	$	131	$	179	$	68	$	—	$	600



	Three Months Ended September 30, 2017
	Market Services		Corporate Services		Information Services		Market Technology		Other Revenues		Consolidated
	(in millions)
Transaction-based trading and clearing, net	$	144	$	—	$	—	$	—	$	—	$	144
Trade management services	75		—		—		—		—		75
Corporate solutions	—		59		—		—		—		59
Listing services	—		67		—		—		—		67
Market data products	—		—		97		—		—		97
Index	—		—		43		—		—		43
Investment data & analytics	—		—		10		—		—		10
Market technology	—		—		—		62		—		62
Other revenues	—		—		—		—		46		46
Revenues less transaction-based expenses	$	219	$	126	$	150	$	62	$	46	$	603

For the three months ended September 30, 2018, approximately 63.0% of Market Services revenues were recognized at a point in time and 37.0% were recognized over time. For the three months ended September 30, 2017, approximately 62.0% of Market Services revenues were recognized at a point in time and 38.0% were recognized over time. Substantially all revenues from the Corporate Services, Information Services and Market Technology segments were recognized over time for both the three months ended September 30, 2018 and 2017.

The following tables summarize the disaggregation of revenue by major product and service and by segment for the nine months ended September 30, 2018 and 2017:



	Nine Months Ended September 30, 2018
	Market Services		Corporate Services		Information Services		Market Technology		Other Revenues		Consolidated
	(in millions)
Transaction-based trading and clearing, net	$	489	$	—	$	—	$	—	$	—	$	489
Trade management services	220		—		—		—		—		220
Corporate solutions	—		178		—		—		—		178
Listing services	—		217		—		—		—		217
Market data products	—		—		293		—		—		293
Index	—		—		152		—		—		152
Investment data & analytics	—		—		83		—		—		83
Market technology	—		—		—		194		—		194
Other revenues	—		—		—		—		56		56
Revenues less transaction-based expenses	$	709	$	395	$	528	$	194	$	56	$	1,882



	Nine Months Ended September 30, 2017
	Market Services		Corporate Services		Information Services		Market Technology		Other Revenues		Consolidated
	(in millions)
Transaction-based trading and clearing, net	$	441	$	—	$	—	$	—	$	—	$	441
Trade management services	218		—		—		—		—		218
Corporate solutions	—		173		—		—		—		173
Listing services	—		197		—		—		—		197
Market data products	—		—		276		—		—		276
Index	—		—		125		—		—		125
Investment data & analytics	—		—		31		—		—		31
Market technology	—		—		—		176		—		176
Other revenues	—		—		—		—		143		143
Revenues less transaction-based expenses	$	659	$	370	$	432	$	176	$	143	$	1,780

For the nine months ended September 30, 2018, approximately 64.0% of Market Services revenues were recognized at a point in time and 36.0% were recognized over time. For the nine months ended September 30, 2017, approximately 63.0% of Market Services revenues were recognized at a point in time and 37.0% were recognized over time. Substantially all revenues from the Corporate Services, Information Services and Market Technology segments were recognized over time for both the nine months ended September 30, 2018 and 2017.

* * * * * *

Equity Securities

On January 1, 2018, we adopted ASU 2016-01 which requires that investments in equity securities (excluding equity method investments) be measured at fair value with changes in fair value recognized in net income. Equity securities are no longer classified as trading or available for sale.

We elected the measurement alternative for equity securities which were historically accounted for under the cost method of accounting. Since these equity securities do not have readily determinable fair values, they are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We evaluate these

securities for impairment by considering a variety of factors such as the earnings capacity of the investment. If a qualitative assessment indicates that the security is impaired, Nasdaq will estimate the fair value of the security, and if the fair value is less than the carrying amount of the security, recognize an impairment loss in net income equal to the difference between the carrying amount and fair value. There was no impact on our condensed consolidated financial statements as a result of this change.

The guidance for classifying and measuring investments in debt securities is unchanged. Therefore, changes in debt securities classified as trading securities are included in dividend and investment income in the Condensed Consolidated Statements of Income and debt securities classified as available-for-sale

investment securities are carried at fair value with unrealized gains and losses, net of tax, reported in accumulated other comprehensive loss within stockholders’ equity in the Condensed Consolidated Balance Sheets. Realized gains and losses on these securities are included in earnings upon disposition of the securities using the specific identification method. In addition, realized losses are recognized when management determines that a decline in value is other than temporary, which requires judgment regarding the amount and timing of recovery. For financial investments that are classified as available-for-sale securities, we also consider the extent to which cost exceeds fair value, the duration of that difference, management’s judgment about the issuer’s current and prospective financial condition, as well as our intent and ability to hold the security until recovery of the unrealized losses.

4. Acquisitions and Divestiture

2018 Pending Acquisition

In September 2018, we announced that we made a SEK 75 per share and SEK 85 per warrant, or approximately $190 million (based on an exchange rate of USD 1.00 = SEK 8.96 as of September 13, 2018), all cash recommended public offer to the shareholders and warrant holders of Cinnober, a major Swedish financial technology provider to brokers, exchanges and clearinghouses worldwide. Our acquisition of Cinnober would be included in our Market Technology segment. Nasdaq expects to fund the acquisition with either cash on hand or liquidity available under existing credit facilities. The public tender offer is expected to be completed during the fourth quarter of 2018, subject to certain customary conditions.

2018 Divestiture and 2017 Acquisitions

We completed the following divestiture in 2018 and acquisitions in 2017. Financial results of each transaction are included in our Condensed Consolidated Statements of Income from the date of each divestiture or acquisition.

2018 Divestiture

In April 2018, we sold our Public Relations Solutions and Digital Media Services businesses which were part of our Corporate Solutions business to West Corporation and recognized a pre-tax net gain on the sale of $33 million, net of disposal costs ($14 million after tax), which includes a post-closing working capital adjustment of $8 million ($5 million after tax) recorded during the three months ended September 30, 2018. The total net pre-tax gain is included in net gain on divestiture of businesses in the Condensed Consolidated Statements of Income for the nine months ended September 30, 2018.

As of December 31, 2017, the assets and liabilities of the above businesses were held for sale. See Note 5, “Assets and Liabilities Held For Sale,” for further discussion.

Through a multi-year partnership with West, Nasdaq will continue to provide eligible Nasdaq-listed clients with access to public relations, webcasting and webhosting products and services as part of the terms of the transaction.

As part of the terms of the transaction, we are providing transition services to West, such as technology, finance and facilities related services for a period of time, and the compensation received for such transition services is being reflected as a reduction to the underlying expenses incurred by Nasdaq to provide such transition services.

* * * * * *

2017 Acquisitions



	Purchase Consideration		Total Net Liabilities Acquired			Total Net Deferred Tax Liability			Acquired Intangible Assets		Goodwill
	(in millions)
eVestment	$	744	$	(10	)	$	(104	)	$	405	$	453

The amounts in the table above represent the preliminary allocation of purchase price as of September 30, 2018 and are subject to revision during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Adjustments to the provisional values, which may include tax and other estimates, during the measurement period will be recorded in the reporting period in which the adjustment amounts are determined. Changes to amounts recorded as assets and liabilities may result in a corresponding adjustment to goodwill.

See “Intangible Assets” below for further discussion of intangible assets acquired in the eVestment acquisition.

Acquisition of eVestment

In October 2017, we acquired eVestment for $705 million. The aggregate cash consideration of $744 million, which is net of cash acquired of $22 million, included $39 million of estimated tax benefits associated with the transaction. We acquired net liabilities, at fair value, totaling $10 million and we recorded a net deferred tax liability of $104 million, which is net of the $39 million in estimated tax benefits associated with the transaction. The deferred tax liability recorded of $143 million relates to differences in the U.S. GAAP and tax basis of our investment in eVestment. eVestment is part of our Information Services segment.

Nasdaq used cash on hand and issuances of commercial paper to fund this acquisition.

Acquisition of Sybenetix

In September 2017, we acquired Sybenetix for an immaterial amount. Sybenetix is part of our Market Technology segment.

Intangible Assets

The following table presents the details of acquired intangible assets for eVestment at the date of the acquisition. All acquired intangible assets with finite lives are amortized using the straight-line method.



Intangible Assets
($ in millions)
Customer relationships	$	378
Discount rate used	9.3		%
Estimated average useful life	14 years
Trade name	$	13
Discount rate used	9.2		%
Estimated average useful life	8 years
Technology	$	14
Discount rate used	9.2		%
Estimated average useful life	8 years
Total intangible assets	$	405

Customer Relationships

Customer relationships represent the non-contractual and contractual relationships with customers.

Methodology

For our acquisition of eVestment, customer relationships were valued using the income approach, specifically an excess earnings method. The excess earnings method examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return that is attributable to the intangible asset being valued.

Discount Rates

The discount rates used reflect the amount of risk associated with the hypothetical cash flows for the customer relationships relative to the overall business. In developing a discount rate for the customer relationships, we estimated a weighted-average cost of capital for the overall business and we employed this rate when discounting the cash flows. The resulting discounted cash flows were then tax-effected at the applicable statutory rate.

For our acquisition of eVestment, a discounted tax amortization benefit was added to the fair value of the assets under the assumption that the customer relationships would be amortized for tax purposes over a period of 15 years.

Estimated Useful Life

We estimate the useful life based on the historical behavior of the customers and a parallel analysis of the customers using the excess earnings method.

Trade Name

As part of our acquisition of eVestment, we acquired a trade name. This trade name is recognized in the industry and carries a reputation for quality. As such, the reputation and positive recognition embodied in this trade name is a valuable asset to Nasdaq.

Methodology

The eVestment trade name was valued using the income approach, specifically the relief-from-royalty method, or RFRM. The RFRM is used to estimate the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. The royalty rate is applied to the projected revenue over the expected remaining life of the intangible asset to estimate royalty savings. The net after-tax royalty savings are calculated for each year in the remaining economic life of the trade name and discounted to present value.

Discount Rates

The discount rate used reflects the amount of risk associated with the hypothetical cash flows for the trade name relative to the overall business as discussed above in “Customer Relationships.”

Estimated Useful Life

We have estimated the useful life of the eVestment trade name to be 8 years.

Technology

As part of our acquisition of eVestment, we acquired developed technology.

Methodology

The developed technology was valued using the income approach, specifically the RFRM as discussed above in “Trade Names.”

Discount rate

The discount rate used reflects the amount of risk associated with the hypothetical cash flows for the developed technology relative to the overall business as discussed above in “Customer Relationships.”

Estimated Useful Life

We have estimated the useful life of the eVestment technology to be 8 years.

Pro Forma Results and Acquisition-related Costs

The condensed consolidated financial statements for the three and nine months ended September 30, 2018 and 2017 include the financial results of the above 2017 acquisitions from the date of each acquisition. Pro forma financial results have not been presented since these acquisitions both individually and in the aggregate were not material to our financial results.

Acquisition-related costs for the transactions described above were expensed as incurred and are included in merger and strategic initiatives expense in the Condensed Consolidated Statements of Income.

5. Assets and Liabilities Held For Sale

In September 2017, we commenced a process to evaluate strategic alternatives for our Public Relations Solutions and Digital Media Services businesses within our Corporate Solutions business as part of our strategic refinement and subsequently committed to a plan to divest these businesses. The Corporate Solutions business is part of our Corporate Services segment. The Public Relations Solutions and Digital Media Services businesses included the following products and services:


•	Nasdaq GlobeNewswire;


•	Nasdaq Influencers;


•	Nasdaq Media Intelligence;


•	Nasdaq IR Websites and Newsrooms; and


•	Nasdaq Webcasts.

We determined that we met all of the criteria to classify the assets and liabilities of these businesses as held for sale. The disposal of these businesses did not represent a strategic shift that would have a major effect on our operations and financial results and were, therefore, not classified as discontinued operations. As a result of this classification, the assets and liabilities of these businesses were separately presented within the Condensed Consolidated Balance Sheets as held for sale and were recorded at the lower of their carrying amount or fair value less costs to sell.

In January 2018, we entered into a definitive agreement to sell the above businesses. See “2018 Divestiture,” of Note 4, “Acquisitions and Divestiture,” for further discussion.

Based on the sales price in the agreement, no impairment charge was recorded at the time of the sale as the carrying amount of the net assets was less than the sales price in the agreement less costs to sell.

The carrying amounts of the major classes of assets and liabilities that were classified as held for sale at December 31, 2017 in the Condensed Consolidated Balance Sheets were as follows:



	December 31, 2017
	(in millions)
Receivables, net	$	27
Property and equipment, net	21
Goodwill⁽¹⁾	202
Intangible assets, net⁽²⁾	38
Other assets	9
Total assets held for sale	$	297

Deferred tax liabilities	$	16
Other current liabilities	29
Total liabilities held for sale	$	45

____________


⁽¹⁾	The assignment of goodwill was based on the relative fair value of the disposal group and the portion of the remaining reporting unit.

⁽²⁾Primarily represents customer relationships.

* * * * * *

6. Goodwill and Acquired Intangible Assets

Goodwill

The following table presents the changes in goodwill by business segment during the nine months ended September 30, 2018:



	Market Services			Corporate Services			Information Services			Market Technology			Total
	(in millions)
Balance at December 31, 2017	$	3,546		$	490		$	2,362		$	188		$	6,586
Reclassification of goodwill⁽¹⁾	—			29			—			(29		)	—
Foreign currency translation adjustment	(111		)	(16		)	(79		)	(11		)	(217		)
Balance at September 30, 2018	$	3,435		$	503		$	2,283		$	148		$	6,369

____________

⁽¹⁾ Concurrent with the realignment of our BWise corporate enterprise risk management solutions from our Market Technology segment to our Corporate Services segment, goodwill was reassigned to the Corporate Services segment using a relative fair value approach.

As of September 30, 2018, the amount of goodwill that is expected to be deductible for tax purposes in future periods is $749 million.

Goodwill represents the excess of purchase price over the value assigned to the net assets, including identifiable intangible assets, of a business acquired. Goodwill is allocated to our

reporting units based on the assignment of the fair values of each reporting unit of the acquired company. We test goodwill for impairment at the reporting unit level annually, or in interim periods if certain events occur indicating that the carrying amount may be impaired, such as changes in the business climate, poor indicators of operating performance or the sale

or disposition of a significant portion of a reporting unit. There was no impairment of goodwill for the nine months ended September 30, 2018 and 2017; however, events such as

extended economic weakness or unexpected significant declines in operating results of a reporting unit may result in goodwill impairment charges in the future.

* * * * * *

Acquired Intangible Assets

The following table presents details of our total acquired intangible assets, both finite- and indefinite-lived:



	September 30, 2018										December 31, 2017
	Gross Amount			Accumulated Amortization			Net Amount			Weighted-Average Useful Life (in Years)	Gross Amount			Accumulated Amortization			Net Amount			Weighted-Average Useful Life (in Years)
	(in millions)										(in millions)
Finite-Lived Intangible Assets
Technology	$	50		$	(13	)	$	37		9	$	65		$	(22	)	$	43		8
Customer relationships	1,708			(606		)	1,102			18	1,708			(526		)	1,182			18
Other	17			(5		)	12			8	17			(4		)	13			8
Foreign currency translation adjustment	(143		)	62			(81		)		(111		)	46			(65		)
Total finite-lived intangible assets	$	1,632		$	(562	)	$	1,070			$	1,679		$	(506	)	$	1,173
Indefinite-Lived Intangible Assets
Exchange and clearing registrations	$	1,257		$	—		$	1,257			$	1,257		$	—		$	1,257
Trade names	127			—			127				129			—			129
Licenses	52			—			52				52			—			52
Foreign currency translation adjustment	(178		)	—			(178		)		(143		)	—			(143		)
Total indefinite-lived intangible assets	$	1,258		$	—		$	1,258			$	1,295		$	—		$	1,295
Total intangible assets	$	2,890		$	(562	)	$	2,328			$	2,974		$	(506	)	$	2,468

Amortization expense for acquired finite-lived intangible assets was $27 million for the three months ended September 30, 2018, $22 million for the three months ended September 30, 2017, $83 million for the nine months ended September 30, 2018, and $67 million for the nine months ended September 30, 2017. Amortization expense increased in 2018 primarily due to additional amortization expense associated with acquired intangible assets in 2017. These amounts are included in depreciation and amortization expense in the Condensed Consolidated Statements of Income.

The estimated future amortization expense (excluding the impact of foreign currency translation adjustments of $81 million as of September 30, 2018) of acquired finite-lived intangible assets as of September 30, 2018 is as follows:



	(in millions)
2018⁽¹⁾	$	27
2019	99
2020	98
2021	97
2022	94
2023 and thereafter	736
Total	$	1,151

____________

⁽¹⁾ Represents the estimated amortization to be recognized for

the remaining three months of 2018.

In April 2018, in connection with the sale of the Public Relations Solutions and Digital Media Services businesses, we recorded a $2 million pre-tax, non-cash write-off related to an indefinite-lived intangible asset trade name.

7. Investments

The following table presents the details of our investments:



	September 30, 2018		December 31, 2017
	(in millions)
Trading securities	$	202	$	221
Available-for-sale investment securities	—		14
Financial investments, at fair value	$	202	$	235

Equity method investments	$	131	$	131
Equity securities	$	76	$	152

Financial Investments, at Fair Value

Trading Securities

Trading securities, which are included in financial investments, at fair value in the Condensed Consolidated Balance Sheets, are primarily comprised of highly rated European government debt securities, of which $174 million as of September 30, 2018 and $160 million as of December 31, 2017, are assets utilized to meet regulatory capital requirements, primarily for our clearing operations at Nasdaq Clearing.

Available-for-Sale Investment Securities

As of December 31, 2017, available-for-sale investment securities, which are included in financial investments, at fair value in the Condensed Consolidated Balance Sheets, were primarily comprised of commercial paper debt securities. As of December 31, 2017, the cumulative unrealized gains and losses on these securities were immaterial.

Equity Method Investments

As of September 30, 2018 and December 31, 2017, our equity method investments primarily included equity interests in OCC and EuroCCP N.V.

The carrying amounts of our equity method investments are included in other non-current assets in the Condensed Consolidated Balance Sheets.

Net income recognized from our equity interest in the earnings and losses of these equity method investments was $6 million for the three months ended September 30, 2018, $4 million for the three months ended September 30, 2017, $13 million for the nine months ended September 30, 2018, and $10 million for the nine months ended September 30, 2017.

Capital Contribution to OCC

In March 2015, OCC implemented a capital plan under which the options exchanges that are OCC’s stockholders contributed $150 million of new equity capital to OCC, committed to make

future replenishment capital contributions under certain circumstances, and received commitments regarding future dividend payments and related matters. See “Other Commitments,” of Note 16, “Commitments, Contingencies and Guarantees,” for further discussion of our commitment to make future replenishment capital contributions. Nasdaq and ISE each contributed $30 million of new equity capital under the OCC capital plan. OCC adopted specific policies with respect to fees, customer refunds and stockholder dividends, which envision an annual dividend equal to the portion of OCC’s after-tax income that exceeds OCC’s capital requirements after payment of refunds to OCC’s clearing members (such refunds are generally 50% of the portion of OCC’s pre-tax income that exceeds OCC’s capital requirements). In February 2016, the SEC approved the OCC capital plan and certain industry participants appealed that approval in the Federal Court of Appeals. The Court of Appeals denied a requested stay, permitting OCC to pay a dividend which Nasdaq received in February 2016. In August 2017, the Court of Appeals remanded the case to the SEC for further examination of the record and an independent assessment by the SEC of the evidence OCC submitted. The Court directed that the SEC approval of the OCC capital plan remain in place during the SEC’s examination unless the SEC determined not to preserve it. The SEC has allowed OCC to preserve the capital plan, and in September 2018 and 2017, OCC disbursed annual dividends. Nasdaq, as the owner of two shares, received $13 million in 2018 and $10 million in 2017. There has been no final ruling by the SEC at this time, and there is no deadline for the SEC to issue its ruling.

Equity Securities

The carrying amounts of our equity securities are included in other non-current assets in the Condensed Consolidated Balance Sheets. As of September 30, 2018, our equity securities primarily represent our 5% ownership interest in LCH. As of December 31, 2017, our equity securities primarily represented our 5% ownership in Borsa Istanbul and our 5% ownership interest in LCH. For the nine months ended September 30, 2018, no impairment charges were recorded on our equity securities and there were no upward or downward adjustments recorded.

The Borsa Istanbul shares, which were issued to us in the first quarter of 2014, were part of the consideration received under a market technology agreement. This investment had a carrying amount of $75 million which was guaranteed to us via a put option negotiated as part of the market technology agreement. During the second quarter of 2018, we exercised the put option and we expect to receive cash consideration in installments through 2022.

In October 2018, we entered into an agreement to sell our ownership interest in LCH. See “Sale of Equity Security,” of Note 19, “Subsequent Events,” for further discussion.

8. Deferred Revenue

Deferred revenue represents consideration received that is yet to be recognized as revenue. The changes in our deferred revenue during the nine months ended September 30, 2018 are reflected in the following table:



	Initial Listing Revenues			Annual Listings Revenues			Market Technology Revenues			Corporate Solutions and Other Revenues⁽²⁾			Information Services Revenues			Other⁽³⁾			Total
	(in millions)
Balance at December 31, 2017	$	64		$	3		$	109		$	37		$	40		$	34		$	287
Additions	30			231			118			189			128			18			714
Revenue recognized	(27		)	(173		)	(131		)	(191		)	(91		)	(29		)	(642		)
Reclassification of deferred revenue⁽¹⁾	—			—			(11		)	11			—			—			—
Translation adjustment	(2		)	(1		)	(8		)	—			1			(1		)	(11		)
Balance at September 30, 2018	$	65		$	60		$	77		$	46		$	78		$	22		$	348

____________


⁽¹⁾	Concurrent with the realignment of our BWise corporate enterprise risk management solutions from our Market Technology segment to our Corporate Services segment, deferred revenue was reassigned to the Corporate Services segment.


⁽²⁾	Other revenues include the revenues from the Public Relations Solutions and Digital Media Services businesses through the date of sale (April 2018). See “2018 Divestiture,” of Note 4, “Acquisitions and Divestiture,” to the condensed consolidated financial statements for further discussion.

⁽³⁾

The balance as of September 30, 2018 and December 31, 2017 primarily includes deferred revenue from listing of additional shares fees which are included in our Listing Services segment. The activity during the period primarily pertains to our Trade Management Services and FICC businesses, which are included in our Market Services segment, for contracts paid monthly or quarterly in advance of the service.

On January 1, 2018, we adopted Topic 606. As a result, a portion of revenues that were previously deferred were recognized either in prior period revenues, through restatement, or as an adjustment to retained earnings upon adoption of the new standard. See “Revenue From Contracts With Customers,” of Note 3, “Significant Accounting Policies Update,” for a description of our initial listing, annual listing, market technology, corporate solutions, and information services revenues and the revenue recognition policy for each of these revenue streams.

As of September 30, 2018, we estimate that our deferred revenue will be recognized in the following years:



	Initial Listing Revenues		Annual Listings Revenues		Market Technology Revenues		Corporate Solutions Revenues		Information Services Revenues		Other⁽²⁾		Total
	(in millions)
Fiscal year ended:
2018⁽¹⁾	$	6	$	60	$	18	$	24	$	35	$	3	$	146
2019	23		—		34		21		43		10		131
2020	15		—		18		1		—		6		40
2021	10		—		7		—		—		3		20
2022	7		—		—		—		—		—		7
2023 and thereafter	4		—		—		—		—		—		4
Total	$	65	$	60	$	77	$	46	$	78	$	22	$	348

____________


⁽¹⁾	Represents deferred revenue that is anticipated to be recognized over the remaining three months of 2018.


⁽²⁾	Other primarily includes revenues from listing of additional shares fees which are included in our Listing Services business.

The timing of recognition of our deferred market technology revenues is primarily dependent upon the completion of customization and any significant modifications made pursuant to existing market technology contracts. As such, as it relates to market technology revenues, the timing represents our best estimate.

9. Debt Obligations

The following table presents the changes in the carrying amount of our debt obligations during the nine months ended September 30, 2018:



	December 31, 2017		Additions		Payments, Accretion and Other			September 30, 2018
Short-term debt:	(in millions)
Commercial paper	$	480	$	3,192	$	(3,363	)	$	309
Senior unsecured floating rate notes due March 22, 2019⁽¹⁾	498		—		1			499
Total short-term debt	978		3,192		(3,362		)	808
Long-term debt:
5.55% senior unsecured notes due January 15, 2020	599		—		—			599
3.875% senior unsecured notes due June 7, 2021	716		—		(22		)	694
4.25% senior unsecured notes due June 1, 2024	496		—		1			497
1.75% senior unsecured notes due May 19, 2023	712		—		(22		)	690
3.85% senior unsecured notes due June 30, 2026	496		—		—			496
$400 million senior unsecured term loan facility due November 25, 2019 (average interest rate of 3.37% for the period January 1, 2018 through September 30, 2018)	100		—		—			100
$1 billion revolving credit commitment due April 25, 2022 (average interest rate of 2.74% for the period January 1, 2018 through September 30, 2018)	110		—		(114		)	(4		)
Total long-term debt	3,229		—		(157		)	3,072
Total debt obligations	$	4,207	$	3,192	$	(3,519	)	$	3,880

____________


⁽¹⁾	Balance was reclassified to short-term debt as of March 31, 2018.

Commercial Paper Program

Our U.S. dollar commercial paper program is supported by our 2017 Credit Facility which provides liquidity support for the repayment of commercial paper issued through the commercial paper program. See “2017 Credit Facility” below for further discussion of our 2017 Credit Facility. The effective interest rate of commercial paper issuances fluctuate as short term interest rates and demand fluctuate. The fluctuation of these rates due to market conditions may impact our interest expense.

As of September 30, 2018, commercial paper notes in the table above reflect the aggregate principal amount, less the unamortized discount which is being accreted through interest expense over the life of the applicable notes. The original maturities of these notes range from 7 days to 63 days and the weighted-average maturity is 29 days. The weighted-average effective interest rate is 2.45% per annum.

Senior Unsecured Notes

Our senior unsecured notes were all issued at a discount. As a result of the discount, the proceeds received from each issuance were less than the aggregate principal amount. As of September 30, 2018, the amounts in the table above reflect the aggregate principal amount, less the unamortized debt discount and the unamortized debt issuance costs which are being accreted through interest expense over the life of the applicable notes. Our senior unsecured notes are general unsecured obligations of ours and rank equally with all of our existing and future unsubordinated obligations and they are not guaranteed

by any of our subsidiaries. The senior unsecured notes were issued under indentures that, among other things, limit our ability to consolidate, merge or sell all or substantially all of our assets, create liens, and enter into sale and leaseback transactions.

With the exception of the 2020 Notes, upon a change of control triggering event (as defined in the various note indentures), the terms require us to repurchase all or part of each holder’s notes for cash equal to 101% of the aggregate principal amount purchased plus accrued and unpaid interest, if any.

Senior Unsecured Floating Rate Notes

In September 2017, Nasdaq issued the 2019 Notes. The 2019 Notes pay interest quarterly in arrears at a rate equal to the three-month U.S. dollar LIBOR as determined at the beginning of each quarterly period plus 0.39% per annum until March 22, 2019.

5.55% Senior Unsecured Notes

In January 2010, Nasdaq issued the 2020 Notes. The 2020 Notes pay interest semiannually at a rate of 5.55% per annum until January 15, 2020.

3.875% Senior Unsecured Notes

In June 2013, Nasdaq issued the 2021 Notes. The 2021 Notes pay interest annually at a rate of 3.875% per annum until June 7, 2021 and such rate may vary with Nasdaq’s debt rating up to a rate not to exceed 5.875%.

The 2021 Notes have been designated as a hedge of our net investment in certain foreign subsidiaries to mitigate the foreign exchange risk associated with certain investments in these subsidiaries. The decrease in the carrying amount of $22 million noted in the “Payments, Accretion and Other” column in the table above primarily reflects the translation of the 2021 Notes into U.S. dollars and is recorded in accumulated other comprehensive loss within stockholders’ equity in the Condensed Consolidated Balance Sheets as of September 30, 2018.

4.25% Senior Unsecured Notes

In May 2014, Nasdaq issued the 2024 Notes. The 2024 Notes pay interest semiannually at a rate of 4.25% per annum until June 1, 2024 and such rate may vary with Nasdaq’s debt rating up to a rate not to exceed 6.25%.

1.75% Senior Unsecured Notes

In May 2016, Nasdaq issued the 2023 Notes. The 2023 Notes pay interest annually at a rate of 1.75% per annum until May 19, 2023 and such rate may vary with Nasdaq’s debt rating up to a rate not to exceed 3.75%.

The 2023 Notes have been designated as a hedge of our net investment in certain foreign subsidiaries to mitigate the foreign exchange rate risk associated with certain investments in these subsidiaries. The decrease in the carrying amount of $22 million noted in the “Payments, Accretion and Other” column in the table above reflects the translation of the 2023 Notes into U.S. dollars and is recorded in accumulated other comprehensive loss within stockholders’ equity in the Condensed Consolidated Balance Sheets as of September 30, 2018.

3.85% Senior Unsecured Notes

In June 2016, Nasdaq issued the 2026 Notes. The 2026 Notes pay interest semiannually at a rate of 3.85% per annum until June 30, 2026 and such rate may vary with Nasdaq’s debt rating up to a rate not to exceed 5.85%.

Credit Facilities

As of September 30, 2018, the amounts in the table above reflect the aggregate principal amount, less the unamortized debt issuance costs which are being accreted through interest expense over the life of the applicable credit facility. Nasdaq is permitted to repay borrowings under our credit facilities at any time in whole or in part, without penalty.

Our credit facilities contain financial and operating covenants. Financial covenants include a minimum interest expense coverage ratio and a maximum leverage ratio. Operating covenants include, among other things, limitations on Nasdaq’s ability to incur additional indebtedness, grant liens on assets, dispose of assets and pay dividends. Our credit facilities allow us to pay cash dividends on our common stock. The facilities also contain customary affirmative covenants, including access to financial statements, notice of defaults and certain other material events, maintenance of properties and insurance, and events of default, including cross-defaults to our material indebtedness.

2017 Credit Facility

In April 2017, Nasdaq entered into the 2017 Credit Facility. The 2017 Credit Facility consists of a $1 billion five-year revolving credit facility (with sublimits for non-dollar borrowings, swingline borrowings and letters of credit), which replaced a former credit facility. Nasdaq intends to use funds available under the 2017 Credit Facility for general corporate purposes and to provide liquidity support for the repayment of commercial paper issued through the commercial paper program.

As of September 30, 2018, no amounts were outstanding on the 2017 Credit Facility. The $4 million credit balance represents unamortized debt issuance costs. Of the $1 billion that is available for borrowing, $311 million provides liquidity support for the commercial paper program and for a letter of credit. As such, as of September 30, 2018, the total remaining amount available under the 2017 Credit Facility was $689 million. See “Commercial Paper Program” above for further discussion of our commercial paper program.

Under our 2017 Credit Facility, borrowings under the revolving credit facility and swingline borrowings bear interest on the principal amount outstanding at a variable interest rate based on either the LIBOR or the base rate (as defined in the credit agreement) (or other applicable rate with respect to non-dollar borrowings), plus an applicable margin that varies with Nasdaq’s debt rating.

The 2017 Credit Facility includes an option for Nasdaq to increase the available aggregate amount by up to $500 million, subject to the consent of the lenders funding the increase and certain other conditions.

2016 Credit Facility

In March 2016, Nasdaq entered into the 2016 Credit Facility. Under our 2016 Credit Facility, borrowings bear interest on the principal amount outstanding at a variable interest rate based on either the LIBOR or the base rate (or other applicable rate with respect to non-dollar borrowings), plus an applicable margin that varies with Nasdaq’s debt rating.

As of September 30, 2018, the amount outstanding of $100 million is due upon maturity at November 25, 2019.

Other Credit Facilities

We also have credit facilities related to our Nasdaq Clearing operations in order to provide further liquidity. Credit facilities, which are available in multiple currencies, totaled $219 million as of September 30, 2018 and $187 million as of December 31, 2017 in available liquidity, none of which was utilized.

Debt Covenants

As of September 30, 2018, we were in compliance with the covenants of all of our debt obligations.

10. Retirement Plans

Defined Contribution Savings Plan

We sponsor a 401(k) Plan for U.S. employees. Employees are immediately eligible to make contributions to the plan and are also eligible for an employer contribution match at an amount equal to 100.0% of the first 6.0% of eligible employee contributions. Savings plan expense included in compensation and benefits expense in the Condensed Consolidated Statements of Income was $3 million for both the three months ended September 30, 2018 and 2017 and $10 million for both the nine months ended September 30, 2018 and 2017.

Pension and Supplemental Executive Retirement Plans

We maintain non-contributory, defined-benefit pension plans, non-qualified SERPs for certain senior executives and other post-retirement benefit plans for eligible employees in the U.S., collectively referred to as the Nasdaq Benefit Plans. Our pension plans and SERPs are frozen. Future service and salary for all participants do not count toward an accrual of benefits under the pension plans and SERPs. Most employees outside the U.S. are covered by local retirement plans or by applicable social laws. Benefits under social laws are generally expensed in the periods in which the costs are incurred. The total expense for these plans is included in compensation and benefits expense in the Condensed Consolidated Statements of Income and was $4 million for the three months September 30, 2018, $5 million for the three months ended September 30, 2017, $15 million for the nine months September 30, 2018, and $13 million for the nine months ended September 30, 2017. During the third quarter of 2018, we contributed $22 million to our U.S. defined-benefit pension plans. This contribution increased our funded status to approximately 100.0%. We will continue to monitor the plan's funded status.

11. Share-Based Compensation

We have a share-based compensation program for employees and non-employee directors. Share-based awards granted under this program include stock options, restricted stock (consisting of restricted stock units), and PSUs. For accounting purposes, we consider PSUs to be a form of restricted stock.

Summary of Share-Based Compensation Expense

The following table shows the total share-based compensation expense resulting from equity awards and the 15.0% discount for the ESPP for the three and nine months ended September 30, 2018 and 2017 in the Condensed Consolidated Statements of Income:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in millions)
Share-based compensation expense before income taxes	$	18		$	18		$	51		$	52
Income tax benefit	(5		)	(7		)	(14		)	(21		)
Share-based compensation expense after income taxes	$	13		$	11		$	37		$	31

Common Shares Available Under Our Equity Plan

As of September 30, 2018, we had approximately 11.0 million shares of common stock authorized for future issuance under our Equity Plan.

Restricted Stock

We grant restricted stock to most active employees. The grant date fair value of restricted stock awards is based on the closing stock price at the date of grant less the present value of future cash dividends. Restricted stock awards granted generally vest 25.0% on the second anniversary of the grant date, 25.0% on the third anniversary of the grant date, and 50.0% on the fourth anniversary of the grant date. We generally recognize compensation expense for restricted stock awards on a straight-line basis over the requisite service period of the award, taking into account an estimated forfeiture rate. Granted but unvested shares are generally forfeited upon termination of employment.

Summary of Restricted Stock Activity

The following table summarizes our restricted stock activity for the nine months ended September 30, 2018:



	Restricted Stock
	Number of Awards		Weighted-Average Grant Date Fair Value

Unvested balances at January 1, 2018	1,988,500		$	57.34
Granted	489,203		$	81.77
Vested	(669,577	)	$	47.54
Forfeited	(229,214	)	$	63.29
Unvested balances at September 30, 2018	1,578,912		$	68.20

As of September 30, 2018, $58 million of total unrecognized compensation cost related to restricted stock is expected to be recognized over a weighted-average period of 1.9 years.

PSUs

PSUs are based on performance measures that impact the amount of shares that each recipient will receive upon vesting. We have two performance-based long-term PSU programs for certain officers, a one-year performance-based program and a three-year cumulative performance-based program that focuses on TSR.

One-Year PSU Program

The grant date fair value of PSUs under the one-year performance-based program is based on the closing stock price at the date of grant less the present value of future cash dividends. Under this program, an eligible employee receives a target grant of PSUs, but may receive from 0.0% to 150.0% of the target amount granted, depending on the achievement of performance measures. These awards vest ratably on an annual basis over a three-year period commencing with the end of the one-year performance period. Compensation cost is recognized over the performance period and the three-year vesting period based on the probability that such performance measures will be achieved, taking into account an estimated forfeiture rate. Granted but unvested shares are generally forfeited upon termination of employment.

During 2017, certain grants of PSUs with a one-year performance period exceeded the applicable performance parameters. As a result, an additional 14,497 units above target were considered granted in the first quarter of 2018 and are included in the below table.

Three-Year PSU Program

Under the three-year performance-based program, each eligible individual receives PSUs, subject to market conditions, with a three-year cumulative performance period that vest at the end of the performance period. Compensation cost is recognized over the three-year vesting period, taking into account an estimated forfeiture rate, regardless of whether the market condition is satisfied, provided that the requisite service period has been completed. Granted but unvested shares are generally forfeited upon termination of employment. Performance will be determined by comparing Nasdaq’s TSR to two peer groups, each weighted 50.0%. The first peer group consists of exchange companies, and the second peer group consists of all companies in the S&P 500. Nasdaq’s relative performance ranking against each of these groups will determine the final number of shares delivered to each individual under the program. The payout under this program will be between 0.0% and 200.0% of the number of PSUs granted and will be determined by Nasdaq’s overall performance against both peer groups. However, if Nasdaq’s TSR is negative for the three-year performance period, regardless of TSR ranking, the payout will not exceed 100.0% of the number of PSUs granted. We estimate the fair value of PSUs granted under the three-year PSU program using the Monte Carlo simulation model, as these awards contain a market condition.

Certain grants of PSUs that were issued in 2015 with a three-year performance period exceeded the applicable performance parameters. As a result, an additional 237,876 units above target were considered granted in the first quarter of 2018 and are included in the below table.

The following weighted-average assumptions were used to determine the weighted-average fair values of the PSU awards granted under the three-year PSU program:



	Nine Months Ended September 30,
	2018		2017

Weighted-average risk free interest rate⁽¹⁾	2.36	%	1.44	%