UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
☒
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Commission file number: 001-38855
___________________________________
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value per share
0.900% Senior Notes due 2033
0.875% Senior Notes due 2030
1.75% Senior Notes due 2029
Trading Symbol(s)
NDAQ
NDAQ33
NDAQ30
NDAQ29
Name of each exchange on which registered
The Nasdaq Stock Market
The Nasdaq Stock Market
The Nasdaq Stock Market
The Nasdaq Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically 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
Non-accelerated filer
Emerging growth company
☒
☐
☐
Accelerated filer
Smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2021, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $21.0 billion
(this amount represents approximately 119.3 million shares of Nasdaq, Inc.’s common stock based on the last reported sales price of $175.80 of the common stock on
The Nasdaq Stock Market on such date).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Common Stock, $0.01 par value per share
Outstanding at February 14, 2022
164,412,114 shares
Documents Incorporated by Reference: Certain portions of the Definitive Proxy Statement for the 2022 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Form 10-K.
Part I.
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
Part II.
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6.
[Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III.
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV.
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
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About this Form 10-K
Throughout this Form 10-K, unless otherwise specified:
“Nasdaq,” “we,” “us” and “our” refer to Nasdaq, Inc.
“Nasdaq Baltic” refers to collectively, Nasdaq Tallinn
AS, Nasdaq Riga, AS, and AB Nasdaq Vilnius.
“Nasdaq BX” refers to the cash equity exchange
operated by Nasdaq BX, Inc.
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
“Nasdaq BX Options” refers to the options exchange
operated by Nasdaq BX, Inc.
2030 Notes: €600 million aggregate principal amount of
0.875% senior unsecured notes due February 13, 2030
“Nasdaq Clearing” refers to the clearing operations
conducted by Nasdaq Clearing AB.
2031 Notes: $650 million aggregate principal amount of
1.650% senior unsecured notes due January 15, 2031
“Nasdaq CXC” and “Nasdaq CX2” refer to the Canadian
cash equity trading books operated by Nasdaq CXC
Limited.
“Nasdaq First North”
marketplaces
companies in the Nordic and Baltic regions.
to our alternative
for smaller companies and growth
refers
“Nasdaq GEMX” refers
operated by Nasdaq GEMX, LLC.
to
the options exchange
“Nasdaq ISE” refers to the options exchange operated by
Nasdaq ISE, LLC.
“Nasdaq MRX” refers to the options exchange operated
by Nasdaq MRX, LLC.
2033 Notes: €615 million aggregate principal amount of
0.900% senior unsecured notes due July 30, 2033
2040 Notes: $650 million aggregate principal amount of
2.500% senior unsecured notes due December 21, 2040
2050 Notes: $500 million aggregate principal amount of
3.25% senior unsecured notes due April 28, 2050
ARR: Annualized Recurring Revenue
ASU: Accounting Standards Update
ASU 2016-13: Measurement of Credit Losses on Financial
Instruments
ASR: Accelerated Share Repurchase
“Nasdaq Nordic” refers to collectively, Nasdaq Clearing
AB, Nasdaq Stockholm AB, Nasdaq Copenhagen A/S,
Nasdaq Helsinki Ltd, and Nasdaq Iceland hf.
ATS: Alternative Trading System
AUM: Assets Under Management
“Nasdaq PHLX” refers to the options exchange operated
by Nasdaq PHLX LLC.
“Nasdaq PSX” refers to the cash equity exchange
operated by Nasdaq PHLX LLC.
“The Nasdaq Options Market” refers to the options
exchange operated by The Nasdaq Stock Market LLC.
“The Nasdaq Stock Market” refers to the cash equity
exchange and listing venue operated by The Nasdaq
Stock Market LLC.
Nasdaq also provides as a tool for the reader the following
list of abbreviations and acronyms that are used throughout
this Annual Report on Form 10-K.
401(k) Plan: Voluntary Defined Contribution Savings Plan
2020 Credit Facility: $1.25 billion senior unsecured
revolving credit facility, which matures on December 22,
2025
2022 Notes: $600 million aggregate principal amount of
0.445% senior unsecured notes due December 21, 2022
2023 Notes: €600 million aggregate principal amount of
1.75% senior unsecured notes; repaid in full and terminated
in August 2021
CAT: A market-wide consolidated audit trail established
under an SEC approved plan by Nasdaq and other
exchanges
CCP: Central Counterparty
CFTC: U.S. Commodity Futures Trading Commission
EMIR: European Market Infrastructure Regulation
Equity Plan: Nasdaq Equity Incentive Plan
ESG: Environmental, Social and Governance
ESPP: Nasdaq Employee Stock Purchase Plan
ETF: Exchange Traded Fund
ETP: Exchange Traded Product
Exchange Act: Securities Exchange Act of 1934, as amended
FASB: Financial Accounting Standards Board
FICC: Fixed Income and Commodities Trading and Clearing
FINRA: Financial Industry Regulatory Authority
IPO: Initial Public Offering
LIBOR: London Interbank Offered Rate
MiFID II: Update to the Markets in Financial Instruments
Directive
ii
This Annual Report on Form 10-K includes market share and
industry data that we obtained from industry publications and
surveys, reports of governmental agencies and internal
Industry publications and surveys
company surveys.
generally state that the information they contain has been
obtained from sources believed to be reliable, but we cannot
assure you that this information is accurate or complete. We
have not independently verified any of the data from third-
party sources nor have we ascertained the underlying
economic assumptions relied upon therein. Statements as to
our market position are based on the most currently available
market data. For market comparison purposes, The Nasdaq
Stock Market data in this Annual Report on Form 10-K for
IPOs is based on data generated internally by us; therefore,
the data may not be comparable to other publicly-available
IPO data. Data in this Annual Report on Form 10-K for new
listings of equity securities on The Nasdaq Stock Market is
based on data generated internally by us, which includes
issuers that switched from other listing venues, closed-end
funds and ETPs. Data in this Annual Report on Form 10-K
for IPOs and new listings of equity securities on the Nasdaq
Nordic and Nasdaq Baltic exchanges 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
risks and
uncertainties and are subject to change based on various
factors, including those discussed in the “Item 1A. Risk
Factors” section in this Annual Report on Form 10-K.
involve
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.
MiFIR: Markets in Financial Instruments Regulation
MTF: Multilateral Trading Facility
NFF: Nasdaq Financial Framework; Nasdaq's end-to-end
technology solutions for market infrastructure operators,
buy-side firms, sell-side firms and other non-financial
markets
NPM: The NASDAQ Private Market, LLC
NSCC: National Securities Clearing Corporation
OCC: The Options Clearing Corporation
OTC: Over-the-Counter
Proxy Statement: Nasdaq's Definitive Proxy Statement for
the 2022 Annual Meeting of Shareholders
PSU: Performance Share Unit
Regulation NMS: Regulation National Market System
Regulation SCI: Regulation Systems Compliance and
Integrity
SaaS: Software as a Service
SEC: U.S. Securities and Exchange Commission
SERP: Supplemental Executive Retirement Plan
SFSA: Swedish Financial Supervisory Authority
S&P: Standard & Poor’s
S&P 500: S&P 500 Stock Index
SPAC: Special Purpose Acquisition Company
SRO: Self-regulatory Organization
SSMA: Swedish Securities Markets Act 2007:528
TSR: Total Shareholder Return
U.S. GAAP: U.S. Generally Accepted Accounting Principles
UTP: Unlisted Trading Privileges
UTP Plan: Joint SRO Plan Governing the Collection,
Consolidation, and Dissemination of Quotation and
Transaction Information for Nasdaq-Listed Securities
Traded on Exchanges on a UTP Basis
NASDAQ, the NASDAQ logos, and other brand, service or
product names or marks referred to in this report are
trademarks or service marks, registered or otherwise, of
Nasdaq, Inc. and/or its subsidiaries. FINRA and Trade
Reporting Facility are registered trademarks of FINRA.
iii
Forward-Looking Statements
“anticipates,”
The SEC encourages companies to disclose forward-looking
information so that investors can better understand a
company’s future prospects and make informed investment
decisions. This Annual Report on Form 10-K contains these
types of statements. Words such as “may,” “will,” “could,”
“should,”
“estimates,”
“expects,” “projects,” “intends,” “plans,” “believes” and
words or terms of similar substance used in connection with
any discussion of future expectations as to industry and
regulatory developments or business
initiatives and
strategies, future operating results or financial performance,
and other future developments are intended to identify
forward-looking statements. These include, among others,
statements relating to:
“envisions,”
• our strategic direction;
• the
integration of acquired businesses,
including
accounting decisions relating thereto;
• the scope, nature or impact of acquisitions, divestitures,
transactional
joint ventures or other
investments,
activities;
• the effective dates for, and expected benefits of, ongoing
initiatives, including transactional activities and other
strategic, restructuring, technology, de-leveraging and
capital return initiatives;
• our products and services;
• the impact of pricing changes;
• tax matters;
• the cost and availability of liquidity and capital;
• any
litigation, or any
regulatory or government
investigation or action, to which we are or could become a
party or which may affect us; and
• the ongoing impact of the COVID-19 pandemic and the
response of governments and other third parties on our
business, operations, results of operations,
financial
condition, workforce or the operations or decisions of our
customers, suppliers or business partners.
Forward-looking statements involve risks and uncertainties.
Factors that could cause actual results to differ materially
from those contemplated by the forward-looking statements
include, among others, the following:
• our operating results may be lower than expected;
• our ability to keep up with rapid technological advances
and adequately address cybersecurity risks;
• economic, political and market conditions and fluctuations,
including inflation, interest rate and foreign currency risk,
inherent in U.S. and international operations;
• the performance and reliability of our technology and
technology of third parties on which we rely;
• any significant error in our operational processes;
• our ability to continue to generate cash and manage our
indebtedness; and
• adverse changes that may occur in the litigation or
regulatory areas, or in the securities markets generally, or
increased
or
internationally.
domestically
regulatory
oversight
to
Most of these factors are difficult to predict accurately and
are generally beyond our control. You should consider the
forward-looking
uncertainty and any risk related
statements that we make. These risk factors are discussed
under the caption “Item 1A. Risk Factors,” in this Annual
Report on Form 10-K. You are cautioned not to place undue
reliance on these forward-looking statements, which speak
only as of the date of this report. You should carefully read
this entire Annual Report on Form 10-K, including “Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the consolidated
financial statements and the related notes. Except as required
by the federal securities laws, we undertake no obligation to
update any forward-looking statement, release publicly any
revisions to any forward-looking statements or report the
occurrence of unanticipated events. For any forward-looking
statements contained
the
protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of
1995.
in any document, we claim
• 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
from business combinations,
acquisitions, divestitures or other transactional activities;
synergies
realize
• loss of significant trading and clearing volumes or values,
listed companies, market data
fees, market share,
customers or other customers;
• our ability
businesses,
offerings;
to develop and grow our non-trading
technology and analytics
including our
iv
PART I
Item 1. Business
Overview
Nasdaq is a global technology company serving the capital
markets and other industries. Our diverse offerings of data,
analytics, software and services enables clients to optimize
and execute their business vision with confidence.
We manage, operate and provide our products and services in
four business segments: Market Technology, Investment
Intelligence, Corporate Platforms and Market Services.
History
Nasdaq was founded in 1971 as a wholly-owned subsidiary
of FINRA. Beginning in 2000, FINRA restructured and
broadened ownership in Nasdaq by selling shares to FINRA
members, investment companies and issuers listed on The
Nasdaq Stock Market. In connection with this restructuring,
FINRA fully divested its ownership of Nasdaq in 2006, and
The Nasdaq Stock Market became an independent registered
national securities exchange in 2007.
Inc. This
In February 2008, Nasdaq and OMX AB combined their
businesses, and we changed our corporate name to The
NASDAQ OMX Group,
transformational
combination resulted in the expansion of our business from a
U.S.-based exchange operator to a global exchange company
offering technology that powers our own exchanges and
markets as well as many other marketplaces around the
world. We operated as the NASDAQ OMX Group until we
rebranded our business as Nasdaq, Inc. in 2015.
Growth Strategy
To ensure our continued success in the evolving business
environment, we have established a clear and consistent
vision, mission, purpose and strategy:
Our Vision: To reimagine markets to realize the potential of
tomorrow.
Our Mission: To provide
the premier platform and
ecosystem for global capital markets and beyond with
unmatched technology, insights and markets expertise.
Our Purpose: To champion inclusive growth and prosperity.
We power stronger economies, create more equitable
opportunities and contribute to a more sustainable world to
help our communities, clients, employees and people of all
backgrounds reach their full potential.
Our Strategy:
infrastructure
Under the strategic direction that we have been implementing
over the past five years, we have focused on maximizing the
resources, people and capital allocated to our largest growth
include anti-
opportunities. These opportunities, which
financial crime and market
technology
solutions, analytics and workflows for investment managers
and asset owners, and ESG solutions, constitute large and
growing opportunities where we feel our strengths in
technology, analytics and capital markets expertise,
combined with our expansive client network, position us to
meet our clients’ evolving needs. We are also committed to
investing to maintain the strong competitive positioning of
our foundational marketplace and corporate businesses, as
well as over time reducing capital allocated to areas that we
believe are less strategic to our clients and which have less
long-term growth potential within Nasdaq.
Our four business segments reflect our broad capabilities,
Intelligence
with Market Technology and
providing our technology and analytics growth platform, and
Corporate Platforms and Market Services serving as our
foundational marketplace core.
Investment
• Increasing Investment in Businesses Where We See the
Highest Growth Opportunity. We have
increased
investment in fast-growing markets that we believe help
solve our clients’ biggest challenges and are likely to
generate growth for our stockholders. These areas include:
the index and analytics business within our Investment
Intelligence segment; broader governance technology and
consultative solutions, including ESG-focused solutions,
within our Corporate Platforms segment; and anti-financial
crime solutions and trade surveillance in our Market
Technology segment.
1
Products and Services
Market Technology
Powering over 130 market infrastructure operators and new
market clients in more than 55 countries, our Market
Technology business 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 solutions can
handle a wide array of assets, including but not limited to
cash equities, equity derivatives, currencies, various interest-
bearing securities, commodities, energy products and digital
currencies. Our solutions can also be used in the creation of
new asset classes, and non-capital markets customers,
including
liabilities securitization,
cryptocurrencies and sports wagering.
insurance
those
in
Nasdaq’s market technology is utilized by leading markets in
the U.S., Europe and Asia as well as emerging markets in the
Middle East, Latin America, and Africa. Additionally, more
than 220 market participants leverage our surveillance
technology globally to manage their integrity obligations and
assist them in complying with market rules, regulations and
internal market surveillance policies.
During 2021, we continued to build out our SaaS business
portfolio by extending and migrating our current offerings to
SaaS. Across our product portfolio, ranging from our
Marketplace Service Platform to our Surveillance offerings,
we added more than 25 new SaaS customers. Additionally,
our Verafin solutions are offered to our clients entirely on a
SaaS basis.
Our Market Technology segment has evolved from its origins
serving the capital markets, as we have leveraged NFF to
develop our SaaS platform and offerings. We expect to
continue to expand adoption by our clients of this SaaS
model in the future.
In February 2021, we completed the acquisition of Verafin,
a provider of anti-financial crime management solutions,
which is part of our Market Technology segment. We are
continuing to invest in the Market Technology segment
through the expansion, enhancement, and flexibility of our
technology platform, in addition to leveraging emerging
technologies such as machine intelligence in our Trade
Surveillance offering.
In December 2021, we completed the acquisition of
QDiligence, a provider of software that facilitates digital
director and officer questionnaires and self-evaluations for
directors and corporate secretaries. We plan to integrate
QDiligence as part of the Nasdaq Governance Solutions
business.
• Enhancing Our Foundation. As we strive to grow our
business, we have also focused on enhancing our
leadership position in the marketplaces in which we
operate as we continue to innovate with new functionality
and strong market share in our core markets. In December
2021, we announced a multi-year partnership with Amazon
Web Services, or AWS, to migrate our North American
exchanges to the cloud. Nasdaq will utilize a new edge
computing solution that was co-designed by Nasdaq and
AWS for market infrastructure. The partnership with AWS
will also further our strategy with our market infrastructure
clients, including banks, clearing houses, central securities
depositories and regulators that rely on us for their core
surveillance
trading,
technology. We believe these offerings can provide such
clients with added agility in adjusting to changing industry
dynamics. We plan to work with AWS to develop viable
cloud choices that include public-cloud and hybrid models.
The collaboration with AWS also includes opportunities to
explore other ways to leverage AWS’s cloud capabilities
across our other businesses, including our anti-financial
crime and data and analytics businesses.
settlement
clearing
and
and
• Optimizing Slower Growth Businesses. We continually
review areas that are not critical to our core. In June 2021,
we sold our U.S. Fixed Income business. This transaction
aligns with our strategy to concentrate our resources and
capital in order to maximize our potential as a major
technology and analytics provider to the global capital
markets. See “2021 Divestiture,” of Note 4, “Acquisitions
and Divestiture,” to the consolidated financial statements
for further discussion of this transaction.
2
Anti Financial Crime Technology
Integrity of markets is core to everything we do at Nasdaq.
As such, we continue to extend our anti-financial crime
strategy in the Market Technology segment. We have seen a
growing demand globally for our products and services
within the Anti Financial Crime Technology business. Our
Nasdaq Trade Surveillance solution is a SaaS solution
designed for brokers and other market participants to assist
them in complying with market rules, regulations and internal
market surveillance policies. We provide an anti-money
laundering offering with an automated investigator tool for
retail banks, the Nasdaq Automated Investigator. Verafin
provides a cloud-based platform to help detect, investigate,
and report money laundering and financial fraud to more than
2,100 financial institutions in North America.
Market Infrastructure Technology
For Market Infrastructure Operators, we provide and deliver
mission-critical solutions across the trade lifecycle via the
NFF, which is our flexible and modular architecture and
technology that provides next generation capital markets
capabilities in an open and agile environment. The NFF is
designed to cover all aspects of a market operator’s needs,
from trading and clearing to risk management, market
surveillance, index development, data, management, testing,
and quality assurance.
Recently, we have seen a growing demand for our products
and service outside of the traditional capital markets. Market
Technology currently offers its services to several digital
assets exchanges, two commercial real estate markets, the
reinsurance market, and several sports wagering operators.
Our Marketplaces Services Platform provides next-
generation marketplace capabilities spanning the transaction
lifecycle to facilitate the exchange of assets, services and
information across various types of market ecosystems and
machine-to-machine transactions. The Marketplaces Services
Platform is targeted at new markets and enables end-to-end
marketplace implementation without the resources required
with on-premise solutions.
involve complex
Many Market Infrastructure projects
delivery management and systems integration. Through our
integration services, we can assume responsibility for
projects that involve migration to a new system and the
establishment of entirely new marketplaces. We also offer
operation and support for the applications, systems platforms,
networks and other components included in an information
technology solution, as well as advisory services.
Investment Intelligence
Our Investment Intelligence segment provides the global
investing community with access to the financial markets
together with strong investment insights.
Our Investment Intelligence segment includes our Market
Data, Index and Analytics businesses.
For both institutional and retail investors, our market and
alternative data enhances transparency and access to the
markets we operate, and we help guide investment decisions
around the globe through our proprietary indexes and
analytics.
Market Data
Our Market Data business sells and distributes historical and
real-time market data to the sell-side, the institutional
investing community, 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. We collect, process and create information and earn
revenues as a distributor of our own, as well as select third-
party content. We provide varying levels of quote and trade
information
turn provide
subscriptions for this information. Our systems enable
distributors to gain access to our market depth, fund
valuation, order imbalances, market sentiment and other
analytical data.
to our customers who
in
We distribute this proprietary market information to both
market participants and non-participants through a number of
proprietary products, including Nasdaq TotalView, our
flagship market depth quote product. TotalView shows
subscribers quotes, orders and total anonymous interest at
every displayed price level in The Nasdaq Stock Market for
Nasdaq-listed securities and critical data for the opening,
closing, halt and IPO crosses. We also offer TotalView
products for our Nasdaq BX, Nasdaq PSX, Nasdaq Fixed
Income and other Nordic markets.
We operate several other proprietary services and data
products to provide market information, including Nasdaq
Basic, a low cost alternative to the industry Level 1 feed and
Nasdaq Canada Basic, a low cost alternative to other high
priced data feeds. We also provide various other data,
including data relating to our six U.S. options exchanges,
Nordic and U.S. futures, and Nordic commodities.
transactions
information for all
Our Market Data business also includes revenues from U.S.
tape plans. The plan administrators sell quotation and last
in Nasdaq-listed
sale
securities, whether traded on The Nasdaq Stock Market or
other exchanges,
to data
distributors, who then provide the information to subscribers.
After deducting costs, the plan administrators distribute the
tape revenues to the respective plan participants based on a
formula required by Regulation NMS that takes into account
both trading and quoting activity.
to market participants and
The Nasdaq Nordic and Nasdaq Baltic exchanges, as well as
Nasdaq Commodities, also offer data products and services.
These data products and services provide critical market
transparency to professional and non-professional investors
who participate in European marketplaces and, at the same
time, give investors greater insight into these markets.
3
Much like the U.S. products, European data products and
services are based on trading information from the Nasdaq
Nordic and Nasdaq Baltic exchanges, as well as Nasdaq
Commodities, for the following classes of assets: cash
equities, bonds, derivatives and commodities. We provide
varying levels of quote and trade information to market
participants and to data distributors, who in turn provide
subscriptions for this information. Significant European data
products
include Nordic Equity TotalView, Nordic
Derivatives TotalView, and Nordic Fixed Income TotalView,
Level 2 and Analytics.
Index
Our Index business develops and licenses Nasdaq-branded
indexes and financial products. License fees for our
trademark licenses vary by product based on a percentage of
underlying assets, dollar value of a product issuance, number
of products or number of contracts traded. We also license
cash-settled options, futures and options on futures on our
indexes.
As of December 31, 2021, 362 ETPs listed on 25 exchanges
in over 20 countries tracked a Nasdaq index and accounted
for $424 billion in AUM. This includes approximately $94
billion in ETP AUM, or 22% of the total AUM that tracked
our smart beta indexes during this same time period. Our
flagship index, the Nasdaq-100 Index, includes the top 100
non-financial companies listed on The Nasdaq Stock Market,
and is tracked by more than 100 ETPs worldwide, and had
nearly $300 billion in assets tracking the index as of
December 31, 2021.
We provide index data products based on Nasdaq indexes.
Index data products include our Global Index Data Service,
which delivers real-time index values throughout the trading
day, and Global Index Watch/Global Index File Delivery
Service, which delivers daily as well as historical weightings
and components data, corporate actions and a breadth of
additional data for the indexes that we operate.
Nasdaq Dorsey Wright, or NDW, provides passive indexing
and smart beta strategies to support the financial advisor
community, as well as Systematic Relative Strength
strategies
to manage separately and unified managed
accounts. NDW strengthens Nasdaq’s position as a leading
smart beta index provider in the U.S.
Analytics
Our Analytics business provides asset managers, investment
consultants and institutional asset owners with information
and analytics to make data-driven investment decisions,
deploy their resources more productively, and provide
liquidity solutions for private funds. Through our eVestment
and Solovis solutions, we provide a suite of cloud-based
solutions that help institutional investors and consultants
conduct pre-investment due diligence, and monitor their
portfolios post-investment. The eVestment platform also
enables asset managers to efficiently distribute information
about their firms and funds to asset owners and consultants
worldwide.
Additionally, our Nasdaq Cloud Data Service provides a
flexible and efficient method of delivery for real-time
exchange data and other financial information. Data is made
through a suite of application programming
available
interfaces, or APIs, allowing for the integration of data from
disparate sources and a reduction in time to market for
customer-designed applications. The API is highly scalable
and can support the delivery of real-time exchange data.
Through the Solovis platform, endowments, foundations,
pensions and family offices transform how they collect and
aggregate investment data, analyze portfolio performance,
model and predict future outcomes, and share meaningful
portfolio insights with key stakeholders. The Nasdaq Fund
Network and Nasdaq Data Link are additional platforms in
our suite of investment data analytics offerings and data
management tools. Nasdaq Fund Network gathers and
distributes daily net asset values from over 35,000 funds and
other investment vehicles across North America. We have
extended Nasdaq Fund Network to support the distribution of
collective investment trusts, hedge funds, managed accounts,
separate accounts and demand deposit accounts. Nasdaq Data
Link strengthens our position as a leading source for
financial, economic, and alternative datasets. For investment
management firms, investment banks and other investors, the
platform powers data-driven decision-making for users
across the globe via universal APIs, and provides for highly
efficient data discovery and delivery. Additionally, our Data
Fabric solution, launched in 2021, enables investment firms
to leverage the technology and team that powers Nasdaq Data
Link to manage their own internal data with greater speed
and efficiency.
Corporate Platforms
Our Corporate Platforms segment includes our Listing
Services and IR & ESG Services businesses. These
businesses deliver critical capital market and ESG solutions
across the lifecycle of public and private companies.
Listing Services
We operate a variety of listing platforms around the world to
provide multiple global capital raising solutions for public
companies. Companies listed on our markets represent a
diverse array of industries including, among others, health
care, consumer products,
services,
information technology, financial services, industrials and
energy. Our main listing markets are The Nasdaq Stock
Market and the Nasdaq Nordic and Nasdaq Baltic exchanges.
telecommunication
Companies seeking to list securities on The Nasdaq Stock
Market may do so on one of the three market tiers: The
Nasdaq Global Select Market, The Nasdaq Global Market, or
The Nasdaq Capital Market. To qualify, companies must
meet minimum listing requirements, including specified
financial and corporate governance criteria. Once listed,
companies must maintain rigorous listing and corporate
governance standards. We offer a suite of products to assist
companies manage
standards,
discussed below in “IR & ESG Services.”
corporate governance
4
As of December 31, 2021, a total of 4,178 companies listed
securities on The Nasdaq Stock Market, with 1,632 listings
on The Nasdaq Global Select Market, 1,169 on The Nasdaq
Global Market and 1,377 on The Nasdaq Capital Market.
We seek new listings from companies conducting IPOs,
including SPACs, and direct listings as well as companies
looking to switch from alternative exchanges. In 2021, The
Nasdaq Stock Market attracted 1,000 new listings, including
752 IPOs, representing 73% of U.S. IPOs in 2021. Of the 752
IPOs that listed on The Nasdaq Stock Market, 319 were
operating companies, representing 76% of all operating
company IPOs in 2021 and 71% of SPACs IPOs. Nasdaq
featured the year's largest IPO as well as the largest direct
listing by first trade volume. The new listings were
comprised of the following:
IPOs
Switches from the New York Stock Exchange
LLC, or NYSE and the NYSE American LLC, or
NYSE American
Upgrades from OTC
ETPs and Other Listings
Total
752
33
112
103
1,000
During 2021, we had 33 new listings resulting from
companies switching their listings from NYSE or NYSE
American to join Nasdaq. Together with companies that
transferred additional securities to Nasdaq during 2021, an
aggregate of $361 billion
in global equity market
capitalization switched to Nasdaq. Notable switches in 2021
included Honeywell, Palo Alto Networks and Lucid Group.
We also offer listings on the exchanges that comprise Nasdaq
Nordic and Nasdaq Baltic. For smaller companies and growth
companies, we offer access to the financial markets through
the Nasdaq First North alternative marketplaces. As of
December 31, 2021, a total of 1,235 companies listed
securities on our Nordic and Baltic exchanges.
equities, depository
Our European listing customers include companies, funds
and governments. Customers issue securities in the form of
cash
receipts, warrants, ETPs,
convertibles, rights, options, bonds or fixed-income related
products. In 2021, a total of 207 new companies listed on our
Nordic and Baltic exchanges. In addition, 12 companies
upgraded their listings from Nasdaq First North to Nasdaq
Main Market.
During 2021, we announced a joint venture with several
financial institutions to establish an institutional-grade,
centralized secondary trading venue for issuers, brokers,
shareholders and prospective investors of private company
stock. We contributed our Nasdaq Private Market platform to
this new, standalone, independent company, of which we
own the largest minority interest. Nasdaq Private Market’s
existing technology, client relationships and regulatory
infrastructure will provide the foundation for the joint
venture to develop a full suite of liquidity solutions for
private companies. Private companies, brokers and investors
5
transactions
will be able to access, connect, manage and execute their
private company stock
through a global
marketplace and customized technology solutions. The
platform will continue to manage and support private
company stock transactions including tender offers, buy-side
book-building, auctions, investor block trades, company
directed windows of
listing
continuous trading. In addition, the platform will provide
end-to-end settlement process management and an inter-
broker global marketplace through its existing ATS for all
customers, from employees to institutions, to access and
transact.
liquidity and pre-direct
We are continuing to grow our U.S. Corporate Bond
exchange for the listing of corporate bonds. This exchange
operates pursuant to The Nasdaq Stock Market exchange
license and is powered by the NFF. Surveillance is conducted
by the Nasdaq regulatory team, assisted by our Nasdaq Trade
Surveillance solution. As of December 31, 2021, 107
corporate bonds were listed on the Corporate Bond exchange.
Our U.S. corporate bond listing offering won 23 new issues
and we added five existing bond listings that transferred from
the NYSE.
IR & ESG Services
Our IR & ESG Services business serves both public and
private companies and organizations. Our public company
clients can be companies listed on our exchanges or other
U.S. and global exchanges. We help organizations enhance
their ability
their global
to understand and expand
shareholder base,
improve corporate governance, and
navigate the evolving ESG landscape through our suite of
advanced technology, analytics, and consultative services.
We also provide clients with counsel on a range of
governance and sustainability-related issues.
As of December 31, 2021, we provided IR & ESG Services
offerings in the following key areas:
that deliver advisory
• Investor Relations Intelligence. We offer a global team of
consultative experts
services
including Equity Surveillance & Shareholder Analysis,
Investor Engagement and Perception Studies, as well as an
industry-leading platform, Nasdaq IR Insight®, to investor
relations professionals and executive
teams. These
solutions allow investor relations officers and executives to
better manage their investor relations programs, understand
their investor base, target new investors, manage meetings
and consume key data such as investor profiles, equity
research, consensus estimates and news.
• Environmental, Social and Governance Solutions. Our
ESG Advisory practice helps companies analyze, assess
and action best practices to attract long-term capital.
to
OneReport, a SaaS solution, helps organizations
navigate corporate responsibility frameworks, manage
information capture and response process, and deliver ESG
data to ratings agencies and other stakeholders.
We also provide a global
technology offering and
consultative services that streamline the meeting process
for board of directors and executive leadership teams and
help them accelerate decision making and strengthen
governance. Our solutions protect sensitive data and
facilitate productive collaboration, which enables board
members and teams to work faster and more effectively. In
December 2021, we enhanced our position as a provider of
governance technology and consultative solutions with the
acquisition of QDiligence, a provider of software that
facilitates digital director and officer questionnaires and
self-evaluations for boards of directors and corporate
secretaries.
Collectively,
the Nasdaq Nordic and Nasdaq Baltic
exchanges 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. Our platform allows the exchanges to
share the same trading system, which enables efficient cross-
border trading and settlement, cross membership and a single
source for Nordic data products. Settlement and registration
of cash equity trading takes place in Sweden, Finland, and
Denmark via the local central securities depositories. In
addition, Nasdaq owns a central securities depository that
provides notary, settlement, central maintenance and other
services in the Baltic countries and Iceland.
Market Services
FICC
Our Market Services segment includes our Equity Derivative
Trading and Clearing, Cash Equity Trading, FICC and Trade
Management Services businesses.
Equity Derivative Trading and Clearing
We operate six options exchanges in the U.S.: Nasdaq
PHLX, The Nasdaq Options Market, Nasdaq BX Options,
Nasdaq ISE, Nasdaq GEMX and Nasdaq MRX. These
exchanges facilitate the trading of equity, ETF, index and
foreign currency options. Together, our combined options
market share in 2021 represented the largest share of the U.S.
market for all categories, including single-exchange-listed
options products. Our options trading platforms provide
trading opportunities to both retail investors, algorithmic
trading firms and market makers, who tend to prefer
electronic trading, and institutional investors, who typically
require high touch services to execute their trades, which are
often performed on our trading floor in Philadelphia.
In Europe, Nasdaq offers trading in derivatives, such as stock
options and futures and index options and futures. Nasdaq
Clearing offers central counterparty clearing services for
stock options and futures and index options and futures.
Cash Equity Trading
In the U.S., we operate three cash equity exchanges: The
Nasdaq Stock Market, Nasdaq BX and Nasdaq PSX. Our
U.S. cash equity exchanges offer trading of both Nasdaq-
listed and non-Nasdaq-listed securities. The Nasdaq Stock
Market is the largest single venue of liquidity for trading
U.S.-listed cash equities. Market participants include market
makers, broker-dealers, ATSs, institutional investors, and
registered securities exchanges.
In Canada, we operate an exchange with three independent
markets, Nasdaq Canada CXC, Nasdaq Canada CX2 and
Nasdaq Canada CXD, for the trading of Canadian-listed
securities.
in Stockholm
In Europe, Nasdaq operates exchanges
(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.
6
Our FICC business includes Nasdaq Fixed Income, or NFI,
offering trading and clearing services for fixed income
products in Europe and Nasdaq Commodities.
NFI provides a wide range of products and services, such as
trading and clearing, for fixed income products in Sweden,
Denmark, Finland, Iceland, Estonia, Lithuania and Latvia.
Nasdaq is the largest bond listing venue in the Nordics, with
more than 5,600 listed retail and institutional bonds. In
addition, Nasdaq Nordic facilitates the trading and clearing of
Nordic fixed income derivatives in a unique market structure.
Buyers and sellers agree to trades in fixed income derivatives
through bilateral negotiations and then report those trades to
Nasdaq Clearing. Nasdaq Clearing offers central counterparty
clearing services for fixed-income options and futures and
interest rate swaps. Nasdaq Clearing also operates a clearing
service for the resale and repurchase agreement market.
Nasdaq Commodities is the brand name for Nasdaq’s
European commodity-related products and services. Nasdaq
Commodities’ offerings include derivatives in power, natural
gas and carbon emission markets, seafood, electricity
certificates and clearing services. These products are listed on
Nasdaq Oslo ASA, except for seafood, which is listed on
Fishpool, a third party platform.
Nasdaq Oslo ASA is the commodity derivatives exchange for
European products. All trades with Nasdaq Oslo ASA are
subject to clearing with Nasdaq Clearing, which offers
central counterparty clearing services for commodities
options and futures.
In June 2021, we sold our U.S. Fixed Income business, which
included an electronic platform for the trading of U.S.
Treasuries.
in Puro.earth, a Finnish-based
Additionally, in June 2021, we completed the acquisition of a
leading
majority stake
marketplace for carbon removal. Puro.earth offers industrial
carbon removal instruments that are verifiable and tradable
through an open, online platform. The addition of
Puro.earth’s marketplace capabilities to our suite of ESG-
focused technologies and workflow solutions gives our
clients further resources to successfully achieve their ESG
objectives.
Trade Management Services
We provide market participants with a wide variety of
alternatives for connecting to and accessing our markets for a
fee. Our marketplaces may be accessed via a number of
different protocols used for quoting, order entry, trade
reporting and connectivity to various data feeds. In April
2021, we launched WorkX, an upgraded version of Nasdaq
Workstation, a browser-based, front-end interface that allows
market participants to view data and enter orders, quotes and
trade reports. WorkX enables a seamless workflow and
enhanced trade intelligence. All current Workstation users are
expected to migrate to WorkX by the end of 2022. In
addition, we offer a variety of add-on compliance tools to
help firms comply with regulatory requirements.
We provide colocation services to market participants,
whereby we offer firms cabinet space and power to house
their own equipment and servers within our data centers.
Additionally, we offer a number of wireless connectivity
offerings between select data centers using millimeter wave
and microwave technology.
enables
developments.
end users
Competitive Strengths
to
leverage
recent
technology
trusted,
We are a global technology company and we continue to
diversify our product and service offerings by having a
client-first focus and orientation; unparalleled expertise in
independent, global brand; unique
markets; a
technology capabilities and reputation; and fostering a
leading issuer community and investor intelligence platform.
Our business segments complement each other. We believe
that our strong competitive position in large, high-growth
markets positions us for sustained growth.
and
securities
customized
Our broker services operations business primarily offers
technology
administration
solutions to financial participants in the Nordic market. Such
services and solutions primarily consist of flexible back-
office systems, which allow customers to efficiently manage
safekeeping, settlement and corporate actions and reporting,
and include connectivity to exchanges and central securities
depositories. In January 2020, we commenced an orderly
wind-down of this broker services business. We expect this
wind-down to continue through the second quarter of 2022.
Technology
Technology plays a key role in ensuring the growth,
reliability and regulation of financial markets. We have
established a technology risk program to evaluate the
resiliency of critical systems, including risks associated with
cybersecurity. This program is focused on identifying areas
for improvement in systems, and implementing changes and
upgrades to technology and processes to minimize future
risk. We have continued our focus on improving the security
of our technology with an emphasis on employee awareness
through training, targeted phishing campaigns, and new tool
deployment for our securities operations team. See “Item 1A.
Risk Factors,” in this Annual Report on Form 10-K for
further discussion.
Core Technology. The NFF is Nasdaq’s approach to
delivering end-to-end solutions to market infrastructure
operators, buy-side firms, sell-side firms and other non-
financial markets in addition to also supporting Nasdaq's own
internal trading systems. The framework consists of a single
operational core platform
together Nasdaq’s
portfolio of functionality across the trade lifecycle, in an open
framework whereby exchanges, clearinghouses, central
securities depositories, and other entities can easily integrate
Nasdaq’s business applications with each other, as well as
other third-party solutions. In addition to being able to
integrate a broad range of business functions, the NFF
that
ties
A Unique Value Proposition
We operate a diverse and resilient capital markets franchise
with a marketplace core. Our businesses provide capital-
markets infrastructure services to industry players, allowing
us to:
• Develop efficient and reliable technologies to facilitate
capital markets activity;
• Manage the complexities and costs of business on a global
scale; and
• Provide data, tools and insights that drive sound decision
making.
Technological Strength
The strength and resiliency of our technology, enhanced by
our Market Technology business, in meeting the advancing
demands of our global customer base is vital to the continued
success of our business and distinguishes us from our
competitors.
A Focus on Client Needs Throughout the Marketplace
We strive to serve a diverse range of clients including:
• Brokers and Traders - Helping brokers and traders to
confidently plan, optimize and execute their business
vision.
• Market Participants - Enabling market participants to
monitor and capitalize on real-time market changes.
7
Our surveillance and anti-financial crime offerings must
demonstrate the ability to decrease false-positives, provide
in-depth views into potential abuses and risks that stem from
those cases and help firms reduce both the reputational and
regulatory risk, and complexity in efforts to keep markets and
financial institutions safe.
Investment Intelligence
Our Market Data business in the U.S. includes both
proprietary and consolidated data products. Proprietary data
products are made up exclusively of data derived from each
systems. Consolidated data products are
exchange’s
distributed by SEC-mandated consolidators (one for Nasdaq-
listed stocks and another for NYSE and other-listed stocks)
that share the revenue among the exchanges that contribute
data. In Europe, all data products are proprietary, as there is
no official data consolidator. Competition in the data
business is intense and is influenced by rapidly changing
technology and the creation of new product and service
offerings.
The sale of our proprietary data products is under competitive
threat globally from alternative exchanges and trading venues
that offer similar products. Our data business competes with
to provide
other exchanges and
third party vendors
information
to market participants. Examples of our
competitors in proprietary data products are ICE, Cboe, TSX,
and Dow Jones & Company.
The consolidated data business is under competitive pressure
from other securities exchanges that trade Nasdaq-listed
securities. In addition, The Nasdaq Stock Market similarly
competes for the tape fees from the sale of information on
securities listed on other markets.
Our Index business faces competition from providers of
various competing financial indexes. For example, there are a
number of indexes that aim to track the technology sector and
thereby compete with the Nasdaq-100 Index and the Nasdaq
Composite Index. We face competition from investment
banks, dedicated index providers, markets and other product
developers, including S&P Dow Jones Indices, MSCI and
FTSE Russell.
Our Analytics business faces competition from a broad array
of data and analytics suppliers, both established firms and
small start-ups. Our primary competitors are Morningstar,
FactSet and any number of smaller firms along with start-up
data providers and aggregators. Our Solovis offering
competes with other analytics providers, including Addepar
and Caissa. Additionally, other large providers to the
financial services industry, such as Bloomberg and Refinitiv,
are believed to be interested in pursuing certain aspects of the
services we provide.
• Investors and Asset Managers - Offering products and
in
investors and asset managers
services
optimizing their portfolios and offerings.
to assist
• Listed Companies - Promoting the capital health of our
listed companies.
• Market Infrastructure Players - Assisting market
regulators,
infrastructure
clearinghouses, and central securities depositories) in
increasing efficiency, meeting customer needs and growing
revenue.
(exchanges,
players
• Capital Markets
through
economies of scale (cost, speed, connectivity) to all
members of the capital-markets ecosystem.
- Delivering efficiencies
• Banks and Financial Institutions - Providing a suite of
trade surveillance and anti-financial crime management
solutions.
Competition
Market Technology
Traditionally, exchanges and exchange-related businesses
would internally develop technology, sometimes aided by
consultants. However, over time this model has changed as
many operators have recognized the cost-savings made
possible by buying technology from third parties. As a result,
two types of competitors have emerged in our Market
Technology segment: exchange operators and technology
providers unaffiliated with exchanges. These organizations
make available a range of off-the-shelf technology, including
trading, clearing, market surveillance, settlement, depository
and information dissemination, and offer customization and
operation expertise. Market conditions in Market Technology
are evolving rapidly, which makes continuous investment
and innovation a necessity. Our partnership with AWS to
migrate our exchanges, in a phased approach, to the cloud
enables us to compete with other companies that are
developing cloud-based exchanges and market technology
offerings.
A wide range of providers compete with us in surveillance,
where standardization of products and budget pressures drive
customers to focus on pricing. Our competitors range from
large enterprise software providers that cover the broader
compliance lifecycle to smaller vendors focusing on a single
silo of the compliance workflow. Recently, an influx of start-
ups have entered the space from the FinTech landscape, often
shifting from data and analytics, or a complementary silo like
electronic communications, to surveillance. For our anti-
financial crime offering, competitors include core banking
solution providers,
independent fraud and anti-money
laundering solution providers and FinTech start-ups. We also
compete against enterprise solution providers and point
solutions for clients with larger AUM. The anti-financial
crime offering competes on a number of factors, including
but not limited to, increased workflow efficiency, quality of
the data output and pricing.
8
Corporate Platforms
Our Listing Services business in both the U.S. and Europe
provides a means of facilitating capital formation through
public capital markets. There are competing ways of raising
capital, and we seek to demonstrate the benefits of listing
shares on our exchange. Our primary competitor for larger
company stock share listings in the U.S. is NYSE. The
Nasdaq Stock Market competes with local and international
markets located outside the U.S. for listings of equity
securities of both U.S. and non-U.S. companies that choose
to list (or dual-list) outside of their home country. For
example, The Nasdaq Stock Market competes for listings
with exchanges in Europe and Asia, such as LSE and The
Stock Exchange of Hong Kong Limited. Additionally, we
face competition from private equity firms that may elect to
keep their portfolio companies as private companies.
The Listings Services business in Europe is characterized by
a large number of exchanges competing for new or secondary
listings. Each country has one or more national exchanges,
which are often the first choice of companies in each
respective country. For those considering an alternative,
competing European exchanges that frequently attract many
listings from outside their respective home countries include
LSE, Euronext N.V. and Deutsche Börse AG. In addition to
the larger exchanges, companies seeking capital or liquidity
from public capital markets are able to raise capital without a
regulated market listing and can consider trading their shares
on smaller markets and quoting facilities.
In our IR & ESG Services business, competition is varied and
can be fragmented. For our Investor Relations Intelligence
solutions, there are many regional competitors and relatively
few global providers. Other exchange operators are
partnering with firms that have capabilities in this area and
seeking to acquire relevant assets in order to provide investor
relations services to customers alongside listing services. The
competitive landscape for our Governance Solutions business
varies by customer
segment and geography. Most
competitors offer SaaS solutions that are supported by a data
centered strategy. Some firms offer specialized services that
focus on a single niche segment. The larger players often
offer additional services. Customers frequently seek single-
source providers that are able to address a broad range of
needs within a single platform. Our ESG-focused services,
including Nasdaq OneReport and ESG Advisory, are
positioned in evolving markets with competitors offering
multiple point solutions providing software, data or
consulting services.
Market Services
We face intense competition in North America and Europe in
businesses that comprise our Market Services segment. We
seek to provide market participants with greater functionality,
trading system stability and performance, high levels of
customer service, and efficient pricing. In both North
America and Europe, our competitors include other exchange
operators, operators of non-exchange trading systems and
banks and brokerages that operate their own internal trading
pools and platforms.
In the U.S., our options markets compete with exchanges
operated by Cboe Global Markets, Inc., or Cboe, Miami
International Holdings, Inc., or MIAX, Intercontinental
Exchange, Inc., or ICE, and Boston Options Market. In cash
equities in the U.S., we compete with exchanges operated by
Cboe, ICE, MIAX, The Investors Exchange, and the recently
launched Members Exchange and the Long Term Stock
Exchange. We also face competition from ATSs, known as
“dark pools,” and other less-heavily regulated broker-owned
trade facilitation systems, as well as from other types of OTC
trading. In Canada, our cash equities exchange competes with
exchanges such as the Toronto Stock Exchange, or TSX, and
other marketplaces.
In Europe, our cash equities markets compete with exchanges
such as Euronext N.V., Deutsche Börse AG and London
Stock Exchange Group plc, or LSE, and many MTFs such as
Cboe, Turquoise and Aquis. Our competitors in the trading
and clearing of options and futures on European equities
include Eurex, Cboe, ICE Futures Europe and London
Clearing House, or LCH. In addition, in equities in Europe
we face competition from other broker-owned systems, dark
pools, SIs, and other types of OTC trading. Competition
among exchanges for trading European equity derivatives
tends to occur where there is competition in the trading of the
underlying
exchange-based
competition, we face competition from OTC derivative
markets.
equities.
addition
In
to
The implementation of MiFID II and MiFIR has resulted in
further competitive pressure on our European
trading
business. SIs are already attracting a significant share of
electronically matched volume and we expect such venues to
compete aggressively for the trading of equity securities
listed on our Nordic exchanges. Different bilateral trading
systems pursuing block business also remain active in
Europe. As part of this, trading on SIs has increased
markedly as volumes migrate from more transparent types of
trading venues. Regulators are continuously monitoring the
market structure and have, in a series of consultations, asked
for input regarding suggested changes to MiFID II.
Our European fixed income and commodities products and
services are subject to competitive pressure from European
exchanges and clearinghouses.
Our Trade Management Services business competes with
other exchange operators, extranet providers, and data center
providers.
Intellectual Property
We believe that our intellectual property assets are important
for maintaining
the competitive differentiation of our
products, systems, software and services, enhancing our
ability to access technology of third parties and maximizing
our return on research and development investments.
To support our business objectives and benefit from our
investments in research and development, we actively create
and maintain a wide array of intellectual property assets,
including patents and patent applications related to our
9
innovations, products and services; trademarks related to our
brands, products and services; copyrights in software and
creative content; trade secrets; and through other intellectual
property rights, licenses of various kinds and contractual
provisions. We enter into confidentiality and invention
assignment agreements with our employees and contractors,
and utilize non-disclosure agreements with third parties with
whom we conduct business in order to secure and protect our
proprietary rights and to limit access to, and disclosure of,
our proprietary information.
We own, or have licensed, rights to trade names, trademarks,
domain names and service marks that we use in conjunction
with our operations and services. We have registered many of
our most important trademarks in the U.S. and in foreign
countries. For example, our primary “Nasdaq” mark is a
registered trademark that we actively seek to protect in the
U.S. and in over 50 other countries worldwide.
Over time, we have accumulated a robust portfolio of issued
patents in the U.S. and in many other jurisdictions across the
world. We currently hold rights to patents relating to certain
aspects of our products, systems, software and services, but
we primarily rely on
technical
competence and marketing abilities of our personnel. No
single patent is in itself core to the operations of Nasdaq or
any of its principal business areas.
innovative skills,
the
Corporate Venture Practice
in emerging growth
We operate a corporate venture program to make minority
investments primarily
financial
technology companies that are strategically relevant to, and
aligned with, Nasdaq. Investments are made through the
venture program to further our research and development
efforts and accelerate the path to commercial viability. We
expect that capital invested will continue to be modest and
will not have a material impact on our consolidated financial
statements, existing capital return or deployment priorities.
Since its inception in 2017, our venture program has grown,
with aggregate
investments of
approximately $90 million in 19 companies in various
sectors, including data, analytics and workflow, digital assets,
market infrastructure, anti-financial crime, new marketplaces,
and ESG.
initial and
follow-on
Environmental, Social and Governance Matters
Nasdaq is committed to further advancing our longer-term
ESG strategy, advocacy and oversight. We continue to
engage with internal and external stakeholders at all levels on
ESG matters. During 2021, we deepened our corporate and
community ESG efforts, including expanding ESG oversight
of our own operations and furthering our commitment to
greater sustainability and climate change awareness.
For the fourth consecutive year, Nasdaq achieved its
continued commitment to be carbon neutral across all
business operations through the purchase of green power,
carbon removal offsets, and renewable energy certificates.
We were named to the Dow Jones Sustainability North
America Index for the sixth consecutive year and have seen
10
positive progress on our ESG scores across multiple rating
agencies. Nasdaq is also a signatory to the United Nations
Global Compact and the United Nations Principles of
Responsible Investment.
to
impact, we are able
While our business operations account for a comparatively
small environmental
focus
environmental efforts on several key areas, including the way
we use energy resources, manage our workspaces, and
conduct business travel. Through these efforts, we seek to
lessen the environmental impact of our organization by
reducing atmospheric carbon emissions and managing water
and waste associated with business operations. Our
commitment to implement Science-Based targets as part of
the Science-Based Targets Initiative further emphasizes our
ambition to drive to a net-zero economy. For the first time,
Nasdaq obtained a Platinum LEED certification for our New
York Headquarters and we continue to look for opportunities
to transition to green offices across the globe.
We also expanded our ESG services and solutions with new
offerings for our clients, including:
• the Nasdaq ESG Advisory Program, which pairs
companies with consultative ESG expertise to help them
analyze, assess and enact ESG program best practices with
the goals of attracting long-term capital and enhancing
value;
• the Nasdaq OneReport platform, which helps clients
streamline the data gathering process under various
frameworks for sustainability reporting and to provide data
to ratings agencies;
• the Nasdaq Sustainable Bond Network, which connects
issuers and investors in sustainable, green and social
bonds, and provides access to detailed information and
impact data allowing investors to make more informed
decisions;
• the Nasdaq ESG Data Hub, which connects investors with
expert-led ESG data sets from leading providers across a
wide spectrum of areas, including gender diversity, carbon
emissions and climate risk, providing detailed and tangible
intelligence on companies’ ESG profiles;
• the Nasdaq ESG Data Portal, which now includes ESG-
related data from more than 630 companies;
• the Nasdaq ESG Footprint, a tool to help both institutional
their
investors understand
impact of
the
and retail
portfolios; and
• the acquisition of a majority stake in Puro.earth, a leading
marketplace for carbon removal, which we believe will
address the growing demand for carbon removal by
corporations, as well as enable new carbon removal
methodologies as technologies evolve.
In 2021, we also adopted a new Supplier Code of Ethics,
which encourages our suppliers and vendors to adopt
sustainability and environmental practices in line with our
published Environmental Practices Statement. This code asks
our suppliers to measure, report, and mitigate any potential
negative climate change and biodiversity impacts associated
with their operations, products and services including energy
and water consumption, greenhouse gas emissions, waste, air
and water pollution, nature loss and hazardous materials. Our
policy asks suppliers to provide us with information to
support our reporting and transparency commitments related
to environmental sustainability and supply chain emissions.
Additionally, the Supplier Code of Ethics expects suppliers to
promote a diverse and inclusive workforce and encourages
suppliers to engage diverse-owned business in their supply
chain. Our Supplier Code of Ethics is available on Nasdaq’s
website.
During 2021, the SEC adopted Nasdaq’s new listings rule for
companies listed on our U.S. exchange to publicly disclose
consistent, transparent diversity statistics regarding their
board of directors and choose whether to meet recommended
board diversity objectives or disclose their reasons for not
doing so. The diversity rule is currently being challenged by
two advocacy groups in the U.S. Court of Appeals for the
Fifth Circuit.
Nasdaq also was included in the 2021 Bloomberg Gender-
Equality Index in recognition for advancing equality across
its global workforce, and earned a perfect score for the third
consecutive year by
the Human Rights Campaign
Foundation’s 2021 Corporate Equality Index regarding
LGBTQ+ workplace equality.
For more information regarding our ESG efforts in 2021,
both internally and externally, please see the section entitled
“Human Capital Management” below and our Proxy
Statement.
Regulation
We are subject to extensive regulation in the U.S., Canada
and Europe.
U.S. Regulation
SROs
companies.
U.S. federal securities laws establish a system of cooperative
regulation of securities markets, market participants and
listed
day-to-day
administration and regulation of the nation’s securities
markets under the close supervision of, and subject to
extensive regulation, oversight and enforcement by, the SEC.
SROs, such as national securities exchanges, are registered
with the SEC.
conduct
the
This regulatory framework applies to our U.S. business in the
following ways:
• regulation of our registered national securities exchanges;
and
• regulation of our U.S. broker-dealer and investment
advisor subsidiaries.
11
National Securities Exchanges. SROs in the securities
industry are an essential component of the regulatory scheme
of the Exchange Act for providing fair and orderly markets
and protecting investors. The Exchange Act and the rules
thereunder, as well as each SRO’s own rules, impose many
regulatory and operational
responsibilities on SROs,
including the day-to-day responsibilities for market and
broker-dealer oversight. Moreover, an SRO is responsible for
enforcing compliance by its members, and persons associated
with its members, with the provisions of the Exchange Act,
the rules and regulations thereunder, and the rules of the
SRO, including rules and regulations governing the business
conduct of its members.
Nasdaq currently operates three cash equity, six options
markets and one corporate bond market in the U.S. We
operate The Nasdaq Stock Market, The Nasdaq Options
Market and the Corporate Bond Market pursuant to The
Nasdaq Stock Market’s SRO license; Nasdaq BX and Nasdaq
BX Options pursuant to Nasdaq BX’s SRO license; Nasdaq
PSX and Nasdaq PHLX pursuant to Nasdaq PHLX’s SRO
license; and Nasdaq ISE, Nasdaq GEMX and Nasdaq MRX,
each of which operates an options market under its own SRO
license. As SROs, each entity has separate rules pertaining to
its broker-dealer members and listed companies. Broker-
dealers that choose to become members of our exchanges are
subject to the rules of those exchanges.
All of our U.S. national securities exchanges are subject to
SEC oversight, as prescribed by the Exchange Act, including
periodic and special examinations by
the SEC. Our
exchanges also are potentially subject to regulatory or legal
action by the SEC at any time in connection with alleged
regulatory violations. We have been subject to a number of
routine reviews and inspections by the SEC or external
auditors in the ordinary course, and we have been and may in
the future be subject to SEC enforcement proceedings. To the
extent such actions or reviews and inspections result in
regulatory or other changes, we may be required to modify
the manner in which we conduct our business, which may
adversely affect our business, operating results and financial
condition.
Section 19 of the Exchange Act provides that our exchanges
must submit to the SEC proposed changes to any of the
SROs’ rules, practices and procedures, including revisions to
provisions of our certificate of incorporation and by-laws that
constitute SRO rules. The SEC will typically publish such
proposed changes for public comment, after which the SEC
may approve or disapprove the proposal, as it deems
appropriate. SEC approval requires a finding by the SEC that
the proposal is consistent with the requirements of the
Exchange Act and the rules and regulations thereunder.
Pursuant to the requirements of the Exchange Act, our
exchanges must file with the SEC, among other things, all
proposals to change their pricing structure.
Nasdaq conducts real-time market monitoring, certain equity
surveillance not involving cross-market activity, most options
surveillance, rulemaking and membership functions through
our Nasdaq Regulation department. We review suspicious
trading behavior discovered by our regulatory staff, and
depending on the nature of the activity, may refer the activity
to FINRA for further investigation. Pursuant to regulatory
services agreements between FINRA and our SROs, FINRA
provides certain regulatory services to our markets, including
some regulation of trading activity and surveillance and
investigative functions. Our SROs retain ultimate regulatory
responsibility for all regulatory activities performed under
regulatory agreements by FINRA, and for fulfilling all
regulatory obligations for which FINRA does not have
responsibility under the regulatory services agreements.
In addition to its other SRO responsibilities, The Nasdaq
Stock Market, as a listing market, also is responsible for
overseeing each listed company’s compliance with The
Nasdaq Stock Market’s financial and corporate governance
standards. Our listing qualifications department evaluates
applications submitted by issuers interested in listing their
securities on The Nasdaq Stock Market to determine whether
the quantitative and qualitative listing standards have been
satisfied. Once securities are listed, the listing qualifications
department monitors each issuer’s on-going compliance with
The Nasdaq Stock Market’s continued listing standards.
Nasdaq’s
regulation.
Broker-dealer
broker-dealer
subsidiaries are subject to regulation by the SEC, the SROs
and various state securities regulators. Nasdaq operates three
broker-dealers: Nasdaq Execution Services, LLC, NFSTX,
LLC, and Nasdaq Capital Markets Advisory LLC. Each
broker-dealer is registered with the SEC, a member of
FINRA and registered in the U.S. states and territories
required by the operation of its business. In addition, we own
a minority interest in NPM Securities.
Nasdaq Execution Services operates as our routing broker for
sending orders from Nasdaq's U.S. cash equity and options
exchanges to other venues for execution. NFSTX is a
registered ATS and acts as an intermediary to facilitate
secondary transactions in certain funds (both registered or not
registered under the Investment Company Act of 1940),
business development companies, certain closed-end funds
and private real estate investment funds. Nasdaq Capital
Markets Advisory acts as a third-party advisor to privately-
held or publicly-traded companies during IPOs and various
other offerings.
The SEC, FINRA and the exchanges adopt rules and examine
broker-dealers and require strict compliance with their rules
and regulations. The SEC, SROs and state securities
commissions may conduct administrative proceedings which
can result in censures, fines, the issuance of cease-and-desist
orders or the suspension or expulsion of a broker-dealer, its
officers or employees. The SEC and state regulators may also
institute proceedings against broker-dealers seeking an
injunction or other sanction. All broker-dealers have an SRO
that is assigned by the SEC as the broker-dealer’s Designated
12
Examining Authority. The Designated Examining Authority
is responsible for examining a broker-dealer for compliance
with the SEC’s financial responsibility rules. FINRA is the
current Designated Examining Authority for each of our
broker-dealer subsidiaries.
Our registered broker-dealers are subject to regulatory
requirements intended to ensure their general financial
soundness and liquidity, which require that they comply with
certain minimum capital requirements. As of December 31,
2021, each of our broker-dealers were in compliance with all
of the applicable capital requirements.
Regulatory contractual relationships with FINRA. Our SROs
have signed a series of regulatory service agreements
covering the services FINRA provides to the respective
SROs. Under these agreements, FINRA personnel act as our
agents in performing the regulatory functions outlined above,
and FINRA bills us a fee for these services. These
agreements have enabled us to reduce our headcount while
ensuring that the markets for which we are responsible are
properly regulated. However, we have reduced the scope of
services provided by FINRA under these regulatory services
agreements and are performing certain of those regulatory
functions directly. In addition, our SROs retain ultimate
regulatory activities
regulatory
performed under these agreements by FINRA.
responsibility
for all
Exchange Act Rule 17d-2 permits SROs to enter into
agreements, commonly called Rule 17d-2 agreements,
approved by the SEC with respect to enforcement of common
rules relating to common members. Our SROs have entered
into several such agreements under which FINRA assumes
regulatory responsibility for specifics covered by
the
agreement, including:
• agreements with FINRA covering the enforcement of
common rules, the majority of which relate to the
regulation of common members of our SROs and FINRA;
• joint
industry
agreements with FINRA
covering
responsibility for enforcement of insider trading rules;
• joint
industry
covering
enforcement of rules related to cash equity sales practices
and certain other non-market related rules; and
agreement with FINRA
• joint industry agreement covering enforcement of rules
related to options sales practices.
Regulation NMS and Options Intermarket Linkage Plan. We
are subject to Regulation NMS for our cash equity markets,
and our options markets have joined the Options Intermarket
Linkage Plan. These are designed to facilitate the routing of
orders among exchanges to create a national market system
as mandated by the Exchange Act. One of the principal
purposes of a national market system is to assure that brokers
may execute investors’ orders at the best market price. Both
Regulation NMS and the Options Intermarket Linkage Plan
require that exchanges avoid trade-throughs, locking or
crossing of markets and provide market participants with
electronic access to the best prices among the markets for the
applicable cash equity or options order.
In addition, Regulation NMS requires that every national
securities exchange on which an NMS stock is traded and
every national securities association act jointly pursuant to
one or more national market system plans to disseminate
consolidated information, including a national best bid and
national best offer, on quotations for transactions in NMS
stocks, and that such plan or plans provide for the
for an
dissemination of all consolidated
individual NMS stock through a single plan processor.
information
The UTP Plan was filed with and approved by the SEC as a
national market system plan in accordance with the Exchange
Act and Regulation NMS to provide for the collection,
consolidation and dissemination of such information for
Nasdaq-listed securities. The Nasdaq Stock Market serves as
the processor for the UTP Plan pursuant to a contract that
was recently extended for a two-year term through October
2023. The Nasdaq Stock Market also serves as
the
administrator for the UTP Plan. To fulfill its obligations as
the processor, The Nasdaq Stock Market has designed,
implemented, maintained, and operated a data processing and
communications
and
communications infrastructure to provide processing for the
UTP Plan. As the administrator, The Nasdaq Stock Market
manages the distribution of market data, the collection of the
resulting market data revenue, and the dissemination of that
revenue to plan members in accordance with the terms of the
UTP Plan and of Regulation NMS.
hardware,
software
system,
In May 2020, the SEC adopted an order to require changes to
the governance of securities information processors. In June
2020, we and several other exchanges petitioned the U.S.
Court of Appeals for the District of Columbia Circuit, or the
Court of Appeals, to review the SEC’s governance order. In
June 2021, the Court of Appeals dismissed our petition as
premature, but gave us leave to challenge the governance
order after the SEC acted pursuant to the order to approve a
national market system plan implementing it. Accordingly,
we refiled our challenge in August 2021, and also asked the
Court of Appeals to stay the operation of the new national
market system plan. In October 2021, the Court of Appeals
granted our stay request. This case is scheduled for oral
argument on March 24, 2022.
for
the
collection,
consolidation
In December 2020, the SEC adopted a rule to modify the
and
infrastructure
dissemination of market data for exchange-listed national
market stocks, or NMS data. The rule changes include,
among other things, requiring exchanges to add more “core
data” to the securities information processors, including
partial depth-of-book, certain odd-lot quotations/transactions,
auction, regulatory, and administrative data; eliminating
central, official consolidators of tape plans and enabling
multiple competing consolidators to register to aggregate and
disseminate core data; and authorizing persons to purchase
and aggregate core data directly from the exchanges for their
own use. The rule implementation schedule has not yet been
finalized by the SEC, and we are not certain of the timing, or
the impact, of these new rules on our business or role as a
securities information processor. In February 2021, we
petitioned the U.S. Court of Appeals for the District of
Columbia Circuit to review the SEC’s rulemaking. This case
is scheduled for oral argument on March 18, 2022.
Regulation SCI. Regulation SCI is a set of rules designed to
strengthen the technology infrastructure of the U.S. securities
markets. Regulation SCI applies to national securities
exchanges, operators of certain ATSs, market data
information providers and clearing agencies, subjecting these
entities to extensive new compliance obligations, with the
goals of reducing the occurrence of technical issues that
disrupt the securities markets and improving recovery time
when disruptions occur. We
inter-
disciplinary program to ensure compliance with Regulation
SCI. Regulation SCI policies and procedures were created,
internal policies and procedures were updated, and an
information technology governance program was developed
to ensure compliance.
implemented an
Regulation of Registered Investment Advisor Subsidiary. Our
subsidiary NDW is an investment advisor registered with the
SEC under the Investment Advisors Act of 1940. In this
capacity, NDW is subject to oversight and inspections by the
SEC. Among other things, registered investment advisors like
NDW must comply with certain disclosure obligations,
advertising and fee restrictions and requirements relating to
client suitability and custody of funds and securities.
Registered investment advisors are also subject to anti-fraud
provisions under both federal and state law.
CFTC Regulation. The Dodd-Frank Wall Street Reform and
Consumer Protection Act also has resulted in increased
CFTC regulation of our use of certain regulated derivatives
products, as well as the operations of some of our
subsidiaries outside the U.S. and their customers.
Canadian Regulation
Regulation of Nasdaq Canada is performed by the Canadian
Securities Administrators, an umbrella organization of
Canada’s provincial and territorial securities regulators. As a
recognized exchange in Ontario, Nasdaq Canada must
comply with the terms and conditions of its exchange
recognition order. While exempt from exchange recognition
in each jurisdiction in Canada other than Ontario where
Nasdaq Canada carries on business, Nasdaq must also
comply with the terms and conditions of an exemption order
granted by the other jurisdictions in order to maintain its
exemptive status. Oversight of the exchange is performed by
Nasdaq Canada’s lead regulator, the Ontario Securities
Commission.
instruments which set out
Nasdaq Canada is subject to several national marketplace
requirements
related
for
marketplace operations,
rules and managing
trading
electronic trading risk. Exchange terms and conditions
include but are not limited to, requirements for governance,
regulation, rules and rulemaking, fair access, conflict
management and financial viability.
13
European Regulation
Regulation of our markets in the European Union and the
European Economic Area focuses on matters relating to
financial services, listing and trading of securities, clearing
and settlement of securities and commodities as well as
issues related to market abuse.
in 2016,
the European Union’s Market Abuse
In July 2016,
Regulation, which is intended to prevent market abuse,
entered into force. MiFID II and MiFIR entered into force in
January 2018 and primarily affect our European trading
businesses. Many of the provisions of MiFID II and MiFIR
are implemented through technical standards drafted by the
European Securities and Markets Authority and approved by
the European Commission. In addition,
the
European Union adopted legislation on governance and
control of the production and use of benchmark indexes. The
Benchmark Regulation applies in the European Union from
early 2018. However, due to transitional clauses in the
Benchmark Regulation, Nasdaq as a benchmark provider, did
not need to be in compliance with the Benchmark Regulation
until January 1, 2020 in relation to benchmarks provided by
Nasdaq’s European subsidiaries, or until January 1, 2024, in
relation to benchmarks provided by non-European Nasdaq
entities. As the regulatory environment continues to evolve
and related opportunities arise, we intend to continue
developing our products and services to ensure that the
exchanges and clearinghouse that comprise Nasdaq Nordic
and Nasdaq Baltic maintain favorable liquidity and offer fair
and efficient trading.
The entities that operate trading venues in the Nordic and
Baltic countries are each subject to local regulations. As a
result, we have a strong local presence in each jurisdiction in
which we operate regulated businesses. The regulated entities
have decision-making power and can adopt policies and
procedures and retain resources to manage all operations
subject to their license. In Sweden, general supervision of the
Nasdaq Stockholm exchange is carried out by the SFSA,
while Nasdaq Clearing’s role as CCP in the clearing of
derivatives is supervised by the SFSA and overseen by the
Swedish central bank (Riksbanken). Additionally, as a
function of the Swedish two-tier supervisory model, certain
surveillance in relation to the exchange market is carried out
by the Nasdaq Stockholm exchange, through its surveillance
function.
Nasdaq Stockholm’s exchange activities are regulated
primarily by the SSMA, which implements MiFID II into
Swedish law and which sets up basic requirements regarding
the board of the exchange and its share capital, and which
also outlines the conditions on which exchange licenses are
issued. The SSMA also provides that any changes to the
exchange’s
initial
registration must be approved by the SFSA. Nasdaq Clearing
holds the license as a CCP under EMIR.
articles of
association
following
With respect to ongoing operations, the SSMA requires
exchanges to conduct their activities in an honest, fair and
professional manner, and in such a way as to maintain public
14
in
to all
that each person which meets
confidence in the securities markets. When operating a
regulated market, an exchange must apply the principles of
free access (i.e.,
the
requirements established by law and by the exchange may
participate in trading), neutrality (i.e., that the exchange’s
rules for the regulated market are applied in a consistent
manner
trading) and
those who participate
transparency (i.e., that the participants must be given speedy,
simultaneous and correct information concerning trading and
that the general public must be given the opportunity to
access this information). Additionally, the exchange operator
must identify and manage the risks that may arise in its
operations, use secure technical systems and identify and
handle the conflicts of interest that may arise between the
exchange or its owners’ interests and the interest in
safeguarding effective risk management and secure technical
systems. Similar requirements are set up by EMIR in relation
to clearing operations.
The SSMA also contains the framework for both the SFSA’s
supervisory work in relation to exchanges and clearinghouses
and the surveillance to be carried out by the exchanges
themselves. The latter includes the requirement that an
exchange should have “an independent surveillance function
with sufficient resources and powers to meet the exchange’s
obligations.” That requires the exchange to, among other
things, supervise trading and price information, compliance
with laws, regulations and good market practice, participant
financial
trading participation
compliance with
instrument compliance with relevant listing rules and the
extent to which issuers meet their obligation to submit
regular financial information to relevant authorities.
rules,
there has been cooperation between
The regulatory environment in the other Nordic and Baltic
countries in which a Nasdaq entity has a trading venue is
broadly similar to the regulatory environment in Sweden.
Since 2005,
the
supervisory authorities in Sweden, Iceland, Denmark and
Finland, which
and
to
comprehensive supervision of the exchanges comprising
Nasdaq Nordic and the systems operated by it, and to ensure
a common supervisory approach. In 2019, the supervisory
authority in Norway joined this cooperation.
safeguard
effective
looks
Nasdaq owns a central securities depository known as
Nasdaq CSD SE (Societas Europaea)¸ that provides notary,
settlement, central maintenance and other services in the
Baltic countries and in Iceland. Nasdaq CSD SE is licensed
under
the European Central Securities Depositories
Regulation and is supervised by the respective regulatory
institutions.
that
trades and
We operate a licensed exchange, Nasdaq Oslo ASA, in
Norway
lists commodity derivatives.
Although Norway is not a member of the EU, as a result of
the European Economic Area, or EEA, agreement (agreement
on the EEA entered into between the EU and European Free
Trade Association) the regulatory environment is broadly
similar to what applies in EU member states. In addition, in
January 2019 new legislation entered into force in Norway
mirroring the provisions of MiFID II and MIFIR. As a result,
the regulatory environment in Norway is similar to Sweden.
The Financial Supervisory Authority of Norway supervises
the Norwegian exchange on an autonomous basis and the
Norwegian exchange also has a separate market surveillance
function overseen by the Financial Supervisory Authority.
surveillance work
Confidence in capital markets is paramount for trading to
function properly. Nasdaq Nordic carries out market
surveillance through an independent unit that is separate from
the business operations. The
is
conceptually organized into two functions: one for the review
and admission of listing applications and surveillance
activities related to issuers (issuer surveillance) and one for
surveillance of trading (trading surveillance). The real-time
trading surveillance for the Finnish, Icelandic, Danish and
Swedish markets has been centralized to Stockholm. In
addition,
there are special personnel who carry out
surveillance activities at Nasdaq Oslo and the three Baltic
exchanges. In Finland, Sweden and Estonia, decisions to list
new companies on the main market are made by listing
committees that have external members in addition to
members from each respective exchange and in the other
countries the decision is made either by the respective
president of the exchange or by the executive board.
If there is suspicion that a listed company or member has
acted in breach of exchange regulations, the matter is handled
by the respective surveillance department. Serious breaches
are considered by the respective disciplinary committee in
Denmark, Finland, Iceland, Sweden and Norway. Suspected
insider trading is reported to the appropriate authorities in the
respective country.
In the United Kingdom, The Nasdaq Stock Market, Nasdaq
Oslo ASA, Nasdaq Stockholm AB, Nasdaq Copenhagen A/S,
and Nasdaq Helsinki Ltd are each subject to regulation by the
Financial Conduct Authority as “Recognised Overseas
Investment Exchanges.” Nasdaq Clearing is registered as a
recognized third country CCP with the Bank of England
under the temporary recognition regime. The registration
became effective on December 31, 2020, and lasts for three
years. We will be applying for permanent recognition within
eighteen months of the end of this implementation period.
Human Capital Management
Nasdaq deepened its commitment to, and investment in,
attracting, retaining, developing and motivating its employees
during 2021, and while the COVID-19 pandemic has
continued to create certain challenges for our employees, we
have bolstered our human capital management efforts
throughout the past year. The cultural foundation at Nasdaq
is based on our core values: Act as an Owner, Play as a
Team, Fuel Client Success, Lead with Integrity, Expand Your
Expertise, and Drive Innovation. We believe these cultural
values energize and align employees with our most important
priorities, and encourage and reward high
levels of
performance, innovation and growth, while not promoting
undue risk.
15
During 2021, we continued to bolster our efforts to create a
diverse and inclusive work environment of equal opportunity,
where employees feel respected and valued for
their
contributions, and where Nasdaq and its employees have
opportunities to make positive contributions to our local
communities. Nasdaq held its first annual Purpose Week in
2021, a week-long internal series showcasing Nasdaq’s
inclusive growth initiatives and leveraging Nasdaq’s unique
position at the center of capital markets. The week featured
online events, volunteer activities, expert discussions and
business innovation challenges for the entire global Nasdaq
workforce.
As of December 31, 2021, Nasdaq had 5,814 full and part-
time employees. Our total headcount includes 776 employees
from Verafin, which we acquired in February 2021.
ESG Oversight
The Nominating & ESG Committee has formal responsibility
and oversight for ESG policies and programs and receives
regular reporting on key ESG matters and initiatives. Our
Corporate ESG Steering Committee serves as the central
coordinating body for our ESG strategy; it is co-chaired by
executive leaders and comprised of geographically diverse
representatives from multiple business units.
COVID-19 and Employee Safety
As the COVID-19 pandemic continues around the world,
affecting all of our offices, we are committed to ensuring the
safety and well-being of our employees and stakeholders, and
complying with local government regulations in the areas in
which we operate. This includes having the vast majority of
our employees work from home, while
implementing
additional safety measures and precautions for employees
continuing critical on-site work in certain of our offices or
returning to the office. We currently expect to transition to a
hybrid work environment during 2022 as we reopen our
global offices and will continue to evaluate local conditions
and regulations
We also continued benefits for our employees that were
introduced in 2020 as a result of COVID-19, and introduced
additional new benefits this year in an effort to help our
employees balance their work and personal commitments.
These benefits include providing “flex days” for additional
time away from the office without requiring the usage of
vacation or personal leave days, additional family care
resources and benefits, including back-up childcare and other
caregiver support, subsidized distance-learning enrichment
programs and free home workout programs through different
wellness and fitness providers. We also added new programs
to help employees coordinate care for chronically ill family
members and
family
experienced the death of a loved one. Our managers
participated in additional training programs to help them lead
their teams through COVID-19 concerns and challenges.
support employees whose
to
Talent Management and Development
We continued to increase our efforts in attracting and
retaining our employees. Nasdaq seeks to hire world-class,
innovative, and diverse talent across the globe. We created a
Talent Attraction Team focused on strategic marketing and
branding to position Nasdaq as a top employer of choice for
talent in our industry, helping to increase our pool of top
candidates for open positions, particularly diverse candidates.
We continued to strengthen our diversity recruiting efforts to
help us attract talent using innovative new techniques and
channels, enabling us to successfully launch partnerships
with diverse talent organizations, such as the National
Society of Black Engineers,
the Society of Women
Engineers, Women in Technology, Grace Hopper and the
Society of Hispanic Professional Engineers, improving brand
awareness of Nasdaq and helping us to attract more diverse
candidates in our recruiting campaigns.
During 2021, we launched a year-long campaign called
“Your Career Journey” to engage employees and managers in
sustained professional development, and established a core
curriculum to customize curated development training for
employees at each level of seniority. We created performance
objectives for each our managers measuring them on
managerial effectiveness, and the outcomes were included in
each manager’s year-end performance evaluation. We further
refined our onboarding and exit surveys to better understand
why employees join, and leave, Nasdaq. Our internal
employee engagement score, based on our biannual employee
engagement surveys, increased year-over-year from 2020.
Additionally, our peer-to-peer employee recognition program
rewards employees and highlights recognized employees on
our internal social media channels, further amplifying the
recognition. Our workforce voluntary attrition rate during
2021 was 11.5%. This voluntary attrition rate is lower than
averages in the financial services and technology sectors, as
well as for all industries, based on a study for the U.S. for the
period June 1, 2020 to June 1, 2021.
Our internship program welcomed 157 interns remotely to
Nasdaq, and 64% of graduating interns were converted into
full-time hires.
We have invested in professional development for our
employees, including offering access to more than 18,000
tuition
professional development programs; providing
assistance to employees enrolled in degree-granting academic
fairs and career
programs; holding
internal career
development programs; establishing
formal mentoring
programs and providing one-on-one professional coaching
opportunities. We also launched a new internal platform, the
Talent Marketplace, to enable our employees to find short-
term on-the-job development “gigs” throughout the company,
as well as search for and apply for internal full-time job
opportunities. This program provides greater exposure and
professional development for our employees to learn about
different organizations in the company and expand their
professional network at Nasdaq, which we believe is a highly
effective employee retention technique.
16
Finally, to reward our employees at various stages of their
tenure with Nasdaq, we introduced a new anniversary
recognition program that includes, depending on the work
charitable
anniversary, Nasdaq-branded merchandise,
donations
the name of an employee, personalized
messages from our Chief Executive Officer and recognition
on our Nasdaq Tower in New York City.
in
Diversity, Equity and Inclusion
We have established three pillars to guide our diversity,
equity and inclusion efforts with our employees: Workforce,
to ensure our employee population is representative of the
communities in which we operate; Workplace, to ensure a
positive, equitable workplace experience for all employees of
Nasdaq; and Marketplace, to positively influence our peers in
the capital market space and to invest in our local
communities in which we operate.
Nasdaq sponsors eleven employee-led
internal affinity
networks. These networks include more than 1,900 employee
members, representing 39% of our employees, to support the
diverse communities that comprise our workforce, including
networks
for our Black, Asian American, Hispanic,
LGBTQ+, female, disabled, veteran, and parent/caregiver
employees and those that support these employees. The
networks provide both formal and informal development
programs and guidance for their members, and benefit the
entire Nasdaq workforce through educational events, guest
speakers, and volunteering opportunities.
for underrepresented
In order to monitor our diversity efforts on an ongoing basis,
each business unit has a dashboard reflecting the diversity of
their employee population and leaders can track diverse
including hires,
representation on a monthly basis,
departures, and employee sentiment. During 2021, more than
80% of our global managers, and 100% of our executive
team, participated in a “conscious inclusion” leadership
development program that offered training and increased
awareness on inclusion issues. We also added customized
developmental programs
talent,
including executive mentoring and accelerated leadership
development programs. In 2021, we launched a high-
potential leadership program for our Black employees to
hone their skills and increase advancement opportunities;
50% of participants in this program were promoted in 2021,
while 100% of participants have remained with Nasdaq to
date. During our annual executive succession planning
exercise with our Board of Directors, we achieved a 34%
increase in the diversity of our succession candidates
(considering gender, race and LGBTQ+ status) due to a focus
by our senior executives on identifying and cultivating talent
deeper in their organizations. Additionally, as a signatory to
the Parity Pledge, we fulfilled our commitment to interview
female candidates for all externally advertised roles at the
Vice President level and above.
Workplace Demographics
During 2021, we continued our progress to increase the
diversity of our global workforce. Our global employee base
of women grew from 35% to 36%, and in the United States,
we increased our under-represented minority representation
from 15% to 16%. In the United States, Nasdaq has increased
by
representation
approximately 10% since 2019.
under-represented minorities
of
Gender and Ethnicity Performance Data as of December
31, 2021 and 2020
Gender:
* In the charts above, totals may not add up to 100% due to
rounding and the omission of race and ethnicities that are
less than 0.3%.
Additionally, in order to better understand our pay equity
performance, we are currently conducting a global pay equity
analysis, which is expected to be completed in the beginning
of the second quarter of 2022. As a first step, we plan to
review the conclusions internally and evaluate any potential
gaps in pay equity.
Finally, to increase transparency of our workforce, Nasdaq
publishes statistics on the composition of its own global
workforce by gender, and of its U.S. workforce by gender,
race and ethnicity, in our U.S. EEO-1 report and our
Sustainability Report, which are available on our website.
Compensation and Benefits
Our Total Rewards compensation program is designed to
attract, retain, and empower employees to successfully
execute our growth strategy. Our comprehensive Total
Rewards program reflects our commitment to protecting our
employees’ health, well-being and financial security.
Our talented employees are our greatest asset, and we offer
competitive compensation to attract and retain the best
employees. Our pay-for-performance compensation programs
includes market-competitive base salaries, annual bonuses or
sales commissions, and equity. The majority of our
employees are granted annual long-term equity awards,
enabling them to be owners of the company, committed to
our long-term success and aligning their interests with the
short-term and long-term interests of our shareholders.
17
2021*Male:64.1%Female:35.9%Undisclosed:<1%2020*Male:64.9%Female:34.9%Undisclosed:<1%Race and Ethnicity (U.S. only) in 2021*65.4%16.5%7.5%5.8%2.1%2.4%WhiteAsianBlackHispanicTwo or moreNot disclosedRace and Ethnicity (U.S. only) in 2020*66.6%16.2%7.4%5.1%2.0%2.3%WhiteAsianBlackHispanicTwo or moreNot disclosed
Our Total Rewards program extends beyond compensation,
offering a suite of programs, benefits, perquisites and
resources to support employee priorities. In addition to cash
and equity compensation, we also offer employee benefits
such as health (medical, dental, vision and telehealth)
insurance, fertility benefits, paid time off, paid parental leave,
adoption assistance, an employee stock purchase plan,
student loan repayment benefits, charitable contribution
matching and a U.S. 401(k) Plan with company matching.
Since the start of the pandemic, we have introduced
additional benefits to support our employees, as described
above under “COVID-19 and Employee Safety.” We also
provide additional benefits to our international employees
based on local regulations and practice to address market-
specific needs.
Community Involvement
We are committed to creating lasting, positive change within
our Company and the communities we serve.
Our employees take pride in being active in our communities.
Through our Nasdaq GoodWorks Corporate Responsibility
Program, we have committed to supporting the communities
in which we live and work by providing eligible full and part-
time employees two paid days off per year to volunteer. We
also match charitable donations of all Nasdaq employees and
contractors up to $1,000, or more in certain circumstances,
per calendar year. While most of our volunteer efforts in
2021 continued to remain virtual due to the pandemic, we
organized more than 100 employee volunteer events around
the world.
to advance
is designed
As part of Nasdaq’s ongoing commitment to diversity,
equity, inclusion and culture, we have continued our series,
Amplifying Black Voices, which we initiated in 2020. This
year, the program is a multimedia retrospective featuring
works of art and photography documenting Black culture and
life. These works are displayed on the Nasdaq MarketSite
tower in Times Square throughout the year, enabling the
entire community to view and celebrate the exhibits.
In September 2020, we launched the “Purpose Initiative,”
which
inclusive growth and
prosperity, and we continued to expand this initiative
throughout 2021. The Purpose Initiative comprises our
philanthropic, community outreach, corporate sustainability,
and employee volunteerism programs, all designed
to
leverage our unique place at the center of capital creation,
markets, and technology and drive stronger economies, more
equitable opportunities and contribute to a more sustainable
world. During 2021,
two
company-wide roundtables, which explored topics such as
advancing inclusive growth and prosperity, particularly for
women of color, and investor and community engagement to
increase market accessibility across race, ethnicity, gender
and class. Nasdaq also held its first “Purpose Week” to
further the initiative, which included six company-wide
webinars, volunteer opportunities, an innovation challenge
and other events
involving and recognizing company
employees.
the Purpose Initiative held
The mission of
the Nasdaq Foundation, which was
relaunched in 2020, is focused on two primary goals: (i)
reimagining investor engagement to equip under-represented
communities with the financial knowledge to share in the
wealth that markets create; and (ii) leveraging our investment
in the Nasdaq Entrepreneurial Center alongside new strategic
partnerships with organizations that can help build a deeper,
data-led understanding of where the challenges are greatest,
what existing efforts could be amplified, and how the Nasdaq
Foundation can make new and distinctive contributions.
The Nasdaq Foundation provided six grants during 2021 to
organizations that seek to fulfill that mission. These grants
were awarded to, among others, Wall Street Bound, an
organization to increase diversity on Wall Street; 1863
Ventures, a start-up accelerator fund assisting minority
entrepreneurs throughout the growth lifecycle; and The
Leave No Women Behind program, which seeks to advance
female entrepreneurship in Utah by offering a suite of
programs
the
knowledge to start or scale up a business.
Nasdaq Website and Availability of SEC Filings
female entrepreneurs with
to provide
We file periodic reports, proxy statements and other
information with the SEC. The SEC maintains a website that
contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the
SEC. The address of that site is http://www.sec.gov.
Our website is http://ir.nasdaq.com. Information on our
website is not a part of this Form 10-K. We make available
free of charge on our website, or provide a link to, our Forms
10-K, Forms 10-Q and Forms 8-K and any amendments to
these documents, that are filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. To access these
filings, go to our website and click on “Financials” then click
on “SEC Filings.”
Item 1A. Risk Factors
The risks and uncertainties described below are not the only
ones facing us. Additional risks and uncertainties not
presently known to us or that we currently believe to be
immaterial may also adversely affect our business. If any of
the following risks actually occur, our business, financial
condition, or operating results could be adversely affected.
RISKS RELATED TO OUR BUSINESS AND
INDUSTRY
The ongoing COVID-19 pandemic could have an adverse
effect on our business, financial condition, liquidity or
results of operations.
We are closely monitoring the continuing impact of the
COVID-19 pandemic on our industry and business in the
United States and worldwide, including its effect on our
customers, employees, vendors and other stakeholders. The
COVID-19 pandemic has created significant volatility,
uncertainty and economic disruption, which may adversely
affect our business, financial condition, liquidity or results of
operations.
18
Throughout the pandemic, we have shifted to having a
majority of our staff work from home and have added
additional network capacity and monitoring. However, such
remote work may cause heightened cybersecurity and
operational risks. Certain of our global offices have re-
opened on a limited basis, with applicable safety protocols in
place, or expect to re-open subject to limitations during 2022.
We could face disruption to our business or operations if a
significant number of our employees or any of our key
employees becomes ill due to the virus. Any disruption to our
ability to deliver services to our clients could result in
liability to our customers, regulatory fines, penalties or other
sanctions, increased operational costs or harm to our
reputation and brand. This, in turn, may have an adverse
effect on our business, financial condition, liquidity or results
of operations.
The reopening of our global offices has created and may
continue to create additional risks and operational challenges
and may require us to make additional investments in the
design, implementation and enforcement of new workplace
health and safety protocols. Even if we follow governmental
guidance and what we believe to be best practices, our efforts
to reopen our offices safely may not be successful and could
expose our customers, employees, vendors and other
stakeholders to health risks, and we could be exposed to
associated liability. Furthermore, additional and/or extended
governmental restrictions, new regulations or other changing
conditions could cause us to temporarily re-close certain
offices.
The extent to which the COVID-19 pandemic impacts our
business, financial condition, liquidity or results of operations
will depend on future developments, which are uncertain and
cannot be predicted, including the scope and duration of the
COVID-19 pandemic, the length of time of any commercial
and travel limitations, the continued effectiveness of our
remote work arrangements, actions taken by governmental
authorities, regulators and other third parties in response to
the pandemic, as well as other direct and indirect impacts on
us, our exchanges, our customers, our vendors and other
stakeholders.
Economic conditions and market factors, which are beyond
our control, may adversely affect our business and financial
condition.
Our business performance is impacted by a number of
factors, including general economic conditions, current or
expected inflation, interest rate fluctuations, market volatility,
changes in investment patterns and priorities, pandemics
(such as COVID-19) and other factors that are generally
beyond our control. To the extent that global or national
economic conditions weaken and result in slower growth or
recessions, our business is likely to be negatively impacted.
Adverse market conditions could reduce customer demand
for our services and the ability of our customers, lenders and
other counterparties to meet their obligations to us. Poor
economic conditions may result in a reduction in the demand
including our market
for our products and services,
technology, data, indexes and IR & ESG Services, a decline
in trading volumes or values and deterioration of the
economic welfare of our listed companies.
Trading volumes and values are driven primarily by general
market conditions and declines in trading volumes or values
may affect our market share and impact our pricing. In
addition, our Market Services businesses receive revenues
from a relatively small number of customers concentrated in
the financial industry, so any event that impacts one or more
customers or the financial industry in general could impact
our revenues.
The number of listings on our markets is primarily influenced
by factors such as investor demand, the global economy,
available sources of financing, and tax and regulatory
policies. Adverse conditions may jeopardize the ability of our
listed companies to comply with the continued listing
requirements of our exchanges, or reduce the number of
issuers launching IPOs, including SPACs, and direct listings.
Investment Intelligence revenues may be significantly
affected by global economic conditions. Professional
subscriptions to our data products are at risk if staff
reductions occur in financial services companies or if our
customers consolidate, which could result in significant
reductions in our professional user revenue or expose us to
increased risks relating to dependence on a smaller number of
customers. In addition, adverse market conditions may cause
reductions in the number of non-professional investors with
investments in the market and in ETP AUM tracking Nasdaq
indexes as well as trading in futures linked to Nasdaq
indexes.
There may be less demand for our IR & ESG Services or
Market Technology products if global economic conditions
are weak. Our customers historically reduce purchases of
new services and technology when growth rates decline,
thereby diminishing our opportunities to sell new products
and services or upgrade existing products and services.
A reduction in trading volumes or values, market share of
trading, the number of our listed companies, or demand for
Investment Intelligence, Market Technology or Corporate
Platforms products and services due to economic conditions
or other market factors could adversely affect our business,
financial condition and operating results.
The industries we operate in are highly competitive.
We face significant competition in our Market Technology,
Investment Intelligence and Corporate Platforms businesses
from other market participants. We face intense competition
from other exchanges and markets for market share of trading
activity and listings. This competition includes both product
and price competition.
The liberalization and globalization of world markets has
resulted in greater mobility of capital, greater international
participation in local markets and more competition. As a
result, both in the U.S. and in other countries, the competition
among exchanges and other execution venues has become
more intense. Marketplaces in both Europe and the U.S. have
also merged to achieve greater economies of scale and scope.
19
in Europe,
Regulatory changes also have facilitated the entry of new
participants in the European Union that compete with our
European markets. The regulatory environment, both in the
this
U.S. and
environment of intense competition. In addition, a high
proportion of business in the securities markets is becoming
concentrated in a smaller number of institutions and our
revenue may therefore become concentrated in a smaller
number of customers.
is structured
to maintain
We also compete globally with other regulated exchanges
and markets, ATSs, MTFs and other traditional and non-
traditional execution venues. Some of these competitors also
are our customers. In addition, competitors recently have
launched new exchanges in the U.S., including an exchange
established by a group of our customers. Competitors may
develop market trading platforms that are more competitive
than ours. Competitors may leverage data more effectively or
enter into strategic partnerships, mergers or acquisitions that
could make
listings, clearing, data or
trading,
technology businesses more competitive than ours.
their
We face intense price competition in all areas of our
business. In particular, the trading industry is characterized
by price competition. We have in the past lowered prices, and
in the U.S., increased rebates for trade executions to attempt
to gain or maintain market share. These strategies have not
always been successful and have at times hurt operating
performance. Additionally, we have also been, and may once
again be, required to adjust pricing to respond to actions by
competitors and new entrants, or due to new SEC regulations,
which could adversely impact operating results. We also
compete with respect to the pricing of data products and with
respect to products for pre-trade book data and for post-trade
last sale data. In addition, pricing in our Corporate Platforms,
Investment Intelligence and Market Technology segments are
subject to competitive pressures.
If we are unable to compete successfully in the industries in
which we do business, our business, financial condition and
operating results will be adversely affected.
System limitations or failures could harm our business.
Our businesses depend on the integrity and performance of
the technology, computer and communications systems
supporting them. If new systems fail to operate as intended or
our existing systems cannot expand to cope with increased
demand or otherwise fail to perform, we could experience
unanticipated disruptions in service, slower response times
and delays in the introduction of new products and services.
These consequences could result in service outages, lower
trading volumes or values, financial losses, decreased
customer satisfaction and regulatory sanctions. Our markets
and the markets that rely on our technology have experienced
systems failures and delays in the past and could experience
future systems failures and delays.
disruptions and have facilities in place that are expected to
maintain service during a system disruption, such systems
and facilities may prove inadequate. If trading volumes
increase unexpectedly or other unanticipated events occur,
we may need to expand and upgrade our technology,
transaction processing systems and network infrastructure.
We do not know whether we will be able to accurately
project the rate, timing or cost of any volume increases, or
expand and upgrade our systems and infrastructure to
accommodate any increases in a timely manner.
While we have programs in place to identify and minimize
our exposure to vulnerabilities and work in collaboration
with the technology industry to share corrective measures
with our business partners, we cannot guarantee that such
events will not occur in the future. Any system issue that
the
in
causes
responsiveness of our services or otherwise affects our
services could impair our reputation, damage our brand name
and negatively impact our business, financial condition and
operating results.
services, decreases
interruption
an
We must continue to introduce new products, initiatives and
enhancements to maintain our competitive position.
We intend to launch new products and initiatives and
continue to explore and pursue opportunities to strengthen
our business and grow our company. We may spend
substantial time and money developing new products,
initiatives and enhancements to existing products. If these
products and initiatives are not successful, we may not be
able to offset their costs, which could have an adverse effect
on our business, financial condition and operating results.
In our technology operations, we have invested substantial
amounts in the development of system platforms, the rollout
of our platforms and the adoption of new technologies.
Although investments are carefully planned, there can be no
assurance that the demand for such platforms or technologies
will justify the related investments. If we fail to generate
adequate revenue from planned system platforms or the
adoption of new technologies, or if we fail to do so within the
envisioned timeframe, it could have an adverse effect on our
results of operations and financial condition. In addition,
clients may delay purchases in anticipation of new products
or enhancements. Additionally, it is also possible that we
may allocate significant amounts of cash and other resources
to product technologies or business models for which market
demand
the
than anticipated.
introduction of new products by competitors, the emergence
of new industry standards or the development of entirely new
technologies to replace existing product offerings could
render our existing or future products obsolete.
In addition,
lower
is
A decline in trading and clearing volumes or values or
market share will decrease our trading and clearing
revenues.
Although we currently maintain and expect to maintain
multiple computer facilities that are designed to provide
redundancy and back-up to reduce the risk of system
Trading and clearing volumes and values are directly affected
by economic, political and market conditions, broad trends in
business and finance, unforeseen market closures or other
20
disruptions in trading, the level and volatility of interest rates,
inflation, changes in price levels of securities and the overall
level of investor confidence. In recent years, and particularly
in 2020 and 2021 as the pandemic continued, trading and
clearing volumes and values across our markets have
fluctuated significantly depending on market conditions and
other factors beyond our control. Because a significant
percentage of our revenues is tied directly to the volume or
value of securities traded and cleared on our markets, it is
likely that a general decline in trading and clearing volumes
or values would lower revenues and may adversely affect our
operating results if we are unable to offset falling volumes or
values through pricing changes. Declines in trading and
clearing volumes or values may also impact our market share
or pricing structures and adversely affect our business and
financial condition.
If our total market share in securities decreases relative to our
competitors, our venues may be viewed as less attractive
sources of liquidity. If our exchanges are perceived to be less
liquid, then our business, financial condition and operating
results could be adversely affected.
Since some of our exchanges offer clearing services in
addition to trading services, a decline in market share of
trading could lead to a decline in clearing and depository
revenues. Declines in market share also could result in issuers
viewing the value of a listing on our exchanges as less
attractive, thereby adversely affecting our listing business.
Finally, declines in market share of Nasdaq-listed securities,
or recently adopted SEC rules and regulations, could lower
The Nasdaq Stock Market’s share of tape pool revenues
under the consolidated data plans, thereby reducing the
revenues of our Market Data business.
Our role in the global marketplace may place us at greater
risk for a cyberattack.
Our systems and operations are vulnerable to damage or
interruption from security breaches. Due to COVID-19, most
of our workforce has, and may continue to, work from home
the majority of each week, creating a broader and more
distributed network footprint and increased reliance on the
home networks of employees. Some of these threats include
attacks from foreign governments, hacktivists, insiders and
criminal organizations. Foreign governments may seek to
obtain a foothold in U.S. critical infrastructure, hacktivists
may seek to deploy denial of service attacks to bring attention
to their cause, insiders may pose a risk by human error or
malicious activity and criminal organizations may seek to
profit from stolen data. Computer viruses and worms also
continue to be a threat with ransomware increasingly being
used by criminals to extort money. Given our position in the
global securities industry, we may be more likely than other
companies to be a direct target, or an indirect casualty, of
such events.
While we continue to employ resources to monitor our
systems and protect our infrastructure, these measures may
prove insufficient depending upon the attack or threat posed.
Any system issue, whether as a result of an intentional
breach, collateral damage from a new virus or a non-
malicious act, could damage our reputation and cause us to
lose customers, experience lower trading volumes or values,
incur significant liabilities or otherwise have a negative
impact on our business, financial condition and operating
results. Any system breach may go undetected for an
extended period of time. As cybersecurity threats continue to
increase in frequency and sophistication, and as the domestic
and international regulatory and compliance structure related
to information security, data privacy and data usage becomes
increasingly complex and exacting, we may be required to
devote significant additional resources to strengthen our
cybersecurity capabilities, and to identify and remediate any
security vulnerabilities, which could adversely impact our
business, financial condition and operating results. Further,
cybersecurity incidents that impact our vendors and other
third parties that support our organization and industry could
directly or indirectly impact us. For example, in December
2021, the Log4j security vulnerability was widely publicized.
It did not have an impact to our business or operations,
including our core market system environment. There can be
no assurance we will be able to identify and mitigate every
incident
involving cybersecurity attacks, breaches or
incidents.
The success of our business depends on our ability to keep
up with rapid technological and other competitive changes
affecting our industry. Specifically, we must complete
development of, successfully implement and maintain
platforms
functionality, performance,
capacity, reliability and speed required by our business and
our regulators, as well as by our customers.
that have
the
technology, evolving
The markets in which we compete are characterized by
rapidly changing
industry and
regulatory standards, frequent enhancements to existing
products and services, the adoption of new services and
products and changing customer demands. We are reliant on
our customers that purchase our on-premise solutions to
maintain a certain level of network infrastructure for our
products to operate and to allow for our support of those
products, and there is no assurance that a customer will
implement such measures. We may not be able to keep up
with rapid technological and other competitive changes
affecting our industry. For example, we must continue to
enhance our platforms to remain competitive as well as to
address our regulatory responsibilities, and our business will
be negatively affected if our platforms or the technology
solutions we sell to our customers fail to function as
expected. If we are unable to develop our platforms to
include other products and markets, or if our platforms do not
have
the required functionality, performance, capacity,
reliability and speed required by our business and our
regulators, as well as by our customers, we may not be able
to compete successfully. Further, our failure to anticipate or
respond adequately to changes in technology and customer
preferences or any significant delays in product development
efforts, could have a material adverse effect on our business,
financial condition and operating results.
21
Failure to attract and retain key personnel may adversely
affect our ability to conduct our business.
Our future success depends, in large part, upon our ability to
attract and retain highly qualified and skilled professional
personnel that can learn and embrace new technologies. In
the current tight labor market, we have intensified our efforts
to recruit and retain talent. Competition for key personnel in
the various localities and business segments in which we
operate is intense. We have, and may continue to, experience
higher compensation costs to retain personnel, and hire new
talent, that may not be offset by improved productivity,
higher revenues or increased sales. Our ability to attract and
retain key personnel,
in particular senior officers or
technology personnel, will be dependent on a number of
factors, including prevailing market conditions, office/remote
working arrangements and compensation and benefit
packages offered by companies competing for the same
talent. There is no guarantee that we will have the continued
service of key employees who we rely upon to execute our
identify and pursue strategic
business strategy and
opportunities and initiatives. In particular, we may have to
incur costs to replace senior officers or other key employees
who leave, and our ability to execute our business strategy
could be impaired if we are unable to replace such persons in
a timely manner or at all.
Our clearinghouse operations expose us to risks, including
credit or liquidity risks that may include defaults by
clearing members, or insufficiencies in margins or default
funds.
We are subject to risks relating to our operation of a
clearinghouse, including counterparty and liquidity risks, risk
of defaults by clearing members and risks associated with
adequacy of the customer margin and of default funds. Our
clearinghouse operations expose us to counterparties with
differing risk profiles. We may be adversely impacted by the
financial distress or failure of a clearing member, which may
cause us negative financial impact, reputational harm or
regulatory consequences, including litigation or regulatory
enforcement actions.
In September 2018, a member of the Nasdaq Clearing
commodities market defaulted due to an inability to post
sufficient collateral to cover increased margin requirements
for the positions of the relevant member. For further
discussion of the default, see Note 15, “Clearing Operations,”
to the consolidated financial statements. There are no
assurances that similar defaults will not occur again, which
could result in losses. To the extent that our regulatory capital
and risk management policies are not adequate to manage
future financial and operational risks in our clearinghouse,
we may experience adverse consequences to our operating
results or ability to conduct our business.
We are exposed to credit risk from third parties, including
customers, counterparties and clearing agents.
We are exposed to credit risk from third parties, including
customers, counterparties and clearing agents. These parties
may default on their obligations to us due to the effects of
COVID-19 on their business, bankruptcy, lack of liquidity,
operational failure or other reasons.
We clear a range of equity-related and fixed-income-related
derivative products, commodities and resale and repurchase
agreements. We assume
the counterparty risk for all
transactions that are cleared through Nasdaq Clearing on our
markets and guarantee that our cleared contracts will be
honored. We enforce minimum financial and operational
criteria for membership eligibility, require members and
investors to provide collateral, and maintain established risk
policies and procedures to ensure that the counterparty risks
are properly monitored and proactively managed; however,
none of these measures provides absolute assurance against
experiencing
from defaults by our
losses
counterparties on their obligations. No guarantee can be
given that the collateral provided will at all times be
sufficient. Although we maintain clearing capital resources to
serve as an additional layer of protection to help ensure that
we are able to meet our obligations, these resources also may
not be sufficient.
financial
We also have credit risk related
transaction and
subscription-based revenues that are billed to customers on a
monthly or quarterly basis, in arrears.
to
Credit losses such as those described above could adversely
affect our consolidated financial position and results of
operations.
issues relating
Technology
to our role as exclusive
processor for Nasdaq-listed stocks could affect our
business.
Nasdaq, as technology provider to the UTP Operating
Committee, has implemented measures to enhance the
resiliency of
the existing processor system. Nasdaq
transferred the processor technology platform to our INET
platform and this migration further enhanced the resiliency of
the processor systems. We further improved the systems'
resiliency by adding the UTP SnapShot service. However, if
future outages occur or the processor systems fail to function
properly while we are operating the systems, it could have an
adverse effect on our business, reputation and financial
condition.
Stagnation or decline in the listings market could have an
adverse effect on our revenues.
The market for listings is dependent on the prosperity of
companies and the availability of risk capital. A stagnation or
decline in the number of new listings, or an increase in the
number of delistings, on The Nasdaq Stock Market and the
Nasdaq Nordic and Nasdaq Baltic exchanges could cause a
decrease in revenues for future years. Furthermore, a
prolonged decrease in the number of listings could negatively
impact the growth of our transactions revenues. Our IR &
ESG Services business is also impacted by declines in the
listings market or increases in acquisitions activity as there
will be fewer publicly-traded customers that need our
products.
22
RISKS
ACTIVITIES AND STRATEGIC RELATIONSHIPS
RELATED
TRANSACTIONAL
TO
We may not be able to successfully integrate acquired
businesses, which may result in an inability to realize the
anticipated benefits of our acquisitions.
We must rationalize, coordinate and integrate the operations
of our acquired businesses. This process involves complex
technological, operational and personnel-related challenges,
which are time-consuming and expensive and may disrupt
our business. The difficulties, costs and delays that could be
encountered may include:
• difficulties, costs or complications in combining the
companies’ operations, including technology platforms,
which could lead to us not achieving the synergies we
anticipate or customers not renewing their contracts with
us as we migrate platforms;
• incompatibility of systems and operating methods;
• reliance on, or provision of, transition services;
• inability to use capital assets efficiently to develop the
business of the combined company;
• difficulties of complying with government-imposed
regulations in the U.S. and abroad, which may be
conflicting;
• resolving possible inconsistencies in standards, controls,
and
business
policies,
cultures
and
procedures
compensation structures;
• the diversion of management’s attention from ongoing
business concerns and other strategic opportunities;
• difficulties in operating businesses we have not operated
before;
• difficulties of integrating multiple acquired businesses
simultaneously;
• the retention of key employees and management;
• the implementation of disclosure controls, internal controls
and financial reporting systems at non-U.S. subsidiaries to
enable us to comply with U.S. GAAP and U.S. securities
laws and regulations, including the Sarbanes Oxley Act of
2002, required as a result of our status as a reporting
company under the Exchange Act;
• the coordination of geographically separate organizations;
• the coordination and consolidation of ongoing and future
research and development efforts;
• possible
tax costs or
inefficiencies associated with
integrating the operations of a combined company;
• pre-tax restructuring and revenue investment costs;
• the retention of strategic partners and attracting new
strategic partners; and
• negative impacts on employee morale and performance as
a result of job changes and reassignments.
Foreign acquisitions involve risks in addition to those
mentioned above, including those related to integration of
operations across different cultures and languages, our ability
23
to enforce contracts in various jurisdictions, currency risks
and the particular economic, political and regulatory risks
associated with specific countries. We may not be able to
address these risks successfully, or at all, without incurring
significant costs, delays or other operating problems that
could disrupt our business and have a material adverse effect
on our financial condition.
For these reasons, we may not achieve the anticipated
financial and strategic benefits from our acquisitions and
strategic initiatives. Any actual cost savings and synergies
may be lower than we expect and may take a longer time to
achieve than we anticipate, and we may fail to realize the
anticipated benefits of acquisitions.
We rely on third parties to perform certain functions, and
our business could be adversely affected if these third
parties fail to perform as expected or experience service
interruptions affecting our operations.
We rely on third parties for regulatory, data center, cloud,
data storage and processing, data content, clearing and other
services. Interruptions or delays in services from our third-
party data center hosting facilities or cloud computing
platform providers could impair the delivery of our services
and harm our business. To the extent that any of our vendors
or other third-party service providers experiences difficulties
or a significant disruption, breach or outage, materially
changes their business relationship with us or is unable for
any reason to perform their obligations, our business or our
reputation may be materially adversely affected. Our access
to cloud service provider infrastructure could be limited by a
number of events, including technical or infrastructure
failures, natural disasters or cybersecurity attacks. As we
continue to grow our SaaS businesses, our dependency on the
continuing operation and availability of these cloud service
providers increases. If our cloud services from third party
providers are unavailable to us for any reason, our clients
may not be able to access our exchanges or certain of our
cloud products or features, which could significantly impact
our reputation, operations, business, and financial results.
For example, in 2022, we will begin to use AWS to migrate
our North American markets to AWS in a phased approach,
starting with Nasdaq MRX. AWS operates a platform that we
use to provide services to our clients, and therefore we are
vulnerable to Nasdaq-specific service outages on the AWS
platform. If AWS does not deliver our system requirements
on time, fails to provide maintenance and support to our
specifications or
integration
challenges, the successful migration of our exchanges to the
AWS cloud platform may be significantly delayed, which
may adversely affect our reputation and financial results.
the migration experiences
We also rely on members of our trading community to
maintain markets and add liquidity. To the extent that any of
our largest members experiences difficulties, materially
changes its business relationship with us or is unable for any
reason to perform market making activities, our business or
our reputation may be materially adversely affected.
We may be required to recognize impairments of our
goodwill, intangible assets or other long-lived assets in the
future.
Our business acquisitions typically result in the recording of
goodwill and intangible assets, and the recorded values of
those assets may become impaired in the future. As of
December 31, 2021, goodwill totaled $8.4 billion and
intangible assets, net of accumulated amortization, totaled
$2.8 billion. The determination of the value of such goodwill
and intangible assets requires management to make estimates
and assumptions that affect our consolidated financial
statements.
We assess goodwill and intangible assets, as well as other
long-lived assets, including equity method investments,
equity securities, and property and equipment, for potential
impairment on an annual basis or more frequently if
indicators of impairment arise. We estimate the fair value of
such assets by assessing many factors, including historical
performance and projected cash
flows. Considerable
management judgment is necessary to project future cash
flows and evaluate the impact of expected operating and
macroeconomic changes on these cash flows. The estimates
and assumptions we use are consistent with our internal
planning process. However, there are inherent uncertainties
in these estimates.
There were no impairment charges recorded relating to
goodwill and indefinite-lived intangible assets and there were
no material impairment charges recorded relating to other
long-lived assets in 2021, 2020 and 2019.
We may experience future events that may result in asset
impairments. Future disruptions to our business, prolonged
economic weakness, due to COVID-19 or otherwise, or
significant declines in operating results at any of our
reporting units or businesses, may result in impairment
charges to goodwill, intangible assets or other long-lived
assets. A significant impairment charge in the future could
have a material adverse effect on our operating results.
Acquisitions, divestments, investments, joint ventures and
transactional activities may require significant
other
resources and/or result in significant unanticipated losses,
costs or liabilities.
Over
the past several years, acquisitions have been
significant factors in our growth. We have, and may continue
to, divest additional businesses or assets in the future.
Although we cannot predict our transactional activities, we
believe that additional acquisitions, divestments, investments,
joint ventures and other transactional activities will be
important to our strategy. Such transactions may be material
in size and scope. Many of the other potential purchasers of
assets in our industry have greater financial resources than
we have. Therefore, we cannot be sure that we will be able to
complete future transactions on terms favorable to us.
We also invest in early-stage companies through our Nasdaq
Ventures program and hold minority interests in other
entities. Given the size of these investments, we do not have
operational control of these entities and may have limited
visibility into risk management practices. Thus, we may be
subject
in certain
circumstances and financial and reputational risks if there are
operational failures.
to additional capital
requirements
to
In
existing
addition,
shareholders.
We may finance future transactions by issuing additional
equity and/or debt. The issuance of additional equity in
connection with any such transaction could be substantially
dilutive
the
announcement or implementation of future transactions by us
or others could have a material effect on the price of our
common stock. The issuance of additional debt could
increase our leverage substantially. We could face financial
risks associated with incurring additional debt, particularly if
the debt
leverage.
Additional debt may reduce our liquidity, curtail our access
to financing markets, impact our standing with credit rating
agencies and increase the cash flow required for debt service.
Any incremental debt incurred to finance a transaction could
also place significant constraints on the operation of our
business.
in significant
incremental
results
Furthermore, any future transactions could entail a number of
additional risks, including:
• the inability to maintain key pre-transaction business
relationships;
• increased operating costs;
• the inability to meet our target for return on invested
capital;
• increased debt obligations, which may adversely affect our
targeted debt ratios;
• risks to the continued achievement of our strategic
direction;
• risks associated with divesting employees, customers or
vendors when divesting businesses or assets;
• declines in the value of investments;
• exposure to unanticipated liabilities, including after a
transaction is completed;
• incurred but unreported claims for an acquired company;
• difficulties in realizing projected efficiencies, synergies
and cost savings; and
• changes in our credit rating and financing costs.
Charges to earnings resulting from acquisition, integration
and restructuring costs may materially adversely affect the
market value of our common stock.
In accordance with U.S. GAAP, we account for the
completion of our acquisitions using the acquisition method
of accounting. We allocate the total estimated purchase price
to net tangible and identifiable intangible assets based on
24
their fair values as of the date of completion of the
acquisition and record the excess of the purchase price over
those fair values as goodwill. Our financial results, including
earnings per share, could be adversely affected by a number
of financial adjustments including the following:
• we may incur additional amortization expense over the
estimated useful lives of certain of the intangible assets
acquired in connection with acquisitions during such
estimated useful lives;
• we may have additional depreciation expense as a result of
in
recording acquired
accordance with U.S. GAAP, as compared to book value as
recorded;
tangible assets at fair value,
• to the extent the value of goodwill or intangible assets
becomes impaired, we may be required to incur material
charges relating to the impairment of those assets;
depositories, clearinghouse and markets for violations of
applicable requirements.
In the future, we could be subject to regulatory investigations
or enforcement proceedings that could result in substantial
sanctions, including revocation of our operating licenses.
Any such investigations or proceedings, whether successful
or unsuccessful, could result in substantial costs, the
diversion of resources, including management time, and
potential harm to our reputation, which could have a material
adverse effect on our business, results of operations or
financial condition. In addition, our exchanges could be
required to modify or restructure their regulatory functions in
response to any changes in the regulatory environment, or
they may be required to rely on third parties to perform
regulatory and oversight functions, each of which may
require us to incur substantial expenses and may harm our
reputation if our regulatory services are deemed inadequate.
• we may incur additional costs from integrating our
acquisitions. The success of our acquisitions depends, in
part, on our ability to integrate these businesses into our
existing operations and realize anticipated cost savings,
revenue synergies and growth opportunities; and
The regulatory framework under which we operate and new
regulatory requirements or new interpretations of existing
regulatory requirements could require substantial time and
resources for compliance, which could make it difficult and
costly for us to operate our business.
• we may incur restructuring costs in connection with the
reorganization of any of our businesses.
RISKS RELATED TO LEGAL AND REGULATORY
MATTERS
We operate in a highly regulated industry and may be
subject to censures, fines and enforcement proceedings if
we fail to comply with regulatory obligations that can be
ambiguous and can change unexpectedly.
We operate in a highly regulated industry and are subject to
extensive regulation in the U.S., Europe and Canada. The
securities trading industry is subject to significant regulatory
oversight and could be subject to increased governmental and
public scrutiny in the future that can change in response to
global conditions and events, or due to changes in trading
patterns, such as due to the recent volatility involving the
trading of certain stocks.
Our ability to comply with complex and changing regulation
is largely dependent on our establishment and maintenance of
compliance, audit and reporting systems that can quickly
adapt and respond, as well as our ability to attract and retain
qualified compliance and other risk management personnel.
There is no assurance that our policies and procedures will
always be effective or that we will always be successful in
monitoring or evaluating the risks to which we are or may be
exposed.
Our regulated markets are subject to audits, investigations,
administrative proceedings and enforcement actions relating
to compliance with applicable rules and regulations.
Regulators have broad powers to impose fines, penalties or
censure, issue cease-and-desist orders, prohibit operations,
revoke licenses or registrations and impose other sanctions
securities
on our exchanges, broker-dealers, central
Under current U.S. federal securities laws, changes in the
rules and operations of our securities markets, including our
pricing structure, must be reviewed and in many cases
explicitly approved by the SEC. The SEC may approve,
disapprove, or recommend changes to proposals that we
submit. In addition, the SEC may delay either the approval
process or the initiation of the public comment process.
Favorable SEC rulings and interpretations can be challenged
in and reversed by federal courts of appeals, reducing or
eliminating the value of such prior interpretations. Any delay
in approving changes, or the altering of any proposed change,
could have an adverse effect on our business, financial
condition and operating results.
We must compete not only with ATSs that are not subject to
the same SEC approval process but also with other exchanges
that may have lower regulation and surveillance costs than
us. There is a risk that trading will shift to exchanges that
charge lower fees because, among other reasons, they spend
significantly less on regulation.
to
In 2016, the SEC approved a plan for Nasdaq and other
exchanges to establish a CAT, to improve regulators’ ability
to monitor
increased
trading activity. In addition
regulatory obligations, implementation of a consolidated
audit trail has resulted in significant additional expenditures,
including to implement the new technology to meet any of
the plan’s requirements. Creating the CAT has required the
development and implementation of complex and costly
technology. This development effort has been funded by the
SROs (including Nasdaq) in exchange for promissory notes
that Nasdaq expects to be repaid at such time that the SEC
approves the assessment of fees for the funding of the CAT.
The SEC could determine not to approve the assessment of
such fees in which case some or all of the promissory notes
would not be repaid. In addition, the ongoing failure to
25
timely launch or properly operate such technology exposes
Nasdaq and other exchanges to SEC fines. As of December
31, 2021, we have accrued approximately $54 million as a
receivable in connection with our portion of expenses related
to the CAT implementation.
In addition, our registered broker-dealer subsidiaries are
subject to regulation by the SEC, FINRA and other SROs.
These subsidiaries are subject to regulatory requirements
intended to ensure their general financial soundness and
liquidity, which require that they comply with certain
minimum capital requirements. The SEC and FINRA impose
rules that require notification when a broker-dealer’s net
capital falls below certain predefined criteria, dictate the ratio
of debt to equity in the regulatory capital composition of a
broker-dealer and constrain the ability of a broker-dealer to
circumstances.
under
expand
Additionally, the SEC’s Uniform Net Capital Rule and
FINRA rules impose certain requirements that may have the
effect of prohibiting a broker-dealer from distributing or
withdrawing capital and requiring prior notice to the SEC and
FINRA for certain withdrawals of capital. Any failure to
comply with these broker-dealer regulations could have a
material adverse effect on the operation of our business,
financial condition and operating results.
business
certain
its
or
central
exchanges,
In
clearinghouses
these countries, we have
Our non-U.S. business is subject to regulatory oversight in all
the countries in which we operate regulated businesses, such
securities
as
received
depositories.
authorization from the relevant authorities to conduct our
regulated business activities. The authorities may issue
regulatory fines or may ultimately revoke our authorizations
if we do not suitably carry out our regulated business
activities. The authorities are also entitled to request that we
adopt measures in order to ensure that we continue to fulfill
the authorities’ requirements. Additionally, we are subject to
the obligations under the Benchmark Regulation ((EU)
2016/1011), compliance with which could be costly or cause
a change in our business practices.
Furthermore, certain of our customers operate in a highly
regulated industry. Regulatory authorities could impose
regulatory changes that could impact the ability of our
customers to use our exchanges. The loss of a significant
number of customers or a reduction in trading activity on any
of our exchanges as a result of such changes could have a
material adverse effect on our business, financial condition
and operating results.
Regulatory changes and changes in market structure and
proprietary data could have a material adverse effect on our
business.
Regulatory changes adopted by the SEC or other regulators
of our markets, and regulatory changes that our markets may
adopt in fulfillment of their regulatory obligations, could
materially affect our business operations. In recent years,
there has been increased regulatory and governmental focus
on issues affecting the securities markets, including market
structure, technological oversight and fees for proprietary
market data, connectivity and transactions. The SEC, FINRA
26
and the national securities exchanges have introduced several
initiatives to ensure the oversight, integrity and resilience of
markets.
With respect to our regulated businesses, our business model
can be severely impacted by policy decisions. In May 2020,
the SEC adopted a rule to require changes to the governance
of securities information processors. In December 2020, the
SEC adopted a rule to modify the infrastructure for the
collection, consolidation and dissemination of market data for
exchange-listed national market stocks. If either or both of
these rules are fully implemented, they may adversely affect
our revenues. The timing for the implementation of these
rules is currently unknown, and we believe they may take
two or more years to fully implement. If the rules are
ultimately implemented as set forth in their adopting releases,
demand for certain of our proprietary tape share data
products may be reduced, or we may have to reduce our
pricing to compete with other entrants into the market for
consolidated data. Our opponents in some markets are larger
and better funded and, if successful in influencing certain
policies, may successfully advocate for positions
that
adversely impact our business. These regulatory changes
could impose significant costs, including litigation costs, and
other obligations on the operation of our exchanges and
processor systems and have other impacts on our business.
In Canada, all new marketplace fees and changes to existing
fees, including trading and market data fees, must be filed
with and approved by the Ontario Securities Commission.
The Canadian Securities Administrators adopted a Data Fees
Methodology that restricts the total amount of fees that can
be charged by all marketplaces to a reference benchmark.
Currently, all marketplaces are subject to annual reviews of
their market data fees tying market data revenues to pre- and
post- trade market share metrics. Permitted fee ranges are
based on an interim domestic benchmark that is subject to
change to an international benchmark, which could lower the
permitted fees charged by marketplaces, which could
adversely impact our revenues.
Our European exchanges currently offer market data products
to customers on a non-discriminatory and reasonable
commercial basis. The MiFID II/MiFIR rules entail that the
price for regulated market data such as pre- and post-trade
data shall be based on cost plus a reasonable margin.
However, these terms are not clearly defined. There is a risk
that a different interpretation of these terms may influence
the fees for European market data products adversely. In
addition, any future actions by European Union institutions
could affect our ability to offer market data products in the
same manner as today, thereby causing an adverse effect on
our market data revenues.
We are subject to litigation risks and other liabilities.
Many aspects of our business potentially involve substantial
liability risks. Although under current law we are immune
from private suits arising from conduct within our regulatory
authority and from acts and forbearances incident to the
exercise of our regulatory authority, this immunity only
covers certain of our activities in the U.S., and we could be
exposed to liability under national and local laws, court
decisions and
regulations promulgated by
regulatory agencies.
rules and
Some of our other liability risks arise under the laws and
regulations relating to the tax, employment, intellectual
property, anti-money laundering, technology export, foreign
asset controls, foreign corrupt practices, employee labor and
employment areas, including anti-discrimination and fair-pay
laws and regulations.
Liability could also result from disputes over the terms of a
trade, claims that a system failure or delay cost a customer
money, claims we entered into an unauthorized transaction or
claims that we provided materially false or misleading
statements in connection with a securities transaction. As we
intend to defend any such litigation actively, significant legal
expenses could be incurred. Although we carry insurance that
may limit our risk of damages in some cases, we still may
sustain uncovered losses or losses in excess of available
insurance that would affect our financial condition and results
of operations.
We have self-regulatory obligations and also operate for-
profit businesses, and these two roles may create conflicts
of interest.
We have obligations to regulate and monitor activities on our
markets and ensure compliance with applicable law and the
rules of our markets by market participants and listed
companies. In the U.S., some have expressed concern about
potential conflicts of
interest of “for-profit” markets
performing the regulatory functions of an SRO. We perform
regulatory functions and bear regulatory responsibility related
to our listed companies and our markets. Any failure by us to
diligently and fairly regulate our markets or to otherwise
fulfill our regulatory obligations could significantly harm our
reputation, prompt SEC scrutiny and adversely affect our
business and reputation.
Our Nordic and Baltic exchanges monitor trading and
compliance with listing standards in accordance with the
European Union’s Market Abuse Regulation and other
applicable laws. The prime objective of such monitoring
activities is to promote confidence in the exchanges among
the general public and to ensure fair and orderly functioning
markets. The monitoring functions within the Nasdaq Nordic
and Nasdaq Baltic exchanges are the responsibility of the
surveillance departments or other surveillance personnel. The
surveillance departments or personnel are
to
strengthen the integrity of and confidence in these exchanges
and to avoid conflicts of interest. Any failure to diligently
and fairly regulate the Nordic and Baltic exchanges could
significantly harm our reputation, prompt scrutiny from
regulators and adversely affect our business and reputation.
intended
Laws and regulations regarding the handling of personal
data and information may affect our services or result in
increased costs, legal claims or fines against us.
27
Our business relies on the processing of data in many
jurisdictions and the movement of data, including personal
data, across national borders. Legal and contractual
requirements relating to the collection, storage, handling, use,
disclosure, transfer and security of personal data continue to
evolve; regulatory scrutiny and customer requirements in this
area are increasing around the world. Significant uncertainty
exists as privacy and data protection laws may be interpreted
and applied differently across jurisdictions and may create
inconsistent or conflicting requirements with privacy and
other laws to which we are subject.
Laws and regulations such as the European Union General
Data Protection Regulation, or GDPR, and the California
Consumer Privacy Act, or CCPA, can have application and
effect beyond their territorial limits, and require companies to
meet new requirements regarding the handling of personal
data. In addition to directly applying to certain Nasdaq
business activities, these laws impact many of our customers,
which may affect their requirements and decisions related to
services that we offer. Our efforts to comply with GDPR,
CCPA and other privacy and data protection laws may entail
substantial expenses, may divert resources from other
initiatives and projects, and could impact the services that we
offer. Furthermore, enforcement actions and investigations
by regulatory authorities, as well as third party litigation,
related to data security incidents and privacy violations
continue to increase. The enactment of more restrictive laws,
future enforcement actions or
rules or
investigations, or the creation of new rights to pursue
damages could
increased costs or
restrictions on our business, and noncompliance could result
in regulatory penalties and significant legal liability.
regulations,
impact us
through
Changes in tax laws, regulations or policies could have a
material adverse effect on our financial results.
Like other corporations, we are subject to taxes at the federal,
state and local levels, as well as in non-U.S. jurisdictions.
Changes in tax laws, regulations or policies could result in us
having to pay higher taxes, which may reduce our net
income, or could adversely affect our ability to continue our
capital allocation program or effect strategic transactions in a
tax-favorable manner. In addition, such changes, including
federal or state financial transaction taxes, may increase the
cost of our offerings or services, which may cause our clients
to reduce their use of our services.
In addition, some of our subsidiaries are subject to tax in the
jurisdictions in which they are organized or operate. In
computing our tax obligation in these jurisdictions, we take
various tax positions. We cannot ensure that upon review of
these positions, the applicable authorities will agree with our
positions. A successful challenge by a tax authority could
result in additional taxes imposed on our clients or our
subsidiaries.
RISKS RELATED TO LIQUIDITY AND CAPITAL
RESOURCES
Our credit rating could increase the cost of our funding
from the capital markets.
Our debt is currently rated investment grade by two of the
major rating agencies. These rating agencies regularly
evaluate us, and their ratings of our long-term debt and
commercial paper are based on a number of factors, including
our financial strength and corporate development activity, as
well as factors not entirely within our control, including
conditions affecting our industry generally. There can be no
assurance that we will maintain our current ratings. Our
failure to maintain such ratings could reduce or eliminate our
ability to issue commercial paper and adversely affect the
cost and other terms upon which we are able to obtain
funding and increase our cost of capital. A reduction in credit
ratings would also result in increases in the cost of our
commercial paper and other outstanding debt as the interest
rate on the outstanding amounts under our credit facilities
and our senior notes fluctuates based on our credit ratings.
Our leverage limits our financial flexibility, increases our
exposure to weakening economic conditions and may
adversely affect our ability to obtain additional financing.
Our indebtedness as of December 31, 2021 was $5.8 billion.
We may borrow additional amounts by utilizing available
liquidity under our existing credit facilities, issuing additional
debt securities or issuing short-term, unsecured commercial
paper notes through our commercial paper program.
Our leverage could:
• reduce funds available to us for operations and general
corporate purposes or for capital expenditures as a result of
the dedication of a substantial portion of our consolidated
cash flow from operations to the payment of principal and
interest on our indebtedness;
• increase our exposure to a continued downturn in general
economic conditions;
• place us at a competitive disadvantage compared with our
competitors with less debt;
• affect our ability to obtain additional financing in the future
for refinancing indebtedness, acquisitions, working capital,
capital expenditures or other purposes; and
• increase our cost of debt and reduce or eliminate our ability
to issue commercial paper.
In addition, we must comply with the covenants in our credit
facilities. Among other things, these covenants restrict our
ability to effect certain fundamental transactions, dispose of
certain assets, incur additional indebtedness and grant liens
on assets. Failure to meet any of the covenant terms of our
credit facilities could result in an event of default. If an event
of default occurs, and we are unable to receive a waiver of
default, our lenders may increase our borrowing costs,
restrict our ability to obtain additional borrowings and
accelerate all amounts outstanding.
We will need to invest in our operations to maintain and
grow our business and to integrate acquisitions, and we
may need additional funds, which may not be readily
available.
We depend on the availability of adequate capital to maintain
and develop our business. Although we believe that we can
internally
meet our current capital requirements from
generated funds, cash on hand and borrowings under our
revolving credit facility and commercial paper program, if
the capital and credit markets experience volatility, access to
capital or credit may not be available on terms acceptable to
us or at all. Limited access to capital or credit in the future
could have an impact on our ability to refinance debt,
maintain our credit rating, meet our regulatory capital
requirements,
initiatives, make
acquisitions or strategic investments in other companies, pay
dividends, repurchase our stock or react to changing
economic and business conditions. If we are unable to fund
our capital or credit requirements, it could have an adverse
effect on our business, financial condition and operating
results.
strategic
engage
in
In addition to our debt obligations, we will need to continue
to invest in our operations for the foreseeable future to
integrate acquired businesses and to fund new initiatives. If
we do not achieve the expected operating results, we will
need to reallocate our cash resources. This may include
borrowing additional funds to service debt payments, which
may impair our ability to make investments in our business
or to integrate acquired businesses.
If we need to raise funds through issuing additional equity,
our equity holders will suffer dilution. If we need to raise
funds through incurring additional debt, we may become
subject to covenants more restrictive than those contained in
our credit facilities, the indentures governing our notes and
our other debt instruments. Furthermore, if adverse economic
conditions occur, we could experience decreased revenues
from our operations which could affect our ability to satisfy
financial and other restrictive covenants to which we are
subject under our existing indebtedness.
RISKS RELATED TO INTELLECTUAL PROPERTY
AND BRAND REPUTATION
Damage to our reputation or brand name could have a
material adverse effect on our businesses.
One of our competitive strengths is our strong reputation and
brand name. Various issues may give rise to reputational risk,
including issues relating to:
• our ability to maintain the security of our data and systems;
• the quality and reliability of our technology platforms and
systems;
• the ability to fulfill our regulatory obligations;
• the ability to execute our business plan, key initiatives or
new business ventures and the ability to keep up with
changing customer demand;
• the representation of our business in the media;
28
• the accuracy of our financial statements and other financial
and statistical information;
• the accuracy of our financial guidance or other information
provided to our investors;
• the quality of our corporate governance structure;
• the quality of our products, including the reliability of our
transaction-based, IR & ESG Services and market
technology products, the accuracy of the quote and trade
information provided by our Market Data business and the
accuracy of calculations used by our Indexes business for
indexes and unit investment trusts;
• the quality of our disclosure controls or internal controls
in
including any
reporting,
financial
failures
over
supervision;
• extreme price volatility on our markets;
• any negative publicity surrounding our listed companies or
our listing rules;
• any negative publicity surrounding the use of our products
and/or services by our customers, including in connection
with emerging asset classes such as crypto assets; and
• any misconduct, fraudulent activity or theft by our
formerly or currently
employees or other persons
associated with us.
Although we monitor developments, including social media,
for areas of potential risk to our brand and reputation,
negative publicity or misrepresentations by third parties,
particularly on social media, may adversely impact our
credibility as a leader in the global capital markets and as a
source for data and analytics, and may have an adverse effect
on our brands, business and operating results. Damage to our
reputation could cause some issuers not to list their securities
on our exchanges, as well as reduce the trading volumes or
values on our exchanges or cause us to lose customers in our
Market Data, Index, IR & ESG Services or Market
Technology businesses. This, in turn, may have a material
adverse effect on our business, financial condition and
operating results.
Failure to meet customer expectations or deadlines for the
implementation of our products could result in negative
publicity, losses and reduced sales, each of which may harm
our reputation, business and results of operations.
and
budget
associated with
large-scale market
We generally mutually agree with our customers on the
duration,
the
costs
implementation of certain of our products, particularly our
Market Technology
infrastructure
projects. Various factors may cause implementations to be
delayed, inefficient or otherwise unsuccessful, including due
to unforeseen project complexities, our deployment of
insufficient resources, logistical challenges due to the effects
of COVID-19 or other external factors. The effects of a
failure to meet an implementation schedule could include
monetary credits for current or future service engagements, a
reduction in fees for the project, or the expenditure of
additional expenses to mitigate such delays. In addition, time-
consuming implementations may also increase the personnel
we must allocate to such customer, thereby increasing our
costs and diverting attention
from other projects.
Unsuccessful, lengthy, or costly customer implementation
projects could result in claims from customers, decreased
customer
reputation, and
opportunities for competitors to displace us, each of which
could have an adverse effect on our reputation, business and
results of operations.
satisfaction, harm
to our
Failure to protect our intellectual property rights, or
allegations that we have infringed on the intellectual
property rights of others, could harm our brand-building
efforts and ability to compete effectively.
To protect our intellectual property rights, we rely on a
combination of trademark laws, copyright laws, patent laws,
trade secret protection, confidentiality agreements and other
contractual arrangements with our affiliates, clients, strategic
partners, employees and others. However, the efforts we have
taken to protect our intellectual property and proprietary
rights might not be sufficient, or effective, at stopping
unauthorized use of those rights. We may be unable to detect
the unauthorized use of, or take appropriate steps to enforce,
our intellectual property rights.
effective
jurisdictions. However,
We have registered, or applied to register, our trademarks in
the United States and in over 50 foreign jurisdictions and
have pending U.S. and foreign applications for other
trademarks. We also maintain copyright protection for
software products and pursue patent protection for inventions
developed by us. We hold a number of patents, patent
applications and licenses in the United States and other
foreign
trademark,
copyright, patent and trade secret protection might not be
available or cost-effective in every country in which our
services and products are offered. Moreover, changes in
patent law, such as changes in the law regarding patentable
subject matter, could also impact our ability to obtain patent
protection for our innovations. There is also a risk that the
scope of protection under our patents may not be sufficient in
some cases, or that existing patents may be deemed invalid or
unenforceable. Failure to protect our intellectual property
adequately could harm our brand and affect our ability to
compete effectively. Further, defending our intellectual
property rights could result in the expenditure of significant
financial and managerial resources.
Third parties may assert intellectual property rights claims
against us, which may be costly to defend, could require the
payment of damages and could limit our ability to use certain
technologies, trademarks or other intellectual property. Any
intellectual property claims, with or without merit, could be
expensive to litigate or settle and could divert management
resources and attention. Successful challenges against us
could require us to modify or discontinue our use of
technology or business processes where such use is found to
infringe or violate the rights of others, or require us to
purchase licenses from third parties, any of which could
adversely affect our business, financial condition and
operating results.
29
GENERAL RISK FACTORS
We are a holding company that depends on cash flow from
to meet our obligations, and any
our subsidiaries
restrictions on our subsidiaries’ ability to pay dividends or
make other payments to us may have a material adverse
effect on our results of operations and financial condition.
As a holding company, we require dividends and other
payments from our subsidiaries to meet cash requirements.
Minimum capital requirements mandated by regulatory
authorities having jurisdiction over some of our regulated
subsidiaries indirectly restrict the amount of dividends paid
upstream.
In addition, unremitted earnings of certain subsidiaries
outside of the U.S. are used to finance our international
operations and are considered to be indefinitely reinvested.
If our subsidiaries are unable to pay dividends and make
other payments to us when needed, we may be unable to
satisfy our obligations, which would have a material adverse
effect on our business, financial condition and operating
results.
We may experience fluctuations in our operating results,
which may adversely affect the market price of our common
stock.
Our industry is risky and unpredictable and is directly
affected by many national and international factors beyond
our control, including:
• economic, political and geopolitical market conditions;
• natural disasters, terrorism, pandemics, war or other
catastrophes;
• broad trends in finance and technology;
• changes in price levels and volatility in the stock markets;
• the level and volatility of interest rates;
• volatility in commodity markets, including the energy
markets;
• changes in government monetary or tax policy;
• the imposition of governmental economic sanctions on
countries in which we do business or where we plan to
expand our business;
• the perceived attractiveness of the U.S. or European capital
markets; and
• inflation.
Any one of these factors could have a material adverse effect
on our business, financial condition and operating results by
causing a substantial decline in the financial services markets
and reducing trading volumes or values.
Additionally, since borrowings under our credit facilities bear
interest at variable rates and commercial paper is issued at
prevailing interest rates, any increase in interest rates on debt
that we have not fixed using interest rate hedges will increase
our interest expense, reduce our cash flow or increase the
cost of future borrowings or refinancings. Other than variable
rate debt, we believe our business has relatively large fixed
costs and low variable costs, which magnifies the impact of
30
revenue fluctuations on our operating results. As a result, a
decline in our revenue may lead to a relatively larger impact
on operating results. A substantial portion of our operating
expenses is related to personnel costs, regulation and
corporate overhead, none of which can be adjusted quickly
and some of which cannot be adjusted at all. Our operating
expense levels are based on our expectations for future
is below management’s
revenue.
expectations, or if our expenses increase before revenues do,
both revenues less transaction-based expenses and operating
results would be materially and adversely affected. Because
of these factors, it is possible that our operating results or
other operating metrics may fail to meet the expectations of
stock market analysts and investors. If this happens, the
market price of our common stock may be adversely affected.
If actual
revenue
Our operational processes are subject to the risk of error,
which may result in financial loss or reputational damage.
We have instituted extensive controls to reduce the risk of
error inherent in our operations; however, such risk cannot
completely be eliminated. Our businesses are highly
dependent on our ability to process and report, on a daily
basis, a large number of transactions across numerous and
diverse markets. Some of our operations require complex
processes, and the introduction of new products or services or
changes
to regulatory
requirements may result in an increased risk of errors for a
period after implementation. Additionally, the likelihood of
such errors or vulnerabilities is heightened as we acquire new
products from
third parties, whether as a result of
acquisitions or otherwise.
in processes or reporting due
Data, other content or information that we distribute may
contain errors or be delayed, causing reputational harm. Use
of our products and services as part of the investment process
creates the risk that clients, or the parties whose assets are
managed by our clients, may pursue claims against us in the
event of such delay or error. Even with a favorable outcome,
significant
litigation against us might unduly burden
management, personnel, financial and other resources.
In addition, the sophisticated software we sell to our
customers may contain undetected errors or vulnerabilities,
some of which may be discovered only after delivery, or
could fail to perform its intended purpose. Because our
clients depend on our solutions for critical business functions,
any service interruptions, failures or other issues may result
in lost or delayed market acceptance and lost sales, or
negative customer experiences that could damage our
reputation, resulting in the loss of customers, loss of revenues
and liability for damages, which may adversely affect our
business and financial results.
Climate change may have a long-term adverse impact on
our business, and climate change disclosure requirements
may reduce demand for listings on our exchanges.
While we seek to mitigate our business risks associated with
climate change by establishing robust environmental and
sustainability programs, there are inherent climate related
risks wherever our business is conducted. There is an
increased focus from our investors, clients, employees, and
other stakeholders concerning corporate citizenship and
sustainability matters. Access to clean water and reliable
energy in the communities where we conduct our business,
whether for our offices, data centers, vendors, clients or other
stakeholders, is a priority. For example, changes in weather
where we operate may increase the costs of powering and
cooling our data centers or the facilities that we use to
operate our exchanges and clearinghouses, develop our
products or provide cloud-based services. Climate related
events, including extreme weather events and their impact on
the critical infrastructure in the United States and elsewhere,
have the potential to disrupt our business or the business of
our clients; cause increased volatility in commodity markets
in which Nasdaq Clearing operates as a clearinghouse, which
may result in Nasdaq Clearing holding insufficient collateral
for such volatility; lead to an increase in costs of raw
materials, which may adversely affect certain of our listed
companies operating in certain sectors and create adverse
trading volatility beyond
market conditions,
historical levels, any of which could adversely affect our
business, reputation, financial condition and operating
results. Additionally, if the SEC or other federal regulatory
reporting obligations
agencies
regarding climate change on public companies, there may be
a decrease in new listings or an increase in de-listings of our
listed companies, which may adversely affect our business,
results. Such new
financial condition and operating
regulations, whether in the U.S. or in other countries in which
we operate, could also cause us
incur additional
compliance and reporting costs.
impose comprehensive
including
to
Our businesses operate in various international markets,
including certain emerging markets that are subject to
greater political, economic and social uncertainties than
developed countries.
to
in
the
inherent
the risk
Our businesses operate in various international markets,
including but not limited to Northern Europe, the Baltics, the
Middle East, Africa and Asia, and our non-U.S. operations
are subject
international
environment. Political, economic or social events or
developments in one or more of our non-U.S. locations could
adversely affect our operations and financial results. Some
locations, such as Lithuania, India and the Philippines, have
economies that may be subject to greater political, economic
and social uncertainties than countries with more developed
institutional structures, which may increase our operational
risk.
Unforeseen or catastrophic events could interrupt our
critical business functions. In addition, our U.S. and
European businesses are heavily concentrated in particular
areas and may be adversely affected by events in those
areas.
We may incur losses as a result of unforeseen or catastrophic
events, such as terrorist attacks, natural disasters, pandemics
(such as COVID-19), extreme weather, fire, power loss,
telecommunications failures, human error, theft, sabotage and
31
vandalism. Given our position in the global capital markets,
we may be more likely than other companies to be a target
for malicious disruption activities.
In addition, our U.S. and European business operations are
heavily concentrated in the U.S. East Coast, and Stockholm,
Sweden, respectively. Any event that impacts either of those
geographic areas could potentially affect our ability to
operate our businesses.
We have disaster recovery and business continuity plans and
capabilities for critical systems and business functions to
mitigate the risk of an interruption. Any interruption in our
critical business functions or systems could negatively impact
our financial condition and operating results. Additionally,
some colocation customers may lack adequate disaster
recovery solutions to avoid loss of trade flow from a
sustained interruption of our critical systems.
Because we have operations in numerous countries, we are
exposed to currency risk.
We have operations in the U.S., the Nordic and Baltic
countries, Canada, the United Kingdom, Australia and many
other foreign countries. We therefore have significant
exposure to exchange rate movements between the Euro,
Swedish Krona, the Canadian dollar and other foreign
currencies towards the U.S. dollar. Significant inflation or
disproportionate changes in foreign exchange rates with
respect to one or more of these currencies could occur as a
result of general economic conditions, acts of war or
terrorism, changes in governmental monetary or tax policy,
changes in local interest rates or other factors. These
exchange rate differences will affect the translation of our
non-U.S. results of operations, interest expense and financial
condition into U.S. dollars as part of the preparation of our
consolidated financial statements.
If our risk management methods are not effective, our
business, reputation and financial results may be adversely
affected.
We utilize widely-accepted methods to identify, assess,
monitor and manage our risks, including oversight of risk
management, by Nasdaq’s Global Risk Management
Committee, which is comprised of senior executives and has
the responsibility for regularly reviewing risks and referring
significant risks to the board of directors or specific board
committees. Local risk management committees in our
international offices provide
local risk oversight and
escalation to local boards, as appropriate. Certain risk
management methods require subjective evaluation of
dynamic information regarding markets, customers or other
matters. That variable information may not in all cases be
accurate, complete, up-to-date or properly evaluated. If we do
not successfully identify, assess, monitor or manage the risks
to which we are exposed, our business, reputation, financial
condition and operating results could be materially adversely
affected.
Decisions to declare future dividends on our common stock
will be at the discretion of our board of directors and there
can be no guarantee that we will pay future dividends to our
stockholders.
Our board of directors regularly declares quarterly cash
dividend payments on our outstanding common stock. Future
declarations of quarterly dividends and the establishment of
future record and payment dates are subject to approval by
Nasdaq’s board of directors. The board’s determination to
declare dividends will depend upon our profitability and
financial condition, contractual
restrictions
imposed by applicable law and other factors that the board
deems relevant. Based on an evaluation of these factors, the
board of directors may determine not to declare future
dividends at all or to declare future dividends at a reduced
amount. Accordingly, there can be no guarantee that we will
pay future dividends to our stockholders.
restrictions,
Provisions of our certificate of incorporation, by-laws,
exchange rules (including provisions included to address
SEC concerns) and governing law restrict the ownership
and voting of our common stock. In addition, such
provisions could delay or prevent a change in control of us
and entrench current management.
Our organizational documents place restrictions on the voting
rights of certain stockholders. The holders of our common
stock are entitled to one vote per share on all matters to be
voted upon by the stockholders except that no person may
exercise voting rights in respect of any shares in excess of
5% of the then outstanding shares of our common stock. Any
change to the 5% voting limitation would require SEC
approval.
In response to the SEC’s concern about a concentration of
our ownership,
the rules of some of our exchange
subsidiaries include a prohibition on any member or any
person associated with a member of the exchange from
beneficially owning more than 20% of our outstanding voting
interests. SEC consent would be required before any investor
could obtain more than a 20% voting interest in us. The rules
of some of our exchange subsidiaries also require the SEC’s
approval of any business ventures with exchange members,
subject to exceptions.
Our organizational documents contain provisions that may be
deemed to have an anti-takeover effect and may delay, deter
or prevent a change of control of us, such as a tender offer or
takeover proposal that might result in a premium over the
market price for our common stock. Additionally, certain of
these provisions make it more difficult to bring about a
change in the composition of our board of directors, which
could result in entrenchment of current management.
Our certificate of incorporation and by-laws:
• do not permit stockholders to act by written consent;
• require certain advance notice for director nominations and
actions to be taken at annual meetings; and
• authorize the issuance of undesignated preferred stock, or
“blank check” preferred stock, which could be issued by
our board of directors without stockholder approval.
Section 203 of the Delaware General Corporation Law
imposes
restrictions on mergers and other business
combinations between us and any holder of 15% or more (or,
in some cases, a holder who previously held 15% or more) of
our common stock. In general, Delaware law prohibits a
publicly held corporation from engaging in a “business
combination” with an “interested stockholder” for three years
after the stockholder becomes an interested stockholder,
unless the corporation’s board of directors and stockholders
approve the business combination in a prescribed manner.
Finally, many of the European countries where we operate
regulated entities require prior governmental approval before
an investor acquires 10% or greater of our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We conduct our business operations in leased facilities. We
do not own any real property. Our U.S. headquarters are
located in New York, New York, and our European
headquarters are located in Stockholm, Sweden. We also
lease space in multiple locations around the world, which are
used for research and development, sales and support, and
administrative activities, as well as for data centers and
disaster preparedness facilities.
Generally, our properties are not allocated for use by a
particular segment. Instead, most of our properties are used
by two or more segments. We regularly monitor the facilities
we occupy to ensure that they suit our needs, particularly as
we transition to a hybrid work environment as we reopen our
global offices. We believe the facilities that we occupy are
adequate for the purposes for which they are currently used
and are well-maintained. See Note 16, “Leases,” to the
consolidated financial statements for further discussion.
Item 3. Legal Proceedings
See “Legal and Regulatory Matters - Litigation,” of Note 18,
“Commitments, Contingencies and Guarantees,”
the
consolidated financial statements, which is incorporated
herein by reference.
to
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
Market Information
Our common stock is listed on The Nasdaq Stock Market
under the ticker symbol “NDAQ.” As of February 14, 2022,
we had approximately 214 holders of record of our common
stock.
32
• Employee transactions represents shares surrendered to us
to satisfy tax withholding obligations arising from the
vesting of restricted stock and PSUs issued to employees.
• In July 2021, we entered into an ASR agreement to
repurchase $475 million of common stock. See “ASR
Agreements,” of Note 12, “Nasdaq Stockholders’ Equity,”
to
the consolidated financial statements for further
discussion.
Issuer Purchases of Equity Securities
Share Repurchase Program
See “Share Repurchase Program,” of Note 12, “Nasdaq
Stockholders’ Equity,”
financial
statements for further discussion of our share repurchase
program.
the consolidated
to
Purchases of Equity Securities by the Issuer and
Affiliated Purchasers
The table below represents repurchases made by or on behalf
of us or any “affiliated purchaser” of our common stock
during the fiscal quarter ended December 31, 2021:
(d)
Maximum
Dollar
Value of
Shares
that May
Yet Be
Purchased
Under the
Plans or
Programs
(in
millions)
(c)
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
(a)
Total Number
of Shares
Purchased
(b)
Average
Price Paid
Per Share
— $ —
— $ 984
12,368 $ 203.46
N/A
N/A
— $ —
— $ 984
391,272
See
below 391,272 $ 984
515 $ 212.83
N/A
N/A
Period
October 2021
Share
repurchase
program
Employee
transactions
November 2021
Share
repurchase
program
ASR
agreement
Employee
transactions
December 2021
Share
repurchase
program
Employee
transactions
Total Quarter Ended December 31, 2021
287,657 $ 204.34
46,854 $ 210.24
287,657 $ 926
N/A
N/A
Share
repurchase
program
ASR
agreement
Employee
transactions
287,657 $ 204.34
287,657 $ 926
391,272
See
below 391,272 $ 926
59,737 $ 208.86
N/A
N/A
In the table above:
• N/A - Not applicable.
• See “Share Repurchase Program,” of Note 12, “Nasdaq
Stockholders’ Equity,”
the consolidated financial
to
statements for further discussion of our share repurchase
program.
33
PERFORMANCE GRAPH
The following graph compares the total return of our common stock to the Nasdaq Composite Index, the S&P 500 and a
peer group selected by us, shown below, for the past five years:
• ASX Limited
• Deutsche Börse AG
• LSE
• B3 S.A.
• Bolsas Mexicana de Valores, S.A.B.
• Euronext N.V.
• Hong Kong Exchanges and Clearing
• Singapore Exchange Limited
• TMX Group Limited
Peer Group
de C.V.
• Cboe
• CME Group Inc.
Limited
• ICE
• Japan Exchange Group, Inc
The figures represented below assume an initial investment of $100 in the common stock or index at the closing price on
December 31, 2016 and the reinvestment of all dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Nasdaq, Inc., the Nasdaq Composite Index, the S&P 500, and a Peer Group
* $100 invested on 12/31/2016 in stock or index, including reinvestment of dividends.
Nasdaq, Inc.
Nasdaq Composite Index
S&P 500
Peer Group
Fiscal Year Ended December 31,
2016
2017
2018
2019
2020
2021
$
100 $
100
100
100
117 $
130
122
127
126 $
126
116
129
169 $
172
153
197
213 $
250
181
248
342
305
233
216
Copyright© 2022 Standard & Poor's, a division of S&P Global. All rights reserved.
34
Period EndedNasdaq, Inc.Nasdaq Composite IndexS&P 500Peer Group201620172018201920202021$50$100$150$200$250$300$350
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions, except per share
amounts)
2021 vs.
2020
2020 vs.
2019
$ 3,420 $ 2,903 $ 2,535
17.8 % 14.5 %
1,979 1,669 1,518
18.6 % 9.9 %
1,441 1,234 1,017
16.8 % 21.3 %
$ 1,187 $ 933 $ 774
27.2 % 20.5 %
$ 7.05 $ 5.59 $ 4.63
26.1 % 20.7 %
$ 2.11 $ 1.94 $ 1.85
8.8 % 4.9 %
Revenues
less
transaction-
based
expenses
Operating
expenses
Operating
income
Net income
attributable
to Nasdaq
Diluted
earnings
per share
Cash
dividends
declared
per
common
share
In countries with currencies other than the U.S. dollar,
revenues and expenses are translated using monthly average
exchange rates. Impacts on our revenues less transaction-
based expenses and operating income associated with
fluctuations in foreign currency are discussed in more detail
under “Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.”
Nasdaq's Operating Results
The following chart summarizes our ARR (in millions):
Item 6. [Reserved]
Item 7. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
The following discussion and analysis of the financial
condition and results of operations of Nasdaq should be read
in conjunction with our consolidated financial statements and
related notes included in this Form 10-K, as well as the
discussion under “Item 1A. Risk Factors.” For further
discussion of our growth strategy, products and services, and
competitive strengths, see “Item 1. Business.” Unless stated
otherwise, the comparisons presented in this discussion and
analysis refer to the year-over-year comparison of changes in
our financial condition and results of operations as of and for
the fiscal years ended December 31, 2021 and December 31,
2020. Discussion of fiscal year 2020 items and the year-over
year comparison of changes in our financial condition and
results of operations as of and for the fiscal years ended
December 31, 2020 and December 31, 2019 can be found in
Part II, “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of our
Annual Report on Form 10-K for the fiscal year ended
December 31, 2020, which was previously filed with the SEC
on February 23, 2021.
Business Segments
We manage, operate and provide our products and services in
four business segments: Market Technology, Investment
Intelligence, Corporate Platforms and Market Services. See
Note 1, “Organization and Nature of Operations,” and Note
19, “Business Segments,” to the consolidated financial
statements for further discussion of our reportable segments
and geographic data, as well as how management allocates
resources, assesses performance and manages
these
businesses as four separate segments. See “Part I, Item 1.
Business” for additional discussion on recent developments
and highlights.
Financial Summary
The following table summarizes our financial performance
for the year ended December 31, 2021 when compared to the
same period in 2020 and for the year ended December 31,
2020 when compared to the same period in 2019. The
comparability of our results of operations between reported
periods is impacted by the acquisition of Verafin in February
2021 and the divestiture of our U.S. Fixed Income business,
which was part of our FICC business within our Market
Services segment in June 2021. See “2021 Divestiture,” and
“2021 Acquisition,” of Note 4, “Acquisitions and
Divestiture,” to the consolidated financial statements for
further discussion. For a detailed discussion of our results of
operations, see “Segment Operating Results” below.
35
$1,871$1,577$1,446$330$308$284$546$470$430$567$516$472$428$283$260Market TechnologyInvestment IntelligenceCorporate PlatformsMarket Services4Q214Q204Q19
Segment Operating Results
The following table presents our revenues by segment,
transaction-based expenses for our Market Services segment
and total revenues less transaction-based expenses:
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
2021 vs.
2020
2020 vs.
2019
Market
Technology $
463 $
357 $
338
29.7 %
5.6 %
Investment
Intelligence
Corporate
Platforms
Market
Services
Other
revenues
Total
revenues
Transaction
rebates
Brokerage,
clearance
and
exchange
fees
Total
revenues
less
transaction-
based
expenses
1,076
898
768
19.8 % 16.9 %
613
521
490
17.7 %
6.3 %
3,707
3,818
2,616
(2.9) % 45.9 %
27
31
46
(12.9) % (32.6) %
5,886
5,625
4,258
4.6 % 32.1 %
(2,168)
(2,028)
(1,324)
6.9 % 53.2 %
(298)
(694)
(399)
(57.1) % 73.9 %
$ 3,420 $ 2,903 $ 2,535
17.8 % 14.5 %
ARR for a given period is the annualized revenue derived
from subscription contracts with a defined contract value.
This excludes contracts that are not recurring, are one-time in
nature, or where the contract value fluctuates based on
defined metrics. ARR
is currently one of our key
performance metrics to assess the health and trajectory of our
recurring business. ARR does not have any standardized
definition and is therefore unlikely to be comparable to
similarly titled measures presented by other companies. ARR
should be viewed independently of revenue and deferred
revenue and is not intended to be combined with or to replace
either of those items. ARR is not a forecast and the active
contracts at the end of a reporting period used in calculating
ARR may or may not be extended or renewed by our
customers.
The ARR chart includes:
▪
▪
Active Market Technology support and SaaS
subscription contracts.
Proprietary market data and index data subscriptions
as well as subscription contracts for eVestment,
Solovis, NDW Research Platform, Nasdaq Fund
Network and Nasdaq Data Link. It also includes
guaranteed minimum on futures contracts within the
Index business.
▪
▪
U.S. and Nordic annual listing fees, IR and ESG
products, including subscription contracts for IR
Insight, board portals and OneReport, as well as IR
advisory services.
Trade Management Services business, excluding one-
time service requests.
The following chart summarizes our quarterly annualized
SaaS revenues for our Solutions Segments, which
is
comprised of Market Technology, Investment Intelligence
and Corporate Platforms, for the fourth quarter of 2021, 2020
and 2019 (in millions):
36
$640$448$404$148$144$136$208$180$160$284$124$108Market TechnologyInvestment IntelligenceCorporate Platforms4Q214Q204Q19
The following charts present our Market Technology,
Investment Intelligence, Corporate Platforms and Market
Services segments as a percentage of our total revenues, less
transaction-based expenses, of $3,420 million for the year
ended December 31, 2021, $2,903 million for the year ended
December 31, 2020 and $2,535 million for the year ended
December 31, 2019.
Percentage of Revenues Less Transaction-based Expenses
by Segment for the:
37
Year Ended December 31, 2021MarketServices:36.3%CorporatePlatforms:17.9%Otherrevenues:0.8%InvestmentIntelligence:31.5%MarketTechnology:13.5%Year Ended December 31, 2020MarketServices:37.8%CorporatePlatforms:17.9%Otherrevenues:1.1%InvestmentIntelligence:30.9%MarketTechnology:12.3%Year Ended December 31, 2019MarketServices:35.2%CorporatePlatforms:19.4%Otherrevenues:1.8%InvestmentIntelligence:30.3%MarketTechnology:13.3%
216 227 217
(4.8) % 4.6 %
ARR (in millions)
$ 463 $ 357 $ 338
29.7 % 5.6 %
Market Data Revenues
SaaS revenues (in millions)
$ 208 $ 180 $ 160
Number of licensed ETPs
ETP AUM tracking Nasdaq
indexes (in billions)
Net appreciation (in billions)
Net impact of ETP sponsor
switches (in billions)
Net inflows in ETP AUM
tracking Nasdaq indexes (in
billions)
Year Ended December 31,
2021
2020
2019
362
339
332
$ 424 $ 359 $ 233
$
83 $
80 $
48
$
(92) $ — $ —
$
74 $
46 $
13
$ 567 $ 516 $ 472
Market data revenues increased in 2021 compared with 2020
primarily due to an increase in proprietary data revenues
from new sales primarily outside the U.S., partially offset by
lower U.S. shared tape plan revenues.
Index Revenues
Index revenues increased in 2021 compared with 2020
primarily due to higher licensing revenues from higher
average AUM in ETPs linked to Nasdaq indexes and higher
licensing revenues from futures trading linked to the
Nasdaq-100 Index.
Analytics Revenues
Analytics revenues increased in 2021 compared with 2020
primarily due to the growth in our eVestment and Solovis
products driven by new sales, strong retention, and higher
average revenue per client from expanded offerings.
CORPORATE PLATFORMS
The following tables present revenues and key drivers from
our Corporate Platforms segment:
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
Listing Services $ 387 $ 307 $ 290
IR & ESG
Services
Total Corporate
Platforms
$ 613 $ 521 $ 490
226 214 200
2021 vs.
2020
2020 vs.
2019
26.1 % 5.9 %
5.6 % 7.0 %
17.7 % 6.3 %
MARKET TECHNOLOGY
The following tables present revenues and key drivers from
our Market Technology segment:
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
2021 vs.
2020
2020 vs.
2019
$ 247 $ 130 $ 121
90.0 % 7.4 %
Anti Financial
Crime
Technology
Marketplace
Infrastructure
Technology
Total Market
Technology
Order intake
ARR
SaaS revenues
Year Ended December 31,
2021
2020
2019
$
(in millions)
378 $
428
284
240 $
283
124
366
260
108
In the table above, order intake is the total contract value of
orders signed during the period, excluding Verafin. ARR and
SaaS revenues include Verafin.
Anti Financial Crime Technology Revenues
Anti-financial crime technology revenues increased in 2021
compared with 2020 primarily due to the inclusion of
revenues from our acquisition of Verafin and continued
growth in surveillance solutions.
Marketplace Infrastructure Technology Revenues
Marketplace infrastructure technology revenues decreased in
lower
2021 compared with 2020 primarily due
professional services revenues reflecting both an elevated
prior year comparison period as well as capacity constraints
that pandemic-related
imposed on
installation and change request projects as well as the
completion of a significant long-term contract, partially offset
by an increase in SaaS revenues.
logistical challenges
to
INVESTMENT INTELLIGENCE
The following tables present revenues and key drivers from
our Investment Intelligence segment:
Year Ended December 31,
2021
2020
2019
Percentage Change
2020 vs.
2021 vs.
2019
2020
(in millions)
Market Data
Index
Analytics
$ 414 $ 399 $ 387
223
459
324
3.8 % 3.1 %
41.7 % 45.3 %
203
175
158
16.0 % 10.8 %
Total
Investment
Intelligence $ 1,076 $ 898 $ 768
19.8 % 16.9 %
38
Year Ended December 31,
2021
2020
2019
IR & ESG Services Revenues
IR & ESG Services revenues increased in 2021 compared
with 2020 primarily due to higher adoption of our investor
relations intelligence products as well as new ESG solutions.
752
316
188
MARKET SERVICES
Equity Derivative Trading and Clearing Revenues
The following tables present total revenues, transaction-based
expenses, and total revenues less transaction-based expenses
as well as key drivers from our Equity Derivative Trading
and Clearing business:
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
2021 vs.
2020
2020 vs.
2019
$ 1,469 $ 1,258 $ 816
16.8 % 54.2 %
(1,018) (828) (477)
22.9 % 73.6 %
(38)
(76)
(47) (50.0) % 61.7 %
$ 413 $ 354 $ 292
16.7 % 21.2 %
Equity Derivative
Trading and
Clearing
Revenues
Transaction-based
expenses:
Transaction
rebates
Brokerage,
clearance and
exchange fees
Equity derivative
trading and
clearing
revenues less
transaction-based
expenses
In the table above, brokerage, clearance and exchange fees
includes Section 31 fees of $32 million in 2021, $69 million
in 2020 and $43 million in 2019. Section 31 fees are recorded
as equity derivative trading and clearing revenues with a
transaction-based
recorded
corresponding
expenses.
amount
in
IPOs
The Nasdaq Stock
Market
Exchanges that
comprise Nasdaq
Nordic and Nasdaq
Baltic
Total new listings
The Nasdaq Stock
Market
Exchanges that
comprise Nasdaq
Nordic and Nasdaq
Baltic
Number of listed
companies
The Nasdaq Stock
Market
Exchanges that
comprise Nasdaq
Nordic and Nasdaq
Baltic
ARR (in millions)
SaaS revenues (in
millions)
$
$
In the table above:
174
45
34
1,000
454
313
207
67
53
4,178
3,392
3,140
1,235
1,071
546 $
470 $
1,040
430
148 $
144 $
136
• The Nasdaq Stock Market new listings include IPOs,
including issuers that switched from other listing venues
and separately listed ETPs. For the years ended December
31, 2021, 2020 and 2019, IPOs included 433, 132 and 43
SPACs, respectively.
• Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic
new listings include IPOs and represent companies listed
on the Nasdaq Nordic and Nasdaq Baltic exchanges and
companies on the alternative markets of Nasdaq First
North.
• Number of total listed companies on The Nasdaq Stock
Market for the years ended December 31, 2021, 2020 and
2019 included 441, 412 and 412 ETPs, respectively.
• Number of total listed companies on the exchanges that
comprise Nasdaq Nordic and Nasdaq Baltic represents
companies listed on these exchanges and companies on the
alternative markets of Nasdaq First North.
Listing Services Revenues
Listing services revenues increased in 2021 compared with
2020 primarily due to an increase in the overall number of
listed companies.
39
Cash Equity Trading Revenues
The following tables present total revenues, transaction-based
expenses, and total revenues less transaction-based expenses
as well as key drivers and other metrics from our Cash Equity
Trading business:
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
2021 vs.
2020
2020 vs.
2019
$ 1,854 $ 2,211 $ 1,462
(16.1) % 51.2 %
(1,150) (1,200)
(847)
(4.2) % 41.7 %
(260)
(618)
(352)
(57.9) % 75.6 %
$ 444 $ 393 $ 263
13.0 % 49.4 %
Cash Equity
Trading
Revenues
Transaction-
based
expenses:
Transaction
rebates
Brokerage,
clearance
and
exchange
fees
Cash equity
trading
revenues less
transaction-
based
expenses
In the table above, brokerage, clearance and exchange fees
includes Section 31 fees of $228 million in 2021, $586
million in 2020 and $337 million in 2019. Section 31 fees are
revenues with a
recorded as cash equity
corresponding
transaction-based
expenses.
recorded
amount
trading
in
U.S. equity options
Total industry average daily
volume (in millions)
Nasdaq PHLX matched market
share
The Nasdaq Options Market
matched market share
Nasdaq BX Options matched
market share
Nasdaq ISE Options matched
market share
Nasdaq GEMX Options matched
market share
Nasdaq MRX Options matched
market share
Total matched market share
executed on Nasdaq’s
exchanges
Year Ended December 31,
2021
2020
2019
37.2
27.7
17.5
12.4%
12.7%
15.9%
8.1%
9.8%
8.8%
1.4%
0.2%
0.2%
6.6%
7.8%
9.0%
4.3%
5.6%
4.2%
1.6%
0.7%
0.2%
34.4%
36.8%
38.3%
Nasdaq Nordic and Nasdaq Baltic options and futures
Total average daily volume of
options and futures contracts
287,182 320,204 366,289
In the table above, Nasdaq Nordic and Nasdaq Baltic total
average daily volume of options and futures contracts include
Finnish option contracts traded on Eurex for which Nasdaq
and Eurex have a revenue sharing arrangement.
Equity derivative trading and clearing revenues and equity
derivative trading and clearing revenues less transaction-
based expenses increased in 2021 compared with 2020
primarily due to higher U.S. industry trading volumes,
partially offset by lower overall U.S. matched market share
executed on Nasdaq's exchanges and a lower capture rate.
Also partially offsetting the increase in equity derivative
trading and clearing revenues was lower Section 31 pass-
through fee revenue.
Section 31 fees are recorded as equity derivative trading and
clearing revenues with a corresponding amount recorded as
brokerage, clearance and exchange fees in the Consolidated
Statements of Income. In the U.S., we are assessed these fees
from the SEC and pass them through to our customers in the
form of incremental fees. Pass-through fees can increase or
decrease due to rate changes by the SEC, our percentage of
the overall industry volumes processed on our systems, and
differences in actual dollar value of shares traded. Since the
amount recorded in revenues is equal to the amount recorded
as brokerage, clearance and exchange fees, there is no impact
on our revenues less transaction-based expenses. Section 31
fees decreased in 2021 compared with 2020 due to lower
average SEC fee rates, partially offset by higher dollar value
traded on Nasdaq's exchanges.
Transaction rebates, in which we credit a portion of the per
share execution charge to the market participant, increased in
2021 compared with 2020. The increase in 2021 was
primarily due to higher U.S. industry trading volumes,
partially offset by lower overall U.S. matched market share
executed on Nasdaq's exchanges and a lower rebate capture
rate.
40
Total U.S.-listed securities
Total industry average daily
share volume (in billions)
Matched share volume (in
billions)
The Nasdaq Stock Market
matched market share
Nasdaq BX matched market
share
Nasdaq PSX matched market
share
Total matched market share
executed on Nasdaq’s
exchanges
Market share reported to the
FINRA/Nasdaq Trade
Reporting Facility
Total market share
Year Ended December 31,
2021
2020
2019
11.4
10.9
7.0
491.9
508.3
348.1
15.8%
16.8%
17.2%
Transaction rebates decreased 2021 compared with 2020. For
The Nasdaq Stock Market and Nasdaq PSX, we credit a
portion of the per share execution charge to the market
participant that provides the liquidity, and for Nasdaq BX, we
credit a portion of the per share execution charge to the
market participant that takes the liquidity. The decrease was
primarily due to lower overall U.S. matched market share
executed on Nasdaq's exchanges and a lower rebate capture
rate, partially offset by higher U.S. industry trading volumes.
0.6%
0.9%
1.7%
FICC Revenues
0.7%
0.6%
0.7%
The following table present revenues from our FICC
business:
17.1%
18.3%
19.6%
34.9%
52.0%
31.8%
50.1%
29.8%
49.4%
Nasdaq Nordic and Nasdaq Baltic securities
Average daily number of
equity trades executed on
Nasdaq’s exchanges
1,036,523 933,822 590,705
Total average daily value of
shares traded (in billions)
Total market share executed
on Nasdaq’s exchanges
$ 6.4
$ 5.6
$ 4.5
76.9%
78.1%
72.8%
In the table above, total market shares includes transactions
executed on The Nasdaq Stock Market’s, Nasdaq BX’s and
Nasdaq PSX’s systems plus trades reported through the
FINRA/Nasdaq Trade Reporting Facility.
Cash equity trading revenues decreased in 2021 compared
with 2020 primarily due to lower Section 31 pass-through fee
revenue and lower overall U.S. matched market share
executed on Nasdaq's exchanges, partially offset by higher
U.S. industry trading volumes, higher U.S. gross capture
rates, higher European value traded and a favorable impact
from changes in foreign exchange rates.
Cash equity trading revenues less transaction-based expenses
increased in 2021 compared with 2020 primarily due to
higher U.S. net capture rates, higher U.S. industry trading
volumes, higher European value traded and a favorable
impact from changes in foreign exchange rates, partially
offset by lower overall U.S. matched market share executed
on Nasdaq's exchanges.
Similar to equity derivative trading and clearing, in the U.S.
we record Section 31 fees as cash equity trading revenues
with a corresponding amount recorded as brokerage,
clearance and exchange fees in the Consolidated Statements
of Income. We are assessed these fees from the SEC and pass
them through to our customers in the form of incremental
fees. Since the amount recorded as revenues is equal to the
amount recorded as brokerage, clearance and exchange fees,
there is no impact on our revenues less transaction-based
expenses. Section 31 fees decreased in 2021 compared with
2020 primarily due to lower average SEC fee rates.
41
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
2021 vs.
2020
2020 vs.
2019
FICC Revenues $
59 $
53 $
51
11.3 % 3.9 %
FICC revenues increased in 2021 compared with 2020
primarily due to higher European products revenues and a
positive impact from foreign exchange rates.
Trade Management Services Revenues
The following tables present revenues and key drivers from
our Trade Management Services business:
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
2021 vs.
2020
2020 vs.
2019
Trade
Management
Services
Revenues
ARR
$ 325 $ 296 $ 287
9.8 % 3.1 %
Year Ended December 31,
2021
2020
2019
(in millions)
$ 330 $ 308 $ 284
Trade management services revenues increased in 2021
compared with 2020 primarily due to increased demand for
connectivity and infrastructure services.
OTHER REVENUES
Other revenues include the revenues associated with our U.S.
Fixed Income business, which was sold in June 2021. Prior to
the sale date, these revenues were included in our Market
Services and Investment Intelligence segments. See “2021
Divestiture,” of Note 4,“Acquisitions and Divestiture,” to the
consolidated financial statements for further discussion of
this divestiture. Additionally, other
include
revenues associated with the NPM business which we
contributed in July 2021 to a standalone, independent
company, of which we own the largest minority interest,
together with a consortium of
financial
institutions. Prior to July 2021, these revenues were included
in our Corporate Platforms segment.
third party
revenues
EXPENSES
Operating Expenses
The following tables present our operating expenses:
Year Ended December 31,
2021
2020
2019
(in millions)
Percentage Change
2020 vs.
2021 vs.
2019
2020
$ 938 $ 786 $ 707
19.3 % 11.2 %
144
137
127
5.1 % 7.9 %
186
151
133
23.2 % 13.5 %
Compensation and
benefits
Professional and
contract services
Computer
operations and
data
communications
Occupancy
109
107
97
1.9 % 10.3 %
General,
administrative
and other
Marketing and
advertising
Depreciation and
amortization
Regulatory
Merger and
strategic
initiatives
Restructuring
charges
Total
operating
expenses
85
142
125
(40.1) % 13.6 %
57
39
39
46.2 %
— %
278
202
190
37.6 % 6.3 %
64
24
31
166.7 % (22.6) %
87
33
30
163.6 % 10.0 %
31
48
39
(35.4) % 23.1 %
$ 1,979 $ 1,669 $ 1,518
18.6 % 9.9 %
The increase in compensation and benefits expense in 2021
compared with 2020 was primarily driven by higher
performance-linked compensation expense, our continued
investment to drive growth, an increase in headcount as a
result of our acquisition of Verafin and an unfavorable
impact from foreign exchange rates.
Headcount increased to 5,814 employees as of December 31,
2021 from 4,830 as of December 31, 2020 primarily due to
our recent acquisition of Verafin.
Professional and contract services expense increased in 2021
compared with 2020 primarily due to an increase in
consulting costs.
Computer operations and data communications expense
increased in 2021 compared with 2020 primarily due to our
acquisition of Verafin and higher hardware and software
maintenance costs due to increased cloud storage costs.
Marketing and advertising expense
in 2021
compared with 2020 primarily due to an increase in
marketing commitments primarily driven by the increase in
new listings.
increased
Depreciation and amortization expense increased in 2021
compared with 2020 primarily due to additional expense for
acquired intangible assets related to our acquisition of
Verafin.
Regulatory expense increased in 2021 compared with 2020
primarily due to a charge associated with an administrative
fine issued by the SFSA. See “Nasdaq Commodities Clearing
Default,” of Note 15, “Clearing Operations,”
the
consolidated financial statements for further discussion of the
SFSA administrative fine.
to
Merger and strategic initiatives expense increased in 2021
compared with 2020 primarily due to the acquisition of
Verafin. We have pursued various strategic initiatives and
completed acquisitions and divestitures in recent years, which
have resulted in expenses which would not have otherwise
been incurred. These expenses generally include integration
costs, as well as legal, due diligence and other third party
transaction costs and will vary based on the size and
frequency of the activities described above.
See Note 20, “Restructuring Charges,” to the consolidated
financial statements for further discussion of our 2019
restructuring plan and charges associated with this plan.
Non-operating Income and Expenses
The following table presents our non-operating income and
expenses:
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
2021 vs.
2020
2020 vs.
2019
Interest income
$
1 $
4 $
10
(75.0) % (60.0) %
Interest expense
(125)
(101)
(124)
23.8 % (18.5) %
Net interest
expense
Net gain on
divestiture of
businesses
(124)
(97)
(114)
27.8 % (14.9) %
84
—
27
N/M (100.0) %
Other income
81
5
5
1,520.0 %
— %
Net income
from
unconsolidated
investees
Total non-
operating
income
52
70
84
(25.7) % (16.7) %
$
93 $
(22) $
2
(522.7) % (1,200.0) %
Occupancy expense increased in 2021 compared with 2020
due to our acquisition of Verafin and higher data center costs.
____________
N/M Not meaningful.
General, administrative and other expense decreased in 2021
compared with 2020 primarily due to charitable donations
made to the Nasdaq Foundation, COVID-19 response and
relief efforts and social justice charities in 2020, and a
reserve recorded for a loss on a Market Technology
implementation project in 2020.
Interest income decreased in 2021 compared with 2020
primarily due to a decrease in interest rates and lower average
cash and cash equivalents balance.
42
The following table presents our interest expense:
NON-GAAP FINANCIAL MEASURES
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
2021 vs.
2020
2020 vs.
2019
$ 115 $ 93 $ 115
23.7 % (19.1) %
7
3
6
2
6
3
16.7 % — %
50.0 % (33.3) %
Interest expense
on debt
Accretion of debt
issuance costs
and debt
discount
Other fees
Interest expense
$ 125 $ 101 $ 124
23.8 % (18.5) %
Interest expense increased in 2021 compared with 2020
primarily due to new issuances of senior notes in December
2020 and commercial paper issuances in the first quarter of
2021 to fund our acquisition of Verafin. See “2021
Acquisition,” of Note 4, “Acquisitions and Divestiture,” to
the consolidated financial statements for further discussion of
the acquisition of Verafin. See Note 9, “Debt Obligations,” to
the consolidated financial statements for further discussion of
our debt obligations.
The net gain on divestiture of businesses in 2021 relates to
the sale of our U.S. Fixed Income business, which was part
of our FICC business within our Market Services segment.
We recognized a pre-tax gain on the sale of $84 million, net
of disposal costs. See “2021 Divestiture,” of Note 4,
“Acquisitions and Divestiture,” to the consolidated financial
statements for further discussion.
Other income increased in 2021 compared with 2020
primarily due to gains from sales of strategic investments
entered into through our corporate venture program.
Net income from unconsolidated investees decreased in the
2021 compared with 2020 primarily due to a decrease in
income recognized from our equity method investment in
OCC. See “Equity Method Investments,” of Note 6,
“Investments,” to the consolidated financial statements for
further discussion.
Tax Matters
The following table presents our income tax provision and
effective tax rate:
Year Ended December 31,
Percentage Change
2021
2020
2019
(in millions)
2021 vs.
2020
2020 vs.
2019
Income tax
provision
$ 347 $ 279 $ 245
24.4 % 13.9 %
Effective tax rate
22.6 % 23.0 % 24.0 %
For further discussion of our tax matters, see Note 17,
“Income Taxes,” to the consolidated financial statements.
In addition to disclosing results determined in accordance
with U.S. GAAP, we have also provided non-GAAP net
income attributable to Nasdaq and non-GAAP diluted
earnings per share. Management uses this non-GAAP
information internally, along with U.S. GAAP information,
in evaluating our performance and in making financial and
operational decisions. We believe our presentation of these
measures provides investors with greater transparency and
supplemental data relating to our financial condition and
results of operations. In addition, we believe the presentation
of these measures is useful to investors for period-to-period
comparisons of our ongoing operating performance.
These measures are not in accordance with, or an alternative
to, U.S. GAAP, and may be different from non-GAAP
measures used by other companies. In addition, other
companies, including companies in our industry, may
calculate such measures differently, which reduces their
usefulness as comparative measures. Investors should not
rely on any single financial measure when evaluating our
business. This non-GAAP information should be considered
as supplemental in nature and is not meant as a substitute for
our operating results in accordance with U.S. GAAP. We
recommend investors review the U.S. GAAP financial
measures included in this Annual Report on Form 10-K,
including our consolidated financial statements and the notes
thereto. When viewed in conjunction with our U.S. GAAP
results and the accompanying reconciliation, we believe these
non-GAAP measures provide greater transparency and a
more complete understanding of factors affecting our
business than U.S. GAAP measures alone.
We understand that analysts and investors regularly rely on
non-GAAP financial measures, such as non-GAAP net
income attributable to Nasdaq and non-GAAP diluted
earnings per share, to assess operating performance. We use
non-GAAP net income attributable to Nasdaq and non-
GAAP diluted earnings per share because they highlight
trends more clearly in our business that may not otherwise be
apparent when relying solely on U.S. GAAP financial
measures, since these measures eliminate from our results
specific financial items that have less bearing on our ongoing
operating performance. Non-GAAP net income attributable
to Nasdaq for the periods presented below is calculated by
adjusting for the following items:
• Amortization expense of acquired intangible assets: We
amortize intangible assets acquired in connection with
various acquisitions. Intangible asset amortization expense
can vary from period to period due to episodic acquisitions
completed, rather
than from our ongoing business
operations. As such, if intangible asset amortization is
included in performance measures, it is more difficult to
the
assess
businesses, the relative operating performance of the
businesses between periods, and the earnings power of
Nasdaq. Performance measures excluding intangible asset
amortization expense therefore provide investors with a
the day-to-day operating performance of
43
receivable associated with
• for the year ended December 31, 2020, a provision for
notes
funding of
technology development for the CAT included in
in our
general, administrative and other expense
Consolidated Statements of Income;
the
• for the years ended December 31, 2021 and 2020, a
charge on extinguishment of debt which is included in
general, administrative and other expense
in our
Consolidated Statements of Income;
• for the year ended December 31, 2021, a net gain on
divestiture of business, which represents our pre-tax net
gain of $84 million on the sale of our U.S. Fixed Income
business;
• for the year ended December 31, 2020, charitable
donations made to the Nasdaq Foundation, COVID-19
response and relief efforts, and social justice charities
included in general, administrative and other expense in
our Consolidated Statements of Income; and
• for the year ended December 31, 2021 gains from
strategic investments entered into through our corporate
venture program included in other income in our
Consolidated Statements of Income.
• Significant tax items: The non-GAAP adjustment to the
income tax provision for the years ended December 31,
2021 and 2020 includes the tax impact of each non-GAAP
adjustment. In addition, for year ended December 31,
2021, the non-GAAP adjustment to the income tax
provision includes return-to-provision adjustments and
prior period tax benefits and for the year ended December
31, 2020, a tax benefit on compensation related deductions
determined to be allowable and excess tax benefit related
to employee share-based compensation to reflect the
recognition of the income tax effects of share-based awards
when awards vest or are settled. Beginning with the quarter
ended March 31, 2021, such excess tax benefits are no
longer included as a non-GAAP adjustment as they do not
have a material impact on period over period comparison.
useful representation of our businesses’ ongoing activity in
each period.
• Merger and strategic initiatives expense: We have pursued
various strategic initiatives and completed acquisitions and
divestitures in recent years that have resulted in expenses
which would not have otherwise been incurred. These
expenses generally include integration costs, as well as
legal, due diligence and other third party transaction costs.
The frequency and the amount of such expenses vary
significantly based on the size, timing and complexity of
the transaction. Accordingly, we exclude these costs for
purposes of calculating non-GAAP measures, which
provide a more meaningful analysis of Nasdaq’s ongoing
operating performance or comparisons
in Nasdaq’s
performance between periods.
• Restructuring charges: We initiated the transition of
certain technology platforms to advance our strategic
opportunities as a technology and analytics provider and
continue the re-alignment of certain business areas. See
Note 20, “Restructuring Charges,” to the consolidated
financial statements for further discussion of our 2019
restructuring plan, which was completed in June 2021.
represented a
Charges associated with
fundamental shift in our strategy and technology as well as
executive re-alignment and were excluded for purposes of
calculating non-GAAP measures as they are not reflective
of ongoing operating performance or comparisons in
Nasdaq's performance between periods.
this plan
• Net income from unconsolidated investee: See “Equity
Method Investments,” of Note 6, “Investments,” to the
consolidated financial statements for further discussion.
Our income on our investment in OCC may vary
significantly compared to prior periods due to the changes
in OCC's capital management policy. Accordingly, we will
exclude this income from current and prior periods for
purposes of calculating non-GAAP measures which
provide a more meaningful analysis of Nasdaq’s ongoing
operating performance or comparisons
in Nasdaq’s
performance between periods.
• Other significant items: We have excluded certain other
charges or gains, including certain tax items, that are the
result of other non-comparable events to measure operating
performance. We believe the exclusion of such amounts
allows management and investors to better understand the
ongoing financial results of Nasdaq. Other significant
items include:
• for the year ended December 31, 2021 a charge related to
an administrative fine imposed by the SFSA associated
with the default that occurred in 2018, see “Nasdaq
Commodities Clearing Default,” of Note 15, “Clearing
Operations,” to the consolidated financial statements for
further discussion, and for the year ended December 31,
2020, the reversal of a $6 million regulatory fine issued
by the SFSA. Both charges have been included in
regulatory expense in our Consolidated Statements of
Income;
44
The following table presents reconciliations between U.S.
GAAP net income attributable to Nasdaq and diluted
earnings per share and non-GAAP net income attributable to
Nasdaq and diluted earnings per share:
U.S. GAAP net income
attributable to Nasdaq
Non-GAAP adjustments:
Amortization expense of
acquired intangible assets
Merger and strategic initiatives
expense
Restructuring charges
Net income from unconsolidated
investee
Regulatory matters
Provision for notes receivable
Extinguishment of debt
Net gain on divestiture of
businesses
Charitable donations
Other
Year Ended December 31,
2021
2020
2019
(in millions, except per share
amounts)
$ 1,187 $ 933
$ 774
170
103
101
87
31
33
48
30
39
(52)
(70)
(82)
33
—
33
(6)
—
6
36
20
11
(84)
—
(27)
—
(71)
17
14
181
—
17
109
(77)
(43)
Total non-GAAP adjustments
147
Adjustment to the income tax
provision to reflect non-GAAP
adjustments and other tax items (61)
Excess tax benefits related to
employee share-based
compensation
Total non-GAAP tax
adjustments
—
(6)
(5)
(61)
(83)
(48)
Total non-GAAP adjustments,
net of tax
86
98
61
Non-GAAP net income
attributable to Nasdaq
U.S. GAAP effective tax rate
Total adjustments from non-
GAAP tax rate
$ 1,273 $ 1,031 $ 835
22.6 % 23.0 % 24.0 %
1.7 % 3.0 % 2.0 %
Non-GAAP effective tax rate
24.3 % 26.0 % 26.0 %
Weighted-average common shares
outstanding for diluted earnings
per share
168.4
166.9
167.0
U.S. GAAP diluted earnings per
share
Total adjustments from non-
GAAP net income
Non-GAAP diluted earnings per
share
$ 7.05 $ 5.59 $ 4.63
0.51
0.59
0.37
$ 7.56 $ 6.18 $ 5.00
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have funded our operating activities and met
our commitments through cash generated by operations,
augmented by the periodic issuance of our common stock and
debt. Currently, our cost and availability of funding remain
healthy.
As of December 31, 2021, our sources and uses of cash were
not materially impacted by COVID-19 and we have not
identified any liquidity deficiencies as a result of the ongoing
impact of the COVID-19 pandemic.
We will continue to closely monitor and manage our liquidity
and capital resources. In addition, we continue to prudently
assess our capital deployment strategy through balancing
acquisitions, internal investments, debt repayments, and
shareholder return activity, including share repurchases and
dividends.
In the near term, we expect that our operations and the
facility and
availability under our
commercial paper program will provide sufficient cash to
fund our operating expenses, capital expenditures, debt
repayments, any share repurchases, and any dividends.
revolving credit
In April 2021, we filed a universal shelf registration
statement on Form S-3ASR (Automatic Shelf Registration)
with the SEC to have the ability to sell various types of
securities including debt securities, common stock, preferred
stock, depository receipts, warrants, subscription rights,
purchase contracts and purchase units. The specific terms of
any securities to be sold will be described in supplemental
filings with the SEC. The registration statement will expire in
April 2024.
In July 2021, we issued the 2033 Notes and primarily used
the net proceeds from the sale of the 2033 Notes to redeem
the 2023 Notes. See
“Early
Extinguishment of 2023 Notes,” of Note 9, “Debt
Obligations,” to the consolidated financial statements for
further discussion.
“2033 Notes,”
and
the current portion of
The value of various assets and liabilities, including cash and
cash equivalents, receivables, accounts payable and accrued
expenses,
long-term debt, and
commercial paper, can fluctuate from month to month.
Working capital (calculated as current assets less current
liabilities) was $(449) million as of December 31, 2021,
compared with $2,736 million as of December 31, 2020, a
decrease of $3,185 million. The decrease was primarily due
to a decrease in cash and cash equivalents, mainly due to the
utilization of cash to partially fund the acquisition of Verafin,
increases in short-term debt and deferred revenue, partially
offset by a decrease in Section 31 fees payable and an
increase in other current assets.
Principal factors that could affect the availability of our
internally-generated funds include:
• deterioration of our revenues in any of our business
segments;
45
• changes in regulatory and working capital requirements;
• other investing activities;
and
• an increase in our expenses.
Principal factors that could affect our ability to obtain cash
from external sources include:
• operating covenants contained in our credit facilities that
limit our total borrowing capacity;
• credit rating downgrades, which could limit our access to
additional debt;
• a significant decrease in the market price of our common
stock;
• volatility or disruption in the public debt and equity
markets; and
• the impact of the COVID-19 pandemic on our business.
The following sections discuss the effects of changes in our
regulatory capital
financial assets, debt obligations,
requirements, and cash flows on our liquidity and capital
resources.
Financial Assets
The following table summarizes our financial assets:
December 31,
2021
December 31,
2020
(in millions)
393 $
2,745
208
195
601 $
2,940
$
$
Cash and cash equivalents
Financial investments
Total financial assets
Cash and Cash Equivalents
rates, our
Cash and cash equivalents includes all non-restricted cash in
banks and highly liquid investments with original maturities
of 90 days or less at the time of purchase. The balance
retained in cash and cash equivalents is a function of
anticipated or possible short-term cash needs, prevailing
interest
investment policy, and alternative
investment choices. As of December 31, 2021, our cash and
cash equivalents of $393 million were primarily invested in
bank deposits and money market funds. In the long-term, we
may use both internally generated funds and external sources
to satisfy our debt obligations and other long-term liabilities.
Cash and cash equivalents as of December 31, 2021
decreased $2,352 million from December 31, 2020, primarily
due to:
• payments related to employee shares withheld for taxes;
• payment of debt extinguishment cost, partially offset by;
• net cash provided by operating activities;
• proceeds from issuances of long-term debt, net of issuance
costs and utilization of credit commitment;
• proceeds from commercial paper, net; and
• proceeds from divestiture of businesses, net of cash
divested.
See “Cash Flow Analysis” below for further discussion.
Repatriation of Cash
Our cash and cash equivalents held outside of the U.S. in
various foreign subsidiaries totaled $266 million as of
December 31, 2021 and $237 million as of December 31,
2020. The remaining balance held in the U.S. totaled $127
million as of December 31, 2021 and $2,508 million as of
December 31, 2020.
Unremitted earnings of certain subsidiaries outside of the
U.S. are used to finance our international operations and are
considered to be indefinitely reinvested.
Share Repurchase Program
See “Share Repurchase Program,” of Note 12, “Nasdaq
Stockholders’ Equity,”
financial
statements for further discussion of our share repurchase
program.
the consolidated
to
ASR Agreements
See “ASR Agreements,” of Note 12, “Nasdaq Stockholders’
Equity,” to the consolidated financial statements for further
discussion of our ASR agreements.
Cash Dividends on Common Stock
The following table presents our quarterly cash dividends
paid per common share on our outstanding common stock:
First quarter
Second quarter
Third quarter
Fourth quarter
Total
2021
2020
$
$
0.49
0.54
0.54
0.54
2.11
$
$
0.47
0.49
0.49
0.49
1.94
See “Cash Dividends on Common Stock,” of Note 12,
“Nasdaq Stockholders’ Equity,” to the consolidated financial
statements for further discussion of the dividends.
• our acquisition of Verafin, net of cash and cash equivalents
Financial Investments
acquired;
• repayment of borrowings under our credit commitment and
debt obligations;
• the ASR agreement;
• other repurchases of our common stock;
• cash dividends paid on our common stock;
• purchases of property and equipment;
46
investments
Our financial
totaled $208 million as of
December 31, 2021 and $195 million as of December 31,
2020. Of these securities, $162 million as of December 31,
2021 and $175 million as of December 31, 2020 are assets
primarily utilized to meet regulatory capital requirements,
mainly for our clearing operations at Nasdaq Clearing. See
Note 6, “Investments,”
financial
statements for further discussion.
the consolidated
to
Debt Obligations
Regulatory Capital Requirements
The following table summarizes our debt obligations by
contractual maturity:
$
1,018 $
597
Broker-Dealer Net Capital Requirements
Clearing Operations Regulatory Capital Requirements
We are required to maintain minimum levels of regulatory
capital for the clearing operations of Nasdaq Clearing. The
level of regulatory capital required to be maintained is
dependent upon many factors, including market conditions
and creditworthiness of the counterparty. As of December 31,
2021, our required regulatory capital of $138 million was
comprised of highly rated European government debt
securities that are included in financial investments in the
Consolidated Balance Sheets.
Our broker-dealer subsidiaries, Nasdaq Execution Services,
NFSTX, LLC, and Nasdaq Capital Markets Advisory, are
subject to regulatory requirements intended to ensure their
general financial soundness and liquidity. These requirements
obligate these subsidiaries to comply with minimum net
capital requirements. As of December 31, 2021,
the
combined required minimum net capital totaled $1 million
and the combined excess capital totaled $21 million,
substantially all of which is held in cash and cash equivalents
in the Consolidated Balance Sheets. The required minimum
net capital is included in restricted cash and cash equivalents
in the Consolidated Balance Sheets.
Nordic
Requirements
and Baltic Exchange Regulatory Capital
The entities that operate trading venues in the Nordic and
Baltic countries are each subject to local regulations and are
required to maintain regulatory capital intended to ensure
their general financial soundness and liquidity. As of
December 31, 2021, our required regulatory capital of $35
million was primarily invested in European government debt
securities that are included in financial investments in the
Consolidated Balance Sheets and cash, which is included in
restricted cash and cash equivalents in the Consolidated
Balance Sheets.
Other Capital Requirements
We operate several other businesses, which are subject to
local regulation and are required to maintain certain levels of
regulatory capital. As of December 31, 2021, other required
regulatory capital was $8 million and was primarily included
in restricted cash in the Consolidated Balance Sheets.
Maturity Date
December 31,
2021
December 31,
2020
(in millions)
Weighted-
average
maturity of 29
days
$
420 $
December 2022
598
—
597
May 2023 $
— $
June 2024
499
730
498
December 2025
(4)
(4)
June 2026
March 2029
February 2030
January 2031
July 2033
December 2040
April 2050
498
676
676
643
694
644
486
497
726
726
643
—
643
485
$
$
4,812 $
4,944
5,830 $
5,541
Short-term debt -
commercial
paper
2022 Notes
Total short-term
debt
Long-term debt
- senior
unsecured
notes:
2023 Notes
2024 Notes
2020 Credit
Facility
2026 Notes
2029 Notes
2030 Notes
2031 Notes
2033 Notes
2040 Notes
2050 Notes
Total long-term
debt
Total debt
obligations
In the table above, the 2022 Notes were reclassified to short-
term debt as of December 31, 2021.
In addition to the $1.25 billion revolving credit facility, we
also have other credit facilities primarily to support our
Nasdaq Clearing operations in Europe, as well as to provide a
cash pool credit line for one subsidiary. These credit
facilities, which are available in multiple currencies, totaled
$212 million as of December 31, 2021 and $232 million as of
December 31, 2020 in available liquidity, none of which was
utilized.
As of December 31, 2021, we were in compliance with the
covenants of all of our debt obligations.
See Note 9, “Debt Obligations,” to the consolidated financial
statements for further discussion of our debt obligations.
47
Cash Flow Analysis
The following table summarizes the changes in cash flows:
Year Ended December 31,
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash and
cash equivalents and restricted cash and cash
equivalents
Net increase (decrease) in cash and cash
equivalents and restricted cash and cash
equivalents
Cash and cash equivalents, restricted cash and
cash equivalents at beginning of period
Cash and cash equivalents, restricted cash and
cash equivalents at end of period
Reconciliation of Cash, Cash Equivalents and
Restricted Cash and Cash Equivalents
Cash and cash equivalents
Restricted cash and cash equivalents
Restricted cash and cash equivalents (default
funds and margin deposits)
Total
2021
2020
2019
(in millions)
$ 1,083 $ 1,252 $ 963
(2,653)
(122)
(414)
1,418
1,910
(2,472)
(331)
353
(188)
(483) 3,393
(2,111)
5,979
2,586
4,697
$ 5,496 $ 5,979 $ 2,586
$ 393 $ 2,745 $ 332
30
37
29
5,074
3,197
2,224
$ 5,496 $ 5,979 $ 2,586
We have adjusted prior period presentation of opening and
ending amounts of cash, cash equivalents, and restricted cash
and cash equivalents in our consolidated statements of cash
flows to include restricted cash and cash equivalents related
to the default funds and margin deposits. See Note 2,
“Summary of Significant Accounting Policies,” to the
consolidated financial statements for further discussion of
this adjustment.
Net Cash Provided by Operating Activities
Net cash provided by operating activities primarily consists
of net income adjusted for certain non-cash items such as:
depreciation and amortization expense of property and
equipment; amortization expense of acquired finite-lived
intangible assets; expense associated with share-based
compensation; deferred income taxes; debt extinguishment
costs; net gain on divestiture of a business, and net income
from unconsolidated investees.
Net cash provided by operating activities is also impacted by
the effects of changes in operating assets and liabilities such
as: accounts receivable and deferred revenue which are
impacted by the timing of customer billings and related
collections from our customers; accounts payable and
accrued expenses due to timing of payments; accrued
impacted by employee
personnel costs, which are
performance targets and the timing of payments related to
employee bonus incentives; and Section 31 fees payable to
the SEC, which is impacted by the timing of collections from
customers and payments to the SEC.
Net cash provided by operating activities decreased $169
million for the year ended December 31, 2021 compared with
2020. The decrease was primarily driven by a cash payment
of an acquisition-related tax obligation on behalf of Verafin
of $221 million and a cash payment of $102 million, the
release of which is subject to certain employment-related
conditions over three years following the closing of the
acquisition of Verafin, partially offset by higher net income.
The remaining change was primarily due to other fluctuations
in our working capital.
Net Cash Used in Investing Activities
Net cash used in investing activities for the year ended
December 31, 2021 primarily related to $2,430 million of
cash used for the acquisition of Verafin, net of cash and cash
equivalents acquired of $221 million, which was utilized to
satisfy an acquisition-related tax obligation on behalf of
Verafin, $163 million of purchases of property and
equipment, a net decrease in investments related to default
funds and margin deposits $132 million, $31 million of net
purchases of securities and other investing activities of $87
million, partially offset by proceeds from divestiture of
businesses, net of cash divested $190 million.
Net cash used in investing activities for the year ended
December 31, 2020 primarily related to $157 million of cash
used for acquisitions, net of cash and cash equivalents
acquired and $188 million of purchases of property and
equipment, partially offset by $119 million of proceeds from
the net sales of securities and a net increase in investments
related to default funds and margin deposits of $109 million.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities for the year ended
December 31, 2021 primarily related to a net increase in
default funds and margin deposits of $2,330 million,
proceeds of $826 million from the issuances of long-term-
debt and utilization of credit commitment and $420 million
of proceeds from issuances of commercial paper, net,
partially offset by repayment of borrowings under our credit
commitment and debt obligations of $804 million, $475
million of repurchases of common stock pursuant to the ASR
agreement, $468 million in other repurchases of common
stock, $350 million of dividend payments to our shareholders
and a $33 million payment for debt extinguishment costs.
Net cash provided by financing activities for the year ended
December 31, 2020 primarily related to $3,807 million of
proceeds from issuances of long-term debt and the utilization
of our credit commitment and a net increase in default funds
and margin deposits $527 million, partially offset by $1,468
million in repayments of borrowings under our credit
commitment and debt obligations, $222 million
in
repurchases of common stock, $391 million of net
repayments of commercial paper, $320 million of dividend
payments to our shareholders and a $36 million payment for
debt extinguishment costs.
48
See Note 4, “Acquisitions and Divestiture,”
the
consolidated financial statements for further discussion of our
acquisitions and divestiture.
to
See Note 9, “Debt Obligations,” to the consolidated financial
statements for further discussion of our debt obligations.
See “ASR Agreements,” “Share Repurchase Program,” and
“Cash Dividends on Common Stock,” of Note 12, “Nasdaq
Stockholders’ Equity,”
financial
statements for further discussion of our ASR agreement,
share repurchase program and cash dividends paid on our
common stock.
the consolidated
to
Off-Balance Sheet Arrangements
For discussion of off-balance sheet arrangements see:
• Note 15, “Clearing Operations,” to the consolidated
financial statements for further discussion of our non-cash
default fund contributions and margin deposits received for
clearing operations; and
• Note 18, “Commitments, Contingencies and Guarantees,”
the consolidated financial statements for further
to
discussion of:
◦ Guarantees issued and credit facilities available;
Contractual Obligations and Contingent Commitments
◦ Other guarantees;
Nasdaq has contractual obligations to make future payments
under debt obligations by contract maturity, operating lease
payments, and other obligations. The following
table
summarizes material
for known
cash
contractual and other obligations as of December 31, 2021,
and the estimated timing thereof.
requirements
(in millions)
Total
<1 year
1-3
years
3-5
years
5+ years
Payments Due by Period
Debt obligation by
contractual maturity
Operating lease
obligations
Purchase obligations
$ 7,125 $ 1,131 $ 705 $ 664 $ 4,625
697
477
65
137
111
64
106
90
384
217
Total
$ 8,299 $ 1,260 $ 948 $ 865 $ 5,226
In the table above:
• Debt obligations by contractual maturity include both
principal and interest obligations. As of December 31,
2021, an interest rate of 2.4% was used to compute the
amount of the contractual obligations for interest on the
2020 Credit Facility. All other debt obligations were
primarily calculated on a 365-day basis at the contractual
fixed rate multiplied by the aggregate principal amount as
of December 31, 2021. See Note 9, “Debt Obligations,” to
the consolidated financial statements for further discussion.
• Operating lease obligations represent our undiscounted
operating lease liabilities as of December 31, 2021. See
Note 16, “Leases,” to the consolidated financial statements
for further discussion of our leases.
• Purchase obligations primarily
represent minimum
outstanding obligations due under software
license
agreements. The balance as of December 31, 2021 is
primarily comprised of our multi-year AWS partnership
contract, which replaces our previous shorter
term
contracts,
those with no minimum spend
commitment, and is not expected to increase our overall
spend footprint with AWS over the life of the contract,
based on projected growth and expansion of our existing
AWS-based solutions.
including
◦ Routing brokerage activities;
◦ Legal and regulatory matters; and
◦ Tax audits.
Quantitative And Qualitative Disclosures About Market
Risk
As a result of our operating, investing and financing
activities, we are exposed to market risks such as interest rate
risk and foreign currency exchange rate risk. We are also
exposed to credit risk as a result of our normal business
activities.
We have implemented policies and procedures to measure,
manage, monitor and report risk exposures, which are
reviewed regularly by management and the board of
directors. We identify risk exposures and monitor and
manage such risks on a daily basis.
We perform sensitivity analyses to determine the effects of
market risk exposures. We may use derivative instruments
solely to hedge financial risks related to our financial
positions or risks that are incurred during the normal course
of business. We do not use derivative instruments for
speculative purposes.
Interest Rate Risk
We are subject to the risk of fluctuating interest rates in the
normal course of business. Our exposure to market risk for
changes in interest rates relates primarily to our financial
investments and debt obligations, which are discussed below.
Financial Investments
As of December 31, 2021, our investment portfolio was
primarily comprised of highly rated European government
debt securities, which pay a fixed rate of interest. These
securities are subject to interest rate risk and the fair value of
these securities will decrease if market interest rates increase.
If market interest rates were to increase immediately and
uniformly by a hypothetical 100 basis points from levels as
of December 31, 2021, the fair value of this portfolio would
have declined by $5 million.
49
Debt Obligations
Foreign Currency Exchange Rate Risk
the amounts outstanding from
As of December 31, 2021, the majority of our debt
obligations were fixed-rate obligations. Interest rates on
certain tranches of notes are subject to adjustment to the
extent our debt rating is downgraded below investment grade,
as further discussed in Note 9, “Debt Obligations,” to the
consolidated financial statements. While changes in interest
rates will have no impact on the interest we pay on fixed-rate
obligations, we are exposed to changes in interest rates as a
result of
the sale of
commercial paper, which have variable interest rates and any
borrowings under our 2020 Credit Facility, as the interest rate
on this facility has a variable interest rate. As of December
31, 2021, we had principal amounts outstanding of $420
million of commercial paper and no amounts outstanding
under our 2020 Credit Facility. A hypothetical 100 basis
points
rates on our outstanding
commercial paper would increase annual interest expense by
approximately $4 million based on borrowings as of
December 31, 2021.
increase
interest
in
We may utilize interest rate swap agreements to achieve a
desired mix of variable and fixed rate debt.
transactional
We are subject to foreign currency exchange rate risk. Our
currency
exposure
primary
denominated revenues less transaction-based expenses and
operating income for the years ended December 31, 2021 and
2020 are presented in the following tables:
foreign
to
Euro
Swedish
Krona
Other
Foreign
Currencies
U.S.
Dollar
Total
(in millions, except currency rate)
Year Ended December 31, 2021
Average foreign
currency rate to
the U.S. dollar
Percentage of
revenues less
transaction-
based expenses
Percentage of
operating
income
Impact of a 10%
adverse
currency
fluctuation on
revenues less
transaction-
based expenses
Impact of a 10%
adverse
currency
fluctuation on
operating
income
1.183
0.117
#
N/A
N/A
7.1 % 6.2 %
4.9 % 81.8 % 100.0 %
10.4 % (4.6) %
(9.1) % 103.3 % 100.0 %
$ (24)
$ (21)
$ (17)
$ —
$ (62)
$ (15)
$ (7)
$ (13)
$ —
$ (35)
Year Ended December 31, 2020
Average foreign
currency rate to
the U.S. dollar
Percentage of
revenues less
transaction-
based expenses
Percentage of
operating
income
Impact of a 10%
adverse
currency
fluctuation on
revenues less
transaction-
based expenses
Impact of a 10%
adverse
currency
fluctuation on
operating
income
1.1398
0.1086
#
N/A
N/A
7.7 % 6.6 %
4.7 % 81.0 % 100.0 %
10.7 % (4.6) %
(4.9) % 98.8 % 100.0 %
$ (22)
$ (19)
$ (14)
$ —
$ (55)
$ (13)
$ (6)
$
(6)
$ —
$ (25)
____________
#
N/A Not applicable.
Represents multiple foreign currency rates.
50
Our investments in foreign subsidiaries are exposed to
volatility in currency exchange rates through translation of
the foreign subsidiaries’ net assets or equity to U.S. dollars.
Substantially all of our foreign subsidiaries operate in
functional currencies other than the U.S. dollar. The financial
statements of these subsidiaries are translated into U.S.
dollars for consolidated reporting using a current rate of
exchange, with net gains or losses recorded in accumulated
other comprehensive loss within stockholders’ equity in the
Consolidated Balance Sheets.
Our primary exposure to net assets in foreign currencies as of
December 31, 2021 is presented in the following table:
$
Swedish Krona
British Pound
Norwegian Krone
Canadian Dollar
Australian Dollar
Euro
Net Assets
Impact of a 10%
Adverse Currency
Fluctuation
(in millions)
3,369 $
181
168
171
117
54
337
18
17
17
12
5
In the table above, Swedish Krona includes goodwill of
$2,484 million and intangible assets, net of $589 million.
Credit Risk
Credit risk is the potential loss due to the default or
deterioration in credit quality of customers or counterparties.
We are exposed to credit risk from third parties, including
customers, counterparties and clearing agents. These parties
may default on their obligations to us due to bankruptcy, lack
of liquidity, operational failure or other reasons. We limit our
exposure to credit risk by evaluating the counterparties with
which we make investments and execute agreements. For our
investment portfolio, our objective is to invest in securities to
preserve principal while maximizing yields, without
significantly increasing risk. Credit risk associated with
investments is minimized substantially by ensuring that these
financial assets are placed with governments which have
financial
ratings, well-capitalized
investment
institutions and other creditworthy counterparties.
grade
Our subsidiary, Nasdaq Execution Services, may be exposed
to credit risk due to the default of trading counterparties in
connection with the routing services it provides for our
trading customers. System trades in cash equities routed to
other market centers for members of our cash equity
exchanges are routed by Nasdaq Execution Services for
clearing to the NSCC. In this function, Nasdaq Execution
Services is to be neutral by the end of the trading day, but
may be exposed to intraday risk if a trade extends beyond the
trading day and into the next day, thereby leaving Nasdaq
Execution Services susceptible to counterparty risk in the
period between accepting the trade and routing it to the
clearinghouse. In this interim period, Nasdaq Execution
Services is not novating like a clearing broker but instead is
subject to the short-term risk of counterparty failure before
the
transaction. Once
the clearinghouse enters
the
clearinghouse officially accepts the trade for novation,
Nasdaq Execution Services is legally removed from trade
risk. However, Nasdaq has membership
execution
obligations to NSCC independent of Nasdaq Execution
Services’ arrangements.
Pursuant to the rules of the NSCC and Nasdaq Execution
Services’ clearing agreement, Nasdaq Execution Services is
liable for any losses incurred due to a counterparty or a
clearing agent’s failure to satisfy its contractual obligations,
either by making payment or delivering securities. Adverse
movements in the prices of securities that are subject to these
transactions can increase our credit risk. However, we believe
that the risk of material loss is limited, as Nasdaq Execution
Services’ customers are not permitted to trade on margin and
risk on self-cleared
NSCC
transactions by establishing credit limits and capital deposit
requirements for all brokers
that clear with NSCC.
Historically, Nasdaq Execution Services has never incurred a
liability due to a customer’s failure to satisfy its contractual
obligations as counterparty
trade. Credit
difficulties or insolvency, or the perceived possibility of
credit difficulties or insolvency, of one or more larger or
visible market participants could also result in market-wide
credit difficulties or other market disruptions.
limit counterparty
to a system
rules
We have credit risk related to transaction and subscription-
based revenues that are billed to customers on a monthly or
quarterly basis, in arrears. Our potential exposure to credit
losses on these transactions is represented by the receivable
balances in our Consolidated Balance Sheets. We review and
evaluate changes
the status of our counterparties’
creditworthiness. Credit losses such as those described above
could adversely affect our consolidated financial position and
results of operations.
in
We also are exposed to credit risk through our clearing
operations with Nasdaq Clearing. See Note 15, “Clearing
Operations,” to the consolidated financial statements for
further discussion. Our clearinghouse holds material amounts
of clearing member cash deposits, which are held or invested
primarily to provide security of capital while minimizing
credit, market and liquidity risks. While we seek to achieve a
reasonable rate of return, we are primarily concerned with
preservation of capital and managing the risks associated
with these deposits. As the clearinghouse may pass on
interest revenues (minus costs) to the members, this could
include negative or reduced yield due to market conditions.
The following is a summary of the risks associated with these
deposits and how these risks are mitigated.
• Credit Risk. When the clearinghouse has the ability to hold
cash collateral at a central bank, the clearinghouse utilizes
its access to the central bank system to minimize credit risk
exposures. When funds are not held at a central bank, we
seek to substantially mitigate credit risk by ensuring that
investments are primarily placed in large, highly rated
financial
rated government debt
instruments and other creditworthy counterparties.
institutions, highly
51
• Liquidity Risk. Liquidity risk is the risk a clearinghouse
may not be able to meet its payment obligations in the right
currency, in the right place and the right time. To mitigate
this risk, the clearinghouse monitors liquidity requirements
closely and maintains funds and assets in a manner which
minimizes the risk of loss or delay in the access by the
clearinghouse to such funds and assets. For example,
holding funds with a central bank where possible or
investing in highly liquid government debt instruments
serves to reduce liquidity risks.
• Interest Rate Risk. Interest rate risk is the risk that interest
rates rise causing the value of purchased securities to
decline. If we were required to sell securities prior to
maturity, and interest rates had risen, the sale of the
securities might be made at a loss relative to the latest
market price. Our clearinghouse seeks to manage this risk
by making short term investments of members' cash
deposits.
investment
guidelines allow for direct purchases or repurchase
agreements with short dated maturities of high quality
sovereign debt (for example, European government and
U.S. Treasury securities), central bank certificates and
multilateral development bank debt instruments.
the clearinghouse
In addition,
• Security Issuer Risk. Security issuer risk is the risk that an
issuer of a security defaults on its payment when the
security matures. This risk is mitigated by limiting
allowable
reverse
sovereign,
repurchase agreements
government agency or multilateral development bank debt
instruments.
investments and collateral under
to high quality
Critical Accounting Policies and Estimates
financial statements and
in conformity with U.S. GAAP
related
The preparation of
disclosures
requires
management to make judgments, assumptions, and estimates
that affect the amounts reported in the consolidated financial
statements and accompanying notes. Note 2, “Summary of
Significant Accounting Policies,”
the consolidated
financial statements describes the significant accounting
policies and methods used in the preparation of the
consolidated financial statements. The accounting policies
described below are significantly affected by critical
accounting estimates. Such accounting policies require
significant judgments, assumptions, and estimates used in the
preparation of the consolidated financial statements, and
actual results could differ materially from the amounts
reported based on these policies.
to
Revenue Recognition
Market Technology Revenues
Within our market infrastructure technology business, we
enter into long-term contracts with customers to develop
customized technology solutions, license the right to use
software and provide support and other services to our
these contracts containing
in
customers which results
multiple performance obligations. We allocate the contract
transaction price to each performance obligation using our
best estimate of the standalone selling price of each distinct
good or service in the contract. In instances where standalone
selling price is not directly observable, such as when we do
not sell the product or service separately, we determine the
standalone selling price predominantly through an expected
cost plus a margin approach.
We generally recognize revenue over time as our customers
simultaneously receive and consume the benefits provided by
our performance because our customer controls the asset for
which we are creating, our performance does not create an
asset with alternative use, and we have a right to payment for
performance completed to date. For these services, we
recognize revenue over time using costs incurred to date
relative to total estimated costs at completion to measure
progress toward satisfying our performance obligation.
Incurred costs represent work performed, which corresponds
with, and thereby depicts, the transfer of control to the
customer.
Accounting for our long-term contracts requires judgment
relative to assessing risks and their impact on the estimate of
revenues and costs. Our estimates are impacted by factors
such as the potential for schedule and technical issues,
productivity,
the complexity of work performed, and
logistical challenges due to the effects of COVID-19.
Revenue and cost estimates for our long-term contracts are
reviewed and reassessed at least quarterly. When adjustments
in estimated total contract costs are required, any changes in
the estimated revenues from prior estimates are recognized in
the current period for the effect of such change. If estimates
of total costs to be incurred on a contract exceed estimates of
total revenues, a provision for the entire estimated loss on the
contract is recorded in the period in which the loss is
determined.
Due to the significance of judgment in the estimation process,
as discussed above, changes in assumptions and estimates
may adversely or positively affect financial performance in
future periods.
For further discussion related to recognition of these
revenues, see “Revenue From Contracts with Customers -
Revenue Recognition - Market Technology,” of Note 2,
“Summary of Significant Accounting Policies,” to the
consolidated financial statements.
52
Goodwill, Indefinite-Lived Intangible Assets and Related
Impairment
Assets acquired and liabilities assumed in connection with
our acquisitions are recorded at their estimated fair values.
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 recognize specifically identifiable intangibles,
such as customer relationships, technology, exchange and
clearing registrations, trade names and licenses when a
specific right or contract is acquired. Goodwill and intangible
assets deemed to have indefinite useful lives, primarily
exchange and clearing registrations, are not amortized but
instead are tested for impairment at least annually as of
October 1 and more frequently whenever events or changes
in circumstances indicate that the fair value of the asset may
be less than its carrying amount, 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. We perform our goodwill impairment test at the
reporting unit level for our five reporting units: Market
the
Services segment,
Corporate Platforms segment: Listing Services and IR &
ESG Services, the Investment Intelligence segment, and the
Market Technology segment. When testing goodwill and
indefinite-lived intangible assets for impairment, we have the
option of first performing a qualitative assessment to
determine whether it is more likely than not that the fair
value of a reporting unit or indefinite-lived intangible asset is
less than their respective carrying amounts as the basis to
determine if it is necessary to perform a quantitative
impairment test. If we choose not to complete a qualitative
assessment, or if the initial assessment indicates that it is
more likely than not that the carrying amount of a reporting
unit or the carrying amount of an indefinite-lived intangible
asset exceed
their respective estimated fair values, a
quantitative test is required. Our decision to perform a
qualitative
is
influenced by a number of factors, including but not limited
to, the size of the reporting unit’s goodwill, the significance
of the excess of the reporting unit’s estimated fair value or
the indefinite-lived intangible asset’s fair value over their
last quantitative
respective carrying amounts at
assessment date, and the amount of time in between
quantitative fair value assessments.
two businesses comprising
impairment assessment
in a given year
the
the
and
assumptions used
In performing a quantitative impairment test, we compare the
fair value of each reporting unit and
indefinite-lived
intangible asset with their respective carrying amounts. The
fair value of each reporting unit is estimated using a
combination of a discounted cash flow valuation, which
incorporates assumptions regarding future growth rates,
terminal values, and discount rates, as well as guideline
public company valuations, incorporating relevant trading
multiples of comparable companies and other factors. The
estimates
consider historical
performance and are consistent with the assumptions used in
determining future profit plans for each reporting unit, which
are approved by our board of directors. The fair value of
indefinite-lived intangible assets is primarily determined on
the basis of estimated discounted value, using the Greenfield
Approach for exchange and clearing registrations and
licenses, and the relief from royalty approach or excess
earnings approach for trade names, both of which incorporate
assumptions regarding future revenue projections and
discount rates. If the carrying amounts of the reporting unit or
the indefinite-lived intangible asset exceed their respective
fair values, an impairment charge is recognized in an amount
equal to the difference, limited to the total amount of
goodwill allocated to that reporting unit or the total carrying
value of the indefinite-lived intangible asset.
The following table presents the balances of goodwill for our
reportable segments at the time of our 2021 annual
impairment test:
Market Technology
Investment Intelligence
Corporate Platforms
Market Services
October 1, 2021
(in millions)
$
$
2,176
2,457
470
3,407
8,510
In 2021 and 2020, we have elected to perform a quantitative
impairment test for goodwill and indefinite-lived intangible
assets. In conducting
the quantitative assessment, we
determined that the fair value of our goodwill for each of our
reporting units and the fair value of our indefinite-lived
intangible assets sufficiently exceed their respective carrying
amounts. As a result, there were no goodwill or indefinite-
lived intangible assets impairment charges recorded in 2021
or 2020. In 2019, we performed a qualitative assessment and
no impairment was recorded.
Although we believe our estimates of fair value are
reasonable, the determination of certain valuation inputs is
subject to management’s judgment. Changes in these inputs
could materially affect the results of our impairment review.
If our forecasts of cash flows or other key inputs are
negatively revised in the future, the estimated fair value of
each reporting unit and of our indefinite-lived intangible
assets would be adversely impacted, potentially leading to an
impairment in the future that could materially affect our
operating results.
53
Subsequent to our annual impairment test, no indications of
impairment were identified.
Other Long-Lived Assets and Related Impairment
We review our other long-lived assets, such as finite-lived
intangible assets, equity method
investments, equity
securities, property and equipment, and operating lease assets
for potential impairment when there is evidence that events
or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The carrying amount of
an asset is not recoverable if it exceeds the sum of the
undiscounted cash flows expected to result from the use and
eventual disposition of the asset. Fair value of finite-lived
intangible assets and property and equipment is based on
various valuation techniques. We evaluate our equity method
investments for other-than-temporary declines in value by
considering a variety of factors such as the earnings capacity
of the investment and the fair value of the investment
compared to its carrying amount. In addition, for investments
where the market value is readily determinable, we consider
the underlying stock price as an additional factor. For equity
securities, when assessing investments in private companies
for impairment, we consider such factors as, among others,
the share price from the investee's latest financing round, the
performance of the investee in relation to its own operating
targets, the investee's liquidity and cash position, and general
market conditions. Any required impairment loss is measured
as the amount by which the carrying amount of the asset
exceeds its fair value and is recorded as a reduction in the
carrying amount of the related asset and a charge to operating
results.
We recorded an impairment charge of $14 million in 2021
related to a finite-lived intangible asset for customer
relationships associated with the wind down of a previous
acquisition included in depreciation and amortization expense
in the Consolidated Statements of Income. There were no
material finite-lived impairment charges in 2020 and 2019.
We recorded pre-tax, non-cash property and equipment asset
impairment charges of $4 million in 2021, $14 million in
2020 and $26 million in 2019. The asset impairment charges
in 2020 and 2019 primarily related to capitalized software
that was retired and are included in restructuring charges in
the Consolidated Statements of Income for 2021, 2020 and
the
2019. See Note 20, “Restructuring Charges,”
consolidated financial statements for a discussion of our 2019
restructuring plan.
to
No material impairments were recorded to reduce the
carrying value of our other long-lived assets during 2021,
2020 or 2019.
Income Taxes
the
tax and
Estimates and judgments are required in the calculation of
certain tax liabilities and in the determination of the
recoverability of certain deferred tax assets, which arise from
net operating loss carryforwards, tax credit carryforwards and
temporary differences between
financial
statement recognition of revenue and expense. Our deferred
tax assets are reduced by a valuation allowance if it is more
likely than not that some portion or all of the recorded
deferred tax assets will not be realized in future periods.
Management is required to determine whether a tax position
is more likely than not to be sustained upon examination,
including resolution of any related appeals or litigation
processes, based on the technical merits of the position. Once
it is determined that a position meets the recognition
thresholds, the position is measured to determine the amount
of benefit to be recognized in the consolidated financial
statements.
In assessing the need for a valuation allowance, we consider
all available evidence including past operating results, the
existence of cumulative losses in the most recent fiscal years,
estimates of future taxable income and the feasibility of tax
planning strategies. In the event that we change our
determination as to the amount of deferred tax assets that can
be realized, we will adjust our valuation allowance with a
corresponding impact to the provision for income taxes in the
period in which such determination is made.
In addition, the calculation of our tax liabilities involves
uncertainties in the application of tax regulations in the U.S.
and other tax jurisdictions. We recognize potential liabilities
for anticipated tax audit issues in such jurisdictions based on
our estimate of whether, and the extent to which, additional
taxes and interest may be due. While we believe that our tax
liabilities reflect the probable outcome of identified tax
uncertainties, it is reasonably possible that the ultimate
resolution of any tax matter may be greater or less than the
amount accrued. If events occur and the payment of these
amounts ultimately proves unnecessary, the reversal of the
liabilities would result in tax benefits being recognized in the
period when we determine the liabilities are no longer
necessary. If our estimate of tax liabilities proves to be less
than the ultimate assessment, a further charge to expense
would result.
Recent Accounting Pronouncements Not Yet Adopted
We have considered all recent accounting pronouncements
and have concluded that no accounting pronouncements that
have not yet been adopted would have a material impact on
our financial position or results of operations. See “Recent
Accounting Pronouncements,” of Note 2, “Summary of
Significant Accounting Policies,”
the consolidated
financial statements for further discussion of recently adopted
and recently issued accounting pronouncements that are
applicable to Nasdaq.
to
54
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Management’s Report on Internal Control Over Financial
Reporting
Management is responsible for the preparation and integrity
of the consolidated financial statements appearing in the
reports that we file with the SEC. The consolidated financial
statements were prepared in conformity with U.S. generally
accepted accounting principles and include amounts based on
management’s estimates and judgments.
Management
is also responsible for establishing and
maintaining adequate internal control over Nasdaq’s financial
reporting. Although there are inherent limitations in the
effectiveness of any system of internal control over financial
reporting, we maintain a system of internal control that is
designed to provide reasonable assurance as to the fair and
reliable preparation and presentation of the consolidated
financial statements, as well as to safeguard assets from
unauthorized use or disposition that could have a material
effect on the financial statements.
issued by
Our management assessed the effectiveness of our internal
control over financial reporting as of December 31, 2021,
based on criteria established in Internal Control—Integrated
Framework
the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) (2013
framework). This evaluation
the
the design
documentation of controls, evaluation of
effectiveness of controls,
the operating
effectiveness of controls and a conclusion on this evaluation.
Based on its assessment, our management believes that, as of
December 31, 2021, our internal control over financial
reporting is effective.
testing of
review of
included
Ernst & Young LLP, an independent registered public
accounting firm, has issued an attestation report on Nasdaq’s
internal control over financial reporting, which is included
herein.
Information about quantitative and qualitative disclosures
about market risk is incorporated herein by reference from
“Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations - Quantitative and
Qualitative Disclosures About Market Risk.”
Item 8. Financial Statements and Supplementary Data
statements,
Nasdaq’s consolidated
including
financial
Consolidated Balance Sheets as of December 31, 2021 and
2020, Consolidated Statements of Income for the years ended
December 31, 2021, 2020 and 2019, Consolidated Statements
of Comprehensive Income for the years ended December 31,
2021, 2020 and 2019, Consolidated Statements of Changes in
Stockholders' Equity for the years ended December 31, 2021,
2020 and 2019, Consolidated Statements of Cash Flows for
the years ended December 31, 2021, 2020 and 2019 and
notes to our consolidated financial statements, together with a
report thereon of Ernst & Young LLP, dated February 23,
2022, are attached hereto as pages F-1 through F-46 and
incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
Item 9A. Controls And Procedures
Disclosure controls and procedures. Nasdaq’s management,
with the participation of Nasdaq’s President and Chief
Executive Officer, and Executive Vice President and Chief
Financial Officer, has evaluated the effectiveness of Nasdaq’s
disclosure controls and procedures (as defined in Rule
13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of
the end of the period covered by this report. Based upon that
evaluation, Nasdaq’s President and Chief Executive Officer
and Executive Vice President and Chief Financial Officer,
have concluded that, as of the end of such period, Nasdaq’s
disclosure controls and procedures are effective.
Changes in internal control over financial reporting. There
have been no changes in Nasdaq’s internal control over
financial reporting (as defined in Rule 13a-15(f) and Rule
15d-15(f) under the Exchange Act) that occurred during the
quarter ended December 31, 2021 that have materially
affected, or are reasonably likely to materially affect,
Nasdaq’s internal control over financial reporting.
55
Definition and Limitations of Internal Control Over
Financial Reporting
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
timely
reasonable assurance
detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on the
financial statements.
regarding prevention or
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
/s/ Ernst & Young LLP
New York, New York
February 23, 2022
Report of Independent Registered Public Accounting
Firm
To the Shareholders and the Board of Directors of Nasdaq,
Inc.
in
established
Opinion on Internal Control over Financial Reporting
We have audited Nasdaq, Inc.’s internal control over
financial reporting as of December 31, 2021, based on
Internal Control—Integrated
criteria
the Committee of Sponsoring
Framework
Organizations of
(2013
framework) (the COSO criteria). In our opinion, Nasdaq, Inc.
(the Company) maintained, in all material respects, effective
internal control over financial reporting as of December 31,
2021, based on the COSO criteria.
the Treadway Commission
issued by
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the
Company as of December 31, 2021 and 2020, the related
consolidated statements of income, comprehensive income,
changes in stockholders’ equity and cash flows for each of
the three years in the period ended December 31, 2021, and
the related notes and our report dated February 23, 2022
expressed an unqualified opinion thereon.
included
reporting
Basis for Opinion
The Company’s management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial
accompanying
Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on
our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
the
in
We conducted our audit in accordance with the standards of
the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
56
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that
Prevent Inspections
Not applicable.
PART III
In addition, in jurisdictions where participation in the ESPP
is permitted, all our employees are eligible. Employees may
purchase shares of our common stock at a 15% discount to
the lesser of the closing price of our common stock on (i) the
first trading day of the offering period or (ii) the last trading
day of the offering period. Offering periods under the ESPP
are six months in duration. As of December 31, 2021, all our
employees are eligible to participate.
Item 10. Directors, Executive Officers and Corporate
Governance
Information about Nasdaq’s directors, as required by
Item 401 of Regulation S-K, is incorporated by reference
from the discussion under the caption “Director Nominees-
Proposal 1: Election of Directors” in Nasdaq’s Proxy
Statement. Information about Nasdaq’s executive officers, as
required by Item 401 of Regulation S-K, is incorporated by
reference from the discussion under the caption “Other Items-
Executive Officers” in the Proxy Statement. Information
about Section 16 reports, as required by Item 405 of
Regulation S-K, is incorporated by reference from the
discussion under
the caption “Other Items-Delinquent
Section 16(a) Reports” in the Proxy Statement. Information
about Nasdaq’s code of ethics, as required by Item 406 of
Regulation S-K, is incorporated by reference from the
discussion under the caption “Our Ethical Culture” in the
Proxy Statement. Information about Nasdaq’s nomination
procedures, Audit & Risk Committee and Audit & Risk
Committee financial experts, as required by Items 407(c)(3),
407(d)(4) and 407(d)(5) of Regulation S-K, is incorporated
by reference from the discussions under the headings
“Director Nominees-Proposal 1: Election of Directors” and
the Proxy
“Director Nominees-Board Committees”
Statement.
in
Item 11. Executive Compensation
Information about Nasdaq’s director and executive
compensation, as required by Items 402, 407(e)(4) and
407(e)(5) of Regulation S-K, is incorporated by reference
from the discussions under the headings “Director Nominees-
Director Compensation” and “Executive Compensation” in
the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder
Matters
Information about security ownership of certain beneficial
owners and management, as required by Item 403 of
Regulation S-K, is incorporated by reference from the
discussion under
Items-Security
Ownership of Certain Beneficial Owners and Management”
in the Proxy Statement.
the heading “Other
Equity Compensation Plan and ESPP Information
Nasdaq’s Equity Plan provides for the issuance of our equity
securities to all employees and directors as part of their
compensation plan.
57
The Equity Plan and the ESPP have been previously
approved by our stockholders. The following table sets forth
regarding outstanding options and shares
information
reserved
issuance under all of Nasdaq’s
compensation plans as of December 31, 2021.
future
for
Number of
shares
to be issued
upon exercise
of outstanding
options,
warrants
and rights(a)
Weighted-
average
exercise price
of
outstanding
options,
warrants and
rights(b)
Number of
shares
remaining
available
for future
issuance under
equity
compensation
plans (excluding
shares
reflected in
column(a))(c)
268,817 $
66.68
13,767,883
—
—
—
Plan Category
Equity
compensation
plans approved
by stockholders
Equity
compensation
plans not
approved by
stockholders
Total
268,817 $
66.68
13,767,883
In the table above:
• The number of shares to be issued upon exercise of
outstanding options, warrants and rights include only the
number of shares to be issued upon exercise of outstanding
options, warrants and rights. As of December 31, 2021, we
also had 2,280,198 shares to be issued upon vesting of
outstanding restricted stock and PSUs.
• The number of shares remaining available for future
issuance under equity compensation plans (excluding
shares reflected in column (a) includes 9,535,851 shares of
common stock that may be awarded pursuant to the Equity
Plan and 4,232,032 shares of common stock that may be
issued pursuant to the ESPP.
Item 13. Certain Relationships and Related Transactions,
and Director Independence
and
about
certain
relationships
related
Information
transactions, as required by Item 404 of Regulation S-K, is
incorporated herein by reference from the discussion under
the heading “Other Items-Certain Relationships and Related
Transactions” in the Proxy Statement. Information about
director independence, as required by Item 407(a) of
Regulation S-K, is incorporated herein by reference from the
discussion under the heading “Director Nominees-Proposal
1: Election of Directors” in the Proxy Statement.
Item 14. Principal Accountant Fees and Services
Information about principal accountant fees and services, as
required by Item 9(e) of Schedule 14A, is incorporated herein
by reference from the discussion under the heading “Audit &
Risk Committee Matters-Annual Evaluation and 2022
Selection of
the Proxy
the Independent Auditor”
Statement.
in
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
See “Index to Consolidated Financial Statements.”
(a)(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or
the required information is included in the consolidated
financial statements or notes.
(a)(3) Exhibits
Exhibit
Number
Purchase Agreement, dated as of April 1, 2013,
among Nasdaq, Inc. (f/k/a The NASDAQ OMX
Group, Inc.), BGC Partners, Inc., BGC
Holdings, L.P., BGC Partners, L.P., and, solely
for purposes of certain sections thereof, Cantor
Fitzgerald, L.P. (incorporated herein by
reference to Exhibit 2.1 to the Quarterly Report
on Form 10-Q for the quarter ended June 30,
2013 filed on August 8, 2013).
Share Purchase Agreement, dated as of
November 18, 2020, by and among Osprey
Acquisition Corporation, a wholly owned
subsidiary of Nasdaq, Verafin Holdings Inc.,
certain shareholders of Verafin (the “Sellers”),
and Shareholder Representative Services LLC,
solely in its capacity as the representative of the
Sellers (incorporated herein by reference to
Exhibit 2.2 to the Annual Report on Form 10-K
for the year ended December 31, 2020 filed on
February 23, 2021).†
Amendment to Share Purchase Agreement,
dated as of February 11, 2021, by and among
Osprey Acquisition Corporation, a wholly
owned subsidiary of Nasdaq, Verafin Holdings
Inc., certain shareholders of Verafin (the
“Sellers”), and Shareholder Representative
Services LLC, solely in its capacity as the
representative of the Sellers (incorporated herein
by reference to Exhibit 2.3 to the Annual Report
on Form 10-K for the year ended December 31,
2020 filed on February 23, 2021).
Amended and Restated Certificate of
Incorporation of Nasdaq (incorporated herein by
reference to Exhibit 3.1 to the Current Report on
Form 8-K filed on January 28, 2014).
2.1
2.2
2.3
3.1
3.1.1
3.1.2
3.1.3
3.2
4.1
4.2
4.2.1
4.3
4.3.1
4.4
Certificate of Elimination of Nasdaq’s Series A
Convertible Preferred Stock (incorporated
herein by reference to Exhibit 3.1.1 to the
Current Report on Form 8-K filed on January
28, 2014).
Certificate of Amendment of Nasdaq’s
Amended and Restated Certificate of
Incorporation (incorporated herein by reference
to Exhibit 3.1 to the Current Report on Form 8-
K filed on November 19, 2014).
Certificate of Amendment of Nasdaq’s
Amended and Restated Certificate of
Incorporation (incorporated herein by reference
to Exhibit 3.1 to the Current Report on Form 8-
K filed on September 8, 2015).
Nasdaq’s By-Laws (incorporated herein by
reference to Exhibit 3.2 to the Current Report on
Form 8-K filed on November 21, 2016).
Form of Common Stock certificate
(incorporated herein by reference to Exhibit 4.1
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 2015 filed on
November 4, 2015).
Stockholders’ Agreement, dated as of February
27, 2008, between Nasdaq, Inc. (f/k/a The
NASDAQ OMX Group, Inc.) and Borse Dubai
Limited (incorporated herein by reference to
Exhibit 10.2 to the Current Report on Form 8-K
filed on March 3, 2008).
First Amendment to Stockholders’ Agreement,
dated as of February 19, 2009, between Nasdaq,
Inc. (f/k/a The NASDAQ OMX Group, Inc.)
and Borse Dubai Limited (incorporated herein
by reference to Exhibit 4.10.1 to the Annual
Report on Form 10-K for the year ended
December 31, 2008 filed on February 27, 2009).
Registration Rights Agreement, dated as of
February 27, 2008, among Nasdaq, Inc. (f/k/a
The NASDAQ OMX Group, Inc.), Borse Dubai
Limited and Borse Dubai Nasdaq Share Trust
(incorporated herein by reference to Exhibit 10.3
to the Current Report on Form 8-K filed on
March 3, 2008).
First Amendment to Registration Rights
Agreement, dated as of February 19, 2009,
among Nasdaq, Inc. (f/k/a The NASDAQ OMX
Group, Inc.), Borse Dubai Limited and Borse
Dubai Nasdaq Share Trust (incorporated herein
by reference to Exhibit 4.11.1 to the Annual
Report on Form 10-K for the year ended
December 31, 2008 filed on February 27, 2009).
Stockholders’ Agreement, dated as of
December 16, 2010, between Nasdaq, Inc. (f/k/a
The NASDAQ OMX Group, Inc.) and Investor
AB (incorporated herein by reference to Exhibit
4.12 to the Annual Report on Form 10-K for the
year ended December 31, 2010 filed on
February 24, 2011).
58
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
Indenture, dated as of June 7, 2013, between
Nasdaq, Inc. (f/k/a The NASDAQ OMX Group,
Inc.) and Wells Fargo Bank, National
Association, as Trustee (incorporated herein by
reference to Exhibit 4.1 to the Current Report on
Form 8-K filed on June 10, 2013).
First Supplemental Indenture, dated as of June 7,
2013, among Nasdaq, Inc. (f/k/a The NASDAQ
OMX Group, Inc.), Wells Fargo Bank, National
Association, as Trustee, Deutsche Bank AG,
London Branch, as paying agent, and Deutsche
Bank Luxembourg S.A., as registrar and transfer
agent (incorporated herein by reference to
Exhibit 4.2 to the Current Report on Form 8-K
filed on June 10, 2013).
Second Supplemental Indenture, dated as of
May 29, 2014, among Nasdaq, Inc. (f/k/a The
NASDAQ OMX Group, Inc.) and Wells Fargo
Bank, National Association, as Trustee
(incorporated herein by reference to Exhibit 4.1
to the Current Report on Form 8-K filed on May
30, 2014).
Third Supplemental Indenture, dated as of May
20, 2016, among Nasdaq, Inc., Wells Fargo
Bank, National Association, as Trustee, and
HSBC Bank USA, National Association, as
paying agent and as registrar and transfer agent
(incorporated herein by reference to the Current
Report on Form 8-K filed on May 23, 2016).
Fifth Supplemental Indenture, dated as of
September 22, 2017, among Nasdaq, Inc. and
Wells Fargo Bank, National Association, as
Trustee (incorporated herein by reference to
Exhibit 4.1 to the Current Report on Form 8-K
filed on September 22, 2017).
Sixth Supplemental Indenture, dated as of April
1, 2019, among Nasdaq, Inc., Wells Fargo Bank,
National Association, as Trustee, and HSBC
Bank USA, National Association, as paying
agent and as registrar and transfer agent
(incorporated by reference to Exhibit 4.2 to the
Form 8-A filed on April 1, 2019).
Seventh Supplemental Indenture, dated February
13, 2020, among Nasdaq, Inc., Wells Fargo
Bank, National Association, as Trustee, and
HSBC Bank USA, National Association, as
paying agent and as registrar and transfer agent
(incorporated herein by reference to Exhibit 4.2
to the Company’s Form 8-A filed on February
13, 2020).
Eighth Supplemental Indenture, dated April 28,
2020, by and between Nasdaq, Inc. and Wells
Fargo Bank, National Association, as Trustee
(incorporated herein by reference to Exhibit 4.2
to the Current Report on Form 8-K filed on
April 28, 2020).
Ninth Supplemental Indenture, dated December
21, 2020, by and between Nasdaq, Inc. and
Wells Fargo Bank, National Association, as
Trustee (incorporated herein by reference to
Exhibit 4.2 to the Current Report on Form 8-K
filed on December 21, 2020).
59
4.14
4.15
4.16
4.17
Tenth Supplemental Indenture, dated December
21, 2020, by and between Nasdaq, Inc. and
Wells Fargo Bank, National Association, as
Trustee (incorporated herein by reference to
Exhibit 4.3 to the Current Report on Form 8-K
filed on December 21, 2020).
Eleventh Supplemental Indenture, dated
December 21, 2020, by and between Nasdaq,
Inc. and Wells Fargo Bank, National
Association, as Trustee (incorporated herein by
reference to Exhibit 4.4 to the Current Report on
Form 8-K filed on December 21, 2020).
Twelfth Supplemental Indenture, dated July 30,
2021, by and among Nasdaq, Inc., Wells Fargo
Bank, National Association, as Trustee and
HSBC Bank USA, National Association, as
registrar and transfer agent (incorporated by
reference to Exhibit 4.2 to the Company’s 8-A
filed on July 30, 2021).
Registration Rights Agreement, dated as of June
28, 2013, by and among Nasdaq, Inc. (f/k/a The
NASDAQ OMX Group, Inc.), BGC Partners,
Inc., BGC Holdings, L.P. and BGC Partners,
L.P. (incorporated herein by reference to Exhibit
10.1 to the Current Report on Form 8-K filed on
July 1, 2013).
4.18
Description of Securities.
10.1
10.2
10.3
10.4
10.5
10.6
10.7
Amended and Restated Board Compensation
Policy, effective on June 16, 2021 (incorporated
herein by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the quarter
ended June 30, 2021 filed on August 4, 2021).*
Nasdaq Executive Corporate Incentive Plan,
effective as of January 1, 2015 (incorporated
herein by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed on May 11,
2015).*
Nasdaq, Inc. Equity Incentive Plan (as amended
and restated as of April 24, 2018) (incorporated
herein by reference to Exhibit 10.1 to the Form
S-8 filed on May 25, 2018).*
Form of Nasdaq Non-Qualified Stock Option
Award Certificate (incorporated herein by
reference to Exhibit 10.3 to the Annual Report
on Form 10-K for the year ended December 31,
2010 filed on February 24, 2011).*
Form of Nasdaq Restricted Stock Unit Award
Certificate (employees) (incorporated herein by
reference to Exhibit 10.2 to the Quarterly Report
on Form 10-Q for the quarter ended June 30,
2021 filed on August 4, 2021).*
Form of Nasdaq Restricted Stock Unit Award
Certificate (directors) (incorporated herein by
reference to Exhibit 10.3 to the Quarterly Report
on Form 10-Q for the quarter ended June 30,
2021 filed on August 4, 2021).*
Form of Nasdaq One-Year Performance Share
Unit Agreement (incorporated herein by
reference to Exhibit 10.4 to the Quarterly Report
on Form 10-Q for the quarter ended June 30,
2019 filed on August 5, 2019).*
10.8
Form of Nasdaq Three-Year Performance Share
Unit Agreement (incorporated herein by
reference to Exhibit 10.4 to the Quarterly Report
on Form 10-Q for the quarter ended June 30,
2021 filed on August 4, 2021).*
10.9
Form of Nasdaq Continuing Obligations
Agreement.
10.10
10.10.1
10.11
10.12
10.13
10.14
10.15
10.16
Amended and Restated Supplemental Executive
Retirement Plan, dated as of December 17, 2008
(incorporated herein by reference to Exhibit 10.6
to the Annual Report on Form 10-K for the year
ended December 31, 2008 filed on February 27,
2009).*
Amendment No. 1 to Amended and Restated
Supplemental Executive Retirement Plan,
effective as of December 31, 2008 (incorporated
herein by reference to Exhibit 10.6.1 to the
Annual Report on Form 10-K for the year ended
December 31, 2008 filed on February 27,
2009).*
Nasdaq Supplemental Employer Retirement
Contribution Plan, dated as of December 17,
2008 (incorporated herein by reference to
Exhibit 10.7 to the Annual Report on Form 10-K
for the year ended December 31, 2008 filed on
February 27, 2009).*
Employment Agreement between Nasdaq and
Adena Friedman, made and entered into on
November 14, 2016 and effective as of January
1, 2017 (incorporated herein by reference to
Exhibit 10.10 to the Annual Report on Form 10-
K for the year ended December 31, 2016 filed
on March 1, 2017).*
Nonqualified Stock Option Award Certificate to
Adena T. Friedman from Nasdaq, Inc. in
connection with grant made on January 3, 2017
(incorporated herein by reference to Exhibit 10.1
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 2017 filed on
November 7, 2017).*
Employment Agreement between Nasdaq and
Adena Friedman, made and entered into on
November 19, 2021 and effective as of January
1, 2022.*
Nonqualified Stock Option Award Certificate to
Adena T. Friedman from Nasdaq, Inc. in
connection with grant made on January 3,
2022.*
Employment Offer Letter, dated as of May 10,
2016, between Nasdaq, Inc. and Michael
Ptasznik (incorporated herein by reference to
Exhibit 10.2 to the Quarterly Report on Form
10-Q for the quarter ended March 31, 2017 filed
on May 10, 2017).*
Retirement Agreement and General Release of
Claims by and between Nasdaq, Inc. and
Michael Ptasznik, dated October 21, 2020
(incorporated herein by reference to Exhibit
10.15 to the Annual Report on Form 10-K for
the year ended December 31, 2020 filed on
February 23, 2021).*
Employment Agreement by and between
Nasdaq, Inc. and Bradley J. Peterson, dated
October 1, 2020 (incorporated herein by
reference to Exhibit 10.17 to the Annual Report
on Form 10-K for the year ended December 31,
2020 filed on February 23, 2021).*
Employment Offer Letter, dated as of April 30,
2019, between Nasdaq, Inc. and Lauren B.
Dillard (incorporated herein by reference
to Exhibit 10.6 to the Quarterly Report on Form
10-Q for the quarter ended June 30, 2019 filed
on August 5, 2019).*
Employment Offer Letter by and between
Nasdaq, Inc. and Michelle Daly (incorporated
by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed on May 3, 2021).*
Nasdaq Change in Control Severance Plan for
Executive Vice Presidents and Senior Vice
Presidents, effective November 26, 2013
(incorporated herein by reference to Exhibit 10.1
to the Current Report on Form 8-K filed on
November 29, 2013).*
Credit Agreement, dated as of December 21,
2020, among Nasdaq, Inc., the various lenders
from time to time party thereto and, Bank of
America, N.A., as administrative agent and
issuing bank (incorporated herein by reference
to Exhibit 10.1 to the Current Report on Form 8-
K filed on December 21, 2020).
LIBOR Transition Amendment, dated as of
October 19, 2021 by and among Nasdaq, Inc.
and Bank of America, N.A., as administrative
agent.
Form of Commercial Paper Dealer Agreement
between Nasdaq, Inc., as Issuer, and the Dealer
party thereto (incorporated herein by reference
to Exhibit 10.3 to the Current Report on Form 8-
K filed on April 26, 2017).
Statement regarding computation of per share
earnings (incorporated herein by reference from
Note 13 to the consolidated financial statements
under Part II, Item 8 of this Form 10-K).
List of all subsidiaries.
Consent of Ernst & Young LLP.
Powers of Attorney.
Certification of President and Chief Executive
Officer pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 (“Sarbanes-Oxley”).
Certification of Executive Vice President and
Chief Financial Officer pursuant to Section 302
of Sarbanes-Oxley.
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
11
21.1
23.1
24.1
31.1
31.2
60
32.1
Certifications Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of
Sarbanes-Oxley.
101
The following materials from the Nasdaq, Inc.
Annual Report on Form 10-K for the year ended
December 31, 2021, formatted in iXBRL (Inline
eXtensible Business Reporting Language): (i)
Consolidated Balance Sheets as of December
31, 2021 and December 31, 2020; (ii)
Consolidated Statements of Income for the years
ended December 31, 2021, 2020 and 2019 (iii)
Consolidated Statements of Comprehensive
Income for the years ended December 31, 2021,
2020 and 2019; (iv) Consolidated Statements of
Changes in Stockholders' Equity for the years
ended December 31, 2021, 2020 and 2019; (v)
Consolidated Statements of Cash Flows for the
years ended December 31, 2021, 2020 and 2019;
and (vi) notes to consolidated financial
statements.
104
Cover Page Interactive Data File, formatted in
iXBRL and contained in Exhibit 101.
____________
* Management contract or compensatory plan or
arrangement.
† Schedules have been omitted pursuant to Item 601(b)(2)
of Regulation S-K.
(b) Exhibits:
See Item 15(a)(3) above.
(c) Financial Statement Schedules:
All schedules are omitted because they are not applicable
or
the
consolidated financial statements or notes.
information
included
required
the
in
is
Item 16. Form 10-K Summary
None.
61
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
*
Thomas A. Kloet
Director
*
John D. Rainey
Director
*
Toni Townes-Whitley
Director
*
Jacob Wallenberg
Director
*
Alfred W. Zollar
Director
* Pursuant to Power of Attorney
By:
Name:
Title:
/s/ John A. Zecca
John A. Zecca
Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on February 23,
2022.
Nasdaq, Inc.
(Registrant)
By:
Name:
Title:
Date:
/s/ Adena T. Friedman
Adena T. Friedman
President and Chief Executive Officer
February 23, 2022
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
indicated as of February 23, 2022.
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
/s/ Adena T. Friedman
Adena T. Friedman
President and Chief Executive Officer;
Director
/s/ Ann M. Dennison
Ann M. Dennison
Executive Vice President and Chief
Financial Officer
/s/ Michelle Daly
Michelle Daly
Senior Vice President, Controller and
Principal Accounting Officer
*
Michael R. Splinter
Chairman of the Board
*
Melissa M. Arnoldi
Director
*
Charlene T. Begley
Director
*
Steven D. Black
Director
*
Essa Kazim
Director
62
Nasdaq, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of Nasdaq, Inc. and its subsidiaries are presented herein on the page indicated:
Report of Independent Registered Public Accounting Firm (PCAOB ID 42)
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-2
F-5
F-6
F-7
F-8
F-9
F-10
F-1
Report of Independent Registered Public Accounting
Firm
To the Shareholders and the Board of Directors of Nasdaq,
Inc.
Opinion on the Financial Statements
Critical Audit Matters
The critical audit matters communicated below are matters
arising from the current period audit of the financial
statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and
we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
We have audited the accompanying consolidated balance
sheets of Nasdaq, Inc. (the Company) as of December 31,
2021 and 2020, the related consolidated statements of
income, comprehensive income, changes in stockholders’
equity and cash flows for each of the three years in the period
ended December 31, 2021, and the related notes (collectively
referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company
at December 31, 2021 and 2020, and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 2021, in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over
financial reporting as of December 31, 2021, based on
criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework), and our report
dated February 23, 2022 expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of
the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether
the financial statements are free of material
misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of
material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
F-2
How We
Addressed
the Matter
in Our
Audit
We obtained an understanding, evaluated the
design and tested the operating effectiveness of
controls over the Company's processes with
respect to estimates that impact the timing and
measurement of revenue recognition. For
example, we tested controls over the allocation
of contract transaction price to performance
obligations, including management’s review of
the estimated margin used when applying the
cost plus an estimated margin to determine the
standalone selling price. We also evaluated the
design and tested the operating effectiveness of
controls over the completeness and accuracy of
the data utilized to measure the estimate and
recognize the revenue in the appropriate period.
and
modifications,
We performed substantive audit procedures
that included, among other things, evaluating
the significant assumptions and the accuracy
and completeness of the underlying data used
in management’s calculation. Specifically, we
inspected certain customer contracts, including
contract
tested
management’s determination of the standalone
selling price and its allocation to performance
obligations in accordance with the cost plus a
margin approach, including comparing the
margin assumptions to actual margins earned
on completed contracts. We also tested the
accuracy of the revenue recognized in the
current period by inspecting reports relating to
the hours recorded on a project. We evaluated
the adequacy of the Company’s disclosures in
Notes 2, 3 and 8 to the consolidated financial
statements
technology
related
revenue recognition.
to market
Description
of the
Matter
contracts
containing
statements,
financial
into
Market Technology Revenue Recognition
As described in Notes 2, 3 and 8 to the
the
consolidated
long-term market
Company enters
technology contracts with customers
to
develop customized
technology solutions,
license the right to use software, and provide
support and other services which results in
these
multiple
performance obligations. The Company
recorded market technology deferred revenue
of $117 million as of December 31, 2021 and
recognized $463 million in revenue for the
year then ended. Of the market technology
revenue recognized, $216 million relates to
marketplace infrastructure technology, where
the Company allocates the contract transaction
price to each performance obligation using
their best estimate of the standalone selling
price of each distinct good or service in the
technology contract. In
respective market
instances where standalone selling price is not
directly observable, such as when a product or
service is not sold separately, the Company
selling price
standalone
determines
predominantly through an expected cost plus a
margin approach. The Company recognizes
revenue over time using costs incurred to date
relative to total estimated costs at completion
to measure progress toward satisfying the
performance obligation.
the
the significant management
Auditing the Company’s calculation of the
standalone selling price and timing of revenue
recognition was complex and involved a high
degree of subjective auditor judgment because
of
judgment
the estimates. The
required
standalone selling price is based on an estimate
of total project costs, ongoing monitoring of
completion of performance obligations and
establishing margins for goods or services
where a standalone selling price is not directly
observable.
to develop
F-3
Description
of the
Matter
resulted
recorded.
Intangible
Accounting for Acquisition of Verafin
As described in Note 4 to the consolidated
financial statements the Company completed
its acquisition of Verafin, accounted for as a
business combination,
for an aggregate
purchase price of $2.75 billion. The
in $1.88 billion of
transaction
goodwill and $815 million of intangible assets
being
assets were
comprised of customer relationships of $532
million, developed
technology of $246
million, and a trade name of $37 million.
Auditing the Company's accounting for its
acquisition of Verafin was complex due
primarily to the significant estimation in the
Company’s determination of the fair value of
the customer relationships and developed
technology intangible assets, both of which
were valued using the income approach. The
significant assumptions used in estimating the
value of the intangible assets included the
discount rate for customer relationships and
the royalty rate for the developed technology.
How We
Addressed
the Matter
in Our
Audit
We obtained an understanding, evaluated the
design and tested the operating effectiveness
of controls over the Company's processes with
respect to estimates that impact the accounting
for the Verafin acquisition. For example, we
tested controls over the estimation process
supporting the recognition and measurement of
the customer relationships and developed
technology intangible assets, which included
testing controls over management’s review of
assumptions used in the valuation models.
and
developed
evaluating
supporting
underlying
assets, we
that
To test the estimated fair value of the customer
technology
relationships
intangible
audit
performed
procedures
included, among others,
evaluating the Company's use of valuation
methodologies,
significant
assumptions utilized by the Company, and
evaluating the completeness and accuracy of
those
data
the
significant assumptions. We
involved our
valuation specialists
to assist with our
evaluation of the methodologies used by the
Company, the discount rate applied in valuing
the customer relationships, and the royalty rate
utilized in the developed technology fair value
estimates. We performed sensitivity analyses
over the selected discount rate and royalty rate
to evaluate the impact that movements in those
assumptions would have on the fair value of
the customer relationships and developed
technology intangible assets.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1986.
New York, New York
February 23, 2022
F-4
Nasdaq, Inc.
Consolidated Balance Sheets
(in millions, except share and par value amounts)
December 31, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
Restricted cash and cash equivalents
Default funds and margin deposits (including restricted cash and cash equivalents of
$
393 $
29
$5,074 and $3,197, respectively)
Financial investments
Receivables, net
Other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Operating lease assets
Other non-current assets
Total assets
Liabilities
Current liabilities:
Accounts payable and accrued expenses
Section 31 fees payable to SEC
Accrued personnel costs
Deferred revenue
Other current liabilities
Default funds and margin deposits
Short-term debt
Total current liabilities
Long-term debt
Deferred tax liabilities, net
Operating lease liabilities
Other non-current liabilities
Total liabilities
Commitments and contingencies
Equity
Nasdaq stockholders’ equity:
$
$
5,911
208
588
294
7,423
509
8,433
2,813
366
571
20,115 $
185 $
62
252
329
115
5,911
1,018
7,872
4,812
406
386
234
13,710
2,745
37
3,942
195
566
175
7,660
475
6,850
2,255
381
358
17,979
175
224
227
235
121
3,942
—
4,924
5,541
502
389
187
11,543
Common stock, $0.01 par value, 300,000,000 shares authorized, shares issued:
173,418,939 at December 31, 2021 and 171,278,761 at December 31, 2020; shares
outstanding: 166,679,635 at December 31, 2021 and 164,933,678 at December 31, 2020
Additional paid-in capital
Common stock in treasury, at cost: 6,739,304 shares at December 31, 2021 and
6,345,083 shares at December 31, 2020
Accumulated other comprehensive loss
Retained earnings
Total Nasdaq stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
F-5
2
1,952
(437)
(1,587)
6,465
6,395
10
6,405
2
2,547
(376)
(1,368)
5,628
6,433
3
6,436
$
20,115 $
17,979
Nasdaq, Inc.
Consolidated Statements of Income
(in millions, except per share amounts)
Revenues:
Market Technology
Investment Intelligence
Corporate Platforms
Market Services
Other revenues
Total revenues
Transaction-based expenses:
Transaction rebates
Brokerage, clearance and exchange fees
Revenues less transaction-based expenses
Operating expenses:
Compensation and benefits
Professional and contract services
Computer operations and data communications
Occupancy
General, administrative and other
Marketing and advertising
Depreciation and amortization
Regulatory
Merger and strategic initiatives
Restructuring charges
Total operating expenses
Operating income
Interest income
Interest expense
Net gain on divestiture of businesses
Other income
Net income from unconsolidated investees
Income before income taxes
Income tax provision
Net income attributable to Nasdaq
Per share information:
Basic earnings per share
Diluted earnings per share
Cash dividends declared per common share
Year Ended December 31,
2021
2020
2019
$
463 $
1,076
613
3,707
27
5,886
357 $
898 $
521 $
3,818 $
31
5,625
338
768
490
2,616
46
4,258
(2,168)
(298)
3,420
(2,028)
(694)
2,903
(1,324)
(399)
2,535
938
144
186
109
85
57
278
64
87
31
1,979
1,441
1
786
137
151
107
142
39
202
24
33
48
1,669
1,234
4
(125)
(101)
84
—
81
52
1,534
347
1,187 $
5
70
1,212
279
933 $
707
127
133
97
125
39
190
31
30
39
1,518
1,017
10
(124)
27
5
84
1,019
245
774
7.15 $
7.05 $
2.11 $
5.67 $
5.59 $
1.94 $
4.69
4.63
1.85
$
$
$
$
See accompanying notes to consolidated financial statements.
F-6
Nasdaq, Inc.
Consolidated Statements of Comprehensive Income
(in millions)
Net income
Other comprehensive income (loss):
Foreign currency translation gains (losses)
Income tax benefit (expense)(1)
Foreign currency translation, net
Employee benefit plan adjustment losses
Employee benefit plan income tax benefit
Employee benefit plan, net
Year Ended December 31,
2021
2020
2019
$
1,187 $
933 $
774
(176)
(42)
(218)
(1)
—
(1)
269
49
318
—
—
—
(122)
(31)
(153)
(4)
1
(3)
(156)
618
Total other comprehensive income (loss), net of tax
Comprehensive income attributable to Nasdaq
(219)
318
$
968 $
1,251 $
____________
(1) Primarily relates to the tax effect of unrealized gains and losses on Euro denominated notes.
See accompanying notes to consolidated financial statements.
F-7
Nasdaq, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(in millions)
Common stock
Additional paid-in capital
Beginning balance
Share repurchase program
ASR agreement(1)
Share-based compensation
Stock option exercises, net
Other issuances of common stock, net(2)
Ending balance
Common stock in treasury, at cost
Beginning balance
Other employee stock activity
Ending balance
Accumulated other comprehensive loss
Beginning balance
Other comprehensive income (loss)
Ending balance
Retained earnings
Beginning balance
Impact of adoption of ASU 2016-13
Net income
Cash dividends declared per common share
Ending balance
Year Ended December 31,
2021
2020
Shares
165
$
2
Shares
165
2019
Shares
$
165
2
$
2
2,547
2,632
2,716
(3)
(2)
1
—
6
(468)
(2)
(222)
(2)
(200)
(475) —
90
1
257
1
—
1
—
87
2
48
—
1
—
1
—
79
2
35
1,952
2,547
2,632
—
(376)
(61)
(437)
(336)
—
(40) —
(376)
(297)
(39)
(336)
(1,368)
(219)
(1,587)
5,628
—
1,187
(350)
6,465
(1,686)
318
(1,368)
(1,530)
(156)
(1,686)
5,027
4,558
(12)
933
(320)
—
774
(305)
5,628
5,027
Total Nasdaq stockholders’ equity
6,395
6,433
5,639
Noncontrolling interests
Beginning balance
Net activity related to noncontrolling interests
Ending balance
Total Equity
3
7
10
—
3
3
—
—
—
167 $ 6,405
165 $ 6,436
165 $ 5,639
____________
(1) See “ASR Agreements,” of Note 12, “Nasdaq Stockholders’ Equity,” for further discussion.
(2) For the year ended December 31, 2021 primarily relates to the tax impact of shares accelerated and issued upon the sale of
our U.S. Fixed Income business. See “2021 Divestiture,” of Note 4, “Acquisitions and Divestiture,” for further discussion.
See accompanying notes to consolidated financial statements.
F-8
Nasdaq, Inc.
Consolidated Statements of Cash Flows
(in millions)
Year Ended December 31,
2020
2019
2021
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
1,187 $
933 $
774
Depreciation and amortization
Share-based compensation
Deferred income taxes
Extinguishment of debt
Net gain on divestiture of businesses
Net income from unconsolidated investees
Other reconciling items included in net income
Net change in operating assets and liabilities, net of effects of acquisitions:
Receivables, net
Other assets
Accounts payable and accrued expenses
Section 31 fees payable to SEC
Accrued personnel costs
Deferred revenue
Other liabilities(1)
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of securities
Proceeds from sales and redemptions of securities
Proceeds from divestiture of businesses, net of cash divested
Proceeds from sale of investment securities
Acquisition of businesses, net of cash and cash equivalents acquired
Purchases of property and equipment
Investments related to default funds and margin deposits, net (2)
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from (repayments of) commercial paper, net
Repayments of borrowings under our credit commitment and debt obligations
Payment of debt extinguishment cost
Proceeds from issuances of debt, net of issuance costs and utilization of credit commitment
Repurchases of common stock
ASR agreement
Dividends paid
Proceeds received from employee stock activity and other issuances
Payments related to employee shares withheld for taxes
Default funds and margin deposits
Other financing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents
Cash and cash equivalents, restricted cash and cash equivalents at beginning of period
Cash and cash equivalents, restricted cash and cash equivalents at end of period
Reconciliation of Cash, Cash Equivalents and Restricted Cash and Cash Equivalents
Cash and cash equivalents
Restricted cash and cash equivalents
Restricted cash and cash equivalents (default funds and margin deposits)
Total
Supplemental Disclosure Cash Flow Information
Cash paid for: Interest
Income taxes, net of refund(1)
278
90
94
33
(84)
(52)
6
(6)
(140)
(17)
(162)
28
106
(278)
1,083
(316)
285
190
—
(2,430)
(163)
(132)
(87)
(2,653)
202
87
41
36
—
(70)
32
(167)
26
5
92
32
15
(12)
1,252
(283)
402
—
22
(157)
(188)
109
(27)
(122)
190
79
35
11
(27)
(84)
33
(42)
(173)
(49)
23
(9)
(15)
217
963
(579)
543
132
11
(206)
(127)
(174)
(14)
(414)
420
(804)
(33)
826
(468)
(475)
(350)
26
(61)
2,330
7
1,418
(331)
(483)
5,979
5,496 $
(391)
(1,468)
(36)
3,807
(222)
—
(320)
50
(40)
527
3
1,910
353
3,393
2,586
5,979 $
116
(1,215)
(11)
680
(200)
—
(305)
37
(39)
(1,535)
—
(2,472)
(188)
(2,111)
4,697
2,586
393 $
29
5,074
5,496 $
2,745 $
37
3,197
5,979 $
332
30
2,224
2,586
118 $
501 $
97 $
290 $
120
205
$
$
$
$
$
___________
(1)
(2)
Includes payment of an acquired tax liability in 2021 related to the Verafin acquisition. See “2021 Acquisition,” of Note 4, “Acquisitions and
Divestiture,” for further discussion.
Includes purchases and proceeds from sales and redemptions related to the default funds and margin deposits of our clearing operations. For
further information, see "Default Fund Contributions and Margin Deposits," within Note 15, "Clearing Operations."
See accompanying notes to consolidated financial statements.
F-9
Nasdaq, Inc.
Notes to Consolidated Financial Statements
1. ORGANIZATION AND NATURE OF OPERATIONS
Investment Intelligence
Nasdaq is a global technology company serving the capital
markets and other industries. Our diverse offerings of data,
analytics, software and services enable clients to optimize
and execute their business vision with confidence.
We manage, operate and provide our products and services in
four business segments: Market Technology, Investment
Intelligence, Corporate Platforms, and Market Services.
For further discussion of our businesses, see “Products and
Services,” of “Item 1. Business.”
Market Technology
is a
Our Market Technology segment
leading global
technology solutions provider and partner to exchanges,
clearing organizations, central
securities depositories,
regulators, banks, brokers, buy-side firms and corporate
businesses. Our solutions are utilized by leading markets in
the U.S., Europe and Asia as well as emerging markets in the
Middle East, Latin America, and Africa. The Market
Technology segment includes our Anti Financial Crime
Technology business and our Marketplace Infrastructure
Technology business.
Our Anti Financial Crime Technology business includes
Nasdaq Trade Surveillance, a SaaS solution designed for
brokers and other market participants to assist them in
complying with market rules, regulations and internal market
surveillance policies. The Nasdaq Automated Investigator is
our cloud-deployed anti-money laundering offering with an
automated investigator tool for retail banks. In February
2021, we completed the acquisition of Verafin, a SaaS
technology provider of anti-financial crime management
solutions that offers a cloud-based platform to help detect,
investigate, and report money laundering and financial fraud.
See “2021 Acquisition,” of Note 4, “Acquisitions and
Divestiture,” for further discussion.
Our Marketplace Infrastructure Technology business powers
over 130 market infrastructure operators and new market
clients in more than 55 countries and handles a wide array of
assets, including but not limited to cash equities, equity
derivatives, currencies, various interest-bearing securities,
commodities, energy products and digital currencies. Our
solutions can also be used in the creation of new asset
classes, and non-capital markets customers, including those
in insurance liabilities securitization, cryptocurrencies and
sports wagering.
Our Investment Intelligence segment includes our Market
Data, Index and Analytics businesses.
Our Market Data business sells and distributes historical and
real-time market data to the sell-side, the institutional
investing community, retail online brokers, proprietary
trading shops, other venues, internet portals and data
distributors. Our market data products can enhance
transparency of market activity within our exchanges and
provide critical
to professional and non-
professional investors globally. Additionally, our Nasdaq
Cloud Data Service provided on our Data Link data
dissemination platform provides a flexible and efficient
method of delivery for real- time exchange data and other
financial information.
information
Our Index business develops and licenses Nasdaq-branded
indexes and financial products. We also license cash-settled
options, futures and options on futures on our indexes. As of
December 31, 2021, 362 ETPs listed on 25 exchanges in over
20 countries tracked a Nasdaq index and accounted for $424
billion in AUM.
Our Analytics business provides asset managers, investment
consultants and institutional asset owners with investment
insights and workflow solutions. The eVestment platform
provides asset owners and allocators with analytics to make
data-driven investment decisions, enables asset managers to
position
institutional products worldwide and provides
liquidity solutions for private funds. Together with Solovis, a
cloud-based multi-asset portfolio management provider, we
offer a suite of cloud-based solutions that help institutional
investors and consultants conduct pre-investment due
diligence, and monitor their portfolios post-investment.
During 2021, we launched Data Fabric, a managed data
solution utilizing our Nasdaq Data Link to help investment
management firms scale
infrastructure with
enhanced quality, governance and integrity.
their data
Corporate Platforms
Our Corporate Platforms segment includes our Listing
Services and IR & ESG Services businesses. These
businesses deliver critical capital market and ESG solutions
across the lifecycle of public and private companies.
Our Listing Services business
includes our U.S. and
European Listing Services businesses. We operate a variety
of listing platforms around the world to provide multiple
global capital raising solutions for 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. In July 2021, we contributed our NPM
business, which was included in our Listing Services
business, to a standalone, independent company, of which we
F-10
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.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements are prepared
in
accordance with U.S. GAAP and include the accounts of
Nasdaq, its wholly-owned subsidiaries and other entities in
which Nasdaq has a controlling financial interest. When we
do not have a controlling interest in an entity but exercise
significant influence over the entity’s operating and financial
policies, such investment is accounted for under the equity
method of accounting. We recognize our share of earnings or
losses of an equity method investee based on our ownership
percentage. See “Equity Method Investments,” of Note 6,
“Investments,” for further discussion of our equity method
investments.
The accompanying consolidated financial statements reflect
all adjustments which are, in the opinion of management,
the results. These
necessary for a fair statement of
adjustments are of a normal recurring nature. All significant
intercompany accounts and transactions have been eliminated
in consolidation.
Certain prior year amounts have been reclassified to conform
to the current year presentation.
the fourth quarter of 2021, we adjusted
During
the
presentation of cash and cash equivalents held within default
funds and margin deposits on the consolidated statement of
cash flows from operating activities, to present them as
restricted cash and cash equivalents with the associated
changes being included within cash flows from investing and
financing activities. These balances cannot be used to satisfy
the Company's operating or other liabilities. See Note 15,
“Clearing Operations,” for further discussion of the default
funds and margin deposits.
Prior period amounts have also been adjusted to conform to
current period presentation. This immaterial adjustment had
no impact on our previously reported consolidated balance
sheets, consolidated statements of income, or consolidated
statements of comprehensive income.
own the largest minority interest, together with a consortium
of third party financial institutions. The NPM business
provides liquidity solutions for private companies to enable
employees, investors, and companies to execute transactions.
As of December 31, 2021, there were 4,178 total listings on
The Nasdaq Stock Market, including 441 ETPs. The
combined market capitalization was approximately $28.2
trillion. In Europe, the Nasdaq Nordic and Nasdaq Baltic
exchanges, together with Nasdaq First North, were home to
1,235 listed companies with a combined market capitalization
of approximately $2.6 trillion.
We continue to grow our U.S. Corporate Bond exchange for
the listing of corporate bonds. This exchange operates
pursuant to The Nasdaq Stock Market exchange license and
is powered by the NFF. As of December 31, 2021, 107
corporate bonds were listed on the Corporate Bond exchange.
We also continue to develop the Nasdaq Sustainable Bond
Network, a platform for increased transparency in the global
sustainable bond markets.
Our IR & ESG Services business includes our Investor
Relations Intelligence and Governance Solutions businesses,
which serve both public and private companies and
organizations. Our public company clients can be companies
listed on our exchanges or other U.S. and global exchanges.
Our private company clients include a diverse group of
organizations ranging from family owned companies,
government organizations, law firms, privately held entities,
various non-profit organizations to hospitals and health care
systems. We help organizations enhance their ability to
understand and expand
their global shareholder base,
improve corporate governance, and navigate the evolving
ESG landscape through our suite of advanced technology,
analytics, reporting and consultative services. In December
2021, we acquired QDiligence, a provider of software that
facilitates digital director and officer questionnaires and self-
evaluations for boards of directors and corporate secretaries.
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
certain countries where we operate exchanges, we also
provide broker services, clearing, settlement and central
depository services. In January 2020, we commenced an
orderly wind-down of our Nordic broker services operations
business. We expect this wind-down to continue through the
second quarter of 2022. In June 2021, we sold our U.S. Fixed
Income business which included an electronic platform for
trading of U.S. Treasuries. See “2021 Divestiture,” of Note 4,
“Acquisitions and Divestiture,” for further discussion. Also
in June 2021, we completed the acquisition of a majority
stake in Puro.earth, a Finnish-based leading marketplace for
carbon removal.
F-11
The tables below present a summary of the 2020 and 2019
Statements of Cash Flows as reported and as adjusted:
Year Ended December 31, 2020
As Reported Adjustment Adjusted
(in millions)
$
1,252 $
— $ 1,252
(231)
109
(122)
1,383
527 1,910
16
337
353
2,420
973 3,393
362
2,224 2,586
Net cash provided by operating
activities
Net cash used in investing
activities
Net cash provided by (used in)
financing activities
Effect of exchange rate changes
on cash, cash equivalents,
restricted cash and cash
equivalents
Net increase (decrease) in cash,
cash equivalents, restricted cash
and cash equivalents
Cash, cash equivalents, restricted
cash and cash equivalents at
beginning of period
Cash, cash equivalents, restricted
cash and cash equivalents at end
of period
Use of Estimates
In preparing our consolidated financial statements, we make
assumptions, judgments and estimates that can have a
significant impact on our revenue, operating income and net
income, as well as on the value of certain assets and liabilities
in our consolidated balance sheets. At least quarterly, we
evaluate our assumptions, judgments and estimates, and
make changes as deemed necessary.
limited
including but not
Nasdaq has considered the impact of COVID-19 on the
assumptions and estimates used in evaluating our assets and
to our goodwill,
liabilities,
intangible assets, equity method
investments, equity
securities and allowance for losses on accounts receivable.
We determined that there was no material adverse impact on
our results of operations and financial position for the year
ended December 31, 2021. These estimates may change as
new events occur and additional information is obtained.
Actual results could differ from these estimates under
different assumptions or conditions.
$
2,782 $
3,197 $ 5,979
Foreign Currency
Reconciliation of Cash, Cash Equivalents and Restricted Cash and Cash
Equivalents
Cash and cash equivalents
$
2,745 $
— $ 2,745
Restricted cash and cash
equivalents
Restricted cash and cash
equivalents (Default funds and
margin deposits)
Total
Net cash provided by operating
activities
Net cash used in investing
activities
Net cash provided by (used in)
financing activities
Effect of exchange rate changes on
cash, cash equivalents, restricted
cash and cash equivalents
Net increase (decrease) in cash,
cash equivalents, restricted cash
and cash equivalents
Cash, cash equivalents, restricted
cash and cash equivalents at
beginning of period
Cash, cash equivalents, restricted
cash and cash equivalents at end
of period
37
—
37
—
3,197 3,197
$
2,782 $
3,197 $ 5,979
Year Ended December 31, 2019
As Reported Adjustment
Adjusted
(in millions)
$
963 $
— $
963
(240)
(174)
(414)
(937)
(1,535)
(2,472)
(10)
(178)
(188)
(224)
(1,887)
(2,111)
586
4,111
4,697
$
362 $
2,224 $ 2,586
Reconciliation of Cash, Cash Equivalents and Restricted Cash and Cash
Equivalents
Cash and cash equivalents
$
332 $
— $
332
Restricted cash and cash
equivalents
Restricted cash and cash
equivalents (Default funds and
margin deposits)
Total
30
—
30
—
2,224
2,224
$
362 $
2,224 $ 2,586
Foreign denominated assets and liabilities are remeasured
into the functional currency at exchange rates in effect at the
balance sheet date and recorded
income
statement. Gains or losses resulting from foreign currency
transactions are remeasured using the rates on the dates on
which those elements are recognized during the period, and
are included in general, administrative and other expense in
the Consolidated Statements of Income.
through
the
Translation gains or losses resulting from translating our
subsidiaries’ financial statements from the local functional
currency to the reporting currency, net of tax, are included in
accumulated other comprehensive loss within stockholders’
equity in the Consolidated Balance Sheets. Assets and
liabilities are translated at the balance sheet date while
revenues and expenses are translated at the date the
transaction occurs or at an applicable average rate.
Cash and Cash Equivalents
Cash and cash equivalents include all non-restricted cash in
banks and highly liquid investments with original maturities
of 90 days or less at the time of purchase. Such equivalent
investments included in cash and cash equivalents in the
Consolidated Balance Sheets were $109 million as of
December 31, 2021 and $2,509 million as of December 31,
2020. Cash equivalents are carried at cost plus accrued
interest, which approximates fair value due to the short
maturities of these investments. The decrease in cash
equivalents in 2021 was primarily due to the use of net
proceeds of $1.9 billion from issuances of long-term debt in
the fourth quarter of 2020 to acquire Verafin in February
2021. See “Acquisition of Verafin,” of Note 4, “Acquisitions
and Divestiture,” for further discussion.
F-12
Restricted Cash
Restricted cash and cash equivalents, which was $29 million
as of December 31, 2021 and $37 million as of December 31,
2020, is restricted from withdrawal due to a contractual or
regulatory requirement or not available for general use and as
such is classified as restricted in the Consolidated Balance
Sheets. As of December 31, 2021 and 2020, restricted cash
and cash equivalents primarily includes funds held for our
trading and clearing businesses.
Default Funds and Margin Deposits
Nasdaq Clearing members’ cash contributions are included in
default funds and margin deposits in the Consolidated
Balance Sheets as both a current asset and a current liability.
These balances may fluctuate over time due to changes in the
amount of deposits required and whether members choose to
provide
contributions. Non-cash
contributions include highly rated government debt securities
that must meet specific criteria approved by Nasdaq Clearing.
Non-cash contributions are pledged assets that are not
recorded in the Consolidated Balance Sheets as Nasdaq
Clearing does not take legal ownership of these assets and the
risks and rewards remain with the clearing members.
cash or non-cash
Receivables, net
Our receivables are concentrated with our member firms,
market data distributors, listed companies, investor relations
intelligence, governance and market technology customers.
Receivables are shown net of allowance for credit losses. The
allowance is maintained at a level that management believes
to be sufficient to absorb expected losses over the life of our
accounts receivable portfolio. The allowance is increased by
the provision for bad debts, which is included in general,
administrative and other expense
the Consolidated
Statements of Income, and decreased by the amount of
charge-offs, net of recoveries.
in
The allowance is primarily based on an aging methodology.
This method applies loss rates based on historical loss
information which is disaggregated by business segment and,
as deemed necessary, is adjusted for other factors and
considerations that could impact collectibility. Additionally,
we consider corporate default rate averages over an extended
period as compared to the period covered by our historical
loss data and include an adjustment to historical loss
percentages for current conditions and expected future
conditions if necessary.
In circumstances where a specific customer’s inability to
meet its financial obligations is known (i.e., bankruptcy
filings), we determine whether a specific provision for bad
debts is required. Accounts receivable are written-off against
the allowance when collection efforts cease. Due to changing
economic, business and market conditions, we review the
allowance quarterly and make changes to the allowance
through the provision for bad debts as appropriate. If
circumstances change (i.e., higher than expected defaults or
an unexpected material adverse change in a major customer’s
ability to pay), our estimates of recoverability could be
reduced by a material amount. The total allowance netted
against receivables in the Consolidated Balance Sheets was
$17 million as of December 31, 2021, $21 million as of
December 31, 2020 and $9 million as of December 31, 2019.
The change in the balance in 2021 was immaterial.
In 2020 we adopted ASU 2016-13, which changed the
impairment model for certain financial instruments. We
recorded a $12 million non-cash cumulative effect
adjustment to retained earnings on our opening Consolidated
Balance Sheets as of January 1, 2020 as a result of the
adoption of this new standard.
Investments
Purchases and sales of investment securities are recognized
on settlement date.
Financial investments
Financial investments are comprised of trading securities
bought principally to meet regulatory capital requirements
mainly for our clearing operations at Nasdaq Clearing. These
investments are classified as trading securities as they are
generally sold in the near term, with changes in fair value
included in other income in the Consolidated Statements of
Income.
Fair value is generally obtained from third party pricing
sources. When available, quoted market prices are used to
determine fair value. If quoted market prices are not
available, fair values are estimated using pricing models with
observable market inputs. The inputs to the valuation models
vary by the type of security being priced but are typically
benchmark yields, reported trades, broker-dealer quotes, and
prices of similar assets. Pricing models generally do not
entail material subjectivity because
the methodologies
employed use inputs observed from active markets. See “Fair
Value Measurements,” below for further discussion of fair
value measures.
Equity Securities
Investments in equity securities with readily determinable
fair values (other than those accounted for under the equity
method or those that result in consolidation of the investee)
are measured at fair value and any changes in fair value are
recognized in other income in the Consolidated Statements of
Income.
Equity investments without readily determinable fair values
are accounted for under the measurement alternative, under
which investments 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 on a prospective basis. We
assess relevant transactions that occur on or before the
balance sheet date to identify observable price changes, and
we regularly monitor these investments to evaluate whether
there is an indication that the investment is impaired, based
on the share price from the investee's latest financing round,
the performance of the investee in relation to its own
operating targets, the investee's liquidity and cash position,
F-13
and general market conditions. If a qualitative assessment
indicates that the security is impaired, Nasdaq will estimate
the fair value of the security and, if the fair value is less than
the carrying amount of the security, will recognize an
impairment loss in net income equal to the difference in the
period the impairment occurs. See Note 6, “Investments,” for
further discussion of our equity securities.
For the years ended December 31, 2021, 2020 and 2019, no
material adjustments were made to the carrying value of our
equity securities.
Our investments in equity securities are included in other
non-current assets in the Consolidated Balance Sheets, as we
intend to hold these investments for more than one year.
Equity Method Investments
In general, the equity method of accounting is used when we
own 20% to 50% of the outstanding voting stock of a
company or when we are able to exercise significant
influence over the operating and financial policies of a
company. We have certain investments in which we have
determined that we have significant influence and as such
account for the investments under the equity method of
accounting. We record our estimated pro-rata share of
earnings or losses each reporting period and record any
dividends as a reduction in the investment balance. We
evaluate our equity method investments for other-than-
temporary declines in value by considering a variety of
factors such as the earnings capacity of the investment and
the fair value of the investment compared to its carrying
amount. In addition, for investments where the market value
is readily determinable, we consider the underlying stock
price. If the estimated fair value of the investment is less than
the carrying amount and management considers the decline in
value to be other than temporary, the excess of the carrying
amount over the estimated fair value is recognized in net
income in the period the impairment occurs. See Note 6,
“Investments,” for further discussion of our equity method
investments.
No material impairments were recorded to reduce the
carrying value of our equity method investments in 2021,
2020 or 2019.
Derivative Financial Instruments and Hedging Activities
Non-Designated Derivatives
We use foreign exchange forward contracts to manage
foreign currency exposure of intercompany loans, accounts
receivable, accounts payable and other balance sheet items.
These contracts are not designated as hedges for financial
reporting purposes. The change in fair value of these
contracts is recognized in general, administrative and other
expense in the Consolidated Statements of Income and
offsets the foreign currency exposure.
As of December 31, 2021 and 2020, the fair value amounts of
our derivative instruments were immaterial.
Net Investment Hedges
Net assets of our foreign subsidiaries are exposed to volatility
in foreign currency exchange rates. We may utilize net
investment hedges to offset the translation adjustment arising
from re-measuring our investment in foreign subsidiaries.
Our 2029, 2030 and 2033 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. Any increase or decrease
related to the remeasurement of the 2029, 2030, and 2033
Notes into U.S. dollars is recorded in accumulated other
comprehensive loss within stockholders’ equity in the
Consolidated Balance Sheets. See “2029 Notes,” “2030
Notes,” and “2033 Notes,” of Note 9, “Debt Obligations,” for
further discussion.
Property and Equipment, net
Property and equipment, including leasehold improvements,
are carried at cost less asset impairment charges and
accumulated depreciation and amortization. Depreciation and
amortization are recognized using the straight-line method
over the estimated useful lives of the related assets, which
range from 10 to 40 years for buildings and improvements, 2
to 5 years for data processing equipment, and 5 to 10 years
for furniture and equipment.
Leasehold improvements are amortized using the straight-line
method over the shorter of their estimated useful lives or the
remaining term of the related lease.
We develop systems solutions for both internal and external
use. Certain costs incurred in connection with developing or
obtaining internal use software are capitalized. In addition,
certain costs of computer software to be sold, leased, or
otherwise marketed as a separate product or as part of a
product or process are capitalized beginning when a
product’s technological feasibility has been established and
ending when a product is available for general release.
Technological feasibility is established upon completion of a
detailed program design or, in its absence, completion. Prior
to reaching technological feasibility, all costs are charged to
expense. Unamortized capitalized costs are included in data
processing equipment and software, within property and
equipment, net
the Consolidated Balance Sheets.
Capitalized software costs are amortized on a straight-line
basis over the estimated useful lives of the software,
generally 5 to 10 years. Amortization of these costs is
included in depreciation and amortization expense in the
Consolidated Statements of Income.
in
incurred
Implementation costs
in a cloud computing
arrangement that is a service contract are capitalized as a
prepaid asset included in other assets in our Consolidated
Balance Sheets and are amortized over the expected service
period in the relevant expense category in the Consolidated
Statements of Income.
F-14
Goodwill and Indefinite-Lived Intangible Assets
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 recognize specifically identifiable intangibles,
such as customer relationships, technology, exchange and
clearing registrations, trade names and licenses when a
specific right or contract is acquired. Goodwill and intangible
assets deemed to have indefinite useful lives, primarily
exchange and clearing registrations, are not amortized but
instead are tested for impairment at least annually as of
October 1 and more frequently whenever events or changes
in circumstances indicate that the fair value of the asset may
be less than its carrying amount, 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. When testing goodwill and indefinite-lived intangible
assets for impairment, we have the option of first performing
a qualitative assessment to determine whether it is more
likely than not that the fair value of a reporting unit or
indefinite-lived intangible asset is less than their respective
carrying amounts as the basis to determine if it is necessary
to perform a quantitative impairment test. If we choose not to
complete a qualitative assessment, or if the initial assessment
indicates that it is more likely than not that the carrying
amount of a reporting unit or the carrying amount of an
indefinite-lived intangible asset exceed their respective
estimated fair values, a quantitative test is required.
In performing a quantitative impairment test, we compare the
indefinite-lived
fair value of each reporting unit and
intangible asset with their respective carrying amounts. If the
carrying amounts of the reporting unit or the indefinite-lived
intangible asset exceed their respective fair values, an
impairment charge is recognized in an amount equal to the
difference, limited to the total amount of goodwill allocated
to that reporting unit or the total carrying value of the
indefinite-lived intangible asset.
There was no impairment of goodwill or indefinite-lived
intangible assets for the years ended December 31, 2021,
2020 and 2019. Future disruptions to our business and events,
such as prolonged economic weakness or unexpected
significant declines in operating results of any of our
reporting units or businesses, may result in goodwill or
indefinite-lived intangible asset impairment charges in the
future.
Property and equipment are subject to impairment testing
when events or conditions indicate that the carrying amount
of an asset may not be recoverable. The carrying amount of
an asset is not recoverable if it exceeds the sum of the
undiscounted cash flows expected to result from the use and
eventual disposition of the asset. Any required impairment
loss is measured as the amount by which the carrying amount
of the asset exceeds its fair value and is recorded as a
reduction in the carrying amount of the related asset and a
charge to operating results.
See Note 7, “Property and Equipment, net,” for further
discussion.
Leases
At inception, we determine whether a contract is or contains
a lease. We have operating leases which are primarily real
estate leases for our U.S. and European headquarters and for
general office space. As of December 31, 2021, these leases
have varying lease terms with remaining maturities ranging
from 1 month to 15 years. Operating lease balances are
included in operating lease assets, other current liabilities,
and operating lease liabilities in our Consolidated Balance
Sheets. We do not have any leases classified as finance
leases.
Operating
to use an
lease assets represent our right
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 estimated rate of interest for collateralized borrowing
over a similar term of the lease payments 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 that are
based on a change in an index or a rate are considered
variable lease payments and are expensed as incurred.
lease agreements with
We have
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. See
Note 16, “Leases,” for further discussion.
F-15
Other Long-Lived Assets
We review our other long-lived assets, such as finite-lived
intangible assets and property and equipment, for potential
impairment when there is evidence that events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable. The carrying amount of an asset is
not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual
disposition of the asset. Fair value of finite-lived intangible
assets and property and equipment is based on various
valuation techniques. Any required impairment loss is
measured as the amount by which the carrying amount of the
asset exceeds its fair value and is recorded as a reduction in
the carrying amount of the related asset and a charge to
operating results.
We recorded pre-tax, non-cash finite-lived intangible assets
impairment charges of $14 million in 2021 and property and
equipment asset impairment charges of $4 million in 2020
and $24 million in 2019.
Sales commissions earned by our sales force are considered
incremental and recoverable costs of obtaining a contract
with a customer. These costs are deferred and amortized on a
straight-line basis over the period of benefit that we have
determined to be the contract term or estimated service
period. Sales commissions for renewal contracts are deferred
and amortized on a straight-line basis over the related
contractual renewal period. Amortization expense is included
in compensation and benefits expense in the Consolidated
Statements of Income. The balance of deferred costs and
related amortization expense are not material
to our
consolidated financial statements. Sales commissions are
expensed when incurred if contract durations are one year or
less. Sales taxes are excluded from transaction prices.
Certain
the
judgments and estimates were used
identification and timing of satisfaction of performance
obligations and the related allocation of transaction price and
are discussed below. We believe that these represent a
faithful depiction of the transfer of services to our customers.
in
Revenue Recognition and Transaction-Based Expenses
Revenue Recognition
Revenue From Contracts With Customers
Our revenue recognition policies under ASU 2014-09,
“Revenue from Contracts with Customers (Topic 606),” are
described in the following paragraphs.
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 Consolidated Balance
Sheets as receivables which is net of an allowance for credit
losses of $17 million as of December 31, 2021 and $21
million as of December 31, 2020. 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 there is no
significant variable consideration. We do not have a material
amount of revenues recognized from performance obligations
that were satisfied in prior periods. We do not provide
disclosures about transaction price allocated to unsatisfied
performance obligations if contract durations are less than
one year.
For contract durations that are one-year or greater, the portion
of transaction price allocated to unsatisfied performance
obligations is included in Note 3, “Revenue From Contracts
With Customers.” Deferred revenue primarily represents our
contract liabilities related to our fees for annual and initial
listings, market
technology, IR & ESG services and
investment intelligence contracts. Deferred revenue is the
only significant contract asset or liability as of December 31,
2021. See Note 8, “Deferred Revenue,” for our discussion of
deferred revenue balances, activity, and expected timing of
recognition. See “Revenue Recognition” below for further
descriptions of our revenue contracts.
Our primary revenue contract classifications are described
below. Although we may discuss additional revenue details
in our “Management's Discussion and Analysis of Financial
Condition and Results of Operations,” the categories below
best
similar economic
characteristics of the nature, amount, timing and uncertainty
of our revenues and cash flows.
that depict
represent
those
Market Technology
Market Technology revenues primarily consist of SaaS
revenues, software, license and support revenues, and change
request revenues.
long-term contracts with customers
In our market infrastructure technology business, we enter
into
to develop
customized technology solutions, license the right to use
software, and provide support and other services to our
customers. We also enter into agreements to modify the
system solutions sold by Nasdaq after delivery has occurred.
In addition, we enter into subscription agreements which
allow customers to connect to our servers to access our
software.
long-term contracts with customers
Our
to develop
customized technology solutions, license the right to use
software and provide support and other services to our
customers have multiple performance obligations. The
performance obligations are generally: (i) software license
and installation service and (ii) software support. We have
determined that the software license and installation service
are not distinct as the license and the customized installation
service are inputs to produce the combined output, a
functional and integrated software system.
F-16
For contracts with multiple performance obligations, we
allocate the contract transaction price to each performance
obligation using our best estimate of the standalone selling
price of each distinct good or service in the contract. In
instances where standalone selling price is not directly
observable, such as when we do not sell the product or
service separately, we determine the standalone selling price
predominantly through an expected cost plus a margin
approach.
Contract modifications are routine in the performance of our
contracts. Contracts are often modified to account for
changes in contract specifications or requirements. In most
instances, contract modifications are for goods and services
that are not distinct, and, therefore, are accounted for as part
of the existing contract.
For our long-term contracts, payments are generally made
throughout the contract life and can be dependent on either
reaching certain milestones or paid upfront in advance of the
service period depending on the stage of the contract. For
subscription agreements, contract payment terms can be
quarterly, annually or monthly, in advance. For all other
contracts, payment terms vary.
We generally recognize revenue over time as our customers
simultaneously receive and consume the benefits provided by
our performance because our customer controls the asset for
which we are creating, our performance does not create an
asset with alternative use, and we have a right to payment for
performance completed to date. For these services, we
recognize revenue over time using costs incurred to date
relative to total estimated costs at completion to measure
progress toward satisfying our performance obligation.
Incurred costs represent work performed, which corresponds
with, and thereby depicts, the transfer of control to the
customer. Contract costs generally include labor and direct
overhead. For software support and update services, and for
subscription agreements which allow customers to connect to
our servers to access our software, we generally recognize
revenue ratably over the service period beginning on the date
our service is made available to the customer since the
customer receives and consumes the benefit consistently over
the period as Nasdaq provides the services.
Accounting for our long-term contracts requires judgment
relative to assessing risks and their impact on the estimate of
revenues and costs. Our estimates are impacted by factors
such as the potential for schedule and technical issues,
productivity, and the complexity of work performed. When
adjustments in estimated total contract costs are required, any
changes in the estimated revenues from prior estimates are
recognized in the current period for the effect of such change.
If estimates of total costs to be incurred on a contract exceed
estimates of total revenues, a provision for the entire
estimated loss on the contract is recorded in the period in
which the loss is determined.
Investment Intelligence
Market Data
Market data revenues are earned from U.S. and European
proprietary market data products. In the U.S., we also earn
revenues from U.S. shared tape plans.
We earn revenues primarily based on the number of data
subscribers and distributors of our data. Market data revenues
are subscription-based and are recognized on a monthly
basis.
For U.S. tape plans, revenues are collected monthly based on
published fee schedules and distributed quarterly to the U.S.
exchanges based on a formula required by Regulation NMS
that takes into account both trading and quoting activity.
Revenues are presented on a net basis as we are acting as an
agent in this arrangement.
Market Data Revenue Sharing
The most significant component of market data revenues
recorded on a net basis is the UTP Plan revenue sharing in
the U.S. All indicators of principal versus agent reporting
under U.S. GAAP have been considered in analyzing the
appropriate presentation of the revenue sharing. However, the
following are the primary indicators of net reporting:
• We are the administrator for the plan, in addition to being a
participant in the plan. In our unique role as administrator,
we facilitate the collection and dissemination of revenues
on behalf of the plan participants. As a participant, we
share in the net distribution of revenues according to the
plan on the same terms as all other plan participants.
• The operating committee of the plan, which is comprised
of representatives from each of the participants, including
us solely in our capacity as a plan participant, is
responsible for setting the level of fees to be paid by
in
subscribers and
distributors and
accordance with the provisions of the plan, subject to SEC
approval.
taking action
• Risk of loss on the revenue is shared equally among plan
participants according to the plan.
The exchanges that comprise Nasdaq Nordic and Nasdaq
Baltic do not have any material market data revenue sharing
agreements.
Index
We develop and license Nasdaq branded indexes and
financial products. We also provide index data products and
custom calculation services for third-party clients. Revenues
primarily include license fees from these branded indexes and
financial products in the U.S. and abroad. We primarily have
two types of license agreements: transaction-based licenses
and asset-based licenses. Transaction-based licenses are
generally renewable agreements. Customers are charged
based on transaction volume or a minimum contract amount,
or both. If a customer is charged based on transaction
volume, we recognize revenue when the transaction occurs. If
F-17
a customer is charged based on a minimum contract amount,
we recognize revenue on a pro-rata basis over the licensing
term since the customer receives and consumes the benefit as
Nasdaq provides the service. Asset-based licenses are also
generally renewable agreements. Customers are charged
based on a percentage of AUM for licensed products, per the
agreement, on a monthly or quarterly basis. These revenues
are recognized over the term of the license agreement since
the customer receives and consumes the benefit as Nasdaq
provides the service. Revenue from index data subscriptions
are recognized on a monthly basis.
Analytics
Analytics revenues are earned from investment content and
analytics products. We earn revenues primarily based on the
number of content and analytics subscribers and distributors.
Subscription agreements are generally one to three years in
term, payable in advance, and provide for automatic renewal.
Subscription-based revenues are recognized over time on a
ratable basis over the contract period beginning on the date
that our service is made available to the customer since the
customer receives and consumes the benefit as Nasdaq
provides the service.
Corporate Platforms
Listing Services
the standalone selling price of
Listing services revenues primarily include initial listing fees
and annual renewal fees. Under Topic 606, the initial listing
fee is allocated to multiple performance obligations including
initial and subsequent listing services and IR & ESG services
(when a company qualifies to receive these services under the
applicable Nasdaq rule), as well as a customer's material right
to renew the option to list on our exchanges. In performing
this allocation,
the
performance obligations is based on the initial and annual
listing fees and the standalone selling price of the IPO
complimentary services is based on its market value. All
listing fees are billed upfront and the identified performance
obligations are satisfied over time since the customer receives
and consumes the benefit as Nasdaq provides the listing
service. The
IPO
complimentary services performance obligation is recognized
ratably over a three-year period, which is based on contract
terms, with the remaining revenue recognized ratably over
six years which is based on our historical listing experience
and projected future listing duration.
amount of
revenue
related
to
In the U.S., annual renewal fees are charged to listed
companies based on their number of outstanding shares at the
end of the prior year and are recognized ratably over the
following twelve-month period since the customer receives
and consumes the benefit as Nasdaq provides the service.
Annual fees are charged to newly listed companies on a pro-
rata basis, based on outstanding shares at the time of listing
and recognized over the remainder of the year. European
annual renewal fees, which are received from companies
listed on our Nasdaq Nordic and Nasdaq Baltic exchanges
and Nasdaq First North, are directly related to the listed
companies’ market capitalization on a trailing twelve-month
basis and are recognized ratably over the following twelve-
month period since the customer receives and consumes the
benefit as Nasdaq provides the service.
IR & ESG Services
Our IR & ESG Services business includes our Investor
Relations Intelligence and Governance Solutions businesses,
which serve both public and private companies and
organizations.
IR & ESG Services revenues primarily include subscription
and transaction-based income from our investor relations
intelligence and governance solutions products and services.
Subscription-based revenues earned are recognized over time
on a ratable basis over the contract period beginning on the
date that our service is made available to the customer since
the customer receives and consumes the benefit as Nasdaq
provides the service. Generally, fees are billed in advance
and the contract provides for automatic renewal. As part of
subscription agreements, customers can also be charged
usage fees based upon actual usage of the services provided.
Revenues from usage fees are recognized at a point in time
when the service is provided.
Market Services
Transaction-Based Trading and Clearing
Transaction-based
includes equity
trading and clearing
derivative trading and clearing, cash equity trading and FICC
revenues. Nasdaq charges transaction fees for trades executed
on our exchanges, as well as on orders that are routed to and
executed on other market venues. Nasdaq charges clearing
fees for contracts cleared with Nasdaq Clearing.
In the U.S., transaction fees are based on trading volumes for
trades executed on our U.S. exchanges and in Europe,
transaction fees are based on the volume and value of traded
and cleared contracts. In Canada, transaction fees are based
on trading volumes for trades executed on our Canadian
exchange.
Nasdaq satisfies its performance obligation for trading
services upon the execution of a customer trade and clearing
services when a contract is cleared, as trading and clearing
transactions are substantially complete when
they are
executed and we have no further obligation to the customer at
that time. Transaction-based trading and clearing fees can be
variable and are based on trade volume tiered discounts.
Transaction revenues, as well as any tiered volume discounts,
are calculated and billed monthly in accordance with our
published fee schedules. In the U.S., we also pay liquidity
payments to customers based on our published fee schedules.
We use these payments to improve the liquidity on our
markets and therefore recognize those payments as a cost of
revenue.
The majority of our FICC trading and clearing customers are
charged transaction fees, as discussed above, which are
primarily based on volume of traded and cleared contracts.
F-18
For U.S. equity derivative trading, we credit a portion of the
per share execution charge to the market participant that
provides the liquidity. For U.S. cash equity trading, for The
Nasdaq Stock Market, Nasdaq PSX and Nasdaq CXC, we
credit a portion of the per share execution charge to the
market participant that provides the liquidity, and for Nasdaq
BX and Nasdaq CX2, we credit a portion of the per share
execution charge to the market participant that takes the
liquidity. We record these credits as transaction rebates that
the
are
Consolidated Statements of Income. These
transaction
rebates are paid on a monthly basis and the amounts due are
included in accounts payable and accrued expenses in the
Consolidated Balance Sheets.
transaction-based expenses
included
in
in
In the U.S., we pay Section 31 fees to the SEC for
supervision and regulation of securities markets. We pass
these costs along to our customers through our equity
derivative trading and clearing fees and our cash equity
trading fees. We collect the fees as a pass-through charge
from organizations executing eligible trades on our options
exchanges and our cash equity platforms and we recognize
these amounts in transaction-based expenses when incurred.
Section 31 fees received are included in cash and cash
equivalents in the Consolidated Balance Sheets at the time of
receipt and, as required by law, the amount due to the SEC is
remitted semiannually and recorded as Section 31 fees
payable to the SEC in the Consolidated Balance Sheets until
paid. Since the amount recorded as revenues is equal to the
amount recorded as transaction-based expenses, there is no
impact on our revenues less transaction-based expenses. As
we hold the cash received until payment to the SEC, we earn
interest income on the related cash balances.
Under our Limitation of Liability Rule and procedures, we
may, subject to certain caps, provide compensation for losses
directly resulting from our systems’ actual failure to correctly
process an order, quote, message or other data into our
platform. We do not record a liability for any potential claims
that may be submitted under the Limitation of Liability Rule
unless they meet the provisions required in accordance with
U.S. GAAP. As such, losses arising as a result of the rule are
accrued and charged to expense only if the loss is probable
and estimable.
Trade Management Services
We provide market participants with a wide variety of
alternatives for connecting to and accessing our markets for a
fee. We also offer market participants colocation services,
whereby we charge firms for cabinet space and power to
house their own equipment and servers within our data
centers. These participants are charged monthly fees for
cabinet space, connectivity and support in accordance with
our published fee schedules. These fees are recognized on a
monthly basis when the performance obligation is met. We
also earn revenues from annual and monthly exchange
membership and registration fees. Revenues for monthly
exchange membership and registration fees are recognized on
a monthly basis as the service is provided. Revenues from
annual fees for exchange membership and registration fees
are recognized ratably over the following twelve-month
period since the customer receives and consumes the benefit
as Nasdaq provides the service. We also offer broker services
to financial participants in the Nordic market primarily
offering back office technology solutions. Revenues from
broker services are based on a fixed basic fee for licensing,
maintenance and support and development, and an
incremental fee depending on the number of transactions.
Broker services revenues are generally billed and recognized
monthly. As previously disclosed, in January 2020, we
commenced an orderly wind-down of this broker services
business. We expect this wind-down to continue through the
second quarter of 2022.
Other Revenues
revenues
For the years ended December 31, 2021, 2020 and 2019,
other revenues include the revenues associated with our U.S.
Fixed Income business, which was sold in June 2021. Prior to
the sale date, these revenues were included in our Market
Services and Investment Intelligence segments. See “2021
Divestiture,” of Note 4,“Acquisitions and Divestiture,” to the
consolidated financial statements for further discussion of
this divestiture. Additionally, other
include
revenues associated with the NPM business which we
contributed to a standalone, independent company, of which
we own the largest minority interest, together with a
consortium of third party financial institutions in July 2021.
Prior to July, these revenues were included in our Corporate
Platforms segment. For the year ended December 31, 2019,
other revenues also include the revenues from the BWise
enterprise governance,
risk and compliance software
platform, which was sold in March 2019. Prior to the sale
date, these revenues were included in our IR & ESG Services
business within our Corporate Platforms segment and were
both subscription and transaction-based revenues.
Earnings Per Share
We present both basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income
attributable to Nasdaq by the weighted-average number of
common shares outstanding for the period. Diluted earnings
per share is computed by dividing net income attributable to
Nasdaq by the weighted-average number of common shares
and common share equivalents outstanding during the period
and reflects the assumed conversion of all dilutive securities,
which primarily consist of restricted stock, PSUs, and
employee stock options. Common share equivalents are
excluded from the computation in periods for which they
have an anti-dilutive effect. Stock options for which the
exercise price exceeds the average market price over the
period are anti-dilutive and, accordingly, are excluded from
the calculation. Shares which are considered contingently
issuable are included in the computation of dilutive earnings
per share on a weighted average basis when management
determines the applicable performance criteria would have
been met if the performance period ended as of the date of
the relevant computation. See Note 13, “Earnings Per Share,”
for further discussion.
F-19
Pension and Post-Retirement Benefits
Pension and other post-retirement benefit plan information
for financial reporting purposes is developed using actuarial
valuations. We assess our pension and other post-retirement
benefit plan assumptions on a regular basis. In evaluating
these assumptions, we consider many factors, including
evaluation of the discount rate, expected rate of return on
plan assets, mortality rate, healthcare cost trend rate,
retirement age assumption, our historical assumptions
compared with actual results and analysis of current market
conditions and asset allocations. See Note 10, “Retirement
Plans,” for further discussion.
Discount rates used for pension and other post-retirement
benefit plan calculations are evaluated annually and modified
to reflect the prevailing market rates at the measurement date
of a high-quality fixed-income debt instrument portfolio that
would provide the future cash flows needed to pay the
benefits included in the benefit obligations as they come due.
Actuarial assumptions are based upon management’s best
estimates and judgment.
The expected rate of return on plan assets for our U.S.
pension plans represents our long-term assessment of return
expectations which may change based on significant shifts in
economic and financial market conditions. The long-term rate
of return on plan assets is derived from return assumptions
based on targeted allocations for various asset classes. While
we consider the pension plans’ recent performance and other
economic growth and inflation factors, which are supported
by long-term historical data, the return expectations for the
targeted asset categories represent a long-term prospective
return.
Share-Based Compensation
Nasdaq uses the fair value method of accounting for share-
based awards. Share-based awards, or equity awards, include
restricted stock, PSUs, and stock options. The fair value of
restricted stock awards and PSUs, other than PSUs granted
with market conditions, is determined based on the grant date
closing stock price less the present value of future cash
dividends. We estimate the fair value of PSUs granted with
market conditions using a Monte Carlo simulation model at
the date of grant. The fair value of stock options are
estimated using the Black-Scholes option-pricing model.
We generally recognize compensation expense for equity
awards on a straight-line basis over the requisite service
period of the award, taking into account an estimated
forfeiture rate. Granted but unvested shares are generally
forfeited upon termination of employment.
Excess tax benefits or expense related to employee share-
based payments, if any, are recognized as income tax benefit
or expense in the Consolidated Statements of Income when
the awards vest or are settled.
Nasdaq also has an ESPP that allows eligible employees to
purchase a limited number of shares of our common stock at
six-month intervals, called offering periods, at 85.0% of the
lower of the fair market value on the first or the last day of
each offering period. The 15.0% discount given to our
employees is included in compensation and benefits expense
in the Consolidated Statements of Income.
See Note 11, “Share-Based Compensation,” for further
discussion of our share-based compensation plans.
Merger and Strategic Initiatives
We incur incremental direct merger and strategic initiative
costs relating to various completed and potential acquisitions,
divestitures, and other strategic opportunities. These costs
generally include integration costs, as well as legal, due
diligence and other third party transaction costs. As of
December 31, 2021, all planned integrations have been
completed.
Fair Value Measurements
the
Fair value is defined as the price that would be received from
selling an asset or paid to transfer a liability, or the exit price,
in an orderly transaction between market participants at the
fair value
measurement date. When determining
measurements for assets and liabilities required or permitted
to be either recorded or disclosed at fair value, we consider
the principal or most advantageous market in which we
would transact, and we also consider assumptions that market
participants would use when pricing the asset or liability. Fair
value measurement establishes a hierarchy of valuation
techniques based on whether the inputs to those valuation
techniques are observable or unobservable. Observable inputs
reflect market data obtained from independent sources, while
unobservable inputs reflect Nasdaq’s market assumptions.
These two types of inputs create the following fair value
hierarchy:
• Level 1 - Quoted prices for identical instruments in active
markets.
• Level 2 - Quoted prices for similar instruments in active
markets; quoted prices for identical or similar instruments
that are not active; and model-derived
in markets
valuations whose
inputs are observable or whose
significant value drivers are observable.
• Level 3 - Instruments whose significant value drivers are
unobservable.
This hierarchy requires the use of observable market data
when available.
See Note 14, “Fair Value of Financial Instruments,” for
further discussion.
F-20
Tax Matters
We use the asset and liability method to determine income
taxes on all transactions recorded in the consolidated
financial statements. Deferred tax assets (net of valuation
allowances) and deferred tax liabilities are presented net by
jurisdiction as either a non-current asset or liability in our
Consolidated Balance Sheets, as appropriate. Deferred tax
assets and liabilities are determined based on differences
between the financial statement carrying amounts and the tax
basis of existing assets and liabilities (i.e., temporary
differences) and are measured at the enacted rates that will be
in effect when these differences are realized. If necessary, a
valuation allowance is established to reduce deferred tax
assets to the amount that is more likely than not to be
realized.
In order to recognize and measure our unrecognized tax
benefits, management determines whether a tax position is
more likely than not to be sustained upon examination,
including resolution of any related appeals or litigation
processes, based on the technical merits of the position. Once
it is determined that a position meets the recognition
thresholds, the position is measured to determine the amount
of benefit to be recognized in the consolidated financial
statements. Interest and/or penalties related to income tax
matters are recognized in income tax expense.
Subsequent Events
3. REVENUE FROM CONTRACTS WITH
CUSTOMERS
Disaggregation of Revenue
The following tables summarize the disaggregation of
revenue by major product and service and by segment for the
years ended December 31, 2021, 2020 and 2019:
Year Ended December 31,
2021
2020
2019
(in millions)
Market Technology
Anti Financial Crime Technology $ 247 $ 130 $ 121
Marketplace Infrastructure
Technology
Investment Intelligence
216
227
217
Market data
Index
Analytics
Corporate Platforms
Listing services
IR & ESG Services
Market Services
Transaction-based trading and
clearing, net
414
399
387
459
324
223
203
175
158
387
307
290
226
214
200
916
800
606
Trade management services
325
296
287
We have evaluated subsequent events through the issuance
date of this Annual Report on Form 10-K. See Note 21,
“Subsequent Events,” for further discussion.
Other revenues
Revenues less transaction-based
expenses
27
31
46
$ 3,420 $ 2,903 $ 2,535
Recent Accounting Developments
In October 2021, the FASB issued ASU 2021-08, “Business
Combinations (Topic 805) - Accounting for Contract Assets
and Contract Liabilities from Contracts with Customers.” The
ASU requires an acquirer in a business combination to
recognize and measure contract assets and contract liabilities
from acquired contracts using the revenue recognition
guidance under Topic 606 in order to align the recognition of
a contract liability with the definition of a performance
obligation. This approach differs
the current
requirement to measure contract assets and contract liabilities
acquired in a business combination at fair value. This ASU is
effective for fiscal years beginning after December 15, 2022,
including interim periods within those fiscal years. Early
adoption is permitted. We adopted this standard on January 1,
2022 on a prospective basis.
from
Substantially all revenues from the Market Technology,
Investment Intelligence and Corporate Platforms segments
were recognized over time for the years ended December 31,
2021, 2020, and 2019. For the years ended December 31,
2021, 2020 and 2019 approximately 70.8%, 69.8% and
64.4%, respectively, of Market Services revenues were
recognized at a point in time and 29.2%, 30.2% and 35.6%,
respectively, were recognized over time.
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 Consolidated Balance
Sheets as receivables, which are net of allowance for doubtful
accounts of $17 million as of December 31, 2021 and $21
million as of December 31, 2020. 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 range from three months to three
years and there is no significant variable consideration.
F-21
Deferred revenue is the only significant contract asset or
liability as of December 31, 2021. Deferred revenue
represents consideration received that is yet to be recognized
as revenue for unsatisfied performance obligations. Deferred
revenue primarily represents our contract liabilities related to
our fees for Market Technology, Analytics, annual and initial
listings, and IR & ESG Services contracts. See Note 8,
“Deferred Revenue,” for our discussion on deferred revenue
balances, activity, and expected timing of recognition.
the
We do not have a material amount of revenue recognized
from performance obligations that were satisfied in prior
periods. We do not provide disclosures about transaction
price allocated to unsatisfied performance obligations if
contract durations are less than one year. For our initial
listings
remaining
transaction price allocated
performance obligations is included in deferred revenue. For
our market technology, Analytics, and IR & ESG contracts
the portion of transaction price allocated to unsatisfied
performance obligations is presented in the table below. To
the extent consideration has been received, unsatisfied
performance obligations would be included in the table below
as well as deferred revenue.
to
table summarizes
the
The following
transaction price allocated to performance obligations that are
unsatisfied, for contract durations greater than one year, as of
December 31, 2021:
the amount of
Market
Technology
Analytics
IR & ESG
Services
Total
2022
2023
2024
2025
2026
2027+
Total
$
$
506 $
337
178
106
68
92
1,287 $
(in millions)
63 $
38
15
4
3
2
125 $
57 $
30
8
1
—
—
96 $
626
405
201
111
71
94
1,508
4. ACQUISITIONS AND DIVESTITURE
We completed the following divestiture and acquisitions in
2021 and 2020. Financial results of each transaction are
included in our consolidated financial statements from the
date of each acquisition.
2021 Divestiture
In June 2021, we sold our U.S. Fixed Income business, which
was part of our FICC business within our Market Services
segment, to Tradeweb Markets Inc. We recognized a pre-tax
gain on the sale of $84 million, net of disposal costs. The pre-
tax gain is included in net gain on divestiture of businesses in
the Consolidated Statements of Income.
As part of the purchase price consideration related to this
business when it was acquired in 2013, we agreed to future
annual issuances of 992,247 shares of Nasdaq common stock,
which approximated certain tax benefits associated with the
transaction. Such contingent future issuances of Nasdaq
common stock were to be issued annually through 2027 if
Nasdaq’s total gross revenues equaled or exceeded $25
million in each such year. The contingent future issuances of
Nasdaq common stock were subject
to anti-dilution
protections and acceleration upon certain events.
Upon the consummation of the sale of our U.S. Fixed Income
business, the aggregate number of Nasdaq shares remaining
under the contingent obligation described above were
reduced (pursuant to the discounting adjustment provisions
set forth in the original purchase agreement for Nasdaq's
acquisition of the business) and accelerated, resulting in an
issuance of approximately 6.2 million shares of Nasdaq
common stock to an assignee of the entity that sold this
business to us in 2013.
Nasdaq intends to use the proceeds from the sale, available
tax benefits and working and clearing capital of this business,
as well as other sources of cash, to repurchase shares of
Nasdaq common stock to reduce the impact on earnings per
share dilution from the sale.
To facilitate these repurchases, the board of directors
authorized an increase to the share repurchase program. See
“Share Repurchase Program,” of Note 12, “Nasdaq
Stockholders' Equity,” for further discussion.
2021 Acquisition
Acquisition of Verafin
of
provider
technology
anti-financial
In February 2021, we completed the acquisition of Verafin, a
SaaS
crime
management solutions that provides a cloud-based platform
to help detect, investigate, and report money laundering and
financial fraud, for an aggregate purchase price of $2.75
billion, subject to certain adjustments. The $2.75 billion
purchase price includes a cash payment of $102 million,
reflected in cash from operating activities in our Consolidated
Statements of Cash Flows, the release of which is subject to
certain employment-related conditions over three years
following the closing of the transaction. This payment was
recorded as a prepaid expense and is recorded in other current
and non-current assets in our Consolidated Balance Sheets
and will be amortized to merger and strategic initiatives
expense on a straight-line basis over a three-year period.
Verafin is part of our Market Technology segment.
Nasdaq used the net proceeds from our offering of senior
notes in December 2020, commercial paper issuances, and
cash on hand to fund this acquisition. See “Commercial
Paper Program,” and “Senior Unsecured Notes Due 2022,
2031 and 2040,” of Note 9, “Debt Obligations,” for further
discussion.
F-22
As of December 31, 2021, the allocation of purchase price
includes the effect of a $9 million measurement period
adjustment recorded during
the second quarter. This
adjustment resulted in an increase to both total net liabilities
the
acquired and goodwill. Additional adjustments
provisional values may result before
the
measurement period, a period not to exceed 12 months from
the acquisition date. These adjustments, which may include
tax and other estimates 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.
to
the end of
Goodwill
Acquired Intangible Assets
Total Net Liabilities Acquired
Purchase Consideration
Intangible Assets
(in millions)
$
1,882
815
(46)
$
2,651
The following table presents the details of acquired intangible
assets for Verafin at the date of acquisition. Acquired
intangible assets with finite lives are amortized using the
straight-line method.
Customer
Relationships Technology
Trade
Name
Total
Acquired
Intangible
Assets
Intangible asset
value (in millions)
$
532
$ 246
$ 37
$
815
Discount rate used
7.5 %
7.5 %
7.5 %
Estimated average
useful life
22 years
7 years 20 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
for
flows
the hypothetical cash
The discount rate used reflects the amount of risk associated
with
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 utilized this rate as an input when discounting the cash
flows. The resulting discounted cash flows were then tax-
effected at the applicable statutory rate.
For our acquisition of Verafin, a discounted tax amortization
benefit was added to the fair value of the assets under the
assumption
the customer relationships would be
amortized for tax purposes over a period of 20 years.
that
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.
Technology
As part of our acquisition of Verafin, we acquired developed
technology.
Methodology
The developed technology was valued using the income
approach, specifically the relief-from-royalty method, or
RFRM. The RFRM is used to estimate the cost savings that
accrue to the owner of an intangible asset who would
otherwise have to pay royalties or license fees on revenues
earned through the use of the asset. The royalty rate is
applied to the projected revenue over the expected remaining
life of the intangible asset to estimate royalty savings. The
net after-tax royalty savings are calculated for each year in
the remaining economic life of the technology and discounted
to present value.
Discount Rate
the hypothetical cash flows for
The discount rates used reflect the amount of risk associated
with
the developed
technology relative to the overall business as discussed above
in “Customer Relationships.”
Estimated Useful Life
We have estimated the useful life of the Verafin technology
to be 7 years.
Trade Name
As part of our acquisition of Verafin, we acquired a trade
name. The trade name is recognized in the industry and
carries a reputation for quality. As such, the reputation and
positive recognition embodied in the trade name is a valuable
asset to Nasdaq.
Methodology
The Verafin trade name was valued using the income
approach, specifically the RFRM as discussed above in
“Technology.”
Discount Rate
The discount rate used reflects the amount of risk associated
with the hypothetical cash flows for the trade name relative to
the overall business as discussed above in “Customer
Relationships.”
F-23
Estimated Useful Life
We have estimated the useful life of the Verafin trade name
to be 20 years and our intention is to continue to use it in the
branding of products.
2020 Acquisition
Acquisition of Solovis
5. GOODWILL AND ACQUIRED INTANGIBLE
ASSETS
Goodwill
The following table presents the changes in goodwill by
business segment during the year ended December 31, 2021:
(in millions)
In March 2020, we acquired Solovis, a provider of multi-
asset class portfolio management, analytics and reporting
tools across public and private markets. Solovis is part of our
Investment Intelligence segment.
Pro Forma Results and Acquisition-Related Costs
The consolidated financial statements for the years ended
December 31, 2021, 2020 and 2019 include the financial
results of the above acquisitions from the dates of these
acquisitions. Pro forma financial results have not been
presented since these acquisitions both individually and in the
aggregate were not material to our financial results.
Acquisition-related costs for the transactions described above
were expensed as incurred and are included in merger and
strategic initiatives expense in the Consolidated Statements
of Income.
Market Technology
Balance at December 31, 2020
Goodwill acquired
Other adjustments
Balance at December 31, 2021
Investment Intelligence
Balance at December 31, 2020
Divestiture of business
Other adjustments
Balance at December 31, 2021
Corporate Platforms
Balance at December 31, 2020
Other adjustments
Balance at December 31, 2021
Market Services
Balance at December 31, 2020
Goodwill acquired
Divestiture of business
Other adjustments
Balance at December 31, 2021
Total
Balance at December 31, 2020
Goodwill acquired
Divestiture of business
Other adjustments
Balance at December 31, 2021
In the table above:
$
$
$
$
$
$
$
$
$
$
309
1,873
(11)
2,171
2,541
(23)
(90)
2,428
481
(12)
469
3,519
15
(37)
(132)
3,365
6,850
1,888
(60)
(245)
8,433
• Divestiture of business relates to the sale of our U.S. Fixed
Income business. See “2021 Divestiture,” of Note 4,
“Acquisitions and Divestiture,” for further discussion. In
addition to revenues earned through Market Services, our
U.S. Fixed Income business also earned fees from market
data, which are included in our Investment Intelligence
segment. Therefore, a portion of the goodwill was
allocated to this segment.
• Other adjustments includes foreign currency translation
adjustment. For Market Technology, it also includes a
measurement period adjustment related to our acquisition
of Verafin. See “2021 Acquisition,” of Note 4,
“Acquisitions and Divestiture,” for further discussion.
As of December 31, 2021, the amount of goodwill, primarily
relating to our acquisition of Verafin, that is expected to be
deductible for tax purposes in future periods is $1.8 billion.
F-24
The change in the gross and net amounts for technology,
customer relationships and trade names and other finite-lived
intangible assets as of December 31, 2021 compared with
December 31, 2020 is primarily related to our acquisition of
Verafin. The change in the gross and net amounts for
customer relationships as of December 31, 2021 compared
with December 31, 2020 is also related to the divestiture of
our U.S. Fixed Income business. See “2021 Acquisition,” and
“2021 Divestiture,” of Note 4, “Acquisitions and
Divestiture,” for further discussion of these transactions.
There was no impairment of indefinite-lived intangible assets
for the years ended December 31, 2021, 2020 and 2019. We
recorded an impairment charge of $14 million in 2021 related
to a finite-lived intangible asset for customer relationships
associated with the wind down of a previous acquisition
included in depreciation and amortization expense in the
Consolidated Statements of Income. There were no material
finite-lived impairment charges in 2020 and 2019.
The following table presents our amortization expense for
acquired finite-lived intangible assets:
Year Ended December 31,
2021
2020
2019
(in millions)
Amortization expense
$
170 $
103 $
101
The increase in amortization expense for the year ended
December 31, 2021 compared with the same periods in 2020
and 2019 was primarily due to additional amortization
expense for acquired
to our
acquisition of Verafin. These amounts are included in
depreciation and amortization expense in the Consolidated
Statements of Income.
intangible assets related
The table below presents the estimated future amortization
expense (excluding the impact of foreign currency translation
adjustments of $62 million as of December 31, 2021) of
acquired finite-lived intangible assets as of December 31,
2021:
2022
2023
2024
2025
2026
2027+
Total
(in millions)
$
161
157
152
149
146
864
$ 1,629
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 years ended December 31,
2021, 2020 and 2019; however, events such as prolonged
economic weakness or unexpected significant declines in
operating results of any of our reporting units or businesses,
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:
Finite-Lived Intangible Assets
(in millions)
December 31,
2021
December 31,
2020
Gross Amount
Technology
Customer relationships
Trade names and other
Foreign currency translation
adjustment
Total gross amount
Accumulated Amortization
Technology
Customer relationships
Trade names and other
Foreign currency translation
adjustment
Total accumulated amortization
Net Amount
Technology
Customer relationships
Trade names and other
Foreign currency translation
adjustment
Total definite-lived intangible
assets
$
295 $
76
2,050
60
1,599
18
(143)
(104)
$
2,262 $
1,589
$
$
$
(54) $
(711)
(11)
81
(695) $
241 $
1,339
49
(24)
(648)
(6)
58
(620)
52
951
12
(62)
(46)
$
1,567 $
969
Indefinite-Lived Intangible Assets
Exchange and clearing
registrations
Trade names
Licenses
Foreign currency translation
adjustment
Total indefinite-lived
intangible assets
Total intangible assets, net
$
1,257 $
1,257
121
52
121
52
(184)
(144)
$
$
1,246 $
1,286
2,813 $
2,255
F-25
6. INVESTMENTS
7. PROPERTY AND EQUIPMENT, NET
The following table presents the details of our investments:
December 31, 2021
December 31, 2020
The following table presents our major categories of property
and equipment, net:
Financial investments
$
Equity method investments $
Equity securities
$
Financial Investments
(in millions)
208 $
363 $
67 $
195
216
60
Financial investments are comprised of trading securities,
primarily highly rated European government debt securities,
of which $162 million as of December 31, 2021 and $175
million as of December 31, 2020, are assets primarily utilized
to meet regulatory capital requirements, mainly for our
clearing operations at Nasdaq Clearing.
Equity Method Investments
We record our estimated pro-rata share of earnings or losses
each reporting period and record any dividends as a reduction
in the investment balance. As of December 31, 2021 and
2020, our equity method investments primarily included our
40.0% equity interest in OCC.
The carrying amounts of our equity method investments are
included in other non-current assets in the Consolidated
Balance Sheets. No material impairments were recorded for
the years end December 31, 2021 and 2020.
Net income recognized from our equity interest in the
earnings and losses of these equity method investments,
primarily OCC, was $52 million for the year ended
December 31, 2021, $70 million for the year ended
December 31, 2020 and $84 million for the year ended
December 31, 2019. For the year ended December 31, 2021,
lower equity interest in the earnings of OCC as compared to
2020 and 2019 is primarily driven by a reduction, in 2021, in
the clearing fee rates that OCC charged its customers.
Equity Securities
The carrying amounts of our equity securities are included in
other non-current assets in the 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. No material adjustments were made
to the carrying value of our equity securities for the year
ended December 31, 2021, 2020 and 2019. As of December
31, 2021 and December 31, 2020, our equity securities
primarily represent various strategic
investments made
through our corporate venture program as well as
investments acquired through various acquisitions.
Data processing equipment and
software
Furniture, equipment and leasehold
improvements
Total property and equipment
Less: accumulated depreciation and
amortization and impairment
charges
Year Ended December 31,
2021
2020
(in millions)
$
735 $
732
288
1,023
300
1,032
(514)
(557)
Total property and equipment, net
$
509 $
475
Depreciation and amortization expense for property and
equipment was $108 million for the year ended December
31, 2021, $99 million for the year ended December 31, 2020,
and $89 million for the year ended December 31, 2019.
These amounts are included in depreciation and amortization
expense in the Consolidated Statements of Income.
We recorded pre-tax, non-cash property and equipment asset
impairment charges on capitalized software that was retired
and accelerated depreciation expense on certain assets as a
result of a decrease in their useful life of $4 million in 2021,
$14 million in 2020 and $26 million in 2019. These charges
are included in restructuring charges in the Consolidated
Statements of Income. See Note 20, “Restructuring Charges,”
for a discussion of our 2019 restructuring plan. There were
no other material impairments of property and equipment
recorded in 2021, 2020 or 2019.
As of December 31, 2021 and 2020, we did not own any real
estate properties.
8. DEFERRED REVENUE
Deferred revenue represents consideration received that is yet
to be recognized as revenue. The changes in our deferred
revenue during the year ended December 31, 2021 are
reflected in the following table:
Balance at
December 31,
2020
Revenue
Additions
Recognized Adjustments
Balance at
December 31,
2021
(in millions)
Market
Technology $
Investment
Intelligence
Corporate Platforms:
Initial Listing
Annual
Listings
IR & ESG
Services
53 $ 113 $
(46) $
(3) $
117
97 104
(95)
—
106
91
97
(41)
2
3
(2)
46
17
52
15
(41)
(9)
(2)
(1)
—
(2)
145
2
57
21
$
306 $ 384 $ (234) $
(8) $
448
Other
Total
F-26
In the preceding table:
9. DEBT OBLIGATIONS
• Additions primarily reflect deferred revenue billed in the
current period, net of recognition. Market Technology
additions include deferred revenue acquired as part of the
acquisition of Verafin.
• Revenue recognized includes revenue recognized during
the current period that was included in the beginning
balance.
The following table presents the changes in the carrying
amount of our debt obligations during the year ended
December 31, 2021:
December 31,
2020
Additions
Payments,
Foreign
Currency
Translation
and
Accretion
December 31,
2021
reflect
foreign
currency
translation
(in millions)
• Adjustments
adjustments.
• Other primarily includes deferred revenue from non-U.S.
listing of additional shares fees. Listing of additional shares
fees are included in our Listing Services business.
As of December 31, 2021, we estimate that our deferred
revenue will be recognized in the following years:
Fiscal year
ended:
2022
2023
2024
2025
2026
2027+
Total
(in millions)
Market
Technology $ 109 $ 6 $ 1 $ 1 $ — $ — $ 117
Investment
Intelligence
2 — — — — 106
104
Corporate Platforms:
Initial
Listings
Annual
Listings
IR & ESG
Services
Other
Total
49 35 26 17 14
4 145
2 — — — — —
2
56
1 — — — —
9
7
4
1 — —
57
21
$ 329 $ 51 $ 31 $ 19 $ 14 $ 4 $ 448
In the above table, the timing of recognition of our deferred
market technology revenues is primarily dependent upon the
completion
significant
modifications made pursuant to existing market technology
contracts. As such, as it relates to market technology
revenues, the timing represents our best estimate.
customization
any
and
of
Short-term
debt -
commercial
paper
2022 Notes
Total short-
term debt
Long-term
debt - senior
unsecured
notes:
$
— $ 4,079 $ (3,659) $
597 —
1
420
598
$
597 $ 4,079 $ (3,658) $
1,018
2024 Notes
$
498 $ — $
1 $
2023 Notes
2026 Notes
2029 Notes
2030 Notes
2050 Notes
2031 Notes
2040 Notes
2033 Notes
2020 Credit
Facility
Total long-
term debt
Total debt
obligations
$
$
730
—
(730)
497
—
726
—
726
—
485
—
643
—
643
—
1
(50)
(50)
1
—
1
—
726
(32)
499
—
498
676
676
486
643
644
694
(4)
100
(100)
(4)
4,944 $ 826 $
(958) $
4,812
5,541 $ 4,905 $ (4,616) $
5,830
In the table above, the 2022 Notes were reclassified to short-
term debt as of December 31, 2021.
Commercial Paper Program
Our U.S. dollar commercial paper program is supported by
our 2020 Credit Facility which provides liquidity support for
the repayment of commercial paper issued through this
program. See “2020 Credit Facility” below for further
discussion. The effective interest rate of commercial paper
issuances fluctuates as short term interest rates and demand
fluctuate. The fluctuation of these rates may impact our
interest expense.
In February 2021, we issued $475 million of commercial
paper to partially fund the acquisition of Verafin. For further
the acquisition of Verafin, see “2021
discussion of
Acquisition,” of Note 4, “Acquisitions and Divestiture.”
F-27
In July 2021, we issued commercial paper to partially fund
our ASR agreement. See “ASR Agreements,” of Note 12,
“Nasdaq Stockholders' Equity."
reflect
As of December 31, 2021, commercial paper notes in the
table above
the aggregate principal amount
outstanding, 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 31 days to 66 days and the weighted-average maturity is
29 days. The weighted-average effective interest rate is
0.34% per annum.
Senior Unsecured Notes
Our 2022 and 2040 Notes were issued at par. All of our other
outstanding senior unsecured notes were 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
December 31, 2021, 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. For our Euro denominated notes, the
“Payments, Foreign Currency Translation and Accretion”
impact of foreign currency
column also
translation. Our senior unsecured notes are general unsecured
obligations which rank equally with all of our existing and
future unsubordinated obligations and 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. The senior unsecured notes may be redeemed by
Nasdaq at any time, subject to a make-whole amount.
includes
the
Upon a change of control triggering event (as defined in the
various supplemental indentures governing the applicable
notes), 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.
2026 Notes
In June 2016, Nasdaq issued the 2026 Notes, which pay
interest semi-annually at a rate of 3.85% per annum until
June 30, 2026. Such interest rate may vary with Nasdaq’s
debt rating, to the extent Nasdaq is downgraded below
investment grade, up to a rate not to exceed 5.85%.
2029 Notes
In April 2019, Nasdaq issued the 2029 Notes, which pay
interest annually at a rate of 1.75% per annum until March
28, 2029. Such interest rate may vary with Nasdaq’s debt
rating, to the extent Nasdaq is downgraded below investment
grade, up to a rate not to exceed 3.75%.
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. The decrease in the carrying amount of
$50 million noted in the “Payments, Foreign Currency
Translation and Accretion” column in the table above
primarily reflects the remeasurement of the 2029 Notes into
U.S. dollars and
in accumulated other
recorded
comprehensive loss within Nasdaq's stockholders’ equity in
the Consolidated Balance Sheets as of December 31, 2021.
is
2030 Notes
In February 2020, Nasdaq issued the 2030 Notes. The 2030
Notes pay interest annually in arrears, which began on
February 13, 2021.
The 2030 Notes were 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
$50 million noted in the “Payments, Foreign Currency
Translation and Accretion” column in the table above
primarily reflects the remeasurement of the 2030 Notes into
U.S. dollars and
in accumulated other
recorded
comprehensive loss within Nasdaq's stockholders’ equity in
the Consolidated Balance Sheets as of December 31, 2021.
is
2024 Notes
2050 Notes
In May 2014, Nasdaq issued the 2024 Notes, which pay
interest semiannually at a rate of 4.25% per annum until June
1, 2024. Such interest rate may vary with Nasdaq’s debt
rating, to the extent Nasdaq is downgraded below investment
grade, up to a rate not to exceed 6.25%.
Early Extinguishment of 2023 Notes
Nasdaq issued the 2023 Notes in May 2016, which paid
interest annually at a rate of 1.75% per annum. In August
2021, we primarily used the net proceeds from the 2033
Notes to repay in full and redeem our 2023 Notes. For further
discussion see “2033 Notes” below. In connection with the
early extinguishment of the 2023 Notes, we recorded a pre-
tax charge of $33 million, which primarily includes a make-
whole redemption price premium. This charge is included in
general, administrative and other expense in the Consolidated
Statements of Income for the year ended December 31, 2021.
In April 2020, Nasdaq issued the 2050 Notes. The 2050
Notes pay interest semi-annually in arrears, which began on
October 28, 2020. The interest rate of 3.25% may vary with
Nasdaq's debt rating, to the extent Nasdaq is downgraded
below investment grade, up to a rate not to exceed 5.25%.
Senior Unsecured Notes Due 2022, 2031 and 2040
In December 2020, Nasdaq issued the 2022, 2031 and 2040
Notes. The net proceeds were used to partially fund the
acquisition of Verafin. For further discussion of
the
acquisition of Verafin, see “2021 Acquisition,” of Note 4,
“Acquisitions and Divestiture.”
F-28
2022 Notes
The 2022 Notes pay interest semi-annually in arrears, which
began on June 21, 2021. The interest rate of 0.445% may
vary with Nasdaq's debt rating, to the extent Nasdaq is
downgraded below investment grade, up to a rate not to
exceed 2.445%.
2031 Notes
The 2031 Notes pay interest semi-annually in arrears, which
began on January 15, 2021. The interest rate of 1.650% may
vary with Nasdaq's debt rating, to the extent Nasdaq is
downgraded below investment grade, up to a rate not to
exceed 3.65%.
2040 Notes
The 2040 Notes pay interest semi-annually in arrears, which
began on June 21, 2021. The interest rate of 2.500% may
vary with Nasdaq's debt rating, to the extent Nasdaq is
downgraded below investment grade, up to a rate not to
exceed 4.50%.
2033 Notes
In July 2021, Nasdaq issued €615 million aggregate principal
amount of 0.900% senior notes due in 2033, which pay
interest annually in arrears, beginning on July 30, 2022. The
net proceeds from the 2033 Notes were approximately $726
million after deducting
the underwriting discount and
expenses of the offering. We primarily used the net proceeds
from the 2033 Notes to redeem all of the 2023 Notes. For
further discussion of
see “Early
Extinguishment of 2023 Notes” above.
the 2023 Notes,
The 2033 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
$32 million noted in the “Payments, Foreign Currency
Translation and Accretion” column in the table above
primarily reflects the remeasurement of the 2033 Notes into
U.S. dollars and
in accumulated other
recorded
comprehensive loss within Nasdaq stockholders’ equity in
the Consolidated Balance Sheets as of December 31, 2021.
is
Credit Facilities
2020 Credit Facility
In December 2020, Nasdaq entered into the 2020 Credit
Facility, which replaced a former credit facility and consists
of a $1.25 billion five-year revolving credit facility (with
sublimits for non-dollar borrowings, swingline borrowings
and letters of credit). Nasdaq intends to use funds available
under the 2020 Credit Facility for general corporate purposes
and to provide liquidity support for the repayment of
commercial paper issued through the commercial paper
program. Nasdaq is permitted to repay borrowings under our
2020 Credit Facility at any time in whole or in part, without
penalty.
As of December 31, 2021, no amounts were outstanding on
the 2020 Credit Facility. The $(4) million balance represents
unamortized debt issuance costs which are being accreted
through interest expense over the life of the credit facility. Of
the $1.25 billion that is available for borrowing, $420 million
provides liquidity support for the commercial paper program.
As such, as of December 31, 2021, the total remaining
amount available under the 2020 Credit Facility was $830
million, excluding the amounts that support the commercial
paper program. See “Commercial Paper Program” above for
further discussion of our commercial paper program.
Under our 2020 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 a successor rate to
LIBOR), 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
0.350%, 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
year ended December 31, 2021 and 2020.
The 2020 Credit Facility contains financial and operating
covenants. Financial covenants include a maximum leverage
ratio. Operating covenants include, among other things,
limitations on Nasdaq’s ability
incur additional
indebtedness, grant liens on assets, dispose of assets and
make certain restricted payments. The facility also contains
customary affirmative covenants,
to
financial statements, notice of defaults and certain other
material events, maintenance of properties and insurance, and
customary events of default, including cross-defaults to our
material indebtedness.
including access
to
The 2020 Credit Facility includes an option for Nasdaq to
increase the available aggregate amount by up to $625
million, subject to the consent of the lenders funding the
increase and certain other conditions.
Other Credit Facilities
Certain of our European subsidiaries have several other credit
facilities, which are available
in multiple currencies,
primarily to support our Nasdaq Clearing operations in
Europe, as well as to provide a cash pool credit line for one
subsidiary. These credit facilities, in aggregate, totaled $212
million as of December 31, 2021 and $232 million as of
December 31, 2020 in available liquidity, none of which was
utilized. Generally, these facilities each have a one year term.
The amounts borrowed under these various credit facilities
bear interest on the principal amount outstanding at a variable
interest rate based on a base rate (as defined in the applicable
credit agreement), plus an applicable margin. We are charged
commitment fees (as defined in the applicable credit
agreement), whether or not amounts have been borrowed.
These commitment fees are included in interest expense and
were not material for the years ended December 31, 2021 and
2020.
F-29
These facilities include customary affirmative and negative
operating covenants and events of default.
Debt Covenants
As of December 31, 2021, we were in compliance with the
covenants of all of our debt obligations.
10. RETIREMENT PLANS
Defined Contribution Savings Plan
We sponsor a 401(k) Plan for U.S. employees. Employees
are immediately eligible to make contributions to the plan
and are also eligible for an employer contribution match at an
amount equal to 100.0% of the first 6.0% of eligible
employee contributions. Savings plan expense included in
compensation and benefits expense in the Consolidated
Statements of Income was $14 million for the year ended
December 31, 2021, $14 million for the year ended
December 31, 2020 and $13 million for the year ended
December 31, 2019.
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 Consolidated
Statements of Income and was $26 million for the year ended
December 31, 2021, $23 million for the year ended
December 31, 2020 and $20 million for the year ended
December 31, 2019.
Nasdaq recognizes the funded status of the Nasdaq Benefit
Plans, measured as the difference between the fair value of
the plan assets and the benefit obligation, in the Consolidated
Balance Sheets. The fair value of our U.S. defined-benefit
pension plans' assets was $111 million as of December 31,
2021 and the benefit obligation was $112 million as of
December 31, 2021. As a result, the U.S. defined-benefit
pension plans are underfunded by $1 million as of December
31, 2021. The fair value of our U.S. defined-benefit pension
plans' assets was $119 million as of December 31, 2020 and
the benefit obligation was $118 million as of December 31,
2020. As a result, the U.S. defined-benefit pension plans
were fully funded as of December 31, 2020. During 2021 and
2020, we did not make any contributions to our U.S. defined-
benefit pension plans. For our SERP and other post-
retirement benefit plans, the net underfunded liability was
$34 million as of December 31, 2021 and $30 million as of
December 31, 2020. The underfunded liability for the above
plans is included in accrued personnel costs and other non-
current liabilities in the Consolidated Balance Sheets. The
plan assets of the Nasdaq Benefit Plans are invested per
target allocations adopted by Nasdaq’s Pension and 401(k)
Committee and are primarily invested in collective fund
investments that have underlying investments in fixed
income securities. The collective fund investments are valued
at net asset value which is a practical expedient to estimate
fair value.
Accumulated Other Comprehensive Loss
As of December 31, 2021, accumulated other comprehensive
loss for the Nasdaq Benefit Plans was $26 million reflecting
an unrecognized net loss of $33 million, partially offset by an
income tax benefit of $7 million, primarily due to our
pension plans.
Estimated Future Benefit Payments
We expect to make the following benefit payments to
participants in the next ten fiscal years under the Nasdaq
Benefit Plans:
Fiscal Year Ended:
(in millions)
Pension
SERP
Post-
retirement
Total
2022
2023
2024
2025
2026
2027 through 2031
$
8 $
6 $ — $
7
8
8
10
38
2
2
2
2
8
—
—
—
—
2
14
9
10
10
12
48
$
79 $
22 $
2 $ 103
11. SHARE-BASED COMPENSATION
We have a share-based compensation program for employees
and non-employee directors. Share-based awards granted
under this program include restricted stock (consisting of
restricted stock units), PSUs and stock options. For
accounting purposes, we consider PSUs to be a form of
restricted stock.
Summary of Share-Based Compensation Expense
the
total
following
table presents
The
share-based
compensation expense resulting from equity awards and the
15.0% discount for the ESPP for the years ended December
31, 2021, 2020 and 2019, which is included in compensation
and benefits expense in the Consolidated Statements of
Income:
Year Ended December 31,
2021
2020
2019
(in millions)
Share-based compensation
expense before income taxes
Income tax benefit
Share-based compensation
expense after income taxes
$
90 $
87 $
79
(24)
(23)
(21)
$
66 $
64 $
58
F-30
Common Shares Available Under Our Equity Plan
PSUs
As of December 31, 2021, we had approximately 9.5 million
shares of common stock authorized for future issuance under
our Equity Plan.
Restricted Stock
We grant restricted stock to most 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 to employees
below the manager level generally vest 33.3% on the first
anniversary of
the second
anniversary of the grant date, and 33.3% on the third
anniversary of the grant date. Restricted stock awards granted
to employees at or above the manager level generally vest
33.3% on the second anniversary of the grant date, 33.3% on
the third anniversary of the grant date, and 33.3% on the
fourth anniversary of the grant date.
the grant date, 33.3% on
Summary of Restricted Stock Activity
The following table summarizes our restricted stock activity
for the years ended December 31, 2021, 2020 and 2019:
Restricted Stock
Number of Awards
Weighted-Average
Grant Date Fair
Value
Unvested at December 31,
2018
Granted
Vested
Forfeited
Unvested at December 31,
2019
Granted
Vested
Forfeited
Unvested at December 31,
2020
Granted
Vested
Forfeited
Unvested at December 31,
2021
1,583,375 $
605,033
(548,588)
(153,064)
1,486,756 $
743,300
(499,357)
(91,648)
1,639,051 $
507,745
(541,603)
(138,853)
68.62
85.03
61.45
73.99
77.38
89.93
72.95
81.17
84.21
151.56
83.34
102.11
1,466,340 $
106.16
As of December 31, 2021, $81 million of total unrecognized
compensation cost related to restricted stock is expected to be
recognized over a weighted-average period of 1.8 years.
PSUs are based on performance measures that impact the
amount of shares that each recipient will receive upon
vesting. Prior to April 1, 2020, we had two performance-
based PSU programs for certain officers, a one-year
performance-based program and a three-year cumulative
performance-based program that focuses on TSR. Effective
April 1, 2020, to better align the equity programs for eligible
officers,
the one-year performance-based program was
eliminated and all eligible officers now participate in the
three-year cumulative performance-based program. While the
performance periods are complete for all PSUs granted under
the one-year performance-based program, some shares
underlying these PSUs have not vested.
One-Year PSU Program
The grant date fair value of PSUs under the one-year
performance-based program was 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 received
a target grant of PSUs, but could have received from 0.0% to
150.0% of the target amount granted, depending on the
achievement of performance measures. These awards vest
three-year period
ratably on an annual basis over a
commencing with the end of the one-year performance
period. Compensation cost
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.
recognized over
is
Three-Year PSU Program
individual
receives PSUs, subject
Under the three-year performance-based program, each
eligible
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 performance 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 award issuance 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 award issuance 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.
F-31
Grants of PSUs that were issued in 2019 with a three-year
performance period exceeded the applicable performance
parameters. As a result, an additional 289,307 units above the
original target were granted in the first quarter of 2022 and
were fully vested upon issuance.
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
years ended December 31, 2021 and 2020:
Year Ended December 31,
2021
2020
Weighted-average risk free
interest rate
Expected volatility
Weighted-average grant date
share price
Weighted-average fair value
at grant date
$
$
0.33 %
30.30 %
0.27 %
27.40 %
155.63
218.24
$
$
92.34
111.50
In the table above:
• 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; and
• 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
years ended December 31, 2021, 2020 and 2019:
PSUs
One-Year Program
Three-Year Program
Weighted-
Average
Grant
Date Fair
Value
Number of
Awards
Weighted-
Average
Grant
Date Fair
Value
Number of
Awards
314,231 $ 74.01
837,750 $ 96.57
179,599
83.56
(147,984) 70.64
(28,595) 75.43
397,553
96.55
(431,751) 93.25
(6,101) 103.29
317,251 $ 80.87
797,451 $ 98.31
26,780
84.17
320,328
107.42
(138,423) 78.09
(300,767) 81.57
Unvested at
December
31, 2018
Granted
Vested
Forfeited
Unvested at
December
31, 2019
Granted
Vested
Forfeited
(36,060) 82.41
(7,023) 98.26
Unvested at
December
31, 2020
Granted
Vested
169,548 $ 83.33
809,989 $ 108.12
—
—
360,569
175.98
(99,764) 82.99
(392,727) 116.86
Forfeited
(20,050) 83.29
(13,707) 142.29
Unvested at
December
31, 2021
49,734 $ 84.03
764,124 $ 135.04
In the table above, the granted amount includes additional
awards granted based on overachievement of performance
parameters as well as target awards.
As of December 31, 2021, $1 million of total unrecognized
compensation cost related to the one-year PSU program is
expected to be recognized over a weighted-average period of
1.0 year. For the three-year PSU program, $43 million of
total unrecognized compensation cost is expected to be
recognized over a weighted-average period of 1.4 years.
F-32
Stock Options
ESPP
A summary of stock option activity for the years ended
December 31, 2021, 2020 and 2019 is as follows:
Number of
Stock Options
Weighted-
Average
Exercise
Price
Outstanding at December 31, 2018
448,966 $ 49.25
Exercised
Forfeited
(69,699)
(165)
20.84
25.28
Outstanding at December 31, 2019
379,102 $ 54.32
Exercised
Forfeited
Outstanding and exercisable at
December 31, 2020
Exercised
Forfeited
Outstanding and exercisable at
December 31, 2021
(85,195)
(554)
23.91
20.94
293,353 $ 63.22
(24,409)
(127)
25.28
25.28
268,817 $ 66.68
The net cash proceeds from the exercise of 24,409 stock
options for the year ended December 31, 2021 was $1
million. The net cash proceeds from the exercise of 85,195
stock options for the year ended December 31, 2020 was $2
million. The net cash proceeds from the exercise of 69,699
stock options for the year ended December 31, 2019 was $2
million.
As of December 31, 2021, the aggregate pre-tax intrinsic
value of the outstanding and exercisable stock options in the
above table was $39 million and represents the difference
between our closing stock price on December 31, 2021 of
$210.01 and the exercise price, times the number of shares,
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. As of December 31, 2021, the weighted-
average remaining contractual term of the outstanding and
exercisable stock options included in the above table was 5.0
years.
The total pre-tax intrinsic value of stock options exercised
was $3 million for the year ended December 31, 2021, $9
million for the year ended December 31, 2020 and $6 million
for the year ended December 31, 2019.
We have an ESPP under which approximately 4.2 million
shares of our common stock were available for future
issuance as of December 31, 2021. 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. The following table summarizes
employee activity and expense associated with the ESPP for
the years ended December 31, 2021, 2020 and 2019:
Year Ended December 31,
2021
2020
2019
Number of shares
purchased by
employees
Weighted-average price
of shares purchased
Compensation expense
(in millions)
201,758
221,123
229,172
$ 124.24 $ 95.79 $ 73.79
$
7 $
5 $
4
12. NASDAQ STOCKHOLDERS' EQUITY
Common Stock
As of December 31, 2021, 300,000,000 shares of our
common stock were authorized, 173,418,939 shares were
issued and 166,679,635 shares were outstanding. As of
December 31, 2020, 300,000,000 shares of our common
stock were authorized, 171,278,761 shares were issued and
164,933,678 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
shareholder 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 Consolidated
Balance Sheets. Shares repurchased under our share
repurchase program are currently retired and canceled and are
therefore not included in the common stock in treasury
balance. If treasury shares are reissued, they are recorded at
the average cost of the treasury shares acquired. We held
6,739,304 shares of common stock in treasury as of
December 31, 2021 and 6,345,083 shares as of December 31,
2020, most of which are related to shares of our common
tax
stock withheld
withholding obligations arising from the vesting of restricted
stock and PSUs.
the settlement of employee
for
F-33
Share Repurchase Program
Preferred Stock
April 21, 2021
July 21, 2021
0.54
0.54
Year Ended
December 31, 2021
October 20, 2021
0.54
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
December 31, 2021 and December 31, 2020, no shares of
preferred stock were issued or outstanding.
Cash Dividends on Common Stock
During 2021, our board of directors declared and paid the
following cash dividends:
Declaration Date
Dividend
Per
Common
Share
Record Date
Total
Amount
Paid
(in millions)
January 27, 2021
$ 0.49
March 12,
2021
$
Payment
Date
March 26,
2021
June 25,
2021
September
24, 2021
December
17, 2021
81
89
90
June 11,
2021
September
10, 2021
December
3, 2021
90
350
$
The total amount paid of $350 million was recorded in
retained earnings within Nasdaq's stockholders' equity in the
Consolidated Balance Sheets at December 31, 2021.
In January 2022, the board of directors approved a regular
quarterly cash dividend of $0.54 per share on our outstanding
common stock. The dividend is payable on March 25, 2022
to shareholders of record at the close of business on March
11, 2022. The estimated amount of this dividend is $90
million. Future declarations of quarterly dividends and the
establishment of future record and payment dates are subject
to approval by the board of directors.
The board of directors maintains a dividend policy with the
intention to provide stockholders with regular and increasing
dividends as earnings and cash flows increase.
As discussed in “2021 Divestiture,” of Note 4, “Acquisitions
and Divestiture,” on June 16, 2021, our board of directors
authorized an increase to our share repurchase program to an
aggregate authorized amount of $1.5 billion. As of December
31, 2021, the remaining aggregate authorized amount under
the existing share repurchase program was $926 million.
transactions, block purchase
These repurchases may be made from time to time at
prevailing market prices in open market purchases, privately-
negotiated
techniques, an
accelerated share repurchase program or otherwise, as
determined by our management. The repurchases are
primarily funded from existing cash balances. The share
repurchase program may be suspended, modified or
discontinued at any time, and has no defined expiration date.
The following is a summary of our share repurchase activity,
excluding the repurchases done through our ASR agreement
described below, reported based on settlement date, for the
year ended December 31, 2021:
Number of shares of common stock
repurchased
Average price paid per share
Total purchase price (in millions)
2,911,208
160.87
468
$
$
In the table above, the number of shares of common stock
repurchased excludes an aggregate of 394,221 shares
withheld upon the vesting of restricted stock and PSUs for
the year ended December 31, 2021.
As discussed above in “Common Stock in Treasury, at Cost,”
shares repurchased under our share repurchase program are
currently retired and cancelled.
ASR Agreements
In July 2021, we entered into an ASR agreement to
repurchase $475 million of common stock. We received a
total delivery of 2,431,212 shares of common stock and
completed the ASR program during the fourth quarter of
2021. The ASR agreement was entered into pursuant to our
$1.5 billion share repurchase authorization as discussed in
"Share Repurchase Program," above.
On January 26, 2022 we announced that we entered into
an ASR agreement to repurchase $325 million of common
stock and received an initial delivery of 1,533,923 shares of
common stock. The final number of shares to be repurchased
will be based on the volume-weighted average price of the
Company’s common stock during the term of the ASR
agreement, less a discount and subject to adjustments
pursuant to the terms of the ASR agreement. The final
settlement of the ASR agreement is expected to be completed
in the first quarter of 2022. At settlement, our counterparty
may be required to deliver additional shares of common stock
to us, or, under certain circumstances, we may be required to
deliver shares of our common stock or may elect to make a
cash payment to our counterparty.
F-34
13. EARNINGS PER SHARE
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table sets forth the computation of basic and
diluted earnings per share:
The following tables present our financial assets and financial
liabilities that were measured at fair value on a recurring
basis as of December 31, 2021 and December 31, 2020.
Year Ended December 31,
2021
2020
2019
(in millions, except share and per share amounts)
$
1,187 $
933 $
774
165,899,459
164,415,191
164,931,628
Numerator:
Net income
attributable to
common
shareholders
Denominator:
Weighted-average
common shares
outstanding for
basic earnings per
share
Weighted-average effect of dilutive securities:
Employee equity
awards
Contingent
issuance of
common stock
Weighted-average
common shares
outstanding for
diluted earnings
per share
2,463,063
2,135,532
1,679,922
—
353,218
358,611
168,362,522
166,903,941
166,970,161
Basic and diluted earnings per share:
Basic earnings per
share
7.15 $
$
5.67 $
4.69
Diluted earnings
per share
$
7.05 $
5.59 $
4.63
In the tables above:
• Employee equity awards from our PSU program, which are
considered contingently issuable, are included in the
computation of dilutive earnings per share on a weighted
average basis when management determines that the
applicable performance criteria would have been met if the
performance period ended as of the date of the relevant
computation.
• For the years ended December 31, 2020 and 2019, the
contingent issuance of common stock was related to a
contingent obligation associated with a business we sold in
June 2021. See “2021 Divestiture,” of Note 4,
“Acquisitions and Divestiture,” for further discussion.
Securities that were not included in the computation of
diluted earnings per share because
their effect was
antidilutive were immaterial for the years ended December
31, 2021, 2020 and 2019.
December 31, 2021
Total
Level 1
Level 2
Level 3
(in millions)
$ 144 $ 144 $ — $ —
20
—
20
—
11
—
11
—
21
12
—
—
21
12
—
—
European
government debt
securities
Corporate debt
securities
State owned
enterprises and
municipal
securities
Swedish mortgage
bonds
Time deposits
Total assets at fair
value
$ 208 $ 144 $
64 $ —
December 31, 2020
Total
Level 1
Level 2
Level 3
(in millions)
$ 156 $ 156 $ — $ —
2
—
2
—
15
—
15
—
22
—
22
—
European
government debt
securities
Corporate debt
securities
State owned
enterprises and
municipal
securities
Swedish mortgage
bonds
Total assets at fair
value
$ 195 $ 156 $
39 $ —
Financial Instruments Not Measured at Fair Value on a
Recurring Basis
Some of our financial instruments are not measured at fair
value on a recurring basis but are recorded at amounts that
approximate fair value due to their liquid or short-term
nature. Such financial assets and financial liabilities include:
cash and cash equivalents, restricted cash and cash
equivalents, receivables, net, certain other current assets,
accounts payable and accrued expenses, Section 31 fees
payable to SEC, accrued personnel costs, commercial paper
and certain other current liabilities.
Our investment in OCC is accounted for under the equity
method of accounting. We have elected the measurement
alternative for the majority of our equity securities, which
primarily represent various strategic
investments made
through our corporate venture program. See “Equity Method
Investments,” and “Equity Securities,” of Note 6,
“Investments,” for further discussion.
F-35
We also consider our debt obligations to be financial
instruments. As of December 31, 2021, the majority of our
debt obligations were fixed-rate obligations. We are exposed
to changes in interest rates as a result of borrowings under
our 2020 Credit Facility, as the interest rates on this facility
have a variable rate depending on the maturity of the
borrowing and the implied underlying reference rate. As of
December 31, 2021, we had no outstanding borrowings under
our 2020 Credit Facility. We are also exposed to changes in
interest rates as a result of the amounts outstanding from the
sale of commercial paper under our commercial paper
program. The fair value of our debt obligations utilizing
discounted cash flow analyses for our floating rate debt, and
prevailing market rates for our fixed rate debt was $5.9
billion as of both December 31, 2021 and 2020. The
discounted cash flow analyses are based on borrowing rates
currently available to us for debt with similar terms and
maturities. The fair value of our commercial paper as of
December 31, 2021 approximated the carrying value since
the rates of interest on this short-term debt approximated
market rates. Our commercial paper and our fixed rate and
floating rate debt are categorized as Level 2 in the fair value
hierarchy.
For further discussion of our debt obligations, see Note 9,
“Debt Obligations.”
Non-Financial Assets Measured at Fair Value on a Non-
Recurring Basis
Our non-financial assets, which include goodwill, intangible
assets, and other long-lived assets, are not required to be
carried at fair value on a recurring basis. Fair value measures
of non-financial assets are primarily used in the impairment
analysis of these assets. Any resulting asset impairment
would require that the non-financial asset be recorded at its
fair value. Nasdaq uses Level 3 inputs to measure the fair
value of the above assets on a non-recurring basis. As of
December 31, 2021 and December 31, 2020, there were no
non-financial assets measured at fair value on a non-recurring
basis.
15. CLEARING OPERATIONS
Nasdaq Clearing
Nasdaq Clearing is authorized and supervised under EMIR as
a multi-asset clearinghouse by the SFSA. Such authorization
is effective for all member states of the European Union and
certain other non-member states that are part of the European
Economic Area, including Norway. The clearinghouse acts as
the CCP for exchange and OTC trades in equity derivatives,
fixed income derivatives, resale and repurchase contracts,
power derivatives, emission allowance derivatives, and
seafood derivatives.
include
the resale and repurchase market,
Through our clearing operations in the financial markets,
which
the
commodities markets, and the seafood market, Nasdaq
Clearing is the legal counterparty for, and guarantees the
fulfillment of, each contract cleared. These contracts are not
used by Nasdaq Clearing for the purpose of trading on its
own behalf. As the legal counterparty of each transaction,
Nasdaq Clearing bears the counterparty risk between the
purchaser and seller in the contract. In its guarantor role,
Nasdaq Clearing has precisely equal and offsetting claims to
and from clearing members on opposite sides of each
contract, standing as the CCP on every contract cleared. In
accordance with the rules and regulations of Nasdaq
Clearing, default fund and margin collateral requirements are
calculated for each clearing member’s positions in accounts
with the CCP. See “Default Fund Contributions and Margin
Deposits” below for further discussion of Nasdaq Clearing’s
default fund and margin requirements.
Nasdaq Clearing maintains three member sponsored default
funds: one related to financial markets, one related to
commodities markets and one related to the seafood market.
Under this structure, Nasdaq Clearing and its clearing
members must contribute to the total regulatory capital
related to the clearing operations of Nasdaq Clearing. This
structure applies an initial separation of default fund
contributions for the financial, commodities and seafood
markets in order to create a buffer for each market’s
counterparty risks. As of September 1, 2021, the mutualized
default fund has been eliminated and the default fund
structure
“Default Fund
Contributions” below for further discussion of Nasdaq
Clearing’s default fund. A power of assessment and a
liability waterfall have also been implemented to further align
risk between Nasdaq Clearing and its clearing members. See
“Power of Assessment” and “Liability Waterfall” below for
further discussion.
segregated. See
fully
is
Nasdaq Commodities Clearing Default
In September 2018, a member of the Nasdaq Clearing
commodities market defaulted due to the inability to post
sufficient collateral to cover increased margin requirements
for the positions of the relevant member, which had
experienced losses due to sharp adverse movements in the
Nordic - German power market spread. Nasdaq Clearing
followed default procedures and offset the future market risk
on the defaulting member’s positions.
Immediately following the event, Nasdaq Clearing launched
a comprehensive enhancement program to strengthen the
resilience and robustness of the clearinghouse.
F-36
In December 2018, the SFSA initiated a review of Nasdaq
Clearing. In January 2021, the SFSA issued a warning
combined with an administrative fine of approximately $33
million (SEK 300 million) to Nasdaq Clearing based on its
review. Nasdaq Clearing appealed the SFSA´s decision to the
Administrative Court. In December 2021, the court rejected
Nasdaq Clearing’s appeal and upheld the decision of the
SFSA. In January 2022, Nasdaq Clearing appealed this
decision to the Administrative Court of Appeal. While we
continue to firmly believe in the merit of our appeal, due to
the recent decision by the Administrative Court, we have
determined it is appropriate to record an accrual for the full
amount of the administrative fine issued by the SFSA. The
charge is included in regulatory expense in our Consolidated
Statements of Income for the year ended December 31, 2021.
Default Fund Contributions and Margin Deposits
As of December 31, 2021, clearing member default fund
contributions and margin deposits were as follows:
December 31, 2021
Cash
Contributions
Non-Cash
Contributions
Total
Contributions
(in millions)
$
$
771 $
109 $
880
5,140
6,614
11,754
5,911 $
6,723 $ 12,634
Default fund
contributions
Margin deposits
Total
Of the total default fund contributions of $880 million,
Nasdaq Clearing can utilize $804 million as capital resources
in the event of a counterparty default. The remaining balance
of $76 million pertains to member posted surplus balances.
Our clearinghouse holds material amounts of clearing
member cash deposits which are held or invested primarily to
provide security of capital while minimizing credit, market
and liquidity risks. While we seek to achieve a reasonable
rate of return, we are primarily concerned with preservation
of capital and managing the risks associated with these
deposits.
Clearing member cash contributions are maintained in
demand deposits held at central banks and large, highly rated
financial institutions or secured through direct investments,
primarily central bank certificates and highly rated European
government debt securities with original maturities primarily
1 year or less, reverse repurchase agreements and multilateral
development bank debt securities. Investments in reverse
repurchase agreements range in maturity from 4 days to 14
days and are secured with highly rated government securities.
The carrying value of these securities approximates their fair
value due to the short-term nature of the instruments and
reverse repurchase agreements.
Nasdaq Clearing has invested the total cash contributions of
$5,911 million as of December 31, 2021 and $3,942 million
as of December 31, 2020, in accordance with its investment
policy as follows:
December 31, 2021 December 31, 2020
Demand deposits
Central bank certificates
Restricted cash and cash
equivalents
European government debt
securities
Reverse repurchase
agreements
Multilateral development
bank debt securities
Investments
Total
$
$
$
$
(in millions)
3,061 $
2,013
2,086
1,111
5,074 $
3,197
414
152
271
837 $
5,911 $
470
180
95
745
3,942
In the table above the change from December 31, 2020 to
December 31, 2021 includes currency translation adjustments
of $321 million for restricted cash and cash equivalents and
$40 million for investments.
For the years ended December 31, 2021, 2020 and 2019
investments related to default funds and margin deposits, net
includes purchases of investment securities of $(41,098)
$(38,203) million,
million,
respectively, and proceeds from sales and redemptions of
investment securities of $40,966 million, $54,155 million and
$38,029 million, respectively.
$(54,046) million
and
In the investment activity related to default fund and margin
contributions, we are exposed to counterparty risk related to
reverse repurchase agreement transactions, which reflect the
risk that the counterparty might become insolvent and, thus,
fail to meet its obligations to Nasdaq Clearing. We mitigate
this risk by only engaging in transactions with high credit
quality reverse repurchase agreement counterparties and by
limiting
reverse
repurchase agreement to high quality issuers, primarily
government
securities explicitly
guaranteed by a government. The value of the underlying
security is monitored during the lifetime of the contract, and
in the event the market value of the underlying security falls
below the reverse repurchase amount, our clearinghouse may
require additional collateral or a reset of the contract.
the acceptable collateral under
securities and other
the
Default Fund Contributions
Required contributions to the default funds are proportional
to the exposures of each clearing member. When a clearing
member is active in more than one market, contributions
must be made to all markets’ default funds in which the
member is active. Clearing members’ eligible contributions
may
include cash and non-cash contributions. Cash
contributions received are maintained in demand deposits
held at central banks and large, highly rated financial
institutions or invested by Nasdaq Clearing, in accordance
F-37
with its investment policy, either in central bank certificates,
highly rated government debt securities, reverse repurchase
agreements with highly rated government debt securities as
collateral, or multilateral development bank debt securities.
Nasdaq Clearing maintains and manages all cash deposits
related to margin collateral. All risks and rewards of
collateral ownership, including interest, belong to Nasdaq
Clearing. Clearing members’ cash contributions are included
in default funds and margin deposits in the Consolidated
Balance Sheets as both a current asset and a current liability.
Non-cash contributions include highly rated government debt
securities that must meet specific criteria approved by
Nasdaq Clearing. Non-cash contributions are pledged assets
that are not recorded in the Consolidated Balance Sheets as
Nasdaq Clearing does not take legal ownership of these
assets and the risks and rewards remain with the clearing
members. These balances may fluctuate over time due to
changes in the amount of deposits required and whether
members choose to provide cash or non-cash contributions.
Assets pledged are held at a nominee account in Nasdaq
Clearing’s name for the benefit of the clearing members and
are immediately accessible by Nasdaq Clearing in the event
of a default. In addition to clearing members’ required
contributions to the liability waterfall, Nasdaq Clearing is
also required to contribute capital to the liability waterfall
and overall regulatory capital as specified under
its
clearinghouse rules. As of December 31, 2021, Nasdaq
Clearing committed capital totaling $138 million to the
liability waterfall and overall regulatory capital, in the form
of government debt securities, which are recorded as
financial investments in the Consolidated Balance Sheets.
The combined regulatory capital of the clearing members and
Nasdaq Clearing is intended to secure the obligations of a
clearing member exceeding such member’s own margin and
default fund deposits and may be used to cover losses
sustained by a clearing member in the event of a default.
Margin Deposits
Nasdaq Clearing requires all clearing members to provide
collateral, which may consist of cash and non-cash
contributions, to guarantee performance on the clearing
members’ open positions, or initial margin. In addition,
clearing members must also provide collateral to cover the
daily margin call
if needed. See “Default Fund
Contributions” above for further discussion of cash and non-
cash contributions.
Similar to default fund contributions, Nasdaq Clearing
maintains and manages all cash deposits related to margin
collateral. All risks and rewards of collateral ownership,
including interest, belong to Nasdaq Clearing and are
recorded in revenues. These cash deposits are recorded in
default funds and margin deposits in the Consolidated
Balance Sheets as both a current asset and a current liability.
Pledged margin collateral is not recorded in our Consolidated
Balance Sheets as all risks and rewards of collateral
ownership, including interest, belong to the counterparty.
Assets pledged are held at a nominee account in Nasdaq
Clearing’s name for the benefit of the clearing members and
are immediately accessible by Nasdaq Clearing in the event
of a default.
Nasdaq Clearing marks to market all outstanding contracts
and requires payment from clearing members whose
positions have lost value. The mark-to-market process helps
identify any clearing members that may not be able to satisfy
their financial obligations in a timely manner allowing
Nasdaq Clearing the ability to mitigate the risk of a clearing
member defaulting due to exceptionally large losses. In the
event of a default, Nasdaq Clearing can access the defaulting
member’s margin and default fund deposits to cover the
defaulting member’s losses.
Regulatory Capital and Risk Management Calculations
risk management
framework, which
Nasdaq Clearing manages risk through a comprehensive
is
counterparty
comprised of policies, procedures, standards and financial
resources. The level of regulatory capital is determined in
accordance with Nasdaq Clearing’s regulatory capital and
default fund policy, as approved by the SFSA. Regulatory
capital calculations are continuously updated through a
proprietary capital-at-risk calculation model that establishes
the appropriate level of capital.
is
the
legal
As mentioned above, Nasdaq Clearing
counterparty for each contract cleared and thereby guarantees
the fulfillment of each contract. Nasdaq Clearing accounts for
this guarantee as a performance guarantee. We determine the
fair value of the performance guarantee by considering daily
settlement of contracts and other margining and default fund
requirements,
the risk management program, historical
evidence of default payments, and the estimated probability
of potential default payouts. The calculation is determined
using proprietary risk management software that simulates
gains and losses based on historical market prices, extreme
but plausible market scenarios, volatility and other factors
present at that point in time for those particular unsettled
contracts. Based on this analysis, excluding any liability
related to the Nasdaq commodities clearing default (see
discussion above), the estimated liability was nominal and no
liability was recorded as of December 31, 2021.
Power of Assessment
To further strengthen the contingent financial resources of the
clearinghouse, Nasdaq Clearing has power of assessment that
provides the ability to collect additional funds from its
clearing members to cover a defaulting member’s remaining
obligations up to the limits established under the terms of the
clearinghouse rules. The power of assessment corresponds to
230.0% of the clearing member’s aggregate contribution to
the financial, commodities and seafood markets’ default
funds.
Liability Waterfall
The liability waterfall is the priority order in which the
capital resources would be utilized in the event of a default
where the defaulting clearing member’s collateral would not
be sufficient to cover the cost to settle its portfolio. If a
the defaulting clearing member’s
default occurs and
F-38
collateral, including cash deposits and pledged assets, is
depleted, then capital is utilized in the following amount and
order:
• junior capital contributed by Nasdaq Clearing, which
totaled $44 million as of December 31, 2021;
• a loss-sharing pool related only to the financial market that
is contributed to by clearing members and only applies if
the defaulting member’s portfolio includes interest rate
swap products;
• specific market default fund where the loss occurred (i.e.,
the financial, commodities, or seafood market), which
includes capital contributions of the clearing members on a
pro-rata basis; and
• fully segregated senior capital for each specific market
contributed by Nasdaq Clearing, calculated in accordance
with clearinghouse rules, which totaled $24 million as of
December 31, 2021.
If additional funds are needed after utilization of the liability
waterfall, or if part of the waterfall has been utilized and
needs to be replenished, then Nasdaq Clearing will utilize its
power of assessment and additional capital contributions will
be required by non-defaulting members up to the limits
established under the terms of the clearinghouse rules.
In addition to the capital held to withstand counterparty
defaults described above, Nasdaq Clearing also has
committed capital of $70 million to ensure that it can handle
an orderly wind-down of its operation, and that it is
adequately protected against investment, operational, legal,
and business risks.
Market Value of Derivative Contracts Outstanding
The following table presents the market value of derivative
contracts outstanding prior to netting:
Commodity and seafood options, futures
and forwards
Fixed-income options and futures
Stock options and futures
Index options and futures
Total
In the table above:
December 31, 2021
(in millions)
$
$
282
291
147
80
800
• We determined the fair value of our option contracts using
standard valuation models that were based on market-based
observable inputs including implied volatility, interest rates
and the spot price of the underlying instrument.
• We determined the fair value of our futures contracts based
upon quoted market prices and average quoted market
yields.
• We determined the fair value of our forward contracts
using standard valuation models that were based on
market-based observable inputs including benchmark rates
and the spot price of the underlying instrument.
Derivative Contracts Cleared
The following table presents the total number of derivative
contracts cleared through Nasdaq Clearing for the years
ended December 31, 2021 and 2020:
December 31, 2021
December 31, 2020
Commodity and seafood
options, futures and
forwards
Fixed-income options and
futures
536,252
672,219
23,140,918
21,299,713
Stock options and futures
20,308,811
19,757,733
Index options and futures
37,860,187
51,371,391
Total
81,846,168
93,101,056
In the table above, the total volume in cleared power related
to commodity contracts was 813 Terawatt hours (TWh) and
956 TWh for the years ended December 31, 2021 and 2020,
respectively.
Resale
Outstanding and Cleared
and Repurchase Agreements Contracts
The outstanding contract value of resale and repurchase
agreements was $139 million and $253 million as of
December 31, 2021 and 2020, respectively. The total number
of resale and repurchase agreements contracts cleared was
6,070,414 and 4,832,504 for the years ended December 31,
2021 and 2020, respectively .
16. LEASES
We have operating leases which are primarily real estate
leases predominantly for our U.S. and European headquarters
and for general office space. The following table provides
supplemental balance sheet information related to Nasdaq's
operating leases:
Leases
Balance Sheet
Classification
December 31,
2021
December 31,
2020
(in millions)
Assets:
Operating lease
assets
Operating
lease assets
$
366 $
381
Liabilities:
Current lease
liabilities
Non-current
lease
liabilities
Total lease
liabilities
Other current
liabilities
Operating
lease
liabilities
$
37 $
46
386
389
$
423 $
435
F-39
The following table summarizes Nasdaq's lease cost:
17. INCOME TAXES
Income Before Income Tax Provision
The following table presents the domestic and foreign
tax provision:
components of
income before
income
Year Ended December 31,
2021
2020
2019
(in millions)
Domestic
$ 1,299 $
898 $
235
314
691
328
$ 1,534 $ 1,212 $ 1,019
Foreign
Income before income tax
provision
Income Tax Provision
The income tax provision consists of the following amounts:
Current income taxes provision:
Federal
State
Foreign
Total current income taxes
provision
Deferred income taxes provision
(benefit):
Federal
State
Foreign
Total deferred income taxes
provision
Year Ended December 31,
2021
2020
2019
(in millions)
$ 144 $ 114 $ 120
45
64
50
74
40
50
253
238
210
82
22
37
6
(10)
(2)
94
41
27
7
1
35
Total income tax provision
$ 347 $ 279 $ 245
We have determined that undistributed earnings of certain
non-U.S. subsidiaries will be reinvested for an indefinite
period of time. We have both the intent and ability to
indefinitely reinvest these earnings. As of December 31,
2021, the cumulative amount of undistributed earnings in
these subsidiaries is $286 million. Given our intent and
ability to reinvest these earnings for an indefinite period of
time, we have not accrued a deferred tax liability on these
earnings. A determination of an unrecognized deferred tax
liability related to these earnings is not practicable.
Operating lease cost
Variable lease cost
Sublease income
Total lease cost
Year Ended December 31,
2021
2020
2019
(in millions)
$
85 $
85 $
28
26
79
23
(4)
(4)
(5)
$ 109 $ 107 $
97
In the table above, operating lease costs include 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 Consolidated
Balance Sheets.
2022
2023
2024
2025
2026
2027+
Total lease payments
Less: interest
Present value of lease liabilities
December 31, 2021
(in millions)
$
$
52
57
52
39
36
293
529
(106)
423
In the table above, interest is calculated using the interest rate
for each lease. Present value of lease liabilities include the
current portion of $37 million.
Total lease payments in the table above exclude $168 million
of legally binding minimum lease payments for a ten year
lease signed but not yet commenced.
The following table provides information related to Nasdaq's
lease term and discount rate:
Weighted-average remaining lease term
(in years)
Weighted-average discount rate
December 31, 2021
11.4
3.8 %
The following
information related to Nasdaq's operating leases:
table provides supplemental cash flow
Year Ended December 31,
2021
2020
2019
(in millions)
Cash paid for amounts included in
the measurement of operating lease
liabilities
$ 77 $ 77 $ 78
Lease assets obtained in exchange
for new operating lease liabilities
$ 45 $ 100 $ 26
F-40
A reconciliation of the income tax provision, based on the
U.S. federal statutory rate, to our actual income tax provision
for the years ended December 31, 2021, 2020 and 2019 is as
follows:
Federal income tax provision at
the statutory rate
State income tax provision, net
of federal effect
Excess tax benefits related to
employee share-based
compensation
Year Ended December 31,
2021
2020
2019
21.0 % 21.0 % 21.0 %
3.9 % 4.2 % 4.1 %
(1.3) % (0.6) % (0.5) %
Non-U.S. subsidiary earnings
0.3 % 0.5 % 1.0 %
Tax credits and deductions
Change in unrecognized tax
benefits
Other, net
(0.3) % (0.2) % (0.2) %
0.6 % (0.6) % (0.1) %
(1.6) % (1.3) % (1.3) %
Actual income tax provision
22.6 % 23.0 % 24.0 %
The majority of the decrease in our effective tax rate in 2021
compared to 2020 was due to a tax benefit related to federal,
state and local provision to return adjustments, which is
included in “Other, net” in the table above. The majority of
the decrease in our effective tax rate in 2020 compared to
2019 was the result of favorable audit settlements and
remeasurement of our deferred inventory, which is included
in “Other, net” in the table above.
The effective tax rate may vary from period to period
depending on, among other factors, the geographic and
business mix of earnings and losses. These same and other
factors, including history of pre-tax earnings and losses, are
taken into account in assessing the ability to realize deferred
tax assets.
Deferred Income Taxes
The temporary differences, which give rise to our deferred
tax assets and (liabilities), consisted of the following:
Deferred tax assets:
Deferred revenues
U.S. federal net operating loss
Foreign net operating loss
State net operating loss
Compensation and benefits
Federal benefit of uncertain tax positions
Operating lease liabilities
Unrealized losses
Other
Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets, net of valuation
allowance
Deferred tax liabilities:
Amortization of software development
costs and depreciation
Amortization of acquired intangible assets
and goodwill
Investments
Operating lease assets
Other
Gross deferred tax liabilities
Net deferred tax liabilities
Reported as:
Non-current deferred tax assets
Deferred tax liabilities, net
Net deferred tax liabilities
December 31,
2021
2020
(in millions)
$ 12 $
—
4
1
28
6
99
2
34
8
3
4
2
28
5
97
54
39
186
240
(4)
(3)
$ 182 $ 237
$ (65) $ (55)
(322) (499)
(99)
(77)
(84)
(86)
(16)
(19)
$ (586) $ (736)
$ (404) $ (499)
$
3
2 $
(406) (502)
$ (404) $ (499)
In the table above, non-current deferred tax assets are
included in other non-current assets in the Consolidated
Balance Sheets.
As of December 31, 2021 and 2020, we recognized a
valuation allowance of $4 million and $3 million,
respectively, due to recurring operating losses in a foreign
jurisdiction. Based on all available positive and negative
evidence, we believe the sources of future taxable income are
sufficient to realize the remainder of Nasdaq's deferred tax
asset inventory.
F-41
Nasdaq has deferred tax assets associated with NOLs in U.S.
state and local and non-U.S. jurisdictions with the following
expiration dates:
Jurisdiction
December 31, 2021
Expiration Date
Foreign NOL
State NOL
(in millions)
$
4 No expiration
1 2025-2036
Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
Beginning balance
Additions as a result of tax positions
taken in prior periods
Additions as a result of tax positions
taken in the current period
Reductions related to settlements with
taxing authorities
Reductions as a result of lapses of the
applicable statute of limitations
Ending balance
Year Ended December 31,
2021
2020
2019
(in millions)
$ 42 $ 48 $ 52
16
9
10
11
2
1
(6)
(6) (10)
(6) (11)
(5)
$ 57 $ 42 $ 48
We had $57 million of unrecognized tax benefits as of
December 31, 2021, $42 million as of December 31, 2020,
and $48 million as of December 31, 2019 which, if
recognized in the future, would affect our effective tax rate.
Nasdaq does not believe that our unrecognized tax benefits
will materially change over the next 12 months.
We recognize interest and/or penalties related to income tax
matters in the provision for income taxes in our Consolidated
Statements of Income, which was a $2 million tax benefit for
both the years ended December 31, 2021 and 2020, and a tax
provision of $3 million for 2019. Accrued interest and
penalties, net of tax effect were $4 million as of December
31, 2021 and $8 million as of December 31, 2020.
Tax Audits
Nasdaq and its eligible subsidiaries file a consolidated U.S.
federal income tax return and applicable state and local
income tax returns and non-U.S. income tax returns. We are
subject to examination by federal, state and local, and foreign
tax authorities. Our Federal income tax return for the years
2018 through 2020 is subject to examination by the Internal
Revenue Service. Several state tax returns are currently under
examination by the respective tax authorities for the years
2012 through 2019. Non-U.S. tax returns are subject to
examination by the respective tax authorities for the years
2015 through 2020. We regularly assess the likelihood of
jurisdiction and have
additional assessments by each
established tax reserves that we believe are adequate in
relation
for additional assessments.
Examination outcomes and the timing of examination
settlements are subject to uncertainty. Although the results of
the potential
to
such examinations may have an impact on our unrecognized
tax benefits, we do not anticipate that such impact will be
material to our consolidated financial position or results of
operations. We do not expect to settle any material tax audits
in the next twelve months.
18. COMMITMENTS, CONTINGENCIES AND
GUARANTEES
Guarantees Issued and Credit Facilities Available
In addition to the default fund contributions and margin
collateral pledged by clearing members discussed in Note 15,
“Clearing Operations,” we have obtained financial guarantees
and credit facilities, which are guaranteed by us through
counter indemnities, to provide further liquidity related to our
clearing businesses. Financial guarantees issued to us totaled
$5 million as of December 31, 2021 and December 31, 2020.
As discussed in “Other Credit Facilities,” of Note 9, “Debt
Obligations,” we also have credit facilities primarily related
to our Nasdaq Clearing operations, which are available in
multiple currencies, and totaled $212 million as of December
31, 2021 and $232 million as of December 31, 2020 in
available liquidity, none of which was utilized.
Other Guarantees
Through our clearing operations in the financial markets,
Nasdaq Clearing is the legal counterparty for, and guarantees
the performance of, its clearing members. See Note 15,
“Clearing Operations,” for further discussion of Nasdaq
Clearing performance guarantees.
We have provided a guarantee related to lease obligations for
The Nasdaq Entrepreneurial Center, Inc., which is a not-for-
profit organization designed to convene, connect and engage
aspiring and current entrepreneurs. This entity is not included
in the consolidated financial statements of Nasdaq.
We believe that the potential for us to be required to make
payments under these arrangements is unlikely. Accordingly,
no contingent liability is recorded in the Consolidated
Balance Sheets for the above guarantees.
Routing Brokerage Activities
One of our broker-dealer subsidiaries, Nasdaq Execution
Services, provides a guarantee to securities clearinghouses
and exchanges under its standard membership agreements,
which require members to guarantee the performance of other
members. If a member becomes unable to satisfy its
obligations to a clearinghouse or exchange, other members
would be required to meet its shortfalls. To mitigate these
performance risks, the exchanges and clearinghouses often
require members to post collateral, as well as meet certain
minimum financial standards. Nasdaq Execution Services’
maximum potential liability under these arrangements cannot
be quantified. However, we believe that the potential for
Nasdaq Execution Services to be required to make payments
under these arrangements is unlikely. Accordingly, no
contingent liability is recorded in the Consolidated Balance
Sheets for these arrangements.
F-42
Legal and Regulatory Matters
Armenian Stock Exchange Investigation
Litigation
As previously disclosed, we are named as one of many
defendants in City of Providence v. BATS Global Markets,
Inc., et al., 14 Civ. 2811 (S.D.N.Y.), which was filed on April
18, 2014 in the United States District Court for the Southern
District of New York. The district court appointed lead
counsel, who filed an amended complaint on September 2,
2014. The amended complaint names as defendants seven
national exchanges, as well as Barclays PLC, which operated
a private ATS. On behalf of a putative class of securities
traders, the plaintiffs allege that the defendants engaged in a
scheme to manipulate the markets through high-frequency
trading; the amended complaint asserts claims against us
under Section 10(b) of the Exchange Act and Rule 10b-5, as
well as under Section 6(b) of the Exchange Act. The
plaintiffs seek
injunctive and monetary relief of an
unspecified amount. We filed a motion to dismiss the
amended complaint on November 3, 2014. In response, the
plaintiffs filed a second amended complaint on November 24,
2014, which names
the same defendants and alleges
essentially the same violations. We then filed a motion to
dismiss the second amended complaint on January 23, 2015.
On August 26, 2015, the district court entered an order
dismissing the second amended complaint in its entirety. The
plaintiffs appealed the judgment of dismissal to the United
States Court of Appeals for the Second Circuit (although
opting not to appeal the dismissal with respect to Barclays
PLC or the dismissal of claims under Section 6(b) of the
Exchange Act). On December 19, 2017, the Second Circuit
issued an opinion vacating the district court’s judgment of
dismissal and remanding to the district court for further
proceedings. On May 18, 2018, the exchanges filed a motion
to dismiss the amended complaint, raising issues not
addressed in the proceedings to date. On May 28, 2019, the
district court denied the exchanges’ renewed motion to
dismiss, leading the parties to commence the discovery
process. Discovery, focused on issues of whether the case can
be certified as a class action and whether the plaintiffs’
claims are precluded by federal securities regulation, ended
on April 26, 2021, and potentially dispositive motions
regarding these issues were filed on May 28, 2021. Given the
preliminary nature of the proceedings, we are unable to
estimate what, if any, liability may result from this litigation.
However, we believe that the claims are without merit and
will continue to litigate vigorously.
As disclosed in our prior filings with the SEC, a former non-
U.S. subsidiary of Nasdaq, NASDAQ OMX Armenia OJSC,
operated the Armenian Stock Exchange and the Central
Depository of Armenia, which are regulated by the Central
Bank of Armenia under Armenian law. In accordance with
the requirements of Armenian law, Mellat Bank SB CJSC, an
Armenian entity that is designated under Executive Order
13382, was a market participant on the Armenian Stock
Exchange and, as a result, paid participation and transaction
fees to the Armenian Stock Exchange during the period from
2012-2014. In 2014, we voluntarily self-disclosed this matter
to the U.S. Department of Treasury’s Office of Foreign
Assets Control, or OFAC, and received authorization from
OFAC to continue, if necessary, certain activities pertaining
to Mellat Bank SB CJSC in Armenia in a limited manner. In
2015, Nasdaq sold a majority of its ownership of Nasdaq
OMX Armenia OJSC, with the remaining minority interest
sold in 2018.
OFAC has been conducting an inquiry into the Armenian
Stock Exchange matter described above and in our prior
filings since 2016, and during the first quarter of 2021, we
were advised that OFAC is considering a civil monetary
penalty in connection with that matter. We are currently in
discussions with OFAC.
While we believe our decision to voluntarily self-report this
issue and our continued cooperation with OFAC, along with
the permit we received from OFAC in connection with our
transactions involving the Armenian Stock Exchange, will be
mitigating factors with respect to the matter, any monetary
fines or restrictions may nonetheless be material to our
financial results in the period in which they are imposed. We
cannot currently predict when our discussions with OFAC
will conclude or the amount of any potential penalties
imposed. Accordingly, we are unable to reasonably estimate
any potential loss or range of loss and we have not accrued
for a loss contingency.
Nasdaq Commodities Clearing Default
In December 2021, we recorded a charge related to an
administrative fine issued by the SFSA associated with the
default which occurred in 2018. The charge is included in
regulatory expense in our Consolidated Statements of Income
for the year ended December 31, 2021. See “Nasdaq
Commodities Clearing Default,” of Note 15, “Clearing
Operations,” for further information.
Other Matters
Except as disclosed above and in prior reports filed under the
Exchange Act, we are not currently a party to any litigation
or proceeding that we believe could have a material adverse
effect on our business, consolidated financial condition, or
operating results. However, from time to time, we have been
threatened with, or named as a defendant in, lawsuits or
involved in regulatory proceedings.
F-43
In the normal course of business, Nasdaq discusses matters
with its regulators raised during regulatory examinations or
otherwise subject to their inquiries. Management believes
that censures, fines, penalties or other sanctions that could
result from any ongoing examinations or inquiries will not
have a material impact on its consolidated financial position
or results of operations. However, we are unable to predict
the outcome or the timing of the ultimate resolution of these
matters, or the potential fines, penalties or injunctive or other
equitable relief, if any, that may result from these matters.
Tax Audits
We are engaged in ongoing discussions and audits with
taxing authorities on various tax matters, the resolutions of
which are uncertain. Currently, there are matters that may
lead to assessments, some of which may not be resolved for
several years. Based on currently available information, we
believe we have adequately provided for any assessments that
could result from those proceedings where it is more likely
than not that we will be assessed. We review our positions on
these matters as they progress. See “Tax Audits,” of Note 17,
“Income Taxes,” for further discussion.
19. BUSINESS SEGMENTS
We manage, operate and provide our products and services in
four business segments: Market Technology, Investment
Intelligence, Corporate Platforms and Market Services. See
Note 1, “Organization and Nature of Operations,” for further
discussion of our reportable segments.
Our management allocates resources, assesses performance
and manages these businesses as four separate segments. We
evaluate the performance of our segments based on several
factors, of which the primary financial measure is operating
income. Results of individual businesses are presented based
on our management accounting practices and structure. Our
chief operating decision maker does not review total assets or
statements of income below operating income by segments as
key performance metrics; therefore, such information is not
presented below.
The following table presents certain information regarding
our business segments for the years ended December 31,
2021, 2020 and 2019:
Market Technology
(in millions)
Year Ended December 31,
2021
2020
2019
Total revenues
Depreciation and
amortization
Operating income
Purchase of property and
equipment
Investment Intelligence
Total revenues
Depreciation and
amortization
Operating income
Purchase of property and
equipment
Corporate Platforms
Total revenues
Depreciation and
amortization
Operating income
Purchase of property and
equipment
Market Services
Total revenues
$
463 $
357 $
338
111
46
48
1,076
62
694
44
613
31
247
30
33
32
43
898
57
572
52
521
34
187
30
30
54
40
768
52
480
30
490
34
177
27
3,707
3,818
2,616
Transaction-based expenses
(2,466)
(2,722)
(1,723)
Revenues less transaction-
based expenses
1,241
1,096
Depreciation and
amortization
Operating income
Purchase of property and
equipment
Corporate Items
Total revenues
Depreciation and
amortization
Operating income (loss)
Consolidated
Total revenues
Transaction-based expenses
Revenues less transaction-
based expenses
Depreciation and
amortization
73
800
41
27
1
76
685
63
31
2
893
72
508
30
46
2
(346)
(242)
(202)
$ 5,886 $ 5,625 $ 4,258
(2,466)
(2,722)
(1,723)
$ 3,420 $ 2,903 $ 2,535
$
278 $
202 $
190
Operating income
$ 1,441 $ 1,234 $ 1,017
Purchase of property and
equipment
$
163 $
188 $
127
F-44
Certain amounts are allocated to corporate items in our
management reports as we believe they do not contribute to a
meaningful evaluation of a particular segment's ongoing
operating performance. These items, which are presented in
the table below, include the following:
the day-to-day operating performance of
• Amortization expense of acquired intangible assets: We
amortize intangible assets acquired in connection with
various acquisitions. Intangible asset amortization expense
can vary from period to period due to episodic acquisitions
completed, rather
than from our ongoing business
operations. As such, if intangible asset amortization is
included in performance measures, it is more difficult to
assess
the
segments, and the relative operating performance of the
segments between periods. Management does not consider
intangible asset amortization expense for the purpose of
evaluating the performance of our segments or their
managers or when making decisions to allocate resources.
Therefore, we believe performance measures excluding
intangible asset amortization expense provide management
with a useful representation of our segments' ongoing
activity in each period.
• Merger and strategic initiatives expense: We have pursued
various strategic initiatives and completed acquisitions and
divestitures in recent years that have resulted in expenses
which would not have otherwise been incurred. These
expenses generally include integration costs, as well as
legal, due diligence and other third party transaction costs.
The frequency and the amount of such expenses vary
significantly based on the size, timing and complexity of
the transaction. Management does not consider merger and
strategic initiatives expense for the purpose of evaluating
the performance of our segments or their managers or
when making decisions to allocate resources. Therefore,
we believe performance measures excluding merger and
strategic initiatives expense provide management with a
useful representation of our segments' ongoing activity in
each period.
• Restructuring charges: We initiated the transition of
certain technology platforms to advance our strategic
opportunities as a technology and analytics provider and
continue the re-alignment of certain business areas. See
Note 20, “Restructuring Charges,” for further discussion of
our 2019 restructuring plan. We believe performance
measures
charges provide
management with a useful representation of our segments'
ongoing activity in each period.
restructuring
excluding
• Revenues and expenses - divested/contributed businesses:
We have included in corporate items the revenues and
expenses of our U.S. Fixed Income business, which was
previously included in our Market Services and Investment
Intelligence results. See “2021 Divestiture,” of Note 4,
“Acquisitions and Divestiture,” for further discussion of
this divestiture. Also included are the revenues and
expenses associated with the NPM business which we
contributed to a standalone, independent company, of
which we own the largest minority interest, together with a
consortium of third party financial institutions in July
2021. Prior to July these revenues were previously
included in our Corporate Platforms results. For 2019, we
have included in corporate items the revenues and
expenses of the BWise business which was part of the IR
& ESG Services business within our Corporate Platforms
segment as BWise was sold in March 2019.
• Other significant items: We have included certain other
charges or gains in corporate items, to the extent we
believe they should be excluded when evaluating the
ongoing operating performance of each
individual
segment. Other significant items include:
◦ for the year ended December 31, 2021 a charge related to
an administrative fine imposed by the SFSA associated
with the default that occurred in 2018, see “Nasdaq
Commodities Clearing Default,” of Note 15, “Clearing
Operations,” for further discussion, and for the year
ended December 31, 2020 the reversal of a regulatory
fine issued by the SFSA. Both charges have been
included in regulatory expense in the Consolidated
Statements of Income;
◦ for the year ended December 31, 2020, a provision for
funding of
notes
technology development for the consolidated audit trail;
receivable associated with
the
◦ for the years ended December 31, 2021 and 2020, a
charge on extinguishment of debt;
◦ for the year ended December 31, 2020, charitable
donations made to the Nasdaq Foundation, COVID-19
response and relief efforts, and social justice charities;
and
◦ for the years ended December 31, 2020, certain litigation
costs which are recorded in professional and contract
services expense in the Consolidated Statements of
Income.
The above charges are recorded in general, administrative
in our
and other expense, unless otherwise noted,
Consolidated Statements of Income.
F-45
The following table summarizes our Corporate Items:
20. RESTRUCTURING CHARGES
In September 2019, we initiated the transition of certain
technology platforms to advance the company's strategic
opportunities as a technology and analytics provider and
continue the re-alignment of certain business areas. In
connection with these restructuring efforts, we retired certain
elements of our marketplace infrastructure and technology
product offerings as we
implement NFF and other
technologies internally and externally. This represented a
fundamental shift in our strategy and technology as well as
executive re-alignment. In June 2021, we completed our
2019 restructuring plan and recognized total pre-tax charges
of $118 million over a two-year period. Total pre-tax charges
related primarily to non-cash items such as asset impairments
and accelerated depreciation, and third-party consulting costs.
Severance and employee-related charges were also incurred.
The following table presents a summary of the 2019
restructuring plan charges in the Consolidated Statements of
Income for the years ended December 31, 2021, 2020 and
2019 which primarily consisted of consulting services, asset
impairment charges primarily related to capitalized software
that was retired, and accelerated depreciation expense on
certain assets as a result of a decrease in their useful life.
Year Ended December 31,
2021
2020
2019
(in millions)
Asset impairment charges
and accelerated
depreciation expense
$
4 $
14 $
26
Consulting services
19
22
Contract terminations
Severance and employee-
related costs
Other
—
1
7
3
3
6
2
2
8
1
Total restructuring charges $
31 $
48 $
39
21. Subsequent Event
In January 2022, we entered into an ASR agreement to
repurchase $325 million of common stock. Refer to “ASR
Agreements,” of Note 12, “Nasdaq Stockholders' Equity,” for
further discussion.
Revenues - divested/contributed
businesses
Expenses:
Amortization expense of
acquired intangible assets
Merger and strategic initiatives
expense
Restructuring charges
Regulatory matters
Provision for notes receivable
—
Extinguishment of debt
Charitable donations
Expenses - divested/
contributed businesses
Other
Total expenses
Operating loss
Year Ended December 31,
2020
2019
2021
(in millions)
$
27 $
31 $
46
170
103
101
87
31
33
33
—
10
9
33
48
30
39
(6) —
6
36
17
18
18
20
11
—
25
22
373
273
248
$ (346) $ (242) $ (202)
For further discussion of our segments’ results, see “Segment
Operating Results,” of “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations.”
Geographic Data
The following table presents total revenues and property and
equipment, net by geographic area for 2021, 2020 and 2019.
Revenues are classified based upon the location of the
customer. Property and equipment information is based on
the physical location of the assets.
2021:
United States
All other countries
Total
2020:
United States
All other countries
Total
2019:
United States
All other countries
Total
Total
Revenues
Property and
Equipment, Net
(in millions)
4,822 $
1,064
5,886 $
4,662 $
963
5,625 $
3,405 $
853
4,258 $
$
$
$
$
$
$
325
184
509
311
164
475
250
134
384
Our property and equipment, net for all other countries
primarily includes assets held in Sweden. No single customer
accounted for 10.0% or more of our revenues in 2021, 2020
and 2019.
F-46