Good day, ladies and gentlemen, and welcome to The NASDAQ OMX Fourth Quarter 2013 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Ed Ditmire, Head of Investor Relations. Sir, you may begin.

Good morning, everyone, and thanks for joining us today to discuss NASDAQ OMX's fourth quarter 2013 earnings results. On the line are Bob Greifeld, our CEO, Lee Shavel, our CFO; Ed Knight, General Counsel and other members of the management team. After prepared remarks, we'll open up to Q&A. The press release and presentation are on our website. We intend to use the website as a means of disclosing material, non-public information and complying with disclosure obligations under SEC Regulation FD. I'd like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations, and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these projections. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our press release and periodic reports filed with the SEC. Now I will turn the call over to Bob.

Thank you, Ed, and thank you everybody for joining us on this very difficult morning. I want to start by saying we are very pleased to announce record fourth quarter 2013 results. It truly caps another exceptional year for our franchise. While the quarter featured record revenues, non-GAAP net income and non-GAAP EPS perhaps what is most noteworthy for us is that we achieved this while also making significant strategic investments in our future. The progress and strong performance across our core businesses provides us the flexibility that allows us to make critical investments in our future such as NLX, our interest rate derivatives exchange in London, NASDAQ private markets are offering to help private companies manage their interactions with investors and our lead to cash initiative which we expect to make our back office interactions with our Corporate Solution customers more efficient while also delivering outstanding results. When we look at the underlying reasons for our performance in 2013, and in particular the fourth quarter, it is impressive to recognize the progress across all our business segments, clearly highlighting the soundness of our strategy and approach. Let me highlight some of the major factors contributing to the $1.9 billion record revenue we achieved during the year. We saw a strong performance in Technology Solutions, in particular the doubling of our revenue Corporate Solutions to $230 million. We also grew our Market Technology business, which achieved record revenue of $219 million, up 12% year-on-year. In fact, in the fourth quarter, we saw organic growth across all our non-transaction business segments, including Information Services Technology Solutions and Listing Services, leading to a 5% overall organic revenue growth in the period. One of the standout performers in particular was our Index Licensing and Services group. In 2013, revenue grew to a record…

Thanks Bob. The following comments will focus on our non-GAAP and pro forma non-GAAP results. Reconciliations to GAAP and to non-GAAP and pro forma non-GAAP results can be found in the attachments to our press release and in presentation that's available on our website at ir.nasdaqomex.com. I'll start by reviewing our fourth quarter revenue performance relative to the prior year quarter. Net revenues increased $98 million to a record $520 million. Contributing to this increase, was an $80 million or 27% increase in subscription and recurring revenue, primarily from acquisitions but also from material organic growth. Subscription and recurring revenue represent 73% of total revenues, up from 71%. Transaction-driven revenues rose $18 million, mostly due to the inclusion of transaction revenue related to the eSpeed acquisition, but also due to the higher European cash equities revenues, which rose $4 million, partially offset by lower net U.S. derivatives revenues. On an organic basis, assuming constant currency and excluding acquisitions, total company net revenues rose 5%. I am now going to go over some of the highlights with each of our reporting segments. All comparisons will be to the prior year unless otherwise noted. Information Services, which includes our Market Data and Index businesses increased revenues 10% and operating profit by 6%. Operating margin was down marginally, but remained at very high level at 69%. Market Data had a 7% increase in revenues on growth in new product sales, in particular NASDAQ Basic, select pricing actions such as an increased from Level 2 quotes and mutual fund services and the inclusion of eSpeed market data, partially offset by lower audit collections which were 2 million lower than the prior year period. Index Licensing and Services grew revenues 25%, including the impact of the merchant indexes acquisition with a number of licensed ETP,…

Operator, please open up the lines for Q&A.

(Operator Instructions) Our first question comes from Rich Repetto of Sandler O'Neill. Your line is now opened.

Good morning, Bob. Good morning, Lee. Congrats on a strong quarter here.

Thank you.

My questions is information services and more specifically Market Data, because you are looking good year-over-year, but there were some sequential quarterly declines and I am trying to see does it have anything to do with the restructuring of eSpeed market that or our agreements. Just explain the quarter-over-quarter changes in our market data and information services.

Sure. Rich, the reason that you are seeing a decline from the from the third quarter really is principally due audit revenues, so as you know we are engaged in the process of evaluating the utilization by our clients of the market data services we will undertake audits of those clients and occasionally recognize that the clients are under reporting or under calculating the amount of revenue. In the third quarter, we had a particularly strong level of audit revenue. As a consequence, the fourth a particularly strong on level of a quiet revenue and as a consequence, the fourth quarter comparison was lower because we simply had lower right lower audit revenues on than in the third quarter. I wouldn't say that it represented that any fundamental change in the business and it was not infected by its eSpeed, so third quarter was high, fourth quarter low, first quarter be more in line.

Sort of like if you look at the of the two rather than…

…way to do it.

Okay. Then my follow-up is eSpeed, you have a plan, Bob, and there has been stuff flow there about market share changes. I just want to see whether you could sort of point us in the right direction of, you know, how you feel about the market share in eSpeed and that the offering going forward doesn't conflict with your clients' interest.

I would say quite the opposite, so one of the things I am happy about the progress we made with the relationship with our customers and I think we had to do some level of repair work there, but what's interesting to me is, we are to come to new contractual relationships with them in a lot of shorter period of time than one had thought. I think, with a core bank customer base, we are in a better position now than we were six months ago. We also have made progress with introducing new customers into the marketplace and probably just as important is where the final stages of having trading technologies being certified on a platform and that's been really holding back some of the progress. I think, one, the market share is work-in-progress. It's essentially what it was when we did the acquisition. We clearly want to improve it and we have made major technology changes and that information is filtering into communities, filtering into the technology folks who support these platforms and we are building the data to show in times of stress our platform is certainly remarkably strong and dramatically better than what it was six months ago, so work-in-progress. We are happy that were taking all the right actions and we expect that in the not too distant future that will show up in our results.

Understood. Thanks and congrats on a strong quarter.

Thank you. Appreciate it.

Thank you. Our next question comes from Kenneth Hill of Barclays. Your line is now opened.

Good morning, Bob and Lee.

How are doing.

Morning.

Doing good. I wanted to start on NASDAQ private market. I think that's an interesting - am not sure you guys have and you are working to get the approvals in place shortly. Just kind of wondering and I am sure ahead of those approvals, you have been talking to a lot of customers. How are you thinking about the revenue outlook for those businesses, what kind of services customers are looking at?

Yes. I would look at the three revenue drivers for this marketplace. One is, a subset of our corporate solutions products is certainly applicable to this marketplace. Just because you are private, doesn't mean you don't want to send press releases out in the order you want. You still need some marketing surveillance. Clearly, your directors want to have automated board tools, numbers of different products we will be selling to them, so we are finalizing that offering now. The second is, and in many ways is important in the beginning is, to have control of your shareholder register, so we want to provide product and services to allow them to do that, you know, who owns the shares and who can sell under what conditions. The third is, you have to provide liquidity programs to these issuers. It's not going to look like NASDAQ public market. It will be some type of auction that will be based on the issuers' desire to have it once-a-year, once-a-quarter, once-a-month. We certainly believe that over time our liquidity is seductive to people and they have more rather than less of these liquidity auctions, but I think it could be quite small in the beginning, so three drivers there. What's important to recognize is, when we look at embed that capital markets to public market which is fundamentally different than the private market is, we probably have more revenue opportunity NPM than we do in public market context and the public market companies do not trade that often. So in a real sense, liquidity programs could be that much more attractive to us and to them. We are obviously trying to get a sense of the scope of the market, but there hundreds of companies that are a natural first target for us. I would say that we are going to make sure that we keep the quality of the companies very high to come to market here and we are definitely going to look to do a controlled launch in March and I think quite respective in number of companies that use a platform in the beginning, but the demand is certainly there and the excitement is building.

Okay. My follow-up I guess is on the other side of that equation, on the expense side. I was just wondering I think you mentioned that Lee, in the comments, there's a somewhat of a drag on margin for the quarter. Just wondering how much might be on the new initiative spend, is that 35 to 50 and maybe what it could grow to over time?

Well, in terms of the interest the overall expense growth, as I mentioned, we had a 6% organic growth in operating expenses and that reflected a higher level of investment in the two acquisitions as we described initially, particular with Thomson Reuters there is an initial investment base, and as Bob mentioned, a number of the technology investments that we are making in eSpeed are contributing to that, but we view those as temporary influences on that. Once those investments are made, I think, we expect the margins to improve in those businesses. As it relates to GIFT spending, the guidance that we provided reflects our expectations for the portfolio of projects that we have principally in there it is our NLX initiative, but we have other portfolio investment opportunities that we see there and I think that the overall level that you see for the 2014 guidance is down slightly from where we were in 2013.

Thanks for taking my question.

Thank you. Our next question comes from Dan Fannon of Jefferies. Your line is now open.

Good morning. I guess if you could talk to us about the second quarter when you get your deleveraging targets and think about capital priorities and looking at buybacks, dividends and potential acquisitions and kind of update us on those thoughts and what potential areas of new businesses you might be looking at if any.

I would say one is, we want to get the second quarter, and the way to do that successfully is to focus on one of the first and the second quarter execution, so with respect to capital return, I would say that the board will contemplate that probably sometime after the second quarter, assuming we achieve what we think will, we all are confident we will in the first two quarters - not the time and the place, but it will come. The second part of your question was about acquisitions?

Correct.

Well, I mean, what we have said before is, we have, I think, a very capable corporate development department and we literally look at probably a hundred different opportunities in any given year. We obviously don't participate in the vast majority of them and I would say that it's just the normal course of business, but there is certainly no higher or lower activity than we normally see in that as -in terms of thinking about things. As I said before, it's our job to know every asset in every corner of the world across all different asset classes. To the extent you have really a template of where the world is and where the world might go then you have a pretty clear view of how that will play and help or hurt strategically where you want to go.

Great. Thank you. Then I guess, Lee, just on the GIFT spend, you know, NLX last year was a big component. Is that a smaller component in 2014, and one of the other programs and development you listed is now increasing as a percentage?

I would say that with both, regard to NLX, it continues to be the most significant element of the overall GIFT spending budget, and depending upon how NLX continues to progress, it could be an increasing amount or a decreasing amount, but it's really too early to say. As Bob indicated, we are extremely pleased with the progress that we have seen on the market share front and we have to allow that the continued time as we indicated through 2014 for us to come to our conclusion, but certainly our expectation is that we will continue to generate momentum at clients. As a consequence, be a less significant expenditure within the GIFT budget. I certainly NLX had a very exciting fourth quarter. As we said, we had 20% market share in certain days and certain hours of your LIBOR. That was not unnoticed by the community. More importantly as a result of that, we do see a strong series of inbound calls and a strong number of new participants and some very large participants in the marketplace now working very hard to hook up to NLX, and obviously that will be the determinant of our long-term success, so very successful fourth quarter and very strong progress so far in the first quarter 2014.

Thanks for taking my questions.

Thank you.

Thank you. Our next question comes from Jillian Miller of BMO Capital Markets. Your line is now opened.

Thanks, guys. I am just following upon that last kind of question. Given the strength that you have seen in NLX and all the success you have had in the fourth quarter, I am just wondering when do you plan to roll back some of those incentives for people that trade to see what's fixed versus what might be just kind of temporarily to be around for this rebate?

Good question. I think it ties back what I just said. Right now, we do have a queue of people wanting to hook up and I think hopefully there is more coming and that's a process. To the extent we are through that queue, and we know that we have a really steady-state number of participants that would be the time that we would start thinking about it.

Okay. Got it. Then there was a news article few weeks back that had some commentaries some guy suggesting you might potentially be interested in acquiring an index properties going forward and I know (Inaudible) during that platform, but buying some more IP to run on it, so I just want to get your thoughts on that specifically, what would be attractive to you guys those businesses, how do you think about valuation just because maybe they tend to be relatively high multiple businesses.

A good question. One is, we have said publicly before that we love our positioning in the index business. We undertook through a GIFT initiative development of our index platform to basically be on par from a breadth with any of the platform out there and we think from a technology point of view, we are representing a step function. If you equate the Index business to the Transaction business, you see that now that we have the planned incremental business, incremental revenue tends to drop to the bottom line, so the plant is built no different than when we looked at the Transactions business back 10 years ago, so we want to put good volume to it. We have made one small very successful acquisitions in the Index business called Mergent, and that was a dividend achievers. We have done incredibly well with that. To the extent that other Mergent-type opportunities become available, we clearly would be interested in that, but I would also say that our primary focus is about organic development. We've increased the sales outreach, we are making, I think, very strong incremental progress in that effort and we have more prospects lined up than we ever had before, so we are going to look at both weapons. We have the plant, we have the capability, we have the scalable platform and we are going to look at both, organic and inorganic growth in this space.

Okay. Thank you.

Thank you. Our next question comes from Bill Katz of Citi. Your line is now opened.

Thank you very much for taking my questions. First question is just coming back to the expense guidance try maybe frame the operating leverage underneath that. What kind of revenue backdrop are you considering? Then to the extent that we either had a fair than expected or worse than expected operating leverage. CapEx is at range of expenses.

Well, I would say, Bill, and that revenue outlook that we are looking for the expense range is, as I indicated in the comments, if it revenues remain - the environment remains as it was in the second half of 2013, then I think our expectation is that we would be towards the lower end of the expense guidance range that's set out, the 1,250 billion. To the extent that we see an improvement across our businesses and activity in terms of trading activity or pickups in our technology businesses, then we expect we would be towards the higher end of that range. Is that the guidance that you are looking for?

Yes. Thank you. I apologize if I missed your prepared remarks. Second question I have is just, you mentioned that your synergies and transaction times when we are back into 2015, which seems reasonable [versus]previous, can you give us an update on where you stand maybe even qualitatively? What you are hearing from clients as it relates to the possible for cross-sell, or revenue synergies as you are now another quarter into the transaction?

Yes. I would say this. One is, we like to break things down into manageable pieces, so cross-sell is a big overarching theme that we will execute upon obviously in the quarters and the years to come. In 2013, now going to 2014, we more narrowly defined it, so when you look at a product that old NASDAQ had that old Thompson did not have, which has high growth and high margins that was Directors Desk, so clearly that was the number one thing that we want to do in cross-sell, so we want to give that to the sales force to do and in a very manageable way. Then when you look at what old Thompson had, and clearly NASDAQ, always wish they had that was first call and content products such as StreetEvents, so that was our focus, so that will be the mission for the next number of months and then we will expand upon that as we go along, so great opportunities with those two. As we mentioned in the prepared remarks, Directors Desk had an outstanding year and quarter, and clearly a lot of that was related to cross-selling that we were able to do.

Thank you.

Thank you. Our next question comes from Ken Worthington of JPMorgan. Your line is now opened.

Thank you very much. First I wanted to ask on the SIP, what are your intentions with the SIP? I think you gave notice to give up responsibility, so maybe what are the advantages of controlling the SIP and if you continue to manage it, what kind of investments may be needed to improve the technology there?

Yes. All right, so a couple comments with the SIP. One is, we have made a recommendation to strip to many 10 things that needed to be done and we spoke to the committee about that verbally, obviously post 822 and then put it formally in front of them in November. We have not seen progress on those 10 items. We have progress on two items. It's basically wholly unacceptable to us. If this is under our control, and we lived through, what happened then 822 and 823, we would be working hard around the clock to remediate the system which had been obviously sitting there, somewhat neglected over the last decade. So, it obviously is a source of frustration to us and we have to communicate that. We sent determination and that it's not tolerable for us to work in this environment with a known system with no deficiencies and the committee is not stepping up to their responsibilities to authorize us to fix that, so it's the is a frustration right now and like you said, we have no intention to want to continue on this environment and we are going to communicate that pretty loudly and clearly.

I am sorry. What are the advantages of actually controlling the SIP? How is this a strategic…

It's not. It sits at infinite risk. At this point, no reward.

Okay. Great. Then maybe for the follow-up, can you give us an update on the pursuit to replace Eric Noll.

Yes. As I commented before, we are going to look to do that in and around the end of the first quarter, so that's in process.

Okay. Thank you.

Meantime, I am having some fun running the U.S. transaction business, which had a strong fourth quarter in [Italy].

Thank you very much.

Thank you. Our next question comes from Chris Harris of Wells Fargo Securities. Your line is now opened.

Thanks, guys. First question relates to Method. It sounds like your commentary, you are positive or constructive about what that might do, but correct me if I am wrong, but it seems like it would open up your Nordics business to a little bit more competition, so wondering net that whether you guys view this as a really good opportunity for NASDAQ or potential threat at the same time.

I think it's an unbelievable opportunity for NASDAQ. As I said in my prepared comments, it definitely sounds to me, it feels to me like the days before Reg NMS was implemented and you had a number of deniers out there in terms of what that would mean to the marketplace, so I don't know the precise numbers. The way I look at this right now with respect to European clearing, we might have the 5% market share, so I have 5% market share to think about for that 95% market share to go compete for us, so I like that ratio, so it is a fundamental and basic opportunity for us. There will be heightened competition in the trading of these instruments and it's something we do well.

Okay. That makes sense. Then the follow-up question, the numbers question maybe for Lee. You guys did have a nice pick up in the Tech Solutions revenues and you did walk through a few of those line items. Just wondering though, you how, much of the revenue bump was driven by seasonality? It seems like a few of the line items might be part of the more recurring bucket you have, so just trying to as we think about this revenue line item going forward, in which we expect over the next couple of quarters.

I can't predict what our expectations are for the quarter ahead. I think the things that I would point out is that we tend to see and I think you can look at this on a quarterly basis, we tend to see strong growth in the change and request revenue, or a sub-revenue line item in the fourth quarter and so if you are trying to get a sense as to what the seasonality impact, I think you can look at that number to get a feel for it. Then there are also some impacts in the corporate solutions business, but it's very difficult I think to identify specific products or give you a sense of the percentage. The other element that I think you should just be aware of is, as I noted there were approximately $3 million of revenues associated with BWise that was a acceleration of revenue recognition due to an accounting change that we made that influenced the fourth quarter numbers. Those revenues in subsequent quarters will also be increased, but we probably had an un-repeating, non-recurring element about $3 million in the fourth quarter, so I think those are the elements that would address your question.

Understood. Thanks.

Well, our next question comes from Rob Rutschow of CLSA. Your line is now opened.

How are you doing, Rob?

Good morning. Thanks for taking my question. I was just wondering if you could give us an update on eSpeed client base and how many of those clients you have been able to renegotiate into longer contracts? One is, we have a one-year contract and we continued with that and we finished that renegotiation I think somewhat early in the fourth quarter and it's sometime in the fourth quarter, so as I said before that happened sooner or quicker than I would guess and I think there was generally positive experience for both sides.

Okay. Then just a numbers question, follow-up - I appreciate the disclosure on foreign currency. I was just curious as to why there was sort of a big swing in the Swedish Kroner expenses from quarter-to-quarter.

Rob, I don't think we have an answer at our fingertips for that question, but we will follow up with you afterwards and take a look at that.

Thanks a lot.

Thank you. Our next question comes from Mike Carrier. Your line is now opened.

How are you doing, Mike? I guess, he is not doing that well.

(Operator Instructions) Our next question comes from Michael Carrier of Bank of America Merrill Lynch. Your line is now opened.

How are you doing, Mike?

Good. Just a question first on the technology business, I think you even excluding that adjustment of $3 million, still strong quarterly. If we look the pipeline, the backlog, everything you looks positive going forward. I guess just the two questions there, even axe that $3 million, is there still some seasonality in terms of revenue recognition in the fourth quarter? Then we think about going forward and you think about the opportunity that you guys see whether it's with exchanges, the buy-side clients, sell-side client, just where are you in terms of going after that opportunity, meaning, how much market share, what else exist, because there's only so many exchanges out there that you can have relationships with.

I'll let Bob handle the outlook, but just to confirm. You mean to suggest that $3 million was the only impact in the quarter as I discussed the change in request revenue line separate from the other revenues has a seasonal impact in the fourth quarter as people are generally rushing to get the final changes in before yet year end, so that's influencing it, but you are right. I mean, what's primarily driving the quarter is just the very order intake that we saw from Market Technology.

Let me get you your other question, so one there does seem to be more and more exchanges available for us to sell to, so I kind of have shared your thought three years ago, but I would say the number of new name exchanges that we are talking to now is greater than it's been in the past. In addition to that in terms of driving our growth, we have gone in a very significant way in declaring systems, post-trade and so you see what is turbulence of our the new deals and it's not just the trading systems, they are looking to us for clearing systems, post-trade processing. In addition to that with our SMARTS acquisition, we have certainly made a major splash in risk management and SMARTS tie together with BWise truly will give us a leading position there. We have an increasing number of customers we are talking to and we are talking to customers at multiple levels right now, really pre-trade, risk management, trading and post-trade, so our opportunity set is quite large.

Okay. That's helpful. Then just follow-up, the U.S. auction business, it looks like market share has trended in the right direction. Pricing look like it ticked down. I think, you guys have a new proposal in terms of the new pricing mechanism, so just any comments on the outlook of the auctions business and from a strategy standpoint, you now, what you guys are trying to achieve?

I would say the auctions business is certainly multidimensional chess that we play and we play it basically on a month-by-month basis. Our team is incredibly well led and we tend to think in the right ways, and by that I mean really acting in concert with what our customers require, so I think it's a tough competitive environment and we continue to do well and we certainly are very excited about the new plans we are putting in place, but we also recognize that two to three months, after that we will be doing further refinements to those plans.

Okay. Thanks a lot.

Okay. So, one, we want to thank you for attending on this snowy day. Two, is I want to just repeat what we said earlier. We are certainly proud of the fact that we had record revenues, but probably more importantly than that, we had in certain ways record investments in our future and certainly some most GIFT initiatives showing some real signs of life, so it's a great thing to be able to, one, deliver record revenues, invest in our future and obviously delivery to our investors, so we are proud of the quarter, we are excited about what 2014 will represent and we certainly appreciate your support and look forward to talking to you in the future, so thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.