United states securities and exchange commission

F-33
12. Share-Based Compensation
We have a share-based compensation program that provides our 
board of directors broad discretion in creating employee equity 
incentives.  Share-based  awards  granted  under  this  program 
include stock options, restricted stock (consisting of restricted 
stock units), and PSUs. For accounting purposes, we consider 
PSUs to be a form of restricted stock.
Summary of Share-Based Compensation Expense
The following table shows the total share-based compensation 
expense resulting from equity awards and the 15.0% discount 
for the ESPP for the years ended December 31, 2016, 2015 and 
2014 in the Consolidated Statements of Income:
Year Ended December 31,
2016
2015
2014
(in millions)
Share-based compensation
expense before income
taxes
$
86 $
68 $
62
Income tax benefit
(35)
(28)
(26)
Share-based compensation
expense after income
taxes
$
51 $
40 $
36
Common Shares Available Under Our Equity Plan
As of December 31, 2016, we had approximately 6.7 million 
shares of common stock authorized for future issuance under 
our Equity Plan.
Restricted Stock
We grant restricted stock to most active employees. The grant 
date fair value of restricted stock awards is based on the closing 
price at the date of grant less the present value of future cash 
dividends.  Restricted  stock  awards  granted  generally  vest 
25.0% on the second anniversary of the grant date, 25.0% on 
the third anniversary of the grant date, and 50.0% on the fourth 
anniversary  of  the  grant  date.  We  generally  recognize 
compensation expense for restricted stock awards on a straight-
line basis over the requisite service period of the award, taking 
into account an estimated forfeiture rate. 
Summary of Restricted Stock Activity
The following table summarizes our restricted stock activity for 
the years ended December 31, 2016, 2015 and 2014:
Restricted Stock
Number of
Awards
Weighted-
Average Grant
Date Fair Value
Unvested balances at
December 31, 2013
3,826,470
$
25.96
Granted
1,196,441
36.87
Vested
(1,529,792)
23.29
Forfeited
(299,889)
29.87
Unvested balances at
December 31, 2014
3,193,230
$
30.99
Granted
823,950
49.26
Vested
(370,998)
29.90
Forfeited
(302,444)
34.34
Unvested balances at
December 31, 2015
3,343,738
$
35.36
Granted
724,200
62.91
Vested
(1,238,980)
27.91
Forfeited
(268,380)
43.29
Unvested balances at
December 31, 2016
2,560,578
$
45.92
At  December 31,  2016,  $52  million  of  total  unrecognized 
compensation cost related to restricted stock is expected to be 
recognized over a weighted-average period of 1.7 years.
PSUs
The grant date fair value of PSUs is based on the closing price 
at  the  date  of  grant  less  the  present  value  of  future  cash 
dividends.  PSUs  are  based  on  performance  measures  that 
impact the amount of shares that each recipient will receive 
upon vesting. We report the target number of PSUs granted, 
unless we have determined that it is more likely than not, based 
on the actual achievement of performance measures, that an 
employee will receive a different amount of shares underlying 
the PSUs, in which case we report the amount of shares the 
employee is likely to receive. We have two performance-based 
long-term  PSU  programs  for  certain  officers,  a  one-year 
performance-based  program  and  a  three-year  cumulative 
performance-based program that focuses on TSR.
One-Year PSU Program
Under the one-year performance-based program, an employee 
may receive from 0.0% to 150.0% of the target amount granted, 
depending on the achievement of performance measures. These 
awards vest ratably on an annual basis over a three-year period 
commencing  with  the  end  of  the  performance  period. 
Compensation cost is recognized over the  performance period 
and  the  three-year  vesting  period,  taking  into  account  an 
estimated forfeiture rate.

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F-34
During  2016,  certain  grants  of  PSUs  with  a  one-year 
performance  period  exceeded  the  applicable  performance 
parameters. As a result, an additional 56,533 units above target 
were considered granted in the first quarter of 2017. 
Three-Year PSU Program
Under  the  three-year  performance-based  program,  each 
individual  receives  PSUs  with  a  three-year  cumulative 
performance  period  that  vest  at  the  end  of  the  performance 
period. Compensation cost is recognized over the three-year 
vesting period. Performance will be determined by comparing 
Nasdaq’s TSR to two peer groups, each weighted 50.0%. The 
first peer group consists of exchange companies, and the second 
peer group consists of all companies in the S&P 500. Nasdaq’s 
relative performance ranking against each of these groups will 
determine  the  final  number  of  shares  delivered  to  each 
individual under the program. The payout under this program 
will  be  between  0.0%  and  200.0%  of  the  number  of  PSUs 
granted  and  will  be  determined  by  Nasdaq’s  overall 
performance against both peer groups. However, if Nasdaq’s 
TSR  is  negative  for  the  three-year  performance  period, 
regardless of TSR ranking, the payout will not exceed 100.0% 
of the number of PSUs granted. We estimate the fair value of 
PSU’s  granted  under  the  three-year  PSU  program  using  the 
Monte  Carlo  simulation  model,  as  these  awards  contain  a 
market condition. 
Certain grants of PSUs that were issued in 2014 with a three-
year performance period exceeded the applicable performance 
parameters. As a result, an additional 538,892 units above target 
were considered granted in the first quarter of 2017.
The  following  weighted-average  assumptions  were  used  to 
determine the weighted-average fair values of the PSU awards 
granted under the three-year PSU program for the years ended 
December 31, 2016 and December 31, 2015:
Year Ended December 31,
2016
2015
Weighted-average risk free interest 
rate
(1)
0.84%
0.81%
Expected volatility
(2)
21.0%
21.5%
Weighted-average grant date share
price
$ 66.36
$ 50.97
Weighted-average fair value at
grant date
$ 93.25
$ 64.08
____________
(1) 
The risk-free interest rate for periods within the expected
life of the award is based on the U.S. Treasury yield curve
in effect at the time of grant.
(2) 
We use historic volatility for PSU awards issued under the
three-year PSU program, as implied volatility data could
not be obtained for all the companies in the peer groups
used  for  relative  performance  measurement  within  the
program.
In  addition,  the  annual  dividend  assumption  utilized  in  the 
Monte Carlo simulation model is based on Nasdaq’s dividend 
yield at the date of grant.
Summary of PSU Activity
The following table summarizes our PSU activity for the years 
ended December 31, 2016, 2015 and 2014:
PSUs
One-Year Program
Three-Year Program
Number of
Awards
Weighted
-Average
Grant
Date Fair
Value
Number of
Awards
Weighted
-Average
Grant
Date Fair
Value
Unvested
balances at
December
31, 2013
804,377
 
$27.38
1,111,224   $31.95
Granted
328,791
36.20
553,846
42.80
Vested
(442,781)
27.75
—
—
Forfeited
(132,347)
28.58
(10,503)
30.82
Unvested
balances at
December
31, 2014
558,040 $24.17
1,654,567 $35.57
Granted
206,199
48.16
649,626
49.69
Vested
(247,273)
30.51
(837,109)
22.50
Forfeited
(92,999)
34.74
(27,366)
43.49
Unvested
balances at
December
31, 2015
423,967 $41.34
1,439,718 $49.41
Granted
242,642
58.33
761,501
66.89
Vested
(242,793)
39.63
(879,926)
43.81
Forfeited
(45,050)
47.72
(6,625)
69.11
Unvested
balances at
December
31, 2016
378,766 $52.55
1,314,668 $63.18
At  December 31,  2016,  $10  million  of  total  unrecognized 
compensation  cost  related  to  the  one-year  PSU  program  is 
expected to be recognized over a weighted-average period of 
1.4 years. For the  three-year PSU program, $20 million of total 
unrecognized compensation cost is expected to be recognized 
over a weighted-average period of 1.3 years. 

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