- Quarterly Report (10-Q)

IDC Interactive Data Corp.

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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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of common stock, par value $.01 per share, of the registrant outstanding as of October 27, 2008 was 93,761,782.


PART I FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2008 and 2007 and for the Nine Months Ended September 30, 2008 and 2007	3

	Unaudited Condensed Consolidated Balance Sheets at September 30, 2008 and December 31, 2007 (Audited)	4

	Unaudited Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Income for the Nine Months Ended September 30, 2008	5

	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	38

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults upon Senior Securities	39

Item 4.	Submission of Matters to a Vote of Security Holders	39

Item 5.	Other Information	39

Item 6.	Exhibits	40

Signatures		41

2


	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007
REVENUE	$	188,589	$	175,027	$	556,449	$	507,530
COSTS AND EXPENSES:
Cost of services		60,469		55,501		181,979		165,878
Selling, general and administrative		60,727		59,196		181,101		174,623
Depreciation		6,706		5,742		20,016		16,708
Amortization		7,006		6,724		20,761		19,665

Total costs and expenses		134,908		127,163		403,857		376,874

INCOME FROM OPERATIONS		53,681		47,864		152,592		130,656
Interest income		1,893		2,405		6,208		6,332

INCOME BEFORE INCOME TAXES		55,574		50,269		158,800		136,988
Income tax expense		18,859		10,930		56,260		42,889

NET INCOME	$	36,715	$	39,339	$	102,540	$	94,099

NET INCOME PER SHARE:
Basic	$	0.39	$	0.42	$	1.09	$	1.00
Diluted	$	0.38	$	0.40	$	1.06	$	0.97
Cash dividends declared per common share	$	0.30	$	0.125	$	0.45	$	0.375
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		94,002		94,264		94,094		93,973
Diluted		96,764		97,206		97,023		96,892

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


	September 30, 2008			December 31, 2007
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	184,831		$	205,470
Marketable securities		54,207			73,465
Accounts receivable, net of allowance for doubtful accounts and sales credits of $7,524 and $6,819 at September 30, 2008 and December 31, 2007, respectively		115,920			112,432
Prepaid expenses and other current assets		18,102			18,523
Deferred income taxes		5,106			5,276

Total current assets		378,166			415,166

Property and equipment, net		94,901			93,832
Goodwill		554,725			554,842
Intangible assets, net		153,977			159,869
Other assets		5,112			4,517

Total Assets	$	1,186,881		$	1,228,226

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable, trade	$	14,615		$	24,405
Accrued liabilities		74,204			84,706
Payables to affiliates		3,388			732
Income taxes payable		9,446			16,065
Deferred revenue		38,367			30,524
Dividends payable		14,066			61,331

Total current liabilities		154,086			217,763

Income taxes payable		8,752			7,667
Deferred tax liabilities		34,170			29,785
Other liabilities		10,153			9,487

Total Liabilities		207,161			264,702

Commitments and contingencies (Note 6)
Stockholders’ Equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued or outstanding at September 30, 2008 and December 31, 2007		—			—
Common stock, $.01 par value, 200,000,000 shares authorized, 102,707,015 shares issued and 93,865,952 shares outstanding at September 30, 2008, and 101,572,558 shares issued and 94,343,458 shares outstanding at December 31, 2007		1,027			1,015
Additional paid-in-capital		972,455			941,265
Treasury stock, at cost, 8,841,063 and 7,229,100 shares, at September 30, 2008 and December 31, 2007 respectively		(182,273	)		(137,506	)
Accumulated earnings		173,395			113,595
Accumulated other comprehensive income		15,116			45,155

Total Stockholders’ Equity		979,720			963,524

Total Liabilities and Stockholders’ Equity	$	1,186,881		$	1,228,226

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


	Common Stock			Additional Paid- In-Capital		Treasury Stock Number of Shares	Treasury Stock Cost
	Number of Shares	Par Value		Additional Paid- In-Capital		Treasury Stock Number of Shares	Treasury Stock Cost
Balance, December 31, 2007 (Audited)	101,573	$	1,015	$	941,265	7,229	$	(137,506	)
Exercise of stock options and issuance of deferred and restricted stock units	951		10		12,443	—		—
Issuance of stock in connection with employee stock purchase plan	183		2		4,202	—		—
Tax benefit from exercise of stock options and employee stock purchase plan	—		—		3,440	—		—
Stock-based compensation (Note 2)	—		—		10,648	—		—
Purchase of treasury stock	—		—		—	1,612		(44,767	)
Other comprehensive income (Note 12)	—		—		—	—		—
Common stock dividends awarded to holders of restricted stock units	—		—		457	—		—
Common stock cash dividends declared to stockholders	—		—		—	—		—
Net income	—		—		—	—		—

Balance, September 30, 2008	102,707	$	1,027	$	972,455	8,841	$	(182,273	)


	Accumulated Other Comprehensive Income			Accumulated Earnings			Total Stockholders’ Equity			Total Comprehensive Income
Balance, December 31, 2007 (Audited)	$	45,155		$	113,595		$	963,524			—
Exercise of stock options and issuance of deferred and restricted stock units		—			—			12,453			—
Issuance of stock in connection with employee stock purchase plan		—			—			4,204			—
Tax benefit from exercise of stock options and employee stock purchase plan		—			—			3,440			—
Stock-based compensation (Note 2)		—			—			10,648			—
Purchase of treasury stock		—			—			(44,767	)		—
Other comprehensive income (Note 12)		(30,039	)		—			(30,039	)		(30,039	)
Common stock dividends awarded to holders of restricted stock units		—			(457	)		—			—
Common stock cash dividends declared to stockholders		—			(42,283	)		(42,283	)		—
Net income		—			102,540			102,540			102,540

Balance, September 30, 2008	$	15,116		$	173,395		$	979,720		$	72,501

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


	Nine Months Ended September 30,
	2008			2007
Cash flows provided by (used in) operating activities:
Net income	$	102,540		$	94,099
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40,777			36,373
Amortization of discounts and premiums on marketable securities, net		456			444
Deferred income taxes		(66	)		(1,631	)
Excess tax benefits from stock-based compensation		(1,978	)		(3,148	)
Stock-based compensation		10,648			10,024
Provision for doubtful accounts and sales credits		705			116
Loss on dispositions of fixed assets		246			2,229
Changes in operating assets and liabilities, net		(16,686	)		(6,914	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		136,642			131,592

Cash flows provided by (used in) investing activities:
Purchase of fixed assets		(22,629	)		(21,136	)
Purchase of marketable securities		(117,552	)		(125,647	)
Proceeds from maturities of marketable securities		136,215			122,692
Acquisition of business		(27,338	)		(24,473	)

NET CASH USED IN INVESTING ACTIVITIES		(31,304	)		(48,564	)

Cash flows provided by (used in) financing activities:
Proceeds from exercise of stock options and employee stock purchase plan		16,657			25,233
Purchase of treasury stock		(44,767	)		(27,586	)
Common stock cash dividends paid		(89,542	)		(35,286	)
Excess tax benefits from stock-based compensation		1,978			3,148

NET CASH USED IN FINANCING ACTIVITIES		(115,674	)		(34,491	)

Effect of change in exchange rates on cash and cash equivalents		(10,303	)		4,941

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(20,639	)		53,478
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		205,470			152,449

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	184,831		$	205,927

NON-CASH FINANCING ACTIVITY:
Dividends declared and unpaid in dividends payable	$	14,066		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with generally accepted accounting principles for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles for complete periods have been condensed or omitted pursuant to such regulations. In the opinion of management, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included. All such adjustments are of a normal recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2007 filed with the Securities and Exchange Commission (“SEC”) in our Annual Report on Form 10-K filed on February 27, 2008. The results for interim periods are not necessarily indicative of the results to be expected for the full year.

As of September 30, 2008, a wholly owned indirect subsidiary of Pearson plc (or Pearson) owned approximately 61% of our issued and outstanding shares of common stock.

Our common stock trades on the New York Stock Exchange under the trading symbol “IDC”.

Reclassifications:

Certain prior year amounts in the Consolidated Statements of Operations have been reclassified to conform to the current year’s presentation. These reclassifications had no effect on the Company’s previously reported consolidated operating income, net income or shareholders’ equity.

2. Stock-Based Compensation

Stock-based Compensation Plans:

Employee Stock Option Plan

In 2000, we adopted our 2000 Long-Term Incentive Plan (as amended, the “2000 LTIP”). Under the 2000 LTIP, the Compensation Committee of our Board of Directors can grant stock-based awards representing in the aggregate up to 20% of the total number of shares of common stock outstanding at the date of grant. As originally approved by stockholders, the 2000 LTIP had no termination date. On February 24, 2004, the 2000 LTIP was amended to include a termination date of February 22, 2010. On May 21, 2008, the 2000 LTIP was amended in order to provide greater flexibility in structuring performance-based equity awards under the 2000 LTIP in the future by including a more comprehensive list of eligible performance measures under the 2000 LTIP. In addition, the May amendment modified certain provisions regarding approval and administration of awards granted under the 2000 LTIP that are intended to constitute “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code. The 2000 LTIP provides for the discretionary issuance of stock-based awards to directors, officers, and employees, as well as persons who provide consulting or other services to us. The Board of Directors has the authority to administer the 2000 LTIP. The Board may appoint a committee to administer the 2000 LTIP on its behalf. Our Board has designated the Compensation Committee as the administrator of the 2000 LTIP. Except with respect to eligible directors (with regard to whom, pursuant to the terms of the 2000 LTIP, such decisions are made by the full Board of Directors), as administrator of the 2000 LTIP, the Compensation Committee has the authority to select grantees, determine the type and number of awards to be granted, and to determine the other terms and conditions of any equity-based award (including, but not limited to, exercise price).

With respect to executive officers, certain members of senior management and persons required to file reports under Section 16 of the Securities Exchange Act of 1934, as amended, the Compensation Committee has delegated its authority to make equity-based awards to such persons to the Compensation Subcommittee. The Compensation Subcommittee is a subcommittee of the Compensation Committee comprised solely of independent directors.

The exercise price for all stock options granted to date has been equal to the market price of the underlying shares of common stock at the date of grant. In this regard, when making stock option awards, the practice has been to determine the applicable grant date and to specify that the exercise price shall be the closing price of the Company’s common stock on the date of grant. Stock options granted to date have had a term of ten years from the date of grant and have generally vested over a four-year period.

7

We have awarded restricted and deferred stock units to certain key employees, executive officers and members of the board of directors under the 2000 LTIP. Each of these units represents the contingent right to receive one share of our common stock. An aggregate of 854,482 deferred and restricted stock units have been granted as of September 30, 2008. Pursuant to the terms of the applicable grant certificates, the underlying shares of common stock are available for distribution, at no cost, to grantees at the end of a three-year vesting period, with the exception of restricted stock units awarded to directors in May 2008 which have a one-year vesting period. We charge the cost of the awards, which we determined to be the fair value of the shares at the date of the grant, to compensation expense on a straight-line basis, ratably, over the vesting periods. During the nine months ended September 30, 2008, we issued a total of 80,516 shares of common stock in connection with the settlement of restricted and deferred stock units.

Employee Stock Purchase Plan

In 2001, we adopted our 2001 Employee Stock Purchase Plan for all eligible employees worldwide (the “2001 ESPP”). The 2001 ESPP allows our employees to purchase stock at a 15% discount price at specific times. During the nine months ended September 30, 2008, our employees purchased an aggregate of 183,138 shares at an average share price of $22.95. At September 30, 2008, 954,631 shares were reserved for future issuance under the 2001 ESPP.

Shares of common stock that are issued in respect of the exercise of options or other equity awards granted under the 2000 LTIP and 2001 ESPP are issued from authorized, but unissued common stock.

Stock-based Compensation Expense and Valuation Assumptions

Stock-based compensation expense recognized under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”) and related interpretations, which requires us to measure the cost of employee services received in exchange for equity awards based on the fair value of the award as of the grant date, is based on the value of the portion of stock-based payment awards that are ultimately expected to vest. Accordingly, stock-based compensation expense recognized in the statement of income for the three and nine months ended September 30, 2008 and 2007 reflects estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We estimate forfeiture rates based on our historical forfeitures of stock options.

SFAS 123(R) supersedes Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and Accounting Principles Board Opinion No. 25, “Accounting for Stock Issues to Employees” (“APB 25”). We adopted SFAS 123(R), as of January 1, 2006, using the modified prospective application transition method of adoption which required us to record compensation cost related to unvested stock awards as of December 31, 2005 by recognizing the unamortized grant date fair value of these awards over their remaining requisite service periods. We will continue to recognize the unamortized grant date fair value of these awards on a straight-line basis. With respect to awards granted after December 31, 2005, we have recorded compensation cost based on the grant date fair value and recognized the fair value on a straight-line basis over the requisite service period of each award.

For the three and nine months ended September 30, 2008 and 2007, we recognized stock-based compensation expense under SFAS 123(R) as follows (in thousands):


	Three Months Ended September 30, 2008		Three Months Ended September 30, 2007		Nine Months Ended September 30, 2008		Nine Months Ended September 30, 2007
Cost of services	$	1,012	$	1,069	$	2,905	$	3,159
Selling, general and administrative		2,738		2,493		7,743		6,865

Stock-based compensation expense before income taxes	$	3,750	$	3,562	$	10,648	$	10,024
Income tax benefit		1,324		1,144		3,778		3,568

Stock-based compensation expense after income taxes	$	2,426	$	2,418	$	6,870	$	6,456

The estimated fair value of the options granted during 2008 and in prior years was calculated using a Black-Scholes Merton option-pricing model (“Black-Scholes model”). The Black-Scholes model incorporates assumptions to value stock-based awards. The risk-free interest rate is based on the implied yield currently available on zero-coupon U.S. Treasury issues, in effect at the time of the grant, whose remaining maturity period equals the stock award’s expected term assumption. Expected volatility of our common stock is based on the historical volatility of our stock price over the expected term of the option. Our expected term is based on an analysis of historical exercise behavior and post-vesting termination data. The

8

expected dividend yield reflects our historical dividend yield, excluding special dividends, and is calculated by annualizing the quarterly cash dividends declared by our Board of Directors divided by the closing price of our common stock on the declaration date of each dividend. The actual declaration of future dividends, and the establishment of record and payment dates are subject to final determination by our Board of Directors.

The fair value of stock options granted under the 2000 LTIP was estimated as of the date of grant using a Black-Scholes model with the following assumptions:


	Nine Months Ended September 30, 2008	Nine Months Ended September 30, 2007
Risk free interest rate	2.2%-3.5%	4.2%-4.9%
Weighted average expected term (in years)	5.7	5.0
Weighted average expected volatility	24.1%	23.4%
Expected dividend yield	2.2%	1.9%

	Three Months Ended September 30, 2008	Three Months Ended September 30, 2007
Risk free interest rate	2.6%-3.5%	4.2%-4.9%
Weighted average expected term (in years)	5.7	5.0
Weighted average expected volatility	24.1%	23.4%
Expected dividend yield	2.2%	1.9%

The weighted average grant-date fair value of options granted during the three months ended September 30, 2008 and 2007 was $5.59 and $6.61, respectively. The weighted average grant-date fair value of options granted during the nine months ended September 30, 2008 and 2007 was $5.59 and $6.60, respectively.

The fair value of stock issued under the 2001 ESPP was estimated as of the beginning date of the offering period using a Black-Scholes model with the following assumptions:


	Nine months ended September 30,
	2008	2007
Risk free interest rate	2.0%-2.4%	4.3%-5.1%
Expected term (in years)	0.5	0.5
Weighted average expected volatility	33.7%	20.5%
Expected dividend yield	2.1%	2.0%

	Three months ended September 30,
	2008	2007
Risk free interest rate	2.0%	4.3%
Expected term (in years)	0.5	0.5
Weighted average expected volatility	37.7%	25.0%
Expected dividend yield	2.2%	1.9%

The weighted average grant-date fair value of stock issued under the 2001 ESPP for the three months ended September 30, 2008 and 2007 was $7.13 and $5.40, respectively. The weighted average grant-date fair value of the stock issued under the 2001 ESPP for the nine months ended September 30, 2008 and 2007 was $6.59 and $4.76, respectively.

9


	Number of Options		Weighted Average Exercise Price (Per Share)
	*(in thousands, except per share data)*
Outstanding at January 1, 2008	9,827		$	18.21
Granted	1,421			24.99
Exercised	(866	)		(15.48	)
Forfeited	(73	)		(21.03	)
Expired	(11	)		(8.57	)

Outstanding at September 30, 2008	10,298		$	19.37

Vested and unvested expected to vest at September 30, 2008	9,924		$	19.18
Exercisable at September 30, 2008	6,579		$	16.57

A summary of the status and activity for restricted and deferred stock units under our 2000 LTIP for the nine months ended September 30, 2008, is presented below:


	Number of Units		Weighted Average Grant Date Fair Value (per share)
Unvested Restricted and Deferred Stock Units
Unvested at January 1, 2008	464,978		$	23.36
Granted	180,444			25.60
Vested	(110,371	)		(21.76	)
Forfeited	(5,263	)		(24.01	)

Unvested at September 30, 2008	529,788		$	24.45

A summary of the unrecognized compensation expense, net of estimated forfeitures and the weighted average period remaining at September 30, 2008 related to our non-vested employee stock purchase plan, stock options and deferred and restricted stock unit awards is presented below:


	Employee Stock Purchase Plan		Stock Options		Restricted Stock Unit Awards
Unrecognized compensation expense (net of forfeitures)	$	662,000	$	18,526,000	$	7,472,000
Weighted average period remaining (in years)		0.9		2.8		2.1

3. Marketable Securities

The Company follows Statement of Financial Accounting Standard No. 115, “Accounting for Certain Investments in Debt and Equity Securities” in accounting for our marketable securities. Investments consist of high-grade municipal obligations with original maturities of greater than 90 days and remaining maturities of less than one year. All marketable securities have been classified as available-for-sale and are carried at fair value. Unrealized gains or losses on our available-for-sale securities are included in accumulated other comprehensive income as a component of stockholders’ equity.

Marketable securities by security type at September 30, 2008 were as follows:

(In thousands)

Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

Municipal Obligations

$

54,256

$

—

$

(49

)

$

54,207

Marketable securities by security type at December 31, 2007 were as follows:


(In thousands)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Municipal Obligations	$	73,439	$	41	$	(15	)	$	73,465

There were no sales of our marketable securities for the three and nine months ended September 30, 2008 and 2007.

10

Our Institutional Services segment primarily targets financial institutions such as banks, brokerage firms, mutual fund companies, hedge funds, insurance companies and money management firms. In addition, our Institutional Services segment markets its offerings to financial information providers, information media companies, third-party redistributors and outsourcing organizations, such as service bureaus and custodian banks. The Institutional Services segment is composed of the following three businesses, each of which was renamed in February 2007 as part of a global marketing initiative to reinforce our value proposition and emphasize the Interactive Data brand to institutional customers:

•

Interactive Data Pricing and Reference Data. Our Pricing and Reference Data business provides financial institutions, third-party redistributors and outsourcing organizations with historical, intraday and end-of-day pricing, evaluations and reference data for an extensive range of securities, commodities, and derivative instruments that are traded around the world.

•

Interactive Data Real-Time Services. Our Real-Time Services business provides financial institutions, financial information providers and information media companies with global real-time and delayed financial market information covering equities, derivative instruments, futures, fixed income securities and foreign exchange. Our Real-Time Services business also includes Interactive Data Managed Solutions business which offers customized financial information portals and terminals.

•

Interactive Data Fixed Income Analytics. Our Fixed Income Analytics business provides financial institutions with sophisticated fixed income analytics to manage risks and understand the performance of diversified portfolios.

Active Trader Services

Our Active Trader Services segment targets active traders, individual investors and investment community professionals. We consider active traders to be investors who typically make their own investment decisions, trade frequently through online brokerage accounts and seek to earn a substantial portion of their income from trading. The Active Trader Services segment is composed of the following business:

•

eSignal. Our eSignal business provides active traders, individual investors and investment community professionals with real-time financial market information and access to decision-support tools to assist in their analysis of securities traded on all major markets worldwide. eSignal also operates financial websites that provide investors with free financial information and news about global equities, options, futures and other securities.

The Company evaluates its segments on the basis of revenue and income (loss) from operations. For comparative purposes, we have provided the information for the three months and nine months ended September 30, 2008 and 2007.

Reportable segment financial information is as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Revenue (a):
Institutional Services	$	166,036		$	152,891		$	489,724		$	441,312
Active Trader Services		22,553			22,136			66,725			66,218

Total	$	188,589		$	175,027		$	556,449		$	507,530

Income (loss) from operations (b):
Institutional Services	$	72,546		$	65,454		$	209,959		$	185,085
Active Trader Services		7,683			8,193			21,500			21,155
Corporate and unallocated (c)		(26,548	)		(25,783	)		(78,867	)		(75,584	)

Total	$	53,681		$	47,864		$	152,592		$	130,656

11

We calculate earnings per share in accordance with Statement of Financial Accounting Standard No. 128, “Earnings per Share” (“EPS”) and apply the treasury stock method in computing the weighted-average shares outstanding used in the diluted earnings per share calculation. Under the treasury stock method, the assumed proceeds calculation includes the actual proceeds to be received from the employee upon exercise, the average unrecognized compensation cost during the period and any tax benefits credited upon exercise to additional paid-in-capital. The treasury stock method assumes that a company uses the proceeds from the exercise of awards to repurchase common stock at the average market price for the period. Windfall tax benefits created upon the exercise of an award would be added to assumed proceeds, while shortfalls charged to additional paid in capital would be deducted from assumed proceeds. Any shortfalls not covered by the windfall tax pool would be charged to the income statement and would be excluded from the calculation of assumed proceeds, if any.

Stock options representing the right to acquire 2,898,138 and 1,528,275 shares of common stock during the three months ended September 30, 2008 and 2007, respectively, were outstanding but were not included in the calculation of diluted net income per share because the effect would have been antidilutive. Stock options representing the right to acquire 1,973,563 and 1,533,775 shares of common stock during the nine months ended September 30, 2008 and 2007, respectively, were outstanding but were not included in the calculation of diluted net income per share because the effect would have been antidilutive. Although these share based awards were antidilutive during the three and nine months ended September 30, 2008 and 2007, they may be dilutive in future quarters’ calculations. All outstanding deferred or restricted stock units were included in the calculation of diluted net income per share for the three and nine months ended September 30, 2008 and 2007 because all such units were dilutive.

Below is a reconciliation of the weighted average number of shares of common stock outstanding (in thousands, except per share information):

Three months ended
September 30,

Nine months ended
September 30,

2008

2007

2008

2007

Numerator:

Net income

$

36,715

$

39,339

$

102,540

$

94,099

12


	Three months ended September 30,				Nine months ended September 30,
	2008		2007		2008		2007
Denominator:
Weighted average shares used to compute basic EPS		94,002		94,264		94,094		93,973
Effect of dilutive securities:
Stock options		2,510		2,761		2,668		2,727
Deferred and restricted stock units		252		181		261		192

Weighted average shares used to compute diluted EPS		96,764		97,206		97,023		96,892

Basic EPS	$	0.39	$	0.42	$	1.09	$	1.00
Diluted EPS	$	0.38	$	0.40	$	1.06	$	0.97

6. Commitments and Contingencies

On February 25, 2008, we entered into a new property lease agreement for our London, UK office, which effectively extends our current lease agreement from the current expiration date in April 2010 to an expiration date of April 2025. The total incremental minimum lease obligation over this additional fifteen year term will be approximately $60,746,000, as measured at the foreign currency exchange rate between the UK pound and the US dollar at the date of the agreement, none of which is payable until beginning in September 2011. The lease agreement includes open market rent reviews on April 12, 2015 and April 12, 2020, which could increase the total minimum lease obligation. The Company will follow the guidance in Statement of Financial Accounting Standard No. 13 “Accounting for Leases” and Statement of Financial Accounting Standard No. 29 “Determining Contingent Rentals” to account for this contingency at the time of each open market review.

There have been no other material changes to our commitments and contingencies since December 31, 2007. (See Note 9 in the Notes to the Consolidated Financial Statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2007.)

The Company is involved in litigation and is the subject of claims made from time to time in the ordinary course of business with a portion of the defense and/or settlement costs in some such cases being covered by various commercial liability insurance policies. In addition, the Company’s third-party data suppliers audit the Company from time to time in the ordinary course of business to determine if data the Company licenses for redistribution has been properly accounted for. In view of the Company’s financial condition and the accruals established for related matters, management does not believe that the ultimate liability, if any, related to these matters will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

In connection with the provision of services in the ordinary course of business, the Company often makes representations affirming, among other things, that its services do not infringe on the intellectual property rights of others and agrees to indemnify customers against third-party claims for such infringement. The Company has not been required to make material payments under such provisions.

7. Income Taxes

For the nine months ended September 30, 2008, the Company’s effective tax rate was 35.4% as compared to 31.3% for the nine months ended September 30, 2007. The Company’s estimated annual effective tax rate for the nine months ended September 30, 2008 was 35.5% before a net discrete tax expense of $673,000 recorded in the six months ended June 30,2008 and a net discrete tax benefit of $756,000 recorded in the third quarter of 2008. The net discrete tax benefit in the third quarter was attributable to (i) realized tax benefits related to stock-based compensation expense, (ii) a release of tax reserves and interest resulting from the expiration of a statute of limitations, (iii) state income tax rate changes, and (iv) a net benefit resulting from a tax provision to tax return adjustment with respect to the filing of our 2007 federal tax return, offset by an interest expense charge on tax reserves for unrecognized tax benefits.

The third quarter 2008 estimated annual effective tax rate is 35.5% as compared to the prior year third quarter estimated annual effective tax rate of 35.6%. The decline is attributable to (i) an increase in income generated in lower rate jurisdictions, (ii) a reduction in stock-based compensation expense recorded for incentive stock options under SFAS 123(R), and (iii) an estimated increase in the Foreign Tax Credit offset by (iv) the reduction in the Research and Development tax credit which was reflected in the Company’s third quarter 2007 estimated annual effective tax rate. The Company did not record a tax benefit for the Federal Research and Development tax credit in the third quarter of 2008 as the Federal law extending the credit was not signed into law until October 3, 2008. An incentive stock option does not ordinarily result in a tax benefit for the Company unless there is a disqualifying disposition of the stock. Therefore, no deferred tax asset has been recognized by the Company for compensation expense recorded for incentive stock options.

The Company recognizes future tax benefits or expenses attributable to our taxable temporary differences and net operating loss carry forwards. Recognition of deferred tax assets is subject to our determination that realization is more likely than not. Based on taxable income projections, the Company believes recorded deferred tax assets will be realized.

13

The Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, An Interpretation of FASB Statement No. 109,” on January 1, 2007. There were no material changes to the Company’s unrecognized tax benefits in the third quarter. As of September 30, 2008, the Company had approximately $16,540,000 of unrecognized tax benefits of which $15,881,000 would affect our effective tax rate if recognized and $659,000 would result in a decrease to goodwill. The Company does not anticipate a material adjustment to tax reserves for uncertain tax positions within the next twelve months. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of September 30, 2008, the Company had approximately $2,191,000 of accrued interest related to unrecognized tax benefits.

8. Goodwill and Intangible Assets

Intangible assets consist of the following (in thousands, except weighted average amortization period):


	Weighted Average Amortization Period	September 30, 2008							December 31, 2007
	Weighted Average Amortization Period	Gross Carrying Value		Accumulated Amortization			Net Book Value		Gross Carrying Value		Accumulated Amortization			Net Book Value
Non-compete agreements	2.9 years	$	88,062	$	(87,500	)	$	562	$	87,500	$	(87,500	)	$	—
Securities databases	4.0 years		15,361		(11,306	)		4,055		12,692		(10,980	)		1,712
Computer software	7.8 years		97,767		(69,428	)		28,339		100,005		(66,256	)		33,749
Customer lists	11.5 years		256,886		(150,468	)		106,418		245,125		(135,829	)		109,296
Service contracts	23.6 years		17,690		(4,614	)		13,076		17,490		(4,099	)		13,391
Trademarks	12.4 years		2,600		(1,073	)		1,527		2,600		(879	)		1,721

Total		$	478,366	$	(324,389	)	$	153,977	$	465,412	$	(305,543	)	$	159,869

The estimated amortization expense of intangible assets is as follows (in thousands):


For year ending 12/31/09	$	28,540
For year ending 12/31/10	$	28,653
For year ending 12/31/11	$	21,882
For year ending 12/31/12	$	18,909
For year ending 12/31/13	$	13,433
For years thereafter	$	35,857

The estimated amortization expense of intangible assets during the remainder of the fiscal year 2008 is $6,703,000.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2008 by reportable segment are as follows (in thousands):


	Institutional Services		Active Trader Services		Total
Balance as of December 31, 2007	$	401,234	$	153,608	$	554,842
Goodwill acquired during the year		(a) 16,997		—		16,997
Purchase accounting adjustments		(b) (207)		—		(207)
Impact of change in foreign exchange rates		(16,851)		(56)		(c) (16,907)

Balance as of September 30, 2008	$	401,173	$	153,552	$	554,725

(a)	Related to our acquisition of Kler’s Financial Data Service S.r.l. (“Kler’s”) in the third quarter of 2008. Refer to Note 14, “Mergers and Acquisitions”, in these Notes to the Condensed Consolidated Financial Statements.

(b)	Consists of a reduction to goodwill pertaining to our acquisition of the net assets comprising the market data division of Xcitek LLC, as well as the market data assets of its affiliate Xcitax LLC, primarily related to adjustments to accrued acquisition costs of $207,000.

(c)	Foreign currency translation adjustments totaling a decrease of $16,907,000 primarily reflecting the strengthening of the US Dollar against the Euro and UK pound during the nine months ended September 30, 2008.

14

Pearson Inc., a Pearson US subsidiary, sponsors a defined benefit plan (the “Pension Plan”) for Pearson’s US employees which Pension Plan also includes certain of our US employees. Pension costs are actuarially determined. We fund pension costs attributable to our employees to the extent allowable under IRS regulations. In 2001, we froze the benefits associated with this Pension Plan and no gain or loss was recorded as a result of the curtailment.

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”). On December 31, 2006, we adopted the recognition and disclosure provisions of SFAS 158. The adoption of SFAS 158 did not have a material impact on our financial position, results of operations and cash flows. SFAS 158 required us to recognize the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of our benefit plans in our December 31, 2006 Consolidated Balance Sheet, with a corresponding adjustment to accumulated other comprehensive income. The initial impact of the standard due to unrecognized net actuarial gains and losses is recognized as a component of accumulated other comprehensive income. Additional minimum pension liabilities were also derecognized upon adoption of the standard. The adoption of SFAS 158 resulted in a net adjustment to accumulated other comprehensive income of $759,000 at December 31, 2006.

The components of net periodic benefit cost were as follows (in thousands):


	Three Months ended September 30,						Nine Months ended September 30,
	2008			2007			2008			2007
Service cost	$	—		$	—		$	—		$	—
Interest cost		136			128			408			384
Expected return on plan assets		(175	)		(152	)		(524	)		(454	)
Amortization of unrecognized prior service costs		1			1			2			2
Amortization of unrecognized loss		16			20			49			59

Net periodic benefit cost	$	(22	)	$	(3	)	$	(65	)	$	(9	)

In 2008, we expect to contribute $477,000 to fund our obligations under the Pension Plan. As of September 30, 2008, we have contributed $400,000 of this amount under the Pension Plan.

10. Stockholders’ Equity

In addition to our common stock, we are authorized to issue up to 5,000,000 preferred shares, $0.01 par value per share, with terms determined by our Board of Directors, without any further action by our stockholders. At September 30, 2008, no preferred shares have been issued.

In October 2006, our Board of Directors authorized the repurchase of up to 2,000,000 shares of our outstanding shares of common stock. On December 11, 2007, our Board of Directors authorized the repurchase of an additional 2,000,000 shares under the stock buyback program. In the third quarter of 2008, we repurchased 643,963 shares of outstanding common stock under the stock buyback program. As of September 30, 2008, 1,158,937 shares remained available for purchase under the stock buyback program.

In February 2007, we announced that our Board of Directors authorized the initiation of a quarterly cash dividend.

The following table summarizes the dividend activity during the first nine months of 2008:


Declaration Date	Dividend Per Share		Type	Record Date	Payment Date	Total Amount (in thousands)
December 11, 2007 ⁽¹⁾	$	0.50	Special (cash)	January 4, 2008	January 24, 2008	$	47,184
December 11, 2007 ⁽²⁾	$	0.15	Regular (cash)	March 3, 2008	March 31, 2008	$	14,141
May 21, 2008	$	0.15	Regular (cash)	June 6, 2008	June 27, 2008	$	14,100
July 15, 2008	$	0.15	Regular (cash)	September 5, 2008	September 26, 2008	$	14,117
September 15, 2008 ⁽³⁾	$	0.15	Regular (cash)	November 12, 2008	December 10, 2008	$	14,066

(1)	Unpaid dividends declared in the amount of $47,184,000 were included in dividends payable as of December 31, 2007.

(2)

On December 11, 2007, our Board of Directors (i) approved increasing the Company’s regular quarterly dividend by 20%, raising it from $0.125 per share to $0.15 per share of common stock and (ii) declared the first quarter 2008 dividend (payment date: March 31, 2008 and record date March 3, 2008). The March 2008 total dividend paid amount of $14,141,000 was included in dividends payable as of December 31, 2007.

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In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a framework for how companies should measure the fair value of assets and liabilities and expands disclosure about fair value measurements. Additionally, SFAS 157 formally defines fair value as the amount that would be received if an asset was sold or a liability transferred in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for the company in 2008. The adoption of SFAS 157, effective January 1, 2008, did not have a material impact on our financial position, results of operations or cash flows.

In February 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Its Related Interpretive Accounting Pronouncements That Address Leasing Transactions,” (“FSP SFAS 157-1”) and FSP SFAS No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP SFAS 157-2”). FSP SFAS No. 157-1 removes leasing from the scope of SFAS No. 157, “Fair Value Measurements.” FSP SFAS No. 157-2 delays the effective date of SFAS No. 157 from 2008 to 2009 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of FSP SFAS 157-1, effective January 1, 2008, did not significantly impact our financial position, results of operations or cash flows. The Company does not expect its adoption of the provisions of FSP SFAS 157-2 to have a material effect on its financial condition, results of operations or cash flows.

The Fair Value Option for Financial Assets and Financial Liabilities (as amended)

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 provides entities with an option to choose to measure eligible items at fair value at specified election dates. If elected, an entity must report unrealized gains and losses on the item in earnings at each subsequent reporting date. The fair value option may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method, is irrevocable (unless a new election date occurs); and is applied only to entire instruments and not to portions of instruments. SFAS 159 is effective for the company in 2008. The Company did not elect the fair value option for any of our eligible financial instruments and other items, therefore, the adoption of SFAS 159, effective January 1, 2008, did not materially impact our financial position, results of operations or cash flows.

Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards

In June 2007, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) on Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (“EITF 06-11”). EITF 06-11 addresses the issue of the manner in which income tax benefits received on dividends paid to employees holding equity-classified non-vested shares (units or options) should be accounted for when such dividends are charged to retained earnings pursuant to SFAS 123(R). EITF 06-11 concludes that a realized income tax benefit should be recognized as a credit to additional paid-in capital and should be included in the pool of excess tax benefits available to absorb future tax deficiencies on share-based payment awards. In addition, the amount of any tax benefits from dividends reclassified in subsequent periods from additional paid-in capital to a reduction of income tax expense or an increase in income tax benefit should increase or decrease, but, be limited to the pool of excess tax benefits available on the reclassification date. EITF 06-11 is effective for the Company in 2008. The adoption of EITF 06-11, effective January 1, 2008, did not materially impact our financial position, results of operations or cash flows.

Business Combinations

In December 2007, the FASB issued SFAS No. 141 (revised), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS 141(R) is effective for the Company in 2009, with early adoption prohibited. We are currently evaluating the potential impact of adopting SFAS 141(R).

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In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. SFAS 160 is effective for the Company in 2009, with early adoption prohibited. The Company does not anticipate that SFAS 160 will have a material impact on the Company’s financial statements.

Determination of the Useful Life of Intangible Assets

In April 2008, the FASB issued an FSP on SFAS No. 142-3, “ Determination of the Useful Life of Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “ Goodwill and Other Intangible Assets” . The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007), “ Business Combinations”, and other U.S. generally accepted accounting principles. FSP SFAS 142-3 is effective for the Company, prospectively only in 2009, with early adoption prohibited. The Company is currently evaluating the potential impact of adopting FSP SFAS 142-3.

Hierarchy of Generally Accepted Accounting Principles

In May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the U. S. SFAS 162 is effective 60 days following the SEC approval of Public Company Accounting Oversight Board (“PCAOB”) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company does not anticipate that SFAS 162 will have a material impact on the Company’s financial statements.

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”, (“FSP EITF 03-6-1”). This FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in computing earnings per share under the two-class method described in SFAS No. 128, “Earnings Per Share” (“EPS”). Unvested share-based payment awards that contain a non-forfeitable right to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two class method, as the rights to dividends or dividend equivalents provide a non-contingent transfer of value to the holder of the share-based payment award. In contrast, the right to receive dividends or dividend equivalents that the holder will forfeit if the award does not vest does not constitute a participation right. Under the terms of the Company’s restricted stock unit awards, if the award is forfeited prior to vesting, holders are not entitled to receive dividends or dividend equivalents. FSP EITF 03-6-1 is effective for the Company in 2009, with early adoption prohibited. All prior period EPS data must be adjusted retrospectively to reflect the provisions of the FSP, if applicable. The Company does not anticipate that FSP EITF 03-6-1 will have a material impact on the Company’s financial statements.

12. Comprehensive Income

The components of accumulated other comprehensive income were as follows:


	September 30, 2008			December 31, 2007
	(In thousands)
Unrealized gain on securities (net of tax, $205 as of September 30, 2008 and $901 as of December 31, 2007)	$	318		$	1,320
Foreign currency translation adjustment		16,619			45,656
Minimum pension liability/unrecognized losses		(1,821	)		(1,821	)

Total accumulated other comprehensive income	$	15,116		$	45,155

17


	Nine Months Ended September 30, 2008			Nine Months Ended September 30, 2007
	(In thousands)
Net Income	$	102,540		$	94,099
Unrealized (loss)/gain on securities (net of tax, ($647) and $300 as of September 30, 2008 and 2007, respectively)		(1,002	)		437
Foreign currency translation adjustment		(29,037	)		14,757

Total comprehensive income	$	72,501		$	109,293


	Three Months Ended September 30, 2008			Three Months Ended September 30, 2007
	(In thousands)
Net Income	$	36,715		$	39,339
Unrealized (loss)/gain on securities (net of tax, ($302) and $8 as of September 30, 2008 and 2007, respectively)		(467	)		12
Foreign currency translation adjustment		(36,761	)		7,371

Total comprehensive (loss) income	$	(513	)	$	46,722

13. Fair Value Measurements

Effective January 1, 2008, the Company adopted SFAS 157. This statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. As defined in SFAS 157, fair value is the amount that would be received if an asset was sold or a liability transferred in an orderly transaction between market participants at the measurement date. The adoption of SFAS 157 did not have a material impact on our financial position, results of operations or cash flows. As discussed in Note 11 above, the Company has only adopted the provisions of SFAS 157 with respect to its financial assets and liabilities that are measured at fair value within the condensed consolidated financial statements. The Company has deferred the application of the provisions of this statement to its non-financial assets and liabilities in accordance with FSP SFAS 157-2.

SFAS 157 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three levels of the fair value hierarchy established by SFAS 157 in order of priority are as follows:


Level 1:		Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3:		Unobservable inputs that reflect the Company’s assumptions about the assumptions that market participants would use in pricing the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

18


	September 30, 2008
	Fair Value Measurements Using						Assets at Fair Value
(in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Assets:
Cash equivalents- Money Market Funds	$	35,352	$	—	$	—	$	35,352
Cash equivalents (1)		—		29,886		—		29,886
Marketable Securities – Available for Sale (2)		—		54,207		—		54,207
Other (3)		5,332		—		—		5,332

Total Assets	$	40,684	$	84,093	$	—	$	124,777


	September 30, 2008
	Fair Value Measurements Using						Assets at Fair Value
(in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Liabilities:
Other (3)	$	5,332		—		—	$	5,332

Total Liabilities	$	5,332	$	—	$	—	$	5,332

(1)	Consist of high-grade municipal obligations with original and remaining maturities of less than 90 days.

(2)	Refer to Note 3, “Marketable Securities”, in the Notes to the Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for further discussion.

(3)	Consists of mutual fund assets held in a rabbi trust and a corresponding non-qualified deferred compensation plan liability. The fair value of the mutual fund assets and related liability are based on each fund’s quoted market price at the reporting date.

14. Mergers and Acquisitions

Acquisition of Kler’s

On August 1, 2008, we completed the acquisition of Kler’s Financial Data Service S.r.l. (“Kler’s”), a leading provider of reference data to the Italian financial industry, for a purchase price of €19,000,000 in cash (or approximately $29,566,000 at the currency exchange rate at acquisition date). This acquisition was funded from operating cash. In addition, we accrued estimated transaction and acquisition costs of $701,000, consisting of legal and accounting services. As of September 30, 2008, $428,000 of these accrued costs remain unpaid. We expect the majority of the remaining costs to be paid by December 31, 2008. The final purchase price remains subject to post-closing working capital adjustments. The purchase price allocation is considered preliminary; additional adjustments may be recorded during the allocation period specified by Statement of Financial Accounting Standard No. 141, “Business Combinations” (“SFAS 141”), as additional information becomes known or payments are made.

The acquisition was accounted for using the purchase method of accounting in accordance with SFAS 141. The purchase price has been assigned to the assets acquired and liabilities assumed based on their estimated fair values. The intangible assets are being amortized over periods ranging from three to eighteen years. The weighted average amortization period in total is 15.0 years. The weighted average amortization period by major asset class is: customer list 18.0 years; securities database 3.0 years and non- compete agreement 5.0 years. In connection with the acquisition, we recorded $16,997,000 of goodwill, which has been allocated to our Institutional Services segment, none of which is tax deductible. Our financial statements include the results of operations of Kler’s subsequent to the acquisition date.

Kler’s provides comprehensive, high quality reference data, including corporate actions and taxation information, on Italian and international securities, with coverage of equities, listed and unlisted Italian bonds, funds, simple derivatives and warrants. The acquisition of this business will enable the Company to expand its reference data services and to continue increasing its presence across continental Europe. The Kler’s business will be integrated into our Interactive Data Pricing and Reference Data business.

19


Assets:
Cash acquired	$	2,628
Accounts receivable, net		2,821
Prepaid expenses and other current assets		6
Customer list		13,850
Securities database		2,957
Non-Compete agreement		622
Other assets		415
Goodwill		16,997

	$	40,296

Liabilities:
Accounts payable	$	23
Accrued liabilities		305
Deferred revenue		3,735
Accrued acquisition costs		701
Deferred tax liability		5,473
Other liabilities		493

	$	10,730

Total Purchase Price	$	29,566

Acquisition of Xcitek

On May 1, 2007, Interactive Data acquired the net assets comprising the market data division of Xcitek LLC (“Xcitek”), as well as the market data net assets of its affiliate Xcitax LLC (“Xcitax”), for $25,123,000. This acquisition was funded from operating cash. In addition, we accrued estimated transaction and acquisition costs of $1,840,000, consisting of legal services, accounting services, severance and lease termination costs. As of September 30, 2008, $154,000 of lease termination costs remain unpaid. We expect the majority of the remaining costs to be paid by December 31, 2009.

The acquisition was accounted for using the purchase method of accounting in accordance with SFAS 141. The purchase price has been assigned to the assets acquired and liabilities assumed based on their estimated fair values. The intangible assets are being amortized over periods ranging from two to eleven years. The weighted average amortization period in total is 10.6 years. The weighted average amortization period by major asset class is: customer list 11.0 years; securities database 8.0 years and trademark 2.0 years. In connection with the acquisition, we recorded $12,093,000 of goodwill, which has been allocated to our Institutional Services segment. Of that total amount, $11,006,000 is expected to be deductible for tax purposes. Our financial statements include the results of operations of Xcitek and Xcitax subsequent to the acquisition date.

Xcitek’s market data business provides a broad range of North American corporate actions data, including reorganization information, as well as cost basis and class action data. This business has been integrated into our Interactive Data Pricing and Reference Data business.

The acquisition was accounted for as follows (in thousands):


Assets:
Accounts receivable, net	$	1,861
Prepaid expenses and other current assets		10
Customer list		12,200
Securities database		1,600
Trademark		100
Deferred tax assets, net		754
Other assets		12
Goodwill		12,093

	$	28,630


Liabilities:
Accounts payable	$	19
Accrued liabilities		44
Deferred revenue		1,604
Accrued acquisition costs		1,840

	$	3,507

Total Purchase Price	$	25,123

20

We are a leading global provider of financial market data, analytics and related services to financial institutions, active traders and individual investors. Our customers use our offerings to support their portfolio management and valuation, research and analysis, trading, sales and marketing, and client service activities. We market and sell our services either by direct subscriptions or through third-party business alliances.

Our offerings are developed and delivered to customers through four businesses that comprise our two reportable operating segments: Institutional Services and Active Trader Services.

Institutional Services

Our Institutional Services segment primarily targets financial institutions such as banks, brokerage firms, mutual fund companies, hedge funds, insurance companies and money management firms. In addition, our Institutional Services segment markets its offerings to financial information providers, information media companies, third-party redistributors and outsourcing organizations. The Institutional Services segment is composed of three businesses, each of which was renamed in February 2007 as part of a global marketing initiative to reinforce our value proposition and emphasize the Interactive Data brand to institutional customers:

•

Interactive Data Pricing and Reference Data. Our Pricing and Reference Data business provides financial institutions, third-party redistributors and outsourcing organizations with historical, intraday and end-of-day pricing, evaluations and reference data for an extensive range of securities, commodities, and derivative instruments that are traded around the world.

•

Interactive Data Real-Time Services. Our Real-Time Services business provides financial institutions, financial information providers and information media companies with global real-time and delayed financial market information covering equities, derivative instruments, futures, fixed income securities and foreign exchange. Our Real-Time Services business also includes our Interactive Data Managed Solutions business which offers customized financial information portals and terminals.

•

Interactive Data Fixed Income Analytics. Our Fixed Income Analytics business provides financial institutions with sophisticated fixed income analytics to manage risks and understand the performance of diversified portfolios.

Active Trader Services

Our Active Trader Services segment targets active traders, individual investors and investment community professionals. We consider active traders to be investors who typically make their own investment decisions, trade frequently through online brokerage accounts and seek to earn a substantial portion of their income from trading. The Active Trader Services segment is composed of the following business:

•

eSignal. Our eSignal business provides active traders, individual investors and investment community professionals with real-time financial market information and access to decision-support tools to assist in their analysis of securities traded on all major markets worldwide. eSignal also operates financial websites that provide investors with free financial information and news about global equities, options, futures and other securities.

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We are focused on expanding our position as a leading provider of financial market data, analytics and related services to financial institutions, active traders and individual investors. A key element of our strategy involves working closely with our largest customers and redistributors to better understand and address their current and future financial market data needs. By better understanding customer needs, we believe we can develop enhancements to existing services and introduce new capabilities which offer new or improved features, content or capabilities that appeal to current and prospective customers. As part of our efforts to build strong customer relationships, we continue to invest significant resources to provide high-quality, responsive customer support and service. We believe that our combination of strong account management and responsive customer support has contributed to our historically high customer retention rates within our Institutional Services segment, as well as enhanced our ability to attract new customers.

In 2007, we aligned our Pricing and Reference Data, and Real-Time Services business under a single management structure from a business and product strategy, sales management and operational perspective. We believe this action has enabled us to build upon the progress made during the past several years in presenting our business more effectively to the marketplace and to move faster in addressing client needs spanning four core product areas: evaluations, reference data, real-time datafeed services and managed solutions. In 2008, we began the process of gradually aligning our Fixed Income Analytics business under this single management structure.

We plan to continue investing in organic growth initiatives and pursuing strategic acquisitions that will enable us to expand our business in one or more of the following areas:

1.

Focus on High-Value Services. Our efforts to develop new and enhanced offerings that we believe will deliver increased value to customers are based, in part, on an active dialogue with customers, prospects, business partners, industry organizations and other key parties. For example, in June 2007, our Pricing and Reference Data business introduced a service to automate the delivery of independent valuations of interest rate swaps. With this service, we help customers more efficiently value portfolios that contain a broad range of financial instruments. In August 2008, we announced that our Pricing and Reference Data business expanded this service by increasing the delivery frequency of these valuations, as well as adding independent valuations for compounding swaps, and certain historical valuations for interest rate and credit default swaps. In addition, we believe that there are opportunities for our businesses to bring significant value to customers by:

•

developing new tools to assist customers with their regulatory compliance challenges;

•

expanding our coverage to include a growing range of complex securities including over-the-counter (OTC) derivatives; and

•

improving and increasing the frequency of service delivery.

For example, in September 2008, we announced an exclusive agreement between our Pricing and Reference Data business and Prism Valuation. Under the agreement, Interactive Data Pricing and Reference Data will now have the capability to provide valuations of highly complex OTC derivatives and structured products as part of its wide-ranging pricing and evaluation services. As part of this strategic alliance, Interactive Data has purchased a minority ownership stake in Prism.

2.

Expand into Adjacent Markets. We continue to explore entering new market segments in which we can leverage our institutional customer relationships as well as take advantage of the breadth and depth of our existing content and capabilities. For example, the 2003 acquisition of ComStock (now Interactive Data Real-Time Services) enabled us to complement our historical and end-of-day pricing data services by delivering real-time information regarding securities traded around the world to our institutional customers. Our December 2005 acquisition of IS.Teledata AG (now known as Interactive Data Managed Solutions) and the subsequent formation of Interactive Data Managed Solutions business enabled us to provide managed market data solutions that are used to build customized financial information systems and further complement our existing market data services. Our March 2006 acquisition of the net assets of Quote.com and certain other related assets including the Quote.com and RagingBull.com financial websites, enabled eSignal to generate a revenue stream via online advertising across an expanded number of financial websites.

3.

Extend Our Reach Geographically. We continue to invest in growing our business outside of North America both organically and through acquisitions. In addition, since a significant portion of our international revenue has been historically concentrated with customers based in the United Kingdom, we believe that continental Europe represents an attractive opportunity for expansion. In August 2008, we acquired Kler’s Financial Data Service S.r.l. (Kler’s), a leading provider of reference data to the Italian financial industry. We believe that the addition of Kler’s, which is based in Rome, Italy, will help expand our reference data content and services, and significantly increase our presence in Italy, thereby enhancing our ability to continue growing in this region.

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In addition, optimizing our technical infrastructure represents another key element in our strategy. Our technology infrastructure and operations support both the Institutional Services and Active Trader Services segments of our business and are designed to facilitate the reliable and efficient processing and delivery of data to our customers. We have implemented, and will continue to implement, initiatives aimed at optimizing our technical infrastructure by taking advantage of existing resources residing across our global organization. For example, in July 2008, our Real-Time Services business launched its new-generation high-speed data distribution network which is designed to manage the continuing rapid growth of data volumes. By continuing to optimize our technical infrastructure, we believe we can enhance our ability to meet the data delivery needs of our customers while improving our operational efficiency.

Our business has historically generated a high level of recurring revenue and cash flow from operations. We seek to invest our financial resources in organic growth initiatives and strategic acquisitions while maintaining a conservative capital structure. We also have returned cash to stockholders through stock buyback programs and dividends at levels and junctures as our Board of Directors believes appropriate. In February 2007, we announced that our Board of Directors authorized the initiation of a quarterly cash dividend of $0.125 per share of common stock. This amount was increased by 20% to $0.15 per share of common stock commencing with the dividend paid in the first quarter of 2008.

The following table summarizes dividend activity during the first nine months of 2008:


Declaration Date	Dividend Per Share		Type	Record Date	Payment Date
December 11, 2007	$	0.50	Special (cash)	January 4, 2008	January 24, 2008
December 11, 2007	$	0.15	Regular (cash)	March 3, 2008	March 31, 2008
May 21, 2008	$	0.15	Regular (cash)	June 6, 2008	June 27, 2008
July 15, 2008	$	0.15	Regular (cash)	September 5, 2008	September 26, 2008
September 15, 2008	$	0.15	Regular (cash)	November 12, 2008	December 10, 2008

Business and Market Trends

In recent years, modest increases in spending by institutional customers for financial market data services were partially offset by the continuing impact of our customers’ ongoing cost containment initiatives during such periods. Throughout 2008, many large banks and other significant-sized firms in the financial services industry have experienced deteriorating market conditions as significant weakness and volatility within the global credit markets during the second half of 2007 spread to the broader financial markets. By the end of the third quarter of 2008, conditions in the global financial markets had worsened considerably and acted as a catalyst for the collapse of some financial institutions and a number of significant-sized mergers and acquisitions among others. In response, the government introduced new legislation and other government actions to help stabilize the broader financial markets.

When financial institutions consolidate, they frequently look to gain synergies by combining their operations, including the elimination of redundant data sources. We continue to deliver services to a number of customers currently involved in the process of a merger or acquisition. If our services are eliminated as a result of consolidation, there is generally a lag between the completion of the customer’s consolidation activity and its impact on our revenue. It is unclear at this time how the affected firms plan to integrate their operations and what impact, if any, those plans will have on the demand for our services. Additional financial institution failures or additional consolidation activity has the potential to adversely impact our revenue in the future.

We continue to see customers focus on cost containment as a result of the more challenging market conditions and expect this trend to continue into 2009. At the same time, however, customers continue to spend prudently on financial market data services. It remains unclear at this time what impact the recent events in the global financial markets will have on the overall financial market data services spending of financial institutions in 2009 or subsequent years. If current conditions lead to an increased focus on containing or reducing financial market data spending, our revenue growth could be adversely impacted.

Institutional Services

Within the Institutional Services segment, overall annual renewal rates for customer contracts remained at approximately 95% during the third quarter of 2008, consistent with our experience in each quarter for the past two fiscal years.

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We believe that much of the data we supply is mission critical to our customers’ operations regardless of market conditions; however, we are affected, at least in part, by the continuing cost containment focus within our institutional customer base. If the data we provide were not mission critical, we believe a decline in market conditions would affect us more adversely.

The following are among the major trends influencing our institutional businesses:

•

There has been and continues to be a trend in North America for major financial institutions to outsource their back-office operations to service bureaus and custodian banks. We have established relationships with, and are a major data supplier to, many service bureaus and custodian banks. If an existing customer elects to terminate direct services from us because of a decision to outsource its back-office operations to a service bureau or custodian bank, we often continue to supply our data indirectly through our relationships with these institutions. In such cases, the revenue we earn per customer may be less than what we would earn if the customer obtained the data from us directly, although the costs associated with delivering and supporting the data indirectly may also be less.

•

Over the past decade, there has been a consolidation of financial institutions both within and across the financial services industry. As discussed above, deteriorating conditions in the financial markets during the third quarter of 2008 led to increased consolidation activity among financial institutions. Consolidations can lead to the elimination of redundant data sources at the combined entity. Consequently, consolidation activity has the potential to adversely impact our future revenue.

•

Increased regulation within the global financial services industry continues to influence the ways in which financial institutions utilize financial market data. We believe that the use of real-time, intraday, end-of-day and historical financial market data from independent third-party providers like us will be increasingly important as firms seek to modify existing practices to effectively and efficiently address their regulatory compliance obligations.

•

The complexity of financial instruments has escalated in recent years. Determining the fair value of highly complex instruments requires specialized expertise, and the firms trading these instruments seek to leverage efficiencies by working with third-party providers like us who can assist them in their valuation of these instruments.

•

Financial institutions are creating automated algorithmic and electronic trading applications to efficiently execute their trading strategies. In order to rapidly execute their trading strategies, these applications require real-time market data with minimal latency. In addition, the trend toward algorithmic and other electronic trading programs is contributing to significant growth in market data volumes, thereby requiring both market data suppliers like us and the financial institutions themselves to increase network capacity to address these volume issues.

Interactive Data Pricing and Reference Data’s growth continues to be driven by new sales to existing customers and, to a lesser extent, sales to new customers. Growth in the Interactive Data Pricing and Reference Data business is dependent, in large part, on our ability to continue the expansion of our data content offerings in order to meet the current and evolving needs of our customers, particularly as regulatory changes occur and as financial instruments become more numerous and complex.

Interactive Data Real-Time Services continues to generate growth for its real-time business both by sales to new customers and new sales to existing customers. In particular, financial institutions such as hedge funds are seeking to subscribe to our low latency data services in order to support their algorithmic and electronic trading applications. This business also continues to expand its Interactive Data Managed Solutions business globally with both existing and new clients. Interactive Data Real-Time Services continues to invest in enhancing and expanding its offerings and technical infrastructure. For example, in August 2008, our Real-Time Services business launched PlusFeed Select ^SM , a new low latency data service that enables cost-effective access to a specified “watch -list” of instruments.

Growth in our Interactive Data Fixed Income Analytics business continues to be largely offset by cancellations, the majority of which are resulting from client consolidation activities. We continue to invest in product and business development activities that we believe will help expand our Fixed Income Analytics business with existing and prospective customers. In September 2008, we announced that a new managing director had been appointed to lead this business.

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eSignal’s growth continues to be constrained by challenging conditions in the active trader market. Expansion of the eSignal business is partly dependent on the growth in online trading accounts managed by active traders. Stock market volatility is an important trend that can influence active trader subscriptions. During periods when the major stock markets are less volatile, active traders tend to trade less frequently and cancellations of eSignal’s services by active traders typically increase and new subscriptions slow. In addition, periods of declines in the major stock markets have greater potential to lead to an increase in cancellations of eSignal’s services by traders who are unable or unwilling to withstand losses. Other factors that may affect eSignal’s growth include the contribution of its redistribution partners who resell its data and analytics, and online advertising on its financial websites, price increases and mix shifts within its suite of real-time market data terminals.

We believe that eSignal’s future growth is dependent on a combination of expanding its direct subscriber base for real-time financial market information and decision-support tools, and attracting increased online advertising on eSignal’s financial websites. In difficult market conditions, the businesses which advertise online may reduce spending on online advertising and the competition to attract online advertising can increase. To address the evolving needs of active traders worldwide, eSignal continues to invest in adding new features to its various services, establishing strategic alliances, developing new offerings, and building traffic to and advertising on its financial websites. For example, in June 2008, eSignal introduced significant enhancements across its eSignal®, eSignal Pro® and eSignal, Advanced GET® edition offerings.

Results of Operations

Selected Financial Data

(In thousands, except per share information)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2008		2007		% Change		2008		2007		% Change
REVENUE	$	188,589	$	175,027	7.7	%	$	556,449	$	507,530	9.6	%
COSTS AND EXPENSES
Cost of services		60,469		55,501	9.0	%		181,979		165,878	9.7	%
Selling, general and administrative		60,727		59,196	2.6	%		181,101		174,623	3.7	%
Depreciation		6,706		5,742	16.8	%		20,016		16,708	19.8	%
Amortization		7,006		6,724	4.2	%		20,761		19,665	5.6	%

Total costs and expenses		134,908		127,163	6.1	%		403,857		376,874	7.2	%

INCOME FROM OPERATIONS		53,681		47,864	12.2	%		152,592		130,656	16.8	%
Interest income		1,893		2,405	(21.3	)%		6,208		6,332	(2.0	)%

INCOME BEFORE INCOME TAXES		55,574		50,269	10.6	%		158,800		136,988	15.9	%
Income tax expense		18,859		10,930	72.5	%		56,260		42,889	31.2	%

NET INCOME	$	36,715	$	39,339	(6.7	)%	$	102,540	$	94,099	9.0	%

NET INCOME PER SHARE
Basic	$	0.39	$	0.42	(7.1	)%	$	1.09	$	1.00	9.0	%
Diluted	$	0.38	$	0.40	(5.0	)%	$	1.06	$	0.97	9.3	%
Cash dividends declared per common share	$	0.30	$	0.125	140.0	%	$	0.45	$	0.375	20.0	%
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		94,002		94,264	(0.3	)%		94,094		93,973	0.1	%
Diluted		96,764		97,206	(0.5	)%		97,023		96,892	0.1	%

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(In thousands)	2008			2007		% Change
Institutional Services:
Pricing and Reference Data	$	121,089		$	109,490	10.6	%
Real-Time Services		37,726			35,373	6.7	%
Fixed Income Analytics		8,194			8,028	2.1	%
Foreign Exchange		(973	)		—	—

Total Institutional Services	$	166,036		$	152,891	8.6	%
Active Trader Services:
eSignal		22,651			22,136	2.3	%
Foreign Exchange		(98	)		—	—

Total Active Trader Services		22,553			22,136	1.9	%

TOTAL REVENUE	$	188,589		$	175,027	7.7	%

Total revenue increased by $13,562,000, or 7.7%, to $188,589,000 in the third quarter of 2008. The Kler’s business, which was acquired in August 2008, contributed incremental revenue of $1,313,000 to revenue for the third quarter of 2008. Other factors which contributed to the increase in total revenue included strong revenue growth of $10,286,000 at our Pricing and Reference Data business and a revenue increase of $2,353,000 at our Real-Time Services business. In addition, revenue at our eSignal and Fixed Income Analytics businesses increased $515,000, and $166,000, respectively. The change in foreign exchange rates in the third quarter of 2008 compared with the third quarter of 2007 had an unfavorable impact on revenue of $1,071,000 in the third quarter of 2008, mainly due to the strengthening of the US dollar against the UK pound.

Institutional Services

Revenue within the Institutional Services segment increased by $13,145,000, or 8.6%, to $166,036,000 in the third quarter of 2008. The change in foreign exchange rates, as noted above, had an unfavorable impact on revenue of $973,000 in the third quarter of 2008.

Revenue for the Pricing and Reference Data business increased by $11,599,000, or 10.6%, to $121,089,000 in the third quarter of 2008. The Kler’s business contributed incremental revenue of $1,313,000 in the third quarter of 2008. The revenue increase for the Pricing and Reference Data business was attributable primarily to growth in both North America and Europe resulting from higher demand for our evaluated pricing and reference data content and increased levels of usage-related revenue.

Revenue for the Real-Time Services business increased by $2,353,000, or 6.7%, to $37,726,000 in the third quarter of 2008 primarily due to the continued expansion of the real-time datafeed business and the Managed Solutions business in North America. Revenue for this business in the third quarter of 2008 also included $391,000 of foreign exchange loss mainly related to the revaluation of accounts receivable in Europe.

Revenue for the Fixed Income Analytics business increased by $166,000, or 2.1%, to $8,194,000 in the third quarter of 2008. This increase in revenue is mainly due to new sales and one-time consulting project revenue, partially offset by the impact of cancellations primarily caused by client consolidation activities.

Active Trader Services

Within the Active Trader Services segment, revenue increased by $417,000, or 1.9%, to $22,553,000 in the third quarter of 2008. The change in foreign exchange rates, as noted above, had an unfavorable impact on revenue of $98,000 in the third quarter of 2008. This revenue increase was primarily related to higher average subscription fees, partially offset by lower advertising revenue and a decline in the number of core eSignal direct subscription terminals which decreased 3.1% to 61,252 in the third quarter of 2008.

Cost of Services

Cost of services expenses are composed mainly of personnel-related expenses, communication, data acquisition, and consulting costs and expenditures associated with software and hardware maintenance agreements.

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The increase in cost of services expenses is mainly due to higher personnel-related costs of $2,946,000 associated with increased headcount levels and the effect of annual merit increases, coupled with higher communications expense of $1,215,000. Also contributing to the increase in cost of services expense in the third quarter of 2008 were increased hardware and software maintenance costs of $313,000. The change in foreign exchange rates, as noted above, increased cost of services expense by $85,000 in the third quarter of 2008. Cost of services expense as a percentage of revenue was 32.1% in the third quarter of 2008 compared with 31.7% in the third quarter of 2007.

Selling, General and Administrative Expenses

Selling, general and administrative expenses are composed mainly of personnel-related expense, outside professional services, advertising and marketing expenses, occupancy-related expenses, and commissions paid to third parties for distribution of our data to customers.


	For the Three Months Ended September 30,
(In thousands)	2008		2007		% Change
SELLING, GENERAL and ADMINISTRATIVE	$	60,727	$	59,196	2.6	%

Selling, general and administrative expenses increased by $1,531,000, or 2.6%, to $60,727,000 in the third quarter of 2008. The Kler’s business contributed incremental selling, general, and administrative expenses of $234,000 in the third quarter of 2008.

The increase in selling, general and administrative expenses is mainly due to higher personnel-related costs of $1,801,000 associated with increased headcount levels, the effect of annual merit increases, and higher incentive compensation-related costs. Also contributing to the increase in selling, general, and administrative expenses are increased legal fees of $463,000, increased bad debt expense of $414,000, and higher premises expense of $408,000 primarily related to higher rent in our London office. This is coupled with higher consulting expense of $224,000 mainly related to tax consulting. This increase is partially offset by a foreign exchange gain primarily due to the revaluation of Euro bank balances and inter-company bank balances of $1,162,000. The increase was further offset by a decrease in commissions paid to third parties for distribution of data of $269,000 and lower sales tax expense of $228,000. The change in foreign exchange rates, as noted above, decreased selling, general, and administrative expenses by $278,000 in the third quarter of 2008. Selling, general, and administrative expenses as a percentage of revenue was 32.2% in the third quarter of 2008 compared with 33.8% in the third quarter of 2007.

Depreciation


	For the Three Months Ended September 30,
(In thousands)	2008		2007		% Change
DEPRECIATION	$	6,706	$	5,742	16.8	%

Depreciation expense increased by $964,000, or 16.8%, to $6,706,000 in the third quarter of 2008. The increase in depreciation expense is mainly due to higher capital spending, coupled with higher capitalized software development amortization. This is partially offset by the normal expiration of asset lives. The change in foreign exchange rates, as noted above, decreased depreciation expense by $13,000 in the third quarter of 2008.

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Amortization expense increased by $282,000, or 4.2%, to $7,006,000 in the third quarter of 2008 primarily due to an incremental $149,000 of amortization expense associated with the acquisition of the Kler’s business. The change in foreign exchange rates, as noted above, increased amortization expense by $92,000 in the third quarter of 2008.

Other Consolidated Financial Information

Income from operations increased by $5,817,000, or 12.2%, to $53,681,000 in the third quarter of 2008 due to the factors discussed above.

Interest income decreased by $512,000, or 21.3%, to $1,893,000 in the third quarter of 2008 due to a decline in interest rates.

Income before income taxes increased by $5,305,000, or 10.6%, to $55,574,000 in the third quarter of 2008 mainly due to higher income from operations discussed above.

Net income decreased by $2,624,000, or 6.7%, to $36,715,000 in the third quarter of 2008. The decrease in net income is primarily due to a higher effective tax rate of 33.9% for the third quarter of 2008 compared to 21.7% for the third quarter of 2007. The third quarter of 2007 effective tax rate was lower compared with the third quarter of 2008 mainly due to the impact of a number of discrete, one-time items in the third quarter of 2007. The impact of the higher effective tax rate in the third quarter of 2008 is partially offset by higher income before income taxes, as noted above.

We generated basic net income per share of $0.39 and diluted net income per share of $0.38 in the third quarter of 2008, compared with basic net income per share of $0.42 and diluted net income per share of $0.40 in the third quarter of 2007.

Weighted average basic shares outstanding decreased 0.3% and weighted average diluted shares outstanding decreased 0.5% in the third quarter of 2008 compared to the third quarter of 2007. Repurchases of shares of outstanding common stock under our publicly announced stock buyback program more than offset options exercised by employees and the issuance of shares under the 2001 Employee Stock Purchase Plan.

Nine Months Ended September 30, 2008 versus Nine Months Ended September 30, 2007

Revenue


(In thousands)	2008		2007		% Change
Institutional Services:
Pricing and Reference Data	$	351,468	$	315,169	11.5	%
Real-Time Services		109,818		101,837	7.8	%
Fixed Income Analytics		24,394		24,306	0.4	%
Foreign Exchange		4,044		—	—

Total Institutional Services	$	489,724	$	441,312	11.0	%

Active Trader Services:
eSignal		66,676		66,218	0.7	%
Foreign Exchange		49		—	—

Total Active Trader Services		66,725		66,218	0.8	%

TOTAL REVENUE	$	556,449	$	507,530	9.6	%

Total revenue increased by $48,919,000, or 9.6%, to $556,449,000 in the first nine months of 2008. The Xcitek business, which we acquired in May 2007, contributed incremental revenue of $3,058,000 in the first nine months of 2008. The Kler’s business, which we acquired in August 2008, contributed $1,313,000 in the first nine months of 2008. Other factors driving the increase in total revenue included strong revenue growth at both our Pricing and Reference Data business

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of $31,928,000 and at our Real-Time Services business, which produced a revenue increase of $7,981,000. In addition, revenue at our eSignal and Fixed Income Analytics businesses increased $458,000, and $88,000, respectively. The change in foreign exchange rates in the first nine months of 2008 compared with the first nine months of 2007 had a favorable impact on revenue of $4,093,000 in the first nine months of 2008, mainly due to the weakness of the US dollar against the Euro.

Institutional Services

Revenue within the Institutional Services segment increased by $48,412,000, or 11.0%, to $489,724,000 in the first nine months of 2008. The change in foreign exchange rates, as noted above, had a favorable impact on revenue of $4,044,000 in the first nine months of 2008.

Revenue for the Pricing and Reference Data business increased by $36,299,000, or 11.5%, to $351,468,000 in the first nine months of 2008. The Xcitek business contributed incremental revenue of $3,058,000 in the first nine months of 2008. Additionally, the Kler’s business contributed $1,313,000, to revenue for the first nine months of 2008. The revenue increase for the Pricing and Reference Data business was attributable primarily to growth in North America and Europe resulting from higher demand for our evaluated pricing and reference data content, and increased levels of usage-related revenue.

Revenue for the Real-Time Services business increased by $7,981,000, or 7.8%, to $109,818,000 in the first nine months of 2008 primarily due to the continued expansion of the real-time datafeed business and the Managed Solutions business in North America. Revenue for this business in the first nine months of 2008 also included $637,000 of foreign exchange loss from the revaluation of accounts receivable in Europe.

Revenue for the Fixed Income Analytics business increased by $88,000, or 0.4%, to $24,394,000 in the first nine months of 2008. This increase in revenue is mainly due to new sales and one-time consulting project revenue, partially offset by the impact of cancellations primarily caused by client consolidation activities.

Active Trader Services

Within the Active Trader Services segment, revenue increased by $507,000, or 0.8%, to $66,725,000 in the first nine months of 2008. The change in foreign exchange rates, as noted above, had a favorable impact on revenue of $49,000 in the first nine months of 2008. This revenue increase was primarily related to higher average subscription fees, partially offset by lower advertising revenue and a decline in the number of core eSignal direct subscription terminals which decreased 3.2% to 61,252 in the first nine months of 2008.

Cost of Services

Cost of services expenses are composed mainly of personnel-related expenses, communication, data acquisition, and consulting costs and expenditures associated with software and hardware maintenance agreements.


	For the Nine Months Ended September 30,
(In thousands)	2008		2007		% Change
COST OF SERVICES	$	181,979	$	165,878	9.7	%

Cost of services expenses increased by $16,101,000, or 9.7%, to $181,979,000 in the first nine months of 2008. The Xcitek business contributed incremental cost of services expense of $932,000 in the first nine months of 2008. Additionally, the Kler’s business contributed $285,000 to cost of services expense for the first nine months of 2008.

The increase in cost of services expenses is mainly due to higher personnel-related costs of $8,165,000 associated with increased headcount levels and the effect of annual merit increases, coupled with higher communications expense of $2,824,000. Also contributing to the increase in cost of services expense in the first nine months of 2008 were increased expenditures associated with hardware and software maintenance agreements of $1,598,000, and higher consulting expenses of $1,235,000. This is partially offset by lower data acquisition expense of $836,000, lower premises expense of $337,000, and a decrease in supplies and shipping expense of $157,000. The change in foreign exchange rates, as noted above, increased cost of services expense by $2,947,000 in the first nine months of 2008. Cost of services expense as a percentage of revenue was 32.7% in the first nine months of 2008, which is unchanged from the first nine months of 2007.

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Selling, general and administrative expenses increased by $6,478,000, or 3.7%, to $181,101,000 in the first nine months of 2008. The Xcitek business contributed incremental selling, general, and administrative expense of $414,000 in the first nine months of 2008. In addition, the Kler’s business contributed incremental selling, general, and administrative expense of $233,000.

The increase in selling, general and administrative expenses is mainly due to higher personnel-related costs of $4,383,000 associated with increased headcount levels, the effect of annual merit increases, and higher incentive compensation-related costs. This is coupled with higher premises expense of $2,454,000 primarily related to higher rent in our London office, and higher commissions paid to third parties for distribution of data of $578,000. Also contributing to the increase in selling, general and administrative expenses in the first nine months of 2008 is higher travel expenditures of $706,000, higher legal costs of $938,000, and increased marketing expense of $581,000. Additionally, increased bad debt expense of $557,000 contributed to the increase in selling, general, and administrative expenses in the first nine months of 2008. This is partially offset by a foreign exchange gain primarily due to the revaluation of Euro bank balances and inter-company bank balances of $5,167,000. The increase was further offset by lower sales and franchise tax expense of $311,000, lower communications expense of $186,000, and a decrease in consulting fees of $93,000. The change in foreign exchange rates, as noted above, increased selling, general, and administrative expenses by $1,575,000 in the first nine months of 2008. Selling, general, and administrative expenses as a percentage of revenue was 32.5% in the first nine months of 2008 compared with 34.4% in the first nine months of 2007.

Depreciation


	For the Nine Months Ended September 30,
(In thousands)	2008		2007		% Change
DEPRECIATION	$	20,016	$	16,708	19.8	%

Depreciation expense increased by $3,308,000, or 19.8%, to $20,016,000 in the first nine months of 2008. The increase in depreciation expense was mainly associated with an adjustment in the second quarter of 2007 of $695,000 associated with the reversal of previously depreciated capitalized development costs. This is coupled with higher capital spending and increased capitalized software development amortization in the first nine months of 2008. This is partially offset by the normal expiration of asset lives. The change in foreign exchange rates, as noted above, increased depreciation expense by $100,000 in the first nine months of 2008.

Amortization


	For the Nine Months Ended September 30,
(In thousands)	2008		2007		% Change
AMORTIZATION	$	20,761	$	19,665	5.6	%

Amortization expense increased by $1,096,000, or 5.6%, to $20,761,000 in the first nine months of 2008 primarily due to an incremental $471,000 of amortization expense associated with the acquisition of the Xcitek business, coupled with an incremental $149,000 of amortization associated with the acquisition of Kler’s. The change in foreign exchange rates, as noted above, increased amortization expense by $386,000 in the first nine months of 2008.

Other Consolidated Financial Information

Income from operations increased by $21,936,000, or 16.8%, to $152,592,000 in the first nine months of 2008 due to the factors discussed above.

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Net income increased by $8,441,000, or 9.0%, to $102,540,000 in the first nine months of 2008. The increase in net income is primarily due to higher income before income taxes. Our annual effective tax rate for the first nine months of 2008 was 35.4% compared with 31.3% for the first nine months of 2007.

We generated basic net income per share of $1.09 and diluted net income per share of $1.06 in the first nine months of 2008, compared with basic net income per share of $1.00 and diluted net income per share of $0.97 in the first nine months of 2007.

Weighted average basic shares outstanding increased 0.1% and weighted average diluted shares outstanding increased 0.1% in the first nine months of 2008 compared to the first nine months of 2007. Options exercised by employees and the issuance of shares under the 2001 Employee Stock Purchase Plan were mostly offset by repurchases of shares of outstanding common stock under our publicly announced stock buyback program.

Income Taxes

Three Months ended September 30, 2008 versus Three Months ended September 30, 2007

Our estimated effective tax rate after discrete items increased to 33.9% in the third quarter of 2008 from 21.7% in the third quarter of 2007 primarily due to (i) non-recurring discrete benefits recognized in the third quarter of 2007, (ii) expiration of the federal Research and Development tax credit, (iii) a reduction in tax exempt income, and (iv) a reduction in stock-based compensation expense recorded for incentive stock options under SFAS 123(R). An incentive stock option does not ordinarily result in a tax benefit for us unless there is a disqualifying disposition of the stock. Therefore, no deferred tax asset has been recognized by us for compensation expense recorded for incentive stock options. We have not recorded a tax benefit for the federal Research and Development tax credit in the third quarter of 2008 as the federal law extending the credit was not signed into law until October 3, 2008.

A net discrete tax benefit of $756,000 was recorded in the quarter ended September 30, 2008. The net discrete tax benefit in the third quarter was attributable to (i) realized tax benefits related to stock-based compensation expense, (ii) a release of tax reserves and interest resulting from the expiration of a statute of limitations, (iii) state income tax rate changes, and (iv) a net benefit resulting from a tax provision to tax return adjustment with respect to the filing of our 2007 federal tax return, offset by an interest expense charge on tax reserves for unrecognized tax benefits.

Nine Months ended September 30, 2008 versus Nine Months ended September 30, 2007

We determine our periodic income tax expense based on the current forecast of income in the respective countries in which we operate and our estimated annual effective tax rate in each tax jurisdiction. The rate is revised, if necessary, at the end of each successive interim period during the fiscal year to management’s best current estimate of the Company’s annual effective tax rate. For the nine months ended September 30, 2008, our effective tax rate was 35.4% as compared to 31.3% for the nine months ended September 30, 2007. The estimated annual effective tax rate for the nine months ended September 30, 2008 was 35.5% before a discrete tax expense of $673,000 recorded in the six months ended June 30, 2008 and a discrete tax benefit of $756,000 recorded in the third quarter of 2008. The net discrete tax benefit in the third quarter was attributable to (i) realized tax benefits related to stock-based compensation expense, (ii) a release of tax reserves and interest resulting from an expiration of statute of limitation, (iii) state income tax rate changes, and (iv) a net benefit resulting from a tax provision to tax return adjustment with respect to the filing of our 2007 federal tax return, offset by an interest expense charge on tax reserves for unrecognized tax benefits.

The third quarter 2008 estimated annual effective tax rate is 35.5% as compared to the prior year third quarter estimated annual effective tax rate of 35.6%. The decline is attributable to (i) an increase in income generated in lower rate jurisdictions, (ii) a reduction in stock-based compensation expense recorded for incentive stock options under SFAS 123(R), and (iii) an estimated increase in the Foreign Tax Credit offset by (iv) the reduction in the Federal Research and Development tax credit which was reflected in the Company’s third quarter 2007 estimated annual effective tax rate. We have not recorded a tax benefit for the federal Research and Development tax credit in the third quarter of 2008 as the Federal law extending the credit was not signed into law until October 3, 2008. An incentive stock option does not ordinarily result in a tax benefit for the company unless there is a disqualifying disposition of the stock. Therefore, no deferred tax asset has been recognized by us for compensation expense recorded for incentive stock options.

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We adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, An Interpretation of FASB Statement No. 109,”on January 1, 2007. There were no material changes to our unrecognized tax benefits in the third quarter. As of September 30, 2008, we had approximately $16,540,000 of unrecognized tax benefits of which $15,881,000 would affect our effective tax rate if recognized and $659,000 would result in a decrease to goodwill.

We do not anticipate a material adjustment to tax reserves for uncertain tax positions within the next twelve months. We recognize interest and penalties related to uncertain tax positions in income tax expense. As of September 30, 2008, we have approximately $2,191,000 of accrued interest related to unrecognized tax benefits.

The tax years 2000 through 2007 remain open to examination by the major taxing jurisdictions to which we are subject.

We recognize future tax benefits or expenses attributable to our taxable temporary differences and net operating loss carry forwards. Recognition of deferred tax assets is subject to our determination that realization is more likely than not. Based on taxable income projections, we believe recorded deferred tax assets will be realized.

Liquidity and Capital Resources

Our cash needs arise primarily from the purchase of equipment and the improvement of facilities, including investments in our underlying infrastructure to expand the capacity of our data centers. We also use cash to fund working capital requirements and acquisitions, to support business growth initiatives, to pay dividends to stockholders, and to repurchase shares of our common stock under our stock repurchase program. We continue to generate cash from operations and believe we remain in a strong financial position. Management believes that our cash, cash equivalents and marketable securities, combined with expected cash flows generated by operating activities, will be sufficient to meet our cash needs for at least the next 12 months. We currently have no long-term debt.

The following table summarizes our cash flow activities for the periods indicated:


	Nine Months Ended September 30,
(in thousands)	2008			2007
Cash flow provided by (used in):
Operating activities	$	136,642		$	131,592
Investing activities		(31,304	)		(48,564	)
Financing activities		(115,674	)		(34,491	)
Effect of exchange rates on cash balances		(10,303	)		4,941

Net (decrease) increase in cash and cash equivalents	$	(20,639	)	$	53,478

Operating Activities

Net cash provided by operating activities increased by $5,050,000, or 3.8%, to $136,642,000 in the first nine months of 2008. The increase in net cash provided by operating activities was due to higher net income of $8,441,000 in the first nine months of 2008 compared with the first nine months of 2007. This is coupled with an increase in non-cash items related to depreciation and amortization expense of $4,404,000 in the first nine months of 2008 and a decrease in cash outflows related to excess tax benefits from stock-based compensation of $1,170,000 in the first nine months of 2008 compared with the first nine months of 2007, primarily due to a lower number of stock option exercises in the first nine months of 2008. This was partially offset by a decrease in our working capital of $9,772,000 mainly due to timing of payables and lower incentive compensation payments.

Investing Activities

Capital expenditures increased by $1,493,000, or 7.1%, to $22,629,000 in the first nine months of 2008 mainly due to higher capital spending associated with infrastructure investments at our Real-Time Services business partially offset by lower capital spending at our Pricing and Reference Data business.

In 2008, we expect to spend approximately $49,000,000 in capital expenditures focusing mainly on decreasing the latency, and increasing the capacity and bandwidth of our real-time datafeed and managed solutions infrastructures.

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In August 2008, we completed the acquisition of Kler’s, a leading provider of reference data to the Italian financial industry, for a purchase price of €19,000,000 in cash (or approximately $29,566,000 at the currency exchange rate at acquisition date) offset by cash acquired of €1,689,000 (or approximately $2,628,000 at the currency exchange rate at acquisition date). The final purchase price remains subject to post-closing working capital adjustments. This acquisition was funded from operating cash.

In the first nine months of 2008, we purchased marketable securities of $117,552,000 with original maturities greater than 90 days but remaining maturities of less than one year and had matured $136,215,000 of marketable securities with original maturities greater than 90 days but remaining maturities of less than one year.

In May 2007, we acquired the net assets comprising the market data division of Xcitek LLC, as well as the market data net assets of its affiliate Xcitax LLC for $25,123,000. This acquisition was funded from operating cash.

In the first nine months of 2007, we purchased marketable securities of $125,647,000 with original maturities greater than 90 days but remaining maturities of less than one year and had matured $122,692,000 of marketable securities with original maturities greater than 90 days but remaining maturities of less than one year.

We engage third-party investment advisers to advise us in connection with our investments.

Financing Activities

In the first nine months of 2008, we utilized $44,767,000 to repurchase 1,612,000 outstanding shares of common stock under our publicly announced stock buyback program. Also in the first nine months of 2008, we received $16,657,000 from the exercise of options and settlement of deferred and restricted stock units to purchase 951,000 shares of common stock issued pursuant to our 2000 Long-Term Incentive Plan and the purchase of 183,000 shares of common stock by employees under our 2001 Employee Stock Purchase Plan.

During the first nine months of 2008, we paid quarterly cash dividends to stockholders in the following amounts on the following dates:


Declaration Date	Dividend Per Share		Type	Record Date	Payment Date	Total Dividend Paid (in thousands)
December 11, 2007 ⁽¹⁾	$	0.50	Special (cash)	January 4, 2008	January 24, 2008	$	47,184
December 11, 2007 ⁽²⁾	$	0.15	Regular (cash)	March 3, 2008	March 31, 2008	$	14,141
May 21, 2008	$	0.15	Regular (cash)	June 6, 2008	June 27, 2008	$	14,100
July 15, 2008	$	0.15	Regular (cash)	September 5, 2008	September 26, 2008	$	14,117

Total						$	89,542

(1)	Unpaid dividends declared in the amount of $47,184,000 were included in dividends payable as of December 31, 2007.

(2)

On December 11, 2007, our Board of Directors (i) approved increasing the Company’s regular quarterly dividend by 20%, raising it from $0.125 per share to $0.15 per share of common stock and (ii) declared the first quarter 2008 dividend (payment date: March 31, 2008 and record date: March 3, 2008). The March 2008 total dividend paid amount of $14,141,000 was included in dividends payable as of December 31, 2007.

The actual declaration of any future dividends, and the establishment of record and payment dates, is subject to final determination by our Board of Directors.

In the first nine months of 2007, we utilized $27,586,000 to repurchase 1,037,000 outstanding shares of common stock under our publicly announced stock buyback program. Also in the first nine months of 2007, we received $25,233,000 from the exercise of options and settlement of deferred and restricted stock units to purchase 1,626,000 shares of common stock issued pursuant to our 2000 Long-Term Incentive Plan and the purchase of 185,000 shares of common stock by employees under our 2001 Employee Stock Purchase Plan.

In February 2007, we announced that our Board of Directors authorized the initiation of a quarterly cash dividend. During the first nine months of 2007, we paid quarterly cash dividends to stockholders in the following amounts on the following dates:


Payment Date	Record Date	Type	Amount Per Share		Total Dividend Paid (in thousands)
March 30, 2007	March 1, 2007	Regular, Cash	$	0.125	$	11,706
June 27, 2007	June 7, 2007	Regular, Cash	$	0.125	$	11,793
Sept 26, 2007	Sept 6, 2007	Regular, Cash	$	0.125	$	11,787

Total					$	35,286

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On February 25, 2008, we entered into a new property lease agreement for our London, UK office, which effectively extends our current lease agreement from the current expiration date in April 2010 to an expiration date of April 2025. The total incremental minimum lease obligation over this additional fifteen year term will be approximately $60,746,000, as measured at the foreign currency exchange rate between the UK pound and the US dollar at the date of the agreement, none of which is payable until beginning in September 2011. The lease agreement includes open market rent reviews on April 12, 2015 and April 12, 2020, which could increase the total minimum lease obligation. The Company will follow the guidance in Statement of Financial Accounting Standard No. 13 “Accounting for Leases” and Statement of Financial Accounting Standard No. 29 “Determining Contingent Rentals” to account for this contingency at the time of each open market review.

There have been no other material changes to our commitments and contingencies since December 31, 2007. (See Note 9 in the Notes to the Consolidated Financial Statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2007.)

The Company is involved in litigation and is the subject of claims made from time to time in the ordinary course of business with a portion of the defense and/or settlement costs in some such cases being covered by various commercial liability insurance policies. In addition, the Company’s third-party data suppliers audit the Company from time to time in the ordinary course of business to determine if data the Company licenses for redistribution has been properly accounted for. In view of the Company’s financial condition and the accruals established for related matters, management does not believe that the ultimate liability, if any, related to these matters will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

In connection with the provision of services in the ordinary course of business, the Company often makes representations affirming, among other things, that its services do not infringe on the intellectual property rights of others and agrees to indemnify customers against third-party claims for such infringement. The Company has not been required to make material payments under such provisions.

Seasonality and Market Activity

Historically, we have not experienced any material seasonal fluctuations in our business and we do not expect to experience seasonal fluctuations in the future. However, financial information market demand is largely dependent upon activity levels in the securities markets. In the event that the US or international financial markets were to suffer a prolonged downturn that results in a significant decline in investor activity in trading securities, our sales and revenue could be adversely affected. The degree of such consequences is uncertain. Our exposure in the United States in this area could be mitigated in part by our service offerings in non-US markets.

Recently Issued Accounting Pronouncements

Fair Value Measurements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a framework for how companies should measure the fair value of assets and liabilities and expands disclosure about fair value measurements. Additionally, SFAS 157 formally defines fair value as the amount that would be received if an asset was sold or a liability transferred in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for the company in 2008. The adoption of SFAS 157, effective January 1, 2008, did not have a material impact on our financial position, results of operations or cash flows.

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In February 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Its Related Interpretive Accounting Pronouncements That Address Leasing Transactions,” (“FSP SFAS 157-1”) and FSP SFAS No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP SFAS 157-2”). FSP SFAS No. 157-1 removes leasing from the scope of SFAS No. 157, “Fair Value Measurements.” FSP SFAS No. 157-2 delays the effective date of SFAS No. 157 from 2008 to 2009 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of FSP SFAS 157-1, effective January 1, 2008, did not significantly impact our financial position, results of operations or cash flows. The Company does not expect its adoption of the provisions of FSP SFAS 157-2 to have a material effect on its financial condition, results of operations or cash flows.

The Fair Value Option for Financial Assets and Financial Liabilities (as amended)

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 provides entities with an option to choose to measure eligible items at fair value at specified election dates. If elected, an entity must report unrealized gains and losses on the item in earnings at each subsequent reporting date. The fair value option may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method, is irrevocable (unless a new election date occurs); and is applied only to entire instruments and not to portions of instruments. SFAS 159 is effective for the company in 2008. The Company did not elect the fair value option for any of our eligible financial instruments and other items, therefore, the adoption of SFAS 159, effective January 1, 2008, did not materially impact our financial position, results of operations or cash flows.

Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards

In June 2007, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) on Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (“EITF 06-11”). EITF 06-11 addresses the issue of the manner in which income tax benefits received on dividends paid to employees holding equity-classified non-vested shares (units or options) should be accounted for when such dividends are charged to retained earnings pursuant to SFAS 123(R). EITF 06-11 concludes that a realized income tax benefit should be recognized as a credit to additional paid-in capital and should be included in the pool of excess tax benefits available to absorb future tax deficiencies on share-based payment awards. In addition, the amount of any tax benefits from dividends reclassified in subsequent periods from additional paid-in capital to a reduction of income tax expense or an increase in income tax benefit should increase or decrease, but, be limited to the pool of excess tax benefits available on the reclassification date. EITF 06-11 is effective for the Company in 2008. The adoption of EITF 06-11, effective January 1, 2008, did not materially impact our financial position, results of operations or cash flows.

Business Combinations

In December 2007, the FASB issued SFAS No. 141 (revised), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS 141(R) is effective for the Company in 2009, with early adoption prohibited. We are currently evaluating the potential impact of adopting SFAS 141(R).

Accounting and Reporting of Noncontrolling Interests

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. SFAS 160 is effective for the Company in 2009, with early adoption prohibited. The Company does not anticipate that SFAS 160 will have a material impact on the Company’s financial statements.

Determination of the Useful Life of Intangible Assets

In April 2008, the FASB issued an FSP on SFAS No. 142-3, “ Determination of the Useful Life of Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “ Goodwill and Other

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Intangible Assets” . The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007), “ Business Combinations”, and other U.S. generally accepted accounting principles. FSP SFAS 142-3 is effective for the Company, prospectively only in 2009, with early adoption prohibited. The Company is currently evaluating the potential impact of adopting FSP SFAS 142-3.

Hierarchy of Generally Accepted Accounting Principles

In May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the U. S. SFAS 162 is effective 60 days following the SEC approval of Public Company Accounting Oversight Board (“PCAOB”) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company does not anticipate that SFAS 162 will have a material impact on the Company’s financial statements.

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,” (“FSP EITF 03-6-1”). This FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in computing earnings per share under the two-class method described in SFAS No. 128, “Earnings Per Share” (“EPS”). Unvested share-based payment awards that contain a non-forfeitable right to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two class method, as the rights to dividends or dividend equivalents provide a non-contingent transfer of value to the holder of the share-based payment award. In contrast, the right to receive dividends or dividend equivalents that the holder will forfeit if the award does not vest does not constitute a participation right. Under the terms of the Company’s restricted stock unit awards, if the award is forfeited prior to vesting, holders are not entitled to receive dividends or dividend equivalents. FSP EITF 03-6-1 is effective for the Company in 2009, with early adoption prohibited. All prior period EPS data must be adjusted retrospectively to reflect the provisions of the FSP, if applicable. The Company does not anticipate that FSP EITF 03-6-1 will have a material impact on the Company’s financial statements.

Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws, and is subject to the safe-harbor created by such Act and laws. Forward-looking statements include all statements that are not historical statements and include our statements discussing our goals, beliefs, strategies, objectives, plans, future financial conditions, results of operations, cash flows, or projections as well as our statements about expected market conditions, our expected growth and profitability, and planned product and service developments, and acquisitions; our statements related to any potential future stock repurchase transactions, including our intention to repurchase shares of our common stock from time to time under the stock repurchase program, the source of funding for the stock repurchase program, as well as the timing, nature and financial impact of any such transactions related to the stock buyback program; and statements related to dividends, including the timing, nature and financial impact of issuing any dividends. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. Such factors include, but are not limited to:

(i)

the impact of cost-cutting pressures across the industries we serve;

(ii)

consolidation of financial services companies, both within an industry and across industries;

(iii)

our ability to maintain our relationships with service bureaus and custodian banks;

(iv)

the presence of competitors with greater financial resources than ours and their strategic response to our services and offerings;

(v)

new offerings by competitors or new technologies that could cause our offerings or services to become less competitive or obsolete or we may not be able to develop new or enhanced services or offerings;

(vi)

a decline in activity levels in the securities markets;

(vii)

new legislation or changes in government or quasi-government rules, regulations, directives or standards may reduce demand for our services or increase our expenses;

(viii)

our ability to maintain relationships with our key suppliers and providers of market data;

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Further information on potential factors that could affect our business is described under the heading “Information Regarding Forward-Looking Statements” 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, 2007.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

A portion of our business is conducted outside the United States through our foreign subsidiaries and branches. We have foreign currency exposure related to operations in international markets where we transact business in foreign currencies and, accordingly, we are subject to exposure from adverse movements in foreign currency exchange rates. Our foreign subsidiaries maintain their accounting records in their respective local currencies. Consequently, changes in currency exchange rates may impact the translation of foreign statements of operations into US dollars, which may in turn affect our consolidated statements of operations. Currently, our primary exposure to foreign currency exchange rate risk rests with the UK pound and the Euro to US dollar exchange rates due to the significant size of our operations in Europe. The effect of foreign exchange on our business historically has varied from quarter to quarter and may continue to do so.

Please refer to Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the impact of foreign exchange on our financial position, results of operations and cash flows.

Total revenue for the three months and nine months ended September 30, 2008 and 2007 and long lived assets as of September 30, 2008 and December 31, 2007 by geographic region outside the United States, is as follows (in thousands):


	Three Months Ended September 30,
	2008		2007
Revenue:
United Kingdom	$	21,132	$	19,126
All other European countries		29,503		27,992
Asia Pacific		4,823		3,813

Total	$	55,458	$	50,931


	Nine Months Ended September 30,
	2008		2007
Revenue:
United Kingdom	$	63,050	$	53,667
All other European countries		88,290		81,327
Asia Pacific		13,749		11,084

Total	$	165,089	$	146,078

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We currently invest excess cash balances primarily in cash deposits held at major banks, money market fund accounts, and marketable securities. The money market fund accounts and marketable securities largely consist of US Government obligations, investment grade commercial paper and high credit quality municipal obligations; accordingly, we are exposed to market risk related to changes in interest rates. We believe that the effect, if any, of reasonable near-term changes in interest rates on our financial position, results of operations and cash flows will not be material.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of September 30, 2008. Based on this evaluation, our CEO and CFO concluded that, as of September 30, 2008, our disclosure controls and procedures were (1) designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management including our CEO and CFO to allow timely decisions regarding required disclosure and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our CEO and CFO have concluded that our disclosure controls and procedures were effective as of September 30, 2008 to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting. No change in our internal control over financial reporting occurred during the fiscal quarter ended September 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

We are not party to any material legal proceedings.

Item 1A.

Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under “Risk Factors” in Part I—Item 1A and under “Information Regarding Forward-Looking Statements” in Part II—Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (the “2007 Annual Report”), which could materially affect our business, financial condition or future results. Other than as set forth below, there have been no material changes in our risk factors from those disclosed in our 2007 Annual Report.

Global financial markets have experienced extreme volatility and disruption for more than twelve months. Since September 2008, this volatility has reached unprecedented levels as a result of a financial crisis affecting the banking system and participants in the global financial markets. The global financial crisis has resulted in consolidation among some participants in the financial markets and the collapse of others, and has prompted a wave of government intervention in the financial services industry to stabilize the markets. As a result, it is expected that there will be significant new regulation and

38

additional government oversight of the financial services industry. Concerns over the tightening of the corporate credit markets, inflation, energy costs and the dislocation of the residential real estate and mortgage markets have also contributed to the volatility in the global financial markets and, together with the global financial crisis, have diminished expectations for global economic conditions in the future.

As result of the foregoing events, the risks associated with the following risk factors described in “Item 1A. Risk Factors” in our 2007 Annual Report have intensified:

•

“The continuing impact of cost-cutting pressures across the financial services industry we serve could reduce demand for our services.”

•

“Consolidation of financial services within and across industries could lower demand for our services. ”

•

“A decline in the activity levels in the securities markets could lower demand for our services. ”

•

“New legislation or changes in governmental or quasi-governmental rules, regulations, directives, or standards may reduce demand for our services or increase our expenses. ”

•

“We are subject to regulatory oversight and we provide services to financial institutions that are subject to significant regulatory oversight, and any investigation of us or our customers relating to our services could be expensive, time consuming and adversely impact our reputation. ”

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds (1)

ISSUER PURCHASES OF EQUITY SECURITIES

In October 2006, our Board of Directors authorized the repurchase of up to 2,000,000 shares of our outstanding shares of common stock. On December 11, 2007, our Board of Directors authorized the repurchase of an additional 2,000,000 shares under the stock buyback program. Repurchases may be made in the open market or in privately negotiated transactions from time to time, subject to market conditions and other factors and in compliance with applicable legal requirements. We use cash on hand to fund repurchases under the stock buyback program. We are not obligated to acquire any particular amount of common stock as a result of the stock buyback program, which may be suspended at any time at our discretion.


Period	(a) Total Number of Shares (or Units) Purchased (1)	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1, 2008—July 31, 2008	176,000	$	25.58	176,000	1,626,900
August 1, 2008—August 31, 2008	168,000	$	29.75	168,000	1,458,900
September 1, 2008—September 30, 2008	299,963	$	26.17	299,963	1,158,937

Total	643,963	$	26.94	643,963

(1)	No shares have been purchased in the third quarter of 2008 other than through our publicly announced stock buyback program.

Item 3.

Defaults upon Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

Item 5.

Other Information

None.

39

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	As of September 30, 2008		As of December 31, 2007
Identifiable assets by reportable segment:
Institutional Services	$	943,342	$	982,381
Active Trader Services		190,638		197,750
Corporate and unallocated (d)		52,901		48,095

Total	$	1,186,881	$	1,228,226


	As of September 30, 2008		As of December 31, 2007
Long-Lived Assets:
United Kingdom	$	123,691	$	139,162
All other European countries		104,018		76,517
Asia Pacific		4,854		5,192

Total	$	232,563	$	220,871


Exhibits*
31.1		Rule 13(a)-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2		Rule 13(a)-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1		18 U.S.C. Section 1350 Certification of Chief Executive Officer.

32.2		18 U.S.C. Section 1350 Certification of Chief Financial Officer.


	INTERACTIVE DATA CORPORATION
		(Registrant)

Dated: November 3, 2008	By:	/s/ STUART J. CLARK
	Name:	Stuart J. Clark
		President and Chief Executive Officer

Dated: November 3, 2008	By:	/s/ ANDREW J. HAJDUCKY III
	Name:	Andrew J. Hajducky III
		Executive Vice President, Chief Financial Officer and Treasurer

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