Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations of Nasdaq should be read in conjunction with our condensed consolidated financial statements and related notes included in this Form 10-Q.

OVERVIEW

Nasdaq is a global technology company serving the capital markets and other industries. Our diverse offerings of data, analytics, software and services enables clients to optimize and execute their business vision with confidence.

We manage, operate and provide our products and services in four business segments: Market Technology, Investment Intelligence, Corporate Platforms and Market Services.

Third Quarter 2021 and Recent Developments

Cash Dividend on Common Stock

• In October 2021, the board of directors approved a regular quarterly cash dividend of $0.54 per share on our outstanding common stock.

• For the three months ended September 30, 2021, we returned $90 million to shareholders through dividend payments.

Share Repurchase Program

• In July 2021, we entered into an ASR agreement to repurchase $475 million of shares and received an initial delivery of 2,039,940 shares of common stock. We expect to receive the remaining shares in the fourth quarter of 2021 and that additional planned repurchases related to the sale of our U.S. Fixed Income business will resume in 2022.

• As of September 30, 2021, the remaining amount authorized for share repurchases under our share repurchase program was $984 million.

Corporate Highlights

• In July 2021, we contributed our NPM business to a standalone, independent company, of which we own the largest minority interest, together with a consortium of third party financial institutions, with NPM’s existing technology, client relationships and regulatory infrastructure providing a strong foundation to develop a full suite of liquidity solutions for private companies.

• Overall AUM in ETPs benchmarked to our proprietary indexes totaled $361 billion as of September 30, 2021, an increase of 15% compared to September 30, 2020. There were nearly 60 ETPs tracking Nasdaq indexes launched over the 12 months with over $5 billion of AUM accumulated through the third quarter of 2021.

• Nasdaq launched Nasdaq Data Link, a cloud-based technology platform that empowers all segments of the investing public with a comprehensive suite of core financial, fund and alternative data. The platform builds on Nasdaq’s Quandl technology to provide a unified, modern API interface that enables seamless integration across Nasdaq’s portfolio of data products.

• The Nasdaq Stock Market led U.S. exchanges for IPOs during the third quarter of 2021. The Nasdaq Stock Market IPO win rate was 75% in the third quarter of 2021, including 147 IPOs representing $29 billion in capital raised. There were 80 operating company and 67 special purpose acquisition company IPOs during the period.

• Our U.S. options market average daily number of contracts totaled 11.5 million, an increase of 11% year over year, and led all exchanges during the period in total volume traded for U.S. multiply-listed equity options.

Financial Summary

The following tables summarize our financial performance for the three and nine months ended September 30, 2021 when compared to the same periods in 2020. The comparability of our results of operations between reported periods is impacted by the acquisition of Verafin in February 2021 and the divestiture of our U.S. Fixed Income business, which was part of our FICC business within our Market Services segment to Tradeweb in June 2021. See “2021 Divestiture,” and “2021 Acquisition,” of Note 4, “Acquisitions and Divestiture,” to the condensed consolidated financial statements for further discussion. For a detailed discussion of our results of operations, see “Segment Operating Results” below.

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						(in millions, except per share amounts)
Revenues less transaction-based expenses						$	838					$	715											17.2		%
Operating expenses						482						389												23.9		%
Operating income						356						326												9.2		%
Net income attributable to Nasdaq						$	288					$	264											9.1		%
Diluted earnings per share						$	1.69					$	1.58											7.0		%
Cash dividends declared per common share						$	0.54					$	0.49											10.2		%
						Nine Months End September 30,												Percentage Change
						2021						2020
						(in millions, except per share amounts)
Revenues less transaction-based expenses						$	2,534					$	2,115											19.8		%
Operating expenses						1,437						1,199												19.8		%
Operating income						1,097						916												19.8		%
Net income attributable to Nasdaq						$	928					$	708											31.1		%
Diluted earnings per share						$	5.53					$	4.25											30.1		%
Cash dividends declared per common share						$	1.57					$	1.45											8.3		%

In countries with currencies other than the U.S. dollar, revenues and expenses are translated using monthly average exchange rates. Impacts on our revenues less transaction-based expenses and operating income associated with fluctuations in foreign currency are discussed in more detail under “Item 3. Quantitative and Qualitative Disclosures about Market Risk.”

NASDAQ'S OPERATING RESULTS

The following chart summarizes our ARR (in millions):

ARR for a given period is the annualized revenue derived from subscription contracts with a defined contract value. This excludes contracts that are not recurring, are one-time in nature, or where the contract value fluctuates based on defined metrics. ARR is currently one of our key performance metrics to assess the health and trajectory of our recurring business. ARR does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

The ARR chart includes:

•						Active Market Technology support and SaaS subscription contracts.
•						Proprietary market data and index data subscriptions as well as subscription contracts for eVestment, Solovis, DWA tools and services, Nasdaq Fund Network and Quandl. It also includes guaranteed minimum on futures contracts within the Index business.
•						U.S. and Nordic annual listing fees, IR and ESG products, including subscription contracts for IR Insight, board portals and OneReport, as well as IR advisory services.
•						Trade Management Services business, excluding one-time service requests.

The following chart summarizes our annualized SaaS revenues for our Solutions Segments, which comprised of Market Technology, Investment Intelligence and Corporate Platforms, for the three months ended September 30, 2021 and 2020 (in millions):

Segment Operating Results

The following tables present our revenues by segment, transaction-based expenses for our Market Services segment and total revenues less transaction-based expenses:

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						(in millions)
Market Technology						$	114					$	86											32.6		%
Investment Intelligence						272						236												15.3		%
Corporate Platforms						155						131												18.3		%
Market Services						814						954												(14.7)		%
Other revenues						2						6												(66.7)		%
Total revenues						$	1,357					$	1,413											(4.0)		%
Transaction rebates						(472)						(517)												(8.7)		%
Brokerage, clearance and exchange fees						(47)						(181)												(74.0)		%
Total revenues less transaction-based expenses						$	838					$	715											17.2		%
						Nine Months Ended September 30,												Percentage Change
						2021						2020
						(in millions)
Market Technology						$	332					$	251											32.3		%
Investment Intelligence						787						654												20.3		%
Corporate Platforms						451						382												18.1		%
Market Services						2,823						2,855												(1.1)		%
Other revenues						26						21												23.8		%
Total revenues						$	4,419					$	4,163											6.1		%
Transaction rebates						(1,642)						(1,525)												7.7		%
Brokerage, clearance and exchange fees						(243)						(523)												(53.5)		%
Total revenues less transaction-based expenses						$	2,534					$	2,115											19.8		%

The following charts present our Market Technology, Investment Intelligence, Corporate Platforms and Market Services segments as a percentage of our total revenues, less transaction-based expenses, of $838 million for the three months ended September 30, 2021, $715 million for the three months ended September 30, 2020, $2,534 million for the nine months ended September 30, 2021 and $2,115 million for the nine months ended September 30, 2020.

Percentage of Revenues Less Transaction-based Expenses by Segment for the:

MARKET TECHNOLOGY

The following tables present revenues and key drivers from our Market Technology segment:

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						(in millions)
Anti Financial Crime Technology						$	66					$	32											106.3		%
Marketplace Infrastructure Technology						48						54												(11.1)		%
Total Market Technology						$	114					$	86											32.6		%
						Nine Months Ended September 30,												Percentage Change
						2021						2020
						(in millions)
Anti Financial Crime Technology						$	175					$	94											86.2		%
Marketplace Infrastructure Technology						157						157												—		%
Total Market Technology						$	332					$	251											32.3		%

						Three Months Ended September 30,
						2021						2020
Order intake (in millions)						$	76					$	84
						Nine Months Ended September 30,
						2021						2020
						(in millions)
Order intake						$	236					$	202
ARR						428						278
SaaS revenues						276						120

In the tables above, order intake is the total contract value of orders signed during the period, excluding Verafin. ARR and SaaS revenues include Verafin.

Anti Financial Crime Technology Revenues

Anti-financial crime technology revenues increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to the inclusion of revenues from our acquisition of Verafin and continued growth in surveillance solutions.

Marketplace Infrastructure Technology Revenues

Marketplace infrastructure technology revenues decreased in the third quarter of 2021 compared with the same period in 2020 primarily due to the completion of a significant long-term contract, and lower professional services revenue reflecting both elevated prior year comparison period as well as capacity constraints that pandemic-related logistical challenges have imposed on installation and change request projects. Revenues in the first nine months of 2021 remained flat compared with the same period in 2020 as the decreases due to the completion of the above mentioned contract and pandemic-related logistical challenges were offset by an increase in change request revenues, an increase in SaaS revenues and a favorable impact in foreign exchange rates.

INVESTMENT INTELLIGENCE

The following tables present revenues and key drivers from our Investment Intelligence segment:

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						(in millions)
Market Data						$	102					$	105											(2.9)		%
Index						119						86												38.4		%
Analytics						51						45												13.3		%
Total Investment Intelligence						$	272					$	236											15.3		%
						Nine Months Ended September 30,												Percentage Change
						2021						2020
						(in millions)
Market Data						$	310					$	298											4.0		%
Index						328						227												44.5		%
Analytics						149						129												15.5		%
Total Investment Intelligence						$	787					$	654											20.3		%

						Nine Months Ended September 30,
						2021						2020
Number of licensed ETPs						347						335
ETP AUM tracking Nasdaq indexes (in billions)						$	361					$	313
TTM net appreciation/ (depreciation) (in billions)						$	87					$	58
TTM net inflows in ETP AUM tracking Nasdaq indexes (in billions)						$	53					$	48
ARR (in millions)						$	555					$	507
SaaS revenues (in millions)						$	200					$	176

In the tables above, TTM represents trailing twelve months (net inflows excludes ETP sponsor switches of $92 billion).

Market Data Revenues

Market data revenues decreased in the third quarter of 2021 compared with the same period in 2020 primarily due to lower U.S. tape plan revenues, partially offset by an increase in proprietary data revenues from new sales, including continued expansion geographically. Market data revenues increased in the first nine months of 2021 compared with the same period in 2020 primarily due to an increase in proprietary data revenues from new sales, including continued expansion geographically and a favorable impact in foreign exchange rates, partially offset by lower U.S. shared tape plan revenues.

Index Revenues

Index revenues increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to higher licensing revenues from higher average AUM in ETPs linked to Nasdaq indexes and higher licensing revenues from futures trading linked to the Nasdaq-100 Index.

Analytics Revenues

Analytics revenues increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to the growth in our eVestment platform driven by new sales, strong retention, and higher average revenue per client from expanded offerings.

CORPORATE PLATFORMS

The following tables present revenues and key drivers from our Corporate Platforms segment:

			Three Months Ended September 30,												Percentage Change
			2021						2020
			(in millions)
Listing Services			$	99					$	78					26.9		%
IR & ESG Services			56						53						5.7		%
Total Corporate Platforms			$	155					$	131					18.3		%
			Nine Months Ended September 30,												Percentage Change
			2021						2020
			(in millions)
Listing Services			$	282					$	224					25.9		%
IR & ESG Services			169						158						7.0		%
Total Corporate Platforms			$	451					$	382					18.1		%

						Three Months Ended September 30,
						2021						2020
IPOs
The Nasdaq Stock Market						147						105
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic						25						5
Total new listings
The Nasdaq Stock Market						223						144
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic						28						11
Number of listed companies
The Nasdaq Stock Market						3,990						3,249
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic						1,172						1,049

						Nine Months Ended September 30,
						2021						2020
IPOs
The Nasdaq Stock Market						557						174
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic						111						21
Total new listings
The Nasdaq Stock Market						734						255
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic						132						33
Number of listed companies
The Nasdaq Stock Market						3,990						3,249
Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic						1,172						1,049
ARR (in millions)						$	529					$	453
SaaS revenues (in millions)						$	144					$	140

In the tables above:

• The Nasdaq Stock Market new listings include IPOs, including issuers that switched from other listing venues and separately listed ETPs. For the three months ended September 30, 2021 and 2020, IPOs included 67 and 41 SPACs, respectively. For the nine months ended September 30, 2021 and 2020, IPOs included 310 and 55 SPACs, respectively.

• Exchanges that comprise Nasdaq Nordic and Nasdaq Baltic new listings include IPOs and represent companies listed on the Nasdaq Nordic and Nasdaq Baltic exchanges and companies on the alternative markets of Nasdaq First North.

• Number of total listed companies on The Nasdaq Stock Market at period end, including 430 ETPs as of September 30, 2021 and 409 as of September 30, 2020.

• Number of total listed companies on the exchanges that comprise Nasdaq Nordic and Nasdaq Baltic represents companies listed on these exchanges and companies on the alternative markets of Nasdaq First North.

Listing Services Revenues

Listing services revenues increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to an increase in the overall number of listed companies.

IR & ESG Services Revenues

IR & ESG Services revenues increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to an increase in the number of corporate issuer clients as well as higher adoption of our investor relations products and new ESG advisory and reporting offerings.

MARKET SERVICES

Equity Derivative Trading and Clearing Revenues

The following tables present total revenues, transaction-based expenses, and total revenues less transaction-based expenses as well as key drivers from our Equity Derivative Trading and Clearing business:

																								Three Months Ended September 30,																		Percentage Change
																								2021						2020
																								(in millions)
Equity Derivative Trading and Clearing Revenues																								$	330					$	317											4.1		%
Transaction-based expenses:
Transaction rebates																								(220)						(214)												2.8		%
Brokerage, clearance and exchange fees																								(5)						(19)												(73.7)		%
Equity derivative trading and clearing revenues less transaction-based expenses																								$	105					$	84											25.0		%
																		Nine Months Ended September 30,												Percentage Change
																					2021						2020
																		(in millions)
Equity Derivative Trading and Clearing Revenues																								$	1,114					$	901											23.6		%
Transaction-based expenses:
Transaction rebates																								(770)						(585)												31.6		%
Brokerage, clearance and exchange fees																								(31)						(55)												(43.6)		%
Equity derivative trading and clearing revenues less transaction-based expenses																								$	313					$	261											19.9		%

In the tables above, brokerage, clearance and exchange fees includes Section 31 fees of $4 million in the third quarter of 2021, $26 million in the first nine months of 2021, $18 million in the third quarter of 2020 and $49 million in the first nine months of 2020. Section 31 fees are recorded as equity derivative trading and clearing revenues with a corresponding amount recorded in transaction-based expenses.

						Three Months Ended September 30,
						2021						2020
U.S. equity options
Total industry average daily volume (in millions)						35.5						28.1
Nasdaq PHLX matched market share						12.1		%				12.8		%
The Nasdaq Options Market matched market share						8.1		%				9.6		%
Nasdaq BX Options matched market share						1.6		%				0.2		%
Nasdaq ISE Options matched market share						6.0		%				6.9		%
Nasdaq GEMX Options matched market share						2.7		%				6.3		%
Nasdaq MRX Options matched market share						1.8		%				0.9		%
Total matched market share executed on Nasdaq’s exchanges						32.3		%				36.7		%
Nasdaq Nordic and Nasdaq Baltic options and futures
Total average daily volume of options and futures contracts						241,653						256,478
						Nine Months Ended September 30,
						2021						2020
U.S. equity options
Total industry average daily volume (in millions)						36.7						26.7
Nasdaq PHLX matched market share						12.6		%				12.4		%
The Nasdaq Options Market matched market share						8.2		%				10.2		%
Nasdaq BX Options matched market share						1.1		%				0.2		%
Nasdaq ISE Options matched market share						6.6		%				7.8		%
Nasdaq GEMX Options matched market share						4.9		%				5.3		%
Nasdaq MRX Options matched market share						1.5		%				0.6		%
Total matched market share executed on Nasdaq’s exchanges						34.9		%				36.5		%
Nasdaq Nordic and Nasdaq Baltic options and futures
Total average daily volume of options and futures contracts						286,794						335,043

In the tables above, Nasdaq Nordic and Nasdaq Baltic total average daily volume of options and futures contracts include Finnish option contracts traded on Eurex for which Nasdaq and Eurex have a revenue sharing arrangement.

Equity derivative trading and clearing revenues and equity derivative trading and clearing revenues less transaction-based expenses increased in the third quarter and first nine months of 2021 compared with the same periods in 2020. The increase in equity derivative trading revenues in the third quarter and first nine months of 2021 was primarily due to higher U.S. industry trading volumes, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges, lower Section 31 pass-through fee revenue and a lower gross capture rate. The increase in equity derivative trading and clearing revenues less transaction-based expenses in the third quarter of 2021 was primarily due to higher U.S. industry trading volumes and higher U.S. net capture rates, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges. The increase in equity derivative trading and clearing revenues less transaction-based expenses for the first nine months of 2021 was primarily due to higher U.S. industry trading volumes, partially offset by a lower net capture rate and a lower overall U.S. matched market share executed on Nasdaq's exchanges.

Section 31 fees are recorded as equity derivative trading and clearing revenues with a corresponding amount recorded as transaction-based expenses. In the U.S., we are assessed these fees from the SEC and pass them through to our customers in the form of incremental fees. Pass-through fees can increase or decrease due to rate changes by the SEC, our percentage of the overall industry volumes processed on our systems, and differences in actual dollar value of shares traded. Since the amount recorded in revenues is equal to the amount recorded as transaction-based expenses, there is no impact on our revenues less transaction-based expenses. Section 31 fees decreased in the third quarter and first nine months of 2021 compared with the same periods in 2020 as lower average SEC fee rates was partially offset by higher dollar value traded on Nasdaq's exchanges.

Transaction rebates, in which we credit a portion of the per share execution charge to the market participant, increased in the third quarter and first nine months of 2021 compared with the same periods in 2020. The increase in the third quarter of 2021 was primarily due to higher U.S. industry trading volumes and a higher rebate capture rate, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges. The increase in the first nine months of 2021 was primarily due to higher U.S. industry trading volumes, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges and a lower rebate capture rate.

Brokerage, clearance and exchange fees decreased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to lower Section 31 pass-through fees, as discussed above.

Cash Equity Trading Revenues

The following tables present total revenues, transaction-based expenses, and total revenues less transaction-based expenses as well as key drivers and other metrics from our Cash Equity Trading business:

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						(in millions)
Cash Equity Trading Revenues						$	390					$	550											(29.1)		%
Transaction-based expenses:
Transaction rebates						(252)						(303)												(16.8)		%
Brokerage, clearance and exchange fees						(42)						(162)												(74.1)		%
Cash equity trading revenues less transaction-based expenses						$	96					$	85											12.9		%
						Nine Months Ended September 30,												Percentage Change
						2021						2020
						(in millions)
Cash Equity Trading Revenues						$	1,423					$	1,697											(16.1)		%
Transaction-based expenses:
Transaction rebates						(872)						(940)												(7.2)		%
Brokerage, clearance and exchange fees						(212)						(468)												(54.7)		%
Cash equity trading revenues less transaction-based expenses						$	339					$	289											17.3		%

In the tables above, brokerage, clearance and exchange fees includes Section 31 fees of $35 million in the third quarter of 2021, $187 million in the first nine months of 2021, $154 million in the third quarter of 2020 and $444 million in the first nine months of 2020. Section 31 fees are recorded as cash equity trading revenues with a corresponding amount recorded in transaction-based expenses.

						Three Months Ended September 30,
						2021						2020
Total U.S.-listed securities
Total industry average daily share volume (in billions)						9.8						9.9
Matched share volume (in billions)						106.5						123.7
The Nasdaq Stock Market matched market share						15.9		%				18.0		%
Nasdaq BX matched market share						0.5		%				0.8		%
Nasdaq PSX matched market share						0.6		%				0.6		%
Total matched market share executed on Nasdaq’s exchanges						17.0		%				19.4		%
Market share reported to the FINRA/Nasdaq Trade Reporting Facility						34.3		%				32.0		%
Total market share						51.3		%				51.4		%
Nasdaq Nordic and Nasdaq Baltic securities
Average daily number of equity trades executed on Nasdaq’s exchanges						989,688						819,751
Total average daily value of shares traded (in billions)						$	5.7					$	4.8
Total market share executed on Nasdaq’s exchanges						76.3		%				77.5		%
						Nine Months Ended September 30,
						2021						2020
Total U.S.-listed securities
Total industry average daily share volume (in billions)						11.6						11.1
Matched share volume (in billions)						373.3						393.2
The Nasdaq Stock Market matched market share						15.8		%				17.2		%
Nasdaq BX matched market share						0.6		%				1.0		%
Nasdaq PSX matched market share						0.7		%				0.6		%
Total matched market share executed on Nasdaq’s exchanges						17.1		%				18.8		%
Market share reported to the FINRA/Nasdaq Trade Reporting Facility						35.0		%				31.2		%
Total market share						52.1		%				50.0		%
Nasdaq Nordic and Nasdaq Baltic securities
Average daily number of equity trades executed on Nasdaq’s exchanges						1,033,316						924,455
Total average daily value of shares traded (in billions)						$	6.4					$	5.6
Total market share executed on Nasdaq’s exchanges						77.4		%				77.6		%

In the tables above total market shares includes transactions executed on The Nasdaq Stock Market’s, Nasdaq BX’s and Nasdaq PSX’s systems plus trades reported through the FINRA/Nasdaq Trade Reporting Facility.

Cash equity trading revenues decreased in the third quarter and first nine months of 2021 compared with the same periods in 2020. The decrease in cash equity trading revenues in the third quarter was primarily due to lower Section 31 pass-through fee revenue and lower overall U.S. matched market share executed on Nasdaq's exchanges, partially offset by higher European value traded. The decrease in cash equity trading revenues in the first nine months was primarily due to lower Section 31 pass-through fee revenue and lower overall U.S. matched market share executed on Nasdaq's exchanges, partially offset by higher U.S. industry trading volumes, higher U.S. gross capture rates, higher European value traded and a favorable impact from changes in foreign exchange rates.

Cash equity trading revenues less transaction-based expenses increased in the third quarter and first nine months of 2021 compared with the same periods in 2020. The increase in cash equity trading revenues less transaction based expenses in the third quarter was due to higher U.S. net capture rate and higher European value traded, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges. The increase in cash equity trading revenues less transaction based expenses in the first nine months was primarily due to higher U.S. net capture rates, higher U.S. industry trading volumes, higher European value traded and a favorable impact from changes in foreign exchange rates, partially offset by lower overall U.S. matched market share executed on Nasdaq's exchanges.

Similar to equity derivative trading and clearing, in the U.S. we record Section 31 fees as cash equity trading revenues with a corresponding amount recorded as transaction-based expenses. We are assessed these fees from the SEC and pass them through to our customers in the form of incremental fees. Since the amount recorded as revenues is equal to the amount recorded as transaction-based expenses, there is no impact on our revenues less transaction-based expenses. Section 31 fees decreased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to lower average SEC fee rates.

Transaction rebates decreased in the third quarter and first nine months of 2021 compared with the same periods in 2020. For The Nasdaq Stock Market, Nasdaq PSX and Nasdaq CXC, we credit a portion of the per share execution charge to the market participant that provides the liquidity, and for Nasdaq BX and Nasdaq CX2, we credit a portion of the per share execution charge to the market participant that takes the liquidity. The decrease in the third quarter and first nine months of 2021 was primarily due to lower overall U.S. matched market share executed on Nasdaq's exchanges and a lower rebate capture rate. The decrease in the first nine months was partially offset by higher U.S. industry trading volumes.

Brokerage, clearance and exchange fees decreased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to lower Section 31 pass-through fees, as discussed above.

FICC Revenues

The following tables present revenues from our FICC business:

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						(in millions)
FICC Revenues						$	13					$	12											8.3		%
						Nine Months Ended September 30,												Percentage Change
						2021						2020
						(in millions)
FICC Revenues						$	44					$	39											12.8		%

FICC revenues increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to higher European products revenues.

Trade Management Services Revenues

The following tables present revenues and key drivers from our Trade Management Services business:

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						(in millions)
Trade Management Services Revenues						$	81					$	75											8.0		%
						Nine Months Ended September 30,												Percentage Change
						2021						2020
						(in millions)
Trade Management Services Revenues						$	242					$	218											11.0		%

						Nine Months Ended September 30,
						2021						2020
						(in millions)
ARR						$	322					$	300

Trade management services revenues increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to higher demand for our connectivity services.

OTHER REVENUES

Other revenues include the revenues associated with our U.S. Fixed Income business, which was sold in June 2021. Prior to the sale date, these revenues were included in our Market Services and Investment Intelligence businesses. See “2021 Divestiture,” of Note 4,“Acquisitions and Divestiture,” to the condensed consolidated financial statements for further discussion of this divestiture. Additionally, other revenues include revenues associated with the NPM business which we contributed to a standalone, independent company, of which we own the largest minority interest, together with a consortium of third party financial institutions in July 2021. Prior to July, these revenues were included in our Corporate Platforms business.

EXPENSES

Operating Expenses

The following tables present our operating expenses:

																								Three Months Ended September 30,																		Percentage Change
																								2021						2020
																								(in millions)
Compensation and benefits																								$	230					$	198											16.2		%
Professional and contract services																								36						38												(5.3)		%
Computer operations and data communications																								47						39												20.5		%
Occupancy																								27						29												(6.9)		%
General, administrative and other																								42						13												223.1		%
Marketing and advertising																								12						7												71.4		%
Depreciation and amortization																								67						51												31.4		%
Regulatory																								8						2												300.0		%
Merger and strategic initiatives																								13						1												1,200.0		%
Restructuring charges																								—						11												(100.0)		%
Total operating expenses																								$	482					$	389											23.9		%

																		Nine Months Ended September 30,												Percentage Change
																					2021						2020
																		(in millions)
Compensation and benefits																								$	700					$	582											20.3		%
Professional and contract services																								101						96												5.2		%
Computer operations and data communications																								137						109												25.7		%
Occupancy																								81						80												1.3		%
General, administrative and other																								66						99												(33.3)		%
Marketing and advertising																								32						20												60.0		%
Depreciation and amortization																								197						149												32.2		%
Regulatory																								22						16												37.5		%
Merger and strategic initiatives																								70						12												483.3		%
Restructuring charges																								31						36												(13.9)		%
Total operating expenses																								$	1,437					$	1,199											19.8		%

The increase in compensation and benefits expense in the third quarter of 2021 compared with the same period in 2020 was primarily driven by an increase in headcount as a result of our acquisition of Verafin, higher performance-linked compensation expense, our continued investment in our employees to drive growth and an unfavorable impact from foreign exchange rates. The increase in compensation and benefits expense in the first nine months of 2021 compared with the same period in 2020 was primarily driven by higher performance-linked compensation expense, our continued investment in our employees to drive growth, an increase in headcount as a result of our acquisition of Verafin and an unfavorable impact from foreign exchange rates.

Headcount increased to 5,764 employees as of September 30, 2021 from 4,776 as of September 30, 2020 primarily due to our recent acquisition of Verafin and strategic initiatives, including growth in our Market Technology business.

Computer operations and data communications expense increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to our acquisition of Verafin and higher software maintenance costs due to higher cloud storage costs.

Occupancy expense remained relatively flat in the third quarter and first nine months of 2021 compared with the same periods in 2020.

General, administrative and other expense increased in the third quarter of 2021 compared with the same period in 2020 primarily due to a pre-tax charge recorded in connection with the early extinguishment of our 2023 notes. The decrease in the first nine months of 2021 was primarily due to charitable donations made to the Nasdaq Foundation, COVID-19 response and relief efforts and social justice charities in 2020, and lower travel costs.

Marketing and advertising expense increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to an increase in marketing commitments primarily driven by the increase in new listings.

Depreciation and amortization expense increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to additional expense for acquired intangible assets related to our acquisition of Verafin. The increase in the first nine months of 2021 was also due to an unfavorable impact from foreign exchange rates.

Merger and strategic initiatives expense increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to the acquisition of Verafin. We have pursued various strategic initiatives and completed acquisitions and divestitures in recent years, which have resulted in expenses which would not have otherwise been incurred. These expenses generally include integration costs, as well as legal, due diligence and other third party transaction costs and will vary based on the size and frequency of the activities described above.

See Note 19, “Restructuring Charges,” to the condensed consolidated financial statements for further discussion of our 2019 restructuring plan and charges associated with this plan.

Non-operating Income and Expenses

The following tables present our non-operating income and expenses:

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						(in millions)
Interest expense						$	(33)					$	(24)											37.5		%
Net interest expense						(33)						(24)												37.5		%
Other income						42						1												4,100.0		%
Net income from unconsolidated investees						6						54												(88.9)		%
Total non-operating income						$	15					$	31											(51.6)		%

						Nine Months Ended September 30,												Percentage Change
						2021						2020
						(in millions)
Interest income						$	1					$	4											(75.0)		%
Interest expense						(95)						(77)												23.4		%
Net interest expense						(94)						(73)												28.8		%
Net gain on divestiture of business						84						—												N/M
Other income						43						5												760.0		%
Net income from unconsolidated investees						90						97												(7.2)		%
Total non-operating income						$	123					$	29											324.1		%

____________

N/M Not meaningful.

Interest Expense

Interest expense increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to new issuances of senior notes in December 2020 and commercial paper issuances in the first quarter of 2021 to fund our acquisition of Verafin. See “2021 Acquisition,” of Note 4, “Acquisitions and Divestiture,” to the condensed consolidated financial statements for further discussion of the acquisition of Verafin. See Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion of our debt obligations.

The following tables present our interest expense:

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						(in millions)
Interest expense on debt						$	30					$	22											36.4		%
Accretion of debt issuance costs and debt discount						2						1												100.0		%
Other fees						1						1												—		%
Interest expense						$	33					$	24											37.5		%
						Nine Months Ended September 30,												Percentage Change
						2021						2020
						(in millions)
Interest expense on debt						$	87					$	71											22.5		%
Accretion of debt issuance costs and debt discount						6						4												50.0		%
Other fees						2						2												—		%
Interest expense						$	95					$	77											23.4		%

Net Gain on Divestiture of Business

The net gain on divestiture of business in the first nine months of 2021 relates to the sale of our U.S. Fixed Income business, which was part of our FICC business within our Market Services segment. We recognized a pre-tax gain on the sale of $84 million, net of disposal costs. See “2021 Divestiture,” of Note 4, “Acquisitions and Divestiture,” to the condensed consolidated financial statements for further discussion.

Other Income

Other income increased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to gains from strategic investments entered into through our corporate venture program.

Net Income from Unconsolidated Investees

Net income from unconsolidated investees decreased in the third quarter and first nine months of 2021 compared with the same periods in 2020 primarily due to a decrease in income recognized from our equity method investment in OCC. See “Equity Method Investments,” of Note 6, “Investments,” to the condensed consolidated financial statements for further discussion.

Tax Matters

The following tables present our income tax provision and effective tax rate:

						Three Months Ended September 30,																		Percentage Change
						2021						2020
						($ in millions)
Income tax provision						$	83					$	93											(10.8)		%
Effective tax rate						22.4		%				26.1		%
						Nine Months Ended September 30,												Percentage Change
						2021						2020
						($ in millions)
Income tax provision						$	292					$	237											23.2		%
Effective tax rate						23.9		%				25.1		%

For further discussion of our tax matters, see Note 16, “Income Taxes,” to the condensed consolidated financial statements.

NON-GAAP FINANCIAL MEASURES

In addition to disclosing results determined in accordance with U.S. GAAP, we also have provided non-GAAP net income attributable to Nasdaq and non-GAAP diluted earnings per share. Management uses this non-GAAP information internally, along with U.S. GAAP information, in evaluating our performance and in making financial and operational decisions. We believe our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparisons of our ongoing operating performance.

These measures are not in accordance with, or an alternative to, U.S. GAAP, and may be different from non-GAAP measures used by other companies. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces their usefulness as comparative measures. Investors should not rely on any single financial measure when evaluating our business. This non-GAAP information should be considered as supplemental in nature and is not meant as a substitute for our operating results in accordance with U.S. GAAP. We recommend investors review the U.S. GAAP financial measures included in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the notes thereto. When viewed in conjunction with our U.S. GAAP results and the accompanying reconciliation, we believe these non-GAAP measures provide greater transparency and a more complete understanding of factors affecting our business than U.S. GAAP measures alone.

We understand that analysts and investors regularly rely on non-GAAP financial measures, such as non-GAAP net income attributable to Nasdaq and non-GAAP diluted earnings per share, to assess operating performance. We use non-GAAP net income attributable to Nasdaq and non-GAAP diluted earnings per share because they highlight trends more clearly in our business that may not otherwise be apparent when relying solely on U.S. GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our ongoing operating performance. Non-GAAP net income attributable to Nasdaq for the periods presented below is calculated by adjusting for the following items:

*•*Amortization expense of acquired intangible assets: We amortize intangible assets acquired in connection with various acquisitions. Intangible asset amortization expense can vary from period to period due to episodic acquisitions completed, rather than from our ongoing business operations. As such, if intangible asset amortization is included in performance measures, it is more difficult to assess the day-to-day operating performance of the businesses, the relative operating performance of the businesses between periods, and the earnings power of Nasdaq. Performance measures excluding intangible asset amortization expense therefore provide investors with a useful representation of our businesses’ ongoing activity in each period.

• Merger and strategic initiatives expense: We have pursued various strategic initiatives and completed acquisitions and divestitures in recent years that have resulted in expenses which would not have otherwise been incurred. These expenses generally include integration costs, as well as legal, due diligence and other third party transaction costs. The frequency and the amount of such expenses vary significantly based on the size, timing and complexity of the transaction. Accordingly, we exclude these costs for purposes of calculating non-GAAP measures, which provide a more meaningful analysis of Nasdaq’s ongoing operating performance or comparisons in Nasdaq’s performance between periods.

• Restructuring charges: We initiated the transition of certain technology platforms to advance our strategic opportunities as a technology and analytics provider and continue the re-alignment of certain business areas. See Note 19, “Restructuring Charges,” to the condensed consolidated financial statements for further discussion of our 2019 restructuring plan, which was completed in June 2021. Charges associated with this plan represented a fundamental shift in our strategy and technology as well as executive re-alignment and were excluded for purposes of calculating non-GAAP measures as they are not reflective of ongoing operating performance or comparisons in Nasdaq's performance between periods.

• Net income from unconsolidated investee: See “Equity Method Investments,” of Note 6, “Investments,” to the condensed consolidated financial statements for further discussion. Our income on our investment in OCC may vary significantly compared to prior periods due to the changes in OCC's capital management policy. Accordingly, we will exclude this income from current and prior periods for purposes of calculating non-GAAP measures which provide a more meaningful analysis of Nasdaq’s ongoing operating performance or comparisons in Nasdaq’s performance between periods.

*•*Other significant items: We have excluded certain other charges or gains, including certain tax items, that are the result of other non-comparable events to measure operating performance. We believe the exclusion of such amounts allows management and investors to better understand the ongoing financial results of Nasdaq. Other significant items include:

• for the three and nine months ended September 30, 2021, and for the nine months ended September 30, 2020, a charge on extinguishment of debt which is included in general, administrative and other expense in our Condensed Consolidated Statements of Income;

• for the three and nine months ended September 30, 2021 gains from strategic investments entered into through our corporate venture program included in other income in our Condensed Consolidated Statements of Income;

• for the nine months ended September 30, 2021, a net gain on divestiture of business, which represents our pre-tax net gain of $84 million on the sale of our U.S. Fixed Income business;

• for the three and nine months ended September 30, 2020, the reversal of a $6 million regulatory fine issued by the SFSA included in regulatory expense in our Condensed Consolidated Statements of Income;

• for the three and nine months ended September 30, 2020, a provision for notes receivable associated with the funding of technology development for the CAT included in general, administrative and other expense in our Condensed Consolidated Statements of Income; and

• for the first nine months of 2020, charitable donations made to the Nasdaq Foundation, COVID-19 response and relief efforts, and social justice charities included in general, administrative and other expense in our Condensed Consolidated Statements of Income.

*•*Significant tax items: The non-GAAP adjustment to the income tax provision for the three and nine months ended September 30, 2021 and 2020 includes the tax impact of each non-GAAP adjustment. In addition, for the three and nine months ended September 30, 2021, the non-GAAP adjustment to the income tax provision includes return-to-provision adjustments and prior period tax benefits and for the nine months ended September 30, 2020, a tax benefit on compensation related deductions determined to be allowable and excess tax benefit related to employee share-based compensation to reflect the recognition of the income tax effects of share-based awards when awards vest or are settled. Beginning with the quarter ended March 31, 2021, such excess tax benefits are no longer included as a non-GAAP adjustment as they do not have a material impact on period over period comparison.

The following tables present reconciliations between U.S. GAAP net income attributable to Nasdaq and diluted earnings per share and non-GAAP net income attributable to Nasdaq and diluted earnings per share:

			Three Months End September 30,
			2021						2020
			($ in millions, except share and per share amounts)
U.S. GAAP net income attributable to Nasdaq			$	288					$	264
Non-GAAP adjustments:
Amortization expense of acquired intangible assets			40						26
Merger and strategic initiatives expense			13						1
Restructuring charges			—						11
Net income from unconsolidated investee			(6)						(55)
Provision for notes receivable			—						6
Extinguishment of debt			33						—
Other			(42)						(1)
Total non-GAAP adjustments			38						(12)
Total non-GAAP tax adjustments			(23)						4
Total non-GAAP adjustments, net of tax			15						(8)
Non-GAAP net income attributable to Nasdaq			$	303					$	256
Weighted-average common shares outstanding for diluted earnings per share			170.2						167.5
U.S. GAAP diluted earnings per share			$	1.69					$	1.58
Total adjustments from non-GAAP net income			0.09						(0.05)
Non-GAAP diluted earnings per share			$	1.78					$	1.53

									Nine Months End September 30,
															2021						2020
															($ in millions, except share and per share amounts)
U.S. GAAP net income attributable to Nasdaq															$	928					$	708
Non-GAAP adjustments:
Amortization expense of acquired intangible assets															116						76
Merger and strategic initiatives expense															70						12
Restructuring charges															31						36
Net income from unconsolidated investee															(88)						(97)
Net gain on divestiture of business															(84)						—
Provision for notes receivable															—						6
Extinguishment of debt															33						36
Charitable donations															—						17
Other															(37)						3
Total non-GAAP adjustments															41						89
Total non-GAAP tax adjustments															(24)						(34)
Total non-GAAP adjustments, net of tax															17						55
Non-GAAP net income attributable to Nasdaq															$	945					$	763
Weighted-average common shares outstanding for diluted earnings per share															167.9						166.8
U.S. GAAP diluted earnings per share															$	5.53					$	4.25
Total adjustments from non-GAAP net income															0.10						0.32
Non-GAAP diluted earnings per share															$	5.63					$	4.57

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have funded our operating activities and met our commitments through cash generated by operations, augmented by the periodic issuance of our common stock and debt. Currently, our cost and availability of funding remain healthy.

As of September 30, 2021, our sources and uses of cash were not materially impacted by COVID-19 and we have not identified any material liquidity deficiencies as a result of the COVID-19 pandemic.

We will continue to closely monitor and manage our liquidity and capital resources. In addition, we continue to prudently assess our capital deployment strategy through balancing acquisitions, internal investments, debt repayments, and shareholder return activity, including share repurchases and dividends.

In the near term, we expect that our operations and the availability under our revolving credit facility and commercial paper program will provide sufficient cash to fund our operating expenses, capital expenditures, debt repayments, any share repurchases, and any dividends.

In April 2021, we filed a universal shelf registration statement on Form S-3ASR (Automatic Shelf Registration) with the SEC to have the ability to sell various types of securities including debt securities, common stock, preferred stock, depository receipts, warrants, subscription rights, purchase contracts and purchase units. The specific terms of any securities to be sold would be described in supplemental filings with the SEC. The registration statement will expire in April 2024.

In July 2021, we issued the 2033 Notes and we primarily used the net proceeds from the sale of the 2033 Notes to redeem the 2023 Notes. See “2033 Notes,” and "Early Extinguishment of 2023 Notes," of Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion.

The value of various assets and liabilities, including cash and cash equivalents, receivables, accounts payable and accrued expenses, the current portion of long-term debt, and commercial paper, can fluctuate from month to month. Working capital (calculated as current assets less current liabilities) was $(99) million as of September 30, 2021, compared with $2,736 million as of December 31, 2020, a decrease of $2,835 million. Current asset balance changes decreased working capital by $2,164 million, primarily due to a decrease in cash and cash equivalents, mainly due to the utilization of cash to partially fund the acquisition of Verafin, partially offset by increases in default fund and margin deposits and other current assets. Current liability balance changes decreased working capital by $671 million, as increases in short term debt, default funds and margin deposits and deferred revenue were partially offset by decreases in Section 31 fees payable.

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

• deterioration of our revenues in any of our business segments;

• changes in regulatory and working capital requirements; and

• an increase in our expenses.

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

• operating covenants contained in our credit facilities that limit our total borrowing capacity;

• credit rating downgrades, which could limit our access to additional debt;

• a significant decrease in the market price of our common stock;

• volatility or disruption in the public debt and equity markets; and

• the impact of the COVID-19 pandemic on our business.

The following sections discuss the effects of changes in our financial assets, debt obligations, regulatory capital requirements, and cash flows on our liquidity and capital resources.

Financial Assets

The following table summarizes our financial assets:

						September 30, 2021						December 31, 2020
						(in millions)
Cash and cash equivalents						$	303					$	2,745
Restricted cash and cash equivalents						29						37
Financial investments						185						195
Total financial assets						$	517					$	2,977

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash and cash equivalents includes all non-restricted cash in banks and highly liquid investments with original maturities of 90 days or less at the time of purchase. The balance retained in cash and cash equivalents is a function of anticipated or possible short-term cash needs, prevailing interest rates, our investment policy, and alternative investment choices. As of September 30, 2021, our cash and cash equivalents of $303 million were primarily invested in bank deposits and money market funds. In the long-term, we may use both internally generated funds and external sources to satisfy our debt obligations and other long-term liabilities. Cash and cash equivalents as of September 30, 2021 decreased $2,442 million from December 31, 2020, primarily due to:

• cash paid for our acquisition of Verafin, net of cash and cash equivalents acquired;

• repayment of borrowings under our credit commitment and debt obligations;

• the ASR agreement;

• other repurchases of our common stock;

• cash dividends paid on our common stock;

• purchases of property and equipment;

• other investing activities;

• payments related to employee shares withheld for taxes;

• payment of debt extinguishment cost, partially offset by;

• proceeds from issuances of long-term debt, net of issuance costs and utilization of credit commitment;

• net cash provided by operating activities;

• proceeds from commercial paper, net; and

• proceeds from divestiture of business, net of cash divested.

See “Cash Flow Analysis” below for further discussion.

Restricted cash and cash equivalents are restricted from withdrawal due to contractual or regulatory requirements or is not available for general use. Restricted cash and cash equivalents were $29 million as of September 30, 2021 and $37 million as of December 31, 2020, a decrease of $8 million. Restricted cash and cash equivalents are classified as restricted cash and cash equivalents in the Condensed Consolidated Balance Sheets.

Repatriation of Cash

Our cash and cash equivalents held outside of the U.S. in various foreign subsidiaries totaled $191 million as of September 30, 2021 and $237 million as of December 31, 2020. The remaining balance held in the U.S. totaled $112 million as of September 30, 2021 and $2,508 million as of December 31, 2020.

Unremitted earnings of certain subsidiaries outside of the U.S. are used to finance our international operations and are considered to be indefinitely reinvested.

Share Repurchase Program

See “Share Repurchase Program,” of Note 11, “Nasdaq Stockholders’ Equity,” to the condensed consolidated financial statements for further discussion of our share repurchase program.

ASR Agreement

See “ASR Agreement,” of Note 11, “Nasdaq Stockholders’ Equity,” to the condensed consolidated financial statements for further discussion of our ASR agreement.

Cash Dividends on Common Stock

The following table presents our quarterly cash dividends paid per common share on our outstanding common stock:

			2021						2020
First quarter			$	0.49					$	0.47
Second quarter			0.54						0.49
Third quarter			0.54						0.49
Total			$	1.57					$	1.45

See “Cash Dividends on Common Stock,” of Note 11, “Nasdaq Stockholders’ Equity,” to the condensed consolidated financial statements for further discussion of the dividends.

Financial Investments

Our financial investments totaled $185 million as of September 30, 2021 and $195 million as of December 31, 2020. Of these securities, $166 million as of September 30, 2021 and $175 million as of December 31, 2020 are assets primarily utilized to meet regulatory capital requirements, mainly for our clearing operations at Nasdaq Clearing. See Note 6, “Investments,” to the condensed consolidated financial statements for further discussion.

Debt Obligations

The following table summarizes our debt obligations by contractual maturity:

						Maturity Date						September 30, 2021						December 31, 2020
												(in millions)
Short-term debt - commercial paper						Weighted-average maturity of 35 days						$	480					$	—
Long-term debt - senior unsecured notes:
2022 Notes						December 2022						598						597
2023 Notes						May 2023						—						730
2024 Notes						June 2024						498						498
2020 Credit Facility						December 2025						(4)						(4)
2026 Notes						June 2026						498						497
2029 Notes						March 2029						689						726
2030 Notes						February 2030						689						726
2031 Notes						January 2031						643						643
2033 Notes						July 2033						707						—
2040 Notes						December 2040						643						643
2050 Notes						April 2050						486						485
Total long-term debt												$	5,447					$	5,541
Total debt obligations												$	5,927					$	5,541

In addition to the $1.25 billion revolving credit facility, we also have other credit facilities primarily to support our Nasdaq Clearing operations in Europe, as well as to provide a cash pool credit line for one subsidiary. These credit facilities, which are available in multiple currencies, totaled $218 million as of September 30, 2021 and $232 million as of December 31, 2020 in available liquidity, none of which was utilized.

As of September 30, 2021, we were in compliance with the covenants of all of our debt obligations.

See Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion of our debt obligations.

Regulatory Capital Requirements

Clearing Operations Regulatory Capital Requirements

We are required to maintain minimum levels of regulatory capital for the clearing operations of Nasdaq Clearing. The level of regulatory capital required to be maintained is dependent upon many factors, including market conditions and creditworthiness of the counterparty. As of September 30, 2021, our required regulatory capital of $137 million was comprised of highly rated European government debt securities that are included in financial investments in the Condensed Consolidated Balance Sheets.

Broker-Dealer Net Capital Requirements

Our broker-dealer subsidiaries, Nasdaq Execution Services, NFSTX, LLC, and Nasdaq Capital Markets Advisory, are subject to regulatory requirements intended to ensure their general financial soundness and liquidity. These requirements obligate these subsidiaries to comply with minimum net capital requirements. As of September 30, 2021, the combined required minimum net capital totaled $1 million and the combined excess capital totaled $21 million, substantially all of which is held in cash and cash equivalents in the Condensed Consolidated Balance Sheets. The required minimum net capital is included in restricted cash and cash equivalents in the Condensed Consolidated Balance Sheets.

Nordic and Baltic Exchange Regulatory Capital Requirements

The entities that operate trading venues in the Nordic and Baltic countries are each subject to local regulations and are required to maintain regulatory capital intended to ensure their general financial soundness and liquidity. As of September 30, 2021, our required regulatory capital of $34 million was primarily invested in European debt securities that are included in financial investments in the Condensed Consolidated Balance Sheets and cash, which is included in restricted cash and cash equivalents in the Condensed Consolidated Balance Sheets.

Other Capital Requirements

We operate several other businesses, which are subject to local regulation and are required to maintain certain levels of regulatory capital. As of September 30, 2021, other required regulatory capital was $8 million and was primarily included in restricted cash in the Condensed Consolidated Balance Sheets.

Cash Flow Analysis

The following table summarizes the changes in cash flows:

						Nine Months Ended September 30,
						2021						2020
Net cash provided by (used in):						(in millions)
Operating activities						$	699					$	817
Investing activities						(2,440)						(157)
Financing activities						(701)						(408)
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents						(8)						3
Net increase (decrease) in cash and cash equivalents and restricted cash						(2,450)						255
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period						2,782						362
Cash and cash equivalents and restricted cash and cash equivalents at end of period						$	332					$	617

Net Cash Provided by Operating Activities

Net cash provided by operating activities primarily consists of net income adjusted for certain non-cash items such as: depreciation and amortization expense of property and equipment; amortization expense of acquired finite-lived intangible assets; expense associated with share-based compensation; debt extinguishment costs; net gain on divestiture of a business, and net income from unconsolidated investees.

Net cash provided by operating activities is also impacted by the effects of changes in operating assets and liabilities such as: accounts receivable which is impacted by the timing of customer billings and related collections from our customers; accounts payable and accrued expenses due to timing of payments; accrued personnel costs, which are impacted by employee performance targets and the timing of payments related to employee bonus incentives; and Section 31 fees payable to the SEC, which is impacted by the timing of collections from customers and payments to the SEC.

Net cash provided by operating activities decreased $118 million for the nine months ended September 30, 2021 compared with the same period in 2020. The decrease was primarily driven by a cash payment of an acquisition-related tax obligation on behalf of Verafin of $221 million and a cash payment of $102 million, the release of which is subject to certain employment-related conditions over three years following the closing of the acquisition of Verafin, partially offset by higher net income. The remaining change was primarily due to other fluctuations in our working capital.

Net Cash Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2021 primarily related to $2,430 million of cash used for acquisitions, net of cash and cash equivalents acquired of $221 million, which was utilized to satisfy an acquisition-related tax obligation on behalf of Verafin, $113 million of purchases of property and equipment and other investing activities of $84 million, partially offset by proceeds from divestiture of business, net of cash divested $190 million.

Net cash used in investing activities for the nine months ended September 30, 2020 primarily related to $157 million of cash used for acquisitions, net of cash and cash equivalents acquired and $128 million of purchases of property and equipment, partially offset by $120 million of proceeds from the net sales of securities.

Net Cash Used in Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2021 primarily related to repayment of borrowings under our credit commitment and debt obligations of $804 million, $475 million of repurchases pursuant to the ASR agreement, $410 million in repurchases of common stock and $260 million of dividend payments to our shareholders, partially offset by proceeds of $826 million from the issuances of long-term-debt and utilization of credit commitment and $480 million of proceeds from issuances of commercial paper, net.

Net cash used in financing activities for the nine months ended September 30, 2020 primarily related to $1,470 million in repayments of borrowings under our credit commitment and debt obligations, $391 million of net repayments of commercial paper, $239 million of dividend payments to our shareholders, $186 million in repurchases of common stock, and a $36 million payment for debt extinguishment costs, partially offset by $1,928 million of proceeds from issuances of long-term debt and the utilization of our credit commitment.

See Note 4, “Acquisitions and Divestiture,” to the condensed consolidated financial statements for further discussion of our acquisitions and divestiture.

See Note 8, “Debt Obligations,” to the condensed consolidated financial statements for further discussion of our debt obligations.

See “ASR Agreement,” “Share Repurchase Program,” and “Cash Dividends on Common Stock,” of Note 11, “Nasdaq Stockholders’ Equity,” to the condensed consolidated financial statements for further discussion of our ASR agreement, share repurchase program and cash dividends paid on our common stock.

Contractual Obligations and Contingent Commitments

There were no significant changes to our contractual obligations and contingent commitments from those disclosed in “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report Form 10-Q that was filed with the SEC May 5, 2021.

Off-Balance Sheet Arrangements

For discussion of off-balance sheet arrangements see:

• Note 14, “Clearing Operations,” to the condensed consolidated financial statements for further discussion of our non-cash default fund contributions and margin deposits received for clearing operations; and

• Note 17, “Commitments, Contingencies and Guarantees,” to the condensed consolidated financial statements for further discussion of:

◦Guarantees issued and credit facilities available;

◦Other guarantees;

◦Routing brokerage activities;

◦Legal and regulatory matters; and

◦Tax audits.