納斯達克交易所 (NDAQ) 2007 Q4 法說會逐字稿

Good day, and welcome to the NASDAQ fourth quarter 2007 earnings conference call.

Today's call is being recorded.

At this time, I would like to turn the call over to Vice President of Investor Relations, Mr.

Vincent Palmiere.

Thank you, operator.

Good morning and thanks for joining us today to discuss NASDAQ's fourth quarter and full year 2007 earnings results.

Joining me as usual are Bob Greifeld, President, Chief Executive Officer, Daved Warren, Chief Financial Officer and Ed Knight, our General Counsel.

Following our prepared remarks, we'll open the lines for Q and A.

If you haven't done so already, you can access the press release on the nasdaq press release and nasdaq newsroom websites at www.nasdaq.com.

And if you have any questions following the call, please contact me at 212-401-8742.

Again before, we start I would like to remind you that certain statements in the prepared presentation and during the subsequent Q and A period 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.

I urge you to read the full disclosure statement concerning such forward-looking statements in our press release and other factors detailed in the company's Form 10-K and periodic reports filed at the SEC.

With that I'll turn it it over to Bob.

Thank you, Vince.

Let me start off by saying that we are very pleased with our results as they represent another solid quarterly performance and conclude a truly fantastic year for NASDAQ.

By virtually every metric our business improved.

Operationally, revenues and earnings increased to record levels as did traded volume and market share.

And strategically, we were successful in setting the stage for a geographic expansion and product diversification.

All of these achievements have helped us strengthen our competitive position, leaving us in better position for future success.

Most importantly, we have kept our eye on the most critical factor.

Delivering real value for our customers.

As we enter 2008 we are well on our way to having created a unique customer focused exchange with access to many of the fastest growing markets in the world.

Let me now touch on some highlights for the quarter.

We achieved both notable operational and strategic successes.

First, we have to look no further than market share both in areas of trading and listing.

We were very pleased that NASDAQ continued to make further inroads across the equities trading business.

We have truly established NASDAQ as the destination of choice for the trading community.

Our mass market share for U.S.

equities grew to a record high 29.7% for the fourth quarter and is up over 31% at the start of first quarter of 2008.

During the high volume days in January, while market share increased as market participants had a right to quality and they recognized the true advantages of our technology.

Within the listings business, during the fourth quarter, we witnessed the largest switch from NIZI to NASDAQ in our history.

In making their decision to list, DirectTV chose NASDAQ because of the value proposition that we offer to public companies.

This marks the third consecutive year where NASDAQ has attracted more market capitalization to our exchange from the NIZI.

We have also continued to make customer focus changes including new functionality and fee changes that better seven the needs of various trading constituents.

We also introduced new issuer services such as director's desk and rolled out new service offerings, like our Select Market Maker Program.

This was recently made available for NIZI listed companies.

The Select Market Maker Program provides trading information to companies that had previously looked to their specialists to gain insight regarding activity in their stock.

We were able to exit 2007 virtually debt free.

We started 2007 with approximately $1.5 billion in debt.

We ended the year with slightly more than $100 million in convertible notes.

This financial strength provided us with the flexibility to invest in new business opportunities during the fourth quarter.

In the quarter, we achieved significant strategic progress.

NASDAQ received the necessary regulatory and shareholder approvals to move forward with the OMX combination and the DIFX investment.

And this morning the Swedish government expressed their support for the transaction.

We are currently in position where we have great confidence that in the first quarter of 2008, we will close on the OMXdeal, A deal that would essentially transform NASDAQ into the first global exchange with significant operations on six continents.

We solidified NASDAQ as a leader in the fast growing options business, --- A deal we expect to close early in the second quarter.

This transaction instantly makes NASDAQ a player of note in the options market and further diversifies our overall business.

With respect to our organically developed options market, we have a fundamental belief that different customers require different market structures in the options space.

We expect SEC approval in the near term and will launch our price time priority options market several weeks after approval.

In the fourth quarter we also brought you Portal, our wonderful foreign market.

To the Portal alliance, NASDAQ led an effort to open up this marketplace to include the major investment banking players in the capital raising business and create a truly transparent marketplace for quips.

While still in the early days for the alliance, we continue to see potential for marketplace incentives around NASDAQ's technology leadership.

And finally, on the back of our opening of our office in China, we furthered our global ambitions by entering into an MOU with the Tel Aviv stock exchange.

Let me remind you that all that I referenced occurred in the fourth quarter.

Some might call that a pretty active and successful year.

And I am very proud of our team for these accomplishments.

But it's important to note, in the fourth quarter in 2008 and beyond, this management team will continue with its maniacal focus on execution.

I do have to say that David Warren, though, did take time to enjoy a ski holiday.

And he wasn't interrupted which was not the case on his summer vacation.

That being said I will now turn the call over to David who can walk you through the particulars of our performance.

David.

Thank you, Bob.

And that's right, I was not interrupted.

I also went to a different time zone which maybe helped out as well.

But thanks, Bob, and good morning, everyone and thanks for joining us today.

Our financial performance for the quarter continued to be strong, as our operating income increased nearly 50% from the prior year quarter.

And for the full year 2007, on a non-GAAP basis, net income grew to $223.1 million from $121 million in 2006.

And that represents an increase of more than 84%.

I will now start with a review of the income statement.

Revenues less liquidity rebates, brokerage, clearance and exchange fees, which I will refer to as net exchange revenues, increased to $211.6 million, or 15 -- or 15.6%, up from the $183.1 million that was reported in the year-ago quarter, and up from $210 million in the third quarter of 2007.

Within market services, net exchange revenues were $137.9 million.

That was up 18.9% from the $116 million a year ago and up about $1.2 million sequentially.

NASDAQ centered net revenues increased 26.2% from a year ago quarter particularly due to higher volumes, market share and higher access service revenues.

Volumes matched on NASDAQ systems increased to $123.4 billion, up nearly 46% from the $84.6 billion matched in the fourth quarter of 2006.

And as, Bob mentioned, our mass market share for U.S.

equities expanded to a record high 29.7%, making us the largest liquidity pool in which to trade U.S.

equities.

Also contributing to the increase was an access services which improved $3.8 million, up about 23% from a year ago.

And in market services subscriptions revenues increased $4.2 million, up 10.7% from the prior year quarter, driven by higher subscriber populations for both proprietary and nonproprietary data products.

Moving to issuer services, fourth quarter revenues were $62 million, up 11.1% from the $55.8 million recorded in the prior year quarter driven primarily from a revised annual renewal fee schedule which we introduced earlier this year.

And, lastly, on the income side, within financial products, revenues increased slightly to $11.6 million, up from $11.2 million in the prior year.

These due to increases in licensing revenues associated with NASDAQ's licensed ETFs.

Now turning to operating expenses, fourth quarter total operating expenses declined to $110 million when compared to the $115 million in the prior year quarter, and when compared to $126.1 million in the third quarter of 2007.

But note, however, as I've said in prior calls, that these quarters include charges that are non-recurring in nature.

And so in order to provide a more relevant comparison of expenses we have provided a non-GAAP reconciliation as an attachment to our earnings release.

Included in the non-GAAP reconciliation are total expenses of $108.3 million for the quarter, down when compared to the $109.3 million recorded in the year-ago quarter but up from $99.7 million of expenses, non-GAAP, in the third quarter of '07.

Now, the fourth quarter tends to have some cyclicalities as we spend an increased amount on marketing during the last few months of the year.

And we've done that again this year with spending in marketing increasing $3.5 million from third quarter '07 levels.

Also in the fourth quarter, our expenses of approximately $1.5 million in fees associating with registering Helmut and Friedman shares that were subsequently sold in the market back in November and as well as increased compensation expense related to some year-end equity grants.

On a non-GAAP basis, our operating income for the quarter was $103.3 million with operating margins, which I'm defining as non-GAAP operating income divided by net exchange revenues, were at 48.8%, up from 40.3% in the year-ago quarter.

And finally, as you will note in our release, we recorded an $18.2 million gain on foreign currency option contracts related to hedging our foreign currency risk associated with the OMX transaction.

Now turning briefly to the balance sheet, cash and cash equivalents at quarter end were approximately $1.3 billion versus the $300 million recorded at year-end 2006.

The changes in these balances are primarily related to the sale of our LSE stake which, as you all know, we completed in late September.

And as you are all well aware we used approximately $1.1 billion of proceeds from that sale to pay down our outstanding debt obligations which is also the reason for the dramatic reduction in interest expense in the fourth quarter.

I will now address guidance and the respective deals that we expect to close in 2008.

Typically at this point in the year we've used our fourth quarter earnings release as a forum to provide full-year guidance for the coming year.

However, given the transactions we're about to complete, providing guidance for NASDAQ as a stand alone entity becomes very difficult and at the same time less relevant.

So what I would like to do, however, is give you some updates relating to the synergies for the OMX, Phil X and Boston transactions.

For OMX we continue to be very confident in the synergies, and we expect to realize $20 to $30 million of the total $100 million of expense synergies in 2008.

With regard to Philadelphia, as Bob said we expect to close in the second quarter, we expect that we will be able to yield annual cost synergies from the combined organizations of approximately $50 million within two years of closing.

And finally, with respect to Boston, as we discussed and went through in some detail when we announced the acquisition, we expect to realize $14 million annually in reduced clearing expenses once we have the clearing entity operational.

So, to repeat what Bob said, we remain extremely pleased with both our financial performance in the progress we've made in each of our businesses.

As we look at the challenges before us in 2008, we plan to use the same operating philosophy that has resulted in our past success to ensure that we are successful in achieving all of our goals in '08 and beyond, And with that I will turn it back over to Bob.

Thank you, David.

Let me finish by saying that 2007 was truly a defining year for NASDAQ.

We emerged having never been stronger or better positioned for future success.

We are truly global and more diversified than ever.

At the same time, after an explosive 2007, in terms of identifying and securing the key pieces towards our future success, 2008 will find NASDAQ doing what it does best.

Bringing it all together to deliver a new, cohesive, broader value proposition to our customers.

No one integrates assets or understands indicators to their customers like NASDAQ.

In 2008 we plan to further our leading position as a customer-focused exchange.

Operator, we will now take questions.

Thank you.

(OPERATOR INSTRUCTIONS) We'll pause for just a moment to assemble the roster.

And we'll take our first question from Roger Freeman from Lehman Brothers.

How we doing, Roger?

Good, Bob.

You?

Very well.

I'll pick up on the last point you were talking about there.

You obviously do have a it lot on your plate, putting things together this year.

You made some comments in Davos that you're not looking to do any acquisitions.

So how should we interpret those comments?

They're obviously consistent, but with respect to anything that were to come up, I mean, you're not limiting yourself on that, or are you really focused here internally now?

Well, we're certainly focused on delivering the value to our customers and to our investors, what these deals represent.

So, that's clear.

Mission number one.

What I said in Davos, we would not contemplate another major transaction until such time as it's clear that we will deliver that value.

And to customers and to investors.

So that is the definitive statement.

Okay.

Fair enough.

Let me ask you, also, in terms of the market environment, how do you think about a recessionary outlook?

If you look back historically, there really haven't been big fall-offs in equities volumes during recessions.

There have been slowdowns, but also the market has changed a lot more now to greater institutional and algorithmic flow.

If we were to get into a sustained downturn in market industries, how would you think abut volumes?

I think at the end of the trail, our volume growth would moderate.

So, clearly during these times where there's unformed or transforming opinions with respect to our economic prospects, you see greater volatility, which drives increased volume, and we clearly have been enjoying that.

So, once we get past that stage and there is a downturn then there will be moderation in growth.

But we don't foresee any real decline in volume.

Okay.

And speaking of the volatility and the heightened volumes we've seen, your market share on N Y S D listed has really been picking up a fair amount in the last few week.

Is there any more insight you can give into why you think that's been?

Is it because of higher algorithmic flow in there that's migrated over to NASDAQ?

I think we definitely see a strong correlation between highly volatile days and our market share.

When the market is unconcern, they want the systems of the marketplace to be certain.

And we have the leading platform.

So in those days we do well.

Our market share ticks up.

You saw a week ago, Tuesday, after the Martin Luther King holiday, we set volume records and market share record on NIZI.

And it's a flight to quality.

And it's all good for us and we believe that it gives us an enduring value because once the customers get accustomed to coming to us more frequently they tend to continue with that behavior.

Okay.

Lastly, there was a decline sequentially in the non proprietary market data revenue.

It looks like the pool size actually declined in case C in the fourth quarter.

Is that a function you think in some of the staff reductions we've seen?

Roger, there was an audit recovery in the third quarter that put revenues artificially higher as compared to what we typically take in.

Okay.

It had been sort of flat to ticking up over the course of the 3Q, So, is that a give-back in the fourth quarter?

No, it's just more normalization.

More normalization.

Okay.

Thanks, David.

Thank you, Roger.

And we'll take our next question from Dan Fannin from Jeffreys.

Good morning and thanks for taking my questions.

In terms of guidance as we look forward when we do close the OMX deal, is it something -- will you guys be updating us on your outlook for 2008 at that point?

What we said today, obviously we're not giving it today, and what we are doing is evaluating what we will be saying once the acquisitions are completed.

So at this point, we'll have more to say once the acquisitions end.

Bob, you want to say anything more?

It's just obviously very difficult, I think impossible for us to give guidance at this point.

In our comments we spoke to OMX in Philadelphia and Boston, but we also have to remember that OMX has a pending acquisition of Nordpool which I think will be very important to the combined organization so that will be coming on stream sometime midyear.

So there's just going to be a lot of moving parts as we progress through 2008.

I think what I can say is that we will be giving you sufficient information expressed in a clear way that allows to you track our progress with respect to the achievement and synergies.

And when we do report our first -- when we do report our first quarter as a combined company we will be giving pro forma comparisons.

So again, I think we recognize, and I think we've done a good job in terms of providing good information for you, but at this point, we just simply aren't sure right now what we'll be doing in terms of forward-looking guidance.

Okay, that's helpful.

And then as guys look out at other opportunities, obviously the European opportunity is pretty robust right now outside of what you're doing with OMX..

Can you talk about any potential strategies or how you're looking at those areas of the market?

I think it's important to focus on what we have in front of us today, and the fact that this management team, the OMX management team, the Philly management team, Nordpool recognizes it's about operational excellence.

So we have a full plate.

We intend to deliver.

We tend to overachieve, actually, and there's just so much opportunity in terms of what we have identified today.

So, we obviously will have strategic goals beyond what's on our plate today but I think the main thing is that we're going to deliver what we promised with OMX, with Philly, with Boston, and with Nordpool.

Okay, great.

Thank you.

And we'll take our next question from David Grossman from Thomas Weisel Partners.

Good morning.

Thanks.

How are you doing, David?

Good, Thanks, Bob.

Looking at the NASDAQ stand-alone numbers on an expense basis, you guys have done a great job over the last couple of years in kind of executing on the road map to reduce those expenses.

As we just look at NASDAQ on a stand-alone basis going forward, how should we think about expense growth relative to revenue growth as we go forward here?

Good question.

We did complete the road map in 2007.

NASDAQ as a stand-alone has a redrawn road map.

Obviously the expense reductions will be at a lower level as compared to the initial road map, But the quest for for efficiency is never ending.

So, we keep along with that.

I think it is important to recognize the NASDAQ business model is fundamentally attractive in that we spend considerable time, effort, and money to build our processing plant, but the marginal costing against that processing plant approaches zero.

So, it's a wonderful business model for both transactions and for data.

Within the listings business, we see tremendous opportunity for margin expansion with respect to the services that we now offer to our listed companies.

Each of the acquired companies are now achieving a greater level of scale and will have a greater level of efficiency.

So, we expect margin expansion in those parts of our businesses.

Let me ask you this, Bob.

Is it fair to say that the base is kind of there for your existing business model and that to think about expenses is just to think about some kind of inflation rate on top of the base in '07?

Or is that oversimplifying it?

It's oversimplifying it, but it's not that far off.

Yes.

One of the points we've been making is we need to continue to make investments in our business but the nature of those investments are large when we're leveraging off of our very scalable fixed base.

So I think that, again, we're trying to stay away from this topic even on a stand-alone basis, but if you look at our expenses and you can see that they have been in that band between 100 and 110, I think if you look at -- that's probably a good guide, knowing that we would need to be making some investments, mild investments in growth going forward.

What we track internally is the percent of our technology budget that's going to new development projects.

So three years ago, it was about expense reduction, and there was very little R&D.

That number for the first time was significant in 2007, and is a larger percentage in 2008.

So when you look at our organic options market that we developed in 2007, that was contained in the budget, the portal system that was developed that was contained in the budget.

So we have demonstrated not just the ability he to reduce expenses but the ability to develop new and innovative products without having to spend massive amounts of money.

I got it, great, thank you.

And one other question, and I know that everyone probably calculates your net capture or realization portrayed slightly differently.

But no matter if you try a couple different ways it looks like it was relatively flat in the second half of the year, and despite a lot of the different pricing kind of changes, if you will, throughout the industry, is your sense that everything being equal, that we're in a period of stability, or do you think there's still very little visibility going forward here into 2008 in terms of would that may look like?

Well, you know, we operate on the philosophy that there will be continued capture, compression as time Marchs on.

We think that's a fact of life.

We think as we keep our operation lean and mean, we can do very well in that environment, and obviously every single study we look at is as capture rates go down, volume goes up, and the overall pie is bigger.

So that's what drives our activities.

We expect capture to decline.

Just one last question on currency.

Have you actually locked in a rate on the OMX deal?

We have an option, yes, we've locked in -- we've managed our risk on it.

Can you give us an idea what rate you're locked in at?

No, it's not something we want to disclose, just for some market issues and other factors.

I think the important part, just responding to your question is that we've basically managed our currency risk with respect to the acquisition.

Okay.

Alright, guys.

Thanks very much.

Thank you.

And we'll take our next question from Don Fandetti from Citi.

Hi.

Good afternoon.

Bob, as you sort of think broadly about the business in terms of fragmentation and consortiums, you're starting to see consortiums in derivatives in Europe and the U.S., I want to get your thoughts on that.

And, in some respects, NASDAQ might actually be best positioned, given that you've been facing that type of environment for quite some time.

Well, you know, we have a belief that there will be increasing competition in various markets around the planet where those markets have, [heretofore], been monopolies.

We think, each and every time that happens, it's a potential opportunity for NASDAQ.

And we pay close attention to it.

Okay.

And in terms of the -- we're seeing a lot of other exchanges make strategic investments in other exchanges around the globe.

What are your thoughts on that and what's your strategy?

We're not excited about that.

For us to own a minority stake in an exchange that doesn't roll up into our earnings we don't see the long-term value of that.

And we're smiling a little bit because we obviously had a minority stake in an exchange last year that didn't quite roll up into our market capitalization.

So we'd much rather have a real strategic relationship.

I think OMX is a unique -- in a unique position to provide that to the combined organization, and I point to the technology contract they signed with Bombay Stock Exchange last month where Bombay did take in other minority investors outside of OMX, but then OMX is the -- really, I think, in a key strategic position as they provide all the technology to that exchange.

So we like that type of relationship.

Okay, thank you.

And we'll take our next question from Niamh Alexander from KBW.

Good morning.

Thanks for taking my questions.

I wanted to go to the balance sheet.

Can you help us understand the allocation of cash.

I mean the Philly and the cash deal, the Boston and the cash deal.

How should we think about cash for OMX?

And then on that subject, share repurchases, because I remember Bob and Dave you talked about maybe getting a bit aggressive with share repurchases on the last quarter call.

Thanks.

Okay.

Hi, Niamh, It's David.

Obviously we're holding the cash for acquisitions which will combine with the financing we're lining up.

When it is all said and done, we'll have about $350 -- $350 million, just confirming that with Ron, on the balance sheet of NASDAQ.

With respect to the share repurchase, you know, I think generally obviously that's something that we always take a look at.

But clearly the the discussion that we had around the share repurchase last year I think were discussions in a different context.

And at this point in time, our focus now is on using the cash to get the acquisitions done.

But certainly we'll have opportunities with the excess cash that we generate and look for opportunities to either manage debt down or buy back shares in the future.

Okay.

That's helpful.

Have you specified what cash you're going to use in the OMX deal?

Or will it be all debt?

Well, it's a combination.

Sorry.

I know it it's a share cash combination for consideration.

But just in terms of NASDAQ's own resources for that cash.

Well, I think about it, probably a little differently.

I think about the number of acquisitions we have to make between now and the middle of May and I'm not really earmarking cash versus debt.

I just know that we need to raise a certain amount of money to get it all done.

And we'll have $300 million -- $350 million left over.

Okay.

That's very helpful.

Thanks.

Then if I could just move back to the U.S.

cash equities growth, which is certainly tracking very well and into the quarter and we could see, too, you're taking market share.

But Tape A volume is still outgrowing Tape C.

And I'm wondering, Bob, if that's reflective of some tail wind from Reg NMS market structure change and your thoughts on maybe expecting to see continued increased velocity in the Tape A volume for awhile.

Yes.

I think I spoke of it in a couple different meetings.

We expect at least through 2008 to see higher growth on tape A as a result, direct result of, the changes brought upon by Reg NMS.

And we probably predict that would continue into '09 but it's a little too soon for us to guess that.

So, it's tracking the way we thought.

We're just happy that tape C and Tape B volume is also growing.

So A is growing faster but B and C is also growing.

Okay, that's helpful.

Thanks so much.

We'll take our next question from Mike Vinciquerra from BMO Capital Markets.

Hi, this is Jeanine Miller filling in for Mike.

Just a quick numbers question.

It seems like your share count increased during the quarter a bit more than we've been asking.

And I was wondering if there was something in particular that was driving that.

Yes, it was basically what was the accounting from the 800, under treasury accounting it was the intrinsic value of our employee options and warrants.

Just to give you comparisons.

The average market value for NASDAQ in the third quarter was $32.65.

And in the fourth quarter it increased pretty sharply, good news for us, to $43.92.

And so we had to factor that additional amount of intrinsic value into our fully diluted EPS number.

Okay, great.

Thanks.

And we'll take our next question from Rich Repetto from Sandler O'Neill.

Good morning, guys.

Rich, I thought for a minute you were not going to join us.

Absolutely not true.

First question.

You got some validation on this due option exchange model where you have make or take traditional market maker models recently.

So, I guess the question is, how quick can you get your model up and running?

Seems like there has been delays with SEC, and we are experiencing some record 75% year-over-year volumes and options.

So, the question is how quick can you get it up given that other people are trying to put together this dual structure as well.

Well, I would say there is a decent amount of frustration here that we're not up and running as of yet.

A credit to the technology team, we are ready to go with our organic option strategy by December the 7th.

We're progressing through the approval process at the SEC.

We achieved a -- I think a new level just two days ago, so we're optimistic that we'll have the approval in relatively short order and we will go live with the system probably two weeks after the approval date.

So we're hoping it it it's in the short order.

System is ready to go, a good system, it's got the right structure for certain class of customers, and it will do very well.

Understood.

Thanks.

Next is, David, you mentioned the debt that you need to raise some level looking at sort of the acquisitions holistically, at least, word back is you've been on the road.

What's your level of confidence that the debt deal will get done at reasonable rates in this market?

It it's very high.

We've had -- we had very strong meetings in New York and in London.

And in stock home.

And in Stockholm.

As you know we received an investment grade rating from Standard and Poor's and the interest in this credit has been very, very strong.

Understood.

And the last thing, Bob, and I'm not sure whether we can talk about it now.

But it hasn't been talked about much, is the DIFX investment, and some people look at that and say, and this could be, you know, that -- they try and understand the strategy there.

Could it be a potential rollup vehicle for exchanges in the Mideast, et cetera?

Can you give us any more color on that?

Well, we certainly have great expectations for that investment, and we're happy to see that the D.P.

world IPO went off very well.

So it's basically an international trading zone within Dubai that currently has, what we call, a leadership position in that part of the world.

Having combined with NASDAQ and OMX, it's our job to make sure we extend that lead.

So we will be, obviously, on the prowl for listings to come to that marketplace, and we'll use the NASDAQ reach and the OMX reach to help accelerate that progress.

And then we'll be in a position to get into strategic relationships with other players in the developing world, inclusive of the Middle East and again, we think our technology prowess is particularly important in that part of the world where DIFX will go to different exchanges and certainly help assist them as they themselves try to move their markets along and then set up different listing arrangements.

So, lots of up side potential from that market and we look forward to getting on with the mission.

Understood.

And I just want to quickly get in just an accounting question.

David, what's the add-back in the numeral rate for the convert interest this quarter and what do you expect it will -- I don't know what it's going to be next quarter.

It's $1.6 million for the fourth quarter and for the fourth quarter and for the first quarter of this, what is it?

About $600,000.

Okay.

Great.

Thanks, guys.

Thank you.

And we'll take our next question from Ed from Fox-Pitt and Kelton.

Hey, guys.

How we doing, Ed?

Hey, since the last quarterly conference call you guys have had really a good developments on the portal front, expanding the portal alliance.

But how should we think about, you know, when we'll likely see volumes trading in this new alliance or revenue recognition, that sort of thing?

Good question.

I think realistically we'll see some volume in the portal system the second half of the year and revenue associated with that.

Okay.

Thank you.

And do you think, did including the new members in the consortium, did that make it -- did that involve a lot more revenue and profit share?

Yes, it did.

Okay, thank you.

And we'll take our next question from Rob Rutschow from Deutsche Bank.

Hey, good morning.

how are you doing, Rob?

Good.

The first question I have, I'm wondering if you guys could give us an aggregate revenue number and an aggregate expense number as pro forma for all of your deals for 2007.

And if you don't have that, maybe for third quarter.

We certainly don't have that handy right now.

Okay.

Hold on, Rob.

Let me just have Vince add some comments to that.

On the pro forma going forward, if you're asking about, I think I tried to cover in that response to an earlier question, is that we will -- we will be, when we actually report -- or when we close the acquisitions and start reporting them on a consolidated basis we'll provide the pro forma comparisons from '08 to '07.

Okay.

So maybe you won't be able to answer this question, either.

I guess in looking at some of your filings from November, it appears that the Genium Platform is obviously very important for OMX, and that there's some increased expense in '08.

Can you give us any idea of what the development costs are there and, you know, how much of that goes away with the ramp in pretax margin in '09?

We're certainly not in a position today to comment on the current state of operations of OMX.

We've been working with the OMX team quite extensively, but it's been on a particular topic nope as integration planning.

So next call we'll be able to speak to that.

Okay.

Thanks a lot.

And, once again, if you would like to ask a question it is star 1.

And we'll take our next question from Jill Baker from Ark Asset Management.

I guess this follows on Rob's question, and it's on the synergies that you're projecting from the OMX deal.

Assuming it close tin first quarter and Nordpool closes by mid-year '08.

Are the synergies they project in their year-end in your $20 to $30 million of synergies.

And what else is there, and when should they come into earnings?

Are they back half loaded?

The $20 to $30 million of synergies that David referred to is strictly NASDAQ and OMX coming together, and it's not incisive of what OMX has communicated with regard to Nordpool.

OKay.

And how do you see them coming in?

We're not prepared to give quarter by quarter guidance with respect to synergies.

Okay.

Thank you.

And at this time we have no further questions in the queue.

Great.

Well, I do thank you for your time here today, and we look forward to talking during the next quarterly call and meeting with a number of you in the days and weeks and months to come.

So thank you.

Thank you.