NASDAQ OMX Group (NDAQ)

Setting Executive Compensation

We operate in a dynamic and highly regulated environment. Nasdaq is a leading provider of securities trading, listing and information products and services and operates the largest electronic equity securities market in the United States. The complexity of our business has increased in recent years due in part to a number of significant acquisitions, including Brut ECN, INET ECN, Carpenter Moore, Shareholder.com and PrimeNewswire. Our total revenues have increased from approximately $590 million in 2003, when Mr. Greifeld became our President and Chief Executive Officer, to approximately $1.7 billion in 2006. We also successfully migrated our legacy trading systems onto a single platform prior to the implementation of new trading rules under Regulation NMS.

Our long-term success is dependent on a leadership team with the experience, skills and dedication necessary to manage a growing global organization and the vision to anticipate and respond to future market developments. Our executive compensation program is designed to enable us to attract, retain and motivate executives who are capable of meeting these challenges.

In 2006, the management compensation committee reviewed the various elements of our executive compensation program to determine whether modifications to the program were appropriate in light of Nasdaq’s growth and success and external market factors. Nasdaq hired two consultants to assist us with elements of this review. The management compensation committee retained Frederic W. Cook & Co., Inc. (Fred Cook) to assist it in reviewing the appropriate compensation for Mr. Greifeld. In addition, the human resources department

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retained Hewitt Associates to assist it in revising Nasdaq’s equity award program. Based on this review, the committee ultimately adopted a series of changes to the program that are described in this compensation discussion and analysis.

We use several methods to set the amounts and mix of compensation elements. These include:

We consider all of these factors in structuring compensation to best reward each individual executive. Rather than setting compensation based solely on what the competition pays, we focus on the “right fit for Nasdaq” to attract, retain and motivate our executives. Therefore, the management compensation committee does not necessarily consider an individual executive’s net worth or the aggregate wealth accumulated or realizable by the individual from past compensation when making current compensation decisions.

To evaluate the external competitiveness of our executive compensation, we compared the individual elements of our cash and equity compensation package against a select group of peer companies. For 2006, this peer group of companies (which was developed based on Standard Industry Classification (SIC), geography, size and financial performance criteria) consisted of the following companies:

The primary elements of our executive compensation program are:

Our CEO and human resources department assist the management compensation committee in reaching compensation decisions with respect to the named executive officers other than the CEO. The other named executive officers do not play a role in their own compensation determinations, other than discussing individual performance objectives with the CEO.

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