EFTA01113123.pdf

NYSE Group, Inc. (NYX) 10-K Annual report pursuant to section 13 and 15(d) Filed on 02/29/2012 Filed Period 12/31/2011 THOMSON REUTERS ACCELUS " EFTA01113123 Table of Controls UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2011 Commission File Number: 001-33392 NYSE Euronext (Ewes name of registrant asspec-Ord in its charter) Delaware 20-5110848 (State or (Action:diction 4 URI employer incorporation or oneanianion) identification number) II Wall Street 10005 New York, N.Y. (Zip curie) (Address 4p/int/pal executire offices) (212) 656-3000 (Registrant's telephone number. including area code) Securities registered pursuant to Section 12(b) of the Act: toe of Each (lass Name of Each Exchange on Which Registered Common Stock. $0.01 par value per share New York Stock Exchange Euronext Paris Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes El No ❑ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ❑ No El Indicate by check mark whether the registrant ( I) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports). and (2) has been subject to such filing requirements for the past 90 days. Yes El No ❑ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any. every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes El No ❑ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge. in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ❑ Indicate by check mark whether the registrant is a large accelerated filer. an accelerated filer. a non-accelerated filer. or a smaller reporting company. See the definitions of "large accelerated filer." "accelerated filer and "smaller reporting company" in Rule 126-2 of the Exchange Act. (Check one): Large accelerated filer El Accelerated filer ❑ Non-accelerated filer ❑ Smaller reporting company ❑ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-2 of the Exchange Act). Yes ❑ No El As of lune 30. 2011. the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately 58.9 billion. As of February• 22. 2012. there were approximately 258.3 million shares of the registrant's common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of NYSE Euronext's Proxy Statement for its April 26. 2012 Annual Meeting of Stockholders am incorporated by reference into Part III of this Annual Report on Form 10-K. EFTA01113124 Table of Contents NYSE EURONEXT ANNUAL REPORT ON FORM 10-K FOR TILE FISCAL YEAR ENDED DECEMBER 31, 2011 INDEX PART I ITEM I BUSINESS 6 ITEM IA. RISK FACTORS 23 ITEM I B. UNRESOLVED STAFF COMMENTS 37 ITEM 2 PROPERTIES 38 ITEM 3. LEGAL PROCEEDINGS 38 ITEM 4. MINE SAFETY DISCLOSURES 19 EXECUTIVE OFFICERS OF NYSE EURONEXT 19 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EOUITY, RELATED STOCKHOLDER MATTERS AND LSSUER PURCHASES OF EOUITY SECURITIES 41 ITEM 6 SELECTEILEThaNCLUS RATTNOTIATA 45 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSLS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 50 ITEM 7A. OUANTITATIVE AND OUALITATIVE DISCLOSURES ABOUT MARKET RISK 73 ITEM S. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 76 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 118 ITEM 9A CONTROLS AND PROCEDURES 118 ITEM 9B. OTHER INFORMATION 118 PART HI ITEM 10. DIRECTORS. EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 118 ITEM II. EXECUTIVE COMPENSATION 119 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 119 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. AND DIRECTOR INDEPENDENCE 119 ITEM 14. PRINCIPAL. ACCOUNTING FEES AND SERVICES 119 PARLT_W ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHFDIR 120 2 EFTA01113125 Table of Contents In this Annual Report on Form 10-K. 'NYSE Euronext: "we." "us: and "our" refer to NYSE Euronext. a Delaware corporation. and its subsidiaries. except where the context requires otherwise. "AEX"." "Altemext": "ArcaBook"." "ArcaVision"." "Archipelago": 'Belem": "CAC 40"." "Cscreen"." eGovDirect.com": "Euronexte: "Euronext 100 Index": "Intellidex"." "NYSE Blue1O." "NSC"." "NYFIX01." "NYSE": 'NYSE Bonds": "NYSE Broker Volume": "NYSE Composite Index": "NYSE Liffe"." "NYSE MAC": "NYSE MAC Alerts": "NYSEnet"." 'NYSE OpenBook"." "NYX"." "SFTI"." 'SmartPool"." "UTP "and "Wombat"" among others. are trademarks or service marks of NYSE Euronext or its licensees or licensors with all rights reserved. "FINRA"" and 'Trade Reporting Facility"' are trademarks of the Financial Industry Regulatory Authority ("FINRA"), with all rights reserved, and are used under license from FINRA. All other trademarks and servicemarks used herein arc the property of their respective owners. About NYSE Euronext NYSE Euronext. a Delaware corporation. was organized on May 22.2006 in anticipation of the combination of the businesses of NYSE Group. Inc.. a Delaware corporation. and Euronext N.V., a company organized under the laws of the Netherlands. The combination was consummated on April 4. 2007. NYSE Group. Inc. was formed in connection with the March 7.2006 merger between New York Stock Exchange. Inc.. a New York Type A not-for-profit corporation. and Archipelago Holdings. Inc.. a Delaware corporation. Euronext was created with the 2000 merger of the Paris. Amsterdam and Brussels stock exchanges. Our principal executive office is located at I 1 Wall Street. New York. New York 10005 and our telephone number is (212) 656-3000. Our European headquarters are located at 39 rue Cambon. 75039 Paris. France. and our telephone number is +33 1 49 27 10 00. Our website is www.nyse.com. We are not incorporating the information on our website into this Annual Report on Form 10-K. We are required to file annual. quarterly and current reports. proxy statements and other information with the U.S. Securities and Exchange Commission (the "SEC"). The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street. N.E.. Washington. D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at I -800-SEC-0330. In addition. the SEC maintains an Internet site that contains reports. proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. We also make available free of charge. on or through our website, our proxy statements. Annual Reports on Form 10-K. Quarterly Reports on Form 10- Q. Current Reports on Form 8-K and any amendments to those reports. as soon as reasonably practicable after they are filed with. or furnished to. the SEC. Unless otherwise specified or the context otherwise requires. all the entities listed below are direct or indirect subsidiaries of NYSE Euronext and: . "NYSE" refers to New York Stock Exchange LLC. a New York limited liability company. and, where the context requires. its subsidiaries. NYSE Market. Inc.. a Delaware corporation. and NYSE Regulation. Inc.. a New York not-for-profit corporation. New York Stock Exchange LLC is registered with the SEC under the U.S. Securities Exchange Act of 1934 (the 'Exchange Act") as a national securities exchange. . "NYSE Arca" refers collectively to NYSE Arca. LW. a Delaware limited liability company. NYSE Arca. Inc.. a Delaware corporation. and NYSE Arca Equities. Inc.. a Delaware corporation. NYSE Arca. Inc. is registered with the SEC under the Exchange Act as a national securities exchange. . "NYSE Amex" refers to NYSE Amex LW. a Delaware limited liability company (formerly known as the American Stock Exchange LLC). NYSE Amex LLC is registered with the SEC under the Exchange Act as a national securities exchange. 3 EFTA01113126 Table of Contents • "£uronexr" refers to NYSE Euronext's market operations in Europe. including the European-based exchanges that comprise Euronext. N.V. — the Paris. Amsterdam. Brussels. London and Lisbon securities exchanges and, where the context requires. the derivatives markets in London. Paris. Amsterdam. Brussels and Lisbon. • "NYSE LOe" refers to NYSE Euronext's derivatives markets in London. Paris. Amsterdam. Brussels and Lisbon. FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as "may." "might." "will." "should." "expect." "plan." "anticipate." "believe: "estimate." "predict." "potential" or "continue." and the negative of these terms and other comparable terminology. These forward-looking statements. which are subject to known and unknown risks, uncertainties and assumptions about us. may include projections of our future financial performance based on our growth strategies and anticipated trends in our business and industry. These statements arc only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results. level of activity. performance or achievements to differ materially from the results, level of activity. performance or achievements expressed or implied by the forward-looking statements. In particular. you should consider the risks and uncertainties described under Item IA. — "Risk Factors." These risks and uncertainties arc not exhaustive. Other sections of this report describe additional factors that could adversely impact our business and financial performance. Moreover. we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time. and it is not possible to predict all risks and uncertainties, nor can we assess the impact that these factors will have on our business or the extent to which any factor, or combination of factors. may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements arc reasonable. we cannot guarantee future results level of activity. performance or achievements. Moreover. neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward- looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this report to conform our prior statements to actual results or revised expectations and we do not intend to do so. Forward-looking statements include, but are not limited to. statements about: • possible or assumed future results of operations and operating cash flows: • strategies and investment policies: • financing plans and the availability of capital: • our competitive position and environment: • potential growth opportunities available to us: • the risks associated with potential acquisitions. alliances or combinations: • the recruitment and retention of officers and employees: • expected levels of compensation: • potential operating performance. achievements. productivity improvements. efficiency and cost reduction efforts: • the likelihood of success and impact of litigation: • protection or enforcement of intellectual property rights; 4 EFTA01113127 Table of Contents • expectations with respect to financial markets, industry trends and general economic conditions: • our ability to keep up with rapid technological change: • the timing and results of our technology initiatives: • the effects of competition: and • the impact of future legislation and regulatory changes. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We expressly qualify in their entirety all forward-looking statements attributable to us or any person acting on our behalf by the cautionary statements referred to above. 5 EFTA01113128 Table of Contents PART I ITEM I. BUSINESS NYSE Euronext is a global operator of financial markets and provider of trading solutions. We offer an array of products and services in cash equities. futures. options. swaps. exchange-traded products. bonds. clearing operations. market data. commercial technology solutions and carbon trading. all designed to meet the evolving needs of investors. issuers. financial institutions and market participants. NYSE Euronext consists of three business segments: Derivatives: Cash Trading and Listings; and Information Services and Technology Solutions. Terminated Business Combination On February 15. 2011. we entered into a Business Combination Agreement (the "Business Combination Agreement") with Deutsche Borse AG ("Deutsche Bone), pursuant to which the two companies agreed to combine their respective businesses and become subsidiaries of a newly formed Dutch holding company (the "Proposed Business Combination"). Completion of the Proposed Business Combination was subject to the satisfaction of several conditions. including, among others, approvals by the relevant competition and financial, securities and other regulatory authorities in the United States and Europe. On February 1. 2012. the EU Competition Commission issued a formal decision disapproving the Proposed Business Combination. In light of the EU Commission's decision, on February 2. 2012. NYSE Euronext and Deutsche Boise announced that they mutually agreed to terminate the Business Combination Agreement. For the year ended December 31. 2011. NYSE Euronext incurred approximately $85 million of legal. investment banking and other professional fees and costs related to the terminated business combination, which are recorded in "Merger expenses and exit costs" in the consolidated statement of operations. NYSE Euronext also incurred additional indirect costs associated with management's significant time and focus negotiating and preparing to close the Proposed Business Combination. instead of pursuing other business opportunities that could have been beneficial to the Company. General In our Derivatives segment. our key initiatives in 2011 related to maintaining our position in the U.S. options market and growing our U.S. futures business. During May 2010. we announced plans to commence clearing our European securities and derivatives business through new. purpose-built clearing facilities. having given notice to terminate the current outsourcing arrangements with LCH.Cleamet SA in Paris for European cash and Continental European derivatives clearing. Although these standalone NYSE Euronext clearinghouse development plans were put on hold following the announcement of the recently terminated Proposed Business Combination. we have re-launched this project and am reviewing the strategic options available to develop these clearing facilities. See "— Products and Services —Clearing and Settlement — Europe." In addition. New York Portfolio Clearing ("NYPC"), our joint venture with The Depository Trust and Clearing Corporation ("MCC") became operational in 2011. See "— Derivatives — New York Portfolio Clearing." In our Cash Trading and Listings segment. we continued to focus on our pricing and market share mix in the U.S. and European cash markets. In both the U.S. and Europe. our market share decreased slightly in 2011. Demand for our listing venues continued to be strong in terms of transfers. new listings and secondary offerings. In 2011. 16 companies with an aggregate market capitalization of $30.4 billion transferred to the NYSE from other exchanges. and. additionally. 4 companies with an aggregate market capitalization of $164.8 million transferred to the NYSE Amex from other exchanges. A total of 104 issuers listed their securities on NYSE Euronext markets in 2011, raising total proceeds of $33.5 billion. Our Information Services and Technology Solutions segment exhibited growth in 2011. benefiting from an expanding customer base. improved software sales and the launch of colocation services in our data centers in Mahwah. New Jersey and Basildon. United Kingdom in 2010. Through colocation services, we allow our customers (including proprietary trading firms, hedge funds and other buy-side and sell-side traders) to host their trading platforms directly in our data centers and gain high-speed access to our matching engines. All of the matching engines for our markets in Europe are now consolidated in the Basildon facility, and we completed the migration of our U.S. exchanges to the Mahwah facility during the first half of 2011. 6 EFTA01113129 Table of Contents We also commenced the migration of NYSE Liffe to our Universal Trading Platform. which we expect to complete in the second quarter of 2012 for our European derivatives markets. We also continued the migration of the NYSE to our Universal Trading Platform during 2011. This migration will likely be completed in 2012. Our primary sources of revenue include our transaction and clearing fees, consisting of fees from our cash trading. derivatives trading and clearing businesses: revenues from the dissemination of our market data in the U.S. and Europe: listing fees and annual fees applicable to companies listed on our securities exchanges: and revenues generated from our technology services, including fees for connectivity services. software licenses, maintenance and strategic consulting services. See Item 7 — "Managements Discussion and Analysis of Financial Condition and Results of Operations—Sources of Revenues." Derivatives Our Derivatives segment is comprised of our derivatives trading and clearing businesses and includes our subsidiaries NYSE Liffe, NYSE Liffe Clearing. NYSE Life US. NYSE Amex Options. NYSE Arca Options and our joint venture NYPC as well as our related derivatives market data business. . NYSE Liffe — NYSE Liffe is the international derivatives business of NYSE Euronext. comprising the derivatives markets operated by LIPPE Administration and Management and Euronext in each of Amsterdam. Brussels. Lisbon. London and Paris. NYSE Liffe offers customers the advantages of an advanced derivatives trading platform and a wide choice of products. NYSE Lille offers customers access to a range of interest- rate, equity. index. commodity and currency derivative products. NYSE Life also offers its customers the Bclear and Cscreen services, which bridge the listed and over-the-counter ("OTC") markets. providing a means to register and process wholesale derivatives trades through NYSE Liffe to clearing at NYSE Liffe Clearing. . NYSE Life Clearing — Following the launch of NYSE Life Clearing. NYSE Liffe assumed full responsibility for clearing activities for the London market of NYSE Life. In this regard. NYSE Liffe's London market as a self-clearing Recognized Investment Exchange and outsources certain clearing guarantee arrangements and related risk functions tootg alnearnet Limited ( LCH.Clearnet"). a U.K. recognized clearinghouse. See — Products and Services — Clearing and Settlement — Europe." . NYSELife US — NYSE Life US LLC ("NYSE Life US"). our U.S. futures exchange. makes available for trading full- and mini-sized gold and silver futures, options on full-sized gold and silver futures, futures on MSCI Indices and fixed income futures. In 2011. NYSE Liffe US launched a full suite of fixed income futures which clear at NYPC. NYSE Lille US transitioned the trading and open interest of all existing MSCI-linked stock index futures in the U.S. to its platform during June 2011. A significant minority equity stake in NYSE Life US is held by six external investors — Citadel Securities. DRW Investments. Getco. Goldman Sachs. Morgan Stanley and UBS. Under this ownership structure. NYSE Euronext remains the largest shareholder in the entity and consolidates it for financial reporting purposes. NYSE Euronext manages the day-to-day operations of NYSE Liffe US. which operates under the supervision of a separate board of directors and a dedicated chief executive officer. . NYSE Amex Options — In June 2011. we completed the sale of a significant equity interest in NYSE Amex Options, one of our two U.S. options exchanges. to seven external investors — Bank of America Merrill Lynch. Barclays Capital. Citadel Securities. Citi. Goldman Sachs. TD AMERITRADE and UBS AG. Under the framework. NYSE Euronext remains the largest shareholder in the entity and manages the day-to-day operations of NYSE Amex Options. which operates under the supervision of a separate board of directors and a dedicated chief executive officer. NYSE Euronext consolidates this entity for financial reporting purposes. . NYSE Arca Options — NYSE Arca Options. one of our two U.S. options exchanges. offers electronic order execution in approximately 2.500 options issues. . New York Po olio Clearing — NYPC, our joint venture with DTCC. became operational in 2011. NYPC currently clears fixed income futures traded on NYSE Litre US and will have the ability to provide 7 EFTA01113130 Table of Contents clearing services for other exchanges and Derivatives Clearing Organizations in the future. NYPC uses NYSE Euronext's clearing technology. TRS/ CPS. to process and manage cleared positions and post-trade position transfers. DTCCs Fixed Income Clearing Corporation provides capabilities in risk management. settlement, banking and reference data systems. NYPC operates under the supervision of a separate board of directors and a dedicated chief executive officer. Our investment in NYPC is treated as an equity method investment. As of December 31. 2011. we had a minority ownership interest in. and board representation on. DTCC. Products and Services Trading PlaVenn and Market Structure. NYSE Liffe's full service electronic trading platform features an open system architecture which allows users to access our system. Traders commonly access our system via one of the many front-end trading applications that have been developed by independent software vendors, and this has enabled our distribution to grow with widespread adoption around the world. These applications are personalized trading screens that link the user to the market. which allows users to integrate front/back office trading. settlement risk management and order routing systems. NYSE Liffe's trading platform has been designed to handle significant order flows and transaction volumes. Orders can be matched either on a pricchime or pro rata basis. configurable by contract. with transacted prices and volumes and the aggregate size of all bids and offers at each price level updated on a real- time basis. Users are continually notified of all active orders in the central order book. making market depth easy to monitor. NYSE Liffe expects to complete the migration of its technology to the Universal Trading Platform during the second quarter of 2012 for our European derivatives markets. Sec Information Services and Technology Solutions — Global Technology Group." Products Traded. A wide variety of products are traded on NYSE Lille and NYSE Liffe US. NYSE Liffe's core product line is its portfolio of short- term interest rate ("STIR") contracts. with its principal STIR contracts based on implied forward rates denominated in euro and sterling. Trading volumes in NYSE Liffe's flagship product in this arca. the Euribor Contract, have grown as the euro has increasingly established itself as a global reserve currency. Overall. NYSE Liffe offers a number of derivatives products. including interest rate contracts on a number of currencies. equity futures and options on leading global stocks traded either through LIFF:E CONNECTip° (shortly to be the Universal Trading Platform) or &tear (including a wide range of underlyings not listed on NYSE Euronext), index products covering national and international indices and a wide range of soft and agricultural commodity derivatives. NYSE Liffe US offers a variety of futures and options products. including a full suite of fixed income futures that launched in 2011 and clear at NYPC. NYSE Lille US also successfully migrated the trading and open interest of all existing MSCI-linked stock index futures in the U.S. to its platform during lune 2011. We continue to consider and develop new products for our NYSE Liffe US trading platform. Options. NYSE Area and NYSE Amex operate marketplaces for trading options on U.S. exchange-listed securities. The underlying securities arc listed on U.S. markets. These option market centers include trading facilities, technology and systems for trading options as well as regulatory. surveillance and compliance services. NYSE Area's options business uses a technology platform and market structure designed to enhance the speed and quality of trade execution for its customers and to attract additional sources of liquidity. Its market structure allows market makers to access its markets remotely and integrates floor-based participants and remote market makers. NYSE Amex's options business uses a hybrid model combining both auction-based and electronic trading capabilities that is designed to provide a stable, liquid and less volatile market. as well to as provide the opportunity for price and/or size improvement. Trading Members. NYSE Liffe's and NYSE Lille US's trading members are typically proprietary trading firms, dealers and brokers. Trading members can also become liquidity providers. Liquidity providers are able to place several series of bulk quotes in one order. allowing them to send buy and sell orders for many contract months using only one message. Clearing and Settlement — Europe. Clearing and settlement of trades executed on Euronext are currently handled by LCH.Cleamet SA (for central counterparty clearing). Euroc tear Group (for settlement of cash equities except for Lisbon trades) and Interbolsa (for settlement of Lisbon trades). LCH.Cleamet SA also handles the clearing of the Continental European derivatives of NYSE Liffe. The London derivatives market of NYSE Lille 8 EFTA01113131 Table of Contents handles its own clearing, albeit using LCH.Cleamet Limited for certain services. In May 2010. NYSE Euronext announced plans to establish full-service clearing house facilities in Europe from mid-2012 and gave notice to terminate the current out-sourcing arrangements with LCH.Cleamet SA in Paris for European cash and Continental European derivatives clearing. During 2011. these termination dates were extended into 2013 by mutual agreement because of. among other things. the changes to NYSE Euronexfs clearing plans as a result of the Proposed Business Combination. Following the announcement of the recently terminated Proposed Business Combination. NYSE Euronext reviewed the strategic options available to it for clearing and has determined to re- launch the project to develop a full service derivatives clearing house in London. which was put on hold during 2011. LCH.Clearnet SA and Euroclear am independent entities that provide services to Euronext pursuant to contractual agreement. As noted above, on June 16. 2011. an agreement was reached to extend the termination date for the out-sourcing contract with LCH.Cleamet SA in Paris from December 2012 until June 2013 for derivatives and until December 2013 for cash given the discussions around the recently terminated Proposed Business Combination. No termination fees or penalties will be payable. The clearing arrangements for NYSE Euronext's London derivatives market of NYSE Liffe have remained unchanged throughout 2011, whereby clearing remains in-sourced via the NYSE Liffe Clearing operation and LCH.Cleamet Limited in London provides certain services under a separate contractual arrangement upon which notice of termination has not been given. As of December 31. 2011. NYSE Euronext retained a 9.15E stake in LCH.Cleamet Group Limited's outstanding share capital and the right to appoint one director to its board of directors. Interbolsa is one of our wholly-owned subsidiaries. We also have a minority ownership interest in. and board representation on. Euroclear. Compedlion NYSE Liffe and NYSE Liffe US compete with the OTC markets as well as a number of international derivatives exchanges. including the CME Group Inc. and Eurex, which is the derivatives platform operated by Deutsche Borse. NYSE Liffe US, NYSE Arca and NYSE Amex face considerable competition in derivatives trading. Their principal U.S. competitors am the CME Group Inc.. Chicago Board Options Exchange. Inc. ("O3OE"). the International Securities Exchange Holdings. Inc.. BATS Global Markets. Inc. ("BATS"). the Boston Options Exchange Group. LLC and the Nasdaq OMX Group. Inc. ("Nasdaq OMX"), as well as startups such as ELX Futures. L.P., backed by a consortium of banks and other market participants. Cash Trading and Listings Our Cash Trading and Listings segment consists of our cash trading and listings businesses and includes our subsidiaries the NYSE. Euronext. NYSE Amex. NYSE Arca. NYSE AltemexL NYSE Arca Europe and SmartPool, as well as NYSE Blue and Interbolsa and our related cash trading market data business. . NYSE — In addition to common stock. preferred stock and warrants. the NYSE lists debt and corporate structured products. such as capital securities. mandatory convertibles and repackaged securities (not including ETPs. as defined below). and new types of structured products. . Euronext — Euronexfs exchanges list a wide variety of securities, including domestic and international equity securities. convertible bonds. warrants, trackers and debt securities. including corporate and government bonds. All of Euronexfs markets are operated by subsidiaries of Euronext. N.V. . NYSE Amex — NYSE Amex. formerly the American Stock Exchange. became part of NYSE Euronext in 2038 and is our U.S. listing venue for emerging growth companies. NYSE Amex also provides a listing venue for a broader class of companies than am qualified for listing on NYSE. . NYSE Area — NYSE Arca is a fully electronic exchange in the United States for equities. exchange traded products ('L•TPs"). which include exchange traded funds ('L•TFs"), exchange traded notes. exchange traded vehicles, certificates and options. 9 EFTA01113132 Table of Contents • NYSE Ahemext — NYSE Altemext operates our European markets for emerging growth companies. NYSE Altemext-listed companies are required to satisfy less stringent listing standards than companies listing on Euronext. Companies listing on NYSE Altemext have greater flexibility in their choice of accounting standards and are subject to less extensive ongoing post-listing reporting requirements than companies listing on Euronext. • NYSE Arca Europe — NYSE Arca Europe is a pan-European multilateral trading facility ("MTV"). operated by Euronext Amsterdam. NYSE Arca Europe offers a fully electronic, low latency trading platform for blue chip stocks from eleven European countries. • SmartPool —SmartPool is a European dark pool dedicated to the execution of institutional order flow. This MTF. created in partnership with NYSE Euronext and three European investment banks (BNP Paribas. HSBC and J.P. Morgan). is operated by NYSE Euronext and has its own dedicated management team in London. • BlueNext/NYSE Blue —On February 18. 2011. the formation of the NYSE Blue joint venture was consummated. NYSE Blue is a new global company that is majority owned by NYSE Euronext. NYSE Blue consists of the businesses of APX (headquartered in the New York City region) and B. lueNext S.A. ("BlueNext") (headquartered in Paris). In its environmental unit. NYSE Blue provides infrastructure and services to environmental sponsors and market participants. through its environmental management account for asset and risk management as well as its registry services for renewable energy in the United States and voluntary carbon credits worldwide. Additionally. NYSE Blue operates. through BlueNexL a spot exchange for the European Emissions Trading System. a multi-country. multi-sector greenhouse gas emission trading scheme. In its power unit. NYSE Blue is a provider of hosted power scheduling and settlement services for wholesale power market participants. NYSE Euronext consolidates the results of operations and financial condition of NYSE Blue. Products and Services Order Execution. We provide multiple marketplaces for investors. broker-dealers and other market participants to meet directly to buy and sell cash equities. fixed income securities. ETPs and a broad range of derivative products. One of the primary functions of our markets is to ensure that orders to purchase and sell securities are executed in a reliable, orderly. liquid and efficient manner. Order execution occurs through a variety of means, and we seek to continue to develop additional and more efficient mechanisms of trade. Cash Trading. In the United States, we offer cash trading in equity securities, fixed income securities and ETPs on the NYSE NYSE Arca and NYSE Amex. We arc able to offer our customers the option of using either auction trading with a floor-based component or electronic trading. In Europe. Euronexes cash trading business consists of trading in equity securities and other cash instruments including funds, bonds. warrants. trackers and structured funds. Trading PiaVann and Market Structure. The NYSE and NYSE Amex markets combine both auction-based and electronic trading capabilities. These markets are intended to emulate, in a primarily automatic execution environment, the features of the traditional auction market that have provided stable. liquid and less volatile markets. as well as provide the opportunity for price and/or size improvement. The markets build on our core attributes of liquidity. pricing efficiency. low trading costs and tight spreads by broadening customers' ability to trade quickly and anonymously. During 2011. we continued to migrate our U.S. exchanges to a single Universal Trading Platform. See — "Information Services and Technology Solutions — Global Technology Group." Designated Market Makers on the trading floor arc charged with maintaining fair. orderly and continuous two-way trading markets by bringing buyers and sellers together and. in the relative absence of orders to buy or sell their assigned stuck adding liquidity by buying and selling the assigned stock for their own accounts. Supplemental Liquidity Providers are a class of high-volume members financially incentivized to add liquidity on the NYSE upon fulfilling quoting requirements. Floor brokers act as agents on the trading floor to handle customer orders. Cash trading on Euronexes markets in Amsterdam. Brussels. Lisbon and Paris takes place via the Universal Trading Platform following the successful migration of these markets from the Nouveau Systeme de Cotation. Cash trading on Euronext is governed both by a single harmonized rulebook for trading on each of Euronext's 10 EFTA01113133 Table of Contents markets and by the various non-harmonized Euronext Rulebooks containing local exchange-specific rules. Euronext's trading rules provide for an order-driven market using an open electronic central order book for each traded security, various order types and automatic order matching and a guarantee of full anonymity both for orders and trades. At the option of the listed company. trading of less-liquid listed securities on the European markets can be supported by a Liquidity Provider ("LP") who is either an existing member of Euronext andior a corporate broker. The LP is dedicated to supporting the trading in less- liquid small and mid-sized companies to foster regular trading and minimize price volatility. NYSE Arca operates an open. all-electronic stock exchange for trading all U.S. listed securities (in addition to options. as discussed above). NYSE Arca also provides additional listing services for ETPs. NYSE Area's trading platform provides customers with fast electronic execution and open. direct and anonymous market access. NYSE Arca operates the Lead Market Maker ("LMM") program. whereby an LMM functions as the exclusive dedicated liquidity provider in NYSE Arca primary listings. Selected by the issuer, the LMM must meet minimum performance requirements determined by NYSE Arca. which include percentage of time at the national best bid and offer. average displayed size and average quoted spread. and must support the NYSE Arca opening and closing auctions. Trade Reporting Facility. We operate a trade reporting facility with FINRA to serve our customers reporting off-exchange trades in all listed national market system ("NMS") stocks. Our trade reporting facility enhances the range of trading products and services we offer customers and is a reliable and competitively priced venue to report internally executed transactions. NYSE Bonds. NYSE Bonds. our bond trading platform. incorporates the design of the NYSE Arca electronic trading system and provides investors with the ability to readily obtain transparent pricing and trading information. The platform trades bonds of all NYSE and NYSE Amex-listed companies and their subsidiaries without the issuer having to separately list each bond issued. NYSE Bonds maintains and displays priced bond orders and matches those orders on a strict price and time-priority basis. It also reports real-time bids and offers with size and trades to our network of market data vendors. Trading Members. Trading members in our U.S. cash markets include entities registered as broker-dealers with the SEC that have obtained trading permits or licenses in accordance with the rules of the NYSE. NYSE Arca or NYSE Amex. Trading members are subject to the rules of the relevant exchange. The majority of Euronext's European cash trading members are brokers and dealers based in Euronext's marketplaces. but also include members in other parts of Europe. most notably the United Kingdom and Germany. Clearing and Settlement — Europe. As discussed above. clearing and settlement of trades executed on Euronext are currently handled by LCH.Clearnet SA (for central counterparty clearing). Euroclear Group (for settlement of cash equities except for Lisbon trades) and Interbolsa (for settlement of Lisbon cash and derivatives equities). Clearing for trades executed on NYSE Arca Europe takes place on EuroCCP. a London-based subsidiary of DTCC. For SmartPool, trades are cleared by EuroCCP. Listings. Through our U.S. listing venues NYSE. NYSE Arca and NYSE Amex. we have developed a market information analytics platform. complimentary• to all listed companies. that is a combination of technology-enabled market intelligence insight and a team of highly skilled market professionals. This platform. called the NYSE Market Access Center ("MAC"). was created to provide issuers with better market insight and information across all exchanges and trading venues. This includes services that were either developed by the NYSE using proprietary data and/or intellectual property or built by a third party expressly for NYSE-listed companies. Within this platform all issuers have access to daily trading summaries. a trading alert system highlighting user-defined trading or market events, social and professional networking within the NYSE community. a messaging and communication platform with an NYSE client service team, a website with proprietary trading information and market data. a series of institutional ownership reports. weekly economic updates and regularly scheduled executive educational programming. All issuers listed on the NYSE have access to the NYSE MAC on the same basis. In addition to the NYSE MAC. the NYSE offers tools to certain currently listed issuers on a tiered basis. The NYSE has also developed eGovDirect.com• an interactive, web-based tool that helps listed companies meet their NYSE governance and compliance requirements. II EFTA01113134 Table of Contents Through our European listing venues Euronext and NYSE Altemext. we have developed a broad range of services to meet the needs of Euronext and NYSE Altemext-listed companies. In July 2010. we launched a new London-based regulated securities market. NYSE Euronext London. aimed at attracting international issuers looking to seek a listing on the UK Official List in London. We also offer listed companies ExpertLine, a continuous push and pull communication and information platform that provides listed companies with real-time responses to topics relating to listing and stock trading as well as detailed information on their stacks. Companies listed on Euronext also have access to secure online tools, such as "Mylisting.euronext.com." a web-based investor relations tool that provides real-time information and data on listed stocks and offers issuer-customized alerts and a range of other services. As pan of our executive education, we offer workshops and information sessions to better inform and educate issuers on our new regulations and related legal matters, as well as guidance on investor relations and communication matters. Following the creation of our European Government Affairs department. we have launched an advocacy effort in order to represent the views of our issuers on both a national and European level. As pan of this we provide input on reviews of European Union ("EU") directives and regulations that affect our issuer community. Indexes andIndex Semites. We own and operate benchmark and strategy indexes that measure different segments of the NYSE Euronext and global markets. From time to time, we create new proprietary indexes when added value for market participants is identified or to provide measurement tools for all types of investment categories