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NDAQ » Topics » We are exposed to counterparty risk for all transactions that are cleared through our markets.

These excerpts taken from the NDAQ 10-K filed Feb 27, 2009.

We are exposed to counterparty risk for all transactions that are cleared through our markets.

 

We clear a range of equity-related and fixed-income-related derivative products. We assume the counterparty risk for all transactions that are cleared through our markets and guarantee that our cleared contracts

 

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will be honored. We enforce minimum financial and operational criteria for membership eligibility, require members and investors to provide collateral, and maintain established risk policies and procedures to ensure that the counterparty risks are properly monitored and pro-actively managed; however, none of these measures provides absolute assurance against defaults by our counterparties on their obligations. No guarantee can be given that the collateral provided will at all times be sufficient. Although we maintain clearing capital resources to serve as an additional layer of protection to help ensure that we are able to meet our obligations, these resources may not be sufficient. In addition, our high leverage could limit our flexibility in the operation of our clearing business.

 

We are exposed to counterparty risk for all transactions that are cleared through our
markets.

 

We clear a range of equity-related and
fixed-income-related derivative products. We assume the counterparty risk for all transactions that are cleared through our markets and guarantee that our cleared contracts

 


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will be honored. We enforce minimum financial and operational criteria for membership eligibility, require members and investors to provide collateral, and
maintain established risk policies and procedures to ensure that the counterparty risks are properly monitored and pro-actively managed; however, none of these measures provides absolute assurance against defaults by our counterparties on their
obligations. No guarantee can be given that the collateral provided will at all times be sufficient. Although we maintain clearing capital resources to serve as an additional layer of protection to help ensure that we are able to meet our
obligations, these resources may not be sufficient. In addition, our high leverage could limit our flexibility in the operation of our clearing business.

 

STYLE="margin-top:0px;margin-bottom:0px">We are exposed to credit risk from third parties, including customers, counterparties and clearing agents.

STYLE="margin-top:0px;margin-bottom:-6px"> 

We are exposed to credit risk from third parties, including customers,
counterparties and clearing agents. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons.

SIZE="1"> 

Our subsidiaries, Nasdaq Execution Services and NASDAQ Options Services may be exposed to credit risk, due to the default of
trading counterparties, in connection with the clearing and routing services Nasdaq Execution Services and NASDAQ Options Services provides for our trading customers. System trades in NASDAQ-listed securities, NYSE-listed securities and trades
routed to other market centers for members of The NASDAQ Stock Market are cleared by Nasdaq Execution Services, as a member of the National Securities Clearing Corporation, or NSCC. System trades in derivative contracts for the opening and closing
cross and trades routed to other market centers are cleared by NASDAQ Options Services, as a member of the OCC. Pursuant to the rules of the NSCC and Nasdaq Execution Services’ clearing agreement, Nasdaq Execution Services is liable for any
losses incurred due to counterparty or a clearing agent’s failure to satisfy its contractual obligations, either by making payment or delivering securities. Pursuant to the rules of the OCC and NASDAQ Options Services’ clearing agreement,
NASDAQ Options Services is also liable for any losses incurred due to counterparty or a clearing agent’s failure to satisfy its contractual obligations, either by making payment or delivering securities. Adverse movements in the prices of
securities and derivative contracts that are subject to these transactions can increase our credit risk. Credit difficulties or insolvency or the perceived possibility of credit difficulties or insolvency of one or more larger or visible market
participants could also result in market-wide credit difficulties or other market disruptions.

 

FACE="Times New Roman" SIZE="2">In addition, through our NASDAQ OMX Stockholm clearing operations, we act as a counterparty in each transaction and thereby guarantee the fulfillment of each contract. We are required to pledge collateral for
commitments with other clearinghouses.

 

We also have credit
risk related to transaction fees that are billed to customers on a monthly basis, in arrears. Our customers are financial institutions whose ability to satisfy their contractual obligations may be impacted by volatile securities markets.


 

Credit losses such as those described above could adversely affect our
consolidated financial position and results of operations.

 

EXCERPTS ON THIS PAGE:

10-K (2 sections)
Feb 27, 2009

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