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 March 31, 2019
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.)

151 W. 42nd Street, New York, New York (Address of Principal Executive Offices)	10036 (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 April 23, 2019
Common Stock, $.01 par value per share		165,704,510 shares

Nasdaq, Inc.



		Page
Part I. FINANCIAL INFORMATION

Item 1.	Financial Statements	2

	Condensed Consolidated Balance Sheets - March 31, 2019 (unaudited) and December 31, 2018	2

	Condensed Consolidated Statements of Income - Three Months Ended March 31, 2019 and 2018 (unaudited)	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) - Three Months Ended March 31, 2019 and 2018 (unaudited)	4

	Condensed Consolidated Statements of Changes in Equity - Three Months Ended March 31, 2019 and 2018 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2019 and 2018 (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	47

Part II. OTHER INFORMATION		46

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	47

SIGNATURES		49

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

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

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

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

ETF: Exchange Traded Fund

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

LIBOR: London Interbank Offered Rate

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

SEC: U.S. Securities and Exchange Commission

SERP: Supplemental Executive Retirement Plan

SFSA: Swedish Financial Supervisory Authority

S&P: Standard & Poor’s

S&P 500: S&P 500 Stock Index

TSR: Total Shareholder Return

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

* * * * *

NASDAQ, the NASDAQ logos, and other brand, service or product names or marks referred to in this report are trademarks or 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 and Nasdaq First North also is based on data generated internally by us. IPOs and new listings data is presented as of period end. While we are not aware of any misstatements regarding industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors. We refer you to the “Risk Factors” section in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, and the “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 that was filed with the SEC on February 22, 2019.

* * * * * *

Nasdaq intends to use its website, ir.nasdaq.com, as a means for disclosing material non-public information and for complying with SEC Regulation FD and other disclosure obligations.

iii

Forward-Looking Statements

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains these types of statements. Words such as “may,” “will,” “could,” “should,” “anticipates,” “envisions,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words or terms of similar substance used in connection with any discussion of future expectations as to industry and regulatory developments or business initiatives and strategies, future operating results or financial performance, and other future developments identify forward-looking statements. These include, among others, statements relating to:


•	our strategy, growth forecasts and 2019 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 or transition may be more difficult, time consuming or costly than expected, and we may be unable to realize synergies from business combinations, acquisitions, divestitures or other transactional activities;


•	loss of significant trading and clearing volumes or values, fees, market share, listed companies, market data 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 March 31, 2019 and more fully described in the “Risk Factors,” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 that was filed with the SEC on February 22, 2019. 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)



	March 31, 2019			December 31, 2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	472		$	545
Restricted cash	67			41
Financial investments, at fair value	220			268
Receivables, net	447			384
Default funds and margin deposits	3,274			4,742
Other current assets	256			390
Total current assets	4,736			6,370
Property and equipment, net	370			376
Goodwill	6,380			6,363
Intangible assets, net	2,329			2,300
Operating lease assets	378			—
Other non-current assets	310			291
Total assets	$	14,503		$	15,700
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	218		$	198
Section 31 fees payable to SEC	69			109
Accrued personnel costs	118			199
Deferred revenue	402			194
Other current liabilities	321			253
Default funds and margin deposits	3,274			4,742
Short-term debt	1,239			875
Total current liabilities	5,641			6,570
Long-term debt	2,328			2,956
Deferred tax liabilities, net	503			501
Operating lease liabilities	357			—
Other non-current liabilities	180			224
Total liabilities	9,009			10,251
Commitments and contingencies
Equity
Nasdaq stockholders’ equity:
Common stock, $0.01 par value, 300,000,000 shares authorized, shares issued: 171,592,982 at March 31, 2019 and 170,709,425 at December 31, 2018; shares outstanding: 165,701,483 at March 31, 2019 and 165,165,104 at December 31, 2018	2			2
Additional paid-in capital	2,732			2,716
Common stock in treasury, at cost: 5,891,499 shares at March 31, 2019 and 5,544,321 shares at December 31, 2018	(327		)	(297		)
Accumulated other comprehensive loss	(1,645		)	(1,530		)
Retained earnings	4,732			4,558
Total Nasdaq stockholders’ equity	5,494			5,449
Total liabilities and equity	$	14,503		$	15,700

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 March 31,
	2019			2018
Revenues:
Market Services	$	638		$	735
Corporate Services	131			132
Information Services	193			174
Market Technology	77			60
Other revenues	—			50
Total revenues	1,039			1,151
Transaction-based expenses:
Transaction rebates	(331		)	(348		)
Brokerage, clearance and exchange fees	(74		)	(137		)
Revenues less transaction-based expenses	634			666
Operating expenses:
Compensation and benefits	175			197
Professional and contract services	37			37
Computer operations and data communications	33			32
Occupancy	24			25
General, administrative and other	16			22
Marketing and advertising	10			9
Depreciation and amortization	48			53
Regulatory	7			8
Merger and strategic initiatives	9			10
Total operating expenses	359			393
Operating income	275			273
Interest income	3			2
Interest expense	(37		)	(38		)
Net gain on divestiture of business	27			—
Net income from unconsolidated investees	45			2
Income before income taxes	313			239
Income tax provision	66			62
Net income attributable to Nasdaq	$	247		$	177
Per share information:
Basic earnings per share	$	1.49		$	1.06
Diluted earnings per share	$	1.48		$	1.05
Cash dividends declared per common share	$	0.44		$	0.82

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in millions)



	Three Months Ended March 31,
	2019			2018
Net income	$	247		$	177
Other comprehensive loss:
Foreign currency translation losses	(106		)	(76		)
Income tax expense⁽¹⁾	(9		)	(115		)
Foreign currency translation, net	(115		)	(191		)

Employee benefit plan income tax expense⁽¹⁾	—			(7		)
Total other comprehensive loss, net of tax	(115		)	(198		)
Comprehensive income (loss) attributable to Nasdaq	$	132		$	(21	)

____________


⁽¹⁾	Includes a reclassification of the stranded tax effects, for the three months ended March 31, 2018, related to the Tax Cuts and Jobs Act. See “Tax Cuts and Jobs Act,” of Note 17, “Income Taxes,” for further discussion.

See accompanying notes to condensed consolidated financial statements.

Nasdaq, Inc.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

(in millions, except share amounts)



	Number of Common Shares Outstanding		Common Stock at Par Value		Additional Paid-in Capital		Common Stock In Treasury, at Cost			Accumulated Other Comprehensive Loss			Retained Earnings			Total Equity
Balance at December 31, 2018	165,165,104		$	2	$	2,716	$	(297	)	$	(1,530	)	$	4,558		$	5,449
Net income	—		—		—		—			—			247			247
Other comprehensive loss	—		—		—		—			(115		)	—			(115		)
Cash dividends declared per common share	—		—		—		—			—			(73		)	(73		)
Share-based compensation	874,404		—		16		—			—			—			16
Stock option exercises, net	8,666		—		—		—			—			—			—
Restricted stock and performance-based shares withheld for taxes	(346,691	)	—		—		(30		)	—			—			(30		)
Balance at March 31, 2019	165,701,483		$	2	$	2,732	$	(327	)	$	(1,645	)	$	4,732		$	5,494



	Number of Common Shares Outstanding		Common Stock at Par Value		Additional Paid-in Capital			Common Stock In Treasury, at Cost			Accumulated Other Comprehensive Loss			Retained Earnings			Total Equity
Balance at December 31, 2017	167,441,030		$	2	$	3,024		$	(247	)	$	(862	)	$	3,963		$	5,880
Net income	—		—		—			—			—			177			177
Other comprehensive loss⁽¹⁾	—		—		—			—			(198		)	142			(56		)
Cash dividends declared per common share	—		—		—			—			—			(136		)	(136		)
Share repurchase program	(1,258,946	)	—		(99		)	—			—			—			(99		)
Share-based compensation	1,250,013		—		15			—			—			—			15
Stock option exercises, net	34,195		—		1			—			—			—			1
Restricted stock and performance-based shares withheld for taxes	(519,700	)	—		—			(42		)	—			—			(42		)
Other employee stock activity	—		—		(15		)	—			—			—			(15		)
Balance at March 31, 2018	166,946,592		$	2	$	2,926		$	(289	)	$	(1,060	)	$	4,146		$	5,725

____________

⁽¹⁾Includes a reclassification of the stranded tax effects, for the three months ended March 31, 2018, related to the Tax Cuts and Jobs Act. See “Tax Cuts and Jobs Act,” of 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)



	Three Months Ended March 31,
	2019			2018
Cash flows from operating activities:
Net income	$	247		$	177
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	48			53
Share-based compensation	16			15
Deferred income taxes	(16		)	(9		)
Net gain on divestiture of business	(27		)	—
Net income from unconsolidated investees	(45		)	(2		)
Other reconciling items included in net income	—			3
Net change in operating assets and liabilities, net of effects of divestiture and acquisitions:
Receivables, net	(50		)	(127		)
Other assets	(288		)	68
Accounts payable and accrued expenses	34			65
Section 31 fees payable to SEC	(40		)	—
Accrued personnel costs	(79		)	(59		)
Deferred revenue	186			208
Other liabilities	351			(17		)
Net cash provided by operating activities	337			375
Cash flows from investing activities:
Purchases of securities	(101		)	(73		)
Proceeds from sales and redemptions of securities	138			81
Proceeds from divestiture of business	108			—
Acquisition of business, net of cash and cash equivalents acquired	(193		)	—
Purchases of property and equipment	(20		)	(16		)
Other investing activities	(6		)	—
Net cash used in investing activities	(74		)	(8		)
Cash flows from financing activities:
Proceeds from (repayments of) commercial paper, net	265			(18		)
Repayments of long-term debt	(515		)	(115		)
Proceeds from long-term debt issuances	15			—
Repurchases of common stock	—			(99		)
Dividends paid	(73		)	(63		)
Payments related to employee shares withheld for taxes	(30		)	(42		)
Proceeds of customer funds	36			—
Net cash used in financing activities	(302		)	(337		)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(8		)	—
Net increase (decrease) in cash and cash equivalents and restricted cash	(47		)	30
Cash and cash equivalents and restricted cash at beginning of period	586			399
Cash and cash equivalents and restricted cash at end of period	$	539		$	429
Supplemental Disclosure Cash Flow Information
Cash paid for:
Interest	$	23		$	33
Income taxes, net of refund	$	22		$	27

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 certain Canadian-listed securities.

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

Nasdaq Commodities is the brand name for Nasdaq’s European commodity-related products and services. Nasdaq Commodities’ offerings include derivatives in oil, power, natural gas and carbon emission markets, seafood, 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, and connectivity to various data feeds. We also provide data center services, including co-location to market participants, whereby we offer firms cabinet space and power to house their own servers and other equipment within our data centers. Our broker services operations offer technology and customized securities administration solutions to financial participants in the Nordic market.

In March 2019, we entered into an agreement to sell Nordic Fund Market, an electronic mutual fund service which is a smaller part of our Broker Services business.

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 enhance their ability to understand and expand their global shareholder base, and improve corporate governance through our suite of advanced technology, analytics, and consultative services. In March 2019, we sold our BWise enterprise governance, risk and compliance software platform and in April 2018, we sold our Public Relations Solutions and Digital Media Services businesses. See Note 5, “Acquisitions and Divestitures,” for further discussion. As of March 2019, our Corporate Solutions business includes our Investor Relations Intelligence and Governance Solutions businesses.

As of December 31, 2018, BWise was classified as held for sale. See Note 6, “Assets and Liabilities Held for Sale,” for further discussion.

For segment reporting purposes, we have included the revenues and expenses of the Public Relations Solutions and Digital Media Services businesses in corporate items, which were part of the Corporate Solutions business, within our Corporate Services segment, prior to the date of sale. For discussion of business segments, see Note 19, “Business Segments.”

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

provides liquidity solutions for private companies and private funds.

In December 2018, we launched a Corporate Bond exchange for the listing and trading of corporate bonds. The new exchange operates pursuant to The Nasdaq Stock Market exchange license and is powered by the Nasdaq Financial Framework.

As of March 31, 2019, there were 3,059 total listings on The Nasdaq Stock Market, including 388 ETPs. The combined market capitalization was approximately $12.9 trillion. In Europe, the Nasdaq Nordic and Nasdaq Baltic exchanges, together with Nasdaq First North, were home to 1,018 listed companies with a combined market capitalization of approximately $1.4 trillion.

Information Services

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

Our Market Data business sells and distributes historical and real-time 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 March 31, 2019, we had 346 ETPs licensed to Nasdaq’s indexes which had $196 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, buy-side firms 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.

2. Summary of Significant Accounting Policies

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 8, “Investments,” for further discussion of our equity method investments.

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

As permitted under U.S. GAAP, certain footnotes or other financial information can be condensed or omitted in the interim condensed consolidated financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in Nasdaq’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

On January 1, 2019, we adopted ASU 2016-02, “Leases,” or ASU 2016-02. See Note 3, “Significant Accounting Policies Update,” for further discussion.

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

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.

Recent Accounting Pronouncements



Accounting Standard	Description	Effective Date	Effect on the Financial Statements or Other Significant Matters
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 will adopt this standard on January 1, 2020. 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. 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.
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 will adopt this standard on January 1, 2020 and will recognize a cumulative-effect adjustment to retained earnings as of the effective date to align our credit loss methodology with the new standard. We are currently assessing the impact that this standard will have on our consolidated financial statements.

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, 2018 that was filed with the SEC on February 22, 2019. A significant change to our accounting policies as a result of adopting ASU 2016-02 is discussed below.

We adopted ASU 2016-02 on January 1, 2019, and elected the optional transition method to initially apply the standard at the January 1, 2019 adoption date. As a result, we applied the new lease standard prospectively to our leases existing or commencing on or after January 1, 2019. Comparative periods presented were not restated upon adoption. Similarly, new disclosures under the standard were made for periods beginning January 1, 2019, and not for prior comparative periods. Prior periods will continue to be reported under guidance in effect prior to January 1, 2019. In addition, we elected the package of practical expedients permitted under the transition guidance within the standard, which among other things, allowed us to not reassess contracts to determine if they contain leases, lease classification and initial direct costs. The standard did not impact our statements of income and had no impact on our cash flows.

We have operating leases which are primarily real estate leases for our U.S. and European headquarters and for general office space. These leases have varying lease terms ranging from 3 months to 17 years. We determine if an arrangement is a lease at inception. Operating leases are included in operating lease assets, other current liabilities, and operating lease liabilities in our condensed consolidated balance sheets as of March 31, 2019. As of March 31, 2019, we do not have any finance leases.

Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Since our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease asset also includes any lease payments made and excludes lease incentives. Our lease terms include options to extend or terminate the lease when we are reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Certain of our lease agreements include rental payments adjusted periodically for inflation based on an index or rate. These payments are included in the initial measurement of the operating lease liability and operating lease asset. However, rental payments which are based on a change in an index or a rate are considered variable lease payments and are expensed as incurred.

We have lease agreements with lease and non-lease components, which are accounted for as a single performance obligation to the extent that the timing and pattern of transfer are similar for the lease and non-lease components and the lease component qualifies as an operating lease. We do not recognize lease liabilities and operating lease assets for leases with a term of 12 months or less. We recognize these lease payments on a straight-line basis over the lease term.

Our lease agreements do not contain any material residual value guarantees or material restrictions or covenants.

We sublease certain real estate to third parties. Our sublease portfolio consists of operating leases.

The following table provides supplemental balance sheet information related to Nasdaq's operating leases:



Leases	Balance Sheet Classification	March 31, 2019
		(in millions)
Assets:
Operating lease assets	Operating lease assets	$	378

Liabilities:
Current lease liabilities	Other current liabilities	$	61
Non-current lease liabilities	Operating lease liabilities	357
Total lease liabilities		$	418

The following table summarizes Nasdaq's lease cost:



	Three Months Ended March 31, 2019
	(in millions)
Operating lease cost⁽¹⁾	$	20
Variable lease cost	5
Sublease income	(1		)
Total lease cost	$	24

____________


⁽¹⁾	Includes short-term lease cost, which was immaterial.

The following table reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded in our condensed consolidated balance sheet.



	March 31, 2019
	(in millions)
2019⁽¹⁾	$	60
2020	76
2021	66
2022	44
2023	39
Thereafter	260
Total lease payments	545
Less: interest⁽²⁾	(127		)
Present value of lease liabilities⁽³⁾	$	418

____________


⁽¹⁾	Represents the estimated lease payments to be made for the remaining nine months of 2019.


⁽²⁾	Calculated using the interest rate for each lease.


⁽³⁾	Includes the current portion of $61 million.

Total lease payments in the above table exclude $128 million of legally binding minimum lease payments for leases signed but not yet commenced related to expansion of our world headquarters. These leases will commence in 2020 with a lease term of 16 years.

The following table provides information related to Nasdaq's lease term and discount rate:



	March 31, 2019
Weighted-average remaining lease term (in years)	10.4

Weighted-average discount rate	4.6	%

The following table provides supplemental cash flow information related to Nasdaq's operating leases:



	Three Months Ended March 31, 2019
	(in millions)
Cash paid for amounts included in the measurement of operating lease liabilities	$	18

Lease assets obtained in exchange for new operating lease liabilities	$	16

4. Revenue From Contracts With Customers

Disaggregation of Revenue

The following tables summarize the disaggregation of revenue by major product and service and by segment for the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31, 2019
	Market Services		Corporate Services		Information Services		Market Technology		Consolidated
	(in millions)
Transaction-based trading and clearing, net	$	160	$	—	$	—	$	—	$	160
Trade management services	73		—		—		—		73
Corporate solutions	—		60		—		—		60
Listing services	—		71		—		—		71
Market data products	—		—		100		—		100
Index	—		—		54		—		54
Investment data & analytics	—		—		39		—		39
Market technology	—		—		—		77		77
Revenues less transaction-based expenses	$	233	$	131	$	193	$	77	$	634



	Three Months Ended March 31, 2018
	Market Services		Corporate Services		Information Services		Market Technology		Other Revenues		Consolidated
	(in millions)
Transaction-based trading and clearing, net	$	175	$	—	$	—	$	—	$	—	$	175
Trade management services	75		—		—		—		—		75
Corporate solutions	—		60		—		—		—		60
Listing services	—		72		—		—		—		72
Market data products	—		—		100		—		—		100
Index	—		—		50		—		—		50
Investment data & analytics	—		—		24		—		—		24
Market technology	—		—		—		60		—		60
Other revenues	—		—		—		—		50		50
Revenues less transaction-based expenses	$	250	$	132	$	174	$	60	$	50	$	666

For the three months ended March 31, 2019, approximately 65.0% of Market Services revenues were recognized at a point in time and 35.0% were recognized over time. For the three months ended March 31, 2018, approximately 66.0% of Market Services revenues were recognized at a point in time and 34.0% were recognized over time. Substantially all revenues from the Corporate Services, Information Services and Market Technology segments were recognized over time for the three months ended March 31, 2019 and 2018.

* * * * * *

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 are net of allowance for doubtful accounts of $11 million as of March 31, 2019 and $13 million as of December 31, 2018. 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. Excluding our market technology contracts, for contract durations that are one-year or greater, materially all of the transaction price allocated to unsatisfied performance obligations is included in deferred revenue. For our market technology contracts, the portion of transaction price allocated to unsatisfied performance obligations is shown in the table

below. 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 as of March 31, 2019. See Note 9,

“Deferred Revenue,” for our discussion on deferred revenue balances, activity, and expected timing of recognition.

* * * * * *

Transaction Price Allocated to Remaining Performance Obligations

As stated above, 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. For our market technology contracts, the following table summarizes the amount of the transaction price allocated to performance obligations that are unsatisfied as of March 31, 2019:



	(in millions)
2019⁽¹⁾	$	231
2020	257
2021	125
2022	82
2023	43
2024 and thereafter	82
Total	$	820

____________


⁽¹⁾	Represents performance obligations to be recognized over the remaining nine months of 2019.

Market technology deferred revenue, as discussed in Note 9, “Deferred Revenue,” to the condensed consolidated financial statements, represents consideration received that is yet to be recognized as revenue for unsatisfied performance obligations.

5. Acquisitions and Divestitures

2019 Divestiture and Acquisition

We completed the following divestiture and acquisition in 2019. Financial results of each transaction are included in our condensed consolidated financial statements from the date of each divestiture or acquisition.

2019 Divestiture

In March 2019, we sold our BWise enterprise governance, risk and compliance software platform which was part of our Corporate Solutions business within our Corporate Services segment to SAI Global and recognized a pre-tax gain on the sale of $27 million, net of disposal costs ($20 million after tax). The pre-tax gain is included in net gain on divestiture of business in the Condensed Consolidated Statements of Income for the three months ended March 31, 2019.

As of December 31, 2018, the assets and liabilities of BWise were held for sale. See Note 6, “Assets and Liabilities Held For Sale,” for further discussion.

2019 Acquisition



	Purchase Consideration		Total Net Assets Acquired		Total Net Deferred Tax Liability			Acquired Intangible Assets		Goodwill
	(in millions)
Cinnober	$	219	$	22	$	(19	)	$	79	$	137

In January 2019, we acquired Cinnober, a major Swedish financial technology provider to brokers, exchanges and clearinghouses worldwide for $219 million. Cinnober is part of our Market Technology segment.

Nasdaq used cash on hand to fund this acquisition.

The amounts in the table above represent the preliminary allocation of purchase price as of March 31, 2019 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 Cinnober acquisition.

2018 Acquisition and Divestiture

We completed an acquisition during the year ended December 31, 2018 and a divestiture in April 2018. Financial results of each transaction are included in our condensed consolidated financial statements from the date of the acquisition or divestiture.

2018 Acquisition

Acquisition of Quandl

In November 2018, we acquired Quandl, Inc., a leading provider of alternative and core financial data. Quandl is part of our Information Services segment.

Nasdaq used issuances of commercial paper to fund this 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. A pre-tax gain of $41 million, net of disposal costs ($19 million after tax) was included in the Condensed Consolidated Statements of Income in the second quarter of 2018. A post-closing working capital adjustment of $8 million ($5 million after tax) was included in the Condensed Consolidated Statements of Income in the third quarter of 2018 bringing the net gain on the sale to $33 million, ($14 million after tax) for the nine months ended September 30, 2018.

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 until mid-2019, 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.

Intangible Assets

The following table presents the details of the customer relationships intangible asset at the date of acquisition for Cinnober which was the significant acquired intangible asset for this acquisition. All acquired intangible assets with finite lives are amortized using the straight-line method.



	March 31, 2019
	($ in millions)
Customer relationships	$	67
Discount rate used	9.5		%
Estimated average useful life	13 years

Customer Relationships

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

Methodology

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 Rate

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 Cinnober, 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 5 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.

6. Assets and Liabilities Held For Sale

In December 31, 2018, we decided to sell BWise, our enterprise governance, risk and compliance software platform and this business was recorded as held for sale. BWise was part of our Corporate Solutions business within our Corporate Services segment.

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

In February 2019, we entered into an agreement to sell BWise and in March 2019, we completed the sale and recognized a pre-tax gain on the sale of $27 million, net of disposal costs ($20 million after tax). See “2019 Divestiture,” of Note 5, “Acquisitions and Divestitures,” 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.

Major Classes of Assets and Liabilities Held For Sale

The carrying amounts of the major classes of assets and liabilities that were classified as held for sale at December 31, 2018 were as follows:



	December 31, 2018
	(in millions)
Receivables, net	$	13
Property and equipment, net	10
Goodwill⁽¹⁾	47
Intangible assets, net⁽²⁾	16
Other assets	3
Total assets held for sale⁽³⁾	$	89

Deferred tax liabilities	$	4
Deferred revenue	12
Other current liabilities	4
Total liabilities held for sale⁽⁴⁾	$	20

____________


⁽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.

⁽³⁾Included in other current assets in the Condensed Consolidated Balance Sheets as of December 31, 2018.

⁽⁴⁾Included in other current liabilities in the Condensed Consolidated Balance Sheets as of December 31, 2018.

* * * * * *

7. Goodwill and Acquired Intangible Assets

Goodwill

The following table presents the changes in goodwill by business segment during the three months ended March 31, 2019:



	Market Services			Corporate Services			Information Services			Market Technology			Total
	(in millions)
Balance at December 31, 2018	$	3,430		$	455		$	2,333		$	145		$	6,363
Goodwill acquired	—			—			—			137			137
Foreign currency translation adjustment	(62		)	(4		)	(44		)	(10		)	(120		)
Balance at March 31, 2019	$	3,368		$	451		$	2,289		$	272		$	6,380

The goodwill acquired for Market Technology shown above relates to our acquisition of Cinnober. See “2019 Acquisition,” of Note 5, “Acquisitions and Divestitures,” for further discussion.

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 three months ended March 31, 2019 and 2018; 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:



	March 31, 2019										December 31, 2018
	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	$	65		$	(16	)	$	49		9	$	54		$	(15	)	$	39		9
Customer relationships	1,599			(460		)	1,139			18	1,532			(456		)	1,076			18
Other	18			(3		)	15			8	17			(2		)	15			8
Foreign currency translation adjustment	(160		)	51			(109		)		(149		)	64			(85		)
Total finite-lived intangible assets	$	1,522		$	(428	)	$	1,094			$	1,454		$	(409	)	$	1,045
Indefinite-Lived Intangible Assets
Exchange and clearing registrations	$	1,257		$	—		$	1,257			$	1,257		$	—		$	1,257
Trade names	122			—			122				122			—			122
Licenses	52			—			52				52			—			52
Foreign currency translation adjustment	(196		)	—			(196		)		(176		)	—			(176		)
Total indefinite-lived intangible assets	$	1,235		$	—		$	1,235			$	1,255		$	—		$	1,255
Total intangible assets	$	2,757		$	(428	)	$	2,329			$	2,709		$	(409	)	$	2,300

Amortization expense for acquired finite-lived intangible assets was $26 million for the three months ended March 31, 2019 and $28 million for the three months ended March 31, 2018. Amortization expense decreased in 2019 primarily due to certain assets becoming fully amortized in the fourth quarter of 2018, partially offset by additional amortization expense associated with acquired intangible assets in 2019. 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 $109 million as of March 31, 2019) of acquired finite-lived intangible assets as of March 31, 2019 is as follows:



	(in millions)
2019⁽¹⁾	$	80
2020	104
2021	103
2022	100
2023	98
2024 and thereafter	718
Total	$	1,203

____________


⁽¹⁾	Represents the estimated amortization to be recognized for the remaining nine months of 2019.

8. Investments

The following table presents the details of our investments:



	March 31, 2019		December 31, 2018
	(in millions)
Trading securities	$	220	$	259
Available-for-sale investment securities	—		9
Financial investments, at fair value	$	220	$	268

Equity method investments	$	136	$	135
Equity securities	$	61	$	44

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 $194 million as of March 31, 2019 and $166 million as of December 31, 2018, are assets primarily

utilized to meet regulatory capital requirements, mainly for our clearing operations at Nasdaq Clearing.

Available-for-Sale Investment Securities

As of December 31, 2018, 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. As of March 31, 2019 and December 31, 2018, the cumulative unrealized gains and losses on these securities were immaterial.

Equity Method Investments

As of March 31, 2019 and December 31, 2018, our equity method investments primarily included our equity interest in OCC.

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 $45 million for the three months ended March 31, 2019 and $2 million for the three months ended March 31, 2018.

The change for the three months ended March 31, 2019 compared with the same period in 2018 is due to an increase in income recognized from our investment in OCC. Following the disapproval of the OCC capital plan in February 2019, described below, OCC suspended customer rebates and dividends to owners, including the unpaid dividend on 2018 results which Nasdaq expected to receive in March 2019. In 2018, we recorded $16 million of income relating to our share of OCC’s net income. We were not able to determine the impact of the disapproval of the OCC capital plan on OCC's 2018 net income until March 2019, when OCC's 2018 financial statements were made available to us. As a result, in March 2019, we recognized an additional $36 million of income relating to our share of OCC's net income for the year ended December 31, 2018. In March 2019, we also recognized our share of OCC's first quarter 2019 net income of $9 million.

OCC Capital Plan

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. Nasdaq PHLX 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 envisioned an annual dividend equal to the portion of OCC’s after-tax income that exceeded OCC’s capital requirements after payment of refunds to OCC’s clearing members (such refunds were generally 50% of the portion of OCC’s pre-tax income that exceeded OCC’s capital requirements). In 2018, 2017 and 2016, OCC disbursed annual dividends under the capital plan and Nasdaq, as the beneficial owner of shares held by Nasdaq PHLX and ISE, received $13 million in 2018, $10 million in 2017 and $4 million in 2016. The dividend recorded by Nasdaq in 2016 did not include the dividend due to ISE because our acquisition of ISE was completed in June 2016, after that year’s dividend had been paid.

In February 2016, after the SEC approved the rule change establishing the OCC capital plan, certain industry participants appealed that approval in the U.S. Court of Appeals. In February 2019, on remand from the Court of Appeals, the SEC disapproved the OCC rule change that established the capital plan. OCC began a phased return of capital contributed under the capital plan, and we received $44 million in February 2019, with the remainder to be repaid at a later date. As a result of the SEC's disapproval of the rule change, we are also released from any future capital replenishment obligations under the 2015 capital plan.

Equity Securities

The carrying amounts of our equity securities are included in other non-current assets in the Condensed Consolidated Balance Sheets. We elected the measurement alternative for primarily all of our equity securities as they do not have a readily determinable fair value. Under the measurement alternative, these securities 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. For the three months ended March 31, 2019, no impairment charges were recorded on our equity securities and there were no upward or downward adjustments recorded. As of March 31, 2019 and December 31, 2018, our equity securities primarily represent various strategic investments made through our corporate venture program.

9. Deferred Revenue

Deferred revenue represents consideration received that is yet to be recognized as revenue. The changes in our deferred revenue during the three months ended March 31, 2019 are reflected in the following table:



	Initial Listing Revenues			Annual Listings Revenues			Market Technology Revenues			Corporate Solutions Revenues			Information Services Revenues			Other⁽¹⁾			Total
	(in millions)
Balance at December 31, 2018	$	66		$	4		$	75		$	36		$	80		$	20		$	281
Additions	8			229			55			42			56			9			399
Revenue recognized	(8		)	(56		)	(49		)	(38		)	(40		)	(7		)	(198		)
Translation adjustment	(1		)	—			(3		)	—			—			—			(4		)
Balance at March 31, 2019	$	65		$	177		$	78		$	40		$	96		$	22		$	478

____________


⁽¹⁾	Primarily includes deferred revenue from U.S. listing of additional shares fees which will continue to run-off as a result of the implementation of our all-inclusive annual fee. Listing of additional shares fees are included in our Listing Services business. The additions primarily pertain to our Market Services business.

As of March 31, 2019, 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⁽¹⁾		Total
	(in millions)
Fiscal year ended:
2019⁽²⁾	$	19	$	177	$	49	$	37	$	87	$	12	$	381
2020	20		—		22		3		9		7		61
2021	11		—		7		—		—		3		21
2022	8		—		—		—		—		—		8
2023	5		—		—		—		—		—		5
2024 and thereafter	2		—		—		—		—		—		2
Total	$	65	$	177	$	78	$	40	$	96	$	22	$	478

____________


⁽¹⁾	Other primarily includes revenues from listing of additional shares fees which are included in our Listing Services business.


⁽²⁾	Represents the estimated amortization to be recognized for the remaining nine months of 2019.

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.

10. Debt Obligations

The following table presents the changes in the carrying amount of our debt obligations during the three months ended March 31, 2019:



	December 31, 2018			Additions		Payments, Accretion and Other			March 31, 2019
Short-term debt:	(in millions)
Commercial paper	$	275		$	692	$	(427	)	$	540
Senior unsecured floating rate notes repaid on March 22, 2019	500			—		(500		)	—
5.55% senior unsecured notes due January 15, 2020⁽¹⁾	599			—		—			599
$400 million senior unsecured term loan facility due November 25, 2019 (average interest rate of 4.00% for the period January 1, 2019 through March 31, 2019)	100			—		—			100
Total short-term debt	1,474			692		(927		)	1,239
Long-term debt:
3.875% senior unsecured notes due June 7, 2021	686			—		(15		)	671
4.25% senior unsecured notes due June 1, 2024	497			—		—			497
1.75% senior unsecured notes due May 19, 2023	682			—		(15		)	667
3.85% senior unsecured notes due June 30, 2026	496			—		—			496
$1 billion revolving credit commitment due April 25, 2022 (average interest rate of 5.60% for the period January 1, 2019 through March 31, 2019)	(4		)	15		(14		)	(3		)
Total long-term debt	2,357			15		(44		)	2,328
Total debt obligations	$	3,831		$	707	$	(971	)	$	3,567

____________


⁽¹⁾	Balance was reclassified to short-term debt as of March 31, 2019.

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 fluctuates as short term interest rates and demand fluctuate. The fluctuation of these rates due to market conditions may impact our interest expense.

As of March 31, 2019, 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 3 days to 19 days and the weighted-average maturity is 2 days. The weighted-average effective interest rate is 2.78% 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 March 31, 2019, 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 March 2019, we used net proceeds from the sale of commercial paper and cash on hand to redeem all of our 2019 Notes.

Nasdaq issued the 2019 Notes in September 2017. The 2019 Notes paid 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 Due 2020

In April 2019, we sent a redemption notice to the trustee to redeem all $600 million aggregate principal amount outstanding of our 2020 Notes, at a cash redemption price to be calculated as provided in the indenture governing the 2020 Notes, plus accrued and unpaid interest, if any, to the

redemption date of May 1, 2019. Upon completion of the redemption, no 2020 Notes will remain outstanding.

Payment of the redemption price will be made on or after the redemption date only upon presentation and surrender of the 2020 Notes to the trustee. Interest on the 2020 Notes called for redemption will cease to accrue from and after the redemption date.

Nasdaq issued the 2020 Notes in January 2010. The 2020 Notes paid interest semiannually at a rate of 5.55%% per annum.

Nasdaq will primarily use the net proceeds from the sale of the 2029 Notes to redeem the 2020 Notes. For further discussion of the 2029 Notes, see “1.75% Senior Unsecured Notes Due 2029” below.

3.875% Senior Unsecured Notes Due 2021

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 $15 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 March 31, 2019.

4.25% Senior Unsecured Notes Due 2024

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 Due 2023

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 $15 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 March 31, 2019.

3.85% Senior Unsecured Notes Due 2026

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%.

1.75% Senior Unsecured Notes Due 2029

In April 2019, Nasdaq issued €600 million aggregate principal amount of 1.75% senior notes due 2029, or the 2029 Notes, at a discount. As a result of the discount, the proceeds received from the issuance were less than the aggregate principal amount.

The 2029 Notes are unsecured, pay interest annually in arrears, beginning on March 28, 2020 and may be redeemed by Nasdaq at any time, subject to a make-whole amount. The proceeds from the 2029 Notes, approximately $669 million after deducting the underwriting discount and expenses of this offering, will primarily be used to redeem the 2020 Notes. For further discussion of the 2020 Notes, see “5.55% Senior Unsecured Notes Due 2020” above.

The 2029 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.

Credit Facilities

As of March 31, 2019, 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 March 31, 2019, no amounts were outstanding on the 2017 Credit Facility. The $3 million balance represents unamortized debt issuance costs. Of the $1 billion that is available for borrowing, $541 million provides liquidity support for the commercial paper program and for a letter of credit. As such, as of March 31, 2019, the total remaining amount available under the 2017 Credit Facility was $459 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. We are charged commitment fees of 0.125% to 0.4%, depending on our credit rating, whether or not amounts have been borrowed. These commitment fees are included in interest expense and were not material for the three months ended March 31, 2019 and 2018.

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 March 31, 2019, the amount outstanding of $100 million is due upon maturity at November 25, 2019, which we expect to repay with cash on hand and proceeds from issuances of commercial paper or borrowings from our revolving credit commitment under our 2017 Credit Facility.

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 $210 million as of March 31, 2019 and $220 million as of December 31, 2018 in available liquidity, none of which was utilized.

Debt Covenants

As of March 31, 2019, we were in compliance with the covenants of all of our debt obligations.

11. 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 the three months ended March 31, 2019 and $4 million for three months ended March 31, 2018.

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 $5 million the three months ended March 31, 2019 and $6 million for three months ended March 31, 2018.

12. 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 months ended March 31, 2019 and 2018 in the Condensed Consolidated Statements of Income:



	Three Months Ended March 31,
	2019			2018
	(in millions)
Share-based compensation expense before income taxes	$	16		$	15
Income tax benefit	(4		)	(4		)
Share-based compensation expense after income taxes	$	12		$	11

Common Shares Available Under Our Equity Plan

As of March 31, 2019, we had approximately 11.3 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.

Summary of Restricted Stock Activity

The following table summarizes our restricted stock activity for the three months ended March 31, 2019:



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

Unvested balances at January 1, 2019	1,583,375		$	68.62
Granted	250		$	77.54
Vested	(435,765	)	$	57.07
Forfeited	(65,798	)	$	70.35
Unvested balances at March 31, 2019	1,082,062		$	73.12

The awards granted in the above table do not include the all-employee grant which occurred on April 1, 2019.

As of March 31, 2019, $45 million of total unrecognized compensation cost related to restricted stock is expected to be recognized over a weighted-average period of 1.7 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.

During 2018, certain grants of PSUs with a one-year performance period exceeded the applicable performance parameters. As a result, an additional 51,914 units above target were considered granted in the first quarter of 2019 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. 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 2016 with a three-year performance period exceeded the applicable performance parameters. As a result, an additional 99,622 units above target were considered granted in the first quarter of 2019 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 for the three months ended March 31, 2018:



	Three Months Ended March 31, 2018
Weighted-average risk free interest rate⁽¹⁾	2.36		%
Expected volatility⁽²⁾	18.7		%
Weighted-average grant date share price	$	86.22
Weighted-average fair value at grant date	$	116.79

____________


⁽¹⁾	The risk-free interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.


⁽²⁾	We use historic volatility for PSU awards issued under the three-year PSU program, as implied volatility data could not be obtained for all the companies in the peer groups used for relative performance measurement within the program.

In addition, the annual dividend assumption utilized in the Monte Carlo simulation model is based on Nasdaq’s dividend yield at the date of grant.

Summary of PSU Activity

The following table summarizes our PSU activity for the three months ended March 31, 2019:



	PSUs
	One-Year Program				Three-Year Program
	Number of Awards		Weighted-Average Grant Date Fair Value		Number of Awards		Weighted-Average Grant Date Fair Value
Unvested balances at January 1, 2019	314,231		$	74.01	837,750		$	96.57
Granted⁽¹⁾	51,914		$	82.08	99,622		$	93.25
Vested	(6,888	)	$	64.93	(431,751	)	$	93.25
Forfeited	(13,984	)	$	74.54	(6,101	)	$	103.29
Unvested balances at March 31, 2019	345,273		$	75.38	499,520		$	98.70

____________


⁽¹⁾	Only includes certain additional awards granted based on overachievement of performance parameters as the all-employee grant occurred on April 1, 2019.

As of March 31, 2019, $11 million of total unrecognized compensation cost related to the one-year PSU program is expected to be recognized over a weighted-average period of 1.5 years. For the three-year PSU program, $23 million of total unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.3 years.

Stock Options

In January 2017, our CEO received 268,817 performance-based non-qualified stock options which will vest annually over a three-year period, with each vesting contingent upon the achievement of annual performance parameters. On January 29, 2019, Nasdaq's management compensation committee and board of directors determined that the performance goal for 2018 was met, resulting in the settlement of the second one-third of the grant. There were no stock option awards granted during the three months ended March 31, 2019.

The weighted-average grant date fair value for the 2017 grant was $66.68. We estimated the fair value of this stock option award using the Black-Scholes valuation model using the following assumptions:



Expected life (in years)	6
Weighted-average risk free interest rate	2.1	%
Expected volatility	25.6	%
Dividend yield	1.92	%

Our computation of expected life was based on an estimate of the average length of time between option grant and exercise. The interest rate for periods within the expected life of the award was based on the U.S. Treasury yield curve in effect at the time of grant. Our computation of expected volatility was an estimate

of the future upward/downward fluctuations in the underlying share price. We used Nasdaq's historical volatility for the trailing 6-year period as of the grant date. Our computation of dividend yield was based on annualized dividends expressed as a percentage of share price.

Summary of Stock Option Activity

A summary of stock option activity for the three months ended March 31, 2019 is as follows:



	Number of Stock Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)

Outstanding at January 1, 2019	448,966		$	49.11	5.51	$	15
Exercised	(8,666	)	23.81
Outstanding at March 31, 2019	440,300		$	49.61	5.33	$	17
Exercisable at March 31, 2019	350,694		$	45.25	4.71	$	15

The net cash proceeds from the exercise of 8,666 stock options for the three months ended March 31, 2019 was immaterial. We received net cash proceeds of $1 million from the exercise of 34,195 stock options for the three months ended March 31, 2018.

The aggregate intrinsic value in the above table represents the total pre-tax intrinsic value (i.e., the difference between our closing stock price on March 29, 2019 of $87.49 and the exercise price, times the number of shares) based on stock options with an exercise price less than Nasdaq’s closing price of $87.49 as of March 29, 2019, which would have been received by the option holders had the option holders exercised their stock options on that date. This amount can change based on the fair market value of our common stock. The total number of in-the-money stock options exercisable as of March 31, 2019 was 0.4 million and the weighted-average exercise price was $45.25. As of March 31, 2018, 0.4 million outstanding stock options were exercisable and the weighted-average exercise price was $34.28.

The total pre-tax intrinsic value of stock options exercised was $1 million for the three months ended March 31, 2019 and $2 million for the three months ended March 31, 2018.

ESPP

We have an ESPP under which approximately 1.9 million shares of our common stock have been reserved for future issuance as of March 31, 2019. Under our ESPP, employees may purchase shares having a value not exceeding 10.0% of their annual compensation, subject to applicable annual Internal Revenue Service limitations. We record compensation expense related to the 15.0% discount that is given to our employees which

totaled $1 million for both the three months ended March 31, 2019 and 2018.

13. Nasdaq Stockholders’ Equity

Common Stock

As of March 31, 2019, 300,000,000 shares of our common stock were authorized, 171,592,982 shares were issued and 165,701,483 shares were outstanding. The holders of common stock are entitled to one vote per share, except that our certificate of incorporation limits the ability of any person to vote in excess of 5.0% of the then-outstanding shares of Nasdaq common stock.

Common Stock in Treasury, at Cost

We account for the purchase of treasury stock under the cost method with the shares of stock repurchased reflected as a reduction to Nasdaq stockholders’ equity and included in common stock in treasury, at cost in the Condensed Consolidated Balance Sheets. Shares repurchased under our share repurchase program are currently retired and canceled. When treasury shares are reissued, they are recorded at the average cost of the treasury shares acquired. We held 5,891,499 shares of common stock in treasury as of March 31, 2019 and 5,544,321 shares as of December 31, 2018, most of which are related to shares of our common stock repurchased for the settlement of employee tax withholding obligations arising from the vesting of restricted stock and PSUs.

Share Repurchase Program

In January 2018, our board of directors authorized an additional $500 million for the share repurchase program bringing the total capacity to $726 million.

These purchases may be made from time to time at prevailing market prices in open market purchases, privately-negotiated transactions, block purchase techniques or otherwise, as

determined by our management. The purchases are primarily funded from existing cash balances. The share repurchase program may be suspended, modified or discontinued at any time. The share repurchase program has no defined expiration date.

There was no share repurchase activity during the three months ended March 31, 2019. The following is a summary of our share repurchase activity, reported based on settlement date, for the three months ended March 31, 2018:



	Three Months Ended March 31, 2018

Number of shares of common stock repurchased	1,258,946
Average price paid per share	$	78.75
Total purchase price (in millions)	$	99

As discussed above in “Common Stock in Treasury, at Cost,” shares repurchased under our share repurchase program are currently retired and cancelled. As of March 31, 2019, the remaining amount authorized for share repurchases under the program was $332 million.

Other Repurchases of Common Stock

During the first three months of 2019, we repurchased 346,691 shares of our common stock in settlement of employee tax withholding obligations arising from the vesting of restricted stock and PSUs.

Preferred Stock

Our certificate of incorporation authorizes the issuance of 30,000,000 shares of preferred stock, par value $0.01 per share, issuable from time to time in one or more series. As of March 31, 2019 and December 31, 2018, no shares of preferred stock were issued or outstanding.

* * * * * *

Cash Dividends on Common Stock

During the first three months of 2019, our board of directors declared the following cash dividends:

Declaration Date

Dividend Per

Common Share

Record Date

Total Amount Paid

Payment Date

(in millions)

January 29, 2019

0.44

March 15, 2019

March 29, 2019

The total amount paid of $73 million was recorded in retained earnings in the Condensed Consolidated Balance Sheets at March 31, 2019.

In April 2019, the board of directors approved a regular quarterly cash dividend of $0.47 per share on our outstanding common stock, which reflects a 7.0% increase from our prior quarterly cash dividend of $0.44. The dividend is payable on June 28, 2019 to shareholders of record at the close of business on June 14, 2019. The estimated amount of this dividend is $78 million. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by the board of directors.

Our board of directors maintains a dividend policy with the intention to provide stockholders with regular and growing dividends over the long term as earnings and cash flow grow.

14. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:



	Three Months Ended March 31,
	2019		2018
Numerator:	(in millions, except share and per share amounts)
Net income attributable to common shareholders	$	247	$	177
Denominator:
Weighted-average common shares outstanding for basic earnings per share	165,343,968		166,921,542
Weighted-average effect of dilutive securities:
Employee equity awards⁽¹⁾	1,682,787		2,070,997
Weighted-average common shares outstanding for diluted earnings per share	167,026,755		168,992,539
Basic and diluted earnings per share:
Basic earnings per share	$	1.49	$	1.06
Diluted earnings per share	$	1.48	$	1.05

____________


⁽¹⁾	PSUs, which are considered contingently issuable, are included in the computation of dilutive earnings per share on a weighted average basis when management determines the related performance criteria are met.

Securities that were not included in the computation of diluted earnings per share because their effect was antidilutive were immaterial for the three months ended March 31, 2019 and 2018.

15. Fair Value of Financial Instruments

The following tables present our financial assets and financial liabilities that are measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018.



	March 31, 2019
	Total		Level 1		Level 2		Level 3
Assets at Fair Value	(in millions)
Financial investments, at fair value	$	220	$	162	$	58	$	—
Default fund and margin deposit investments	1,604		180		1,424		—
Total Assets at Fair Value	$	1,824	$	342	$