Good day, ladies and gentlemen. Welcome to the Nasdaq third quarter 2017 results conference call. At this time, all participants are in listen only mode. Later, there will be a question and answer session and instructions will follow at that time. If you require any assistance during today's call, you may press star then 0 on your touch-tone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ed Ditmire, Vice President, Investor Relations. Sir, you may begin.
Good morning, everyone. Thank you for joining us today to discuss Nasdaq's third quarter 2017 financial results. On the line are Adena Friedman, our CEO, Michael Ptasznik, our CFO, Edward Knight, our General Counsel, and other members of the management team. After prepared remarks, we'll open up to Q&A. The press release and presentation are on our website. We intend to use the website as a means of disclosing material, non-public information and complying with disclosure obligations under SEC regulation updates. I'd like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations. As such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these projections.
Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our press release and periodic reports filed with the SEC. I now will turn the call over to Adena.
Thank you, Ed. Good morning. Thank you for joining us. I'm pleased to report Nasdaq's strong third quarter 2017 results today. I also want to discuss how we are deliberately evolving the strategic direction of the company, the actions we've taken to drive that forward to date. Address the regulatory environment and some of the developments there. The results we delivered during the quarter are indicative of our strong focus and alignment with our clients' needs. In particular, we increased our non-GAAP diluted EPS by 12% year-over-year, excluding the $0.04 benefit from changes in the share-based tax accounting. We generated total net revenue of $607 million in non-GAAP operating income of $290 million, up 4% and 8% respectively year-over-year.
We continue to execute well to achieve our 2017 priorities, including improving our competitive position across our businesses, integrating the 2016 acquisitions and delivering on their full promise, and commercializing our expertise in emerging technologies and bringing new solutions to the marketplace. Growth was especially strong in the recurring and subscription side of the business, where we generated 76% of our third quarter revenue. First, information services saw strong performance with $150 million in revenues for the quarter, with especially strong growth in index licensing and services revenue up 21% year-over-year, a testament to the unique positioning that we've established in the index space with over 40% of our licensed AUM in smart beta products. Market technology generated revenues of $77 million, an increase of 5% year-over-year, and year to date, the segment has generated $215 million in revenue, up 8% year-over-year.
We exited Q3 on a strong footing in terms of backlog, new client wins, and fast business trends, all of which we expect to drive future growth. We're positioning ourselves to further that growth momentum through our investments in Sybenetix and internal development initiatives, most notably our investment in the Nasdaq Financial Framework, our next generation market infrastructure platform. Under our market services segment, trade management services saw strong growth from some of our newer products, in particular, third-party connectivity, which contributed to a 9% increase in the quarter year-over-year. The trading side of the business is performing well despite historic lows in volatility and muted industry volumes due to market share gains in the three largest trading revenue categories, U.S. options, U.S. equities, and Nordic equities. This is a visible example of the progress against one of our 2017 execution priorities to improve our competitive position.
With another one of our 2017 priorities, our acquisition integration efforts, I'm very pleased to say that we have completed the technology integration of the ISE options exchanges onto the INET technology. The teams did an outstanding job with the complex integration, which they completed on time and which enabled us to execute on all of our synergy expectations. There are areas of our business that continue to show slower growth than we would like, in particular, our corporate solutions and our listing services businesses. In terms of listings, we are seeing some encouraging business-level operating trends. In the Nordics, despite a seasonally slow third quarter, our new listings are still on their way to a record in 2017, with 72 new listings so far this year, up 24% year to date.
In the U.S., we have had 87 IPOs during the first nine months of 2017, up 32% year to date over the comparable period last year. We increased our IPO win rate to 77% during the third quarter, improving our year to date win rate to 60%. In 2018, we'll enter the final phase of the 2015 pricing changes in listings when U.S. corporate listing customers who haven't already opted in will transition to the bundled annual and listing of additional shares fees, which will bring a moderate revenue benefit next year. In corporate solutions, where year-over-year comparisons were flat, we're taking actions to better position ourselves strategically and leverage the parts of those businesses that play to Nasdaq's strengths and expertise going forward. I'll provide more detail around this later in my remarks.
Moving on from the financial metrics, I want to spend a few minutes discussing the long-term opportunities we're focused on that will continue to position this firm for growth in the quarters and years to come. As I mentioned in our September call, in terms of our strategic planning, we've been examining the key trends that will drive change and evolution in our industry with a focus on how we can best serve our clients as they adapt and respond to technology and other industry advancements in the coming years. We intend to use our capital, talent, and other resources to align ourselves with the need of our clients, both today and tomorrow. The specific long-term trends that we believe will impact our business are, first, the emergence of a marketplace economy with two-sided market mechanisms proliferating far beyond financial markets.
Over the years, using our market infrastructure technology, we have worked with third-party clients looking to create auction mechanisms or continuous markets to allow for price discovery for assets outside the scope of the financial markets today. We believe that this trend, to give consumers the power to negotiate price for goods that are easily transferred, coupled with advanced digital payment options, will continue to expand. Essentially, the Nasdaq Financial Framework offers our existing clients, but also the emerging marketplace economy, a modern architecture that embraces the latest advancements in technology. Second is the role of the investment banks as critical pillars of the financial system. Our view is that many of the global banks have emerged from the aftermath of the credit crisis in a position of strength.
As they've reoriented their own capital allocation priorities, they have developed a different attitude towards technology partnerships, where they're willing to find strategic partners who have specialized capabilities in areas where they don't view the technology as a key competitive differentiator, and that can be delivered in a less expensive way than their own internal IT organizations can manage. They can then focus their internal IT efforts on those areas that provide them specific competitive advantages. An example of that shift has been our Ocean initiative, where we seek to serve as the technology partner for banks in managing their internal trading venues. In the third quarter, we have won a second Ocean mandate, in this case, to power a Tier 1 global bank's foreign exchange trading platform.
We continue to have active and encouraging discussions with other banks seeking to find ways to optimize their internal operations with our market infrastructure technology. The third major trend that every industry is facing is the explosion of data, coupled with the advancement of machine intelligence. We have built a successful data franchise with global distribution, and today, we have new tools to dissect our data, intersect it with outside information, and deliver deeper and more meaningful insights to our clients. Our Analytics Hub is a good example. We're using machine intelligence to provide investors with robust signals that can help them navigate the financial markets and execute their investment and trading strategies more efficiently. Similarly, for our corporate clients, we've just launched Insight360, which mines data in a new way to deliver insights to IR officers and other executives on their investor base and how they're interacting with them.
In our smart surveillance business, we're creating ever more intelligent alerts and other capabilities that enable more sophisticated means to oversee the activities across markets globally. The last major trend is the shifting environment in investment management. We're seeing shifts that go far beyond the active to passive dynamic. For example, the increasing importance of investing in private companies, the growth in quantitative strategies, and overall, the increased competition that all asset managers are facing, despite a rising tide in ever more investable assets entering the markets in the coming years. We believe that this trend, coupled with the third trend of the data explosion, creates interesting opportunities to serve the asset management industry with increasingly sophisticated data and analytics, with the aim to empower them to compete more effectively in the shifting environment. We are excited that we have just closed on our acquisition of eVestment.
The special fit between eVestment and Nasdaq creates opportunities to build our role as a key differentiated analytics partner in the investment community. Our interactions with the eVestment team in the weeks since announcing the acquisition through to closing this week has only raised our conviction on this fantastic opportunity. These initiatives and others that we have in our information services segment pipeline will enable us to continue our sharp focus on delivering more valuable information and intelligence to our clients. As we completed our strategic review, we assessed our current assets and capabilities and mapped them against our areas of strategic focus. In that process, we identified where we have assets that are ready to be applied against our focus areas, where we need to invest to improve our position, and where we may have assets that are not core to our future.
Due to that evaluation, we have placed our public relations solutions and digital media services business under strategic review. As we mentioned in our release, when we have material news related to those businesses to share with you, we will do so. By retaining and focusing on our IR intelligence solutions and board and leadership portals, we will be able to continue to serve as a key partner to our corporate clients as they navigate the global capital markets, and we will maintain the capabilities that are strategic to them in their governance and IR relationships. The strategic pivot we've just begun to implement has us better oriented today to pursue our objectives, but we're also working to institutionalize some of the process and learnings that occurred during this long-term strategic analysis.
By regularly reviewing, assessing, and making adjustments when needed to maximize our long-term effectiveness and making this as much a part of the culture as our operating and efficiency disciplines will put ourselves in a great position to ensure that we've maximized how we can deliver for our clients and our shareholders alike. Lastly, I want to spend a few minutes on the regulatory environment. Nasdaq's mission is to use ingenuity, integrity, and insights to deliver markets that promote economic growth. As part of that mission, we want to ensure that the U.S. capital markets are the best and most robust that they can be. To that end, in May, we released a blueprint for revitalizing the U.S. capital markets with recommendations that we see as essential for the U.S. to retain its preeminence in the global capital markets.
As part of our initiative, we're seeking to gain support from key stakeholders to increase the appeal of public markets for innovative and growing companies. We've been encouraged by several actions taken by the new administration in recent months. Specifically, soon after Chairman Clayton was sworn in, he extended the ability to submit confidential filings to all companies, not just those with less than $1 billion in annual revenue. We also applaud Congress for introducing several pieces of legislation in the last several weeks focused on the public equity markets, including a bill to strengthen proxy advisory firm oversight. All of which aim to create more appealing public company experience while preserving critical investor protections.
On October 6th, the U.S. Treasury published its report recommending various reforms to how to improve the capital markets, how the capital markets can support economic growth with considerable focus on the U.S. equity markets. There are areas in the report where the U.S. Treasury is in complete alignment with the recommendations in Nasdaq's blueprint, including reducing corporate disclosure obligations that were principally politically motivated, working to establish more meaningful proxy access thresholds, reviewing oversight of proxy advisory firms, and reforming shareholder litigation. Also in alignment with Nasdaq's recommendation was Treasury's desire to give less liquid issuers more choice on the market structure of their listing exchange. Notably, they support revisions to unlisted trading privileges to allow a single exchange to trade a company's stock in order to reconsolidate the company's liquidity, with the aim to improve market quality and lower their equity cost to capital.
There are also other market structure recommendations, such as increased ATS and payment for order flow disclosures, which have had and continue to have Nasdaq support. In other areas, such as the Treasury's recommendations around the SIP data's role in satisfying Best Execution requirements and their view on SEC review standards for market data fee filings, we view Treasury's recommendations and priorities as completely consistent with current law and precedent. Treasury also recommends the SEC consider a potential for a multiple consolidator system for the provision of SIP feeds. Nasdaq has not opposed such a system, as long as it can be demonstrated that it will not impose new burdens on broker-dealers or the exchanges to create such a system, and that a reasonable articulation supporting the economic benefits to investors is made before embarking on the creation of a multiple consolidator role.
In Michael's remarks, he'll discuss some incremental disclosures we've made this quarter to bring more transparency to this special area of focus for our investors. I would like to summarize my comments by saying that we are very pleased with our continued solid performance across our business, which has been propelled by our focus and achievement against our 2017 execution priorities. We're excited about the strategic direction that we're embarking on, which should enable us to focus on the evolving future needs of our clients. And we're pleased to see our U.S. regulatory agenda playing out with initial regulatory and political actions aimed to create a better and more inviting public environment for innovative growth companies. With that, I'll turn it over to Michael to review the financial details.
Thank you, Adena. Good morning, everyone. My commentary will primarily focus on our non-GAAP results, and all comparisons will be to the prior year period, unless otherwise noted. Reconciliations of U.S. GAAP to non-GAAP results can be found in the attachments to our press release and in the presentation that is available on our website at ir.nasdaq.com. Starting with the third quarter revenue performance, as shown on page three of the presentation, and organic growth on pages four and 16. The 4% or $22 million increase in reported record net revenue of $607 million consisted of organic growth of $15 million, with 3% organic growth in the non-trading segments and 1% organic growth in Market Services, and a $7 million favorable impact from changes in foreign exchange rates. We will look now at the highlights within each of the reporting segments.
I will start with Information Services, which, as reflected on pages five and 16, saw a $13 million or 9% increase in revenue, consisting of $12 million or 9% organic growth. Index licensing and services revenues were up 21% in the third quarter of 2017, primarily due to higher assets under management and exchange traded products linked to Nasdaq indexes, with AUM reaching a record $154 billion as of September 30, 2017. Market Technology revenue, as shown on pages six and 16, increased $4 million or 5%, with organic growth totaling $2 million or 3%. Organic growth totaled 8% on a year-to-date basis, which we point out because organic growth in Market Technology tends to fluctuate quarter-to-quarter more than other segments. The period-end backlog finished at $805 million, a record high and an increase of 9% from the prior year quarter.
The operating income margin for Market Technology was 21%, down five percentage points from 26% in the prior year period, reflecting the impact of investments we are making to upgrade our technology for the next generation Nasdaq Financial Framework and to enhance and grow our surveillance offering. Turning to Corporate Services on pages seven and 16, revenues declined $1 million or 1%. While listings activity in the Nordic region is robust, revenue growth in the Nordics was offset by lower U.S. listings revenue from the runoff of listing of additional shares or LAS fees due to activity generated in past years. For the Corporate Solutions segment, growth was flat in the quarter. Reflecting the progress we have achieved in our synergy targets, the Corporate Services operating margin was 28% versus 26% in the prior year period.
Market Services net revenues on pages eight and 16 saw a $6 million or 3% increase, equally split between organic growth and the positive impact from changes in foreign exchange. Market Services operating income margin totaled 54%, unchanged versus the prior year period. Turning to pages nine and 16 to review expenses. Non-GAAP operating expenses were unchanged at $317 million, with a $4 million organic expense decrease offset by a $4 million unfavorable impact from the changes in foreign exchange rates. Turning to slide 10, our revised 2017 non-GAAP operating expense guidance is $1.275 billion-$1.29 billion versus $1.26 billion-$1.29 billion previously. The updated guidance largely reflects the closing of our acquisitions of eVestment earlier this week and Sybenetix toward the end of the third quarter. As is our typical practice, we'll establish 2018 expense guidance when we report the 4Q17 results in late January.
Understanding that many of you will be working now to incorporate our acquisitions, particularly eVestment, into your model, please keep the following in mind. When considering our 2018 expense run rate, in addition to the organic growth rate of core expenses, which in recent full-year periods has been 3%, we believe our 2018 expense run rate should also reflect a 6% non-organic increase over 2017 due to the full-year impact of the late 2017 acquisitions of eVestment and Sybenetix. The 6% non-organic increase reflects growth in the expense bases of the acquisitions to support the continued organic growth, as well as upfront integration costs, including certain retention and incentive programs. Non-GAAP operating income increased 8% in the third quarter of 2017, and the non-GAAP operating margin totaled 48%, an increase from 46% in the prior year period.
Net interest expense was $32 million in the third quarter of 2017, a decrease of $4 million versus the prior year period, primarily due to a lower average debt balance since the 2016 acquisitions. The non-GAAP effective tax rate for the third quarter of 2017 was 31%, in the middle of the 30%-32% range we provided during the last quarterly call. We continue to expect the 2017 non-GAAP effective tax rate to be in the range of 30%-32%. Non-GAAP net income attributable to Nasdaq for the third quarter of 2017 was $181 million, or $1.06 per diluted share, compared to $154 million or $0.91 per diluted share in the prior year period. The adoption of accounting standard ASU 2016-09 added $0.04 to our 3Q17 results.
Turning to capital, as shown on slide 11, debt increased $991 million versus 2Q17, primarily due to issuing a $500 million floating rate note during the period in preparation for the closing of the eVestment transaction and a $48 million increase in euro bonds due to changes in FX rates. This increase was partially offset as we used a portion of the proceeds to temporarily pay down $340 million of commercial paper. This resulted in our debt-to-EBITDA ratio ending the period at 3.1 times versus 3.0 times at the end of the second quarter of 2017. With the eVestment acquisition, we expect our leverage ratio to temporarily increase, and then we plan to deleverage to a mid-two times leverage ratio by mid-2019. Share repurchases in the third quarter totaled $18 million, bringing year-to-date repurchases to $175 million.
Together with dividend payments, we have returned $355 million to shareholders through the nine months of 2017, representing 66% of our non-GAAP net income in the period. Looking forward, while in the near term, our actions in part will reflect our commitment to deleverage towards our mid-2019 commitment to reach a mid-twos gross debt-to-EBITDA ratio, we are looking to optimize the returns to shareholders through continued investment in organic growth initiatives, carefully considered M&A, continuing to grow the dividend as earnings and cash flow increase, and buybacks that principally offset the impacts of share issuance. Before I turn the call back over to Adena, we wanted to take this opportunity to provide you with some additional color on our information services business and have added some additional disclosure on slides 12 and 13.
First, I'd like to provide some detail on the implications of the eVestment acquisition we closed this week and how its revenues will be reflected in our financials in light of the temporary impacts of the purchase accounting adjustment for deferred revenue balances. On page 12 of the quarterly presentation, we reiterate that eVestment revenues have grown an average of 12% per year over the period from 2013 through the first half of 2017. 2Q17 trailing 12 months revenues were $81 million. Due to a writedown of deferred revenue under purchase accounting, revenues related to eVestment are expected to be reduced by approximately $34 million for the 12-month period following the acquisition, or $9 million in 4Q17, $11 million in 1Q18, $8 million in 2Q, $5 million in Q3, and $1 million in 4Q18.
Revenues in 2019 and beyond will not be affected by the purchase accounting adjustment to deferred revenues. Secondly, I'd like to follow up Adena's comments on the regulatory environment. In order to help answer requests from the investment community for more detail on the data business, we've included a slide on page 13 of the earnings deck. We hope this helps investors understand some of the nuance in our global information services business, in particular, understanding the portion of our business that comes from the U.S. equity, proprietary depth, and shared tape data product groups. This revenue consists of a number of different products that are grouped into the categories of pro display and non-display fees, non-pro fees, license fees, as well as the revenues from Tapes A, B, and C.
Interestingly, as we have continued to diversify and expand our overall global information services business, with particular focus on our index business and non-equities data, over the past 12 months, our U.S. equities debt fees represent approximately 4% of our overall revenue. As the chart demonstrates, today, most of our information services revenues, and particularly our growth opportunities, are focused on products and services that are not related to U.S. equity market structure. This will be further diversified and enhanced with the inclusion of the eVestment starting this quarter. Thank you for your time, and now I'd like to turn it back to the operator for queueing.
Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please press star then one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. We ask that you please limit yourself to one question and one related follow-up. Our first question comes from Rich Repetto with Sandler O'Neill. You may begin.
Yeah, good morning, Adena. Good morning, Michael.
Morning.
Morning.
I guess the question is gonna be, since you just went through slide 13, Michael, but on the market data, I think it was a combination of the Treasury report as well as a new appointment at the SEC. Could you comment, Adena, on any views you might have? Obviously, the positions of the individual that's appointed the head of Trading and Markets were very much, I would say, pro-dealer. Could you comment on what you'd expect? I think the investment community is adding these two together, I guess, in what you'd expect from a person taking that position.
Well, I would say very definitively, we've had a long and productive working relationship with the SEC, we expect to continue to. I think that since Chairman Clayton came into the role earlier this year, we feel that we have been very aligned on some key areas of concern that we've had around the capital markets and making sure that we have a great balance for investor protection with a robust and exciting U.S. public capital markets. We would expect that we will continue to be able to work towards those goals with the Chairman as well as with the staff. We look forward to working with Brett in his new role in Trading and Markets.
I think in general, as we mentioned with the Treasury report as well as with the changes there, we feel that the Treasury report is pretty clear in articulating issues around market data that are still very consistent with the SEC and their guidance around the use of SIP data for Best Exec, as well as the reasonable and fair standard that they apply to our market data filings today. We don't really see any change that comes from the Treasury report recommendations or from the activities that we'll have at the SEC in that regard.
Thanks. That's helpful, Adena. I guess the last question is more open, but you did outline sort of what you look in the key areas of growth for strategic planning, whether it be the marketplace economy, investment banks, et cetera. I guess the question is, does this, as you assess the whole strategic pivot, incrementally add to the growth rate? Like, what do you expect, if you could quantify that in any way, it'd be helpful.
Sure. Well, I think that we have been and will continue to be very focused on total shareholder return. We have as our goal to deliver double-digit total shareholder return, and we will continue to have that as our goal and our target. I think that as we are pretty early on in the strategy, but as we execute against that strategy, we will continue to evaluate and assess the growth rates, the long-term growth targets that we provide to you. If there are opportunities to increase those, we certainly will. We also will want to make sure that we provide you insight into the investments we are making, and particularly in R&D, that are focused on our strategy so that we can provide you an update and measures for you to be able to understand how we're progressing against those investment areas.
We will continue to provide and probably provide a little bit more disclosures in the future just around our R&D activities. Generally speaking, our goal is to make sure that we can deliver on that double-digit total shareholder return, and we hope to be able to do that with increased growth over time as we execute against our strategy.
Great. Thank you very much.
Thank you. Our next question is from Chris Harris with Wells Fargo. You may begin.
Thanks, guys. Two questions on market structure. One, wondering if you guys are supportive of a pilot to examine the impact of reduced access fees. Related to that, if maker-taker went away, what do you think would be the impact on your business?
In terms of the access fee pilot, what we've discussed and we've said in public testimony is that we are willing to work with the SEC on an access fee pilot. We tried to do it without the SEC involvement a couple of years ago, the other exchanges didn't choose to participate in that, it's hard to get any sort of meaningful results out of it. I would say that we are willing to work, certainly with the SEC, to implement an access fee pilot. We have expressed some real concern around the access fees as it applies to smaller company stocks and the need for market makers to have proper incentives to post quotes and be involved in those stocks. We are pretty adamant about our concern around that.
How they construct the pilot, how long they run it, how many stocks are involved, which stocks are involved, are going to be very important to working with them on that. I do believe that it seems like it's something that they are interested in trying to do, we will work with them if that's their decision. In terms of the impact of elimination of access fees, this has been a part of our markets. It's integrated and integral to Regulation NMS. To the extent that there's a review of Regulation NMS and all of the market structure components there, that certainly looking at access fees could be a part of that over the long run. Elimination of access fees, we don't really try to predict the impact of that.
I think that it is an integral part of our market structure today, and it likely will continue to be, with the pilot giving us some information as to the impact of that over time.
Thanks a lot.
Thank you. Our next question comes from Jeremy Campbell with Barclays. You may begin.
Hey, thanks. Just a quick question on your info services. Thanks for the incremental disclosure here. I think it's going to be useful for folks, but just thinking big picture, in your entire info services complex, but maybe especially in the proprietary U.S. equity stuff that's under the scrutiny here, how much of the top-line growth in the past was from price increases? With the focus here on this kind of vertical, what do you think the outlook is for price increases going forward on this business?
Overall, within our Information Services business, we have given some clarity on that in the past, where we say somewhere in the range of 1-2 percentage points of growth can come from price increases in general. That does not pertain necessarily specifically to each feed. We have, as you can tell, a very diversified business. We work very closely with our clients and with industry groups to understand how we're adding value to those products, how the use of those products are changing, and therefore we factor that into any pricing decisions we make. That's a general comment across all of Information Services, and there are many times when we don't make increases in any particular product. We do it based on maybe changes, enhancements, improvements we made to the products and changes in usage that would warrant a change in price.
That's generally how we run the business.
Thanks. Would it be fair to say that maybe instead of wiping out this revenue stream like some people were kind of doing, maybe it's more about the growth rate of this might be slowing versus where it had been in the past, given the kind of the U.S. Treasury proposal?
I would say that, as we said before, the U.S. Treasury proposal, in our opinion, is completely consistent with current practice, and it's consistent with the current requirements that the SEC places on broker-dealers for their Best Execution obligations. We continue to support a mid-single-digit growth rate for the Global Information Services business in the years to come, and that includes the complement of everything we do there and our focus areas on growth in terms of our data analytics, the growth in our index business, our focus on the buy side and the investment community, in addition to all the current products that we support that supports the broker-dealer community.
Great. Thank you.
Thank you. Our next question comes from Dan Fannon with Jefferies. You may begin.
Thanks. Just a follow-up on the expenses and kind of the outlook for next year. Just want to clarify, you talked about a kind of a 3% core Nasdaq expense growth rate, but that jives with or compares to roughly 1% I think you guys are tracking at this year. Then just the 6% number I think you talked about on the combined businesses of eVestment and Sybenetix, that's what you're going to be spending on just the kind of core growth of that business going forward versus any synergies or anything that might be coming out?
First of all, with the 3% relative to the 1%, the 3% represents the historical growth rate we've typically seen before synergies. This year, the 1% on a year-to-date basis really does take into account the synergies we have as for the four acquisitions and the flow-through of that into this year. 3% would be a normal organic growth rate over the last few years before the synergies. With respect to the 6%, that 6% does reflect the combination of both Sybenetix and eVestment, the year-over-year approximate increase due to those acquisitions and what that impact would be, and includes the run rate, the growth that we expect behind those businesses. As we said, we do believe that eVestment will continue to drive growth as well as Sybenetix, obviously.
Additional, as we disclosed here, there are some upfront integration costs for incentive retention compensation and some other things that we're going to be spending. When we did the call, when we announced the eVestment deal, we did talk about how there will be some synergies in the business, and that will be offset by some additional expenses that we'll be spending. So some of that is with respect to timing. Some of the upfront costs obviously have to occur now, and then the synergies would come in a future period.
Got it. Thank you.
Thank you. Our next question comes from Michael Carrier with Bank of America. You may begin.
Hey, good morning, Adena. Michael. This is Sameer Murukutla on for Michael Carrier. I guess I want to focus more on the market technology segment, and I think you highlighted the growth in the SaaS effort. Can you just give us more detail on this initiative, what kind of growth rates you're seeing, who you primarily are competing with? I guess if this is really being reflected in the backlog order intake as, I guess, it didn't move up as much as I would expect then on a quarter-to-quarter basis.
You're asking the question across the full segment? I just want to make sure.
Yes.
Okay. Yeah. I think that in terms of the overall growth of market tech, where we continue to see very strong demand is frankly in existing clients taking on more of our services and some new clients signing up to take our services, particularly in the post-trade area, in the surveillance and risk management areas, as well as some new trading clients that we've been able to attract this year. Then I would say that in our surveillance area, the smart surveillance business continues to be a high grower for us. All of those pieces are included in order intake and order backlog. I think that in the third quarter, you do have some vacation periods. It does slow down some of our clients from making decisions. We have had some really good wins this quarter.
Most notably, having a tier 1 bank choose us to develop their foreign exchange trading system, in addition to some post-trade wins with our clients. We are continuing to see very strong demand dynamics within the business. We do believe that the order backlog does reflect the potential for us to continue to show good organic growth in that business. We continue to have great dialogue with our clients as we roll out the Nasdaq Financial Framework and other new services that will expand what we can do for them.
As we've mentioned on other calls, as more of the business continues to convert towards more of a SaaS recurring business, the order backlog number is maybe not as representative as it has been in the past. We will be revisiting those measures in the future as to try and provide you with some additional color or some alternative measures to help see how the growth of the business is coming on.
Thanks for the color.
Thank you. Our next question comes from Brian Bedell with Deutsche Bank. You may begin.
Great, thanks. Adena, maybe just a little bit more on the regulatory side of things. You mentioned, obviously, this sort of relook at the Regulation NMS. I guess reasonably, in your view, how long would it take, it's always tough to obviously gauge regulators, but how long do you think it would take to run through the pilot programs and the process of gauging how effective the pilots were and actually changing any kind of rules on market structure? Also, same thing on the market data side. I know, obviously Tom Wittman and Chris Concannon, Tom Farley put a letter together with some concerns on the access fee pilot. Just trying to gauge sort of a timing of how long that whole process might take, and to what extent that would impact your business in the much more distant future than the near term.
Sure. Well, a regulatory process, particularly SEC rulemaking, is a robust process. It goes through an extensive comment period. It goes through a lot of debates and discussions. I can't predict how long that type of process could take. But in prior experiences, it's been a multi-year experience to try to look at significant changes in market structure at the SEC. What I'm pleased about is that it does go through a robust process. They have to go through an economic review. They have to seek comments from the industry. They allow the industry to have deep dialogue with the staff and with the commission. They do this in a way that's very overt and open to public comment as well, so that everyone kind of understands the process as it unfolds. But it is a long process and for good reason.
These are important decisions to make. They're important to our U.S. capital markets and to the way that the system works. They are integrated and integral. It's hard to take one part of a system and change it without having consequences to other parts of the system. It is really important for them to be very careful in considering them. I think they are. My experience has been over many years of working with the SEC, has been they do take these things very seriously, and they go through a very robust process. I can't predict specific times, but it generally is a multi-year process.
Adena, that's great color. Maybe back on the strategic review for the public relations and digital media. Obviously, you'll announce something when you have something. If we were to sort of assume that business is sold, given the revenue and operating income metrics, I think $195 million of revenue, I think it's about 13% or so of your nearly $1.5 billion of non-trading revenue. Can you give us a sense of the growth rate of that piece of business and assuming that's lower growth, that would sort of automatically enhance your non-trading revenue? As you pivot towards investments in some of the faster growth segments, could we see some upside to that mid-single digit overall non-trading revenue long-term growth profile?
The PR and the digital media businesses have been slow to no growers, essentially. They're not growth areas for us. I think that part of that is because we focus very much on the IR component of those businesses, because of course, that's our inclination. Using those services to interact with the capital markets and manage the public company components of working in the capital markets. I think that we are finding that we have a better opportunity to use our skills, our expertise, and our strategic relationships with our clients to really more on the intelligence side, the IR Insight, the advisory business, the board and leadership businesses. Those are higher grower businesses as a general matter than the PR and digital media businesses.
In terms of the pivot, the goal of our strategic review is to find ways to elevate our growth rates, to push ourselves towards the higher growth businesses. As we execute against that strategy, as I said earlier, we will be looking to assess our growth rates and provide you updated guidance, or at least our long-term, medium-term outlook, I think is what we call it, in terms of our revenue growth rates as we execute against that strategy. To the extent that we have completed the strategic review there and we've got investment inside our organization, those will be the types of things that would drive us to reassess our growth rates.
Okay. It's more like a next year type of potential change in that.
We are in the middle of execution today, so we'll see how things go.
Great. Okay. Fair enough. Thank you.
Thank you. Our next question comes from Alex Blostein with Goldman Sachs. You may begin.
Great. Thanks. Good morning, everybody. Just a couple of follow-ups around the operating leverage discussion, one kind of specific question and one broader picture question. I guess on the specific side, looking at Market Tech, this obviously remains a faster growth area for Nasdaq. Sounds like you guys are going through near-term investments, but the margins are kind of in the 20%-21% range for the last couple of quarters. How long do you guys think the elevated investment spend will persist, and how should we think about incremental margin expansion opportunities in that particular segment? I guess the follow-up on a broader side of things, just, Michael, taking kind of your comments around expectations for expenses for next year, obviously too early to be too explicit, but can Nasdaq deliver operating leverage next year, assuming mid-single-digit kind of revenue growth rates that you've targeted in the past? Thanks.
With regard to Market Tech, I think that we are making some very good investments in the technology. As a technology business, you always have to have some investment dollars. I think, though, that we have had some concentrated investments with the Nasdaq Financial Framework and some real investment in the smart surveillance business and some of the new capabilities we're bringing there. I think that that will continue to have an impact on the expenses of the business in the near term, as you mentioned. I think the question is, can we deliver that into a more scalable business going forward? That is most certainly the goal. As Michael mentioned, we are moving more of our revenue towards a SaaS model, recurring license model, and trying to make it so that we also have more hosted solutions over time.
We do believe that also will give us more operating leverage in that business. We do definitely have opportunities with these investments we're making to create operating leverage in that business. It will always be an area that we invest in because there's always new technologies we can apply and provide to our clients. I think that's a general answer to Market Tech. You want to answer the expense question, Michael?
Yes. I would say, with respect to whether there's going to be margin expansion or not, obviously, that is the goal over the medium to long term of the organization, is to continue to, as Adena said, drive the double-digit TSR, continue to grow the business for the top line at a faster rate than the expenses, which should drive that margin expansion. On a year-over-year basis, we don't give margin goals on a year-over-year basis, but that is the goal that we would have as an organization over the medium term. There's a number of things coming into next year, like the investment we talked about, the impact of the investment of the revenue impact of the acquisitions there, what ends up happening with the strategic review. There's a lot of moving pieces with respect to next year, and we don't provide that short-term guidance.
Really, the focus is driving TSR and margin expansion over medium to long term.
Got it. All right, fair enough. Thanks, guys.
Thank you. Our next question comes from Vincent Hung with Autonomous. You may begin.
Hi. Just a question on the SIP. The SIP has seen numerous improvements in recent years, I guess notably in latency. Given these improvements, did you ever see any impact on your proprietary data business? I'm just trying to understand whether meaningful improvements in the SIP here could lead customers to find the proprietary data is redundant.
The answer is no, we have not seen any impact on the demand for our proprietary data in relation to the improvements we've made in the SIP and the latency there. I think that people see them as serving two different needs. The SIP obviously is the basis for Best Execution. It's the foundation for interacting with the capital markets. The depth feeds allow for companies to have a lot of different strategies that they undertake to interact with those capital markets or to give clients just a bigger and better picture of the market. We generate revenue, as you can see, in our depth feeds across a whole range of clients. You've got non-professional users that get a chance to see depth through their online brokers.
You've got professional institutional users that are using it to really get a sense of where the market is and where it's going. You also have the professional traders who are using it to actually interact and execute strategies in the market. We have not seen any sort of shift in the demand characteristics as a result of improving the SIP latency.
Great. Thanks.
Thank you. Our next question comes from Benjamin Herbert with Citi. You may begin.
Hi, good morning. Thanks for taking the question.
Sure.
Just on eVestment, could you provide a little more color on the competitive position and then how that might change or improve, kind of plugged into your platform?
Well, I would say that eVestment today has a very strong competitive position. Bjørn Sibbern, who leads our information services business, has been working very closely on the integration planning with the eVestment team. We continue to be just incredibly impressed with the business, with the interactions they have with their clients, with the level of distribution and penetration they have in the industry, and kind of the unique nature of how they bring the information together and the analytics they can provide to every aspect of the investment management community. They have a very strong competitive position. I would say that they are relatively unique in how the data that they've been collecting, the penetration in the market, and the analytics that they generate.
We would expect that our synergies with them are that we can probably bring even more advanced analytics to the data that they have. We have our Mutual Fund Quotation Service. We would expect to integrate that and potentially get more penetration of that service through their clients. We have the potential to create new indices and other data products that are more generally available based on the public data that they collect. We just see great opportunity and synergy between the businesses to increase distribution, but also to deepen our relationships with the investment management community.
Thanks. Maybe just a quick follow-up on Sybenetix. That $805 million backlog, would that include any backlog related to Sybenetix?
I would say what we've been saying is that Sybenetix is a small company today. It definitely will include the backlog from Sybenetix going forward, it doesn't suddenly create a significant change in backlog upon the closure of the deal.
Great. Thank you.
Thank you. Our next question comes from Kyle Voigt with KBW. You may begin.
Hi. Good morning. First question on the strong growth in Trade Management Services. I know you cited in the slide deck an increase in customer demand for third-party connectivity in colo. We don't have any underlying stats on how the number of subscribers or users of these products has changed over time, but I'm wondering if you could help us kind of bridge the gap between the higher customer demand that you're seeing for connectivity with, on the other side, kind of continued consolidation of market makers and high-frequency traders and that consolidating trend seeming to accelerate more recently.
Generally speaking, the client base in our TMS business has increased over time. We continue to see new participants actually coming in and asking for connectivity, in addition to, obviously, the acquisitions create kind of a countertrend to that in some regards. Frankly, we continue to have active sign-ups and new clients coming in to support the TMS business. It's basically in terms of also the growth that we've gotten from Chi-X and the ISE integrations also have contributed to growth in that business as well.
Okay. Just as a follow-up on a prior question on the Treasury report, and specifically the question related to the SIP. One of the recommendations was to move to a consolidator model to provide alternatives to the SIP. I know it's a relatively broad recommendation, and not many details were kind of in the recommendation. Just trying to understand how you would envision that model playing out and how it could potentially impact the SIP data revenue pool for the industry, as well as maybe some other products that you have that already compete with the SIP, such as Nasdaq Basic.
Mm-hmm. First of all, the multiple consolidator concept is not a new concept at all. It's been a concept that the industry's been discussing for a while. The UTP committee has had that as an open agenda item for a while. It's not a new concept. I think that, as I said before, we have not objected to the concept of a multiple consolidator model, so long as it does not place undue burden on the broker-dealer community or the exchanges to create it. Just so everyone understands, the SIP itself is its own technology contract. The market technology business has a contract with the UTP committee to provide the SIP technology. In terms of having potentially a competing SIP, that's fine. The question is, who would also pay for that? That is not related to the market data revenue itself.
The market data revenue itself and the pricing of that is done by the UTP committee, and that would continue to be the case even if there were multiple SIPs distributing that data. I don't believe that would have an impact on the revenue. It would just create an alternative to the SIP. I think that there have been discussions on multiple consolidators or just a distributed SIP model, and we've had, I think, productive dialogue on both of those ideas over time.
Thank you.
Thank you. Our next question comes from Alex Kramm with UBS. You may begin.
Yeah. Hey, good morning.
Hi.
I guess coming back to that regulation topic that we've been debating all day here. I think the bigger reason why we're having this debate is obviously because broker-dealers' customers are facing a hard time in seeing non-transaction costs and U.S. equities go higher. That doesn't obviously not just include market data, but also includes things like connectivity, co-location, port fees, et cetera. To Kyle's question just now on the trade management fees, which is, I think, roughly $300 million per year trailing, how much of that is U.S. equities? What's the pricing dynamics there? Are you getting a lot of questions or headwinds from clients on that part of the business? Because I think it's included in the bigger debate, right? Maybe some more color.
Yeah. Our overall TMS business is also a very diversified business, and it supports a lot of different asset classes. It also supports our trade reporting facility and other things. It is a diversified revenue stream itself. We do not separately disclose the components of that revenue stream. I think that generally speaking, the demand for overall just cabinets, ports, colo, things like that have been steady over time for the U.S. equities markets. We've had growth in that business coming from some of the acquisitions, as I mentioned, with Chi-X and ISE and earlier with eSpeed. I think that we're growing by having more things, more exchanges, more asset classes traded through our data center, in addition to having connectivity for equities, and I would say, a variety of different connectivity choices that we offer to all of our clients across asset classes.
I would say this, Alex, it's a very steady business. We work very productively with our clients. We continue to have actually new customers signing up for certain services and connectivity into equities in addition to other asset classes. It's been a nice, strong part of our business.
That's fair enough. Just very quickly for Michael, did you point out audit fees this quarter? I think in the press release you said it was a driver, but what's the number this quarter?
It was $8 million this quarter. It was $4 million the same quarter a year ago.
Perfect. Thank you.
Thank you. Our next question comes from Patrick O'Shaughnessy with Raymond James. You may begin.
Hey, good morning. I was hoping you could provide an update on the U.S. listings competitive environment, I think both in terms of battling against the established competitor for some of the biggest IPOs and then battling against the new entrants in the spaces offering to waive 5 years of listings fees.
First of all, we are really pleased with how the listings have developed as we've gone through the year. As you mentioned, in the third quarter, we had a 77% win rate. We've had some great companies come and access the public markets over the quarter, and we continue to see a really nice, strong pipeline of listings as we go through the rest of the year. It does feel like the overall environment's picking up, and I think we're doing well competitively in winning IPOs and having some great companies choose to have Nasdaq as their home. We're pretty pleased with how the dynamics are developing there. In terms of just overall competition, we compete vigorously for every IPO. We compete vigorously on getting companies to switch from our competitors to Nasdaq, and we continue to find success in that area as well.
We respect all competitors and new entrants. We do want to make sure that our clients, our existing clients, and any new clients fully understand the breadth and depth of Nasdaq as a listing exchange partner and the value proposition we offer. I think we do believe that we have the best value proposition out there. We feel very good about how things are developing right now.
Got it. Thanks. Then for my follow-up, you touched on this a little bit in your prepared remarks, but can you expand on some of the ways that you might be able to leverage your eVestment client relationships to provide more services or products to active asset managers?
Well, I would say the core of their business today are active asset managers in addition to alternatives and, over time, some more focus on the passive investors as well. We do want to make sure that we look at how we can leverage the relationships they have there, the platform, the delivery mechanism, to bring them more analytics that would help them manage their investment strategies in addition to making them competitive with each other. I think that we are just at the beginning of our planning stages around that, but that certainly is part of the strategy.
Great. Thank you.
Thank you. Once again, ladies and gentlemen, if you wish to ask a question at this time, please press star then one on your touchtone telephone. I'm currently showing no further questions at this time. I'd like to turn the call back over to Adena Friedman for closing remarks.
Great. Well, thank you very much. I think that as we look at all of the advancements and the strong third quarter results, we feel that they have been achieved by advancing our core franchise's competitive position coupled with driving growth in our technology information analytics businesses. The strategy that we articulated today will continue to gain momentum as we integrate the acquisitions, invest in our future, and conclude our strategic reviews. Our refined cap allocation and continued focus on double-digit shareholder return will help ensure that our team and our shareholders remain aligned in the quarters and years ahead. With that, thank you very much, and I look forward to speaking with you all soon.
Ladies and gentlemen, this concludes today's conference. Thanks for your participation. Have a wonderful day.