2005 ANNUAL REPORT NASDAQ’s Business in Brief NASDAQ manages and provides services through two business segments: Market Services and Issuer Services. Management allocates resources, assesses performance and manages these two business groups separately. Market Services includes our interrelated, transaction-based NASDAQ Market Center and NASDAQ Market Services Subscriptions information businesses. Issuer Services includes our securities-listings business, the Corporate Client Group, and the financial products business, NASDAQ Financial Products. Originated in 1971, NASDAQ is the largest U.S. electronic equity market and the fastest, most emulated market model worldwide. Approximately 3,200 companies from 37 countries and across all industry sectors are listed on NASDAQ. FROM OUR CEO There has been a worldwide convergence of interest around the electronic model NASDAQ® pioneered 35 years ago. The alignment of market forces around a transparent, electronic market structure has tipped the balance decisively in our favor. NASDAQ is the master in the electronic trading space and well positioned for opportunity in 2006 and beyond. In 2005, we continued to expand and enhance NASDAQ’s compelling value proposition for investors, market participants and listed companies. We made three substantial acquisitions: INET, Carpenter-Moore Insurance Services and Shareholder.com. We also completed our integration of the Brut ECN, and began the integration of INET. NASDAQ welcomed high-profile companies representing over $25 billion in market capitalization that switched their listings from the NYSE. We grew our share of trading in non- NASDAQ stocks, and are well positioned to compete effectively when Regulation NMS is fully implemented. In 2006, we’ll focus foremost on integrating recent acquisitions and competing nationally and globally as one of the two major U.S. equity exchange players. Looking at our bottom line, NASDAQ is no longer a turnaround story. We are performing and succeeding on every measure. Our earnings have been on a strong incline, matched by a return to profitability. We continue to reduce costs while at the same time integrating substantial new businesses. The trademark fairness and integrity inherent in our open, transparent electronic market are more highly valued by the marketplace than ever before. These principles guide all our activities, from corporate governance and listing standards, to how we operate our Market Center, and how we display information equally to all investors. On January 13, 2006, the SEC approved our application to become an exchange. Once we are opera- tional as an exchange, we will be able to separate ownership from our regulator, the NASD, and set a strong and independent regulatory standard. We believe good regulation is good business, and remain an advocate of robust and balanced regulation. Coinciding with our 35th anniversary in February 2006, NASDAQ announced a new premier market segment: The NASDAQ Global Select MarketSM, with the highest listings standards of any equity market in the world. To more accurately identify our other market categories, we designated them as: The NASDAQ Capital Market® (formerly SmallCap); and, to better reflect its international reach, The NASDAQ Global MarketSM (formerly the National Market). A significant development soon to impact U.S. stock trading is the SEC’s Regulation NMS. It allows electronic markets to trade through slower non-electronic markets, which means manual markets will no longer be an impediment to fast executions. Faster executions benefit investors by providing more certainty of the price they want. Upon full implementation of Regulation NMS, we expect to see increased volume in electronic trading and anticipate that a greater percentage of that volume will be pushed to electronic venues like NASDAQ. Underlying our progress and activities are three essential points for current and potential NASDAQ investors to keep in mind. First, that our business is well and wisely diversified across Issuer Services and Market Services. Second, much of our revenue is on a fee or recurring basis not on a transaction basis. Our Issuer Services segment provides recurring revenue streams in the form of listing fees, and licensing fees for products such as those based on the Nasdaq-100 Index, including QQQ. Our Market Services segment delivers real-time quote and trade data to investors through our extensive network of vendors, generating recurring revenues from market data products and services. So, while it is important, our financial fortunes and future don’t hinge on sheer volume. Third, we continue to innovate across NASDAQ’s businesses to meet the rising marketplace demand for more high value products, services and solutions. NASDAQ has come a long way in a short time, particularly in the last two years, when we worked through an intense period of consolidation and transition. The view ahead is clear, and we’re in an exceptional position. A major competitor is grappling with the past, transforming its culture and making the challenging transition to an electronic platform. In sharp contrast, NASDAQ is nimble, forward looking and fast moving, with 35 years of experience and lead time running a time-tested and now widely- emulated electronic market. In fact, there’s no time in our history when NASDAQ’s opportunities and competitive advantages have been as abundant as today. We intend to capitalize on this. By bringing all our proven resources to bear — the fastest systems, best functionality and industry-standard interfaces, and all the right strategies — we expect to succeed on every crucial level. Our market and business is thriving because issuers, investors and market participants have confidence in NASDAQ’s integrity, innovation, management and competitive momentum. We especially thank our shareholders for their support, and our employees for their energy, enthusiasm and unyielding commit- ment. As we move forward into 2006, we plan to grow NASDAQ’s business and revenues, continue to achieve efficiencies and keep demonstrating how much more an equity market can be, do and deliver. Robert Greifeld President and Chief Executive Officer Key Accomplishments Corporate Client Group NASDAQ Information Services Group Providing listed companies a leading market model; Providing deep and transparent data products and lower listing fees; tighter spreads; greater trading services which offer traders strategic advantages, efficiencies and visibility; comprehensive support and including superior speed, depth and flexibility of data high-integrity NASD regulation. management and delivery. NASDAQ won major listing switches in 2005 TotalView®, is fast becoming the standard for NASDAQ including Charles Schwab, Cadence, Sears Holdings, order book data. In 2005, distributors increased 90%, Tasty Baking and Nashua. In 2006, United Airlines non-professional users increased 250% and professional moved to NASDAQ. users increased 70%.*** We achieved a record 99% retention rate of listed Our TotalView subscribers doubled to a record 18,000 companies. in 2005.*** With the addition of five new dual listings in 2005 Scottrade and Charles Schwab became the first and Ivanhoe Mines in 2006, NASDAQ’s now has ten major retail brokers to make TotalView available to dual listings. active traders. NASDAQ attracted the majority of IPOs in 2005, 59% In 2005, we launched OpenViewSM, now with over percent of the year’s total.* 8,000 users, for market depth information on NASDAQ trading of NYSE and Amex-listed stocks; ModelViewSM, NASDAQ won major IPOs in 2005 including Under that provides historical insight into liquidity patterns; Armour, Morningstar, iRobot and, from China, Baidu. and OrderViewSM, a high-speed market data feed focused After taking full ownership of the NASDAQ Insurance on lowest latency delivery of data. Agency™, we acquired Carpenter-Moore Insurance ***Source Market Data Distribution Services, putting NASDAQ in the top ten of Directors & Officers insurance brokers nationwide. We also acquired Shareholder.com, to add to our NASDAQ Financial Products Group diversified revenue streams and increase our overall value proposition to listed companies. A unique stock market asset, offering institutional and retail investors a rich portfolio of products, services We launched the Independent Research Network and programs; providing our listed companies with with Reuters, to provide research analyst coverage for direct and indirect investment and visibility; and adding under covered companies. robustness to NASDAQ’s data products. The NFP portfolio has grown from a few products and a single *Source: Thomson Financial index in the U.S. in 1996, to many indexes available for licensing and over 400 products in 32 countries today. NASDAQ Transaction Services Group EQQQ trading expanded in Europe with listings on the London Stock Exchange and VIRTX. EQQQ assets grew Providing the fastest and most competitive trading over 60% in the fourth quarter of 2005. platform; the most transparent investing environment; the lowest-cost high quality trade execution; the ability In 2005, the Chicago Mercantile Exchange launched to connect in any way clients want and deep liquidity a single stock future on QQQ, The NASDAQ-100 Index for all equities — regardless of where they are listed. Tracking Stock®, and an e-Mini NASDAQ Biotechnology Index® futures contract. In 2005, we acquired INET, a technologically advanced trading system which in combination with the NASDAQ We rolled out an enhanced index