Nasdaq OMX Group's CEO Hosts Analyst Day (Transcript)

May.10.12 | About: Nasdaq Inc. (NDAQ)


Analyst Day

May 10, 2012 8:00 am ET


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

Anna Ewing - Chief Information Officer and Executive Vice President of Global Software Development

John L. Jacobs - Chief Marketing Officer, Executive Vice President of World Wide Marketing and Chief Marketing officer of Global Index Products & Global Marketing Group

Brian Hyndman - Senior Vice President of Global Data Products

Hans-Ole Jochumsen - Executive Vice President of Transaction Services Nordics and Global Data Products

Bruce Aust - Executive Vice President of Global Corporate Client Group

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

Lee Shavel - Chief Financial Officer and Executive Vice President of Corporate Strategy


Michael Carrier - Deutsche Bank AG, Research Division

Roger A. Freeman - Barclays Capital, Research Division

Unknown Executive

I think we've got a great program today, and we're going to kick off. Our CEO, Mr. Bob Greifeld, is going to start off, and then we're going to go through the different businesses. I'm sure you're going to find we have a very compelling portfolio of opportunities here at NASDAQ OMX, and we're very excited to tell you about it today.

And so we'd like to kick it off. Bob, if you would, you're up, yes. And here we go.

Robert Greifeld

Thank you, and welcome to -- bright lights, there. So I want to start with probably a new premise, but it's not really a new premise. The concept here is at the end of the day, management matters in terms of the success of an institution over time to get the business models to get strategic advantage. It's about the management team. And when you look at the exchange space, it's my contention that in the first quarter of 2012, you saw the first true manifestation of that. And when we look at the public exchange space over the last 5 years, a lot of the performance has been dictated to by the absolute quality of the business model that exchanges have typically received as a result of their regulatory license or licenses. So certain licenses had different advantages over other. Obviously, the most notable is if you have a vertical silo and you have a monopoly position in that vertical silo, it gave you some relative advantages.

So we saw in the last 5 years as exchanges became public, especially here in the U.S., the market had to come to understand the absolute value of the franchise they received. Now it's certainly our contention that in the next 5 years, the performance is going to be on a relative basis. We've level set the advantages of the licenses. Now the question is, what can management do on a relative basis to their peers to really succeed in life?

In the first quarter of 2012, with volumes as low as we haven't seen since 2007, NASDAQ OMX had its fourth best quarter ever, where we did $0.61. As we said on the earnings call, if we had the -- look back to 2007 where we had similar volume, we earned $0.38. So that $0.38 to $0.61 was a tribute, to me, to the quality of the management team and, clearly, the diversification strategies that we've implemented. And when you look at our peers on a relative basis to their performance in 2007, there's nobody can make that claim that we can in terms of the performance.

So we think this will become the norm in the next 5 years. What has the management team done to achieve greater success in a relatively difficult environment? Now when you think about the management team, you have to then speak about how the management team operates within the culture of the organization. And I want to spend a couple of minutes talking about the culture of the NASDAQ OMX management team.

So the first thing we always say is that if we can weigh, measure and count something, we need to weigh, measure and count that item. And in NASDAQ OMX, we have probably the most sophisticated internal accounting system that the world has seen, and we call it our PPM system, product profitability, and we have the ability to weigh, measure and count everything we do.

Another hallmark of the culture is that we believe that we have to judge people actually on what they do and not what they say. And we certainly believe in most corporations, articulation is over rewarded, and we want to live in an objective world where people at the beginning of the year say this is what I need to accomplish. And then at the end of the year, if they have accomplished it, there's really no reason to have a discussion, you either earned your particular pay or you did not. And common maxim would be, we want to obviously plan the work and work the plan. Simple concepts, but not that easy to do in practice, so I think we excel in that regard. And when you look at what that culture brings to us, it obviously brings a management team that has a quite strong discipline, is forward-looking with respect to what they have to accomplish and puts us in a position where you can achieve $0.61 in a difficult environment.

Now when we think about this structure, we also realize that like anything else, we have to evolve over time and we recognize that your strength can be your weakness. And when we look at our culture here, we said we have excelled at what I'll call the plus-ones, the organic growth efforts within our organization. We have excelled at the acquisitions within our organization, and we'll talk a little bit more about that, but we wanted to get better at what we call new business initiatives. And as I've said to most of you folks, we've established what we call a gift council. And this is probably in the 2.5 year of its development, and I would say in 2012 is the first year that we can hold it up to world-class standards. And the gift council has taken us away from some of the product management disciplines and allowed people to invest in the future without that affecting their PPM.

So in certain ways, it's a free lunch. To get that free lunch, they give up elements of their sovereignty and at the business unit, then has to go before council with respect to whether they get approval for these funds. And this council has a charter, and that charter is to ensure that our product management disciplines improve dramatically, and we're able to run the whole organization as one of our leading venture capital funds would run it, that we have strong supporters on the West Coast.

So when you look at the gift council over the last number of years, we have had some notable successes. We've had some notable failures, and we have had some in the middle. But we know that when you start new initiatives, you're not going to go one for one. If you do, it's pure blind luck. And you have to obviously fund a number of different flowers.

So we will hear -- you'll hear more of that through the course of the day, but I would say that is working extremely well for us here at NASDAQ OMX, a number of announcements you'll see sprinkle through the day is there. And as we said for our 2012 plan, there was a dramatic increase, the largest increase we ever had in one category in funding for gift initiatives.

So we look at the 3 legs of the stool. We have what I'll call the plus-ones, the organic growth within the organization, which is funded by the unit itself. We have obviously then, the gift initiatives that we speak about, and then we have acquisitions, which will obviously and has been and will be continued to be a part of our DNA in terms of what we do.

Now with respect to the culture, clearly we weigh, measure and count everything. We tend to be cost-conscious. We tend to be cheap. But also important to recognize, that we're keenly conscious of who we are as NASDAQ OMX, and we're first very protective of, one, our reputation, our reputation in this public arena, our reputation with the regulators. And we're certainly immensely proud of the fact that we run 22 markets, 10 clearinghouses on a global basis, and we do it in a pristine basis. And our reputation, our brand awareness on a global basis has never been higher based on the studies we track.

An example where the culture have to recognize that, in 2010 going to 2011, we, like many companies, had info security attacks happening on an increasing rapidity. And that's the point in time where you throw out the budget and you do what you have to do to make sure that you're protecting your name, your reputation, your brand. So in 2011, we had an unplanned almost $10 million of spending that was outside the budget. But again, the culture is not so rigid that we can't respond to those kind of situations as we look at it.

So with respect to how we've done, as I've said on a relative or absolute basis, we do want to brag a little bit. When you see 2005 with revenue just around $500 million, and we did 2011, we're over $1.6 billion heading towards $1.7 billion, 221% growth in revenue, clearly impressive. We're also proud of the fact through these efforts, our EPS number grew at a higher percent at 277%. And I can't see the exact number, but it was obviously low when we went to 256% last year. And most impressively, the free cash flow grew by 500%. So obviously, we had to had a bit of organic growth and some very successful acquisitions -- and next slide.

And you look at it -- now this is from 2007, not 2005. But you see from '07 to '11, net exchange revenues at the start of the period was $800 million, $133 million in organic growth, $745 million through acquisition, landing up with $1.69 billion. So when you look at that free cash flow growth and the EPS growth -- and John, can you go back a second? And you have listed here a number of the different acquisitions, obviously, our acquisition discipline has served us well. As we've said to many of you folks before but we'll repeat it again, when we look at an acquisition, one, we want it to accrete within 12 months, and we want a reasonable period of time before we have the return on the investment capital.

Now why do we get so hard up about the accretion within 12 months? And we say for very large acquisition, we'll go a little bit longer. One thing we're keenly aware of is we have a very limited ability to predict the future. And to the extent that you are going further out with when you think the accretion will happen, external events will get in the way of your internal plans. I'd say, you can still do everything the way you thought and execute perfectly, but the world has changed a lot and then you never get to that accretion number. So we have that one discipline.

Two is, we see many acquisitions where they can meet financial metrics, but if they're not leveraging the mother ship in some fundamental way, then it's not something we should be doing. And that's actually a bigger topic of discussion than you might realize, but we have to have a point of leverage. The financial return by itself is not enough. And if you do that well with these acquisitions, obviously, then your EPS can grow faster than your revenue. Your cash flow can grow dramatically faster than both, so we feel very good about that. And you'll hear about that from the different business units today.

And just 2 slides forward -- All right. Now shifting gears. What I did want to talk about is a question that's on our minds and on your mind is, you live in a volume-based environment, Bob, you and the team had done a better job than most, if not all, diversifying your revenues and your businesses. We saw the example of that in the first quarter where you did $0.61, but still volume is a good thing. All right. We like more of it, and we're obviously living through a low-volume period of time.

And what is your prediction for volume? How do you guess it? Now we don't really know, all right. But we obviously do spend some time thinking about it. I just wanted to spend a minute or 2 to step you through a couple different factors that we look at, and then you can make your own value judgments with respect to what's transpiring. So let's go one forward, and then we'll come back to this.

The first thing you see is, obviously, U.S. GDP growth. And if you see the flow of GDP growth from '08 as a trough for beginning of '09 to '11, it's obviously increased. Volumes has not moved up, so we'd have to say that GDP and its correlation to volume is not as strong as you might think. Then we look at the unemployment rate, and that starts to look more like the volume curve. And then we look at consumer confidence, and this chart really, I think, masked health. You've gone from 100 to 75, so it's a fairly substantial drop. So those 2 charts start to map to the volume chart. Let's move back a second.

And then another factor is volatility versus volume, and that's on the top right. And you see the red is the VIX index, and the blue is the volume. And that chart starts to line up fairly closely. It's a multiple, and we'll spend another second on that in a minute. And the other thing we look at is investor confidence, and we certainly see that being even more important than consumer confidence. So GDP, not so correlated, investor confidence, consumer confidence, correlated more, unemployment rate correlated more, get down to investor confidence, then you see it tracking pretty closely to equity mutual fund inflows. And we know that when there's equity mutual fund inflows, that has a ripple effect on our market. So as we look at volume, we first look at investor confidence. We look at equity fund inflows, then, obviously, some correlation between the VIX and volume.

Let's go to the detailed Slide on VIX. Now to bore people a little bit more with this, is we had our economist spend some time looking at correlations here. And you'd see, to give you one example, is if the VIX is, let's just pick a number, at 31.93 in the middle of the chart -- do you have the pointer on that, John? Maybe you don't. Okay, so in the middle of the chart, you see 31.93. So what this chart is saying is, one, is I had a 103 observations of the VIX being around that level. And in -- when it's around that level, the volume tends to be between 9.5 billion and 10.5 billion shares.

Now the deviation is 12.7, and the absolute max we've seen is 80 and the minimum is 15. So it's not exact -- it's obviously not perfect, but it gives you some indication to where we are. Now let's go back to current volume is 6.5 to 7.5, VIX around 21 -- no, just stay on this slide, John. So we've got a lot of observations there, 253, and the deviation is a lot less. So this is getting to be a pretty good number to look at. And the max is 40, which is that -- not that full of and the min is only 14 there. So there is a clear number you can get towards volume based upon the VIX. Now we don't want -- we don't take any one of these factors as the gospel but this, obviously, is helpful. The investor confidence number is helpful. The equity inflow number or bond outflow number is helpful.

So the point being is that when we look at the numbers today, and again this is just one person's predictions, we're not here to say, you have to make your own judgments. With respect the volume, it certainly appears that you have a bias towards the upside based upon historical trend lines and norms. And from a volatility perspective, what brings volatility to the market is a particular event, and we think of there's biases towards events happening in the next 6 months. And I've said publicly, what's important for us based upon our business model, and you witnessed it in '10 and '11, is if we have a month of good volume or 6 weeks of good volume, then that really kind of makes the year within a reasonable percentage.

Now obviously, would we like 3 months of good volume, 4 months of good volume, 5 months of good volume? We would. And that will happen in time. We're not here to predict when. But certainly look at 2012, as we study these tea leaves and they're available in the presentation, and we'd be happy to follow up with you because it's really up to every one person to come up with their own determination. So we look at that.

So our conclusion is looking at our tea leaves, there is a bias to the upside. On volume, it would appear that we're at a sign on the low-end, and we have some correlations, which, in time, will definitely prove correct, which are not correct today. So we'll leave it at that.

But just rehashing, the management team matters. I'm obviously very proud of the management team you're going to see here today. This is the team that has executed quite successfully over both turbulent and calm waters, and that's truly the mark. This team will matter more than the business model in the next 5 years. The last 5 years has been more about the business model we've been handed to them. We have a wonderful deck of cards. We're in a position to hit on all 3 cylinders with respect to plus-one, new initiatives and, obviously, continued strategic acquisition.

So I do thank you for coming here today. I think you'll find the time well spent and certainly look forward to your very forthright questions. And I will now turn the program over to somebody who's been with NASDAQ OMX I think, a year longer than I have. I've been fortunate to have her part of the senior team. She runs both our Market Technology business, which is a business -- which is one of our shining stars, and has a small part-time job of being the CIO, Anna Ewing. Thank you.

Anna Ewing

Well, good morning, everyone, and it's a pleasure to stand here today and give you an update on our technology and our Technology business. I was really hoping to give you a breakdown on all the great technology that we build and operate, but I was told by Bob I wasn't allowed to do that. So what I would like to do instead is really start off by telling you about how we think about technology at NASDAQ OMX, and it's actually pretty simple.

We really believe that technology is the beating heart at NASDAQ OMX. It's as simple as that. And you will see through the presentations that you -- will get presented by my peers today, that our business success is really built from our technology excellence. Not that I'm trying to take credit, it's a true partnership.

And if you think of our trading platform, and we're well known for our technology, no trading platform in the world can operate faster or at the scales that we operate. And to put it in perspective, we can operate -- we can process, and we do on peak days, more than 1 million messages per second at speeds at some 40 microseconds. And to put it in perspective for those of you who are trying to remember what a microsecond is, it's 0.000001 seconds, just to give you some context. And our technology can trade and clear really any instrument on the planet. And in fact, we power 1 in 10 securities transaction around the world through our own markets and to our Market Technology customers.

We are the world's largest technology exchange provider, with over 22 years of experience, and that is through our Market Technology business that we acquired through OMX. We have unique capabilities that is unmatched by any other exchange in the world. And it's really not just about the technology itself, it's -- as Bob said, it's about our ability to execute.

We've got a lot of logistics up here to work through. Okay, so the first one, as you know, we have done a lot of acquisitions. And we're very proud of our success, both from an accretion perspective, from an ROI, but also from our ability to actually deliver on the promise. So at the same time we're building out new products and services, we've been acquiring and integrating all these different companies. And we have done -- we have met on schedule all of our deliverables, all of our IT deliverables. And in every single case, we have either met or exceeded our cost synergy estimates.

In our business, operational excellence is really table stake, and we really set the standards here. We have 5 9s availability. We process billions of transactions in a day at sub-microsecond speeds to millions of customers. And as much as that's tables stakes, that's hard work to make sure you have that reliability and capability. And we're proud of not just our excellence, but how we set the standard around the world as far as that excellence.

For example, and I personally experienced this as I rolled out some of our technology around the world, one of the first -- in markets that are becoming more competitive, more algorithmic trading, they all want our ITCH feed. So our ITCH feed for market data is really the world's de facto standard for algorithmic trading.

And certainly my peers and Eric Noll will talk about all the innovative stuff we're doing in co-lo [co-location] is another example. But you'll see examples of our technology not just from a innovation perspective, but also from an operational excellence perspective as well.

Efficiency culture is a core part of our DNA, and what this allows us to do is we cut our cost. It allows us to really reinvest some of those savings into all these growth initiatives that you're going to hear about today. We have, as an example, a continuous efficiency program to reduce our baseline cost by 5% every year. We call it our own Moore's Law. And we do that by being smarter at what we do, leveraging new technologies, leveraging Moore's Law itself, and so it's an ongoing part of our target and our plans.

We have a proven track record for the cost synergies that we've achieved, new products and services, all at the same time as reducing costs. We believe that an asset-light strategy as far as our CapEx investments. So where we can limit the exposure in terms of heavy investment, we will do that. For example, we lease our data centers, as many of you know, but at the same time have full control over that infrastructure. We also will, where we can, buy capacity on demand or on a real time basis. And what this allows us to do, as I said, is minimize our costs, reinvest. And if you think of our development resources and a lot of what we do is around our software, 1/3 of that, which is world-class by the way, 1/3 of that effort is directly attributed to new growth opportunities rather than just run the shop.

In addition to our ongoing annual program of cost reduction, we have introduced this year a new technology road map. And the specific goal of the technology road map is to reduce our cost in 2013 by 10% rather than just 5%. And we believe we want to do that because we can -- well, we want to that for obvious reasons, but we think there are some opportunities and some key IT trends that we are leveraging. Cloud computing is one example, where we are looking at some of our non-core applications on our trading platforms that are some our non-core corporate systems website, et cetera and moving into the cloud.

We are looking at alternate sourcing models. We are in multiple cities, not just Stockholm and New York and Sydney, and we want to leverage some of those lower-cost centers for development. Platform consolidation is a never-ending journey for us. It's a continuous part of our product road map. And then what we call lean IT, which is always looking at how to reduce our footprint, reduce our power consumption, et cetera.

So at NASDAQ OMX, technology is a catalyst for growth. And you can see this as we go ahead, and it's really across all our businesses. But what I'd like to now do is actually spend some time giving you an update on our Market Technology business, which is the business that I run, I have the pleasure of running. And we provide -- as part of Market Technology, we provide value added technology to exchanges, clearinghouses, regulators and brokers around the world. And this is typically core, strategic, mission-critical technology such as older trading platforms, other clearing platforms, other risk management and market surveillance platforms. So these aren't commoditized widgets. I'm not selling feed handlers or fixed engines per se. That's just an extended part of our offering. These are core, strategic, sticky technology that we implement, manage, support, extend.

I'm very proud of this graph. And those of you who have taken the journey with us since 2008, I know that when we first acquired Market Technology -- the business, we were intrigued. It was strategic, It was around the world. It made us more global, but we were more concerned about our ability to make the business a profitable business and ensure that we have the type of ROI that Bob expects us to. And I'm delighted to say we are absolutely on track to not just grow the business, but to expand the margin of the business in a significant way.

We, today, represent -- this is in 2011, we had $183 million, and we're on track this year. We, in 2010 Analyst Day, forecast a revenue in 2012 -- boy, time flies -- of $200 million with a margin exiting run rate of 25%. And I'm happy to say that we're on track for that. We're going to say the range is $190 million to $200 million because they are always factors that may come into play, as you all know. Also, we're also going to give you a range of $190 million to $200 million, but we will be exiting 2012 at a 25% margin and just continued margin expansion as we go through the next year.

Just a brief breakdown of how we report our revenue, for those of you who may not be as familiar, but just real quick. We have 3 categories: The first category, which is the light blue, is our license support and facility management services revenue. So that is -- I guess, that means you want me to point? Here we go. Okay. So, what's that? At the slide? Sorry, John, I didn't mean to point at your forehead. So that -- first of all, as you can see in all these fronts, we're growing our revenue pretty nicely. But this first category is license support fees that are based -- they're annual fees. They're part of our long-term contracts. And what we do is we recognize the revenue over the life of the contract, which is typically 5 years but sometimes longer.

The next category, which is in this dark blue, is what we call delivery projects. And delivery projects are really, as we implement these, again, strategic complex systems, there are onetime costs around the project delivery, around customization for the customer, et cetera. And those onetime costs also get recognized over the life of the support contract. The support contract tends to be -- well, it tends to be 5 years in nature, obviously. But the reason we want to distinguish that is because a support contract can get renewed, the delivery costs do not at the end of that 5-year period. So we don't think of -- even though project costs are recognized over the life of the initial contract, we don't think of it as recurring.

And then finally, we have this last category, which is more of a short-term recognize revenues such as change requests, CRs we call them, advisory services. And it's also our fast-growing subscription revenue from our broker, our SMARTS broker, and I'll talk about that in a minute.

We are growing and diversifying our customer base in addition to having our technology and expanding our footprints with that technology. We're really diversifying who our customer base is. So if you look at the exchanges, we have 74 exchanges, clearinghouses and depositories. We've actually grown more than that. We've actually, from 2010, have brought on 9 new customers. But we also had some planned exits through some low-margin nonperforming contracts that, when they expired, we didn't renew with the customer and as a consolidation -- M&A consolidation, more specifically, IFC and the Borsa Italiana.

With the SMARTS acquisition, we have been introduced to the regulator community and the broker community. So we are operating -- and these are all who's who, by the way. You can see by the icons. We all have to have our icons -- but the who's who in the exchange world. And with the regulators and SMARTS, we have been growing substantially, and there's the domino effect. When you think of what's happening on the regulatory landscape, when you're providing market integrity, technology to the regulator, there's a domino effect of that technology also being adopted by the broker community and, more often than not, by the market itself in that region.

The other keynote, and we talked about this last time, is our revenue mix by region. We have been growing overall, as you know. But in particular, we've been growing in Asia Pacific, which represents 41% of our revenue mix today. And if you look, think of it from 2010 to today, that revenue base has grown 45%. And we think of technology for our own markets, the markets that we operate and also for our Market Technology customers in very much the same way.

How do we help drive alpha growth? And we're very much true partners with our customers. So for example, if you think about what's happening around the world with electronic trading, with increased cost competition, with fragmentation, those are all opportunities for us. And what we have been doing, as some very quick examples again, this is more for a leave-behind and for me to read these slides for you, but in Australia or in Singapore or in Switzerland where fragmentation, competition, entering, our low-latency reliable technology was introduced by that market to take that competition head on. You don't get much more strategic than trying to protect the mother ship. So that's the nature of the relationships that we have.

ICAP in the U.S, another example. But we also work with new entrants. So what's happening in Japan with the PTS landscape competition, Japannext wanted to improve their technology so they can compete in that market. We worked with them, got them up and running in less than 6 months in our platform, and they have been increasing their market share.

Kuwait, another example of an emerging country. And most recently, we announced the work we're doing with Nigeria where you want to build your capital markets, you want to comply with international standards and best practices. We are their partner. And so these are again our long-term strategic relationships.

Also wanted to highlight real quick, some of the examples of what we do in the clearing and risk management space. TOCOM has to comply with SPAN in international standards in Japan using our technology. KDPW wanted to introduce clearing of OTC instruments, including interest rate swaps, in Poland using our risk management technology. So again, opportunities of markets, new markets that are forming, existing markets that are growing, markets that are being challenged, those are all opportunities to us.

SMARTS has been a brilliant acquisition, if I do say so myself. We acquired SMARTS right at the pinnacle of the regulatory changes, debates that have been going on, new legislation, uncertainty, all those things that have been driving costs for the industry up has been an opportunity for SMARTS in the business. And as you can see by our revenue -- whoops, wrong button -- we have increased our revenue from 2010 to 2012 by 51%. So Bob, I think that matched your expectations for the accretion guideline. But again, it's not just the path that the revenue is going so dramatically well, is we don't see that ending, we see this just the beginning. There's opportunity. The pipeline that we have is very strong. And in particular, if you look at SMARTS broker and if you look at the number of markets we cover, so these are the actual markets that we connect to, and then the number of broker subscriptions, which has doubled in 2 years, and we're all on the same track with our pipeline, this is a very, very strong business. And these are the types of acquisitions that we're interested in doing in the future, but we set the bar pretty high.

I'd like to point out to you, the numbers aren't obvious in and of themselves, let me just reiterate, that the Market Technology business, we feel very committed to this business. We're very happy. We're very proud of what we've achieved, and it has a strong business outlook for continued growth. We are on track, as I mentioned, to reach our targets for 2012, both for revenue of -- what was $190 million to $200 million, as well as margin expansion exiting the year with 25%. And in fact, 85% of our revenue is already contracted in 2012, so the downside risk is minimal. And again, this is long-term, strategic, sticky contracts, and our CAGR over the last 5 years is 14%.

In addition to having a strong business outlook and growth, we also have a very stable business model. So as I described earlier, our annual license fees and support fees, as well as our broker subscription fees, is what we consider recurring revenue. 65% of our revenue is recurring in nature, so that's a pretty significant percentage. And not only are they recurring in nature, the contract gets extended because of the stickiness of -- and the strategic aspect of this technology and how it's being used.

We also have a strong growth in our order intake. It's a 30% growth from last year over to this year. And order intake is the value of new contracts that are brought in to the business that will get recognized over the life of the contract. So we're very confident with this number, 174. There's always the caveat risks but, again, we're on track to achieve that. And what we call total order value or sometimes we call it order backlog, it's the same thing. That is the value of contracts that have -- are in place but the revenue hasn't been recognized. So I know some of you look at that as the leading indicator to future revenue. But again, we are at $496 million as of Q1 2012. And with some of the deals that we haven't announced yet in the second quarter, which we will at our next earnings release, hopefully, we'll be in a position to be able to announce them, you'll see that, that is a very healthy number and also growing.

So I just like to summarize the Market Tech business. If you can get the sense I'm proud is because I am. But I just want to leave you with a couple of points. The Market Technology business has a strong outlook of continued growth, both revenue and margin. We have a growing and diversifying customer base. We have long-term, strategic relationships that are sticky in nature. And we have a stable business model with mainly recurring revenue.

With that, I would love to answer any of your questions.

Question-and-Answer Session

Anna Ewing

Can I talk to you about my technology products?

Unknown Analyst

I was just wondering -- I mean, it's been a little bit more difficult in the technology segment recently. But I was curious that, that might open up some opportunities for you guys in terms of assets you may have been looking at that were maybe more pricey than you want to pay and maybe things are rationalizing now?

Anna Ewing

So if I can just understand your question, are there assets on the market for sale that we are contemplating? I just want to make sure I got your question right.

Unknown Analyst

Yes, and maybe just, given the fact that there has -- it's been a little bit more difficult recently on the technology side of the business, just there's the prices of those assets that are maybe coming into a range where you guys would be more interested.

Anna Ewing

Well, first and foremost -- well, you can imagine with our brand, we have a lot of opportunity, and we've looked at a lot of deal books. And we do that on a continuous basis, but we are very disciplined. First of all, can we leverage the mother ship? From a technology point of view, I'd like to say, we eat our dog food, but we -- first of all, even with Market Tech, we're not necessarily diverging into providing technology or services that we don't use ourselves somehow as an exchange. And that's part of our value add. That's part of our domain expertise. So I was looking at books, and if there's a strategic fit and a good ROI, we will consider it. So we are looking at various assets, but our first driver is how does it leverage the franchise and then what is the ROI.

Unknown Analyst

Obviously, there's been some pretty impressive growth driven by SMARTS. I'm just wondering, maybe you could frame what's the opportunity set from here in terms of the overall market and who your competitors are and what are the plans to continue to drive growth in that area?

Anna Ewing

Sure. So when you look at the SMARTS business and the growth trends I displayed is really what I see in the foreseeable future. The landscape is, again, continually dynamic not just in the U.S., not just in Europe, but, clearly, there's a lot of regulatory changes in requirements going on in those regions, but also in Australia and Asia Pac. So we're seeing it consistently around the world. In Latin America, we're doing work with BOVESPA as an example. What's unique to our business is you can sort of slice SMARTS and say, "Okay, how does it relate in the brokers space or the regulators space, whatever?" What's unique to us is that our technology -- and it's, in essence, the same technology that's across all spectrums of a marketplace, the broker community, the regulator, the markets. And so when you have that and when you think of what SMARTS is, right, what is SMARTS? It builds in all the IP, all the rules, all the requirements -- regulatory requirements of that marketplace, of that region, into the technology. Right? So it's an intelligent technology that has all that IP built-in. So the stamp of integrity, the stamp of endorsement, especially if the regulator is in that marketplace using that technology is what differentiates us from everywhere else. If you take Australia and Canada, it's 2 quick examples of where that is the case. The regulator is using it, the marketplace is using it. When TRIAX set up shop in Australia, we had to add the TRIAX marketplace to the technology for a fixed -- the broker community -- over 60% of the broker community is using SMARTS. Now wouldn't you want to use SMARTS if you know your regulator and your market is using the same technology and their expectations is built into that IP? So that's how we look at the landscape. And really there's no competitor to us when you look at it from that text. If you look at specific verticals, the broker compliance, yes, there's some players there that are in that space that are doing other things besides compliance. They may be doing anti-money laundering and other things. And so we also, from a product development point of view, going back to the question on how to extend our product sweeps, we will look at bolt-on acquisitions to expand some of these offerings, in particular, in the SMARTS space because it's such a growth potential.

Unknown Analyst

Thanks for the color on the portion of the business coming from Asia. That was really helpful, and you said there was a 45% growth as well. When you kind of take a step back and you look at the structural changes in those markets, is there still a lot of opportunity in Asia? I mean, I guess, rule changes and regulatory-driven changes drive a lot of these exchanges to have to update because there's competition coming. Are you kind of done with most of the growth, the strong growth there? Is there another region that we can think about or are you still in early innings, you think?

Anna Ewing

I certainly hope we're not done. No, I think we're actually in the very early innings. And one of -- if I can just segue a little bit and talk about the sticky nature of our business. So we're in Australia, Osaka, Singapore, Philippines, Thailand, Indonesia, Hong Kong, right? So when you think of the markets that we're in and we're operating in and then you think what's happening to those markets from a growth and diversification perspective, just staying with those markets, there is tremendous opportunity. And our -- what's really unique about our technology, I know I wasn't supposed to talk about technology today, but it's a multi-asset trading and clearing platform that can trade anything and clear anything, and I mean that. So when you actually go to each of our Market Tech customers and see what they're actually using the technology for, the asset classes are tremendous. So part of what we're seeing, and OTC is a great example of what's happening in the OTC space, assets diversification. So that's one trend, and that's a growing opportunity. The other, especially the markets where competition is -- in Australia, Japan, et cetera, we see new market players, so the addressable market is actually growing. So definitely we continue to see growth in Asia, but we're seeing it across the board, Latin America, Africa. We have a significant presence in Africa and the Middle East. There are smaller and more emerging markets in some cases, but we dominate that region. So we definitely see growth on all fronts. But certainly, Asia continues to be the area where some of the trends -- I mean, even some of the trends, whether it's trading, regulation, et cetera, are going into the Asia landscape, another key driver why we see we're in the early innings in Asia.

Unknown Analyst

Question on Slide 23, on the customer footprint between the exchanges, regulators and brokers. Can you give us a sense of -- maybe not giving out as exact numbers if you don't want to, but sort of the revenue composition of the technology business across that customer base, and then if you could just talk maybe a little bit about whether you're seeing slowdown in the sales cycle in general given the market environment, some of these customers potentially pulling back versus the organic growth opportunities that you outlined and whether we can still get close to double-digit type of top line growth over the next couple of years?

Anna Ewing

Sure. Okay. So I'll start with the first part of your question, which is the footprint, and I would break it down because we look at our SMARTS technology, SMARTS revenue holistically. As a growing percentage right now, it's about 20% of our overall revenues mix. And the accelerated growth of the broker business is a key driver of the growth itself, but from a composition, it's about 20%. The next question was, do we see the ability to continue on with the type of growth as the market is slowing down because of some of the economic factors? We absolutely see growth. I mean, it's interesting. The macroeconomic landscape drives more the time to decision, not necessarily the decision itself. So if you go forward and if you look at, for example, the order intake by year, and if you can see 2011 went down and then we're going up by 30% this year, part of that, quite frankly, is driven by timing of decisions that got deferred into 2012. So for us, it's more of -- and that's why we re-hedge and give you ranges sometimes is because it's timing is what will impact the opportunity, not so much whether there's an opportunity itself. So we are on track with our projections, our forecasts to continue on the growth curve that we're on today.

Unknown Analyst

Just on the pricing. So when you look at all the products and the services that you offer, are there areas where you have pricing power versus products in areas where you have a lot of competition, and it -- any incremental data points over the past 2 to 5 years in terms of trends in product areas?

Anna Ewing

So you may not believe me when I say this, but I'm going to say it anyway. We don't compete on price, I don't sell commoditized technology. I don't sell market data fees or fixed handlers or whitespace in a data center. That's not the business I'm in. I'm in providing value added software technology, and in some cases hosted, but software technologies that runs the core operation of a market or exchange clearinghouse or CSC. So what we -- where we tend to win is where that customer is looking for our domain expertise, as well as the core mix. And our biggest competitor, quite frankly, is really in-house development. Why? Because if you think of -- if it's still strategic, do you really want to partner with the third party, right? So it's not a commoditized deal, it's a very customized deal. The pricing is very much -- yes, are there other players at the RFP? Of course, but we're not competing on price. We're competing on -- same price is effective, of course, but on our domain expertise. And is this the strategic relationship, is this something that we want to put our scarce REITs and valuable resources against, and is it sticky and is it long term? So I would say, it's very much a customized pricing model because of all of the above. I don't have a price list.

Unknown Analyst

In terms of the margin expectations, can you refresh us as to where they are now to get to the end of the year and then are there still some lower margin contracts that are expected to roll off to kind of get you there?

Anna Ewing

Sure. We do have a couple left and they're insignificant enough that it's not that material, but there are a couple. We, I believe at the end of first quarter, we're around the 12% range. And 2 of the quarters, we're improving through to exiting at 25%. And if I had to average out this year, it will probably be around 20%, 21%. And then next year, we'll be -- we'll start the year at 25%, and there's still some margin expansion opportunity through some of the technology road map initiatives that I described earlier, in particular, sourcing model.

Robert Greifeld

Anna, apparently I get to ask you a question.

Anna Ewing

Oh, no.

Robert Greifeld

So any further questions for Anna? Okay, thank you Anna.

Anna Ewing

Thank you.

Robert Greifeld

So I'll just make a couple of comments before introducing the next speaker. One is, we call Anna's business Market Technology, but the other business units probably resent that a little bit because we feel that each and every one of our businesses are in the Technology business itself. As Anna said, it's the beating heart of NASDAQ OMX. It runs through everything you'll do. You hear about that.

In respect to Anna's tremendous performance, I would just highlight that order backlog -- and I heard the question about other software companies having difficulties in these times, order backlog went from $134 million to $174 million. I don't think there's too many people out there who can say that, so that's certainly a great indicator. And just in the last month or so, I've approved so many press releases with successful installations with Kuwait just the other day; Nigeria last week; a week before that, Swiss Exchange went live; TOCOM in Hong Kong. So it's been a truly outstanding year for Anna so far.

The only thing I would also mention is we do have a contract for the Asia strategy. We have -- now have our first penetration into Mainland China with some contract, so we feel good about that, where that is going. And regarding the price question, as we said at the last Analyst Day, we, I think, getting fair revenue amount from our contracts and our issue was more to get the operations in place where we can get to that 25% margin. Anna is obviously doing a wonderful job there.

Next speaker is John Jacobs. He's the institutional memory of NASDAQ OMX. He, as a business, has been too neglected by the investor community, so I ask you to pay close attention. It's certainly one of our growth drivers in the future.

So John, it's all yours.

John L. Jacobs

Thanks, Bob, for that kind introduction. Institutional? I'm not sure about that, but I have been around a long time. I do believe NASDAQ grew. Thank you, ladies and gentlemen, for coming today. It is a pleasure to talk about the NASDAQ OMX Global Index business. It's a very exciting time to be an indexer. The index industry is undergoing fundamental change, and we'll continue to undergo fundamental change as we all experience every single day.

And I want to make a very bold statement now. The NASDAQ OMX Global Index group -- this business is absolutely the best-positioned business on this planet bar none to move forward in this industry. We're not just going to survive. We're not going to fly. We're going to disrupt and redefine indexing, and we're going to be the index business that every other indexer has to react to and has to drive their model to. So it's a very, very exciting, opportunistic time for us. And when you look at how a modern index business is going to be defined in the future, it's going to be dealt on brand, technology, breadth of offering and value. And no one, not MSCI, S&P nor anyone else would be able to compete with us as effectively as we will be across those 4 attributes. So now I'm going to walk you through that -- our relentless march forward as we disrupt and redefine this business moving forward.

So I don't get to speak about this business too often because it's actually kind of broken up a couple of different places the way we report it. And I did get to speak about it at Analyst Day last September 2010, and we'll talk about our past from there to now and now into the future. But let's talk about brands for a moment.

Millions -- tens of millions of times today, around the planet, people say, "How is the market is doing? How are this section doing? How is the section doing or some other parts? And the answer is NASDAQ or OMX or SWXess or one of our other benchmarks. We've moved from 1,000 to 3,000 indexes, and we're going to talk about all the rest coming online shortly.

Our index is widely used by people who create products like BlackRock and iShare, I'm sorry, BlackRock, iShares and PowerShares and CME and other markets out there that creates different types of products. And they're also used by pension plans and pension folks and portfolio managers. So let's talk about the revenues and look at the numbers for a second.

So in 2010, one of the premises I told you was we were going to move from being a specialty niche indexer with a couple of hot indexes to become this institutional player as well, so that we can start monetizing our data in a far more efficient manner. Most indexers, major indexers have a ratio of index data that's twice the license data is, and we're just starting on that journey. And we've had great opportunities as you can see from this chart here to start with.

So let me tell you how to map this back to our financials. So if you look at the orange area at the bottom, it's -- you'll see, this is what you can see in the 10-K -- in the 10-Q under the Issuer Services segment under Global Index. This is our license revenue and custom calc, and this is the numbers that you see and this is where the licensee you get paid for by the CME or PowerShares or BlackRock or Fidelity, whoever it is, the 165 licensees we have around the world. And that number fits right there. If you look at the blue area, blue area is index data. Index data is the index data that people subscribe to and that is found under Market Services within U.S. Data, and [indiscernible] is a followup speaker to me.

The next section at the top is visibility. Visibility is, as you know, we run multiple web properties through NASDAQ online group. But is a website that is designed to attract financial advisors and investors and index investors and so on, and we sell advertising in that model and drive more and more content to support that. That business you'll find under Issuer Services segment again but within Corporate Solutions Other. So it's hard for you to pull out these numbers, that's why we're kind of going to give you the clarity today. That's 14% CAGR since 2007 and great opportunity for -- in all those categories.

So let's talk about some launches since the last Analyst Day I spoke to you into a little bit more clarity into and a little bit more discussion of the growth. So since last Analyst Day, we launched 2,000 indexes, 44 additional ETFs. When I started the ETF business -- and I started this ETF business essentially by myself and grabbed a couple of people and I still feel like it's just a couple of people, we have built this business to be a very lean -- Bob is laughing. I'm pitching for the next budget round -- it's a very lean, mean operation but it's organic, and we built this business from scratch. We had 4 ETFs. Now we have 77. We have 9,000 structured products against our indexes around the world now, with a $1 trillion in notional value.

So let's see how that's played out in the numbers. So again, the orange area is the growth in license revenue, and licensing is again -- to give you those licensees, that has been a 19% growth. You'll see that one little bar there that we normally include in licensing, which we broke out as customs calculation. We are purposely not expanding that business at this point in time until we finish our technology build, which I'll talk about in a minute. And then you see visibility services. That's been growing at 20% and index data at 26%. That is from September 2010 to the end of 2011.

Okay. Now I think this is going to be a very interesting conversation. As we drive more, I want to give you more clarity and more definition, granularity into the revenue. But I also want to talk about some of these different relationships that we have. So again, when you're investing in a business many times, you have to take a temporary stay at your top line revenue or marginal pressure. We've had to do neither. We been able to continue to grow the top line while we continue to move down this path and investing in this new -- our new technology and continue to enjoy very healthy margins in this business.

But I'm often asked the question, as I keep talking about idea of index licensing versus index data, okay, the license fee you get from PowerShares or BlackRock versus the subscription fee you get from a portfolio manager and how those 2 kind of work together. They're both important, and our goal is to get them from a 1:2 ratio to 1:1 ratio to 2:1 ratio and normalize it.

So index -- here's a couple of examples, and this shows you the reason why we're the ones who are going to redefine indexing in the future. Okay? So let's take an example. So iShares had an index -- had an ETF out there on the S&P semi-connector index. And we walked into them and said, "We can give you a better index. You should switch your benchmark." And they said, "Tell me when you need our better index. Well, it's better constructed. It has a broader following. It is already the basis for products on PHLX and NOM, its options. It is already the basis for structured products. It is already the basis for levered up and down ETF." And so we walked in and said, "You can get a far more adopted, highly more adopted ETF -- index for your ETF." So we certainly increased value of that and increased visibility. So they switched their benchmark. And we can do that because that index cost us absolutely nothing more to calculate the way we do our indexes, and we can do that at a far better value to them than they were paying at the current time. So it was our ability to go and then replace that benchmark. And everything has worked. They've gotten more visibility, more volume, more -- everything has worked about that switch. Okay? And that's an advantage I have.

Being part of the NASDAQ OMX group, I can lever all the parts of this business. I can turn to Tom Wittman and Eric Noll at any time and say, "I've an index. Put an option on it." And they will for our customer. They'll put an option on it. It may not sustain but they can put it on there. No other indexer can say that. I can turn to Hans-Ole and say, "Please, give us a derivative." Because remember, the third most heavily traded -- or the fourth most heavily traded derivative in Europe is OMXS30. We have the ability to lever other parts of our business. So that's one great example of how we can go in and get a better value and undercut a customer -- a competitor.

The second one, I think, is even more interesting. This shows the adoption of licensees to data. So we went to PowerShares and said, "You've got some water indexes that are baseless to the ETF. We can give you a superior water index. It's better constructed. It can support multiple types of products, better data. We can give you 5 years back history. We can do -- it gets better dissemination, all the things that a big indexer does." So they picked it, and they did it. We didn't even have to discount it. We've got full fare. Immediately, within 96 hours, 4 major firms on the buy side started subscribing to our green family of index data because water is part of green. So maybe we started seeing data subscriptions. And after that and within next week, the numbers doubled and so on and so forth. So the point is, the higher adoption you get for your indexes on the ETF side and the visible retail product side, the more people will buy your data on the other side and do the analysis thing to do.

It also works the other way. The more people start adopting your index data to use for benchmarking and risk analysis, the more that there will be a demand created on the side of the product sponsor. So again, the goal is to create a comprehensive offering at a low cost with a brand that gives you integrity and credibility with better construction, and that is how you define the index business. Okay?

So again, what we've launched just this year in order to driving that data business we talked about is we've launched our first commodities -- 2 commodity family share. We launched a commodity family based on futures and an equity commodity family with Axioma. We have launched a U.S. all-market family. We have launched the first fixed-income offering with the Treasury offering that we have with PC-Bond, a joint venture with TMX. And we launched a green economy family. The other thing, those first 4 families come with 10 years of back-half data. It's a very quantitative business today, 10 years of back-half data, green economy comes with 5.

So it's a very, very great opportunity for us, and it was working. Obviously, we've seen the uptick in data, revenue and so forth and so on as we drive more data subscriptions. We have 3 -- 2 more things that are really going to redefine this business and help us redefine this business. And we'll take a minute to talk about technology. So I'm going to pick up where Anna left off in her last slide, her last comment. Anna can trade or clear anything on the planet, any item on the planet. Because she can do that, I can index it, I can benchmark it, I can distribute it, I can monetize it. Okay? Because INET is the absolute fastest and most scalable transaction technology, she's building me a brand new index platform and with 2 -- we'll have gone through the first 2 phases. Two more phases this year, and we'll complete it next year. I will have the absolute, most scalable index platform, which gives me the unbelievable competitive advantage against every other incumbent out there.

So for example, with 1,000 to 3,000 indexes. Later on this year we're launching 15,000 more of global equity families. By next year, I should have 150,000 indexes. The cost of those indexes of going 5x and 50x more than today is incremental cost. I have some slight data acquisition cost depending on the asset classes, but it's incremental cost. My next 50,000 indexes are as cheap as the first 3,000 indexes. That's a huge advantage. We do not have a very expensive base. So I can go in there and I can sell my indexes and my index data far less expensive than anyone else. Okay?

But very interesting is right now Anna has assigned 14 technologists to our business. We have 14 technologists somewhat supporting the business on an ongoing basis and some are building the new platform and migrating off our 2 legacy platforms. When we're done next year, I'll have 50x indexes and half of the number technologists. That's scale. That only comes because we -- I can leverage the advantage of being the absolute technology leader in this space to become the technology -- and the overall exchange space as technology leader in the index space.

So what's our focus today? On -- our focus is across the board. So again, I've talked about the change in environment, right? So we've all seen, first CME bought Dow and now S&P is going to require essentially the Dow and CME index business through a big JV. LSE brought the rest of FTSE from Pearson. There's clearly consolidation. On the -- if you look at just the ETF market today, the top 3 ETF providers account for over 70% of the assets in ETFs. The top 10 indexers account for those same 70% of the assets that are in ETFs. It's clearly an issue of consolidation. It's clearly an issue of competition and moving to those major companies. There are dozens of other indexers out there. They're not going to be relevant. And there are dozens of other ETF providers out there, and they're going to work their own channels. But we know where the bulk of the business is going to be, and we're best positioned to move forward there.

So as we continue to drive forward, we have to focus what we're measured on. What does Bob measure me on every week? He measures me on new ETFs, whether we continue to launch new products, which we did, 3 last week -- I'm sorry, 3 on Monday, we launched 3 new ETFs on Monday, bringing us to 44 since Analyst Day up to 77. He has measured on how many times we get somebody to switch their index to our index, how many more data subscriptions that we get. These are alpha drivers. This is in additions to all that great revenue we're already getting from all those legacy products like the NASDAQ-100 and the Q's and things like that.

But the other thing that's a great opportunity for us now is this has been an organic story. And we are in a great opportunity now in order to start using -- start doing judicious acquisitions. And those judicious acquisitions can really speed us along this path. We can get new asset class exposure faster through an acquisition or a partnership. Same thing you'd see with deeper geographic coverage and driving assets under management. We can buy them in bulk; we can get them individually, and get exposure to new customer segments for our weighings data. So every avenue is open to us now because this business is run so lean and this business has got that high level of operational excellence and such penetration. It's all about execution for us over the next 18 months moving forward.

So looking forward, so we're going to continue to rapidly expand our capabilities, our index offerings. You'll see more and more index offerings coming out. We're going to be multi-asset class. We will be equities, we will be fixed income, we will be commodities, we will be whatever Anna finds to trade in the planet, we'll able to index it and create a family with 10 years of back data and a very quantitative-driven business and send that out, okay? We will be able to -- we will continue to focus on sales and talk about end research.

Let me tell you, our index dissemination, we disseminate index data in 2 different ways. We have price dissemination, and Brian will talk a bit about this. Price dissemination are news offering later on this year, GIDS 2.0 will be 23/5 dissemination of our prices. Our weight to components is the way we distribute the weight to components. It's obviously all the components in the index and the weight that's in each index, which is what people need to do to benchmark and do a risk analysis.

We're going to launch the All-World family. So our U.S. family was launched earlier this year. It has -- goes down to 4 subsectors using ITB. We're going to launch the World family that covers all equities across the planet, again going down to sectors. So we will have a very comprehensive list again, 10 years of back data.

So our index calculator, going to the top page, Phase I and Phase II are done, Phase III and Phase IV this year, Phase V will be done by next year. We'll be rolling out a far more robust offering to fixed income by next year. As I said, the next 50,000 indexes cost me almost nothing compared to the first 3,000 indexes. It is built on our proven NASDAQ OMX INET technology. It is absolutely scalable far beyond anyone else in the business. And we have the ability to do not just scale, but multi-frequency types of calculations. So when you look out there and see an MSCI or S&P, say, oh, we do 400,000 indexes, most of those indexes are end of day. Most of the indexes are end of day. We don't do any end of day today. We can; we're going to do a few. And that is depends on the asset class and the feed, whether or not you want to go there. We'll be able to do end of day.

All of our indexers are either 15 second or 1 second. Most of the markets of the world define real-time indexes as 15 seconds. We've already moved our indexes like the NASDAQ-100 and those indexes to 1 second. But with our ability on with our OMX platform, our INET platform, we will be doing indexes tick by tick as well. So we'll be able to do every single tick. Imagine the OMXS30, imagine the NASDAQ-100 going tick by tick at the open or the close, and being that information feed going out to different customers for a fee, at the same time as the index is being disseminated on a second-by-second basis, a great opportunity to bring even more people in to use those indexes and benchmarks.

So we'll be able to do multi-frequency in multi-asset classes and multi-currencies, and this should interest anyone on the planet. As I said in the beginning, there are customers who are selling our products in 30 countries, and index consumers are consuming our data in every country in the world. So we are well-positioned in order to define indexing. Everyone is going to have to come and compete with our model, because we will be able to offer more for less across the board.

And so as I take you down this path, this path of relentlessly moving forward on this path, it is not just about adapting our model to what's changing out there. We are going to be the model that everyone adapts to. Questions?

John L. Jacobs

Yes, sir. You, right there.

Unknown Analyst

Getting back to your point that normally the index data is around 2x licensing data.

John L. Jacobs


Unknown Analyst

Yes, even absent any sort of growth in the licensing revenue, it implies a pretty big uptick in index revenue.

John L. Jacobs


Unknown Analyst

And I guess, how long is the time frame to achieve that? Where are the margins in the business now, and where would they be if you hit that normalized ratio?

John L. Jacobs

So let me defer the answer on margin, we should take that first, so how transparent should I be? High. So I would say north of 60% is our margin today, okay? And so while we don't believe that we're going to have to do and have any margin compression at all on those particular piece on the index data. Index data does require some work, and I didn't address it, but there is -- I should have addressed it back on Slide 33, strategic redesign of index data packaging and delivery. Here's how index data people -- customers want their index data. They want to get it directly, they want to get it through a vendor like Bloomberg, they want to get it through a risk analytics engine, like RiskMetrics or Axioma. They want to get it in variety different ways and they want to get it in a variety of different technology solutions. They want to incorporate it into their own models or into other models that they have. That is another effort that we're taking right now, undertaking right now to redesign that index dissemination of data and to make that -- optimize that, make that faster, make that better. So that's part of the work, ongoing work over the next 18 months. Parallel to the calculator, parallel to designing all these new families and parallel to designing all the visibility and support for that is building the index dissemination. So our goal is to continue to grow that index data number healthy, a healthy growth of index data number, especially relative to licensing over the next 18 months, so you should see continued growth in that over the next 18 months.

Yes, sir?

Unknown Analyst

When you look at the global opportunities, does the Market Technology group help pull you to potential customers, exchanges, and is that a competitive advantage over a traditional index provider like S&P or MSCI?

John L. Jacobs

Absolutely. The answer is unequivocally yes. That is very symbiotic related to -- Market Technology is out there with different market places. They're looking for solutions, and those markets are looking to realize that they can go it alone and be one of those little niche indexers out there or they can become part of a bigger family. So it gives us great opportunity to look at partnership on a variety of levels. I consider a Market Technology part of my global sales force, okay? And same thing with Bruce's team in Corporate Client Group. The ability to be part of a bigger company that has relationship cannot be underestimated. It's a huge factor of differentiation, gives us great opportunity to have conversation that our competitors can't have. I get to leverage every part of this company. Every part of this company I get to leverage.

Okay. Next question. Yes, sir?

Unknown Analyst

The comments you made on the tick-by-tick calculation, how are indices -- how often are they generally recalculated?

John L. Jacobs

Today indexes, S&P's like 15 seconds dissemination, S&P 500 is 15 seconds, every 15 seconds for new value. We moved ours to 1 -- every second, others are moving to 1 second. A lot -- most of the indexes out there are end of day because they're an asset class requires at end of day. But tick-by-tick is very, very rare, and we're going to be the ones to who will be able to do it across the board. So -- but most today is 15 second or 1 second.

Unknown Analyst

What is the implication that? What's the demand for it? I'm thinking that's an...

John L. Jacobs

At the open of the market, the NASDAQ-100 could have 100,000 upticks in 1 second, okay? 100,000, and those ticks are not being captured except at a second interval. So if you think about the ability to be able to analyze them and parse that through if you're very quantitatively driven, you can look and see within that. So there are people who are very, very astute at the analysis and -- at the portfolio analysis and looking those kinds of things who want better indications or faster indications of data, so.

Unknown Analyst

What I was trying to get at is, is there much high frequency volume today that are the underlying versus the index? And if you were to go tick-by-tick, you could cut into the ability to...

John L. Jacobs

Probably it's a better question for Eric to answer when Eric talks in transactions. I don't think that that's what's going on today. I think people more look at not the underlying, the arbitrage there. I think it's more around index reconstitution events, re-rating events. I think you'll find when we do -- there's ruffle day on NASDAQ or we did the NASDAQ-100 new ranking or we did the rebalance for Apple last year, I think that's where you find more the arbitrage opportunity less so. But we don't know what opportunities we'll create until you actually get that product out in the marketplace.

Other questions? Yes, sir?

Unknown Analyst

How much of your revenue is actually driven by the largest index product that you have, call it, the top 3 or top 5?

John L. Jacobs

The Q's is still -- the Q's are our biggest ETF obviously over $30 billion in assets and that probably drives the majority of revenue of ETF licensing. The most successful derivative product is the NASDAQ-100 future on the CME. It's one of the most heavily traded future products here, and then there's other products as well. We don't have to disclose and don't publish our fee schedules, the other side of revenue are the fee schedules, so we get different amounts for different products. But those are -- and we like that because those are very stable. They're great. They continue to drive -- help us drive the business. But the growth is going to be, obviously, as we said, in these other new opportunities that we have to roll out these index subscriptions. These new index subscriptions we're doing and we're getting our new indexes, are new index families. So it's great to have that core, but our goal is to grow beyond that and become a very broad-based institutional business.

Other questions or comments? Great. Thank you very much.

Robert Greifeld

Great job, John. So just as a follow-up and, Roger, you kind of get to it, so we in our R&D function have had the need for speed. And when we look at our change peers around the world, we have distance -- the distance between us and them increases year-by-year. And it's one of the few things we do where it's not a direct definable economic benefit. So when we went from 80 microseconds to 40, what does that do? We still like doing it. So we spend the money to get there, and we're unique in the world. Now clearly, the index business is going to ride upon that core technology due to introducing this tick-by-tick capability, which is not what John is focused on right now as he redefines the industry, but it is a latent capability there, the uses for that data, Eric and Brian can speak to it, we don't really know because you're going to be able to do something that has not been done before. And in a real sense, it can give you a view into the future in terms of where it's going to go if somebody who's doing a 15 second index calculation, we're going be doing it tick-by-tick. So it's going to be an exciting second-stage benefit from this effort. But John's effort by itself speaks I think volumes in terms of the opportunity set we have there. We're obviously very excited about it, and it is a high-margin business.

And so that being said, we're on schedule, and we want to introduce part of the next generation. Brian, are you part of the next generation? Brian works for Hans-Ole, who will be speaking later. But we moved him in to run the data business about a year ago, so a lot of great things with it. And obviously, data is a large business for us, very profitable, with a tremendous opportunity set, and Brian will speak to it. Brian?

Brian Hyndman

Thanks, Bob. So prior to coming into the Data business, I've spent about 13 years on the transaction side. And when Hans-Ole and Bob presented the idea to me about a year ago, I wasn't too thrilled. I said it's not the sexy part of the business. And Bob said, "You're wrong. It's changing. You can go in there and be a change agent." So he said if I wanted to keep the status quo, I would have kept existing management in place. So it's been a fun year, and I hate to say, but Bob is right.

Okay. So what I'd like to do today is kind of give you an overview of global data products, then get into our growth for the past 4 years, then give an overview of the current operating landscape, and then we'll really get into the meat of the presentation and that's how I'm going to strategically grow the business over the next 4 years.

Okay. So in the data world, it's broken up really into 3 components right now, but we're expanding it. So one is we administer the U.S. Tape plan, that's really Tape C which includes U.S. equity bid offering last sale information. We sell this product out to the industry and then we redistribute the revenue based on a very complex formula, but it tracks really closely to market share. We then sell U.S. proprietary market data and European proprietary market data. Both of those products provide depth and transparency. As we move forward though, more of our products will be driven by technology, like with our machine-readable acquisition that we had at the latter part of last year and also with our UltraFeed products.

If you take a look at the bottom left hand corner, you would see that global data products is about $333 million in revenue, that's 20% of NASDAQ OMX's overall revenue pie, and we've had a 4-year CAGR of 9%.

So where is the growth coming from over the last 4 years? So in 2007, we had about $240 million in revenue. We then had some headwinds where we lost about $35 million, and that's primarily coming from Tape plan losses. The bulk of that is coming from market share losses and to a much lesser extent, fewer eyeballs looking at the data. We then have $83 million in new revenue coming in from acquisitions. About $80 million of that came from the OMX acquisition and $3 million of that came from the PHLX acquisitions. We then have $45 million in what I call alpha growth, and that's really coming from our proprietary products. A lot of that is coming from our index data that John recently spoke about, in particular the index weightings and components and our GIDS data feeds. Our flagship product TotalView, along with our mutual fund data feed.

So 2 years ago I didn't present at Investor Day, but since then, we've had a 9% growth, and the bulk of that growth is coming from our U.S. proprietary products.

So what is the current operating landscape look like today? Still, we're seeing big demand for low-latency data feeds as algorithmic trading is still a big part of the equity markets. The amount of eyeballs continues to shrink slightly, but we're seeing a big increase in non-displayed or machine-driven business. There is big demand for different data sets and new sources as customers look to drive alpha. Customers are extremely sensitive to price given that volumes are down 15% to 20%, and Eric will talk about that later. The cloud is becoming a bigger part of the solutions both here and over in Europe. Customers' demand for global data sets, they're demanding global data sets as they're trading across many geographies. And the industry is focused on alpha solutions and expense reduction solutions. So when I go out and speak to customers, they want to know what tools I'm going to give them to generate more alpha in their trading strategies, or what tools I'm going to give them to reduce their overall expense base.

So management's focus. Really, we're going to grow revenue by 8% to 10% over the next 3 years. And if you go back to that base of $333 million, that says that we're going to get up there roughly about $440 million in revenue. And we're going to do it through this 3-legged stool strategy that I have in global data products. 50% of it will come from the first 2 legs, the other 50% will come from the third leg, which is really the acquisitions.

So in the first leg of this stool, I call it maximizing existing products. This is really rightsizing our pricing for our data product, make sure that we're getting revenue. That's commensurate with the value of the feed. And I believe that the algorithm of customers are underpaying for the value of the data that they're using today, and we're in the process of rightsizing that. We're also putting a tremendous amount of resources behind selling the indices that John is creating. We're upping now audit efforts to ensure that our customers are accurately reporting their data usage. The way it works in data world is that they self-report monthly. We'll then go back in a year, 2 years later and conduct audits. So we pulled in somewhere around $10 million or $11 million from audit revenue last year alone.

We're also creating new policies to ensure that we're being flexible as technology continues to evolve. So what does that mean? Basically, when someone's looking at a Bloomberg terminal today, they're using our data. Those terminals have gotten very sophisticated. You could now pull data feeds off of those terminals and power other order of management systems. So we've come up with policies to make sure that we're getting that revenue.

The second leg of the stool is new products and services, so we announced our UltraFeed product back in October. That's where we're leveraging our technology and aggregating and normalizing U.S. equities options, futures data feeds into one easy-to-read format for our customers. It's an expense reduction strategy for them. The second one is leveraging again our technology and getting into FPGA. That's a fancy way of saying hardware accelerated. Basically, we're using hardware to accelerate our data feeds where, historically, we've used software. This gives our algorithmic customers a more deterministic price. We're then focused on selling NASDAQ Basic as an expense reduction strategy for our customers. It's a level 1 replacement product that's really at 1/3 of the cost and it gives the customers pretty much 99.8% of the data that they're looking at today. We've tripled our usage last year and in NASDAQ basic and we'll probably double or triple it again this year. We're also looking at storing tick information in our data center and giving customers tools to do complex event processing. That's basically giving them tools again to gain greater alpha in their trading strategies.

So most of the efforts in the first leg of the stool are underway and the execution probability is extremely high. In the second leg of the stool, again, many of those efforts are underway. We've built the products, we're selling them, and the execution probability is extremely high.

The third leg of the stool is really why Bob and Hans-Ole brought me in. That's really the focus on the acquisitions and how we get data to the next level. So we had our first acquisition in 2011, December of 2011. The company was called the RapiData. It's really a machine-readable company. We strongly believe that our customers want additional data in new sources, again to create more alpha. We have a partnership with Russell where we distribute their index data on our data feeds, leveraging our distribution. We have our Data-On-Demand product, where we get tick information on the cloud, partnering with Amazon and a company called Xignite. And we're also leveraging our audit team and conducting audits for other exchanges around the world and we're auditing common customers.

So we've begun to look at many acquisitions. We certainly want to measure twice and cut once a year. I've hired 2 business development folks to focus on, and they're here today. Mohammed is over on the right, Vince Palmiere, as you know from his IR days. We are keenly focused on looking at acquisitions where we can either reduce expense or generate alpha for our customers.

So just to reiterate, tremendous amount of growth can come from the first leg, and the second leg, we had our first acquisition in December. It's a micro acquisition. But nonetheless, we are delivering a product that we think can generate alpha for our customers. We want to leverage our core strength, which is our world-class technology, our brand and distribution. Keep in mind, we are predicting 8% to 10% growth over the next 3 years, even when the markets and the volumes are in a bit of a downturn. If the volumes in the equity and option markets do turn around, we certainly see that we can see some upside on those data drivers. We believe that there is a great opportunity in data to take that $333 million and bring it up to $440 million through executing this strategic outline here and really leveraging the 3 legs of the stool. Like I said, the first 2, high probability of execution; the third one we're going to work on over the next 12 to 24 months.

And those -- that's my formal presentation. I'd like to open it up for questions and answers.

Unknown Analyst

Can you just talk a little bit about the Tape plan revenue source? Obviously, you've grown the proprietary data business substantially over the last several years. Going forward, how do you look at whether there'll be any structural changes and how they compute the Tape plans? Do you see maybe if you can talk about the growth of the proprietary side of the market data business versus the actual Tape plan revenues within that 8% to 10%?

Brian Hyndman

Sure, sure. So the Tape plan revenues, we certainly took some losses over the last 4 years, and that's when our market share was closer to 27% and 28% and now it's down closer to 20%. So I don't anticipate, and I'm sure Eric will back me up later, I don't anticipate any further market share or losses. If anything, we've seen some gains recently, which is only going to help that revenue. I don't anticipate any changes here in the U.S. to the Tape plan. They are considering a Tape plan over in the European market with MiFID II. I think there is very low probability of execution on that. So I think it's pretty static revenue. I don't really see it growing dramatically or decreasing over the next 3 to 4 years.

Unknown Analyst

Great. And just of the 8% to 10% growth, would you say that's static, the proprietary side will start double-digit growth?

Brian Hyndman

The proprietary side, the first 2 legs of the stool, which is includes the proprietary data, is going to produce 50% of that growth.

Any other questions? That's too easy.

Unknown Analyst

The basic data I think that's something you've been pitching for a while now. Where is that taking share from? I guess that's pulling people off the TotalView product, or where are those customers coming from?

Brian Hyndman

Good question. It is certainly starting to get some traction. I always tell Bob that the flywheel is starting to move. We’ve tripled usage the last year and we have over 20,000 users today, probably closer to 25,000. I think we can get that closer to 50,000 by the end of the year. That’s really coming from the plan data, that all the exchanges are sharing. So right now, it’s slightly revenue-neutral to us, maybe positive depending on our market share. In the future, I think that there’s an opportunity to up price and actually make a significant amount of revenue. But the money is coming out of the plan data. So as we stay revenue-neutral, the other exchanges out there are getting less money in plan data revenue.

Unknown Analyst

Are you not getting less money on plan data revenue, too?

Brian Hyndman

We're actually getting it from basic, so we're saying even while the other exchanges are actually getting less.

Robert Greifeld

Okay. Thank you, Brian. And just a follow-up with that -- so yes, great job. So the strategy is pretty self-evident. So we calibrate the basic price today, so we are revenue-neutral. We get to a critical mass of users, as Brian says, we're 20,000, 25,000 today, so it's a dramatic improvement over the last time we spoke to you. We have expectations to get to 50,000 exit 2012. That's probably an aggressive number, but it's going to be some number there. So you could see in 2013, we'd be in a position to incrementally raise the price on basic as it's institutionalized in the communities, so then we come out ahead. Obviously, the other exchanges that have just had a net loss of revenue.

So we're running ahead of schedule, which is great. We have a time for a break right now. So the management team is here to answer any questions, but we'll try to move the break along as quickly as we can also and take more time at lunch for questions. Thanks.


Robert Greifeld

So we're changing the order a little bit. Bruce is out with a client, but Hans-Ole will be the next speaker. And as I we spoke about the culture, we have a very strong culture which also has to evolve over time. So Hans-Ole obviously come to us as part of the OMX transaction. And he, I think, like a fish to water came to the NASDAQ OMX culture, but in his own way, has helped to expand and grow it in a very positive way. So it's my pleasure to introduce Hans-Ole.

Hans-Ole Jochumsen

Thank you very much. Bruce and I attribute then also to navigate. So thank you very much for the welcome, Bob. I guess, today, at this time, I'm happy that I have a passport from a Northern European country and not from south of Europe. Last year, we talked a little bit our last time for the ones of you being here in intent. We presented the European business with 3 different nationalities. Today, we try to do a little bit shorter, so I'll try to cover all of it. So today, you need to listen just to a day. And we decided to start a little bit with Europe.

But before we do that, what do I plan to talk about? What do I want you to remember when you come back? Two things, opportunities within fixed income, opportunities within commodities. So you will find out that I'll come back to that a couple of times during the next 20 minutes. So that is the story I would like you to remember.

But coming to New York every month, I realize that Europe is a long, long way from U.S. So I would like to spend a couple of minutes on Europe, and this slide is just to demonstrate that we are talking about us having the main activities in these 4 Nordic-based countries, and they are far away from the south of Europe. It also means, what Anna was talking about exports and being the patron on these countries is very limited. So where are these countries from an economic point of where they [indiscernible] Germany, of course. And that's, of course, good for us because Germany is one of the countries with real economic growth, or at least better situation within the Eurozone than the other countries.

And the other thing that is relatively important to remember is that only 1 of the 4 countries are part of the Eurozone, that's Finland. 1 of the 4 countries is outside the European Union, that's Norway. The 2 remaining, Sweden and Finland, they have their own currency. So we are talking about 3 countries with own currency and one having the euro.

So if you then looking at data on the situation, you will find out that when it comes to economic growth, they are pretty okay. But even perhaps in this situation and more important is that their public debt level is very modest compared with the European average. And now the average has also been impacted by the fact that some countries are low and some countries are extremely high.

Within the Eurozone, a key number, which should be below 60% in debt ratio. So you will see that these 3 European countries being part of European Union and only 1 being inside Eurozone are well below this. So definitely our operations, our core revenue in Europe are coming from countries which are in a very safe harbor.

Now some of you would argue but isn't that just something is coming and talking about. And what do the markets say? And yes, why not listen a little bit to the market. So now I've said that 2 of these countries have their own currency, Sweden and Denmark, being part of European Union. So what do the market say about that? Yes, the long interest rate is nearly very, very close to the German because it's historically very, very unseen. And what about Finland? They're inside the Eurozone. Finland are the country with the lowest yields to Germany of all European Eurozone countries. So I would argue that even the markets can prove that we are right in being in the right path of Europe for the time being.

So enough about Europe and macroeconomics; as an educated economist, I could talk about that for 20 minutes, so I'll try to avoid that. So where do we have our exchange business? So we have exchanges in 7 of these 8 Nordic Baltic countries as you can see on this Slide. And there, the main volume, the main revenue is coming out of Sweden, Finland and Denmark. There with our commodity business, it's a little bit different because there we are very large also in Norway, where we even have an exchange license for what we are doing in the energy space. And in the commodity space, the main bulk of our revenue are coming from Norway, Sweden, Finland and Denmark.

So enough about these conditions about Europe and let me move into the business. And I'd like to start to give you just a short overview, and then I'll start to go into the different ETF process and products we are working today. So $275 million is our revenue in these businesses. You will see that the biggest single area are in Nordic equities. But combined, our revenue from trading and clearing of equities fixed income, and commodities is higher than what we earn from the cash business. You will also see that we've been able during the last couple of years to grow our sources of revenue with 10%, and we decided to show you the split on the different areas, to stress that, of course, the competition in Europe in our exchange space are primarily within the cash stocks. And yes, we have lost from a revenue perspective some revenue, but please also look at what we have been able to build up on Access Services, a business model from scratch and with relatively nice numbers during the last couple of years. And also, with the growth we have in derivatives, we believe that we have a growth story also going forward.

Again, a little bit on -- I promise not to say too much about this because even European regulation can take a long time to say a lot about. But Europe, of course, still influenced by the fact that there is still more and more entrants to the market. Every quarter, you will see a new player, a new MTF that's somewhere in Europe. It also means that European market are being more and more fragmented. It is already fragmented by the fact there's also many countries, and each country has their own exchange. But on top of that, you have a lot of MTFs coming into the market. So there is reason to believe that you will see some consolidation going forward at a time.

But more important is to understand what is happening on the regulatory front. Number one, number one is definitely came from what is called EMIR. That is Dodd-Frank. That is what mandate clearing of OTC products. And that is well away, the legislation is in place. We expect that the rest of the rule-setting will be rated during the end of this year or we say into very, very early next year. So we will see mandatory clearing end of the year, beginning of next year.

MiFID II, it is an update of the first and last regulation of the exchange market in Europe, the market which created competition. And the relative legislators would like to address and adjust the situation in some areas. One of the things at least based on what is in the proposal for the time being is that there will be a new excess life, which in reality means that you will be able to see competition in trading of derivatives, not in clearing.

And on the energy side, and I mention that because that's important for our strategy in the commodity space. There is a continuous dislike for deregulations of the European markets. And to put it simple, what it is about is instead of every country have its own electricity market, what is happening is that you connect the markets. And when you connect the markets, then electricity can be traded across Europe. If that is possible, then, of course, you can create also a financial market based on that. So that is a very important driver for us.

So if I should try to -- in fact, I could even stop here and make it very fast because I could really try to summarize it. So what are we going to do? We are going to double our revenue coming from clearing-related activities. And we call it clearing-related because we would like to include those revenue coming from trading and clearing. We believe that we will be able to double that from 10% to 14%, so based on revenue and our activities in the 3 asset classes, equities, fixed income and commodities. And, of course, it means that we will be -- we have to work on also markets we are not in today. We need to work with products we do not offer today, and we need to have more clients for us to be able to execute on this ambition.

And you can see that there are a lot of things mentioned here, and I'm not planning to go into all these products. But at any time later today, I'm prepared to talk about this, and I'm also coming to New York, as I mentioned, very often. So if anyone of you through the year would like to have more insight into one or all of these asset classes, you can always reach out to John and he can set up meetings when I am in New York.

So let me say a little bit about what an exchange is known for to execute the business. We're happy with that. But this is what, as I mentioned, the competitive scene we have, satisfied that we now have been in a very competitive situation since 2006. We still have a, as you can see, a relatively high market share and that is attributed between larger exchanges in Europe. This is the high market share. We also -- and that's a quite interesting thing, and perhaps that explained -- I started to explain about Europe because you would take the trading in all the listed companies in our exchanges, then that share of European trading had gone up. So many of our shares are traded on our platforms, of course, because there is competition. So I think if I take all the volumes, then these listed companies in Bruce's area are so important that more and more are trading them. So we're up now at 8.4% of European equity trading are happening in NASDAQ OMX listed companies in the Nordics. That is up from 7.4% in 2011. I don't want to come up with a lot of explanation on that part. Of course, it could be that the Nordic countries are seeing also some of the more EC Safe Harbor in Europe. If you want to invest in Europe, why not invest in companies in that part of Europe?

We have also introduced the Access Services, as I mentioned. If I take a look at the next slide, you will see that the time where we have the best EBBO and the best price in the market is extremely high in the markets we operate, so that is, of course, very important. We have as part of the consequence of the conversation reduced our capital rates, but still keep it at a high level compared with the ones who more or less offer free trading. So all in all, I think we have been able to execute this relatively okay given the circumstances.

But the good question is, of course, how are we able to move this forward? How are we able to increase? Can we increase the revenue? One of the things is, of course, the same discussion we have with our U.S. equities. What about the volume level? Will it come back and when? And we make some interesting small analyze you can find here. The first diagram up there. It's hard to say, so have a look here. You will see that there is a tremendous correlation between the trading volumes in the U.S. and the development in the trading volumes in U.S. and Europe. So Europe and U.S. are really correlated when it comes to development in volumes. So we definitely believe that the day we see an uptick in the market in the north area, then we will also benefit in Europe. So that's a very important thing.

The other thing is that we still have a very healthy inflow of new members who want to trade in our markets, and our pipeline is also very strong in this area. We have succeeded to build a business within Access Services, as I mentioned, and fill up our ability to increase our product range in that area and also to get more customers. And then as we can see here, we also have a market share in Oslo with 7%. We believe that, that will grow during the year. We're also considering whether we should take the step and offer trading in all Norwegian shares. And the reason for that is that we have some customers who definitely would like us to do it because then they could avoid to trade on the Norwegian Exchange and can trade with us instead, and thereby they can save cost.

Yes, that was a little bit of our captive business. And before I go into each of the 3 asset classes as far as the risk aside, I would like to say a little bit about our clearing because a lot of things are happening in that space. I think number one is to understand that we are talking about clearing in all 3 asset classes in the same clearinghouse, that you're talking not only about listed products, but also OTC products. So in reality, we have a full-scale, full-equipped clearinghouse to do all these kind of things. And you can also see there is a split showing that the biggest area today is the equity derivatives followed by commodities and then fixed income. But I have already mentioned to you that the potential is definitely in the 2 smallest of the 3, and I'll come back to that.

So the strategy for us is definitely that this last European clearinghouse should be recharged, number one, following Nordic-based customers. And of course, there will be areas where we'll also go into other products where we could be in competition. The company bit by the fact that Finland is a euro-denominated country, so if you would like to have products for that country, you need to also have them in euros. It do not mean that it will -- for all European euro-denominated products, but we could go into it. But with the spending, increased spending in many countries' currencies, you should expect us to be active.

And I also wondered whether that is Peter Strandell organizing things very well, but in reality, May 7, we got the new report from Standard & Poor's. So this clearinghouse we think within the legal entity called the NASDAQ OMX Stockholm got an upgrade from Standard & Poor's, from the stable with an assortment of the rating A+ and A1. So this is in reality, the highest positive rating a subsidiary can have given the rating of the mother ship. Of course, we are very proud of that. Why do I mention it? I mentioned it not only to be proud, because we, of course, are, but the argumentation for why they see this clearinghouse to be so strong, and that is because of 2 changes we have made. The one is relating to it is -- that is to implement default funds, so the relative you have similar to risk of the clearinghouse and share that with our customers. And as they are writing in this report, this is a very strong commitment given the circumstances that our customers have been prepared to pay in cash to our clearinghouse so we can free up capital.

The second reason is that we will also have started to do that offer that we can take good care of collateral management instead of outsourcing it. They see that as a very strong thing also because the clearinghouse also strong, and it's interesting that the clearinghouse rating is now better than some other banks with our customers. So maybe we'd probably also like to have the cash in the clearinghouse.

So that was a little bit about clearing and such. And at the end let me say a little bit but not too much about each of the 3 asset classes. This is our picture of our business on the equity side. You can see that we are all over in the way that we have both futures and options in the same clearinghouse. I know you are not used to that, but that's the European style. On the index side, of course, the Stockholm index product is the dominant one.

So what is our play in this area? We are #1. It is that end of last year, we had our systems and our product offerings ready, so we are able also in this area to offer equity-based trading. So equity-based trading can now grow in this market because all what is needed are available here, including co-location and Access Services.

The second element is, of course, that the mandatory clearing will also hit the equity business. Now yes, I know, it is not as big as the fixed income, but still there are a lot of business out there, which is bilateral which will come into the clearinghouse. And of course, we are prepared to grab that part of it. And with these very strong position we have in our clearinghouse, we believe, of course, also based on the dialogues we have all time that there are partners and customers out there who in selected areas within the European scene would like to do something with us, so we can leverage on our trading technology, on our clearing technology and our risk technology, all delivered by OMX, by the way.

So the fixed income, now it's beginning to be very interesting because now we're going to talk about very interesting potential. So just a few facts; our business here is all the way from listing, as you see, relatively last listing, that is because, especially in Sweden and Denmark, we have a lot of bonds and they are listed on the exchange and that gives us a very interesting revenue which do not change that much from year-to-year. That is an ongoing trend all the time. We even have some trading. It could be that the trading has also got potential. One of the reasons is, of course, that it is expected that the mandatory clearing will be followed also with clearing that would be trading in the products where it's relevant to our trading. And I mean, especially from the U.S., there is a lot of pressure from U.S. regulators on European regulators to make sure that Europe follow up and also make relevant products traded in another only cleared. So that's something we are already ready to do.

And then the clearing business is, of course, is the last part already today. You can also see what is our ambition here. Of course, it is to be the venue for clearing of Scandinavian-based currencies and then in selected areas also clear other products.

So what about the potential and where are we? Yes, I guess it goes without saying in this group that the OTC fixed income markets worldwide are huge and many, many times larger than equity cash markets. I think that is the number one. And sometimes you still come with each of the numbers, and if I can find out to push on this one, I mean, try to look at these numbers. It's roughly speaking, this is the daily turnover according to Fitch. So it's roughly speaking USD $4,000 million a day is the last number.

By the way, if you should try to find out what is then the potential, what is the size of that, then I guess you guys would do it in a way that you will try to say, okay, what is the possible fee you can get in these circumstances and then try to calculate the possible fee of this. So if you use that fee schedules out there in the world today for the ones clearing these products, you will find out that this could generate revenue in the size of USD $60 million. But please remember, I have never said that, that is our target. I'm just saying that, that is the potential because there will, of course, be competition in Europe, I have to put your eyes on it, so try to grasp it.

Now this is just the Nordic countries. The euro currency is even larger, so probably many will have focused on euro currency, and then we can concentrate on what can we get of this revenue's potential here. The good news is that we already do it in the Swedish krona. We could do much more. Now it's more question about the Swedish banks need to have their systems and back office and so on ready to do this. We are also working on getting 2 other Nordic countries ready. They will be ready midyear, so we're already now working with the bank so it can get them ready to use these opportunities and be ready for the mandatory situation, which will happen within maximum 1 year.

So all in all, if you haven't looked here, what are the products and what is not clear today? You will see mandatory clearing will increase the new products that we are coming in with, also a lot of potential the things we are not offering today but are going to offer within the next 6 to 9 months, a lot of potential. And we even had discussions about these areas with the cash side and the FX side.

On FX, one of the things we, of course, are aware of is that some FX products, the long ones, will probably also be hit by mandatory clearing. So we'd even like to offer our customers clearing in all products where it is mandatory has to clear, you need to be at draw point so that will be our ambition. Of course, why should Nordic banks need to go anywhere else than to NASDAQ OMX?

Let me move on to commodities, and that's also a very, very interesting area. Already today, we are the #1 exchange in Europe when it comes to electricity trading when we talk about financial markets. So we are #1. We, in March, finalized our technology roadmap in the Nordic area. The last stage was to move our commodifications business to Genium trading, Genium clearing and Genium risk. So now we're able to do everything in the same technical set up. And that, of course, gives us a lot of opportunities also to cross-sale.

Another important element is also to understand in this area is the correlation between some of the different product areas. So our starting point is the power. We definitely see gas as a very interesting next step. And why is that? That is because you can use gas to produce electricity. And if that is for families [ph] what we're doing in U.K. We were taking gas up from the North Sea and using gas to produce electricity. So these 2 things are extremely correlated. And then, of course, it goes without saying that then you're very close to oil and coal because you can also use that for power production. And then, of course, emissions are related to these products. And if you are into this, then there are some of these products will need to be transported and then you'll be into freight.

So for us there are logical way into this, and then you need to be also clever in the way you do it because you need to be able to use the correlation. The new clearinghouse to make sure that the customers get the efficients coming out of you being able to offer correlated products in the same clearinghouse in the same risk markets. And then, of course, what we are here to do now, our new risk model as we make this trend for remark is the pure spend model in Chicago, so everybody in the commodity space are well aware of this new risk model. So I think all in all, that is a little bit the strategy what we are in.

Then let us try to go to the next slide and have a look on the potential in this area. Where we are today is in this corner up here. Our Nordic business is based on that we are clearing, roughly speaking 1,700 terawatt hours a year. That is a little bit a low point. Why? Then what is the driver when we talk about electricity? One of the main drivers is, of course, economical growth. Because if you have growth, you have a lot of production, then you need energy. And also retailers are spending more using more electricity. So the economic growth, you will see that use of electricity will increase. So we're a little bit by macro factors, then we are a little bit at a lower point. Our high mark point is a little bit higher than 2,000 terawatt hours, which in reality means that if you look at it today, we are clearing, roughly speaking, 4x the consumption in these 4 countries. And we believe based on other markets that long term, there is a potential to grow this step by step. So you can have definitely, in this market with this consumption, you can have much more trading of the ForEx products.

And that brings us to the next step, the U.K. market, where we’ve been invited to try to create an efficient market. And I need to admit that it tends sometimes too difficult to put us on the [indiscernible] because, step one, step one is you need to have a very strong spot market because the financial product is based on that. U.K. didn’t have that. So they asked us, together we’re not going to spot. These are the ones that are running the spot market in the Nordic area. And we have nothing to do with that; that is government-owned by the 4 countries.

But together with them, we have a joint venture called N2Ex. They have established now during the last 2 years relatively well-functioning spot market. And based on that spot market, we have been able to establish a future market. And of course, we have done it in such a way that it’s the same system, the same clearing, the same risk business. So it means that all of our customers who already are trading and clearing the Nordic electricity contracts can do it in the same setup. So very easy, and they got the margin offset also.

So we definitely have seen this starting up. In revenue terms, we are still talking about a small number, roughly speaking, around USD $3 million last year, and we are not doubling it this year, but probably close to that. So we are on a growth path in this area, and we don’t see any reason for us not long term to be able to reach this level.

I mentioned this with gas and U.K., and we have been invited also to move into the gas space, but these are all competitive because there's already clearance in that area. But some of these customers believe that we have a very strong offering. So we are definitely looking into the timing on when we should move in to gas in the U.K. So that is definitely on the plan.

And there's also all the products we’re looking into if we go into gas. It will also be relevant to have what the market calls a spark contract. An easy way to explain it, is that is the difference between gas and power. So the market participants, the producers and so on would like to have that. So when we go after this, we’ll probably go out with a gas contract, with a spark contract, so our customers can trade against the spark and electricity in one setup. And nobody can offer that in the U.K. today.

So we definitely see some opportunities, and then I decided not to try to put all these numbers together because then the potential will be too high and we are in a competitive world. But I still believe that this shows that long term, there are new opportunities to grow the commodities which we are in Europe, and we are starting from, you can say, industry's heart is the commodity space, and that is what we will be concentrating on going forward.

And I should have mentioned that we, a couple of weeks ago, we acquired, there is still have a closing we need to pass, but we bought a small clearinghouse in Norway. It’s harbor and freight. So I mentioned freight earlier, and certainly there was an opportunity. But even then it was not the next step in our strategy, we decided why not buy. And we believe we have made a very good deal buying at the bottom of the freight market, so that could be good. And then on top of that, we also have moved into sea food. Dick Mahek [ph] was very conscious about where they were physically delivering, but I could assure him that this is also a financially clear product. And so we are in relative clearing salmon in Norway. Salmon is a very huge product in Norway. It's sold to the whole world and we have a future on that product. And if he wants that agreement is something we need see. It’s not in the strategy, but sometimes you need to take it.

So we are moving and taking the opportunities when it is in this space. So organic growth is, of course, the number one here, but when you see an opportunity to do an acquisition would fit into our long-term strategy and you can get it at the right price, then we’re definitely out there looking at it.

So with these words, I’ll try to finalize. So please remember our European business has definitely possibilities to grow in derivative space in what is clear and traded. The biggest opportunities are within the fixed income area and really in commodities, and we should have a very good opportunities to execute on these strategies in the next 2 years.

Thank you very much for listening, and you are welcome to ask questions.

Unknown Analyst

I think one of the things you didn't touch upon a lot was Access Services, I mean, 28% growth over the last couple years is I think the fastest growing in Europe Protection Services. So maybe can you frame for us where we are in that process in terms of getting more folks involved with co-lo and so forth? If I look at the U.S. side, I think, Access Services are much bigger component of the overall revenue pie there, so where are we in terms of -- like how could that shakeout over time match versus non-match or however Bob likes to call it?

Hans-Ole Jochumsen

It's extremely relevant, the question. So now, even the -- probably be listening carefully. So I would say that we have been extremely successful when it comes to having customers to sign up. If you take the number of our customers, usually for location extra services, then we are at the same level as they got with the rest [ph]. So do we have a great potential in number of customers. It's not the same that we do not have a pipeline. We have a pipeline, we have a key goal to increase number of customers this year. But in the U.S. market, we are much more advanced in the product portfolio. So we haven't really started with the basic parts and then we aspire to increase -- also when our customers learn to use co-location accesses, so we are able to sell in new products. So that is what is happening now and we have been relatively successful by selling in. You can see more high-end products with a higher margin to our existing customers. So while we focus on to make sure that we get customers in so we can set up, have been very successful. So what is the other potential? It's difficult to say. I think it's important to have in mind that in the U.S., the trading fee is extremely low compared with Europe and [indiscernible], so that disturb a little bit the picture when you look upon it. So I think it's more relevant to look upon the fact that we have a very high number of our clients already being there. So there are potential -- money is not fit. Okay?

Unknown Analyst

You seem to be fairly optimistic about the opportunities in fixed income clearing arising from the new regulations as are most in the industry. But I was wondering if you could just comment kind of on specific product areas that you see as most promising and kind of what your competitive positioning is relative to some of the larger EU players? And then secondly, if you could comment on some of the regulatory guidance you're getting around OTC execution and whether you have an opportunity to participate there?

Hans-Ole Jochumsen

Yes. Let me start with your first question. Firstly, it is the biggest opportunity with interest rate swaps. These markets probably are biggest [ph] in the world and then -- and where are we with that? We are in a position where we have default management contracts in place with the largest Nordic bank for the Swedish krona market. So it's not something, it's not just something you talk about. This is real. The product is available. They have already cleared within 15 contracts. I think the nominal value on them are SEK 6 billion. We have extremely strong support from the Swedish government from the Central Bank. The Central Bank are pushing also the banks to get this up and running and the Central Bank and the government would like to see this sooner than later. So if the banks would like to wait until they're pushed finally by regulation, then regulators will like to have it to do to the value. So I'm quite convinced that we did successful in the Swedish krona market also because the Swedish banks have a very long position to clear the fixed income Swedish krona products give us and 95% of our clearing revenue in fixed income are coming from Swedish krona. So we are really confident in this area and also the fact that we have committed also to be able to clear all the low advanced things like basic swaps and so on. On the way, we've treated -- we expect will be mandatory. We have a growth map for developing these products. Some of them will be ready this year and the last one, I think, will be ready beginning of next year. So we will have a clearinghouse, which we will be able to clear all these products when the Nordic banks are forced to clear them. And that will happen and there is a very clear path in Europe. And that could bring a little bit into this with an expected [ph] regulation. Now you usually -- when you hear about Europe, it is normally what is called a directive. A directive is a decision by the council, which is representative for our council, is making a decision and then the parliament in all 27 countries needs to implement it. That's a normal procedure. Very seldom, there some and other possibilities and that is relative to what they call regulation. And in this regulation, in this area called EMEA, is regulation. So it means that when this is put in place, then this is law in all 27 countries. So we are not in a process where we have to wait for 27 parliaments to implement something. This will be in place. So relatively, we are waiting for a few things. One of them is a process related to all European-based clearinghouses that need to be reapproved. And if they don't do that, if they're not reapproving and they could fail to deliver a certain [ph] part of the market. But even more important is that the new regulator in Europe, if not, are going to come up with decisions on exactly which products are going to the clear mandatory. And they have relatively limited time to do that. Increase [ph] they should finalize this year. So I'm just saying that I think they will do that at least on 80% of the products relevant and then it could be that it may take a little bit longer time on some smaller product areas before they are finalized, their amount. All because it is tough for a new regulator to really cover the year and find itself to so this. So there's a clear path and it's much more -- you could much more sure in the outcome because of this different way to implement it compared with the usual situation. So I hope that response to your question, otherwise...

Unknown Analyst

Yes. You had basically, from 2010 to 2014, a doubling of the revenue opportunity. Just wondering what kind of environment that builds in going forward, from an industry perspective, whether through volumes or economic growth? I'm just trying to figure out what's dependent on new products, new services and what can be driven just, in your mind, by growth in the overall market right now?

Hans-Ole Jochumsen

I would say that in -- I think that the regular chart changes [ph] is driver #1. And I'm saying it because these mandatory rules are coming in place now. It means that my customers having a lot of activity with me on equity purchase [ph]. They need to do something else with all their [indiscernible] stock, they have an excess [ph]. Some of that, they do with other banks or the Nordic banks or with other banks. They need to put that into clear. And some of them are only using one clearinghouse and that is our clearinghouse. On the fixed income side, we have these huge, huge opportunities and we have this very strong stock [ph] point where they used to work with us. So they like to work with us and they are -- I mean, very severe, a little bit ahead of them. We can be ready faster than they can. And I think for them, it also plays into this that their possibility to work with us and be our last player. So we are able listen to them. This is, of course, relevant to them. This may go anywhere else. They will be a small fish. So I think that's also a strong driver. And then when you're coming to the commodity space, again, commonly, also, some of the mandatory rules are probably also this special that some of this business will also be mandatory clear, but not to the same exchanges percent in the fixed income area. So I would say, on the fixed income, the main driver is regulation; on commodities, it's a little bit more the development you see. One could argue that, that is also regulation. I mean, the push in U.K., this is from the regulator saying that, if the market cannot find out to come up with a model which works, then we will mandate something. So that's another kind of driver. It's not put in for directives but it's a strong driver. So it help us a little bit on the timeline, and I would say that the size of the spot market for electricity in U.K. would've been filled up over 2 years. It took -- probably likely to take 8 years to build the same size of the market in the Nordic area. So if you take the history we have about, building the biggest and most well-functioning electricity market in the world, it took 8 years to have a well functioning spark market to [indiscernible] with what we have done that in 2 years. We have a lot of support from the regulator, who pushed the constituents [ph] in U.K. to get it done. So I'm comfortable as you can afford always discuss some of these, whether some of these things will be late half a year or if you think about that, but this it will happen.

Unknown Analyst

It looks like just from the slide that you have up there that good portion of your longer term growth in the commodities market is driven by, I guess, increasing the churn of the turnover. Can you just kind of walk us through how you do that? Like what steps can you take as an exchange to make people trade more, increase velocity? I know technology might be one of them.

Hans-Ole Jochumsen

Yes, but if we try to look at the slide and take a little bit step-by-step, you can say we will prefer to -- just to do it from a [indiscernible] point of view. So starting with the base, the starting point, is the Nordic electricity. Then it's obviously, the U.K. electricity is now #2. That will bring us into gas. Once we're into gas, we are into a more competitive fix. Once were into the gas, so the next step will be to consider terrific things when we like also to be into the center of the gas market. And with the players like to do also supposed to be there. So it is a step-by-step and very much also driven by our ability to work with our customers. Now in Europe, as in the U.S., we will always have some very big players also on the energy side. For example, in Europe, it's CBS, it's EM who are working in several European countries and key for us is, of course, that we are able to have a product offering and a service level. So they would like to work with us, also to develop products and have the market to work in the right way. Very often, they are market makers in some of these markets, especially when you had to start up, you need to have a market maker. So we are working closely within to beat the markets. So I would say that behind the success is definitely the ability for my commodity organization to be able to work so close with the customers. That they feel that, in our market, their market, so they want to be there. In fact, we need to take a little bit step by -- and then not try to be jumping too much ahead of them, also because I think we are now in a position where we can do things relatively fast. But customers are not able to get their things to do -- to work as fast. And I will say one thing I have learned, and is that is one of those differences on the financial companies we are used to work with, the banks and so on. And then the commodity market, because in the commodity market, the biggest players are not financial institutions, sometimes their government or electricity companies or gas companies. They can also be very big users of electricity, who use the market directly. So it's another type of customers and their time to market, this definitely feels different from a builder bank. So there's a lot of things we need to be careful about. But working closely with them, we will be able to be done. In some of these areas, we -- I mean, we are not necessarily make decision in all of these areas where or what we would like to do. I mean, some of them, when you're talking about this European scene, it's a huge task to take on. But I guess it goes without saying with the starting point we have, what I have said we would like to do in the next 3 years. Of course, we had a lot of discussions. What is the strategy in 5 years' time and are we prepared to invest in some of this? And for example, if you want to do that, I think I will keep the program that I talked about, will be an obviously way for us to try to invest into this. So really where we have -- what we have decided to do is to go into U.K., on the electricity side and then as the next step gas, but the timing on gas, not decided yet.

Robert Greifeld

Just a couple of comments on Hans-Ole's presentation. One, Access Services. What I'm excited about is the fixed income part of Access Services. The clearing is at a very early stage. So the equity part, as Hans-Ole has said, a lot of upsale opportunities to existing customers, fixed income, beginning stages. And then when you talk about Access Services for the commodity side, we're not even on the ballfield yet and clearly that would be growth. Then right now in the commodities business, the amount of unexchanged trading as opposed to just clearing is increasing year-by-year. And so as that number gets higher, then the opportunity to sell Access Services increases quite dramatically.

On the clearing question, and I can speak as American here, there is a clear bias for the home team with respect to the clearing efforts we have in the Nordics. And as part of the success in NASDAQ OMX is our commitment to the north side. We have resisted the siren call of London. We've invested in the Nordics. And in terms of turmoil that's happening in Europe, that also helps us. So we have to execute well with respect to our OTC clearing strategy. We're clearly ahead of the game in terms of product and capabilities and we think we're in a great position to take that entire ecosystem, that entire market that's happening.

With respect to your question, understand the equity market, the ratio of trading between the naturals and the intermediaries, I'm afraid to say what the actual numbers is and I don't really know, but it's quoted 100:1, probably higher, Eric, I don't know, but it's some very high number. So right now, you see in the commodity market, you're getting up to maybe 3 or 4 or 5:1. So as the market matures and evolves, you'll see the intermediaries being a larger percent of the volume and obviously, the volume will increase. As we're starting into EX today as compared to either the Nordic market, it is really the natural power producers who are the participants in the marketplace. So that will -- and they're driving the market. You need them at the point of creation because if they are the naturals governments is helping the regulators with that. But that will evolve in time and that will drive as we state the 10, 12 that 10 is not hard stop ceiling if you look at obviously the most developed market.

So moving forward from there, Bruce Aust has been running the CTG business for a long period of time. It certainly took a village for us to win Facebook. But to the extent if any one person who is responsible it, it's Bruce. So let's give him a round of applause and come up to the stage.

Bruce Aust

Good morning, everyone. Thank you, Bob. So as we get into global listing service business, we are pleased with the growth that we had in 2010 to '11 despite a pretty volatile IPO market. So as you can see, listings grew by $227 million, corporate solutions was $90 million and I think what's great about this slide is it really does show that we've accomplished our goal of trying to diversify our revenues, they's our Corporate Solutions business and that's going to become a bigger piece of our overall revenues as we go forward.

As we look at the listing market, we do operate in several markets, as Hans-Ole talked about, in Europe, as well as in the U.S. We're proud of the fact that we have 3,400 companies around the globe that we're responsible for, and 2 of the 3 largest companies, Apple and Google are listed with NASDAQ in the U.S. We also have 3 of the most admired brands, according to Fortune, with Apple, Google and Amazon. So over the last 41 years, we've built a franchise that does really represent growth companies and we're proud of the companies that list with us.

We've also been very hard at work, our Corporate Solutions business. We think owning a Corporate Solutions business really does differentiate what is a listing on NASDAQ OMX and we focused on 3 key areas in the Corporate Solutions business. The areas of investor intelligence, communications and marketing, governance and risk implants and we'll touch on those further and because I think that's exciting growth opportunities that we have in the Listing Service business going forward.

When we look at the opportunities in 2012, there is a lot of information on the slide, but I think it does show one, the diversity of our revenues. It also shows our geographic diversity and our specter diversity. We have a very strong IPO pipeline in 2012 and we are hopeful that the markets will cooperate. We'll get a lot of those companies in the pipeline, actually to the market. The job deck, which was recently passed, does create a new opportunity for some of the listing side. We do hope that companies that have been delaying going public because of the heavy regulatory requirements in the U.S. will now seek access to get capital market sooner. So we're excited about the opportunity to go after those companies and help them become public companies.

On the Corporate Solution side, we have really innovated the space. We're seen as a leader in the space and we are winning against our competition at a 15-1 win rate. So we feel like when we go up against the competition, whether it be Thomson or BusinessWire or PR Newswire, we are winning against our competitors. So we thought we got a great product in the market and we'll continue to build off of those wins. And we've also introduce products into the suite of services. We feel like we are the innovator in exchange space and we will continue to do that in the Corporate Solution space.

When I look at my challenges for 2012, at our last Analyst Day, we did talk about China. We still see China as an opportunity for us. Once investors get excited about China again, from a listing standpoint, but we have the largest market outside of the U.S., with 125 companies. We do hope one will price tonight and start trading on NASDAQ market in Hong Kong. So we do feel that Asia is still a big market for us and one that will be in the future but it has somewhat been delayed.

As you all know, the competition for listings here in the U.S. is very fierce, so we see that as a constant challenge and we look constantly at ways to differentiate our product from our competitors. And in the Corporate Solutions business, there are a lot of new players that come into the market, where we're always competing on price but we think we are building the best-in-class product in Corporate Solutions and we're no longer just a low-cost provider, we are the best provider in the marketplace. So we're confident of our position in Corporate Solutions.

From the listing side, just cover the number of new listings that we have. From 2010, 2011, you can see it did go down in the U.S. from -- with 195 in 2010 with the volatility in the market in 2011, that they go down to 151. And in Europe, we do see more listings but it was probably more in the ETS side that we saw most of the those listings but we are proud of the fact that in the U.S., where we have a very competitive market, we won 53% of the IPOs for 2011 and we won some of the bigger IPOs with the Index being the largest Internet IPO to that date at $1.3 billion raise, I think it raised $1 billion. We had other great brands like Dunkin', that lasted -- which was with us last year.

So far this year, we've had some great brands like Splunk and The Carlyle Group, who just listed with us last week. So we feel like we're definitely winning the major brands in the listings arena. And just to give you an example of how this affects our revenues, if we have 100 new listings in a given year, that translates to roughly $7.5 million per year going forward for the Listings business. So we do hope that the pipeline, I'm about to show you, does become a reality.

So obviously, as Bob mentioned, the most anticipated IPO that we have in the pipeline is Facebook, which we'll welcome to NASDAQ next week. But we have some other great brands that are coming to market as well, Kayak, Fender guitars in the consumer space, Norwegian Cruise Line, Gogo Wireless. As you can see from the pipeline, we have 109 companies that are -- have filed to come to NASDAQ, that's backed with [ph] with S1 filings and we have 13 S1 filings that we're still battling it out over, I guess, our competition. But we are winning 57% of the total current pipeline and we hope to increase that with the ones that are -- have not decided where they're going to list.

I think one of the point, I'd point out on this slide is that if you look at the top of the pipeline, it's in the sector that NASDAQ is really known for, telecom, healthcare and technology. Those are our strong points. So those are the majority of the IPOs that we see coming into market and we have a nice position in those industries.

Another point you guys have heard us talk about is our transfers to NASDAQ from other markets. And so I want to highlight one thing on this slide. We've had over -- when I first took over the Listings business 9 years ago, it was unheard of for companies to transfer from our competitor to us. So we are very proud of the fact that over the last 5 years, we've had $420 billion in market cap switch. And if you look at the numbers here, I think you'll find interesting, that the average market capitalization of the companies that have switched to us is around $6 billion, and the average daily volume is around 5 million shares. So we are seeing larger cap companies that have higher trading volumes switch to us versus the companies that do move away unfortunately are smaller cap and are lower volume stock. So we feel good about our results here and we want to continue that as we move forward in 2012.

As mentioned, with Facebook, I think it does further cement that we are the home for technology. But I want to give you a few stat to kind of reinforce that we are the natural home for technology. And as we see more of these Internet companies, social media companies come to market, we hope that we'll be the natural place for them to list. You can see there are 683 technology companies on NASDAQ, roughly we've captured 62% of the technology IPOs since 2007. And I think, in this slide, that all of the companies that have transferred to us, over $230 billion of that market cap was in the tech sector. So we are the dominant player in tech and we expect to remain so.

And I want to spend probably most of my time today on Corporate Solutions because we are really excited about this business and the opportunities that we have to really make a difference in our revenues and continue to grow the listing services revenues and diversify the listing service revenues. As mentioned, we break it down to 3 categories: so the investor relations tools, communications and marketing tools, the governance risk and compliance tools. And when we look at those markets individually, I'll take them one by one, so in the IR tools market, we see that's it's being around a $500 million market opportunity. In the communications and marketing, that's even a larger market opportunity. We take -- we see this about $1.5 billion. And in the governance and risk compliance business, we have our Director Desk product which we've been selling for years and I'll show you some numbers on how that's performing in a minute. But now with their acquisition BWise, we do say it has a very large market opportunity that we can start to penetrate.

So if you look at that, it's roughly $2 billion in revenues that we have. If we just capture 10% of that market, we'll have $200 million in additional revenues on the Listing Services side. So we think it's a great opportunity. The numbers on the left really just point to the fact that we are a credible player in the marketplace. We have some penetration but we do have the ability to expand into those relationships and sell all of our products. So we're excited about the opportunity and we're really excited about this next slide, which is the growth.

We've done several acquisitions over the last 5 years, total of 6. And you can see, we've added $44 million of organic growth based on $31 million of acquired revenue. So we feel like we've got a really great growth strategy. We've got a great distribution channel in place with our sales forces, which are located around the country, working with the -- not only the 3,400 companies that listed on NASDAQ OMX, but private companies and companies that are public on other markets. So we see tremendous opportunity continue to grow this business.

And I broken out some of the acquisitions just so you can see how we're performing since the acquisition. As you can see, so for, which we bought in 2006, we've got a 15% CAGR. And our GlobeNewswire business, that's grown 22% CAGR, it was also bought in '06. And the Directors Desk which we bought in '06 has got a tremendous growth rate, 112%. As more and more boards are looking to get away from paper, they want to have a secure board portal and really have their documents on an iPad or another mobile device. We really are taking the leadership position in that space and that's basically exploded for us and we see it will continue to do so as we go forward.

On the IR side, we have the Bloom Partners, which we acquired in '07 and that's at a nice growth rate as well at 42%. So these all have been built-in acquisitions. We are on our target that we committed to -- it's now stable at around 18% growth and we're actually exceeding the target slightly. And we think that we have done a great job of really developing these products, just leveraging our distribution channel and growing the business, so, so far so good.

I'll talk about the last 2 acquisitions that we did. Most recently, just to give you a little bit more flavor as far to what's that all about because we are very excited about these 2 acquisitions. Glide Technologies, we acquired in October of last year, and when we look at Glide, it is a media marketing business that ties in nicely with our GlobeNewswire business where we have a great distribution channel there. But it really does allow companies and something we launched this week which we're excited about is social media monitoring. So it's companies and brands who want to understand what's being said about their brands on Twitter, or Facebook or the other social media platforms. We now have the tools that can measure that. And they can measure not only what's being said, they can look at the sentiment analysis as well. And that's what we'd like about this technology that we acquired in October. It was the best-in-class technology. They have some great clients such as Virgin Media, General Electric and we are very happy that one of our first customers here in the U.S. that used Glide media was Facebook. So we feel like we've got the ability to really take in technology and leverage our distribution channel here in the U.S. and grow that business. And we will continue to innovate in this space and integrate it with all our other products. BWise, which we just closed last week, and it's a company in the Netherlands. They do have a large presence in Europe. Some of their companies, they focus a lot on life insurance companies and other highly regulated industries, so Swiss Life, Marathon Oil, Leapfrog here in the U.S., it's an education company, but we're excited about Bwise because this really is a tremendous opportunity from a revenue standpoint. We have the ability as more and more boards and internal audit committees, CFOs, are really concerned with risk, they are looking for solutions that they can become more efficient and actually outsource this solution to a provider that is an expertise in the area. So we feel like risk is something that's with us for the long term now and more and more companies are going to want to measure that risk. So we're well-positioned with BWise and we spent about a year really trying to understand the government's risk appliance pace and they were truly a leader in this space. So we're excited about the opportunity to synchronize this with our other Corporate Solutions products. We are talking to the C Suite and we think it's going to be a product that was being able to leverage highly for our sales force. So we're excited about the BWise and Glide going forward.

So I've left most of my time for questions but I will just kind of end on the fact that we are looking to really the 3 key areas of our roadmap for 2012. We do want to continue to expand on the current market that we have. So when you look at our customer penetration down below, I think we have a lot of opportunity to continue to sell and cross-sell products into our existing customers. So we're just down below, if you look at the U.S. alone, over 50% of public companies only buying one product from us and so there's tremendous opportunity to continue to expand in those relationships and cross-sell products.

On the product innovation side, we are leveraging the technology that we've acquired to develop new products. We are excited about our virtual data room which we're launching here in the second quarter. And leverage to get Director Technology and we think that'll be something that our company for end of the opportunity to for us to grow our revenues. We also see a lot of these products want to be utilized through mobile devices, so we're ahead of the competition in a lot of the areas around mobile so we will continue to innovate in that space as well.

And lastly, we look at strategic investments where it makes sense. We are going to digest the last 2 that we've made. We feel like they're great acquisitions that fit nicely into our portfolio of companies that would really see as the convergence between the 3 key areas that I talked about today: investor relations, core communications and corporate governance. They all want to want to talk together, they all want to use the same tools and we've got the ability unlike anybody else in the marketplace to really allow them to do that. So we think we're going to leverage our platforms and really grow this business and take it the next level. And I'd say, what will really help us realize our initial goal when we got into Corporate Solutions which help us diversify our revenues, so they were not just dependent on the number of companies that list every year and I think we've come a long way from the last 5 years.

So with that, I'll answer a few questions -- I see a few hands already.

Unknown Analyst

Can you just talk a little bit more about the interaction between the new listings effort and the -- I guess, Corporate Solutions side? So I guess that can answer in a couple of ways, but when you go in and pitch a new listing, how much of the pitch involves the Corporate Solutions in terms of saying like, hey, by the way, when you list here, we also have this whole set of tools and maybe it's part of the value proposition. I think a couple of years ago you actually started giving some of these things away. So what are you giving away right now? How often do you maybe throw something in for free for a couple of years? And how quickly do you actually, when you get the listings -- the other team companies says like, by the way, now that you're a public company, you should really do that still.

Bruce Aust

Well, as I mentioned, the competition here in the U.S. is very fierce and we've publicly filed what is an IPO package for our company. So you can go on and see just a few filings to see what each company by size would get. We see that as really -- we're early to this market and it would be IR or PR or the corporate governance world. This gives us a great entry into these companies to help them be better public companies. So this one-stop solution that a CFO, once they filed their S1, they're barraged with phone calls with every vendor in the world trying to sell them something and we have a relationship with them and we have the best solution for them. So it's been well-received. It's a differentiator in the marketplace and we've seen our competition react because we've had the better solution. But again we own the assets. So our customers like the fact that they know if we have problem with the webcast or a press release, they know the business all report to NASDAQ and are owned by NASDAQ. So we're very confident in our position and I think it is 2 differentiators as we continue to build out more and more services, we think it will be a larger differentiator in the marketplace.

Unknown Analyst

Just a question on the IPO market generally. If you consider the 2 factors of regulation and just general economic and market confidence, which factor or combination of factors do you think is weighing on new IPOs the most? And what do you think needs to change to kind of kick start -- upstart companies from going public?

Bruce Aust

Yes, and I definitely think -- and we had a -- as you see the tremendous pipeline we have, 109 companies that are looking to go public, a lot of it is left over from last year. And a lot of those companies were discouraged because of the IPO market that we saw last year. And truth of the matter is, a lot of the companies that are in the pipeline don't necessarily have to go public. They're generating revenue. They don't need access to the capital markets, so they've been able to wait. What we're encouraged about is the jobs that gives a lot of companies that were smaller but didn't go public because they had to deal with starting [indiscernible] and other regulations, gives them the opportunity to have the early on ramp. So we're hoping that opens up a whole new market of companies that would traditionally waited 3 or 4 years before they went public as they're growing their business. So I think that's kind of the dynamic you have is that companies aren't going to take less for their company than they have to, if they're able to keep going and that's what we see in the marketplace. We're encouraged by the fact that we have 8 companies this week that are looking to IPO and NASDAQ. So that's the biggest week we've had since the fall of 2011. So hopefully all those 8 companies will get out and that will help the market. I also do think -- Facebook is obviously the most anticipated IPO in history and once that IPO comes out, I think we'll see several companies look to take advantage of that in the market. So we're encouraged by this year. Again, we can't control the interesting factors so if market volatility is going to play into it and companies are seeing less investors' appetite to get the true value that they're not going to go, so we can't control that.

Unknown Analyst

Your challenges for this year. China came out. Can you walk me through like what changes have you made around listing Chinese companies or accounting centers and working with the SEC? What have you done over the last few years to kind of get more comfortable that there's still going to be a pipeline and demand for the companies coming into list in the NASDAQ and China?

Bruce Aust

Well, we are proud of the fact that we listed the largest companies from China like Baidu, CTrip, Sino, those are some of the early companies that listed with us and continue to do quite well in their marketplace. And let's face it, China is a huge market. There's huge tremendous opportunity for companies to grow over there. So we think there will be an opportunity for those companies to come back to market. We were close with the SEC, the PCOB, we're working with Stanford Director's College. We're creating a corporate governance program that's being actually held in Beijing this month, so we're working on education, on corporate governance matters, which we think is going to be helpful but at the end of the day, this is working with the SEC and the PCOB be to make sure that we have the right standards in place and also, that's just a few bad apples and we think there's a ton more opportunity of companies that are great companies that will come to the market and we have several that tried to go out, they haven't been successful. So I think they'll wait until the market conditions change and I think they will change. I mean, it's a huge opportunity for those companies.

Unknown Analyst

In your presentation, you said it was 5% of the 3,400 listed companies. About how much of your revenue was coming from the Chinese -- China-based companies?

Bruce Aust

We'll get to the breakout. I don't have the exact number on the top of my head.

Unknown Analyst

I just have one. How big of an opportunity do you think -- I know it's still a little bit early but when you at like your listing requirements versus what qualifies the file under the emerging growth designation, is there a lot of -- there's plenty of room for a lot of those companies not even qualified for NASDAQ? And the second thing was on, I think you mentioned that there's -- on the ideal backlog, there's 13 that are still being fought over. How do we read that number because that's not a big number? Is that because there's more that are clearly in your camp or NYB's [ph] or is that really reflective of unfiled ideal backlogs?

Bruce Aust

Yes, we've got the -- well these are file companies. So the 13 is those have filed as 1. They just haven't designated which market they're going to go to. So we won 57% of the ones that have filed and have designated a marketplace. There's 13 that haven't designated a marketplace, so we're still fighting for those 13. So of the overall market that's filed, we won 57% where they've indicated an exchange. There's 13 that haven't indicated the exchange.

Unknown Analyst

How about the unfiled market?

Bruce Aust

The unfiled market is huge. I mean, there are still a huge pipeline of company. We are busier than we've ever been. I would say a couple of hundred, 200 or 300 probably that are with us. If you go to Silicon Valley and I go out pretty much every other week, and because it is just a huge opportunity when we look at what's going on with social media, what's going on with Apple and the application of the ecosystem that's being created by that, the gaming industry is being created by social media. It's just tremendous opportunity and we're beating with 20, 30 companies a week, so it's very good.

Unknown Analyst

Is that could be a filers over the next few months?

Bruce Aust

Next 6 to 12 months, these will filers, yes. We're extremely encouraged by the number of new companies. When you look at the Cloud computing, data mining, all these things that are new to the market, they'll all be looking for access to capital and we'll be there for them. On the job deck, we have the capital market which has relative low standards. We just got a good price approved in lowered to $2 for those companies to come to market. We are seeing already with just the job deck recently being passed, there's an ecosystem being created with the law firms and the banks that are trying to figure out how to help these companies come to market. So, we're encouraged by that, we ourselves to be a player in that, we're doing a lot of education, webinars, and IPOs some restaurant Capital Market so we think it's the building and we think that they will take advantage of it. We see some companies that take advantage of some of the benefits from the filing already.

Unknown Analyst

Just a question on the Corporate Solutions. So when I look at the organic growth to the $44 million, when you look at that growth say over the last 3 to 4 years, what portion is being created from like the IPO pipeline versus current NASDAQ clients versus non-NASDAQ clients? And then when you look at that target, I think that total number might be around I don't know 75 or so for '11. When you look at that going to that 200, if you get that 10% of the market share, where do you see the most growth opportunity among that segment, meaning the IPOs, the current clients, the new outside NASDAQ clients?

Bruce Aust

Sure. As we mentioned, we do give free services and IPO package. So for a certain period of time, the service are free but then honestly we have to lock in and enter that business going forward. So it is a revenue channel for us going forward. So every purchase -- pretty much every IPO will use our product. We do see that there's missed opportunity within our current customers already. So a lot of our customer only buy product from us. We have the ability to expand that into other areas, especially as we continue to innovate the space. So with social media and the Glide platform, we think that's a tremendous opportunity. Combining Glide with GlobeNewswires is just a tremendous opportunity. So we're excited about the corporate communications space and where -- we were a small player with GlobeNewswire. Glide really gives us the opportunity to take that to the next level. We can do newsrooms, media monitoring, social media monitoring. It's just changed the game for us in corporate communications. So we've just scratched the surface, we just did the acquisition in October and we're excited about where that could take us. And the Directors Desk is one that's just really scaling very nicely. This is a business where we I think every 2 or 3 years from now, every board will be doing their board meeting on a device and we are -- we're the leaders in the space, we have a very secure portal. We're leveraging that technology to launch a new product with the DDR program, which will give us another opportunity to sell additional products to those customers that are using our Directors Desk today. So we see those 2 business, ones we're very excited about, we tie in the risk component with BWise and if you think about Directors Desk, if we can tie in some risk modules that will help those board members understand their risk of their company, that's a huge opportunity to expand the platform as well. So I think we're very well-positioned not only to continue to penetrate in the current customers that we have, but to really steal market share from the other players. That's kind of [indiscernible].

Robert Greifeld

All right. Thank you, Bruce. Just a couple of side points. One, in terms of the switches, we have gained 5 million shares per day in our transaction business from the switches and they have gained 1 million. So it shows you the quality of listings we've won and obviously, that accrues to us every month there. And Bruce committed to, I heard, what, $200 million of additional revenue in the existing market. But what's important to me is the BWise acquisition again, solidifies our position in the GRC space, [indiscernible] Directors Desk truly outstanding CAGR over 100%. The market for risk is infinitely larger than anything else you're addressing today. And we feel that Bruce has again, been ahead of the curve when he was with Directors Desk in that 3 to 5 years from now, every single public board committee will demand that management has some sort of GRC system in place, especially during these uncertain times. So we're nowhere near that state of being today we're into the space early, we've got the best provider so we're excited about that. And the backlog, you talked about the IPOs, that is where we give stuff away for client [indiscernible] in the SEC filings, but that's been latent revenue coming to us. And our churn rate, when they come off the free service period, it's quite hot, since we do a great job. And the last point I'll make ties back to Anna's business with Bwise and this really ties in to SMARTS because the thing about SMARTS with respect to realtime surveillance, that is the industry-specific GRC service. So you tie that in with the global case management type of capabilities, with BWise, it really crosses our silos quite effectively. So that's again, a great opportunity for us.

Now, we serve -- we save the U.S. transaction business for the -- I didn't know if anybody cared about it, so I wasn't sure. So Eric begged to get on the agenda. So he did get on the agenda, so Eric Noll has been -- a short period of time feels like forever and I think it's a good thing, almost 3 years, so Eric?

Eric W. Noll

Thank you, Bob. And good morning, everyone. Yes, I wasn't quite sure whether I was going to get a shot to talk it all today or not, but I'm happy to be here and I'll leave time for questions at the end. When we think about our strategic vision for this business, we look at it as the match, what we do in the transaction side of the business, which is we employ efficient, security, diagnostic matching technology and the security diagnostics being the important part. We really believe that we have opportunities to trade any number of asset classes. Matching technologies to offer innovative trading experiences and facilitate low cost trading. We're a skilled player. We do it very, very well and we see opportunities for us to continue to expand that business as we move forward and beyond. So we want to take the technology platforms that we've built, we want to take the relationships we have with our customer base and we want to provide services and offerings to them that surround both the broker-dealer and the match.

More importantly and more specifically, it's about outsourcing to us their non-alpha needs and infrastructure that we can provide to them in a much higher, much more effective way than they can provide it for themselves.

We break our business out in 3 main buckets and the way we think about it we manage it today: U.S. equities, which is the matching and routing cash equities in ETFs; U.S. options and futures, which is the trading of the equity options and ETF options, index options, and foreign currency options, as well as gold and currency futures, they're relatively new products for us; and finally, Access Services in FTEN. We have FTEN fully integrated into our Access Services business but I will talk about it specifically as we go through the rest of the presentation.

So let's talk about U.S. equities. So we have today 3 equity platforms that we operate. Each one has an innovative market model compared to the others. This is the revenue from 2007, 2008 with the high watermark in terms of volume and pricing power in the U.S. equity market. You see there's been a decline from them, but I do think we've done a terrific job at maintaining revenue in a very, very weak trading environment.

Since January of 2011, we've grown market share on each one of our platforms, including our newest platform, NASDAQ OMX TSX and we see that as the trend that we want to continue as we move forward. It's challenging environment out there given the volume setting. If you look at the top chart though, you'll see that we have narrowed the gap between ourselves and NYSE Euronext in terms of market share. We intend to continue to follow that path and continue to try to grow our business compared to our peers. There is, however, a long term increase and long term trade -- off exchange trading, dark trading that continues to trouble the markets and trouble us as to what that means for price discovery as we move forward, but we think that we are an effective and innovative competitor in that space.

Most importantly, I think, loyalty and trading on our platforms is driven not necessarily by price, but it's about the efficiency, the product enhancement, the innovation and the functionality that we have there. We'll talk a little bit more about price on the next slide.

So this is a capture story in equities. So I would -- and I do point this out to Bob. When I joined NASDAQ, it was the very bottom spike. And you see that we managed to increase capture over the last couple of years and then we've had a falloff in -- at the latter part of '11 and the part of '12. Some of that falloff was delivered on our part, which was we were trying to change the mix of business so that we made the trading experience on NASDAQ a much more fruitful one for all of our members and attracted more and more flow. Unfortunately, that coincided with what was a very low volume and low volatility environment, so that the positive effect that we saw from it sort of overwhelmed our capture story. So effective on May 1, we have actually adjusted pricing and at the end of this quarter and going into third and fourth quarter, you will see that line go -- start to move back up towards the high watermark. And that was because that the incentives that we put in place has resegmented our market in attract the right mix of business to our marketplace. We kind of overshot that and the rest of the marketplace just wasn't trading as much. And so as we adjust our pricing around there, we expect that capture number to improve and continue to move back up towards the high watermark. Again, we speak to compete here not just on price but on quality and performance of our marketplace.

Competitors remain intense out there, but I do think there's rationality in pricing or increased rationality in pricing, particularly in the equity space. I think every market participant realizes that these race to 0 is a long term bad strategy for them. And so we have seen people become much more rational about their pricing as they move forward.

This is the stuff that we're pretty excited about though. This is the future, this is the stuff that we're trying to build out for the rest of this year. So all of this, I will caveat by saying it's all pending SEC approval. So we need our regulator to approve these new innovative things that we're doing here. But we expect and have had good feedback from them so far.

So the first one is our retail investor auction. So our competitor, our largest list competitor in the New York Stock Exchange has made a somewhat of a big deal about their RLP program. We think that there are some problems with the structure, what they're trying to do and ultimately, some problems with the way that, that process will work. So we have created what we believe is a much more innovative and effective competitive tool there, which is to resegment the market, attract flow from the dark pool for retail investors, give them a live auction process for them to get price improvement on the lid exchange with competitive market makers competing to provide that price improvement for them.

We expect that to add about 1% to 2% market share when we grow it out, again pending SEC approval and market condition. But we're pretty excited about that, we think it's an opportunity for us to segment the market in a realistic, competitive and transparent way that adds value.

The most interesting thing I think we're doing this year is the introduction of what we call benchmark orders. So when we think about the way we run our business and how it grows, what we do I think best is provide low cost effective transparent solutions in what is becoming commodity spaces. So we take businesses that have been innovative elsewhere and we provide that low cost that's highly efficient, highly transparent solution to the larger marketplace.

We think algos and algo executions belong in that bucket. Most specifically, we think, VWAP, TWAP and percent of volume strategies have become relatively commoditized in the algo space. So what we intend to do is offer those as order types on our exchange. This is not to go directly to the buy side customer. What this is intended to do is to provide order functionality to our broker-dealer base that allows us to provide a cheaper, better, faster product than having them all develop their own algo offerings and got out into the marketplace and compete for that low-end commodity business. This is not intended to compete with the high end, high touch, highly sophisticated algo providers, but is instead, addressed to the largest part of the market, which is the VWAP and TWAP market and say, we can do this for you better, faster, cheaper than you can do it for yourself. We expect to roll that out in the second quarter. We think that has the potential to be a 3% to 7% market share gain for us as we go forward in time.

And then the last one is making additional changes to our PSX model. So as many of you know, PSX started out as a price size exchange, still is a price size exchange. One of the issues with that is that the rest of the market is really a price timing market and this exchange is locked into that national market system. The advantages of quoting on size haven't really been in parent to the liquidity providing community. So while you had some modicum of success in the last month, we've picked out the market share up in that market to 1%, 1.5% up. It hasn't grown the way we wanted it to and it's really intended to provide services to core institutional users who are looking more for liquidity than for speed.

So what we're proposing to the SEC is that we create a speed bump in that system that allows our liquidity providers to really provide size quotes without being exposed in a way that has been at risk for capital for fast-moving orders, right? This is not to violate price -- the best price in the marketplace. It's so also not intended to buck regular [indiscernible] in any serious way. What it's intended to do is to address what's the real concern, which is how can I quote a large size in the marketplace and not be taken advantage of. And so, we hope that we'll have some success with this. There some interest in the end user community in it and there's quite a bit of interest in the market -- the broker-dealer community to provide markets in that. So we think that, that should, over the long term, grow to be a 3% to 5% market share -- marketplace as we go out in time. Again, all of this is pending SEC approval.

Turning to the options business. So we've been very happy with our U.S. options performance, particularly in a low trading and volatility and volume environment. Our 2011 revenue in that business is $185 million. That is a 17% 2-year CAGR. You can see that our market share had a spike in '10 and has remained relatively high, thought there's been some fall off because of price competition that we refused to engage in. And you've seen our revenues continue to show some ramp despite the course -- or high volatility quarters, where volumes were exceedingly high.

The bottom chart is our market share and you'll see that the NASDAQ market share started out in July of 2008, as being the smallest of the exchange families and has grown today in U.S. equity options to being the biggest. And there's some variation in that, of course, having to do with pricing and volume but for the most part, it's been in a steady upward trend in that business. There's some challenges in this business, coming from the regulatory side, like in all of our transaction services business. The business tends to be run by several vary large, vertically integrated consolidators. So you have to spend a lot of time meeting their needs, as well as the needs of their end customers to be successful and we think we're very good at that.

Customer orders are highly price sensitive and they aggressively seek rebates to compliment their shrinking broker payment for order flow pools. So they're looking to replace other functionality and other sources of income with what they're getting directly in terms of payment order flow. So they are aggressive rebate seekers.

What we're seeing happening out there in terms of customer attributes. There's an increasing demand for low latency and fast low cost execution, that's relatively new for the options market is probably a generation behind the equities market in that respect. And an increasing demand for co-lo services and market data. So we'll talk more about this in the Access Services part of our business. But the split right now of Access Services for options and equity, there's about 80% equities and 20% option. So we do think that there is real space to grow that side of our business as we go forward with the options piece of it.

There's a shift from OTC markets to regulated market. This is hard to quantify with numbers. A lot of this is an anecdotal information, but as Dodd-Frank has rolled out, particularly with OTC individual equities product, we are seeing more and more of that flow coming on exchanges. So the largest growth that we have seen in that business is what we were calling our complex order flow, which are complex spreads often stock tied, and they're coming from brokers who have traditionally done this business in the over-the-counter market. So they're, one, starting to address their Dodd-Frank concerns by getting this in the clearinghouse and getting in on a transparent market. But not only are they trying to do that, they're also bringing more transparency and lower cost. So we expect that business to continue growing. That, of course, is linked to the last point there, which is our voice business and our floor business remains surprisingly robust. So we would have expected or I would have expected over the long term that business to start to wither as electronic trading became more and more prevalent an option. The floor means quite active for us and with the growth of the complex order flow, it remains an important part of our business.

Just a real quick touch on what we offer our customers on our platforms. As you can see, if you go down those different kinds of primary features, we're the only change family that offers all of those, as opposed to our competitors. The one functionality that we haven't effectively offered yet is this bottom one which is an electronic crossing and facilitation system. We will have that rolled out fourth quarter of this year. And at that point, we will have exchange offering that meet all of those primary features, being the only exchange family out there that can do that.

This is the most exciting thing that we're doing in the options business this year in terms of growing it. So we're introducing our third options license. As many of you know, we own the Boston Stock Exchange and for a number of years, BOX, one of our competitors in the options space had been using the options portion of that license. Effective at the end of this month, they go on to their own license, freeing up that options license for up introducing new model. So we have a rule filing going down to the SEC to launch this market. We're excited about it in a couple of ways. One is, it gives us a chance to be the first options exchange to offer this kind of model out there, which is to pay takers of liquidity as opposed to makers of liquidity.

So why it's interesting in the options space is as payment for order flow has become increasingly opaque and has become increasingly difficult for earners of payment for order flow to know what they're getting paid, how they're getting paid, the transparency of how they're getting paid. This is a model that actually makes this their rebate for taking liquidity transparent, competitive and certain. And we think that has real value to them. So every other market model that operates out there operates primarily to the benefit of the provider of liquidity. This is going to be the first model out there that operates to the benefit of the taker of liquidity.

The other thing we're excited about is infusing the very same technology software, APIs, functionality that we have developed elsewhere. So the cost for us to introduce this model is incredibly low. We're leveraging everything else we have, our existing customer relationship, our existing regulatory infrastructure and our existing technology infrastructure. So the benefits of what we're gaining here with kind of having built everything on the same technology platform and building that infrastructure is for us to hang a new model on there is a low cost venture for us. So we're pretty excited about that. We think we're going to hit about a 3% market share by the end of 2013. We expect it will be accretive very quickly as we grow our business and we think that gives the chance to continue to expand our footprint in the equity options space.

Switching gears very quickly. We have started to grow very slowly and quietly, our futures business. As some of you may remember when we bought the Philadelphia Stock Exchange, it also came in a commodities exchange. The old Philadelphia Board of Trade, now called the NASDAQ Futures Exchange. And we introduced in February this year our first real product on that exchange, that has had customer interest. And that is a retail-based spot gold futures product.

So what this product does is essentially it's in response to the Dodd-Frank Act, which eliminates the ability of retail investors to do leverage spot gold transactions, and we have recreated with a futures product the ability to buy and sell spot gold with a futures product. So when we launched this product, it had an immediate uptake, it's a retail 10 ounce -- troy ounces. It now -- it started out at about 1,000 contracts a day. By April, we're at 3,500 contracts a day. So far in May, we're exceeding 4,000 contracts a day. So it's had tremendous growth since we introduced it. It is -- we have low connectivity to it so far from our customer base from a limited number firm. So starting next week, this will be resident in our Carteret data facility. We will increase the number of people connected to it and it will be the basis on which we continue our future strategy. So I want to be clear about what our future strategy there in the words of Wee Willie Keeler, the baseball player, we want to hit them where they yank. So we don't intend to use this platform to compete with the CME or the ICE in the big institutional euro-dollar or crude oil contracts. What we have found with the spot gold contract is there's a demand and an appetite for innovative products, particularly those that are retail-focused as supposed to institutionally focused that is not being met in the marketplace today.

We think we have the best platform for that and the best team to get that out to our customer base. And so our strategy here is not to invest a lot of money and time in this effort, but to find those innovative products, introduce them on this platform and continue to grow this business as we go over time. So while this is accretive to NASDAQ now, it's not material yet, but we hope as we grow our business over time it will become an increasingly important part of our Transaction Services business.

Real quickly, other new opportunities in the option space. We continue to add functionality. We talked about the crossing solicitation network. We're continuing to look at improving our price improvement option. We're spending a lot of time now in developing what we would call proprietary options products. Link to specific indexes, we intend to introduce the auctions on U.S. treasuries in the third quarter of this year. This will be individual treasuries, so not our cheapest delivery structure but keeps it identified treasury, a relaunched ForEx options program, and our Alpha Index program. We think if we're successful with those product introductions that they could add between $6 million and $12 million a year to our P&L in the option side and we think this is also just the beginning of an effort for us in the proprietary option space.

Moving on to Access Services. So this has been an interesting growth story for us and an exciting one given the current market conditions. Well, our 2011 revenue is up 29% year-over-year. It's shown growth in the face of a declining volume environment and a declining volatility environment. We do a lot of things in Access Services, and it's probably interesting to note them: Co-location; we also provide data center facilities for some of our clients, our broker-dealer clients; market connectivity and protocol for the supports, this is connectivity to other markets, this is connectivity to other broker-dealers, and we provide cross-connect services in our data services to them; membership, people who have joined us, joined our exchanges. Ironically enough, the downside to increased stock trading for us is that we operate the FINRA/NASDAQ Trade Reporting Facility, which has about a 97.5% market share. So we do get some economic benefits from trade to take place off exchange that uses our ACT technology system. We also sell other co-location services with that and it is a surprisingly robust business for us. A workstation business and of course our FTEN realtime low latency risk management business.

So this is the successes in '11. We expanded our 10G network, low latency connectivity choices to other venues, other Value-Added Services. We had a 17% increase in our memberships, primarily PSX and NAM [ph]. Our port revenues were up 7% year-over-year with people connecting to new venues through us. Front-end applications, we developed a short sale monitor for people to remain in compliance with short sale rules and we introduced a PRM system, which is a low-latency, pre-trade risk management system on every port to make sure that you're not violating your pre-trade risk management requirements. And on the post-trade side of course ACT, FTEN often in integration with the smart business as well.

Where we're going in '12. So we've already rolled out and we are the first exchange to offer 40G connectivity in our data center. We're also the first to offer 17.3 kilowatts of power in a single cabinet. So I want to just stop there for one minute to talk about that. So we early on made the strategic bet that bricks and mortars and co-location and Access Services was not the long-term route to go down. So what we chose to do really was outsource the bricks and mortars to providers, leaving us do concentrate on providing those flexible services that our customers were ultimately going to need. So our strategy here has really been to concentrate on where the business is going, not where it's been.

So I'll just use this as an illustrative example. I had a chance, when I joined NASDAQ, to review the co-location plan that we put in place when we moved out to the Verizon facility. In that plan, 90% of the boxes that we expected to sell in co-location were 5G, 10% of the boxes were supposed to be 10G. When I look out at that plan now, we have about 2% of the boxes are 5G, about 97% of the boxes are 10G and we have people coming in to take 40G, so if you want to envision in this way at some point in the future, with FPGA power usage, our facilities could have one box in the middle using all the power of North Jersey, and a lot a lot of open space. But that doesn't put us at risk because we built our model in a way where we can take advantage of those trends.

Other front-end applications, we've developed QVIEW for realtime order flow tracking, a virtual service desk. So that allows you to outsource all their needs to us about connectivity to your market, additional membership, core promotion, and the newest thing that we're looking at is wireless connectivity. So, so far, connectivity between data centers and connectivity to pools of liquidity has been fiber. Then the technology that's rolling out now on the wireless side is actually faster than fiber, there's some issues with it, yes, but for the most part, we think we're the leader in providing the opportunity for wireless providers to bring those services to our clients and to their clients on a worldwide basis. And then additional post-trade services, particularly around the ACT dashboard and what we do with the TRF. We talked about much of this before so I'll skip both of that.

I just wanted to talk about FTEN. Like Anna, we're incredibly pleased with our purchase of the FTEN asset. So we have it fully integrated into our Access Services business. What we think it did for us is a couple of important things. It's changed the discussion points with our customers from a way from providing them with match services, to providing them with services that they needed to provide for themselves and their customers and outsource that to us. So it opened up a whole new avenue of business opportunities for us with those customers. The most important thing on this thing is really the last one, Point 5, which is a development of functionality that enables brokers to calculate their portfolio risk exposure in a realtime basis across all asset classes and control their own in-house and third-party gateways.

So the technology that we're now developing and now rolling out to customers essentially is venue-agnostic, firm-agnostic. So we can actually penetrate a marketplace that doesn't need to come to NASDAQ but needs our pre-trade risk management services, and that's going to be across equities, options, bonds, futures, the whole gamut. And we're rolling that out on a global basis, talking to customers right now about that, and we'll probably have some announcements about new customers in those services as we go forward for the next quarter or so. So with that, I'm happy to take your questions.

Unknown Analyst

You talked about a little bit about how there's a significant growth in TRF market share, obviously attracting a lot of liquidity. NYX has talked about some of the algos traders moving from lit to dark markets. Wondering if there's any validity to that? And then second part of the question would be, where do you think share could go in that marketplace, assuming there's not a whole lot of volatility? Might we see 46% share and...

Eric W. Noll

Well, and I think if you look carefully at the numbers, there are some securities, actually a large number of securities, over 1,000, that have 50% to 60% off exchange trading. So it has a significant impact in today's -- particularly in today's volume and volatility environment of off-exchange trading. I think the key things for us that we worry about and that we spend time on, is I think we can compete very effectively with segmenting the market, particularly with things like PSX or algos system, retail auction, some of the pricings that we've done allow us to remain competitive about dark trading. But on a larger macro issue, we're concerned about the primacy of price discovery. So we want to make sure that as we're managing our business and the regulatory postures that we're taking in Washington, keep in mind that making sure that price discovery remains the highest priority of our lit markets remains front and center in everyone's mind as they're thinking about how these markets evolve. More to your point about whether algo traders or high-frequency traders are showing up in dark pools, they clearly are. Most electronic market makers and algo traders are venue-agnostic, all right, they go where they think they can make money, they have been attracted into dark pools by dark pool operators because they bring necessary liquidity. So they are quite active on and off exchange. And so that's definitely something that's happened. Michael?

Michael Carrier - Deutsche Bank AG, Research Division

Some of the new initiatives that you have on the cash side. You mentioned some market share gain potential, some of the strategies get approved. It seems pretty big, I mean the range -- I think if I add it up, somewhere between 7% or 10% plus. So I guess one is, is there something that competitors have done and you're looking at their strategies and you can use these new initiatives to gain some of that market share fast? And I guess any of those new strategies from a pricing standpoint, does it have a negative impact on pricing? So from a revenue standpoint, it's not -- the numbers aren't as big?

Eric W. Noll

Yes, well. It's a little bit of a static analysis about market share growth because it assumes that competitors don't come out with competing products and we get it approved from a regulatory point of view and things like that. But given all of that, I think what we've been able to do which some of our competitors have either chosen strategically not to do or have not executed as well as we think we have, is to figure out how to segment the market to meet the needs of some of the other market participants in there. So some of our competitors have chosen -- -- we don't segment at all. It's a "one size fits all" strategy and we're going to barrel down that path, and they've had some measure of success with that. I ultimately don't think that that's a long-term growth strategy. Other competitors have tried segmentation strategies that have not really had them be successful yet. I think we've demonstrated our ability to attract different kinds of order flow to our platforms those products or products that will do that. We think we can deliver them with same capture we do today, as we go forward. We think they're value-added to customers and customer needs and we expect to see a fairly significant uptake point.

Michael Carrier - Deutsche Bank AG, Research Division

Just a follow-on to that. So should we be basing that off of the 22% market share that you have now versus the capital markets? So let's say you're looking for 7% to 14% incremental growth on that market share, that is a sizable number obviously. And assuming there is -- obviously, there'll be a competitive response. But assuming there weren't and you hit even low into that goal, I mean what type of timeframe are you thinking about...

Eric W. Noll

Well I think, as we roll these products out and they should all come out, we hope, this year. We would start to see the impact, probably, immediately in some of them. So we would expect to see significant progress for that goal in '13, certainly by the end of '13 and finishing up in '14. I want to be clear about them as well. So they're not just designs, and it's easy to think about the stuff we do as competing with our other lit menus. These are products that are really designed to take flow back from dark trading, by providing a better solution to what other people have gone to the dark to do. So this is really, this isn't so much directed as hack it [ph], moving share from one of our lit competitors, though we certainly hope to do that. It's really designed to answer some of the dark trading crush, which is we're going to provide you with some additional functionality services needs, price discovery cost that will pull back business out of the dark side of the marketplace back on to the lit venues.

Michael Carrier - Deutsche Bank AG, Research Division

And just assuming there's -- if there were no competitive response or no effective competitive response, should we consider revenue capture to be...

Eric W. Noll

About the same as it is today.

Unknown Analyst

Just on the DWAP order type that you were talking about, is that something that dealers really have a need for? Just as far as sort of algo-type trade, it's the oldest one in the book.

Eric W. Noll

Yes, it is the oldest one in the book, it's also the one that's most used, which is why we think it's right for us. So everybody offers it one way or another. So some of the high-end firms or larger firms have developed it and offered it themselves and maintain their own DWAP engines, there are lower-level broker-dealers actually outsource that to somebody else and use third-party labels. We're going to do it cheaper than they can do. And offer it in a quick transparent way to the customer base. And so we think it's a real competitive tool in the marketplace that we're very excited about.

Unknown Analyst

So we recently saw that there's another option exchange filed from Medallion here in the States, plans to launch I believe a Paretta [ph] allocation model later this year, in the fall. In light of that, I mean I guess we know how competitive the price time business has been, but it seems to have been pretty stable on the allocation side. I'm just kind of wondering what your thoughts are on the competitive environment and where you see that headed longer-term?

Eric W. Noll

I think it's fair to say that the option business and equity business are competitive businesses in the U.S. As the option business is characterized, as I think many of you know, is that in order to trade equity options in the U.S., your print has to happen on an exchange. So there is no off-exchange trading in the equity options. So in order to penetrate that market, the only way you can bring a new model to market is to actually get a new options license and bring that marketplace out. I would expect -- you mentioned one that was recently filed, I would expect to see at least another one from another operator at some point in the very near future. It raises the question of how many of these is too many, and whether anyone can effectively gain share and value out of that? I think what we like about our model and what we think brings the value to us is we can do it cheaper than anyone else can do it, right? So we're hanging it on our existing infrastructure, we're using our existing platforms, everything is essentially this is a marginal growth for us, it's not brand-new so we don't have the expenses of trying to compete by redeveloping an entire new structure to do this. So there's some marginal spend for us and a relatively modest one at that. The other point I'd make about it is we're going to be first out of the box here with this model, so we're going to set the standards, we are going to attract the order flow in. I think we've demonstrated particularly over the last couple of years, our ability to effectively manage the mix segmentation pricing and functionality of the business to keep successfully against our competitors. So yes, while there are going to be other competitors coming, I like it that we're making much better than a lot of competitors are making.

Unknown Analyst

I have a question on the efforts on the retail auction project. I can totally understand why U.S. exchanges would love to get the U.S. retail business back on the exchanges, it seems like valuable order flow that currently isn't participating in our price discovery system. But when I think about the other parts of the equation, it seems like retail customers are relatively oblivious to the routing practices and it doesn't seem like they're particularly engaged on the issue, while retail brokers seem extremely satisfied with the status quo, how do you overcome that?

Eric W. Noll

Well, that's a very good question. Let me talk specifically what we think is going to help people in the marketplace. Leaving aside the benefits of price improvement for retail investors for a second. So if I am a liquidity provider to retail equity order flow today, and part of the arrangement of me providing liquidity to that retail order flow provider, I have to guarantee them a certain percentage of order -- price improvement. So as I execute all my orders within the NDDL [ph], I'm also telling them I'm going to price improve x amount of your orders as they come in, and I have to use my own capital to do that today. So what this model allows them to do, however, is to say, "You know what, I don't want to use my own capital to price improve those orders," because either I don't know where the market's going, I'm capital constrained, I want to go to more of an agency model, but I do want that order flow. I do want -- I want to continue to service that retail broker-dealer and that retail customer. What this model does though is it opens up the price improvement process for that order consolidator to every liquidity provider on the street. So they can route the order to NASDAQ, we will run a retail auction price improvement option, market makers who wouldn't otherwise get a chance to interact with that retail order flow, will compete to offer price improvement. The consolidated gets to pass that price improvement number back to the retail broker, meeting their obligations to the retail broker. So I think you're absolutely correct that the individual retail investor probably doesn't understand how the orders get routed, probably isn't paying that much attention to it. But the people in the intermediary, in the step, they do. And this allows them access to a much larger pool of liquidity and a much larger pool of price improvers that they wouldn't otherwise have access to. I was hoping I could avoid this, but go ahead.

Unknown Analyst

Facebook. Google and Microsoft, these guys have huge drivers of option trading going across the industry, does the fact that you have then the IPO, that doesn't necessarily give you an advantage or does it? Or maybe getting out there with the options first?

Eric W. Noll

Well, there's not a lot of advantage on the options side, but there clearly is some advantage for listings on the equity side. So as I think everybody knows, every exchange family trades everybody else's listing, so they're freely tradable. So I do think the advantage we gain from having those kinds of listings on our markets is that we get -- typically get the opening and closing auction rotation. So as the market continues to grow, institutional investors focus a lot on their opening trades and their closing trade. They like to participate on those auction processes. And so a listing in those names actually drives that flow to a listing market. So having Apple, Amazon, Priceline, Google and now Facebook on our exchange, we actually get the benefit of an almost 100% market share in the opens and closes in those names and that is a real benefit to us.

Unknown Analyst

And then to be predictable. The SEC, we've seen a lot in the headlines but I haven't seen any specific proposals yet. Europe had done a lot, I expect, to Washington. Do you get a sense if there's anything coming soon with respect to that personal [ph] group?

Eric W. Noll

I don't think that we should expect to see a lot of rule-making in HFT space. So I think a couple of things that we have noticed, one is I think, to a large extent, the problem is correcting itself. So we've seen high frequency trading becoming less and less important part of our business, it's still a very important part of our business, electronic market making. But if you look at who our largest liquidity providers are, and we publish that every quarter on our website, you will note that the firms Morgan Stanley, Merrill Lynch, Bar Cap, Deutsche Bank are at the top of that list. 5 years ago it was primarily high frequency-firms. And so to the extent that's a volume driven, volatility-driven story. But to a large extent is, the marketplace is maturing, we on the exchange side have provided incentives to attract a richer mix of order flow providers to our exchanges, which mixes it up. So we've seen firms that traditionally were not high on the liquidity provider list, becoming very high liquidity provider list, becoming very high on the liquidity provider list. And as we have announced earlier, we're going to put in an accepted messaging fee charge. So the industry is addressing some of these concerns itself. I think the commission recognizes that as they go forward in time and may or may not need to do any kind of rule-making here. I think there's also -- I think it's also important to note that high-frequency trading has real value and there's real liquidity provided by high-frequency traders. And the commission recognizes that other market participants recognize that. When there are issues, they tend to typically be the same issues. In other words, there's nothing new under the sun. So if you were engaging in manipulative stock behavior in person, on a NASDAQ trading desk or with a New York specialist, you could still do that electronically. We surveil for that, we catch them, we turn them over to FINRA for prosecution. So to the extent it's not a high-frequency problem, there is a bad actor. If you're a bad actor, you get caught and you get prosecuted, it doesn't really have anything to do with high-frequency trading. So we have the ability to do that. We do that very effectively under Ed Knight's leadership on the regulatory side and surveillance side. And so there clearly remains large issues about market structure, increase in dark trading. Is high-frequency trading good or bad? Can you identify what high-frequency trading is? Do you know what it is? And those issues will remain out there and will be debated. But I think we've positioned ourselves that we can provide the services we need for the marketplace. We don't expect there to be any dramatic rule-making in this particular space, we haven't seen any sign of it. There's been no concept release on it. There's been no particular effort on this. The SEC clearly has a watching brief on the quality of our markets and they'll continue to exercise that.

Robert Greifeld

So, Eric, we did hear you say 7% to 10% market share? I heard that right? Good. Everybody heard that? That's good. He's a man of his word. The other thing I'll add is the ISP program which we highlighted during the earnings call, pricing changes went into effect in May, May 1. So we do expect some increase in cash, so that's good news. So as I said we have a strong culture at NASDAQ OMX but it has to be receptive to new people coming in. Lee joined us how long ago?

Lee Shavel

One year ago.

Robert Greifeld

One year ago. So he certainly has been a great addition to the culture in addition to his day job of being what, the CFO, right? Lee, it's all yours.

Lee Shavel

Great. Thank you, everyone. I know it's tough slot. Hang in there, almost through this. I want to make sure everybody saw the podium, I don't know if it's just me, but do we look like we're standing in a water goblet here? A little bit, right? So keep out -- if you see a giant hand with ice cubes, somebody give me the hi sign. But I'm actually not going to use the podium. So you had a chance to hear from Anna on Market Technology and what she's been able to deliver in terms of growth there. You've heard from John on the index side and the growth potential for that business from Brian on the market data front, from Hans-Ole in terms of what we're doing in Fixed Income and the Commodities business, from Bruce on the Corporate Solutions business that continues to grow well for me and finally, Eric Noll and the growth in Access Services as well as in many of our trading venues.

And so what I'd like to do is to try to tie a lot of this together and translate it into the financial impact that it's had on our business. Now in September of 2010, our last analyst day, we talked a lot about the growth potential that we had. And if we hadn't delivered on it and if we hadn't had an impact in our financial results I wouldn't be making these points but I think they are worth bearing out.

And so towards the first slide, the first thing that I want to emphasize is that our performance through the financial crisis we think has been exceptional. Notwithstanding the fact that average daily volumes in a general sense and as typified by the U.S. equity average daily volume dropping in 2010 and 2011, down 13% and down 8%, we successfully grew our non-GAAP EPS by 9% in 2010 and 27% in 2011. This is a function of everything that you heard today from our business leaders, and how they've been able to grow all of their businesses.

Now we're very proud of that, we think it exemplifies what we set out to do. But we're also particularly glad that we were differentiated relative to our competitors in this regard. And if you look in the upper left-hand corner you can see that our index non-GAAP EPS, we're the blue line here, stayed relatively stable through this declining period. We're actually increased in 2011, whereas our hybrid equity and derivatives exchange peers suffered clear deterioration and have rebounded but clearly not to the level that we've been able to achieve. In addition, if you look our 3-year cumulative annual growth rate in non-GAAP net income and non-GAAP EPS relative to our peers, we've been able to grow net income 4% on an annual basis for that past 3 years and grow EPS 9% over that period in comparison to an average, for our peers, a decline of 5% in net income, a decline of 4%. Now that's a function of the fact that we have a much better business mix. It's more resilient, it's more recurring. The fact that only 1/3 of our revenues here in the dark blue are directly driven by volume and all of these other businesses are more stable and reoccurring has driven this performance. I think it's worth noting I made a point on our first quarter earnings call that despite drops in revenues in our equity trading and our derivatives trading businesses, every single one of these other businesses grew nearly offsetting the revenue decline that we experienced on the trading side.

Now the core of our financial strength at NASDAQ is the fact that we have consistently, through this period, grown our free cash flow excluding Section 31 fees. Now the reason we take those out is that they are purely a pass-through cash flow. We collect fees on behalf of the SEC and we give them to the SEC. They have no impact on our operational cash flows. And you can see the consistency of the growth in this cash flow. It's been a function of the organic growth of our business, investments in the new initiatives and the acquisitions that we have made with a very strict discipline that we'll talk about later.

Now certainly great to generate the cash flows, but very legitimate for you to ask us, "But what have you been doing with the cash flows?" And I think this is where reality diverges a little bit from perception. If you noticed for the period from 2009 to the first quarter of 2012, we generated nearly $1.6 billion of free cash flow and our deployment of that included $947 million, nearly $1 billion, certainly it will be $1 billion after we fully execute our share repurchase program, which is about 57% of this total we've given back to you, the investors. We've used, utilized approximately 30%, I think it's $506 million, for net repayment of debt that brought our leverage levels back down to approximately the 2.1x debt-to-EBITDA level, which we intend to maintain. And have utilized only $218 million or about 13% for acquisitions consisting of, in 2010, the FTEN and the SMARTS acquisition, and then in 2011 the Glide acquisition.

We think in terms of the proportion of what we're doing with our capital, this is a pretty good mix. And importantly it's fundamentally predicated on a discipline of making certain that if we are going to be utilizing cash flow in new initiatives or acquisitions, we're going to be doing it with the expectation that we're generating good returns and acceptable cost of capital.

So to give you a sense of our we think about looking ahead, and this is a conservative estimate, we obviously, given the growth dynamics, are anticipating continued and strong growth within our businesses. But conservatively we generate, and I think you'll see it in the future slides, fairly consistent cash flow of between $125 million to $150 million in our operations. We're utilizing about $15 million to $20 million in CapEx, that was slightly elevated in 2011 due to some of the inflow security investments that we made, but that is coming back down and evidenced by on the level that you saw in the first quarter of 2012, leaving us some available capital of $110 million to $130 million. Now the dividend, which is a new capital stream that we were very pleased to announce in the first quarter, will be about $23 million. And the investment capital that we will allocate to our new initiatives, as we've indicated about $40 million to $50 million from an expense standpoint, will translate into about $11 million a quarter, leaving us about we'll call it roughly $75 million to $100 million of deployable capital.

And our strategy with that, as it has been for the past couple of quarters, has been to evaluate. Do we see applications of that capital either through acquisitions or through new initiatives that we're confident will generate good returns in excess on a risk-adjusted basis to our cost of capital?

Now everybody here from the NASDAQ side will tell you I spend a lot of time talking about return on invested capital. In fact, I think I'm reaching the point where I think Bob's going to punch me in the mouth pretty soon. And it came close last night, but I survived. We spend a lot of time developing this supplemental discipline. As you know, NASDAQ has always had an extraordinary cost discipline in focusing on its businesses. And with the cash flow that we're generating, it's very important that we are looking at return on invested capital in each of our incremental investments. In M&A, every one of our deals requires an examination of return on invested capital and an ROE on an annual basis. It's very easy to go down the path of looking at 5-year IRRs or NPVs that rely heavily on a 5-year terminal multiple. We want to know what are we generating in terms of return on capital each year. And it has to exceed that. Our expectation is it will exceed that within a 2- to 3-year period.

Now, as many of you know, we have a very clear discipline that any acquisition that we do has to be accretive within one year. And as you know, accretive deals aren't necessarily high return deals, that's the objective. But our return ramp up we expect will be within that time frame. And we monitor those deals both from a management standpoint and ultimately with the Board to make certain that they understand what we've been able to generate from those transactions.

On the new initiatives front, similarly all of them require this analysis. They have to exceed an adequate risk-adjusted return within a shorter time frame. And the reason we use a shorter timeframe in this context is that we're often leveraging our internal infrastructure. Our ability to leverage the mother ship allows us to accelerate the returns in those instances. And they're monitored with escalating intensity if they are below the return hurdles. And if they don't reach these returns by a certain time period, we will shut down those investments and cut off the capital supply. But we do believe, based upon our historical performance and the deals that we have right now, that we will be able to generate attractive returns well in excess of our cost of capital.

Now I do want to touch on -- I'm not going to rehash the merits of each of those deals. You've certainly heard about Glide from Bruce and on SMARTS from Anna. But I do want to make clear on one very thing, we've obviously -- we believe that we create value through acquisitions. The reason that we believe we've been able to do that successfully is that we often take acquisitions or companies that are relatively small-scale companies. You can see $22 million for Glide, $77 million for SMARTS, that have established products. So they've proven the validity, the value of their technology and we're able to leverage them effectively either through our distribution strength or through our technology platform.

With Glide, our ability to take that business that was a technology-founded business but didn't have access to the broad universe a public companies and to leverage it across the 3,400 listed companies that we have utilizing our brand and the established infrastructure that we have in our Corporate Solutions business run by DMO [ph] to sell those products effectively allows us to accelerate that business and generate revenues and returns well in excess in the pure return on capital that we get from the business itself. And we're often able to also add to the operating efficiency through the natural efficiency focus that we bring from our operating strategy. Similarly, SMARTS allows us to expand our customer base to regulators, but we've also been able turn that around. And with SMARTS Broker, expand our dialogue and expand the distribution of that product to the broker business.

So turning to a more recent performance, what we're showing here is quarterly performance of overall volumes and then our P&L. You can see on the upper right, clearly volumes have been bouncing around. We had a great third quarter in 2011. Since then, volumes have dropped off. But you can see while that's certainly more dramatic, we're still generating either the $400 million a quarter plus from a revenue standpoint, operating profit on a non-GAAP basis still around the $200 million level and operating our non-GAAP per net income also pretty consistently above $100 million. That consistency is of course driven by the stability of our market data revenues our listing revenues, Access Services and all of the other subscription business. Now I do also want to point out that volumes so far in April remain relatively weak, and our revenues in the first -- in the second quarter are generally tracking to about the second quarter level.

Now we certainly see reasons to be optimistic. The declining unemployment, increasing consumer confidence and we think general trends for GDP growth that encourage us that at that some point we will see some recovery in overall volumes. But we can't know for certain when that's going to occur. Consequently we need to be prepared to operate in a sustained low-volume environment. As many of you know, we announced in the first quarter a cost reduction plan by which we are expecting to generate $50 million in run rate savings by the end of 2012. We set very specific targets, we have very specific plans, both from headcount, restructuring, technology and other facility savings that give us a high degree of confidence that we'll be able to achieve that by the end of 2012 with $25 million in savings to be realized during the course of 2012.

And next, I just wanted to reiterate and try to pull together where we are relative to the goals that we set at the last Analyst Day. Our goals back in September of 2010 was for a 3-year revenue cumulative annual growth rate of 9%. In 2011, we were able to beat that. Our objective was to do that while maintaining an operating margin of 46% to 47%. We're at 46% on a non-GAAP basis. CapEx, we intended to keep proportionate to where we were. As I mentioned, info security, bump that up in 2011, but we do expect that we'll return to more traditional levels in 2012 and beyond.

Now as you all know, but bears repeating, we were assuming a market environment on those generating $9 billion to $10 billion in average daily volume and an accelerated economic recovery. In reality our volume was clearly below that and the economic recovery has been somewhat more choppy and slow. So we certainly think this performance in 2011, one year of a 3-year target is a great performance and a testament to all of the efforts of the managers and my colleagues that have built these businesses.

Turning to each of the business lines. These were all of the targets that we set for the individual businesses that they put out. What you will see going down this is that we're slightly behind, usually 2% or 3% behind the revenue growth rates, and order derivatives, 15%. We were at a 13% level, but we are reaffirming our expected 15% cumulative annual growth rate. Corporate Solutions, from 15% in 2011 relative to 18% of the target, but we remain confident reaffirming that growth rate. Really across the board, we won't go through all of these in detail, but despite the challenges that we saw in 2011, we continue to be optimistic based upon the opportunities that we see within he businesses that, through our 2013 goals, that we will be able to continue to achieve these transactions.

Now finally, I want to spend a few minutes talking about valuation and hopefully give you something interesting to chew on. I think it's important to us that from 2007 to 2011, we generated a higher cumulative annual growth rate on revenues in the S&P 500 and that our non-GAAP EPS of 14% over that period was substantially higher than the S&P 500. At the same time, given the strength of our cash flows, we're also generating a 14% free cash flow yield. Yet despite that performance, that outperformance, we have gone from a 30% premium to the S&P 500 valuation in 2007 to a 30%, to a 30% discount at this point. And to us there's a natural disconnect. We're performing better than market, we certainly think that we have delivered on our objectives but we still have this challenge.

Now an additional perspective that we'd offer, and I think this is going to be something new for a lot of you, is that we've prepared on this slide some of the part valuation. And what we've done for each of our businesses is provide our 2011 non-GAAP net income by the business segments that we report in an additional level of detail. And we have put together, with the assistance of an outside party, a set of comparables for each of those business lines, and you'll be able to see the specific comparables on the next page. And what we're presenting here is that we're presenting the low multiple for that group of relevant companies and the mean multiple for that group of companies. And then the implied value range from the low to the midpoint so for instance, if we go to the Access Services business, access and broker services with 2011 non-GAAP net income of $68 million -- I think my battery is dying -- apply the 13.3 to 18.4 multiple, it suggests a value between $900 million and $1.3 billion for the Access Services and broker business.

Now if you also look in moving down to global information services, $160 million in 2011 non-GAAP net income. So listing for global information services, the $160 million in 2011 non-GAAP net income at a 14.9 to 21.9 multiple range gives us a $2.4 billion to $3 billion, $3.5 billion valuation for these businesses. Now it's up to each of you to evaluate these businesses based upon what you've heard, look at comparable companies and evaluate whether these multiples and comparable companies are relevant or not. We certainly think they are. But if you come to the bottom line, the low value for our company on this basis is $6.1 billion and the mean multiple is approximately $8.5 billion. Now that's a 50% to 100% premium to where we trade right now. And I think the fundamental disconnect is, we're obviously perceived as an exchange and when you think about that, you tend to think U.S. equities. But one thing that's absolutely clear from today is that we have a very broad set of businesses that have been very stable and have been growing through this period. And certainly on many of these businesses, that stability should be reflected we think in stronger multiples. So I'll stop there. Hopefully that gives you something to think about. And we certainly appreciate all of your time and effort in understanding our story today and I'll hand it back over to Bob.

Happy to take any questions. And I want to clarify, I think I misspoke. April revenues are tracking at second quarter levels. With the April volumes, what I meant to say is we're really tracking to kind of the first quarter levels that we had generated.

Unknown Analyst

Just on the ROIC discussion, you provided a lot of kind of detail about how you think about incremental ROIC on new initiatives, but I'm just curious how you view the overall business ROIC, I think it's somewhere between 8% and 10%. And I'm just wondering do you think that's an acceptable level, would you like it to go higher? Are there opportunities kind of on the financial engineering side to help? Or is it going to be purely kind of a P&L-type initiative to get that higher?

Lee Shavel

It's a great question. Well certainly, very easy, really easy question. We certainly expect the ROIC to go up over time and all of the -- I think with the discipline that I talked about is important here. I think it's important to state that when you look at the business as a whole, our capital level, it's not like a bank where you have more real capital. Our capital levels are really driven by kind of the net assets, which in large part reflect the goodwill from the acquisitions that we've made, and that's certainly some -- one use of capital. But I think it doesn't necessarily reflect the economic capital in the business. Each of our core businesses, certainly U.S. Transaction Services, Nordic Transaction Services and Market Data Listing Services are all capital-generating businesses. And so they technically don't have, excepting kind of very specific regulatory circumstances, capital requirements to them. And so capital from an overall enterprise level is a little bit of an accounting exercise. So consequently when I came in and wanted to focus on this issue I focused very much on the incremental capital. So knowing what we're generating and then determining how we allocate it to new initiatives within the business or to acquisitions became to me the relevant mechanic for improving our return on investment over time. And so that's where we're focused right now. We have been engaged in a project of thinking about what is really the economic capital that should be allocated to the business, but that's somewhat more of a theoretical exercise. We're going to spend some time thinking about it. But for the time being I think the important issue is that we're looking very specifically at the incremental capital that we're generating and using that as a tool to make certain that we're investing it lively and with the expectation of good returns. Roger?

Roger A. Freeman - Barclays Capital, Research Division

Just quickly following on, the way to think about it maybe, in the past, Bob, you said to think about acquisitions versus say buybacks, has anybody anything have to do with being more into [ph] buybacks. This is one of them out to deploy capital for [indiscernible] acquisition. But I mean that's kind of a one way to look at -- your cost to equity is kind of what's buying back your equity does for you. So is it still sort of fair to think about that's kind of your hurdle?

Lee Shavel

The way I would address it is, I think when you look at a buyback, we view that as, in one sense, you can certainly look at the EPS accretion of buying back those shares. But you're doing that on a very different scale than a potential acquisition, which can create -- if you can invest $50 million in a transaction that can generate 20%, 30% return on capital in excess of our cost of capital, it's difficult to compare that against buying $1 million of shares at a given price. So the way we think about share repurchase is that a share repurchase is returning capital that we can't generate an adequate return in excess of our 10% to 11% cost of equity. And so to your point, Roger, I think that we view the share repurchase as a return of capital and a benchmark for us to evaluate it. And we do spend time thinking about where is the stock trading from a value standpoint. Is fair at a high valuation and how does that influence where we want to allocate capital. But I think fundamentally, we think about it as a return at our cost of equity.

Unknown Analyst

My question was basically in the same vein. I guess just following up on that, looking at your deployable capital $75 million to $100 million a quarter, so $300 million to $400 million annually, which included new initiatives. I think you've talked about M&A in the past at the current -- thinking about $50 million on an annual basis. And just looking at this slide at some of the parts valuation, I mean from my perspective I think a lot of others your stocks should to be trough [ph] valuation levels. I wondering how aggressive you are from a share buyback perspective right now at least thinking about it?

Lee Shavel

I hope we've given you some evidence of what we did in the fourth quarter, what we did in the first quarter, obviously at higher levels than where we're trading right now. And given the cash flow that we are generating, you can expect we're going to be continuing to repurchase shares. In the aspect of M&A opportunities that they are somewhat episodic, we have a certain level of smaller transactions that we look at. You can't really completely budget for them but what we do is we look at the pipeline. I spent time with my colleague Jean Jacques Louis [ph] who is responsible for corporate strategy and M&A. And we evaluate what we anticipate the needs are going to be over the next 12 months, and evaluate that relative to the cash that we're generating and what we can deploy through share repurchases. But I think the bottom line is, for the near term, I think you can expect that share repurchases are going to continue to be a significant part of our capital return strategy in addition to the dividend.

Unknown Analyst

Just one more. If you look at the -- I think it's Slide 97 where it a historical use of the cash flow. So obviously on the buyback side, there was a strategic reason why the buybacks were so significant in the past. But when you look at, going forward, that's like 2/3 of your cash flow is used for the buyback. Is there anything different now on the M&A front when you think about these fold-in acquisitions that makes it -- you're going to be more aggressive or that you see more opportunities out there versus to the past 3 years when you put up that data?

Lee Shavel

Very difficult to answer that question because it really depends upon the merits of the transaction as they present themselves. So the thing I want to emphasize is we're going to continue to be very disciplined about what we decide to do. In terms of overall opportunities, I think that the challenges that the environment has presented for many smaller, midsized companies has probably created more opportunities for us to look at and at valuation ranges that are more interesting and will generate higher returns for us. So I think that, that environment, I think, which has helped generate transactions like Glide and BYs [ph] and SMARTS and FTEN continues to exist. But, I think it's just been a function of the financial crisis environment that we're going through. I haven't seen that really change. I think it's still probably a relatively more attractive environment for us.

Unknown Analyst

Maybe just one other. Just on the expense side, you guys announced the 5% reduction. From a scenario standpoint, if we remain at this level of volumes across products, is that, like, the right expense base? Or maybe put another way, if we fall another 5% or 10%, do we have another look at the cost structure?

Robert Greifeld

Cost efficiency is something that, for us, is part of an ongoing culture and I think it's been said before, we view all fixed cost as being variable over the long-term. And if we come to the conclusion that the environment is going to be, it becomes weaker, is going to be sustained, then we're going to look for additional opportunities to manage that cost base. We think this is appropriate to what we're dealing with right now, but it certainly wouldn't be -- if circumstances change, then we would take another look and evaluate what do we need to operate in this environment. Thank you very much, I'll turn it back over to Bob.

Robert Greifeld

A couple of follow-up comments. One is, in terms of the businesses we look at, we have a philosophy that we don't want to be in arm's-length businesses. We want to be in technology businesses that are fundamentally scalable. So when you're in that mindset then, if you are successful in your chosen business endeavor, then the returns are quite attractive. If you're not, then you're not. It's kind of -- that's straight [ph]. In terms of the expense basis, Anna, going back to her earlier presentation, we have a goal to get more efficient every year, and that's independent of volume. Obviously, when you're in the scalable business, the flip side of scalability is, if the scale's not there, then you cannot contract the cost on an equal basis there.

But let me wrap up by tying back to the opening comments I made and that is the next stage of exchange evolution for the next 3 to 5 years will be determined by the quality of the management teams and the quality of the cultures within that management team operates. Now today, you've got the seasoned management team of NASDAQ OMX. I'm particularly proud of them. And when you think about what they said, and I'll take you through it in 2 seconds. I'm in a hurry because I normally eat lunch in 11:30 and it's quite late for me right now, so I'm quite hungry. But if you think about, when Anna started off, she talked about the fact that SMARTS was a homerun acquisition for us. And she talked about the fact total backlog had grown by $30 million quite dramatically. That is not a first stage management set of progress, not likely what you're going to see from any other companies in this kind of environment.

Then John Jacobs, clearly excited, clearly has a fundamental opportunity for us to be a big player. We have technology which will redefine this industry. We have a brand and established credibility based upon the queues that we built up over time and we do have competitive advantage with respect to how we're going to construct these indexes over time. Again, I think a second-stage type of opportunity, not the type of thing we talked about 5 years ago. 5 years ago was what is volume going to be. We're in a more nuanced, more sophisticated world than we have today.

Brian Hyndman spoke about data and he spoke about going from $330 million to 4-what, Brian? $440 million. 3 pillars, right? First 2 pillars are going to be 50% of it, the second pillar was going to be what we had to do to acquire assets in the space with a similar type of margin. There's nobody in the exchange phase that's taken this, I think, comprehensive look at the opportunities that we have. This great business here, great margin and we are not. Brian's not satisfied, Hans-Ole's not satisfied just to get the revenue associated with the margin, with the license. And NASDAQ Basic is a great example. The flywheel is in fact engaged and we're certainly very excited about that.

Bruce was late, so he didn't come up right after Brian. But certainly, when we look at all our exchange peers around the world, we're at step 8 and they're not even at step 1 in terms of what we're doing to maximize that distribution channel. It's really remarkable. The size of market that he is now going after is staggering where it has the ability to change in some fundamental way what NASDAQ OMX is about. And we've been on a growth path in terms of building our confidence index. And right now, again, the flywheel is engaged. You're starting to see it make a difference to our numbers.

Hans-Ole, he talked about the over-the-counter market having those essentially cleared. Very simply leave this room with thought that we have that fundamental opportunity in the Nordics. We'll leverage our home field advantage, our technology advantage and basically clean up fixed income interest rate swaps. We're going to be the place where that market goes to great opportunities. Commodities again, we are ahead of the curve in some fundamental way. We're leveraging for the -- those who don't follow it -- from a European context. We are the big dog. We had -- for the Nordics was the first market established. We're there and we're leveraging that certainly into the U.K. market today than we're going to lever that into gas. We've got a clear growth path going there. And again, this is not first-stage exchange evolution. This is a engaged, highly capable management team that's been focused on this for a long period of time.

And, Eric, we really -- Keeler [ph] -- where is he? That's a great analogy. I'm a baseball fan, but he dug that one up. And he mentioned this but, Eric redefined the space with respect to equity trading in the U.S. Before he came here, we and everybody else were in this downward path with caps rate. No coincidence that when he came into the exchange base and thought in a comprehensive way of what it meant to compete and we're getting return from this ruinous price war, he changed our strategy, the world has changed around him. And so when you look at the caps rate in the U.S. equity marketplace, it's quite healthy right now. It's been quite healthy for a period of time. We obviously believe that volume will come back in some period of time. Again, we encourage you to look at the charts we provided. We certainly will make our economic team available to you, and you can come up of your own view of the world there.

When Eric says that he believes he's got 5%, 7%, 8% market share available to him, you've got to believe it. And the point is that Eric and his team can effectively compete against the dark trading environment. The 3 endeavors that he put up there really represent an intelligent way to compete against dark trading that has nothing to do with capture rate. It's about intelligent use of the market structure that we have here.

So the only other person -- is Ed still here? The other person from the senior management team that did not get to talk today who keeps us all straightened out is obviously our General Counsel, but I stand by the statement that the management teams are going to matter the most over the next 3 to 5 years, and am proud of ours, hopefully you feel that same way.

And should I take a question or just go to lunch? I will take a question, if you want. Give me an easy one, go ahead.

Unknown Analyst

[indiscernible] high-frequency trading. But 2 part question. Part one, to what extent do you think the volume decline that we've seen over last year is in fact due to structurally lower high-frequency trading participation in the market as opposed to the other factors? And then second part, you got a lot of great growth initiative. How much of a headwind do you think that could be on not only volumes but also the recurring revenue mixes in the near term at that quarter?

Robert Greifeld

So let me answer the first part of the question. I spoke to Christian at the break and I'd say you got the cart before the horse there. So in the numbers I put up in the beginning of the day I put up equity inflows, the mutual fund inflows. And the question was, though the ETF volume has been pretty good, obviously the equity inflows have been going down. Why do you concentrate on that? And the clear answer is that, that has the tremendous ripple effect in the marketplace. And that ripple effect means that high-frequency traders come in when there's more natural order flow and it presents greater opportunities for them. So when you have volume and volatility, the characteristics of the markets changes quite dramatically. So we certainly focus on investing -- we look at consumer confidence, we look the GDP, we look at unemployment, we look at investor confidence, we look at inflows. That happens, then high-frequency trading will be back there, right? They're a derivative of that natural activity in the marketplace. So if volatility comes back, you can have a quick correlation, you see the mapping, you see the deviation which slide is in the presentation. You can kind of predict exactly where the volume will be and then when you have investors coming in, the natural investors, everybody else comes in to follow them. They follow in their way. So right now we've had -- to the second part of your question, we certainly believe and hope. We don't know for sure that we're the bottom. You've seen equity outflows for a period of time. You've seen investor confidence going sideways for a period of time. And from there we just got to -- we don't have any magic wand to say what's going to happen. But historically, you'd say the odds are in our favor and that we're are at the bottom.

So lunch is through those doors over there. Management will be seated at each of the tables and feel free to ask them any question you want. So thank you for coming today.

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