Nasdaq Reports Third-Quarter Net Income of $7.9 Million
Earnings Per Share of $0.07

New York, NY—The Nasdaq Stock Market, Inc. (Nasdaq^®), today reported net income of $7.9 million for the quarter ended September 30, 2001, compared with net income of $22.0 million for the third quarter of 2000, a decrease of 64.1%. Diluted earnings per share was $0.07 for the third quarter of 2001, compared with $0.18 for the third quarter of 2000. Annualized return on average stockholders' equity was 6.1% for the third quarter.

Total revenues for the third quarter were $197.7 million, a 2.5% decrease from $202.7 million for the same period last year. Total expenses for the quarter were $191.0 million, an increase of 18.0% from the $161.8 million the prior year. These expense increases were anticipated and represented investments in technology and global initiatives.

Commenting on the results, Nasdaq President Richard G. Ketchum said, "This has been a year in which we have continued to invest in and build our major strategic initiatives, while managing the business through continued soft market conditions. The third quarter continued this theme and, obviously, also presented additional challenges."

Ketchum added, "I am proud of how Nasdaq and its participants responded to the events of September 11th. We closed the market for four days, which was the right thing to do under the circumstances. When we reopened, we did it without a hitch and with virtually all market participants connected and ready to trade."

"We expect the soft market conditions to continue," Ketchum said. "In the fourth quarter, we are continuing to manage our costs, while at the same time investing in the development efforts for SuperMontage^SM and our international initiatives. These actions, and others, continue to strengthen our competitive posture and position us as the venue of choice for investors, companies and market participants," he concluded.

Nine Month Results

Results for the nine months ended September 30, 2001 are shown below and are compared with the nine months ended September 30, 2000:

Business Highlights

Major events so far this year:

Third-Quarter Business Line Results

Transaction Services

For the three months ended September 30, 2001, transaction services revenues were $84.6 million, a decrease of $6.7 million, or 7.3%, from $91.3 million for the three months ended September 30, 2000. Transaction services consist of SelectNet^SM, SOES^SM, SuperSoes, ACT, the Nasdaq Workstation II ^TM, CTCI, and other related execution services. Average daily share volume, one of the drivers of transaction services revenues, was 1.63 billion for the quarter, compared with 1.59 billion for the third quarter of 2000.

While the year-over-year average daily share volume comparison for the third quarters was relatively flat, revenues for the quarter decreased as a result of the loss of four consecutive days of trading following the September 11th terrorist attacks and because of the implementation of SuperSoes in late July, which significantly altered trading patterns and resulted in a decrease in revenues. Nasdaq has subsequently implemented a repricing of its services that largely recaptures the trading revenue stream altered by the new execution system.

Market Information Services

For the three months ended September 30, 2001, market information revenues were $58.3 million, a decrease of $7.9 million, or 11.9%, from $66.2 million for the three months ended September 30, 2000. Market information services consist of Level 1, Nasdaq Quotation Dissemination Service (NQDS), Nasdaq InterMarket tape revenues, and other related services. The decline in market information services revenue has been largely the result of a decrease in demand for non-professional data services and the introduction of a lower priced non-professional NQDS service.

Corporate Client Group Services

Corporate Client Group services (formerly issuer services) revenues were $39.4 million for the three months ended September 30, 2001, an increase of $0.9 million, or 2.3%, from $38.5 million for the three months ended September 30, 2000. Corporate Client Group services revenues represent the amortization of fees for initial listings, listings of additional shares, and annual renewal fees for companies listed on The Nasdaq Stock Market. These fees are initially deferred and amortized over the estimated periods for which the services are provided. This is discussed more fully below in the section "Change in Accounting Principle" and in the quarterly report on Form 10-Q filed November 14, 2001. Initial listings on The Nasdaq Stock Market for the quarter totaled 32, compared to 163 for the same period of 2000. Actual initial listing fees charged in the quarter decreased $13.3 million or 83.1% from $16.0 million in the quarter ended September 30, 2000 to $2.7 million in the quarter ended September 30, 2001.

In October, Nasdaq announced an increase in listing fees, subject to SEC approval, and an expansion of services to be provided to Nasdaq listed companies, both to occur in 2002.

Other Revenues

Other revenues for the three months ended September 30, 2001, totaled $15.5 million, up from $6.7 million from the same period of 2000, primarily attributable to increased trademark and licensing revenues related to the Nasdaq-100 Trust and related products.

Expenses

Total expenses for the third quarter were $191.0 million, up $29.2 million or 18.0% from total expenses of $161.8 million for the same period in 2000. The largest component of this increase was in Compensation and Benefits. This increase was due to a number of factors, including the transfer of positions from the NASD associated with the restructuring and separation of Nasdaq from the NASD, and new positions required to support strategic initiatives.

Much of the expense activities are to support the development of Nasdaq's strategic initiatives - notably SuperMontage and Nasdaq's international initiatives. Ketchum noted, "We are actively managing our cost structure given the soft market conditions. We are taking opportunities to wring out expenses and defer optional activities, while at the same time continuing to invest and build in the initiatives that are important to Nasdaq's future."

Change in Accounting Principle

In the fourth quarter of 2000, the SEC Staff Accounting Bulletin No. 101 - "Revenue Recognition in Financial Statements" (referred to as "SAB 101"), became effective for SEC public reporting companies. Nasdaq initiated discussions with the SEC as it prepared to become an SEC public reporting company this year. As a result of these discussions, which concluded in August of this year, Nasdaq adopted a change in accounting principle for revenue recognition of its initial listing fees and fees for listing of additional shares.

Revenues for these fees are now deferred and amortized over estimated periods of six and four years, respectively. As a result, reported earnings for 2000 - a period of robust listing and capital raising activity - substantially decreased and earnings for the first nine months of 2001 - a period of reduced listing and capital raising activity -- increased. These changes had no effect on cash receipts, cash flows, or on the underlying economics of the business - merely on the timing of when these revenues are recognized for financial reporting purposes. As a result of the adoption of SAB 101, Nasdaq recognized a negative one-time $101.1 million adjustment to revenue in the first quarter of 2000. This adjustment will be recognized as an addition to future revenue streams. The impact of this change is described more fully in the Form 10-Q filed November 14, 2001.

Investor Conference Call

An investor conference call to discuss the firm's results, outlook and related matters will be held at 11:00 am, ET on Thursday, November 15. Members of the public and the media who would like to listen to the conference call can access it through an audio webcast available at www.nasdaq.com/reference/nasdaq_3q_earnings_frameset.htm or by calling in at 1-888-820-8956 (in the U.S.) or 1-712-271-0950 (International), password "Nasdaq 10Q," leader "Richard Ketchum." At 12noon ET, there will be a call to answer questions from the media, at 1-888-455-2655, password "Nasdaq Press Conference," leader "Andy MacMillan." For those unable to listen to the live broadcasts, a webcast replay of the Investor Call will be available on the Nasdaq website investor relations page at http://www.nasdaq.com/or the Nasdaq Newsroom website at http://www.nasdaq.com/newsroom/or by dialing 1-800-294-4341, pass code number 7425, beginning approximately one hour after the event. A replay of the Media Q&A will be available on the Nasdaq website investor relations page at http://www.nasdaq.com/or the Nasdaq Newsroom website at http://www.nasdaq.com/newsroom/or by dialing 1-800-262-5125 beginning approximately one hour after the event. The replay number will be available until 5:00 p.m. on November 30. Please direct any questions regarding obtaining access to the conference call to Nasdaq Media Relations, via e-mail, to judith.inosanto@nasdaq.com.

Nasdaq Financial Statements

The following attachments summarize the results reported on the Form 10-Q:

Cautionary Note Regarding Forward-Looking Statements

The matters described herein, and the matters described in The Nasdaq Stock Market's (the Company's) webcast, may contain forward?looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward?looking statements involve a number of risks, uncertainties or other factors beyond the Company's control, which could cause actual results to differ materially from historical results, performance or other expectations and from any opinions or statements expressed or implied with respect to future periods. These factors include, but are not limited to, the Company's ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors detailed in the Company's registration statement on Form 10, as amended, and periodic reports filed with the U.S. Securities and Exchange Commission. We undertake no obligation to release any revisions to any forward-looking statements.

The Nasdaq Stock Market lists over 4,100 companies and trades more shares per day than any other U.S. market. For more information about Nasdaq, visit the Nasdaq Web site at www.nasdaq.com or the Nasdaq Newsroom at www.nasdaq.com/newsroom.