Good day, ladies and gentlemen. Welcome to the Nasdaq second quarter 2016 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will follow at that time. Should you require operator assistance, please press star then zero on your touch-tone telephone. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Ed Ditmire, vice president, Investor Relations. Please go ahead.
Good morning, everyone. Thank you for joining us today to discuss Nasdaq's second quarter 2016 earnings results. On the line are Bob Greifeld, our CEO, Ronald Hassen, who was our interim CFO and is acting as our principal financial officer until the filing of our second quarter 2016 Form 10-Q, Michael Ptasznik, our new CFO, our Chief Operating Officer and President, Adena Friedman, President, Hans-Ole Jochumsen, 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 FD.
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 Bob.
Thank you, Ed. Good morning, everyone. Thank you for joining us today to review Nasdaq's second quarter 2016 results. Certainly, when you look at our performance this quarter and during the first half of the year, the balance of our business model continues to demonstrate its resiliency. As I have pointed out to you before, while we are not immune to market forces and significant global events, we are, however, intensely focused on serving our clients and supporting them throughout pivotal moments in their evolution. As a fintech company, technology has always been the fundamental focus that drives our decisions and ultimately enables us to expand and grow our competitive position in the marketplace. During the quarter, Nasdaq delivered record revenues of $559 million, as well as record non-GAAP operating income of $259 million.
We achieved non-GAAP EPS of $0.91, which ties our all-time high and is a 2Q record. It represents a 10% year-over-year increase and underscores our ability to deliver double-digit shareholder returns through EPS growth and dividend yield. Clearly, organic revenue growth is one of the key benchmarks by which we judge our progress. I am pleased to report that it was positive in all 4 segments. Our non-transaction segments combined delivered a very respectable 4% organic growth in the 2Q versus the prior-year period. The biggest standout was in our Technology Solutions segment, which saw organic growth of 6% when compared to the prior-year quarter. Truly outstanding. This was driven by recent business wins and continued growth in market technology, including SMARTS surveillance and revenue recognition of our Borsa İstanbul contract.
On top of the organic progress, we also closed 2 important acquisitions during the quarter in ISE and Boardvantage. We are now clearly in execution mode on all 4 acquisitions we completed during this year. We have been and will continue to be maniacally focused on delivering maximum value in each of these deals to our clients and our shareholders. I'm pleased to report we've achieved the first $10 million of synergies in the 2Q. When we look at how we are improving our competitive position across this franchise in all the businesses in which we compete, we are doing it in a variety of compelling ways. One, through organic investments in fundamentally disruptive technologies and also organic growth initiatives, as well as expansion through acquisitions that lever our core competencies.
I want to talk about our progress this quarter in the context of these 3 core areas of focus and highlight how they continue to drive client opportunities and growth. As I mentioned, organic growth reinforces that we are on the right track strategically and in terms of running our business as well. It's also a sound endorsement that we're doing the right things on behalf of our clients. In our Market Services segment, we continue to focus on creating one of the most robust multi-asset platforms in the industry for our clients. To this point, perhaps most exciting for us right now is the progress of NFX. We just passed the 1-year anniversary since the launch, and we've hit 3 major milestones around that 1-year mark. 1st, we had just this week our first 5% market share day. 2nd, we had our 100th firm transact on the platform.
And 3rd, we've gone over 1 million contracts in open interest. Operationally, we began a new chapter in the NFX story when we introduced fees in the beginning of May. In the 2-month period that followed in May and June, I'm pleased to report that open interest ended 22% higher, while average daily volume was 27% higher. Our market share during the same 2-month period increased by 70 basis points, a 29% improvement. As I've said before, pricing is being introduced at modest but meaningful levels in the products that have already seen a meaningful liquidity build. We will continue to price according to the value we are delivering to our customers. In addition, we're already off to a strong start in the 2nd half of the year.
This is against a backdrop that features macro and geopolitical volatility, as well as progress we've seen on strategic initiatives such as our acquisitions. I'll come back to those a little bit later. Given our momentum, we are in a strong position to defend and improve our competitive position in our trading businesses, something that has and always will be fundamental to our future. In our listing services business, organic growth continued to be solid at 3% during the quarter. Overall, Nasdaq remains the new listings global leader in the first half of 2016, with a total of 167 new listings, including 68 IPOs and a 73% win rate in our U.S. market. One standout for us has been the performance in the Nordic markets, where we saw 47 new listings in the first half of the year, with over €4.2 billion in capital raised.
Included in these numbers was the largest IPO of the year globally, the DONG Energy listing on our Copenhagen market. We also continue to maintain strong exchange listing transfer momentum in the U.S. We had 13 companies switch from NYSE in the first half of 2016. They were led by such great companies as Scripps Networks Interactive, Tronc, which is formerly Tribune Publishing, OPKO, a leading biotechnology company. Since 2005, over $830 billion in market value has chosen to switch to Nasdaq, including $43 billion in the first six months of 2016. Truly outstanding. Elsewhere, we also continue to improve in ETF listings. Nasdaq added 61 new listings in the first half of the year, including 24 switches, leading the industry with a 39% share of new listings and switches, and driving the total number of ETP listed at Nasdaq to 277 at mid-year, up 57% versus the prior year.
While still clearly an early-stage initiative in terms of revenue, we continue to see strong operational traction in Nasdaq Private Market. We saw 133 private companies use our platform in the second quarter, more than doubling from 62 in the prior year period. We also are working to expand our offering. The private market opportunities continues to grow. We have new clients coming on board just recently, such as [Usero] and Skybox. During the first half of 2016, the private company secondary market saw the number of transactions grow by over 20%. The dollar volume rose most significantly, 135% year-over-year. Again, another outstanding performance. As I mentioned before, our technology solutions segment saw the most dynamic growth during the quarter, achieving 6% organic growth.
This was driven by market technology business, which benefited from continued strong trends in the surveillance, post-trade, and GRC spaces, also as revenue recognition starts to reflect more of the recent period's significant business wins. These are just a few of the examples of how our focus on efficiency and serving clients continues to manifest itself in our results and improve our competitive positioning. As you know, in addition to organic growth, strategic acquisitions are core to our growth strategy and will deliver increased value to our clients. Let me give you a brief update on our progress. As I mentioned, during the quarter, we closed two acquisitions, ISE and Boardvantage. With ISE, we closed the transaction at the very end of June. I'm pleased we were able to do so in such a timely fashion.
Less than four months from announcement and executing on a financing package at lower than expected cost. We are intensely focused on leveraging our platforms to provide new capabilities and functionalities to clients of the combined businesses. We're off to a strong start. Since closing the transaction, our combined options market share has remained very close to the 40% level, combining all our franchises together. It's certainly an early sign that the market understands and is responding positively to our client discussions on how the combination will deliver greater value and opportunity. Upon closing the transaction, we've already realized approximately $8 million in annualized run rate synergies, a first step against the total $40 million synergy opportunity. I am pleased to report that the transaction is immediately accretive to non-GAAP earnings. Very similar to Philly, if you remember, Ron, back in the day.
Of course, we are targeting much higher synergies as we continue integrating our technology assets and teams and migrating to our core trading platform. I'm looking forward to updating you on that progress, as well as our progress in integrating and migrating our Nasdaq CXC business onto our core trading platform in the quarters to come. In our corporate solutions business, we closed Boardvantage in May and are well underway with the integration and our focus to provide one of the most robust set of board and collaboration tools in the marketplace today. Taking the Boardvantage acquisition together with the first quarter's close on the Marketwired acquisition, our expanded footprint in PR distribution and governance space gives our corporate solutions business a heavier mix than what we believe are the higher growth, higher margin, and more scalable businesses, as well as material cost synergy opportunity.
We achieved $2 million in run rate synergies in the second quarter versus a targeted $20 million opportunity within 18 months of closing. Perhaps even more importantly, as we work more broadly to return corporate solutions to positive organic growth, the two deals bring approximately 7,500 new corporate clients to expand our relationships and drive new cross-selling opportunities across this franchise. In summary, during the first half of the year, we closed four acquisitions on or ahead of schedule at significantly better than expected financing costs. Based on that, as well as our increased confidence in revenue trends and synergies, we feel comfortable raising the 2015 diluted EPS accretion number to $0.40 per share from the prior $0.37 we provided during our March Investor Day. The $0.40 accretion assumes 2015 pro forma results with full synergy realization. Certainly very good progress so far.
As a financial technology company, our ability to see around corners and apply technology in new and innovative ways for clients is fundamental to our success and the future of the franchise. I want to briefly highlight our ongoing progress during the quarter. In May, at our semi-annual Future of Technology Conference for market technology customers in Stockholm, with the largest customer attendance ever, we announced a significant step in the evolution of how we will deliver technology to our clients and our internal systems as well. The Nasdaq Financial Framework is a result of listening to our clients and the result of significant R&D efforts. It truly transforms our offering into a more modular approach that will enable more flexibility in the way our clients use our solutions.
The heart of the framework will be an open and high-speed communication, operations, and resiliency layer that will allow us to more effectively introduce new functionality, including blockchain capabilities, across the entire trade life cycle for clients. It's early days yet, but we are excited about the potential this innovation will bring to capital markets as we begin to roll it out later this fall. The interest and conversation levels with current and potential customers has been remarkable. Likewise, in our corporate solutions business, we continue to accelerate the rate of innovation and new solutions we're putting onto the platform. For example, we continue to enhance IR Insight even as we dedicate significant resources to the migration of thousands of users onto the platform.
In June, we announced the addition to the platform of IR Analytics, which will provide clients with dynamic and rich data dashboards to help them analyze large amounts of data from multiple sources and make better decisions about how they allocate finite, valuable resources to pursue their objectives. In addition, we also introduced Nasdaq Influencers to our PR and communication suite, where we are empowering communications and marketing clients around the world to tap into an increasingly important network of thought leaders. These are just a few examples of the types of ongoing innovation occurring at Nasdaq. In addition to proofs of concepts we continue to develop to better leverage new technologies like machine learning and blockchain to improve our clients' workflow and alleviate business complexities. In closing, I am proud of the team and the results we delivered this quarter.
It is certainly indicative of our strong ability to execute against a variety of backdrops while continuing to meet our clients' needs. Perhaps, though, what is most exciting for me is the level and intensity of innovation occurring throughout this organization. As I've stated before, I do not judge our business on backward-looking financial results, but forward-looking measures, such as how are we meeting our clients' needs and how is our relative competitiveness. In both of these most important measures, it has been a most outstanding quarter. We look forward to the second half of the year and hope to execute just as strong for both our clients and shareholders as we did for the first half of the year. Before I turn the call over to Ron Hassen, I want to introduce everyone to our new Chief Financial Officer, Michael Ptasznik.
We are very excited to have him join the team. With over 20 years of experience, we certainly look forward to working with him and benefiting from his extensive experience on both the financial and operational sides. This is a particularly busy time in our company's evolution. We know Michael is a great asset for the team, and you will enjoy getting to know him and working with him. Welcome, Michael. I also want to thank Ron for his dedication in guiding us through this transition, as well as working and serving as our corporate controller over my entire tenure at Nasdaq. His contributions have been immeasurable. He will be missed. Now I turn the call over to Ron Hassen one last time to review the financial details.
Thank you, Bob. Good morning, everyone, and thanks for joining us today. My commentary will focus on our non-GAAP results. Later in my prepared remarks, I will discuss the periods differences between U.S. GAAP and non-GAAP results. Reconciliations of U.S. GAAP to non-GAAP results can be found in the attachments to our press release and in the presentation that's available on our website at ir.nasdaq.com. I will start by reviewing the second quarter revenue performance relative to prior year quarter as shown on page four of the presentation. The 8% or $41 million increase in reported net revenue of $559 million consisted of organic growth in Market Services net revenues of $1 million or 1%, resulting principally from higher access fees of revenues. Organic growth in non-trading Information Services, Technology Solutions, and Listing Services segments totaled $13 million or 4%.
In addition, there was $24 million in revenues from our recently completed acquisitions of Marketwired, Boardvantage and Nasdaq CXC. Year-over-year changes in FX rates increased revenues by $3 million. I am now going to go over some highlights within each of our reporting segments. All comparisons will be to the prior year period, unless otherwise noted. Information Services on page six saw a $3 million organic growth, a $2 million increase related to Nasdaq CXC acquisition, and a $1 million increase due to the positive impact of foreign exchange. Data product revenues increased 8%, including organic growth in consolidated and proprietary data products revenues, as well as a growth in audit collections. Index Licensing and Services saw a $2 million decline due to lower average assets under management in the period, which was primarily due to declines in market values.
Technology Solutions, as shown on page seven, increased $28 million, reflecting a $19 million contribution from the acquisitions of Boardvantage and Marketwired, $8 million or 6% organic increase. The non-GAAP operating margin was 18%, up from 14% in the prior year period. We continue to have confidence in reaching our medium-term objective of 20% and expect further year-over-year progress as we move forward. Corporate Solutions revenue increased due to the impact of the two acquisitions. We continue to believe we are on a path to return to organic revenue growth in Corporate Solutions in the coming quarters. Market Technologies revenues increased by $10 million or 17%, primarily due to increased revenues from licensing and support contracts, change requests, and surveillance products. New order intake was $69 million in the second quarter, and at the period end, backlog finished at $769 million, up 9% year-over-year.
Listing Services, which is on page eight, saw a $2 million or 3% organic increase in revenues, driven primarily by increase in the number of listings. Non-GAAP operating income margin of 43% was down from 44% in the prior year quarter. Market Services, which is on page nine, saw a $1 million or 1% organic increase in net revenues, plus a $3 million increase due to the acquisition of Nasdaq CXC and a $1 million positive impact from foreign exchange. Non-GAAP operating income increased to 54% from 53% in the prior period. Equity derivatives trading and clearing net revenues increased 5%, primarily due to the higher U.S. industry trading volume and market share.
Cash equities net revenue increased 2% due to the higher industry U.S. volumes and the inclusion of revenue from Nasdaq CXC, partially offset by lower market share in both the U.S. and European markets and lower capture rate in the U.S. Fixed income currency and commodities trading and clearing net revenues decreased by 13% from the prior year, principally due to the impact of NFX-related trading incentives and lower U.S. Treasury revenues, partially offset by growth in European fixed income and commodity trading. Access and broker services revenue increased by 8% due to an increase in customer demand across most product areas. Before we turn to expense trends, I'd like to take a moment and give some detail around the non-GAAP adjustments this quarter. First, we had a $33 million restructuring charges related to the completion of the restructuring program that began in the first quarter of 2015.
The total cost of the restructuring program was $214 million, which included $119 million related to the write-off of the OMX trade name. Excluding the write-off of the trade name, the restructuring cost was $95 million. The estimated annual savings associated with these costs are $36 million, which will result in a three-year recovery. Second, we had $35 million in charges related to the acquisition and integration activity, substantially all of this related to the ISE acquisition. Third, during the quarter, we received an unfavorable tax ruling, which resulted in a $27 million charge on our tax line. Turning to page 10 to review expenses. Non-GAAP operating expenses increased to $19 million. The increase included $15 million due to our acquisitions and $4 million in organic growth.
Turning to slide 12, our revised 2016 non-GAAP operating expense guidance has increased by $35 million from the prior guidance to reflect the expected impact of the acquisition of ISE. Non-GAAP operating income in the second quarter increased 4% on an organic basis and 9% in total. Non-GAAP operating margin came in at 46%, up 50 basis points from the prior year period. Net interest expense was $31 million in the second quarter, an increase of $5 million versus the prior year period, reflecting the additional interest expense from our recent bond offering. Non-GAAP effective tax rate for the second quarter of 2016 was 33.8%, within our unchanged 33%-35% full-year guidance. Non-GAAP net income attributed to Nasdaq was $153 million, or $0.91 per diluted share, compared to $143 million or $0.83 per diluted share in the second quarter of 2015.
Moving on to cash flow and capital. Please turn to slide 15. We repurchased $16 million in stock during the second quarter of 2016. We purchased an additional $8 million in the first few days of July of 2016. Through dividends and repurchases, Nasdaq returned nearly $70 million in capital to shareholders during the second quarter of 2016. As of July 26, there is $476 million remaining on the board repurchase authorization plan. I am probably even more excited about Mr. Ptasznik's arrival as a new CFO than the rest of the team.
In addition, to welcome Michael, I wanted to thank Bob, Adena, Hans-Ole, and the rest of the Nasdaq management team and the board for the opportunity to serve as the Interim CFO. To the analysts and the investors I met during this period, it was truly a pleasure talking to you about Nasdaq, a company that is positioned and well to move forward to tackle its unique opportunities. Thank you for your time. I turn it over to Bob.
Thank you, Ron. As I said before, you'll be missed. Your sense of humor will be impossible to replace.
Thank you, sir. Appreciate that.
Operator, should we open up the queue for Q&A?
Thank you. Ladies and gentlemen, if you have a question at this time, please press star, then one on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question today comes from the line of Rich Repetto with Sandler O'Neill. Your line is open.
Yeah, good morning, Rich.
How are we doing, Bob? Pretty good, Bob. How are you?
I cannot complain.
Congrats on the record quarter.
Thank you.
First question is, you beat on the revenue side at least versus us on technology solutions, with a good portion driven by the market technology. I know you've given three reasons why it did so well. I guess the question is, how much is one-time? How much is in that will improve the run rate going forward, whether it's the licensing fees, the change requests, or surveillance seems like it's an ongoing thing. I guess to give us an outlook on market technology going forward, because that was a clear beat.
I'll turn it over to Adena, but I do want to make it very clear, this business is really doing incredibly well across a number of different areas. We highlighted a couple, but our competitive position, as a result of our technology initiatives, our technology investments, our focus on the customer, is certainly starting to pay off in a major way.
Great. Hi, Rich. How are you?
Hi, Adena.
In terms of market tech, I think that there are, as we said, three factors. The Borsa İstanbul revenue recognition is an ongoing benefit that we will see. In the second quarter, it had about a $4 million positive impact, and on an ongoing basis, subject to FX, it should have somewhere in the range of $6 million of quarterly benefit to us. I think that the second thing was the CRs. Those tend to ebb and flow quarter-over-quarter. There's some seasonality to that. It's based on change requests that our clients ask for. We got off to somewhat of a slow start to the year, the second quarter was a great quarter for us in terms of the CR revenue. We do tend to see that happen in both the second and the fourth quarter tend to be our strongest quarters there.
Lastly, on SMARTS, you're right that the SMARTS Trade system is a SaaS-based model, so we have about a $2 million impact there, and that would be an ongoing uplift that we can enjoy going forward as we continue to sell more of that service throughout the clients. We're very excited about how market tech continues to progress.
Okay. Very helpful. Since it's Ron's last call, Ron, on the outlook for expenses, if you back out the first half, you come up with the midpoint somewhere around $330 million in expense per quarter. I guess I'm trying to see. We know we got the ISE
We know we got a small portion of Boardvantage in there. To me, that might be an incremental uptick of somewhere around $20 million. You got synergies, I would expect
Right
of the $52 million that you haven't realized yet.
Yeah. You're right. ISE is in there for around $18 million, and if you normalize for a Boardvantage for a full quarter, you're there about $3 million. We gave you guidance also on R&D is between $35 million and $45 million. We expect to spend a large part of that in the second half. You'll see some of that expense coming in. Then we're seeing higher activity where we have gross up in expenses and revenue from some of our corporate solutions businesses, which kind of make up that amount to bring you to roughly around the $330 range.
Okay. Thanks. That's helpful, Ron. Bob, one last quick question. Great results, the one thing I wanted to ask about is on the market share. If you look at the market share in U.S. equities, it's hitting a low in July. I know it's low volatility. It doesn't look like you're losing it to competitors rather than the TRF. I know you monitor it, but how do you think about that, I guess?
Yeah. Well, your point is well taken. When you see Tape C relative to A and B, we've had a greater use of the TRF there. We don't quite understand why that is, but it is what it is today. I'd also say as a general statement, our capture rate, as you saw in the quarter, was high, as I've said before, we try to balance that. I think you'll see us go forward taking a number of different actions, which will probably increase market share, but still keep a robust capture, but maybe not at the $0.50 level.
Understood. Thanks, congrats again on the record quarter.
Thank you.
Thank you. Our next question comes from the line of Ashley Serrao with Credit Suisse. Your line is open.
Yes, hello. This is Mark Carney, standing in for Credit or Ashley Serrao.
Okay. How we doing, Mark?
Not bad. How are you all?
Can't complain.
Excellent. Just two quick questions. One, I was wondering if we could have an update on the IR solutions client conversions, kind of where we are in the process and how retention has fared.
Yes. Go ahead.
Sure. We continue to be on track with the IR conversions. In fact, I think that we've been accelerating that as we've been going through the quarter. People are receiving the product extremely well. We've built in an automated migration tool that's really helped, and clients are very excited about being able to get access to the new product. Far, I just want to make sure that I get the right numbers here. We've upgraded 1,600 clients to the IR Insight platform and 2,800 users. We continue to be on track to complete that through this year.
Generally, in terms of the client retention, it is a very competitive market out there, but we are seeing very good improvement, both in terms of how our clients are taking the product and retaining our users in addition to selling the products, and competing against our tough competitors.
I think with respect to this business, it's important to recognize we come at it, as we talk about, as a technology company. This is a game-changing release that we're putting out there. We've only just begun. There's active efforts to continue and invest in the product, and that's where our skills, our abilities, I think, are unmatched. Customers are starting to recognize when you think about long-term direction, Nasdaq is providing it.
Excellent. Thank you. Then quickly on capital management, just wondering how you're thinking about kind of buybacks versus paying down debt and whether you still kind of view the M&A market as frothy.
I'll say two things. One, with respect to buybacks, we're committed to do buybacks. You saw the board increase the authorization. As I said before, we'll be opportunistic. I think under Ron's leadership, we did a very good job in the quarter buying at the right time. We're there, but we'll be opportunistic. With respect to M&As, I think, anytime you have the interest rate environment you have here now, you have to guard against frothy evaluations. We've done that, I think, quite successfully. As I've said before, we have been shut out in a number of deals, but then, after waiting for a long period of time, the four deals we've done this year, as we said, are, I think, fairly priced. They represent right down the bowling alley in terms of what we do today.
The synergy numbers are impressive, and the return to our shareholders will be equally impressive. Those kind of deals, if they become available, we'll be in the game. If they're not, and they're richly priced, representing some type of asset bubble, then we're happy to lose.
Excellent. Thank you very much.
Thank you. Again, ladies and gentlemen, to ask a question, press star then one. We do ask that you limit yourself to one question and one follow-up question. Our next question comes from the line of Christopher Harris with Wells Fargo. Your line is open.
Thanks, guys.
How are you doing, Chris?
Hey, pretty good, Bob. Real quick question on the acquisitions you guys have done. I believe your guidance is excluding potential upside from any revenue synergies that might occur. As you guys are integrating these transactions, any thoughts on how material those could be and how quickly you might be able to achieve those?
Well, I would say this, we're very comfortable increasing the number to $0.40. We believe there's an upside bias to that number for both expense and revenue, we're not in a position to commit to that now. It's early days with all of them. We feel optimistically inclined.
All right. Just a quick question unrelated to the quarter. Bob, would really like to get your thoughts on blockchain technology in general, and how big of an impact you think this might have on the industry, and perhaps a little bit about how Nasdaq plans to capitalize on that.
I'll give you two views. One, on the optimistic side is the blockchain will change everything with respect to post-trade across a wide variety of asset classes across the globe, in time. That will happen. On the other side, you have to recognize that blockchain by itself, and I tie back to what Larry Ellison said back in the dot-com days, is that's a feature. It's not a company. Blockchain is another method of storing data, and it needs to be integrated into solutions that fit within the construct of the ecosystem we live in. What we announced at the Future of Technology Conference, which I referenced in my prepared remarks, is a pure recognition of that. We're putting the blockchain as a key part, a central part of the Nasdaq Financial Framework. By itself, it doesn't do anything.
I think the integration, the deep integration of blockchain into core technologies is fundamental, and we're on that mission. We see this as a major opportunity, but we think just somebody out there trying to sell blockchain technology is not going to get that far. It has to get integrated into what happens today.
Thanks.
Thank you. Our next question comes from the line of Alex Kramm with UBS. Your line is open.
Good morning, everyone. Just maybe more broadly speaking on the non-transaction side, wondering if you could give us an update around the selling environment and how that's changed so far this year, given all the challenges from the financial services industry. In particular, as you look forward, how Brexit, in your opinion, could change that in some of your businesses. Thanks.
Sure. Hey, Alex. If we start with the Market Tech business, I think that we continue to find a very receptive audience among our clients, as well as new potential clients. We did sign on a new client in the first quarter. We've renewed several contracts. We've upgraded several of our contracts. That's why we had such good order intake in the second quarter, and we continue to see very good opportunity in our core Market Tech business, in addition to the SMARTS Trade system, which frankly has tremendous traction, is an award-winning solution, and we continue to see a very robust pipeline of sales opportunities there. I don't think Brexit is going to have an impact on either of those businesses in any meaningful way.
If we turn over to Corporate Solutions, Corporate Solutions continues to have a variety, frankly, of sales environments in it because it's a wide range of products. But in terms of the need for instance, board portal technology, and more intelligent PR distribution and intelligence solutions, that continues to be an area of very good growth for us. In terms of the investor relations products, I would say it depends on the sector. We continue to see weakness in the energy sector, but strength in some of the biotech and the technology sectors. Again, Brexit doesn't really have any impact on that business either. I hope that answers your question.
Sure. Thank you. I guess secondly, I think this is for Bob. I know cash equities isn't really that important of a business for you anymore in terms of revenue contribution, but it seems like there is some growing support within the SEC for some access pilots or access fee pilots. Just wondering what you think about that kind of initiative. It seems like it would actually impact a lot of the market if they really include all of the different symbols, and some of the folks we've talked to think this could actually be a pretty big negative for volumes down the line. Any thoughts, any discussions you've had from your end will be helpful. Thanks.
Yeah. Well, the first thing I want to say is we are in love with the cash equities business. It's the core of what we do, and we pay a lot of attention to it. As we get larger and do different things, it's important to recognize we will not do that unless we execute quite successfully in all our chosen businesses, and cash equities is really first among equals. With respect to what's happening, as you recollect, we attempted of our own accord, to do a basic access fee pilot.
We picked certain stocks, we thought this was a good thing to do because when you think about the passage of Reg NMS and the $0.30 was picked as the limit for access fee, that may or may not have been the right number at that point in time, it cannot be the right number a decade later. We have a belief that that number is too high, we're in full support of the commission moving forward with that. On the other side of the equation, we believe in rebates. We believe in the maker-taker model, but we also do not believe that the maker fee should be so high that it creates activity in and of itself. It should be there to provide incentive for somebody to reveal their hand first.
To the extent we shrink the access fee and the maker rebate declines, I think that could be a good thing for the market. First and foremost, we believe that high-quality markets are good for Nasdaq and good for us, we fully support what hopefully will happen in a faster pace with the commission. We certainly think that, as I said before, if the market quality is better, then an organization like Nasdaq is better served.
Fair enough. Thank you.
Thank you. Our next question comes from the line of Michael Carrier with Bank of America Merrill Lynch. Your line is open.
Thanks, guys. First question, when we look at the updated expense guidance, wanted to maybe get a comparable update in terms of the acquisitions that closed and some of them that closed during 2Q. Maybe what the full run rate can be on the revenue side. Looking out, I know you guys aren't providing 2017 expense guidance, but when I think about that, I think there's about $50 million of synergies that remain, I think you said, over the next 18 months. When you look at that midpoint of the expense range for this year, if we kept expenses flat going into next year, that would be like a 4% growth rate, if you realize those synergies. Wanted to get some guidance of what the core maybe expense run rate should be going forward, maybe pre those synergies.
It's a little too early to go. We want to see exactly what the synergies are going to look like going into 2017. I think it's much too early to try to look out into 2017 at this point in time and to give any form of guidance. We gave fairly good guidance at this point, taking into consideration the synergies that we know to date, which is roughly $10 million on an annualized basis, and gave a midpoint of roughly $1,240 million. To go beyond that would be quite difficult to go that way. We'll give 2017 guidance as we always have in the fourth quarter.
Got it. Anything on the revenue side, meaning any of the deals that closed intra-quarter-
Yeah
A full run rate or an update there.
As you saw at Investor Day, I gave guidance on these deals as how they performed in 2015. It's too early to talk about ISE at this point, but in terms of the other three deals, they're operating on the same pace as their 2015 revenue guidance that I gave earlier. It's not too much difference than what you saw there.
Okay. Got it. Thanks a lot.
All right.
Thank you. Our next question comes from the line of Chris Allen with Buckingham Research. Your line is open.
Good morning, everyone. Just wanted to shift back a little bit to Corporate Solutions. I think, Bob, you said in your remarks that the stage is set for better organic growth in the back half of this year. I'm just wondering what are going to be the catalysts for that. Adena talked about some of the tailwinds, headwinds within the business, and maybe any color on subscription sales that you guys have seen so far this year and what kind of the outlook is moving forward.
Yeah. I would say this, that the second quarter was very strong and that we're serving two masters, in that there was a massive ramp-up in the transition to the new platform. Adena references we're on schedule, and I think soon we'll be ahead of schedule with that. That's obviously a consumer resource and will cost money. At the same time, we saw a noticeable increase in our win rate versus the competitors, and that will obviously translate down the line to the growth. The core drivers of the business look strong, and as we convert folks to the new platform, we're certainly in ideal position to start cross-selling. Adena, you want to add to that?
Yeah, I think more broadly, Chris, we've been talking about the different dynamics within Corporate Solutions all year. I think one of the areas that we have had some headwinds is in the MMS sales, but that's been, I think, offset by continued growth in the BoardPortal platform. Definitely very strong revenues coming in on Marketwired as well as continued rollout and definitely a pickup in sales within the IR Insight platform. There are lots of different dynamics there, but I think that as Bob said, we are moving towards a situation where we feel that we can hit revenue growth, and we will continue to track that very carefully.
Okay, thanks. Just one quick question on Market Data. In the press release, you called out year-over-year growth benefited from audit collections. I know last year was a low quarter for audit collections. I'm just wondering if any color in terms of magnitude this quarter, maybe how it compared sequentially with the first quarter?
Yeah. This quarter, we had $5 million in audit revenues. Last quarter, the first quarter, that was $4 million, and the second quarter of last year was $2 million.
Great. Thanks a lot.
Okay.
Thank you. Our next question comes from the line of Daniel Fannon with Jefferies. Your line is open.
Good morning. Thanks. Within the Tech Solutions, the margin improvement quarter-over-quarter or year-over-year as well, I guess, can you talk about the contribution from Marketwired and Boardvantage to that versus kind of the core trend potentially improving longer term?
Yeah, I think that the improvement in the margin was driven by the core business and primarily in Market Technology, not by Marketwired or Boardvantage. Right now, we're having to absorb them. There's some one-time costs associated with bringing them in. As we achieve synergies, they will become a significant contributor, and they should help us accelerate some of the path to that 20%. Right now, they're not contributing to an increase in the margin right now.
Great. Just a follow-up on the synergies, the outlook, I guess the pace of synergy realization over the next 18 months, do we think that's more of a 2017 event, or we should see that kind of progress through this year?
Well, within Corporate Solutions, I would say that it's more of a 2017 event because we'll be consolidating platforms and providing our clients new benefits, and we'll be managing that through 2017.
Also on the Market Services side, just with the synergies, the $40 million that's been targeted.
Yeah. There's one bump, and that's when you actually move away from the platform. We haven't locked in on that date yet. You'll see an increase in the synergies and then an acceleration as the platform is migrated.
Great. Thank you.
Thank you. Again, ladies and gentlemen, in the interest of time, we do ask that you now limit yourself to one question. Our next question is going to come from the line of Patrick O'Shaughnessy with Raymond James. Your line is open.
Hey, good morning.
How we doing?
Curious if you have any updated thoughts on what you might do with those U.S. stock exchange medallions you're getting from ISE.
What I would say for today's call is the intention on the options side is to keep all the medallions active. We'll be managing the six medallions. It's important, I expected the question, but I'll handle it here. With our options, we're definitely managing this as a portfolio. Tom will answer to Hans-Ole, Adena, myself with respect to the overall market share, and we expect to pull different levers at different times between the different exchanges with the different market share results. We're happy with the fact that we're 40% market share this week and been in and around 40% certainly since the acquisition. I think the customer uptake has been very strong. To get to your question with respect to equities and the licenses we have there, we certainly have more than enough. We do not have an answer at this point.
We know they're assets, and we want to come up with what I would say imaginative plans how to monetize those assets over time.
Thank you.
Thank you. Our next question comes from the line of Kyle Voigt with KBW. Your line is open.
Hi, good morning. Thanks for taking my question.
How are you? Go.
I just want to touch on the ISE deal again. When you announced the deal, you said there would be some sharing of synergies with clients, and I just wanted to revisit this. Could you provide some more clarity around your plans here and when or if we should expect to see some impact on average capture rates in the options businesses as you realize your cost synergies?
I would say that under Tom's leadership, we've already done some clever things with respect to pricing. It's not that noticeable on the outside, but certainly appreciated by the customers. Without those moves, I don't think we would've maintained the share we have. As I said before, we can be quite clever about where we allocate our pricing power. We have the six licenses, we go into this recognizing we can, and we have some big data analysis behind this to help us serve two masters, where we can more competitively price where it matters to our customers and probably gain some extra capture where the customers are relatively price insensitive. We feel comfortable that we're able to keep share and maintain capture.
As I said before, if we need to in order to make customers happy, we will sacrifice capture that has not been necessary as of this point in time.
Okay, thank you.
Thank you. Our next question comes from the line of Andrew Bond with RBC Capital Markets. Your line is open.
Hey, thanks. Good morning. One more question on ISE. MIAX and BATS both plan to enter the complex segment. They've both been disruptors in the won market share in their respective option segments in which they currently operate. Do you guys believe there's going to be any additional pricing pressure or this will be a more difficult market for these exchanges to disrupt? Additionally, what are the competitive advantage of your complex book platform that will be key in maintaining market share versus MIAX and BATS?
All right. The first thing I want to do is put this in context. We identify ourselves as a financial technology company, and as such, we recognize that whatever advantage you have today will disappear if you do not continue to innovate and move the product forward. We have a massive lead right now in complex order flow. As we gain an appreciation of the ISE technology as the owner, we see that they are doing things that others are not right now with complex orders. If that's all we do, we will lose share. Certainly, we have no intention to staying where we are. We intend to continue to innovate within the complex order flow.
I'm happy to report under Tom's leadership, we're engaged with the customers, and there's a path we can take in complex order flow that a lot of our competitors are not in a position to think about or leverage based upon the fact they don't have the presence we have in that area. We will continue to innovate in that space and I think do incredibly well.
Thank you. Our next question comes from the line of Brian Bedell with Deutsche Bank. Your line is open.
Hi. Great, thanks very much. Maybe, Bob, if you could circle back on NFX. You mentioned earlier in the presentation, if you could talk a little bit about the pricing that you've been increasing on which contracts, and what the EPS drag from NFX is now and where you expect that to go.
Sure. All right. I would say this, in terms of the way to think about our pricing philosophy, if you see us have double-digit market share for a reasonable period of time, we'll look to take a pricing move. The two contracts we have had double-digit market share, it's important to note that we took a pricing move, and I said it was meaningful in May and June from that pricing move, we received $500,000 in gross revenue, and our market share continued to increase. We're still a fraction of what the competitors charge. There's room to grow there. As our share continues to grow and we deliver more value to our customers, we're going to see that. As different assets get to that double-digit threshold, we will think about that.
It's also important to note that we're adding new instruments to the platform, I think we're very excited about that. There was a bit of publicity on that just the other day. That's going to continue to go forward. With respect to the drag on the second quarter, Ron, that was $0.02?
That was $0.02.
$0.02 for the quarter. One of the best investments we could make. Clearly, as we have more instruments at double-digit market share and we're charging, then that burn rate will decline.
Great. Thank you very much.
Thank you. Our next question comes from the line of Warren Gardiner with Evercore. Your line is open.
Great. Thanks, guys. With the new IR Insight rollout kind of moving along and the addition of Marketwired and Boardvantage, I was just wondering if you guys could give us some thoughts on how to think about pricing power in that business going forward, and then also kind of the same question for MarketTech as well.
Sure. Well, Corporate Solutions operates within a very competitive landscape, we are very mindful of our clients and what they expect in terms of the service versus the price and the value that we provide to them. We did make some small pricing changes at the beginning of the year as we have the right to do under our contracts, but it's not something where we could make wholesale pricing moves and not expect client reaction. We manage that very carefully. Again, it is a highly competitive space. Within MarketTech, we have longstanding relationships with our clients and long-dated contracts with our clients. Again, it's not something where we can make changes in pricing year over year or anything like that because it's just a very different kind of business.
Most contracts are five years in length, some of them are three, some are seven, some are longer. Those things are all negotiated up front, it's not really a situation where we can make pricing moves like we can in other subscription products.
I would add then, with the new products we're coming out with, we're reimagining the support requirements and using technology to deliver a better customer experience with less manual support from Nasdaq. That represents a good lever for us with respect to margin improvement.
Great. Thank you.
Thank you. Our next question comes from the line of Rob Rutschow with CLSA. Your line is open.
Hi. Good morning.
How we doing, Rob?
Good, thanks. I think most of my question's been asked. Just one quick one on Boardvantage. I think that had a high growth rate, maybe double digits. Are you continuing to see that sort of growth rate in that segment? Was that the main driver of the increase in Corporate Solutions revenue in the quarter? Thanks.
Well, I think that the full quarter impact of Marketwired, plus the closing of the Boardvantage deal during the quarter were the two drivers of the increase in revenue for Corporate Solutions. Yes, the board portal space, and just the collaboration space in general tends to be a high-growth area for us. I would say that it probably is high single digits, low double digits is kind of the type of growth rate we've seen in those products and what Boardvantage and Directors Desk have been experiencing. We definitely continue to see companies moving away from paper towards electronic solutions and realizing how critical it is to have a very highly secured solution because of the sensitivity of the information that they're sharing, either across the management team or with the board.
That has continued to drive great demand, both in private companies and public companies for these types of services.
Thank you.
Thank you. Our final question for today is a follow-up from the line of Michael Carrier with Bank of America Merrill Lynch.
Hey, good morning, guys. This is actually Samir. Mike had to jump off. Just a quick follow-up on the index business. What drove the licensees lower, given that the markets and the average markets are at highs?
Well, actually, it depends on the index values. Primarily, the index values did have a decline in the quarter, and based on things like Brexit and other things that drove different indexes down.
It's the average.
Yeah, it's an average across a lot of different index products, a lot of different ETFs. I think that it's definitely a beta much more than there really wasn't a lot of alpha headwinds. It's really just a beta headwind with regard to market valuations.
That's right.
Thank you.
Thank you. That does conclude today's Q&A portion of the call. I'd like to turn it back over to Bob Greifeld for any closing remarks.
Thank you. Well, one, I appreciate everybody joining us with this call today. An outstanding quarter for Nasdaq, and as I referenced in my prepared remarks, most importantly, on a forward-looking basis, we're doing the right things to continue this progress. As a final note, Ron, again, you've been with me every day since I got here. It's been much appreciated.
Thank you
You'll be much missed. Thank you.
Thank you.
Let's give him a round of applause.