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Turning your business

inside out… safely.

Gregor BailarCIO & EVP of Operations

Nasdaq Stock Market, Inc.

May 2001

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• Built on Technology • Competing Daily for Business• Riding Incredible Growth• Continually re-inventing our self• Creating a Global Brand

A Perpetual Start-upA Perpetual Start-up

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• Opened in 1971• World’s First Electronic Stock Market• Largest Stock Market in the USA• Over $20 Trillion traded in 2000• $70 to 115 Billion traded daily• Lists 4,829 Companies and 5210

Issues• Over 600 Companies over $1 Billion• Regularly Handles 2 Billion Shares

• Opened in 1971• World’s First Electronic Stock Market• Largest Stock Market in the USA• Over $20 Trillion traded in 2000• $70 to 115 Billion traded daily• Lists 4,829 Companies and 5210

Issues• Over 600 Companies over $1 Billion• Regularly Handles 2 Billion Shares

The Nasdaq Stock Market, Inc.

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Nasdaq’s Dollar Volume Ranks #1 in the World.

Values in Billions YTD for 2000 as of Sept. 2000

0

2000

4000

6000

8000

10000

12000

14000

16000

Nasdaq NYSE London Paris Tokyo Germany

World’s Leading Stock Markets

$15.5 Trillion

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Percentage Change in Dollar Volume of the Major Markets, 1990 - 1999

515% 475%

171%

NYSENasdaq London TokyoDeutsche

14%

Source: International Federation of Stock Exchanges (FIBV) As of 11/30/99

Dollar Volume Growth

1876%

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Source: CommScan LLC and Securities Data Company. As of 12/31/99, excludes closed-end funds.

Total Number of IPOs

287

484

397

19 14 11

7349 48

0

100

200

300

400

500

1998 1999 20001998 1999

Nasdaq

NYSE

Amex

2000

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1998

A little history…

1999 2000 2001

700 MSD

2.881 BSD April 4

1760 MSD

200120001997

1.34 BSD Oct 28

500 MSD

1998

1054 MSD

2300 MSD

3.18 BSD Jan 3

3.19 BSD April 18

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Nasdaq Operating Statistics

• World’s Largest Real-time Network 7,500+ Screens• Retail & Commercial Data Subscribers500,000+

Subscribers• Peak Daily Share Volume 3.19 Billion• Average Daily Share Volume (YTD) 2.0 Billion• Simultaneous Price Discovery <180 msec• Peak Transaction Rate 4000+ TPS• Peak Daily Page Views 12+ Million• Annual Technology Spend (2001) $500+ Million• Production System Upgrades 232+ Releases

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Trading Network TopographyConnectivity Points

of PresenceCanada

Rockville

Trumbull

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Nasdaq Domestic Technology Centers

Backup site for market systemsPrimary site for post-trade, Web-site systems30,000 sq ft Data Center300 technologists

Primary site for market systemsBackup site for post-trade, Web-site systems75,000 sq ft Data Center550 technologists3 buildings

Nasdaq Market Site operationsTier III SWAT Team 2500 sq ft Data Center15 technologists2 locations (Wall Street and Times Square)

RockvilleMaryland

TrumbullConnecticut

New York

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Nasdaq Market Systems

Quotation

Execution

Trade Reporting

Computer to

ComputerLinks

Quote and Trade Data

VendorsOrders

Trade

Market Surveillance

Quote Data

Trade Data

QuoteBroker Dealers

Trade Confirmation

Reports

Updates

Clearing and

Settlement

Locked-In Trades

Nasdaq Workstatio

n

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26.9%

133%

136%

Historic Quote Volumes

1994 1995 1996 1997 1998 1999 20001993

500

1000

1500

2000

2500

3000

3500

4000

4500

Annualized GrowthAdditional 40% Growth

During Q1 ‘00

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April 18, 2001 – 3.19 Billion Shares

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www.Nasdaq.com

• Engineered for Scale• >12 million page

views• 25% International• Windows 2000• Intel-based Servers• Multiple Incoming

Real-Time Feeds

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NasdaqNasdaqJapanJapan

NasdaqNasdaqEuropeEurope

NasdaqNasdaqUSAUSA

Nasdaq Global Plans

SEHKSEHK

Latin Latin AmericaAmerica

Middle Middle EastEast

NasdaqNasdaqCanadaCanada

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The world comes full circle

ARPAARPA InternInternetet

.edu

.org.com

DARPADARPA

.gov

Targetedresearch

Generalresearch

Generalcommerce

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The Internet Promise• Access

– Open– 24 x 7– Global

• Customization– Personalization– Supply chain integration– Product Innovation

• Transparency– Self Service– Expose internal data

• Efficiency

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The Internet Tension

– How deep?– Do you have 24x7 capability?– What are the Global implications?

– How? For whom? How interactive?– For whom? What level of

openness?– Who will innovate?

– What is your customer looking for?– How deep? At what risk?

– What will go away…?

• Access– Open– 24 x 7– Global

• Customization– Personalization– Supply chain integration– Product Innovation

• Transparency– Self Service– Expose internal data

• Efficiency

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Pitfalls

• Quality of Service– Reliability– Predictability: The Monica

effect

• Performance– World Wide Wait– “BusyTone”

• Security - Entitlement/Trust

• Regulatory Constraints• Control shifts appears to

shift to users… but more is actually centralized

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Role of the CIO in securing e-commerce

• FACT 1: The Internet cannot be centrally governed – period…

• FACT 2: Customers demand an Internet venue for commerce

• Conclusion: Each participant must bear his/her weight and create a dome of compliance through its commercial associations

• Build resilient infrastructures• NEVER underestimate the power (needs) of self-service• Actively support industry information sharing vehicles

– NIPC, ISACs, CERT, etc…

• Certify your suppliers for the same standards• Proactively plan for Forensic Readiness

In the early 90’s 1 out of every 6 new US jobs was created by a Nasdaq Company.

In the new Millenium, perhaps a quarter of new jobs where Nasdaq operates will be created by

Nasdaq companies…

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Several “moon shots” underway

• Several simultaneous high visibility projects:– Doubling volume every 14 months– Re-architecting the entire underbelly of the company – 3rd year of $100 million new delivery projects

• Y2k, Decimals, Supermontage…

• Required on-site executive presence – Accept hand-off from prior site executive– Spearhead customer-focused cultural re-alignment

• Demutualizing/Privatizing the company• Expanding both globally and into new products

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SuperMontage

• Nasdaq’s Next Generation Trading System • Shows sum of all orders and quotes at various price levels• Acts as a voluntary central repository for all Nasdaq activity• Provides competitive services to all participants equally• Shows investors many price levels beyond the current best• Replaces Nasdaq’s Current Transaction Systems• Provides for Increased Volume and Flexibility• Allows backward compatibility for all participants

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Nasdaq Japan

• First international subsidiary of a market• Targeting Nasdaq hybrid market structure• Initially operating through Osaka Securities

Exchange

• June 19, 2000 launch: over 40 new IPOs since 2000

• Connectivity to all major participants in Japan• Fully independent and operational corporation• Recently completed a round of private funding• Will launch Super Montage structure at end of 2001

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Nasdaq Europe

• Nasdaq is launching a native European Nasdaq market

• Nasdaq Europe has three initial phases of trading:– Easdaq systems (started March, 2001]– New Nasdaq European Trading System (May, 2001]– Nasdaq European Supermontage System [Q4 2001]

• Nasdaq Europe will trade all applicable European stocks

• Nasdaq Europe will be the IPO market of choice in Europe

• Nasdaq Europe will offer other global Nasdaq products as well

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NasdaqWeb

Services

Global Trading Platform

Nasdaq Trading Network

NasdaqJapan

Nasdaq US

NasdaqEurope

Global Linkage

Professional Traders

InternetServices

Other Markets