Included in third quarter 2007 results was a pre-tax gain of $431.4 million associated with NASDAQ's sale of its share capital of the London Stock Exchange Group plc, which had the impact of increasing diluted earnings per share by $1.95.

For comparison purposes pro forma non-GAAP results are being presented that reflect the financial results of both NASDAQ OMX and the Philadelphia Stock Exchange as if we were a combined company for the periods presented and exclude certain non-operational items. Items excluded from third quarter 2008 results are:

• A $50.7 million non-cash pre-tax loss primarily related to a forward contract to hedge the Norwegian Krone cash payment for the acquisition of Nord Pool's clearing, international derivatives and consulting subsidiaries;
• $8.5 million in pre-tax merger related expenses;
• A pre-tax non-cash impairment charge of $7.3 million primarily related to intangible assets of our insurance agency business; and
• $4.2 million in pre-tax expenses associated with workforce reductions and other reserves.
  

For the third quarter of 2008, net income on a pro forma non-GAAP basis was $109.7 million, or $0.52 per diluted share, an increase of 27.7% when compared to pro forma non-GAAP net income of $85.9 million, or $0.42 per diluted share, for the third quarter of 2007, and an increase of 7.2% when compared to pro forma non-GAAP net income of $102.3 million, or $0.48 per diluted share, for the second quarter of 2008.

The remaining results are presented on a pro forma basis unless otherwise noted.

Total revenues were $1.0 billion in the third quarter of 2008. Revenues less liquidity rebates, brokerage, clearance and exchange fees ("net exchange revenues") were $410.6 million for the third quarter of 2008, an increase of $26.4 million, or 6.9%, from the third quarter of 2007, and a decrease of $9.7 million, or 2.3%, from the second quarter of 2008.

"During the quarter we continued with our ongoing mission to leverage massive scale against extreme efficiencies, building a global business to be successful in all economic environments," commented Bob Greifeld, Chief Executive Officer of NASDAQ OMX. "All of the steps taken, including the acquisitions of the Philadelphia Stock Exchange and the Boston Stock Exchange, as well as the launch of NASDAQ OMX Europe, are designed to further diversify our product offerings while utilizing the same efficient platform. In many ways, NASDAQ OMX has never been better positioned to deliver value to our customers and long term returns for our shareholders as we redefine the role of the global exchange company."

Recent Highlights

• On October 21, 2008, NASDAQ OMX was added to the S&P 500 index, the most widely watched index of large-cap U.S. stocks.
• Reached new market share highs in the trading of U.S. equity options contracts. The combined market share of NASDAQ OMX PHLX and The NASDAQ Options Market averaged 17.9% during the third quarter of 2008, up from 15.6% in the third quarter of 2007, while reaching a high of 19.0% during the month of August. Total volume traded grew 54.3% in the third quarter of 2008 when compared to the same period last year.
• Total cash equity volume matched on NASDAQ in the third quarter of 2008 grew 47.2% from the prior year quarter while matched average daily volume reached a record high of 2.8 billion shares. NASDAQ matched 29.6% of all U.S. traded equity volume in the third quarter of 2008, maintaining its leading position as the largest single pool of liquidity in which to trade U.S.-listed equities. And NASDAQ continued to gain share in NYSE-listed securities, matching 23.3% of volume during the quarter.
• Launched NASDAQ OMX Europe and recently completed the phased roll- out of trading for approximately 600 listed European equities. NASDAQ OMX also announced its intentions to launch a London listing venue by becoming a Recognized Investment Exchange.
• Completed the acquisition of the Boston Stock Exchange (BSE). Subject to SEC approval, BSE will be renamed NASDAQ OMX BX and will be used to launch a second U.S. equities market.
• Became the world leader in cleared power derivatives volumes following the October 21, 2008 acquisition of Nord Pool's clearing, international derivatives and consulting subsidiaries. NASDAQ OMX also launched NASDAQ OMX Commodities, which includes Nord Pool's energy and carbon derivatives products.
• Announced a binding agreement to acquire a 22% equity stake in the European Multilateral Clearing Facility N.V. (EMCF) from Fortis Bank Nederland (Holding) N.V. (FBN) on October 16, 2008. EMCF is a central counterparty clearing house for European equity trading on exchanges and multilateral trading facilities. NASDAQ OMX's and FBN's objective is to reinforce EMCF's position as the leading cash equity central counter party clearing facility in Europe.
• NASDAQ OMX attracted 62 new listings in the third quarter of 2008, including 21 new listings and 4 IPOs from China, 3 switches from the New York Stock Exchange and 16 from the American Stock Exchange. Notable switches from the NYSE during the quarter were the CME Group, Inc. (Nasdaq:CME), Seagate Technology (Nasdaq:STX), and Celera Corporation (Nasdaq:CRA). Also, Automatic Data Processing, Inc. switched its listing from NYSE to NASDAQ on October 21, 2008 while retaining its three-character ticker symbol ADP.
• Board Recruiting, a service of NASDAQ OMX, announced that it created a strategic alliance with leading executive search firm Heidrick & Struggles to provide companies with enhanced services in board recruiting. The new offering will integrate the leadership assessment expertise of Heidrick & Struggles with Board Recruiting's online matching system to provide clients with a broader array of choices in how they identify and recruit director candidates.

"We continue to deliver strong operating results," said David Warren, NASDAQ OMX's Chief Financial Officer. "Our integration efforts are moving forward well ahead of schedule. The $100 million in expense synergies resulting from the combination with OMX are now expected to be achieved in the fourth quarter this year, up from the original estimate of year-end 2009, and up from the first quarter of 2009 target that we communicated last quarter. And the integration of the Philadelphia Stock Exchange is far ahead of schedule as the deal accreted to shareholders this quarter."

Financial Review

Market Services

Market Services net exchange revenues increased to $299.4 million, up 10.2% from the prior year quarter and up 2.3% from the second quarter of 2008.

Transaction Services

Net exchange revenues from Transaction Services were $183.7 million for the third quarter of 2008, an increase of $20.1 million, or 12.3%, when compared to the third quarter of 2007. Net exchange revenues increased $7.4 million, or 4.2%, from the second quarter of 2008.

Cash Equity Trading net exchange revenues increased from the prior year quarter and from the second quarter of 2008.

• Increases when compared to both the prior year quarter and the second quarter of 2008 are due to higher trading volumes for U.S.-listed equities. Volume matched on NASDAQ systems increased to 179.2 billion shares in the third quarter of 2008, up 47.2% from 121.7 billion shares in the third quarter of 2007, and up 31.4% from 136.4 billion shares in the second quarter of 2008.
• Somewhat offsetting the increases in U.S. cash equity trading are declines in European cash equity trading revenues. The decline in revenue when compared to the third quarter of 2007 is driven by a 34.6% reduction in value traded on the Nordic Markets, offset slightly by a 4.6% increase in trade volume. When compared to the second quarter of 2008, value traded declined 10.0% while trade volume increased 7.9%.
• Included in U.S. cash equity trading revenues in the third quarter of 2008 are $42.4 million in SEC Section 31 fees, compared with $94.2 million in the third quarter of 2007 and $37.3 million in the second quarter of 2008. Corresponding cost of revenues, reflecting the reimbursement of these fees to the SEC, is included in brokerage, clearance and exchange fees.

Derivative Trading net exchange revenues increased from the prior year quarter and from the second quarter of 2008.

• The increases when compared to prior periods are primarily due to higher trading volumes for U.S. options contracts. Total combined volume traded by NASDAQ OMX PHLX and The NASDAQ Options Market increased 53.5% from the third quarter of 2007 and increased 21.4% from the second quarter 2008.
• Somewhat offsetting the increases in U.S. options revenues when compared to the second quarter of 2008 are declines in European derivative trading revenues, which are primarily driven by seasonally lower trading volumes for derivative products.

Market Data

Market Data revenues were $87.5 million for the third quarter of 2008, up $5.5 million, or 6.7%, when compared to the third quarter of 2007, but down $0.9 million, or 1.0%, from the second quarter of 2008.

Net U.S. Tape Plan revenues in the third quarter of 2008 were up
$0.7 million, or 1.9%, when compared to the prior year quarter and
up $1.9 million, or 5.2%, from the second quarter of 2008.

• U.S. Tape Plan revenues reflect revenues generated by members of joint industry plans that distribute the national best bid and offer and last sale information for U.S. equities. Plan members, such as The NASDAQ Stock Market, share revenue collected from disseminating this information. The distribution of revenue to each plan member is determined using a formula, required by Regulation NMS, that calculates each participant's share of trading and quoting activity.
• Driving U.S. Tape Plan revenues, net of revenue sharing plans, higher in the third quarter of 2008 when compared to the second quarter of 2008 were increases in NASDAQ's share of trading and quoting activity in NYSE-listed securities. Somewhat offsetting this increase is a decline in NASDAQ's share of trading and quoting activity in NASDAQ-listed securities.

U.S. market data products revenues were $27.1 million in the third quarter of 2008, an increase of $3.9 million, or 16.8%, when compared to the year ago quarter, and up $0.1 million when compared to the second quarter of 2008. U.S. market data products revenues reflect revenue generated from the sale of NASDAQ OMX proprietary data products. Revenue growth when compared to the prior year quarter is driven by the launch of NASDAQ Last Sale, and growth of other proprietary products including TotalView. Revenue growth when compared to the second quarter of 2008 is driven primarily by the launch of NASDAQ Last Sale, offset by declines in demand for certain proprietary products and higher than usual revenue in the second quarter from back-billing of customers.

European market data products revenues were $22.3 million in the third quarter of 2008, an increase of $0.9 million when compared to the prior year quarter but a decline of $2.9 million when compared to the second quarter of 2008. The increase from prior year is due

primarily to changes in the exchange rate of the Euro as compared to the U.S. dollar. Declines when compared to the second quarter of 2008 are due to changes in the exchange rate of the Euro as compared to the U.S. dollar as well as a decrease in demand for certain European data products.

Issuer Services

During the third quarter of 2008, Issuer Services revenues declined $1.9 million, or 2.2%, to $85.1 million from the third quarter of 2007 and declined $2.5 million, or 2.9%, from the prior quarter.

Listing Services

Listing Services revenues were $72.4 million for the third quarter of 2008, down $2.8 million, or 3.7%, when compared to the third quarter of 2007 and down $4.3 million, or 5.6%, from the second quarter of 2008. Decreases in revenues from prior periods are driven primarily by lower market capitalization values for European listed equities, which in turn resulted in a decline in European listing fees of $2.3 million when compared to the third quarter of 2007 and $3.6 million when compared to the second quarter of 2008.

Financial Products

Financial Products revenues were $12.7 million for the third quarter of 2008, up 7.6% when compared to the third quarter of 2007, and up 16.5% when compared to the second quarter of 2008. Driving the increase in revenues is higher license fees associated with NASDAQ-licensed products.

Market Technology

Market Technology revenues were $24.9 million for the third quarter of 2008, equal to revenues recognized in the third quarter of 2007, but down $13.8 million, or 35.7%, when compared to the second quarter of 2008. Revenue declines when compared to the second quarter of 2008 are due to seasonally lower demand for licensed products, technology support and facilities management services.

Operating Expenses

When presented on a pro forma non-GAAP basis, total operating expenses decreased $4.7 million, or 2.1%, to $222.0 million from $226.7 million in the prior year quarter and $30.4 million, or 12.0%, from $252.4 million in the prior quarter. The decrease in expenses was driven primarily by lower compensation expenses, declines in professional and contract services, and reduced general and administrative expenses. Somewhat offsetting these declines are higher marketing and occupancy expenses and spending on new initiatives.

Net Interest Expense

Net interest expense was $19.0 million for the third quarter of 2008, compared with $31.2 million for the third quarter of 2007 and $20.6 million for the second quarter of 2008. The decline in net interest expense is primarily due to lower interest rates.

Earnings Per Share

On a pro forma non-GAAP basis, third quarter 2008 earnings per diluted share were $0.52 versus $0.42 per diluted share in the prior year quarter, and $0.48 in the second quarter of 2008. NASDAQ OMX's weighted average shares outstanding used to calculate diluted earnings per share were 214.2 million in the third quarter of 2008 versus 212.8 million in the year-ago quarter and 214.4 million in the second quarter of 2008.

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