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Nasdaq Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 4, 2011 01:53PM

Nasdaq (NDAQ) filed Quarterly Report for the period ended 2011-09-30. Nasdaq Omx Group Inc. has a market cap of $4.48 billion; its shares were traded at around $25.31 with a P/E ratio of 10.3 and P/S ratio of 1.4. Nasdaq Omx Group Inc. had an annual average earning growth of 10.6% over the past 10 years.



Highlight of Business Operations:

Revenues less transaction rebates, brokerage, clearance and exchange fees increased $148 million, or 13.2%, to $1,269 million in the first nine months of 2011, compared with $1,121 million in the same period in 2010, reflecting an operational increase in revenues of $98 million and a favorable impact from foreign exchange of $50 million. The increase in operational revenues was primarily due to:

Of our total first nine months of 2011 revenues less transaction rebates, brokerage, clearance and exchange fees of $1,269 million, 67.6% was from our Market Services segment, 21.8% was from our Issuer Services segment, and 10.6% was from our Market Technology segment. Of our total first nine months of 2010 revenues less transaction rebates, brokerage, clearance and exchange fees of $1,121 million, 67.7% was from our Market Services segment, 22.7% was from our Issuer Services segment, 9.5% was from our Market Technology segment and 0.1% related to other revenues.

We record Section 31 fees as U.S. cash equity trading revenues with a corresponding amount recorded as cost of revenues. 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, the percentage of overall industry trading 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 in cost of revenues, there is no impact from the fees on our revenues less transaction rebates, brokerage, clearance and exchange fees. Section 31 fees were $92 million in the third quarter of 2011 and $231 million in the first nine months of 2011 compared with $60 million in the third quarter of 2010 and $195 million in the first nine months of 2010. The increase in the third quarter of 2011 compared with the same period in 2010 was primarily due to higher dollar value traded on the NASDAQ and NASDAQ OMX BX trading systems, and higher Section 31 fee rates. The increase in the first nine months of 2011 compared with the same period in 2010 was primarily due to higher Section 31 fee rates, partially offset by lower dollar value traded on the NASDAQ and NASDAQ OMX BX trading systems.

Similar to U.S. cash equity trading, Section 31 fees are recorded as derivative trading and clearing revenues with a corresponding amount recorded as cost of revenues. 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 in revenues is equal to the amount recorded in cost of revenues, there is no impact on our revenues less transaction rebates, brokerage, clearance and exchange fees. Section 31 fees were $7 million in the third quarter of 2011 and $20 million in the first nine months of 2011 compared with $4 million in the third quarter of 2010 and $11 million in the first nine months of 2010. The increase in the third quarter and first nine months of 2011 compared with the same periods in 2010 is primarily due to an increase in dollar value traded and higher Section 31 fee rates.

NASDAQ OMX’s income tax provision was $61 million in the third quarter of 2011 and $151 million in the first nine months of 2011 compared with $43 million in the third quarter of 2010 and $124 million in the first nine months of 2010. The overall effective tax rate was 36% in the third quarter of 2011 and 30% in the third quarter of 2010. The overall effective tax rate was 33% in the first nine months of 2011 and 2010. The higher effective tax rate in the third quarter of 2011 when compared to the third quarter of 2010 was primarily due to a change in the geographic mix of earnings and losses, as well as the impact of changes in tax laws in certain jurisdictions where NASDAQ OMX operates. Furthermore, in the third quarter of 2011, we recorded significant adjustments due to provision to tax return adjustments related to our 2010 tax return liabilities and a corresponding effect on deferred tax liabilities.

Read the The complete Report



Stocks Discussed: NDAQ,
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