NYSE Euronext, a Delaware corporation, was organized on May 22, 2006 in anticipation of the combination of the businesses of NYSE Group, Inc., a Delaware corporation, and Euronext N.V., a company organized under the laws of the Netherlands. The combination was consummated on April 4, 2007. NYSE Group, Inc. was formed in connection with the March 7, 2006 merger between New York Stock Exchange, Inc., a New York Type A not-for-profit corporation, and Archipelago Holdings, Inc., a Delaware corporation. Euronext was the first cross-border exchange group, created with the 2000 merger of the Paris, Amsterdam and Brussels stock exchanges. The New York Stock Exchange traces its origins to the Buttonwood Agreement, signed in 1792 by a group of 24 traders gathered under a buttonwood tree in lower Manhattan. In 1817, the traders formed the New York Stock & Exchange Board, which in 1863 was renamed the New York Stock Exchange. The Amsterdam Stock Exchange, Euronext’s oldest constituent and the world’s first stock exchange, originated in 1602 in conjunction with a stock issuance by the Dutch East India Company.
NYSE Euronext is a leading global operator of financial markets and provider of innovative trading strategies. We offer a broad and growing array of products and services in cash equities, futures, options, swaps, exchange-traded products, bonds, market data and commercial technology solutions, all designed to meet the evolving needs of issuers, investors, financial institutions and market participants. We are also the world’s leading, most liquid equities exchange group. With more listed issues than any other exchange group, trading on NYSE Euronext’s equity markets represents approximately one-third of the world’s cash equities volume. As of December 31, 2009, 64 of the 2009 Fortune Global 100 companies were listed on NYSE Euronext.
Through 2009, we operated under two reportable segments: U.S. Operations and European Operations. U.S. Operations and European Operations consist of providing various services in our U.S. and European markets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview.”
We operate the following businesses:
• NYSE — the New York Stock Exchange, or NYSE, is the world’s premier listing venue and the leading and most liquid cash equities exchange in the world, based on aggregate market capitalization of listed operating companies and average daily value of Tape A trading as of December 31, 2009. The NYSE, one of the most recognized brand names in the world, is registered as a national securities exchange under the Exchange Act. In addition to common stock, preferred stock and warrants, the NYSE lists debt and corporate structured products such as capital securities, mandatory convertibles, repackaged securities (not including ETPs, as defined below), and has continued to attract listings of new types of structured products.
As of December 31, 2009, 1,924 operating companies were listed on the NYSE, including a cross-section of large, mid-size and small-cap U.S. and non-U.S. companies. These operating companies represented a total global market value of approximately $18.5 trillion, and represented approximately 90% and 80% of the publicly traded companies that constitute the Dow Jones Industrial Average and S&P 500 Index, respectively. As of December 31, 2009, 486 closed-end funds, with an aggregate market capitalization of approximately $159.7 billion, and 474 corporate structured products, with an aggregate market capitalization of approximately $191.8 billion, were listed on the NYSE.
• Euronext — Euronext, the first integrated cross-border exchange, combines the stock exchanges of Amsterdam, Brussels, Lisbon and Paris into a single market. Issuers who meet European Union (“EU”) regulatory standards are qualified for listing on the regulated markets operated by Euronext. Euronext’s exchanges list a wide variety of securities, including domestic and international equity securities, convertible bonds, warrants, trackers and debt securities, including corporate and government bonds. All of Euronext’s markets are operated by subsidiaries of Euronext, each of which holds a national license as an exchange operator.
As of December 31, 2009, Euronext was Europe’s second largest stock exchange group based on aggregate market capitalization of listed operating companies and second largest stock exchange group based on the value of equities trading in the central order book. Euronext was one of the leading European markets for IPOs in 2009 by offer value (€1.9 billion). As of December 31, 2009, 1,472 operating companies were listed on Euronext, of which 1,274 were based in one of Euronext’s home markets.
• NYSE Liffe — NYSE Liffe is the international derivatives business of NYSE Euronext. In 2009, NYSE Liffe was the second largest derivatives market in Europe by volume, and the second largest in the world by average daily value of trading. During 2009, average daily trading volume on NYSE Liffe was 4.1 million contracts with a value of €1.7 trillion, and, on an annual basis, 1.06 billion futures and options contracts were traded on NYSE Liffe with a total contract value of €433 trillion. The total volume of interest rate contracts declined 6.7% in 2009, equity products (single stocks and indexes) grew 9.3% and commodities declined 8.3%.
• NYSE Arca — NYSE Arca is a fully electronic exchange in the United States for equities, exchange traded products (“ETPs”), including exchange traded funds (“ETFs”), exchange traded notes (“ETNs”), exchange-traded vehicles (“ETVs”), certificates and options. NYSE Arca is registered as a national securities exchange under the Exchange Act.
As of December 31, 2009, NYSE Arca had 738 primary ETF, 48 primary ETV, 89 ETN and 190 certificate listings, while trading all other eligible ETPs on an unlisted trading privileges basis. As of December 31, 2009, total assets under management of NYSE Arca’s ETP listings was approximately $772.6 billion.
• NYSE Arca Europe — NYSE Arca Europe is a pan-European multilateral trading facility (“MTF”), operated by Euronext Amsterdam. NYSE Arca Europe offers a fully electronic, low latency trading platform for blue chip stocks from eleven European countries.
• NYSE Alternext — NYSE Alternext operates our European markets for emerging growth companies. NYSE Alternext-listed companies are required to satisfy less stringent listing standards than companies listing on Euronext. Companies listing on NYSE Alternext have greater flexibility in their choice of accounting standards and are subject to less extensive ongoing post-listing reporting requirements than companies listing on Euronext. As of December 31, 2009, 125 companies were listed on NYSE Alternext. Since its launch, NYSE Alternext-listed companies have raised approximately €2.2 billion in proceeds and represent a total market capitalization of approximately €4.2 billion as of December 31, 2009.
• NYSE Amex — NYSE Amex, formerly the American Stock Exchange, became part of NYSE Euronext in 2008 and is our U.S. listing venue for emerging growth companies. NYSE Amex enhances our scale in U.S. options and provides a listing venue for a broader class of companies than are qualified for listing on NYSE. As of December 31, 2009 391 operating companies, representing a total market capitalization of approximately $180.4 billion, and 138 closed-end funds, with an aggregate market capitalization of approximately $23.9 billion, were listed on NYSE Amex. NYSE Amex is registered as a national securities exchange under the Exchange Act.
• NYSE Liffe US — NYSE Liffe US, LLC (“NYSE Liffe US”), our U.S. futures exchange, trades full and mini-sized gold and silver futures and options on futures contracts. During 2009, on average, approximately 17,700 precious metals contracts were traded each day. In September 2009, equity index futures products based on indexes licensed from MSCI Inc. began trading on NYSE Liffe US and traded approximately 1,700 contracts each day.
• NYSE Technologies — NYSE Euronext operates a commercial technology business, NYSE Technologies, Inc. (“NYSE Technologies”). NYSE Technologies provides comprehensive transaction, data and infrastructure services and managed solutions for buy-side, sell-side and exchange communities that require next-generation performance and expertise for mission critical and value-added client services. NYSE Technologies’ advanced integrated solutions power the trading operations of global financial institutions and exchanges, including 16 non-NYSE Euronext markets in addition to all the exchanges in the NYSE Euronext group. NYSE Technologies operates four businesses: Global Market Data, which offers a broad array of global market information products covering multiple asset classes; Trading Solutions, which creates and implements high performance, end-to-end messaging software and real-time market data distribution and integration products; Exchange Solutions, which provides multi-asset exchange platform services, managed services and expert consultancy; and Global Connectivity, offering one of the world’s largest, most reliable financial transaction networks connecting firms and exchanges worldwide.
• SmartPool — SmartPool is a European dark pool dedicated to the execution of institutional order flow that launched its trading services in February 2009. This new MTF, created in partnership with NYSE Euronext and three European investment banks (BNP Paribas, HSBC and J.P. Morgan), is operated by NYSE Euronext and has its own dedicated management team in London.
NYSE Euronext is part of the S&P 500 index and the only exchange operator in the S&P 100 index.
We have recently announced a number of strategic initiatives designed to expand our global presence, further penetrate the market for clearing services, establish new trading markets, improve trade execution and strengthen our technology. Several of these initiatives are described below.
NYSE Liffe Clearing — Following the launch of “NYSE Liffe Clearing” on July 30, 2009, NYSE Liffe assumed full responsibility for clearing activities for the U.K. derivatives market. In this regard, NYSE Liffe’s London Market operates as a self-clearing Recognized Investment Exchange and outsources certain clearing guarantee arrangements and related risk functions to LCH.Clearnet Limited (“LCH.Clearnet”), a U.K. recognized clearing house. In connection with the commencement of this arrangement, NYSE Euronext made a one-time €260 million ($355 million) payment to LCH.Clearnet as compensation for economic losses arising as a result of the early termination of previous clearing arrangements with LCH.Clearnet for NYSE Liffe’s London Market. As of December 31, 2009 and following the completion of a voluntary share redemption scheme by LCH.Clearnet Group Limited in November 2009, NYSE Euronext retained a 9.1% stake in LCH.Clearnet Group Limited’s outstanding share capital (increased from a 5% stake after other shareholders redeemed shares pursuant to the share redemption scheme) and the right to appoint one director to its board of directors.
New York Portfolio Clearing — During the third quarter of 2009, NYSE Euronext and The Depositary Trust and Clearing Corporation (“DTCC”) entered into an exclusive arrangement to pursue a joint venture that is expected to be operational in the third quarter of 2010, subject to regulatory approval. NYSE Euronext plans to contribute $15 million in working capital and commit a $50 million financial guarantee as an additional contribution to the New York Portfolio Clearing (“NYPC”) default fund. Pending Registered Derivatives Clearing Organization status approval from the U.S. Commodity Futures Trading Commission as well as other required regulatory approvals, NYPC initially will clear fixed income derivatives traded on NYSE Liffe US, with the ability to provide clearing services for other exchanges in the future. NYPC will use NYSE Euronext’s clearing technology, TRS/CPS, to power its clearinghouse. DTCC’s Fixed Income Clearing Corporation will provide capabilities in risk management, settlement, banking and reference data systems.
Bclear — NYSE Liffe further extended its Bclear over the counter (“OTC”) wholesale service, which provides a simple and cost-effective way to register and process wholesale derivatives trades through NYSE Liffe to clearing at NYSE Liffe Clearing, with the launch of thirteen MSCI index futures in February 2009 and, in March 2009, with the launch of a range of soft commodity products. In 2010, we intend to further broaden the underlyings and products offered on this service.
NYSE Liffe US — In 2008 we expanded our U.S. derivatives business by launching a futures exchange in the United States, NYSE Liffe US, following from the acquisition of the precious metals franchise of the Chicago Board of Trade from the CME Group. In 2009, NYSE Euronext completed the sale of a significant equity stake in NYSE Liffe US to five external investors, Citadel Securities, GETCO, Goldman Sachs, Morgan Stanley and UBS. NYSE Euronext will remain the largest shareholder in the entity. NYSE Euronext will continue to manage the day-to-day operations of NYSE Liffe US, which will operate under the supervision of a separate board of directors. NYSE Euronext will continue to consolidate the financial reporting of this entity. In the third quarter of 2010, NYSE Liffe US plans to launch fixed income derivatives trading which will clear on NYPC, subject to regulatory approval. See “Products and Services — Order Execution — United States — Derivatives Trading — Futures.”
NYSE Amex Options — In October 2009, we agreed in principle on a framework to sell a significant equity interest in NYSE Amex options, one of our two U.S. options exchanges, to seven external investors, BofA Merrill Lynch, Barclays Capital, Citadel Securities, Citi, Goldman Sachs, TD AMERITRADE and UBS. Under the new framework, NYSE Euronext will remain the largest shareholder in the entity, which aims to enhance the competitive position of NYSE Amex options, while bringing competitive and operational benefits to the marketplace. The contemplated transaction calls for NYSE Euronext to continue to manage the day-to-day operations of NYSE Amex options, which would operate under the supervision of a separate board of directors and a dedicated chief executive officer. NYSE Euronext will continue to consolidate this entity for financial reporting purposes. We expect this transaction to close in 2010.
We undertook several initiatives in early 2009 designed to capitalize on our position as operator of the world’s leading and most liquid equities markets.
Liquidity Aggregation — We are committed to improving execution quality and providing greater access to liquidity for our customers. In January 2009 we launched NYSE MatchPoint, an electronic equity trading facility that matches aggregated orders at pre-determined fixed times with prices that are derived from primary markets. NYSE MatchPoint’s portfolio-crossing technology will expand our ability to match baskets of stocks at pre-determined points in time during the after-hours market and eventually at any point during the day.
In January 2009, we launched the New York Block Exchange through a joint venture with BIDS Holdings, L.P., a consortium of 12 leading U.S. broker-dealers. The New York Block Exchange is designed to improve execution quality and access to liquidity in block trading in the United States. The New York Block Exchange is open to all NYSE members and accessible through BIDS Trading, a registered alternative trading system. The New York Block Exchange operates as a facility of the NYSE and is intended to respond to customer needs by creating a highly liquid, anonymous marketplace for block trading, and bring block-size orders back into contact with active traders, algorithms and retail order flow.
European MTFs — To respond to increasing competition from electronic communications networks following the European Commission’s adoption of the Markets in Financial Instruments Directive (“MiFID”), we have launched new European MTFs. In February 2009, we and our joint venture partners launched SmartPool, a new dark MTF for trading pan-European stocks, which currently trades stocks from 15 European markets, including NYSE Euronext’s four national markets. In addition, in the first quarter of 2009, we commenced operations of NYSE Arca Europe, an MTF for trading the most active pan-European stocks that are not already traded on NYSE Euronext’s four national markets.
NYFIX, Inc. — On November 30, 2009, we completed our acquisition, through NYSE Technologies, of NYFIX, Inc., a leading provider of innovative solutions that optimize trading efficiency. The total value of this acquisition was approximately $144 million. This acquisition expands NYSE Euronext’s pre-trade product offering and global buy-side and sell-side communities. With the completion of the acquisition, the NYFIX FIX business, which incorporates the NYFIX Marketplace and the industry-leading FIX Software business, became part of the offerings of NYSE Technologies.
With the most recognized brand names within the global exchange industry and among the world’s largest securities marketplaces, we are well-positioned to continue to play a leadership role in the ongoing consolidation of the industry through acquisitions and strategic alliances.
Qatar Exchange — In June 2009, we amended a Shareholders’ Agreement entered into in June 2008 with Qatar Holding (“QH”), the strategic and direct investment arm of Qatar Investment Authority (“QIA”), a Qatar governmental entity. The amended Shareholders’ Agreement represents a strategic partnership between us and the State of Qatar to establish the Qatar Exchange, the successor to the Doha Securities Market (“DSM”). The Qatar Exchange will continue to provide a market for cash equities, and the aim of management is also to create a new derivatives market. In addition, the Qatar Exchange will adopt the latest NYSE Euronext trading and network technologies, and we will provide certain management services to the Qatar Exchange at negotiated rates.
NYSE Euronext agreed to contribute $200 million in cash to acquire a 20% ownership interest in the Qatar Exchange, $40 million of which was paid upon closing on June 19, 2009 and generally, the remaining $160 million is to be paid in four equal installments on each of the next four anniversaries of the closing date. QIA retained the remaining 80% ownership of the Qatar Exchange through QH, and the DSM was transferred to the new Qatar Exchange. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Acquisition and Other Transactions.”
Other Exchanges — We are currently working with certain exchanges, particularly in Asia, on market development, information sharing and technology.
Products and Services
We provide multiple marketplaces for investors, broker-dealers and other market participants to meet directly to buy and sell cash equities, fixed income securities, ETPs and a broad range of derivative products. Based on average daily trades and average daily turnover, we are the world’s most liquid cash equities exchange group with approximately one-third of the world’s cash equities trading taking place on our exchanges.
One of the primary functions of our markets is to ensure that orders to purchase and sell securities are executed in a reliable, orderly, liquid and efficient manner. Order execution occurs through a variety of means, and we seek to continue to develop additional and more efficient mechanisms of trade. To maintain our leadership position, we intend to continue to develop our market model in response to emerging trends in the trading environment and technological advancements.
United States — Cash Trading
In the United States, we offer cash trading in equity securities, fixed income securities and ETPs on the NYSE, NYSE Arca and NYSE Amex. We are able to offer our customers the option of using either auction trading with a floor-based component or electronic trading. In 2009, on a combined basis, our U.S. market centers achieved record volumes with a combined 2.9 billion shares traded daily and executed more matched Tape A volume than any other U.S. exchange.
Trading Platform and Market Structure — NYSE and NYSE Amex. The NYSE and NYSE Amex markets combine both auction-based and electronic trading capabilities. These markets are intended to emulate, in a primarily automatic execution environment, the features of the traditional auction market that have provided stable, liquid and less volatile markets, as well as provide the opportunity for price and/or size improvement. The markets build on our core attributes of liquidity, pricing efficiency, low trading costs and tight spreads by broadening customers’ ability to trade quickly and anonymously. We believe that the interaction of our automatic and auction markets also maintains opportunities for price improvement, while providing all investors, regardless of their size, with the best price when buying or selling shares.
Designated Market Makers (“DMMs”) on the trading floor are charged with maintaining fair, orderly and continuous two-way trading markets by bringing buyers and sellers together and, in the relative absence of orders to buy or sell their assigned stock, adding liquidity by buying and selling the assigned stock for their own accounts. Supplemental Liquidity Providers (“SLPs”) are a class of high-volume members incented to add liquidity on the NYSE in exchange for quoting requirements. Floor brokers act as agents on the trading floor to handle customer orders. DMMs and brokers use judgment to improve prices and enhance order competition, while interacting with the market electronically as well as manually. We believe that their judgment is particularly valuable in less liquid stocks and during the opening and closing of trading, as well as during times of uncertainty, for example, when a corporate announcement or an outside event could lead to market instability and price volatility.
During 2009, we continued to migrate our U.S. exchanges to a single universal trading platform (“UTP”). See “— Technology — NYSE Euronext’s Global Technology Group.”
Trading Platform and Market Structure — NYSE Arca. NYSE Arca operates an open, all-electronic stock exchange for trading all U.S. listed securities (in addition to options, as discussed below). NYSE Arca also provides additional listing services for ETPs. NYSE Arca’s trading platform provides customers with fast electronic execution and open, direct and anonymous market access. In 2006, NYSE Arca established the Lead Market Maker (“LMM”) program whereby the LMM functions as the exclusive market maker in NYSE Arca primary listings. Selected by the issuer, the LMM must meet minimum performance requirements determined by NYSE Arca, which include percentage of time at the national best bid and offer, average displayed size and average quoted spread, and supports the NYSE Arca opening and closing auctions. During 2009, approximately 1.7 billion shares were handled daily through NYSE Arca’s trading platform.
This trading system offers a variety of execution-related services and trading rules predicated on “price-time priority,” which requires execution of orders at the best available price and, if orders are posted at the same price, based on the time the order is entered in the trading system. The open limit order book displays orders simultaneously to both the buyer and the seller, and buyers and sellers have the option of submitting orders on an anonymous basis. Trades are executed in the manner designated by the party entering the order, often at a price equal to or better than the highest bid or lowest offer quote reported to the consolidated quotation systems.
Trade Reporting Facility. We operate a trade reporting facility with FINRA to serve our customers reporting off-exchange trades in all listed national market system (“NMS”) stocks. Our trade reporting facility enhances the range of trading products and services we provide to our customers by offering a reliable and competitively priced venue to report internally executed transactions.
NYSE Bonds. NYSE Bonds, our bond trading platform, incorporates the design of the NYSE Arca electronic trading system and provides investors with the ability to readily obtain transparent pricing and trading information. The platform trades bonds of all NYSE and NYSE Amex-listed companies and their subsidiaries without the issuer having to separately list each bond issued. NYSE Bonds maintains and displays priced bond orders and matches those orders on a strict price and time-priority basis. It also reports real-time bids and offers with size and trades to our network of market data vendors.
Trading Members. Trading members in our U.S. cash markets include entities registered as broker-dealers with the SEC that have obtained trading permits or licenses in accordance with the rules of the NYSE, NYSE Arca or NYSE Amex. Trading members are subject to the rules of the relevant exchange.
United States — Derivatives Trading and Clearing
Options. NYSE Arca and NYSE Amex operate marketplaces for trading options on exchange-listed securities. The underlying securities are listed on the NYSE, NYSE Arca, NYSE Amex and Nasdaq. These option market centers include trading facilities, technology and systems for trading options as well as regulatory, surveillance and compliance services. During 2009, the market’s combined options businesses traded an average of 2.6 million contracts each day on approximately 2,500 underlying stocks.
NYSE Arca’s options business uses a technology platform and market structure designed to enhance the speed and quality of trade execution for its customers and to attract additional sources of liquidity. Its market structure allows market makers to access its markets remotely and integrates floor-based participants and remote market makers. NYSE Amex’s options business uses a hybrid model combining both auction-based and electronic trading capabilities that is designed to provide a stable, liquid and less volatile market, as well as provide the opportunity for price and/or size improvement.
In the first quarter of 2009, we relocated NYSE Amex’s options trading floor operations to the NYSE options trading floor and transitioned from the NYSE Amex-supported technology to NYSE Euronext-supported technology for electronic options trading.
Futures. NYSE Liffe US received Designated Contract Market (“DCM”) status in August 2008 and began trading of full and mini-sized gold and silver futures and options on futures contracts in September 2008. In October 2008, NYSE Liffe US selected The Options Clearing Corporation to provide clearing services from the end of March 2009. The precious metals contracts provide a point of entry for NYSE Euronext into the U.S. futures market and complement the existing commodities futures franchise at NYSE Liffe. In the third quarter of 2010, NYSE Liffe US plans to launch fixed income derivatives trading which will clear on NYPC, subject to regulatory approval. In the fourth quarter of 2009, leading global banks and liquidity providers made an equity investment in NYSE Liffe US.
Europe — Cash Trading
Euronext is Europe’s second largest cash market based on average daily trades and average daily turnover. The cash trading business unit comprises trading in equity securities and other cash instruments including funds, bonds, warrants, trackers and structured funds. During 2009, on an average day, 1.4 million trades were executed on Euronext exchanges for all cash instruments, while the total number of trades in all cash instruments amounted to 350 million.
Trading Platform and Market Structure. Cash trading on Euronext’s markets in Amsterdam, Brussels, Lisbon and Paris takes place via the UTP following the successful migration of these markets from the Nouveau Système de Cotation in 2009.
Cash trading on Euronext is governed both by a single harmonized rulebook for trading on each of Euronext’s markets in Amsterdam, Brussels, Lisbon and Paris and by the various non-harmonized Euronext Rulebooks containing local exchange-specific rules. Euronext’s trading rules provide for an order-driven market using an open electronic central order book for each traded security, various order types and automatic order matching and a guarantee of full anonymity both for orders and trades. At the option of the listed company, trading of less-liquid listed securities on the European markets can be supported by a Liquidity Provider (“LP”) who is either an existing member of Euronext and/or a corporate broker. The LP is dedicated to supporting the trading in less-liquid small and mid-sized companies to foster regular trading and minimize price volatility.
Trading Members. The majority of Euronext’s cash trading members are brokers and dealers based in Euronext’s marketplaces, but also include members in other parts of Europe, most notably the United Kingdom and Germany. Between 2002 and 2009, the share of trading from outside Euronext’s four domestic equities markets (Paris, Brussels, Amsterdam and Lisbon) increased from approximately 20% to 55%, reflecting the increasing internationalization of our client base.
Clearing and Settlement. Clearing and settlement of trades executed on Euronext are handled by LCH.Clearnet S.A. (for central counterparty clearing), Euroclear Group (for settlement of cash equities except for Lisbon trades) and Interbolsa (for settlement of Lisbon cash equities). Interbolsa is one of our wholly-owned subsidiaries. LCH.Clearnet S.A. and Euroclear are independent entities that provide services to Euronext pursuant to contractual agreement. We have a minority ownership interest in, and board representation on, LCH.Clearnet Group Limited and Euroclear. Clearing for trades executed on NYSE Arca Europe takes place on EuroCCP, a London-based subsidiary of DTCC. Concerning SmartPool, trades on NYSE Euronext listed stocks are cleared by LCH.Clearnet S.A., and trades on non-NYSE Euronext listed stocks are cleared by EuroCCP.
Europe — Derivatives Trading and Clearing
NYSE Liffe. NYSE Liffe is the international derivatives business of NYSE Euronext, with customers in numerous countries worldwide. NYSE Liffe offers customers the advantages of one of the most technologically-advanced derivatives trading platforms and one of the widest choices of products of any exchange. Through a single electronic trading platform, NYSE Liffe offers customers access to a wide range of interest-rate, equity, index, commodity and currency derivative products. NYSE Liffe also offers its customers the pioneering Bclear and Cscreen services, which bridge the listed and over-the-counter markets. Across these trading platforms, NYSE Liffe conducted business with an average daily value of €1.7 trillion during 2009, making it the world’s second largest derivatives exchange by average daily value of trading and Europe’s second largest derivatives market by volume. In equity derivatives alone, NYSE Liffe conducted business with an average daily value of €28.5 billion in 2009.
Trading Platform and Market Structure. NYSE Liffe’s full service electronic trading platform features an open system architecture which, through an Application Programming Interface (“API”), allows users to access our system for trading or for view-only purposes. Traders commonly access our system via one of the many front-end trading applications that have been developed by independent software vendors, and this has enabled our distribution to grow continuously with widespread adoption around the world. These applications are personalized trading screens that link the user to the market via an API, which allows users to integrate front/back office trading, settlement, risk management and order routing systems.
NYSE Liffe’s trading platform has been designed to handle significant order flows and transaction volumes. Orders can be matched either on a price/time or pro rata basis, configurable by contract, with transacted prices and volumes and the aggregate size of all bids and offers at each price level updated on a real-time basis. Users are continually notified of all active orders in the central order book, making market depth easy to monitor. NYSE Liffe intends to upgrade its technology during 2010 to the UTP. See “Technology — NYSE Euronext’s Global Technology Group.”
Products Traded. A wide variety of products are traded on NYSE Liffe. NYSE Liffe’s core product line is its portfolio of short-term interest rate (“STIR”) contracts with its principal STIR contracts based on implied forward rates denominated in euro and sterling. Trading volumes in NYSE Liffe’s flagship product in this area, the Euribor Contract, have grown as the euro has increasingly established itself as a global reserve currency. Overall, NYSE Liffe offers over 1,250 derivatives products, including 17 interest rate contracts on five currencies, equity futures and options on approximately 1,100 leading global stocks traded either through LIFFE CONNECT or Bclear (including a wide range of underlyings not listed on NYSE Euronext), 89 index products covering national and international indices and a wide range of soft and agricultural commodity derivatives.
OTC Services. Customers who might normally use the OTC market to trade equity derivatives have the ability to process transactions cheaply and efficiently using NYSE Liffe’s wholesale services — Bclear and Cscreen. Through these services, NYSE Liffe offers a flexible, secure, simple and cost-effective way of conducting wholesale equity derivatives trades. NYSE Liffe is expanding the Bclear service to other asset classes to meet customer demand.
Bclear provides OTC equity derivatives market participants a means of registering, processing and clearing wholesale equity derivatives within the secure framework of an exchange and clearinghouse. Through Bclear, users can register OTC business for trade confirmation, administration and clearing as an exchange contract, while retaining the flexibility to specify contract maturity, exercise price and settlement method. As evidence of Bclear’s increasing popularity within the derivative trading industry, equity derivative contract volumes processed through Bclear increased by 36.7% in 2009, compared to 2008.
Cscreen is a dynamic application that enables registered brokers and traders to post and respond to indications of interest for wholesale equity derivatives.
Trading Members. NYSE Liffe’s trading members are dealers and brokers. Trading members can also become liquidity providers. Liquidity providers are able to place several series of bulk quotes in one order, allowing them to send buy and sell orders for many contract months using only one message.
Clearing and Settlement. In May 2009, NYSE Liffe received regulatory approval to take responsibility for clearing activities in its London market through the creation of NYSE Liffe Clearing. NYSE Liffe Clearing launched operations in July 2009 and became the central counterparty, and thereby earning clearing revenues, in respect of contracts entered into by clearing members on NYSE Liffe’s London Market. As well as opening up a new revenue stream for NYSE Euronext, NYSE Liffe Clearing allows NYSE Liffe to respond to changing customer needs in this increasingly important arena quickly and effectively. In entering the clearing business, NYSE Liffe has access to new business opportunities, is able to invest in clearing technology and services and can innovate more effectively and with a faster time to market to take advantage of new opportunities which are opening up in the clearing and post trade area.
As part of the arrangements between NYSE Liffe and LCH.Clearnet to establish NYSE Liffe Clearing, the parties entered into a termination agreement providing for the payment to LCH.Clearnet of approximately €260 million ($355 million), which NYSE Euronext paid in July 2009 in conjunction with the launch of NYSE Liffe Clearing, to compensate LCH.Clearnet for economic losses arising as a result of the early termination of its previous clearing arrangements with LCH.Clearnet for NYSE Liffe’s London Market. LCH.Clearnet will continue to provide certain services to NYSE Liffe’s London Market for a base annual fee plus certain amounts to reflect inflation and an increase in the volume of trades on the London market of NYSE Liffe over time. The primary obligation of LCH.Clearnet under the agreement is to accept the novation from NYSE Liffe’s London Market of the defaulting contracts of a NYSE Liffe clearing member and to manage such member’s positions under its default rules. LCH.Clearnet continues to provide risk management, guarantee and default management services to NYSE Liffe’s London Market and therefore offset NYSE Liffe’s credit exposure. Clearing and settlement of contracts executed on NYSE Liffe’s markets in Amsterdam, Brussels, Lisbon and Paris are handled by LCH.Clearnet S.A. (as central counterparty) pursuant to contractual agreement. As of December 31, 2009, NYSE Euronext retained a 9.1% stake in LCH.Clearnet Group Limited’s outstanding share capital and the right to appoint one director to its board of directors. See Item 1A — “Risk Factors — Risks Relating to Our Business— Our business may be adversely affected by risks associated with clearing activities.”
BlueNext. We hold a 60% interest in BlueNext with the remaining 40% held by Caisse des Dépôts. BlueNext operates a spot market in carbon dioxide (CO2) emission allowances and credits that is the European leader in the field, from trading through to worldwide delivery-versus-payment settlement in real time. BlueNext seeks to establish a leading position in trading in environment-related instruments. BlueNext has also launched a futures market with physical delivery of allowances and credits.
Through our listing venues — the NYSE, NYSE Arca and NYSE Amex in the United States, and Euronext and NYSE Alternext in Europe — we are the leading global exchange brand and a premier capital-raising venue. We constantly seek to optimize our listing standards to make sure we are offering a range of listing venues to companies across the growth cycle. As of December 31, 2009:
• Our exchanges were home to over 3,700 listed operating companies including cross listings from 58 countries.
• Companies listed on our exchanges represented approximately 90% and 80% of the publicly traded companies that constitute the Dow Jones Industrial Average and S&P 500 Index, respectively, and 50% of the companies comprising the EUROSTOXX 50 Index.
• We listed, on a primary or secondary basis, 64 of the 2009 Fortune Global 100 companies.
• Including cross-listings, NYSE Euronext’s ETP business listed 1,235 ETFs, 122 ETVs, 94 ETNs and 11,912 certificates and warrants, across approximately 90 different ETP issuers. Assets under management for ETPs (excluding certificates and warrants) listed on NYSE Euronext were approximately $930 billion.
In 2009, our U.S. and European equities markets attracted 177 new listings, including operating companies, closed-end funds, REITs and corporate structured products. IPOs on our markets raised a total of approximately $55.4 billion in proceeds, including proceeds from operating companies, closed-end funds, REITs and structured products. Excluding structured products, IPOs on our markets raised a total of approximately $24.5 billion.
In addition in 2009, our U.S. and European ETP businesses attracted 214 new ETFs, 7 new ETVs, 13 new ETNs and 27,110 new certificates and warrants to our exchanges.
We offer our listed companies in the United States a comprehensive suite of services to increase their visibility with existing and prospective investors, to expand their capital market intelligence and to provide educational services and best practices solutions. These services leverage web-based technology, unique analytics and NYSE-sponsored programs. For example, the NYSE sponsors virtual forums, as well as domestic and international conferences, to provide issuers access to global institutional and retail investors. These services include the NYSE Market Access Center (“MAC”), MAC Alerts and MAC Capital Markets desk. The NYSE MAC is a comprehensive investor relations and market intelligence service for senior executives at certain NYSE-listed companies. The NYSE MAC, which offers an electronic alerts system and NYSE-based market professionals, is designed to provide timely access to market-moving information such as analysts’ rating changes, earnings announcements, companies added or deleted from major indexes and pre-and post-market trading activity. Additionally, NYSEnet, a password-protected website for senior executives, provides data relating to proprietary trading, institutional ownership and market activity. A market focus report is delivered to issuers at the beginning, middle and end of each day to provide a summary of daily trading activity. The NYSE has also developed eGovDirect.com, an interactive, web-based tool that helps listed companies meet their NYSE governance and compliance requirements efficiently and economically. We also entered into partnership agreements with Thomson Reuters and Ipreo to provide stockholder information and web hosting offerings to our customers. Additionally, in connection with listings, we on occasion commit to provide advertising, investor education and other services to issuers. We expect to continue to invest in products and services for the benefit of our listed companies.
In 2008, we adopted new initial listing standards on the NYSE. These standards were designed to capture a larger percentage of qualified issuers and attract more emerging growth companies as a competitive alternative to Nasdaq OMX, particularly with respect to technology companies. Growth companies will be able to leverage many of the unique and innovative benefits that are provided to NYSE-listed companies, including an affiliation with one of the world’s leading brands, a dedicated liquidity provider, exceptional market quality and a wide range of value-added products and services.
We have developed a broad range of services to meet the needs of Euronext listed companies. Each Euronext issuer receives personalized support through a team of dedicated account managers. In 2009, Euronext enriched its service offering for listed companies with ExpertLine, a continuous push and pull communication and information platform. Located directly in the trading room and managed by a multidisciplinary team of experts, ExpertLine provides listed companies with real-time responses to topics relating to listing and stock trading. Companies listed on Euronext also benefit from secure online tools, such as “Mylisting.euronext.com,” a web-based technology that provides real time information and data on listed stocks and offers issuer-customized alerts and a range of other services. We offer training workshops and information sessions to better inform and educate issuers on new regulations and related legal matters, as well as practical guidance on investor relations and communication matters.
Through close cooperation with the regulators of the financial markets in each of the EU member states where Euronext operates, Euronext has adopted a harmonized rulebook that sets out a unified set of listing standards with which issuers must comply, regardless of which of Euronext’s markets (Paris, Brussels, Amsterdam, Lisbon) is chosen as the entry point. These harmonized listing standards and the local applicable rules from Euronext Rulebook II set forth the criteria required for the listing of securities on Euronext’s exchanges, as well as ongoing requirements, particularly with respect to financial reporting. We seek to attract emerging growth companies through NYSE Alternext, which has less stringent listing standards and ongoing reporting requirements than Euronext.
On July 1, 2009, the calculation used to determine the annual fees paid by domestic European issuers was amended. Previously, all companies were charged based on their market capitalization and the number of shares outstanding. For the revised fee calculation, companies with market capitalizations of less than €150 million will be billed on number of shares outstanding only. Companies with market capitalizations greater than €150 million will be billed on shares outstanding and market capitalization, as was previously the case, with the total cap on annual fees increasing from €22,000 to €50,000. In addition to changes to the annual fee calculation, amendments were made to the 2009 fee book clarifying billing amounts to ensure consistency between the domestic markets for several different types of transaction types including stock dividends, bonds and multiple listings within the Euronext family.
Global Market Data
The broad distribution of accurate and reliable real-time market data is essential to the proper functioning of any securities market because it enables market professionals and investors to make informed trading decisions. The quality of our market data, our world-class collection and distribution facilities, and the ability of traders to act on the data we provide, attract order flow to our exchanges and reinforce our brand. Our primary market data services include the provision of real-time information relating to price, transaction or order data on all of the instruments traded on the cash and derivatives markets of our exchanges.
In the United States, we provide two types of market data products and services: core data products, or those governed by NMS plans, and non-core, or proprietary, data products.
Core Data Products. The SEC requires securities markets to join together in consolidating their bids, offers and last sale prices for each security, and to provide this information to the public on an integrated basis. We work with other markets to make our U.S. market data available, on a consolidated basis, on what is often referred to as the “consolidated tape.” The data resulting from the consolidated tape is also referred to as “core data.” This intermarket cooperative effort provides the investing public with the reported transaction prices and the best bid and offer for each security, regardless of the market from which a quote is reported or on which market a trade takes place.
Last sale prices and quotes in NYSE-listed, NYSE Amex-listed and NYSE Arca-listed securities are disseminated through Tape A and Tape B, which constitute the majority of our market data revenues. We also receive a share of the revenues from Tape C, which represents data related to trading of certain securities (including ETPs) that are listed on Nasdaq. Over the past two decades, we have expanded our market data business by accessing new customers, in particular nonprofessional subscribers and cable television audiences.
Non-Core Data Products. We make certain market data available independently of other markets, which is known as non-core, or proprietary, data. We package this type of market data as trading products (such as NYSE OpenBook, through which the NYSE makes available all limit orders) and analytic products (such as TAQ Data, NYSE Broker Volume and a variety of other databases that are made available other than in real-time and that are generally used by analytic traders, researchers and academics). These products are proprietary to us, and we do not share the revenues that they generate with other markets.
Revenues for our proprietary data products have grown over the last few years, driven in large part by the success of NYSE OpenBook, which the NYSE introduced in 2002. The advent of trading in penny increments and the increased use of “black box” trading tools accelerated the success of NYSE OpenBook.
NYSE Real-Time Reference Prices is a data product that enables Internet and media organizations to buy real-time, last sale prices from the NYSE and provide it broadly and free of charge to the public. Google Finance and CNBC were the first organizations to make the product available to the public. NYSE Arca last sale prices are made available through this product.
NYSE Arca also makes certain market data available independent of other markets. Through ArcaVision, NYSE Arca provides listed companies, traders and investors with a tailored and customizable means to view detailed market data on particular stocks and market trends. Another data product, ArcaBook, displays the limit order book of securities traded on NYSE Arca in real time.
The pricing for U.S. market data products must be approved by the SEC on the basis of whether prices are fair, reasonable and non-discriminatory.
Unlike in the United States, European market data is not consolidated. In Europe, we distribute and sell both real-time and proprietary market information to data vendors (such as Reuters and Bloomberg), as well as financial institutions and individual investors.
Real-Time Market Data. Our main data services offering involves the distribution of real-time market data. This data includes price, transaction and order book data on all of the instruments traded on the cash and derivatives markets of Euronext, as well as information about Euronext’s indexes. The data is marketed in different information products, and can be packaged according to the type of instrument (shares, derivatives or indexes), the depth of the information (depth of the order book, number of lines of bid and ask prices), and the type of customer (professional or private). The data is disseminated primarily via data vendors, but also directly to financial institutions and other service providers in the financial sector.
Other Information Products. In addition to real-time market data, Euronext also provides historical and analytical data services as well as reference and corporate action data services.
Through NextHistory, we offer professionals in the financial industry access to historical data for all of our European markets via the Internet or DVD. Through our Index File Service, we also provide traders, analysts, investors and others who rely on up-to-date index information with daily information on the exact composition and weighting of our indexes and precise details of changes in index levels and constituent share prices.
Our market snapshots service in Europe provides full market overviews — including, but not limited to, quotes, prices and volumes relating to the full array of financial instruments traded on Euronext — at fixed times every trading day. Through our Masterfiles service, we offer comprehensive information on the characteristics of all warrants and certificates for listed securities on Euronext markets. Another service delivers information concerning corporate actions to the market.
Our TradeCheck service is designed to help buy side and sell side firms to demonstrate best execution to their customers and regulators. The product is web-based and allows users to perform post trade (T+1) verifications via three services: execution quality analysis, transaction quality analysis and order book replay. TradeCheck encompasses all the main markets of the European Economic Area that are covered by MiFID.
Finally, we publish a number of daily official price lists, such as the Cote officielle in Paris, the Daily Bulletin in Lisbon and the Amsterdam Daily Official List.
Corporate News Distribution and Investor Relations Services. In 2006, Euronext acquired Companynews and Hugin AS in order to meet the demand for specialized services in corporate news distribution resulting from the European Transparency Directive, which took effect in January 2007. This Directive requires that listed companies adhere to minimum requirements in disclosing price sensitive information. The business today operates under a single company, Hugin B.V., and a single brand, Hugin. On October 14, 2009, NYSE Euronext closed a transaction with Thomson Reuters to sell Hugin Group B.V. As part of the agreement, Thomson Reuters and NYSE Euronext will expand their strategic partnership in offering value-added services to the issuer community.
Indexes & Index Services
We own and operate over 450 benchmark and strategy indexes that measure different segments of the NYSE Euronext and global markets. We have licensed many of our indexes to asset managers for use in ETFs that are listed on our exchanges. As of December 31, 2009, such traded products represented over $17 billion in assets under management. Index licensing for the listed and OTC structured product markets has grown at double-digit rates over the last few years in both Europe and the United States.
In 2009, we created new 25 proprietary indexes including the NYSE Euronext Iberian Index, NYSE US Treasuries Indexes and AEX and CAC 40 Equal Weight Indexes.
We also offer third-party index calculation services for ETFs and other structured products, which we believe is important to the development of such products on our exchanges, as it allows us to leverage our technology and understanding of traded products to better serve investors. All of our index services are designed to offer our clients more tools and services to support the listing and trading of their products.
NYSE Indexes. We maintain 12 NYSE benchmark indexes. NYSE established its first index, the NYSE Composite Index, in 1966 to provide a comprehensive measure of the performance of all of the common stocks listed on the NYSE. Four other NYSE-branded indexes were launched in June 2002, followed by three single-sector indexes, all of which are composed entirely of NYSE-listed companies. Four U.S. Treasury indexes were launched under the NYSE brand in 2009, covering the two-, five-, ten- and thirty-year treasury markets.
Euronext Indexes. Through our European subsidiaries, we maintain and improve approximately 200 existing indexes, including the flagship AEX, BEL 20, CAC 40, PSI 20 and Euronext 100 indexes, and develop new ones when added value for market participants is identified. Companies listed on Euronext are indexed according to size, segments and sectors, per national market as well as Euronext-wide.
NYSE Arca Indexes. NYSE Arca has over 30 index offerings. The NYSE Arca indexes provide measurement tools for all types of investment categories regardless of listing venue. Many of the indexes are widely followed as the bases for ETPs, structured products and listed index options.
NYSE Amex Indexes. We maintain six NYSE Amex benchmark indexes. NYSE Amex established the NYSE Amex Composite Index in 1995 to provide a comprehensive measure of the performance of all of the common stocks and closed-end funds listed on NYSE Amex. There are five subsector indexes that comprise the NYSE Amex Composite Index, which cover the Financial, Industrial, Technology, Health Care and Natural Resources sectors.
Intellidex Indexes. We also own the Intellidex indexes, which consist of 40 indexes covering the U.S. listed marketplace and various sectors, industries and size and style boxes. We have exclusively licensed these indexes to INVESCO PowerShares Capital Management LLC to use as the underlying indexes for ETFs in the United States.
Technology is a key component of our business strategy, and we regard it as crucial to our success. We plan to implement our technology solutions to enable us to use our infrastructure to build an open platform and apply technology to lower client costs. Our technological initiatives are focused on satisfying the following objectives:
• Functionality — Our technologies are designed to support business-driven requirements and should be delivered on a timely basis with minimal defects. We continually assess the need to enhance our functionality in response to changing customer needs and evolving competitive and trading environments. In addition, our technologies must provide for regulatory effectiveness and are designed to support market surveillance and enforcement.
• Performance — Our trading technologies are designed to provide fast and competitive response times, which are critical to operating successful electronic markets. We continually evaluate system performance in terms of its speed, reliability, scalability and capacity.
• Capacity/Scalability — Our systems must be highly scalable, enabling us to meet anticipated growth in trading multi-asset classes in multiple markets by participants globally. We are committed to investing in systems capacity to ensure that our markets can maintain investor access during unusual peaks in trading activity or in response to other business-driven requirements.
• Reliability — Our systems are designed to be reliable and resilient to maintain investor trust and confidence. We continually evaluate our business continuity plans, including the availability and functionality of back-up data centers and back-up trading floors.
• Total cost of ownership — We believe that our systems and operating environment should be managed with a competitive cost structure.
NYSE Euronext’s commercial technology businesss, NYSE Technologies, provides comprehensive transaction, data and infrastructure services and managed solutions for buy-side, sell-side and exchange communities that require next-generation performance and expertise for mission critical and value-added client services. NYSE Technologies operates four businesses:
• Global Market Data — See “— Products and Services — Global Market Data.”
• Trading Solutions — In March 2008, NYSE Euronext acquired Wombat Financial Software Inc. NYSE Technologies has now incorporated these products and solutions in the Trading Solutions business, which provides software solutions for the trading operations of hundreds of exchanges and global financial institutions. NYSE Technologies’ Market Data Platform provides real-time market data distribution and integration comprising high performance messaging middleware and sub-millisecond connectivity to global markets with numerous high speed direct exchange and aggregated vendor feed handlers.
• Exchange Solutions — In August 2008, NYSE Euronext acquired the remaining 50% of Atos Euronext Market Solutions (“AEMS”), a leading global provider of technology solutions and managed services for exchanges, clearing houses, banks and intermediaries. NYSE Technologies Exchange Solutions business provides international exchange clients with platforms to support dynamic, growing markets at the best price points possible, while ensuring market integrity and access to a truly global network.
• Global Connectivity — NYSE Technologies operates the Secure Financial Transaction Infrastructure (“SFTI”), a rapidly expanding physical network infrastructure that connects our markets and other major market centers with numerous market participants in the United States and Europe. SFTI connects all NMS market centers in the United States and is expanding to link major and emerging markets around the globe.
Through this single network, trading firms and investors can connect to real-time information and trading, while financial markets can provide customers with access to their data and execution services regardless of their trading platform or interfaces. Customers gain access to SFTI market centers via direct circuit to a SFTI access point or through a third-party service bureau or extranet provider.
NYSE Euronext’s Global Technology Group
NYSE Euronext is integrating its technologies globally to establish a single UTP, a multi-market, multi-geography and multi-regulation exchange platform for all NYSE Euronext markets (cash and derivatives in both the U.S. and Europe). This global technology initiative involves several upgrades to our current architecture, using technologies acquired through strategic initiatives and acquisitions. This initiative will involve the simplification and convergence of our systems into a single global electronic trading platform system, with equities- and derivatives-specific versions. We began this initiative in 2007 and have completed the migration of our European cash market to UTP. We are currently in the process of migrating our U.S. platforms to a common customer gateway, a key component of our UTP architecture that will provide a single method for market participants globally to access our markets, products and services. In the final phase of our platform integration, we intend to integrate our European and U.S. derivatives platforms into the UTP. We began the final phase of the roll-out of the program to all of our markets in 2009 and expect it to be completed in 2010.
To enhance the capacity and reliability of our systems, we have established data centers in Boston, Chicago, New York, San Francisco and Northern New Jersey totaling approximately 125,000 sq. ft. in size. Our European business is supported by data centers in London (12,900 sq. ft.) and Paris (15,600 sq. ft.). We are in the process of consolidating our data centers in the United States and Europe, and have commenced construction of two new global data centers, which we expect to complete by the end of 2010.
We seek to ensure the integrity of our data network through a variety of methods, including access restrictions and firewalls. We monitor traffic and components of our data network, and use an application to detect network intrusions and monitor external traffic. Customer circuits and routers are monitored around the clock and anomalies in customer circuits are reported to its staff and carrier support personnel for resolution.
We own the rights to a large number of trademarks, service marks, domain names and trade names in the United States, Europe and in other parts of the world. We have registered many of our most important trademarks in the United States and other countries. We hold the rights to a number of patents and have made a number of patent applications. However, we do not engage in any material licensing of these patents, nor are these patents, individually or in the aggregate, material to our business. We also own the copyright to a variety of material. Those copyrights, some of which are registered, include printed and online publications, web sites, advertisements, educational material, graphic presentations and other literature, both textual and electronic. We attempt to protect our intellectual property rights by relying on trademarks, copyright, database rights, trade secrets, restrictions on disclosure and other methods.
As of December 31, 2009, we employed 3,367 full-time equivalent employees. Overall, we consider our relations with our employees, as well as our relations with any related collective bargaining units or worker’s councils, to be good.