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EX-32.2 - EXHIBIT 32.2 - Intercontinental Exchange, Inc.ice2015331ex322.htm
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EX-31.2 - EXHIBIT 31.2 - Intercontinental Exchange, Inc.ice2015331ex312.htm

 
 
 
 
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
 
Form 10-Q
 
 
 
(Mark One)
 
þ
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


 
For the quarterly period ended March 31, 2015
Or
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from                 to
Commission File Number 001-36198
 
 
 
 
 
INTERCONTINENTAL EXCHANGE, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
46-2286804
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification Number)
5660 New Northside Drive,
Atlanta, Georgia
30328
(Zip Code)
(Address of principal executive offices)
 
(770) 857-4700
Registrant’s telephone number, including area code 
 
 
 
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 
 
 
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
   Smaller reporting company  ¨   
 
 
 
 
 
 
(Do not check if a smaller company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨   No   þ
As of May 1, 2015, the number of shares of the registrant’s Common Stock outstanding was 111,309,558 shares.
 
 
 
 
 





 
 
INTERCONTINENTAL EXCHANGE, INC.
Form 10-Q
Quarterly Period Ended March 31, 2015
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
PART I.
Financial Statements
 
Item 1
Consolidated Financial Statements (Unaudited):
 
 
Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014
 
Consolidated Statements of Income for the three months ended March 31, 2015 and 2014
 
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014
 
Consolidated Statements of Changes in Equity, Accumulated Other Comprehensive Income (Loss) and Redeemable Non-Controlling Interest for the three months ended March 31, 2015 and for the year ended December 31, 2014
 
Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014
 
Notes to Consolidated Financial Statements
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3
Quantitative and Qualitative Disclosures About Market Risk
Item 4
Controls and Procedures

 
 
 
PART II.
Other Information
 
Item 1
Legal Proceedings
Item 1A
Risk Factors
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3
Defaults Upon Senior Securities
Item 4
Mine Safety Disclosures
Item 5
Other Information
Item 6
Exhibits




PART I. Financial Statements
Item 1.    Consolidated Financial Statements (Unaudited)

Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Balance Sheets
(In millions, except per share amounts)
(Unaudited)
 
As of
 
As of
 
March 31, 2015
 
December 31, 2014
Assets:
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
752

 
$
652

Short-term investments
1,073

 
1,200

Short-term restricted cash and investments
298

 
329

Customer accounts receivable, net of allowance for doubtful accounts of $1 at March 31, 2015 and December 31, 2014
608

 
471

Margin deposits and guaranty funds
45,600

 
47,458

Prepaid expenses and other current assets
155

 
135

Total current assets
48,486

 
50,245

Property and equipment, net
879

 
874

Other non-current assets:
 
 
 
Goodwill
8,504

 
8,535

Other intangible assets, net
7,724

 
7,780

Long-term restricted cash and investments
295

 
297

Long-term investments
309

 
379

Other non-current assets
231

 
169

Total other non-current assets
17,063

 
17,160

Total assets
$
66,428

 
$
68,279

 
 
 
 
Liabilities and Equity:
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
392

 
$
337

Section 31 fees payable
92

 
137

Accrued salaries and benefits
112

 
205

Deferred revenue
367

 
69

Short-term debt
1,946

 
2,042

Margin deposits and guaranty funds
45,600

 
47,458

Other current liabilities
289

 
291

Total current liabilities
48,798

 
50,539

Non-current liabilities:
 
 
 
Non-current deferred tax liability, net
1,913

 
1,938

Long-term debt
2,247

 
2,247

Accrued employee benefits
502

 
516

Other non-current liabilities
474

 
482

Total non-current liabilities
5,136

 
5,183

Total liabilities
53,934

 
55,722

Commitments and contingencies


 


Redeemable non-controlling interest
169

 
165


2


Equity:
 
 
 
Intercontinental Exchange, Inc. shareholders’ equity:
 
 
 
Preferred stock, $0.01 par value; 100 shares authorized; no shares issued or outstanding at March 31, 2015 and December 31, 2014

 

Common stock, $0.01 par value; 500 shares authorized; 116 and 112 shares issued and outstanding at March 31, 2015, respectively, and 116 and 113 shares issued and outstanding at December 31, 2014, respectively
1

 
1

Treasury stock, at cost; 4 and 3 shares at March 31, 2015 and December 31, 2014, respectively
(975
)
 
(743
)
Additional paid-in capital
9,983

 
9,938

Retained earnings
3,441

 
3,210

Accumulated other comprehensive loss
(153
)
 
(46
)
Total Intercontinental Exchange, Inc. shareholders’ equity
12,297

 
12,360

Non-controlling interest in consolidated subsidiaries
28

 
32

Total equity
12,325

 
12,392

Total liabilities and equity
$
66,428

 
$
68,279


See accompanying notes.

3


Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
 
Three Months Ended 
 March 31,
 
2015
 
2014
Revenues:
 
 
 
Transaction and clearing fees, net
$
812

 
$
764

Data services fees
187

 
157

Listing fees
101

 
90

Other revenues
56

 
52

Total revenues
1,156

 
1,063

Transaction-based expenses:
 
 
 
Section 31 fees
92

 
74

Cash liquidity payments, routing and clearing
214

 
192

Total revenues, less transaction-based expenses
850

 
797

Operating expenses:
 
 
 
Compensation and benefits
151

 
154

Technology and communication
51

 
47

Professional services
33

 
54

Rent and occupancy
16

 
20

Acquisition-related transaction and integration costs
19

 
25

Selling, general and administrative
29

 
26

Depreciation and amortization
89

 
80

Total operating expenses
388

 
406

Operating income
462

 
391

Other income (expense):
 
 
 
Interest expense
(23
)
 
(27
)
Other income (expense), net
2

 
(2
)
Other expense, net
(21
)
 
(29
)
Income from continuing operations before income tax expense
441

 
362

Income tax expense
118

 
101

Income from continuing operations
323

 
261

Income from discontinued operations, net of tax

 
13

Net income
$
323

 
$
274

Net income from continuing operations attributable to non-controlling interest
(8
)
 
(13
)
Net income attributable to Intercontinental Exchange, Inc.
$
315

 
$
261

Basic earnings per share attributable to Intercontinental Exchange, Inc. common shareholders:
 
 
 
Continuing operations
$
2.81

 
$
2.16

Discontinued operations

 
0.12

Basic earnings per share
$
2.81

 
$
2.28

Basic weighted average common shares outstanding
112

 
115

Diluted earnings per share attributable to Intercontinental Exchange, Inc. common shareholders:
 
 
 
Continuing operations
$
2.80

 
$
2.15

Discontinued operations

 
0.12

Diluted earnings per share
$
2.80

 
$
2.27

Diluted weighted average common shares outstanding
112

 
116

Dividend per share
$
0.65

 
$
0.65


See accompanying notes.

4


Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
 
Three Months Ended 
 March 31,
 
2015
 
2014
Net income
$
323

 
$
274

Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments, net of tax benefit of $4 for the three months ended March 31, 2015
(37
)
 
45

Change in fair value of available-for-sale securities
(70
)
 
60

Other comprehensive income (loss)
(107
)
 
105

Comprehensive income
$
216

 
$
379

Comprehensive income attributable to non-controlling interest
(8
)
 
(13
)
Comprehensive income attributable to Intercontinental Exchange, Inc.
$
208

 
$
366


See accompanying notes.

5


Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Statements of Changes in Equity, Accumulated Other Comprehensive Income (Loss)
and Redeemable Non-Controlling Interest
(In millions)
(Unaudited)
 
Intercontinental Exchange, Inc. Shareholders' Equity
 
Non-
Controlling
Interest in
Consolidated
Subsidiaries
 
Total
Equity
 
Redeemable Non-Controlling Interest
 
Common
 Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
 
Shares
 
Value
 
Shares
 
Value
 
Balance, as of December 31, 2013
115

 
$
1

 

 
$
(53
)
 
$
9,794

 
$
2,482

 
$
125

 
$
32

 
$
12,381

 
$
322

Other comprehensive loss

 

 

 

 

 

 
(171
)
 

 
(171
)
 

Issuance of restricted stock
1

 

 

 

 

 

 

 

 

 

Exercise of common stock options

 

 

 

 
13

 

 

 

 
13

 

Repurchases of common stock

 

 
(3
)
 
(645
)
 

 

 

 

 
(645
)
 

Payments relating to treasury shares

 

 

 
(45
)
 

 

 

 

 
(45
)
 

Stock-based compensation

 

 

 

 
105

 

 

 

 
105

 

Tax benefits from stock option plans

 

 

 

 
26

 

 

 

 
26

 

Acquisition of redeemable non-controlling interest

 

 

 

 

 

 

 

 

 
16

Adjustment to redemption value

 

 

 

 

 
46

 

 

 
46

 
(46
)
Distributions of profits

 

 

 

 

 

 

 
(17
)
 
(17
)
 
(16
)
Dividends paid to shareholders

 

 

 

 

 
(299
)
 

 

 
(299
)
 

Purchase of subsidiary shares

 

 

 

 

 

 

 

 

 
(129
)
Net income attributable to non-controlling interest

 

 

 

 

 
(35
)
 

 
17

 
(18
)
 
18

Net income

 

 

 

 

 
1,016

 

 

 
1,016

 

Balance, as of December 31, 2014
116

 
1

 
(3
)
 
(743
)
 
9,938

 
3,210

 
(46
)
 
32

 
12,392

 
165

Other comprehensive loss

 

 

 

 

 

 
(107
)
 

 
(107
)
 

Exercise of common stock options

 

 

 

 
4

 

 

 

 
4

 

Repurchases of common stock

 

 
(1
)
 
(196
)
 

 

 

 

 
(196
)
 

Payments relating to treasury shares

 

 

 
(36
)
 

 

 

 

 
(36
)
 

Stock-based compensation

 

 

 

 
28

 

 

 

 
28

 

Tax benefits from stock option plans

 

 

 

 
13

 

 

 

 
13

 

Adjustment to redemption value

 

 

 

 

 
(11
)
 

 

 
(11
)
 
7

Distributions of profits

 

 

 

 

 

 

 
(8
)
 
(8
)
 
(7
)
Dividends paid to shareholders

 

 

 

 

 
(73
)
 

 

 
(73
)
 

Net income attributable to non-controlling interest

 

 

 

 

 
(8
)
 

 
4

 
(4
)
 
4

Net income

 

 

 

 

 
323

 

 

 
323

 

Balance, as of March 31, 2015
116

 
$
1

 
(4
)
 
$
(975
)
 
$
9,983

 
$
3,441

 
$
(153
)
 
$
28

 
$
12,325

 
$
169


 
As of
 
As of
 
March 31, 2015
 
December 31, 2014
Accumulated Other Comprehensive Income (Loss) was as follows:
 
 
 
Foreign currency translation adjustments
$
(24
)
 
$
13

Fair value of available-for-sale securities
(15
)
 
55

Employee benefit plans adjustments
(114
)
 
(114
)
Accumulated other comprehensive loss
$
(153
)
 
$
(46
)

See accompanying notes.

6



Intercontinental Exchange, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
Three Months Ended 
 March 31,
 
2015
 
2014
Operating activities:
 
 
 
Net income
$
323

 
$
274

Less: income from discontinued operations, net of tax

 
(13
)
Income from continuing operations
323

 
261

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
 
 
 
Depreciation and amortization
89

 
80

Stock-based compensation
24

 
20

Deferred taxes
(24
)
 
(15
)
Amortization of fair market value premium on NYSE Notes
(12
)
 
(14
)
Other
(15
)
 
(10
)
Changes in assets and liabilities:
 
 
 
Customer accounts receivable
(122
)
 
(49
)
Other current and non-current assets
(26
)
 
(11
)
Section 31 fees payable
(45
)
 
(13
)
Deferred revenue
312

 
293

Other current and non-current liabilities
(39
)
 
(5
)
Total adjustments
142

 
276

Net cash provided by operating activities from continuing operations
465

 
537

 
 
 
 
Investing activities:
 
 
 
Capital expenditures
(39
)
 
(25
)
Capitalized software development costs
(21
)
 
(20
)
Cash paid for acquisitions, net of cash acquired

 
(142
)
Additional contribution to equity method investee
(60
)
 

Proceeds from sales of available-for-sale investments

 
10

Purchases of available-for-sale investments

 
(6
)
Decrease (increase) in restricted cash and investments
34

 
(60
)
Net cash used in investing activities from continuing operations
(86
)
 
(243
)
 
 
 
 
Financing activities:
 
 
 
Borrowings (repayments) of debt facilities and commercial paper, net
35

 
(161
)
Dividends to shareholders
(73
)
 
(76
)
Payments relating to treasury shares received for restricted stock tax payments and stock option exercises
(36
)
 
(36
)
Repurchases of common stock
(196
)
 

Proceeds from exercise of common stock options
4

 
2

Distributions of profits to non-controlling interest
(15
)
 
(9
)
Other
13

 
14

Net cash used in financing activities from continuing operations
(268
)
 
(266
)
Net cash used in operating activities from discontinued operations

 
(18
)
Net cash used in investing activities from discontinued operations

 
(6
)
Effect of exchange rate changes on cash and cash equivalents
(11
)
 
(1
)
Net increase in cash and cash equivalents
100

 
3

Cash and cash equivalents, beginning of period
652

 
961

Cash and cash equivalents, end of period
$
752

 
$
964

 
 
 
 
Supplemental cash flow disclosure:
 
 
 
Cash paid for income taxes
$
51

 
$
46

Cash paid for interest
$
1

 
$
5


See accompanying notes.

7


Intercontinental Exchange, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1.
Description of Business
We are a leading global operator of regulated exchanges and clearing houses and a provider of data services for financial and commodity markets. We operate global marketplaces for trading and clearing a broad array of securities and derivatives contracts across major asset classes, including energy and agricultural commodities, interest rates, equities, equity derivatives, credit derivatives, bonds and currencies.
Our regulated exchanges include futures exchanges in the United States, United Kingdom, Canada, Singapore and Europe, three cash equities exchanges and two equity options exchanges. We operate over-the-counter ("OTC") markets for physical energy and credit default swaps ("CDS"). We also currently operate seven central counterparty clearing houses (Note 8). Through our trading, clearing, listings and post-trade platforms, we bring together buyers and sellers by offering liquid markets, benchmark products, access to capital markets, and a range of services to support market participants’ trading, risk management and capital raising activities.

2.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared by us in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2014. The accompanying unaudited consolidated financial statements reflect all adjustments that are, in our opinion, necessary for a fair presentation of results for the interim periods presented. These adjustments are of a normal recurring nature.
Preparing financial statements requires us to make certain estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, actual results may be different from these estimates. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for any future period or the full fiscal year.
The accompanying unaudited consolidated financial statements include the accounts of us and our wholly-owned and controlled subsidiaries. All intercompany balances and transactions between us and our wholly-owned and controlled subsidiaries have been eliminated in the consolidation. For those consolidated subsidiaries in which our ownership is less than 100% and for which we have control over the assets and liabilities and the management of the entity, the outside stockholders’ interests are shown as non-controlling interests. In instances where outside stockholders' hold an option to require us to repurchase the outside stockholders' interest, these interests are shown as redeemable non-controlling interests.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period’s financial statement presentation. As discussed in Note 12, we completed the initial public offering ("IPO") and sale of our wholly-owned subsidiary Euronext and completed the sales of our wholly-owned subsidiaries Wombat, NYFIX and Metabit during 2014, and have included the financial results of these companies in discontinued operations in the accompanying consolidated financial statements.

3.
Goodwill and Other Intangible Assets

The following is a summary of the activity in the goodwill balance for the three months ended March 31, 2015 (in millions):
Goodwill balance at December 31, 2014
$
8,535

Foreign currency translation
(30
)
Other activity, net
(1
)
Goodwill balance at March 31, 2015
$
8,504


8


The following is a summary of the activity in the other intangible assets balance for the three months ended March 31, 2015 (in millions):
Other intangible assets balance at December 31, 2014
$
7,780

Foreign currency translation
(18
)
Amortization of other intangible assets
(38
)
Other intangible assets balance at March 31, 2015
$
7,724


The foreign currency translation adjustments in the tables above result from a portion of our goodwill and other intangible assets being held at our United Kingdom, European, Singapore and Canadian subsidiaries, some of whose functional currencies are not the U.S. dollar. We did not recognize any impairment losses on goodwill or other intangible assets during the three months ended March 31, 2015 and 2014.

4.
Deferred Revenue

Deferred revenue represents consideration received that is yet to be recognized as revenue. Total deferred revenue was $450 million as of March 31, 2015, including $367 million in current deferred revenue and $83 million in non-current deferred revenue. The changes in our deferred revenue during the three months ended March 31, 2015 are as follows (in millions):
 
Annual Listing Fee Revenue
 
Original Listing Fee Revenues
 
Other Listing Fee Revenues
 
Data Services Fees and Other Revenues
 
Total
Deferred revenue balance at December 31, 2014
$

 
$
47

 
$
34

 
$
55

 
$
136

Additions
354

 
6

 
19

 
61

 
440

Amortization
(89
)
 
(2
)
 
(3
)
 
(32
)
 
(126
)
Deferred revenue balance at March 31, 2015
$
265

 
$
51

 
$
50

 
$
84

 
$
450


5.
Debt

Our total debt, including short-term and long-term debt, consisted of the following as of March 31, 2015 and December 31, 2014 (in millions):
 
As of
 
As of
 
March 31, 2015
 
December 31, 2014
Debt:
 
 
 
Commercial Paper
$
940

 
$
905

NYSE EUR Notes (5.375% senior unsecured notes due June 30, 2015)
1,006

 
1,137

Short-term debt
1,946

 
2,042

NYSE USD Notes (2.00% senior unsecured notes due October 5, 2017)
853

 
853

2018 Senior Notes (2.50% senior unsecured notes due October 15, 2018)
600

 
600

2023 Senior Notes (4.00% senior unsecured notes due October 15, 2023)
794

 
794

Long term debt
2,247

 
2,247

Total debt
$
4,193

 
$
4,289

2014 Credit Facility
On April 3, 2014, we entered into a $3.0 billion senior unsecured revolving credit facility (the “2014 Credit Facility”). The 2014 Credit Facility includes an option for us to propose an increase in the aggregate amount by up to $1.0 billion, subject to the consent of the lenders funding the increase and certain other conditions. The 2014 Credit Facility matures on April 3, 2019. No amounts were outstanding under the 2014 Credit Facility as of March 31, 2015. Of the $3.0 billion that is available for borrowing under the 2014 Credit Facility, $940 million is required to back-stop the amount outstanding under our U.S. dollar commercial paper program (the “Commercial Paper Program”) as of March 31, 2015 and $303 million is reserved to provide liquidity or required financial resources for our clearing houses. The amount required to back-stop the Commercial Paper Program will fluctuate as we increase or decrease our commercial paper borrowings. The remaining $1.8 billion as of March 31, 2015 is available to us to use for working capital and general corporate purposes, and any portion of the revolving credit facility no longer necessary in the future to be reserved for the foregoing purposes will be available to us to use for working capital and general corporate purposes.

9


Commercial Paper Program
Our Commercial Paper Program is currently backed by the borrowing capacity available under the 2014 Credit Facility, equal to the amount of the commercial paper that is issued and outstanding at any given point in time. The effective interest rate of commercial paper issuances does not materially differ from short term interest rates (such as USD LIBOR). The fluctuation of these rates due to market conditions may impact our interest expense.
Commercial paper notes of $940 million with original maturities ranging from 1 to 90 days were outstanding as of March 31, 2015 under the Commercial Paper Program. As of March 31, 2015, the weighted average interest rate on the $940 million outstanding under the Commercial Paper Program was 0.23% per annum, with a weighted average maturity of 23 days. We used net proceeds from the Commercial Paper Program during the three months ended March 31, 2015 for general corporate purposes.
NYSE Notes
In connection with our acquisition on November 13, 2013 of NYSE Euronext, which we refer to as NYSE following the IPO and sale of Euronext in 2014, one of our subsidiaries assumed NYSE's outstanding debt instruments, which included $850 million of 2.00% senior unsecured fixed rate notes due in October 2017 (the “NYSE USD Notes”) and €920 million ($1.0 billion) of 5.375% senior unsecured fixed rate notes due in June 2015 (the “NYSE EUR Notes”, and together with the NYSE USD Notes, the "NYSE Notes").
Upon closing of the Euronext IPO on June 24, 2014, we received €1.4 billion ($1.9 billion) in net cash proceeds. We elected to set aside sufficient euro-denominated cash from the proceeds to effectively pre-fund the maturity of the NYSE EUR Notes and the related final interest coupon payment, both due on June 30, 2015. In connection with this, in July 2014, we placed €969 million ($1.0 billion) of the cash proceeds from the Euronext IPO in term deposits at various banks with a maturity date of June 25, 2015 to cover the €920 million ($995 million) principal and the €49 million ($53 million) final interest coupon payment due on June 30, 2015. These deposits are classified as short-term investments in the accompanying consolidated balance sheet as of March 31, 2015.
In accordance with purchase accounting, we recorded the NYSE Notes at fair value on the November 13, 2013 acquisition date. Based on public debt prices, as of this date, the NYSE USD Notes had a fair value of $854 million (an increase of $4 million from its November 13, 2013 face value) and the NYSE EUR Notes had a fair value of $1.3 billion (an increase of $89 million from its November 13, 2013 face value). To record the NYSE Notes at fair value, the increase in the carrying amount of the NYSE Notes is amortized as a reduction to the interest expense recorded by us in the consolidated statements of income over the remaining maturities of the NYSE Notes. During the three months ended March 31, 2015 and 2014, the amortization of the increase in the fair value of the NYSE Notes was $12 million and $14 million, respectively.
Senior Notes
In October 2013, we issued $600 million aggregate principal amount of 2.50% senior unsecured fixed rate notes due October 2018 (the “2018 Senior Notes”) and $800 million aggregate principal amount of 4.00% senior unsecured fixed rate notes due October 2023 (the “2023 Senior Notes”, together with the 2018 Senior Notes, the “Senior Notes”).

6.
Equity
We currently sponsor employee and director stock option and restricted stock plans. Stock options and restricted stock are granted at the discretion of the compensation committee of the board of directors. All stock options and restricted stock awards are granted at an exercise price equal to the fair value of the common stock on the date of grant. The grant date fair value is based on the closing stock price on the date of grant. The fair value of the stock options and restricted stock on the date of grant is recognized as expense over the vesting period, net of estimated forfeitures. The non-cash compensation expenses recognized in our consolidated statements of income for stock options and restricted stock were $24 million and $17 million for the three months ended March 31, 2015 and 2014, respectively.
Stock Option Plans
The following is a summary of stock options for the three months ended March 31, 2015:
 
Number of Options
 
Weighted Average
Exercise Price per
Option
Outstanding at December 31, 2014
762,867

 
$
136.03

Granted
176,464

 
207.97

Exercised
(35,580
)
 
94.72

Outstanding at March 31, 2015
903,751

 
151.70

 

10


Details of stock options outstanding as of March 31, 2015 are as follows:
 
Number of Options
 
Weighted Average
Exercise Price
 
Weighted Average
Remaining
Contractual Life
(Years)
 
Aggregate
Intrinsic
Value
(In millions)
Vested or expected to vest
903,751

 
$
151.70

 
6.6
 
$
74

Exercisable
596,511

 
$
128.04

 
5.2
 
$
63

The total intrinsic value of stock options exercised during the three months ended March 31, 2015 and 2014 were $5 million and $12 million, respectively. As of March 31, 2015, there were $12 million in total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of 2.2 years as the stock options vest.
We use the Black-Scholes option pricing model for purposes of valuing stock option awards. During the three months ended March 31, 2015 and 2014, we used the weighted-average assumptions in the table below to compute the value of all options for shares of common stock granted to employees:
 
Three Months Ended March 31,
Assumptions:
2015
 
2014
Risk-free interest rate
1.08
%
 
1.23
%
Expected life in years
5.0

 
5.0

Expected volatility
24
%
 
27
%
Expected dividend yield
1.25
%
 
1.26
%
Estimated weighted-average fair value of options granted per share
$
40.94

 
$
45.23

The risk-free interest rate is based on the zero-coupon U.S. Treasury yield curve in effect at the time of grant. The expected life computation is derived from historical exercise patterns and anticipated future patterns. Expected volatilities are based on historical volatility of our stock.
Restricted Stock Plans
In January 2015, we reserved a maximum of 429,468 restricted shares for potential issuance as performance-based restricted shares to certain of our employees. The number of shares that will ultimately be granted under the performance awards will be based on our actual financial performance as compared to financial performance targets set by our board of directors and compensation committee for the year ending December 31, 2015. These restricted shares are also subject to a market condition that could reduce the number of shares that are ultimately granted. The reduction would occur if our 2015 total shareholder return falls below the 2015 return of the S&P 500 Index and we achieve an above “target” financial performance level threshold.
The maximum compensation expense to be recognized under these performance-based restricted shares is $86 million if the maximum financial performance target is met and all 429,468 shares vest. The compensation expense to be recognized under these performance-based restricted shares will be $43 million if the target financial performance is met, which would result in 214,734 shares vesting. We will recognize expense on an accelerated basis over the three-year vesting period based on our quarterly assessment of the probable 2015 actual financial performance as compared to the 2015 financial performance targets. If the market condition is not achieved, compensation cost will not be affected since the grant date fair value of the award gave consideration to the probability of market condition achievement.
As of March 31, 2015, we determined that it is probable that the target financial performance level will be met for 2015. Based on this assessment, we recorded non-cash compensation expense of $5 million for the three months ended March 31, 2015, related to these shares and the remaining $38 million in non-cash compensation expense will be recorded on an accelerated basis over the remaining vesting period, including $20 million of which will be recorded over the remainder of 2015.
The following is a summary of the non-vested restricted shares for the three months ended March 31, 2015:  
 
Number of
Restricted
Stock Shares
 
Weighted Average
Grant-Date Fair
Value per Share
Non-vested at December 31, 2014
1,070,995
 
$
176.82

Granted
506,560
 
207.31

Vested
(369,511)
 
153.79

Forfeited
(18,840)
 
193.04

Non-vested at March 31, 2015
1,189,204
 
196.70


11


Restricted stock shares granted in the table above include both time-based and performance-based grants. Performance-based shares have been adjusted to reflect the actual shares to be issued based on the achievement of past performance targets. Non-vested performance-based restricted shares granted are presented in the table above at the maximum number of restricted shares that would vest if the maximum performance targets are met. As of March 31, 2015, there were $175 million in total unrecognized compensation costs related to the time-based restricted stock and the performance-based restricted stock. These costs are expected to be recognized over a weighted-average period of 2.3 years as the restricted stock vests. These unrecognized compensation costs assume that a target performance level will be met on the performance-based restricted shares granted in January 2015. During the three months ended March 31, 2015 and 2014, the total fair value of restricted stock vested under all restricted stock plans was $80 million and $84 million, respectively.
Stock Repurchase Program
In September 2014, we entered into a Rule 10b5-1 trading plan as authorized by our board of directors permitting open market repurchases of our common stock based on certain parameters described in the trading plan. During the three months ended March 31, 2015, we repurchased 872,300 shares of our outstanding common stock under the Rule 10b5-1 trading plan at a cost of $196 million. During the first quarter of 2015, our board of directors approved an increase of our share repurchase authorization to an aggregate of $600 million of our common stock with no fixed expiration date, effective as of April 1, 2015.
We expect to fund any remaining repurchases with a combination of cash on hand, future cash flows and by borrowing under our credit facilities and in connection with our Commercial Paper Program. The timing and extent of any future repurchases that are not made pursuant to the Rule 10b5-1 trading plan will be at our discretion and will depend upon market conditions, the amount authorized by our board of directors, our stock price, our target debt ratio and corporate debt rating, and our strategic growth initiatives at that time. We may discontinue the stock repurchases at any time and may terminate the current Rule 10b5-1 trading plan or enter into a new Rule 10b5-1 trading plan in the future. In addition, our board of directors may increase or decrease the amount of capacity we have for repurchases from time to time.

7.
Income Taxes from Continuing Operations
Our effective tax rate from continuing operations was 27% and 28% for the three months ended March 31, 2015 and 2014, respectively. The effective tax rates for the three months ended March 31, 2015 and 2014 are lower than the federal statutory rate primarily due to the favorable foreign income tax rate differentials, partially offset by state income taxes. Favorable foreign income tax rate differentials result from lower tax rates in the United Kingdom, the Netherlands and various other lower tax jurisdictions than compared to the tax rates in the United States.
Our non-U.S. subsidiaries had $2.4 billion in cumulative undistributed earnings as of March 31, 2015. This amount represents the post-income tax earnings under U.S. GAAP adjusted for previously taxed income. The earnings from our non-U.S. subsidiaries are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes has been made in the accompanying consolidated financial statements. Further, a determination of the unrecognized deferred tax liability is not practicable. Any future distribution by way of dividend of these non-U.S. earnings may subject us to both U.S. federal and state income taxes, as adjusted for non-U.S. tax credits, and withholding taxes payable to various non-U.S. countries.

8.
Clearing Organizations
We currently operate seven regulated central counterparty clearing houses for the settlement and clearance of derivative contracts. The seven clearing houses include ICE Clear Europe, ICE Clear U.S., ICE Clear Credit, ICE Clear Canada, Holland Clearing House ("HCH"), The Clearing Corporation ("TCC") and ICE Clear Singapore ("ICSG"), and are referred to herein collectively as the “ICE Clearing Houses”. ICSG is not yet operational due to the transition to our technology that is underway. We anticipate launching ICSG later this year.
Each of the ICE Clearing Houses requires all clearing members to maintain cash on deposit or pledge certain assets, which may include government obligations, non-government obligations, letters of credit or gold to guarantee performance on the clearing members’ open positions. Such amounts in total are known as “original margin.” The ICE Clearing Houses may make intraday original margin calls in circumstances where market conditions require additional protection. The daily profits and losses from and to the ICE Clearing Houses in respect of marking to market open contracts is known as “variation margin”. The ICE Clearing Houses mark all outstanding contracts to market, and therefore pay and collect variation margin, at least once daily, and in some cases multiple times throughout the day. Marking-to-market allows the ICE Clearing Houses to identify any clearing members that may be unable to satisfy the financial obligations resulting from changes in the prices of their open contracts before those financial obligations become exceptionally large and jeopardize the ability of the ICE Clearing Houses to ensure financial performance of clearing members’ open positions.
Each of the ICE Clearing Houses requires that each clearing member make deposits into a fund known as a guaranty fund (“Guaranty Fund”), which is maintained by the relevant ICE Clearing House. These amounts serve to secure the obligations of a

12


clearing member to the ICE Clearing House to which it has made the Guaranty Fund deposit and may be used to cover losses sustained by the respective ICE Clearing House in the event of a default of a clearing member.
Each of the ICE Clearing Houses has equal and offsetting claims to and from their respective clearing members on opposite sides of each cleared contract. This arrangement allows the ICE Clearing Houses to serve as the central financial counterparty on every cleared contract. Each ICE Clearing House bears financial counterparty credit risk in the event that market movements create conditions that lead to its clearing members failing to meet their financial obligations to that ICE Clearing House. Accordingly, the ICE Clearing Houses account for this central counterparty guarantee as a performance guarantee. Given that each contract is margined and marked or settled on at least a daily basis for each clearing member, the ICE Clearing Houses’ maximum estimated exposure for this guarantee, excluding the effects of original and variation margin requirements and mandatory deposits to the applicable Guaranty Fund by clearing members, is $67.1 billion as of March 31, 2015, which represents the maximum estimated value by the ICE Clearing Houses of a hypothetical one day movement in pricing of the underlying unsettled contracts. This amount is based on calculations determined using proprietary risk management software that simulates gains and losses based on historical market prices, volatility and other factors present at that point in time for those particular unsettled contracts. Future actual market price volatility could result in the exposure being significantly different than the amount estimated by the ICE Clearing Houses. The net notional value of unsettled contracts was $2.4 trillion as of March 31, 2015. We performed calculations to determine the fair value of our counterparty performance guarantee taking into consideration factors such as daily settlement of contracts, margining requirements, other elements of our risk management program, historical evidence of default payments, and estimated probability of potential default payouts by the ICE Clearing Houses. Based on these analyses, the estimated counterparty performance guaranty liability was determined to be nominal and no liability was recorded as of March 31, 2015 and December 31, 2014.
The ICE Clearing Houses seek to reduce their exposure through a risk management program that includes initial and ongoing financial standards for clearing member admission and continued membership, original and variation margin requirements, and mandatory deposits to the Guaranty Fund. The amounts that the clearing members are required to maintain in the original margin and Guaranty Fund accounts are determined by standardized parameters established by the risk committees, risk management departments and the boards of directors of each of the ICE Clearing Houses and may fluctuate over time. As of March 31, 2015 and December 31, 2014, the ICE Clearing Houses have received or have been pledged $76.8 billion and $77.0 billion, respectively, in cash and non-cash collateral in original margin and Guaranty Fund deposits to cover price movements of underlying contracts. The ICE Clearing Houses also have powers of assessment that provide the ability to collect additional funds from their clearing members to cover a defaulting member’s remaining obligations up to the limits established under the respective rules of each ICE Clearing House.
Should a particular clearing member fail to deposit original margin, or to make a variation margin payment, when and as required, the relevant ICE Clearing House may liquidate or hedge the clearing member’s open positions and use the clearing member’s margin and Guaranty Fund deposits to make up any amount owed. In the event that those deposits are not sufficient to pay the amount owed in full, the ICE Clearing Houses may utilize the respective Guaranty Fund deposits of their respective clearing members on a pro-rata basis for that purpose. We have contributed $128 million, $50 million and $50 million to the ICE Clear Europe, ICE Clear Credit and ICE Clear U.S. Guaranty Funds, respectively, as of March 31, 2015, and such amounts are at risk and could be used in the event of a clearing member default where the amount of the defaulting clearing member’s original margin and Guaranty Fund deposits are insufficient. The $228 million combined contributions as of March 31, 2015 are included in long-term restricted cash in the accompanying consolidated balance sheet.
As of March 31, 2015, original margin and Guaranty Fund cash deposits are as follows for the ICE Clearing Houses (in millions):
 
ICE Clear 
Europe
 
ICE Clear
Credit
 
ICE Clear  U.S.
 
ICE Clear 
Canada, HCH and TCC
 
Total
Original margin
$
24,484

 
$
11,972

 
$
3,925

 
$
89

 
$
40,470

Guaranty Fund
2,868

 
1,946

 
305

 
11

 
5,130

Total
$
27,352

 
$
13,918

 
$
4,230

 
$
100

 
$
45,600

As of December 31, 2014, original margin and Guaranty Fund cash deposits are as follows for the ICE Clearing Houses (in millions):
 
ICE Clear 
Europe
 
ICE Clear
Credit
 
ICE Clear  U.S.
 
ICE Clear 
Canada, HCH and TCC
 
Total
Original margin
$
23,291

 
$
14,056

 
$
4,285

 
$
42

 
$
41,674

Guaranty Fund
3,048

 
2,408

 
290

 
38

 
5,784

Total
$
26,339

 
$
16,464

 
$
4,575

 
$
80

 
$
47,458


13


We have recorded these cash deposits in the accompanying consolidated balance sheets as current assets with corresponding current liabilities to the clearing members of the relevant ICE Clearing House. All cash, securities and letters of credit are available only to meet the financial obligations of that clearing member to the relevant ICE Clearing House. ICE Clear Europe, ICE Clear U.S., ICE Clear Credit, ICE Clear Canada, HCH, TCC and ICSG are separate legal entities and are not subject to the liabilities of the other ICE Clearing Houses or the obligations of the members of the other ICE Clearing Houses. The amount of these cash deposits may fluctuate due to the types of margin collateral choices available to clearing members and the change in the amount of deposits required. As a result, these assets and corresponding liabilities may vary significantly over time. The majority of cash held by the ICE Clearing Houses is secured overnight in reverse repurchase agreements or direct investment in U.S. government securities. Remaining balances are invested overnight across a diverse set of high quality financial institutions.
In addition to the cash deposits for original margin and the Guaranty Fund, the ICE Clearing Houses have also received other assets from clearing members, which may include government obligations, certain agency and corporate debt, letters of credit or gold to mitigate credit risk. These assets are not reflected in the accompanying consolidated balance sheets as the risks and rewards of these assets remain with the clearing members. These assets are held in safekeeping and any interest and gain or loss accrues to the clearing member. For certain non-cash deposits, the ICE Clearing Houses may impose discount or "haircut" rates to ensure adequate collateral levels to account for fluctuations in the market value of these deposits. As of March 31, 2015 and December 31, 2014, the assets pledged by the clearing members as original margin and Guaranty Fund deposits for each of the ICE Clearing Houses are detailed below (in millions):
 
As of March 31, 2015
 
As of December 31, 2014
 
ICE Clear 
Europe
 
ICE Clear Credit
 
ICE Clear  U.S.
 
ICE Clear Canada, HCH and TCC
 
ICE Clear 
Europe
 
ICE Clear Credit
 
ICE Clear  U.S.
 
ICE Clear Canada, HCH and TCC
Original margin:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government securities at face value
$
19,718

 
$
3,896

 
$
6,389

 
$
111

 
$
18,284

 
$
3,235

 
$
6,972

 
$
99

Letters of credit

 

 

 
199

 

 

 

 
4

Total
$
19,718

 
$
3,896

 
$
6,389

 
$
310

 
$
18,284

 
$
3,235

 
$
6,972

 
$
103

Guaranty Fund:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government securities at face value
$
259

 
$
335

 
$
186

 
$
83

 
$
284

 
$
424

 
$
190

 
$
15


9.
Commitments and Contingencies
Legal Proceedings
We are subject to legal proceedings and claims, like the ones described below, that arise in the ordinary course of business. Typically, we do not believe that the resolution of these ordinary course matters, including those described below, will have a material adverse effect on our consolidated financial condition, results of operations, or liquidity. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially and adversely affected by any developments relating to the legal proceedings and claims. A range of possible losses related to the cases below cannot be reasonably estimated at this time.
In April 2014, the first of four purported class action lawsuits was filed in the U.S. District Court for the Southern District of New York (the “Southern District”) by the City of Providence, Rhode Island, against more than 40 defendants, including “Exchange Defendants”, “Brokerage Defendants” and “HFT (High Frequency Trading) Defendants” (the “City of Providence lawsuit”). New York Stock Exchange LLC and NYSE Arca, Inc., two of our subsidiaries, were among the named Exchange Defendants. On July 2, 2014, the court ordered the cases consolidated for all purposes, and appointed lead plaintiffs. On September 3, 2014, the lead plaintiffs filed an amended complaint asserting claims against only a subset of the original Exchange Defendants, including New York Stock Exchange LLC and NYSE Arca, Inc., and also asserting claims against Barclays PLC (“Barclays”), a subsidiary of which operates an alternative trading system known as Barclays LX. The lead plaintiffs are suing on behalf of a class of “all public investors” who bought or sold stock from April 18, 2009 to the present on the U.S.-based equity exchanges operated by the remaining Exchange Defendants or on Barclays LX. The amended complaint asserts violations by all remaining Exchange Defendants of Sections 10(b) and 6(b) of the Exchange Act, and seeks unspecified compensatory damages against all defendants, jointly and severally, as well as various forms of equitable relief. The defendants filed a motion on November 3, 2014 to dismiss the amended complaint. On November 24, 2014, the plaintiffs filed a second amended complaint asserting the same legal claims and substantially the same factual allegations. On January 23, 2015, the defendants filed a motion to dismiss the second amended complaint.
On October 2, 2014, Barclays filed a motion before the U.S. Judicial Panel on Multidistrict Litigation (the "MDL Panel") requesting that a separate lawsuit filed against Barclays in the U.S. District Court for the Central District of California be transferred

14


to the Southern District judge handling the City of Providence lawsuit for consolidated or coordinated pre-trial proceedings. On December 12, 2014, the MDL Panel entered an order granting Barclays’ motion and transferring the matter to the Southern District. Depending on the outcome of further pre-trial proceedings to occur in the Southern District, the scope of this litigation could be expanded.
In May 2014, three purported class action lawsuits were filed in the Southern District by Harold Lanier against the securities exchanges that are participants in each of the three national market system data distribution plans - the Consolidated Tape Association/Consolidated Quotation Plan, the Nasdaq UTP Plan, and the Options Price Reporting Authority (the “Plans”) - which are established under the Exchange Act and regulated by the SEC. On August 15, 2014, Lanier filed amended complaints in each of the three lawsuits but did not alter the named defendants. New York Stock Exchange LLC, NYSE Arca, Inc. and NYSE MKT LLC, which are our subsidiaries, are among the defendants named in one or more of the suits. Lanier is claiming to sue on behalf of him and all other similarly situated subscribers to the market data disseminated by the Plans. Lanier’s allegations include that the exchange participants in the Plans breached agreements with subscribers by disseminating market data in a discriminatory manner in that other “preferred” customers allegedly received their data faster than the proposed class. The complaints seek, among other relief, unspecified compensatory damages, restitution of the putative class’s subscription fees paid to the defendants, disgorgement of the fees paid by the so-called preferred customers, and injunctive and declaratory relief. On September 29, 2014, the defendants moved to dismiss the amended complaint. On April 28, 2015, the court issued an opinion and order granting the motion and dismissing the three lawsuits with prejudice. The court determined that the claims were preempted by a “comprehensive federal regulatory scheme”, and that in any event Lanier had failed to state a claim for breach of contract.
One of our subsidiaries, NYSE Brazil Holdings, B.V. ("NYSE BV"), is a party to a pending arbitration proceeding initiated by an arbitration demand dated June 4, 2014 in Brazil, filed by ATG Americas Trading Group, S.A. ("ATG") and ATS Brasil S.A. (“ATS”). NYSE BV and ATG own 20% and 80%, respectively, of the equity in ATS, a company with a prospective cash equity trading platform in Brazil, which is not yet operational. ATG and ATS allege NYSE BV breached certain obligations and assert damages of at least 100 million Brazilian Reais ($31 million based on the Brazilian Real/U.S. dollar exchange rate of 0.3131 as of March 31, 2015). The case has not yet proceeded to a point where ATG and ATS would be required to provide factual support for its damages demand, whether 100 million Brazilian Reais, or a materially higher amount. NYSE BV has served ATG and ATS with a responsive statement which denies liability in connection with the claims, and we are defending the proceeding. The arbitration panel has been appointed and is first deciding a threshold issue presented by ATG/ATS - whether to expand the arbitration to include other of our subsidiaries as parties - before scheduling further proceedings in the matter. Because this arbitration is in an unfamiliar forum under foreign law, we have less ability to predict results than we would in a U.S. proceeding.
Redeemable Non-controlling Interest
We currently own 84% of NYSE Amex Options, one of our two U.S. options exchanges. The remaining 16% of the outstanding shares is owned by seven external investors, valued at $130 million as of March 31, 2015 and recorded as redeemable non-controlling interest in the accompanying consolidated balance sheet. We plan to repurchase the remaining 16% of shares outstanding from the external investors in the second quarter of 2015.

10.
Pension and Other Benefit Programs
The following table provides the components of net periodic expense (benefit) associated with our pension plans, the supplemental executive retirement ("SERP") plans and the post-retirement benefit plans for the three months ended March 31, 2015 and 2014 in the accompanying consolidated statements of income (in millions):
 
Three Months Ended March 31, 2015
 
Three Months Ended March 31, 2014
 
Pension Plans
 
SERP Plans
 
Post-retirement Benefit Plans
 
Pension Plans
 
SERP Plans
 
Post-retirement Benefit Plans
Service costs
$

 
$

 
$

 
$
1

 
$

 
$

Interest costs
8

 
1

 
2

 
9

 
1

 
2

Estimated return on plan assets
(11
)
 

 

 
(12
)
 

 

Amortization of loss
1

 

 

 

 

 

Net periodic expense (benefit)
$
(2
)
 
$
1

 
$
2

 
$
(2
)
 
$
1

 
$
2

During the three months ended March 31, 2015, we contributed $2 million to our pension plans. Based on current actuarial assumptions, we anticipate funding an additional $10 million to our pension plans during 2015.

11.
Fair Value Measurements
Our financial instruments consist primarily of cash and cash equivalents, short-term and long-term restricted cash and investments, short-term and long-term investments, customer accounts receivable, margin deposits and guaranty funds, cost and equity

15


method investments, short-term and long-term debt and certain other short-term assets and liabilities. The fair value of our financial instruments are measured based on a three-level hierarchy:
Level 1 inputs — quoted prices for identical assets or liabilities in active markets.
Level 2 inputs — observable inputs other than Level 1 inputs such as quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are directly observable.
Level 3 inputs — unobservable inputs supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
In general, we use Level 1 inputs to determine fair value. The Level 1 assets consist of U.S. Treasury securities, equity and other securities listed in active markets, and investments in publicly traded mutual funds held for the purpose of providing future payments of the SERP and the supplemental executive savings plans.
Financial assets and liabilities recorded in the accompanying consolidated balance sheets as of March 31, 2015 and December 31, 2014 are classified in their entirety based on the lowest level of input that is significant to the asset or liability’s fair value measurement. Financial instruments measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014 are as follows (in millions):
 
As of March 31, 2015
 
As of December 31, 2014
 
Level 1
 
Level 2 and 3
 
Total
 
Level 1
 
Level 2 and 3
 
Total
Assets at fair value:
 
 
 
 
 
 
 
 
 
 
 
Long-term investment in equity securities
$
309

 
$

 
$
309

 
$
379

 
$

 
$
379

U.S. Treasury securities
436

 

 
436

 
374

 

 
374

Mutual Funds
24

 

 
24

 
27

 

 
27

Total assets at fair value
$
769

 
$

 
$
769

 
$
780

 
$

 
$
780

As of March 31, 2015, the fair values of our $1.40 billion Senior Notes and $1.86 billion NYSE Notes are $1.48 billion and $1.87 billion, respectively. The fair values of these fixed rate notes were estimated using quoted market prices for these instruments. The fair value of our other short-term and long-term debt approximates the carrying value since the rates of interest on the debt approximate market rates as of March 31, 2015. All other financial instruments are determined to approximate carrying value due to the short period of time to their maturities.
As of March 31, 2015, we are holding $436 million in U.S. Treasury securities, all of which had maturities of less than one year from the date of purchase. Of these securities, $221 million were recorded as cash and cash equivalents, $87 million were recorded as short-term restricted cash and investments and $128 million were recorded as long-term restricted cash and investments in the accompanying consolidated balance sheet as of March 31, 2015 (all of the U.S. Treasury securities recorded as cash have original maturities of less than 90 days).
We did not use Level 2 and 3 inputs to determine the fair value of assets or liabilities measured at fair value on a recurring basis as of March 31, 2015 or December 31, 2014. We measure certain assets, such as intangible assets and cost and equity method investments, at fair value on a non-recurring basis. These assets are recognized at fair value if they are deemed to be impaired. As of March 31, 2015 and December 31, 2014, none of these assets were required to be recorded at fair value since no impairment indicators were present. Cost and equity method investments were $118 million and $53 million as of March 31, 2015 and December 31, 2014, respectively, and are classified as other non-current assets in the accompanying consolidated balance sheets. The increase in the cost and equity method investments during the three months ended March 31, 2015 is primarily due to an additional $60 million investment we made in The Options Clearing Corporation ("OCC").
We have a 40% ownership interest in OCC. OCC serves as a clearing house for securities options, security futures, commodity futures and options on futures traded on various independent exchanges. OCC clears securities options traded on NYSE Arca and NYSE MKT, along with other non-affiliated exchanges, and is regulated by the SEC as a registered clearing agency and by the Commodity Futures Trading Commission ("CFTC") as a derivatives clearing organization. OCC adopted a new capital plan during the first quarter of 2015, which raised $150 million in equity capital from OCC's shareholders, including $60 million contributed by NYSE. Pursuant to the terms of the capital plan, in exchange for the contributions of equity capital from its shareholders, OCC would be required, subject to determination by its board of directors and compliance with legal requirements, to pay an annual dividend to its shareholders, on a pro rata basis, equal to the after-tax income of OCC, in excess of the amount required to maintain its target capital requirement and satisfy other capital requirements, and after refunds to its clearing members equal to 50% of distributable earnings before tax. In addition, under the OCC capital plan, the OCC shareholders will contribute up to $200 million in additional equity capital if certain capital thresholds are breached, including up to $80 million to be contributed by NYSE. The OCC shareholders would receive Class C stock in exchange for any additional capital contribution. No dividends or other remuneration would be paid to

16


OCC shareholders holding this stock. Unless and until such $200 million capital contribution is repaid to the shareholders, OCC would be required not to declare any dividends and would be required not to pay refunds to its clearing members.
Subsequent to our investment of the $60 million, aggrieved parties petitioned the SEC to review its approval of the capital plan. As a result of such petition, the implementation of the capital plan was automatically stayed. Consequently OCC will not pay dividends to shareholders or issue refunds to customers until the stay is lifted or the SEC reconfirms its approval of the capital plan. The outcome of the petition is uncertain at this time. 

12.
Discontinued Operations
We completed the IPO of our wholly-owned subsidiary Euronext on June 24, 2014 and completed the sales of our wholly-owned subsidiaries Wombat on July 23, 2014, and NYFIX and Metabit on September 19, 2014. We have reflected the results of Euronext, Wombat, NYFIX and Metabit as discontinued operations up to the IPO or sale dates in the accompanying consolidated statement of income and consolidated statement of cash flows for the three months ended March 31, 2014.
The results below include external advisory costs and professional services costs related to the Euronext IPO and sales of Wombat, NYFIX and Metabit of $15 million for the three months ended March 31, 2014, which have been included below with acquisition-related transaction and integration costs from discontinued operations. The results below also include transaction-related compensation and severance costs related to the Euronext IPO and sales of Wombat, NYFIX and Metabit of $21 million for the three months ended March 31, 2014, which have been included below with acquisition-related transaction and integration costs from discontinued operations. Results of discontinued operations were as follows for the three months ended March 31, 2014 (in millions):
Total revenues, less transaction-based expenses
$
162

Compensation and benefits
55

Technology and communication
15

Professional services
8

Rent and occupancy
7

Acquisition-related transaction and integration costs
41

Selling, general, administrative
9

Depreciation and amortization
8

Total operating expenses
143

Operating income
19

Other expense, net
1

Income tax expense
5

Income from discontinued operations, net of tax
$
13


13.
Condensed Consolidating Financial Statements (Unaudited)
    
In connection with our acquisition of NYSE, Intercontinental Exchange, Inc. ("ICE") and NYSE Holdings LLC ("NYSE") established various guarantees to protect against structural subordination of each entities’ existing indebtedness. NYSE is our wholly-owned subsidiary and fully and unconditionally guarantees, on an unsecured and unsubordinated basis, the payment of principal, premium, if any, and interest of our 2014 Credit Facility, Senior Notes and the Commercial Paper Program. Similarly, ICE fully and unconditionally guarantees, on an unsecured and unsubordinated basis, the payment of principal, premium, if any, and interest of the NYSE Notes. The guarantees will remain in place until each applicable debt obligation has been satisfied.

The following unaudited consolidating financial information sets forth, under the equity method of accounting, the condensed consolidating statements of income and comprehensive income, the condensed consolidating balance sheets, and the condensed consolidating statements of cash flows for (i) ICE ("Parent"); (ii) NYSE; (iii) the subsidiary non-guarantors; (iv) elimination entries necessary to consolidate each of ICE and NYSE with the non-guarantor subsidiaries; and (v) on a consolidated basis. The condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements.

17


Intercontinental Exchange, Inc.
Condensed Consolidating Balance Sheets
As of March 31, 2015
(In millions)
 

ICE
 (Parent)
 
Subsidiary
Guarantor - NYSE
 
Subsidiary
Non-Guarantors
 
Consolidating
 Adjustments
 
Consolidated
 Total
Current assets:
 
 
 
 
 
 
 
 
 
   Cash and cash equivalents
$
8

 
$

 
$
744

 
$

 
$
752

   Intercompany receivable
2,840

 

 

 
(2,840
)
 

   Margin deposits and guaranty funds

 

 
45,600

 

 
45,600

   Notes receivable from affiliate, current

 
257

 
307

 
(564
)
 

   Other current assets

 
1,049

 
1,085

 

 
2,134

Total current assets
2,848

 
1,306

 
47,736

 
(3,404
)

48,486

Property and equipment, net

 

 
879

 

 
879

Other non-current assets:
 
 
 
 
 
 
 
 
 
   Goodwill and other intangible assets, net

 

 
16,228

 

 
16,228

   Investment in subsidiaries
13,862

 
9,633

 

 
(23,495
)
 

   Notes receivable from affiliate, non-current

 
2,919

 
2,003

 
(4,922
)
 

   Other non-current assets
24

 
10

 
801

 

 
835

Total other non-current assets
13,886

 
12,562

 
19,032

 
(28,417
)
 
17,063

Total assets
$
16,734

 
$
13,868

 
$
67,647

 
$
(31,821
)
 
$
66,428

 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
   Short-term debt
$
940

 
$
1,006

 
$

 
$

 
$
1,946

   Margin deposits and guaranty funds

 

 
45,600

 

 
45,600

   Intercompany payable

 
1,503

 
1,337

 
(2,840
)
 

   Notes payable to affiliates, current
292

 
272

 

 
(564
)
 

   Other current liabilities
53

 

 
1,199

 

 
1,252

Total current liabilities
1,285

 
2,781

 
48,136

 
(3,404
)
 
48,798

Non-current liabilities:
 
 
 
 
 
 
 
 
 
   Long-term debt
1,394

 
853

 

 

 
2,247

   Notes payable to affiliates, non-current
1,741

 
262

 
2,919

 
(4,922
)
 

   Other non-current liabilities
17

 

 
2,872

 

 
2,889

Total non-current liabilities
3,152

 
1,115

 
5,791

 
(4,922
)
 
5,136

Total liabilities
4,437

 
3,896

 
53,927

 
(8,326
)
 
53,934

Redeemable non-controlling interest

 

 
169

 

 
169

 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
 
Total shareholders' equity
12,297

 
9,972

 
13,523

 
(23,495
)
 
12,297

Non-controlling interest in consolidated subsidiaries

 

 
28

 

 
28

Total equity
12,297

 
9,972

 
13,551

 
(23,495
)
 
12,325

Total liabilities and equity
$
16,734

 
$
13,868

 
$
67,647

 
$
(31,821
)
 
$
66,428



















18


Intercontinental Exchange, Inc.
Condensed Consolidating Balance Sheets
As of December 31, 2014
(In millions)
 

ICE
 (Parent)
 
Subsidiary
Guarantor - NYSE
 
Subsidiary
Non-Guarantors
 
Consolidating
 Adjustments
 
Consolidated
 Total
Current assets:
 
 
 
 
 
 
 
 
 
   Cash and cash equivalents
$
6

 
$
5

 
$
641

 
$

 
$
652

   Intercompany receivable
2,793

 

 
529

 
(3,322
)
 

   Margin deposits and guaranty funds

 

 
47,458

 

 
47,458

   Note receivable from affiliate, current

 
313

 
31

 
(344
)
 

   Other current assets
60

 
1,173

 
962

 
(60
)
 
2,135

Total current assets
2,859

 
1,491

 
49,621

 
(3,726
)
 
50,245

Property and equipment, net

 

 
874

 

 
874

Other non-current assets:
 
 
 
 
 
 
 
 
 
   Goodwill and other intangible assets, net

 

 
16,315

 

 
16,315

   Investment in subsidiaries
13,682

 
9,572

 

 
(23,254
)
 

   Note receivable from affiliate, non-current

 
2,790

 
1,516

 
(4,306
)
 

   Other non-current assets
25

 
11

 
809

 

 
845

Total other non-current assets
13,707

 
12,373

 
18,640

 
(27,560
)
 
17,160

Total assets
$
16,566

 
$
13,864

 
$
69,135

 
$
(31,286
)
 
$
68,279

 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
   Short-term debt
$
905

 
$
1,137

 
$

 
$

 
$
2,042

   Margin deposits and guaranty funds

 

 
47,458

 

 
47,458

   Intercompany payable

 
1,933

 
1,389

 
(3,322
)
 

   Notes payable to affiliates, current
344

 

 

 
(344
)
 

   Other current liabilities
30

 

 
1,069

 
(60
)
 
1,039

Total current liabilities
1,279

 
3,070

 
49,916

 
(3,726
)
 
50,539

Non-current liabilities:
 
 
 
 
 
 
 
 
 
   Long-term debt
1,394

 
853

 

 

 
2,247

   Notes payable to affiliates, non-current
1,516

 

 
2,790

 
(4,306
)
 

   Other non-current liabilities
17

 

 
2,919

 

 
2,936

Total non-current liabilities
2,927