NASDAQ OMX Group (NDAQ)

Note M—Income taxes

The components of the provision for income taxes are:

The 2005 and 2004 provisions for income taxes are different from the amount which would be provided by applying the statutory Federal income tax rate to the loss before income taxes, primarily as a result of permanent book tax differences including equity issued to third parties, dividend income offset by non-deductible items, and the reversal of the valuation allowance recorded on the net deferred tax asset.

Deferred taxes result from federal operating losses, recording depreciation, pension costs, deferred compensation, retiree medical benefits, unrealized gains/losses on investments, and the reserve for possible losses on aged items in different periods for financial accounting and income tax reporting purposes.

The components of the net deferred tax asset/liability recognized in the accompanying consolidated balance sheets are as follows:

As of December 31, 2005 and 2004, the Exchange had net deferred tax assets relating to research and development credits of $48,000. These credits expire in 2012. In 2005, the Exchange reversed the valuation allowance previously recorded, except for the amounts relating to the research and development tax credits. The reversal of the valuation allowance is due to increased projected net income from increased order flow primarily from the six Strategic Partners. Due to this projected net income, the Exchange believes that it is more likely than not that the net deferred tax asset will be realized. As of December 31, 2005, the Exchange has approximately $7,500,000 of federal net operating losses, expiring through 2024, available to reduce future federal taxable income.

F-114

As described in notes P and Q, the Exchange demutualized in 2004 and issued stock in two rounds during 2005. The second round of stock issued on August 16, 2005 triggered an ownership change as defined in Internal Revenue Code (IRC) Section 382. This ownership change limits the amount of net operating losses that the Exchange can utilize annually subsequent to the ownership change date. Under IRC Section 382, the Exchange is limited to net operating losses annually totaling approximately $2,600,000.

The Exchange files a consolidated federal income tax return. It is the Exchange’s policy to calculate all taxes on a separate company basis. Any tax calculated at the Subsidiary level is paid to the parent for subsequent payment to the federal government.