NYSE Euronext
Item 1 - “Business - Products and Services - Order Execution - Europe - Derivatives Trading - Clearing and Settlement.”
We have also entered into a joint venture with the DTCC to establish NYPC, which is expected to be operational in the third quarter of 2010, subject to definitive documentation and regulatory approval. NYPC will initially clear fixed income derivatives traded on NYSE Liffe US, with the ability to add other exchanges in the future. We plan to commit a $50 million financial guarantee to the NYPC default fund and will face clearing risks similar to those we expect to face with respect to NYSE Liffe Clearing. We may also in the future expand our clearing operations to other markets and financial products, which would increase our exposure to these types of risks.
We operate in a business environment that continues to experience significant and rapid technological change.
Technology is a key component of our business strategy, and we regard it as crucial to our success. We seek to offer market participants a comprehensive suite of best-in-class technology solutions in a centralized environment, including successfully transitioning to our UTP on a global basis and implementing our global data center strategy. However, we operate in a business environment that has undergone, and continues to experience, significant and rapid technological change. In recent years, electronic trading has grown significantly, and customer demand for increased choice of execution methods has increased. To remain competitive, we must continue to enhance and
improve the responsiveness, functionality, capacity, accessibility and features of our trading platforms, software, systems and technologies. Our success will depend, in part, on our ability to:
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develop and license leading technologies;
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enhance existing trading platforms and services and create new platforms and services;
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respond to customer demands, technological advances and emerging industry standards and practices on a cost-effective and timely basis; and
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continue to attract and retain highly skilled technology staff to maintain and develop existing technology and to adapt to and manage emerging technologies.
The development and expansion of electronic trading and market data related technologies entail significant technological, financial and business risks. Any failure or delay in exploiting technology, or failure to exploit technology as effectively as competitors, could adversely affect our business, financial condition and operating results.
The adoption of new technologies or market practices may require us to devote additional resources to improve and adapt our services. For example, the growth of algorithmic and so called “black box trading” requires us to increase systems and network capacity to ensure that increases in message traffic can be accommodated without adverse effect on system performance. Keeping pace with these ever increasing requirements can be expensive, and we cannot be sure that we will succeed in making these improvements to our technology infrastructure in a timely manner or at all. If we are unable to anticipate and respond to the demand for new services, products and technologies on a timely and cost-effective basis and to adapt to technological advancements and changing standards, we may be unable to compete effectively, which could adversely affect our business, financial condition and operating results. Moreover, we may incur substantial development, sales and marketing expenses and expend significant management effort to add new products or services to our trading platforms. Even after incurring these costs, we ultimately may not realize any, or may realize only small amounts of, revenues for these new products or services. Consequently, if revenue does not increase in a timely fashion as a result of these expansion initiatives, the up-front costs associated with expansion may exceed revenue and reduce our working capital and income.
Our reliance on third parties could adversely affect our business if these third parties cease to perform the functions that they currently perform at NYSE Euronext.
We rely on third parties for certain clearing and regulatory services. For example, we are dependent on LCH.Clearnet to provide a clearing guarantee and manage related risk functions in connection with clearing on our European cash and derivatives markets. We also rely on the services of Euroclear for settling transactions on our European cash markets (except in Portugal). Additionally, we have a contractual arrangement with FINRA pursuant to which FINRA performs certain regulatory functions on our behalf. To the extent that LCH.Clearnet, Euroclear or FINRA experiences difficulties, materially changes their business relationship with us or is unable for any reason to perform their obligations, our business or our reputation may be materially adversely affected.
We also rely on members of our trading community to maintain markets and add liquidity. Recent global market and economic conditions have been difficult and volatile, in particular for financial services companies such as our members. To the extent that any of our largest members experiences difficulties, materially changes their business relationship with us or is unable for any reason to perform market making activities, our business or our reputation may be materially adversely affected.
Insufficient systems capacity and systems failures could adversely affect our business.
Our business depends on the performance and reliability of complex computer and communications systems. Heavy use of our platforms and order routing systems during peak trading times or at times of unusual market volatility could cause our systems to operate slowly or even to fail for periods of time. Our U.S. systems capacity requirements could grow significantly in the future as a result of a variety of factors, including changes in the NYSE market and growth in our options trading business. Our failure to maintain systems or to ensure sufficient capacity may also result in a temporary disruption of our regulatory and reporting functions.
We have experienced systems failures in the past, and it is possible that we will experience systems failures in the future. Systems failures could be caused by, among other things, periods of insufficient capacity or network bandwidth, power or telecommunications failures, acts of God or war, terrorism, human error, natural disasters, fire, sabotage, hardware or software malfunctions or defects, computer viruses, intentional acts of vandalism and similar events over which we have little or no control. We also rely on third parties for systems support. Any interruption in these third-party services or deterioration in the performance of these services could also be disruptive to our business. In addition, our systems may be adversely affected by failures of other trading systems, as a result of which we may be required to suspend trading activity in particular securities or, under certain circumstances, unwind trades.
If we cannot expand system capacity to handle increased demand, or if our systems otherwise fail to perform and we experience disruptions in service, slower response times or delays in introducing new products and services, then we could incur reputational damage, regulatory sanctions, litigation, loss of trading share, loss of trading volume and loss of revenues, any of which could adversely affect our business, financial condition and operating results.
Our networks and those of our third-party service providers may be vulnerable to security risks.
The secure transmission of confidential information over public and other networks is a critical element of our operations. Our networks and those of our third-party service providers may be vulnerable to unauthorized access, computer viruses and other security problems. Persons who circumvent security measures could wrongfully access and use our information or our customers’ information, or cause interruptions or malfunctions in our operations. Our security measures are costly, and may prove to be inadequate. This could cause us to incur reputational damage, regulatory sanctions, litigation, loss of trading share, loss of trading volume and loss of revenues, any of which could adversely affect our business, financial condition and operating results.
We may be at greater risk from terrorism than other companies.
Given our position as the world’s leading market, our prominence in the global securities industry, and the concentration of many of our properties and personnel in U.S. and European financial centers, including lower Manhattan, we may be more likely than other companies to be a direct target of, or an indirect casualty of, attacks by terrorists or terrorist organizations, or other extremist organizations that employ threatening or harassing means to achieve their social or political objectives.
It is impossible to predict the likelihood or impact of any terrorist attack on the securities industry generally or on our business. In the event of an attack or a threat of an attack, our security measures and contingency plans may be inadequate to prevent significant disruptions in our business, technology or access to the infrastructure necessary to maintain our business. For example, if part or all of our primary data center facilities become inoperable, our disaster recovery and business continuity planning practices may not be sufficient and we may experience a significant delay in resuming normal business operations. Damage to our facilities due to terrorist attacks may be significantly in excess of insurance coverage, and we may not be able to insure against some damage at a reasonable price or at all. The threat of terrorist attacks may also negatively affect our ability to attract and retain employees. In addition, terrorist attacks may cause instability or decreased trading in the securities markets, including trading on exchanges. Any of these events could adversely affect our business, financial condition and operating results.
Damage to our reputation could adversely affect our business.
One of our competitive strengths is our strong reputation and brand name. Our reputation could be harmed in many different ways, including by regulatory, governance or technology failures or the activities of members or listed companies whom we do not control. Damage to our reputation could cause some issuers not to list their securities on our exchanges, as well as reduce the trading volume on our exchanges. Any of these events could adversely affect our business, financial condition and operating results.
A failure to protect our intellectual property rights, or allegations that we have infringed on the intellectual property rights of others, could adversely affect our business.
We own or license rights to a number of trademarks, service marks, trade names, copyrights and patents that we use in our business, including exclusive rights to use certain indexes as the basis for equity index derivatives products traded on our futures markets. To protect our intellectual property rights, we rely on a combination of trademark laws, copyright laws, patent laws, trade secret protection, confidentiality agreements and other contractual arrangements with our affiliates, customers, strategic investors and others. The protective steps taken may be inadequate to deter misappropriation of our intellectual property. We may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Failure to protect our intellectual property adequately could harm our reputation and affect our ability to compete effectively. Further, defending our intellectual property rights may require significant financial and managerial resources, the expenditure of which may adversely affect our business, financial condition and operating results.
Third parties may assert intellectual property rights claims against us, which may be costly to defend, could require the payment of damages and could limit our ability to use certain technologies, trademarks or other intellectual property. Some of our competitors currently own patents and have actively been filing patent applications in recent years, some of which may relate to our trading platforms and business processes. As a result, we may face allegations that we have infringed or otherwise violated the intellectual property rights of third parties. Any intellectual property claims, with or without merit, could be expensive to litigate or settle and could divert management resources and attention. Successful challenges against us could require us to modify or discontinue our use of technology or business processes where such use is found to infringe or violate the rights of others, or require us to purchase licenses from third parties, any of which could adversely affect our business, financial condition and operating results.
We are subject to significant litigation risks and other liabilities.
Many aspects of our business involve litigation risks. These risks include, among others, potential liability from disputes over terms of a securities trade or from claims that a system or operational failure or delay caused monetary losses to a customer, as well as potential liability from claims that we facilitated an unauthorized transaction or that we provided materially false or misleading statements in connection with a transaction. Dissatisfied customers frequently make claims against their service providers regarding quality of trade execution, improperly settled trades, mismanagement or even fraud. Although aspects of our business are protected by regulatory immunity, we could nevertheless be exposed to substantial liability under U.S. federal and state laws and court decisions, laws and court decisions in the other countries where we operate, as well as rules and regulations promulgated by the SEC, CFTC or European and other regulators. We could incur significant expenses defending claims, even those without merit. In addition, an adverse resolution of any lawsuit or claim against us may require us to pay substantial damages or impose restrictions on how we conduct business, either of which could adversely affect our business, financial condition and operating results. For a discussion of certain legal claims against us, see Item 8 - “Financial Statements and Supplementary Data - Notes to the Consolidated Financial Statements - Note 17 - Commitments and Contingencies - Legal Matters.”
Perceptions about the legal and regulatory environment in the United States may make it difficult for us to compete with non-U.S. exchanges.
Our U.S. exchanges compete for listings of securities of both U.S. and non-U.S. companies. However, the legal and regulatory environment in the United States, and market perceptions about that environment, may make it difficult for our U.S. exchanges to compete with non-U.S. exchanges for listings. For example, the Sarbanes-Oxley Act of 2002 imposes a stringent set of corporate governance, reporting and other requirements on both U.S. and non-U.S. companies with securities listed on a U.S. exchange. Significant resources are necessary for companies to comply with the requirements of the Sarbanes-Oxley Act, and we believe this has had an adverse impact on the ability of our U.S. exchanges to attract and retain listings. In this regard, the number of U.S. companies that have chosen to list shares exclusively on a non-U.S. exchange has increased in recent years. At the same time, both U.S. and non-U.S. companies are increasingly seeking to access the U.S. capital markets through private
transactions that do not involve listing on a U.S. exchange, such as through Rule 144A transactions directed exclusively to mutual funds, hedge funds and other large institutional investors.
The SEC and the Public Company Accounting Oversight Board have taken steps to address some of these concerns through initiatives that include revisions to the rules relating to internal control over financial reporting established under Section 404 of the Sarbanes-Oxley Act, rules that facilitate the delisting and deregistration of securities issued by some non-U.S. companies, and rules that exempt some non-U.S. companies from U.S. GAAP reconciliation requirements. It is unclear whether U.S. or non-U.S. companies will exhibit greater interest in accessing the U.S. public markets as a result of these changes. Moreover, the rules facilitating a non-U.S. company’s ability to delist its securities and exit the U.S. public company reporting system may make it more difficult for us to retain listings of non-U.S. companies, and may diminish the perception of our U.S. exchanges as premier listing venues, which could adversely affect our business, financial condition and operating results.
Provisions of our organizational documents may delay or deter a change of control.
Our organizational documents contain provisions that may have the effect of discouraging, delaying or preventing a change of control, or an acquisition proposal, that our stockholders might consider favorable. These include provisions:
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vesting our board of directors with sole power to set the number of directors;
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limiting the persons that may call special stockholders’ meetings;
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limiting stockholder action by written consent;
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requiring supermajority stockholder approval with respect to certain amendments to our certificate of incorporation and bylaws;
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restricting any person (either alone or together with its related persons) from voting or causing the voting of shares of stock representing more than 10% of our outstanding voting capital stock (including as a result of any agreement by any other persons not to vote shares of stock); and
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restricting any person (either alone or together with its related persons) from beneficially owning shares of stock representing more than 20% of the outstanding shares of any class or series of our capital stock.
In addition, our board of directors has the authority to issue shares of preferred stock in one or more series and to fix the rights and preferences of these shares without stockholder approval. Any series of preferred stock is likely to be senior to our common stock with respect to dividends and liquidation rights. The ability of our board of directors to issue preferred stock could have the effect of discouraging unsolicited acquisition proposals, thus adversely affecting the market price of our common stock.
The market price of our common stock may be volatile.
Securities and derivatives markets worldwide experience significant price and volume fluctuations. This market volatility, as well as the factors listed below, could affect the market price of our common stock:
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quarterly variations in our results of operations or the results of operations of our competitors;
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changes in earning estimates, investors’ perceptions, recommendations by securities analysts or our failure to achieve analysts’ earning estimates or ratings downgrades;
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the announcement of new products or service enhancements by us or our competitors;
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announcements related to litigation;
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potential acquisitions by us of other companies;
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developments in our industry; and
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general economic, market and political conditions and other factors unrelated to our operating performance or the operating performance of our competitors.
Risks Relating to Regulation
We operate in a highly regulated industry and may be subject to censures, fines and other legal proceedings if we fail to comply with our legal and regulatory obligations.
We operate in a highly regulated industry and are subject to extensive regulation. The securities industry is subject to extensive governmental regulation and could become subject to increased regulatory scrutiny. As a matter of public policy, these regulations are designed to safeguard the integrity of the securities and other financial markets and to protect the interests of investors in those markets. The SEC and CFTC regulate our U.S. exchanges and have broad powers to audit, investigate and enforce compliance with their rules and regulations and impose sanctions for non-compliance. European regulators have similar powers with respect to our exchanges in their respective countries. As the scope of our business expands, we may also become subject to oversight by other regulators. As a result of the current market conditions, recent nationalizations and bailouts, there might be increasing demand for more regulation and stricter oversight which could cause excessive regulatory burdens. Our ability to comply with applicable laws and rules will largely depend on our establishment and maintenance of appropriate systems and procedures, as well as our ability to attract and retain qualified personnel.
Both the U.S. regulators and the European regulators are vested with broad enforcement powers over exchanges in their respective jurisdictions, including powers to censure, fine, issue cease-and-desist orders, prohibit an exchange from engaging in some of its operations or suspend or revoke an exchange’s recognition, license or registration. In the case of actual or alleged non-compliance with regulatory requirements, our exchanges could be subject to investigations and administrative or judicial proceedings that may result in substantial penalties, including revocation of an exchange’s recognition, license or registration. Any such investigation or proceeding, whether successful or unsuccessful, would result in substantial costs and diversions of resources and could adversely affect our business, financial condition and operating results.
We may face competitive disadvantages if we do not receive necessary or timely regulatory approvals for new business initiatives.
We currently operate three U.S. registered national exchanges and one DCM. Pursuant to U.S. laws and regulations, these exchanges are responsible for regulating their member organizations through the adoption and enforcement of rules governing the trading activities, business conduct and financial responsibility of their member organizations and the individuals associated with them. Changes to the rules of the U.S. registered securities exchanges are generally subject to the approval of the SEC, which publishes proposed rule changes for public comment. Changes to our certificate of incorporation or bylaws and changes to the organizational documents or rules of our U.S. exchanges, to the extent affecting the activities of these exchanges, must also be approved. We may from time to time seek to engage in new business activities, some of which may require changes to our or our U.S. exchanges’ organizational documents or rules.
We also operate exchanges in France, Belgium, Portugal, the Netherlands and the United Kingdom. Regulators in each of these countries regulate exchanges through the adoption and enforcement of rules governing the trading activities, business conduct and financial responsibility of such exchanges and individuals associated with them. All of our initiatives in these jurisdictions with regulatory implications must be approved by the relevant authorities in each of these countries, as well as by the coordinating bodies set up under the Euronext regulators’ memoranda of understanding. Changes to our certificate of incorporation or bylaws and changes to the organizational documents or rules of our European exchanges, to the extent affecting the activities of these exchanges, may also require approvals. We may from time to time seek to engage in new business activities, some of which may require changes to our or our European exchanges’ organizational documents or rules.
Any delay or denial of a requested approval could cause us to lose business opportunities, slow our ability to integrate our different markets or slow or impede our ability to change our governance practices. Our competitive position could be significantly weakened if our competitors are able to obtain regulatory approval for new functionalities faster, or with less cost or difficulty, than we are, or if approval is not required for our competitors but is required for us. Competitors that are not registered exchanges are subject to less stringent regulation. In addition, as we seek to expand our product base, we could become subject to the oversight of additional regulatory bodies.
An “extraterritorial” change of law may adversely affect our business and, under certain special arrangements, our rights to control a substantial portion of our assets.
We operate exchanges and regulated markets in various jurisdictions and thus are subject to a variety of laws and regulations. Although we do not anticipate that there will be a material adverse application of European laws to our U.S. exchanges, or a material adverse application of U.S. laws to our European exchanges, the possibility of such an occurrence cannot be ruled out entirely. If this were to occur, and we were not able to effectively mitigate the effects of such “extraterritorial” application, our affected exchanges could experience a reduction in the number of listed companies or business from other market participants, or our business could otherwise be adversely affected.
In addition, in connection with obtaining regulatory approval of the merger between NYSE and Euronext, we implemented certain special arrangements consisting of two standby structures, one involving a Dutch foundation and one involving a Delaware trust. The Dutch foundation is empowered to take actions to mitigate the adverse effects of any potential changes in U.S. law that have certain extraterritorial effects on the European regulated markets of NYSE Euronext, and the Delaware trust is empowered to take actions to ameliorate the adverse effects of any potential changes in European law that have certain extraterritorial effects on our U.S. exchanges. These actions include the exercise by the foundation or the trust of potentially significant control over our European or the U.S. Operations, as the case may be. Although the Dutch foundation and the Delaware trust are required to act in our best interest, subject to certain exceptions, and any remedies implemented may be implemented only for so long as the effects of the material adverse application of law persist, we may, as a result of the exercise of such rights, be required to transfer control over a substantial portion of our business and assets to the direction of the trust or of the foundation. Any such transfer of control could adversely affect our ability to implement our business strategy and operate on an integrated and global basis, which could adversely affect our business, financial condition and operating results.
Regulatory changes or future court rulings may have an adverse impact on our ability to derive revenue from market data fees.
Regulatory developments could reduce the amount of revenue that we obtain from market data fees. With respect to our U.S. exchanges, the ability to assess fees for market data products is contingent upon receiving approval from the SEC. There continue to be opposing industry viewpoints as to the extent that we should be able to charge for market data, and it is conceivable that the SEC could undertake an examination of exchange market data fees. If such an examination is conducted, and the results are detrimental to our U.S. exchanges’ ability to charge for market data, there could be a negative impact on our revenues. In November 2004, the SEC proposed corporate governance, transparency, oversight and ownership rules for registered national exchanges and other SROs and issued a concept release examining the efficacy of self-regulation. The concept release also solicited public comment concerning the level of market data fees, following several years of claims from some competitors and data intermediaries that market data fees and revenues are excessive. We cannot predict whether, or in what form, any regulatory changes will take effect, or their impact on our business. A determination by the SEC, for example, to link market data fees to marginal costs, to take a more active role in the market data rate-setting process, or to reduce the current levels of market data fees could have an adverse effect on our market data revenues.
Our European exchanges are currently authorized to sell trade information on a non-discriminatory basis at a reasonable cost. This regulatory position could be modified or interpreted by the European Commission or future European court decisions in a manner that could have an adverse effect on our European market data revenues.
Conflicts of interest between our for-profit status and our regulatory responsibilities may adversely affect our business.
We are a for-profit business with regulatory responsibilities. In some circumstances, there may be a conflict of interest between the regulatory responsibilities of certain of our exchanges and some of their respective member organizations and customers. Any failure by one of our exchanges with self-regulatory responsibility to diligently and fairly regulate its member organizations or to otherwise fulfill its regulatory obligations could significantly harm our reputation, prompt regulatory scrutiny and adversely affect our business, financial condition and operating results.
NYSE Regulation, our wholly-owned not-for-profit subsidiary, performs market surveillance of our SEC regulated U.S. exchanges and related enforcement activities and enforces listed company compliance with applicable standards. Similarly, Euronext is responsible for monitoring trading and enforcing Euronext rules. Conflicts of interest may exist when a for-profit entity, such as NYSE Euronext, also functions as the operator of a regulated exchange. The for-profit entity’s goal of maximizing stockholder value might conflict with the exchange’s responsibilities as a regulator of its member and listed companies. Conflicts also arise when a company lists its securities on an exchange that it owns. The listing of our common stock on the NYSE and Euronext could potentially create a conflict between the exchanges’ regulatory responsibilities to vigorously oversee the listing and trading of securities, on the one hand, and the exchanges’ commercial and economic interest, on the other hand. While NYSE Euronext has implemented structural protections to minimize these potential conflicts, we cannot be sure that such measures will be successful. For a discussion of some of these structural protections, see Item 1 - “Business - Regulation - United States - NYSE Regulation - Structure, Organization and Governance of NYSE Regulation.”
Our obligation to fund NYSE Regulation limits our ability to reduce our expenses or use our cash in other ways.
NYSE Regulation has undertaken to perform the regulatory functions of our SEC regulated U.S. exchanges. These exchanges are required to allocate significant resources to NYSE Regulation. In addition, no regulatory fees, fines or penalties collected by NYSE Regulation may be distributed to NYSE Euronext or any entity other than NYSE Regulation. The obligation to fund NYSE Regulation could limit our ability to reduce our expense structure, and could limit our ability to invest in or pursue other opportunities that may be beneficial to our stockholders.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
There are no material unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Exchange Act.
ITEM 2.
PROPERTIES
Our headquarters are located in New York City, at 11 Wall Street, and in Paris, at 39 Rue Cambon. Euronext’s registered office is located at Beursplein 5, 1012 JW Amsterdam, the Netherlands. In total, we maintain approximately 3.1 million square feet in offices throughout the United States, Europe and Asia. Our principal offices consist of the properties described below.
(1)
Does not include approximately 25,000 sq. ft. leased to third parties.
(2)
We have the option to extend the leases on this property for subsequent five-year terms.
We believe the facilities we own or occupy are adequate for the purposes for which they are currently used and are well-maintained.
ITEM 3.
LEGAL PROCEEDINGS
See Item 8 - “Financial Statements and Supplementary Data - Notes to the Consolidated Financial Statements - Note 17 - Commitments and Contingencies - Legal Matters,” which is incorporated herein by reference.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth quarter of our fiscal year ended December 31, 2009.
ITEM 4A.
EXECUTIVE OFFICERS OF NYSE EURONEXT
Set forth below is information regarding our executive officers. All of our executive officers have been appointed by and serve at the pleasure of our board of directors.
(1)
Mr. Cerutti was appointed President and Deputy Chief Executive Officer in the first quarter of 2010. His previous title was Deputy Chief Executive Officer and Head of Global Technology.
(2)
Mr. Leibowitz was appointed Chief Operating Officer in the first quarter of 2010. His previous title was Group Executive Vice President and Head of U.S. Execution.
Duncan L. Niederauer. Mr. Niederauer was appointed chief executive officer and director of NYSE Euronext, effective December 1, 2007, after joining NYSE Euronext in 2007 as a member of the management committee. Mr. Niederauer also serves on the boards of NYSE Group and Euronext N.V. Mr. Niederauer was previously a partner at The Goldman Sachs Group, Inc. (United States) (“GS”) where he held many positions, among them, co-head of the Equities Division execution services franchise and the managing director responsible for Goldman Sachs Execution & Clearing, L.P. (formerly known as Spear, Leeds & Kellogg L.P.). Mr. Niederauer joined GS in 1985. From 2002 until 2004, Mr. Niederauer also served on the board of managers of Archipelago Holdings, LLC (United States). Mr. Niederauer also serves on the board of trustees for Colgate University.
Dominique Cerutti. Mr. Cerutti was appointed president and deputy chief executive officer in the first quarter of 2010. He joined NYSE Euronext on December 15, 2009 and was approved as deputy chief executive officer and head of Global Technology on December 31, 2009. Mr. Cerutti most recently served as General Manager of IBM Southwest Europe. In this role, he led all of IBM’s business operations, had full profit and loss responsibility and ensured risk management, compliance and business controls across IBM’s business units in southern and western Europe. Mr. Cerutti was a member of IBM Chairman and CEO Sam Palmisano’s Senior Leadership Team. Previously, he was general manager of IBM’s Global Services in Europe, Middle East & Africa, based in Paris. In 1999, he was appointed executive assistant at IBM’s New York headquarters to former IBM Chairman and CEO Louis V. Gerstner. Before joining IBM in 1986, Mr. Cerutti spent two years with Bouygues, a French civil engineering company, in Saudi Arabia.
Lawrence E. Leibowitz. Mr. Leibowitz was appointed chief operating officer in the first quarter of 2010. In this capacity, he is responsible for operations management, global cash execution and global listings. He previously served as group executive vice president and head of U.S. Execution and Global Technology from 2007 until 2009. He joined NYSE Euronext in 2007, having served as managing director and chief operating officer, Americas Equities, at UBS Investment Bank. Prior to joining UBS in 2004, Mr. Leibowitz held the position of executive vice president, co-head of Schwab Capital Markets. He currently serves on the board of National Stock Exchange of India and has also served on many industry boards and committees, among them the Market Structure Committee of the former Securities Industry Association (now SIFMA).
Michael S. Geltzeiler. Mr. Geltzeiler has served as group executive vice president and chief financial officer since 2008. Most recently, he served as president, School & Educational Services for The Reader’s Digest Association. He was the organization’s CFO and senior vice president from 2001 to 2007. In 2005, Mr. Geltzeiler’s responsibilities were expanded to also include oversight for global operations and information technology. While at ACNielsen Corporation from 1995 to 2001, Mr. Geltzeiler served as CFO, SVP & controller, and CFO for ACNielsen Europe, Middle East & Africa. He held a variety of positions in corporate finance in America and abroad while at The Dun & Bradstreet Corporation from 1980 to 1995. Mr. Geltzeiler currently serves on the boards of the Museum of American Finance, Lerner College of Business and Economics Advisory Board, the Madison Square Boys and Girls Club, the NYSE Foundation and the Euronext Supervisory Board, as well as an officer of the Fallen Heroes Fund.
Roland Bellegarde. Mr. Bellegarde is group executive vice president and head of European Execution. He is responsible for European listing activities as well as trading, which includes managing market operations for the four Euronext markets and handling product development and user relations on the buy side and sell side. Mr. Bellegarde previously served as head of Cash Trading beginning in 2000 and has been leading the process to integrate the NSC trading platform across the Euronext markets. As such, he has defined and developed the global Euronext market model for securities trading. From 1998 to 2000, Mr. Bellegarde served as head of Cash & Derivatives Markets - ParisBourse. From 1995 to 1998, he served as head of Cash Markets - ParisBourse. Prior to that, from 1993 to 1995, he designed the functionalities of the NSC trading systems, which operated on all Euronext markets until the recent introduction of the UTP in 2009.
Philippe Duranton. Mr. Duranton has served as group executive vice president and global head of Human Resources since 2008. Prior to joining NYSE Euronext, Mr. Duranton had been senior vice president of human resources for Cognos Inc., a world leader in business intelligence and performance management solutions, from 2007 until 2008. From 2003 to 2006, he was executive vice president for GEMPLUS, a digital security provider. Prior to these positions, Mr. Duranton served in senior human resources positions at Vivendi Universal TV and Film Group and Thales, a leader in defense aerospace, security and services.
Garry P. Jones. Mr. Jones has served as group executive vice president and head of Global Derivatives since May 2009. From 2007 to April 2009, Mr. Jones was executive director of Business Development and Strategy for NYSE Liffe, with responsibility for marketing, sales, product development and business strategy. Mr. Jones joined NYSE Liffe from ICAP plc, where he was CEO of ICAP Electronic Broking (Europe), and, prior to the merger in 2003, CEO and President of BrokerTec Europe Ltd, the bank consortium-owned global fixed income electronic trading platform. Mr. Jones worked for almost 20 years in a variety of senior management roles in trading, sales and
research for investment banks in both the United States and Europe, focusing on the bond and derivatives markets, working for Bankers Trust, Merrill Lynch, Daiwa Securities and Banque Paribas.
John K. Halvey. Mr. Halvey has served as group executive vice president and general counsel of NYSE Euronext since 2008. Mr. Halvey also serves on the supervisory board of Euronext N.V. Prior to joining NYSE Euronext in 2008, Mr. Halvey was a corporate partner with the international law firm of Milbank, Tweed, Hadley & McCloy, LLP from 1994 to 1999 and from 2001 to 2008. From 1999 to 2001, Mr. Halvey was executive vice president of Safeguard Scientifics, Inc. Mr. Halvey has practiced in all areas of corporate, technology and intellectual property law, with particular emphasis on information technology and business process related transactions and private equity transactions involving technology companies.
James F. Duffy. Mr. Duffy was appointed interim chief executive officer of NYSE Regulation in March 2009. Mr. Duffy joined the New York Stock Exchange in May 1999 and served as its senior vice president and deputy general counsel until becoming executive vice president and general counsel of NYSE Regulation upon its formation in 2006. For the ten years prior to joining the NYSE he served as general counsel at the American Stock Exchange. Earlier in his career he spent several years on the legal staff at GTE Corporation in Stamford, Connecticut, and was a corporate lawyer with the firm of Lord, Day & Lord in New York.
Mr. Duffy performs certain policy making functions with respect to NYSE Euronext, although he is not an officer or employee of any unit of NYSE Euronext other than NYSE Regulation, and he reports solely to the NYSE Regulation board of directors. He has informed and assisted our management in developing regulatory policies and assisted management in the development and structuring of our U.S. market structure initiatives. Mr. Duffy does not report to the NYSE Euronext board of directors or any of its executive officers. By virtue of his position as chief executive officer of NYSE Regulation, Mr. Duffy serves as a member of the board of directors of FINRA for a term ending July 30, 2010.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The principal market on which our common stock is traded is the NYSE. Our common stock is also traded on Euronext Paris. Our common stock commenced trading on April 4, 2007 under the ticker symbol “NYX.” Prior to that date, there was no public market for our common stock.
Common Stock Price Range
The following table sets forth, for the quarters indicated, the high and low sales prices per share of our common stock.
(1)
Figures for the first quarter of 2010 are through February 18, 2010.
As of February 18, 2010, there were approximately 755 holders of record of our common stock. On February 18, 2009, the last reported sales price for our common stock on the NYSE and Euronext Paris was $25.42 and 18.66 per share, respectively.
Dividends
In February 2009, our board of directors approved quarterly cash dividend payments of $0.30 per share of common stock, payable through the end of 2009. Quarterly dividends of $0.25 per share of common stock were paid on March 31, 2008, and quarterly dividends of $0.30 per share of common stock were paid on June 30, 2008, September 30, 2008, December 31, 2008, March 31, 2009, June 30, 2009, September 30, 2009 and December 31, 2009. A quarterly dividend of $0.30 is scheduled to be paid on March 31, 2010 to shareholders of record as of the close of business on March 15, 2010. We offer our European stockholders the ability to elect payment of the dividend in euros.
In December 2009, we announced that our board of directors had adopted a quarterly dividend declaration policy such that dividends for future quarters would be determined by the board taking into account such factors as our evolving business model, prevailing business conditions and our financial results and capital requirements, without a predetermined annual net income payout ratio. The declaration of dividends by NYSE Euronext is subject to the discretion of our board of directors.
Outstanding Options and Restricted Stock
The following table sets forth information regarding the outstanding options and restricted stock units on our common stock as of December 31, 2009 (in thousands, except exercise price):
(1)
Corresponding to the weighted-average exercise price of approximately 0.6 million stock options outstanding as of December 31, 2009. Does not include outstanding rights to receive approximately 2.0 million restricted stock units for which there is no exercise price.
Treasury Stock
The number of shares of common stock outstanding on February 18, 2010 (approximately 261 million shares) does not include shares held in treasury, consisting of approximately 1.6 million shares held by a wholly owned subsidiary and 13.4 million shares purchased as part of our share repurchase program.
Unregistered Sales of Equity Securities
Consistent with customary practice in the French securities market, we are party to a liquidity agreement (contrat de liquidité) (the “Liquidity Agreement”) with SG Securities (Paris) SAS (“SG”). The Liquidity Agreement complies with applicable laws and regulations in France, including the ethical charter of the AFEI (the French
Association of Investment Firms), as approved by the AMF. The Liquidity Agreement authorizes SG to carry out market purchases and sales of our common stock on Euronext Paris for our account in order to promote the liquidity and the orderly listing of such securities on Euronext Paris. Under the Liquidity Agreement, we deposited 40 million into a liquidity account with SG to be used by SG in its discretion to purchase and sell shares of our common stock on Euronext Paris. Proceeds of sales are deposited into the liquidity account. The Liquidity Agreement has a term of 12 months and will renew automatically in April of each year unless otherwise terminated by either party. The Liquidity Agreement is consistent with the liquidity agreement maintained by Euronext, N.V. with respect to its securities prior to the combination of NYSE Group and Euronext.
Under the Liquidity Agreement and consistent with applicable laws in France, SG exercises full and complete discretion in making any decision to purchase or sell our common stock on Euronext Paris, and no discretion is retained by us. In order to reinforce SG’s independence in performing its obligations under the Liquidity Agreement, information barriers have been established between persons effecting transactions and persons with inside information.
All transactions under the Liquidity Agreement will be executed offshore (outside the United States in accordance with Regulation S) and, except for block transactions, only through the Euronext Paris electronic trading system. SG may also undertake block transactions under the Liquidity Agreement, provided such transactions are made in accordance with the rules governing Euronext Paris.
In performing its obligations under the Liquidity Agreement, SG has agreed to comply with the guidelines and regulations of the AMF, the anti-manipulation and related provisions applicable in France, and the anti-fraud and anti-manipulation provisions of the Exchange Act. Sales under the Liquidity Agreement have been made in offshore transactions exempt from registration.
Sales and purchases of our common stock may be suspended if we become subject to legal, regulatory or contractual restrictions that would prevent SG from making purchases and sales under the Agreement or upon our instruction.
No transactions were carried out by SG on Euronext Paris under the Liquidity Agreement during 2009.
Stock Repurchase Program
In 2008, our board of directors authorized the repurchase of up to $1 billion of our common stock. Under the program, we may repurchase stock from time to time at the discretion of management in open market or privately negotiated transactions or otherwise, subject to applicable U.S. or European laws, regulations and approvals, strategic considerations, market conditions and other factors. This stock repurchase plan does not obligate us to repurchase any dollar amount or number of shares of our common stock and any such repurchases will be made in compliance with the applicable laws and regulations, including rules and regulations of the SEC and applicable EU regulations and regulations of the AMF. No shares were repurchased in 2009. Cumulatively as of December 31, 2009, we have repurchased 13.4 million shares at an average price per share of $26.04 with an approximate dollar value of shares that may yet be repurchased under the repurchase plan of $652 million.
Stock Performance Graph
The following performance graph compares the cumulative total stockholder return on our common stock for the period from April 4, 2007 to December 31, 2009 with the cumulative total return of the S&P 500 Index and a peer group of companies consisting of five exchanges to which we compare our business and operations: CME Group, Deutsche Börse, Intercontinental Exchange, London Stock Exchange and Nasdaq OMX.
COMPARISON OF 32 MONTH CUMULATIVE TOTAL RETURN*
Among NYSE Euronext, The S&P 500 Index
And A Peer Group
*
$100 invested on 4/4/07 in stock or 3/31/07 in index, including reinvestment of dividends.
Fiscal year ending December 31.
ITEM 6.
SELECTED FINANCIAL AND OPERATING DATA
Selected Consolidated Financial Data The following selected consolidated financial data has been derived from the historical consolidated financial statements and related notes for the years ended December 31, 2005 through December 31, 2009, which have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, and prepared in accordance with U.S. GAAP. The information presented here is only a summary, and it should be read together with our consolidated financial statements included in this Annual Report on Form 10-K. The information set forth below is not necessarily indicative of NYSE Euronext’s results of future operations and should be read in conjunction with Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
(1)
The results of operations of Euronext have been included since April 4, 2007 and the results of operations of Archipelago have been included since March 7, 2006.
(2)
On November 1, 2006, NYSE Group completed the purchase of the one-third ownership stake in SIAC previously held by NYSE Amex, as a result of which NYSE Euronext acquired full ownership of SIAC.
(3)
Effective July 30, 2007, the member firm regulatory functions of NYSE Regulation, including related enforcement activities, risk assessment and the arbitration service, were transferred to FINRA. Regulatory revenues decreased as a result of this transfer and in connection with pricing changes.
(4)
Represents severance costs, curtailment losses, contract termination costs, accelerated depreciation, legal and other expenses directly attributable to merger-related activities and cost reduction initiatives.
(5)
Represents non-cash charges recorded in connection with the write-down of certain goodwill, indefinite-lived intangible assets and other investments to their estimated fair value.
(6)
The operations of GL Trade, which were sold on October 1, 2008, are reflected as discontinued.
(7)
Represents liabilities due after one year, including accrued employee benefits, deferred revenue, and deferred income taxes.
(8)
Adjusted to reflect the March 7, 2006 merger between the NYSE and Archipelago, giving retroactive effect to the issuance of shares to former NYSE members.
Selected Operating Data
The following tables present selected operating data for the periods presented. U.S. data includes NYSE Amex beginning October 1, 2008. All trading activity is single-counted, except European cash trading which is double-counted to include both buys and sells. The information set forth below is not necessarily indicative of NYSE Euronext’s future operations and should be read in conjunction with Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Volume Summary - Cash Products
(1)
Includes all volume executed in NYSE Group crossing sessions.
(2)
Represents the total number of shares of equity securities and ETFs internally matched on the NYSE Group’s exchanges or routed to and executed at an external market center. NYSE Arca routing includes odd-lots.
(3)
Represents the total number of shares of equity securities and ETFs executed on the NYSE Group’s exchanges.
(4)
Data included in previously identified categories.
Source: NYSE Euronext, Options Clearing Corporation and Consolidated Tape as reported for equity securities.
Volume Summary - Derivatives Products
(1)
Includes currency products.
(2)
Includes all Bclear trading activities for Bclear, NYSE Liffe’s clearing services for wholesale derivatives.
(3)
Includes trading in U.S. equity options contracts, not equity-index options.
(4)
U.S. options contracts data has been updated for the integration of NYSE Amex from October 2008 forward.
Source: NYSE Euronext, Options Clearing Corporation and Consolidated Tape as reported for equity securities.
Other Operating Statistics
(1)
Figures for NYSE listed issuers include listed operating companies, special-purpose acquisition companies and closed-end funds listed on the NYSE and NYSE Amex and do not include NYSE Arca or corporate structured products listed on the NYSE. There were 1,065 ETPs and 3 operating companies exclusively listed on NYSE Arca as of December 31, 2009. There were 474 corporate structured products listed on the NYSE as of December 31, 2009. Figures for new issuers listings include NYSE new listings (including new operating companies, special-purpose acquisition companies and closed-end funds listings on NYSE) and new ETP listings on NYSE Arca (NYSE Amex is excluded). Figures for Euronext present the operating companies listed on Euronext and do not include NYSE Alternext, Free Market, closed-end funds, ETFs and structured products (warrants and certificates). As of December 31, 2009, 125 operating companies were listed on NYSE Alternext, 312 on Free Market and 497 ETFs were listed on NextTrack.
(2)
Euronext figures show capital raised in millions of dollars by operating companies listed on Euronext, NYSE Alternext and Free Market and do not include closed-end funds, ETFs and structured products (warrants and certificates). NYSE figures show capital raised in millions of dollars by operating companies listed on NYSE and NYSE Amex only.
(3)
Euronext figures include only operating companies listed on Euronext, NYSE Alternext and Free Market.
(4)
“Tape A” represents NYSE listed securities, “Tape B” represents NYSE Arca and NYSE Amex listed securities, and “Tape C” represents Nasdaq listed securities. Per Regulation NMS, as of April 1, 2007, share of revenues is derived through a formula based on 25% share of trading, 25% share of value traded, and 50% share of quoting, as reported to the consolidated tape. Prior to April 1, 2007, share of revenues for Tapes A and B was derived based on the number of trades reported to the consolidated tape, and share of revenue for Tape C was derived based on an average of share of trades and share of volume reported to the consolidated tape. The consolidated tape refers to the collection and dissemination of market data that multiple markets make available on a consolidated basis. Share figures exclude transactions reported to the FINRA/NYSE Trade Reporting Facility.
(5)
NYSE Euronext headcount includes the employees of NYSE Technologies and NYSE Amex for all periods presented and excludes GL Trade headcounts resulting from the sale of its 40% stake in October 2008. December 2009 includes 136 NYFIX employees subsequent to the November 30, 2009 acquisition. In January 2010, 85 employees were terminated.
Source: NYSE Euronext, Options Clearing Corporation and Consolidated Tape as reported for equity securities.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the audited consolidated financial statements and related notes included in this Annual Report on Form 10-K. This discussion contains forward-looking statements. Actual results may differ from such forward-looking statements. See
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General
As a result of its operating and financing activities, NYSE Euronext is exposed to market risks such as interest rate risk, currency risk, credit risk and equity risk. NYSE Euronext has implemented policies and procedures to measure, manage, monitor and report risk exposures, which are regularly reviewed by the appropriate management and supervisory bodies. NYSE Euronext’s central treasury is charged with identifying risk exposures and monitoring and managing such risks on a daily basis. To the extent allowed by local regulation and necessary, NYSE Euronext’s subsidiaries centralize their cash investments, report their risks and hedge their exposures with the central treasury. NYSE Euronext performs sensitivity analysis to determine the effects that market risk exposures may have.
NYSE Euronext uses derivative instruments solely to hedge financial risks related to its financial positions or risks that are otherwise incurred in the normal course of its commercial activities. It does not use derivative instruments for speculative purposes.
Interest Rate Risk
Most of NYSE Euronext’s financial assets and liabilities are based on floating rates, on fixed rates with an outstanding maturity or reset date falling in less than one year or on fixed rates that have been swapped to floating rates via fixed-to-floating rate swaps. The following table summarizes NYSE Euronext’s exposure to interest rate risk as of December 31, 2009 (in millions of U.S. dollars):
(1)
Includes floating rate, fixed rate with an outstanding maturity or reset date falling in less than one year and fixed rate swapped to floating rate.
(2)
Impact on profit and loss for floating rate positions (cash flow risk) and on equity until realization in profit and loss for fixed rate positions (price risk).
(3)
100 basis points parallel shift of yield curve.
NYSE Euronext is exposed to price risk on its outstanding fixed rate positions. At December 31, 2009, fixed rate positions in U.S. dollar and in euro with an outstanding maturity or reset date falling in more than one year amounted to $749 million and $1,417 million, respectively. A hypothetical shift of 1% in the U.S. dollar or in the euro interest rate curves would in the aggregate impact the fair value of these positions by $25.9 million and $68.6 million, respectively.
NYSE Euronext is exposed to cash flow risk on its floating rate positions. Because NYSE Euronext is a net lender in the sterling, when interest rates in sterling decrease, NYSE Euronext’s net interest and investment income decreases. Based on December 31, 2009 positions, a hypothetical 1% decrease in sterling rates would negatively impact annual income by $2.0 million. Because NYSE Euronext is a net borrower in U.S. dollar and euro, when interest rates in U.S. dollar or euro increase, NYSE Euronext net interest and investment income decreases. Based on December 31, 2009 positions, a hypothetical 1% increase in U.S. dollar or euro rates would negatively impact annual income by $2.1 million and $1.7 million, respectively.
Currency Risk
As an international group, NYSE Euronext is subject to currency translation risk. A significant part of NYSE Euronext’s assets, liabilities, revenues and expenses is recorded in euro and sterling. Assets, liabilities, revenues and expenses of foreign subsidiaries are generally denominated in the local functional currency of such subsidiaries.
NYSE Euronext’s exposure to foreign denominated earnings for the year ended December 31, 2009 is presented by primary foreign currency in the following table (in millions):
(1)
Excluding the NYSE Liffe Clearing payment of 260 million ($355 million).
(2)
Represents the impact of currency fluctuation for the year ended December 31, 2009 compared to the same period in the prior year.
NYSE Euronext’s exposure to net investment in foreign currencies is presented by primary foreign currencies in the table below (in millions):
At December 31, 2009, NYSE Euronext was exposed to net exposures in euro and sterling of 1.8 billion ($2.6 billion) and £2.4 billion ($3.9 billion), respectively. NYSE Euronext’s borrowings in euro of 1.2 billion ($1.7 billion) constitute a partial hedge of NYSE Euronext’s net investments in foreign entities. As of December 31, 2009, NYSE Euronext also had a 40 million ($57 million) Euro/dollar and £112 million ($178 million) sterling/dollar foreign exchange swaps outstanding. These swaps matured in January 2010. As of December 31, 2009, the fair value of these swaps was a $2.7 million asset.
Based on December 31, 2009 net currency positions, a hypothetical 10% decrease of the euro against the dollar would negatively impact NYSE Euronext’s equity by $257 million and a hypothetical 10% decrease of the sterling against the dollar would negatively impact NYSE Euronext’s equity by $394 million. For the year ended December 31, 2009, currency exchange rate differences had a positive impact of $367 million on NYSE Euronext’s consolidated equity.
Credit Risk
NYSE Euronext is exposed to credit risk in the event of a counterparty default. NYSE Euronext limits its exposure to credit risk by rigorously selecting the counterparties with which it makes investments and executes agreements. Credit risk is monitored by using exposure limits depending on ratings assigned by rating agencies as well as the nature and maturity of transactions. NYSE Euronext’s investment objective is to invest in securities that preserve principal while maximizing yields, without significantly increasing risk. NYSE Euronext seeks to substantially mitigate credit risk associated with investments by ensuring that these financial assets are placed with governments, well-capitalized financial institutions and other creditworthy counterparties.
An ongoing review is performed to evaluate changes in the status of counterparties. In addition to the intrinsic creditworthiness of counterparties, NYSE Euronext’s policies require diversification of counterparties (banks, financial institutions, bond issuers and funds) so as to avoid a concentration of risk. Derivatives are negotiated with highly rated banks.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF NYSE EURONEXT
Page
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition as of December 31, 2009 and 2008
Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007
Consolidated Statements of Changes in Equity and Comprehensive Income for the Years Ended December 31, 2009, 2008 and 2007
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007
Notes to the Consolidated Financial Statements
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of NYSE Euronext is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
As of December 31, 2009, management conducted an assessment of the effectiveness of NYSE Euronext’s internal control over financial reporting based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded that NYSE Euronext’s internal control over financial reporting as of December 31, 2009 was effective.
The effectiveness of NYSE Euronext’s internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of NYSE Euronext:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of NYSE Euronext and its subsidiaries at December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 26, 2010
NYSE EURONEXT
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in millions, except per share data)
The accompanying notes are an integral part of these consolidated financial statements.
NYSE EURONEXT
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
The accompanying notes are an integral part of these consolidated financial statements.
NYSE EURONEXT
CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY AND COMPREHENSIVE INCOME
(in millions)
NYSE EURONEXT
CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY AND COMPREHENSIVE INCOME - (Continued)
(in millions)
Accumulated other comprehensive income (loss) was as follows (in millions):
The accompanying notes are an integral part of these consolidated financial statements.
NYSE EURONEXT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
NYSE EURONEXT
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(in millions)
The accompanying notes are an integral part of these consolidated financial statements.
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -
Description of Business
NYSE Euronext is a holding company that, through its subsidiaries, operates the following securities exchanges: the New York Stock Exchange (“NYSE”), NYSE Arca, Inc. (“NYSE Arca”) and NYSE Amex LLC (“NYSE Amex”) in the United States and the five European-based exchanges that comprise Euronext N.V. (“Euronext”) - the Paris, Amsterdam, Brussels and Lisbon stock exchanges, as well as the Liffe derivatives markets in London, Paris, Amsterdam, Brussels and Lisbon. NYSE Euronext is a global provider of securities listing, trading, market data products, and software and technology services. NYSE Euronext was formed in connection with the April 4, 2007 combination of NYSE Group (which was formed in connection with the March 7, 2006 merger of the NYSE and Archipelago) and Euronext. NYSE Euronext common stock is dually listed on the NYSE and Euronext Paris under the symbol “NYX.”
Note 2 -
Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of NYSE Euronext and all other entities in which NYSE Euronext has a controlling financial interest. When NYSE Euronext does not have a controlling financial interest in an entity but exercises significant influence over the entity’s operating and financial policies, such investment is accounted for using the equity method.
The business combination transaction between NYSE Group and Euronext has been treated as a purchase business combination for accounting purposes, with NYSE Group as the business and accounting acquiror. As a result, the results of NYSE Group are the historical results of NYSE Euronext, prior to the business combination.
We made certain reclassifications to our prior year consolidated financial statements to conform to our 2009 presentation. The operations of GL Trade are reflected as discontinued operations. See Note 5 - “Discontinued Operations.”
Use of Estimates
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of these consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could be materially different from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents are composed of cash and highly liquid investments with an original maturity of three months or less.
Revenue Recognition
Cash trading fees are paid by organizations based on their trading activity. Fees are assessed on a per share basis for trading in equity securities. The fees are applicable to all transactions that take place on any of the NYSE Euronext trading venues, and the fees vary, based on the size, type of trade that is consummated and trading venue. Our U.S. securities exchanges earn transaction fees for customer orders of equity securities matched internally, as well as for customer orders routed to other exchanges. Euronext earns transaction fees for customer orders of equity, debt securities and other cash instruments on Euronext’s cash markets. Cash trading fees are recognized as earned.
Derivative trading and clearing fees are paid by organizations based on their trading activity. Fees are assessed on a fixed per-contract basis for the (i) execution of trades of derivative contracts on Euronext’s derivatives markets in London, Paris, Amsterdam, Brussels and Lisbon, and (ii) execution of options contracts traded on NYSE Arca
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
and LIFFE Administration and Management (“NYSE Liffe”). In some cases, these fees are subjected to caps. Derivative trading and clearing fees are recognized as earned.
Listing fees consist of original listing fees paid by issuers to list securities on the various cash markets, annual fees paid by companies whose financial instruments are listed on the cash markets, and fees related to other corporate actions (including stock splits, sales of additional securities and merger and acquisitions). Original listing fees are assessed primarily based on the number of shares that the issuer initially lists. Original listing fees are recognized on a straight-line basis over estimated service periods ranging from 5 to 10 years. Annual listing fees are recognized on a pro rata basis over the calendar year. Unamortized balances are recorded as deferred revenue on the consolidated statements of financial condition.
In the U.S., NYSE Euronext collects market data revenues principally for consortium-based data products and, to a lesser extent, for NYSE proprietary data products. Consortium-based data fees are determined by securities industry plans. Consortium-based data revenues that coordinated market data distribution generates (net of administration costs) are distributed to participating markets on the basis of the Regulation NMS formula. In Europe, Euronext charges a variety of users, primarily end-users, for the use of Euronext’s real-time and proprietary market services. Euronext also collects annual license fees from vendors for the right to distribute Euronext data to third parties and a service fee from vendors for direct connection to market data. These fees are recognized as services are rendered.
Software and technology services revenues are generated primarily from connectivity services related to the SFTI network, software licenses and maintenance fees, and strategic consulting services. Co-location revenue is recognized monthly over the life of the contract. Software license revenue other than customer-specific is recorded at the time of sale, and maintenance contracts are recognized monthly over the life of the maintenance term. Expert consulting services are offered for customization or installation of the software and for general advisory services. Consulting revenue is generally billed in arrears on a time and materials basis, although customers sometimes prepay for blocks of consulting services in bulk. Customer specific software license revenue is recognized at the time of client acceptance. NYSE Euronext records revenues from subscription agreements on a pro rata basis over the life of the subscription agreements. The unrealized portions of invoiced subscription fees, maintenance fees and prepaid consulting fees are recorded as deferred revenue on the consolidated statements of financial condition.
The principal regulatory fees charged to member organizations of our U.S. markets include (i) a regulatory fee based on Gross Focus revenues charged to member organizations (in 2009, $0.105 per $1,000 of Gross Focus - Financial and Operational Combined Uniform Single Report - revenues generated by member broker-dealers, which are reported on a six-month lag basis), (ii) a fee based on the number of registered representatives charged to NYSE Arca and NYSE Amex member organizations and (iii) various regulatory fees charged to specialists, through June 30, 2009, on the NYSE and NYSE Amex, and to market makers, order routing firms and other broker-dealers on NYSE Arca and NYSE Amex.
Other revenues consist of trading license fees, facility and other fees provided to specialists, brokers and clerks physically located on the U.S. markets that enable them to engage in the purchase and sale of securities on the trading floor, and clearance and settlement activities derived from Euronext businesses. License fees are recognized on a pro-rata basis over the calendar year. All other fees are recognized when services are rendered.
Currency Translation
NYSE Euronext’s functional currency is the U.S. dollar. Assets and liabilities denominated in non-U.S. currencies are translated at rates of exchange prevailing on the date of the consolidated statement of financial condition, and revenues and expenses are translated at average rates of exchange throughout the year. NYSE Euronext seeks to reduce its net investment exposure to fluctuations in foreign exchange rates through the use of foreign currency-denominated debt.
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Hedging Activity
NYSE Euronext uses derivative instruments to limit exposure to changes in foreign currency exchange rates and interest rates. NYSE Euronext accounts for derivatives pursuant to the Derivatives and Hedging Topic of the FASB Accounting Standards Codifications. The Derivatives and Hedging Topic establishes accounting and reporting standards for derivative instruments and requires that all derivatives be recorded at fair value on the consolidated statement of financial condition. Changes in the fair value of derivative financial instruments are either recognized in other comprehensive income or net income depending on whether the derivative is being used to hedge changes in cash flows or changes in fair value. Cash flows from hedging activities are included in the same category as the items being hedged. Cash flows from instruments designated as net investment hedges are classified as financing activities.
Financial Investments
NYSE Euronext’s financial investments generally are classified as available-for-sale securities and are carried at fair value as of trade date with the unrealized gains and losses, net of tax, reported as a component of other comprehensive income. Interest income on debt securities, bank deposits and other interest rate investments, including amortization of premiums and accretion of discounts, is accrued and recognized over the life of the investment. The specific identification method is used to determine realized gains and losses on sales of investments, which are reported in interest and investment income in the consolidated statements of operations.
NYSE Euronext regularly reviews its investments to determine whether a decline in fair value below the cost basis is other-than-temporary. If events and circumstances indicate that a decline in the value of the assets has occurred and is deemed to be other-than-temporary, the carrying value of the security is reduced to its fair value and a corresponding impairment is charged to earnings.
Fair Value Measurements
NYSE Euronext accounts for certain financial instruments at fair value, including available-for-sale instruments, derivative instruments and certain debt instruments pursuant to the Fair Value Measurements and Disclosures Topic in the Codification. The Fair Value Measurements and Disclosures Topic defines fair value, establishes a fair value hierarchy on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial instruments is determined using various techniques that involve some level of estimation and judgment, the degree of which is dependent on the price transparency and the complexity of the instruments.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is maintained at a level that management believes to be sufficient to absorb probable losses in NYSE Euronext’s accounts receivable portfolio. The allowance is based on several factors, including a continuous assessment of the collectability of each account. In circumstances where a specific customer’s inability to meet its financial obligations is known, NYSE Euronext records a specific provision for bad debts against amounts due to reduce the receivable to the amount it reasonably believes will be collected.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The concentration of risk on accounts receivable is mitigated by the large number of entities comprising NYSE Euronext’s customer base. The following is a summary of the allowance for doubtful accounts, utilization and additional provisions (in millions):
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation of assets is provided using the straight-line method of depreciation over the estimated useful lives of the assets, which generally range from 2 to 15 years. Leasehold improvements are amortized using the straight-line method over the term of the lease or the estimated useful lives of the assets, whichever is shorter.
NYSE Euronext accounts for software development costs pursuant to Subtopic 10 of the Intangibles-Goodwill and Other in the Codification. NYSE Euronext expenses software development costs incurred during the preliminary project stage, while it capitalizes costs incurred during the application development stage, which includes design, coding, installation and testing activities. Costs that are related to the development of licenses marketed to external customers are capitalized after technological feasibility has been established. Amortization of capitalized software development costs is computed on a straight-line basis over the software’s estimated useful life, which is applied over periods ranging from 2 to 5 years.
Expenditures for repairs and maintenance are charged to operations in the period incurred.
Goodwill and Other Intangible Assets
Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of a business acquired. NYSE Euronext reviews the carrying value of goodwill for impairment at least annually based upon the estimated fair value of NYSE Euronext’s reporting units. An impairment loss is triggered if the estimated fair value of a reporting unit, which is a component one level below NYSE Euronext’s two reportable segments, is less than its estimated net book value. Such loss is calculated as the difference between the estimated fair value of goodwill and its carrying value. Should the review indicate that goodwill is impaired, NYSE Euronext’s goodwill would be reduced by the impairment loss.
Intangible assets are amortized on a straight-line basis over their estimated useful lives. When certain events or changes in operating conditions occur, an impairment assessment would be performed and lives of intangible assets with determinable lives would be adjusted. Intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. An impairment loss, calculated as the difference between the estimated fair value and the carrying value of an asset or asset group, is recognized if the sum of the estimated undiscounted cash flows relating to the asset or asset group is less than the corresponding carrying value.
For purposes of performing the impairment test, fair values are determined using discounted cash flow methodology. This requires significant judgment including estimation of future cash flows, which, among other factors, is dependent on internal forecasts, estimation of the long-term rate of growth for businesses, and
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
determination of weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill and other intangible impairment for each reporting unit.
Activity Assessment Fees and Section 31 Fees
NYSE Euronext pays the Securities Exchange Commission (the “SEC”) fees pursuant to Section 31 of the Exchange Act for transactions executed on the U.S. exchanges. These Section 31 fees are designed to recover the costs to the government of supervision and regulation of securities markets and securities professionals. NYSE Euronext, in turn, collects activity assessment fees from member organizations clearing or settling trades on the NYSE, NYSE Amex and NYSE Arca and recognizes these amounts when invoiced. Fees received are included in cash at the time of receipt and, as required by law, the amount due to the SEC is remitted semiannually and recorded as an accrued liability until paid. The activity assessment fees are designed so that they are equal to the Section 31 fees. As a result, neither the size of Section 31 fees nor the size of activity assessment fees has an impact on NYSE Euronext’s net income.
Accrued Employee Benefits
NYSE Euronext accounts for defined benefit pension and other postretirement benefit plans (collectively “benefit plans”) in accordance with the Compensation-Retirement Benefits Topic of the Codification. The Compensation-Retirement Benefits Topic requires plan sponsors of benefit plans to recognize the funded status of their benefit plans in the consolidated statement of financial condition, measure the fair value of plan assets and benefit obligations as of the date of the fiscal year-end consolidated statement of financial position, and provide additional disclosures.
Benefit plan costs and liabilities are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, health care cost trend rates, benefits earned, interest cost, expected return on assets, mortality rates, and other factors. Actual results that differ from the assumptions are accumulated and amortized over the future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect NYSE Euronext’s pension and other postretirement obligations and future expense.
Stock-Based Compensation
NYSE Euronext accounts for stock-based compensation in accordance with the Compensation-Stock Compensation Topic of the Codification, which requires that the cost of employee services received in exchange for a share-based award be generally measured based on the grant-date fair value of the award. NYSE Euronext estimates an expected forfeiture rate while recognizing the expense associated with these awards and amortizes such expense on a graded basis.
Comprehensive Income
Other comprehensive income includes changes in unrealized gains and losses on financial instruments classified as available-for-sale, foreign currency translation adjustments and amortization of the difference in the projected benefit obligation and the accumulated benefit obligation associated with benefit plan liabilities, net of tax.
Income Taxes
NYSE Euronext records income taxes using the asset and liability method, under which current and deferred tax liabilities and assets are recorded in accordance with enacted tax laws and rates. Under this method, the amounts of deferred tax liabilities and assets at the end of each period are determined using the tax rate expected to be in
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
effect when the taxes are actually paid or recovered. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not.
Deferred income taxes are provided for the estimated income tax effect of temporary differences between financial and tax bases in assets and liabilities. Deferred tax assets are also provided for certain tax carryforwards. A valuation allowance to reduce deferred tax assets is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
NYSE Euronext is subject to numerous domestic and foreign jurisdictions primarily based on its operations in these jurisdictions. Significant judgment is required in assessing the future tax consequences of events that have been recognized in NYSE Euronext’s financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could have material impact on NYSE Euronext’s financial position or results of operations.
NYSE Euronext determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets this recognition criteria, the position is measured to determine the amount of benefit to be recognized in the financial statements.
Recently Adopted Accounting Guidance
Section 5 of Subtopic 10 in the Codification establishes the Codification as the source of authoritative U.S. accounting and reporting standards recognized by the FASB for use in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. NYSE Euronext adopted such guidance during the quarter ended September 30, 2009.
The Business Combinations Topic of the Codification requires the acquiring entity in a business combination to (1) recognize all assets acquired and liabilities assumed at their acquisition-date fair values; (2) record those assets and liabilities at their full fair value amounts even if there is noncontrolling interest; (3) include noncontrolling interest earnings through net income; (4) expense acquisition-related transaction costs; and (5) disclose information needed to evaluate and understand the nature and financial effect of the business combination. NYSE Euronext adopted the Business Combinations Topic on January 1, 2009.
Section 65 of Subtopic 10 in the Consolidation Topic of the Codification, which is to be retrospectively applied, requires entities to include noncontrolling (minority) interests in partially owned consolidated subsidiaries within shareholders’ equity in the consolidated financial statements. The Section also requires the consolidating entity to include the earnings of the consolidated subsidiary attributable to the noncontrolling interest holder in its income statement with an offsetting charge (credit) to the non-controlling interest in shareholders’ equity. NYSE Euronext adopted Section 65 of Subtopic 10 in the Consolidation Topic on January 1, 2009.
Section 65 of Subtopic 10 in the Derivatives and Hedging Topic of the Codification is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. The Subtopic applies to all derivative instruments within the scope of the Derivatives and Hedging Topic. It also applies to non-derivative hedging instruments and all hedged items designated and qualifying as hedges under the Derivatives and Hedging Topic. The Section amends the current qualitative and quantitative disclosure requirements for derivative instruments and hedging activities set forth in the Derivatives and Hedging Topic and generally increases the level of disaggregation that will be required in an entity’s financial statements. The Section requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk related contingent features in derivative agreements. NYSE Euronext adopted Section 65 of Subtopic 10 in the Derivatives and Hedging Topic on January 1, 2009.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The FASB issued new accounting guidance contained within the Section 50 of Subtopic 20 in the Compensation Topic of the Codification in December 2008. This guidance requires additional disclosure on our pension and other post-retirement benefit plan assets on an annual basis that are based on the fair value disclosure requirements of the Fair Value Measurements and Disclosures Topic in the Codification. We are required to separate our plan assets into three fair value hierarchy levels. If any plan assets are classified as Level 3, we will provide a rollforward of the changes in fair value of such plan assets. For further information on the three fair value hierarchy levels, see Note 12, “Fair Value of Financial Instruments.” Since the new provisions of this guidance require only additional disclosures about our pension and other post-retirement benefit plan assets, NYSE Euronext adopted such guidance on December 15, 2009.
Recent Accounting Guidance Not Yet Adopted
The FASB issued Accounting Standards Update (“ASU”) 2009-13, Multiple-Deliverable Revenue Arrangements, which supersedes certain provisions in Subtopic 25 in the Revenue Recognition Topic of the Codification. ASU 2009-13 requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. It also eliminates the use of the residual method of allocation which was allowed under previous guidance and requires the use of the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverable subject to the Subtopic 25 in the Revenue Recognition Topic. ASU 2009-13 also requires both ongoing disclosures regarding an entity’s multiple-element revenue arrangements as well as certain transitional disclosures during periods after adoption. This new guidance is effective on or after June 15, 2010. NYSE Euronext is currently evaluating the impact of this guidance, if any.
The FASB issued ASU 2009-14, Certain Revenue Arrangements That Include Software Elements, which amends certain provisions in Subtopic 605 in the Software Topic of the Codification. The amendments in ASU 2009-14 change revenue recognition for tangible products containing software elements and non-software elements as follows: (1) the tangible element of the product is always outside the scope of Subtopic 605 in the Software Topic (2) the software elements of tangible products are outside of the scope of Subtopic 605 in the Software Topic when the software elements and non-software elements function together to deliver the product’s essential functionality and (3) undelivered elements in the arrangement related to the non-software components also are excluded from the software revenue recognition guidance. This new guidance is effective on or after June 15, 2010, and it is also applicable to existing arrangements that are materially modified after the effective date. NYSE Euronext is currently evaluating the impact of this guidance, if any.
Note 3 -
Acquisitions and Divestitures
NYFIX, Inc.
On November 30, 2009, NYSE Euronext acquired NYFIX, Inc. (“NYFIX”) which is a leading provider of innovative solutions that optimize trading efficiency. The total value of this acquisition was approximately $144 million. NYFIX FIX business and FIX Software business were merged with the NYSE Technologies’ portfolio. The NYFIX Transaction Services U.S. electronic agency execution business, comprised of its direct market access and algorithmic products and the Millennium Alternative Trading System, was acquired by BNY ConvergEX subsequent to the NYFIX acquisition.
NYSE Liffe US
On October 30, 2009, NYSE Euronext entered into a definitive agreement with Citadel Securities, Getco, Goldman Sachs, Morgan Stanley and UBS to sell a significant equity interest in NYSE Liffe US. NYSE Euronext will continue to consolidate the results of NYSE Liffe US. The transaction closed in the fourth quarter of 2009. NYSE Euronext will continue to manage the day-to-day operations of NYSE Liffe US, which will operate under the supervision of a separate board of directors.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Hugin Group BV
On October 14, 2009, Thomson Reuters acquired Hugin Group BV from NYSE Euronext. Hugin Group BV is a pan-European provider of investor relations and press distribution services.
NYSE Amex
On October 1, 2008, NYSE Euronext completed its acquisition of The Amex Membership Corporation (including its subsidiary the American Stock Exchange now known as NYSE Amex). A total of approximately 6.8 million shares of NYSE Euronext common stock was issued with a value of approximately $260 million. In addition, each former holder of a regular or options principal membership will be entitled to receive additional consideration calculated by reference to the net proceeds, if any, from the sale of the Amex headquarters in lower Manhattan, if such sale occurs within a specified period of time and certain conditions are satisfied. The results of operations and financial condition of NYSE Amex have been included in our consolidated financial statements since October 1, 2008.
AEMS
On August 5, 2008, NYSE Euronext completed the acquisition of the 50% stake in AEMS previously owned by Atos Origin. The purchase price in the transaction was approximately 162 million ($255 million), net of approximately 120 million ($189 million) of cash acquired. The results of operations and financial condition of AEMS have been included in our consolidated financial statements since August 5, 2008.
Wombat
On March 7, 2008, NYSE Euronext completed the acquisition of Wombat Financial Software, Inc. (“Wombat”). NYSE Euronext acquired Wombat for $200 million in cash consideration, and created a retention pool for Wombat employees consisting of restricted stock unit grants in an amount equal to $25 million. The results of operations and financial condition of Wombat have been included in our consolidated financial statements since March 7, 2008.
Other transactions
Qatar
On June 19, 2009, NYSE Euronext entered into a strategic partnership with the State of Qatar to establish the Qatar Exchange, the successor to the Doha Securities Market. Under the terms of the partnership, the Qatar Exchange will adopt the latest NYSE Euronext trading and network technologies for both the existing cash equities market and the new derivatives market. We will provide certain management services to the Qatar Exchange at negotiated rates.
NYSE Euronext agreed to contribute $200 million in cash to acquire a 20% ownership interest in the Qatar Exchange, $40 million of which was paid upon closing on June 19, 2009 and generally, the remaining $160 million is to be paid in four equal installments on each of the next four anniversaries of the closing date. The $150 million present value of this liability is included in “Related party payable” in the consolidated statement of financial condition as of December 31, 2009.
New York Portfolio Clearing (“NYPC”)
On June 18, 2009, NYSE Euronext and The Depositary Trust and Clearing Corporation (“DTCC”) entered into an exclusive arrangement to pursue a joint venture that is expected to be operational in the third quarter of 2010, subject to regulatory approval. NYSE Euronext plans to contribute $15 million in working capital and commit a $50 million financial guarantee as an additional contribution to the NYPC default fund. Pending Registered Derivatives Clearing
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Organization status approval from the U.S. Commodity Futures Trading Commission as well as other required regulatory approvals, NYPC initially will clear fixed income derivatives traded on NYSE Liffe US, with the ability to add other exchanges in the future. NYPC will use NYSE Euronext’s clearing technology. DTCC’s Fixed Income Clearing Corporation will provide capabilities in risk management, settlement, banking and reference data systems.
Note 4 -
Restructuring
Severance Costs
plan
In 2008, NYSE Euronext initiated a voluntary resignation incentive plan (“2008 VRIP”) and voluntary retirement plan in the U.S., which 235 employees accepted during the twelve months ended December 31, 2008. As part of the business combination between NYSE Group and Euronext, NYSE Euronext entered into a plan to eliminate employee positions.
NYSE Euronext initiated a new plan in Europe in 2008 which was finalized in June 2009. This plan included a net reduction of approximately 230 employees.
plan
As a result of streamlining certain business processes throughout 2009, NYSE Euronext finalized the plan in Europe, initiated a voluntary resignation incentive plan in the U.S. (“2009 VRIP”) and realized certain efficiencies from recent acquisitions.
The following is a summary of the severance charges recognized in connection with these plans, utilization of the accrual through December 31, 2009 and the remaining accrual as of December 31, 2009 (in millions):
The severance charges are included in merger expenses and exit costs in the consolidated statements of operations. Based on current severance dates and the accrued severance at December 31, 2009, NYSE Euronext expects to pay these amounts throughout 2010 and 2011.
Contract Termination
LCH.Clearnet Contract Termination/NYSE Liffe Clearing
Through July 30, 2009, NYSE Euronext used the services of LCH.Clearnet Group Limited for clearing transactions executed on its European cash and derivatives markets.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On October 31, 2008, NYSE Euronext announced that NYSE Liffe’s London Market (for the purposes of this section, “NYSE Liffe”) entered into binding agreements with LCH.Clearnet Ltd. (“LCH.Clearnet”) to terminate its clearing arrangements and to establish new arrangements known as “NYSE Liffe Clearing”, whereby NYSE Liffe assumed full responsibility for clearing activities for the U.K. derivatives market. To achieve this, NYSE Liffe became a self-clearing Recognised Investment Exchange and outsourced the existing clearing guarantee arrangements and related risk functions to LCH.Clearnet.
In connection with this arrangement, NYSE Euronext agreed to make a one-time 260 million ($355 million) payment to compensate LCH.Clearnet for economic losses arising as a result of the early termination of its current clearing arrangements with LCH.Clearnet (the “NYSE Liffe Clearing Payment”). This payment is tax deductible.
On May 27, 2009, NYSE Liffe received regulatory approval from the Financial Services Authority (“FSA”) to launch NYSE Liffe Clearing. Following such approval, NYSE Euronext recorded a $355 million expense which is included in merger expenses and exit costs in our consolidated statement of operations for the year ended December 31, 2009.
On July 30, 2009, NYSE Liffe Clearing launched operations and NYSE Euronext made the $355 million payment to LCH.Clearnet.
As of December 31, 2009, NYSE Euronext retained a 9.1% stake in LCH.Clearnet Group Limited’s outstanding share capital and the right to appoint one director to its board of directors.
Note 5 -
Discontinued Operations
On August 1, 2008, SunGard and GL Trade announced SunGard’s intention to acquire a majority stake in GL Trade. Under the terms of the offer, SunGard acquired approximately 64.5% of GL Trade from Euronext Paris S.A., a wholly owned subsidiary of NYSE Euronext, and other significant shareholders at a price of 41.70 per share. As a result, the operations of GL Trade are reflected as discontinued.
In October 2008, NYSE Euronext received 161.6 million ($227.5 million) from the sale of its 40% ownership stake in GL Trade to SunGard.
GL Trade earned revenue mainly from annual subscriptions to its software and technology offerings. Operating results of GL Trade, which were formerly included in European Operations, are summarized as follows (in millions):
Note 6 -
Segment Reporting
NYSE Euronext operates under two reportable segments: U.S. Operations and European Operations. NYSE Euronext evaluates segment performance primarily based on operating income from continuing operations.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
U.S. Operations consist of the following in NYSE Euronext’s U.S. markets:
•
providing access to trade execution in cash equities, options and futures;
•
obtaining new listings and servicing existing listings;
•
selling and distributing market data and related information;
•
providing regulatory services for cash equities and options;
•
operating connectivity networks for our markets and for other major market centers and market participants in the United States; and
•
providing trading and information technology solutions.
European Operations consist of the following in NYSE Euronext’s European markets:
•
providing access to trade execution in cash equities, derivatives products, bonds and repos;
•
obtaining new listings and servicing existing listings;
•
selling and distributing market data and related information;
•
providing settlement of transactions and the safe-custody of physical securities in certain European markets;
•
providing certain clearing services for derivatives products;
•
operating connectivity networks for our markets and for other major market centers and market participants in Europe; and
•
providing trading and information technology solutions.
Commencing in the first quarter of 2010, NYSE Euronext will change its reportable segments to reflect how its primary businesses will be managed in 2010. The new reportable segments will be focused on NYSE Euronext’s three primary global business units: Cash Trading and Listings; Derivatives; and Information Services and Technology Solutions.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Summarized financial data of NYSE Euronext’s reportable segments was as follows (in millions):
For the years ended December 31, 2009 and 2008, the operating income (loss) of European Operations included a $355 million charge recorded in connection with the LCH.Clearnet contract termination/ NYSE Liffe Clearing payment (see Note 3) and a $1,585 million impairment charge, respectively.
Revenues are generated primarily in the United States of America and Europe. Corporate items consist of expenses that are not allocated in assessing segment performance and intercompany eliminations. Corporate assets consist primarily of cash and cash equivalents, investments, prepaid income taxes, and equity investments. For the years ended December 31, 2009, 2008 and 2007, no individual customer accounted for 10% or more of NYSE Euronext’s revenues.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 7 -
Earnings per Share
The following is a reconciliation of the basic and diluted earnings per share computations (in millions, except per share data):
As of December 31, 2009 and 2008, 2.0 million and 3.3 million restricted stock units, respectively, and stock options to purchase 0.6 million and 0.7 million shares of common stock, respectively, were outstanding. For the year ended December 31, 2009, 0.7 million awards were excluded from the diluted earnings per share computation because their effect would have been anti-dilutive. For the year ended December 31, 2008, diluted net loss per common share is the same as basic net loss per common share since the assumed conversion of stock options and restricted stock units would have been anti-dilutive due to the loss position. For the year ended December 31, 2007, an aggregate of 0.4 million stock options and restricted stock units were excluded from the diluted earnings per share calculation because they would have been anti-dilutive.
Note 8 -
Pension and Other Benefit Programs
Defined Benefit Pension Plans
NYSE Euronext maintains pension plans covering its U.S. and European Operations. Effective December 31, 2008, the NYSE Amex benefit plans were merged with benefit plans in the U.S. The benefit accrual for all U.S. Operations pension plans are frozen.
Retirement benefits are derived from a formula, which is based on length of service and compensation. Based on the calculation, NYSE Euronext may contribute to its pension plans to the extent such contributions may be deducted for income tax purposes. In 2009 and 2008, NYSE Euronext contributed $9 million and $5 million to its European Operations, respectively. NYSE Euronext anticipates contributing approximately $4 million in 2010 to its
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
European Operations and zero to its U.S. Operations. There were no contributions to the U.S. pension plans in 2009 and 2008.
NYSE Euronext bases its investment policy and objectives on a review of the actuarial and funding characteristics of the retirement plan, the demographic profile of plan participants, and the business and financial characteristics of NYSE Euronext. Capital market risk/return opportunities and tradeoffs also are considered as part of the determination. The primary investment objective of the NYSE Euronext plan is to achieve a long-term rate of return that meets the actuarial funding requirements of the plan and maintains an asset level sufficient to meet all benefit obligations of the plan. The target allocations for our U.S. plan assets are 65 percent equity securities and 35 percent U.S. fixed income securities. Equity securities primarily include investments in large-cap and small-cap companies primarily located in the United States. U.S Fixed income securities include corporate bonds of companies from diversified industries and U.S. treasuries. The target allocations for our European plan assets are 50 percent equity securities and 50 percent fixed income securities.
The fair values of NYSE Euronext’s pension plan assets at December 31, 2009, by asset category are as follows (in millions):
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The costs of the plans in 2009 and 2008 have been determined in accordance with the Compensation-Retirement Benefits Topic of the FASB Accounting Standards Codification. The measurement date for the plans is December 31, 2009 and 2008. The following table provides a summary of the changes in the plan’s benefit obligations and the fair value of assets for December 31, 2009 and 2008 and a statement of funded status of the plans as of December 31, 2009 and 2008 (in millions):
(1)
NYSE Amex opening balances were recorded as of October 1, 2008 based on the estimated fair value assigned as part of the merger between NYSE Euronext and NYSE Amex.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The components of pension expense/(benefit) are set forth below (in millions):
The following table shows the payments projected based on actuarial assumptions (in millions):
Supplemental Executive Retirement Plans
The U.S. Operations also maintain a nonqualified supplemental executive retirement plan, which provides supplemental retirement benefits for certain employees. The future benefit accrual of all SERP plans is frozen. To provide for the future payments of these benefits, the U.S. Operations has purchased insurance on the lives of the participants through company-owned policies. At December 31, 2009 and 2008, the cash surrender value of such policies was $38 million and $36 million, respectively, and is included in other non-current assets. Additionally certain subsidiaries of the U.S. Operations maintain equity and fixed income mutual funds for the purpose of providing for future payments of SERP. At December 31, 2009 and 2008, the fair value of these assets was $46 million and $36 million, respectively. Such balance is included in financial investments in the consolidated financial statement of financial condition.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table provides a summary of the changes in the U.S. Operations SERP benefit obligations for December 31, 2009 and 2008 (in millions):
(1)
NYSE Amex opening balances were recorded as of October 1, 2008 based on the estimated fair value assigned as part of the merger with NYSE Euronext.
The components of U.S. Operations SERP expense/(benefit) are set forth below (in millions):
The following table shows the projected payments for the U.S. Operations based on the actuarial assumptions (in millions):
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Pension and SERP Plan Assumptions
The weighted average assumptions used to develop the actuarial present value of the projected benefit obligation and net periodic pension/SERP cost are set forth below:
To develop the expected long-term rate of return on assets assumption, both the U.S. and European Operations considered the historical returns and the future expectations for returns for each asset class as well as the target asset allocation of the pension portfolio. The assumed discount rate reflects the market rates for high-quality corporate bonds currently available. The discount rate was determined by considering the average of pension yield curves constructed on a large population of high quality corporate bonds. The resulting discount rates reflect the matching of plan liability cash flows to yield curves.
Postretirement Benefit Plans
In addition, the U.S. Operations maintain defined benefit plans to provide certain health care and life insurance benefits (the “Plans”) for eligible retired employees. These Plans, which may be modified in accordance with their terms, cover substantially all employees. These Plans are measured on December 31 annually. These Plans were fully frozen in 2009.
The net periodic postretirement benefit cost for the U.S. Operations was $4 million and $19 million for years ended December 31, 2009 and 2008, respectively. The defined benefit plans are unfunded. Currently, management does not expect to fund the plans.
The following table shows actuarial determined benefit obligation, benefits paid during the year and the accrued benefit cost for the year (in millions):
(1)
Benefit obligation at the end of 2008 included $13 million related to the NYSE Amex merger on October 1, 2008.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table shows the payments projected (net of expected Medicare subsidy receipts of $12 million over the next ten fiscal years) based on actuarial assumptions (in millions):
For measurement purposes, the U.S. Operations assumed a 8.5% annual rate of increase in the per capita cost of covered health care benefits in 2009 which will decrease on a graduated basis to 5.0% in the year 2018 and thereafter.
The following table shows the effect of a one-percentage-point increase and decrease in assumed health care cost trend rates (in millions):
Assumed Health Care Cost Trend Rate
1% Increase
1% Decrease
Effect of postretirement benefit obligation
$
$
(1
)
Effect on total of service and interest cost components
(18
)
Curtailments to the Plans
In 2009, NYSE Euronext recorded a $9 million curtailment gain associated with changes to its U.S. retiree medical plan and $1 million curtailment gain in Europe. In 2008, NYSE Euronext recorded a $7 million curtailment loss as a result of various employee actions, including the VRIP, on its U.S. benefit plans.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income, before tax, as of December 31, 2009 consisted of the following amounts that have not yet been recognized in net periodic benefit cost (in millions):
Our employee benefit plan adjustments for the year ended December 31, 2009 included a $9.5 million amount relating to an under-accrual of our pension plan liabilities as of December 31, 2008. This entry had no impact to our net income and was not material to the other comprehensive loss or accrued employee benefit liabilities in our consolidated financial statements in any prior year reporting period.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The amount of prior service credit and actuarial loss included in accumulated other comprehensive income related to the pension, SERP and postretirement plans, which are expected to be recognized in net periodic benefit cost in the coming year is estimated to be (in millions):
Defined Contribution Plans
The U.S. Operations maintain savings plans for which most employees are eligible to contribute a part of their salary within legal limits. The U.S. Operations matches an amount equal to 100% of the first 6% of eligible contributions. The U.S. Operations also provides benefits under a Supplemental Executive Savings Plan to which eligible employees may also contribute and receive an appropriate company match. Savings plans expense was $12 million, $12 million and $14 million for the years ended December 31, 2009, 2008 and 2007, respectively. Included in accrued employee benefits payable was $24 million and $29 million at December 31, 2009 and 2008, respectively, related to these plans.
Note 9 -
Goodwill and Other Intangible Assets
The change in the net carrying amount of goodwill by reportable segments was as follows (in millions):
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table presents the details of the intangible assets by reportable segments as of December 31, 2009 and 2008 (in millions):
In the U.S., the national securities exchange registrations allow NYSE Arca and NYSE Amex to (i) generate revenues from market data fees (both from equity and option trading activities) and listing fees, and (ii) reduce its costs because clearing charges are not incurred for trades matched internally on its trading systems. As an operator of five European-based registered national securities exchanges, Euronext is eligible to earn market data fees (both from equity and option trading activities), listing fees and certain trading fees. The national securities exchange registrations were valued using the excess earnings income approach.
NYSE Euronext reviews the carrying value of goodwill and indefinite-lived intangible assets for impairment at least annually. In 2008, NYSE Euronext recorded impairment charges of $1,003 million and $522 million in connection with the write-down of goodwill and other intangible assets, respectively, of our European Operations to their estimated fair value.
These impairment charges recorded during 2008 reflected adverse economic and equity market conditions causing a material decline in industry market multiples, and lower estimated future cash flows of NYSE Euronext’s European Cash reporting unit as a result of increased competition which has caused a decline in our market share of cash trading in Europe as well as pricing pressure following the November 2007 introduction of the European Commission’s Market in Financial Instruments Directive. During 2009, our market share of European cash equities has stabilized.
For the years ended December 31, 2009, 2008 and 2007, amortization expense for the intangible assets was approximately $58 million, $57 million and $81 million, respectively.
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The estimated future amortization expense of acquired purchased intangible assets is as follows (in millions):
Note 10 -
Stock-Based Compensation
Under the Stock Incentive Plan, NYSE Euronext may grant stock options and other equity awards to employees. NYSE Euronext’s approach to the incentive compensation awards contemplates awards of stock options and restricted stock units (“RSUs”).
Stock options are granted at an exercise price equal to the market price at the date of grant. Stock options granted generally vest and become exercisable over a period of three to four years, and generally expire after ten years.
Conversion of Euronext Awards
In connection with the business combination transaction between NYSE Group and Euronext, which was completed on April 4, 2007, generally each restricted stock unit, deferred stock unit, stock option and other right based on shares of common stock of NYSE Group or shares of Euronext outstanding immediately prior to the merger, was converted into an adjusted number of restricted stock units, deferred stock units options and rights with respect to NYSE Euronext common stock, on the same terms and conditions as were applicable before the business combination transaction. However, for tax purposes, in the case of French holders of Euronext awards, Euronext awards remained measured in shares of Euronext. NYSE Euronext intends to offer those holders the right to exchange any Euronext shares that they receive pursuant to their Euronext awards for shares of NYSE Euronext common stock at the exchange ratio set forth in the combination agreement at such time that certain adverse tax consequences no longer apply.
The restricted stock units and deferred stock units measured in shares of NYSE Euronext and the options to purchase shares of NYSE Euronext common stock issued by NYSE Euronext in exchange for the restricted stock units and deferred stock units measured in shares of Euronext and options to purchase shares of Euronext in the combination were included in the purchase price of Euronext and recorded at their fair value on the measurement date. Because continued service is required after the date of consummation in order to vest in any unvested awards, a portion of the value of those unvested awards is recognized over the remaining vesting period.
NYSE Group RSUs
On March 8, 2006, NYSE Group granted approximately 1.2 million restricted stock units to NYSE employees and certain SIAC employees under the Stock Incentive Plan. These restricted stock units vest 50% on the grant date and 25% on each of the first and second anniversaries of the grant date. The 2006 restricted stock unit awards were fully delivered in March 2009.
As of December 31, 2009, the total aggregate intrinsic value of stock options outstanding and exercisable was $5 million and $4 million, respectively.
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
For the year ended December 31, 2009, 2008 and 2007, NYSE Euronext recorded $43 million, $48 million and $31 million, respectively, of stock based compensation. As of December 31, 2009, there was approximately $33 million of total unrecognized compensation cost related to stock options and restricted stock units. This cost is expected to be recognized over approximately three years. Cash received from employee stock option exercises for the years ended December 31, 2009, 2008 and 2007 was $1 million, $10 million and $14 million, respectively. NYSE Euronext satisfies stock option exercises with newly issued shares.
We have not granted stock options in 2009 or 2008. In 2007, the fair value of each option grant was estimated using the Black-Scholes option pricing model with the following assumptions: expected volatility of 30%, risk-free interest of 4.8%, expected life of 7 years and no dividend yield.
The following table summarizes information about the stock option activity (number of stock options in thousands):
Additional information regarding stock options outstanding as of December 31, 2009 is as follows (number of stock options in thousands):
The following table summarizes information about the restricted stock units activity (stock units in thousands):
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 11 -
Related Party Transactions
AEMS
On August 5, 2008, NYSE Euronext acquired the remaining interest in AEMS previously owned by Atos Origin. Prior to the acquisition, NYSE Euronext owned 50% of AEMS and had entered into mutual service agreements. See Note 3 - “Acquisitions and Divestitures.”
FINRA
As part of the July 30, 2007 asset purchase agreement with FINRA, NYSE Euronext entered into service agreements with FINRA and its affiliates. Based on these service agreements, FINRA provides certain regulatory services to NYSE Group and its affiliates. See Note 3 - “Acquisitions and Divestitures.”
LCH.Clearnet
See Note 4 for a discussion of NYSE Liffe Clearing.
Qatar
See Note 3 for a discussion of the strategic partnership with the State of Qatar.
The following table presents revenues (expenses) derived from or incurred with these related parties (in millions):
BlueNext
BlueNext is the European carbon exchange business launched by NYSE Euronext in 2008. BlueNext is established in France and is 60% owned by NYSE Euronext and 40% owned by Caisse des Dépots et Consignation (“CDC”). NYSE Euronext consolidates the results of operations and the financial condition of BlueNext. In the regular course of business, through June 2009, BlueNext paid recoverable Value Added Tax (“VAT”) to certain customers on a daily basis and recovered such VAT from the French Tax Authorities on a one-month lag. CDC provided BlueNext with an overdraft to fund the VAT receivable. Under this arrangement, BlueNext had $249 million overdraft balances outstanding with CDC as of December 31, 2008, reflected as “Related party payable” on our consolidated statement of financial condition. Effective in July 2009, the carbon traded on the BlueNext exchange was VAT exempt.
Note 12 -
Fair Value of Financial Instruments
NYSE Euronext accounts for certain financial instruments at fair value in accordance with the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification. The Fair Value Measurements and Disclosures Topic defines fair value, establishes a fair value hierarchy on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial instruments is determined using
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
various techniques that involve some level of estimation and judgment, the degree of which is dependent on the price transparency and the complexity of the instruments.
In accordance with the Fair Value Measurements and Disclosures Topic, NYSE Euronext has categorized its financial instruments measured at fair value into the following three-level fair value hierarchy based upon the level of judgment associated with the inputs used to measure the fair value:
•
Level 1: Inputs are unadjusted quoted prices for identical assets or liabilities in an active market that NYSE Euronext has the ability to access. Generally, equity and other securities listed in active markets and investments in publicly traded mutual funds with quoted market prices are reported in this category.
•
Level 2: Inputs are either directly or indirectly observable for substantially the full term of the assets or liabilities. Generally, municipal bonds, certificates of deposits, corporate bonds, mortgage securities, asset backed securities and certain derivatives are reported in this category. The valuation of these instruments is based on quoted prices or broker quotes for similar instruments in active markets.
•
Level 3: Some inputs are both unobservable and significant to the overall fair value measurement and reflect management’s best estimate of what market participants would use in pricing the asset or liability. Generally, assets and liabilities carried at fair value and included in this category are certain structured investments, derivatives, commitments and guarantees that are neither eligible for Level 1 or Level 2 due to the valuation techniques used to measure their fair value. The inputs used to value these instruments are both observable and unobservable and may include NYSE Euronext’s own projections.
If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. A review of the fair value hierarchy classifications is conducted on a quarterly basis. Changes in the valuation inputs may result in a reclassification for certain financial assets or liabilities.
The following table presents NYSE Euronext’s fair value hierarchy of those assets and liabilities measured at fair value on a recurring basis as of December 31, 2009 and 2008 (in millions):
The difference between the total financial assets and liabilities as of December 31, 2009 and 2008 presented in the table above and the related amounts in the consolidated statement of financial condition is primarily due to investments recorded at cost or adjusted cost such as non-quoted equity securities, bank deposits and other interest rate investments, and to debt instruments recorded at amortized cost. The fair value of our long-term debt instruments was approximately $2.3 billion as of December 31, 2009. The carrying value of all other financial assets
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
and liabilities approximates fair value. As of December 31, 2009 and 2008, NYSE Euronext has $8 million and $14 million, respectively, of Level 3 securities consisting of auction rate securities purchased by NYSE Amex prior to its acquisition by NYSE Euronext on October 1, 2008. Since February 2008, these auction rate securities have failed at auction and are not currently valued at par. The decrease in the amount of auction rate securities from $14 million at December 31, 2008 to $8 million at December 31, 2009 is attributable to the disposal of $6 million of these securities. As of December 31, 2009, the weighted average price of the outstanding $8 million auction rate securities was 93 cents to a dollar and NYSE Euronext had recorded in other comprehensive income of $0.4 million unrealized gain on these securities.
Note 13 -
Derivatives and Hedges
NYSE Euronext may use derivative instruments to hedge financial risks related to its financial position or risks that are otherwise incurred in the normal course of its operations. NYSE Euronext does not use derivative instruments for speculative purposes and enters into derivative instruments only with counterparties that meet high creditworthiness and rating standards. NYSE Euronext adopted Subtopic 65 in the Derivatives and Hedging Topic of the Codification on January 1, 2009.
NYSE Euronext records all derivative instruments at fair value on the consolidated statement of financial condition. Certain derivative instruments are designated as hedging instruments under fair value hedging relationships, cash flow hedging relationships or net investment hedging relationships. Other derivative instruments remain undesignated. The details of each designated hedging relationship are formally documented at the inception of the relationship, including the risk management objective, hedging strategy, hedged item, specific risks being hedged, derivative instrument, how effectiveness is being assessed and how ineffectiveness, if any, will be measured. The hedging instrument must be highly effective in offsetting the changes in cash flows or fair value of the hedged item and the effectiveness is evaluated quarterly on a retrospective and prospective basis.
The following table presents the aggregated notional amount and the fair value of NYSE Euronext’s derivative instruments reported on the consolidated statement of financial condition as of December 31, 2009 (in millions):
(1)
Included in “Financial investments” in the consolidated statement of financial condition.
(2)
Included in “Short term debt” in the consolidated statement of financial condition.
Pre-tax gains and losses on derivative instruments affecting the consolidated statement of operations for the year ended December 31, 2009 were as follows (in millions):
Gain/(loss)
Gain/(loss) Recognized
Recognized in
in Income on Hedged
Derivatives in Fair Value Hedging Relationship
Income on Derivatives
Items
December 31, 2009
Year Ended
Hedging Relationship
Year Ended
Interest rate swaps
$
(4
)
Fixed-rate debt
$
Derivatives Not Designated as Hedging
Gain/(loss)
Instrument
Income Recognized in
December 31, 2009
Year Ended
Foreign exchange contracts
$
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In order to hedge its interest rate exposures, NYSE Euronext may enter into interest rate derivative instruments, such as swaps. For the year ended December 31, 2009, the only significant interest rate hedge was a fixed-to-floating rate swap that matured on June 16, 2009 and hedged the £250 million ($371 million at December 31, 2008) fixed rate sterling bond repaid on June 16, 2009. The interest rate swap hedged the changes in the bond fair value due to the changes in Libor rates. Changes in the fair value of the swap were recognized in “Interest expense” in the consolidated statement of operations and were substantially offset by the changes in fair value of the hedged bond due to fluctuations in Libor rates. For the year ended December 31, 2009, the fair value of the interest rate swap decreased by £2.7 million ($4.0 million), offsetting the £2.9 million ($4.3 million) adjustment of the hedged bond for the fair value fluctuations in Libor rates.
For the year ended December 31, 2009, NYSE Euronext also entered into euro/U.S. dollar and sterling/U.S. dollar foreign exchange contracts with tenors less than 3 months in order to hedge various financial positions. These swaps were not designated as hedging instruments under the Derivatives and Hedging Topic. As of December 31, 2009, NYSE Euronext had a £112 million ($178 million) sterling/U.S. dollar foreign exchange swap outstanding with a positive fair value of $2.8 million and a 145 million ($209 million) euro/U.S. dollar forward contract outstanding with a negative fair value of $0.7 million. These instruments matured in January 2010. For the year ended December 31, 2009, the cumulative net gain recognized under foreign exchange contracts in “Other income” in the consolidated statement of operations amounted to $2.0 million.
For the year ended December 31, 2009, NYSE Euronext had no derivative instruments in cash flow hedging relationships and net investment hedging relationships.
Note 14 -
Investments
A summary of current investments was as follows (in millions):
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(1)
Equity and fixed income mutual funds held for the purpose of providing future payments of Supplemental Executive Retirement Plan (SERP) and Supplemental Executive Savings Plan (SESP).
(2)
As of December 31, 2009, all unrealized losses have been reported for less than 12 months.
(3)
As of December 31, 2008, all unrealized losses have been reported for less than 12 months, except for $0.6 million of unrealized losses which have been reported for more than 12 months and less than 24 months.
NYSE Euronext received gross proceeds from the sale of available-for-sale current investments of $905 million and $2.4 billion with gross realized gains amounting to $2 million and $17 million and gross realized losses of zero and $9 million for the years ended December 31, 2009 and 2008, respectively.
In addition, we classified our investment in BM&F Bovespa as an available-for-sale security reported within non-current assets. We sold this investment with a gross realized gain of $30.1 million in the third quarter of 2009.
During 2009, NYSE Euronext has not recorded any impairment loss on available-for-sale securities. NYSE Euronext does not believe that any of the gross unrealized losses of $2 million on its current investments is subject to other-than-temporary impairment based upon an evaluation of applicable evidence as of December 31, 2009.
The following table summarizes the adjusted cost and fair value of available-for-sale fixed income securities and other interest rate investments, by contractual maturity (in millions):
(1)
Includes asset-backed securities, collateralized mortgage obligations and auction rate securities.
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15 -
Debt
Short term and long term debt consisted of the following (in millions):
The £250 million ($371 million at December 31, 2008) fixed rate bond issued in 2004 to refinance the acquisition of LIFFE (Holdings) plc by Euronext was repaid at maturity on June 16, 2009.
In 2007, NYSE Euronext entered into a U.S. dollar and euro-denominated global commercial paper program of $3.0 billion in order to refinance the acquisition of the Euronext shares. As of December 31, 2009, NYSE Euronext had $0.6 billion of debt outstanding at an average interest rate of 0.4% under this commercial paper program. The effective interest rate of commercial paper issuances does not materially differ from short term interest rates (Libor U.S. for commercial paper issued in U.S. dollar and Euribor for commercial paper issued in euro). The fluctuation of these rates due to market conditions may therefore impact the interest expense incurred by NYSE Euronext.
The commercial paper program is backed by a $2.0 billion 5-year syndicated revolving bank facility maturing on April 4, 2012 and a $500 million 364-day syndicated revolving bank facility maturing on March 31, 2010. These bank facilities are also available for general corporate purposes and were not drawn as of December 31, 2009. On September 15, 2008, the amount of commitments readily available to NYSE Euronext under the $2.0 billion April 2012 facility decreased from $2.0 billion to $1,833 million as a result of the bankruptcy filing of Lehman Brothers Holdings Inc., which had provided a $167 million commitment under this facility.
In 2006, prior to the combination with NYSE Group, Euronext entered into a 300 million ($430 million at December 31, 2009) revolving credit facility available for general corporate purposes, which matures on August 4, 2011. On a combined basis, as of December 31, 2009, NYSE Euronext had three committed bank credit facilities totaling $2.8 billion, with no amount outstanding under any of these facilities. The commercial paper program and the credit facilities include terms and conditions customary for agreements of this type, which may restrict NYSE Euronext’s ability to engage in additional transactions or incur additional indebtedness.
In 2008, NYSE Euronext issued $750 million of 4.8% notes due in June 2013 and 750 million of 5.375% notes due in June 2015 in order to, among other things, refinance outstanding commercial paper and lengthen the maturity profile of its debt. In 2009, NYSE Euronext increased the 750 million 5.375% notes due in June 2015 to 1 billion as a result of an incremental offering of 250 million. The terms of the bonds do not contain any financial covenants. The bonds may be redeemed by NYSE Euronext or the bond holders under certain customary circumstances, including a change in control. The terms of the bonds also provide for customary events of default and a negative pledge covenant.
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
As at December 31, 2009, the debt repayment schedule was as follows (in millions):
Note 16 -
Income Taxes
The income (loss) from continuing operations before income taxes consisted of the following (in millions):
The income tax (benefit) provision consisted of the following (in millions):
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Deferred tax asset and liability balances consisted of the following (in millions):
Deferred tax liabilities have not been recognized for the portion of the outside basis differences (including undistributed earnings) relating to foreign subsidiaries because the investment in these subsidiaries is considered to be permanent in duration. Quantification of the deferred tax liability associated with these outside basis differences is not practicable.
As of December 31, 2009, NYSE Euronext had approximately $217 million of net operating losses (“NOL”) for tax purposes, which will begin to expire in 2025. A valuation allowance was recorded against approximately $19 million and $13 million of certain NOL as of December 31, 2009 and 2008, respectively, as it appears more likely than not that the corresponding asset will not be realized due to certain tax limitations. There is no valuation allowance recorded against any of the remaining deferred tax assets based on management’s belief that it is more likely than not that such assets will be realized.
For the year ended December 31, 2009, the exercise of stock options and vesting of restricted stock units did not result in any tax benefit. For the years ended December 31, 2008 and 2007, tax benefits of $1 million and $43 million, respectively, associated with the exercise of stock options and vesting of restricted stock units were recorded as an increase to additional paid-in capital.
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The reconciliation between the statutory and effective tax rates is as follows:
For the year ended December 31, 2009, NYSE Euronext’s effective tax rate is lower than the statutory rate primarily due to higher earnings generated from our foreign operations, where the applicable tax rate is lower than the statutory rate, and the recognition of previously unrecognized tax benefits. In 2008, NYSE Euronext’s effective tax rate was lower than statutory rate primarily due to impairment charges.
In connection with the assessment of certain positions in various U.S. and European tax jurisdictions, a reconciliation of the gross unrecognized tax benefits for the years ended December 31, 2009, 2008 and 2007 is as follows (in millions):
Included in the ending balance at December 31, 2009 and 2008 are $46 million and $33 million, respectively, of tax positions which, if recognized, would affect the effective tax rate, and there were no tax positions for which there is uncertainty about the timing of tax benefit in either 2009 and 2008.
NYSE Euronext accounts for interest and penalties related to the underpayment or overpayment of income taxes as a component of income tax provision in the consolidated statements of operations. For the years ended December 31, 2009, 2008 and 2007, we recorded $4 million, $3 million and $1 million, respectively, for interest and penalties in our consolidated statements of operations. For the years ended December 31, 2009 and 2008, the accrued net interest payable related to the above net tax benefit was $7 million and $1 million, respectively.
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In many cases, uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. The following table summarizes these open tax years by major jurisdiction:
NYSE Euronext does not anticipate that the total unrecognized tax benefits will change significantly in the next twelve months.
Note 17 -
Commitments and Contingencies
Legal Matters
The following is a summary of significant legal matters as of December 31, 2009:
In re NYSE Specialists Securities Litigation
In 2003 the California Public Employees’ Retirement System (“CalPERS”) filed a class action complaint, later consolidated with related actions, in the U.S. District Court for the Southern District of New York against the NYSE, NYSE specialist firms and others, alleging various violations of federal securities laws and breach of fiduciary duty, on behalf of a purported class of persons who bought or sold unspecified NYSE-listed stocks between 1998 and 2003, and seeking unspecified money damages. In 2005 the district court granted the NYSE’s motion to dismiss, holding that the NYSE, as a self-regulatory organization, is immune from private lawsuits challenging the manner in which it exercises its regulatory function, and thus dismissed all the claims asserting that the NYSE had failed to effectively regulate specialists during the relevant period. The district court also held that the plaintiffs lacked standing to assert that the NYSE made false and misleading statements concerning the regulation and operation of its market. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Second Circuit (“Second Circuit”).
In 2007 the Second Circuit issued an opinion affirming in part, and vacating and remanding in part, the district court’s decision. The Second Circuit upheld the district court’s ruling as to the NYSE’s self-regulatory immunity, but vacated the district court’s holding that the plaintiffs lacked standing to assert their claims that the NYSE made false and misleading statements. The appeals court remanded the matter to the district court for consideration of other grounds for dismissal that the NYSE had asserted in its motion to dismiss, including the plaintiffs’ failure to allege reliance or loss causation.
In October 2009, the NYSE, lead plaintiff CalPERS and plaintiff Market Street Securities, Inc. reached an agreement, subject to court approval, pursuant to which all remaining claims of those parties against the NYSE would be dismissed with prejudice. The proposed settlement of this matter, which is unrelated to NYSE Euronext’s role as an issuer of securities, does not involve the payment of money to any party or counsel.
IRS Notice
In November 2009, the Internal Revenue Service (“IRS”) issued a notice of proposed adjustment seeking to disallow approximately $161 million in deductions taken by the NYSE for compensation paid to its former Chairman and Chief Executive Officer in the tax years 2001, 2002 and 2003. The NYSE disagrees with and plans to
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
vigorously contest the IRS’s position in this matter. In February 2010, the NYSE filed a protest of the proposed disallowance and requested a conference with the IRS Appeals Office.
In addition to the matters described above, we are from time to time involved in various legal and regulatory proceedings that arise in the ordinary course of our business. We do not believe, based on currently available information, that the results of any of these various proceedings will have a material adverse effect on our operating results or financial condition.
Commitments
NYSE Euronext leases office space under non-cancelable operating leases and equipment that expire at various dates through 2029. Rental expense under these leases, included in the consolidated statements of operations in both occupancy and systems and communications, totaled $123 million, $85 million and $88 million for the years ended December 31, 2009, 2008 and 2007, respectively.
Future payments under these obligations as of December 31, 2009 were as follows (in millions):
(1)
Primarily reflects the outstanding commitment for our investment in the Doha Securities Market.
Our U.K. regulated derivatives subsidiary, the London Market of NYSE Liffe (for the purposes of this paragraph, “NYSE Liffe”), took full responsibility for clearing activities in our U.K. derivatives market on July 30, 2009. As a result, NYSE Liffe became the central counterparty for contracts entered into by its clearing members on the NYSE Liffe market and outsources certain services to LCH.Clearnet through the NYSE Liffe Clearing arrangement. NYSE Liffe has credit exposure to those clearing members. NYSE Liffe’s clearing members may encounter economic difficulties as a result of the market turmoil and tightening credit markets, which could result in bankruptcy and failure. NYSE Liffe offsets its credit exposure through arrangements with LCH.Clearnet in which LCH.Clearnet provides clearing guarantee backing and related risk functions to NYSE Liffe, and under which LCH.Clearnet is responsible for any defaulting member positions and for applying its resources to the resolution of such a default. In addition, NYSE Liffe maintains policies and procedures to help ensure that its clearing members can satisfy their obligations, including by requiring members to meet minimum capital and net worth requirements and to deposit collateral for their trading activity. Nevertheless, we cannot be sure that in extreme circumstances, LCH.Clearnet might not itself suffer difficulties, in which case these measures might not prove sufficient to protect NYSE Liffe from a default, or might fail to ensure that NYSE Liffe is not materially and adversely affected in the event of a significant default.
In the normal course of business, NYSE Euronext may enter into contracts that require it to make certain representations and warranties and which provide for general indemnifications. Based upon past experience, NYSE Euronext expects the risk of loss under these indemnification provisions to be remote. However, given that these would involve future claims against NYSE Euronext that have not yet been made, NYSE Euronext’s potential exposure under these arrangements is unknown. NYSE Euronext also has obligations related to unrecognized tax
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
positions, deferred compensation and other postretirement benefits. The date of the payment under these obligations cannot be determined.
Note 18 -
Detail of Certain Balance Sheet Accounts
Property and equipment - Components of property and equipment were as follows (in millions):
NYSE Euronext capitalized software development costs of approximately $111 million and $67 million in 2009 and 2008, respectively. Unamortized capitalized software development costs of $114 million and $103 million as of December 31, 2009 and 2008, respectively, were included in the net book value of property and equipment.
As of December 31, 2009, property and equipment included $417 million for construction in progress primarily related to our data centers.
Accounts payable and accrued expenses - Components of accounts payable and accrued expenses were as follows (in millions):
Other assets (non-current) - Components of non-current other assets were as follows (in millions):
NYSE EURONEXT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Quarterly Financial Data (unaudited)
The following represents NYSE Euronext’s unaudited quarterly results for the years ended December 31, 2009 and 2008. These quarterly results were prepared in accordance with generally accepted accounting principles and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results. These adjustments are of a normal recurring nature.
(a)
The operations of GL Trade are reflected as discontinued operations.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting and financial disclosure during the last two fiscal years.
ITEM 9A.
CONTROLS AND PROCEDURES
As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
During 2009, there was a change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. During 2009, we completed the migration of our European locations to the accounting system used by our U.S. locations, at which point we operated on a single global system. This initiative further strengthened the overall design and operating effectiveness of our internal control over financial reporting. This initiative was not in response to any identified deficiency or weakness in our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are set forth in Item 8 of this Annual Report on Form 10-K.
Management’s Certifications
We have filed as exhibits to this annual report on Form 10-K for the year ended December 31, 2009, the certifications of the Chief Executive Officer and the Chief Financial Officer of NYSE Euronext required by Section 302 of the Sarbanes-Oxley Act of 2002.
ITEM 9B.
OTHER INFORMATION
Not applicable.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors of NYSE Euronext
Information relating to our board of directors will be set forth under “Election of Directors - Nominees for Election to the Board of Directors” in the 2010 Proxy Statement. Information relating to our executive officers is set forth under Item 4A - “Executive Officers of NYSE Euronext.” Information regarding compliance by our directors, executive officers and 10% stockholders with the reporting requirements of Section 16(a) of the Exchange Act, if applicable, will be set forth under “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2010 Proxy Statement. Information relating to our Audit Committee financial expert, our Nominating and Governance Committee and our Audit Committee will be set forth under the caption “Corporate Governance - Board Meetings and Committees” in our 2010 Proxy Statement. The foregoing information is incorporated herein by reference.
Code of Ethics
We have adopted a Code of Ethics and Business Conduct, which applies to all of our employees, officers and directors. This code meets the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K, and applies to our Chief Executive Officer, Chief Financial Officer (who is the principal financial officer) and Chief Accounting Officer (who is the principal accounting officer), as well as all other employees, as indicated above.
This code also meets the requirements of a code of ethics and business conduct under the NYSE listing standards. Our Code of Ethics and Business Conduct is available on our website at www.nyseeuronext.com under the heading “Investor Relations - Corporate Governance - Governance.” We will also provide a copy of the code to stockholders at no charge upon written request. Any amendment to the NYSE Euronext Code of Ethics and Business Conduct and any waiver applicable to our directors, executive officers or senior financial officers will be posted on our website within the time period required by the SEC and the NYSE.
Departure of Directors and Executive Officers
On April 2, 2009, William E. Ford retired as a director of NYSE Euronext.
James S. McDonald served as a director of NYSE Euronext until his death on September 13, 2009.
On April 1, 2009, Catherine R. Kinney retired as Group Executive Vice President and Head of Global Listings.
On March 14, 2009, Richard G. Ketchum stepped down as Chief Executive Officer of NYSE Regulation to become Chief Executive Officer of FINRA.
On May 1, 2009, Andre Villeneuve retired as Chairman of NYSE Liffe. He was succeeded by Hugh Freedberg, who retired as Group Executive Vice President and Head of Global Derivatives.
On September 1, 2009, Bruno Colmant resigned as Deputy Chief Financial Officer and Head of European Affairs and Belgium Markets.
On December 31, 2009, Jean-François Théodore, a director of NYSE Euronext, retired as Deputy Chief Executive Officer, while remaining a director of the Company.
ITEM 11.
EXECUTIVE COMPENSATION
Information relating to our executive officer and director compensation will be set forth under “Compensation of Executive Officers” and “Corporate Governance - Compensation of Directors” in the 2010 Proxy Statement. Information relating to our Human Resources and Compensation Committee will be set forth under “Corporate Governance - Board Meetings and Committees” in our 2010 Proxy Statement. The foregoing information is incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information relating to security ownership of our management and certain beneficial owners of our common stock will be set forth under “Security Ownership of Certain Beneficial Owners and Management” in the 2010 Proxy Statement. Information regarding securities authorized for issuance under equity compensation plans is set forth under Item 5 - “Outstanding Options and Restricted Stock.” The foregoing information is incorporated herein by reference.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information regarding certain relationships and related transactions and director independence will be set forth under “Other Matters - Certain Relationship and Related Transactions” and “Corporate Governance - Director Independence” in the 2010 Proxy Statement and is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Information regarding Principal Accounting Fees and Services, as well as audit committee pre-approval policies and procedures, will be set forth under “Report of Audit Committee and Ratification of Selection of Independent Registered Public Accounting Firm” in the 2010 Proxy Statement and is incorporated herein by reference.
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF NYSE EURONEXT
Page
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition as of December 31, 2009 and 2008
Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007
Consolidated Statements of Changes in Equity and Comprehensive Income for the Years Ended December 31, 2009, 2008 and 2007
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007
Notes to the Consolidated Financial Statements
(b) The following exhibits are filed herewith or incorporated herein by reference unless otherwise indicated:
Exhibit
No.
Description
.1
Agreement and Plan of Merger, dated as of January 17, 2008, by and among NYSE Euronext, Amsterdam Merger Sub, LLC, The Amex Membership Corporation, AMC Acquisition Sub, Inc., American Stock Exchange Holdings, Inc., American Stock Exchange LLC and American Stock Exchange 2, LLC (incorporated by reference to Annex A to NYSE Euronext’s registration statement on Form S-4 filed with the SEC on February 29, 2008 (File No. 333-149480)).
.2
Purchase Agreement, entered into as of January 12, 2008 by and among (i) Wombat Financial Software, Inc., a Nevada corporation, (ii) TransactTools, Inc., a Delaware corporation, an indirect, wholly owned subsidiary of NYSE Euronext, a Delaware corporation, (iii) Ronald B. Verstappen, Daniel Moore, ML IBK Positions, Inc. and certain other individual parties; (iv) NYSE Euronext, a Delaware corporation (for the limited purposes specified in the agreement only), and (v) Ronald B. Verstappen, as the seller representative (for the limited purposes set specified in the agreement only) (incorporated by reference to Exhibit 2.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on January 16, 2008).
.3
Amended and Restated Combination Agreement, dated as of November 24, 2006, by and among NYSE Group, Inc., Euronext N.V., NYSE Euronext, Inc., and Jefferson Merger Sub, Inc. (incorporated by reference to Annex A to NYSE Euronext’s registration statement on Form S-4/A filed with the SEC on November 27, 2008 (File No. 333-137506)).
.4
Agreement and Plan of Merger, dated as of April 20, 2005, as amended and restated as of July 20, 2005, by and among New York Stock Exchange, Inc., Archipelago Holdings, Inc., NYSE Merger Sub LLC, NYSE Merger Corporation Sub, Inc. and Archipelago Merger Sub, Inc. (incorporated by reference to Annex A to NYSE Group, Inc.’s registration statement on Form S-4 (File No. 333-126780)).
.5
Amendment No. 1, dated as of October 20, 2005, to the Amended and Restated Agreement and Plan of Merger, by and among New York Stock Exchange, Inc., Archipelago Holdings, Inc., NYSE Merger Sub LLC, NYSE Merger Corporation Sub, Inc. and Archipelago Merger Sub, Inc. (incorporated by reference to Annex A to NYSE Group, Inc.’s registration statement on Form S-4 filed with the SEC (File No. 333-126780)).
.6
Amendment No. 2, dated as of November 2, 2005, to the Amendment and Restated Agreement and Plan of Merger, by and among New York Stock Exchange, Inc., Archipelago Holdings, Inc., NYSE Merger Sub LLC, NYSE Merger Corporation Sub, Inc. and Archipelago Merger Sub, Inc. (incorporated by reference to Annex A to NYSE Group, Inc.’s registration statement on Form S-4 (File No. 333-126780)).
.1
Amended and Restated Certificate of Incorporation of NYSE Euronext (incorporated by reference to Exhibit 3.1 to NYSE Euronext’s registration statement on Form S-8 (File No. 333-141869)).
.2
Amended and Restated Bylaws of NYSE Euronext.
.1
Agency Agreement, dated as of April 23, 2008, among NYSE Euronext, Citibank, N.A., London Branch, as fiscal and paying agent, Dexia Banque Internationale à Luxembourg, société anonyme, as Luxembourg Paying Agent, and ABN AMRO N.V., as paying agent (incorporated by reference to Exhibit 4.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 24, 2008).
.2
Indenture dated as of May 29, 2008 between NYSE Euronext and Wilmington Trust Company, as Trustee, relating to Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on May 30, 2008).
.3
First Supplemental Indenture dated as of May 29, 2008 between NYSE Euronext, Wilmington Trust Company, as Trustee, and Citibank, N.A., as authenticating agent, calculation agent, paying agent, security registrar and transfer agent, relating to Senior Notes due June 28, 2013 (incorporated by reference to Exhibit 4.2 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on May 30, 2008).
.4
First Supplemental Agency Agreement, dated as of April 22, 2009, among NYSE Euronext, Citibank, N.A., London Branch, as fiscal and paying agent, Dexia Banque Internationale à Luxembourg, société anonyme, as Luxembourg Paying Agent, and ABN AMRO Bank N.V., as paying agent (incorporated by reference to Exhibit 4.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 23, 2009).
Exhibit
No.
Description
.1
Letter Agreement, dated as of April 6, 2005, by and between New York Stock Exchange, Inc. and Catherine R. Kinney (incorporated by reference to Exhibit 10.10 to NYSE Group, Inc.’s registration statement on Form S-4 (File No. 333-126780)).
.2
Form of Indemnification Agreement, between Archipelago Holdings, L.L.C. and certain indemnitees specified therein (incorporated by reference to Exhibit 10.29 to Archipelago’s registration statement on Form S-1 (File No. 333-11326)).
.3
Credit Agreement, dated as of January 5, 2007, among NYSE Euronext, Inc., NYSE Group, Inc., the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and (for the sole purposes of Sections 2.03, 2.04, 2.06(b), 4.03, 7.02 and 9.01 of the Credit Agreement) the presenting bank parties thereto (incorporated by reference to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on January 9, 2007).
.4
Share Purchase Agreement, dated January 10, 2007, among NYSE Group, Inc., IL&FS Trust Company Limited, ICICI Bank Limited, IFCI Limited, Punjab National Bank, and General Insurance Corporation of India (incorporated by reference to Exhibit 10.37 to NYSE Group, Inc.’s Annual Report on Form 10-K filed with the SEC on March 22, 2007).
.5
Amended and Restated Clearing Agreement dated October 31, 2003 among LCH.Clearnet Group S.A., LCH.Clearnet Group, Euronext Amsterdam, Euronext Brussels, Euronext Lisbon and Euronext Paris (incorporated by reference to Exhibit 10.47 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).*
.6
Amended and Restated Clearing Agreement between LIFFE Administration and Management and LCH.Clearnet Limited dated July 16, 1996 (incorporated by reference to Exhibit 10.48 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).*
.7
The Umbrella Services Agreement among Euronext N.V., Atos Origin SA, Atos Euronext SA and Atos Euronext Market Solutions Holdings S.A.S. dated July 22, 2005 (incorporated by reference to Exhibit 10.49 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).*
.8
Agreement governing the lease of Palais de la Bourse/Beurspaleis, Place de la Bourse/ Beursplein, 1000 Brussels, Belgium (unofficial English translation) (incorporated by reference to Exhibit 10.50 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).*
.9
Agreement governing the lease of Avenida da Liberdade, n.°196, 7°Piso, 1250-147, Lisbon, Portugal (incorporated by reference to Exhibit 10.51 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).*
.10
Agreement governing the lease of 39, rue Cambon, 75039 Paris Cedex 01, France (incorporated by reference to Exhibit 10.52 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).*
.11
Agreement governing the lease of Cannon Bridge House, 1 Cousin Lane, EC4R 3XX London, United Kingdom (incorporated by reference to Exhibit 10.53 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).*
.12
Issuing and Paying Agency Agreement, between NYSE Euronext, Inc. and JPMorgan Chase Bank, National Association, dated March 28, 2007 (incorporated by reference to Exhibit 10.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 2, 2007).
.13
Commercial Paper Dealer Agreement 4(2) Program, between NYSE Euronext, Inc., as Issuer, and Lehman Brothers, Inc., as Dealer, dated March 28, 2007 (incorporated by reference to Exhibit 10.2 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 2, 2007).
.14
Commercial Paper Dealer Agreement 4(2) Program, between NYSE Euronext, Inc., as Issuer, Merrill Lynch Money Markets Inc., as Dealer, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer, dated March 28, 2007 (incorporated by reference to Exhibit 10.3 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 2, 2007).
.15
Note Agency Agreement Relating to a Euro-Commercial Paper Programme, between NYSE Euronext, Inc. and Citibank, N.A., as Issue and Paying Agent, dated March 30, 2007 (incorporated by reference to Exhibit 10.4 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 2, 2007).
Exhibit
No.
Description
.16
Dealer Agreement Relating to a Euro-Commercial Paper Programme, between NYSE Euronext, Inc., as Issuer, Citibank International plc, as Arranger, and Citibank International plc, Credit Suisse Securities (Europe) Limited and Société Générale, as Dealers, dated March 30, 2007 (incorporated by reference to Exhibit 10.5 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 2, 2007).
.17
Credit Agreement ($2,000,000,000), dated as of April 4, 2007, between NYSE Euronext, the Subsidiary Borrowers party thereto, the Lenders party hereto, JPMorgan Chase Bank, N.A. as Administrative Agent, and the other financial institutions party thereto as agents (incorporated by reference to Exhibit 10.5 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 9, 2007).
.18
Trust Agreement, dated as of April 4, 2007, by and among NYSE Euronext, NYSE Group, Inc., Wilmington Trust Company, as Delaware Trustee, Jacques de Larosière de Champfeu, as Trustee, Charles K. Gifford, as Trustee and, John Shepard Reed, as Trustee (incorporated by reference to Exhibit 10.27 to Amendment No. 1 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on May 1, 2007).
.19
Governance and Option Agreement, dated as of April 4, 2007, by and among NYSE Euronext, Euronext N.V., NYSE Euronext (Holding) N.V. and Stichting NYSE Euronext (incorporated by reference to Exhibit 10.28 to Amendment No. 1 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on May 1, 2007).
.20
NYSE Group, Inc. 2006 Stock Incentive Plan (incorporated by reference to Exhibit 99.1 to NYSE Group, Inc.’s registration statement on Form S-8 (File No. 333-132284)) (incorporated by reference to Exhibit 10.28 to Amendment No. 1 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on May 1, 2007).
.21
Form of Restricted Stock Unit Agreement Pursuant to NYSE Group, Inc. 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to NYSE Group Inc.’s Current Report on Form 8-K filed with the SEC on June 7, 2006).
.22
NYSE Group, Inc. 2006 Annual Performance Bonus Plan (incorporated by reference to Exhibit 10.22 to NYSE Group, Inc.’s registration statement on Form S-1 (File No. 333-132390)).
.23
Euronext 2001 stock option plan (incorporated by reference to Exhibit 10.55 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).
.24
Euronext 2004 stock option plan (incorporated by reference to Exhibit 10.57 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).
.25
Employment Agreement, dated as of July 8, 1999 between LIFFE Administration and Management and Mr. Hugh Ronald Freedberg (incorporated by reference to Exhibit 10.60 to NYSE Euronext’s registration statement on Form S-4 (File No. 333-137506)).
.26
Euronext N.V. All Employee Share Purchase and Match Plan 2006 (incorporated by reference to Exhibit 99.10 to NYSE Euronext’s registration statement on Form S-8 (File No. 333-141869)).
.27
Euronext N.V. HM Revenue and Customs Approved Share Incentive Plan 2006 (incorporated by reference to Exhibit 99.11 to NYSE Euronext’s registration statement on Form S-8 (File No. 333-141869)).
.28
Euronext N.V. Share Purchase and Match French Plan (incorporated by reference to Exhibit 99.12 to NYSE Euronext’s registration statement on Form S-8 (File No. 333-141869)).
.29
Asset Purchase Agreement by and among NYSE Group, Inc., NYSE Regulation, Inc. and National Association of Securities Dealers, Inc. dated as of July 30, 2007 (incorporated by reference to Exhibit 10.1 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on November 13, 2007).
.30
Separation Agreement, by and between NYSE Euronext and Gerald D. Putnam, dated September 17, 2007 (incorporated by reference to Exhibit 99.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on September 20, 2007).
.31
Consulting Agreement, by and between NYSE Euronext and Gerald D. Putnam, dated September 17, 2007 (incorporated by reference to Exhibit 99.2 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on September 20, 2007).
Exhibit
No.
Description
.32
Letter Agreement by and between Duncan L. Niederauer and NYSE Euronext, dated November 14, 2007 (incorporated by reference to Exhibit 99.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on November 16, 2007).
.33
Employment Agreement by and between Bruno Colmant and Euronext Brussels N.V./S.A., dated September 7, 2007 (incorporated by reference to Exhibit 10.72 to NYSE Euronext’s registration statement on Form S-4 filed with the SEC on February 29, 2008 (File No. 333-149480)).
.34
Employment Agreement by and between Philippe Duranton and NYSE Euronext, dated February 5, 2008 (incorporated by reference to Exhibit 10.73 to NYSE Euronext’s registration statement on Form S-4 filed with the SEC on February 29, 2008 (File No. 333-149480)).
.35
Employment Agreement by and between John Halvey and NYSE Euronext, dated February 11, 2008 (incorporated by reference to Exhibit 10.74 to NYSE Euronext’s registration statement on Form S-4 filed with the SEC on February 29, 2008 (File No. 333-149480)).
.36
Form of Restricted Stock Unit Agreement pursuant to the NYSE Euronext 2006 Stock Incentive Plan (Bonus) (incorporated by reference to Exhibit 10.3 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 14, 2008).
.37
Form of Restricted Stock Unit Agreement pursuant to the NYSE Euronext 2006 Stock Incentive Plan (LTIP) (incorporated by reference to Exhibit 10.4 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 14, 2008).
.38
364-Day Credit Agreement ($1,000,000,000), dated as of April 2, 2008, between NYSE Euronext, the Subsidiary Borrowers party thereto, the Lenders party thereto, JPMorgan Chase Bank, N.A. as Administrative Agent, and the other financial institutions party thereto as agents (incorporated by reference to Exhibit 10.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 7, 2008).
.39
NYSE Euronext Omnibus Incentive Plan (as amended and restated effective as of May 15, 2008) (incorporated by reference to Exhibit 10.1 to the NYSE Euronext’s Current Report on Form 8-K filed with the SEC on May 20, 2008).
.40
Form of Restricted Stock Unit Agreement pursuant to the NYSE Euronext Omnibus Incentive Plan (US Management Committee members-bonus) (incorporated by reference to Exhibit 10.2 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on August 13, 2008).
.41
Form of Restricted Stock Unit Agreement pursuant to the NYSE Euronext Omnibus Incentive Plan (US Management Committee members-LTIP) (incorporated by reference to Exhibit 10.3 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on August 13, 2008).
.42
Form of U.S. Management Committee Member Employment Agreement (incorporated by reference to Exhibit 10.4 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on August 13, 2008).
.43
Shareholders’ Agreement relating to Qatar Securities Market dated June 24, 2008 between NYSE Euronext and Qatar Investment Authority (incorporated by reference to Exhibit 10.5 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on August 13, 2008).
.44
Form of Phantom Stock Unit Agreement pursuant to the NYSE Euronext 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on November 13, 2008).
.45
Master Agreement Between ATOS Origin S.A. and NYSE Euronext dated July 11, 2008 (incorporated by reference to Exhibit 10.2 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on November 13, 2008).*
.46
NYSE Group, Inc. Supplemental Executive Retirement Plan, as amended and restated effective December 31, 2008 (incorporated by reference to Exhibit 10.50 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).
.47
New York Stock Exchange, Inc. Capital Accumulation Plan, as amended and restated as of January 1, 2005 (reflecting amendments adopted through December 31, 2008) (incorporated by reference to Exhibit 10.51 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).
Exhibit
No.
Description
.48
New York Stock Exchange, Inc. ICP Award Deferral Plan, as amended and restated as of January 1, 2005 (reflecting amendments adopted through December 31, 2008) (incorporated by reference to Exhibit 10.52 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).
.49
New York Stock Exchange and Subsidiary Companies Supplemental Executive Savings Plan, as amended and restated effective as of January 1, 2008 (incorporated by reference to Exhibit 10.53 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).
.50
Amendment Number One to New York Stock Exchange and Subsidiary Companies Supplemental Executive Savings Plan, as amended and restated effective as of January 1, 2008 (incorporated by reference to Exhibit 10.54 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).
.51
Securities Industry Automation Corporation Supplemental Incentive Plan, as amended and restated effective January 1, 2008 (incorporated by reference to Exhibit 10.55 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).
.52
Clearing Relationship Agreement dated October 30, 2008, between LIFFE Administration and Management and LCH.Clearnet Limited (incorporated by reference to Exhibit 10.56 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).*
.53
Termination Agreement dated October 30, 2008, between LIFFE Administration and Management and LCH.Clearnet Limited (incorporated by reference to Exhibit 10.57 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).*
.54
Separation Agreement dated February 25, 2009, between LIFFE Administration and Management and Mr. Hugh Freedberg (incorporated by reference to Exhibit 10.58 to NYSE Euronext’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).
.55
364-Day Credit Agreement ($500,000,000), dated as of April 1, 2009, between NYSE Euronext, the Subsidiary Borrowers party hereto, the Lenders party hereto, Bank of America, N.A. as Administrative Agent, and the other financial institutions party thereto as agents (incorporated by reference to Exhibit 10.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on April 3, 2009).
.56
Form of Restricted Stock Unit Agreement (Non-Employee Directors) (incorporated by reference to Exhibit 10.2 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.57
Form of Restricted Stock Unit Agreement (Bonus - Form for Belgium) (incorporated by reference to Exhibit 10.3 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.58
Form of Restricted Stock Unit Agreement (Bonus - Form for France) (incorporated by reference to Exhibit 10.4 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.59
Form of Restricted Stock Unit Agreement (Bonus - Form for The Netherlands) (incorporated by reference to Exhibit 10.5 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.60
Form of Restricted Stock Unit Agreement (Bonus - Form for Portugal) (incorporated by reference to Exhibit 10.6 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.61
Form of Restricted Stock Unit Agreement (Bonus - Form for Uk) (incorporated by reference to Exhibit 10.7 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.62
Form of Restricted Stock Unit Agreement (Bonus - Form for U.S.) (incorporated by reference to Exhibit 10.8 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.63
Form of Restricted Stock Unit Agreement (LTIP - Form for Belgium) (incorporated by reference to Exhibit 10.9 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.64
Form of Restricted Stock Unit Agreement (LTIP - Form for France) (incorporated by reference to Exhibit 10.10 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.65
Form of Restricted Stock Unit Agreement (LTIP - Form for The Netherlands) (incorporated by reference to Exhibit 10.11 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.66
Form of Restricted Stock Unit Agreement (LTIP - Form for Portugal) (incorporated by reference to Exhibit 10.12 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
Exhibit
No.
Description
.67
Form of Restricted Stock Unit Agreement (LTIP - Form for UK) (incorporated by reference to Exhibit 10.13 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.68
Form of Restricted Stock Unit Agreement (LTIP - Form for U.S.) (incorporated by reference to Exhibit 10.14 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.69
Employment Agreement by and between Garry Jones and LIFFE Administration (incorporated by reference to Exhibit 10.15 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.70
Form of Restricted Stock Unit Agreement (Bonus for U.S. Management Members) (incorporated by reference to Exhibit 10.16 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.71
Form of Restricted Stock Unit Agreement (LTIP for U.S. Management Members) (incorporated by reference to Exhibit 10.17 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009).
.72
Amendment to the Shareholders’ Agreement relating to Qatar Securities Market dated June 19, 2009 between NYSE Euronext and Qatar Investment Authority (incorporated by reference to Exhibit 10.1 to NYSE Euronext’s Current Report on Form 8-K filed with the SEC on June 25, 2009).
.73
Letter Agreement Dated October 15, 2009 (incorporated by reference to Exhibit 10.1 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on November 6, 2009).
.74
Letter Agreement Dated October 15, 2009 (incorporated by reference to Exhibit 10.2 to NYSE Euronext’s Quarterly Report on Form 10-Q filed with the SEC on November 6, 2009).
.75
Employment Agreement by and between Dominique Cerutti and NYSE Euronext, dated September 7, 2009.
.76
Employment Agreements of Roland Bellegarde, dated October 16, 2009, July 1, 2000, March 18, 1996, February 17, 1994, April 22, 1991, May 25, 1990, October 18, 1989, December 30, 1987 and May 15, 1986.
Computation of Ratio of Earnings to Fixed Charges.
Subsidiaries.
Consent of PricewaterhouseCoopers LLP.
Power of Attorney.
.1
Rule 13a-14(a) Certification (CEO).
.2
Rule 13a-14(a) Certification (CFO).
Section 1350 Certifications.
.INS
XBRL Report Instance Document.
.SCH
XBRL Taxonomy Extension Schema Document.
.PRE
XBRL Taxonomy Presentation Linkbase Document.
.CAL
XBRL Calculation Linkbase Document.
.LAB
XBRL Taxonomy Label Linkbase Document.
*
Portions of this exhibit have been omitted pursuant to a request for confidential treatment.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NYSE Euronext
By:
/s/ Duncan L. Niederauer
Name: Duncan L. Niederauer
Title:
Chief Executive Officer
Date: February 26, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in their capacities and on the date indicated.
Signature
Title
Date
/s/ Duncan L. Niederauer
Duncan L. Niederauer
Chief Executive Officer and Director (Principal Executive Officer)
February 26, 2010
/s/ Michael S. Geltzeiler
Michael S. Geltzeiler
Group Executive Vice President and Chief Financial Officer (Principal Financial Officer)
February 26, 2010
/s/ Stéphane Biehler
Stéphane Biehler
Executive Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer)
February 26, 2010
*
Jan-Michiel Hessels
Director (Chairman)
February 26, 2010
*
Marshall N. Carter
Director (Deputy Chairman)
February 26, 2010
*
Ellyn L. Brown
Director
February 26, 2010
*
Patricia M. Cloherty
Director
February 26, 2010
*
Sir George Cox
Director
February 26, 2010
*
Sylvain Hefes
Director
February 26, 2010
*
Shirley Ann Jackson
Director
February 26, 2010
Signature
Title
Date
*
Duncan M. McFarland
Director
February 26, 2010
*
James J. McNulty
Director
February 26, 2010
*
Baron Jean Peterbroeck
Director
February 26, 2010
*
Alice M. Rivlin
Director
February 26, 2010
*
Ricardo Salgado
Director
February 26, 2010
*
Robert G. Scott
Director
February 26, 2010
*
Jean-François Théodore
Director
February 26, 2010
*
Rijnhard van Tets
Director
February 26, 2010
*
Sir Brian Williamson
Director
February 26, 2010
* Pursuant to Power of Attorney
By:
/s/ John K. Halvey
John K. Halvey
Attorney-in-Fact