Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Nasdaq OMX Group (NASDAQ:NDAQ)

Q1 2011 Earnings Call

April 20, 2011 8:00 am ET

Executives

Edward Knight - Chief Regulatory Officer, Executive Vice President and General Counsel

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

Eric Noll - Executive Vice President of Transaction Services - US and UK

Ronald Hassen - Interim Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Controller

Analysts

Brian Bedell - ISI Group Inc.

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

Alex Kramm - UBS Investment Bank

Patrick O'Shaughnessy - Raymond James & Associates, Inc.

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

Michael Carrier - Deutsche Bank AG

Richard Repetto - Sandler O`Neill

Howard Chen - Crédit Suisse AG

Christopher Harris - Wells Fargo Securities, LLC

Daniel Fannon - Jefferies & Company, Inc.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

Matthew Heinz - Jefferies & Company

Roger Freeman - Barclays Capital

Daniel Harris - Goldman Sachs Group Inc.

Operator

Good day, ladies and gentlemen, and welcome to the NASDAQ OMX First Quarter 2011 Results Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Vince Palmiere, Vice President, Investor Relations. Please go ahead.

Vince Palmiere

Thank you, operator. Good morning, everyone, and thank you for joining us today to discuss NASDAQ OMX's first quarter 2011 earnings results. Joining me are Bob Greifeld, our Chief Executive Officer; Ron Hassan, our interim Chief Financial Officer; and Ed Knight, our General Counsel.

Following our prepared remarks, we'll open up the line for Q&A. You can access the results 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 nonpublic information and for complying with disclosure obligations under SEC Regulation FD, and these disclosures will be included under the Events and Presentations section of our site.

Before I turn the call over to Bob, I would like to remind you that certain statements in our 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. These actual results may differ materially from those projected in these forward-looking statements. Information containing factors that could cause actual results to differ from our forward-looking statements is contained in our press release and in our periodic reports filed with the SEC.

And with that, I'll turn the call over to Bob.

Robert Greifeld

Thank you, Vincent. Thank you for joining us on this call this morning. I'll begin by spending a few minutes highlighting first quarter 2011 results and then update you on the status of our joint proposal to acquire NYSE Euronext. Ron will then walk you through the financials in detail.

On a non-GAAP basis, we delivered very strong results as net revenues for the quarter reached $415 million; net income was $110 million; and diluted earnings per share on a non-GAAP basis came in at a record $0.61, 11% above our previous record high and 42% above our first quarter of 2010 non-GAAP results.

This performance was driven by solid results in all our businesses as each delivered material increases in revenues despite a challenging macroeconomic climate. Our disciplined approach to managing the business has yielded top line expansion, revenue grew from $360 million to $415 million year-on-year, improvement in our operating margins and growth in profits as we continue to deliver for our shareholders.

Now turning to the details of the quarter. In Market Services, revenue increased $40 million or 17% from the first quarter of 2010. Year-on-year growth in revenue was driven by strength across all our Transaction and Access Services businesses. NASDAQ OMX was again #1 in equity options market share. The combined market share of PHLX and NOM grew to 29% from 24% in the year-ago period. Also volumes have increased significantly. This increased activity and market share drove our U.S. equity derivatives revenue up to an impressive 45% over the first quarter of 2010.

Within Access Services, revenues grew 36% over the same period, driven by an increased demand for services. Also contributing to the growth is the addition of FTEN, the low-latency, free trade risk management product that we acquired in December.

Moving on to our Issuer Services business segment. Revenues grew on the strength in demand for our Corporate Solutions, which were up 29% from the first quarter of 2010, while our Global Index Group had revenue growth of more than 40% from the lows realized during the financial crisis.

In Market Technology, during the first quarter, the Osaka Securities Exchange, the largest derivatives exchange in Japan, successfully launched its new derivatives trading system using NASDAQ OMX technology, while revenues for the Business segment showed solid performance, growing 26% from the first quarter of 2010.

In summary, results for the quarter were very impressive as strong revenue growth across all our businesses drove earnings higher. As we pursue our joint proposal for NYSE Euronext, we must not become distracted from achieving many of the strategic objectives that we committed to in 2011. Our goal remains to lever our innovative culture to drive growth, and we will achieve these goals by ensuring that our team remains focused on the task at hand.

The integration efforts for FTEN and SMARTS are progressing well, and we continue to see a lot of interest from the exchange community in leveraging our compliance and risk management solutions. Our goal remains to provide customers with FTEN's powerful pre-trade risk and broker compliance solutions that are complemented by SMARTS' leading broker compliance solution.

In our Derivatives business, we plan to continue to expand our capabilities within equity options. In the first quarter, we introduced enhancements to the complex order system in PHLX, thereby expanding the market share for orders in which we can compete. This past Monday, we began trading options on our Alpha Indices starting with Alpha versus a SPDR Index. At N2EX, following the first-quarter launch of our financial derivatives product, NASDAQ OMX Commodities signed up 2 market makers for the U.K. power futures contract. When combined with the success of our spot market, N2EX is now set to become the integrated market platform that we set out to create.

Before I turn the call over to Ron, I do want to spend a few minutes obviously talking about the bid for NYSE Euronext. Now when we step back and look at this quarter, we see that this quarter continues a long line of successful quarters, and I believe it is worthwhile to gain some perspective from our performance over the 4 years of 4 quarters and how that informs our thinking with respect to the bid. Since our achievement of $0.33 per share in the first quarter of 2007, our income has grown 84.8%. Our peers in this space, with the exception of ICE, had their high watermark for earnings in the first quarter of 2008. And we see that over the 4-year period of time, through the end of the fourth quarter of 2010, our peers had, for example, earnings increase of 12% over that period of time at CME, Deutsche Boerse declined by 16%, NYSE declined by 23% and ICE increased by 69%.

During this difficult and exciting period of time, our revenues were essentially flat, while NYSE's revenues declined 9% and Deutsche Boerse declined by 10%. An easy conclusion is that a well-managed cash equity and equity derivatives franchise can perform well on an absolute basis. It can also perform well versus derivative exchanges on a relative basis. An argument is made that the derivatives market will improve as the interest rate environment changes. While that is probably true, it is also important to note that the interest rate environment changes because the economy has improved and if the economy has improved, investors and entrepreneurs are more involved with the stock market, and our performance will improve. And it will improve dramatically as we lever our fixed cost scalable platforms.

We believe that cash equities is the original and the most important derivative product. Cash equities is a derivative of the economy of the market that it serves, and its success over the medium and the long term will be a multiplier of GDP growth in the region.

The recognition of these facts obviously underpins our actions in pursuing with our partner, ICE, a transaction with NYSE Euronext. This transaction will have the unique ability to create the world's leading cash equity marketplace. It'll be the undisputed leader. It'll be the first and most comprehensive pan-European market with market centers in Paris, Stockholm, Copenhagen, Helsinki, Oslo, Brussels, Lisbon, Amsterdam, Tallinn, Riga and Vilnius. So clearly, it will also create a national champion, a U.S. national champion. And collectively, the cash equity franchise will represent the preferred destination for listing for entrepreneurs and enterprises from all corners of the globe.

Promises of future strategic value are typically the last refuge when the facts are difficult to come by. They are nebulous and hard to prove or disprove. Our view of our proposed transaction is that we will deliver hard promises of accretion to our investors in a very short period of time, and we stand on our track record over the past four years, the past 8 years, to deliver hard, quantifiable strategic returns over the medium and long term.

Now as we said before, this proposed transaction is a result of the outstanding execution of our business plan. It gives us the ability to consider this transaction. This is an opportunistic business decision that we remain committed to seeing through, and one that is consistent with a long steady goal of leveraging massive scale against extreme efficiency. We've demonstrated before that we can deliver value to shareholders through this type of transaction, and we are certain we can do so again.

We have great respect for the members of the Board of Directors at NYSE, Duncan, the management team and the NYSE organization. We're uninvited, but we will continue to strive to enter into friendly discussions and hopefully have the opportunity to discuss how our transaction is best for investors over the short and the medium term.

We are committed to pursuing our bid to the end state and Jeff and I, ICE and NASDAQ, will consider all options available to us in this effort. It is fundamental to note that while management receives the bulk of the attention during this process, we, as a management team of public companies, are performing an agency function. I work for the Board of Directors and our shareholders, 25% of our shareholders, which is represented on our board, and the NASDAQ OMX shareholders support us in this effort. And at the end of the day, the agents will step back and the principals, the shareholders, will make the final decision. In the meantime, we will keep executing on our business plan and focus as we always have on operational excellence.

So thank you, and I'll turn the call over to Ron.

Ronald Hassen

Thank you, Bob. Good morning, everyone, and thanks for joining us today. Our GAAP net income for the first quarter of 2011 was $104 million or $0.57 per diluted share. These results include $9 million of expenses associated with merger and strategic initiatives, a sublease loss reserve and other items. When excluding the impact of these items, our non-GAAP diluted earnings per share for the first quarter of 2011 reached a record high of $0.61, an increase of 42% when compared to the first quarter of 2010. Our net income reported on a non-GAAP basis was $110 million, an increase of $18 million or 20% when compared to the prior year quarter.

Reconciliations of GAAP to non-GAAP results can be found in the attachments to our press release and in the presentations that are available on our website at ir.nasdaqomx.com.

Our growth in earnings is driven by continuing strength of the various businesses as increased revenue drove our earnings per share growth. Of the $0.18 increase in earnings per share, when compared to the first quarter of 2010, approximately 2/3 of the increase was driven by stronger business fundamentals while the remainder can be attributed to the share repurchase program that we launched last year.

Turning to our record first quarter operating results. Shown on Slide 5 of our presentation, Net Exchange revenues reached their highest levels ever at $415 million for the quarter and representing an increase of $55 million or 15% when compared to the first quarter of last year.

Within Market Services, revenues were $281 million, an increase of $40 million over the prior year results. Cash Equity revenues were $62 million, up $7 million as lower U.S. transaction volumes were offset by modified fees.

Net Derivative Trading and Clearing revenues were $80 million for the first quarter, up $19 million or 31% due to higher volumes and market share within our PHLX and NASDAQ OMX options in our markets. Also contributing to the increase are higher volumes within our Nordic Derivative business. For the quarter, revenues within Nordic Derivatives were comprised of $11 million from cleared energy and carbon products, $14 million from trading and clearing of stock and index derivatives, $6 million from the clearing of fixed income products and approximately $1 million from other revenues and fees.

In Access Services, revenues were $53 million for the quarter, an increase of $14 million or 36% from last year due primarily to the continued demand of our services. Also contributing to the growth in Access Service revenues is approximately $5 million resulting from the inclusion of results from FTEN, which was acquired at the end of the fourth quarter of 2010.

Within Market Data, revenues were $81 million for the first quarter, up $1 million when compared to the first quarter of 2010 as stronger European market data revenues offset lower U.S. tape plan revenues.

In Issuer Services, revenues were $91 million for the quarter, up $7 million when compared to the first quarter 2010. Driving this growth is increased demand for listed companies for our Corporate Solutions. Also contributing to the growth was higher U.S. listing fees and Global Index Group revenues.

Now turning to Market Technology. Revenue was $43 million for the quarter, up from $34 million in the first quarter of 2010. The increase in revenue is primarily due to the inclusion of SMARTS, which was acquired in the third quarter 2010. Also for the second quarter of 2011, we expect Market Technology revenues to be in the range of $42 million to $44 million.

Now turning to Slide 10. Our total non-GAAP operating expenses for the first quarter was $225 million, representing a $24 million increase, or 12% when compared to the first quarter of 2010. The increase in expenses primarily driven by the inclusion of results from FTEN, SMARTS, and Nord Pool ASA, which were acquired in the second half of 2010. Expenses associated with these acquisitions contributed approximately $17 million in expenses in the first quarter 2011. Also contributing to the increase in expenses was the impact of changes in the exchange rates of various currencies as compared to the U.S. dollar, which have the effect of increasing expenses by $7 million when compared to the first quarter 2010. So when you take into consideration the impact of FX and the costs associated with these new acquisitions, our core expenses were flat when compared to the first quarter of last year.

Now looking forward to 2011. For the full year, we expect total run rate expenses to be in the range of $895 million to $915 million at current exchange rates. This is consistent with our prior guidance. This excludes approximately $50 million of merger-related and other infrequent charges.

Overall results for the quarter yield non-GAAP operating income of $190 million, an increase of 19% when compared to last year as operating margins came in at 46%, up from 44% in the first quarter 2010.

Now moving on to interest expense. In the first quarter, it was $28 million, an increase of $5 million from the first quarter 2010. This is due primarily to the issuance of senior bonds issued in December of 2010, the funds from which were used to partially finance the repurchase of shares.

And finally, on the income statement. The non-GAAP effective tax rate for the quarter was 32%, within the range of our normalized tax rate of 31% to 33%.

Now turning briefly to the balance sheet on Slide 12. Cash and cash equivalents and financial instruments at the quarter were approximately $887 million. Of this amount, approximately $488 million is reserved for regulatory requirements and other restricted purposes.

Also during the quarter, we used $10 million for capital spending purposes and ended the quarter with total debt obligations of $2.3 billion, the details of which can be found on Slide 13.

And finally, as we stated last quarter, we now clear resale and repurchase agreements. As a result of us acting as principal in these transactions, we have grossed up the balance sheet for $6.7 billion.

In closing, let me say that we are extremely pleased with our results this quarter. A combination of exceptional operational performance and effective capital management decisions resulted in NASDAQ OMX growing earnings to record amounts.

Thank you. And I will now turn the call back over to Vince.

Vince Palmiere

Thanks, Ron, and operator, we're ready to take some questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Howard Chen of Credit Suisse.

Howard Chen - Crédit Suisse AG

So it's been a few weeks, obviously, since the initial bid. You've spoken -- had been on the road with a lot of shareholders, regulators, your customers. Just what are you hearing from each of those constituents that's making you more confident to keep going down the path?

Robert Greifeld

The first I have to say, Howard, is I thought you'd ask about the quarter, right? It's $0.61 record quarter.

Howard Chen - Crédit Suisse AG

That's my next question.

Robert Greifeld

All right, good. I'm hoping to get a couple of questions on the quarter. It was a lot of hard work. It's not exactly great times out there, so $0.61 in that context we're proud of. But in terms of what I said in my call, obviously, we first pay attention to what our shareholders are saying and it's easy at 25% because they're on the board. But it's been really incredible the amount of support we're getting from our shareholders. I think through the process we've picked up a couple new, traditional long-only shareholders. So it's been a good experience for us and we're definitely getting the ra ra to go forward. With respect to talking to the NYSE or Deutsche Boerse shareholders, clearly, the NYSE shareholders love the optionality, love the fact that our bid is 20% higher and are also quite encouraging for us to pursue the bid. And I have to say that with respect to what we put forward yesterday, that is probably a direct result of conversations with NYSE shareholders.

Howard Chen - Crédit Suisse AG

And the regulators, customers , Bob?

Robert Greifeld

Well, we obviously have dealt with the regulators all across Europe and here in the U.S. The discussions are definitely pursuing. We're definitely pursuing them. I would say with respect to the antitrust aspect of the regulation here in the States, it's definitely one where they're taking input. We're providing with them reams of data. We've had a number of face-to-face meetings where we're explaining exactly how our business operates. They are reaching out to customers in all segments of our business. And I think what we're most pleased about is the level of engagement, involvement in the sheer number of people from the DOJ who have been working with us.

Howard Chen - Crédit Suisse AG

Great. And then my follow-up, back to the organic business model and congrats on the quarter. Just on U.S. options, you're seeing that nice pickup in the revenue capture there. Is that the benefit of this complex order typing? Or is that still on the calm [ph] in your mind?

Robert Greifeld

Well, I think the complex order type has a ways to run, but it's certainly been helpful, but it's also other actions that the management team has taken that has improved our capture.

Howard Chen - Crédit Suisse AG

Okay, thanks so much.

Operator

Our next question comes from Rich Repetto of Sandler O’Neill.

Richard Repetto - Sandler O`Neill

Congrats on the record revenue and record EPS quarter.

Robert Greifeld

I think you would like that revenue growth, right? It's quite outstanding, I'd say.

Richard Repetto - Sandler O`Neill

Yes. That's actually my first question. So the revenue capture in U.S. Equities, despite how people view the business, but your revenue capture went up. I was trying to see the drivers of why that went up, and I guess the Nordics in Europe went down a little bit, so if you could talk to those two metrics.

Robert Greifeld

All right, but let me get back to my point. So the much-maligned Cash Equity business now over a long period of time is outperforming some of the wanted [ph] Derivatives franchise. So we definitely stand by our comment that you can do quite well. And it's also interesting to note that in the Cash Equity business, over the last four years, has gone through what I call abnormal competition as it was released from monopoly-type strictures into an open world. We've been in what I'll call more normal competition for the last number of quarters. So we feel good about what can transpire as we have some basic pickup in economic activity. In terms of the Equity business in the U.S., just one point I'll make is that PSX, we had that at a inverted capture and we changed that to a positive capture so that had obviously some positive impact in our business. And in terms of the Nordic, I think it was just a normal to-ing and fro-ing of the markets. No structural change.

Richard Repetto - Sandler O`Neill

Okay. I guess next on to the deal. Your net debt improved by $190 million. So I guess my question is first, how are you funding -- in the whole presentation throughout all the press I've seen over the last few weeks, I haven't seen how the breakup fee is funded. Can you explain that? And then the second part of the question is you came up with a reverse termination fee and you picked a pretty -- I guess, appropriate $350 million. But why was it -- would you consider higher? Or why wouldn't you consider higher because certainly some could say hey, that's just going to fund the breakup fee that if the deal didn't fall through that someone would have to pay the Deutsche Boerse.

Robert Greifeld

So let me just try to level set on the concepts here. So with the breakup fee, so to the extent that we signed a merger agreement with NYSE, then there's money owed to Deutsche Boerse, and that's the breakup fee and the round number is $350 million. Now we have that signed merger agreement and we go forward with the regulators and the DOJ comes back to us with remedies that we can't agree to, and we believe it's better just to step away from the deal. And that would be the reverse breakup fee that we agreed to just yesterday. So they're separate and discrete. They both come to us and ICE equally, and something that we obviously had to think long and hard on. With respect to the reverse breakup fee, which we highlighted yesterday, two comments. One, that is on a percentage basis in the range of the 80 deals we studied going back to 2008. So it's in line with norms. And certainly, when we look at the fact that we have a reverse breakup fee and the Deutsche Boerse-NYSE deal does not, we have 0 inclination to consider whether to make that larger or not. And so in the NYSE-Deutsche Boerse deal, Deutsche Boerse has the ability to step away if they believe the regulatory remedy represents a substantial detriment. And now if they did that, then there would be no consideration paid to NYSE and/or their shareholders. So our $350 million reverse breakup fee is clearly superior to no reverse breakup fee is what we'd say. Does that help, Rich?

Richard Repetto - Sandler O`Neill

Yes, that does. And then the funding of the breakup fee, just that straightforward breakup fee to the Deutsche Boerse?

Robert Greifeld

Yes, that was certainly -- I want to make clear that, that was not to be netted out of our original bid of $42.50, so it was inclusive of that. So $42.50 would be the value that we deliver to the NYSE shareholders, and that was in our funding consideration.

Ronald Hassen

Yes, and also the breakup fee is part of our commitment with the banks. And so they're well aware of that as part of our commitment.

Richard Repetto - Sandler O`Neill

So it would come out of financing from the banks?

Ronald Hassen

That's right.

Robert Greifeld

Yes.

Ronald Hassen

That was incorporated in that.

Operator

Our next question comes from Patrick O'Shaughnessy of Raymond James.

Patrick O'Shaughnessy - Raymond James & Associates, Inc.

So my first question would be as far as the conversations that you're having with regulators in the U.S., can you kind of give us a sense of what sort of timeline that you're expecting to maybe try to get some of those issues resolved? And at what levels with the Department of Justice that you're having conversations right now?

Robert Greifeld

Yes, it was a great quarter, Patrick, wasn't it? I'm going to be very predictable today. I would say that to clarify some of the press supports that came out on Friday, we met with the Department of Justice last week. We met with them physically again this week for a very long meeting. And I would, in my words, would say that they are in input mode, right. And we are giving them a tremendous amount of data, tremendous amount of information, and we're certainly impressed with their prior knowledge of the space and they're obviously spending time coming up to the latest state of play. And they're asking us a lot of different insightful questions, which we're scurrying around answering back and the outreach to the customers is proceeding apace. So they control the timing. It's completely in terms of their process. We are just obviously encouraged that this amount of time and effort put into it. Our experts who work with the agencies on a regular basis as their career certainly see the input mode at this pace will slow down or slacken 6 weeks from now, would be their guess. Again this is not a DOJ comment. It's their guess. And at that point then, you can start having more of a 2-way dialogue.

Patrick O'Shaughnessy - Raymond James & Associates, Inc.

Thank you for that, and then getting back to this quarter...

Edward Knight

Hold on 1 second. This is Ed Knight.

On the Hart-Scott and on the antitrust issue, one, the Justice department began a formal investigation on this around the time of our announcement. We are now, though, going to be filing under Hart-Scott, which will give us more certainty around timing in terms of the waiting periods and the deadlines that exist under the Hart-Scott statute, so we'll have the benefit of that.

Robert Greifeld

That was good. When you're getting interrupted by your General Counsel on an earnings call, you get concerned. Glad he clarified. Yes, so the DOJ has been working with us prior to the Hart-Scott. We're grateful for that. And as I said, it's been an intensive dialogue and now we'll have a formal filing. And that formal filing will also be in various jurisdictions in Europe.

Patrick O'Shaughnessy - Raymond James & Associates, Inc.

We look forward to that. And then my follow-up question -- getting back to this quarter. Certainly -- I think at your Analyst Day last year, you spent a lot of time and effort talking about your European derivatives efforts and your repo clearing and other things over there. Can you kind of give us an update on the progress that you're seeing in that area?

Robert Greifeld

Yes, definitely. I didn't highlight from a numerical point of view and maybe I should have. On a revenue growth percentage basis, it's impressive. The Repo business had a very strong quarter. Our interest rate swap effort in the Nordic gains, what I'll say, traction within that community. We've done a number of test rates and we expect -- we have great opportunity to bring that to a production status in the second half of the year. Our efforts with IDCG made tremendous progress in the quarter in terms of our engagement with the dealers community. Also we had some great success in NOCC where the number of clearing members has increased dramatically and somewhat counterintuitively. With all the discussion about margin and margin efficiency, we have a tremendous amount of margin in the NOCC clearinghouse where the margin's greater than the transactional activities. So we think that bodes obviously good things for us because the firms are not putting the margin on deposits just because they want to. So it was just a very strong quarter in the new initiative front also. Not material to the earnings as of yet, but still we look for effectiveness, and we were achieving that.

Patrick O'Shaughnessy - Raymond James & Associates, Inc.

Thank you very much.

Operator

Our next question comes from Alex Kramm of UBS.

Alex Kramm - UBS Investment Bank

Just wanted to come back to some of the questions around feedback from NYX investors. In particular, I think on Friday you met with a lot of risk opt guys and our sense so far is that those guys aren't really that involved yet, maybe a couple that have made it to maybe the top 15 shareholder list or so. And maybe you can give us an update on that, too, of what you're seeing. But any idea what it will take to get these guys more involved? And do you have any goals in terms of how big you think that particular shareholder list needs to be the risk opt guys to put some real pressure on the NYX board and compliance going forward? Thanks.

Robert Greifeld

Well, let me say this. I think first and foremost, we give a lot of credit to the NYX board. We obviously know some of those folks and you read the bios, they are people of I think great stature in their communities. And it's also in a unique position to be on the board of a company that develops and promulgates listing rules. You have a special responsibility to your shareholders. So we certainly remain optimistic that the NYSE board will essentially do the right thing, evaluate our proposal, and we are involved with what I'll call friendly discussions with them. And certainly from our point of view as we look at the proposal that we put forward yesterday and you look at each of the important metrics that you'd use to come up with your decision, we think we're clearly superior in each and every way. And certainly, when we have a reverse breakup fee and the other fellow does not, that speaks volumes there. So that's our plan. As I said in my comments, we are pursuing a friendly approach and our expectation that, that will be, at some point in time, properly received.

Alex Kramm - UBS Investment Bank

So just coming back to my question, no real goals when it comes to like the merger opt crowd like in terms of how big you think they need to be?

Robert Greifeld

We don't think in those terms. We obviously have reached out and spoken to, I think a wide variety of shareholders in NYX, and we will continue to do that in the days and weeks to come. And I think the NYX shareholders want to know, are we in this for the end game? And that cuts across all manner of shareholder. And I think that was a driving factor in what we put forward yesterday. And I think it conclusively says, okay, ICE and NASDAQ together are serious. We're in this for the duration. And again I want to highlight that this is not personal. This is our job as care agents for our shareholders to do. We have tremendous respect for what the board with Duncan and the management team have done there. It's just our role here is to pursue this and we'll pursue this to the end game.

Alex Kramm - UBS Investment Bank

Okay, let me ask you to stay on the M&A just with one last question. Can you actually, for us, lay out the stats here a little bit more detail? I mean, it sounds like you kind of have contingency plans for basically another year, so with the shareholder vote -- shareholder meeting in April for NYX, the vote may be in July, another shareholder meeting potentially next year in April depending on what happens. Can you kind of give us a little bit of the playbook that you have laid out and some of the contingencies depending on what happens next here?

Robert Greifeld

Okay. Certainly in our planning -- and I won't go to more detail on this, we have a scenario that takes us out into April 2012. And we are prepared to pursue a plan that would take us to April 2012. But I would say that we see that as a low probability. And again I hearken back to my comments is this NYSE organization is certainly keenly aware of shareholder rights. We, as listing organization, deal with these issues on a regular basis. And we certainly took it upon ourselves, based upon their rejections, to say, okay, what are their points that are valid? We obviously disagreed with the conclusion, but what are their points that are valid and how can we respond to their points in a productive way? And again this is in the context you're trying to make this into a friendly transaction. We are keenly aware that we're uninvited, but that has the ability to change as we put things on the table that obviously are attractive to shareholders. They also will be attractive to the NYSE board. And we certainly are interested to sit down and talk to them. We certainly believe this transaction will create the undisputed cash equity-leading franchise on a global basis. It'll be attractive to people from all corners of the planet. And when you look at what Jeff has done with the derivatives franchise, life coming together with Jeff's remarkable innovation and entrepreneurship is a powerful thing for shareholders. And it's important to recognize our bid is cash and stock. So the stock component is real. People have to believe in what this will mean over the fullness of time. Now you obviously have a philosophical difference with respect to a exchange supermarket versus focus exchanges. It's our point of view that investors like pure plays. They can make their own allocation decisions. And we certainly believe that the Liffe franchise is under the NYSE Euronext name, really in name only. It's running on a different technology system. It has different segment reporting. And as Jeff and I spoke about this, we realized how it was fundamentally separate from NYSE Euronext. And when we look at the world, we certainly see that equities and equity options are 1 logical business grouping, but fixed income derivatives and equities really don't intertwine very much at all. I mean, it's fine enough to have it under 1 roof. But there's no synergistic strategic value to do that, and we certainly think Jeff, together with Liffe, will represent greater synergies and greater opportunities to develop more customers and more products for customers.

Alex Kramm - UBS Investment Bank

All right, very good. Thank you.

Operator

Our next question comes from Daniel Harris of Goldman Sachs.

Daniel Harris - Goldman Sachs Group Inc.

In terms of the deal, however, I was wondering if you can lay out 2 specific things. First of all, as you talk to investors, I would like to know what they're feedback has been on the negative side. What are they concerned about? And second of all, as you discuss specifically the difference in price, what is their take on that versus what the board of NYSE has said?

Robert Greifeld

Well, in terms of the concern, Daniel, it's clearly 1 thing and 1 thing only, and that is the antitrust concern. And if we had the ability to deliver greater clarity or certainty to them on the antitrust issue, then this would be a very straightforward transaction for us to complete. I think the investors clearly understand the industrial logic even with the NYSE-Deutsche Boerse space -- transaction, I mean, it's not like cash equities is going away. In a real sense, it's a question of do you create a more powerful franchise by putting NYSE and NASDAQ together? Or do you make it more powerful by putting Frankfurt and NYSE together. And I think the answer there is quite straightforward. And the investors know ICE and Jeff's track record and certainly see that under his stewardship, the Liffe asset could have a quite exciting future. So it's just entirely positive. It's a question of the antitrust issue. And they are excited by the fact that now we'll be filing the HSR, that we have intensive meetings with them. We're obviously not sugarcoating the issue and we are presenting our arguments of why we think this thing will be able to get approved by the DOJ, and time will tell.

Daniel Harris - Goldman Sachs Group Inc.

Okay, fair enough. Moving over to European cash equities, you talked about a lot of the changes that you guys made there trying to increase the client base, having more access for high-frequency traders. And trades are up. Pricing is down. If you look across the last few years, there really hasn't been any growth in the revenues in '09 and '10 and '11 the way it's starting out. What do you need to do there to actually see a nice bump up in the revenue base versus just the trade base?

Robert Greifeld

Well, the first thing I would say is we need to increase the non-transaction revenue in that business. So if you look at what we've accomplished in the U.S. with Access Services, we have to replicate that in some close fashion in the Nordics. And that's where part of our fundamental difference of approach comes to bear where we have strengthened the data center in Stockholm. We have been about building the Nordic as a separate destination within the pan-European firmament, and that clearly, should have benefits to us on the Access Services side. So we are in a position to really have that work for us, but we clearly have to deliver on that.

Daniel Harris - Goldman Sachs Group Inc.

Okay, thank you.

Operator

Our next question comes from Dan Fannon of Jefferies.

Daniel Fannon - Jefferies & Company, Inc.

Bob, I guess first on your core business. A question on the sustainability of kind the revenue capture within the options business as you think about the improvement we saw in the first quarter and maybe looking out of it further for the rest of the year.

Robert Greifeld

Well, we certainly believe that what we accomplished in the first quarter is sustainable. And again the pricing decisions in the options world are quite arcane, sometimes counterintuitive, but surprisingly effective in terms of how we approach it. So really pricing, in the options even more so from the equities, springs from a fundamental understanding of what the customers are trying to accomplish and what particular segment of the customers you're addressing. So it's quite detailed, quite nuanced, and I think we're quite good at it.

Daniel Fannon - Jefferies & Company, Inc.

Okay, and then I guess on the M&A front, just looking at kind of various scenarios. In a scenario where Deutsche Boerse does adjust some component of their offer for NYX, are you guys in a position to make changes to your offer in terms of the financial terms without actually getting access to the books? Or do you need to get in there and get further due diligence potentially make any further changes to your offer?

Robert Greifeld

Well, the first thing I say is that we have a lot of things on our to-do list these days. And when your bid is 20% higher than the competing bid, you actually don't spend lot of time thinking about how you can raise it that much more. I would make the general statement that clearly diligence is an opportunity for NYSE shareholders to allow us to put on the table a offer that's fully reflective of the knowledge available to us. We did our best job knowing the businesses over the last number of years. But still there's a fundamental difference between having diligence and not.

Daniel Fannon - Jefferies & Company, Inc.

Okay, thank you.

Operator

Our next question comes from Roger Freeman of Barclays Capital.

Roger Freeman - Barclays Capital

So just in terms of the finance commitments [ph] , I don't know if I've missed any documents that were filed around that, but are those on rolling 3-months basis right now? And does that have any impact on your ability to do a hostile?

Ronald Hassen

It's a fully committed financing for 1 year. So it's not a 3-month roll at all.

Roger Freeman - Barclays Capital

Okay, got it. Okay. And then I guess, Bob, how would you --one of the counterarguments that NYSE is making is that your -- the synergy targets here would represent sort of 70% of non-synergize-able costs or rather of synergize-able costs, when you take out the non-synergize-able. Do you agree with that based on your external due diligence? And if so. . .

Robert Greifeld

I would say this. With every synergy number we have put forward in every deal, we have under promised and over delivered. And this number fits within that context. So I think our record speaks for itself.

Roger Freeman - Barclays Capital

Okay. And then just on the running clearinghouses in Europe relative to the debt load that you'd be taking on here whether you are -- if you were to slide in anonymous and gray [ph] territory, how do you view that as -- any discussions with regulators at this point as to whether that becomes...

Robert Greifeld

Well, the first thing I would say is the offer that we have on the table has been carefully calibrated to ensure that we do maintain investment-grade rating, and we would be at a leverage ratio below 3 after 12 months. So it's clearly an investment-grade company. The second factor is our Nordic clearinghouses ring fence and it has an A rating. And we obviously have that completely isolated ring fenced and nothing to do with the parent.

Roger Freeman - Barclays Capital

Okay. And do you feel good that the rating agencies can get assigned a rating based on a 12-month out cash flow deal?

Robert Greifeld

That's our expectation.

Roger Freeman - Barclays Capital

Okay, all right. Great. Thanks.

Operator

Our next question comes from Chris Harris of Wells Fargo.

Christopher Harris - Wells Fargo Securities, LLC

Bob, can you give us an update on how co-location is progressing in the Nordics? I know derivatives represents a pretty good opportunity for you guys there. I think, last quarter, you disclosed maybe 1 customer had signed up on the listed side. And then as a follow-up to that, what kind of impact on volumes do you think you might see once colo really gets really ramped in the Nordics?

Robert Greifeld

So I think you probably have to do some previous comment that the co-location business in the Nordic was not a roaring success for us in the first quarter. The demand appears to be very strong, but we haven't turned it into revenue to the extent that we want to. So it represents opportunity for us. We're focused on it. And as I said, that's fundamental to our plans going forward.

Christopher Harris - Wells Fargo Securities, LLC

Okay, and then 1 question real quick on the M&A. Following up on your earlier comment about antitrust being top of mind of investors here. What really strategic options do you guys have outside of the reverse termination fee that you could maybe talk to, to kind of get regulators and investors comfortable about this deal meeting antitrust scrutiny?

Robert Greifeld

Well, one, the regulator comment is different than investors in the beginning. At the end, they come together. So we are having very detailed discussions with the regulators. Certainly, our view of the listing franchises and our argument is set around kind of 4 pillars. And I won't go into detail now, but just very quickly when you look at the marketplace raising money, there's a very large market outside of the public market. And once you get to the public market, then there are a multitude of global choices. One of the days we were down at the DOJ, the Glencore announcement was public, so that's helpful. We have a Swiss company listing in Hong Kong and London.

The second -- and probably at the end of the day the most important piece, is the profound regulation that we have from the SEC. So when you think about remedies that the DOJ might ask for, we live in that remedy world today with respect to the fact that we can't change a price. And a lot of the times, price changes have to go through public comment and review. So traditional remedies we agree to limit the price change -- well, right now I don't even have that power to change the pricing. So the DOJ has to understand the fact that okay, we say we're a regulator but what does that really mean? It's really akin to a regulatory environment of the utility.

A third is, in our business, again under SEC dictate, is there are essentially no barriers to entry. Once you have an exchange license, our listing rules in the post-Sarbanes-Oxley era are remarkably similar to NYSE's listing rules and as that comes live with their product bills, just copy ours. And what's remarkable is that we've been endeavoring to get a quasi-venture market approved under BX and it's been a 2-year effort and hopefully soon we'll get that approval. But once we have it, then that's in direct danger and NYSE can file a B3A and make it immediately effective. So in terms of normal competitive dynamics, it's kind of upside down. You get a penalty for innovating, a financial penalty and you gain no time advantage. And then in the construct of having these products we so defined, what will end up happening is you have a situation of what the economist will call nonessential competition. It's competition, but it's not competition that DOJ economists worry about in how to protect and inform customers about. So we certainly think that our opening bell ceremony is superior to theirs. We have a lot of loud music going as we open our bell, and we have confetti and theirs, they're on a balcony over a trading floor. We host our investor events and we kind of have a cool conference room and they have a conference room with a lot of wood and a vase, if I recollect from Czar Nicholas. And we compete room-to-room and bell-to-bell and it is competition, but it's not essential. So that's a broad outline of some of the things we're talking to the DOJ about. So we pursue the arguments, and right now we're encouraged.

Christopher Harris - Wells Fargo Securities, LLC

Okay, very helpful. Thank you, Bob.

Operator

Our next question comes from Matt Heinz of Stifel, Nicolaus.

Matthew Heinz - Jefferies & Company

Just curious to hear your thoughts on the revenue with the synergies and the assumptions that you're making around your $90 million. I think that's one of the issues or one of the areas that NYSE management is focused on saying that, that number may actually be much larger when you assume some market-share deterioration and other issues. Can you just comment on that a bit?

Robert Greifeld

Well, one is we put the $90 million number out there for credibility, but to the extent that happens and there's been some failure of the management team's plans that we put in place. Now we have obviously learned from our past experiences. And when you look at what we did with INET Group and SuperMontage, we took the 3 matching engines and in the space of the year, we consolidated it down to 1. It was Pearl Harbor data, Pearl Harbor day -- if you folks are following us over the time, remember. So it was a wonderful technical success and we kept it as 1 venue in the construct of the maxim that liquidity attracts liquidity. And we found out soon enough that in a Reg NMS world, a protective quote was the dominant way the market would operate. As we went forward in time, we acquired PHLX and we had launched NOM before that. And we said okay, let's not make the same mistake again, and we came out with 2 separate venues. And for those who follow us again, if you remember the big concern with PHLX was the dealers were selling it to us and were they going to be committed to retain the order flow. And that was a legitimate concern and obviously -- we fast forward here, it's worked out remarkably well where our market share went from, call it, 13% to 23%, and NOM went from 0.1% or 0.2% to 5%. So we executed the separate venues strategy quite successfully. Now in this transaction, we would do obviously the same separate venue strategy. We would consolidate down to 1 platform, and the different venues would really be different instances in the same data center, really in the same rack, but allow the customers to trade in the same fashion that they do now. So with INET Group and Montage, we forced the customers into a change, which we learned from PHLX. And the very strong positive comments we were getting from customers is when you look at the impact of Reg NMS and competition, the explicit transaction rate has declined quite dramatically. But the infrastructure cost of hooking to the various venues under the Reg NMS has also exploded so the net savings is not nearly as high as you think. So in this transaction, our customers will be able to reduce their infrastructure costs quite dramatically. And that would apply both on the data and the transaction side. So there's certainly positive about that. So we reduced their costs and then what we have here is a tiered pricing plan, and we would continue and probably accelerate the tiering where a higher-end customers, higher-volume customers, would trade essentially for free and to the extent they do that, then we won't be spending the $90 million. But it's also important to recognize with our tiered pricing -- and this is an important concept, the incremental market share is more about pride and bragging rights than about economics. We certainly want the incremental volume. It's important to us. And we do have pride in our market-share numbers and they're paying us something for it. But if you look at what Eric and the team have done over the last number of years, is we have carefully calibrated our pricing to make sure we maximize our capture and didn't have to chase after the last point of market share. So I'm saying 1 is we will chase after it. We'll tier the pricing, so that from our point of view, it'll be more about ego than other things. To the extent we lose some of the market share, we won't be happy. It won't affect the economics that strongly. But it's also important to note that if we lose the market share, they would be going to a venue that would be certainly more expensive because our top tier would be certainly lower than anything they can get from another venue. So that's the outlines of the plan that we have.

Matthew Heinz - Jefferies & Company

Appreciate the detailed answer there. That's very helpful. Then just one quick follow-up on the debt commitments. Now that you have the financing commitments in place, do you have any more clarity on what your funding costs might be, and if you think it's going to be kind of in line with what you see now or a little bit higher or lower?

Robert Greifeld

It's all going to be based upon what current market conditions are when we actually close the deal, but some indication of prices that we have right now is between LIBOR plus 200 to 225.

Matthew Heinz - Jefferies & Company

Okay, thanks very much.

Ronald Hassen

And we're obviously very happy with that right now.

Robert Greifeld

Yes, absolutely.

Operator

Our next question comes from Mike Carrier of Deutsche Bank.

Michael Carrier - Deutsche Bank AG

Thanks. When I look at 2010, there was a lot of progress that you guys made. If you look at access service, the fees of that business, the tech business, there were strong growth there. You did the accelerated buyback and obviously the results showed that and the EPS grew throughout the year. And if I just look at this quarter relative to the fourth quarter, which tends to be strong transaction quarter for the industry, when I look at the revenues up $15 million, it looks like $5 million of that was FTEN, $5 million of that was FX and so revenues were only up around a 1%. So I just want make sure -- obviously, it's just a quarter so don't take too much into reading that. But just in terms of the growth rates that you guys have been delivering in some of the product areas I just want to make sure like in terms of when you're looking out for 2011, 2012, you're still comfortable for some of the non-transaction businesses. And in the one area on the transaction side, it would be just Nordic cash, it looks like pricing was down like 17% sequentially. So just wanted to see if: One, is there was any onetime items on the revenue side or if there was anything else that won't be occurring going forward.

Ronald Hassen

All right. So let me start with a broad response to your question. When we look at the cash equity business, we have to make sure that we don't define it just as the match because when you look at the cash equity business, there have been strong pockets of growth outside of the match. And we had certainly made the strategic decision to ensure that we are positioned in those different pockets of growth within cash equities. So probably 3 years ago we were walking around saying match, match and match market share, but there's a lot of other things going on. So most notably, have you seen our success with Access Services, then in our moves in 2010 with both FTEN and SMARTS, that was clearly a continuation of that strategy. And when you look at the aftermath of May 6, the conclusion was these electronic matching engines that have the ability to turn into a Frankenstein will not go away. So we have to ensure that we have the controls on the front end where the low-latency products such as FTEN and then we have the surveillance capability on the back end with the products such as SMARTS. And the regulatory environment is clearly getting to the point where that's not even optional, but you need it just as a cost of being in business. And the regulatory regime in cash equities is quite strong, and we have to make sure that we participate in that. So we certainly see those businesses having a higher growth rate as Access Services had in the years to come. With respect to the Transaction business in the first quarter, it was quite anemic. And we are especially proud of the $0.61 because it was quite anemic. I think we had essentially 1 good week out of the 12 or the 13. So we had 11 quite mediocre weeks. The second quarter is really not much better. We see low volume, low volatility. So we are managing through what I'll say is a difficult time and we're proud of how we're doing it. And as I said in my opening comments, the beauty of our business model is any incremental activity will flow right to the bottom line. And in our business, incremental activity can come very quickly and obviously disappear quickly. With respect to the Nordic business, I'm not sure I have the detailed answers here, but down 17% on the capture side. I think we'll have to run that down and get back to you, right.

Michael Carrier - Deutsche Bank AG

Okay. That's fine. And then just one other question just on the expenses. So the range is unchanged. Just want to understand like the $25 million in the nonrecurring charges, just what that entails. And I guess the only reason I'm asking is when you go through mergers that makes sense in terms of seeing like elevated nonrecurring items, I'm just trying to gauge how much of that is recurring versus nonrecurring when we're looking forward?

Ronald Hassen

Yes, that $25 million increase for, I guess, to use the term nonrecurring here, is, really relates to our bid with NYSE. We're looking at M&A fees, commitment fees, legal fees, all associated with our bid. It's strictly that $25 million. That's what it represents.

Michael Carrier - Deutsche Bank AG

Okay. Thanks, guys.

Operator

Our next question comes from Niamh Alexander of KBW.

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

Thanks for taking my questions at this time. I'll be quick. Dividends. I guess on the initial bid call, you'd hinted that a post-NYSE NASDAQ might even consider paying dividends. What about a NASDAQ standalone, and Bob, how is the board's attitude tempering maybe towards dividend even though you're still continuing to foster growth?

Robert Greifeld

We don't want to get into, into-the-scene board policies here. But just, I mean, certainly certain board members have a preference for dividends. And when you look at the amount of cash that we generate that clearly will be in our future. It's a question of when, not if. And can I get away with that as an answer, Niamh?

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

You can. Thanks, Bob. But that's even a NASDAQ standalone say, for example, if a NASDAQ-New York combination were not to happen, then it's still a when, not if?

Robert Greifeld

Yes, that's what I'm saying.

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

Okay, perfect. Thank you very much for clarifying that one. And then just to harp on the deal. All the questions almost all of that, but could you help me understand, I mean, do you envision a situation where the New York shareholders would have to vote on Deutsche Boerse without having a really good read from the DOJ on their thoughts on potential merger with you and ICE in addition to potential merger with Deutsche Boerse? Or do you think it's realistic to expect like shareholders will by the time of a vote with Deutsche Boerse have that information?

Robert Greifeld

Well, I think it's got a separate dimension to it, and what is the read on the Deutsche Boerse-Liffe standing with the competition committee. So I think it's somewhat not fair to ask shareholders on either deal to vote without the clear visibility on either issue is what I would say. And certainly, if I was a shareholder I would feel that way. So I would think the timing of the votes at the end of the day have to be timed to where there's some degree of certainty for the shareholders. It's not fair to ask the shareholders to vote on something not knowing if the deal can get approved or if the remedies are fundamental to the business model.

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

Okay. That's fair enough. Thanks, Bob, and I guess just your general council, if I could. Typically, there's a first-stage review, right, that's about 30 days and then it could progress to a second-stage review. Is that fair?

Robert Greifeld

Yes.

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

Okay, and officially do you know if the DOJ has kind of kicked off the timetable yet?

Robert Greifeld

We intend to be making the filing in the near term.

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

Near term. Okay.

Ronald Hassen

The official timing will start when they get our filing.

Robert Greifeld

When they get the documents associated with said filings.

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

Okay. Thank you. So we'll watch for those, and I guess just lastly, to come back to the cash equities within the U.S. because you just delivered 15% revenue growth even though cash equities volume is down 7% and the market share is down. But to the market share point, because it does also drive the market data revenue as well, is it still primarily losses to internalization and I don't know, if maybe if Eric is there, or if you could kind of talk to do you anticipate the SEC kind of making some changes to market structure this year or kind of this is the new paradigm you should expect to continue to kind of operate and compete with non-exchange venues continue to take share quick.

Robert Greifeld

Eric is here and I'll let him answer, but I will just start by saying for us to predict when and how the SEC will act is a difficult science.

Eric Noll

It's Eric. I do think that our market share pressures, if there are some in equities, are primarily due to off-the-exchange trading. And that's both through higher internalization numbers and growth in dark pool trading. Quite frankly, I'm not sure that we can count on or should expect regulatory change to help us there. A lot of it is exogenous factors in the market like lower volatility, which always increases internalization numbers. And we, as exchange operators, just have to continue to offer functionality, depth of liquidity and other innovation that drive or flow outside of dark trading into lit trading, and that's what we spend our time working on.

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

Okay. Fair enough. Thanks for taking my questions.

Operator

Our next question comes from Brian Bedell of ISI Group.

Brian Bedell - ISI Group Inc.

2 questions. So one, we talked about the acquisition attempt process, maybe if you can just talk about sort of the near-term process ahead of the New York shareholder vote that you're trying to do by July. To what extent -- if you're not able to get the board to speak with you, to what extent would you do a tender offer -- on your NASDAQ-ICE tender offer for New York shares if you think you have confidence from the New York shareholders ahead of the New York-Deutsche Boerse shareholder vote?

Robert Greifeld

Okay. Well, the first thing we'd say and we're not naive, but we are optimistic that the board will see, in their fiduciary duty to shareholders, reasons to engage us in conversation. As we said, we just put something on the table yesterday that -- we listened hard to what they were saying. We responded to it, and we think that should be effective. Going beyond that, I'm making the general statement that we're here to the end of the process. We spoke to next April, and I think implicit in those comments, there are some actions that would involve us directly engaging with shareholders. It is not the outcome that we want. It is not the outcome that we expect. As I said, we have great respect for their board. We want to listen to what they have to say to the extent they have more legitimate instructions, then we will listen to that.

Brian Bedell - ISI Group Inc.

That's helpful. And then, just I guess on the DOJ process versus the process in Europe with Eurex and Liffe, I guess, obviously, if you do get DOJ clearance before they do and if you're not talking to the NYX board with that stimulated tender offer and then I guess the reverse of that if Eurex and Liffe was cleared, but the DOJ hasn't gotten to their clearance yet. I guess, what do you see is the chance for that happening from a regulatory perspective?

Robert Greifeld

Well, certainly if we get DOJ approval first, then we have not yet been engaged by the board, we think that would be the ultimate trigger for the board to reach out to us. We are -- from our point of view, I'm not speaking to the DOJ, confident in terms of the process we have to go through and the way I would characterize it is we have to explain to the DOJ market share. And in Europe, they have both a market share and a market structure question. And in certain ways, the market structure question is more problematic than the market share. So with us having 1 issue and them having 2, we certainly think that we have the clearer path and a more certain path to get approval. And I also think as we get into a remedy discussion -- if we get to a remedy discussion, what exists for us today with the SEC oversight would be classical antitrust-type remedy solutions. So we're already living in that regime.

Brian Bedell - ISI Group Inc.

And then just on the equities market structure in general, I mean, obviously if you were successful with the NYX merger, you have a very clean piece of paper potentially to influence the U.S. equities market structure. What are -- how much would you change it in terms of, I guess, deepening the liquidity pool for the investors? Obviously, the buy side has been frustrated in general in being able to do block trades. What type of things would you do other than just having a different venue running under the same matching engine?

Robert Greifeld

Well, you get to do exciting things once you get to 1 technology platform and Eric and team have a number of different creative thoughts. But clearly, you want to provide some cross-venue capability. And Reg NMS "stop the top of the book" protection. One of the things you could think about is full-book protection across your venues. So you have to make it feel to issuers and to the global marketplace like it's 1 integrated controlled market. One of the complaints here for issuers today or if you go overseas why people want to shy away from the market is they believe it has excessive fragmentation and has a certain fragile nature to it. And so you've got to take steps to address those real and legitimate concerns.

Brian Bedell - ISI Group Inc.

And do you think you can help resolve the fragmentation issue by commanding the matching engine in the back end?

Robert Greifeld

Definitely. And even to the extent you're running multiple venues what I'm saying, Brian, is you can put in structures that to the issuers and to the outside world it will look, feel and be under command and control as if it was 1 central book.

Brian Bedell - ISI Group Inc.

Great. Thanks so much.

Robert Greifeld

Thank you.

Operator

Our next question comes from Jonathan Casteleyn of Susquehanna.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

It looks like your net capture and cash equities are still pretty firm from your fourth quarter highs last year. Just perspectively going forward, any reason to think you can continue to maintain these levels or would you expect that number to kind of or the net capture to come down a little bit here?

Robert Greifeld

Well, since Eric is from Susquehanna, I'll let him answer this kind of question. You probably know each other.

Eric Noll

We continue to -- it's always a flexible game about pricing and maintaining capture. And I think the key for us, as Bob indicated on the options side, is that our pricing has to be predicated on how are we meeting our customers needs, both from a making and taking point of view, as well as display of liquidity point of view. So while we remain confident that we can maintain our capture, I think what you continue to see us do is look at different ways to further segment our market to appeal to various customer bases to meet their needs in our marketplace. So the short answer is yes, I think we can keep our capture, but I do think that the rate card gets more complex.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

Understood. Great. And then on just talking on the market technology side, it looks like order intake value's down quite a bit in the quarter. I think it was $6 million this quarter versus $71 million last quarter and then $50 million year-over-year. Any -- is there any way to give investors confidence that there's not exhaustion in this business either talk about potential new wins or pipeline, et cetera?

Ronald Hassen

Yes, there's not exhaustion here. I mean, a lot of deals actually slipped into the second quarter. Our pipeline is very, very strong, and I think you'll see a big rebound in the second quarter.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

And your guidance for Q2 would you just say was $44 million to $46 million in revenues, is that right?

Ronald Hassen

I wish. $42 million to $44 million.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

Thank you.

Robert Greifeld

I'll take that as a commitment, Ron.

Ronald Hassen

Yes. $46 million.

Robert Greifeld

I thought that's what you said.

Operator

Our last question comes from Robert Rutschow of CLSA.

Rob Rutschow - Credit Agricole Securities (USA) Inc.

I guess it's been suggested to us that a potential concession would be for you to spin off or get rid of the regulation of the Listings business. So I'm just curious if you can kind of help me understand what exactly that would involve. I mean, would that be as simple as just letting FINRA determine listing standards in pricing, or is there more to it than that?

Robert Greifeld

Well, I'll let Ed -- and I say I have not heard that before, Rob. I had not talked to anybody so you have different sources than I do, and they're not emanating from the NASDAQ OMX.

Edward Knight

Just to be clear, we believe this transaction not only does not present antitrust problems. We believe it is very pro-competitive, and we are engaged in the process of giving the Justice Department the facts they need to reach that same conclusion. But the combination of global competition, competition from other segments of the industry, the narrowness of the real competition that exists and the SEC regulation that exists all lead us to believe that when we complete this transaction, not only will there not be antitrust problems but that we will be positioned to compete more effectively globally and deliver more value and innovation to our customers. But we're in the midst of making those arguments and the key is to deliver the facts that support that. We're not anywhere near the discussion of remedies.

Rob Rutschow - Credit Agricole Securities (USA) Inc.

I guess I'll try again. Can you just -- just to help me understand what potential issues are, what exactly does your -- the Regulation and the Listings business entail? And what services does NASDAQ provide versus outside.

Edward Knight

The nature of the regulation is that any policy or practice involved in the listing of securities must be submitted to the SEC for their review, publication and approval. That includes all pricing activity in that business. And so there is already a very deep pricing regulation in place that allows the public and customers to fully voice any concerns around market power.

Rob Rutschow - Credit Agricole Securities (USA) Inc.

Okay, and the SEC has the ability to block changes if they see fit?

Robert Greifeld

That's for sure.

Rob Rutschow - Credit Agricole Securities (USA) Inc.

Okay. Last question on options. I don't know if you have this, but can you give us an idea of how much of your volume is executed in penny [ph] price increments versus wider spreads and how much is maker-taker versus the traditional model?

Ronald Hassen

We're going to have to follow up with you on those questions. We don't have that information handy.

Rob Rutschow - Credit Agricole Securities (USA) Inc.

Okay, thank you.

Robert Greifeld

All right. Thank you, and I thank everybody for their time today. I appreciate the questions. And strong quarter in difficult economic times. And we obviously look forward to better economic times and outstanding quarters. So thank you.

Operator

Ladies and gentlemen, this does conclude today's conference. You may all disconnect, and have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Nasdaq OMX Group's CEO Discusses Q1 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts