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The NASDAQ OMX Group, Inc. (NDAQ)

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Nasdaq OMX Group Inc. (NDAQ)

Q1 2009 Earnings Call

May 7, 2009 8:00 am ET

Executives

Vince Palmaro – Vice President Investor Relations

Robert Greifeld – Chief Executive Officer

David Warren – Chief Financial Officer

Magnus Bocker - President

Analysts

Richard Repetto – Sandler O'Neill

Howard Chen – Credit Suisse

Daniel Harris – Goldman Sachs

David Grossman – Thomas Weisel Partners

[Alex Framm – Barclay's Capital]

Michael Vinciquerra – BMO Capital Markets

Niamh Alexander – Keefe, Bruyette & Woods

Edward Ditmire – Fox-Pitt, Kelton

Justin Schnack – Rosenblatt Securities

[Shane Finemore – M&K Partners]

[Alex Framm – Barclays Capital]

Christopher Allen – Pali Research

Daniel Fannon – Jefferies & Co.

Presentation

Operator

Welcome to the Nasdaq first quarter 2009 earnings results conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Vice President of Investor Relations, Mr. Vince Palmaro.

Vince Palmaro

Good morning everyone and thanks for joining us today to discuss our first quarter 2009 earnings results. Joining me are Bob Greifeld, Chief Executive Officer, David Warren, our Chief Financial Officer, Magnus Bocker, President and Ed Knight, our General Council. Following the 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 and the presentation on our website at www.nasdaqomx.com. We intend to use our website as a means of disclosing the material non public information and complying with disclosure obligations under SEC Regulation FC. Any disclosures will be included under the events and presentation section of the site. If you have any questions after the call, please contact me at 212-401-8742.

Before we 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 events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

The actual results may differ materially from those projected in these forward-looking statements. Information containing the factors that could cause actual results to differ from the forward-looking statements is contained in our press release and in our reports filed with the SEC.

Robert Greifeld

I do thank everybody for joining us here this morning. We are particularly proud of the results we are reporting today. GAAP net income for the first quarter 2009 was $94 million or $0.44 per diluted share. When excluding merger related expenses and other non recurring items, on a non-GAAP basis our net income was $102 million or $0.48 per diluted share, an increase of 9% when compared to pro forma non-GAAP results of $0.44 in the first quarter of 2008.

In addition to growing income, our operating margins improved to 47% up from 41% in the year ago period, a remarkable performance in this economic climate. We were able to achieve our year over year growth through the strength of our diversified business model and continued focus on operational efficiency.

By remaining true to our management philosophy, Nasdaq OMX is now in the preferred position of having global scale against a lean cost structure. We have positioned ourselves to succeed whatever the market dynamics.

I will begin my review with a discussion of our Options business. We couldn't be more pleased with the performance of both the PHLX and the Nasdaq NOM options market which combined had 20% of the market during the first quarter and reached 21% during the month of April. The growth in this business has been impressive.

Turning to our Nordic operations, 2009 is a transition year for our cash equity business. By the end of 2009 we will dramatically alter many aspects of the market. We will introduce central clearing through our partnership with the EMCF. We will consolidate trading onto our INET matching engine. We will launch order routing functionality and we'll offer co-locations services for our market participants.

During this time of transition, we are focused on our customers and we have been rewarded by retaining 94% market share in the Nordic and the Baltic cash equities. This is greater than many incumbents in Europe where we see the primary market traded around 74% of the FTSE 100 and the primary market trade around 75% of the Cat40. So truly 94% is outstanding.

In addition, we are starting to see encouraging signs that the markets in the Nordic's are improving. Since December, we witnessed four consecutive months of growth in both the number of trades and the value traded as the number of trades has grown nearly 30% since December and they value traded has grown about 50%.

And finally, we just recently began trading Norwegian equities on the Nasdaq OMX platform and four market makers committed to providing continuous liquidity in these securities.

Our goal through all these activities is to provide greater value by increasing liquidity and trading velocity while reducing costs for our customers.

Now turning to MTF. We recently witnessed significant growth in that market. Average daily value traded on our systems has grown six fold in the past few weeks, truly remarkable. Total traded value yesterday reached more than $300 million, a new record.

Our share has steadily grown to the point where we're now averaging more than 1% of the CAT40 trading. As we've stated on prior calls, our approach to growing this business has been to first focus on establishing connectivity with customers and then to get close to those customers by providing the market structure, services and flexibility they need.

Read the rest of this transcript for free on seekingalpha.com