NASDAQ OMX Group (NDAQ)

Liquidity and Capital Resources

Recent global market and economic conditions have been, and continue to be, disruptive and volatile, having an adverse impact on financial markets in general. As a result of concern about the stability of the markets and the strength of counterparties, many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers resulting in severely diminished liquidity and credit availability. At this time, the extent to which these conditions will persist is unclear. To date, our cost and availability of funding has not been adversely affected by illiquid credit markets and we do not expect it to be materially impacted in the near future.

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. In addition, we have obtained funds by selling our common stock in the capital markets. In order to finance our business combination with OMX AB, our acquisition of PHLX and the Nord Pool transaction, we have incurred additional debt and issued shares of our common stock. See Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion of our debt obligations.

In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. As of March 31, 2009, our cash and cash equivalents of $333 million is primarily invested in money market funds. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

40

Table of Contents

Principal factors that could affect our ability to obtain cash from external sources include:

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

Recent global market and economic conditions have been, and continue to be, disruptive and volatile, having an adverse impact on financial markets in general. As a result of concern about the stability of the markets and the strength of counterparties, many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers resulting in severely diminished liquidity and credit availability. At this time, the extent to which these conditions will persist is unclear. To date, our cost and availability of funding has not been adversely affected by illiquid credit markets and we do not expect it to be materially impacted in the near future.

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. In addition, we have obtained funds by selling our common stock in the capital markets. In order to finance our business combination with OMX AB, our acquisition of PHLX and the Nord Pool transaction, we have incurred additional debt and issued shares of our common stock. See Note 9, “Debt Obligations,” and Note 14, “Stockholders’ Equity,” to the consolidated financial statements for further discussion.

In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. As of December 31, 2008, our cash and cash equivalents of $565.8 million is primarily invested in money market funds comprised of U.S. government treasury obligations. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

65

Table of Contents

Principal factors that could affect our ability to obtain cash from external sources include:

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. In addition, we have obtained funds by selling our common stock in the capital markets. In order to finance our business combination with OMX, our acquisition of PHLX, as well as our acquisition of Nord Pool’s clearing, international derivatives and consulting subsidiaries, we have incurred additional debt and issued shares of our common stock. See Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion.

59

Table of Contents

In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. As of September 30, 2008 our cash and cash equivalents of $737.9 million is primarily invested in money market funds comprised of U.S. government treasury obligations. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities. In order to finance our business combination with OMX and acquisition of PHLX, we have incurred additional debt and issued shares of our common stock. In addition, we expect to incur additional debt to finance the proposed acquisition of certain businesses of Nord Pool. See Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

48

Table of Contents

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities. In order to finance our business combination with OMX, we have incurred additional debt and issued shares of our common stock. In addition, we expect to incur additional debt to finance the proposed acquisitions of PHLX and certain business of Nord Pool. For further discussion see Note 8, “Debt Obligations,” to the condensed consolidated financial statements.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities. In order to finance our proposed combination with OMX, we will incur additional debt and will issue shares of our common stock. For further discussion see Note 9, “Debt Obligations,” and Note 19, “Commitments, Contingencies and Guarantee,” to the consolidated financial statements.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

Liquidity and capital resources

OMX’s primary uses of funds are for capital expenditures, working capital, dividend payments and repayment or refinancing of debt. OMX has historically met these requirements through a combination of cash generated by operating activities and short- and long-term debt. OMX believes these sources of funds will continue to be adequate to meet its currently anticipated funds requirements.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

43

Table of Contents

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. We also have a $75.0 million revolving credit facility under our Credit Facilities to borrow funds. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. We also have a $75.0 million revolving credit facility under our Credit Facilities to borrow funds. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

26

Table of Contents

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. We also have a $75.0 million revolving credit facility under our Credit Facilities to borrow funds. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

55

Table of Contents

The following sections discuss the effects of changes in our cash flows, capital requirements and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. We also have a $75.0 million revolving credit facility under our Credit Facilities to borrow funds. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

The following sections discuss the effects of changes in our cash flows, contractual obligations and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. We also have a $75.0 million revolving credit facility under our Credit Facilities to borrow funds. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

40

The following sections discuss the effects of changes in our cash flows, contractual obligations and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures and service our debt and other long-term liabilities. Our principal source of funds is cash from our operations. We also have availability under our credit facility to borrow funds. In addition, we have obtained funds by selling our common stock in the capital markets. In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures and interest payments on our debt. In the long-term, we may use both internally generated funds and external sources to satisfy our debt and other long-term liabilities.

Principal factors that could affect the availability of our internally-generated funds include:

Principal factors that could affect our ability to obtain cash from external sources include:

34

Table of Contents

The following sections discuss the effects of changes in our cash flows, contractual obligations and other commitments on our liquidity and capital resources.

Liquidity and Capital Resources

Nasdaq’s Treasury department manages Nasdaq’s capital structure, funding, liquidity, collateral and relationships with bankers, investment advisors and creditors.

The Nasdaq Board of Directors approved an investment policy for Nasdaq and its subsidiaries for internally and externally managed portfolios. The goal of the policy is to maintain adequate liquidity at all times and to fund current budgeted operating and capital requirements and to maximize returns. All securities must meet credit rating standards as established by the policy and must be denominated in subsidiary specific currencies. The investment portfolio duration must not exceed 18 months. As of October 2003, the policy prohibits the purchasing of any investment in equity securities. The policy also prohibits any investment in debt interest in an entity that derives more than 25.0% of its gross revenue from the combined broker-dealer and/or investment advisory businesses of all of its subsidiaries and affiliates. Nasdaq’s investment policy is reviewed annually and was re-approved by the Board on January 17, 2006. Nasdaq also periodically reviews its investments and investment managers.

Cash and cash equivalents and available-for-sale investments totaled $344.6 million as of December 31, 2005 compared with $233.1 million at December 31, 2004, an increase of $111.5 million, or 47.8%. This increase was primarily due to the receipt of funds from employee stock options exercises, the sale of the Key West building to NASD, and positive cash flows generated from operations. Partially offsetting these increases

55

Table of Contents

were the payment for the partial redemption of Nasdaq’s Series C Cumulative Preferred Stock and payments made for the acquisitions of INET and Carpenter Moore. See Note 3, “Business Combinations,” Note 4, “2005 and 2004 Cost Reductions and Strategic Review,” Note 11, Related Party Transactions,” and Note 12, “Capital Stock,” to the consolidated financial statements for further discussion. Also in February 2006, Nasdaq raised proceeds from a public offering and redeemed our Series C Cumulative Preferred Stock, which increased our cash and cash equivalents balance. See Note 20, “Subsequent Events,” to the consolidated financial statements for further discussion.

Operating Activities

We rely primarily on cash flows from continuing operations to provide working capital for current and future operations. Cash flows from continuing operating activities totaled $120.9 million, $117.0 million and $145.8 million in 2005, 2004 and 2003, respectively. Cash inflows are primarily due to cash received from customers less cash paid to suppliers, employees and related parties. The increase in operating cash flows in 2005 as compared to 2004 was primarily due to an increase in net income. The decrease in operating cash flows for year ended December 31, 2004 as compared to 2003 was primarily due to a decrease in revenues partially offset by lower expenses and lower non-cash items included in net income.

Investing and Financing Activities

Cash used in investing activities was $953.4 million, $201.3 million and $0.2 million in 2005, 2004 and 2003, respectively. The increase in cash used in investing activities in 2005 as compared with 2004 was primarily due to the acquisitions of INET and Carpenter Moore completed during 2005. We paid $934.5 million and direct acquisition costs for of $34.3 million for INET and paid $27.5 million for Carpenter Moore. In 2004, we acquired Brut for $190.0 million, plus post-closing adjustments. See Note 3, “Business Combinations,” to the consolidated financial statements for further discussion. During 2005, we purchased $591.6 million of available-for-sale investments and $32.0 million of held-to-maturity investments. Capital expenditures and proceeds from sales of property and equipment were $25.4 million and $18.0 million, respectively, in 2005. Investing activities also included proceeds of $585.4 million and $62.7 million from the redemption and maturities of available-for-sale investments and held-to-maturity investments, respectively, in 2005. The increase in cash used in investing activities in 2004 as compared to 2003 was primarily due to the acquisition of Brut. During 2004, Nasdaq purchased $235.2 million of available-for-sale investments and $29.1 million of held-to-maturity investments. Capital expenditures and proceeds from sales of property and equipment were $26.0 million and $11.3 million, respectively, in 2004. Investing activities in 2004 also included proceeds of $240.9 million from the redemption of available-for-sale investments and $26.8 million from the maturities of held-to-maturity investments. During 2003, we purchased $179.2 million of available-for-sale investments and $18.5 million of held-to-maturity investments. Capital expenditures for property and equipment were $31.6 million in 2003. Investing activities in 2003 also included proceeds of $212.7 million from the redemption of available-for-sale investments and $18.6 million from the maturities of held-to-maturity investments. In 2003, we contributed $2.5 million to Nasdaq LIFFE joint venture.

Cash provided by (used in) financing activities was $939.5 million, $(6.5) million and $(157.6) million in 2005, 2004 and 2003, respectively. The increase in 2005, as compared with 2004 was primarily due to the issuances of the $750.0 million senior term debt issued in December 2005 and the $205.0 million convertible notes in April 2005 partially offset by the partial redemption of Nasdaq’s Series C Cumulative Preferred Stock and the redemption of the $25.0 million senior notes. See Note 7, “Debt Obligations,” Note 11, “Related Party Transactions,” and Note 12, “Capital Stock,” to the consolidated financial statements for further discussion. Also in 2005, Nasdaq received proceeds from the issuances of common stock, primarily from employee stock option exercises. The decrease in 2004 as compared with 2003 was primarily due to the redemption of Nasdaq’s $150.0 million senior notes on September 30, 2003. In conjunction with its strategic review, Nasdaq reassessed its capital needs and determined that it no longer needed the liquidity of these senior notes. See Elimination of Non-Core Product Lines, Initiatives and Severance section above for further discussion. Financing activities in

56

Table of Contents

2005, 2004 and 2003 also consisted of payments of preferred stock dividends to NASD of $3.2 million, $8.4 million and $8.3 million, respectively. At December 31, 2005, none of Nasdaq’s lenders were affiliated with Nasdaq, except to the extent, if any, that H&F and SLP would be deemed affiliates of Nasdaq due to their ownership of the $240.0 million convertible notes and $205.0 million convertible notes and associated warrants. See Note 7, “Debt Obligations,” to the consolidated financial statements for further discussion.

Capital Resources and Working Capital

Working capital (calculated as current assets, reduced for held-to-maturity investments classified as current assets, less current liabilities) was $271.6 million at December 31, 2005 compared with $169.3 million at December 31, 2004, an increase of $102.3 million, or 60.4%. This increase was primarily due to additional receivables acquired in connection with the INET and Carpenter Moore acquisitions, an increase in revenues and an increase in cash and cash equivalents as discussed above.

Nasdaq has been able to generate sufficient funds from operations to meet working capital requirements. Except for the un-drawn $75.0 million five-year revolving line of credit obtained in connection with the financing of the INET acquisition, we do not have any lines of credit. We believe that the liquidity provided by existing cash and cash equivalents, investments and cash generated from operations will provide sufficient capital to meet current and future operating requirements. In conjunction with the issuance of the $750.0 million senior term debt, Nasdaq prepaid in full the $25.0 million senior notes and recorded a loss on the early extinguishment of debt of the $25.0 million senior notes of approximately $1.1 million which is recorded in general and administrative expense in the Consolidated Statements of Income. See Note 7, “Debt Obligations,” to the consolidated financial statements for further discussion. Nasdaq will continue to explore alternative sources of financing that may increase liquidity in the future.

On February 15, 2005, we issued 7,000,000 shares in a public offering of our common stock, and received net proceeds of $268.9 million. We used $104.7 million of these proceeds to redeem our Series C Cumulative Preferred Stock, which is described in more detail below. We plan to use the remaining proceeds for general corporate purposes, including potential acquisitions. See Note 20, “Subsequent Events,” to the consolidated financial statements for further discussion.

Broker Dealer Net Capital Requirements

Our broker-dealer subsidiaries, Brut, INET ATS and Island Execution Services, LLC, are subject to regulatory requirements intended to ensure their general financial soundness and liquidity, which require that they comply with certain minimum capital requirements. As of December 31, 2005, Brut was required to maintain minimum net capital of $0.3 million and had total net capital of approximately $6.7 million or $6.4 million in excess of the minimum amount required. As of December 31, 2005, Island Execution Services was required to maintain minimum net capital of $1.0 million and had total net capital of approximately $1.5 million or $0.5 million in excess of the minimum amount required.

As of December 31, 2005, INET ATS was required to maintain minimum net capital of $1.0 million and had a net capital deficiency of approximately $48.0 million or $49.0 million below the minimum amount required. This deficiency was due to INET ATS’s investment in a non-U.S. based money market fund that is not registered under the Investment Company Act of 1940. Accordingly, the balances in the fund are a non-allowable asset under SEC Rule 15c3-1, the net capital rule. INET ATS provided hind-sight notice that the net capital was below the minimum amount required under the net capital rule. On February 8, 2006, the funds were redeemed and invested in a money market fund registered under the Investment Company Act of 1940, which corrected the net capital deficiency position. No funds were lost and no customers suffered any loss.

57

Table of Contents