Nasdaq, Inc.

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NASDAQ OMX Group
NASDAQOMXlogo.gif
Founded Feb. 27, 2008
Headquarters New York
Key People Robert Greifeld, CEO
Products Exchange offering products covering multiple asset classes
Website www.nasdaqomx.com

NASDAQ OMX Group, Inc. owns and operates 24 exchanges, including the Nasdaq Stock Market, as well as three clearing houses and five central securities depositories, spanning six continents. Eighteen of its 24 markets trade equities, and the other six trade options, derivatives, fixed income, and commodities.[1]

NASDAQ OMX Group was created when the Nasdaq Stock Market acquired the Nordic exchanges' OMX Nordic Exchange marketplace on Feb. 27, 2008.[2] As part of the transaction, NASDAQ OMX Group also became a 33.33 percent shareholder in DIFX, Dubai's international financial exchange. Borse Dubai is a 19.9 percent shareholder of NASDAQ OMX Group.

According to the annual Futures Industry Association's (FIA) survey of the world's leading derivatives exchanges in 2012, NASDAQ OMX was ranked as the eighth-largest derivatives exchange in the world by contract volume, putting it below the CBOE and above the Moscow Exchange. The report, which was released in March 2013, states that the number of futures and options traded on NASDAQ OMX decreased by 13.9 percent to 1.1 billion contracts in 2012.[3]

Background of the Combined Entity

NASDAQ OMX Group delivers trading, exchange technology and public company services across six continents, and for more than 3,900 companies. This includes a U.S. listings market; the OMX Nordic Exchange, including First North; and the 144A PORTAL Market. The company offers trading across multiple asset classes including equities, derivatives, debt, commodities, structured products and ETFs. NASDAQ OMX Group technology supports the operations of more than 60 exchanges, clearing organizations and central securities depositories in more than 50 countries.

OMX Nordic Exchange is not a legal entity but describes the common offering from NASDAQ OMX Group exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga, and Vilnius.

Before the merger with OMX, the Nasdaq Stock Market (NASDAQ) listed itself as the world's second-largest cash equities platform by trading volume and the biggest electronic screen-based equity securities market in the U.S. in terms of listings and traded share volume.[4]

With approximately 3,200 listed companies, Nasdaq is home to all areas of business including technology, retail, communications, financial services, transportation, media and biotechnology industries. NASDAQ is the primary market for trading NASDAQ-listed stocks.

NASDAQ trades on the Nasdaq Global Select Market under the symbol "NDAQ."

History

The NASDAQ Stock Market, Inc. debuted in 1971 as the world’s first electronic stock market. Restricted shares of NASDAQ were initially sold by the NASD in 2000 through a private placement offering. Trading restrictions expired in 2002 and shares began trading on the OTC Bulletin Board under the symbol NDAQ. On Feb. 9, 2005, NASDAQ listed its shares on The Nasdaq Stock Market following an offering of secondary shares priced at $9 per share.

Nasdaq was traditionally known as the home of technology and growth stocks, but has expanded into a wide variety of sectors.[5]

Nasdaq embarked on a two-year pursuit of an expanded foothold in Europe with an indicative 950p-a-share offer for the London Stock Exchange (LSE) on March 3, 2006, which was swiftly rejected by the LSE and withdrawn on March 30, 2006. Nasdaq started acquiring LSE stock on Apr. 12, 2006, building a 14.99-percent stake at 1,175p a share, adding a further 3.8 percent on May 3 at 1,218p and 5.4 percent at 1,248p on November 12. Nasdaq tabled a £2.9 billion indicative offer on Nov. 20, 2006 valued at 1,243p per share, with the U.S. exchange boosting its stake from 24.1 percent to 28.75 percent. The LSE continued to reject the offer and rejected discussions with Nasdaq executives. The offer expired on Feb. 10, 2007.

While remaining the LSE's largest shareholder, Nasdaq then embarked in what became a three-way takeover battle for OMX, which saw it lined up against Borse Dubai and the Qatar Investment Authority (QIA). Borse Dubai and the U.S. exchange subsequently teamed up with a joint offer, while the QIA bowed out in December 2007, selling its shares in OMX to Borse Dubai in February 2008.

The deal saw Borse Dubai acquire OMX and then transfer it to Nasdaq in return for a 19.9-percent stake in a new combined company as well as Nasdaq's 28-percent stake in LSE.[6]

In December 2010, Nasdaq OMX Group Inc. announced plans to move into the U.S. carbon markets.

On April 1, 2011, NASDAQ OMX Group and IntercontinentalExchange (ICE) proposed a transaction to acquire NYSE Euronext for $42.50 per share, a 19-percent premium over the offer from Deutsche Boerse.[7] The proposal would have created an international exchange, headquartered in New York City, with a geographic footprint in 16 countries.[8] However, NASDAQ OMX and ICE withdrew their bid for NYSE Euronext on May 16, 2011, after the U.S. Department of Justice threatened a lawsuit over antitrust concerns.[9]

On May 29, 2013 the SEC announced a $10 million fine against NASDAQ OMX, the largest fine ever levied against an exchange, regarding the problematic Facebook IPO on May 18, 2012, in which the SEC cited “poor systems and decision making” both before and after the Facebook initial public offering. When trading began at 11 a.m. on May 18, the Nasdaq system was overwhelmed by 496,000 orders that sent Nasdaq’s computers into a continuous loop that made it impossible to establish a correct opening price for Facebook stock. In addition to the $10 million fine, Nasdaq had already agreed to pay $62 million to the brokers who lost money because of the problems. UBS, which contends that it lost $356 million because of Nasdaq’s errors, said it plans to seek more money from Nasdaq through arbitration.[10]

In January 2014 Nasdaq said it no longer wanted to run the securities information processor, or SIP, the marketwide quote service that broke down and froze thousands of its U.S. stocks in August of 2013. Nasdaq plans to stop running the service around the end of 2015, at which time another company must be found to run it.[11]

On March 23 2014, Nasdaq OMX announced to sell its trading systems to Bangladesh bourse. The deal brings to 18 the number of exchanges in Asia that use Nasdaq’s technology. The exchanges that adopts Nasdaq’s trading system are Malaysian exchange, Singapore, Australian exchanges, and among others. [12]

Key People

Contract Volume

Year Total Annual Volume* Percent Change World Ranking
2012 1,115,529,138 (-) 13.9% 8
2011 1,295,641,151 (+) 17.8% 7
2010 1,099,437,223 (+) 34.8% 8
2009 815,545,867 -- --

2012

Exchange Volume Percent Change
Nasdaq OMX PHLX 791,443,344 (-) 19.5%
Nasdaq Options Market (U.S.) 203,505,324 (+) 4.8%
Nasdaq OMX (Nordic Markets) 104,904,236 (-) 10.4%
Nasdaq OMX Commodities 879,842 (+) 2.6%
Nasdaq OMX Futures Exchange (U.S) 518,360 --
Nasdaq OMX Boston Options 14,278,032 --
Nasdaq OMX 1,115,529,138 (-) 13.9%

Hours

NASDAQ Stock Market Trading Sessions (Eastern Time):

  • Pre-market trading hours from 7 a.m. to 9:30 a.m.
  • Market hours from 9:30 a.m. to 4 p.m.
  • After-market hours from 4 p.m. to 8 p.m.

NASDAQ Company Finder

NASDAQ's Company Finder allows investors to search for any NASDAQ-listed company using name, symbol, state and zip code. Investors can also sort the information by company name, issue symbol, or total market value. A legend explaining the results screen is accessible from each page.[13]

Products

  • On Jan. 8, 2009, Nasdaq OMX announced a new index to track the performance of companies receiving government aid through the $700 billion financial bailout TARP and other programs.
  • In December of 2012, the NASDAQ OMX Group announced the launch of SMARTS Broker market surveillance system for commodities trading on the London Metals Exchange. The launch includes the go-live of two global broker-dealer customers, including the global multi-asset brokerage Newedge. The surveillance system gives brokers the ability to monitor, identify and flag trading activity across the three LME trading venues - Select, Phone and Ring. [14]
  • On April 29, 2013, Nasdaq OMX announced it would re-launch NASDAQ OMX PSX (PSX) in an effort to create the leading marketplace for Exchange Traded Products (ETPs). The exchange will use a price-time model and will offer market making programs and features designed to provide liquidity to institutional and retail investors. The launch of PSX is planned for May 2013, pending SEC approval.[15]
  • On December 31, 2013, Nasdaq OMX announced it would take a 5 percent equity stake in Borsa Istanbul A.S. as part of a deal that also includes technology-sharing and advisory services. Nasdaq will have the option to increase its stake in the Turkish entity by 2 percent and will receive a series of cash payments.[16]

Clearing

NASDAQ OMX operates its own clearinghouses and provides clearing and other post-trade technology to marketplaces around the world.

NASDAQ OMX Clearing offers clearing of the following asset classes:

  • Equity and index derivatives on the Nordic and Baltic markets
  • Fixed income derivatives on the Nordic markets
  • Commodity derivatives on Nordic power, emission rights, gas, German and Dutch power as well as physical contracts for the British electricity market and derivatives on these.
  • OTC trades done outside the regulated markets and reported to the clearinghouse for clearing.[17]

In March 2014, Nasdaq OMX became the first market infrastructure owner to receive approval for its clearing house to operate under stricter new European regulations designed to tighten oversight of derivatives markets. The new regulations are part of a move to mandatory clearing of derivatives trades in Europe, which is set to go into effect in 2014. The approval came from the Swedish Financial Services Authority, after the European college of regulators overseeing the application gave its assent the previous week. [18]

Acquisitions and Agreements

  • On Nov. 7, 2007, NASDAQ announced that it had entered into a definitive agreement to acquire the Philadelphia Stock Exchange (PHLX), with the purpose of significantly diversifying NASDAQ’s product portfolio by providing NASDAQ with an options trading platform. Under the terms of the agreement, NASDAQ would pay $652 million in cash for the capital stock of PHLX. This transaction was expected to close in the first quarter of 2008 and to become accretive to 2009 earnings. The board of directors of each company unanimously approved the transaction.[20]
  • On Nov. 29, 2007, a Reuters story indicated that NASDAQ would slow down its deal making in 2008 to "absorb its recently announced acquisitions," according to Greifeld. NASDAQ had recently reached deals to take over the Philadelphia and Boston stock exchanges and to buy Nordic market operator OMX jointly with Borse Dubai. According to the article, when Greifeld was asked if that intimated that the NASDAQ would not be seeking new deals in 2008, Greifeld replied: "That's a realistic assumption."
  • On Feb. 27, 2008, The Nasdaq Stock Market, Inc. (Nasdaq:NDAQ) (NASDAQ(r)) completed its combination with OMX AB, creating The NASDAQ OMX Group, Inc. (NASDAQ OMX Group).
  • On Oct. 21, 2008, Nasdaq OMX acquired the consulting and clearing units and international derivatives products of Nord Pool of Oslo for about 2.3 billion Norwegian kroner ($412 million).
  • On Dec. 16, 2008, Agora-X, LLC announced that NASDAQ OMX Group, Inc. completed its equity investment following the launch of the new Agora-X electronic communications network for institutional trading in over-the-counter (OTC) commodity contracts. The transaction gave NASDAQ OMX a 20 percent equity interest in Agora-X.[22]
  • On Jan. 11, 2010, Nasdaq OMX Group announced it would offer $700 million of notes and was getting $1.25 billion in new credit, both of which it would use to fully repay its current credit facilities. As a result, Standard & Poor's upgraded the exchange's rating, lifting it one notch from the final rung before junk status.
  • On Dec. 13, 2010, NASDAQ OMX Group agreed to acquire Stockholm-based Zoomvision Mamato, a company that provided live webcasting primarily for investor relations professionals. They would become part of NASDAQ OMX's Global Corporate Solutions division.[24]
  • On Dec. 15, 2010, NASDAQ OMX Group announced an agreement to acquire FTEN, a company that provided real-time risk management solutions.[25]
  • On February 8, 2012, NASDAQ OMX launched a spot gold futures contract in partnership with Ikon Global Markets, a futures commission merchant registered with the CFTC. The contract would be cash-settled, traded under the symbol 'NAU', and sought to simulate the over-the-counter (OTC) spot gold market trading experience.[26]
  • On March 6, 2012, NASDAQ OMX announced NASDAQ OMX Nordic's creation of the Genium INET all-asset and cross-market technology platform. All asset classes from all eight markets in Sweden, Finland, Denmark, Norway, Iceland, Lithuania, Latvia and Estonia were available on this platform.[27]
  • In September of 2012, it became known that Nasdaq OMX Group Inc. planned to set up an interest rate derivatives trading platform called NASDAQ OMX NLX in London with six products including the German bund and Euribor, in direct competition with the two biggest exchanges in the region. The launch is planned for the first quarter of 2013.[28]
  • On July 1, 2013, Nasdaq OMX Group Inc. acquired electronic Treasuries trading platform eSpeed from BGC Partners Inc. The purchase consideration included $750 million in cash and as much as $484 million in stock, to be dispersed over 15 years. [29] The deal gave Nasdaq more exposure to the fixed income markets, allowing the exchange to continue its strategy of expanding into a wide variety of asset classes. [30] The exchange said it expected eSpeed to add to Nasdaq's earnings within the first twelve months after closing.[31] The platform - which trades two-, three- five-, seven-, ten- and 30-year instruments - became part of Nasdaq OMX's Transaction Services business.[32]
  • On March 4, 2014, Trading Technologies announced the connection with NASDAQ OMX eSpeed.[33] Early in December of 2013, TT has launched connections to the NASDAQ OMX Nordic market and NASDAQ OMX NLX.[34]

Structure and Business Model

OMX has three business units. Nordic Marketplaces includes exchanges in Stockholm, Helsinki, Copenhagen and Iceland, as well as the First North alternative market launched in 2006, and accounted for 48 percent of group revenues in that year.

The equities platform ranks as the fifth-largest in Europe, while the derivatives platform traded 137 million contracts in 2006.

The Market Technology division contributed 35 percent of sales in 2006, providing trading and settlement platforms to customers including X and Y. The Information Services and New Markets division provided 17 percent of revenues.

References

  1. What is NASDAQ?. NASDAQ OMX Group.
  2. NASDAQ Completes OMX Transaction to Become The NASDAQ OMX Group, Inc.. Nasdaq.
  3. 2010 Annual Volume Survey. Futures Industry.com.
  4. Analysts' Presentation. NYSE Euronext.
  5. How Stock Markets Work. Forbes.
  6. Qatar bows out of OMX battle. Financial Times.
  7. NASDAQ OMX & ICE Joint Proposal for NYSE Euronext. NASDAQ OMX Group.
  8. NASDAQ OMX Group and Intercontinental Exchange Propose Superior Transaction to Acquire NYSE Euronext for $42.50 Per Share, 19% Premium to Deutsche Boerse Proposal. Nasdaq.
  9. Nasdaq Drops $11.3 Billion Bid for NYSE, Clearing Way for Deutsche Boerse. Bloomberg.
  10. Nasdaq Is Fined $10 Million Over Mishandled Facebook Public Offering. NY Times.
  11. Nasdaq Said to Plan End to Role Running Stock Price System. Bloomberg.
  12. Nasdaq OMX builds up technology sales in Asia. Financial Times.
  13. NASDAQ Company Finder. NASDAQ.
  14. NASDAQ OMX Launches SMARTS Broker for Trade Monitoring on the London Metal Exchange With Newedge. Nasdaq OMX press release.
  15. NASDAQ OMX to Launch Marketplace Designed for Exchange Traded Products. NASDAQ OMC.
  16. Nasdaq To Take 5% Equity Stake in Borsa Istanbul. The Wall Street Journal.
  17. Clearinghouses and CSDs. Nasdaq OMX.
  18. Nasdaq OMX gets go ahead for clearing house under new rules. The Financial Times.
  19. Nasdaq to Buy Boston Stock Exchange for $61 Million. Bloomberg.
  20. NASDAQ to Acquire Philadelphia Stock Exchange. NASDAQ.
  21. Nasdaq OMX Buys Stake in Fortis EMCF. Finextra.
  22. NASDAQ OMX Completes Equity Investment in Agora-X, LLC. NASDAQ OMX.
  23. NASDAQ OMX Rebrands Philadelphia Board of Trade to NASDAQ OMX Futures Exchange. NASDAQ OMX.
  24. NASDAQ OMX to Acquire Zoomvision Mamato. NASDAQ.
  25. NASDAQ OMX to Acquire FTEN. NASDAQ website.
  26. NASDAQ OMX and IKON GLOBAL MARKETS Launch Spot Gold Futures. FinazNachrichten.
  27. NASDAQ OMX Nordic Creates All-Asset and Cross-Market Technology Platform. NASDAQ OMX.
  28. Nasdaq UK Derivative Market to Offer German Bund, Euribor. Bloomberg.
  29. Nasdaq OMX in $1.2bn deal to buy eSpeed. Financial Times.
  30. Nasdaq OMX Completed Acquisition of eSpeed Platform for Trading of Benchmark U.S. Treasuries. NASDAQ OMX Press Release.
  31. Nasdaq to buy eSpeed platform for $750 million. Reuters.
  32. Nasdaq accelerates diversification play with eSpeed buy. The Trade USA.
  33. NASDAQ OMX eSpeed Goes Live on Trading Technologies. The Wall Street Journal.
  34. TT Goes Live on NLX and Nasdaq OMX Nordic. Waters Technology.