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Operator
Good day, and welcome to the NASDAQ first quarter 2008 earnings results conference call.
Today's conference is being recorded.
At this time, I'd like to turn the conference over to the Vice President of Investor Relations, Mr.
Vincent Palmiere.
Please go ahead, sir..
Vincent Palmiere - VP IR
Thank you, operator.
Good morning everyone and thanks for joining us today to discuss NASDAQ OMX's first quarter 2008 earning results.
Joining me are Bob Greifeld; our Chief Executive Officer; David Warren, our Chief Financial Officer; and President, Magnus Hallberg.
Following our prepared remarks, we'll open up the line for Q&A.
If you haven't done so already, you can access the results press release on the NASDAQ OMX Investor Relations and Newsroom Websites at www.nasdaqomx.com.
If you have any follow up questions after this call, please contact me at 212-401-8742.
Before I begin, I'd like to remind you that certain statements in the prepared presentation and during the subsequent Q&A period may relate to future evens 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 and our press release and other factors detailing the Company's Form 10-K and periodic records filed with the SEC.
And with that, I'll turn the call over to Bob.
Bob Greifeld - CEO
Thank you Vincent.
Good morning, good afternoon and good evening.
Wherever you are are in the world, I do appreciate you being with us today to discuss our first quarter results.
When I spoke to you in February, I wrapped up my comments on a strong 2007 and set out the priorities for a very successful 2008.
Clearly, the acquisitions we've announced last year set the foundation for a powerful global exchange Company.
Key to our success for this year will be our focus and discipline in executing on the integration of these acquisitions and delivering the synergy value to our shareholders.
While we are only two months into our future as NASDAQ OMX, I can tell you today that we are operating as one global Company and executing well on our plans.
I can also tell you that our opportunities for growth are the strongest they have been in my time as the CEO.
This morning, we reported our first combined quarterly results with net income of $121 million or $0.69 per diluted share.
I will let David cover the details in his remarks and I will spend my time discussing the highlights for the quarter.
In February, we closed the OMX transaction, solidifying our presence as a global Company.
The combination with OMX and our investment in the Gulf region firmly establishes NASDAQ OMX as the world's largest exchange Company with operations on six continents.
Our new name reflects a new Company.
One that is an $8 billion global organization trading asset classes that span equities, derivatives and fixed income.
The NASDAQ OMX organization is defined in the exchange space by our reach and our capabilities.
We not only operate the most efficient trading platforms in the world but we are the technology provider of choice for more than 60 exchanges around the world.
We have the deepest bench of leaders in our industry all focused on the goals of meeting the needs of our customers through product innovation, unequaled service and connectivity around the globe.
In March, we announced the launch of our Pan-European market, our first major move as a consolidated Company.
This market, based in London, will use our INET technology and establish customer connectivity to provide a highly liquid plug-and-play trading and routing platform for the most actively traded European stocks.
We believe that the recent regulatory changes in Europe, coupled with customer demand for a competitive dynamic, will transform Europe into a marketplace similar to what exists in the United States.
We have been extremely successful in gaining share in the trading of NYSE listed stocks.
We are proud of the fact that we've matched over 20% of NYSE volume and we have established similar goals for our Pan-European effort.
We plan to use the same methodical approach to gain share in Europe that has worked for us in the U.S.
and really one in which we are uniquely qualified to succeed.
Turning to the options market.
On March 31, we launched our U.S.
options market.
A new electronic equity and index options market and the first options trading platform to offer true price/time priority.
Customer reception has been extremely positive and in a scant five weeks since the launch, we are now trading over 117,000 contracts per day.
We also continue to work on our acquisition of the Philadelphia Stock Exchange.
All legal hurdles have been cleared and we plan to close in June, pending SEC approval.
I am pleased to report that Philly's volume growth and market share has been tracking ahead of or plan, which of course, only heightens my desire to close the transaction.
We also expect to close on our acquisition of the Boston Stock Exchange in the second quarter.
As I have said before, with Boston, we pick up a second exchange license and the ability to offer a second quote in the U.S.
equities market to give us more pricing flexibility, increased market share and better distribution of tape revenue under the SEC's revenue sharing formula.
With Boston, we also acquire a clearing business and a point of entry into a business where NASDAQ OMX's reputation for innovative technology and customer service can bring big returns for our trading customers and shareholders alike.
Moving back to Europe, we continued to move forward on the acquisition of Nord Pool, Europe's largest electricity derivatives exchange and our entrance into carbon trading, an exciting growth area.
Nord Pool has experienced year-on-year growth over 40%.
As exchanges around the world seek world class technology, they continue to look to our market technology business as a preferred vendor.
During the first quarter, two exchanges in India, the Bombay Exchange and the India Energy Exchange, as well as the Indonesian Stock Exchange and the as Icelandic FSA have signed technology vendor contracts with NASDAQ OMX.
In April, the Tokyo Commodity Exchange signed a contract with us for an integrated trading and clearing system for commodity derivatives.
The value of our technology continues to be recognized by customers across the globe.
I am very pleased to report that we are moving very well on the integration of NASDAQ and OMX.
Our technology managers came together quickly to launch our technology road map.
We have made the major technology decisions that needed to be made and are executing on our plan to integrate our systems to achieve our cost synergies and importantly, deliver best in class technology to all our customers.
David Warren will go into the details on this shortly but based on the progress we have made in the two months since the closing on OMX, I am confident that we are ahead of our synergy target for this year.
And we are upping our expectations of expense synergies to $25 to $35 million, from the $20 to $30 million we expected in February.
I think you will agree that our growth opportunities are the strongest they have ever been.
But I also want to set these opportunities against the strong performance NASDAQ OMX achieved in the first quarter in our core markets and businesses, demonstrating our ability to advance a number of initiatives and highlighting the strength of our management team.
We expanded our leadership as the largest single pool of liquidity in the trading of U.S.
listed equities, matching a record high 31% of all volume for the first quarter.
NASDAQ OMX also achieved new market share highs in the trading of NYSE and AMEX listed securities, matching 21.1% and 36.2% of volume respectively during the quarter.
Our unique ability to seamlessly integrate our dark pool liquidity with our transparent matching services allowed us to grow both services.
Our dark pool liquidity trades over 350 million shares per day and is a significant opportunity for an increased capture rate in our transaction business in the second quarter and beyond.
Our leadership in providing value-added services to listed companies is providing a compelling case to CEO's to evaluate their listing decision in favor of NASDAQ OMX.
On April 28, Computer Associates a $12 billion market cap company switched from NYSE and began trading on the NASDAQ Global Select Market under the ticker symbol CA.
We traded record volumes on the Nordic Exchange during the quarter.
In January 2008, average daily derivatives trading volume reached a record 789,000 per day.
This record was eclipsed two months later in March 2008, when average daily derivatives trading volume topped 800,000, a 25% increase over March of 2007.
Cash equity trades in January climbed to a new record high of 267,000 trades per day, an increase of 61% over the prior year.
And in February of 2008, new record high average daily trading volume was achieved for fixed income derivatives, when at average of 158,000 contracts traded.
And as these volumes reached record levels, our technology performed flawlessly.
The strength of our technology was recognized by our customers as they moved increasing amounts of volume to systems with sub-millisecond response time.
Let me conclude by saying that NASDAQ OMX is established as a formidable global exchange and technology Company.
We are well positioned for a successful 2008.
We will execute on the integration of OMX, Philly, Boston, Nord Pool and all other opportunities.
The moves we are executing year will set the stage for powerful growth in 2009 and beyond.
NASDAQ and OMX have each earned a reputation as proven integrators who can stay focused and deliver value to our shareholders and customers.
Based on the progress we have made in the two months, I am confident that we can be even more successful together.
I will now turn the call over to David who will walk you through the specifics of our performance.
David Warren - CFO
Thanks, Bob and hello everyone.
Thanks for joining us today.
It's great to be with you.
Let me start by noting that our first quarter results include OMX from February 27, the date that our transaction closed.
I will quickly touch on our reported results and then turn to our pro forma non-GAAP results, which are provided for comparison purposes.
The pro forma results reflect the financial results for both NASDAQ and OMX as if we were a combined Company for the periods discussed.
On a reported basis, revenues less the liquidity rebates, brokerage, clearing and exchange fees, or net exchange revenues were $278.3 million.
Operating expenses were $145.3 million, of net income at $121.4 million and diluted earnings per share at $0.69.
Included in these results, is a pretax gain of $26 million associated with our investment in Dubai International Financial Markets or DIFX.
This is a one-time gain resulting from the write up of the trademark gains we are granting to DIFX.
There is also a pretax gain of $35.3 million related to foreign currency hedges we entered into for the acquisition of OMX and for our planned acquisition of Nord Pool.
Approximately $8 million of this amount relates to a forward contract on the Norwegian crown for Nord Pool and we are required to mark this contract to market going forward.
When you exclude these gains as well as $800,000 in aftertax M&A related expenses, earnings per share on a non-GAAP basis for the first quarter were $0.48.
Now turning to our pro forma results, net exchange revenues were $382.7 million for the first quarter of 2008, up 12.8% when compared to $339.2 million for the first quarter of 2007 and up $3.6 million when compared to $379.1 million for the fourth quarter of 2007.
And I should say at the outset, that as everybody knows, during the period, the Swedish crown has appreciated against the U.S.
dollar.
So as I give these comparisons, if you compare from the -- if you do the prior year comparisons, Q1 to Q1, the net income benefit to NASDAQ is $0.02 per share; a benefit of $0.06 on revenue and an impact of $0.04 on expense.
There is still a benefit sequentially but it's less obviously given the relationship between the dollar and the crown.
It is $0.01 on net income, $0.02 on revenue and $0.01 impact on expenses.
So I just want to cover that up front as I go through these comparisons.
Now back to the comparisons.
Within market services, net exchange revenues were $267.2 million, up 17.6% from the $227.3 million we reported a year ago and up 9.3% sequentially.
Market center net exchange revenues were $192.8 million, up 19.5% from the $161.4 million in the year ago quarter and up 12.7% or almost $22 million sequentially.
The increases, when compared to both periods, are primarily due to higher volumes and record market share in both our U.S.
and Nordic markets.
Total U.S.
listed equity volume matched on NASDAQ increased to 153.7 billion shares in the first quarter of 2008, up 61.5% from the first quarter of 2007.
The increases, when compared to the fourth quarter of '07, are primarily due to higher traded share volumes and reduced fees associated with clearing transactions.
During the quarter, [NFCC] reduced their clearing charges and issued us a rebate for past clearing activity.
At the same time, they have reduced the current fee schedule, so that we expect the benefit of this rebate to continue going forward.
Finally, included in execution and trade record reporting revenues in the first quarter of '08, are $91.1 million in SEC Section 31 fees, compared to $98.5 million in the first quarter of '07 and $99.3 million in the fourth quarter of '07.
In our Nordic markets, revenues increased when compared to both the first quarter of '07 and the fourth quarter of '07.
Driving revenue higher when compared to both periods is higher cash equity and derivatives transaction volumes, offset somewhat by lower cash equity value traded and lower cash equity transaction fees, implemented at the first of the year.
For the first quarter of '08, the number of equity transactions per day grew by 32% from 179,000 to 236,400, when compared to the same period in '07.
For the same periods, the value of equity trading per business day declined 9.9% to 44.5 billion Swedish crowns.
The number of traded derivatives contracts per day increased 9.1% to 754,900.
Also contributing to increases in revenue, as I mentioned before, are definitely the improving exchange rates of the crown versus the dollar.
And in market services subscriptions, revenues were $66.3 million for the first quarter of '08, that's up almost over 14% when compared to the first quarter and up slightly by $400,000 sequentially.
Both of these increases due to higher subscription levels and increased demand for our data products in both the U.S.
and in the Nordics.
And within issuer services, revenues increased 8.3% to $86.2 million from the first quarter and decreased 6.6% or $6 million from the prior quarter.
Corporate client group revenues were $74.7 million for the first quarter, that's up $4 million or almost 6% when compared to the prior year but down $6 million from the fourth quarter.
The increases in our revenues from the prior year are driven by increases in the revenues we are receiving from our corporate client services.
And they reflect increasing customer demand for the products and services that we offer through the acquisitions we have made of PrimeNewswire, Shareholder.com, Carpenter Moore and new products such as Directors Desk.
And the decline in the fourth quarter, from the fourth quarter, is primarily due to a reduction in the total number of listed companies.
And in the Nordic markets, revenues increased when compared to the first quarter of '07, helped by improving exchange rates.
In financial products, revenues were $11.5 million for the first quarter of '08.
That's up $2.6 million or 29% from the first quarter and down slightly sequentially.
The increase in the prior year is due to higher license revenues associated with our license ETF's.
And finally, within market technology, revenues were $29 million for the first quarter, compared to $31 million for the first quarter of '07 and $42 million for the fourth quarter of '07.
Declines when compared to the fourth quarter of '07 are due primarily to higher than normal activity recognized in that period.
And I'd like to add some clarification to a factual statement if our release.
We anticipated the possibility of some temporary declines in sales activity in the first quarter.
I think this is a natural and prudent choice for customers to take when there is a merger, particularly when two world leading technology companies come together.
But we have acted quickly, as Bob said, announcing our technology road map within only seven weeks of closing, which I regard as unique in our industry.
And the response from the technology customers has been positive.
Both in the speed with which we arrived at our decision and the quality of the technology solutions that we will now offer as a new Company.
And you can see this, customer activity continues to be high, with large orders driving order intake to $46.7 million in the first quarter of '08, 16.2% higher than the $40.2 million we realized in the first quarter of '07.
All right, turning now to operating expenses.
Total operating expenses increased 5.1% to $229.4 million.
That's from $218.3 million in the prior year and they declined about 2% sequentially from $234.1 million.
The higher expenses, when compared to the first quarter, are driven primarily by higher compensation expenses resulting from a larger employee base and from increased retention expenses.
Also contributing -- declining expenses, when compared to the fourth quarter of '07, are driven by lower marking expenses, as the fourth quarter is typically a strong period for our advertising programs.
Our pro forma tax rate for the quarter was $36.2 million and that was compared to an average of $32 million for '07.
I would like to also say, that going forward we expect our tax rate to be in the range of the pro forma of last year.
And now if I turn to the balance sheet, you'll note a number of changes related to the combination with OMX.
These changes are in cash, goodwill, intangibles, debt obligations and shareholders equities.
Cash and cash equivalents at quarter end were approximately $736 million, down from $1.3 billion recorded at the end of the year.
And finally, as Bob said, we are increasing our expectations for full year expense synergies that we will achieve by the fourth quarter of this year to $25 to $35 million, up from $20 million to $30 million that we announced to you back in February.
During our last call, I also mentioned that our synergies from the PHLX deal would be $50 million within two years of closing.
And we remain confidence in our ability to achieve this target.
And of course, I'll have more to say on this once we close the transaction.
So in summary, we're quite pleased with our efforts this quarter.
It reflects a lot of hard work from our employees around the world.
We'e glad you're here with us today.
And at this point, I think operator, we'll take your questions.
Operator
(OPERATOR INSTRUCTIONS).
We'll go first to Roger Freeman with Lehman Brothers.
Roger Freeman - Analyst
Hi, good morning.
First of all, with respect to OMX, can you just sort of lay out, and I know you sort of talked about this in generalities around the technology road map and the integration plans.
Can you give us any update on what's happened so far, what's going to be happening over the next two to three quarters?
And then also with respect to technology, is it right to assume that the INET technology becomes the high velocity exchange platform and then the OMX technology is the outsourced version that you're selling?
Bob Greifeld - CEO
One, is we're very comfortable with the fact that we've made the big decisions and the synergy targets that we've given out are certainly within our grasp to achieve.
And we're more comfortable with that statement now than at any time in the past.
So, we're moving along with that.
With respect to the platforms, clearly, the INET platform brings great capability with respect to cash equities and high volumes and the combined organization will use that as a product where it best fits.
But also within our stable, we have a number of different technology platforms that bring unique advantages in what they deliver to the marketplace.
So, I think the key point to focus on is that we will have a single platform of excellence for a given task.
Now, and that won't mean there will be only one platform but only one platform for the given function.
And clearly, we'll make sure that we have best in breed in every area that we compete in.
Roger Freeman - Analyst
Okay.
What is the technology road map that you've communicated to customers that were holding off in making investment decisions?
Bob Greifeld - CEO
Well, first off, we said that, as David said, we think some of the customers would hold off just because the merger was happening, not with respect to our technology road map.
And I think it's also important to note that in the market technology business, it will tend to be somewhat lumpier than other businesses that we have.
In the certain quarters you'll have a big order, in other quarters you will not.
And that's just going be a fact of life with it.
But with respect to the road map, we've certainly put out internally and we're in the process of communicating to our customers exactly what we're doing.
We will certainly look to take full advantage of the Genium platform that OMX had in its stable and we're going to look to take full advantage of the INET technical architecture.
So if you wanted to come up with any sound bite from today's call, you could say that the combined enterprise will standardize on a Genium platform powered by INET.
Roger Freeman - Analyst
Okay.
That's helpful.
On the European ECN strategy, can you talk a little bit more about plans with respect to pricing approach?
And then also, as you think about this, what are the biggest obstacles that you need to overcome or what are the biggest concerns that you have about being able to build market share?
Is it clearing, is it customer acceptance, how do you sort of think about that?
Bob Greifeld - CEO
Well, one, with respect to pricing we are not going to take an incremental approach.
So on a net basis, the pricing we bring to Europe will be very similar to the pricing that we have here in the States.
So, if you look at the capture rates in Europe today, they run 5 to 10 times what we charge here in the States.
And as I said, we won't be incremental, we're going to come in with U.S.
style pricing.
We'll certainly reward provision of liquidity.
On the second question, and I hate to phrase it this way but we don't see any obstacles in our way right now.
We have a clear path, whether that be from a clearing point of view, we have a number of different, I think, very qualified competitors, of which we'll choose between them.
We certainly have customers who are cheering on our efforts and look forward to a new competitive dynamic in the European marketplace.
So, we have a clear path.
Operator
Thank you.
We will go next to Rich Repetto with Sandler O'Neill.
Rich Repetto - Analyst
Morning, guys.
Bob Greifeld - CEO
How are you doing there, Rich?
Rich Repetto - Analyst
Doing okay.
My first question is trying to look at this quarter, the first quarter where you've combined with OMX and you've got the pro forma results for the whole quarter.
And you've mentioned a couple of things that are different going forward like the tax rate, David.
That -- so first, the question is, what things besides -- and I think the tax rate would add $0.03 in the quarter, if I'm calculating it right.
But are there think other things that other than we know volumes can change, etc.
but are there one-time items or anything materially different like interest expense that will change quarter to quarter?
David Warren - CFO
Well, the interest expense obviously, we did very well on that financing so the benefit of that, I think is already reflected in the debt that's on our books.
To your question, there's definitely the tax rate.
And as I said, I do expect that to go down.
And depending on the composition of our revenue as we move forward between European and U.S., obviously, we will benefit from that tax structure in the lower tax rate.
I think the other important part is, if you parse through what we're saying on the synergies, if we're going to exit $25 to $35 million lower in run rate spending annually.
That really means that our run rate spending Q4 had of this year, if you just take the midpoint of that, is going to be $7.5 million lower than where we are right now.
Rich Repetto - Analyst
Got you.
David Warren - CFO
They're -- I think those are the two things we can highlight today.
And as we said, , we're a month into results and two months into operations.
So, we're positive about what's happened to date and there's definitely a lot
Rich Repetto - Analyst
Okay.
And then the efficiency or the improvement from the -- on the debt servicing side, has that -- did that all flow through -- quarter to quarter, what should we expect on the interest expense line?
David Warren - CFO
It's been running around 5%.
I'm not sure I -- maybe -- is that your question or is it you want it stated differently?
Rich Repetto - Analyst
Well, the overall interest expense was $22.6 million in the quarter but some of the convert and debt was reconfigured in the quarter.
So, is that number likely to come down going forward or stay the same?
Bob Greifeld - CEO
Well, it's reflected in the pro forma, Rich -- hold on a minute.
I'm just looking for it.
Rich Repetto - Analyst
Okay.
So that interest expense is as if --?
David Warren - CFO
The pro forma assumes that we had done the acquisition as of January 1 of '07 at the rates we negotiated.
Rich Repetto - Analyst
Understood.
Okay.
And then my last question just more broader and strategic, for Bob.
We are seeing things heat up.
You've got a big opportunity it looks like in Europe as you sort of execute on the play book that you already did here in the U.S.
on the listed side.
But you also see some competition heating up here, Bob, on the NASDAQ side.
So, I am just trying to get your -- see how it's bouncing, at least in your mind, the opportunities versus the competition, abroad and domestic?
Bob Greifeld - CEO
Well, certainly we're try to go repeat our play book in two areas right now.
One, is our organic options strategy.
And we're clearly ecstatic that we've got to 117,000 contracts after a soft roll for the last five weeks.
And I think we've a clear path with PEM to make a real difference in the European marketplace.
Now here in the States, we see certainly great opportunity.
We see that the competitive dynamic is what we expected it to be and we are taking a number of different steps.
One, is we have an underutilized asset in arsenal right now and that is the dark pools.
So right now, NASDAQ trades about 350 million shares per day in our dark pool.
And our fundamental advantage is our dark pool is completely integrated into our continuous market.
And it's clear when you look at what the other dark pools are charging, they're charging orders of magnitude higher than what we get for those similar transactions.
So, we certainly see great opportunity for increased capture in that business.
And Rich, as I am sure you saw with our pricing action effective in May, that was a recognition for the first time of that opportunity.
So, we see that from a financial point of view having, I think, a very positive impact on our side.
In addition, you'll see us take steps with respect to clearing, where we will step out of the clearing process for our customers and we've mentioned that.
That will cut down the expenses in a significant way.
And I think you saw in the Wall Street Journal article that we're going to route to other dark pools and essentially, that's part of our general change and our routing strategy, which will then cut down the expenses quite dramatically.
So we're very, very optimistic that the profitability in the transaction business is quite positive as we look at the balance of the year.
We obviously continue to see great opportunity in tape A and tape B to continue to gain share.
We certainly see, that has New York has melted down, there's share on the hybrid from 39% at the beginning of the year now to 31%.
That they're reaching a point of no return, which will be great opportunities for us.
So, we study that business very closely.
We pay close attention to it.
It's well led by Chris and Ken and the team.
I think we've got a very effective strategy.
One, to increase in gain share.
And probably most importantly, have some fairly dramatic impact on the profitability of that business in the quarters to come.
So, we feel good about that.
Rich Repetto - Analyst
Great.
Thank you.
That's very helpful.
Operator
We'll go next to Mike with BMO Vinciquerra with BMO Capital Markets.
Mike Vinciquerra - Analyst
Thank you, good morning.
I want to ask a question on the options side.
Obviously, you have big pick up here and I can see the stats you're talking about, Bob, on the OCC side.
So, impressive start.
Two things.
Number one, how different contracts are you guys currently listing?
And number two, do you have a sense for your share of volume in penny names?
My guess is you're doing probably better in penny names, right out of the gate, than you are in the traditional options.
Bob Greifeld - CEO
Yes, good questions.
I don't have our stats for penny names and we'll have them in the future.
I would say today, we're trading about 90 underlyings, so we clearly have a lot more to roll our.
It has been a a soft roll.
And we have a lot of customers who are in process of hooking up and other customers have hooked up who want a particular change to the system, which will release that much more volume.
So, it's obviously early days but at this point, it's just going incredibly well.
And I will highlight that Philadelphia, as I said in my prepared comments, is certainly performing significantly ahead of what we had modeled as we contemplated this acquisition.
So, we're obviously anxious to close this transaction.
Mike Vinciquerra - Analyst
Okay.
Thank you.
And just to make sure, your pricing on the options right now, it's $45 to take and $30 rebate and you're not offering other incentives we know of, is that right?
David Warren - CFO
That's right.
Mike Vinciquerra - Analyst
Okay.
And just a couple of questions on the non-U.S.
business if I could.
You guys have a new statistical page you're providing for us that doesn't have historical information for both equities or derivatives for the Nordics.
And I m just curious, one, are you going to provide those?
And number two, when I look back at OMX's statistics that they released last year, they seem to be a little different.
Was there some adjustments you had to make based on how you were reporting those numbers?
David Warren - CFO
Certainly, we can provide historical numbers in the future.
And I'm not aware of any adjustments that we did make.
Bob Greifeld - CEO
Michael, let me add something.
Certainly, there is historical data that's available on the Website.
And as we go forward, obviously, we'll continue to build out that statistics table.
But let me understand more about the changes you're referring to?
Mike Vinciquerra - Analyst
Sure, when I look year-over-year for instance, in this release you guys mentioned that last year you did 691,000 derivatives contracts.
When I look at the OMX's release it says 673,000.
It's just some minor differences and I am just curious if there's just a difference in the way you account for things or whatever else?
David Warren - CFO
Well, I don't I -- I hear your question.
Why don't we get back to you.
Mike Vinciquerra - Analyst
And that's -- offline is fine.
I just wanted -- for modeling purposes it's become a little bit more important, of course.
David Warren - CFO
I understood.
Mike Vinciquerra - Analyst
Okay.
Thank you.
And then the only other thing is just the non-U.S.
execution revenue was about $92 million.
Can you give us the rough break down between equities and derivatives?
OMX also used to give that as well.
David Warren - CFO
Sure.
Let me give you a rough sense of what our revenue will look like post the Nord Pool and post the Philadelphia acquisition.
And again, these aren't exact but they're very close.
So, post those two acquisitions, our U.S.
cash equity business will be about 15% of our revenue.
The Nordic cash equity business will be about 9%.
Our derivatives business and this is global derivatives will be about 17% of our overall revenue.
Global issuers will be 17% also.
And market data will be about 19%.
And market technology will be around 8%.
Mike Vinciquerra - Analyst
Great that's very helpful.
Thank you, guys.
Bob Greifeld - CEO
And I'll make just one editorial comment.
As we look at these percentages, with what the organization will be at the end of June, we're certainly proud of the fact that we have diversified quite substantially into the derivative space.
But we, I think, have a maniacal focus on execution.
And the cash equity business, we believe, is a very strong business, has great opportunity for growth and we certainly intend to protect and grow our market share in that space.
Operator
And we'll go next to Dan Fannon with Jefferies.
Dan Fannon - Analyst
Thanks.
Good morning.
Could -- you mentioned the Nord Pool deal closing, could you remind us when that's expected to close?
And if you could give us a sense of what the contribution from that business might be when it does get consolidated?
David Warren - CFO
Well, we're expecting to close in the third quarter and we haven't yet broken out the separate contribution for the business.
Dan Fannon - Analyst
OMX didn't do that when -- they just gave the historical metrics, they never gave a pro forma earnings or contribution for going forward, it was just the historical numbers?
David Warren - CFO
They did not.
The just looked at historicals.
Dan Fannon - Analyst
And then in terms of your guys' guidance for the expense synergies and how we look at kind of the contribution from the international businesses going forward, is there any type of hedging strategies that we should be looking at to kind of lock in or from a currency perspective?
Bob Greifeld - CEO
Well we can certainly get into this more as our -- as we move forward.
But certainly, we right now have a, as a global Company, have currency exposures in all of the major currencies.
And our policy right now is definitely, with respect to contracted flows, to fully hedge those.
And then, we also look at and make a determination about probable flows and hedge those depending on different times and different opportunities.
So my general question to you is where we can get certainty into our results with respect to currency fluctuations, we do.
We look for opportunities to minimize the risks.
And is that -- is there more to your question than that?
Dan Fannon - Analyst
Well, as you update us on some of the expense synergies and the potential increases or decreases there, what factors -- will currency play a factor in that?
Bob Greifeld - CEO
Well, I think certainly currency is going to play a factor in our transactions going forward.
And we will update you on that.
The expense synergies that I speak of, obviously, are absent any currency effects.
David Warren - CFO
That's right.
Bob Greifeld - CEO
And they're' reduction in our operating expenses going forward.
As you know, currency will cut both ways as we move forward.
Dan Fannon - Analyst
Okay.
Then in terms of the Pan-European offer opportunity and the kind of the offensive tactics you're taking there, are you seeing any kind chang in competition thus far for you in the Nordic region?
I know most of the upstarts are targeting some of the larger exchanges but have you seen any change in the competitive environment for where you guys are currently operating now?
Bob Greifeld - CEO
We have not but we certainly expect that the overall environment will change in time.
But so far, it's been business as usual in the Nordics.
Dan Fannon - Analyst
Okay.
Thank you.
Operator
We'll go next to Josh Elving with Piper Jaffray.
Josh Elving - Analyst
Hi, good morning.
Bob Greifeld - CEO
How are we doing, Josh?
Josh Elving - Analyst
Good.
Hi, Bob, a question, maybe bigger picture, now that you have OMX closed and you have this partner in Dubai, do you have any near term or kind of mid range plans to develop that relationship further or where do you see that going over the longer term?
Bob Greifeld - CEO
Well, definitely.
I think we have great opportunity in our relationship with Dubai.
As I think everybody is aware, the amount of investable assets in that region increases on a daily basis.
And we certainly want to provide an easy efficient outlet for those investable assets to come into our U.S.
customer base and we also want to have our corporate customers have an easy access into that part of the world.
And when I say corporate customers, our listing customers from obviously old OMX and the old NASDAQ stock market.
So, we're working hard on those endeavors.
Josh Elving - Analyst
Okay.
Going back, maybe a numbers question.
With regards to the currency options that -- the $35.3 million in the first quarter, I understand a big part of that had to do with OMX.
David I think you mentioned that there were some existing contracts outstanding with regard to Nord Pool.
Do we expect that to be a significantly lower number the second quarter as a general rule?
David Warren - CFO
Well, it's not realized for one thing.
So what I said was, obviously, the contracts with respect to the acquisition of expired and we booked the gain.
With respect to the acquisition of Nord Pool, we put a forward on for Norwegian crowns to hedge our risk in that acquisition cost in the purchase price of that company.
Josh Elving - Analyst
Okay.
David Warren - CFO
So, we'll mark that to market going forward but clearly, at some point, as we close the transaction it comes off books.
Josh Elving - Analyst
Okay.
And just one follow off question to, I think it was Vinciquerra's question with regard to the breakout of revenues in European execution between cash and derivatives trading, did you offer that or do you have that?
David Warren - CFO
What I said for European cash, it will be 9% of our revenues post the Philly and Nord Pool closing.
Josh Elving - Analyst
Okay.
Thank you very much.
Operator
We'll go next to David Grossman with Thomas Weisel Partners.
David Grossman - Analyst
Thanks, good morning.
Could I ask a quick follow up to the hedging question, David.
So, I understand you're hedge against the outstanding acquisitions but is it your intent or are you still evaluating whether or not you want to hedge the P&L exposure on a go forward basis, so you'd have kind of FX gains and losses on hedges every quarter?
David Warren - CFO
No.
We are not going to -- we're going to -- do you want to answer it, Bob?
Bob Greifeld - CEO
Yes, basically what we're going to do is do net investment hedges going forward, which would be a reflection in the shareholders equity.
And then let flow through the transaction gains and losses.
Economically, we'll be in the same place but the accounting will show up in a transaction related P&L going through the P&L.
And the net investment hedge would go through shareholders equity.
So economically, we are going to be hedged but the accounting isn't going be as clean as we'd like it to be.
David Grossman - Analyst
So on a go forward basis then, we'll see obviously the impact of currency on revenues expenses et cetera.
So, will there be an offsetting hedge gain or loss in the P&L or is that going to be in the balance sheet?
Bob Greifeld - CEO
That's going to be on the balance sheet.
David Grossman - Analyst
All right, so we'll have to live with fluctuations every quarter then, on the P&L?
Bob Greifeld - CEO
Yes, that's right.
David Grossman - Analyst
And then secondly, and I think we calculate this a little differently than you guys do.
But it looks like the net capture rate went down a little more than we thought and it may be just the way we calculate it.
But I was just curious, whether a, did you see the same thing?
And is so, were there some aberrations in the quarter, given that a lot of pricing changes that are going into effect, I think, for the most part happened after the end of March?
So, any thoughts on that?
Bob Greifeld - CEO
Yes.
I'll say this, that we saw in the U.S.
equity business our capture rate declined the most in January and then saw a gradual trend line up for February and March.
And that has continued into April and now into May.
David Grossman - Analyst
Okay.
So you see an improvement into May, I'm sorry, Bob.
Bob Greifeld - CEO
Yes.
David Grossman - Analyst
Okay.
And just getting back to your comment about kind of your pricing strategy in Europe.
So, would you expect the overall net capture rate trend in Europe then to be positive, flat or negative based on the comment that you made about how you're going to enter that marketplace?
Bob Greifeld - CEO
Well, I think you'll see it relatively consistent with the capture rate in the U.S..
David Grossman - Analyst
Okay.
And does that take a period of time to normalize or do you think that happens relatively soon?
Bob Greifeld - CEO
Well, that's -- we're saying, we're not going to go in there with an incremental approach.
So, we'll lead with a similar capture strategy to what we have in place at that point in time in the U.S.
The actual charging could be different but our models will try to get us to the same level of capture.
David Grossman - Analyst
I got it.
Okay.
And just one other question.
Bob can you just remind us what the impact of getting that second quarter in the U.S.
market, how that flows through, kind of the business and how it will kind of impact the results?
Bob Greifeld - CEO
Yes, well, the key thing I think I touched on in my prepared comments, is we, in the United States here have a somewhat obscure way to calculate revenue sharing from market data.
And that revenue sharing formula, as we learned more about it, has a strong bias towards a lower volume exchanges.
So, to the extent that our Boston coat has the ability to gain 2 to 3 points of market share, the real interesting point will be how much of the mark data pool we're able to claim.
And depending upon the mix of orders versus trades, it could be anywhere from 6% to 9% of the market data pool.
So, we see that -- the two things are a benefit because clearly, the incremental transactions are just that, incremental.
Where there's no real change to our cost base.
And we'd like to be on the positive side of that arcane formula that we have to live with based upon the SEC's calculations.
David Grossman - Analyst
Okay.
So, we really wouldn't expect to see it showing up in the execution side, it would be in the data side?
David Warren - CFO
It will be in both.
David Grossman - Analyst
It will.
Okay.
And just one last question actually for David.
Can you give us the quick kind of cash flow metrics, if you will, for the quarter and any thoughts you have on the year in terms of CapEx and D&A and some of the other noncash items that get included?
David Warren - CFO
Well, cash flow from operations was $221 million and that compared to $78 million in March of '07.
David Grossman - Analyst
Okay.
David Warren - CFO
CapEx, I think at this point, as we've come together we'll have more to say on that next quarter but definitely are managing it well.
And in terms of I think the pro forma's at this point and the reason we presented them to you, is I think it definitely presents a good guide from our starting point.
And then our (inaudible).
David Grossman - Analyst
Okay.
So, I'm sorry, did you have a CapEx number for the quarter?
David Warren - CFO
I don't have one for the quarter.
Do we have the CapEx?
Bob Greifeld - CEO
Yes I've got it.
About $14 million was for the quarter.
David Grossman - Analyst
Okay.
All right, guys.
David Warren - CFO
As I said, I'll update that more as we go forward.
I'm just going to know more as we get into the second quarter.
David Grossman - Analyst
Got it.
Thanks very much.
Bob Greifeld - CEO
Thank you.
Operator
We will go next to Mike Carrier with UBS.
Mike Carrier - Analyst
Morning, guys.
I want to try to get around some of the noise in the quarter.
And I realize there's a lot going on and it's kind of early but when I look at the pro forma numbers for OMX or the non-U.S.
Ops and then -- it looks like you're operating pretax margin was in the low to mid-20s versus OMX's operating around 30% or a little above.
So, just want to understand how much is this due to higher one-time expenses, maybe including some the retention or any severance, versus other issues maybe like the light technology revenues?
Bob Greifeld - CEO
That's a big question.
What's that?
We're not breaking it out that way, is the first answer to your question.
Mike Carrier - Analyst
Yes, I was just taking if you look at the non-U.S.
revs that you give and then last quarter, you were just saying if the core NASDAQ revenues or expenses would be running at like $110 million per quarter.
So it's a rough number and I understand there's a lot going on.
But I just didn't know if there was some one-time items on the expense side that maybe just brought it down a little bit?
Bob Greifeld - CEO
Yes, there are no major extraordinary charges in the numbers other than what I've already highlighted.
Mike Carrier - Analyst
Okay.
And then just on the Pan-European initiative, you've mentioned that your goal is try to get maybe 5 percentage of market share in the first year.
And I would just like to get your view on which markets you expect it to be easiest to get that first 5% from?
And then what you expect to see on the pricing?
Bob Greifeld - CEO
Well, I would definitely direct you to -- the 20% number is our goal.
We'll have obviously check points along the way and 5% is a good round check point.
I would say this, the focus, I don't think is on a particular market but it's really the high volume stocks.
And I think those will be the easiest for us to gain share in.
So, we'll look on a Pan-European basis, what are the top 200, 300, 400 or 500 stocks that trade very actively.
Stocks where the algos have the ability to really interact with on an efficient basis.
So, that's going to be our.
Mike Carrier - Analyst
Okay.
Thanks.