Welcome to the NASDAQ Fourth Quarter 2014 Results Conference Call. [Operator Instructions]. I would now turn the call over to your host, Ed Ditmire, Vice President of Investor Relations. Please go ahead.

Good morning, everyone and thanks for joining us today to discuss NASDAQ's fourth quarter 2014 earnings results. On the line are Bob Greifeld, our CEO, Lee Shavel, CFO, our co-Presidents, Adena Friedman and Hans-Ole Jochumsen, Ed Knight, our General Counsel and other members of the Management Team. After prepared remarks we will open up to Q&A. The press release and presentation are on our website. We intend to use the website as a means of disclosing material, non-public information in complying with disclosure obligations under SEC Regulation FD. I would like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these projections. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our press release and periodic reports filed with the SEC. I now will turn the call over to Bob.

Thank you, Ed. Good morning everyone and thank you for joining us today to discuss NASDAQ's fourth quarter 2014 results. We're pleased to deliver another strong quarter for our shareholders with record non-GAAP earnings per share of $0.75, up 9% year-over-year. Our non-GAAP operating margins were 43% during the fourth quarter, a 300 basis point improvement from a year ago and at multi-year highs. When you look back on the results this quarter and really the entire year, what emerges are new higher baselines we've established for our revenue, profitability and earnings metrics as well as an improved strategic alignment between our people, our products, our operational expertise with our customers. Our revenue, non-GAAP operating income and net income all reached record levels during the year, but fundamentally I see this as just a starting point from which we can build. As our business continues to evolve far beyond our grounding in the equity world, the businesses we're in are more diverse than ever before and operate really as complementary ecosystems. As we review our businesses in addition to the obviously successful financial metrics, we focus on our relative competitive position in the marketplaces in which we serve. I'm happy to report that the overwhelming majority of our businesses are in a better competitive position than one year ago. This is the best compliment possible for the management team and all the employees here at NASDAQ. The changes we made during the year to evolve our management structure and to expand our product set across all businesses reflect the evolution of our business and the market realities in front of our clients today. We're confident about the path we're on with operational efficiency continuing to be paramount and our ability to continue to serve our customers and grow this franchise.…

Thanks, Bob. Good morning, everyone. The following comments will focus on our non-GAAP results. Reconciliations of GAAP to non-GAAP results can be found in the attachments to our press release and in the presentation that's available on our website at ir.nasdaq.com. I want to start off by highlighting the impact the stronger dollar had on our results this quarter as it obscures in many cases, solid organic growth that we saw in the business. Revenues of 517 million were reduced by 20 million from the prior-year quarter as a result of the stronger dollar and excluding FX impact grew 3%. Operating expenses were down $11 million due to foreign exchange but even eliminating this impact we were able to reduce expenses organically by $6 million or 2% from the prior year. These combined organic results contributed to operating income growth of 5%, excluding the FX impact and would have produced $0.04 higher non-GAAP EPS. In order to provide a greater understanding of these effects on the business units, we're providing a schedule of the FX impact on the revenues for each business unit on page 14. I'll start by reviewing our fourth quarter revenue performance relative to the prior-year quarter as shown on Page 3 of the presentation. The 1% or $3 million decline in reported revenue of 517 million consisted of organic growth in subscription and recurring revenue of 9 million or 2% from growth in the listings, data products and index licensing and services offset by 13 million due to the impact of foreign exchange for a net 4 million decrease in reported revenues. It also included organic growth in transaction driven net revenues of 8 million or 4% from significantly higher cash equity trading revenue offset by 7 million due to foreign exchange for a net 1…

Operator, can you please open up the line for Q&A?

[Operator Instructions]. Our first question comes from Rich Repetto Sandler O'Neill. Your line is open.

So I guess we're limited one question this time, so my question would be on NLX, Bob because you did address it in the prepared remarks and talking about the lower EPS loss. I guess could you explain a little bit deeper what efficiencies did you do? Was it the pricing changes or headcount and we're balancing that also off with - it looks like if the numbers are correct there is a material market share decline so far in January, so the other part of the question would be outlook on NLX if our market share declined, if it's correct, it stays in place.

So first is as I said in my prepared remarks, we definitely figured out better ways to lever our existing infrastructure within Europe and other parts of the company, so we're able to do that quite efficiently without any really lessening of customer service. With respect to the market share, we've taken a different philosophy with incentives. I think it's a better long term philosophy, short term hit but this is about really growing the core interest and what we'll call the naturals in the marketplace. So we're actually satisfied with the progress we're making under the new way we're looking at the endeavor. That being said I think the eventual long term success of NLX requires a new set of committed partners. Again as I said in my prepared remarks, we're excited about the progress we're making with those discussions but they are at the end of the day fundamental I think to the long term success of NLX.

Our next question comes from Mike Carrier with Bank of America Merrill Lynch. Your line is open.

I guess maybe for Lee, I just want to look at the organic growth and some of the nuances that are going on and maybe the drivers going forward. So if I look at like the second half of this year it looks like the organic growth is coming in maybe around 2% - 3% versus first half it was closer to that mid-single digit of 5% - 6%. So when I think about going forward, you guys have named some initiatives that you are working on to drive that growth back to the mid-single digits. When I think about like pricing moves that you've made on the positive side versus new product launches and taking market share versus maybe the environment or competitive pressures I just want to get a sense on what you think will get us to that level, like what will be the drivers if you can break that down?

From an organic growth standpoint, correct Michael?

Yes that's right.

Yes, so I think when you look at each of the segments of the business, let's go kind of just through the four individually. So in listing services, clearly the strength of the new issue market which we're seeing we continue to see a strong pipeline as well as we talked about we have some pricing increases that we're implementing, I think we feel very comfortable with the organic growth drivers within that segment as we see the business right now and over the intermediate term. And when you look then secondly at the Information Services business, there again you see both product strength in terms of NASDAQ BASIC which is a primary contributor of our organic growth as well as selected pricing improvements that we've been able to make across the business and I would say generally further innovations in finding new products and development and in particular that's where we're very excited about the fresh look that Salil will bring to the business in helping us expand that business. The index business is fundamentally driven organically by the ongoing shift from active to passive management and the growth in our assets under management drives that. So all of those under pin our organic growth confidence in Information Services. In Technology Solutions with market technology as you can see we had particular strength in order intake in that business. I think that's indicative of continued appetite among both large players like the Japan exchange as well as Singapore to upgrade their technology which is an opportunity for us. We continue to be the leading dominant player in that space so as that trend continues, we expect that will drive our growth plus growth in BWise which had record order intake as well as in our SMARTS business is evidence…

Our next question comes from Chris Harris with Wells Fargo. Your line is open.

Wonder if you guys could comment a little bit on ICE's the proposal for Cash Equities and related to that knowing the customers and regulators like you do, what do you think the chances of something like this is actually going through?

Well I would start by saying that we certainly support an active discussion of the underpinnings of the market under Reg NMS and we recognize there needs to be an improvement there. I think I said on some prior releases, we're also now focused on the art of the possible in terms of what's achievable so while we support ICE's efforts and other comments and trying to change the structure, we do understand how the wheels of the machinery down at the commission run. So I think most interesting is what we're trying to do proactively and you see it's basically next week Tom, right, we start the pilot where we put in a fee cap which has been strongly supported by the by side and with most members of the sell-side. So that's something we could do of our own power under our own control with strong support from the customers. We're doing it as a pilot. We'll study the data to the extent that it makes sense and improves market quality then we'll move along with that. The only other thing I'll add as I've said previously, we think the concept to make or take is not by itself bad. The concept of rewarding somebody to provide information to the rest of the marketplace by showing their cards first is fine. We think it's not fine when that reward is the reason for the activity in and of itself so certainly, our concept of make being a valid approach is there in our pilot but you would also see then a reduction in the maker fee to give somebody the essence of the reward for initiating liquidity into the marketplace.

Our next question comes from Ken Worthington with JP Morgan. Your line is open.

I want to follow-up on Rich's question on NLX. I'll phrase it a little differently. It looks like volume is your [inaudible] is now down to 2000 contracts a day. You've been running at 50 to 60 in November and 50 to 80 in October. So how does your approach of letting volume fall as much as it has, help NASDAQ find the partner that you're looking for and then you've announced the launch of energy future products. Why is that experience going to be different than what we've seen thus far in interest rates and I guess will it be as costly?

Let me start with the first. So in consultation with our customers, they definitely educated us in saying that while the market share success of NLX in the beginning days was interesting and certainly served as an advertising mechanism to draw their interest and to draw them into further conversations with us, at the end of the day the question was what kind of natural flow are you bringing into the marketplace and how are you growing open interest over time? So that's been our focus and kind of a pivot point come December. The benefit there it allows us to basically reduce our burn rate in addition to other things we did to lever our infrastructure. So that's been positively received by the customers and I would say the key point is that NLX has established credibility with the potential partners in that we're obviously up or operational. We're live. We have a broad distribution in the marketplace between all the different ISVs and number of direct connections into the marketplace. We have a demonstrated ability when necessary to attract market share to the platform and very importantly also we're clearing through LCH and we're supporting the horizontal clearing model and as I said previously, we don't have yet to find a single customer who wants to be in a vertical monopoly. So we're addressing that need for them. So we're basically very pleased with the reduction in the burn rate. We're pleased I think with the new strategy and we're also pleased with the discussions that are ongoing. And I'll also say with NLX, it's important to recognize based on the new approach we do have in addition to partner discussions a number of new FCMs who are in various stages of connecting to us so far so good there. With respect to a product which we have not announced, there is a newspaper report on it but we haven't fully announced anything on it. As I’ve said in my prepared remarks when customers come to us we do listen and we do understand as I said before the customers like to see some way out of a monopoly type situation. We understand that here in the U.S. as we build our futures franchise and our integration into the clearing infrastructure most notably OCC that we have abilities to do things at a relatively low cost and I would also say that anything we might contemplate with the other asset classes will definitely be well informed by our experiences with NLX and I think we would have a very focused effort if we decide to go in that direction.

Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Let me ask a Capital Management question. I guess with some of the weaker revenue trends from the two bigger acquisitions of E-speed and Thomson Reuters versus initial expectations obviously the cost control and synergies are going to continue to be good there but does that change your view on capital allocation toward more stock buyback on a longer term basis? Maybe if you can just talk about your acquisition strategy?

Well the first thing I would say is the eSpeed acquisition and Thomson Reuters acquisition, well with any acquisition you always - it doesn't go exactly the way you want, we feel very good about the fact that we're in a better competitive position today than we were a year ago and I think you could argue that we're in a significantly better competitive position in both of those businesses than we were one year ago. So that always forebodes well for financial performance in the future so we're happy about that and clearly we're seeing some uptick in eSpeed and also in Corporate Solutions so trend lines are in fact positive. Responding to your question directly, we have to look at each situation individually and make our assessments. I think your direct question would be if you look at an acquisition and you're assuming large revenue growth we clearly recognize that that increases the risk profile and it's a dramatic risk profile increase to assuming expense synergies so we do use that to guide some of our thinking. It's very hard for us to consider any acquisition where we have a hockey stick revenue growth and in the last year we have not been successful in a number of different bidding situations because of our discipline with respect to one, the return we need but two, in terms of just our clinical view of what the revenue growth opportunities are.

Okay, sounds like your greater discipline on the pricing side might skew you towards more buyback in the future again depending on how the properties are come up?

I wouldn't want to say anything definitive. I would say we look at each situation and each particular point in time as unique opportunity.

Our next question comes from Ashley Serrao with Credit Suisse.

So a question on Corporate Solutions, can you slice your margin expansion plan for 2015 further, specifically if you were to assume flat revenues and layer in incremental expense that you identified, where would margins be? Basically trying to just get a sense of how revenue dependent that new margin target is?

Yes, so Ashley, I think that the range that we provided for the fourth quarter I think reflects our current expectations for both the continued cost synergies as well as for revenue expectations for the business. So certainly if we're more successful on the revenue side, then I think we will be to the higher end of that range and then at the lower side if we don't have that success. I will continue to mention that 2015 will as we've discussed before continue to be an integration year as we're migrating from a larger number of platforms to a smaller number of platforms that unlocks the opportunities for us to drive further cost savings, but it also subjects us to transitions with our clients and customers that we try to manage as carefully and as effectively as possible but that takes time from the team focusing on those issues as opposed to sales efforts but we think that as we can successfully complete that process, we'll be able to move more and more focus to the sales growth side and that will translate into stronger revenue growth.

Our next question comes from Alex Blostein with Goldman Sachs. Your line is now open.

So question on eSpeed, just when you take a step back and you think about where the market share was in the fourth quarter and I think you guys have alluded to potential pick up towards the end of the year as you move into new centers. What do you think went the other way for you guys so that you actually lost a little bit of market share and then just a follow-up, I guess on the intangible charge this quarter, the $49 million. Is that essentially eSpeed related? Or is that a related to number of intangibles?

Let me start with the first part of your question, Lee can address the second. So when you look at our customer mix, we recognize that we're more indexed to volatility. So as volatility comes into the marketplace the predominance of our customers enjoy that and trade more actively so in periods of low volatility our markets share will skew lower than I think its baseline rate and during heightened volatility I think you'll see the opposite. So the important point is we're in good situations with all our customer which is we could not say a year ago and certainly we see increased volatility in the fourth quarter going into the first quarter which is serving us well, so we're pleased with the positioning and as we've said before, we're somewhat uniquely able to extend the product set in that we don't have a voice brokerage component that would argue against that and we have the soft role of short shorts this week and we're looking forward to making that in full production the next couple of weeks so we're excited.

And Alex, on the asset impairment, the 49 million approximately 80% of that or 38 million was attributable to an impairment that we took on the eSpeed customer list and I think it's important to note that when we make the acquisition you apply the excess of the purchase price above the fair value to a variety of intangible assets. The smaller one of those was the customer relationships, it's more specifically related to the expected revenues from the existing customer base at that time and as a result of our deliberate pricing actions to move towards a more hybrid pricing model including more variable fees in this lower volume environment, that reduced the amount of revenue associated with that existing customer list so we took a partial impairment of that asset. We did not impair the longer term intangible of trade name for that. We continued to believe that the value of that asset is in excess of our carrying value and importantly that's not just our judgment. It's also the judgment of our external valuation experts that provide those valuations to us. The other amount of the 49 million beyond the eSpeed customer list impairments are a variety of different technology assets that we have decided to write-off. They are no longer contributing to the business, an association of approximately 13 items that contribute to that additional 11 million in the 49 million.

Our next question comes from Niamh Alexander with KBW. Your line is open.

Just to kind of loop back on the solid expense guidance, I want to correspond maybe some of that because the core expense guidance excluding the intangibles was better than we expected. You're kind of modeling flat year-on-year and I'm just trying to parse out maybe some of that as exchange rate related and then I guess relating back to your slide 4 on your revenue guidance, like the Information and the Technology Solutions targeting mid-single digits, if we assume I'm sure the exchange rates will change but if we assume there is no change from now so already we're kind of at a stronger dollar versus where you are a year ago, should we still be kind of modeling mid-single digits or should we be adjusting that for now adjusting it lower for a stronger dollar?

Well our guidance is that it's longer term guidance and so it's first of all, that's organic growth excluding the impact of foreign exchange. So when we provide those organic numbers in the chart on page 4 of the presentation those are at constant currency, Niamh, so that's the changes or fluctuations in foreign exchange rate won't influence the numbers that we're reporting there nor the overall guidance that we've provided.

So for our modeling purposes we should kind of adjust now for where those exchange rates are now and maybe all else equal I guess bring that down a little bit to adjust for the lower non-dollar stuff is that fair?

Yes, I would say it think our expectation in looking at where the analyst consensus expenses are is that they have probably have not updated for current foreign exchange rates. That's why it may look flat to lower than where we're and so when we set the 2015 guidance what we're looking at is average foreign exchange rates in January to determine that number, so I think that adjustment needs to be made and then we've also given you guidance in terms of the additional expenses from the Dorsey, Wright acquisition which would be approximately $10 million on an annual basis.

Our next question comes from Neil Stratton with Citigroup. Your line is open.

I just wanted to ask a question about the listings business. There was a price increase which would have affected 2015 and also a change to a new fee schedule which is optional but mandatory in 2018. Just wanted to get any color around what the revenue pick up could be year-over-year from that? Thanks.

Well it's certainly coming in higher than we anticipated and Adena, what are we looking at, 5 million?

Right. So I think that if we were to look at 2015 versus 2014, just on the fee increase it's approximately 10 million.

And just along with it how do you see the sort of the all-inclusive comparing to the prior fee schedule? Is that a net benefit to NASDAQ? How do you see that shaping up?

I think it's a win-win and it's obviously a net benefit to us but our customers also like it because they have a better ability to budget for the year, they did not like getting middle of the year listing of additional shares fees. So this is a way for them to avoid that, so it's been very, very well received. The uptake was we give them the option, the uptake was higher than we anticipated so we're happy.

Our next question comes from Chris Allen with Evercore. Your line is open.

Most of my questions have been answered. I guess just one quick on one U.S. equity options. We’ve seen some nice market share gains from [inaudible] in the Miami Exchange in recent months; it seems to be coming out of Philex and AMEX. I was just wondering if you could provide any color in terms of competitive dynamics for the industry right now what you guys are seeing.

Yes, right now our market share lead over our nearest competitor is higher than it ever has been historically. So I think we're six points higher than number two when you put our different assets together but so between Philex and BX, were at an all-time high, so we have certainly seen market share gains from us versus some other competitors, I don't need to go into names but we're very pleased with our market share positioning.

And that concludes the Q&A session. I'll now turn the call back over to Bob Greifeld, CEO for closing remarks.

Great. Well as I said in my prepared remarks, it was truly an outstanding quarter and outstanding year. We're happy to be delivering to our investor's record results. Our businesses are better positioned than they were before. Our management team is in place and positioned to grow this institution over time and I think we're striking the right balance between focus on core operational efficiency, investment in R&D and strategic acquisitions. So we like to stay at the - of the franchise at this point in time. We appreciate your support and look forward to getting back to you again in the next quarters to come. So thank you everybody.