Ladies and gentlemen, thank you for standing by, and welcome to the Nasdaq Third Quarter 2019 Results Conference Call. At this time, all participants' lines are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the call over to speaker today, Mr.
Ed Dittmeier, Vice President of Investor Relations. Thank you. Please go ahead, sir.
Good morning, everyone, and thank you for joining us today to discuss Nasdaq's Q3 2019 financial results. On the line are Adena Friedman, our CEO Michael Ptasznik, our CFO John Zekka, our Chief Legal and Policy Officer and other members of the management team. After prepared remarks, we'll open up to Q and 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 and A may relate to future events and expectations and 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, and 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'll now turn the call over to Adena.
Thank you, Ed. Good morning, everyone, and thank you for joining us. I'm pleased to report Nasdaq's financial results for the Q3 of 2019. Guided by our renewed strategic ambitions, we have been consistently focused on leveraging technological advancements to deliver for our clients while creating sustainable value for our shareholders. That focus is reflected in today's strong results where we are seeing significant contributions from across the franchise.
My remarks today will focus on business unit highlights and strategic initiatives from the quarter as well as a brief commentary on the broader macroeconomic environment in which our businesses operate. The Q3 experienced its share volatility as the world continues to grapple with the potential ramifications of Brexit, the U. S.-China trade negotiations and more mixed macroeconomic signals. While the environment presents some uncertainties, the performance of the markets continue to reflect a risk on appetite. Among our clients, we are we see continuing demand for technology, data and analytics due to 3 longer term trends, including first, the competitive forces driving continuous demand for efficiency second, the regulatory changes requiring more effective monitoring and surveillance while protecting information and data privacy and third, continuing pressure on all market participants with
a
with a few supporting factors in the Q3. For instance, the attendance at our NASDAQ Surveillance Conference in Paris last week drew record numbers from a diverse range of attendees and focused specifically on what the future of trade surveillance looks like. Market technology order intake was strong during the Q3 through a combination of new customers and contract extensions with existing customers. We also continue to find new demand for our data products from customers coming to market and through geographic expansion outside the United States. And the performance of the markets coupled with these general trends, particularly towards passive investment strategies continues to support our expanding index business with AUM and ETPs benchmarked to NASDAQ's proprietary index products reaching a new peak as investors continue to put their savings to work in higher return areas of the financial markets.
Examining the impact of the current macroeconomic environment on Nasdaq's markets related businesses, our core markets in the U. S. And Europe experienced strong share and healthy volumes in the quarter as volatility picked up with the macroeconomic and political backdrop. Turning to the IPO environment, it remains quite active with Nasdaq's new issue pipeline standing at healthy levels as we finish 2019 and transition into 2020. We've seen a small number of high profile IPOs decide to postpone listings, while others have seen soft performance in the immediate aftermarket, but we are always quick to remind investors that the success of a company in the public markets is driven by the company's fundamental business and financial performance over time, not by the trading behavior in the 1st few days months as a public company.
Additionally, every IPO has its own story, so it is hard to discern trend from a small sample set of specific situations. In fact, we continue to have productive and positive conversations with companies seeking to tap the public markets within the next year. They are, however, rightfully increasingly focused on demonstrating to prospective investors the scalability of their business models and their plans to achieve profitability if they are not already profitable upon going public. With that consideration, they remain enthusiastic about entering the public markets and gaining access to permanent equity capital. Now moving on to our specific results.
The Q3 of 2019 demonstrated how Nasdaq can achieve solid growth while remaining efficient and disciplined in our execution. This has been a key tenet of our corporate strategy since we announced our strategic repositioning in 2017. We delivered Q3 2019 net revenue of $632,000,000 including 8% organic revenue growth from our non trading segments. We're encouraged that our quarterly and year to date organic growth rates across our non trading business segments remain consistent with our medium term objectives, while the more trading sensitive market services business continues producing near multiyear highs. Our financial achievements in the period were driven by solid growth in our expanded technology and analytics offerings, strong progress on deploying our next generation market technology solutions and enhancing our offerings to the private markets as well as maximizing the opportunities that a busy trading and IPO environment provides.
Turning to the segment specific highlights from the Q3. I'm pleased with the progress that we're seeing across all areas of our business. Our information services business saw an increase of 11% in revenue during the period. This was due to expanded contribution from our fast growing investment data and analytics businesses, continued strong growth in our index business, reflecting a 28% increase in the trading of futures contracts linked to the Nasdaq 100 Index and a record $207,000,000,000 of ETP assets under management tracking the Nasdaq indexes and continued growth of clients using our proprietary market data offerings. During the quarter, we were excited to announce the launch of Nasdaq 100 futures contracts on the Taiwan Futures Exchange, the first Nasdaq 100 futures contract listed outside the United States.
We continue to see strong client traction also in our Market Technology segment, which saw revenues increase 24% from the prior year period due to both January's acquisition of Cinnober as well as organic growth of 9%. Our new order intake of $62,000,000 included a multiyear contract extension with Bolsom Mexicana de Volores for market surveillance, a multiyear extension with the New Zealand Exchange for both trading and surveillance solutions and the addition of a new exchange client in Southeast Asia who plans to adopt our next generation Nasdaq Financial Framework market technology as well as our surveillance solution. Our Corporate Services segment was lifted by another strong quarter of IPO wins and an increase in subscriptions in our IR intelligence unit, where we're seeing multiple engagements around our recently introduced ESG advisory services for public companies. During the period, Nasdaq led U. S.
Exchanges by welcoming 41 IPOs among 66 total new listings. The new listing highlights include the IPOs of Datadog, Peloton Interactive and Appia, the latter of which is our 3rd Brazilian listing in the last 12 months, as well as the listing transfers of Interactive Brokers Group and Exelon Corporation to Nasdaq. Nasdaq's European Exchange has added 8 new listings, including 4 IPOs during the Q3, with EQT Partners IPO in Sweden becoming one of the largest Nordic offerings ever with a total raise of SEK 12,800,000,000. These results build on an outstanding year for Nasdaq Listings business. In the 1st 9 months, Nasdaq has won 76% of the 181 U.
S. IPOs, including 6 of the largest 10, and the IPOs that have come to Nasdaq have raised $27,500,000,000 in capital. Also within the Corporate Services segment, we were pleased to acquire during the Q3 the Center For Board Excellence, a privately held provider of corporate governance and compliance solutions for Board of Directors, CEOs, corporate secretaries and general counsels. By combining CBE with our NASDAQ Governance Solutions business, we aim to establish a leading provider of technology, research, insights and consultative services designed to advance governance excellence and collaboration at organizations worldwide. Nasdaq also made significant strides in the Nasdaq private market, announcing during the quarter a partnership with PJT Partners Park Hill division, which is intended to leverage the Nasic private market to transform and modernize the process for executing private equity fund secondary transactions.
We believe this is an exciting and unique use case for our private market center designed to bring greater standardization and efficiency to the secondaries market and appeal to general partners, limited partners and secondaries investors alike. In market services, our U. S. And Nordic equity and equity derivatives businesses capitalized on a healthy trading environment with strong market share. We're very pleased that our clients across our U.
S. Equities and options markets as well as our Nordic markets are fully engaged with us to utilize our market capabilities to support their trading and investing strategies. We're also encouraged to note a continued interest in ESG trading products and services. Just after the close of Q3, our European sustainable debt market in Stockholm surpassed 200 listed instruments, while trading in the Olmex S30 ESG Index Future reached 1,000,000 contracts after just 1 year in the market. These two milestones serve to underscore the Nordic region's leading position within sustainable finance, a position Nasdaq will continue to look to expand upon across our geographic reach in the quarters to come.
As I wrap up, I will summarize by saying that the 3rd quarter results served as further evidence that we can deliver on our strategic direction for our clients and our shareholders. We are encouraged by our momentum as we head into the final months of the year. And with that, I will turn it over to Michael to review the Q3 financial details.
Thank you very much, Adena, and 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's available on our website at ir.nasdaq.com.
I will start by reviewing 3rd quarter revenue performance as shown on Page 3 of the presentation and organic revenue growth on Pages 4 and 14. The $32,000,000 increase in reported net revenue of $632,000,000 was a net result of organic growth of $37,000,000 including 8% organic growth in the non trading segments, a $2,000,000 net positive impact from acquisitions and divestitures and a $7,000,000 unfavorable impact from changes in foreign exchange rates. I will now review quarterly highlights within each of our reporting segments. I'll start with Information Services, which as reflected on Pages 5 14 saw a $19,000,000 or 11 percent increase in revenue. This is driven by $19,000,000 or 11 percent organic growth, $4,000,000 of which was the result of eVestment's purchase price adjustment on deferred revenues in Q3 2018.
Excluding this adjustment, organic growth would have been $15,000,000 or 8%. In addition to the growth in index licensing revenue that Adena already mentioned, the increase was also driven by new sales of market data and analytics as well as higher revenue from underreported data usage. Market Technology revenue, as shown on Pages 614, increased $16,000,000 or 24%, including organic growth of $6,000,000 or 9%. Organic growth during the period primarily reflects an increase in SaaS surveillance software revenues, an increase in the size and number of software delivery projects and higher change requests and advisory revenues. Turning to Corporate Services on Pages 7 and 14, revenues increased $3,000,000 or 2%.
Organic revenue growth was 3 percent or $4,000,000 reflecting an increase in the number of listed companies and higher revenues from our IR intelligence offerings. Market Services net revenues on Pages 8 and 14 saw a $4,000,000 or 2% increase. Excluding the negative $4,000,000 impact from unfavorable changes in foreign exchange, the organic revenue increase was $8,000,000 or 4%. Organic growth during the period primarily reflects an increase in equities derivatives trading revenue, partially offset by declines in FICC. Turning to Pages 9 14 to review expenses.
Non GAAP operating expenses increased $6,000,000 to $317,000,000 The change reflects an $11,000,000 or 4 percent organic increase and a $1,000,000 increase from the net impact of acquisitions and divestitures, partially offset by $6,000,000 favorable impact from changes in foreign exchange rates. 3rd quarter 2019 non GAAP operating expenses came in lower than we expected when we discussed our expense guidance in July due to factors including new hire timelines, which have lengthened incrementally, the impact of a strengthening U. S. Dollar as well as a modest expense reimbursement received in the quarter and certain other costs that were delayed. Turning to Slide 10, we are lowering our 2019 non GAAP operating expense guidance range to $1,285,000,000 to $1,295,000,000 which implies a range of $325,000,000 to $335,000,000 in the Q4 of 2019.
The new full year guidance centers on an organic expense growth level of less than 2%. The anticipated sequential pickup in Q4 2019 expenses is consistent with the 4% average sequential increase we experienced in prior Q4 periods. This reflects the impact of both product and other initiatives spending as well as some seasonal pickup in certain expenses such as marketing, compensation and peak seasonal revenue related costs. Moving to operating profit and margins. Non GAAP operating income increased $26,000,000 in the Q3 of 2019 and the non GAAP operating margin was 50%, up 2 percentage points from the prior year period.
The increase in part reflects the benefits from a business model that is becoming more scalable as we evolve. We have strategically pivoted to reorient our product and business portfolio towards more SaaS offerings and continue to make investments in our technology platform that we expect to provide for greater operating leverage. We continue on that journey today. And as part of that, we are initiating a restructuring plan that principally focuses on certain elements of our technology platform, particularly as we execute and accelerate our evolution within our technology and analytics offerings. Given the inflection point that has the company has reached with NFF, Certain elements of our legacy marketplace infrastructure and technology product offerings will be retired as we transition and further implement NFF internally and externally.
As a result of these actions, the company expects to incur $65,000,000 to $75,000,000 in pretax GAAP charges over the next 2 years, including $30,000,000 recognized in the Q3. The charges are related principally to non cash items such as asset write downs and accelerated depreciation, as well as third party consulting costs. The impacts of the restructuring plan will be excluded from our non GAAP reporting. Separately, in the Q3 of 2019, we recognized a $20,000,000 non cash provision associated with the industry's consolidated audit trail or CAD initiative. This charge is a consequence of changes to the consolidated Audit Trail project, in particular, the consortium's decision to impair the value of the technology built by the original vendor who has subsequently been replaced.
Net interest expense was $26,000,000 in the Q3 of 2019, a decrease of $9,000,000 versus the prior year period due to lower debt balances and the refinancing of the 5.55 percent, dollars 600,000,000 denominated bond with a new 1.75 percent, dollars 600,000,000 bond. The non GAAP effective tax rate for the Q3 of 2019 was 27% and for the full year 2019, we continue to expect the non GAAP tax rate to be between 26% 27%. Non GAAP net income attributable to Nasdaq for the Q3 of 2019 was $212,000,000 or $1.27 per share per diluted share compared to $189,000,000 or $1.13 per diluted share in the prior year period. Turning to capital on Slide 11. Debt decreased by $11,000,000 versus Q2 2019, primarily due to an $84,000,000 decrease in the euro notes book value caused by changes in FX rates, partially offset by $72,000,000 net borrowing of commercial paper.
Our total debt to EBITDA ratio ended the period at 2.6 times, down from 2.7 times after the Q2 of 2019. During the Q3 of 2019, the company returned $150,000,000 to shareholders through its share repurchase program and paid a common dividend in the aggregate of 78,000,000 dollars In the 1st 9 months of 2019, the company returned $428,000,000 to shareholders through dividends and our share repurchase program. Continuing our commitment to capital return, yesterday, our Board authorized an additional $500,000,000 for our existing share repurchase program. Thank you for your time and I'll turn it back to the operator for Q and A.
Our first question comes from Rich Repetto with Sandler O'Neill. Your line is now open.
Yes. Good morning, Adena, and good morning, Mike. I guess the question is on Market Technology. You continue to see solid performance there and the ARR went up as well as the pipeline. But I guess the question is that percentage of ARR to the annualized revenue is trickling down.
And I'm just trying to understand, is that a I know it's made up a change the difference made up a change fees and other non recurring revenue. Is that a good thing that the percentage is going down? How should we interpret that?
Sure. Thanks, Rich, and it's great to hear from you. So in terms of the way that we look at ARR and the pipeline, that obviously gives you a sense of how well the company is continuing to find new clients and how well we're developing in terms of our recurring revenue streams. But we do you will see ebbs and flows of that percentage to overall revenue quarter by quarter based on how many shorter term change request types of revenues that we end up bringing in. And in the Q3, we did have some of that in the Q3.
And so therefore, you might have seen some shift in the overall kind of composition. But that's going to ebb and flow quarterly, but it should not indicate a trend.
Okay. And my semi related follow-up would be, your debt to EBITDA ratio is now at sort of the target level. And are you comfortable, I guess, with this sort of payout ratio? And what should be the, I guess, the trend of, whether dividend buybacks, etcetera, are going full capital return going forward?
Yes. Thanks, Rich. So we're going to stick with our capital plan that we've disclosed, which is we obviously going to number 1 invest in great opportunities to continue to grow the business that meet our strategic and financial criteria. Secondly, we're going we have a dividend policy that says that we will grow our dividend as earnings and cash flow grow over time. 3rd, we're going to primarily use buybacks to offset any dilution from any equity programs that we have.
And then 4th, we want to maintain our investment grade rating. And so those are the way we think about our capital priorities. If the cash continues to build up over time and we since we have such a strong cash flow business, then and we don't see any good investments or opportunities in the short term or the foreseeable future, then we will look to return that cash to shareholders. But that's not going to be a quarterly thing. It's going to be something that will evolve over time.
And so we'll continue to take a look at the horizon. And if it doesn't look like we have something further out, then we will look to return that cash to shareholders through buyback. Okay. It looks like through a buyback.
Got it. Thank you and congrats on the quarter.
Thanks, Rich. Thank
you. Our next question comes from Michael Carrier with Bank of America. Your line is now open.
Hi, good morning and thanks for taking the questions.
Good morning. Maybe just
on the tech plan, you mentioned some of the charges related to migrating to the new platform. I guess just on the positive side, when you think over the next few years as this process takes place, what are some of the benefits that you expect to realize over time?
Sure. Yes. So as Michael mentioned, the restructuring plan is really meant to help us migrate and transition to the new technology both for Marketech and for internal markets. So I think it's important to recognize that we're really looking at how we can deploy the Nasdaq Financial Framework across our markets as well as continuing to provide and expand our offerings to our other Marketech clients. And so I think that when we look at the benefits that we can provide to products over time.
It also creates a common technology stack across all of our markets, which we now operate in multiple stacks today within the U. S. Versus Europe. It makes it so that we have we obviously hope to achieve a more efficient technology organization by having 1 technology underpinning and 1 technology tech. And then also from the client's perspective, it does allow us to be more nimble in terms of giving them new features, applying, bringing more data in and data analytics and potentially algorithmic capabilities into our markets platform.
And over time, we also this platform, as you know, can be deployed in the cloud. So it gives us the opportunity to start to think about that for our future. I think that within Marketech, we are already deploying clients in the cloud using Nasdaq Financial Framework, and we will be retiring other systems over the next several years as we move some of our clients on or more and more of our clients on to the next generation platform. So it's really meant to position ourselves, Mike, to be able to take advantage of the technology that we're bringing to life. And I do think it will create efficiencies, better efficiencies operationally, efficiencies in terms of technology build and deployment times, better feature function capability and more flexible infrastructure for both us and our clients.
All right. That's helpful. And Michael, just a real small and just on the data business, revenue seemed a little stronger. I think you mentioned something on audit, but if you wanted to just quantify that?
Yes, we did have a stronger audit or recovered have reported usage this quarter. So it was $9,000,000 this quarter.
Okay. Thanks a lot.
Compared
to it was $4,000,000 in last year, the same period last year and $6,000,000 last quarter.
Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is now open.
Good morning and thank you for taking my questions. Recently, Adena, you mentioned that the regulators can make the public market more inviting compared to the private market. I guess, what does it take for us to get there? What is a good way for market participants to encourage the regulators to kind of review the current disclosure requirement for public companies?
Sure. Well, I think that the foundation of the public markets is a disclosure regime, and we do believe that, that generally works. I think the focus that the regulators we've asked the regulators to have on those disclosures though is disclosures that are really meant to support an investor's ability to make an informed financial decision. Sometimes there are frankly politics that come into the mix and then creep into the disclosure obligations that really aren't meant to be helpful to investors, but helpful to frankly further certain political ambitions. And so we want to try to make sure that the disclosure regime really stays true to what it's meant to support, which is employee and I'm investor information.
I think the second thing though is that there are other elements of the public markets that make it so that if you have ready access to capital in the private markets, are you ready to come into the public markets? And the few things that we hear certainly are the issues around the proxy process, the issues around the resubmission thresholds for proxy proposals, the I would say the nature of the proxy advisory firms and some conflicts of interest there as well as the lack of disclosures that they have around how they manage their recommendations and proxies as well as the litigation regime and other things that come with going public. And so we are working very closely with the regulators and on the Hill, there's a receptive audience to a lot of what we're proposing, but obviously it's a process. And we have seen some real action and movement both in Congress and at the SEC as they're examining these issues and trying to find a balance between making sure you are properly protecting investors, but you're also creating a more inviting environment for companies and we've been very supportive of what they've been doing.
That's very helpful. A follow-up question related to Market Tech. So the revenue and organic growth was strong, ARR increased and operating margin went up to 18% from 10% quarter over quarter. How should we think about the margin going forward? Will it bounce around because you will continue to retire the Sunset O System and make new investment in NASDAQ Financial Framework or you can at least hold on the margin at this level?
Thank you.
Sure. Well, what we've been saying to investors and we continue to say is that we've been in a period of strong investment Market Technology business, which over the last couple of years has brought down the margins. We will continue to make investments, but as we continue also to grow the business and move our clients to a more efficient platform, we do believe that we will be able to start to show some margin improvements in 2020 2021. And the idea is though to get ourselves into a more SaaS orientation in the delivery of our services to our clients. And even when we are providing on prem services, can we be more of a managed service provider to them over time using the NextGen platform.
So those things, in addition to just being more efficient and being able to deliver services to our clients, should allow us to start to show some margin improvement in the coming years. But we also say that quarter over quarter is not really a good way to look at the overall margins of the Market Tech business. We tend to look at things in periods of years just because there can be various things that impact a quarter's result. So if we're in a period of heavy implementation for clients, that can sometimes bring down the margin in a quarter. But if we also have more shorter term revenue coming in, that could bring up the revenue for the quarter the margin for the quarter.
So it to me it's better for you to look at it year over year and I think we're hoping to be able to demonstrate a trend over in the coming years towards higher margins.
Thank you very much.
Thank you. Our next question comes from Chris Allen with Compass Point. Your line is now open.
Good morning, everyone. I wanted to ask about just the longer term impact around the tech replatforming moving to the common tech stack. It sounds like it should translate to expense savings over the longer term. So just wondering if you could maybe provide us any color how the kind of the new platform will compare for technology expense run rate versus kind of the current platform?
Well, I think that just the ability for us over the coming years and it will take time, I do want to say, both in terms of moving our own markets onto the platform, we're going to do this in a very measured way. We're going to take time to make sure that we are working with our clients, bringing them onto the platform and then managing it across the multiple markets we have in the United States and Europe. So it will take time. I think it's important to recognize it's measured in years, not months or quarters. But also so when we are moving on to a single platform, just the ability for us to operate on a single technology infrastructure and architecture should provide us efficiencies.
The ability for us to implement changes faster with less effort should provide efficiencies. And over time, we can also look at how we want to manage our infrastructure and how we can create synergies or efficiencies by moving some or all of our capabilities to the cloud in the future, but that's definitely more future oriented. I think that in terms of the Market Tech business, we also are able to start to move people to a more common architecture and platform and that also will provide efficiencies to us as well as efficiencies to our clients. And if we also then become more of a managed service provider and a SaaS provider of services, that is definitely more efficient for our customers, but that also creates revenue opportunity for us as well. So those are the areas that we're focused on in terms of the benefits that this technology platform migration will provide us.
And just a quick follow-up on the expenses. Can you provide the magnitude of the expense reimbursement that was noted? And also any color on what the $10,000,000 in merger strategic initiative, what that related to? Thank you.
Sorry. Can you just repeat
the question? Yes. Can you repeat the question? We're just trying to make sure we're going to answer the right question, sorry.
Yes. But in the comments, I believe you noted that there was a positive you got an expense reimbursement this quarter. So I'm just wondering what the magnitude was in terms of dollar costs? And then the $10,000,000 merger and strategic initiatives, any color on what that's specifically related to?
Yes, sorry, Chris. So the expense reimbursement was in $1,000,000 to $2,000,000 range for the quarter. And then in the $10,000,000 dollars that's related to the initiatives that we were executing on, which is the sale of the BWise business as well as the acquisition of Cinnober so and Quandvo. So that's what's included in there.
Thank you.
Thank you. Our next question comes from Alex Kramm with UBS. Your line is now open.
Hey, good morning. I think quick ones from me. First one, on the equities pricing, I think you highlighted volume tiers and strong volumes, but 10% sequential drop is pretty big. So any more color, what exactly is going on there? And then also quarter to date, maybe if that snapped back a little bit or what we should be thinking about as we think about our models going forward?
Sure. So I think that within the quarter, we did have we definitely saw the composition of our clients and therefore the tiers. So it's really it's a multifactor calculation in terms of looking at overall capture rates. So it has to do with overall volumes and therefore every firm being more likely to hit tiers, but then also the composition of clients and who's coming in and leveraging the markets and what kind of tiers they are able to achieve. And so I think and then on top of that, the share.
So if you have higher share and you're getting just more activity in the market, it's likely that people will then also hit here. So I think, there has been minimal changes to our pricing, but as you know, we are always looking to tweak our pricing to make sure that we are attracting flow into our market, but we're also managing our overall client relationships there. And but there hasn't been anything dramatic impacting the quarter. And I would say, we're always looking to manage that the right way, but we don't have anything specific to discuss in terms of looking at the Q4.
Okay. And then staying within market services, the kind of more recurring line item there, the trading services or trade management services, flat year over year. There was probably a little bit of a negative FX impact, but despite of that, obviously no growth and I guess it makes sense with end markets and limited growth in market making firms, etcetera. But like is there anything coming up that can help that again? I mean, new initiatives, new services, maybe something in Europe that can actually drive some growth again here?
Because this is I mean, it's a pretty big revenue item for you and we don't talk about it a lot. Thank you.
Yes. No, it's a good question. It is a very stable part of our business, but when we look at the ins and outs, I think you're going to what we see every month actually is new clients coming in and taking more ports or opening up new capabilities and then other clients deciding that they're going to dial back on certain things. So it's really kind of a mix underneath it, underneath the total number where certain customers are spinning up new strategies and other customers are changing their strategies. So, and then we have had some consolidation of firms, not so much this year, but we saw more of that last year that's flowing through this year.
So it's maintained stability, but it hasn't been a grower for us. In terms of looking at into the future, I think that we are always working to make sure we provide the right environment for our clients. We want to make sure it's affordable to come in and trade on NASDAQ. So we don't look to make major changes there to make sure that we are creating a very strong, very attractive way to come into the market, but at the same time then getting the revenue, the impact from higher share, as well as from more listed companies coming in, etcetera. So it's kind of a means to an end, I would say.
There isn't anything specific, Alex, that we're planning on that I can talk about that is that would really drive that to a different state, to be honest. It's definitely we consider it a low single digit grower for us.
Makes sense. Thank you.
Thank you. Our next question comes from Alex Blostein with Goldman Sachs. Your line is now open.
Hey, good morning everybody. A question with respect to recent changes by the e brokers, obviously taking commission on equity trading and ETFs to 0. Just curious how you guys think it could impact the ecosystem and then specifically with respect to market data? I know there's always some pressure on that, but it feels like right now it's going to become a little bit more pronounced given they have a revenue hold to make up. So maybe help us size kind of how meaningful market data revenue contribution for you guys from the likes of Ameritrade, E.
Trey Schwab, IBKR? And how should we think about the risk to that revenue pool?
So I think that if we look at the broader ecosystem first, I think that it seemed to us that it was interesting to watch how it all played out, but I think that we've gotten the sense that there were definitely expectations over time that those fees would continue to decline. I think the rise of, obviously, Robinhood and the level of participation in the Robinhood broker has definitely, I think, created people have been preparing or planning for this. And you've seen that the e brokers have been diversifying or many of them have diversifying their revenues in recent years to be able to be prepared for a lower fee environment. In terms of the impact though of the decision and kind of the wave that kind of went through, I think that the whole ecosystem is still evaluating how that will impact things. But when we look at our own markets, we get very little direct order flow from retail brokers today.
They tend to go through the wholesalers. I think the payment for order flow regimes are, I'm sure, will be examined. But at the same time, at the same time they're doing this, they also have new disclosure obligations on best execution. And that I think, that is going to be a big determinant factor as to how overall brokers look at managing their order flow going forward. They're likely to want to have more clarity on the definition of best decks because it's a pretty vague definition today.
But they know that they have those obligations so that their ability to manage their order flow, they have BestEx trumps everything. So they hopefully will also see opportunities potentially to bring more flow directly into the market under that, and as well as make sure that they continue to spread their flow, to make sure they're achieving the best execution. So all of that is going to be an interesting thing to play out. We actually see some sure that they are optimizing their data costs. We have sure that they are optimizing their data costs.
We have lower cost proprietary products that they can use in many of the circumstances that their clients need market data for. So it's really up until the point of trade, they are allowed to use substitutes to the SIP data. And we provide much lower cost products to the consolidated tape and we have enterprise caps, so that they can therefore really leverage that and make sure that they know they don't have an ever escalating cost as they are driving more participation into their systems. And we work very closely with them to make sure that they're balancing the need for the consolidated tape in certain circumstances, but the choices that they have for proprietary data. So we actually don't see a significant change or anything from this because we already are working with them to try to make sure that they have efficient options and that they're deploying them the right way.
Got it. Thanks. And then just a quick follow-up question around the restructuring. I know I think you said $65,000,000 to $75,000,000 in pre GAAP charges over the next couple of years. Can we get the breakdown what's going to be the write down versus accelerated depreciation?
And then ultimately, how much in incremental CapEx you will be thinking about going forward as you guys build out the new systems?
Yes. So, we don't have the specific breakdown, but, the majority of the expense will come through either write down or accelerated depreciation. So the combination of the 2, and it's really about when the platforms roll off. And so the $30,000,000 that we saw this quarter, a big chunk of that was the write down aspect of it and a good portion of the rest will be accelerated depreciation plus some other one time costs that we have as part of the implementation. So that's with respect to that.
And we don't have any it doesn't have any material impact on the depreciation run rate that we've seen this quarter. And we'll just for when we give the guidance for next year, we'll build into that whatever the impact would be for the depreciation of the investment going forward.
And I also would say from a CapEx perspective, you've seen you can kind of see how we've been managing CapEx for the last 3 years as we've been building this platform and we'll continue to manage our CapEx to make sure that we're being efficient in how we're building it. But that the CapEx as it exists today already reflects a lot of the work that we're already that's underway and that will continue.
Yes, there shouldn't be a huge step up in the don't expect a huge step up in the depreciation and amortization was because we're transitioning from one system onto the other and that's what some of this is the amortization. So we don't have a doubling up of that amortization expense in that period.
Got it. Great. All right. Thanks very much.
Thank you. Our next question comes from Chris Harris with Wells Fargo. Your line is now open.
Thanks. Good morning. There's been a lot of change in the Corporate Solutions business over the last couple of years and some further movement in that segment this past quarter. Can you remind us just high level, what are the primary businesses left in Corporate Solutions? And longer term, what are your expectations for growth?
Sure. Well, in Corporate Services in general, we have our listings business and then we have our IR intelligence business and we have our governance solutions business. And so those are the 3 key elements of the corporate services business unit. And as you can see, we are making sure that we provide the best possible products and services to support companies as they're coming into the public market with their new stakeholder base, which are investors, as well as managing to an increasingly complicated governance structure as a public company. And so those that's why these are kind of strategically aligned with who we are as an exchange, but these services are offered to companies all around the world regardless of where they list.
In terms of some of the work we've been doing to shore up and create new services, what we really focus in on is how can we advise our industry with among investors. So we've been building trend within the industry among investors. So we've been building out a capability, really a consultative capability and we will look at how we can also bring products into that mix to provide more solutions for our clients as they're managing increasing disclosure obligations against ESG. And then on the governance side, we made a small acquisition this quarter that really adds a lot of advisory and consultative services as well as really good tools to handle things like, Board surveys, director surveys, things that really help them manage their public company boards. And we can then over time look at integrating that into our Board portal solution so that it creates a more all in solution.
But we're going to make sure that we manage that in a way that is really value additive to our clients. But those are the types of things that we're doing to continue to build out and grow those businesses in connection with our listings business.
And the overall growth target for that business over the medium term is 3% to 5%.
Got it. Thank you.
Thank you. And our next question comes from Brian Bedell with Deutsche Bank. Your line is now open.
Great. Thanks. Good morning, folks. Edina, can you just give us a little bit of a refresh on where we stand in the market data, regulatory sort of battle with the SEC and also the access fee pilot? And then any thoughts on the timing of when members exchange starts to come to market?
Are you having any conversations about that eventuality with clients?
Sure. Well, on the market data and Access C pilot, just from a process perspective, with the Access C pilot, there was a hearing a couple of weeks ago now. So it's sitting in the court's hands to determine the outcome there. I think we feel confident that we gave very good arguments. So I think us and our fair exchanges did a nice job of demonstrating from a procedural perspective why we believe this pilot requires more review and evaluation by the SEC and we'll see how the court, what the court decides on that.
In terms of market data, we're just now in the process of starting to put together some of the briefs that the court will then consider in the first half of next year. And so that's a process that is still ongoing. So that's just from a process perspective. I would say from a point of view perspective, we on the market data side, we continue to provide more and more disclosures to our clients and to everyone around how our market data revenue is defined, how it's changed over the years, what's driven improvements and increases in our market data revenues. And as we did put out a very comprehensive, what we call, Mythbusters piece that shows that revenue increases over the last 10 years in our Market Data business, only 2.4% of our overall revenue increases, CAGR, has come from price changes, whereas the rest of the growth has come from new customers and new products and then further penetration in our existing clients.
And we break that out in a lot of detail in this piece. And then we also provide other facts and figures that really help support the fact that we are, we believe, very, very focused on delivering great value to our clients at a reasonable price. And I think our actions have been consistent with that. And so we will continue to provide those types of that type of information to clients, so that they can make a more informed decision as to how they look at us as a provider of market data to them. And then lastly on MeMex, we don't have any more information than you do.
So they we are we're here running our business. We'll be prepared for any competition that comes along, and that's the way we operate here.
Yes. That makes sense. So it sounds like for the market data in access fee that we're talking about still talking about the distant future from any kind of implementation of anything, if that. So still nothing really impacting even 2020 at this stage from
Yes, it's hard to know. I mean, I think that we have on the accuracy pilot, we've made our case and we'll see how it goes and we may get a decision before the end of this year and then there would be whatever is decided then would flow through the next part of the process, which will take some time. On the market data, I think it's still months away before we kind of understand our kind of our case inside in the court.
Great. Great. And then Michael, just on the Market Tech revenue side, I know 4th quarter is always seasonally strong for that business. If you could just, I don't know, give us any insight of whether we think that's going to continue to be the case for this Q4. I know you mentioned the Southeast Asian.
When is when do you expect the revenue to come in from that client? And then just a quick progress update on nonfinancial clients and that's been a big long term growth initiative.
Yes. So I'll start with the first one. I'll let Adena talk about first 2 and then I'll let Adena talk about the non financial market. So on the quarter, so we would expect to see typical seasonality. I will say that we did normally we see an increase in change requests in the Q4 due to timing of budgets, etcetera.
We did see some of that come through in the Q3 of this year. It's hard to quantify that amount in totality, but I would say that there was, say, dollars 2,000,000 to $3,000,000 of additional revenue that we would have seen that we saw in the Q3 that you typically would have expected to see in the Q4. So that did happen this year. And then on the Southeast Asia, I don't think it may have a material impact specifically that one client as one of the flow through. And so it will just be just think about that with the rest of the modeling that you do.
And then, Nadine, on the new markets?
Yes. And I would just say on any new client now, we start to recognize revenue as soon as we start building for them and start deploying. And so with that particular client, to the extent that it's going to be a cloud based service, it's going to be structured more as a subscription service and it will be we'll start to be able to charge that once we start work with them. So it's kind of how the revenue recognition works. On the new markets, I think that we continue to be very optimistic around how we can deploy our technology outside the traditional capital markets and we have had some recent news in terms of some areas that some opportunities for us in the bedding space.
We continue to engage very well with clients in other industries that we just don't have anything specific this quarter to disclose. But we definitely are seeing behind the scenes a lot of good activity as people are starting to think about how to use 2 sided markets as a means to support pricing and to bring their clients into the decision making around pricing. And it's been a really interesting and I would say very encouraging start to that initiative.
Great. Thanks very much for the color.
Thank you. Our next question comes from Kyle Voigt with KBW. Your line is now open.
Hi, good morning. Thanks for taking my question. Adena, you've done a good job at beginning to kind of shift the earnings mix of the company and building out this analytics business, divesting some of the non core slower growth assets.
I guess when you're looking at
the collection of assets at NASDAQ today, do you still think there's opportunity to accelerate the strategic pivot further through divesting additional assets? Or was that something that's already been reviewed and executed upon when you first announced that pivot 2 years ago?
Sure. Well, we actually do a review every year now, just to understand the overall composition of our business, where we're continuing to make the right investments in those businesses, what may be non core going forward, which may have been core in the past. And so I would just say that it is a continuous process today. We don't have anything specific to discuss here, but I think that you should assume that we're always understanding and evaluating how we are developing the businesses and how we can make sure we're providing the right value to our clients. And if we don't feel like we can provide the right value to our clients, then we should look at how we whether or not we should continue to own that business.
And I think BWise is actually a good example of that. So we made that decision and we executed that here in this year because of the fact that it's a great product and it's a great service to our clients. But this space is changing. It's a pretty small asset in the enterprise risk management space in a space that was consolidating. So we either needed to really kind of decide to lean in and invest more in the business and potentially make other further acquisitions there or find a new home for it where they could have it as part of a roll up strategy and provide better ongoing service to the clients.
And we made the latter decision because it just we decided it was not core to who we are, wasn't core to our corporate relationships. And we wanted to make sure that we were prioritizing our investment in areas that we see more growth prospects for us, notably the Nasdaq Financial Framework, Marketech and our data business, and therefore, that's why we made that decision. So that's the kind of thing we do, but we're not going to do that every quarter, every period, but we will consistently look at our portfolio over time.
Okay. Thank you. And then just a clarification question on the retiring of some of those marketplace infrastructure offering. Could you just provide some more details as to how that works operationally with your market tech clients that may be utilizing that technology today? Are those clients forced to migrate to the Nasdaq Financial Framework?
And then just from a timing standpoint, could you kind of help frame in that market technology business when you'd expect a kind of majority of those market tech clients to be kind of migrated on to NASDAQ Financial Framework, technology infrastructure?
Sure. So we do not we're not in the business of forcing clients. We really do we take a very customer friendly approach to this. We do walk in as they have contract renewals and they're thinking about making changes or upgrades to their market, we walk through and talk to them about what their choices are, and we then allow them to make their own decision. And we give them a range of choices.
So they can understand that they could stay on certain platforms for a period of time. There may be some period well into the future where we really do start to try to be, I would say more prescriptive. But right now, what we're seeing is there's a huge as your markets continue to evolve and to future proof for markets. And on the back of that, we have found that I think 50% of new sales too have been onto the Nasdaq Financial Framework, but not all of them. And so we're still evolving our capabilities and with that evolution, we think that we'll be able to increase that number over time.
But this is something that you should assume happens in slow motion, and we said that from the very beginning. It will take many years for us to work with our clients to move them more towards a unified solution and we will be patient around it so that we manage our client relationships along the way.
Great. Thank you.
Thank you. And our next question comes from Alex Kramm with UBS. Your line is now open.
Hey, I think my follow-up just got answered. But just very quickly on a separate topic then, can you just very briefly talk about the relationship with PJT in the secondary, I guess, private equity stake market? You mentioned briefly, but maybe just run through the revenue model and how we should be thinking about the TAM. I think this is probably a very long term opportunity, just how you're thinking about it financially?
Sure. So yes, we are actually really excited about that partnership and it does provide a true near term revenue opportunity for the Nasdaq Private Market based on the partnership agreement we signed. So it will allow PJT is today the largest provider of what we call GP led secondary. So when a general partner decides to manage a secondary transaction in one of their funds, they tend to use brokers to help facilitate that. And PJT or Park Hill is the largest among these GP sponsored brokers.
And so we are working with them. They're finding that they are actually hitting a wall in terms of their ability to facilitate these deals just based on the manual processes involved and the length of time it takes to facilitate the secondaries. And so they see us as actually an enabler for them to be able to handle more volume, more capabilities. And when we look at how many GP led sponsored secondaries that occurred in private equity last year, I think it was in the range of $40,000,000,000 dollars Yes, so it's probably in the range of $30,000,000,000 to $40,000,000,000 changed hands in the context of GP sponsored secondaries. The overall secondaries market last year in private equity was $80,000,000,000 So that includes both LP led and GP led, secondaries.
And I think that, so we definitely see this as actually a large total market opportunity for us. We are already working with them on an initial program. We've been working very closely to integrate our technology with them. And so we do think that we'll be able to provide some immediate benefit to them and to their clients in 2020. So, very excited about it.
Okay. And then actually my original follow-up, very briefly, I apologize if you mentioned it, but in terms of the transition to NFF, it sounds like some of your existing clients are definitely doing the transition. How do you have any numbers, maybe you've mentioned this, like how many of your clients have not transitioned and maybe what kind of economics you've been picking up both on the revenue and on the margin side as they have transitioned? I know it's probably a small sample so far, but any color would be great. I'm sorry if you answered this already.
Yes, we haven't provided any disclosures on differences in margins and revenues yet. I think that, that's something you will take back and think about. I think that in terms of overall client migrations, among our existing clients, it's still a pretty small number. But it's but actually, it's been really interesting. So some of our larger clients are moving towards that platform.
So they might take it, for instance, the Australian Stock Exchange is looking at deploying components of the Nasdaq Financial Framework into the NextGen Trading System. And so some of our larger clients are understanding where the benefits come from. We have several new clients that have signed up for us to provide clearing services. In the context of that, we are actually building on and deploying our next gen clearing solution onto NFF and then delivering it to them. So that but that is something we're in the process of building and deploying.
So that won't be those are longer term projects and they take generally take 18 months to 2 years to complete. So we have some significant sized clients moving on to the platform. And then the new clients, so certainly the new bedding client we mentioned last quarter as well as the client we mentioned in Southeast Asia, they're just natively going on to the Nasdaq Financial Framework as new customers. But we don't we have not yet provided like stats and details and we'll take that back as feedback from you.
All right. Thanks for squeezing in my follow-up.
Okay.
Thank you. And our last question comes from Dan Fannon with Jefferies. Your line is now open.
Thanks. Mike, just a question on expenses. R and D expenses continue to track lower this year. Can you talk about what initiatives that are coming in lower than expected? And then I apologize if you give this, but have you given kind of the initial framework to think about 2020 expenses and what the how we should think about growth into next year?
Sure. So, on the initiatives, we continue to invest in all the initiatives that we have on the programs. I think going back to my earlier remarks, some of that is really just a matter of hiring and bringing in the bodies in order to build out those initiatives. It's taking a little bit longer than we originally had anticipated, which is what's causing the reduction. And there's not one specific initiative and where there's been a cut back on.
I would say, if anything, we're very excited about the opportunities there and there's more initiatives that are coming in the door. We look to want to continue to invest within that what we call our NASDAQ NEXT R and D bucket. And so we're premature for us to be giving any sort of forward guidance for next year at this point in time. Again, we've been around that 3% mark and of our total revenue and we'll continue to look at how much R and D we want to continue to invest in the business. It is an important driver of our long term growth we believe.
And as I said, we're excited about a number of the different initiatives that we have across the organization. But we'll be providing much more color in our next quarter's results, so stay tuned.
Got it. Thank you.
Thank you. Ladies and gentlemen, this concludes our question and answer session. I would now like to turn the call back over to Adena Friedman for any closing remarks.
Thank you. Well, in closing, we are very encouraged by our Q3 results and how it underscores our ability to execute on our new strategic direction. We will remain focused on delivering results against our 2019 priorities as we finish out the year. So thank you very much for your time today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.