Nasdaq OMX Group's Management Presents at Citigroup US Financial Services Conference (Transcript)

| About: Nasdaq Inc. (NDAQ)


March 06, 2013 9:50 am ET


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

Eric W. Noll

Good morning, everyone. Thank you for joining us today. I appreciate your interest, and I'm delighted to be here today to talk to you about NASDAQ OMX. So as you go through the normal disclaimers out there.

NASDAQ OMX is in the midst of a fairly significant transformation and one that we continue to believe isn't fully understood or appreciated by the investment community. The company, as you may remember, is initially built around our exchange license. But over the past few years, we've been able to diversify away from that transaction-based model into a portfolio really of stable, growing, recurring revenue businesses that admittedly at their core still rely on the transaction businesses that we own and operate, but are built upon that and developing a fairly stable river of revenues coming out of those. The benefits of this transformation are evident when you look at our 2012 results.

Our strong free cash flow was over $0.5 billion. It was generated primarily by our portfolio of these subscription-based revenues, which now account for about 70% of our total, and those revenues increased 4% last year.

So while we're not excited about a 4% revenue growth, but in an environment where U.S. and Nordic cash and equity derivatives volumes were down between 10% and 30%, we still think that was a pretty good result given the headwinds that we faced last year. We're still very committed to our transaction-based businesses. They have tremendous operating leverage, particularly in a recovering volume environment. And while our transaction businesses declined 8% in 2012, a function of lower industry volumes, we're pleased with -- that we've been able to maintain our revenue capture on margins and our market shares within those businesses. And those are really the factors that are within our control.

I would note that in January and February of this year, we are seeing some encouraging signs for volume in our transaction-based businesses. For U.S. equities, we've seen 7 out of the late -- last 8 weeks of positive flows in the U.S. equity mutual funds. First time we've seen a trend like that in about 3 or 4 years. Our U.S. derivatives revenues increased 10% year-over-year in the fourth quarter of 2012, and we experienced continued strong volume in 2013.

In our Nordic markets, in January, the value of our equity shares traded on the market has increased year-over-year, and February is showing continued solid performance there. And our European options and fixed income volumes are also performing well.

I do think that this does reflect what seems to be the early stages and, I would caution you, the early stages of returning appetite for risk assets in the marketplace. So whether they come back to the marketplace in terms of equities or through other instruments, we are seeing what we consider to be some positive trends in that space. I can't say that these trends will continue, and we certainly don't operate our business as if they are going to continue, but we -- these are the most encouraging volume trends we've seen in about 3 years.

I'd also like to -- I also think, if you step back and look at what drives some of this behavior, we're seeing some other stronger trends in terms of consumer financial behavior. Consumers are spending more, they're borrowing more, credit card balances are starting to increase and housing prices are beginning to improve as well, clearly a signaling in activity that people are going back into the marketplace and buying assets again, and that, naturally, in our opinion, has a psychological impact in terms of investors' minds. And we think that's promising for the long-term trends in terms of where volumes go in our marketplace.

At the heart of our -- of NASDAQ OMX is our technology. Our technology capabilities for trading, we think, are unmatched in the exchange space and elsewhere in the marketplace. And we have the technological infrastructure to support what are highly profitable Data, Index and Access Services businesses. We utilize this technology to help other exchanges on a global basis. As you may know, we power with NASDAQ technology over 70 marketplaces around the globe and financial companies to build their infrastructure and power corporate solutions suites for products for public and private companies.

Cost efficiency is also part of our DNA. As we have often said, we view all fixed costs as being variable over the long term. If we come to the conclusion that we will face a weak revenue environment, we're going to look for additional opportunities to reduce our cost basis. In 2012, in the face of what were some fairly significant volume and transaction headwinds, we've reduced our cost by over $50 million on a run rate basis. What this adds up to is a strong record of strong cash flows. Since 2009, we have generated roughly $2 billion in free cash flow, which we used to repurchase 1.2 billion shares of -- $1 billion worth of our own shares. We initiated a dividend currently yielding at about a 1.6% yield, and we reduced our debt by over $0.5 billion and acquired some small attractive assets in the process.

So moving ahead here. The dark blue portions of this pie represent our transaction volume-sensitive businesses. These businesses, cash equities and derivatives businesses accounted for about 30% of our revenues in 2011. And so as you can see, the rest of the 70% of the revenues come from more of a recurring subscription-based model.

On this slide, we'll talk about our global products -- our Data Products business. Global Data Products has had revenues of $344 million in 2012, which represent 21% of our total net revenues. This is a high-margin business for us and has grown in each of the last 3 years and was up 3% in 2012. And again, I'd like to point out it's grown over the last 3 years in the face of a declining volume environment. So we think we are really starting to hit on all cylinders in terms of extracting value out of Data in the data side of our business here.

They're recurring in nature, and they consist of 3 subscription-based revenue streams. The first revenue stream is what we call the U.S. tape plans. Here, we operate -- it's known as securities information processor, or, in the lingo of our business, the SIP. For NASDAQ-listed stocks known -- and what we now call Tape C stocks. We're responsible for the collection and dissemination of the vested offering on that tape and the Last Sale information. We sell this information out to market participants and to data distributors who then provide it to their subscribers, such as Reuters and Bloomberg and so forth.

After deducting costs, we distribute the tape revenues generated by the respective plan participants, and there's -- Tape A is New York-listed stocks. Tape B is Arca and Amex-listed stocks. Tape C is NASDAQ-listed stocks. And we get our share -- our market share percentage of those tape plans, and that includes both Tape A, Tape B and Tape C revenues. This revenue stream declined since 2008 as a consequence of reduced subscriptions with lower Wall Street headcount and higher TRF or off-exchange trading from internalization and dark pools and our own efforts of selling what we call our NASDAQ Basic product in the marketplace as an alternative to the tape revenue plan. So for those of you that don't know, we have a product called NASDAQ Basic. NASDAQ Basic essentially replicates the tape plan for Tape C securities. It only uses NASDAQ stock prices and quotes, when it -- we sell that in a much lower price point than people can buy the Tape C subscription plan for. And so, for many customers who don't need the full data set that will buy the NASDAQ Basic product from us and that's been a nice revenue line for us. The more interesting data line for us is what we call a proprietary U.S. market data product. This business has grown from about $109 million in 2008 to $150 million in 2012, it's an 8% return. And it's now the largest piece of our market business. Market professionals need this information in order to trade effectively in the marketplace.

At NASDAQ, we've been able to sell our quote and trade information to over 2,000 data distributors, who in turn obtain subscriptions for this information. This includes market depth, index values, mutual fund valuation, order and balances and other analytical data that they need to actually trade in the marketplace on a regular basis.

Just to give you a feel for some of the products in this area, they include products like NASDAQ TotalView, which is our flagship, market depth quote product. It shows the depth of the market in particular stock across market makers, and it's sold for a monthly fee per terminal. And there's Level 2 information, which is slightly more limited than TotalView, also sold on a subscription basis. And then, we have a product called UltraFeed, which is a product that aggregates U.S. equities, options and future data feeds -- proprietary data feeds from other venues and puts it into 1 easy-to-read, digestible format, and we sell that feed as well.

I already talked about Nasdaq Basic, which is our replication of the Tape C SIP plan. It can access about 99.8% of the total data plan for about 1/3 of the price, and we have 90,000 users using that now, and we're pricing at the gain share and they achieve a larger subscription bases. There are a variety of other products in our data set, Global Index products, NASDAQ Market Replay, data storage, Mutual Fund Quote Service, RussellTick, MatchView, Global Access. So we slice our data products up in different formats in order to appeal to very specific segments and offer them those specific data lines. We also offer European data products and services. Our European product data is -- had revenues of $77 million in 2012.

In 2011, we acquired the business of RapiData, which is an event-driven analytics company. It provides machine-readable economics news and analytics to trading firms and financial institutions. It's a service used primarily by algorithmically-driven traders, but we believe we can leverage this technology to bring new products in the data set going forward.

This slide talks about our Access and Broker Services business. This business had revenues of $257 million in 2012 or 16% of the total. And it has grown at about a 14% rate since 2008. Access Services is another high-margin business, and it's primarily subscription-based. We provide, in this business, technology products to our broker-dealers and other market participants that enable them to act as our marketplace in various ways. We had a 6% increase in revenues in this business line in 2012.

Access Services includes products such as colocation, where our market participant can choose to place their servers in our data centers, which provide them the highest level of speed and lowest level of latency in executing their orders. Our Carteret New Jersey data center is leased from Verizon, and it is a state-of-the-art facility offering the fastest connectivity with 10 and now 40-gigabyte-per-second connections. These connections offer significant reduction in round-trip latency and increased bandwidth. So just to give you a sense of the scale, we now have a 45 second -- 45-microsecond port-to-port execution speed. So from the time your order hits our outside port till it gets executed and return to that port, it averages about 45 microseconds, which we believe is the fastest in the marketplace today. We made a conscious decision a number of years ago to use a third-party provider, Verizon, to host our data center. We think this gives us a cost advantage and an ability to adapt to changing technology needs with a lower and variable infrastructure cost. In addition, utilizing a third-party provider increases our SIP and scalability without sacrificing performance and reliability.

So if you look at the evolution of data centers and particularly in the exchange space, when colocation first started, the idea was that you had to get a bigger footprint as you possibly could get. So you needed big, bulky data centers, where you could sell lots and lots of machines. So most data centers were built at that time with the idea that everyone would use 1-gig servers, possibility your higher end firms would use 5-gig servers, which took up a lot of space.

Our bet, if you will, at that time was that technology would outstrip that. And so, we didn't want the bricks-and-mortar infrastructure. We wanted the ability to move with the technology. So today, we had no 1-gig servers in our data center. We have very few 5-gig servers in our data center. Most of them are 10, and people are now moving to 40. Now the interesting effect on that is that you don't need the same footprint. So actually, the amount of space that people are taking up is reducing, but the amount of usage that we're getting out of those servers is increasing.

So our pricing has less -- for colocation has a lot less do with the amount of square footage you take in a data center and much more about the amount of power you're using and the amount of bandwidth you're using. And so, we've been able to do that because we don't have the bricks-and-mortar investment, having to fill a big space with computers.

You can access our markets through a number of different protocols, for which we charge subscription fees, what we call port charges. We also receive revenues from managing the TRF, the Trade Reporting Facility, and this is where off-exchange trading or non-lit market [ph] reports their execution, volumes and prices. We also have -- we started a workstation business. We offer what's called the NASDAQ Workstation, an Internet browser-based interface that allows market participants to view market data and their orders, quotes and trade reports. There are still some users out there that still like the screen. They still like the ability to enter their orders by hand.

In 2010, we acquired FTEN, which was a leading provider -- and is a leading provider of free trade, real-time risk management solutions for the financial securities market. This is a trade risk compliance business that was developed for broker-dealers and allows an institution to subject any trade execution to a compliance check to make sure that the trade is consistent with their overall risk parameters and authorization for that trade and should catch what we would call fat finger errors in the marketplace.

Many of you may know that, a couple of years ago, there was a rule passed by the SEC called the Market Access Rule, that required any broker-dealer accessing the marketplace to have free trade risk management tools on the front end of their entry into the marketplace. FTEN is our solution to that Market Access Rule, and it allows firms to manage their exposure in a marketplace as they enter.

Finally, I'd also like to highlight an access service product that we think is going to be an important part going forward in our marketplace, and that's our FinQloud partnership with And here, we are providing a cloud-based solution for broker-dealers to store and retain trade and reporting data over time on a much more cost-efficient basis than utilizing their own internal resources to do that.

How that works is every broker-dealer out there has a regulatory compliance requirement to store all their customer communications, all their trade data, all their quote information for periods of time that range between 5 and 7 years depending on what the data is, and they have to have that what is called WORM eligible, so Write Once Read Many, for the compliance folks, and they have to be able to access that information in a very specified regulatory format.

Now the solutions in the marketplace had been for firms to store and build those solutions themselves. While there are some third-party providers of readers, but the only solution out there has been for firms to keep this information in-house. What we've been able to do, working with Amazon and the Amazon cloud, is take advantage of Amazon's massive scale in the marketplace and offer the storage end of that at a much lower cost than many firms can do it themselves. And then, what we bring to the equation -- Amazon brings their massive cloud computing ability. What we bring to the equation is our ability to put the regulatory wrapper, the WORM readers and the ability to access that data in the appropriate regulatory format over time onto that.

And so, what we are now able to do is sell solutions to broker-dealers that will significantly reduce their cost per storage anywhere between 40% and 80% depending on the firm and how much storage they have out there. The other new business we started in Access Services is something we call Microwave. It's a little bit of a return to the future kind of business for us. So most connectivity, as most people know, in the marketplace today is by fiber, and fiber is by far the very fastest way that people communicate market data back and forth.

And a couple of years ago, there was a firm that was actually dug a new fiber line between Central Jersey and Chicago in order to take out about 3 milliseconds of round-trip from the commercial providers to a more direct line that turned out to be a very successful business in the short term. But what people have found is that if you can communicate market data faster using Microwave -- now there are some issues with Microwave having to deal with weather, making sure that you have the right path and you have data constraints. So you can't -- your data packets have to be small, and they can't be as big as they are in fiber. But if you're communicating just market data information, you can communicate it faster over Microwave. So what we have done is created a, what we call a metro microwave network based in our Carteret facility that allows firms to communicate into our Carteret data facility their market data, and get market data out through a -- what we call short-haul microwave to different data centers in the metropolitan New York area. And later this year, we will establish a Carteret to Chicago microwave network. And we will be doing that where we will be the only terminus in New Jersey for both our metro network and the Chicago network will be the roof of our data facility in Carteret. So it will reduce all of the latency out of the system, and we're getting a good subscriber take-up on that business as we go forward.

I want to talk about Global Listings a little bit. This business had revenues last year of $318 million, that increased 3% in 2012. It accounts for about 19% of our revenue base. We operate as a listing venue for 3,300 companies around the globe. The most well-known brand names are Apple, Google, Amazon, Microsoft, Oracle. Our listing fees have been pressured over the last few years, mainly as a function of the lower of number of companies filing for IPOs. We're starting to see some encouraging signs here. Pipeline from companies has recently thickened up.

In the U.S., we're optimistic that the JOBS Act will make it easier for companies to go public. We've seen some companies taking advantage of some of the JOBS Act features, such as the confidential filing. Some companies have been delaying going public because of the heavy regulatory requirements in the U.S. So we're excited about the opportunities the JOBS Act may create for us over time. We have some great brands listed on NASDAQ, and we have -- we believe we'll have some great new brands coming to the market as well. We received annual listing fees and fees for listing of additional shares in this business. We've done a good job competing for transfers in over the last 5 years. And in 2012, companies with market capitalizations of $136 billion have switched to NASDAQ, and that list includes: Kraft Foods, the first-ever Dow component switch; Texas Instruments; Analog Devices; Western Digital; and Goodyear. In this segment, we also have what we know as our Corporate Solutions business, which had a very strong finish in 2012. We saw a broad-based growth in that business and demand from our corporate clients, which we hope is indicative of a company feeling better about investing in the future. Some areas that showed particular strength over the last year and showed some year-over-year growth included a 31% increase in the number of news releases that were put out by our global newswire service, an 11% increase in the number of our markets surveillance clients as we often -- we provide market surveillance solutions for our listed companies as well. And our Directors Desk, which is an online Board of Directors tool, continued its rapid growth and had a 49% increase in new clients last year. This growth translated into year-over-year organic growth of 25% in the fourth quarter in 2012.

We're also pleased about how our recent acquisition of dWise -- it's an enterprise risk management business, finished out the year. While this business benefited from a one-time accounting catch-up, we also had strong performance for our enterprise, governance risk management, compliance software products and services. Another exciting driver, you may be aware of, for our Corporate Solutions is our recent announcement of the acquisition of the investor relations -- public relations multimedia solutions business of Thomson Reuters. Through this acquisition, we will accelerate our strategy and create one of the premiere suites of products and services for public and private companies in our industry. We will bring the assets, talent and technology together to continue to deliver a strong customer-centric value proposition in that business to over 7,000 new clients in over 60 countries, an incredible opportunity for us. This transaction is currently under review by the regulators, and we expect it to close in the first half of this year. Once completed, it is expected to be accretive to earnings in the first 12 months, excluding transaction-related costs, and it is expected to generate attractive returns on capital flow. With this acquisition, I would note we will bring a portion of our revenues that are recurring subscription up to 75% of our total.

Moving onto Market Technology. As many of you know, we are the world's leading technology solutions provider and partner to exchanges, clearing organizations and central securities depositories. Our technology solutions are used in 70 markets in over 50 countries around the world, with clients including the Australian Stock Exchange, the Colombian Stock Market, the Egyptian Stock Exchange, Hong Kong Exchanges & Clearing, the Swiss Exchange, Singapore, Tokyo Commodity Exchange, Osaka Securities Exchange, SBI Japannext and many others.

At the heart of our technology businesses is our existing trading technology platform with our signature offering Genium INET and X-stream INET, which incorporate the same INET technology that powers the NASDAQ platform today. This segment also contains what we call is our SMARTS business. This is the leading technology provider of surveillance solutions to exchanges, regulators and brokers. We completed our acquisition of SMARTS for $77 million in 2010, and the acquisition diversified our Market Technology business in the broker, surveillance and compliance market. It is an acquisition that has performed exceptionally well for us over time. This segment had revenues last year of $184 million, and we had a very strong finish to the year for new business wins with 95 million in new orders increasing our pipeline.

Significant new wins include a Marketplace for Hire called TOM, which is in the Dutch equity and equity derivatives trading area, Bursa Malaysia, NBI Rwanda. And we're experiencing robust demand for our SMARTS Broker product as opposed to exchange products, where broker-dealers actually take our technology to enable them to manage their surveillance needs inside their company. We were also pleased to be selected by the FSA in the U.K. to be the surveillance provider for the U.K. marketplace with our SMARTS technology.

As a result of these wins, we exited the year with a backlog of orders of $546 million, which is up almost $90 million compared to where we started the year. So we feel good about the prospects of this business as we go forward.

Next up is the Global Index Group. This is where we develop and license NASDAQ OMX-branded indices for associated derivatives and financial products. It represents 3% of our total revenue, and this business increased 10% last year. The majority of these revenues are license fees for our trademark indices, like the QQQs, which I'm sure everyone's familiar, which is the ETF, based on the NASDAQ 100. This license typically represents an annual basis point fee on the underlying assets. So as the Qs grow, so do our licensees grow in that sector.

As we grow this business, most of the incremental revenues fall directly to the bottom line. It's a very high-margin business for us, and one where there are not a lot of infrastructure cost. So growth has a disproportionately positive effect on our earnings. We compete at a relatively low price point compared to other index providers and are still have an excellent margin with it. One factor that will help our competitiveness here is our newly-launched index engine. This index engine is a server that updates and calculates the value of indices. Based on our powerful INET technology, this gives us superior processing capability and enhances our ability to innovate and compete over time. This will improve our competitive positioning in the index base as we move forward.

Moving onto equities. Here, we have consciously sought to innovate and create new pricing structures, where market participants have been motivated to a greater degree by bringing volume to a market, which represent opportunities to them to create profitable trading advantages. To that end, we have moved away from the NASDAQ Classic market in a certain sense, which has primarily been a price/time priority, maker/taker model by creating NASDAQ BX, which is still a price/time market, but it's a taker/maker model. In other words, we pay the rebate to the taker of liquidity as opposed to the maker of liquidity, which, in sense, institutions who are looking to move volume and size and then send someone to provide liquidity to them as opposed to the other way around. So what we've seen in -- as you look at the order flow -- cascade of where people go to look at orders, many institutions and market participants will look at BX first. So this is the most cost-efficient place for them to access liquidity. If you are a provider of liquidity, you will often post in BX first, if it matters to you to get your trade-off before the rest of the market. And so, we've seen some healthy growth in that business.

In European equities, we've been successfully able to hold on to a decent market share in our Nordic markets, again, due to our ability to bring an improved cost structure and better technology to the marketplace. The Nordic continues to outperform the rest of Europe from an economics perspective, or those economies have come through the European crisis in a much better shape than the rest of Europe. And as I mentioned earlier, we're seeing encouraging signs from volume and bulk of this businesses, as we move forward.

Moving onto derivatives. Following our acquisition in 2008 of the PHLX, we've been able to significantly increase our volume and our market share. And as well, this, as with the cash equities business, remain a very competitive marketplace. It's one we continues -- continue to believe holds very good long-term growth prospects for us. We believe that the Options business still is on a growth trajectory as opposed to the equities business. And that the penetration in the investor pool still has room to grow. So even though we think we've done very successfully in gaining market share in that business and operating a very successful business, in equity and options, particularly here in U.S., we think it's a growing pie yet as well. So unlike the Equities business, which does not seem to be a growing pie, the equity options business still is showing some growth characteristics.

I would note, in the fourth quarter 2012, we had double-digit growth in our U.S. equity derivatives business, a function of increased revenue capture and increasing market share. Our European derivatives business is more integrated. As we provide clearing and settling solutions in tandem with our execution solutions there, it covers a wider variety of asset classes, including fixed income and commodities. As European markets continue to open up under MTF 2 and the EMIR regulations we're preparing for in anticipating greater competition in those marketplaces, we continue to introduce new products and expand the numbers that participate within the Nordic community, growing our derivatives, trading and clearing revenues there.

This wraps up the discussion of our business. And now, we'll take a look at our financial performance.

NASDAQ has a strong track record in growing free cash flow over the past few years. This has been a function of the organic growth of our business, investments in new initiatives and the acquisitions that we have made with very strict discipline. As the chart shows, we have generated approximately $2 billion in free cash flow over the past 4 years. Our deployment of that included $1.2 billion in our share repurchase program, over $0.5 billion for net repayment of debt and we have utilized $320 million for acquisitions, including FTEN and SMARTS Glide, NOS and dWise.

So turning to the most recent performance. On Slide 13, here, we're showing quarterly performance of overall U.S. volumes and our revenue and non-GAAP EPS results over the past 2 years. You can see on the upper left, clearly, U.S. volumes have been bouncing around, and the fourth quarter of '12 started to improve. This improvement continues into 2013. And while it is still early, this chart gives us some reason for optimism as we go forward for the rest of this year.

Despite the volatility in the volumes, NASDAQ OMX's revenues have been fairly steady above the $400 million mark. This consistency, of course, is driven by the stability of our Market Data revenues, our listing revenues, Access Services and all the other subscription in the recurring revenue businesses we operate. You can see that stability in our EPS performance also. I also wanted to touch on our expense guidance because I think there are numbers that we want people to understand.

As we start with our original core expense guidance for 2012, midpoint of $925 million and as a result of our success in our cost reduction plan, we are able to achieve 2012 actual expenses of $855 million. We're now looking at comparable core expenses and setting an initial range of $850 million to $870 million.

So finally, in summary, we hope that you've seen we've been leveraging our exchange license to build what we think is a very attractive portfolio of sustainable, recurring, scalable and profitable businesses. And that a substantial proportion of our revenues are subscription-based, and we have equity and derivatives business that stands to benefit from a very strong operating leverage if trading volumes continue to assume their growth trajectory. We're committed to the cost leadership, which we think is a strategic imperative in our business. And we continue to expect to have a very strong history of very strong cash flow generation for our business and remain committed to returning that capital to shareholders if we don't believe we are able to generate attractive returns on that capital, either internally through acquisition or through our share repurchases. So thanks for your patience, and I'll be happy to take any questions.

Question-and-Answer Session

Unknown Analyst

Okay. Thank you, Eric. In the nature of time, why don't we go ahead and see if there are any questions in the audience. I have a few, but I'll just wait -- up front there.

Unknown Analyst

Can I just ask what the trend is on the pricing for the subscription businesses. Do they generally tend to inflate or deflate or [indiscernible]

Eric W. Noll

They've actually been fairly consistent. We haven't -- I would say the last time we had a price increase -- I don't think we've had any significant price decreases in our subscription businesses. The data businesses have had price increases last year. We have had -- colo fees and port charges have been fairly consistent over time, and we haven't reduced prices in that area.

Unknown Analyst

Okay. Any other?

Unknown Analyst

In light of your recent rebate programs, could you maybe, just in broad terms, if that's what you like, address how you think about, sort of, the unit pricing on that volume, not only on a direct basis for that, but potentially into other products, volumes, et cetera?

Eric W. Noll

So our pricing, which has gotten some attention in the press recently, some of our pricing moves on the equity side, is really very targeted pricing. So historically, pricing in U.S. equities has been driven by volume. So you paid your lowest rates or your highest rebates to your highest volume participant. But as -- philosophically as we start to look at the marketplace, what we're looking for and what we're interested in is how do we make the most robust trading experience for all market participants. And so, that has moved us in the direction of trying to price on a more segmented basis, less about how much volume we have and much more driven by either who you are or your behavior in the marketplace. And so, by utilizing that kind of segmentation pricing in the marketplace, what we're able to do is incent certain types of order flow to come to our marketplace. Most recently, that's been retail-oriented. So we have some retail pricing plans we put into place. Historically and in the recent past, we have targeted institutional flow through a program we call ISP, investor support program, which is behavior-driven. And what we've been able to do with that is we've been able to move our liquidity providing pool in a way where we are less reliant on what we would call high-frequency firms and much more reliant on other market participants. So that's done a couple of things for us that we think is very positive for our markets in the long term. One is it made our quote more stable. So we see less flickering in our quote. We see a much more stable price base in our quote. So when we have a more stable quote, what we see is we see more active takers coming into the marketplace. That grows our share over time. It makes their trading experience more beneficial. It lowers what we call toxicity in the marketplace considerably because you're trading against people who have a long-term opinion about a stock as opposed to someone who is driven by short-term price metrics. And so, that makes the trading experience on NASDAQ to be more profitable for them. That causes our share to grow. That attracts more participants. We gain and take revenues. We gain Access Services revenues. And so we're able to -- in a more targeted pricing way, by targeting very specific segments, we're able to sort of shift the nature of trading in a way that we think is positive for us.

Unknown Analyst

Okay. We probably have time for one more question from the audience.

Unknown Analyst

Just interested on the new technology, you say you've done for the updating the indices. Given that reluctance of sort of market participants to change their index provider, how easy is it -- could it be to leverage that technology?

Eric W. Noll

Well, I think in -- there will, obviously, be some challenges there. But I think there's a couple of ways to look at that business. One is that there are always new indices coming out in a variety of asset classes. So our index calculators and index generators are not solely linked to equity. So we can provide index values across a variety of asset classes. So that's one. Though the ability to establish a new market-leading index, denovo, is relatively challenging. But another factor that we're seeing out there is that there are index providers who have the intellectual property in the index, who don't have a low-cost index calculator or order generator, who may be looking to outsource the calculation of those indices. So while they may not be a branded NASDAQ index, they may be branded -- another index providers' index, but we are able to provide the calculation engine for that index at a much lower price point than they are able to do it themselves. So that is a growth area for that business as well. And then lastly, what we hope to be able to do is particularly away from what I call name brand indices. So we're not going to move the S&P 500, a very high name brand indices. But in the lower indexes, particularly those used for lots and lots of ETFs, of which there are many and many more coming, it may be possible for us to substitute a NASDAQ index for another index provider's index, provided it is not -- doesn't have brand equity in it [indiscernible]

Unknown Analyst

With that, I think we will conclude. Eric, thank you very much...

Eric W. Noll

Thank you.

Unknown Analyst

For your perspective. I appreciate it.

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