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    NDAQ   US6311031081

NASDAQ, INC.

(NDAQ)
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NASDAQ : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/05/2021 | 02:39pm EDT
The following discussion and analysis of the financial condition and results of
operations of Nasdaq should be read in conjunction with our condensed
consolidated financial statements and related notes included in this Form 10-Q.
Overview
Nasdaq is a global technology company serving the capital markets and other
industries. Our diverse offerings of data, analytics, software and services
enables clients to optimize and execute their business vision with confidence.
We manage, operate and provide our products and services in four business
segments: Market Services, Corporate Platforms, Investment Intelligence and
Market Technology.
First Quarter 2021 and Recent Developments
Cash Dividend on Common Stock
•  In April 2021, the board of directors approved a regular quarterly cash
dividend of $0.54 per share on our outstanding common stock, which reflects a
10.0% increase from our most recent quarterly cash dividend of $0.49 per share.
•  For the three months ended March 31, 2021, we returned $81 million to
shareholders through dividend payments.
Share Repurchase Program
•During the three months ended March 31, 2021, we repurchased 1,121,620 common
shares at a cost of $162 million. As of March 31, 2021, the remaining amount
authorized for share repurchases under our share repurchase program was $248
million (excluding the additional $1 billion authorized subject to the closing
of the sale of our U.S. Fixed Income business).
Corporate Highlights
•In February 2021, we completed the acquisition of Verafin, a SaaS technology
provider of anti-financial crime management solutions that provides a
cloud-based platform to help detect, investigate, and report money laundering
and financial fraud. The acquisition strengthens our existing regulatory and
anti-financial crime solutions.
•ETP assets under management tracking Nasdaq indexes and derivative product
volume tracking Nasdaq indexes each set new quarterly records. Overall AUM in
ETPs benchmarked to our proprietary indexes totaled $385
billion as of March 31, 2021, an increase of 87% compared to March 31, 2020.
Additionally, the number of futures and options on futures contracts tracking
Nasdaq indexes set a quarterly record with 105 million contracts traded, an
increase of 31% from 80 million in the first quarter of 2020. There were 17
products tracking Nasdaq indexes that launched in the first quarter of 2021,
including 13 outside of the U.S.
•Our analytics business, led by eVestment and Solovis, delivered strong
retention and sales growth during the first quarter of 2021 compared to the
prior year period.
•The Nasdaq Stock Market led U.S. exchanges with a 69% total IPO win rate,
including a 77% win rate among operating companies and a 66% win rate among
SPACs. In the first quarter of 2021, The Nasdaq Stock Market welcomed 275 IPOs,
representing $74 billion in capital raised, including 79 operating company IPOs,
as well as 196 SPAC IPOs.
•In the first quarter of 2021, our U.S. options market set a quarterly record of
892 million contracts traded, an increase of 57% year-over-year. Additionally,
we led all exchanges during the period in total volume traded for options
inclusive of both multiply-listed equity options and index options products. Our
U.S. equities markets set a quarterly record of 153 billion shares traded, an
increase of 20% year-over-year.
•We agreed to sell our U.S. Fixed Income business to Tradeweb. This decision
aligns with our corporate strategy to concentrate our resources and capital to
maximize our potential as a major technology and analytics provider to the
global capital markets. The transaction is expected to close later in 2021
subject to satisfaction of customary closing conditions, including the receipt
of required regulatory approvals.










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Nasdaq's Operating Results
Key Drivers
The following table and charts include key drivers and other metrics for our
Market Services, Corporate Platforms, Investment Intelligence and Market
Technology segments. In evaluating the performance of our business, our senior
management closely evaluates these key drivers.
                                                                            

Three Months Ended March 31,

                                                                                       2021                 2020
Market Services
Equity Derivative Trading and Clearing
U.S. equity options
Total industry average daily volume (in millions)                                         40.1               25.3
Nasdaq PHLX matched market share                                                          12.9  %            12.8  %
The Nasdaq Options Market matched market share                                             7.9  %            10.6  %
Nasdaq BX Options matched market share                                                     0.7  %             0.2  %
Nasdaq ISE Options matched market share                                                    7.7  %             8.4  %
Nasdaq GEMX Options matched market share                                                   5.9  %             3.8  %
Nasdaq MRX Options matched market share                                                    1.4  %             0.3  %
Total matched market share executed on Nasdaq's exchanges                                 36.5  %            36.1  %

Nasdaq Nordic and Nasdaq Baltic options and futures Total average daily volume of options and futures contracts(1)

                        358,365              457,819
Cash Equity Trading
Total U.S.-listed securities
Total industry average daily share volume (in billions)                                   14.7               11.0
Matched share volume (in billions)                                                       152.6              126.8
The Nasdaq Stock Market matched market share                                              15.7  %            16.8  %
Nasdaq BX matched market share                                                             0.7  %             1.2  %
Nasdaq PSX matched market share                                                            0.7  %             0.6  %
Total matched market share executed on Nasdaq's exchanges                                 17.1  %            18.6  %

Market share reported to the FINRA/Nasdaq Trade Reporting Facility

               35.2  %            30.2  %
Total market share(2)                                                                     52.3  %            48.8  %
Nasdaq Nordic and Nasdaq Baltic securities
Average daily number of equity trades executed on Nasdaq's exchanges                 1,093,684            1,021,963
Total average daily value of shares traded (in billions)                         $         7.0           $    6.4
Total market share executed on Nasdaq's exchanges                                         78.5  %            77.1  %

FICC

Fixed Income
U.S. fixed income volume ($ billions traded)                                     $       2,494           $  2,067

Total average daily volume of Nasdaq Nordic and Nasdaq Baltic fixed income contracts

                                                                             125,959              115,137

Commodities

Power contracts cleared (TWh)(3)                                                           250                292
Corporate Platforms
IPOs
The Nasdaq Stock Market(4)                                                                 275                 27
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic                                     24                  7
Total new listings
The Nasdaq Stock Market(4)                                                                 319                 56
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic(5)                                  32                  9
Number of listed companies
The Nasdaq Stock Market(6)                                                               3,667              3,146
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic(7)                               1,090              1,039
Investment Intelligence
Number of licensed ETPs                                                                    349                325
ETP AUM tracking Nasdaq indexes (in billions)                                    $         385           $    206

TTM(8) net inflows in ETP AUM tracking Nasdaq indexes (in billions)

      $          52           $     22
Market Technology
Order intake (in millions)(9)                                                    $          41           $     80
Annualized recurring revenue, or ARR (in millions)(10)                           $         416           $    257


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____________

(1)  Includes Finnish option contracts traded on Eurex for which Nasdaq and
Eurex have a revenue sharing arrangement.
(2)  Includes transactions executed on The Nasdaq Stock Market's, Nasdaq BX's
and Nasdaq PSX's systems plus trades reported through the FINRA/Nasdaq Trade
Reporting Facility.
(3)  Transactions executed on Nasdaq Commodities or OTC and reported for
clearing to Nasdaq Commodities measured by Terawatt hours (TWh).
(4)  New listings include IPOs, including issuers that switched from other
listing venues, closed-end funds and separately listed ETPs. As of March 31,
2021, of the 275 IPOs, 196 were SPACs. As of March 31, 2020, of the 27 IPOs, 7
were SPACs.
(5)  New listings include IPOs and represent companies listed on the Nasdaq
Nordic and Nasdaq Baltic exchanges and companies on the alternative markets of
Nasdaq First North.
(6)  Number of total listings on The Nasdaq Stock Market at period end,
including 410 ETPs as of March 31, 2021 and 412 as of March 31, 2020.
(7)  Represents companies listed on the Nasdaq Nordic and Nasdaq Baltic
exchanges and companies on the alternative markets of Nasdaq First North.
(8)  Trailing 12-months.
(9)  Total contract value of orders signed during the period.
(10)  ARR for a given period is the annualized revenue of active Market
Technology support and SaaS subscription contracts. ARR is currently one of our
key performance metrics to assess the health and trajectory of our recurring
business. ARR does not have any standardized definition and is therefore
unlikely to be comparable to similarly titled measures presented by other
companies. ARR should be viewed independently of revenue and deferred revenue
and is not intended to be combined with or to replace either of those items. ARR
is not a forecast and the active contracts at the end of a reporting period used
in calculating ARR may or may not be extended or renewed by our customers.

The following chart summarizes our ARR (in millions):

                    [[Image Removed: ndaq-20210331_g1.jpg]]
ARR for a given period is the annualized revenue derived from subscription
contracts with a defined contract value. This excludes contracts that are not
recurring, are one-time in nature, or where the contract value fluctuates based
on defined metrics. ARR is currently one of our key performance metrics to
assess the health and trajectory of our recurring business. ARR does not have
any standardized definition and is therefore unlikely to be comparable to
similarly titled measures presented by other companies. ARR should be viewed
independently of revenue and deferred revenue and is not intended to be combined
with or to replace either of those items. ARR is not a forecast and the active
contracts at the end of a reporting period used in calculating ARR may or may
not be extended or renewed by our customers.

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____________
Includes:
•            Trade Management Services business, excluding one-time

service requests.

U.S. and Nordic annual listing fees, IR and ESG products, 

including subscription

             contracts for IR Insight, Boardvantage and OneReport, and IR 

advisory services.


             Proprietary market data and index data subscriptions as well as subscription
•            contracts for eVestment, Solovis, DWA tools and services, 

Nasdaq Fund Network and

             Quandl. Also includes guaranteed minimum on futures contracts 

within the Index

             business.

•            Active Market Technology support and SaaS subscription contracts.


The following chart summarizes our annualized SaaS revenues for the quarters ended March 31, 2020 and 2021 (in millions):

                    [[Image Removed: ndaq-20210331_g2.jpg]]
Financial Summary
The following table summarizes our financial performance for the three months
ended March 31, 2021 when compared to the same period in 2020. The comparability
of our results of operations between reported periods is impacted by the
acquisition of Verafin in February 2021. See "2021 Acquisition," of Note 4,
"Acquisitions," to the condensed consolidated financial statements for further
discussion of the acquisition of Verafin. For a detailed discussion of our
results of operations, see "Segment Operating Results" below.
                                                                          Three Months Ended March 31,
                                                                              2021               2020          Percentage Change
                                                                        

(in millions, except per share

amounts)

Revenues less transaction-based expenses                                 $       851          $   701                    21.4  %
Operating expenses                                                               486              426                    14.1  %
Operating income                                                                 365              275                    32.7  %
Net income attributable to Nasdaq                                        $       298          $   203                    46.8  %
Diluted earnings per share                                               $      1.78          $  1.22                    45.9  %
Cash dividends declared per common share                                 $      0.49          $  0.47                     4.3  %


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In countries with currencies other than the U.S. dollar, revenues and expenses
are translated using monthly average exchange rates. Impacts on our revenues
less transaction-based expenses and operating income associated with
fluctuations in foreign currency are discussed in more detail under "Item 3.
Quantitative and Qualitative Disclosures about Market Risk."
Segment Operating Results
The following table shows our revenues by segment, transaction-based expenses
for our Market Services segment and total revenues less transaction-based
expenses:
                                                                          

Three Months Ended March 31,

                                                                              2021              2020          Percentage Change
                                                                                  (in millions)
Market Services                                                           $   1,139          $   933                    22.1  %
Transaction-based expenses                                                     (801)            (652)                   22.9  %
Market Services revenues less transaction-based expenses                        338              281                    20.3  %
Corporate Platforms                                                             155              128                    21.1  %
Investment Intelligence                                                         258              211                    22.3  %
Market Technology                                                               100               81                    23.5  %

Total revenues less transaction-based expenses                            $     851          $   701                    21.4  %



The following charts show our Market Services, Corporate Platforms, Investment
Intelligence, and Market Technology segments as a percentage of our total
revenues less transaction-based expenses of $851 million for the three months
ended March 31, 2021 and $701 million for the three months ended March 31, 2020:
[[Image Removed: ndaq-20210331_g3.jpg]] [[Image Removed: ndaq-20210331_g4.jpg]]

                                       36
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MARKET SERVICES
The following table shows total revenues, transaction-based expenses, and total
revenues less transaction-based expenses from our Market Services segment:
                                                                             Three Months Ended March
                                                                                        31,                      Percentage
                                                                               2021             2020               Change
                                                                                   (in millions)
Market Services Revenues:
Equity Derivative Trading and Clearing Revenues(1)                          $    422          $  285                   48.1  %
Transaction-based expenses:
Transaction rebates                                                             (296)           (172)                  72.1  %
Brokerage, clearance and exchange fees(1)                                        (20)            (19)                   5.3  %

Equity derivative trading and clearing revenues less transaction-based expenses

                                                       106              94                   12.8  %

Cash Equity Trading Revenues(2)                                                  617             558                   10.6  %
Transaction-based expenses:
Transaction rebates                                                             (358)           (307)                  16.6  %
Brokerage, clearance and exchange fees(2)                                       (126)           (153)                 (17.6) %
Cash equity trading revenues less transaction-based expenses                     133              98                   35.7  %

FICC Revenues                                                                     20              18                   11.1  %
Transaction-based expenses:

Brokerage, clearance and exchange fees                                            (1)             (1)                     -  %
FICC revenues less transaction-based expenses                                     19              17                   11.8  %

Trade Management Services Revenues                                                80              72                   11.1  %
Total Market Services revenues less transaction-based expenses              $    338          $  281                   20.3  %


____________

(1)  Includes Section 31 fees of $17 million in the first quarter of 2021 and
2020. Section 31 fees are recorded as equity derivative trading and clearing
revenues with a corresponding amount recorded in transaction-based expenses.
(2)  Includes Section 31 fees of $115 million in the first quarter of 2021 and
$145 million in the first quarter of 2020. Section 31 fees are recorded as cash
equity trading revenues with a corresponding amount recorded in
transaction-based expenses.
Equity Derivative Trading and Clearing Revenues
Equity derivative trading and clearing revenues and equity derivative trading
and clearing revenues less transaction-based expenses increased in the first
quarter of 2021 compared with the same period in 2020 primarily due to higher
U.S. industry trading volumes. The increase in equity derivative trading and
clearing revenues less transaction-based expenses was partially offset by a
lower U.S. net capture rate.
Section 31 fees are recorded as equity derivative trading and clearing revenues
with a corresponding amount recorded as transaction-based expenses. In the U.S.,
we are assessed these fees from the SEC and pass them through to our customers
in the form of incremental fees. Pass-through fees can increase or decrease due
to rate changes by the SEC, our percentage of the overall industry volumes
processed on our systems, and differences in actual dollar value of shares
traded. Since the amount recorded in revenues is equal to the amount recorded as
transaction-based expenses, there is no impact on our
revenues less transaction-based expenses. Section 31 fees were flat in the first
quarter of 2021 compared with the same period in 2020 as higher dollar value
traded on Nasdaq's exchanges was offset by lower average SEC fee rates.
Transaction rebates, in which we credit a portion of the per share execution
charge to the market participant, increased in the first quarter of 2021
compared with the same period in 2020 primarily due to higher U.S. industry
trading volumes and an increase in the U.S. rebate capture rate.
Brokerage, clearance and exchange fees increased in the first quarter of 2021
compared with the same period in 2020 primarily due to higher routing fees.
Cash Equity Trading Revenues
Cash equity trading revenues and cash equity trading revenues less
transaction-based expenses increased in the first quarter of 2021 compared with
the same period in 2020 primarily due to higher U.S. industry trading volumes
and a favorable impact from foreign exchange of $4 million,
                                       37
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partially offset by lower overall U.S. matched market share executed on Nasdaq's
exchanges. A higher net capture rate also contributed to the increase in cash
equity trading revenues less transaction-based expenses. The increase in cash
equity trading revenues was partially offset by lower Section 31 pass-through
fee revenue, as discussed below.
Similar to equity derivative trading and clearing, in the U.S. we record
Section 31 fees as cash equity trading revenues with a corresponding amount
recorded as transaction-based expenses. We are assessed these fees from the SEC
and pass them through to our customers in the form of incremental fees. Since
the amount recorded as revenues is equal to the amount recorded as
transaction-based expenses, there is no impact on our revenues less
transaction-based expenses. Section 31 fees decreased in the first quarter of
2021 compared with the same period in 2020 due to lower average SEC fee rates,
partially offset by higher dollar value traded on Nasdaq's exchanges.
Transaction rebates increased in the first quarter of 2021 compared with 2020.
For The Nasdaq Stock Market, Nasdaq PSX and Nasdaq CXC, we credit a portion of
the per share execution charge to the market participant that provides the
liquidity, and for Nasdaq BX and Nasdaq CX2, we credit a portion of the per
share execution charge to the market participant that takes the liquidity. The
increase in the first quarter of 2021 was primarily due to higher U.S. industry
trading volumes, partially offset by lower overall U.S. matched market share
executed on Nasdaq's exchanges and a lower rebate capture rate.
Brokerage, clearance and exchange fees decreased in the first quarter of 2021
compared with the same period in 2020 primarily due to lower Section 31
pass-through fees, as discussed above.
FICC Revenues
FICC revenues and FICC revenues less transaction-based expenses increased in the
first quarter of 2021 compared with the same period in 2020 primarily driven by
a favorable impact from foreign exchange of $2 million.
Trade Management Services Revenues
Trade management services revenues increased in the first quarter of 2021
compared with the same period in 2020 primarily due to higher demand for our
connectivity solutions.
CORPORATE PLATFORMS
The following table shows revenues from our Corporate Platforms segment:
                                                  Three Months Ended March 31,
                                                  2021                      2020                 Percentage Change
                                                          (in millions)
Corporate Platforms:
Listing Services                          $              98          $            75                          30.7  %
IR & ESG Services                                        57                       53                           7.5  %
Total Corporate Platforms                 $             155          $           128                          21.1  %


Listing Services Revenues
Listing services revenues increased in the first quarter of 2021 compared with
the same period in 2020. The increase was primarily due to higher U.S. listings
revenues due to an increase in the overall number of listed companies and higher
NPM revenues due to an increase in private company transactions.
IR & ESG Services Revenues
IR & ESG Services revenues increased in the first quarter of 2021 compared with
the same period in 2020 primarily due to an increase in both IR and ESG advisory
services revenues.
INVESTMENT INTELLIGENCE
The following table shows revenues from our Investment Intelligence segment:
                                                             Three Months Ended March 31,
                                                              2021                   2020                Percentage Change
                                                                    (in millions)
Investment Intelligence:
Market Data                                            $           108          $         97                          11.3  %
Index                                                              102                    73                          39.7  %
Analytics                                                           48                    41                          17.1  %
Total Investment Intelligence                          $           258          $        211                          22.3  %


Market Data Revenues
Market data revenues increased in the first quarter of 2021 compared with the
same period in 2020 primarily due to organic growth in proprietary data products
from new sales, including continued expansion geographically, and an increase in
shared tape plan revenues.
Index Revenues
Index revenues increased in the first quarter of 2021 compared with the same
period in 2020 primarily due to higher licensing revenues from higher average
AUM in ETPs linked to Nasdaq indexes and higher licensing revenues from futures
trading linked to the Nasdaq-100 Index.
                                       38
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Analytics Revenues
Analytics revenues increased in the first quarter of 2021 compared with the same
period in 2020 primarily due to the growth in eVestment and Solovis.
MARKET TECHNOLOGY
The following table shows revenues from our Market Technology segment:
                                                           Three Months Ended March 31,
                                                          2021                       2020                 Percentage Change
Market Technology:                                                (in millions)
Marketplace Infrastructure Technology             $               54          $            52                           3.8  %
Anti Financial Crime Technology                                   46                       29                          58.6  %
Market Technology                                 $              100          $            81                          23.5  %


Marketplace Infrastructure Technology
Marketplace infrastructure technology revenues increased in the first quarter of
2021 compared with the same period in 2020 primarily due to a favorable impact
from foreign exchange of $2 million.
Anti Financial Crime Technology
Anti-financial crime technology revenues increased in the first quarter of 2021
compared with the same period in 2020 due to continued growth in surveillance
solutions, the inclusion of revenues from our acquisition of Verafin, and a
favorable impact from foreign exchange of $2 million.
                                  * * * * * *

Expenses

Operating Expenses
The following table shows our operating expenses:
                                                                        Three Months Ended March 31,           Percentage
                                                                            2021              2020               Change
                                                                                (in millions)
Compensation and benefits                                               $     239          $   195                   22.6  %
Professional and contract services                                             27               27                      -  %
Computer operations and data communications                                    44               35                   25.7  %
Occupancy                                                                      28               25                   12.0  %
General, administrative and other                                              13               61                  (78.7) %
Marketing and advertising                                                      10                9                   11.1  %
Depreciation and amortization                                                  63               48                   31.3  %
Regulatory                                                                      7                7                      -  %
Merger and strategic initiatives                                               45                7                  542.9  %
Restructuring charges                                                          10               12                  (16.7) %
Total operating expenses                                                $     486          $   426                   14.1  %



The increase in compensation and benefits expense in the first quarter of 2021
compared with the same period in 2020 was primarily driven by higher
performance-linked compensation expense, an increase in headcount as a result of
our acquisition of Verafin and strategic initiatives, and an unfavorable impact
from foreign exchange of $10 million.
Headcount increased to 5,585 employees as of March 31, 2021 from 4,555 as of
March 31, 2020 primarily due to our recent acquisition of Verafin and strategic
initiatives, including growth in our Market Technology business.
Computer operations and data communications expense increased in the first
quarter of 2021 compared with the same period in 2020 primarily due to higher
software maintenance costs due to higher cloud storage costs and our acquisition
of Verafin.
Occupancy expense increased in the first quarter of 2021 compared with the same
period in 2020 mainly due to higher costs associated with additional facility
and rent costs resulting from the expansion of our new U.S. headquarters in New
York and higher costs related to our acquisition of Verafin.
General, administrative and other expense decreased in the first quarter of 2021
compared with the same period in 2020 primarily due to bond refinancing costs in
the first quarter of 2020, higher charitable donations made to COVID-19 response
and relief efforts in the first quarter of 2020 and lower travel costs in the
first quarter of 2021.
Depreciation and amortization expense increased in the first quarter of 2021
compared with the same period in 2020 primarily due to additional expense for
acquired intangible
                                       39
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assets related to our acquisition of Verafin and an increase in capitalized
software placed in service.
Merger and strategic initiatives expense increased in the first quarter of 2021
compared with the same period in 2020 primarily due to the acquisition of
Verafin. We have pursued various strategic initiatives and completed
acquisitions and divestitures in recent years which have resulted in expenses
which would not have otherwise been incurred. These
expenses generally include integration costs, as well as legal, due diligence
and other third party transaction costs and will vary based on the size and
frequency of the activities described above.
See Note 20, "Restructuring Charges," to the condensed consolidated financial
statements for further discussion of our 2019 restructuring plan and charges
associated with this plan.
                                  * * * * * *
Non-operating Income and Expenses
The following table shows our non-operating income and expenses:
                                                                          

Three Months Ended March 31,

                                                                              2021                 2020          Percentage Change
                                                                                  (in millions)
Interest income                                                        $             1          $     2                   (50.0) %
Interest expense                                                                   (29)             (26)                   11.5  %
Net interest expense                                                               (28)             (24)                   16.7  %

Other income                                                                         1                5                   (80.0)
Net income from unconsolidated investees                                            57               17                   235.3  %
Total non-operating income (expenses)                                  $            30          $    (2)               (1,600.0) %


Interest Expense
Interest expense increased in the first quarter of 2021 compared with the same
period in 2020 primarily due to new issuances of senior notes in December 2020
and commercial paper issuances in the first quarter of 2021 to partially fund
our acquisition of Verafin. See "2021 Acquisition," of Note 4, "Acquisitions,"
to the condensed consolidated financial statements for further discussion of the
acquisition of Verafin. See Note 9, "Debt Obligations," to the condensed
consolidated financial statements for further discussion of our debt
obligations.
The following table shows our interest expense:
                                                                     Three Months Ended March 31,
                                                                         2021                 2020          Percentage Change
                                                                             (in millions)
Interest expense on debt                                          $            26          $    24                     8.3  %
Accretion of debt issuance costs and debt discount                              2                1                   100.0  %
Other fees                                                                      1                1                       -  %
Interest expense                                                  $            29          $    26                    11.5  %


                                  * * * * * *
Net Income from Unconsolidated Investees
Net income from unconsolidated investees increased in the first quarter of 2021
compared with the same period in 2020 primarily due to an increase in income
recognized from our equity method investment in OCC. See "Equity Method
Investments," of Note 7, "Investments," to the condensed consolidated financial
statements for further discussion.
Tax Matters
The following table shows our income tax provision and effective tax rate:
                                    Three Months Ended March 31,
                                 2021                               2020       Percentage Change
                                           ($ in millions)
Income tax provision       $         97                           $  70                   38.6  %
Effective tax rate                 24.6    %                       25.6  %

For further discussion of our tax matters, see Note 17, "Income Taxes," to the condensed consolidated financial statements.

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Non-GAAP Financial Measures
In addition to disclosing results determined in accordance with U.S. GAAP, we
also have provided non-GAAP net income attributable to Nasdaq and non-GAAP
diluted earnings per share. Management uses this non-GAAP information
internally, along with U.S. GAAP information, in evaluating our performance and
in making financial and operational decisions. We believe our presentation of
these measures provides investors with greater transparency and supplemental
data relating to our financial condition and results of operations. In addition,
we believe the presentation of these measures is useful to investors for
period-to-period comparisons of our ongoing operating performance.
These measures are not in accordance with, or an alternative to, U.S. GAAP, and
may be different from non-GAAP measures used by other companies. In addition,
other companies, including companies in our industry, may calculate such
measures differently, which reduces their usefulness as comparative measures.
Investors should not rely on any single financial measure when evaluating our
business. This non-GAAP information should be considered as supplemental in
nature and is not meant as a substitute for our operating results in accordance
with U.S. GAAP. We recommend investors review the U.S. GAAP financial measures
included in this Quarterly Report on Form 10-Q, including our condensed
consolidated financial statements and the notes thereto. When viewed in
conjunction with our U.S. GAAP results and the accompanying reconciliation, we
believe these non-GAAP measures provide greater transparency and a more complete
understanding of factors affecting our business than U.S. GAAP measures alone.
We understand that analysts and investors regularly rely on non-GAAP financial
measures, such as non-GAAP net income attributable to Nasdaq and non-GAAP
diluted earnings per share, to assess operating performance. We use non-GAAP net
income attributable to Nasdaq and non-GAAP diluted earnings per share because
they highlight trends more clearly in our business that may not otherwise be
apparent when relying solely on U.S. GAAP financial measures, since these
measures eliminate from our results specific financial items that have less
bearing on our ongoing operating performance. Non-GAAP net income attributable
to Nasdaq for the periods presented below is calculated by adjusting for the
following items:
Amortization expense of acquired intangible assets: We amortize intangible
assets acquired in connection with various acquisitions. Intangible asset
amortization expense can vary from period to period due to episodic acquisitions
completed, rather than from our ongoing business operations. As such, if
intangible asset amortization is included in performance measures, it is more
difficult to assess the day-to-day operating performance of the businesses, the
relative operating performance of the businesses between periods, and the
earnings power of Nasdaq. Performance measures excluding intangible asset
amortization expense therefore
provide investors with a useful representation of our businesses' ongoing
activity in each period.
Merger and strategic initiatives expense: We have pursued various strategic
initiatives and completed acquisitions and divestitures in recent years that
have resulted in expenses which would not have otherwise been incurred. These
expenses generally include integration costs, as well as legal, due diligence
and other third party transaction costs. The frequency and the amount of such
expenses vary significantly based on the size, timing and complexity of the
transaction. Accordingly, we exclude these costs for purposes of calculating
non-GAAP measures which provide a more meaningful analysis of Nasdaq's ongoing
operating performance or comparisons in Nasdaq's performance between periods.
Restructuring charges: We initiated the transition of certain technology
platforms to advance our strategic opportunities as a technology and analytics
provider and continue the re-alignment of certain business areas. See Note 20,
"Restructuring Charges," to the condensed consolidated financial statements for
further discussion of our 2019 restructuring plan. Charges associated with this
plan represent a fundamental shift in our strategy and technology as well as
executive re-alignment and will be excluded for purposes of calculating non-GAAP
measures as they are not reflective of ongoing operating performance or
comparisons in Nasdaq's performance between periods.
Net income from unconsolidated investee: See "Equity Method Investments," of
Note 7, "Investments," to the condensed consolidated financial statements for
further discussion. Our income on our investment in OCC may vary significantly
compared to prior years due to the changes in the OCC's capital management
policy. Accordingly, we will exclude this income from current and prior periods
for purposes of calculating non-GAAP measures which provide a more meaningful
analysis of Nasdaq's ongoing operating performance or comparisons in Nasdaq's
performance between periods.
Other significant items: We have excluded certain other charges or gains,
including certain tax items, that are the result of other non-comparable events
to measure operating performance. We believe the exclusion of such amounts
allows management and investors to better understand the ongoing financial
results of Nasdaq.
For the three months ended March 31, 2020, other significant items include bond
refinancing costs and charitable donations made to the COVID-19 response and
relief efforts, which are recorded in general, administrative and other expense
in our Condensed Consolidated Statements of Income.
Significant tax items:
The non-GAAP adjustment to the income tax provision for the three months ended
March 31, 2021 and 2020 included the tax impact of each non-GAAP adjustment and
for the three months ended March 31, 2020, excess tax benefits related to
employee share-based compensation to reflect the
                                       41
--------------------------------------------------------------------------------

recognition of the income tax effects of share-based awards when awards vest or
are settled. Beginning with the quarter ended March 31, 2021, such excess tax
benefits will no
longer be included as a non-GAAP adjustment due to the immaterial nature of the
adjustment.
                                  * * * * * *

The following table shows reconciliations between U.S. GAAP net income attributable to Nasdaq and diluted earnings per share and non-GAAP net income attributable to Nasdaq and diluted earnings per share:

Three Months Ended March 31,

                                                                              2021            0      2020
                                                                       ($ 

in millions, except share and per

                                                                       share amounts)
U.S. GAAP net income attributable to Nasdaq                            $           298          $        203
Non-GAAP adjustments:
Amortization expense of acquired intangible assets                                  36                    25
Merger and strategic initiatives expense                                            45                     7
Restructuring charges                                                               10                    12
Net income from unconsolidated investees                                           (57)                  (16)

Extinguishment of debt                                                               -                    36

Charitable donations                                                                 -                     5
Other                                                                                2                     -
Total non-GAAP adjustments                                                          36                    69

Adjustment to the income tax provision to reflect non-GAAP adjustments and other tax items

                                                                 (7)                  (18)
Excess tax benefits related to employee share-based compensation                     -                    (3)

Total non-GAAP tax adjustments                                                      (7)                  (21)
Total non-GAAP adjustments, net of tax                                              29                    48
Non-GAAP net income attributable to Nasdaq                             $    

327 $ 251

Weighted-average common shares outstanding for diluted earnings per share

                                                                      167,092,082           166,776,516

U.S. GAAP diluted earnings per share                                   $          1.78          $       1.22
Total adjustments from non-GAAP net income                                        0.18                  0.28
Non-GAAP diluted earnings per share                                    $    

1.96 $ 1.50




Liquidity and Capital Resources
Historically, we have funded our operating activities and met our commitments
through cash generated by operations, augmented by the periodic issuance of our
common stock and debt. Currently, our cost and availability of funding remain
healthy.
As of March 31, 2021, our sources and uses of cash were not materially impacted
by COVID-19 and we have not identified any material liquidity deficiencies as a
result of the COVID-19 pandemic. We will continue to closely monitor and manage
our liquidity and capital resources. In addition, we continue to prudently
assess our capital deployment strategy through balancing acquisitions, internal
investments, debt repayments, and shareholder return activity including share
repurchases and dividends.
In the near term, we expect that our operations and the availability under our
revolving credit facility and
commercial paper program will provide sufficient cash to fund our operating
expenses, capital expenditures, debt repayments, any share repurchases, and any
dividends. In January 2021, we increased the size of our commercial paper
program from $1 billion to $1.25 billion. In February 2021, we issued $475
million of commercial paper to partially fund the acquisition of Verafin. For
further discussion of the acquisition of Verafin, see "2021 Acquisition," of
Note 4, "Acquisitions," to the condensed consolidated financial statements.
As part of the purchase price consideration of a prior acquisition, Nasdaq has
contingent future obligations to issue 992,247 shares of Nasdaq common stock
annually through 2027. See "Non-Cash Contingent Consideration," of Note 18,
"Commitments, Contingencies and Guarantees," to the condensed consolidated
financial statements for further discussion.
                                       42
--------------------------------------------------------------------------------

The value of various assets and liabilities, including cash and cash
equivalents, receivables, accounts payable and accrued expenses, the current
portion of long-term debt, and commercial paper, can fluctuate from month to
month. Working capital (calculated as current assets less current liabilities)
was $98 million as of March 31, 2021, compared with $2,736 million as of
December 31, 2020, a decrease of $2,638 million. Current asset balance changes
decreased working capital by $2,006 million, due to a decrease in cash and cash
equivalents, primarily due to utilization of cash to partially fund the
acquisition of Verafin and a decrease in default funds and margin deposits,
partially offset by increases in other current assets, financial investments,
receivables, net and restricted cash and cash equivalents. Current liability
balance changes decreased working capital by $632 million, due to increases in
short-term debt, deferred revenue, other current liabilities, and accounts
payable and accrued expenses, partially offset by decreases in default funds and
margin deposits, Section 31 fees payable to the SEC, and accrued personnel
costs.
Principal factors that could affect the availability of our internally-generated
funds include:
•  deterioration of our revenues in any of our business segments;
•  changes in regulatory and working capital requirements; and
•  an increase in our expenses.
Principal factors that could affect our ability to obtain cash from external
sources include:
•  operating covenants contained in our credit facilities that limit our total
borrowing capacity;
•  increases in interest rates under our credit facilities;
•  credit rating downgrades, which could limit our access to additional debt;
•  a decrease in the market price of our common stock;
•  volatility or disruption in the public debt and equity markets; and
•  the impact of the COVID-19 pandemic on our business.
The following sections discuss the effects of changes in our financial assets,
debt obligations, regulatory capital requirements, and cash flows on our
liquidity and capital resources.
Financial Assets
The following table summarizes our financial assets:
                                           March 31, 2021      December 31, 2020
                                                       (in millions)
Cash and cash equivalents                 $          774      $            2,745
Restricted cash and cash equivalents                  38                      37
Financial investments                                215                     195
Total financial assets                    $        1,027      $            2,977


Cash and Cash Equivalents and Restricted Cash and Cash Equivalents
Cash and cash equivalents includes all non-restricted cash in banks and highly
liquid investments with original maturities of 90 days or less at the time of
purchase. The balance retained in cash and cash equivalents is a function of
anticipated or possible short-term cash needs, prevailing interest rates, our
investment policy, and alternative investment choices. As of March 31, 2021, our
cash and cash equivalents of $774 million were primarily invested in bank
deposits and money market funds. In the long-term, we may use both internally
generated funds and external sources to satisfy our debt obligations and other
long-term liabilities. Cash and cash equivalents as of March 31, 2021 decreased
$1,971 million from December 31, 2020, primarily due to:
•cash paid for our acquisition of Verafin, net of cash and cash equivalents
acquired;
•repurchases of our common stock;
•cash dividends paid on our common stock;
•purchases of property and equipment;
•payments related to employee shares withheld for taxes; and
•net purchases of securities, partially offset by;
•proceeds from commercial paper, net; and
•net cash provided by operating activities.
See "Cash Flow Analysis" below for further discussion.
Restricted cash and cash equivalents are restricted from withdrawal due to
contractual or regulatory requirements or is not available for general use.
Restricted cash and cash equivalents were $38 million as of March 31, 2021 and
$37 million as of December 31, 2020, an increase of $1 million. Restricted cash
and cash equivalents are classified as restricted cash and cash equivalents in
the Condensed Consolidated Balance Sheets.
Repatriation of Cash
Our cash and cash equivalents held outside of the U.S. in various foreign
subsidiaries totaled $534 million as of March 31, 2021 and $237 million as of
December 31, 2020. The remaining balance held in the U.S. totaled $240 million
as of March 31, 2021 and $2,508 million as of December 31, 2020.
Unremitted earnings of certain subsidiaries outside of the U.S. are used to
finance our international operations and are considered to be indefinitely
reinvested.
Share Repurchase Program
See "Share Repurchase Program," of Note 12, "Nasdaq Stockholders' Equity," to
the condensed consolidated financial statements for further discussion of our
share repurchase program.
Cash Dividends on Common Stock
The following table shows quarterly cash dividends paid per common share on our
outstanding common stock:
                                       43
--------------------------------------------------------------------------------

                    2021        2020

First quarter $ 0.49 $ 0.47



See "Cash Dividends on Common Stock," of Note 12, "Nasdaq Stockholders' Equity,"
to the condensed consolidated financial statements for further discussion of the
dividends.
Financial Investments
Our financial investments totaled $215 million as of March 31, 2021 and were
trading securities primarily comprised of highly rated European government debt
securities. As of
December 31, 2020, financial investments totaled $195 million and were trading
securities primarily comprised of highly rated European government debt
securities. Of these securities, $164 million as of March 31, 2021 and $175
million as of December 31, 2020 are assets primarily utilized to meet regulatory
capital requirements, mainly for our clearing operations at Nasdaq Clearing. See
Note 7, "Investments," to the condensed consolidated financial statements for
further discussion.

                                  * * * * * *
Debt Obligations
The following table summarizes our debt obligations by contractual maturity:
                                                                                                                    December 31,
                                                                Maturity Date               March 31, 2021              2020
                                                                                                       (in millions)
                                                          Weighted-average maturity
Short-term debt - commercial paper                               of 34 days                $          435          $         -

Long-term debt:


0.445% senior unsecured notes                                          December 2022                  597                  597
1.75% senior unsecured notes                                                May 2023                  701                  730
4.25% senior unsecured notes                                               June 2024                  498                  498
$1.25 billion senior unsecured revolving credit
facility                                                               December 2025                   (4)                  (4)
3.85% senior unsecured notes                                               June 2026                  497                  497
1.75% senior unsecured notes                                              March 2029                  697                  726
0.875% senior unsecured notes                                          February 2030                  697                  726
1.650% senior unsecured notes                                           January 2031                  643                  643
2.500% senior unsecured notes                                          December 2040                  643                  643
3.25% senior unsecured notes                                              April 2050                  486                  485
Total long-term debt                                                                       $        5,455          $     5,541
Total debt obligations                                                                     $        5,890          $     5,541



In addition to the $1.25 billion revolving credit facility, we also have other
credit facilities primarily to support our Nasdaq Clearing operations in Europe,
as well as to provide a cash pool credit line for one subsidiary. These credit
facilities, which are available in multiple currencies, totaled $219 million as
of March 31, 2021 and $232 million as of December 31, 2020 in available
liquidity, none of which was utilized.
As of March 31, 2021, we were in compliance with the covenants of all of our
debt obligations.
See Note 9, "Debt Obligations," to the condensed consolidated financial
statements for further discussion of our debt obligations.
Regulatory Capital Requirements
Clearing Operations Regulatory Capital Requirements
We are required to maintain minimum levels of regulatory capital for the
clearing operations of Nasdaq Clearing. The
level of regulatory capital required to be maintained is dependent upon many
factors, including market conditions and creditworthiness of the counterparty.
As of March 31, 2021, our required regulatory capital of $139 million was
comprised of highly rated European government debt securities that are included
in financial investments in the Condensed Consolidated Balance Sheets.
Broker-Dealer Net Capital Requirements
Our broker-dealer subsidiaries, Nasdaq Execution Services, Execution Access, NPM
Securities, SMTX, and Nasdaq Capital Markets Advisory, are subject to regulatory
requirements intended to ensure their general financial soundness and liquidity.
These requirements obligate these subsidiaries to comply with minimum net
capital requirements. As of March 31, 2021, the combined required minimum net
capital totaled $1 million and the combined excess capital totaled $69 million,
substantially all of which is held in cash and cash equivalents in the Condensed
Consolidated Balance Sheets. The required minimum net
                                       44
--------------------------------------------------------------------------------

capital is included in restricted cash and cash equivalents in the Condensed
Consolidated Balance Sheets.
Nordic and Baltic Exchange Regulatory Capital Requirements
The entities that operate trading venues in the Nordic and Baltic countries are
each subject to local regulations and are required to maintain regulatory
capital intended to ensure their general financial soundness and liquidity. As
of March 31, 2021, our required regulatory capital of $34 million was primarily
invested in European debt securities that are included in financial investments
in the Condensed
Consolidated Balance Sheets and cash which is included in restricted cash and
cash equivalents in the Condensed Consolidated Balance Sheets.
Other Capital Requirements
We operate several other businesses which are subject to local regulation and
are required to maintain certain levels of regulatory capital. As of March 31,
2021, other required regulatory capital was $8 million and was primarily
included in restricted cash in the Condensed Consolidated Balance Sheets.

                                  * * * * * *
Cash Flow Analysis
The following table summarizes the changes in cash flows:
                                                                   Three 

Months Ended March 31,

                                                                       2021                2020        Percentage Change
Net cash provided by (used in):                                            (in millions)
Operating activities                                             $         394          $   380                                       3.7  %
Investing activities                                                    (2,505)            (154)                                  1,526.6  %
Financing activities                                                       152              468                                     (67.5) %
Effect of exchange rate changes on cash and cash
equivalents and restricted cash and cash equivalents                       (11)             (12)                                     (8.3) %

Net increase (decrease) in cash and cash equivalents and restricted cash

                                                         (1,970)             682                                    (388.9) %

Cash and cash equivalents and restricted cash and cash equivalents at beginning of period

                                       2,782              362                                     668.5  %

Cash and cash equivalents and restricted cash and cash equivalents at end of period

                                     $         812          $ 1,044                                     (22.2) %



Net Cash Provided by Operating Activities
Net cash provided by operating activities primarily consists of net income
adjusted for certain non-cash items such as: depreciation and amortization
expense of property and equipment; amortization expense of acquired finite-lived
intangible assets; expense associated with share-based compensation; and net
income from unconsolidated investees.
Net cash provided by operating activities is also impacted by the effects of
changes in operating assets and liabilities such as: accounts receivable which
is impacted by the timing of customer billings and related collections from our
customers; accounts payable and accrued expenses due to timing of payments;
accrued personnel costs which are impacted by employee performance targets and
the timing of payments related to employee bonus incentives; and Section 31 fees
payable to the SEC, which is impacted by the timing of collections from
customers and payments to the SEC.
Net cash provided by operating activities increased $14 million for the three
months ended March 31, 2021 compared with the same period in 2020. The increase
was primarily driven by higher net income and growth in our annual customer
billings related to our listing services business, partially offset by an
increase in a prepaid asset related to a cash payment of $102 million in
connection with our acquisition of Verafin, a decrease in Section 31 fees
payable
to the SEC due to lower average SEC fee rates and timing of payments. The
remaining change was primarily due to other fluctuations in our working capital.
Net Cash Used in Investing Activities
Net cash used in investing activities for the three months ended March 31, 2021
primarily related to $2,430 million of cash used for acquisitions, net of cash
and cash equivalents acquired of $221 million which will be utilized to satisfy
an acquisition-related tax obligation on behalf of Verafin, $42 million of
purchases of property and equipment and $32 million of proceeds from the net
purchases of securities.
Net cash used in investing activities for the three months ended March 31, 2020
primarily related to $157 million of cash used for acquisitions, net of cash and
cash equivalents acquired and $26 million of purchases of property and
equipment, partially offset by $22 million of proceeds from the net sales of
securities.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the three months ended March 31,
2021 primarily related to $435 million of proceeds from issuances of commercial
paper, net, partially offset by $162 million in repurchases of common stock and
$81 million of dividend payments to our shareholders.
Net cash provided by financing activities for the three months ended March 31,
2020 primarily related to proceeds received
                                       45
--------------------------------------------------------------------------------

of $799 million related to the utilization of the revolving credit commitment of
a former credit facility, $644 million from proceeds related to long-term debt
issuances, partially offset by $671 million in repayments of debt obligations,
$122 million in repurchases of common stock, $78 million of dividend payments to
our shareholders, $42 million of net repayments of commercial paper, and a $36
million payment for debt extinguishment costs.
See Note 4, "Acquisitions," to the condensed consolidated financial statements
for further discussion of our acquisitions.
See Note 9, "Debt Obligations," to the condensed consolidated financial
statements for further discussion of our debt obligations.
See "Share Repurchase Program," and "Cash Dividends on Common Stock," of Note
12, "Nasdaq Stockholders' Equity," to the condensed consolidated financial
statements for further discussion of our share repurchase program and cash
dividends paid on our common stock.
                                  * * * * * *

Contractual Obligations and Contingent Commitments Nasdaq has contractual obligations to make future payments under debt obligations by contract maturity, operating lease payments, and other obligations. The following table shows these contractual obligations as of March 31, 2021.

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