NDAQ
#And I just want to add, again, some directional color.
One thing that we're tracking in corporate solutions is, on a quarterly basis, the average number of products per client, average revenue per client, and we have seen steady progress in both of those metrics, which I think is a sign of continued success in working off of that existing customer base and selling additional products and generating more revenue from it.
So that's something that we're watching carefully and are pleased with the specific progress that we've made over the past four quarters.
How we doing.
<UNK>, do you have that number.
Yes.
So <UNK>, first of all, both of those initiatives are within the gift expenses, which in aggregate is in the $30 million to $40 million, as we've provided from a guidance standpoint.
But as we've said previously, NLX is approximately $0.02 per quarter and NFX is below that level.
So that gives you some sense of the aggregate scale of those initiatives on a quarterly basis.
Yes.
So I can't speak for what you're reading in the press, but we haven't announced any FX initiatives that are launching next year.
I am sitting here in London with <UNK>.
<UNK>, have you announced anything without telling me.
(Laughter) So I don't know where you're getting that information, but it's not correct.
Right.
Definitely.
So one, I would say is obviously that announcement was not unexpected and I think it was expected many months before.
So it was no surprise there.
But clearly, we're in close touch with our customers.
And I would state that since that announcement, we have reconfirmed with our customers that there's no change in plans they have with respect to NLX.
I've previously stated that we needed to proceed with NLX2 with some core support in a very meaningful way from some of the major banks, and we're continuing along that path.
And right now we remain optimistic that we're going to get there.
And I also would want to make it clear that the world that we envision in the listed futures world is not that dissimilar from what we see in the equity world, where we expect them to have more than one trading venue clearing through a common clearinghouse.
So if we have LCH playing the essential role that DTCC would play in the US equity world, we certainly see that our customer could trade on one venue and have that then, as long it's clearing in the same venue, then it's basically fungible.
And it puts the customer in a position where the different trading venues can compete quite aggressively against each other.
And you have a situation in the listed futures world where the customers have smart order routers ---+ and if they don't, they're planning to have them ---+ which allow them to create essentially a virtual book between the different venues.
So that's the world we see developing.
It's one we're very comfortable with.
It's one we compete in in our transaction businesses today.
And when you see the results of our transaction businesses in this quarter, in particular, you see that we can run in that competitive world and how efficiently we run our businesses, you can still run it with a very healthy margin.
So that's where we see the world developing.
Yes.
So I'll start and say, one, obviously smarts has been a very strong acquisition for us and it's the model we'd like to use where as a smaller, successful company, we were able to lever our distribution capability and also significantly ramp up the R&D spending where we came out with the products for the brokerage community, where at the time of acquisition, it was primarily geared around exchanges and/or regulatory bodies.
And so you saw evidence of additional product set, as you mentioned, with the dark pool, and we have more products coming.
I say across the planet, you have increased intention, and we think that will continue, for surveillance.
It's necessary in the markets that we live in.
And clearly, whether in China, whether in Europe or the US, that is a common global phenomenon.
And our job is to make sure we're delivering the right product and services to meet that growing and real need.
And I think the team has done an exceptional job doing that.
So the need for surveillance is no different in China than it is in other parts of the world.
<UNK>, do you want to add to that.
I would just add that we've been in Hong Kong for well over a decade.
We've had a good team there.
And we've been working with exchanges, as well as broker-dealers in Asia, for many, many years.
So it is a testament to the relationships that we've been able to develop over the years to be able to find opportunities to work with exchanges, as well as broker-dealers in China, as well as all over Asia.
And I think that the team's done a great job there.
All right.
So let me start with Nasdaq Private Markets.
And it's important to recognize that we seized on this opportunity based upon the passage of the Jobs Act.
And the Jobs Act said that you could stay private with up to 2,000 shareholders and employees did not count.
The prior rules were 500 and employees did count.
So we saw a company could go a long way in its evolution and stay private, and we had to make sure that we provided solutions for them.
So certainly, the relationships we build with these companies in the pre-IPO phase, we have a fundamental belief that that will help us with our IPO win rate.
So that's an element to it.
But that's a secondary benefit, because we think the market by itself is quite exciting, and we certainly believe that a company similarly situated with respect to size and/or complexity will earn for us an equal amount of revenue, if not greater, than it would if it was in a public company context.
But our job is to meet the customer need where companies want to stay private for a longer period of time.
We actually support that notion, in general, in that you should only come public when you have a mature business model that can withstand the rigors of these quarterly calls.
So we think there will be increasing number of private companies, and we're there to meet the totality of their needs.
So within Nasdaq Private Market now obviously being combined with SecondMarket, they have a lot of needs that we have developed for a public company and we have to make sure we target that for the private company.
We think the liquidity needs of these private companies will evolve over time.
We run what is known as SLPs today.
We do it on an episodic basis, and we are starting to see some trend line were companies want to run these liquidity programs on a more consistent and regular basis.
We also see the broadening of participation in these liquidity programs, where they are today primarily employee-based, and we certainly think it will evolve to where early stage investors can use this mechanism for liquidating their position or second stage investors can use it for coming into the marketplace.
So it's something that we think has tremendous potential for us.
And as I said, we think the revenue potential per company in the fullness of time is equal to or greater than the revenue potential of a company in the public market context.
Okay.
And <UNK>, on your question on audit, audit was up just slightly.
It was up $1 million from the prior quarter and up $2 million from the year-ago quarter.
So I'd say consistent with the lower level of audit fees that we've had.
But it was a slight increase from prior periods.
How are you doing, <UNK>.
Thank you.
Yes.
So <UNK>, I do want to start by answering that question in a different way.
I believe right now that the corporate solutions business has to be primarily judged by how good our products are, how good they are relative to the competition, and what momentum do we have with our customers.
The financial results will follow if we do these things right in 2016.
So great credit to the team.
I think we've cleaned up what I'll call the operational aspects of the business over the last year or so.
Our touch points with our customers have improved quite dramatically.
We're seeing signs of that in the financial performance, but more importantly, as we deal with our customers they recognize that we are on the move, we're making progress, and you have the whole world anxiously awaiting now our next gen product.
And as I've said previously, we are in the unique position to take our development might and our development muscle and turn it to this sector of the marketplace.
So we don't have any competitors of our kind of technology capability.
And we're investing in it.
We're investing heavily in it.
And we're excited with the progress.
The team is delivering on time, on schedule, hopefully, we will finish on budget, and good things will happen from there.
The other general point, are you in a market segment once you are more competitive.
That can grow over time.
And we certainly believe that corporate solutions is really strategically placed.
To be running a public company today is an intense endeavor and you have an increasing need for information to help manage that and then also communicate to your shareholders and your stakeholders, and we're there positioned to meet those needs.
No.
As I said, I will be focused on that soon enough, but right now, we're making sure the team is doing all the right things.
This is a function, you do the right things, the margins will come.
Now if you're expecting this business to have margins like we have in index and data, then we won't get there.
So I don't want to create any false expectations.
But we certainly know what a world-class software company should have as margins and that's clearly where we're going to get to.
Right.
So I would say certainly that you will be witnessing a fundamental change in the fixed income market over time.
But it's also wrong to think that it's going to look like the equity market over time.
It has different dimensions to it, different complexities to it which will lead it down a different path.
Clearly, we identified US government Treasuries as a place for us to start, because that's the one area of fixed income that does look and feel like the equity market does on a fully deployed basis.
So we are keenly aware of what's going to change in fixed income in general.
We have views of where it's going to end up.
And then obviously, we have to pay attention to where it's a proper place for us to enter that market.
With respect to eSpeed, I think I referred on prior calls to the fact there is change in the market and you see a number of our customers have traded in the dark in an increasing basis.
And I think under <UNK>'s leadership, the team has come up with an innovative approach that's shifting market structure.
We had the first launch of it just this past Monday.
And it's called eSpeed Elect, and it allows segmentation in the customer base, so customers can choose who they want to trade with and give the pricing that's appropriate to that customer base, and it also allows them to do some of those transactions, assuming they're respecting the lit market, in the dark.
In many ways, it's a market structure we had envisioned for the US equity market structure.
We were able to put it into the fixed income market, to the Treasury market, and we're excited about the prospects.
It's obviously way too early to declare anything today.
This week was a semi-beta launch, where we came out with it in a limited basis.
But we'll see full release of it as the quarter waxes on.
<UNK>, you want to add anything to that.
Just one thing.
As <UNK> already have expressed, we are extremely customer focused and centric, and it also means that we have a dialogue also on the European and the US side with the market participants in the fixed income side about how to address the challenge in the fixed income market going forward.
And broadly speaking, part of that is increased product cost of capital coming out of regulation and the past requirements.
The other element is new regulation, like for example, the new exchange regulation in Europe in (Indiscernible), which definitely influenced the fixed income market.
But also, the last two days conference organized by Fed in New York, showing us that there is a high likelihood that we will see more regulation also coming into the US Treasury market.
So we stay in very close contact with our customers to make sure that we develop solutions together with them.
Great.
Well, first off, thank you, everybody, for attending this call today.
As I said in my prepared comments, this was truly a remarkable quarter for us, and we congratulate the team on great execution.
We are seeing the power of the business model, but it's also important to highlight that this is a balanced quarter.
Our results were in no way shape optimized for the quarter.
If anything, you could say that our investments in the future increased during the quarter, which we were proud to do, but we also balanced that with a very strong return of capital to our shareholders.
So in many ways, we're pleased with the quarter.
But most importantly, it gives us the platform to continue to grow and continue to provide returns to our shareholders.
So thank you for your time, look forward to talking to you in the near future.
