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Nasdaq OMX Group (NASDAQ:NDAQ)

Q4 2010 Earnings Call

February 02, 2011 8:00 am ET

Executives

Vince Palmiere - Vice President of Investor Relations & Nasdaq Corporate Finance and Head of Nasdaq Activities

Robert Greifeld - Chief Executive Officer, Staff Director, Member of Executive Committee and Member of Finance Committee

Adena Friedman - Chief Financial Officer and Executive Vice President of Corporate Strategy

Analysts

Brian Bedell - ISI Group Inc.

Chris Allen - Banc of America Securities

Alex Kramm - UBS Investment Bank

Niamh Alexander - Keefe, Bruyette, & Woods, Inc.

Rob Rutschow - Credit Agricole Securities (NYSE:USA) Inc.

Michael Carrier - Deutsche Bank AG

Jillian Miller - BMO Capital Markets

Richard Repetto - Sandler O`Neill

Howard Chen - Crédit Suisse AG

Christopher Harris - Wells Fargo Securities, LLC

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

Matthew Heinz - Jefferies & Company

Roger Freeman - Barclays Capital

Operator

Good day, ladies and gentlemen. And welcome to the NASDAQ OMX Fourth Quarter 2010 Results Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, Vince Palmiere, Vice President of Investor Relations.

Vince Palmiere

Thank you, operator. Good morning, and thank you for joining us today to discuss NASDAQ OMX's fourth quarter and full year 2010 earnings results. Joining me are Bob Greifeld, our Chief Executive Officer; and Adena Friedman, our Chief Financial Officer.

Following our prepared remarks, we'll open up the line for Q&A. You can access the result's press release and presentation on the NASDAQ OMX Investor Relations website at www.nasdaqomx.com. We intend to use our website as a means of disclosing material non-public information and for complying with disclosure obligations under SEC Regulation FD, and these disclosures will be included under the Events and Presentations section of the site.

Before I turn the call over to Bob, I would like to remind you that certain statements in the prepared presentation and during the subsequent Q&A period may relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The actual results might differ materially from those projected in these forward-looking statements. Information concerning these factors that could cause actual results to differ from forward-looking statements is contained in our press release and in our periodic reports filed with the SEC.

With that, I'll turn it over to Bob.

Robert Greifeld

Thank you, Vince. And thank you, everybody, for joining us on this call this morning. Certainly, I appreciate your effort to get here on this rainy, icy day. I'll begin by spending a few minutes highlighting the fourth quarter 2010, then I will update you on the progress we are making with some of our initiatives. Adena will then walk you through the financial details.

On a non-GAAP basis, we delivered outstanding record results as non-GAAP diluted earnings per share came in at a record $0.55, 6% above our previous record and 20% above our fourth quarter 2009 non-GAAP results. Net revenues for the quarter reached $400 million, while net income grew to $110 million, an 11% increase over results from the fourth quarter of 2009. This performance was driven by our global growth in derivatives and the strength of our European-based businesses and should be attributed to the diversification and globalization strategy that we embarked upon in 2007.

Over the last three years, we have made a successful transition from a U.S.-based cash equities exchange to a highly successful, multi-asset global franchise, with 37% of our total revenues now coming from outside of the U.S. and nearly 20% coming from derivatives, trading and clearing. As I walk you through these results, it will become very clear that many of these new businesses, including derivatives in the U.S. and Europe, global Market Technology, Access Services and corporate solutions all provided strong and sustainable revenue success in the fourth quarter throughout 2010, and is positioned to be an engine of our growth in the years to come.

During the year, we continued to invest in diversifying and globalizing our business. With the acquisition of SMARTS and FTEN, we can now provide a full suite of pre-trade and post-trade risk management solutions to broker-dealers, regulators and exchanges worldwide. As the market access rules ramp up in the U.S. and stronger risk management and compliance practices are implemented worldwide, SMARTS and FTEN are perfectly positioned to meet the needs of these rapidly growing market segments.

As an organization, overall, we are well positioned to continue to experience growth across all our businesses, and we believe that our fourth quarter results are a testament to the benefits of our model and our efforts over the past number of years.

Now turning to the details of the quarter. In Market Services, revenue increased $24 million, or 10%, from the fourth quarter of 2009. One significant milestone in the fourth quarter was the launch of the Genium INET trading platform, the world's fastest trading and clearing system in our Nordic equity derivatives market, as well as the launch of repo clearing in the Nordic clearinghouse. Overall, our Nordic Derivatives business experienced a 23% increase in revenues over the prior year quarter.

In the U.S., NASDAQ OMX was, again, the number one market in options. The combined market share of PHLX and NOM grew to 31%, while volumes jumped significantly. This increased activity and market share drove our U.S. derivatives revenue up an impressive 35% compared to the fourth quarter of 2009.

Finally within Market Services, responding to customer demand in the post-May 6 environment, we successfully launched PSX, our innovative price-size trading venue, which has captured approximately 1% of the market in a short period of time.

Moving on to our Issuer Services business segment. NASDAQ OMX signed 63 new listings during the quarter, at a total of 220 new listings throughout 2010, including 100 IPOs. NASDAQ OMX continued to dominate the Greater China area with 43 new listings in 2010. One notable Chinese listing in the fourth quarter was SinoTech Energy, which was the largest Chinese energy IPO in 2010. We also captured the largest financial company that completed an IPO on the U.S. market in the fourth quarter, LPLA Investment Holdings, based in Boston, that raised over $469 million in proceeds.

Finally, within Issuer Services, corporate solutions continues to deliver innovative product and services that enables issuers to meet the requirements of being a public company, while simultaneously deepening our relationship with these issuers. That has resulted in strong revenue growth, up 29% year-over-year.

Our Global Index Group also had an outstanding year as revenues were up over 20% from last year, driven by increased demand for new licensed ETFs and other financial products. In our industry-leading Market Technology business, we finished the year strong as fourth quarter revenues reached their highest levels ever. The Australian Stock Exchange went live with the Genium INET platform, capping off a very strong quarter for the business.

In summary, results for the quarter were very impressive as strong revenue growth drove our earnings higher. What did not have much of an impact to our Q4 results was the 22.8 million share repurchase from Borse Dubai that we completed on December 21. Since the transaction was completed solely in the quarter, the impact to our fourth quarter results was negligible. However, looking forward, we are pleased with the ongoing benefit the buyback will provide to our 2011 results. Adena will provide some insights in the full quarter impact of the buyback in her remarks.

Overall, the increase in earnings certainly speaks for the strength of our business, the success of our diversification strategy and the soundness of our capital management decisions. During 2010, we took a number of steps in the execution of our corporate strategy to diversify into new asset classes, move into new geographies, develop new capabilities and attract new clients. Let me quickly touch on some.

At the beginning of the year, we obtained investment grade status and refinanced our debt obligations, allowing us to launch a share repurchase program that we aggressively pursued. By year's end, we have repurchased 37.8 million shares valued at $797 million. Within our Derivatives business, we became the number one U.S. Options Market and the Nordics realized strong growth in both volume and membership. 2010 also saw the launch of the repo and swaps clearing service in the Nordics.

In NASDAQ OMX Commodities, we continue to grow our business by launching the U.K. power market N2EX and by acquiring Nord Pool ASA and NOCC, our U.S. Energy Clearing business. In cash equities, we launched PSX, our price size marketplace, installed Genium INET in the Nordics, increased demand for colocation and Access Services and, as the year came to a close, acquired FTEN, a leader in free trade risk management.

And finally within Market Technology, we launched the commercial offering of Genium INET, which quickly realized success through new contract wins at the Singapore Exchange and the Australian Securities Exchange and acquired SMARTS Technology, a world leader provider of market surveillance. We are very pleased with the progress we made in 2010, and we feel that our hard work paid off in the form of improved business performance and truly strong growth in earnings. As we look into 2011, our goal is to continue to execute our corporate strategy by utilizing many of the new products and services we launched last year and by pursuing new initiatives that are a products of our innovative culture here at NASDAQ OMX.

Chief among them is our goal to provide FTEN pre-trade risk management software to clients looking for solutions to comply with the new market access rules. We firmly believe that we can achieve significant synergies by leveraging our customer relationships and offering FTEN's pre-trade products alongside the post-trade market surveillance products that have been developed by SMARTS.

Within Market Technology, we intend to realize continued success within Genium INET as the business moves forward with its growth plans in the Middle East and Asia. Additionally, we plan to continue to expand our capabilities within options and, just yesterday, introduced enhancements for the complex order system at PHLX, thereby expanding the market for orders in which we can compete.

Also within the Options Market, we have plans to offer trading in our after indexes early in the second quarter. In the Nordics, we intend to improve our infrastructure by launching the Genium INET platform for fixed income and commodities and expand our business to the growth of repo and swap clearing services.

And at N2EX, we launched our financial derivatives products just this week. And we did our first trade yesterday, certainly a milestone in our development. In the U.S., with IDCG, we continued to deepen our relationships with leading members of the industry as financial institutions progress in their preparations to clear interest-rate swap products in the second half of 2011. In Issuer Services, we expect to launch our BX venture market, which will be a venue for venture-backed companies that aspire to list on NASDAQ, while simultaneously expanding the reach of our corporate solutions product offering.

Before I turn the call over to Adena, I want to touch again on the quality of our record earnings this quarter. When compared to the third quarter of 2010, revenues were up 8%, while earnings grew 10%. We were able to achieve this growth on the strength of our Global business. This strong growth reflects successful execution of our corporate strategy, which is to lever our core technology while continuing to diversify geographically and to new products and services.

I'll now turn the call over to Adena, and thank you.

Adena Friedman

Thank you, Bob. Good morning, everyone, and thanks for joining us today. Our GAAP net income for the fourth quarter of 2010 was $137 million, or $0.69 per diluted share. These results include $9 million of expenses associated with workforce reductions, merger and strategic initiatives and other items offset by $37 million of tax benefits associated with these items and the restructuring of NASDAQ OMX subsidiaries. When excluding the impact of these items, our non-GAAP earnings per share for the quarter reached a record high of $0.55, an increase of 10% when compared to the third quarter and an increase of 20% when compared to the fourth quarter of 2009. Our net income reported on a non-GAAP basis was $110 million, an increase of 9% when compared to the third quarter of 2010 and an increase of 11% when compared to the fourth quarter of last year. Reconciliations of GAAP to non-GAAP results can be found in the attachments to our press release and in the presentation that's available on our website at ir.nasdaqomx.com.

Our growth in earnings was driven by the strength of our diversified businesses as increased revenue drove our EPS growth. Of the $0.05 increase in earnings when compared to the third quarter of 2010, nearly all of the increase was driven by stronger business fundamentals, only one $0.01 of the increase is due to our share repurchase program.

Turning to our strong Q4 operating results shown on Slide 8 of our presentation. You can see that net exchange revenues were $400 million for the quarter, an increase of $28 million, or 8%, when compared to the third quarter of 2010 and an increase of $31 million, or 8%, when compared to the prior-year quarter. Market Services revenues were $265 million, an increase of $16 million, or 6%, when compared to the third quarter and an increase of $24 million, or 10%, when compared to the fourth quarter of last year. Cash equity revenues for the quarter were $60 million, down $3 million, or 5%, when compared to the third quarter, but up $8 million, or 15%, when compared to the fourth quarter of 2009. Lower U.S. trading volumes and market share were the primary drivers behind the decline from last quarter, while modified fees are responsible for the increase in revenues when compared to the same period last year. Net derivative trading and clearing revenues were $74 million for the fourth quarter, up 23% when compared to $60 million in the third quarter of 2010 and up 30% when compared to the $57 million from the fourth quarter of last year.

Increases when compared to both the third quarter of this year and the fourth quarter of last year are due to higher volumes and market share in U.S. options and increased activities in the Nordic derivatives. Also contributing to the increase was the October 2010 launch of repo clearing in the Nordics. Overall, our Derivatives business exhibited strength in each of the instruments that we trade and clear. Included in Nordic derivatives revenues for the quarter are $12.1 million from cleared energy and carbon products, $12.7 million from trading and clearing of stock and index derivatives, $6 million from the clearing of fixed income products and approximately $1.2 million from other revenues and fees.

In Access Services, revenues were $48 million for the quarter, up from $45 million in the third quarter and up $7 million, or 17%, from the fourth quarter of 2009 on continued demand of our services and modifications to our member-oriented fees. Within Market Data, revenues were $79 million for the fourth quarter, up $3 million when compared to the third quarter of 2010 but down $5 million compared to the fourth quarter of 2009. The increase, when compared to the third quarter, is primarily due to modified fees for European Market Data products and the decline when compared to the fourth quarter of 2009 is due to lower U.S. tape plan and European Market Data revenues, offset by somewhat higher revenues associated with our U.S. proprietary data products.

In Issuer Services, revenues were $89 million for the quarter, up $4 million when compared to the third quarter and up $6 million when compared to the prior-year quarter. Driving growth in revenues when compared to the third quarter is increased demand from listed companies for our corporate solutions. The growth in revenues when compared to the fourth quarter of 2009 is due to increased demand for corporate solutions, as well as higher Global Index Group revenues.

And turning to Market Technology. Revenue at $46 million for the quarter, up from $38 million in the third quarter and $44 million in the prior year quarter. These increases are due to seasonality in our advisory practice and short-term development projects as we work with clients to complete enhancements and other request prior to year end, as well as a full quarter benefit from the SMARTS acquisition. By quarter end, total order value, which represents a cumulative value of all signed orders that have not yet been realized into revenue, was $495 million. And finally, within Market Technology, for the first quarter of 2011, assuming current FX rates, we expect our revenues to be approximately $42 million.

Now turning to Slide 14. Our total non-GAAP operating expenses for the fourth quarter were $216 million, representing an increase of $13 million from $203 million in the third quarter and an increase of $12 million from $204 million in the fourth quarter of 2009. The increase in expenses, when compared to the third quarter of 2010, was driven by higher compensation and depreciation and amortization expenses, partially due to the inclusion of the SMARTS-related expenses, which was acquired in the third quarter. Also contributing to the increase was the impact of changes in the exchange rates of various currencies as compared to the U.S. dollar, which had the effect of increasing expenses by $5 million when compared to the third quarter of 2010. The increase in expenses from the fourth quarter 2009 is primarily due to higher compensation expenses, including those associated with SMARTS and Nord Pool ASA, increases in professional and contract services cost and changes in the exchange rates of various currencies as compared to the U.S. dollar, which have the impact of increasing expenses by $2 million.

The impact of foreign currency fluctuations in our results is summarized on Slide 15 of the presentation. Now looking forward to 2011. For the full year, we expect total expenses to be in a range of $920 million to $940 million at current exchange rates. Our 2011 guidance includes $33 million of new expenses from the acquisitions of FTEN and Zoomvision, in addition to the full year impact of the acquisitions of SMARTS and Nordpool ASA. All of the 2010 acquisitions are expected to deliver profits to the enterprise in 2011.

Also impacting 2011 guidance is the strengthening of other currencies against the dollar. For instance, the Swedish krona has appreciated by 3% against the dollar in the last quarter alone. Lastly, our guidance includes approximately $25 million of non-recurring items. Excluding the non-recurring items, we anticipate that our total operating expenses will be in the range of $895 million to $915 million. An overall results for the quarter yielded non-GAAP operating income of $184 million, with operating margins coming in at 46% from 45% in the third quarter and prior year quarter.

Now turning briefly to investments and new initiatives on Slide 13 of the presentation. We provide a summary of returns on our investments, which continue to drive growth in our revenues and margins. Spending on all initiatives, including those launched in 2009 and 2010, is expected to be in the range of the $85 million to $95 million in 2011, with revenues projected to be in a range of $112 million to $122 million.

And moving on to net interest expense. In the third quarter, it was $24 million, an increase of $1 million from the third quarter of 2010 and an increase of $2 million from the fourth quarter of last year. At year-end 2010, NASDAQ OMX raised $367 million in net proceeds from the issuance of seven-year bonds with a coupon rate of 5.25% to provide funding for the repurchase of our shares from Borse Dubai. Beginning with the first quarter of 2011, incremental interest expense associated with this issuance is expected to be approximately $4.9 million per quarter.

Throughout 2010, we repurchased a total of 37.8 million shares for a total cost of $797 million at an average price of $21.08 per share. Our share repurchase in December occurred very late in the quarter and, therefore, had a negligible impact on the quarter EPS results. However, for illustrative purposes on Slide 15 of the presentation, we provide a calculation of the full quarter benefit of the share repurchase, net of incremental interest expense. Specifically, the December buyback would have resulted an additional $0.04 of EPS growth on top of our strong results of $0.55. Looking forward into 2011, we can expect to enjoy significant full year EPS net benefit from all of our 2010 buyback activity.

And finally, on the income statement, the non-GAAP effective tax rate for the quarter was 31%, while the effective tax rate on a reported GAAP basis was 9%. The lower-than-normal GAAP tax rate is primarily due to the permanent tax effect of restructuring certain NASDAQ OMX subsidiaries. This resulted in a one-time reduction in deferred tax liabilities, due to a revised effective tax rate and a one-time tax deduction for capital loss. Contributing to the lower non-GAAP effective tax rate are higher earnings from our European-based operations. As we look at 2011, we expect the normalized tax rate to be in the range of 31% to 33%, down slightly from where we were in 2010.

Now turning briefly to the balance sheet on Slide 17. Cash and cash equivalents and financial instruments at quarter end were approximately $733 million. Of this amount, approximately $494 million is reserved for regulatory requirements and other restricted purposes.

During the quarter, we used $10 million for capital spending purposes, bringing the total for the full year to $42 million and used $130 million of cash to complete the December buyback. We also used $35 million of cash in the quarter for debt repayments associated with the mandatory payment of our term loan. This brings our repayments for the full year of 2010 to a total of $146 million. We ended the quarter with total debt obligations at $2.3 billion, the details of which can be found on Slide 18.

And, finally, due to the launch of the repo clearing service and as legal counterparty for these transactions, this quarter, we began to recognize the gross market value of a repurchased resale agreements, net of customer positions on our balance sheet. The balance at the end of the fourth quarter was $3.4 billion in both assets and liabilities.

In closing, let me say that we are extremely pleased with our results this quarter. They capped the year in which we were able to grow revenue and earnings, while successfully launching a plan to return capital to shareholders. And as we look at 2011, we are excited about our prospects. Our goal this year is to continue to grow our business and manage our capital effectively as we focus on investments and new initiatives and debt retirement.

Thank you, and I will now turn it back over to Vince.

Vince Palmiere

Thanks, Adena. Operator, we can number up the quota questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Rich Repetto with Sandler O'Neill.

Richard Repetto - Sandler O`Neill

Market share. So it's moving around a little bit, and we know volatility has declined. The TRF for the internalized volume is now up to about 33%. And I guess, the question is, is there anything that can be done -- it seems like more is moving into the internalized of the dark. Is this a situation we're going to see a remedy in? Or is this just an end result of low vol [volatility]?

Robert Greifeld

Well, I think it's also two things, volatility and volume. So when we look at our market share over time, we do best in a volatile, high-volume environment. So when you look at the fourth quarter, it was the exact opposite of that. So it's facing significant headwinds. So some time, those headwinds will turn in our favor, but it's obviously our job to maneuver in both good and bad times. And what I think we're proud of is certain things that we've launched in the fourth quarter. The ISP program, right now, has about 200 million shares coming into our markets center. And it's important to recognize that, that program is targeted to what I'll call good natural order flow, which then will attract other order flow into the market centers. So we expect the benefits from the ISP program to start to accrue to us in some significant way in this quarter, and we're excited about the progress there. We do expect volume volatility to come back. PSX is something that is, obviously, a new concept for the industry. We are clearly educating a number of people. We clearly are getting us up where the buy side through their sell side sponsorship can come in size. And I think every day, we make some progress with it. So we're operating I think quite successfully.

Richard Repetto - Sandler O`Neill

And, Adena, thanks for doing the calculations on the buy back in the earnings pro forma. I guess with the model thrown off a significant amount of cash still, I guess the question is CapEx for next year? And then what is your preference to use the strong cash flow that we expect next year? Is it debt repayment, or where would you lean, given the cash flow?

Adena Friedman

I think on CapEx, I think that we would expect CapEx to be pretty much in the range of 2010 with maybe some slight growth due to the acquisitions, in terms of some of the technology that we acquired. So I wouldn't expect a significant increase in CapEx. I think that in terms of capital returns and how we use our cash, we really did accelerate the 2011 buyback in December with the acquisition of shares from Borse Dubai. So I think this year, we're going to be focused on using our cash on investing in our new initiatives and on debt repayment. And, in general, I think that we have -- Bob and I have been looking at where we get comfortable with looking at continued returns to shareholders. And I think as our debt gets down to about a 2.5x total debt-to-EBITDA ratio, we start to say that it's time for us to really consider and contemplate additional capital returns.

Richard Repetto - Sandler O`Neill

And very last question, Bob, I paid attention to your words, the soundness of the capital management strategy I think that certainly impacting earnings and the stock price. So I guess the question is consolidation, big opportunities, you got to leave some of your peers, the larger exchanges saying, "Hey, we're not seeing anything big on the front". Then maybe smaller acquisition sort of like what you've been doing to add to the model. But what do you see as the bigger picture and to give some comfort to investors on how you're looking at consolidation, I guess?

Robert Greifeld

Well, what we said before, and I'll continue to say, is acquisitions are episodic. They cannot effectively be planned. It's our job to understand the different assets across all geographies and all asset classes and have a point of view with respect to what value it would provide to us and our shareholders. And to the extent that you get the perfect alignment, then it's time to move. And we, obviously, look at a lot more things than we move upon. The order of magnitude probably increases year-to-year, in terms of what we evaluate just doing what we bid on or actually secure the deal on. So I think it's just hard to make any other blanket statement.

Operator

Our next question comes from Chris Harris with Wells Fargo Securities.

Christopher Harris - Wells Fargo Securities, LLC

The growth you're seeing in Nordic cash and, obviously, it continues to be very strong. Is there any way you guys could provide us a little bit more granularity of the drivers of that? And I guess maybe I'm curious as to kind of how much is attributable to maybe the high-frequency traders you're getting there versus maybe some of technology improvements that have occurred or retail flow. Then as a follow-up to that, have you seen any uptake in your high-frequency in your Nordic derivatives business? Maybe you can comment a little bit on the progress there.

Robert Greifeld

Yes, let me touch back to our Analyst Day. We said we're on, basically, a multistep march to bring the Nordic cash equity business in line to what I would say is pan-European and eventually U.S. norms. And we have a lot of work to do. One is, we introduced central clearing. Two is, we upgraded the platform to the INET-based platform. And three, is we started offering colocation services and fix protocol. So that's all working. It has taken longer than we wanted. But as you can see from the numbers, it is working. So that clearly is a higher level of high-frequency trading in the Nordic environment. I would also say it's early days, and we expect the colo and the high-frequency to be a driver of our growth in 2011. So if in a nine-inning game, our Nordics market equity market is inning four or five, the derivatives market is probably in inning one or two. And that we just recently put in the Genium INET technology there, giving us the ability to track a new class of traders in the marketplace. So we expect to make progress in that in 2011.

Christopher Harris - Wells Fargo Securities, LLC

And then, just a quick follow-up on that, in fact maybe tied down to this kind of inning guidance. What inning do you think we're kind of in for growth in Access Services revenue?

Robert Greifeld

We kind of reset the gain there as we acquired SMARTS and, in particular, FTEN. So we clearly have expanded the suite of products we offer. So I would say we're, obviously, in the early stages. And FTEN's got wonderful products, and we're going to delever that with our distribution, our footprint and our data centers. So it's early days.

Operator

Our next question comes from Niamh Alexander with KBW.

Niamh Alexander - Keefe, Bruyette, & Woods, Inc.

Can I just back on to the expenses, Adena? The expense guidance, I guess, it was a little higher than we had expected. Now you said on your prepared remarks, the $33 million of that was attached to FTEN, the Zoom and then was that also SMARTS, because I thought SMARTS would have been in the run rate by now?

Adena Friedman

Right. So I actually thought I'd do -- let me just go through our quick buildup. If we look at our 2010 full year results of $827 million of expenses and then you add the $33 million from FTEN and Zoom, then you also have to add a full year effective SMARTS and the Nord Pool ASA acquisitions, which should bring in another about $15 million of expenses. And then on top of that, we've seen a continued strengthening of the Swedish krona, in particular, against the dollar as well as other currencies. So if you do about a 5% increase in the currency rates, you could look at another $10 million to $15 million of expenses coming from the strengthening with those currencies. So you're really talking about a base of around $890 million just taking the full year effect of some of the acquisitions and FX. So I just want to make sure that we give you kind of a buildup to a baseline number. And then, of course, there's always some minor structural changes that occur year-over-year, particularly in compensation.

Niamh Alexander - Keefe, Bruyette, & Woods, Inc.

And then, as you said earlier also when you think about the $33 million from that and then from SMARTS, and you said you expect them to be profitable, although there should be kind of equal if not more revenue attached to those expenses, right?

Adena Friedman

Yes, I think that's exactly right. So I'm glad you brought that up. There is, of course, revenue attached to all of those. And as we've said, each of the acquisitions is expected to be profitable this year. And so we're very pleased to see that we're going to be providing accretion to our shareholders as the year goes forward against those acquisitions.

Niamh Alexander - Keefe, Bruyette, & Woods, Inc.

And I'd just like to jump on the derivatives because that's I guess where you're really probably ahead on the transaction line. Can you help me understand from the European side where you're seeing most growth and how we should think about the growth potential from there? And then just on the U.S. side, have they heard murmurings of maybe thinking about re-neutralizing that business? It has been doing so well. I know one of your competitors are in the process of doing that.

Robert Greifeld

But first, I'll say is we're glad you asked about the revenue question because Adena was being handed notes to bring it up. So you made it easy for her. Bring up the revenue, not just the expenses. On the derivatives side, let me just cover something that I mentioned in passing, and that is our commodities effort, which we completed Nord Pool ASA, and that has worked out very well for us. And then, as we said last year, we were focused on the U.K. power market. We launched the spot market last year, and we really could not launch the derivatives market until we have enough activity and confirmation of pricing in the spot market. So to the fact that us and the community said it's time to go with the derivatives markets on Monday, and we did some trade just today speaks to the progress we've made. And when we talk about our Derivatives business, we have a number of different irons in the fire and, myself at the CEO level and Adena at CFO level, certainly tend to look at these things collectively because there are many different cylinders. Right now, when you look at the N2EX opportunity, we certainly feel excited about that. We covered on a previous call, the basic growth we have and on to the listed derivatives as we bring it into what I'll call is a Eurocentric clearing model and state-of-the-art execution technology. So we're very early days with that. So we'll continue to drive our business. With respect to the PHLX, there are no plans, and I make this, hopefully, very clear to neutralize that business. It continues to do well. As I mentioned in my prepared comments, complex orders are just becoming available. That opens up, looking at Mr. Knoll, almost 10% of the market to us that we haven't been able to compete. And we launched Pixel. So that is just got a lot of steam behind it and the same with NOM as we put NOM into the same distribution network as PHLX is today. So we just, obviously, feel very good about that Derivatives business. And nobody has mentioned yet, but if you obviously look through the numbers, it's the interesting that derivatives revenue is higher than the cash equities revenue. So, clearly, we're a business that's been able to successfully diversify.

Operator

Our next question comes from Matthew Heinz with Stifel, Nicolaus.

Matthew Heinz - Jefferies & Company

So we've talked a little bit about the volume trends we've seen in Europe, both on the cash side and the derivatives side. If I could just hit on the pricing a little bit, it looks like your pricing revenue capture picked up pretty nicely, much better than we expected in the quarter. I'm just wondering if you could comment on the trends you're seeing there, is that sustainable? And how much, maybe, is the contribution in the Europe or the Nordic pricing a function of the commodities business?

Robert Greifeld

Well, one, with pricing, it's a daily debate with respect to what the pricing should be. So I hate to draw any long-term conclusions to it. We have a commitment to be competitive in all aspects, while not blindly seeking market share just for market share's sake. We clearly do look to get the proper balance. So I would say when you look at the pricing that we have in place across our various transaction businesses in the fourth quarter they represent, I think, a reasoned approach to the markets, and we don't see any dramatic changes as we go into 2011. They're obviously taking different business, as I say, on a daily basis. But on a net corporate level, no big moves one way or the other.

Matthew Heinz - Jefferies & Company

And then just expanding on that, you've clearly had a trend of improved net capture in U.S. cash at the expense of a few points of market share. Now kind of trending around 18%, 19%, what level of U.S. cash, here, do you feel comfortable with before you start to revisit the pricing strategy?

Robert Greifeld

Well, we certainly think the pricing strategy in 2010 was well founded. And as I said, I think in the last quarter call, in reference today with the ISP, I think the pricing strategy has to be about how do you incent those people who give you order flow that results in follow-on or knock-on effects, and that's where the focus is. I think the overall capture rate is a solid plan right now. We just want to have more targeted pricing in the time to come.

Operator

Our next question comes from Howard Chen with Crédit Suisse.

Howard Chen - Crédit Suisse AG

Bob, just a high-level question. You've historically been a really good prognosticator of overall market volumes. Just curious one month into the new year, where your mindset right now for overall activity levels.

Robert Greifeld

Boy, I don't feel that way there, Howard. But I'll take the compliment. One of the things we look at is net inflows into the marketplace, and we clearly saw a strong reversal of trend line in Europe in 2010. And in the U.S., we saw that reversal's trendline at the very end of 2010. We see it continuing. So we think that's a positive tailwind for us. So we clearly think that the volumes this year will be higher. And, again, what's important about the inflows is speaking back to the last question in a certain way, is the natural flow coming into the market generate significant subsequent flow. So that's kind of the head end. And so as we see increased activity in the head end, we know we'll rip it through the system. So that's one way that drives volume, and that's volume over a long period of time. And then it's a question of is there any short-term volatile impacts in the market? We have that for two months last year, enjoyed the benefits of the volume associated with that. So we think volatility, not so much a spike in volatility, but volatility will increase in the market during the course of the year. We're seeing some of that now, and we think the natural flow will increase. So what I will say is cautiously optimistic.

Howard Chen - Crédit Suisse AG

And then, Adena, is it fair to say that the 2011 expense guidance is based on the achievement of that 9% revenue CAGR you laid out at the Investor Day? And so my question would be like what's the flexibility and appetite to pullback on that if you're not seeing that 9% in 2011? Or should we think of some of these investments being initiatives as a bit more longer term?

Adena Friedman

Yes, I mean, I definitely think that you should look at the variability in our expense page generally by the fact that we have, as I laid out on my comments, we have a fair amount of money going into new initiatives, as well as initiatives that we launched in prior years. So we have some flexibility there, if we really find that the growth in our revenues is not being achieved as we expect. And also, I think that our general philosophy, as they always say, is all fixed cost are variable over time. So if we really find that we have some challenges, we can always look at our expense base. But we are certainly -- this expense guidance is based on a growth forecast for us and both in our new initiatives as well as in our core business.

Operator

Our next question comes from Roger Freeman with Barclays Capital.

Roger Freeman - Barclays Capital

I guess just going back to, Bob, your comments there on Howard's question about sort of market volume levels. Back at the Analyst Day, you gave some goals for a number of your businesses, I think, sort of the base assumption was that U.S. market volumes, equity market volumes, would be something like 9 billion to 10 billion shares a day that's probably over the next couple of three years. But we're obviously running well below that order comments of around potential vols spiked, et cetera. But I mean, other than that and taken the flows into account, it seems that we're in a fairly normal market environment. I mean, is it to get to the $9 billion is that just sort of growth in market levels and then the flows over the next couple of years that sort of get us back there? Because it seems kind of hard to get there from just...

Robert Greifeld

Let me speak to the fourth quarter, where we experienced what we think is depressed volume levels, right, averaging 7.4 billion shares a day here in the states and we produced $0.55. So, hopefully, and clearly reveals the diversification of the business across asset classes and across geographies. That being said, we certainly don't believe 7.4 million is what we will experience through 2011. Our budget numbers for 2011 based, upon the experience towards the tail end of last year, obviously, have come in lower. But we certainly believe that 9 billion to 10 billion is a number that we should witness, given equity inflows and some reasonable level of volatility. We have been through a time, as I like to say, the equity asset class essentially lost zero. Investor says should I put money in equities or should I put it in a money market fund or fixed income for those paying in zero. So we have a fundamental belief that risk appetite will return. We're seeing clear signs of that and that will drive volume.

Roger Freeman - Barclays Capital

And then in options, two things. One is what was the percentage of dividend rates in 4Q versus 3Q? And how much of an impact did that have on the net pricing?

Robert Greifeld

Yes, Roger, I don't have that number today and we looked at it. But the key thing is dividend trades have been part of the PHLX business for certainly as long as I've been involved with them, and that number hasn't changed in a dramatic way. But, clearly, our baseline market share has improved quite dramatically.

Roger Freeman - Barclays Capital

And just in sort of more macro on options, is there a role for the exchanges you, specifically, to I guess probably on the education front to try to drive? And you've been doing this, obviously, in the Nordic region. But it seems like in the U.S., Options kind of have been particularly money institutional investors is still in fairly early innings, and we're hearing from dealers that they're saying a lot of their effort, from a failed perspective, trying to just drive it into the institutional account. Is that something that is a focus for you too because it seems there's some significance on that?

Robert Greifeld

You couldn't be more right. And one of the reasons the U.S. Options Market is successful in the U.S. as compared to other countries is for the education effort that some of the founders of the industry set up years ago, and that effort is clearly reaching out to the institutional community at this point in time and in an educational way. And, as you can see by the growth in the volumes, it's working. And I think it will continue to work in the years to come.

Roger Freeman - Barclays Capital

On IDCG, do you have -- can you talk to any kind of refined strategy around the approach of the guarantee. They try to make it more accessible to smaller clearing members through lower initial guarantee funds but probably a hard time attracting larger dealers. Is that being revised at all?

Robert Greifeld

Well, I would say, Roger, the key thing to focus on is that IDCG offered, in the fourth quarter of 2010, a swap alternative for interest rate swaps, and I think that is very appealing to the large dealers.

Operator

Our next question comes from Jillian Miller with BMO Capital Markets.

Jillian Miller - BMO Capital Markets

Just following up on one of Roger's questions I guess asked slightly different way. The net options revenue was quite a bit stronger than we modeled, and we presumed a higher dividend trading during the quarter will translate to a lower capture rate at PHLX. Just want to be sure there weren't any guess pricing changes during the period that might have helped support your average fee.

Robert Greifeld

No, we just really outperformed in the market gained share, and the volume was strong.

Jillian Miller - BMO Capital Markets

And then you guys alluded earlier to plans to roll out some enhanced functionality with NOM 2.0 in April. And I was hoping you could run through what exactly the changes are going to be, whether you expect any meaningful impact on the trading activity.

Robert Greifeld

We certainly do. Just at a macro level, what we're doing is allowing NOM to access the broad range of customers that PHLX has. So NOM was de novo development and it attracted certain new entrants for the market place, and the number of entrants and members we have in NOM is a relatively small subset as compared to what we have in PHLX. So we want to make it seamless for all of PHLX members to now start trading at NOM, and that will happen towards the end of April.

Jillian Miller - BMO Capital Markets

I was hoping to get your thoughts on the potential MTS consolidation in Europe and just whether lower operating costs and potentially a more concentrated liquidity you may try it some of that as a combination a more formidable competitor for OMX.

Robert Greifeld

In the Nordic market? Well, I would say that we certainly compete with all of the MTS today, and whether there's more or less MTS, you can argue whether that's good or bad, I probably change my mind on that depending on the day. So I would say that we have to focus on what we do in the Nordics, and I think the team there, with Hans-Ole and Bjorn, have done a good job, certainly relative to our established exchange peers in coming up with pricing and services that make it attractive. And as I said previously, what's most important to me is the classical users of the MTFs are definitely eager to be part of our colocation data center strategy and become more active players on our Nordic markets. So we have to be on the offense off of products and services. Make sure we get the customers what they want, and I think we'll do well.

Operator

Our next question comes from Michael Carrier with Deutsche Bank.

Michael Carrier - Deutsche Bank AG

It looks like in two of your businesses, in the Market Data and Access Services, some of the pricing has changed to the upside. So I guess one is that more one-time in nature? Or are you seeing in some of the businesses that you do have more pricing power, and if so, which businesses do you see the best opportunities?

Robert Greifeld

Well, one is I think the pricing you see is definitely sustainable. But I wouldn't attribute it to pricing power but more of providing product and services that people recognize value for and pay us on.

Michael Carrier - Deutsche Bank AG

And then just one follow-up on the Options business, and I would say you could take it more broadly. But the whole like equity ownership, whether it's in options or clearinghouses, just wanted to get your view. It seems like it's pricing pressure in a different form but obviously there's benefits in terms of we're seeing an increased market share. So just wanted to get your thoughts on how you balance that option when you weigh the economics of the business.

Robert Greifeld

With respect to U.S. Options?

Michael Carrier - Deutsche Bank AG

Yes, that in particular, but then just broader like looking at other areas of the businesses if that option came up like what your thoughts are.

Robert Greifeld

Well, one with respect U.S. Options. What I would say that Erik and Tom and their team is keep doing what you're doing. It's clearly been a remarkable success over the last 12 months or so. And it shows that if you offer the right products at the right prices, based on the right technology, you can do well. That being said, we understand the reutilization effort and what that can mean, and we certainly recognize that ownership is a liquid form of payment for order flow, in a way. And there is a time and a place for it. So we would consider things like that where we think it's appropriate. We don't see it in the U.S. Options marketplace right now.

Operator

Our next question comes from the line of Alex Kramm with UBS.

Alex Kramm - UBS Investment Bank

In terms of the guidance, can you just, you said Adena that the $33 million from the acquisitions is profitable. Can you actually give us a little bit more detail? I mean, what's the margins in the business or what was the run rate last year off of those businesses? And are there actually any cost cuts coming through or is it $33 million number something that you're already expecting next year?

Adena Friedman

Well, we don't give out the specific margins associated with every acquisition. I think that what we are giving out in terms of the expenses associated with acquisitions does include synergies that we can extract from the businesses but recognize that these businesses are really meant to be opportunities for us to grow and expand our business. So they are certainly revenue growth opportunity for us. We do believe that we can do more with them as part of NASDAQ OMX than they could do alone. And I think our distribution capabilities, our management, our technology expertise can really take all of those acquisitions and take them further along in their growth path. So while we do have some operating synergies associated with them, it's really -- and that is incorporated to the guidance we've given, we really see this more as a revenue play.

Alex Kramm - UBS Investment Bank

So just to ask again, but can you at least compare to your base business or the technology business in very round numbers in terms of the profitability?

Adena Friedman

Yes, we really are not going to give out details on specific margins associated with each acquisition, I'm sorry.

Alex Kramm - UBS Investment Bank

Then second, on Access Services, I don't know if you mentioned this already. But I think you said with the growth in colo in Europe, we're going to see more showing up in there. Can you break this out at all? Or maybe coming back to Bob's inning reference like where are we in terms of colo and revenue showing in that line item?

Robert Greifeld

Well, I can certainly stay with the inning reference and Adena will not answer your question on the import on her part. Certainly, with colo in the Nordics, we're at the first inning, maybe the second, but I would probably say the first. And I'll repeat again what I said on Access Services put the acquisition of FTEN and SMARTS we've kind of reset the game, reset the clock and we obviously look forward to successfully integrating and executing upon our strategy with those acquisitions in 2011.

Alex Kramm - UBS Investment Bank

Then just lastly on regulation in the U.S. cash equities business and, obviously, you answered this to Rich to some degree here that you see that internalization taking up share and I think regulators obviously have been concerned about this a little more and they've commented on it and they've maybe started looking into what they need to change in terms of market structure. But regulators have a lot of things on their minds right now and a lot of things to do with documenting. So do you think there's any chance that we get any help from regulators that may strengthen the incumbents again in the U.S. cash equities market or is this basically something that is it 2012 or later event?

Robert Greifeld

Well, I'll say a couple of things. I think everybody can agree on the fact that if 99% of the market traded in the dark and that 99% of the market referred to the 1% in the lit markets for price discovery, things could be a little out of whack. Anything beyond that probably gets a little more difficult. The SEC, going back to the concept release, has teed those topics up for the industry to comment upon. It's probably impossible for me to forecast when they may or may not move on that. So I can't say too much more than that. But I will say and repeat that volume and volatility can help us, absent any regulatory change. So what we saw in the fourth quarter was historic low volumes and volatility, and internalization and dark trading will go up in that kind of environment. So we can certainly experience a kind of double plus as we get volatility and we get volume, then we'll do better.

Operator

Our next question comes from Chris Allen with Evercore Partners.

Chris Allen - Banc of America Securities

I just wanted to -- the new initiatives and the acquisitions are going to drive about, it's going to factor to the expense guidance of $60 million, $80 million. The slide for the new initiatives implies positive operating leverage and, Adena, you just mentioned potential synergies with some of the acquisitions you've done. I mean, should we think about improvement on operating margins as we move through 2011 towards your goals, just given the opportunities on both of these fronts?

Adena Friedman

I certainly think that we view our overall business as having scalability to it. So as we grow the businesses, we should be able to achieve the scale. I think that the new acquisitions, as well as the new initiatives, as you can tell, the new initiatives are providing us a positive return but not at the same level as our overall business. So we do see progress against those initiatives, in terms of driving margin into the business. But they will have to continue to grow and succeed to be able to achieve the same level of margin opportunity as our overall organization. I think that, certainly, when we look at the acquisitions, we look at them in the context of them ultimately driving scalable growth to our business. And we do believe we are really excited about what we can do with SMARTS and FTEN, in particular, on a global scale, both in terms of providing services to broker-dealers but also to exchanges and regulators. So I think that we have -- there's a very big market opportunity for us. They are scalable businesses, and they will be able to drive margin into the businesses overall. In terms of them getting to the -- helping us grow our 46%, I think that overall, the entire business has the opportunity to do that with the acquisitions and new initiatives helping along the way over time.

Chris Allen - Banc of America Securities

And then, just on the $2 billion revenue target you laid out at the Investor Day, it seems like it did a nice first step this quarter's results. Are there any of the opportunities within that goal that are really standing out in terms of where you are right now and kind of other things that maybe just a work in progress. I'm just trying to think about kind of next steps.

Adena Friedman

Sure. Well, I certainly think that the derivatives revenue had a standout quarter. And if you look at the fact that every asset class in the Derivatives business, both in the U.S. and Europe, grew quarter-over-quarter. And as we projected in our Analyst Day, we kind of set ourselves a long-range targets, particularly for the European derivatives. And I think that you can see that we are making progress towards that target out into 2013. So I think derivatives certainly is showing that it's going to have the growth path that we hope it should have. I think in terms of where we are just at the beginning, we also set growth targets for the market data and the index businesses, and I would say that we really just starting down the path for those two business units and you'll see, hopefully, some acceleration of that in the quarters and in years to come.

Operator

Our next question comes from Brian Bedell with ISI Group.

Brian Bedell - ISI Group Inc.

I wanted to drill on a little bit more granularly, especially in Europe, and as we think about how 2011 will play out and volume from the fourth quarter levels, obviously, your Cleared Energy business went from $9 million to $12 million 3Q to 4Q? If you can talk about the trajectory of that, how you see it coming through as we move through 2011? And then same thing for repo clearing and any impact that Genium INET you think will have on the Nordic Derivatives business?

Robert Greifeld

Sure. So with the Derivatives business in Europe, we have a number of different levers. And I think it's impossible for us to predict which one will accelerate the fastest, but each and every one of them has kind of unique growth opportunities. Listed derivatives is the last thing you mentioned, and I covered this a little bit before. We have a couple of ways to grow. One is our clearinghouse is becoming Eurocentric, and it has been Nordic-centric and it makes it easier for global players and European players to become members and to fully participate in the clearinghouse. And at the same time, we're making the trading platform the industry standard Genium INET with industry standard interfaces with world-leading performance. So that's all good stuff for the existing products we have. And with the innings metaphor, we're early days with that. So we don't have really I think we have one colo customer for our Listed Derivatives business, and that will be a different state of being to 12 months from now. In addition to that, we have this clearinghouse, we have this trading platform, and we have to have an innovative culture. So we need to put more product through that derivatives clearinghouse, and that's certainly our intention. In terms of new initiatives, you've got repo and interest rate swaps had the early most important progress in 2010. We expect the Repo business to contribute some significant revenue to us in '11. Interest rate swaps, we think will lag that by a little bit, but we did do some trades with the government debt office and some major Swedish banks, and we expect that to accelerate in the second half of the year. We move over to the power market. I covered N2EX. We're certainly excited about that. As we said previously, that market is essentially as large as our Nordic market. And we got an exciting opportunity, and it definitely was a cause for celebration to get the derivatives market launched and some trades that happened yesterday. So we're excited about that. And the core business in the Nordics for power, we think, will track in some general way GDP growth, and we're happy to see that the Nordics as compared to the U.S. and most of Europe is, obviously, in a good position, and we think that business will continue to do well.

Brian Bedell - ISI Group Inc.

And on the energy core front, do you think that the $9 million to $12 million, should we think of that growth trajectory linked quarter as being sustained as we move into through 2011?

Adena Friedman

Well, I think it's important to recognize that there is cyclicality to the Energy business. And the fourth quarter tends to be the strongest quarter for the year. The fourth and the first quarters tend to be the strongest quarters in the year, with the second and the third being a little bit less strong. So if you're looking at a quarter-over-quarter $9 million to $12 million, I think that projection is a little bit strong. Now quarter four 2009 was $10.2 million versus $12.1 million in quarter four 2010. So I think that you can see a good progress even against fourth quarter of last year. But there is a certain seasonality of the business.

Brian Bedell - ISI Group Inc.

And then same kind of analogy in the couple of things you mentioned earlier about the U.S. options business, Bob, on the complex order system that you're instituting at PHLX and also the off to indices in early second quarter. What kind of trajectory do you think we'll see from those in second quarter through fourth quarter '11?

Robert Greifeld

Well, our thought is that we will have expanding volume and expanding market share. And so basically the success we saw in 2010 should continue.

Brian Bedell - ISI Group Inc.

Just on expenses, Adena, this $25 million of non-recurring, how should we think about what makes up that $25 million and where it hits the P&L?

Adena Friedman

Well, I think that generally, we do have a few items that we can look at in terms of technology changes that we're making during the year, and that would then accelerate some depreciation, as well as an office move that we have during the year that could have some impact on that. But I would say that there's nothing large or sizable that we can point to right now as to what would drive the non-recurring, but we do tend to have non-recurring through the year. So we have projected those through the year.

Brian Bedell - ISI Group Inc.

And then just lastly, what's your FX forecast that you're using in your budget for 2011?

Adena Friedman

Well, I think the Swedish krona right now is at 6.50 krona to the $1. I think if you look over the last month, it was around 6.7 krona, which is very strong levels. And I think that in terms of my comments around FX, that, that's the rate that we were looking at in terms of it trending higher than 2010.

Brian Bedell - ISI Group Inc.

I guess a little higher than 6.70 krona?

Adena Friedman

Yes.

Operator

Our next question comes from Jonathan Casteleyn with Susquehanna.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

Bob, you just mentioned some confidence and you continued to gain market share in U.S. options. I guess I'm trying to understand what exactly about your functionality or technology allows you to sort of have a forward bias to your option market share gains in '11?

Robert Greifeld

Well, two things I'm highlighting for this call. One is the fact that NOM will be accessible to the broader world come the end of April, and there is pent-up demand for people who want to get to NOM, and we needed to make it a seamless effort for them. So we'll accomplish that at the end of April. The second is that there is a segment of the market that we have not been able to compete for. We've been lacking the functionality, and that functionality is coming online.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

And then to Adena, can you remind me of your debt to EBITDA covenants in the OMX credit facility? I think there was some limitation when you took out that debt pace. I'm just wondering exactly can you just refresh my memory as to what it was?

Adena Friedman

Sure. So the debt we currently have on our term loan is we have a 3.5x total debt to EBITDA ratio covenant in the loan agreement, today. And in terms of looking at buybacks and other capital return activities, we are at a 3x total debt to EBITDA, before goods into a basket. But total debt to EBITDA calculation with our term loan is slightly different than how the rating agencies tend to calculate us. So they do give us some credit for cash and our EBITDA is calculated without some of the non-cash items, such as equity comps. So it's a little bit of a different calculation than it is with the rating agencies.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

And that 3x, is that trailing or is that forward and do you...

Adena Friedman

Trailing.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

So do you have a forward EBITDA estimate for the firm?

Adena Friedman

No, and we don't provide that. That would be a trailing total debt to EBITDA ratio.

Operator

[Operator Instructions] And our next question comes from Rob Rutschow with CLSA.

.

Rob Rutschow - Credit Agricole Securities (USA) Inc.

I realize it's pretty small, but I think you guys provide technology for several of the Middle Eastern exchanges. Can you just confirm if that's maybe 10% to 15% of technology revenues? And just give us any thoughts there?

Robert Greifeld

Yes, I don't know. I'm looking at -- do we know it off the top of our head? No.

Adena Friedman

I don't know what you're talking about. We do provide the technology. I think there is 12 exchanges in the Middle East. So we are very active there and very successful. And we have Kuwait being a significant client, who's going to be coming online hopefully pretty soon, and we've been working very closely with them to finalize the technology implementation for them.

Robert Greifeld

But I would also say, since we haven't received any questions, while we're on Market Technology, I would highlight their outstanding fourth quarter performance. And, obviously, Genium INET is in a strong part of the product cycle, and the addition of SMARTS and FTEN gives them additional products. So they enter into 2011 with a record level backlog but also the most competitive products I think we've ever had.

Rob Rutschow - Credit Agricole Securities (USA) Inc.

In thinking about the Market Technology business, is there any way to sort of size the global market and what your market share might be?

Robert Greifeld

Well, I would say the key thing for you to focus on right now is with SMARTS and FTEN, in a certain respect, we have redefined the market. And we have been focused on exchanges as really our customer base. And now with these acquisitions, you can also state that regulators on a global basis and aspects of the broker-dealer operation are part of our defined market. So our defined market in 2010 increased dramatically.

Rob Rutschow - Credit Agricole Securities (USA) Inc.

With you bringing some of the repo contracts onto your balance sheet, does that impact your required cash at all?

Adena Friedman

No. I mean, generally speaking, as we look at the restricted cash, we do a regular calculation associated with all of the activity in the clearinghouse. But the fact that the repos are showing on a gross pages on the balance sheet does not have a material impact on our cash needs for the clearinghouse.

Operator

And at this time, I'd like to turn the call back over to our speakers for any closing remarks.

Robert Greifeld

Well, thank you, everybody, for your time today. I'd like to just close by, in a sense, repeating what I said. This represents, I think, the fruits of a multiyear effort to diversify our business, one, from an asset class, and two, from a geography point of view. And we hit on many cylinders last quarter. The Global Index business, we do not speak to, but they also had an outstanding 2010 are positioned to grow to 2011. So we feel as we look across the different aspects of NASDAQ OMX, we enter 2011 with great confidence. We would like some tailwinds as opposed to headwinds. But we produce $0.55 per share, dealing with a lot of headwinds. So we're proud of that, and hopefully the investors recognize that the strategy is working. So thank you, and we look forward to talking to you next quarter.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Everyone, have a great day.

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