F-26
impairments of equity method investments were recorded in
2016, 2015 or 2014.
Net income recognized from our equity interest in the earnings
and losses of these equity method investments was $2 million
for the year ended December 31, 2016, $17 million for the year
ended December 31, 2015 and immaterial for the year ended
December 31, 2014. The change in year ended December 31,
2016 compared with the same period in 2015 is primarily due
to income recognized from our equity method investment in
OCC, partially offset by the write-off of our equity method
investment in The Order Machine. The change in year ended
December 31, 2015 compared with the same period in 2014 is
primarily due to income recognized from our equity method
investment in OCC. We were not able to determine what our
share of OCC’s income was for the year ended December 31,
2014 until the first quarter of 2015, when OCC’s financial
statements were made available to us. As a result, we recorded
other income of $13 million in March 2015 relating to our share
of OCC’s income for the year ended December 31, 2014. This
income is included in net income from unconsolidated investees
in the Consolidated Statements of Income for 2015.
Capital Contribution to OCC
In March 2015, in connection with being designated
systemically important by the Financial Stability Oversight
Council, OCC implemented a capital plan under which the
options exchanges that are OCC’s stockholders made new
capital contributions to OCC, committed to make further capital
contributions in the future under certain specified
circumstances, and received certain commitments from OCC
with respect to future dividend payments and related matters.
Under the OCC capital plan, OCC’s existing exchange
stockholders, including Nasdaq and ISE, each contributed a
pro-rata share of $150 million in new equity capital. Nasdaq’s
and ISE’s capital contributions were each $30 million. OCC’s
exchange stockholders also committed to provide, as may
become necessary from time to time, additional replenishment
capital on a pro-rata basis if certain capital thresholds are
triggered. For its part, OCC adopted specific policies with
respect to fees, customer refunds and stockholder dividends,
which envision an annual dividend payment to its stockholders
equal to the portion of OCC’s after-tax income that exceeds
OCC’s capital requirements after payment of refunds to OCC’s
clearing members (with such customer refunds generally to
constitute 50% of the portion of OCC’s pre-tax income that
exceeds OCC’s capital requirements). After the SEC staff
approved the OCC capital plan and the stockholders made their
capital contributions, the plan’s further effectiveness was
suspended under the applicable SEC rules because certain
parties petitioned the full Commission to reconsider the capital
plan’s approval. This stay was lifted by the SEC in September
2015, allowing OCC to implement the plan and in February
2016, the SEC issued an order approving the OCC capital plan
as previously implemented and dismissed the petitions
challenging that plan. The petitioners filed for a stay of the
SEC’s order, which would have blocked OCC from paying a
dividend under the OCC capital plan. The Court of Appeals
denied the requested stay, permitting OCC to pay a dividend
which Nasdaq received in February 2016. The petitioners also
appealed the SEC’s order to the Federal Court of Appeals for
the District of Columbia Circuit, and the appeal is pending.
Cost Method Investments
The carrying amount of our cost method investments is included
in other non-current assets in the Consolidated Balance Sheets.
As of December 31, 2016 and 2015, our cost method
investments primarily represented our 5% ownership interest
in Borsa Istanbul, and our 5% ownership interest in
LCH.Clearnet Group Limited.
The Borsa Istanbul shares, which were issued to us in the first
quarter of 2014, are part of the consideration received under a
market technology agreement. This investment has a cost basis
of $75 million which is guaranteed to us via a put option
negotiated as part of the market technology agreement.
7. Property and Equipment, net
The following table presents our major categories of property
and equipment, net:
Year Ended December 31,
2016
2015
(in millions)
Data
processing equipment and
software
$
665 $
576
Furniture,
equipment and leasehold
improvements
254
254
Total
property and equipment
919
830
Less:
accumulated depreciation and
amortization
(557)
(507)
Total
property and equipment, net
$
362 $
323
Depreciation and amortization expense for property and
equipment was $88 million for the year ended December 31,
2016, $76 million for the year ended December 31, 2015 and
$68 million for the year ended December 31, 2014. The increase
in depreciation and amortization expense in 2016 compared
with 2015 and in 2015 compared with 2014 was primarily due
to additional expense associated with
assets and software
placed in service. These amounts are included in depreciation
and amortization expense in the Consolidated Statements of
Income.
We recorded asset impairment charges of $8 million for the year
ended December 31, 2016 and $18 million for the year ended
December 31, 2015, primarily related to fixed assets and
capitalized software that were retired and included in
restructuring charges in the Consolidated Statements of Income
during the respective period. For the year ended December 31,
2014, we recorded asset impairment charges of $11 million
primarily related to certain technology assets. These charges
are included in asset impairment charges in the Consolidated
Statements of Income for 2014.
As of December 31, 2016 and 2015, we did not own any real
estate properties.