Ladies and gentlemen, thank you for standing by, and welcome to the NASDAQ Third Quarter 2020 Results. 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 conference over to your speaker today, Mr.
Ed Detmyer, Vice President of Investor Relations. Please go ahead, sir.
Good morning, everyone, and thank you for joining us today to discuss Nasdaq's Q3 2020 financial results. On the line are Adena Friedman, our CEO Michael Ptasznik, our CFO John Zekka, our Chief Legal and Regulatory 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 Update.
I would 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. 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. All forward looking statements speak only as of today, October 21, 2020, and Nasdaq assumes no obligation to update or revise any forward looking statements. Lastly, a quick programming mention.
We are excited to be hosting our Investor Day on November 10. Our senior leadership team will give presentations about our operations, opportunities and strategy and will be available for your questions. I know many of you on the line today are planning to participate. If you have not registered, please do so today at our IR website. I will now turn the call over to Adena.
Thank you, Ed, and good morning, everyone. Thank you for joining us. I'm pleased to report Nasdaq's financial results for the Q3 of 2020. With our strategic ambitions as our guide, we have been consistently focused on delivering results for our clients, while creating sustainable value for our stakeholders. Our global workforce has demonstrated their nimbleness and ability to remain highly productive and available to our clients throughout this period.
That focus is reflected in today's strong results, where we are seeing significant contributions from across our franchise. My remarks today will focus on business unit highlights and strategic initiatives from the Q3. I will then touch on today's announcement about Michael's decision to retire and then Michael will cover the financials. Nasdaq delivered another quarter of strong performance, driven by great efforts by our team, coupled with favorable market conditions. Here are some of the highlights.
We welcomed 105 IPOs to Nasdaq during the period, which represents the highest number of IPOs per quarter on a U. S. Exchange in the past decade. Conviction by investors to increase exposure to NASDAQ's focused systematic indexes, coupled with robust market performance, continued to support our expanding index business. As a result, we saw the AUM in our index products achieve another quarter of record highs alongside high trading activity in NASDAQ licensed index derivatives.
Our market infrastructure performed exceptionally well during the peaks of volatility we observed earlier this year, particularly in March April. We continue to experience strong volumes across our equities and options businesses in the Q3, and we have continued to invest to enable us to have the capacity for future volatility as markets react to continually changing dynamics in the U. S. And globally. Our data and analytics business within information services as well as our market technology business continued to demonstrate their resilience with healthy growth in annualized recurring revenue or ARR at Market Tech and targeted sales and new capabilities and products across our product suite.
We are pleased to announce the launch of several new products during the period, including the cloud deployed NASDAQ Automated Investigator for Anti Money Laundering or AML, the SaaS solution for investigating financial crime for retail and commercial banks and other financial institutions. And in our licensed index futures business, we announced together with CME Group 2 innovative index products, a new futures contract on the Nasdaq 100 Volatility Index known as VOLQ and the first ever water index futures based on the Nasdaq Bayless California Water Index. Early in October, we also announced expansion of our partnership with Invesco for our Nasdaq 100 product suite, including a new Nasdaq NextGen 100 Index ETF. Our results for the Q3 highlight the strength of Nasdaq's diversified product offerings and business model, while operating in a unique capital markets environment in 2020. Our ability to execute against the significant demand and logistical challenges of COVID-nineteen enabled us to continue on our strategic journey and bring these new and innovative technology and index solutions to our clients.
Now I will turn to our strong results for the Q3 of 2020. Nasdaq delivered net revenues of $715,000,000 an increase of $83,000,000 or 13% from the prior year period, driven almost entirely by organic growth. Net revenues in our market services business grew 15%, while revenues in our non trading segments rose 12 percent from the prior year period. Operating leverage was particularly strong with non GAAP operating margin expanding nearly 200 basis points to 52% and contributing to the non GAAP EPS growth of 20%. Turning now to the specific highlights from the Q3, starting with our foundational marketplace businesses.
Our Market Services segment saw net revenues of $259,000,000 a 15% increase from the prior year period, led by 35% increase in cash equity net revenues as well as strong growth in both the Equity Derivatives and Trade Management Services businesses. While of course industry volumes were a main contributor to this performance, I do want to bring attention to the strong competitive positioning that Market Services has established and which continued in the Q3. In particular, we have enjoyed relatively stable market share in U. S. Equities, an area where we feature the single largest liquidity pool with the NASDAQ stock market, the largest of our 3 equities exchanges.
Additionally, our Nordic equity franchise with a 77% share on exchange trading was up nearly 500 basis points year over year. And in our U. S. Options trading complex, we continue to lead the industry with 37% share of multiply listed options. The elevated volumes we've experienced are the result of both high investor engagement and a multitude of macro and geopolitical uncertainties.
While the activity levels can change quickly, we believe that the U. S. Presidential election remains a big focus for investors, and we anticipate that our marketplaces are likely to continue to contribute at a high level as we progress through the final quarter of the year. Our Corporate Services segment delivered revenues of $132,000,000 a 6% increase boosted by new listing activity and continued demand for our governance and Relations Intelligence Solutions. In our Listing Services business, Nasdaq led U.
S. Exchanges for IPOs during the period, welcoming 105 IPOs for a 79% win rate for operating company listings and an overall win rate of 65% when including SPAC. We are proud to welcome GoodRx, Lee Auto, Jamp Holding Company and Encino as just a few of the highlight listings from the quarter. Our quarterly win rate of facts has also been rising from 30% in the 2nd quarter to 51% in the 3rd quarter. In addition, we were honored to welcome 6 companies who switched their listings from the New York Stock Exchange to NASDAQ during the period with an aggregate global market capitalization of $187,000,000,000 including AstraZeneca and Keurig Doctor Pepper.
This brings our cumulative exchange switch market cap to over $1,800,000,000,000 from 2,005, with over $1,000,000,000,000 of that value switching in just the last 5 years. When it came to their decision to switch exchanges, these issuers identified strongly with the innovative spirit of Nasdaq's listing platform with the expanding community of listed issuers, recognizing the opportunity to leverage our IR and governance solutions to improve how they engage with critical stakeholders, and lastly, for the larger switches to potentially increase their representation in the NASDAQ family of index by qualifying for the NASDAQ 100. In the Q3, corporate services revenue grew 6% with a balanced contribution from both governance and IR solutions. We are pleased that rising secular demand for insights that help companies better understand and engage the shareholders is more than offsetting the impact of spending reductions by companies and sectors more negatively impacted by COVID-nineteen. We believe that our successes during the quarter underscore how NASA continues to be the destination exchange and partner of choice for companies worldwide with unparalleled expertise across equity markets, Investor Relations and Governance.
Now let me turn to our Information Services and Technology businesses. In our Information Services segment, we delivered net revenues of $238,000,000 up $40,000,000 or 20% from the prior year period. Index AUM rose to $313,000,000,000 versus $207,000,000,000 in the prior year period, up 51%, while contract volumes in the NASDAQ Index NASDAQ license index futures that trade on the CME rose by more than 90%. Each of these contributed meaningfully to the index revenue rising $30,000,000 or 54% year over year. While the Nasdaq 100 Family M Indexes has had market appreciation materially above broader market averages, 30% 37% of the increase AUM year over year came from positive organic investor inflows, and we're working with our partners to meet rising investor interest in NASDAQ's semantic indexes in several ways.
For example, as I stated earlier in my remarks, just last week, Invesco introduced the Q222 Innovation Suite in partnership with NASDAQ, giving a wider population of investors access to the Nasdaq 100 Index for a variety of investment structures and providing exposure to the Nasdaq Next Gen 100 Index through a new ETF. Additionally, we launched VOLQ, a new futures contract on the NASDAQ 100 Volatility Index and announced plans to launch a futures contract based on the NASDAQ Dallas California Water Index. Our investment data and analytics revenues increased 13% from the prior year period, driven both by the incorporation of Salobis and the organic growth in our leading institutional asset allocation solutions. Market data rose 5% with contributions from across our North American and European proprietary products as well as the PayPlan revenues. Growth during the period was driven by new sales and increased retail investor usage worldwide, particularly in new geographies like Asia Pacific and Latin America.
In addition, this area of the business saw new customer expansion and new product launches driven by the launch of the Nasdaq Cloud Data Service, a service that we believe provides significant technical cost reductions and quickens the time to market for clients seeking real time data solutions. Lastly, our Market Technology segment delivered $86,000,000 in revenues and signed $84,000,000 in new order intake. ARR in the quarter was $278,000,000 a 9% increase year over year. However, total revenue rose only nominally in the 3rd quarter compared to the prior year as the growth in the more stable SaaS subscription and recurring licensing fees that comprise our ARR was offset by lower non recurring revenues associated with new service implementations and change requests. As we stated earlier in 2020, service implementation, change request projects, new order intake levels and funding for new markets initiatives have been adversely impacted by the pandemic related factors.
We continue to expect to see in the short term mostly logistical growth headwinds that underpin the risk of market technology being below the bottom of our medium term growth objectives for the current year. We have taken actions that we hope will mitigate pressures on our non recurring market technology revenues in the coming period. For example, we've developed new ways of improving execution for important project phases in a completely virtual environment. And we've increased hiring of technology staff as part of an effort quicken the pace of our full slate of existing implementations to their production phases. The increased technology staff to manage the large project delivery projects has had an impact on the short term margins, and we are managing this expense increase carefully as we continue to be focused on driving margin expansion as the business continues to grow.
Taking a step back in the near term impact of the pandemic, our convection has not changed about the medium to long term opportunity for market technology. A major component of this strategy is our commitment to operating and providing best in class SaaS solutions across the transaction lifecycle. Our marketplace services platform, which launched in June, gives clients a complete transaction lifecycle functionality on a single platform and we've seen positive response in growth and demand for the platform over the quarter. In 2020 year to date, we have increased the count of sales to entirely new clients, the vast majority of which have chosen to implement our next generation SaaS enabled services. Specifically, we signed 8 new market infrastructure operator clients to our SaaS offerings and we've signed 12 new trade surveillance clients so far this year.
We've also had solid success in expanding our existing client relationships in our trade surveillance business. We look forward to updating you both in addressing the near term challenges we are navigating as well as our progress in ramping adoption of our next generation products and services in the coming period. Now, let me take a moment to address today's announcement that Michael will be retiring in early 2021 after a very distinguished 30 year financial services career. Michael joined Nasdaq in 2016 as CFO to lead a dynamic team responsible for finance, treasury, strategy, Investor Relations, Facilities and Risk Management. His extensive operational expertise and industry reputation for strategic thinking, creative resource management and managing through competitive and evolving landscape made him a perfect fit for us during what has been an especially important phase in our growth as a company.
Michael has been an invaluable member of the executive leadership team during this time at NASDAQ. He played a particularly important role in our management team's strategic review of our business in 2017, after which we realigned our vision, mission and corporate strategy to embrace our core strengths in data analytics and technology, our strategic pivot as we refer to it. Michael has since played an instrumental role in the execution of that strategic pivot. For example, he worked closely with me to establish a clear, consistent capital deployment and return framework, including an annual review of our business portfolio and effectively manage the balance sheet to improve liquidity and lower borrowing costs. Michael has been a wonderful partner to our business unit leaders, bringing creative ideas as well as a structured approach to cross business unit initiatives.
He has worked extensively with our business units to evaluate and execute on organic and inorganic opportunities, and he oversaw the launch and development of our venture investment group. Michael has been an outstanding CFO, bringing focus, drive, creativity and determination to his role every day. And on behalf of the entire team at Nasdaq and the Board of Directors, I want to thank you, Michael, for his leadership and dedication to our company and to our values. When Michael retires at the end of February next year, I'm very pleased to announce that Ann Dennison, who currently serves as Senior Vice President, Controller and Chief Accounting Officer, will become Executive Vice President and Chief Financial Officer. Ann joined Nasdaq in 2015, and since 2017, she's been leading an extensive multi year modernization of the company's financial operations infrastructure.
These efforts include Nasdaq's migration to a moderate financial consolidation and reporting system leveraging Workday Financials, the introduction of a new enterprise resource planning surrounding systems and the development of a corporate data strategy and intelligent automation programs that are delivering interesting insights and powerful efficiencies. Additionally, Anne added to her responsibilities in 2017 when she took on leadership of the financial planning and analysis team, which partners with the business units and expert teams to develop to maintain our detailed forecast and budget. Anne is a dedicated leader with a deep understanding of our business and our long term vision. She has made significant contributions to Nasdaq's financial soundness in her 5 years with the company, and her diligence and expertise will be important factors in our growth strategy. With her combination of experience and leadership skills as well as her own knowledge of Nasdaq's business and financial operations Anne is the obvious Anne's best choice to become Nasdaq's next CFO.
I'm excited for our analysts and investors to meet Anne in the coming months as Michael and Anne work together to transition the role between now and the end of February. As I wrap up, I will summarize by saying that we are very pleased with the strong results we delivered in Q3, and we remain focused on advancing our strategic mission. Our results highlight the strength of Nasdaq's diversified product offering and business model, capitalizing both on opportunities presented by this year's unique capital market backdrop, including elevated trading volumes, rising index valuations and strong IPO issuance. We believe that our ability to execute against the significant demand in the logistical challenges of COVID-nineteen has enabled us to continue on our journey while prudently advancing as a technology and analytics provider. And with that, I will turn it over to Michael to review the financial details.
Thank you, Adena, for those kind remarks, and good morning, everyone. I will first provide comments on the quarter and then a few remarks about my decision to retire. My commentary on the quarter 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 our press release as well as in a file located in the Financial section of our Investor Relations 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 414. The $83,000,000 increase in reported net revenue of $715,000,000 is the net result of organic growth of $70,000,000 including 13% organic increase in market services and 10% organic growth in the non trading segments, a $4,000,000 positive impact from acquisitions and a $9,000,000 favorable 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 and 14 saw a $40,000,000 or 20% increase in revenue.
Excluding a positive $3,000,000 impact from the acquisition of Salovis and a $1,000,000 positive impact from favorable changes in foreign exchange rates, organic revenue growth during the period was 18%, primarily reflecting very strong growth in our index business and positive contributions from each of the investment data and analytics and market data businesses. Operating margin of 65% increased 100 basis points compared to the prior year period. Market Technology revenue as shown on Pages 614 increased $2,000,000 or 2%, primarily reflecting $3,000,000 impact from favorable changes in foreign exchange rates. On an organic basis, revenue decreased by $1,000,000 or 1% as the increase in software as a surveillance revenues were more than offset by lower software delivery and support revenues and lower change requests and advisory revenues. Annualized recurring revenue or ARR rose 9% compared to the prior year period.
Operating margin of 10% in the period was down 8 percentage points from 18% in the prior year, putting margin into a 12 month context, which eliminates quarter to quarter volatility from seasonality and other factors, the trailing 12 month margin is 16%, in line with full year 2019 level. As Adena noted, progress has been impacted by the pandemic induced near term growth headwinds. However, we continue to expect margin improvement as the business expands over time. Turning to corporate services on pages 714, revenues increased $8,000,000 or 6%. Organic revenue growth was $6,000,000 or 5%, reflecting an increase in U.
S. Listings revenues and increases in both governance solutions and IR intelligence revenues. The operating margin of 39% for the segment was up 300 basis points from the prior year period. Market Services net revenues on Pages 8 and 14 saw a $33,000,000 or 15% increase. Excluding the positive $4,000,000 impact from favorable change in foreign exchange rates, the organic revenue increase was $29,000,000 or 13%.
The organic increase during the period primarily reflects increases in cash equities and equities derivatives net revenues due to higher industry trading volumes. The operating margin of 59% for the segment increased 2 percentage points year over year. Now turning to Pages 9 and 14 to review expenses. Non GAAP operating expenses increased $29,000,000 to $346,000,000 The increase reflects a $17,000,000 or 5 percent organic increase, a $7,000,000 increase from the impact of acquisitions and a $5,000,000 increase from an unfavorable impact of changes in foreign exchange rates. The organic growth in expenses primarily reflects higher compensation expense, professional fees and infrastructure costs, partially offset by lower travel and event spending.
Turning to Slide 10, we are adjusting our 2020 non GAAP operating expense guidance to a range of $1,360,000,000 to 1,370,000,000 dollars up from $1,330,000,000 to $1,360,000,000 previously. The revised range is driven by 2 factors. First, changes in foreign exchange rates, and particularly the weakening of the U. S. Dollar has manifested in a $10,000,000 increase in the top end of our guidance range.
2nd, as we have continued to deliver especially strong organic growth in both our trading and non trading segments, higher expenses, including accruals of performance based compensation make us increasingly likely to end up at the high end of our expense guidance range. To add some full year context, the $1,370,000,000 high end of our revised expense guidance range implies a 4% organic increase in expenses. While in the 1st 9 months of 2020, the company delivered organic revenue growth of 12%. Now moving to operating profit and margins, non GAAP operating income increased $54,000,000 in the Q3 of 2020 and the non GAAP operating margin was 52% compared to 50% in the prior year period. Net interest expense was $24,000,000 in the Q3 of 2020, a decrease of $2,000,000 versus the prior year.
The non GAAP effective tax rate was 26% for the Q3 of 2020. For the full year 2020, we continue to expect the non GAAP tax rate to be between 26% 27 percent. Non GAAP net income attributable to NASDAQ for the Q3 of 2020 was $256,000,000 or $1.53 per diluted share, compared to $212,000,000 or $1.27 per diluted share in the prior year period. Turning to Slide 11, debt increased by $89,000,000 versus June 30, primarily due to an increase in the Eurobonds book value caused by a stronger euro. Our total debt to EBITDA ratio ended the period of 2.4 times, unchanged from 2.4 times at the end of Q2.
During the Q3 of 2020, the company paid a dividend in the aggregate of $81,000,000 and repurchased common stock in the amount of $34,000,000 The company has repurchased $186,000,000 year to date through September 30, largely completing our objective to use share repurchases to offset dilution of equity compensation and other sources of gross issuances. Now before I turn it back to the Q and A session, a few comments about my decision to retire. While it is the decision I've contemplated for a while now, it certainly comes with mixed emotions. It has been such an honor and a privilege to work for Adena, the Board and this incredible company. And I am extremely excited about the vision and strategy and the great opportunities that we have ahead of us to continue to grow and expand as a technology company serving the capital markets and beyond.
Most importantly, I am fortunate to work with colleagues who are enormously intelligent, innovative, driven and are just good people to consistently exemplify Nasdaq's values of integrity and teamwork. However, I've been in the exchange industry now for a long time, going back to the 90s when exchanges were mutual broker owned not for profits. And while I can't say for certain, I do believe I hold the record for the most consecutive quarterly conference calls as CFO of an Exchange Group with this call being my 72nd in a row. And that's why the decision was so difficult. For those of you who like me are Canadian, I'm sure you recall the ubiquitous early retirement inducing Freedom 55 commercials and will undoubtedly understand the indelible target that left on my psyche.
In finance, we forecast macroeconomics, revenues and earnings, but the one thing that no one can forecast and COVID has certainly been a great reminder of this is the time and capability will be given to enjoy the fruits of our labors. Thankfully, I have no current health concerns, but the point is you just never know. So despite the temptation to stay and partake in the exciting initiatives and growth we have in front of us here at NASDAQ, I've decided to stick with the 5 year timeframe that I shared with Adena and importantly my family when I first accepted this position. What does make my decision easier is that my knowledge of the strength of the team I am leaving behind and I could not be more pleased that Anne Dennison will be taking on the CFO role. Anne has been a key member of my management team, her technical expertise, proven ability to drive change through innovation and her collaborative approach to problem solving make her the ideal candidate for this position.
She's also an absolute pleasure to work with and is always focused on doing what's best for the organization. I am confident that she is the right person to help drive NASDAQ. So there will be plenty of time next quarter to say proper thank yous to the Board and to Adena, to all my colleagues past and present and to you, the investors and analysts. At this point, I will just say it has been an honor and privilege to work for and with all of you. So now I'd like to just drop the mic and walk away, but I think we have to turn to Q and A session now.
So I'll turn it back to the operator.
Thank Our first question comes from Rich Repetto with Piper Sandler. Your line is open.
Yes. Good morning, Adena. Good morning, Michael. And Michael, despite that elegant explanation, you're still too young to retire, we think. Thanks, Rich.
No, I'm kidding. Congrats and you've done a great job. Anyway, so my question is first on the information services is on the index revenue, so nice upside surprise. I guess, Adena or Michael, can you give us a better feel for how the breakout we see that the revenue grew by more than 50%, but the futures and options volumes grew almost double. So can you just give some more color as to how we can model this a little bit better, given your agreements with the CME and also the license AUM that grew by over 50% as well.
So how do you sort of model this a little bit better than what we have?
Been? Sure. So thanks, Rich. I think that the first thing to note is we've kind of given you a little bit of a guide in the past to say that the Index Futures revenue kind of ranges from 10% to 20% of the overall revenues for the Index business. And it obviously it ebbs and flows based on volume, so it's not a we can't give you a precise percentage every quarter, but this quarter it was 21%.
So it's just at the top end of that or just above the top end of that range. And I think that that shows you the strength of the fact that we have a great relationship with CME, and I think that we have a long term partnership with them. And the indexes that we have, particularly the NASDAQ 100, the CME is a particularly strong index this year and one where we see a lot of investor appetite both to invest in the ETFs and the product as well as to use the futures market to help hedge and manage their portfolios.
Okay. That's my I'll get back in the queue. Thank you.
Great. Thanks, Rich.
Thank you. Our next question comes from Dan Fannon with Jefferies. Your line is open.
Thanks. Good morning. I was hoping again you could expand upon your comments on the market tech side. Obviously, the short term dynamics around some of the headwinds with revenue. But if we think about the 4Q sequential build that typically happens in that segment, how we should think about in the context of this year?
Sure. So I think, Ed, if we kind of break down what we were trying to convey, the first is that ARR growth, which is really the recurring revenue streams that comes from our newer offerings that are SaaS oriented as well as our trade surveillance business, which is SaaS oriented. Those continue to see you're seeing continued growth of that 9% growth, and we can continue to see that, that will be a strong part of our franchise. And I think that we should recognize also that those types of implementations are more simple. They're just they don't take as long to put a bring a company into the market, whether it's the marketplace surveillance or market surveillance platform.
It's the bigger project where we still do significant on prem deliveries, where this year we've definitely seen more of an impact of that. And if you think about it, there's a lot of collaboration that needs to go on between us and the client on some of that, particularly in the post trade deliveries, and we have several post trade deliveries that we're working on at the moment. And the pandemic made it harder to have that collaboration and it kind of created some challenges in terms of keeping up the pace of the original delivery schedule. And we've gotten better at that as we've gone through the year and the clients also have gotten more used to it as well. But that I think definitely created some challenges.
And then also just making sure that in order for us to make sure we're managing the pace of those, we have been making some increases in the tech team to make sure that we can deliver against that in this kind of constrained environment. And those are short term issues and those are the types of revenues are nonrecurring because they're delivery revenues, but they continue to be an important part of the business. And then on change requests, it's really a matter of our ability. We actually have the capacity to implement change requests when the clients are looking for them. But when they're not, we obviously apply those people to the implementation projects.
But we also are finding that clients are making change requests for sure, but just have a lower demand for those this year because they're managing through other issues in their own organization. So I think you should assume those are shorter term trends that are really driven by the current environment against the nice long term trend in terms of us increasing the percentage of sales that we're getting through SaaS, as well as continuing to move more of our products into a more flexible delivery mode with NFF. So I think I'm hoping that gives you enough backdrop.
Great. Thank you.
Thank you. Our next question comes from Jeremy Campbell with Barclays. Your line is open.
Hey, thanks. And Michael, just want to say congratulations. I know we still have a few months left, but been a pleasure working with you and best of luck. Quick question on asset manager consolidation. It's heated up a bit over the past year and reportedly the pipeline is pretty active right now.
I know asset managers are kind of a major client base of NASDAQ in different parts of the ecosystem, but how should we think about the pluses and minuses of asset manager consolidation as it relates to your non recurring revenue stream at NASDAQ? And could like some of this post deal integration be another potential near term headwind for Marketech?
Well, on the asset manager side, we don't actually have a lot of asset managers as clients in the Market Tech business. We tend to really focus in on market infrastructure operators as well as broker dealers. And we do have a small business that we've been growing in the surveillance business for the buy side clients. So I think Market Tech won't asset manager consolidation won't be a significant issue there. And then if you look over in the information services business, we have thousands of asset manager clients.
And so you are seeing an occasional combination. And that's where we also work with them to figure out, if they're let's say, both of the clients are investment clients, then we'll work with them to figure out what is the overall enterprise value going forward that they should that we should be able to charge for investment on a combined basis versus a single basis. It's really a matter of us working with the clients on that. And certainly, if the client one client is the investment client and the other one is not, then we have a chance of actually increasing our penetration in that client as they combine. So I think that's the way to look at it for the investment business.
And same with areas like Quandl and others, which are still very small and growing, there's just a huge sea, as you know, of asset managers out there for us to appeal to. On the trading side of the business, I don't anticipate that, that will have a real impact because they're basically just managing more AUM with their trading organization and that shouldn't have a significant impact on how much they're trading and how they're managing their portfolio. So I don't see an impact on the trading side.
Great. Thank you.
Thank you. Our next question comes from Alex Kramm with UBS. Your line is open.
Yes. Hey, good morning, everyone.
Hey Alex. This may
be better for the Investor Day, but I do want to ask about M and A. You have clearly established a pretty strong track record here over the last few years, partially helped by Michael and you obviously as well. But if I look into next year, rates are low, 2021 is going to face a really tough comp on the trading side and on the index side. And your multiple has expanded substantially. So I'm just wondering, is this are you thinking differently about maybe bigger deals in the space?
And if so, to what degree would you actually look at something that has a little bit more transactional revenues with it and where there could be more of a cost driven value proposition? So maybe a broad update on M and A would be great here. Thanks.
Sure. Yes. We will spend a little more time on that in the Investor Day, Alex. So I think it is an area that will at least give you a sense of our focus areas. But I'll give you a little bit of a preview.
I think what we've said all along is that we look at acquisitions as part of fitting into our strategy. So we don't just look at every acquisition out there opportunistically. We have really developed a strategic nexus around where we want to grow and how we want to grow and where we think that we can do everything organically and where we might benefit from acquisitions that could catalyze growth and or expand our clientele. And I think that the areas that we have been primarily focused on, and we've said this many times, is in expanding our Architect business and expanding our Information Services business in terms of growthier parts of the sector in the industry. And then on the marketplace in the marketplaces, I think that we would make targeted acquisitions if it really makes sense in terms of both synergies on the cost side and so therefore the ability to generate scale, but also that it furthers our strategy in the asset classes where we're really strong.
But and all I can say is that we look at a lot of things. We do always put them within the strategic framework so that we also stop looking at things pretty quickly if it doesn't really fit in. And we will certainly not shy away from doing the right transactions that further our strategy. But that hasn't changed. I mean, we're not shifting our strategy from what we've been seeing over the last 2 years.
So we'll spend a little more time on that at Investor Day.
Thank you. And our next question comes from Biren Beddle with Deutsche Bank. Your line is open.
Great. Thanks. Good morning, folks, and congrats, Michael, also. I know we'll talk to you for another quarter, but I just want to say congrats. So just on the sustainability of that information services revenue, extremely strong this quarter.
Looks like it's easy for you to now exceed the top of the 5% to 7% range even with the softness in Market Tech. But as we look at that info services moving into the Q4 and into next year, obviously depending on volumes at CME in your contracts and ETF AUM levels, but it seems like there would still be an upward trajectory in that line. So just maybe some commentary about that and to what extent any audit fees positively impacted the market data? And then just thoughts about market data revenue coming into 2021 with consolidation, say, in the online brokerage industry, for example, with Schwab and Ameritrade and your ability to recoup that cost?
Okay, great. Let me just make sure I said that. Okay. So within information services, I think one of the things that I'm particularly pleased about with the quarter is to show that there is really solid growth across all three subsegments within Information Services. So you have growth within the data analytics franchise with the investments, the logos, Clondal and other assets there.
We have 5% growth in market data, and I'll cover that in a minute. And then we also have a very strong growth in our index franchise. And while there are beta elements to the index business, I think that we have to recognize that even when we saw some like back in the Q4 2018, where we saw the markets really go through a tumultuous period, we continue to see investor inflows into the Nasdaq 100 and other Nasdaq indexes, which really made it so that it buffered the downward trend in the overall market cap there. So we do think that there's just a strong secular interest and appetite among investors to invest in the NASDAQ 100, the Biotech Index, Semiconductor, other thematic indexes in addition to our Spark Data franchise. And we've seen that through both the kind of upward market swing, but also even in March, the largest inflow week that we had was the toughest market week.
As the markets were declining the most, that's when we saw something like $4,000,000,000 or $5,000,000,000 of inflows into the Nasdaq 100. So we just think that the indexes that we have are more aligned with long term themes. But I also would say there is obviously some beta component there in the trading. We are making sure that we continue to generate growth there by launching new products and making sure we're gathering AUM into those products as well, and that will be a testament to our ability to do that over the next several years to continue to expand that franchise. With regard to the Market Data business, we are continuing I think the one thing that this year has shown is it's a very resilient business, and we have done a nice job of diversifying the clientele, which earlier in the year we mentioned could create some challenges just in terms of clients who are some of the newer clients in other parts of the world.
But actually, we found that we continue to see really strong demand from those clients to continue to provide and expand the data that they're providing to investors around the world. So that's showing up in the numbers. And in fact, our audit revenue this quarter is significantly down from last year Q3. And our audit revenue for the year is down from last year. So we're actually not collecting as much on the back billing.
We're really driving the growth that we're seeing this quarter is really just from pure new customers and obviously expansion of our current clients. In terms of the consolidation and the impact from the online brokers, there will be some impact from that, and we've been we've known that for a long time. The nice thing is that it takes a long time to close these deals. So we've had a lot of time to work with those clients and continue to make sure that they're taking all the products that they can take from us as they become a combined organization. But we do also see continued strong demand coming from new, Fintech clients.
And so I think that there's a nice balance there. But we've always said that, that is a low to medium term I mean, a low to mid single digit grower because it's a more mature part of our business. So hopefully, that gives you more context.
And Brian, the audit number was $2,000,000 in the quarter compared to an unusually high quarter of 9 dollars in Q3 of 2019.
Yes, great. Thank you so much for all the color. Really appreciate it. Sure.
Thank you. Our next question comes from Mike Carrier with Bank of America. Your line is open.
Hi, good morning and thanks for taking the question. Hi, Mike. Good quarter, but just wanted to get an update on regulation, given the DOJ working with the SEC on some areas like big market data. Just wanted to get your take, particularly from a process standpoint on how this is potentially different versus the typical SEC process and maybe what to expect then?
Sure. Well, to be honest, we're reading about that the same way you are. So I hope that helps you understand that there's nothing that we're reading it at the same time you're reading it. So I think that the things that's the one thing I would like to say. And secondly, I think that we've been able to demonstrate multiple times over a decade that we have a highly competitive market model that our products are subject to competition in the data space, and that we provide a great value participants alike in the market data that we provide.
And I think we do it in a very responsible way. And I think we've proven that both to our customers and we do have very good relationships with our customers on the market data front despite some of the things that you see in the paper. But I have to say behind the scenes, we continue to have very strong relationships across our clientele as well as the fact that in addition to that, we've had to defend ourselves several times now, both in a court like situation. And I think we've done we've been able to prove ourselves over and over again that this is a competitive space that we price our products competitively and that we create value for people those people who use the data. So I think that we remain very confident, Mike, in the way that we manage the business as well as how we deliver products.
And we're happy to engage with whoever wants to talk to us about that.
Okay. Makes sense. Thanks a lot.
Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.
Okay, good morning. Thank you for taking my questions. So first of all, best of luck in the future and dialysis, Mike.
Thanks for
taking my questions. Yes. So for my question, could you please give us an update on the NASDAQ private market? Does and will SPAC impact the private market and change the way you look at this space? Thank you.
That's the first time I've got that question. Good question. So first of all, the Nasdaq Private Market continues to have solid activity this year. It has been lower this year in terms of the overall level of tenders that have been issued in the private markets this year. But generally speaking, we continue to have a good clientele and a service that we offer the private companies, and they're still taking advantage of managing their liquidity in the private space.
But it's been a little bit I would say, it's decelerated a little bit this year just based on, I think, really the volatility and understanding and the way that people are managing their businesses. But if you're asking, I think as a broader question is, because of all of the different alternative ways that companies can now tap into the public market, are they going to continue to stay private longer? And I think that's a good longer term question on that we're going to have to see play out. So our company is going to tap into the public market earlier in their life cycle, which may make it so that they have less of a demand to do tenders. I don't think we can know the answer to that right now.
I think that we are obviously seeing a lot of growth companies, but still quite mature, quite full on in terms of their overall ability to tap the public markets. I mean, we're still seeing high valuations and strong performance companies coming into the public markets, both through SPACs and through traditional IPOs, and it's been a very active year. But I also think that there are just thousands of private companies that will continue to mature in the private space before they tap the public market. And so I personally think the Nasdaq private market will continue to have a huge opportunity. We're really frankly barely scratching the surface of private company liquidity right now.
And so we have a lot more we can do there. But it is a good question as to whether more companies will come out to the public market sooner, and I just don't know the answer yet.
That's very helpful. Thank you, Alina.
Thank you. Our next question comes from Alex Blostein with Goldman Sachs. Your line is open.
Thanks. Hey, guys. Good morning. Question for you around Market Tech again. So understanding the near term margin dynamics could sort of fluctuate, but I was hoping you could spend a minute and just kind of walking us through the framework for margin improvement opportunity here over time.
And what I'm really kind of trying to get at is kind of what's the incremental margin on the ARPs and sort of the revenue growth that you've seen there? What's the incremental margin on some of the on prem initiatives that you guys have? And really just kind of the incremental margin on the new order intake. Not sure if those
are the best 3 kind
of buckets to tackle it, but something along those lines would be helpful. Thanks.
Sure. I don't know if I'll be able to answer that in detail today. Something we'll but we'll take it back and try to figure out how we can help with that as we get into Investor Day. I think that in terms of the March dynamics, I think what we've been saying all along continues to be very much the case, which is the more that we can move our clients into a SaaS offering. So whether it's market our market surveillance offering is we've launched as a SaaS offering this year, and we've seen strong pickup there.
And that and our trade surveillance offering has always been SaaS. And those offerings definitely allow us to have a higher overall margin just because the implementation time is shorter and it's the recurring revenue stream. And so it's just a different composition of revenue that delivers a stronger margin for us. Whereas with the on prem implementations, we obviously manage to the margin that we think is the right way to go, but we do often do fixed price contracts there. So sometimes, if an implementation ends up being longer and more complex, it can make it like it can make it so that we end up having to put more resources to it and that can have some margin impact in the short term on the implementation and that's what's happening this year.
But over time, I think the more we can show that we're the new sales we're generating are NFF, which is a much more flexible platform and SaaS driven and or because some of the NSF deliveries are still on prem, some are SaaS as well as our surveillance business is all SaaS. The more we can drive to that higher margin. And so it's up to us to show you that shift in the order intake and type of order intake that we're taking in. And that's something that we want to make sure that we provide more context around at Investor Day in a few weeks.
Thank you. Our next question comes from Chris Harris with Wells Fargo. Your line is open.
Great, thanks. Do you think the paradigm has changed for trading in U. S. Equities and options? And really, I guess, what I'm wondering is, whether you think the volumes that we're seeing in these markets are going to be sustainable and why, if so?
I think that there are 2 key factors that are that in our opinion are taking volumes to different levels this year. One is just overall volatility and uncertainty and that always makes it so that you've got investors who have more different opinions, right? So when there are investors who have different views on what could happen next and how the economy is going to progress, you have more volatility because those opinions all get expressed in the market and that drives more volume. But at the same time, we also have a lot more younger retail investors coming into the markets as well. And so I think that has to do with the fact that we do have more engagement around from retail investors.
And those retail investors coming into the market also drive volumes up. Now the question is, are those retail investors a sustainable trend? And I think that as we've been listening to the online brokers speak about it and we've been talking to our own clients about it, I think that there is a view that there is a new wave of investors that have come in on the back of 0 commissions, which takes down the friction in the market and therefore increases overall access as well as the fact that the macro environment has created some really strong investment opportunities for retail investors. And I think that, that is a longer term trend and a healthy one and an exciting one. But I don't think every one of those retail investors will be here over the long term.
But I think we are seeing a secular shift in getting more younger investors engaged in the market. And I think that could create a more sustainably higher trading environment than let's say we saw in 2017, 2018, 2019 timeframe. But I think that time will tell, but that's our I think that's our overall view just speaking with industry professionals to really understand the nature of the investors coming in.
Our next question comes from Kyle Voigt with KBW. Your line is open.
Hi, good morning. Just on the listings business, I know you cited the strong IPO market and some switches as well in the quarter. I guess it's still a little bit surprising that revenues grew by $5,000,000 sequentially given those initial listing fees are amortized over several years. So first part of the question, is there anything else to note that drove the increase there that's more one time in nature or should this be sustainable? And the second part of the question, you're still priced below the NYC for certain tiers within that listings business, Given the strength and the momentum you're seeing in the business, and I know you'd probably say it's not necessarily because of low fees, it's because of the value proposition.
Just wondering if you see potential for pricing tweaks as you look out over the next year or so? Thanks.
Sure. Well, one thing just to note is that, the amortization of the initial listing fees is really the fees that get amortized. That amortization schedule did change a bit few years a couple of years ago. So it's a little shorter than it used to be, but you're right that the initial listing fees do get amortized. And I think, Michael, for IPO, is it still over 2 years or 2 to 3?
Yes, it depends. It's 2 to 4 years is the timeframe. Yes, but we also did have there were some pricing that was taken at the beginning of the year on the sustaining fees as well. And that's flowing through, which has been flowing through all the quarters so far this year.
Yes. So and so I would just say that, first of all, there are no kind of one time fees that are creating that increase in the quarter. It is really just the nature of the strength of the new issuance market coupled with the strength in our Corporate Solutions business. And those are recurring revenue streams. So I think that's an important thing to say.
But I think that because of the fact that the new issuances have been high throughout the year, starting to see that compounding effect of that as we get more and more issuers in the market and then they then start to generate annual listing fees, which will then create a lift going into 2021. So that's the good news is, it is kind of really just coming from the strength of new issuances. I just want to make sure you know that the amortization schedule is a little different than it was a few years ago.
Fair enough. And then just on the potential for pricing tweaks?
Right. Sorry about that. Yes, we are very prudent in the way that we manage our fees. We're very proud of the fact that we deliver a really strong value to our clients. And we never want to give our top clients any reason to even consider an alternative.
And seats do play a role in that. I wouldn't say that it's you're right, it's not the reason they switched to NASDAQ, but it can be a door opener for them to consider. They're paying $500,000 to live on New York and they're paying $160,000 to live here. And they're getting frankly in our opinion a far superior service here, then it allows us to open the door to a conversation and then work with them on all the other aspects of our value proposition to have them move over. So I would have to say the fee differential is a catalyst to conversations on switches.
And for FCOs, we think that we offer a fee structure that is a strong reflection of the value that we give to our clients. And I think it so we feel good about how we tier our fees and the max that we charge. And we'll continue to make pricing changes periodically to reflect the increased investments we're making in the business. But we don't see a reason, frankly, to make a big change in our fees at the top end.
Thank you.
Thank you. We have a follow-up from Alex Kramm with UBS. Your line is open.
Oh, hey. Yes, my follow-up was actually just answered on the listings, but very quickly then maybe on index and other numbers question. You gave the I guess a trading contribution. Can you also give the AUM contribution, the exact number for this quarter?
Sure. I know it's Michael, you might have it more readily available, but I know in any given quarter, it's like 60% to 65%. Yes,
that's why I can say 60%, 65%. I don't know, Ed, do you have the exact number for this quarter? But I think it's in that range.
I think it's in that range, Alex. But probably towards the lower end since the end since the future is right at the high end.
Right. Fair enough. Thank you.
Sure. And just to make up the difference is the data that we should set, index data, index AUM and the futures volumes are the 3 components of the indexes.
Yes, thanks.
Thank you. We have a follow-up from Rich Repetto with Piper Sandler. Your line is open.
Yes. Hi, Adena. I couldn't let the call go by without asking about the financial transaction tax.
Oh, yes.
So I guess the question is, what are you doing to prepare? Are you having discussions with legislators? I know certainly there's been a lot in the press about potentially moving. Is that really possible? So what are your thoughts Sure.
So
Sure. So I think the first thing to say is we're heavily engaged with the New Jersey legislature and the governor. We also have been receiving inbound calls from governors from other states who certainly would welcome us as a data center operator or a company that uses data centers in their states as well. The nice thing about the way that we manage our infrastructure is that we don't actually own any of our data centers. We work with Equinix as our partner today.
And so we do have flexibility. We've moved our data centers in the past. So we used to operate out of Trumbull, Connecticut. We moved to Carteret several years ago and then also we used to be in Ashburn, Virginia for our backup and we're now in Chicago. So we do have experience moving data centers.
We've also moved our data centers in Sweden. So we are familiar with what that takes. And I think that obviously in this particular context, it's not just us. We have to work very, very closely with our clients because our clients are all embedded in our data centers as well, and they've built infrastructure to support connections between Chicago and New Jersey. So there is an investment that would need to be made in order for us as an ecosystem to choose to go to a different state, but it is absolutely feasible to do it.
I think that what we've made clear is that we certainly operate well in New Jersey and we have a well established ecosystem here. And if we don't think there's a risk of attack, then that's something that would obviously be our first choice. But if we believe that the state could impose a tax just because our data centers have to be located in their state and that tax creates friction in the market that then lessens participation from investors, particularly retail investors, then widen spreads and lowers liquidity, we have to do the responsible thing and find an environment that doesn't introduce that pressure. And in every other case, as you know, Rich, that transaction taxes have been implemented in other countries, they've seen really negative effects on liquidity and spread. And so we have a lot of proof points to say friction matters, taxes create a friction and it will be it will have a negative impact right at a time when given the volatility, we really need to maximize liquidity in the market.
So we are quite serious about it, and we are heavily engaged with New Jersey and other states to understand the best long term path forward.
Thank you. And just I think there is a coalition among the exchanges to sort of represent your position and I think NASDAQ is part of it, but I haven't heard as much outside about it, I guess.
From other I would just say that there's a wide range of participants, market participants and exchanges involved in understanding and involved in speaking with the legislature on this issue. Just quickly to get back to Alex Graham's question, the specific percentage of revenue coming from AUM in the quarter within our index business was 63%.
And just to add to that, Adena, it was about 24% on the index licensing side on the futures licensing side.
Oh, it's 24% so 21%. Okay. Thank you. Okay. So, Rich, I hope that answers your question.
Thank you.
Sure, it does. Thank you.
Thank you. Our next question comes from Ken Hill with Loop Capital. Your line is open.
Hey, good morning. First off, I want to say congrats to Michael and Anne on the transition there.
My
question is on
the CUES Innovation Suite you guys launched. I know I was just curious from an economic perspective to NASDAQ. Are there are the new products being rolled out? Do they have any different pricing or any different economics for NASDAQ given maybe like a lower cost product? I know you're rolling out with the Qs or an alternative type of product there.
And then I guess just thinking forward, are there any other additional products you might be looking to slice and dice a little bit differently here within the index suite?
Sure. So on the first point, we don't tend to talk specifically about how we structure our fees with each individual partner. But I would say that we're very comfortable with how we've built this partnership with Invesco and to make sure that we are getting properly compensated for the value of the indexes. And so I think we feel comfortable that if the clients choose the new products or they choose the current products, we're very happy with the fee rate that getting. In terms of other new products, that's actually the most fun part of the index team.
They're always considering new strategies and new ways that we can look at both our benchmarks like the Nasdaq 100 and the Biotech as well as more thematic indexes to bring creativity to investors. And so we are constantly working with our index partners to find new ways to slice and dice it. So for instance, I think it was Victory where we also have implemented the NASDAQ 250, which is the next 50 stocks below the NASDAQ 100. So we have kind of different ways that people can choose to participate in the broader Nasdaq franchise through different partners.
Okay. Thanks for the color there.
Thank you. We have a question from Brian Bedell with Deutsche Bank. Your line is open.
Great. Thanks for the follow-up. Just on the U. S. Cash equities market in terms of pricing and revenue captures, you sort of move into the end of the year.
2 dynamics going on there. Obviously, 1, we're seeing more volume getting executed off exchange. I suspect that's a part of the retail dynamic and market maker dynamic. Maybe if you could just talk about that and whether there's any interest in pricing initiatives to capture more of that share? And then any sort of thoughts on members exchange and that was it seems like that was delayed a little bit.
But in terms of pricing, whether you would be doing any preemptive pricing against that exchange coming into the Q4?
Okay. So with cash equities pricing, the first thing I would say is, as you all know, it's something that we work on very dynamically and we make small changes to pricing almost monthly actually within the cash equities business. And so I would say that we're always watching that and working with our clients to understand how we can bring attractive flow into the NASDAQ exchanges. And in terms of the retail, trying to get more of the retail to come on to exchange from off exchange, you are correct that the retail trend has driven a higher level of off exchange volumes. And so those orders are not getting subject to the price discovery that we have on market.
We'd love to get capture more of that, but we also reflect on the fact that the intermediaries have a payment forward flow scheme that's different than our exchange fee scheme. So we have to work within the exchange fee structure that we're allowed to operate in, and that will limit our ability to kind of bring in a lot of that new retail ops that's going off exchange. But we are always talking to them about on the margins, how can we get more of the retail flow to come straight to the exchange. I think that in terms of MeMex and the way that we're managing that, we are highly engaged with our clients. We have been now ever since they announced that they were forming MeMex, and we take every competitor seriously.
And to the extent that we see changes in behaviors among our clients, we will respond to make sure that we are maximizing and optimizing our platform. And we are having that dialogue all the time. So I wouldn't say that you're going to see dramatic things, but more an ongoing effort for us from a pricing perspective to manage to that competitor to the extent they have early success.
Okay. Great. That's very helpful. Thank you.
Thank you. And there are no other questions in the queue. I'd like to turn the call back to Adena Friedman for any closing remarks.
Great. Thank you very much. Well, I just want to thank you all. And I do want to again thank Michael for just an amazing time together. I mean, we've had we really are great partners, and he's also done a spectacular job of preparing Anne for the role.
He's sponsored her and mentored her. I've had a chance to work very closely with Anne over the years. And so I just can't be more excited to say that despite the fact that we're very sad to see Michael Leaf, we're excited for him and his next step, and we are just thrilled that we have such a strong internal candidate to come in and take the role of CFO. And of course, you get to see Michael a lot over the next few months, including at our Investor Day, which is on November 10, and we hope that you all join us either virtually or in person, and we look forward to that. So thank you all very much, and have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.