NASDAQ OMX Group (NDAQ)

Direct Expenses

The following table shows our direct expenses:

Compensation and benefits expense increased in the first quarter of 2008 compared with the first quarter of 2007 primarily due to the inclusion of OMX’s compensation expense from the date of acquisition of $20.2 million, a curtailment gain of approximately $6.5 million as a result of the Pension Plan and SERP freeze, recognized in the first quarter of 2007 and additional share-based compensation expense due to grants in December 2007 to all active employees. Headcount increased from 887 employees at December 31, 2007 to 2,382 employees at March 31, 2008, primarily due to our business combination with OMX. See Note 9, “Employee Benefits,” and Note 10, “Share-Based Compensation,” to the condensed consolidated financial statements for further discussion.

Marketing and advertising expense decreased in the first quarter of 2008 compared with the first quarter of 2007. The decrease is primarily due to marketing activity in the first quarter of 2007.

Depreciation and amortization expense increased in the first quarter of 2008 compared with the first quarter of 2007 primarily due to additional amortization expense of $3.9 million for intangible assets acquired in our business combination with OMX and the inclusion of OMX’s depreciation and amortization expense from the date of acquisition of $2.5 million.

Professional and contract services expense increased in the first quarter of 2008 compared with the first quarter of 2007 primarily due to the inclusion of OMX’s professional and contract services expense from the date of acquisition of $6.2 million.

Computer operations and data communications expense was flat in the first quarter of 2008 compared with the first quarter of 2007. Amounts were comparable primarily due to the inclusion of OMX’s computer operations and data communication expense from the date of acquisition of $3.0 million offset by lower NASDAQ costs due to hardware and software leases which were cancelled in the fourth quarter of 2007.

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Provision for bad debts decreased in the first quarter of 2008 compared with the first quarter of 2007 due to a decrease in our aged receivables.

Occupancy expense increased in the first quarter of 2008 compared with the first quarter of 2007 primarily due to the inclusion of OMX’s occupancy expense from the date of acquisition of $3.8 million.

Regulatory expense increased in the first quarter of 2008 compared with the first quarter of 2007 primarily due to higher trading and quoting activity in the first quarter of 2008. Since we sought to preserve a regulatory separation upon operation as a national securities exchange, FINRA continues to provide regulatory services to the Exchange, including the regulation of trading activity on The NASDAQ Stock Market and surveillance and investigative functions.

Merger expenses were $1.4 million for the quarter ended March 31, 2008. These costs are directly attributable to the business combination with OMX, but do not qualify as purchase accounting adjustments. The costs include consulting and legal costs related to our integration of OMX.

General, administrative and other expense decreased in the first quarter of 2008 compared with the first quarter of 2007 primarily due to a first quarter 2007 charge of $10.6 million related to a clearing contract. Our single trading platform includes the functionality that enabled us to discontinue the use of services previously provided under the contract. This was partially offset by the inclusion of OMX’s general, administrative and other expense from the date of acquisition of $5.2 million.

Direct expenses

Compensation and benefits expense increased in 2007 compared with 2006. The increase in 2007 was primarily due to increased incentive compensation reflecting stronger financial performance, additional share-based compensation expense due to grants in December 2007 and December 2006 to all active employees and additional compensation costs due to our recent acquisitions. Partially offsetting the increase in 2007 was a curtailment gain of approximately $6.1 million recognized in the first half of 2007 and cost savings as a result of the Pension Plan and SERP freeze.

Depreciation and amortization expense decreased in 2007 compared with 2006. The decrease in 2007 was primarily due to the retirement of certain equipment which was fully amortized in December 2006 related to the migration of all trading of Nasdaq-, NYSE- and AMEX-listed securities to a single platform. The decrease was partially offset by intangible amortization expense on identifiable intangible assets acquired in our recent acquisitions.

Computer operations and data communications expense decreased in 2007 compared with 2006. The decrease in 2007 was primarily due to lower costs associated with hardware leased equipment. The contract for this equipment was cancelled and charged to expense in the fourth quarter of 2006. The decrease is also due to lower costs associated with a reduced number of communication lines due to the consolidation of our data centers.

Regulatory expense was $28.9 million for the year ended December 31, 2007. Since we sought to preserve a regulatory separation upon operation as a national securities exchange, NASDR, a wholly-owned subsidiary of FINRA, continues to provide regulatory services to The NASDAQ Stock

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Market, including the regulation of trading activity on The NASDAQ Stock Market and surveillance and investigative functions. The regulation charges from NASDR of $33.8 million in 2006 were included in support costs from related parties, net. The decrease in 2007 was primarily due to a reduction in surveillance and other regulatory charges by FINRA and an adjustment of the allocation of its costs between members and market matters.

General, administrative and other expense increased in 2007 compared with 2006. The increase in 2007 was primarily due to an increase in charges recorded in 2007 related to the sale of our share capital of the LSE. We recorded pre-tax charges for a $19.5 million tax sharing payment owed to Instinet for the benefit of SLP pursuant to an agreement to share the deferred tax benefit on the sale of Instinet’s Institutional Brokerage division and a $5.8 million loss on the early extinguishment of debt related to the repayment in full of our credit facilities from the proceeds from the sale of the share capital of the LSE. Also, in 2007 there was an additional loss of $1.1 million on the early extinguishment of a portion of the 3.75% convertible notes and a $10.6 million charge related to a clearing contract. Our single trading platform includes functionality that enabled us to discontinue the use of services previously provided under the contract. Partially offsetting these increases were charges recorded in 2006. In 2006, we recorded a $12.3 million loss on the early extinguishment of the $750.0 million senior term debt issued in December 2005, which was refinanced in April 2006. Additional losses totaling $9.7 million were recorded on the early extinguishment of the portion of the $1.1 billion secured term loan of our April 2006 credit facility that was repaid in May 2006 as a result of an equity offering and in November 2006 with excess cash flow. Also, in 2006, a $5.9 million charge was recorded on the write-down of a held-for-sale building to fair market value. These charges were partially offset by a realized foreign currency gain related to our investment in the LSE of $8.2 million in 2006.

Direct Expenses

The following table shows our direct expenses:

Compensation and benefits expense decreased in the first quarter of 2007 compared with the first quarter of 2006 primarily due to a curtailment gain of $6.5 million as a result of the Pension Plan and SERP freeze. See Note 7, “Employee Benefits,” to the condensed consolidated financial statements for further discussion. Partially offsetting the decrease were additional compensation costs due to our recent acquisitions. Headcount decreased from 904 employees at December 31, 2006 to 885 employees at March 31, 2007, primarily due to our continued reduction in force initiative.

Depreciation and amortization expense decreased in the first quarter of 2007 compared with the first quarter of 2006 primarily due to the retirement of certain equipment which was fully amortized in December 2006 related to the migration of all trading to a single platform. These decreases were partially offset by intangible amortization expense on identifiable intangible assets acquired in our recent acquisitions.

Computer operations and data communications expense decreased in the first quarter of 2007 compared with the first quarter of 2006 primarily due to lower costs associated with hardware leased equipment. The contract for this equipment was cancelled and charged to expense in the fourth quarter of 2006. The decrease is also due to lower costs associated with a reduced number of communication lines.

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Provision for bad debts increased in the first quarter of 2007 compared with the first quarter of 2006 primarily due to an increase in past due account balances as well as inactive customer accounts within the Issuer Services segment.

Occupancy expense increased in the first quarter of 2007 compared with the first quarter of 2006 primarily due to additional costs from our recent acquisitions partially offset by lower rental expense due to action taken in prior years related to our real estate consolidation plans.

Regulatory expense was $6.7 million for the first quarter of 2007. Since we sought to preserve a regulatory separation upon operation as a national securities exchange, NASD Regulation, Inc., or NASDR, a wholly-owned subsidiary of NASD, continues to provide regulatory services to the Exchange, including the regulation of trading activity on The Nasdaq Stock Market and surveillance and investigative functions. The regulation charge from NASDR of $8.1 million for the first quarter of 2006 was included in Support Costs From Related Parties, net. See below for further discussion. The decrease was primarily due to a reduction in surveillance and other regulatory charges by NASD and an adjustment of the allocation of its costs between members and market matters.

General, administrative and other expense increased in the first quarter of 2007 compared with the first quarter of 2006 primarily due to a $10.6 million charge related to a clearing contract. Our single trading platform includes functionality that enabled us to discontinue the use of services previously provided under the contract.

Direct Expenses

The following table shows the details of Nasdaq’s direct expenses:

Compensation and benefits expense increased primarily due to our recent acquisitions of INET, Carpenter Moore and Shareholder.com and a higher reduction in force charge. For the three months ended March 31, 2006, the reduction in force charge was $1.7 million compared with a charge of $0.4 million in the same period 2005. Headcount increased from 786 employees at March 31, 2005 to 912 employees at March 31, 2006. Also contributing to the increase was share-based compensation expense of $2.8 million recognized under SFAS 123(R) for the three months ended March 31, 2006 compared with $0.3 million of expense for the three months ended March 31, 2005. See Note 2, “Recently Adopted Accounting Pronouncement,” and Note 10, “Share-Based Compensation,” to the condensed consolidated financial statements for further discussion.

Marketing and advertising expense increased primarily due to costs related to our new listings and dual listing advertisements.

Depreciation and amortization expense increased primarily due to intangible amortization expense on identifiable intangible assets purchased in the INET, Carpenter Moore and Shareholder.com acquisitions and additional amortization expense due to a change in estimated useful life of some of The Nasdaq Market Center assets due to the migration to the INET trading platform.

Professional and contract services expense increased primarily due to additional costs from our recent acquisitions.

Computer operations and data communications expense decreased primarily due to lower costs associated with providing communication lines to customers due to the retirement of legacy access services products, which we discontinued as of December 31, 2005.

Provision for bad debts decreased primarily due to an increase in collections.

Occupancy expense increased primarily due to additional costs from our recent acquisitions.

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General and administrative expense increased primarily due to a charge associated with potential fines or penalties for Brut’s obligations regarding short sales, firm quotes and other reporting and disclosure requirements.

Direct Expenses

Direct expenses decreased $15.3 million, or 14.1%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This decrease was primarily due to a reduction in computer operations and data communications.

Compensation and benefits expense decreased $0.1 million, or 0.3%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. The decrease was primarily due to lower salaries associated with decreased headcount related to workforce reductions in 2004 of 146 positions. Total headcount

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was 786 on March 31, 2005 compared with 917 on March 31, 2004. Nasdaq also incurred lower severance and outplacement charges in the three months ended March 31, 2005 compared to the same period of 2004. See “2005 and 2004 Cost Reductions,” of Note 2, “Significant Transactions,” to the condensed consolidated financial statements for further discussion. The decreases noted above were mostly offset by an increase in employee benefit obligations in the three months ended March 31, 2005.

Marketing and advertising expense decreased $1.3 million, or 50.0%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. The decrease was primarily due to a decline in overall marketing and advertising expenditures, as part of Nasdaq’s cost reduction plan.

Depreciation and amortization expense decreased $1.4 million, or 7.1%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. The decrease in depreciation and amortization expense was primarily due to declines in incremental depreciation and amortization expense on certain equipment associated with Nasdaq’s quoting platform and its trading and quoting network as Nasdaq migrates to lower cost operating environments as part of Nasdaq’s cost reduction plan. See “2005 and 2004 Cost Reductions,” of Note 2, “Significant Transactions,” to the condensed consolidated financial statements for further discussion. Partially offsetting this decrease was intangible amortization expense on identifiable intangible assets acquired in the Brut acquisition.

Professional and contract services expense increased $1.8 million, or 34.6%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This increase was primarily due to an increase in legal and audit fees associated with Nasdaq’s secondary offering on February 15, 2005, Sarbanes-Oxley compliance and activity related to Brut.

Computer operations and data communications expense decreased $15.0 million, or 48.1%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This decrease was primarily due to (1) lower costs associated with the renegotiated MCI contract effective June 1, 2004, (2) lower costs due to the favorable renegotiation of certain maintenance contracts and hardware leases due to the planned retirement of certain equipment and (3) lower costs associated with providing communication lines to customers due to lower demand for legacy Access Services.

Provision for bad debts increased $0.5 million in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This increase was primarily due to timing of collections for Corporate Client Group’s annual fees.

Occupancy expense decreased $0.2 million, or 2.7%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This decrease was primarily due to a reduction in our office space as part of Nasdaq’s cost reduction plans.

General and administrative expense increased $0.4 million, or 8.0%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This increase was primarily due to an increase in printing and other costs associated with Nasdaq’s secondary offering on February 15, 2005.

Direct Expenses

Direct expenses decreased $15.3 million, or 14.1%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This decrease was primarily due to a reduction in computer operations and data communications.

Compensation and benefits expense decreased $0.1 million, or 0.3%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. The decrease was primarily due to lower salaries associated with decreased headcount related to workforce reductions in 2004 of 146 positions. Total headcount

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was 786 on March 31, 2005 compared with 917 on March 31, 2004. Nasdaq also incurred lower severance and outplacement charges in the three months ended March 31, 2005 compared to the same period of 2004. See “2005 and 2004 Cost Reductions,” of Note 2, “Significant Transactions,” to the condensed consolidated financial statements for further discussion. The decreases noted above were mostly offset by an increase in employee benefit obligations in the three months ended March 31, 2005.

Marketing and advertising expense decreased $1.3 million, or 50.0%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. The decrease was primarily due to a decline in overall marketing and advertising expenditures, as part of Nasdaq’s cost reduction plan.

Depreciation and amortization expense decreased $1.4 million, or 7.1%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. The decrease in depreciation and amortization expense was primarily due to declines in incremental depreciation and amortization expense on certain equipment associated with Nasdaq’s quoting platform and its trading and quoting network as Nasdaq migrates to lower cost operating environments as part of Nasdaq’s cost reduction plan. See “2005 and 2004 Cost Reductions,” of Note 2, “Significant Transactions,” to the condensed consolidated financial statements for further discussion. Partially offsetting this decrease was intangible amortization expense on identifiable intangible assets acquired in the Brut acquisition.

Professional and contract services expense increased $1.8 million, or 34.6%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This increase was primarily due to an increase in legal and audit fees associated with Nasdaq’s secondary offering on February 15, 2005, Sarbanes-Oxley compliance and activity related to Brut.

Computer operations and data communications expense decreased $15.0 million, or 48.1%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This decrease was primarily due to (1) lower costs associated with the renegotiated MCI contract effective June 1, 2004, (2) lower costs due to the favorable renegotiation of certain maintenance contracts and hardware leases due to the planned retirement of certain equipment and (3) lower costs associated with providing communication lines to customers due to lower demand for legacy Access Services.

Provision for bad debts increased $0.5 million in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This increase was primarily due to timing of collections for Corporate Client Group’s annual fees.

Occupancy expense decreased $0.2 million, or 2.7%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This decrease was primarily due to a reduction in our office space as part of Nasdaq’s cost reduction plans.

General and administrative expense increased $0.4 million, or 8.0%, in the three months ended March 31, 2005 compared with the three months ended March 31, 2004. This increase was primarily due to an increase in printing and other costs associated with Nasdaq’s secondary offering on February 15, 2005.