Annual Report (10-k)
February 23 2023 - 04:19PM
Edgar (US Regulatory)
0001120193December
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the fiscal year ended
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December 31, 2022 |
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
ACT OF 1934
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For the transition period
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from ________ to ________
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Commission file number: 001-38855
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Nasdaq, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
52-1165937 |
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(State or Other Jurisdiction of Incorporation or
Organization) |
(I.R.S. Employer Identification No.) |
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151 W. 42nd Street, |
New York, |
New York |
10036 |
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(Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s telephone number, including area code: +1 212 401
8700
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common Stock, $0.01 par value per share |
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NDAQ |
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The Nasdaq Stock Market |
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0.900% Senior Notes due 2033 |
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NDAQ33 |
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The Nasdaq Stock Market |
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0.875% Senior Notes due 2030 |
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NDAQ30 |
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The Nasdaq Stock Market |
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1.75% Senior Notes due 2029 |
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NDAQ29 |
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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.
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Large accelerated filer |
☒ |
Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
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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.
☒
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an
error to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are
restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to
§240.10D-1(b).
☐
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, 2022, the aggregate market value of the registrant’s
common stock held by non-affiliates of the registrant was
approximately $17.2 billion (this amount represents approximately
341.3 million shares of Nasdaq, Inc.’s common stock based on the
last reported sales price of $50.53 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.
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Class |
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Outstanding at February 13, 2023 |
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Common Stock, $0.01 par value per share |
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489,002,956 |
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shares |
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Documents Incorporated by Reference: Certain portions of the
Definitive Proxy Statement for the 2023 Annual Meeting of
Shareholders are incorporated by reference into Part III of this
Form 10-K. |
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Page
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Item 1. |
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Item 1A. |
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Item 1B. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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Item 7. |
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Item 7A. |
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Item 8. |
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Item 9. |
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Item 9A. |
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Item 9B. |
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Item 9C. |
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Item 10. |
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Item 11. |
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Item 12. |
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Item 13. |
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Item 14. |
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Item 15. |
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Item 16. |
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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.
•“Nasdaq
BX Options” refers to the options exchange operated by Nasdaq BX,
Inc.
•“Nasdaq
Clearing” refers to the clearing operations conducted by Nasdaq
Clearing AB.
•“Nasdaq
CXC” and “Nasdaq CX2” refer to the Canadian cash equity trading
books operated by Nasdaq CXC Limited.
•“Nasdaq
First North” refers to our alternative marketplaces for smaller
companies and growth companies in the Nordic and Baltic
regions.
•“Nasdaq
GEMX” refers to the options exchange operated by Nasdaq GEMX,
LLC.
•“Nasdaq
ISE” refers to the options exchange operated by Nasdaq ISE,
LLC.
•“Nasdaq
MRX” refers to the options exchange operated by Nasdaq MRX,
LLC.
•“Nasdaq
Nordic” refers to collectively, Nasdaq Clearing AB, Nasdaq
Stockholm AB, Nasdaq Copenhagen A/S, Nasdaq Helsinki Ltd, and
Nasdaq Iceland hf.
•“Nasdaq
PHLX” refers to the options exchange operated by Nasdaq PHLX
LLC.
•“Nasdaq
PSX” refers to the cash equity exchange operated by Nasdaq PHLX
LLC.
•“The
Nasdaq Options Market” refers to the options exchange operated by
The Nasdaq Stock Market LLC.
•“The
Nasdaq Stock Market” refers to the cash equity exchange 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.
2020 Credit Facility: $1.25 billion senior unsecured revolving
credit facility, which was replaced by the 2022 Credit Facility in
December 2022
2022 Credit Facility: $1.25 billion senior unsecured revolving
credit facility, which matures on December 16, 2027
2022 Notes: $600 million aggregate principal amount of 0.445%
senior unsecured notes; repaid in full, at maturity, in December
2022
2024 Notes: $500 million aggregate principal amount of 4.25% senior
unsecured notes, repaid in full and terminated in March
2022
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
2030 Notes: €600 million aggregate principal amount of 0.875%
senior unsecured notes due February 13, 2030
2031 Notes: $650 million aggregate principal amount of 1.650%
senior unsecured notes due January 15, 2031
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
2052 Notes: $500 million aggregate principal amount of 3.950%
senior unsecured notes due March 7, 2052
ARR: Annualized Recurring Revenue
ASC: Accounting Standards Codification
ASU: Accounting Standards Update
ASU 2016-13: Measurement of Credit Losses on Financial
Instruments
ASR: Accelerated Share Repurchase
ATS: Alternative Trading System
AUM: Assets Under Management
AWS: Amazon Web Services
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
FRAML: Fraud Detection & Anti-Money Laundering
IPO: Initial Public Offering
MiFID II: Update to the Markets in Financial Instruments
Directive
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 2023
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
SOFR: Secured Overnight Financing Rate
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
U.S. Tape plans: U.S. cash equity and U.S. options industry
data
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.
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 company surveys.
Industry publications and surveys generally state that the
information they contain has been obtained from sources believed to
be reliable, but we cannot assure you that this information is
accurate or complete. We have not independently verified any of the
data from third-party sources nor have we ascertained the
underlying economic assumptions relied upon therein. Statements as
to our market position are based on the most currently available
market data. For market comparison purposes, The Nasdaq Stock
Market data in this Annual Report on Form 10-K for IPOs and new
listings of equity securities (including issuers that switched from
other listings venues, closed-end funds and ETPs) 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 IPOs and new listings of equity
securities on the Nasdaq Nordic and Nasdaq Baltic exchanges and
Nasdaq First North also is based on data generated internally by
us. IPOs and new listings data is presented as of period end. While
we are not aware of any misstatements regarding industry data
presented herein, our estimates involve risks and uncertainties and
are subject to change based on various factors, including those
discussed in the “Item 1A. Risk Factors” section in this Annual
Report on Form 10-K.
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.
Forward-Looking Statements
The SEC encourages companies to disclose forward-looking
information so that investors can better understand a company’s
future prospects and make informed investment decisions. This
Annual Report on Form 10-K contains these types of statements.
Words such as “may,” “will,” “could,” “should,” “anticipates,”
“envisions,” “estimates,” “expects,” “projects,” “intends,”
“plans,” “believes” and words or terms of similar substance used in
connection with any discussion of future expectations as to
industry and regulatory developments or business initiatives and
strategies, future operating results or financial performance, and
other future developments are intended to identify forward-looking
statements. These include, among others, statements relating
to:
•our
strategic direction, including changes to our corporate
structure;
•the
integration of acquired businesses, including accounting decisions
relating thereto;
•the
scope, nature or impact of acquisitions, divestitures, investments,
joint ventures or other transactional activities;
•the
effective dates for, and expected benefits of, ongoing initiatives,
including transactional activities and other strategic,
restructuring, technology, ESG, 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; and
•any
litigation, or any regulatory or government investigation or
action, to which we are or could become a party or which may affect
us and any potential settlements of litigation, regulatory or
governmental investigations or actions, including with respect to
our CFTC investigation.
Forward-looking statements involve risks and uncertainties. Factors
that could cause actual results to differ materially from those
contemplated by the forward-looking statements include, among
others, the following:
•our
operating results may be lower than expected;
•our
ability to successfully integrate acquired businesses or divest
sold businesses or assets, including the fact that any integration
or transition may be more difficult, time consuming or costly than
expected, and we may be unable to realize synergies from business
combinations, acquisitions, divestitures or other transactional
activities;
•loss
of significant trading and clearing volumes or values, fees, market
share, listed companies, market data customers or other
customers;
•our
ability to develop and grow our non-trading businesses, including
our technology, analytics, ESG and anti-financial crime
offerings;
•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, and geopolitical
instability;
•the
performance and reliability of our technology and technology of
third parties on which we rely;
•any
significant systems failures or errors 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 regulatory oversight
domestically or internationally.
Most of these factors are difficult to predict accurately and are
generally beyond our control. You should consider the uncertainty
and any risk related to forward-looking statements that we make.
These risk factors are discussed under the caption "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 in any document, we claim
the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of
1995.
PART I
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 enable clients to optimize and execute their
business vision with confidence.
We manage, operate and provide our products and services in three
business segments: Market Platforms, Capital Access Platforms and
Anti-Financial Crime.
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.
In February 2008, Nasdaq and OMX AB combined their businesses, and
we changed our corporate name to The NASDAQ OMX Group, Inc. This
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 enable success in the evolving global financial system, we have
established our purpose, vision, and value proposition together
with a focused growth strategy:
Our Purpose:
We advance economic progress for all.
Our Vision:
We will be the trusted fabric of the world’s financial
system.
Our Value Proposition:
We deliver world-leading platforms that improve the liquidity,
transparency and integrity of the global economy.
Our Strategy:
In 2017, we set a new strategic direction focused on maximizing the
resources, people and capital allocated to our largest growth
opportunities. These opportunities, which include anti-financial
crime and marketplace technology solutions, workflow for investment
managers and asset owners as well as insight solutions, constituted
large and growing opportunities where we felt our strengths in
technology, analytics and capital markets expertise, combined with
our expansive client network, positioned us to meet our clients’
evolving needs.
In 2022, we announced a new organizational structure which aligns
our businesses more closely with the foundational shifts that are
driving the evolution of the global financial system. In order to
amplify our strategy, we aligned the Company more closely with
evolving client needs. As a result, we have identified three new
reporting segments, Market Platforms, Capital Access Platforms and
Anti-Financial Crime, which align to our new divisional
structure.
By aligning our business segments against these secular trends, we
aim to deliver more for our clients and increase growth across our
key pillars of liquidity, transparency and integrity:
•Liquidity:
Within our Market Platforms division, we continue to modernize
markets by utilizing technology to maximize the liquidity of the
global economy. New technologies, including cloud, blockchain,
machine learning and artificial intelligence, present significant
opportunities to further enhance market resiliency and scalability
and make markets even more accessible. We believe that these
technologies will enable more opportunities for market participants
and new asset classes to be integrated across markets globally. We
brought our markets and market-related technology businesses
together, aligning complementary capabilities to capture the
potential these technologies can unlock in our industry. By
utilizing the division’s position at the center of markets, we
believe that Market Platforms will be at the forefront of the
financial system’s evolution and will play a critical role in
advancing the modernization of markets across geographies and asset
classes.
•Transparency:
Our Capital Access Platforms division is uniquely placed to help
clients navigate the increasing complexity of the evolving
financial system through access to capital and transparency which
enables economic growth. With over 10,000 corporate clients and
5,000 clients across the investment management ecosystem, Nasdaq is
a trusted partner to aid the corporate and investment communities
in making more informed decisions. Leveraging the insights and
capabilities across our listings, advisory, data, index, and
analytics teams, we believe that Capital Access Platforms will
serve as a bridge between the investor and corporate communities,
focused on enhancing the client experience by providing efficient
routes to capital, delivering more holistic, actionable insights
and intelligence, modernizing workflows, and navigating the climate
and ESG landscape.
•Integrity:
Our Anti-Financial Crime division combines Nasdaq's fraud
detection, anti-money laundering, and surveillance businesses. This
division remains focused on capturing the growth associated with
protecting the integrity of the financial system and fighting
financial crime. The division will continue its focus on delivering
a world-class platform, leveraging the power of the cloud and
machine learning across asset classes, to the full spectrum of
banks and brokers, including the emerging ecosystem of financial
technology, or FinTech, companies and digital banks.
Products and Services
Market Platforms
Our Market Platforms segment delivers world leading platforms that
improve the liquidity, transparency and integrity of the global
economy by architecting and operating the world's best
markets.
Our Market Platforms segment includes our Trading Services and
Marketplace Technology businesses.
Trading Services
We provide trading services in North America and Europe. In the
U.S., we operate six options exchanges: 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. Our combined options market
share in 2022 represented the largest share of the U.S. market for
multi-listed equity options. Our options trading platforms provide
trading opportunities to 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.
We also 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.
Trading Services also includes revenues from U.S. Tape plans. The
plan administrators sell quotation and last sale information for
all transactions, whether traded on The Nasdaq Stock Market or
other exchanges, to market participants and 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.
In Canada, we operate an exchange with three independent markets
for the trading of Canadian-listed securities: Nasdaq Canada CXC,
Nasdaq Canada CX2 and Nasdaq Canada CXD.
In 2022, we began migrating our North American markets to the AWS
cloud-computing platform in a phased approach as part of a
partnership to build the foundation of new capital markets. During
the fourth quarter, we successfully completed the migration of
Nasdaq MRX to the cloud. We believe the shift to cloud-based
markets will provide our exchanges with more security, greater
reliability, better scalability and the ability to quickly power up
computing resources. This will, in turn, enable Nasdaq to provide
its clients access to cloud-based capabilities, including virtual
connectivity services, market analytics and machine learning, at a
lower cost.
In Europe, we operate exchanges in Tallinn (Estonia), Riga (Latvia)
and Vilnius (Lithuania) as Nasdaq Baltic and exchanges in Stockholm
(Sweden), Copenhagen (Denmark), Helsinki (Finland), and Reykjavik
(Iceland) together with the clearing operations of Nasdaq Clearing,
as Nasdaq Nordic.
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-exchange 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.
In Europe, Nasdaq Nordic 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.
Nasdaq Fixed Income, or 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.
In June 2021, we sold our U.S. Fixed Income business, which
included an electronic platform for the trading of U.S.
Treasuries.
Nasdaq Commodities is the brand name for Nasdaq’s European
commodity-related products and services such as trading and
clearing. Nasdaq Commodities’ offerings include derivatives in
power, natural gas and carbon emission markets, seafood and
electricity certificates. These products are listed on Nasdaq Oslo
ASA, except for seafood, which is listed on Fish Pool, 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.
We also own a majority stake in Puro.earth, a Finnish-based leading
platform for carbon removal. Puro.earth offers engineered carbon
removal instruments that are verified and tradable through an open,
online platform. Puro.earth’s marketplace capabilities add to our
suite of ESG-focused technologies and workflow solutions and give
our clients further resources to successfully achieve their ESG
objectives.
In addition to our trading and clearing services business and our
carbon market offering, in September 2022, we announced our planned
launch of a new digital assets business to power the digital asset
ecosystem. The launch underpins Nasdaq’s ambition to advance and
help facilitate broader institutional participation in digital
assets by providing trusted and institutional-grade solutions,
focused on enhanced custody, liquidity and integrity. Nasdaq
Digital Assets will initially develop an advanced custody solution.
Nasdaq’s offering is subject to regulatory approval in applicable
jurisdictions. Additionally, we expanded our anti-financial crime
technology with new coverage for the cryptocurrency ecosystem,
including a comprehensive suite of crypto-specific fraud detection
capabilities discussed below in “Anti-Financial
Crime.”
Marketplace Technology
Marketplace Technology comprises our trade management services and
market technology businesses.
Our trade management services business provides 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. We launched WorkX
in 2021, an upgraded version of Nasdaq ACT Workstation, a
web-based, front-end interface that allows market participants to
view data, utilize risk management tools, and submit and review
trade reports. WorkX enables a seamless workflow and enhanced trade
intelligence. All Workstation users were migrated to WorkX in 2022.
In addition, we offer a variety of add-on compliance tools to help
market participants 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.
We completed the previously announced wind-down of our broker
services operations business during 2022. This business primarily
offered technology and customized securities administration
solutions to financial participants in the Nordic market. Such
services and solutions primarily consisted of flexible back-office
systems, which allowed customers to efficiently manage safekeeping,
settlement and corporate actions and reporting, and included
connectivity to exchanges and central securities
depositories.
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, and powers over
120 market infrastructure operators and new market clients in more
than 55 countries. 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 by non-capital markets
customers, including those in insurance liabilities securitization,
cryptocurrencies and sports wagering, as discussed further
below.
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.
During 2022, we continued to build out our SaaS business portfolio
by extending and migrating our current offerings to SaaS, where we
added 11 new SaaS customers.
Our market technology business has evolved from its origins serving
the capital markets, as we have leveraged NFF, our flexible and
modular architecture technology that provides next generation
capital markets capabilities in an open and agile environment, to
develop our SaaS platform and offerings. We expect to continue to
expand adoption of this SaaS model by our clients in the
future.
For market infrastructure operators, which include exchanges,
regulators, clearinghouses and central securities depositories, we
provide and deliver mission-critical solutions across the trade
lifecycle via NFF, which 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
services outside of the traditional capital markets. Our market
technology business currently offers its services to several
digital assets exchanges, commercial real estate markets, the
reinsurance market and sports wagering operators. Our Marketplace
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 Marketplace
Services Platform is targeted at new markets and enables end-to-end
marketplace implementation without the resources required for
on-premise solutions.
Numerous market technology projects involve complex 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. Our successful Nasdaq MRX migration to the cloud,
discussed above, created a blueprint for our Marketplace Technology
clients that will be used to demonstrate, guide and migrate their
markets to the cloud, as well as for our own future market
migrations.
Capital Access Platforms
Our Capital Access Platforms segment delivers liquidity,
transparency and integrity to the corporate issuer and investment
community by empowering our clients to effectively navigate the
capital markets, achieve their sustainability goals, and drive
governance excellence. As we operate in the center of the capital
markets ecosystem, we are able to serve as a bridge between
investors and corporates focused on enhancing the client experience
by providing efficient routes to capital, delivering more holistic,
actionable insights and intelligence, modernizing workflows, and
navigating the climate and ESG landscape. We offer a suite of
products to assist companies in managing corporate governance
standards, discussed below in Workflow & Insights.
Our Capital Access Platforms segment includes our Data &
Listing Services, Index and Workflow & Insights
businesses.
Data & Listing Services
Our U.S. and European data products enhance transparency of market
activity within our exchanges and provide critical information to
professional and non-professional investors globally. Our Data
business sells and distributes historical and real-time market data
to sell-side customers, the institutional investing community,
retail online brokers, proprietary trading firms, and other venues,
as well as internet portals and data distributors.
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 to market
participants and to data distributors who in 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.
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 offer TotalView products
for our Nasdaq BX, Nasdaq PSX and Nordic markets. We also offer
Nordic Equity TotalView, Nordic Derivatives TotalView and Nordic
Fixed Income TotalView for 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 U.S.
equities and options exchanges and Nordic equities, derivatives,
fixed income, futures and commodities.
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 available through a suite of
application programming 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.
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, healthcare, consumer
products, telecommunication 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.
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.
As of December 31, 2022, a total of 4,230 companies listed
securities on The Nasdaq Stock Market, with 1,566 listings on The
Nasdaq Global Select Market, 1,298 on The Nasdaq Global Market and
1,366 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. The 2022 new listings were comprised of
the following:
|
|
|
|
|
|
|
IPOs |
161 |
|
Switches from the New York Stock Exchange LLC, or NYSE, and the
NYSE American LLC, or NYSE American |
14 |
|
Upgrades from OTC |
46 |
|
ETPs and Other Listings |
145 |
|
Total
|
366 |
|
|
|
|
The Nasdaq Stock Market IPO win rates:
|
|
|
2022 total |
89 |
% |
|
Operating companies |
92 |
% |
|
SPACs |
86 |
% |
During 2022, we had 14 new listings resulting from companies
switching their listings from NYSE or NYSE American to join The
Nasdaq Stock Market. Together with companies that transferred
additional securities to The Nasdaq Stock Market during 2022, an
aggregate of $36 billion in global equity market capitalization
switched to The Nasdaq Stock Market.
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, 2022, a total of
1,251 companies listed securities on our Nordic and Baltic
exchanges.
Our European listing customers include companies, funds and
governments. Customers issue securities in the form of cash
equities, depository receipts, warrants, ETPs, convertibles,
rights, options, bonds or fixed-income related products. In 2022, a
total of 63 new companies listed on our Nordic and Baltic
exchanges. In addition, 12 companies upgraded their listings from
Nasdaq First North to Nasdaq Main Market.
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, 2022, 379 ETPs listed on 26 exchanges in over 20
countries tracked a Nasdaq index and accounted for $315 billion in
AUM. This includes approximately $85 billion in ETP AUM, or 27% 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 $200
billion in assets tracking the index as of December 31,
2022.
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.
Workflow & Insights
Our Workflow & Insights business includes our analytics and
corporate solutions businesses.
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.
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.
Our corporate solutions business serves both public and private
companies and organizations through our Investor Relations
Intelligence, Governance Solutions and ESG Solutions products. 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, and various non-profit organizations to hospitals and
healthcare 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, and consulting
services. We also advise clients on a range of governance and
sustainability-related issues.
Our Investor Relations Intelligence offerings include a global team
of expert consultants that deliver advisory 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.
Through our Governance Solutions products, we provide a global
technology offering and consulting services that streamline the
meeting process for board of directors and executive leadership
teams and enable them to accelerate decision making and strengthen
governance. Our solutions help protect sensitive data and
facilitate productive collaboration, which enables board members
and teams to work faster and more effectively.
Our ESG Solutions includes our ESG Advisory practice and our ESG
software offering. Our ESG Advisory practice helps companies
analyze, assess and action best practices to attract long-term
capital. Our ESG Software offering includes OneReport, a SaaS
solution, that helps organizations navigate corporate
responsibility frameworks, manage information capture and response
process, and deliver ESG data to ratings agencies and other
stakeholders. In June 2022, we acquired Metrio Software Inc., or
Metrio, a cloud-based solution that helps firms manage ESG data,
perform greenhouse gas emissions calculations and accounting, and
optimize granular data collection, report publication and
dashboarding against targets. Both solutions support audit and
assurance requirements.
Anti-Financial Crime
Our Anti-Financial Crime segment delivers leading platforms that
improve the integrity and transparency of the financial world by
providing SaaS solutions for fraud detection, anti-money
laundering, and trade and market surveillance.
The financial services industry has seen a growing demand for
products and services focused on anti-financial crime. Our FRAML
solution provides a cloud-based platform to help detect,
investigate, and report money laundering and financial fraud to
more than 2,300 financial institutions in North
America.
Our surveillance solutions include a SaaS platform designed for
banks, brokers and other market participants to assist in complying
with market rules, regulations and internal market surveillance
policies and serves more than 170 clients. We also provide a
solution to regulators and exchanges with a robust platform to
manage cross-market, cross-asset and multi-venue surveillance. This
offering powers surveillance for more than 50 exchanges and 15
regulators.
In 2022, we expanded our anti-financial crime technology with new
capabilities and coverage for the digital assets ecosystem,
allowing us to play a central role in combating the rising threat
of fraud, money laundering and market manipulation across the
digital assets landscape.
Enablers, Differentiators and Competition
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 education 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.
Nasdaq's shift to utilizing and deploying cloud infrastructure
continued during 2022. In the fourth quarter of 2022, we migrated
Nasdaq MRX to the cloud, which is the first exchange moved to an
exclusively cloud-enabled infrastructure and the first exchange
solely in the cloud of any regulated public market in the world. We
believe that migrating our exchanges to the cloud, through our
partnership with AWS, our preferred cloud provider, will result in
improved performance and increased flexibility for our customers.
We expect to move additional North American markets to the cloud
with AWS during the next several years. The shift to cloud-based
markets will enable Nasdaq to provide its clients access to
cloud-based capabilities, including virtual connectivity services,
market analytics and machine learning, at a lower cost. We also
expect to leverage the cloud-based infrastructure for our market
technology clients, assisting such clients in developing their own
platforms and customizing their offerings for their local, rapidly
changing industry dynamics.
To facilitate the exchange migration to AWS, Nasdaq will also
leverage its Fusion technology platform. Fusion positions Nasdaq’s
North American and European markets to manage, operate and deploy a
common platform that can be used across our nine Nasdaq derivative
markets, while enabling our markets for cloud
deployment.
We continue to utilize NFF for 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 that ties 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, NFF enables end users to leverage recent
technology developments.
Competitive Strengths
We are a global, client-focused technology company with expertise
in markets. We deploy robust technology capabilities and have
developed a leading anti-financial crime and corporate and investor
franchise. Our business segments complement each other and we
believe that our strong competitive position in large, high-growth
markets positions us for sustained growth.
A Unique Value Proposition
We operate leading platforms that can improve the liquidity,
transparency, and integrity of the global economy, allowing us
to:
•Develop
efficient and reliable technologies to facilitate and protect the
financial system across asset classes;
•Empower
our clients to effectively navigate the capital markets, achieve
their sustainability goals, and maintain corporate governance
excellence; and
•Provide
data, tools and insights that drive sound decision
making.
Technological Strength
The strength and resiliency of our technology, enhanced by our
Marketplace 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 Across the Global Financial
Ecosystem
We strive to serve a diverse range of clients that participate
across the global financial ecosystem, including:
•Brokers
and Traders
- Helping brokers and traders to confidently plan, optimize and
execute their business vision.
•Market
Participants
- Providing market participants with access to liquidity and
enabling them to efficiently consume, monitor,
analyze,
and capitalize on real-time market changes.
•Listed
Companies
- Enabling companies to access capital markets effectively and
manage stakeholders.
•Investors
and Asset Managers
- Offering products and services to assist investors and asset
managers in optimizing their portfolios and offerings.
•Market
Infrastructure Operators
- Assisting market infrastructure operators in increasing
efficiency, meeting customer needs, and growing
revenue.
•Banks
and Financial Institutions
- Providing safety and integrity through a suite of trade
surveillance and cloud-native anti-financial crime
solutions.
Competition
Market Platforms
We face intense competition in North America and Europe for our
Trading Services businesses. 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 BOX
Options Market. In cash equities in the U.S., we compete with
exchanges operated by Cboe, ICE, MIAX, The Investors Exchange,
Members Exchange and 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.
Our U.S. Tape plans earn revenue from consolidated data products
which are 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.
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.
In Europe, our cash equities markets compete with exchanges such as
Euronext N.V., Deutsche Börse AG, 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 markets in
Europe, we face competition from other broker-owned systems, dark
pools, Systematic Internalizers, or 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 equities. In addition to exchange-based
competition, we face competition from OTC derivative
markets.
The implementation of MiFID II and MiFIR has resulted in further
competitive pressure on our European trading business. SIs are
attracting a significant share of electronically matched volume and
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. 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 Marketplace Technology business includes our trade management
services and market technology businesses. Our trade management
services business competes with other exchange operators, extranet
providers, and data center providers.
Traditionally, exchanges and exchange-related businesses would
internally develop technology, sometimes aided by consultants.
However, this model has gradually 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 business: exchange operators and
technology providers unaffiliated with exchanges. These
organizations make available a range of off-the-shelf technology,
including trading, clearing, 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 enables us to compete with other companies
that are developing cloud-based exchanges and market technology
offerings.
Capital Access Platforms
Our Data business includes proprietary data products. Proprietary
data products are made up exclusively of data derived from each
exchange’s systems. 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 other
exchanges and third-party vendors to provide information to market
participants. Examples of our competitors in proprietary data
products are ICE, Cboe, TSX, and Dow Jones &
Company.
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.
Our Index business offers Nasdaq-branded indexes and financial
products and 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.
Workflow & Insights includes our analytics and corporate
solutions businesses. 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 analytics business offerings compete
with other analytics providers, including Addepar and
Caissa.
Our corporate solutions business faces competition that can be
varied and 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. Our ESG Solutions, including
Nasdaq OneReport, Metrio and ESG Advisory, are positioned in
evolving markets with competitors offering multiple point solutions
providing software, data or consulting services. The competitive
landscape for our Governance Solutions products varies by customer
segment and geography. Most competitors offer SaaS solutions that
are supported by a data centered strategy, while certain firms
offer specialized services that focus on a single niche segment.
Customers frequently seek single-source providers that are able to
address a broad range of needs within a single
platform.
Anti-Financial Crime
For our Anti-Financial Crime segment, which includes solutions for
fraud detection, anti-money laundering or AML and trade and market
surveillance, competitors include core banking solution providers
ranging from small to large independent solution providers, FinTech
start-ups and in-house custom builds. We compete against enterprise
solution providers and point solutions for clients with larger AUM.
Competitors also include companies that serve multiple industries
in addition to financial services with generalized solutions, such
as business intelligence tools, data integrators, investigation
platforms and software covering the boarder compliance lifecycle.
Recently, there has been an increase of FinTech start-ups shifting
into the surveillance, fraud detection and AML space offering
highly-specialized solutions for advanced data analytics,
artificial intelligence and machine learning technology. The
anti-financial crime and surveillance offerings compete on a number
of factors, including but not limited to, increased workflow
efficiency, quality of the data, quality of alerts and
pricing.
Our surveillance and anti-financial crime offerings must
demonstrate the ability to decrease false-positives and provide
in-depth views into potential abuses and risks that stem from those
cases. These offerings help firms reduce both the reputational and
regulatory risk as well as the complexity in efforts to keep
markets and financial institutions safe.
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 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
the innovative skills, 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.
Corporate Venture Program
We operate a corporate venture program to make minority investments
primarily in emerging growth FinTech 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 in size and has invested in companies covering various
sectors, including data, analytics and workflow, digital assets,
market infrastructure, anti-financial crime, new marketplaces,
enabling technologies and ESG. As of December 31, 2022, our
investments, which include equity and debt investments, were valued
at $180 million.
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 2022, we deepened our corporate and community ESG efforts,
including furthering our commitment to greater sustainability and
climate change awareness.
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.
We continued to be committed to carbon neutrality, and for the
fifth consecutive year, achieved that goal across all business
operations through the purchase of green power, carbon offsets, and
renewable energy certificates. We were named to the Dow Jones
Sustainability North America Index for the seventh consecutive year
and
received recognition from the Bloomberg Gender-Equity Index and The
Human Rights Campaign’s Corporate Equality Index. In addition,
Nasdaq’s ESG scores improved across multiple rating agencies during
2022, including four significant sustainability rating
upgrades:
•MSCI:
a two-tier rating increase to “AA,” from our “BBB” rating in the
prior year, placing Nasdaq in MSCI’s “Leaders”
category.
•CDP:
a score improvement to an “A” from the prior year’s “B”, earning us
a place on CDP’s “A List” for climate disclosures and
actions.
•EcoVadis:
status upgrade to “Gold Medal,” a recognition reserved for the top
5% of all rated companies, as compared to our “Silver Medal” status
in the prior year.
•2022
S&P Corporate Sustainability Assessment (CSA): a score of 60,
representing an 20% year-over-year score increase, placing Nasdaq
in the 95th percentile of our industry group.
In 2022, Nasdaq also continued to be a signatory to the United
Nations Global Compact and the United Nations Principles of
Responsible Investment and became a signatory to the World Economic
Forum Stakeholder Capitalism Metrics.
While our business operations account for a comparatively small
environmental impact, we focus our environmental efforts on several
key areas, including the way we use energy resources, manage our
workspaces, engage our value chain 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.
Nasdaq has approved near-term and long-term science-based emissions
reduction targets with the Science Based Targets initiative, or
SBTi. In 2022, the SBTi verified Nasdaq’s 2050 net-zero
science-based target.
Nasdaq has obtained the LEED Platinum certification for our New
York headquarters office in Times Square, which complements the
LEED Gold certification for our 10th
Floor Client Experience Center, our space for client events in our
New York headquarters.
We also achieved LEED Gold certifications for our new Greensboro,
North Carolina office and existing office locations in Copenhagen,
Reykjavik, San Francisco, Stockholm, Umeå, Vilnius and Washington,
D.C. We continue to look for additional opportunities to transition
to green offices across the globe as part of our strategy to reduce
office operation-related emissions.
We help companies of all ESG maturity levels through our robust
combination of technology, tools, data, insights and capital market
solutions.
During 2022, we maintained, and continued to expand, our portfolio
of ESG services and solutions for our clients and stakeholders,
including:
•the
Nasdaq ESG Advisory Program, which pairs companies with ESG
consulting 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 provides data to ratings agencies;
•the
Metrio platform, which provides tools to address corporate issuers’
expanding ESG data collection, analytics, and reporting
needs;
•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 Nordic companies;
•the
Nasdaq ESG Footprint, a tool that helps both institutional and
retail investors analyze the impact of their
portfolios;
•the
eVestment ESG Questionnaire, which provides a standard approach to
ESG reporting thereby allowing for greater transparency into how
ESG strategies work, providing deeper ESG data for allocator
consumption, and enabling asset managers to better articulate their
approach to ESG; and
•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 2022, we requested our existing leading suppliers by spend to
attest to our updated Supplier Code of Ethics. The Supplier Code of
Ethics, which is available on our website, encourages our suppliers
and vendors to adopt sustainability and environmental practices in
line with our published Environmental Practices Statement, to
promote a diverse and inclusive workforce and to engage
diverse-owned business in their supply chain. Additionally, our new
suppliers are required to attest to the Supplier Code of Ethics in
connection with the commencement of their engagement.
Effective August 8, 2022, Nasdaq’s new listing rule requires
companies listed on our U.S. exchange to publicly disclose
consistent, transparent diversity statistics regarding their board
of directors using a standardized template. Companies are also
required to choose whether to meet recommended board diversity
objectives or disclose their reasons for not doing so under new
listing rules effective in 2023, 2025 and 2026 (depending on the
company’s listing tier and board size). The diversity rules are
currently being challenged by two advocacy groups in the U.S. Court
of Appeals for the Fifth Circuit.
For more information regarding our ESG efforts in 2022, 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
U.S. federal securities laws establish a system of cooperative
regulation of securities markets, market participants and listed
companies. SROs conduct the 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.
This regulatory framework applies to our U.S. business in the
following ways:
National Securities Exchanges.
SROs in the securities industry are an essential component of the
regulatory scheme of the Exchange Act responsible 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, as applicable.
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, enforcement 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. In 2019,
Nasdaq received SEC approval to reclaim from FINRA the
responsibility and opportunity to bring enforcement actions against
member firms for violating certain Nasdaq exchange rules governing
conduct on the Nasdaq exchanges. 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 seeking to list 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.
Broker-dealer regulation.
Nasdaq’s 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 SROs adopt, and require strict compliance with,
rules and regulations applicable to broker-dealers. 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
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, 2022, 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
responsibility for all regulatory activities performed under these
agreements by FINRA.
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 agreement with FINRA covering enforcement of rules related
to cash equity sales practices and certain other non-market related
rules; and
•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 dissemination of all consolidated information
for an individual NMS stock through a single plan
processor.
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 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
system, hardware, software 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.
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 July 2022, the Court of
Appeals vacated portions of the governance order that would have
provided voting rights to persons other than SROs. At this time,
the SEC has not directed implementation of the remaining portions
of the governance order, but may do so in the future.
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, 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.
In May 2022, the Court of Appeals rejected a challenge to the rule
brought by Nasdaq and several other exchanges. In September 2022,
the SEC disapproved fees proposed by Nasdaq and other exchanges to
implement the rule but did not direct exchanges to take further
action to implement the rule. Accordingly, a schedule for
implementing the rule has not been imposed 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.
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 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 implemented an inter-disciplinary program to ensure compliance
with Regulation SCI. We have also created Regulation SCI policies
and procedures, updated internal policies and procedures, and
developed an information technology governance program to ensure
compliance.
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
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.
Nasdaq Canada is subject to several national marketplace related
instruments which set out requirements for marketplace operations,
trading rules and managing 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.
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 July 2016, the European Union’s Market Abuse 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, in 2016, 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, 2026, 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.
In addition, proposed rules under MiFID II and MiFIR rules are
expected to include provisions for the establishment of a European
consolidated tape of pre- and/or post-trade data. These rules may
affect our ability to offer market data products in the same manner
as we currently provide such offerings.
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 of
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 articles of association following initial
registration must be approved by the SFSA. Nasdaq Clearing holds
the license as a CCP under EMIR.
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 confidence in the
securities markets. When operating a regulated market, an exchange
must apply the principles of free access (i.e., that each person
which meets 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
to all those who participate in trading) and transparency (i.e.,
that the participants must be given prompt, 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 compliance with trading participation rules,
financial instrument compliance with relevant listing rules and the
extent to which issuers meet their obligation to submit regular
financial information to relevant authorities.
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, there has been
cooperation between the supervisory authorities in Sweden, Iceland,
Denmark and Finland, which looks to safeguard effective and
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.
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.
We operate a licensed exchange, Nasdaq Oslo ASA, in Norway that
trades and lists commodity derivatives. Although Norway is not a
member of the EU, as a result of the European Economic Area, or
EEA, agreement (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.
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
surveillance work 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 in Stockholm. In addition,
there are designated 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 four years. We
have submitted our application for permanent
recognition.
Human Capital Management
Nasdaq has continued to strengthen our commitment to, and
investment in, attracting, retaining, developing and motivating our
employees during 2022.
In 2022, we introduced the Nasdaq Culture Book, which consolidates
and explains Nasdaq’s culture, including Nasdaq’s vision and
purpose; our values; and behavioral attributes that we believe
successful employees at Nasdaq share.
We believe that being clear and descriptive regarding our culture
energizes and helps align employees, and also enables us to allow
prospective employment candidates to better understand the
organization they are considering joining.
We also 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. See “Diversity, Equity and Inclusion”
below for further discussion of these efforts.
As of December 31, 2022, Nasdaq had 6,377
full and part-time employees, including employees of non-wholly
owned consolidated subsidiaries.
Employee Safety
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. Our employees may
work from our offices or work from home, with most of our employees
continuing to utilize a hybrid work schedule of both working in an
office and remotely during each week.
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.
Our internal employee engagement score, based on our biannual
employee engagement surveys, increased year-over-year from 2021.
Our workforce voluntary attrition rate during 2022 was
approximately 11%, which was comparable to 2021.
Our Talent Attraction Team focused on strategic marketing and
branding to position Nasdaq as a leading employer of choice for
talent in our industry, helping to increase our pool of top
candidates for open positions, particularly diverse candidates. We
ran targeted attraction campaigns in our major markets using (with
permission) local employee stories and photos, and partnered with
diverse talent organizations, such as the National Society of Black
Engineers, AfroTech, the Society of Women Engineers, Women in
Technology, Grace Hopper and the Society of Hispanic Professional
Engineers to help improve brand awareness of Nasdaq and attract a
higher number of diverse candidates compared to 2021.
During 2022, we launched a year-long series called the Manager
Forum, facilitated by our CEO and other senior and mid-career
leaders, to engage managers in sustained leadership development,
alongside our existing formal leadership development
curriculum.
We also launched a new artificial intelligence-driven career
development platform called the Career Hub that matches employees,
based on their career aspirations, to internal training, potential
mentors, short-term projects and full-time internal roles. This
helped us increase our career satisfaction scores in our biannual
employee engagement survey and supported employee
retention.
We have invested in professional development for our employees,
including offering access to more than 26,000 professional
development programs; providing tuition assistance to employees
enrolled in degree-granting academic programs; holding internal
career fairs and career development programs; connecting employees
to our formal mentoring programs and providing one-on-one
professional coaching opportunities. We welcomed 156 interns to
Nasdaq during 2022.
To reward our employees at various stages of their tenure with
Nasdaq, we continued our anniversary recognition program that
includes Nasdaq-branded merchandise, and, for major milestones,
recognition on our Nasdaq Tower in Times Square. Additionally, our
peer-to-peer employee recognition program rewards employees and
highlights recognized employees on our internal social media
channels, further amplifying the recognition.
Diversity, Equity and Inclusion
At Nasdaq, three pillars guide our diversity, equity and inclusion
efforts:
Workforce, Workplace and Marketplace.
Workforce
seeks to ensure that
our employee population is representative of the communities in
which we operate.
Workplace
seeks to create a positive, equitable workplace experience for all
employees of Nasdaq, and
Marketplace
aims to positively influence our peers in the capital market
ecosystem, and to invest in our local communities in which we
operate.
Nasdaq sponsors eleven employee-led internal affinity networks.
These networks include more than 2,400 employee members,
representing 37% of our employees and contractors. Nasdaq’s
Employee Networks support the diverse communities that comprise our
workforce, including Black, Asian American, Hispanic, LGBTQ+,
female, disabled, veteran, and parent/caregiver communities.
Nasdaq’s Employee Networks provide both formal and informal
development programs and guidance for their members. The networks
benefit the entire Nasdaq workforce through educational events,
guest speakers, and volunteering opportunities.
Nasdaq regularly and proactively reviews and monitors diversity
data across its businesses, including workforce composition, talent
pipeline, and sentiment by business unit. In 2022, we offered two
diversity trainings, “Conscious Inclusion” and “Inclusive
Leadership,” for non-managers and managers, respectively. All of
our executives completed this course, increasing understanding of
diversity and equity priorities at the highest level. We also added
customized developmental programs for underrepresented talent,
including executive mentoring and accelerated leadership
development programs. In 2022, we launched a high-potential
leadership program for our female employees to enhance their skills
and increase advancement opportunities.
We continue to seek to improve our diversity metrics, both through
development of our internal talent pool and by focusing on
interviewing diverse candidates externally for new employment
opportunities. During our annual executive succession planning
exercise with our Board of Directors, we realized a 26% increase,
as compared to 2021, in the diversity of our senior executive
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. 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.
Additionally, Nasdaq has been named to the Human Rights Campaign
Corporate Equality Index, Coqual Black Equity Index, and several
Seramount indexes, including 100 Best Companies and Best Companies
for Dads. We were also named to the Bloomberg Gender Equality Index
again in 2022.
Workplace Demographics
During 2022, we continued our progress to increase the diversity of
our global workforce.
Our global female employee base increased from 2021 and has grown
each year since 2019, and in the United States, our minority
employee base also grew, continuing a trend since 2019. Nasdaq has
increased our underrepresented minority representation in the U.S.,
which includes Black/African American, Hispanic/Latino,
Multiracial, Native American, Native Hawaiian, and Pacific Islander
employees, from 14.9% in 2019 to 16.8% in 2022.
Gender and Ethnicity Performance Data as of December 31, 2022 and
2021
Gender:
* In the charts above, not disclosed percentage includes employees
that have chosen not to disclose and race and ethnicities that are
less than 0.3%.
In 2022, we conducted a pay equity analysis, which supplements our
annual multifaceted compensation review program, successfully
concluding that review in the second quarter of the year. Our pay
equity analysis for 2023 has already begun as part of the annual
compensation review program to be completed in the same cycle next
year.
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 grants.
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.
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.
In response to the pandemic we introduced, and have continued to
offer, additional benefits to support our employees, including
caregiver support, back-up childcare, “flex days” (extra time off
in addition to vacation), and hybrid work schedules, allowing our
employees to focus on mental well-being.
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.
In 2022, Nasdaq employees raised over $1 million including
donations and matches, supporting almost 650 charities
worldwide.
Nasdaq’s “Purpose” comprises our philanthropic, community outreach,
entrepreneurial support 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 2022, Nasdaq held two Purpose roundtables, which convened
corporate peers from companies at the forefront of these issues,
sharing insights on the importance of purpose in their
organization, and how it is embedded and communicated within their
company and among stakeholders to drive impact.
Nasdaq also held its second annual “Purpose Week” to further
champion economic progress for all, which included a series of
company-wide webinars, volunteer opportunities, an innovation
challenge and other events involving and recognizing company
employees. In addition to those events, we launched a set of
digital campaigns, accompanied by virtual conversations,
spotlighting several of the Nasdaq Foundation’s community partners.
These discussions explored topics such as creating a stronger
investor identity for underrepresented communities and innovative
approaches needed to tackle investor identity as one of the
overlooked barriers to partaking in the capital
markets.
The mission of the Nasdaq Foundation is focused on two primary
goals: reimagining investor engagement to equip under-represented
communities with the financial knowledge to share in the wealth
that markets create; and 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.
During 2022, the Nasdaq Foundation provided 14 grants to
organizations that seek to fulfill that mission. These grants were
awarded to, among others, Black Girl Ventures, an ecosystem of
Black/Brown woman-identifying leaders, assisting them through the
early-stages of entrepreneurship; Change Labs, a community-led
organization providing access to capital and resources to the next
generation of Native American change makers; and Hispanic Access
Foundation, which provides financial and investment training to
Spanish-speaking Latinos.
Nasdaq Website and Availability of SEC Filings
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 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
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 may 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
for our products and services, including our market technology,
FRAML solutions, data, indexes and corporate solutions, or could
result in a decline in the number of IPOs, reduced trading volumes
or values and deterioration of the economic welfare of our listed
companies, which could cause an increase in
delistings.
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
Platforms 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. The number of IPOs on our exchanges decreased in
2022 and the number of delistings increased compared to
2021.
Our Capital Access Platforms 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 corporate solutions, market
technology and FRAML products and services if global economic
conditions remain 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.
Additionally, during a global economic downturn, or periods of
economic, political or regulatory uncertainty, our sales cycle may
become longer or more unpredictable due to customer budget
constraints or unplanned administrative delays to approve
purchases
A reduction in trading volumes or values, market share of trading,
the number of our listed companies, or demand for market technology
or Capital Access 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 Platforms, Capital
Access Platforms and Anti-Financial Crime 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.
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 U.S. and in
Europe, is structured to maintain this 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.
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 their trading, listings, clearing,
data or technology businesses more competitive than
ours.
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.
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. We could experience a systems failure due to
human error by our employees, contractors or vendors, electrical or
telecommunications failures or disruptions, hardware or software
failures or defects, cyberattacks, sabotage or similar unexpected
events. These consequences could result in service outages, lower
trading volumes or values, financial losses, decreased customer
satisfaction, litigation 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.
Although we currently maintain and expect to maintain multiple
computer facilities, and leverage third party cloud providers, that
are designed to provide redundancy and back-up to reduce the risk
of system 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 causes an interruption in
services, decreases the 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.
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, such as our digital assets offering,
initiatives and enhancements to existing products. If these
products and initiatives are not successful or their launches are
delayed, including for regulatory uncertainty related to our
digital assets offering, 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, including
cloud-based infrastructure for certain of our offerings. 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. We may allocate significant
amounts of cash and other resources to product technologies or
business models for which market demand is lower than anticipated.
In addition, the 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.
A decline in trading and clearing volumes or values or market share
will decrease our trading and clearing revenues.
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 disruptions in
trading, the level and volatility of interest rates, inflation,
changes in price levels of securities and the overall level of
investor confidence. Beginning in 2020, 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 U.S. Tape plans business.
Our role in the global marketplace positions us at greater risk for
a cyberattack.
Our systems and operations are vulnerable to damage or interruption
from security breaches. As a result of our adoption of a hybrid
work environment, we have a broader and more distributed network
footprint and increased reliance on the home networks of employees,
and such remote work may cause heightened cybersecurity and
operational risks. 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 of human error or malicious
activity and criminal organizations may seek to profit from stolen
data. Computer malware, such as 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 and invest additional 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, or due
to a cybersecurity breach of a customer that results in a loss of
our data or compromises our systems or those of our other customers
utilizing the same products, could damage our reputation and result
in: a loss of customers; disrupted customer relationships; the loss
of our intellectual property or sensitive data; lower trading
volumes
or values, incur significant liabilities or otherwise have a
negative impact on our business, our products and services,
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. There can be no assurance we will be able to identify
and mitigate every incident involving cybersecurity attacks,
breaches or incidents. A system breach may go undetected for an
extended period of time.
Expanded cybersecurity regulations, and increased cybersecurity
infrastructure and compliance costs, may adversely impact our
results of operations.
As cybersecurity threats continue to increase in frequency and
sophistication, and as the domestic and international regulatory
and compliance structure related to information and cybersecurity;
data privacy and data usage; and our digital assets offering,
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. Compliance with laws and regulations
concerning cybersecurity, data privacy and data usage could result
in significant expense, and any failure to comply could result in
proceedings against us by regulatory authorities or other third
parties. Additional costs for bolstering cybersecurity
capabilities, and increased cybersecurity and data privacy
compliance costs, could adversely impact our business, financial
condition and operating results. Additionally, our clients
increasingly demand rigorous contractual, certification and audit
provisions regarding cybersecurity, data protection and data usage,
which may also increase our overall compliance burden and costs in
meeting such obligations.
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 that have the
functionality, performance, capacity, reliability and speed
required by our business and our regulators, as well as by our
customers.
The markets in which we compete are characterized by rapidly
changing technology, evolving 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.
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, including
from companies that we acquire, 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 business strategy and identify and pursue
strategic 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 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 financial losses from defaults by
our 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.
We also have credit risk related to transaction and
subscription-based revenues that are billed to customers on a
monthly or quarterly basis, in arrears.
Credit losses such as those described above could adversely affect
our consolidated financial position and results of
operations.
Technology issues relating 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, new listings from IPOs, including SPACs,
decreased in 2022. A prolonged decrease in the number of listings,
or failure of existing SPACs to successfully complete transactions
with target companies and dissolve, could negatively impact the
growth of our revenues. Our Corporate Solutions business is also
impacted by declines in the listings market or increases in
acquisitions activity as there may be fewer publicly-traded
customers that need our products.
RISKS RELATED TO TRANSACTIONAL ACTIVITIES AND STRATEGIC
RELATIONSHIPS
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, procedures and
policies, business cultures and 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 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, or there are cloud
service disruptions or a delay or inability to access our
exchanges, platforms or certain of our cloud products or features,
such unavailability or delays may adversely affect our clients,
which could significantly impact our reputation, operations,
business, and financial results.
For example, in 2022, we began to migrate our North American
markets to AWS in a phased approach, starting with Nasdaq MRX in
December 2022. AWS operates a platform that we use to provide
services to our clients, and therefore we are vulnerable to service
outages on the AWS platform that affect Nasdaq workloads running or
stored in the AWS environment. If AWS does not deliver our system
requirements on time, fails to provide maintenance and support to
our specifications or a migration experiences 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.
We also rely on members of our trading community to maintain
markets and add liquidity. To the extent that any of our largest
members experience difficulties, materially change their business
relationship with us or are 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, 2022,
goodwill totaled $8.1 billion and intangible assets, net of
accumulated amortization, totaled $2.6 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
2022, 2021 and 2020.
We may experience future events that may result in asset
impairments. Future disruptions to our business, prolonged economic
weakness, due to pandemics 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 other
transactional activities may require significant 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 divested businesses 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.
Other potential purchasers of assets in our industry may 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 to additional capital
requirements in certain circumstances and financial and
reputational risks if there are operational failures.
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 to existing
shareholders. In addition, 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 results in significant incremental 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.
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 acquisitions, integrations 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 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 recording
acquired tangible assets at fair value, in accordance with U.S.
GAAP, as compared to book value as recorded;
•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;
•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
•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 on our exchanges,
broker-dealers, central securities 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.
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.
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.
In 2016, the SEC approved a plan for Nasdaq and other exchanges to
establish a CAT, to improve regulators’ ability to monitor trading
activity. In addition to increased 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. As of
December 31, 2022, we have accrued a net receivable of $85 million
in connection with our portion of expenses related to the CAT
implementation. In addition, the ongoing failure to timely launch
or properly operate such technology exposes Nasdaq and other
exchanges to SEC fines.
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
expand its business under certain circumstances. 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.
Our non-U.S. business is subject to regulatory oversight in all the
countries in which we operate regulated businesses, such as
exchanges, clearinghouses or central securities depositories. In
these countries, we have received 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.
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 and the national securities exchanges
have introduced several initiatives to ensure the oversight,
integrity and resilience of markets. In December 2022, the SEC
proposed significant rule changes that, if adopted in their current
form, would substantially alter how stocks are traded in the United
States. While we and other market participants have the opportunity
to submit comments on the proposal, and we will adjust our business
model in accordance with any new SEC regulations implemented, these
changes regarding trading may negatively impact our business and
revenue.
With respect to our regulated businesses, our business model can be
severely impacted by policy decisions. In May 2020, the SEC adopted
an order 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. In 2022, the U.S. Court of Appeals for District of Columbia
Circuit vacated portions of the governance order but upheld the
remainder of the SEC’s 2022 actions. If the remaining aspects of
the order and rule are fully implemented, they may adversely affect
our revenues. The timing for the implementation is currently
unknown, and we believe they may take two or more years to fully
implement.
If the remaining aspects of the order and rule 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 for
professional uses 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 rules and regulations
promulgated by regulatory agencies.
We face risks related to compliance with economic sanctions
(including those administered by the U.S. Office of Foreign Assets
Control), export controls, corruption (including the U.S. Foreign
Corrupt Practices Act) and money laundering. While we maintain
compliance programs to prevent and detect potential violations,
such programs cannot completely eliminate the risk of
non-compliance. Because anti-financial crime management solutions
comprises one of our primary business offerings, a significant
compliance event involving one of these areas could more negatively
impact our business than a comparable business without this service
offering.
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 business,
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. 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.
Laws and regulations regarding security and safeguarding of our
systems and services, protection of sensitive customer data and the
handling of personal data and information may affect our services
or result in increased costs, legal claims or fines against
us.
Our business operates certain systems that may be considered
“critical infrastructure” under certain regulations and licenses or
sells certain systems or services to customers that are used by
customers to fulfill certain core business requirements or process
certain sensitive data. In response to recent events involving
cybersecurity breaches, including ransomware
attacks, regulatory authorities are engaging in rulemaking to
heighten cybersecurity requirements and obligations to notify
authorities and/or take other action in response to a suspected
incident. Such regulations may impact the requirements and cost of
delivery for impacted systems and services and, in the event of an
incident, increase the cost and complexity of our response and the
potential financial and reputation impact from fines or private
litigation. New regulations may also impact customer decision
making and conditions on contracting for our services.
Our businesses and internal operations rely 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 processing, including, but not limited
to, collection, storage, handling, use, disclosure, transfer and
security, of personal data continue to evolve and 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 and United Kingdom
General Data Protection Regulation, or GDPR, the California Privacy
Rights Act, or CPRA, and other comparable laws and regulations
adopted globally and within the United States and Canada can apply
to our processing of their residents' personal data by Nasdaq legal
entities regardless of the location of such entities; such laws may
also require our customers located in such jurisdictions to
contractually obligate Nasdaq to comply.
In addition to directly applying to certain Nasdaq business
activities, these laws and industry-specific regulations, such as
the Health Insurance Portability and Accountability Act (HIPAA) and
the Gramm Leach Bliley Act, impact many of our customers, which may
affect their decisions to purchase our services. Under certain laws
and regulations, as a supplier to such customers, regulators may
engage in direct enforcement actions or seek to impose liability on
Nasdaq if we do not comply with them. Our efforts to comply with
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. The enactment of more
restrictive laws, rules or regulations, future enforcement actions
or investigations, or the creation of new rights to pursue damages
could impact us through increased costs or restrictions on our
business, and noncompliance could result in regulatory penalties
and significant legal liability.
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
A downgrade of 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, 2022 was $5.4 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 and reliance on the capital markets
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 repayment of 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 meet our
current capital requirements from internally 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. Rising interest
rates could adversely affect our ability to pursue new financing
opportunities, and it may be more expensive for us to issue new
debt securities. 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, engage in
strategic 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.
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;
•the
accuracy of our financial statements, other financial and
statistical information or ESG-related disclosures;
•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, Corporate Services and marketplace technology
products, the accuracy of the quote and trade information provided
by our Data & Listing Services 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 over
financial reporting, including any failures in
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 employees or other
persons formerly or currently 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. This
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 or switch to a different
exchange. Reputational damage may also reduce trading volumes or
values on our exchanges or cause us to lose customers in our Data
& Listing Services, Index, Workflow & Insights or
Marketplace 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.
We generally mutually agree with our customers on the duration,
budget and costs associated with the implementation of certain of
our products, particularly our market technology large-scale market
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 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
satisfaction, harm to our reputation, and opportunities for
competitors to displace us, each of which could have an adverse
effect on our reputation, business and results of
operations.
Our reputation or business could be negatively impacted by ESG
matters and our reporting of such matters.
We communicate certain ESG-related initiatives, goals, and/or
commitments regarding environmental matters, diversity, vendors and
suppliers and other matters in our annual Sustainability Report,
Task Force on Climate-related Financial Disclosures, or TCFD,
Report, on our website, in our filings with the SEC, and elsewhere.
These initiatives, goals, or commitments could be difficult to
achieve and costly to implement. For example, in November 2022, we
announced our commitment to achieve net-zero for Scope 3 greenhouse
gas emissions by 2050, the achievement of which relies, in large
part, on the accuracy of our estimates and assumptions, on the
engagement of our value chain to reduce emissions and set their
net-zero targets, and procuring renewable energy for our real
estate and data center portfolios. We could fail to achieve, or be
perceived to fail to achieve, this or other ESG-related
initiatives, goals, or commitments. In addition, we could be
criticized for the timing, scope or nature of these initiatives,
goals, or commitments, or for any revisions to them. We could be
subject to litigation or regulatory enforcement actions regarding
the accuracy, adequacy, or completeness of our ESG-related
disclosures. Our actual or perceived failure to achieve our
ESG-related initiatives, goals, or commitments could negatively
impact our reputation or otherwise materially harm our
business.
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.
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 jurisdictions. However, effective
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.
GENERAL RISK FACTORS
We are a holding company that depends on cash flow from our
subsidiaries to meet our obligations, and any 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 that can be 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, or if regulators or counterparties
require us to increase capital deployed in certain of our regulated
subsidiaries, 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;
•inflation;
•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;
and
•the
perceived attractiveness of the U.S. or European capital
markets.
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 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 revenue. If actual revenue is below management’s
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.
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 in processes or reporting due 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.
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,
operating results and financial condition.
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 regulators, 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 market conditions, including
trading volatility beyond historical levels, any of which could
adversely affect our business, reputation, financial condition and
operating results.
Additionally, if the SEC or other federal regulatory agencies
impose comprehensive reporting obligations regarding climate change
on public companies, there may be a decrease in new listings or an
increase in delistings of our listed companies, which may adversely
affect our business, financial condition and operating
results.
Such new regulations, whether in the U.S. or in other countries in
which we operate, could also cause us to incur additional
compliance and reporting costs.
Our businesses operate in various international markets, including
certain emerging markets that are subject to greater political,
economic and social uncertainties than developed
countries.
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 to the
risk inherent in the 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
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 east coast of the U.S., 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 against 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
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,
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.
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 have reopened all our
global offices and our employees have transitioned to a hybrid work
environment. 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
For a description of our legal proceedings, if any, see “Legal and
Regulatory Matters - Litigation,” of Note 18, “Commitments,
Contingencies and Guarantees,” to the consolidated financial
statements, which is incorporated herein by reference.
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 13, 2023, we had approximately
209 holders of record of our common stock.
Issuer Purchases of Equity Securities
Share Repurchase Program
See “Share Repurchase Program,” of Note 12, “Nasdaq Stockholders’
Equity,” to the consolidated financial statements for further
discussion of our share repurchase program.
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, 2022:
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Period |
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(a)
Total Number of Shares Purchased |
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(b) Average Price Paid Per Share |
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(c)
Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs |
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(d) Maximum Dollar Value of Shares that May Yet Be Purchased Under
the Plans or Programs (in millions) |
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October 2022 |
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Share repurchase program |
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— |
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$ |
— |
|
|
— |
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$ |
293 |
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Employee transactions |
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27,913 |
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$ |
59.76 |
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N/A |
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N/A |
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November 2022 |
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|
Share repurchase program |
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— |
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$ |
— |
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— |
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$ |
293 |
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Employee transactions |
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231 |
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$ |
66.52 |
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N/A |
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N/A |
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December 2022 |
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Share repurchase program |
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— |
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$ |
— |
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— |
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$ |
650 |
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Employee transactions |
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56,480 |
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$ |
61.76 |
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N/A |
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N/A |
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Total Quarter Ended December 31, 2022 |
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Share repurchase program |
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— |
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$ |
— |
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— |
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$ |
650 |
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Employee transactions |
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84,624 |
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$ |
61.11 |
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N/A |
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N/A |
In the preceding table:
•N/A
- Not applicable.
•See
“Share Repurchase Program,” of Note 12, “Nasdaq Stockholders’
Equity,” to the consolidated financial statements for further
discussion of our share repurchase program.
•Employee
transactions represents shares surrendered to us to satisfy tax
withholding obligations arising from the vesting of restricted
stock and PSUs previously issued to employees.
PERFORMANCE GRAPH
The following performance graph and related information shall not
be deemed “filed” for purposes of Section 18 of the Exchange Act or
incorporated by reference into any of our other filings under the
Securities Act or the Exchange Act, except as shall be expressly
set forth by specific reference in such filing.
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:
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Peer Group
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•
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ASX Limited |
• |
Deutsche Börse AG |
• |
LSE |
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• |
B3 S.A.
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• |
Euronext N.V. |
• |
Singapore Exchange Limited |
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• |
Bolsas Mexicana de Valores, S.A.B. de C.V. |
• |
Hong Kong Exchanges and Clearing Limited |
• |
TMX Group Limited |
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• |
Cboe |
• |
ICE |
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• |
CME Group Inc. |
• |
Japan Exchange Group, Inc. |
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The figures represented below assume an initial investment of $100
in the common stock or index at the closing price on
December 31, 2017 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 12/31/2017 in stock or index, including
reinvestment of dividends.
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Fiscal Year Ended December 31, |
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2017 |
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2018 |
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2019 |
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2020 |
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2021 |
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2022 |
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Nasdaq, Inc. |
$ |
100 |
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$ |
108 |
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$ |
145 |
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$ |
183 |
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$ |
293 |
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$ |
260 |
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Nasdaq Composite Index |
100 |
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97 |
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133 |
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192 |
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235 |
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159 |
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S&P 500 |
100 |
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96 |
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126 |
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149 |
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192 |
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157 |
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Peer Group |
100 |
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112 |
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149 |
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186 |
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208 |
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184 |
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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, 2022 and December
31, 2021. Discussion of fiscal year 2021 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,
2021 and December 31, 2020 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, 2021, which was previously filed
with the SEC on February 23, 2022, with the exception of certain
discussions impacted by the new corporate structure.
Business Segments
In September 2022, we announced a new organizational structure
which aligns our businesses more closely with the foundational
shifts that are driving the evolution of the global financial
system. The new corporate structure includes three business
segments: Market Platforms, Capital Access Platforms and
Anti-Financial Crime. All prior periods have been restated to
conform to the current period presentation. 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 three separate segments. See “Part I,
Item 1. Business” for additional discussion on recent developments
and highlights.
Nasdaq's Operating Results
The following tables summarize our financial performance for the
year ended December 31, 2022 when compared to the same period in
2021 and for the year ended December 31, 2021 when compared to the
same period in 2020. The comparability of our results of operations
between reported periods is impacted by the acquisition of Verafin
in February 2021. See “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.
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|
Year Ended December 31, |
|
Percentage Change |
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
|
(in millions, except per share amounts) |
|
|
|
|
Revenues less transaction-based expenses |
$ |
3,582 |
|
$ |
3,420 |
|
$ |
2,903 |
|
|
4.7 |
% |
17.8 |
% |
|
Operating expenses |
2,018 |
|
1,979 |
|
1,669 |
|
|
2.0 |
% |
18.6 |
% |
|
Operating income |
1,564 |
|
1,441 |
|
1,234 |
|
|
8.5 |
% |
16.8 |
% |
|
Net income attributable to Nasdaq |
$ |
1,125 |
|
$ |
1,187 |
|
$ |
933 |
|
|
(5.2) |
% |
27.2 |
% |
|
Diluted earnings per share |
$ |
2.26 |
|
$ |
2.35 |
|
$ |
1.86 |
|
|
(3.8) |
% |
26.3 |
% |
|
Cash dividends declared per common share |
$ |
0.78 |
|
$ |
0.70 |
|
$ |
0.65 |
|
|
11.4 |
% |
7.7 |
% |
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.”
The following chart summarizes our ARR (in millions):
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. Also
excluded are contracts that are signed but not yet commenced. ARR
is 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:
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▪
|
|
Anti-Financial Crime support and SaaS subscription
contracts
|
|
▪
|
|
Proprietary market data subscriptions and annual listing fees
within our Data & Listing Services business, index data
subscriptions and guaranteed minimum on futures contracts within
our Index business and subscription contracts under our Workflow
& Insights business.
|
|
▪
|
|
Market technology support and SaaS subscription contracts as well
as trade management services contracts, excluding one-time service
requests.
|
The following chart summarizes our quarterly annualized SaaS
revenues for our Solutions Businesses, which are comprised of the
Capital Access Platforms and Anti-Financial Crime segments and the
Marketplace Technology business within the Market Platforms
segment, for the three months ended December 31, 2022, 2021 and
2020 (in millions):
Segment Operating Results
The following table presents our revenues by segment,
transaction-based expenses for our Market Platforms segment and
total revenues less transaction-based expenses:
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|
Year Ended December 31, |
|
Percentage Change |
|
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
|
|
(in millions) |
|
|
|
|
Market Platforms |
|
$ |
4,225 |
|
$ |
4,048 |
|
$ |
4,179 |
|
|
4.4 |
% |
(3.1) |
% |
|
Capital Access Platforms |
|
1,684 |
|
1,568 |
|
1,287 |
|
|
7.4 |
% |
21.8 |
% |
|
Anti-Financial Crime |
|
306 |
|
231 |
|
116 |
|
|
32.5 |
% |
99.1 |
% |
|
Other revenues |
|
11 |
|
39 |
|
43 |
|
|
(71.8) |
% |
(9.3) |
% |
|
Total revenues |
|
6,226 |
|
5,886 |
|
5,625 |
|
|
5.8 |
% |
4.6 |
% |
|
Transaction rebates |
|
(2,092) |
|
(2,168) |
|
(2,028) |
|
|
(3.5) |
% |
6.9 |
% |
|
Brokerage, clearance and exchange fees |
|
(552) |
|
(298) |
|
(694) |
|
|
85.2 |
% |
(57.1) |
% |
|
Total revenues less transaction-based expenses |
|
$ |
3,582 |
|
$ |
3,420 |
|
$ |
2,903 |
|
|
4.7 |
% |
17.8 |
% |
The following charts present our Market Platforms, Capital Access
Platforms and Anti-Financial Crime segments as a percentage of our
total revenues, less transaction-based expenses.
Percentage of Revenues Less Transaction-based Expenses by Segment
for the:
MARKET PLATFORMS
The following tables present revenues from our Market Platforms
segment:
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|
Year Ended December 31, |
|
Percentage Change |
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
|
(in millions) |
|
|
|
|
Trading Services |
$ |
3,663 |
|
$ |
3,503 |
|
$ |
3,654 |
|
|
4.6 |
% |
(4.1) |
% |
|
Marketplace Technology |
562 |
|
545 |
|
525 |
|
|
3.1 |
% |
3.8 |
% |
|
Total Market Platforms |
$ |
4,225 |
|
$ |
4,048 |
|
$ |
4,179 |
|
|
4.4 |
% |
(3.1) |
% |
|
Transaction-based expenses: |
|
|
|
|
|
Transaction rebates |
(2,092) |
|
(2,168) |
|
(2,028) |
|
|
(3.5) |
% |
6.9 |
% |
|
Brokerage, clearance and exchange fees
|
(552) |
|
(298) |
|
(694) |
|
|
85.2 |
% |
(57.1) |
% |
|
Total Market Platforms, net |
$ |
1,581 |
|
$ |
1,582 |
|
$ |
1,457 |
|
|
(0.1) |
% |
8.6 |
% |
Trading Services
Our Trading Services business includes equity derivatives trading,
cash equity trading, Nordic fixed income trading & clearing,
U.S. Tape plans and other revenues. The following tables present
net revenues by product from our Trading Services
business:
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|
Year Ended December 31, |
|
Percentage Change |
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
|
(in millions) |
|
|
|
|
U.S. Equity Derivative Trading |
$ |
371 |
|
$ |
343 |
|
$ |
287 |
|
|
8.2 |
% |
19.5 |
% |
|
Cash Equity Trading |
397 |
|
429 |
|
381 |
|
|
(7.5) |
% |
12.6 |
% |
|
U.S. Tape plans |
149 |
|
155 |
|
162 |
|
|
(3.9) |
% |
(4.3) |
% |
|
Other |
102 |
|
110 |
|
102 |
|
|
(7.3) |
% |
7.8 |
% |
|
Trading Services, net |
$ |
1,019 |
|
$ |
1,037 |
|
$ |
932 |
|
|
(1.7) |
% |
11.3 |
% |
In the table above, Other includes Nordic fixed income trading
& clearing, Nordic derivatives, Nordic commodities, and
Canadian cash equities trading.
U.S. Equity Derivative Trading
The following tables present total revenues, transaction-based
expenses, and total revenues less transaction-based expenses as
well as key drivers from our U.S. Equity Derivative Trading
business:
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|
Year Ended December 31, |
|
Percentage Change |
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
|
(in millions) |
|
|
|
|
U.S. Equity Derivative Trading Revenues |
$ |
1,252 |
|
$ |
1,367 |
|
$ |
1,122 |
|
|
(8.4) |
% |
21.8 |
% |
|
Section 31 fees
|
89 |
|
32 |
|
69 |
|
|
178.1 |
% |
(53.6) |
% |
|
Transaction-based expenses: |
|
|
|
|
|
Transaction rebates |
(878) |
|
(1,018) |
|
(828) |
|
|
(13.8) |
% |
22.9 |
% |
|
Section 31 fees
|
(89) |
|
(32) |
|
(69) |
|
|
178.1 |
% |
(53.6) |
% |
|
Brokerage and clearance fees |
(3) |
|
(6) |
|
(7) |
|
|
(50.0) |
% |
(14.3) |
% |
|
U.S. Equity derivative trading revenues, net |
$ |
371 |
|
$ |
343 |
|
$ |
287 |
|
|
8.2 |
% |
19.5 |
% |
Section 31 fees are recorded as equity derivative and cash equity
derivative trading revenues with a corresponding amount recorded in
transaction-based expenses. 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 traded. The SEC implemented a fee increase in May 2022 and a
decrease in February 2021. Since the amount recorded in revenues is
equal to the amount recorded as Section 31 fees, there is no impact
on our net revenues.
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Year Ended December 31, |
|
|
2022 |
|
2021 |
|
2020 |
|
U.S. equity options |
|
|
|
|
|
|
Total industry average daily volume (in millions) |
38.2 |
|
|
37.2 |
|
|
27.7 |
|
|
Nasdaq PHLX matched market share |
11.6 |
% |
|
12.4 |
% |
|
12.7 |
% |
|
The Nasdaq Options Market matched market share |
8.0 |
% |
|
8.1 |
% |
|
9.8 |
% |
|
Nasdaq BX Options matched market share |
2.8 |
% |
|
1.4 |
% |
|
0.2 |
% |
|
Nasdaq ISE Options matched market share |
5.7 |
% |
|
6.6 |
% |
|
7.8 |
% |
|
Nasdaq GEMX Options matched market share |
2.3 |
% |
|
4.3 |
% |
|
5.6 |
% |
|
Nasdaq MRX Options matched market share |
1.6 |
% |
|
1.6 |
% |
|
0.7 |
% |
|
Total matched market share executed on Nasdaq’s
exchanges |
32.0 |
% |
|
34.4 |
% |
|
36.8 |
% |
|
|
|
|
|
|
|
|
|
U.S. equity derivative trading revenues decreased in 2022 compared
with 2021 primarily due to lower overall matched market share
executed on Nasdaq's exchanges and lower gross capture rate,
partially offset by higher industry trading volumes.
U.S. equity derivative trading revenues less transaction-based
expenses increased in 2022 compared with 2021 primarily due to
higher capture rates and higher industry trading volumes, and lower
transaction rebates, partially offset by lower overall matched
market share executed on Nasdaq's exchanges.
U.S. equity derivative trading and clearing revenues and U.S.
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.
Transaction rebates, in which we credit a portion of the execution
charge to the market participant, decreased in 2022 compared with
2021 primarily due to lower overall U.S. matched market share
executed on Nasdaq's exchanges and lower rebate capture rate,
partially offset by higher industry trading volumes. Transaction
rebates 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 rebate capture rate.
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:
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|
Year Ended December 31, |
|
Percentage Change |
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
(in millions) |
|
|
|
|
Cash Equity Trading Revenues |
$ |
1,605 |
|
$ |
1,578 |
|
$ |
1,582 |
|
|
1.7 |
% |
(0.3) |
% |
|
Section 31 fees
|
436 |
|
229 |
|
586 |
|
|
90.4 |
% |
(60.9) |
% |
|
Transaction-based expenses: |
|
|
|
|
|
|
|
Transaction rebates |
(1,184) |
|
(1,118) |
|
(1,169) |
|
|
5.9 |
% |
(4.4) |
% |
|
Section 31 fees
|
(436) |
|
(229) |
|
(586) |
|
|
90.4 |
% |
(60.9) |
% |
|
Brokerage and clearance fees |
(24) |
|
(31) |
|
(32) |
|
|
(22.6) |
% |
(3.1) |
% |
|
Cash equity trading revenues, net |
$ |
397 |
|
$ |
429 |
|
$ |
381 |
|
|
(7.5) |
% |
12.6 |
% |
See discussion in "U.S. Equity Derivative Trading" for an
explanation of Section 31 fees and the period over period
analysis.
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|
Year Ended December 31, |
|
|
2022 |
|
2021 |
|
2020 |
|
Total U.S.-listed securities |
|
|
|
|
|
|
Total industry average daily share volume (in billions) |
11.9 |
|
|
11.4 |
|
|
10.9 |
|
|
Matched share volume (in billions) |
522.8 |
|
|
491.9 |
|
|
508.3 |
|
|
The Nasdaq Stock Market matched market share |
16.2 |
% |
|
15.8 |
% |
|
16.8 |
% |
|
Nasdaq BX matched market share |
0.5 |
% |
|
0.6 |
% |
|
0.9 |
% |
|
Nasdaq PSX matched market share |
0.8 |
% |
|
0.7 |
% |
|
0.6 |
% |
|
Total matched market share executed on Nasdaq’s
exchanges |
17.5 |
% |
|
17.1 |
% |
|
18.3 |
% |
|
Market share reported to the FINRA/Nasdaq Trade Reporting
Facility |
35.2 |
% |
|
34.9 |
% |
|
31.8 |
% |
|
Total market share |
52.7 |
% |
|
52.0 |
% |
|
50.1 |
% |
|
Nasdaq Nordic and Nasdaq Baltic securities |
|
|
|
Average daily number of equity trades executed on Nasdaq’s
exchanges |
908,813 |
|
1,036,523 |
|
933,822 |
|
|
Total average daily value of shares traded (in
billions) |
$ |
5.4 |
|
|
$ |
6.4 |
|
|
$ |
5.6 |
|
|
Total market share executed on Nasdaq’s exchanges |
71.5 |
% |
|
76.9 |
% |
|
78.1 |
% |
In the tables 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 increased in 2022 compared with 2021
primarily due to higher U.S. industry trading volumes and higher
overall U.S. matched market share executed on Nasdaq's exchanges,
partially offset by an unfavorable impact of changes in foreign
exchange rates of $16 million, lower U.S. gross capture rate, lower
European trading volumes and lower European market share executed
on Nasdaq's exchanges.
Cash equity trading revenues less transaction-based expenses
decreased in 2022 compared with 2021 primarily due to lower capture
rate, the unfavorable impact of changes in foreign exchange rates
of $16 million, lower European trading volumes and lower European
market share executed on Nasdaq's exchanges, partially offset by
higher U.S. industry trading volumes.
Cash equity trading revenues decreased in 2021 compared with 2020
primarily due to lower overall U.S. matched market share executed
on Nasdaq's exchanges, partially offset by higher U.S. gross
capture rates, higher U.S. industry trading volumes, 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.
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.
Transaction rebates increased in 2022 compared with 2021. 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 increase was primarily due to higher U.S. industry
volumes and higher U.S. matched market share executed on Nasdaq's
exchanges, partially offset by lower rebate capture rate.
Transaction rebates decreased in 2021 compared with 2020, 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.
U.S. Tape Plans
The following tables present revenues from our U.S. Tape plans
business:
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|
Year Ended December 31, |
|
Percentage Change |
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
|
(in millions) |
|
|
|
|
U.S. Tape plans |
$ |
149 |
|
$ |
155 |
|
$ |
162 |
|
|
(3.9) |
% |
(4.3) |
% |
U.S. Tape plans revenues decreased in 2022 compared with in 2021
and 2021 compared with 2020 primarily due to lower market share and
usage.
Other
Other includes Nordic fixed income trading and clearing,
Nordic derivatives, Nordic commodities and Canadian cash equities
trading. The following tables present revenue and key driver from
our Other business:
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|
Year Ended December 31, |
|
Percentage Change |
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
|
(in millions) |
|
|
|
|
Other |
$ |
102 |
|
$ |
110 |
|
$ |
102 |
|
|
(7.3) |
% |
7.8 |
% |
In the table above, other includes transaction rebates of $30
million, $32 million and $31 million in
2022, 2021 and 2020 respectively.
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Year Ended December 31, |
|
|
2022 |
|
2021 |
|
2020 |
|
Nasdaq Nordic and Nasdaq Baltic options and futures |
|
|
|
Total average daily volume of options and futures
contracts |
296,626 |
|
287,182 |
|
320,204 |
|
In the tables 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.
Other revenues decreased in 2022 compared with 2021 primarily due
to the unfavorable impact of changes in foreign exchange rates of
$14 million and lower commodities products revenues, partially
offset by higher European trading volumes and higher collateral
management services revenues. Other revenues increased in 2021
compared with 2020 primarily due to the favorable impact of changes
in foreign exchange rates of $5 million, higher capture rate and
higher European clearing products revenues, partially offset by
lower European trading volumes.
Marketplace Technology
Marketplace Technology includes our trade management services and
market technology businesses.
The following tables present revenues and key drivers from our
Marketplace Technology business:
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|
Year Ended December 31, |
|
Percentage Change |
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketplace Technology |
$ |
562 |
|
$ |
545 |
|
$ |
525 |
|
|
3.1 |
% |
3.8 |
% |
|
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|
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|
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|
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|
|
|
As of or
Three Months Ended December 31, |
|
|
2022 |
|
2021 |
|
2020 |
|
|
(in millions) |
|
ARR |
|
$ |
503 |
|
|
$ |
479 |
|
|
$ |
468 |
|
|
Quarterly annualized SaaS revenues |
|
39 |
|
|
31 |
|
|
27 |
|
|
Order intake |
|
$ |
264 |
|
|
$ |
304 |
|
|
$ |
167 |
|
In the table above, order intake is for our market technology
business and represents the total contract value of orders signed
during the period.
Marketplace technology revenues increased in 2022 compared with
2021 and 2021 compared with 2020 primarily due to higher trade
management services revenues associated with increased demand for
connectivity services, partially offset by lower market technology
revenues. The decrease in market technology revenues in 2022 was
due to the successful completion of long-term contracts in 2021 and
the unfavorable impact of changes in foreign exchange rates of $10
million, partially offset by growth in SaaS-based revenues. The
decrease in market technology revenues in 2021 was primarily due to
lower professional services revenues, partially offset by an
increase in SaaS revenues.
CAPITAL ACCESS PLATFORMS
The following tables present revenues and key drivers from our
Capital Access Platforms segment:
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|
Year Ended December 31, |
|
Percentage Change |
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
|
(in millions) |
|
|
|
|
Data & Listing Services |
$ |
729 |
|
$ |
680 |
|
$ |
574 |
|
|
7.2 |
% |
18.5 |
% |
|
Index |
486 |
|
459 |
|
324 |
|
|
5.9 |
% |
41.7 |
% |
|
Workflow & Insights |
469 |
|
429 |
|
389 |
|
|
9.3 |
% |
10.3 |
% |
|
Total Capital Access Platforms |
$ |
1,684 |
|
$ |
1,568 |
|
$ |
1,287 |
|
|
7.4 |
% |
21.8 |
% |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
As of or
Three Months Ended December 31, |
|
2022 |
|
2021 |
|
2020 |
|
(in millions) |
|
ARR |
$ |
1,192 |
|
|
$ |
1,113 |
|
|
$ |
986 |
|
|
Quarterly annualized SaaS revenues |
$ |
388 |
|
|
$ |
356 |
|
|
$ |
323 |
|
Data & Listing Services Revenues
The following tables present key drivers from our Data &
Listing Services business:
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|
|
Year Ended December 31, |
|
|
2022 |
|
2021 |
|
2020 |
|
IPOs |
|
|
|
|
|
|
|
The Nasdaq Stock Market |
|
161 |
|
|
752 |
|
|
316 |
|
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic |
|
38 |
|
|
174 |
|
|
45 |
|
Total new listings |
|
|
|
|
|
|
|
The Nasdaq Stock Market |
|
366 |
|
|
1,000 |
|
|
454 |
|
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic |
|
63 |
|
|
207 |
|
|
67 |
|
Number of listed companies |
|
|
|
|
|
|
|
The Nasdaq Stock Market |
|
4,230 |
|
|
4,178 |
|
|
3,392 |
|
|
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic |
|
1,251 |
|
|
1,235 |
|
|
1,071 |
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|
In the tables above:
•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, 2022, 2021 and 2020, IPOs included
74, 433 and 132 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, 2022, 2021 and 2020 included 528, 441 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.
Data & Listing Services revenues increased in 2022 compared
with 2021 and 2021 compared with 2020. The increase in 2022 was
primarily due to an increase in annual listing fees, due to an
increase in the overall number of listed companies, and an increase
in proprietary data revenues driven by higher international demand,
partially offset by lower initial listings fees and the unfavorable
impact of changes in foreign exchange rates of $21 million. The
increase in 2021 was primarily due to an increase in annual and
initial listing fees due to the increase in the overall number of
listed companies and an increase in proprietary data revenues
driven by higher international demand.
Index Revenues
The following tables present key drivers from our Index
business:
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|
|
As of or
Three Months Ended December 31, |
|
|
2022 |
|
2021 |
|
2020 |
|
Number of licensed ETPs |
|
379 |
|
|
362 |
|
|
339 |
|
TTM change in period end ETP AUM tracking Nasdaq indexes (in
billions) |
|
|
|
Beginning balance |
|
$ |
424 |
|
|
$ |
359 |
|
|
$ |
233 |
|
|
Net (depreciation) appreciation |
|
(142) |
|
|
83 |
|
|
80 |
|
|
Net impact of ETP sponsor switches |
|
(1) |
|
|
(92) |
|
|
— |
|
|
Net inflows |
|
34 |
|
|
74 |
|
|
46 |
|
|
Ending balance |
|
$ |
315 |
|
|
$ |
424 |
|
|
$ |
359 |
|
|
Quarterly average ETP AUM tracking Nasdaq indexes (in
billions) |
|
$ |
326 |
|
|
$ |
400 |
|
|
$ |
334 |
|
|
|
|
|
|
|
|
|
Quarterly annualized SaaS revenues (in millions) |
|
$ |
220 |
|
|
$ |
208 |
|
|
$ |
179 |
|
In the table above, TTM represents trailing twelve
months.
Index revenues increased in 2022 compared with 2021 and 2021
compared with 2020. The increase in 2022 was primarily due to
higher licensing revenues from futures trading linked to the
Nasdaq-100 Index, partially offset by lower AUM in ETPs linked to
Nasdaq indexes. The increase in 2021 was 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.
Workflow & Insights Revenues
Workflow & Insights revenues increased in 2022 compared with
2021 and 2021 compared with 2020. The increase in both periods was
due to an increase in both analytics and corporate solutions
revenues. The increase in analytics revenues for both periods was
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. The increase in corporate
solutions for both periods was due to higher adoption of our
investor relations intelligence products as well as new ESG
solutions, with ESG solutions being the primary driver of the
increase in 2022.
ANTI-FINANCIAL CRIME
The following tables present revenues and key drivers from our
Anti-Financial Crime segment:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
Percentage Change |
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
(in millions) |
|
|
|
|
Anti-Financial Crime |
$ |
306 |
|
$ |
231 |
|
$ |
116 |
|
|
32.5 |
% |
99.1 |
% |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
As of or
Three Months Ended December 31, |
|
|
|
|
2022 |
|
2021 |
|
2020 |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
ARR |
|
$ |
312 |
|
|
$ |
269 |
|
|
$ |
111 |
|
|
|
|
Signed ARR |
|
338 |
|
|
288 |
|
|
— |
|
|
|
|
Quarterly annualized SaaS revenues |
|
298 |
|
|
253 |
|
|
97 |
|
|
|
In the table above, signed ARR reflects ARR recognized as revenue
in the current period as well as ARR for new contracts signed but
not yet commenced. We began tracking signed ARR in 2021 following
our acquisition of Verafin, and thus there is no available metric
for 2020.
Anti-financial crime revenues increased in 2022 compared with 2021
primarily due to an increase in demand for fraud detection and
anti-money laundering solutions and strong performance by our
surveillance business in new sales to existing clients and new
customer acquisitions. The increase was also driven by a $28
million purchase price adjustment on Verafin deferred revenue in
2021 and the inclusion of a full year of Verafin revenues in 2022.
The increase in 2021 compared with 2020 was due to the inclusion of
revenues from our acquisition of Verafin and growth in our
surveillance solutions.
OTHER REVENUES
Other revenues include revenues related to our Nordic broker
services business, for which we completed the wind-down in June
2022, as well as revenues associated with our U.S. Fixed Income
business, which was sold in June 2021. Prior to the closing of the
transaction, these revenues were included in our Market Platforms
and Capital Access Platforms segments. See “2021 Divestiture,” of
Note 4, “Acquisitions and Divestiture,” to the consolidated
financial statements for further discussion of this divestiture.
Additionally, for the years ended December 31, 2021 and 2020, other
revenues 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 third-party financial institutions. Prior to July
2021, these revenues were included in our Capital Access Platforms
segment. For the twelve months ended December 31, 2022, other
revenues also include a transitional services agreement associated
with a divested business.
EXPENSES
Operating Expenses
The following table presents our operating expenses:
|
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|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
Percentage Change |
|
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
|
(in millions) |
|
|
|
|
Compensation and benefits |
$ |
1,003 |
|
$ |
938 |
|
$ |
786 |
|
|
6.9 |
% |
19.3 |
% |
|
Professional and contract services |
140 |
|
144 |
|
137 |
|
|
(2.8) |
% |
5.1 |
% |
|
Computer operations and data communications |
207 |
|
186 |
|
151 |
|
|
11.3 |
% |
23.2 |
% |
|
Occupancy |
104 |
|
109 |
|
107 |
|
|
(4.6) |
% |
1.9 |
% |
|
General, administrative and other |
125 |
|
85 |
|
142 |
|
|
47.1 |
% |
(40.1) |
% |
|
Marketing and advertising |
51 |
|
57 |
|
39 |
|
|
(10.5) |
% |
46.2 |
% |
|
Depreciation and amortization |
258 |
|
278 |
|
202 |
|
|
(7.2) |
% |
37.6 |
% |
|
Regulatory |
33 |
|
64 |
|
24 |
|
|
(48.4) |
% |
166.7 |
% |
|
Merger and strategic initiatives |
82 |
|
87 |
|
33 |
|
|
(5.7) |
% |
163.6 |
% |
|
Restructuring charges |
15 |
|
31 |
|
48 |
|
|
(51.6) |
% |
(35.4) |
% |
|
Total operating expenses |
$ |
2,018 |
|
$ |
1,979 |
|
$ |
1,669 |
|
|
2.0 |
% |
18.6 |
% |
The increase in compensation and benefits expense in 2022 compared
with 2021 was primarily driven by continued investment in employees
to drive growth and inflationary pressures, partially offset by a
favorable impact from foreign exchange rates of $42
million.
Headcount, including employees of non-wholly owned consolidated
subsidiaries, increased to 6,377 employees as of December 31, 2022
from 5,814 as of December 31, 2021 reflecting growth across each of
our three segments.
Professional and contract services expense decreased in 2022
compared with 2021 primarily due to a favorable impact from foreign
exchange rates and a decrease in legal fees, partially offset by an
increase in consulting costs.
Computer operations and data communications expense increased in
2022 compared with 2021 primarily due to higher software costs and
higher costs related to new cloud initiatives.
Occupancy expense decreased in 2022 compared with 2021 primarily
due to a favorable impact from foreign exchange rates.
General, administrative and other expense increased in 2022
compared with 2021 primarily due to an accrual related to a legal
matter and higher travel costs.
Marketing and advertising expense decreased in 2022 compared with
2021, reflecting lower IPO activity.
Depreciation and amortization expense decreased in 2022 compared
with 2021 due to 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 and a favorable impact from foreign exchange
rates.
Regulatory expense decreased in 2022 compared with 2021 due to a
charge in 2021 associated with an administrative fine issued by the
SFSA. See “Nasdaq Commodities Clearing Default,” of Note 15,
“Clearing Operations,” to the consolidated financial statements for
further discussion of the SFSA administrative fine.
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 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 2022 divisional alignment
program and 2019 restructuring plans and charges associated with
these plans.
Non-operating Income and Expenses
The following table presents our non-operating income and
expenses:
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Year Ended December 31, |
|
Percentage Change |
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|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
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|
(in millions) |
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|
|
Interest income |
$ |
7 |
|
$ |
1 |
|
$ |
4 |
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|
600.0 |
% |
(75.0) |
% |
|
Interest expense |
(129) |
|
(125) |
|
(101) |
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|
3.2 |
% |
23.8 |
% |
|
Net interest expense |
(122) |
|
(124) |
|
(97) |
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|
(1.6) |
% |
27.8 |
% |
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Net gain on divestiture of business |
— |
|
84 |
|
— |
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(100.0) |
% |
N/M |
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Other income |
2 |
|
81 |
|
5 |
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|
(97.5) |
% |
1,520.0 |
% |
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Net income from unconsolidated investees |
31 |
|
52 |
|
70 |
|
|
(40.4) |
% |
(25.7) |
% |
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Total non-operating income (expenses) |
$ |
(89) |
|
$ |
93 |
|
$ |
(22) |
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|
(195.7) |
% |
(522.7) |
% |
_______
N/M Not meaningful.
The following table presents our interest expense:
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Year Ended December 31, |
|
Percentage Change |
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|
2022 |
|
2021 |
|
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
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(in millions) |
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|
Interest expense on debt |
$ |
120 |
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|
$ |
115 |
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$ |
93 |
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|
4.3 |
% |
23.7 |
% |
|
Accretion of debt issuance costs and debt discount |
7 |
|
|
7 |
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|
6 |
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|
— |
% |
16.7 |
% |
|
Other fees
|
2 |
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|
3 |
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|
2 |
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|
(33.3) |
% |
50.0 |
% |
|
Interest expense |
$ |
129 |
|
|
$ |
125 |
|
|
$ |
101 |
|
|
3.2 |
% |
23.8 |
% |
Interest income increased in 2022 compared with 2021 primarily due
to an increase in interest rates.
Interest expense increased in 2022 compared with 2021 primarily due
to an increase in interest rates related to borrowings under our
commercial paper program.
The net gain on divestiture of business 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 decreased in 2022 compared with 2021 primarily due to
gains from strategic investments related to our corporate venture
program in the prior year.
Net income from unconsolidated investees decreased in 2022 compared
with 2021 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:
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Year Ended December 31, |
|
Percentage Change |
|
2022 |
2021 |
2020 |
|
2022 vs. 2021 |
2021 vs. 2020 |
|
(in millions) |
|
|
|
|
Income tax provision |
$ |
352 |
$ |
347 |
$ |
279 |
|
1.4 |
% |
24.4 |
% |
|
Effective tax rate
|
23.9 |
% |
22.6 |
% |
23.0 |
% |
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