NASDAQ OMX Group (NDAQ)

Stock Compensation

Nasdaq accounts for stock option grants in accordance with APB 25. Nasdaq grants stock options with an exercise price equal to the fair market value of the stock at the date of the grant, and accordingly, recognizes no compensation expense related to option grants.

As required under SFAS 123 and SFAS 148 “Accounting for Stock-Based Compensation—Transition and Disclosure,” the pro forma effects of share-based payments on net income and earnings per share as if the fair value method had been applied in measuring compensation expense are provided in Note 10, “Stock Compensation and Stock Awards.”

In December 2004, the FASB issued SFAS 123(R), which revises SFAS 123, supersedes APB 25 and amends SFAS 95. See Future Accounting Requirements in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

Stock Compensation

Nasdaq accounts for stock option grants in accordance with APB 25. Nasdaq grants stock options with an exercise price equal to the fair market value of the stock at the date of the grant, and accordingly, recognizes no compensation expense related to such grants.

In the first quarter of 2003, Nasdaq adopted the disclosure requirements of SFAS No. 148 “Accounting for Stock-Based Compensation—Transition and Disclosure” (“SFAS 148”). SFAS 148 amends the disclosure requirements of SFAS 123. Pro forma disclosures of net income and earnings per share as if the fair value method had been applied in measuring compensation expense are provided in Note 15, “Stock Compensation and Stock Awards.”

In December 2004, the FASB issued SFAS 123(R), which is a revision of SFAS 123. SFAS 123(R) supersedes APB 25 and amends SFAS No. 95, “Statement of Cash Flows.” See Future Accounting Requirements in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.