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Nasdaq Inc (NASDAQ:NDAQ)
Q4 2019 Earnings Call
Jan 29, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Nasdaq Fourth Quarter 2019 Results Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mr. Ed Ditmire, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Ed Ditmire -- Vice President, Investor Relations

Good morning, everyone. Thank you for joining us today to discuss Nasdaq's fourth quarter and full year 2019 financial results. On the line are Adena Friedman, our CEO; Michael Ptasznik, our CFO; John Zecca, our Chief Legal and Regulatory Officer; and other members of the management team. After prepared remarks, we'll open up to Q&A.

The press release and presentation are on our website. We intend to use the website as a means of disclosing material non-public information and complying with disclosure obligations under Regulation FD.

I'd like to remind you that certain statements in this presentation and during Q&A may relate to future events and expectations, and as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these projections. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our press release and periodic reports filed with the SEC.

I will now turn the call over to Adena.

Adena T. Friedman -- President and Chief Executive Officer

Thank you, Ed, and good morning, everyone. Thank you for joining us. My remarks today will focus on the following areas: Nasdaq's 2019 financial and business performance, the progress we have made to drive Nasdaq forward along our strategic direction, and our ambitions for 2020 and beyond.

Turning to our results, I'm very pleased to report Nasdaq's strong financial performance for the fourth quarter and full year 2019. We achieved $646 million in net revenues in the fourth quarter of 2019, while non-GAAP earnings per share of $1.29 rose 4% compared to the fourth quarter 2018, despite a significantly lower volume and lower volatility market environment in the US as compared to the same period in 2018.

Turning to full year 2019, we generated total net revenue of $2.54 billion, including 8% organic revenue growth across our non-trading businesses, tempered by a 3% decline in our trading businesses, with total organic revenue growth of 3% for the year. 2019 was another year of strong execution for Nasdaq, exceeding our longer-term revenue growth objectives in our non-trading businesses, while also exhibiting increases in efficiency, hitting a multi-year high of 49% for our non-GAAP operating margin, despite an operating leverage headwind presented by moderated trading revenues.

Throughout 2019, we also continued to invest organically and inorganically to advance our offerings, guided by our strategic pivot to maximize opportunities as a technology and analytics provider, while also investing to sustain the strong competitive position of our core marketplace franchise. We are now in our third year since the announcement of our new vision for Nasdaq. Our 2019 results illustrate how Nasdaq can deliver on our technology-led strategy, and more importantly, how our disciplined client-centric focus is creating value, not just for our clients, but for all of our shareholders.

We entered 2020 with strong momentum, following a great finish in 2019. We experienced an acceleration in Market Technology new order intake as the year progressed. And with eVestment, almost 40% of our new sales were to new clients, and existing clients exhibited higher average spend as product usage broadened. Our ETP assets under management are at record levels. And we have a very healthy new listings pipeline.

Turning to specific highlights from our businesses in the fourth quarter and throughout the year. Our Market Technology segment delivered 12% organic growth in the fourth quarter and 11% organic growth in 2019 as it progressed with the development and implementation of our next-gen technology platform. Our total revenue growth in 2019 was 25%, including the positive impact of the Cinnober acquisition. New order intake totaled $204 million for the fourth quarter, while our annualized recurring revenue, or ARR, totaled $260 million, an increase of 17% year-over-year.

The fourth quarter featured some particularly encouraging wins. As part of our new market strategy, we recently announced that we have signed a new partnership with an Airbus subsidiary called Skytra, in which we agreed to provide the full suite of marketplace solutions to enable the air travel industry to price and manage the revenue risks associated with fluctuating ticket prices. In our sell side business, we signed two new Tier 1 global banks to our execution platform in the fourth quarter, bringing our total to six banks and brokers as we enter 2020. We also signed extension and expansion agreements with five existing marketplace clients in the fourth quarter, including Japan Exchange Group for derivatives trading and surveillance and FINRA for its multi-product trading and data platform services.

Next, I'd like to update you on the development and deployment of our next-generation market technology product offering, the Nasdaq Financial Framework. Work on the core platform of NFF has reached its advanced stages. And while our efforts on application solutions on top of the core platform continue, we believe that both are on target in terms of our product planning schedule. As we begin 2020, other phases of this long journey become increasingly important. For example, we will focus significantly on our go-to-market approach with both our managed services and SaaS-based solutions. And we have made recent organizational changes to optimize efficient client delivery and support.

We are encouraged by the growth and momentum in this segment of our business with our sights now set on continuing to scale the business and delivering improved profitability in 2020 and 2021.

Turning to our Information Services segment, we delivered $194 million in net revenue during the fourth quarter, a 4% increase from the prior year period, bolstered by index licensing and Investment Data & Analytics revenues. Over the course of the full year in 2019, Information Services rose 9%, driven overwhelmingly by organic growth, with both the higher-growth index and Investment Data & Analytics businesses, as well as the more mature market data businesses performing in line with their respective long-term organic growth objectives.

The fourth quarter marked an interesting milestone for Information Services. For the first time, over 50% of revenue was generated by our higher-growth index and investment analytics businesses. It's exciting to see this progress in the areas with clear secular growth opportunities, born out of our strategic pivot in action. And while quarterly figures can fluctuate, I expect this trend to continue over time.

As we move into 2020, we're making investments to ensure these growth engines have the fuel to continue performing in the long term. For instance, we're working to bring eVestment's capabilities and insights to the fast-expanding private market space. Additionally, our new eVestment products, Research Management and Market Lens, given [Phonetic] us new capabilities for our existing clientele and can provide new growth engines in 2020.

Moving to our foundational marketplace businesses, our Corporate Services segment delivered revenue of $129 million in the fourth quarter, a 5% increase, boosted by particularly strong performance in our listing business and increased demand for our investor relations intelligence offerings. Full year organic revenue growth in Corporate Services was 3%.

For the seventh consecutive year, Nasdaq led US exchanges for IPOs in 2019 with a 78% US win rate, welcoming 188 IPOs. We welcomed 50 IPOs in the fourth quarter alone, achieving an 82% US win rate during the period. In 2019, we listed 10 of the top 15 IPOs by dollars raised. In total, the US Nasdaq IPOs raised $34.5 billion in 2019, well in excess of the dollars raised by our competitor exchange. We are extremely pleased that our listing clients are demonstrating their trust in us as a true partner to them as they enter and navigate the public markets.

Meanwhile, our Nordic, Baltic and First North exchanges continue to attract new companies from across Europe, adding 53 new listings, including 34 IPOs in 2019. I'm also very pleased to report that we had 16 new companies switch their corporate listings from either the New York Stock Exchange or IEX to Nasdaq in 2019, including Exelon and the newly created ViacomCBS. Sanofi and TCF Financial also transferred US components of their listings to Nasdaq, which combined with the 16 new switches, resulted in an aggregate of $230 billion in global equity market capitalization coming to Nasdaq last year.

On the private capital side, our Nasdaq Private Market business set a new record for annual volume in 2019, facilitating $4.8 billion in transaction value for private company liquidity programs. Demand for our IR intelligence offering drove growth in the Corporate Solutions sub segment. We saw a 6% increase in the fourth quarter. I'm proud of the growing momentum in that business. It underscores the years of under-the-hood work by our team to focus and build solutions that best suit our clients -- our corporate clients' needs like our new ESG offerings, expanding the ways we help them address the most acute challenges for our public issuers.

Finally, our Market Services business delivered net revenue of $225 million in the fourth quarter, an 8% organic decline compared to the prior-year period, reflecting in large part the lower volume and volatility comparison against a very active prior-year period. For the full year, the organic decline was 3%, again due principally to moderation in industry volumes in our largest equity derivatives and cash equities products. When I look at the factors that we have the most influence on, our competitive standing as represented by our market share and capture trends, we delivered consistently in our larger revenue categories, US and European cash equities and equity derivatives. Our smaller FICC area continues to be a work in progress, where we're working to enhance our offerings to deliver the kind of performance we're looking for going forward.

In the US, The Nasdaq Stock Market remains the largest single venue of liquidity for traded/listed cash equities, while in options, we retained the largest combined market share for multiply listed options with fairly steady capture and share developments. In Europe, Nasdaq's Nordic LIFFE [Phonetic] equity market share increased to 71% in 2019 versus 67% in 2018.

As part of our broader commitment to engaging with our clients, I would like to highlight one regulatory development. Nasdaq introduced our total markets reform agenda last April, which outlines our ideas and proposals aimed to make the capital markets more efficient for investors, and combined with our revitalize efforts, also attractive to small and medium growth companies. The blueprint also highlighted our thinking around areas where we could help our clients to be more effective in the market.

In that regard, we are pleased to see the SEC propose the merging of the Consolidated Tape facilities to propose -- and to propose governance changes to give customers more involvement in the SIP plans. As we review the SEC's proposal in detail through the comment period, we will focus our comments and recommendations on ensuring the best interest of the market and the goals of the plan are maintained going forward.

Switching gears, I would like to talk now about our efforts to advance our practices in corporate sustainability, both within our own operations and as we support our clients in solving complex challenges. Nasdaq launched several ESG-focused commercial offerings in 2019 to meet demand from our clients across our respective businesses. This includes our ESG advisory program for corporate clients, the Nasdaq

Sustainable Bond Network, the Nasdaq Center for Corporate Governance, as well as publishing our global ESG reporting guide. And just this past week, we announced our new ESG workflow technology to simplify the ESG reporting process for public companies. Our offering is in response to corporates seeking to bring efficiency to a process that more often than not is plagued by data management challenges and survey fatigue. We are excited to be a strategic partner to our clients in this rapidly growing area of the market.

We're also very proud to have announced that Nasdaq achieved carbon neutrality across our business operations, changing our energy sources where possible to renewable energy and purchasing renewable energy certificates that offset the emissions impact of our office locations, data center usage, corporate travel and employee commuting. Nasdaq is also actively exploring ways to further reduce both its consumption of resources and resulting emissions.

As I've said, 2019 represented an important year in terms of progress on our strategic journey. As we continue on that path, I'd like to share our core ambitions for the next several years. First, it is to become the most trusted, most successful market technology and reg tech partner to trading firms, financial marketplaces and new non-financial markets worldwide. Second is to evolve as a strategic market operator and specialized analytics partner to the investment management industry across index, active and alternative management. Third is to serve as the destination exchange and partner for companies worldwide with unparalleled expertise across equity markets, investor relations and governance. Fourth, to strengthen our position as a preeminent market operator in North America and Europe, enhancing -- by enhancing the client experience across the trading, data and connectivity aspects of our exchange complex. And fifth, to be the trusted provider of liquidity solutions for private asset classes, including private company shares, private equity funds and other traditional and digital assets.

We intend to execute against these ambitions through the combination of the incredibly talented and client-focused Nasdaq team by understanding the clear needs of our customers as we work together, and lastly, by investing in and embracing the capabilities of today's most powerful technologies, in particular cloud and machine intelligence, notably through the deployment of the Nasdaq Financial Framework to accelerate the delivery to our clients. We look forward to updating you on our progress on these ambitions in the quarters to come.

As I wrap up, I will summarize by saying, our fourth quarter produced solid results for Nasdaq, completing a successful 2019 for our company. Moving forward into 2020, we remain relentlessly focused on advancing our strategic pivot to maximize opportunities as a technology and data analytics provider, while maintaining segment leadership in our foundational marketplace businesses in the US and Europe. I remain confident we are moving Nasdaq in the right direction this year as we capitalize on the strong momentum generated in 2019.

And with that, I'll turn it over to Michael to review the financial details.

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

Thank you, Adena, and good morning, everyone. My commentary will primarily focus on our non-GAAP results, and all comparisons will be to the prior-year period, unless otherwise noted. Reconciliations of US GAAP to non-GAAP results can be found in the attachments to our press release and in the presentation that's available on our website at ir.nasdaq.com.

I'll start by reviewing fourth quarter revenue performance as shown on Page 3 of the presentation and organic revenue growth on Pages 4 and 14. The $1 million increase in reported net revenue of $646 million is a net result of 6% organic growth in the non-trading segments and a $5 million net positive impact from acquisitions and divestitures. This was largely offset by the 8% organic decline in Market Services as compared to last year's active Q4 and a $5 million unfavorable impact from the changes in foreign exchange rates.

I will now review quarterly highlights within each of the reporting segments. Let's start with Information Services, which as reflected on Pages 5 and 14, saw a $7 million or 4% increase in revenue. Organic revenue growth during the period was 4%, reflecting growth in the investment data, analytics and index businesses. Excluding investments purchase price adjustment on deferred revenues in Q4 '18, organic growth would have been 3%. For the full year of 2019, Information Services organic revenue growth was 9%, or 6% excluding the investment purchase price adjustment, with the growth coming primarily from non-regulated sources.

Market Technology revenue, as shown on Pages 6 and 14, increased $22 million or 29%, including organic growth of $9 million or 12%. Organic growth during the period primarily reflects an increase in change request revenues and software as a service surveillance revenues, as well as an increase in the size and number of software delivery projects. Annualized recurring revenue totaled $260 million, up 17% year-over-year, and represented 66% of annualized fourth quarter segment revenues, down from 76% in Q3 '19, primarily due to the increase in change request and software deliveries revenues during the fourth quarter.

For the full year 2019, Market Technology organic revenue growth was 11% and the operating income margin totaled 16%. As previously stated, in 2020, we expect to begin to see year-over-year margin improvement in the segment as we leverage our investments in the Nasdaq Financial Framework over a larger recurring revenue base and experience the benefits of the run rate synergies achieved from the Cinnober acquisition.

Turning to Corporate Services on Pages 7 and 14, revenues increased $6 million or 5% due to organic revenue growth, reflecting an increase in the number of listed companies and higher revenues from our IR intelligence offerings.

Market Services net revenues on Pages 8 and 14 saw a $24 million or 10% decrease. Excluding the negative $3 million impact from unfavorable changes in foreign exchange, the organic revenue decrease was $21 million or 8%. The organic decline during the period reflects decreases in cash equities, equity derivatives and FICC trading revenues, primarily due to the lower industry trading volumes compared to the particularly active Q4 '18 period.

Turning to Pages 9 and 14 to review expenses, non-GAAP operating expenses increased $5 million to $335 million. While expenses came in at the high end of our range, the year-over-year increase reflects only a 2% or $8 million organic increase. In addition, there was a $1 million increase from the net impact of acquisitions and divestitures, partially offset by a $4 million favorable impact from changes in foreign exchange rates. During 2019, the Company's organic expense increase totaled 2%.

Turning to Slide 10, we are initiating our 2020 non-GAAP operating expense guidance range of $1.31 billion to $1.36 billion. Adjusting for foreign exchange rates, the midpoint of the expense range represents an approximate 3% organic increase year-over-year, consistent with our medium-term 3% expectation.

Moving to operating profit and margins, non-GAAP operating income decreased $4 million in the fourth quarter of 2019 and the non-GAAP operating margin was 48%. During the full year 2019, the non-GAAP operating margin increased 1 percentage point to 49% versus 48% in the prior year. The increase in the full year margin reflects in part the benefits from a business model that is becoming more scalable as we evolve. We strategically pivoted to reorient our product and business portfolio toward more SaaS offerings, and we continue to make investments in our technology platform that we expect to provide for even greater operating leverage in the future.

Net interest expense was $26 million in the fourth quarter of 2019, a decrease of $9 million versus the prior year due to lower debt balances and refinancing the 5.55% $600 million US denominated bond with a new 1.75% EUR600 million notes.

The non-GAAP effective tax rate was 25% for the fourth quarter of 2019 and 26% for the full year 2019. The 2019 tax rate came in at the lower end of the full year guidance, primarily due to reduction in US taxes associated with certain foreign-derived income. For the full year 2020, we expect the non-GAAP tax rate to be between 25.5% and 27.5%.

Non-GAAP net income attributable to Nasdaq for the fourth quarter of 2019 was $215 million or $1.29 per diluted share, compared to $207 million or $1.24 per diluted share in the prior-year period.

Turning to capital on Slide 11, debt decreased $91 million versus Q3 '19, primarily due to net payment of $148 million of commercial paper, partially offset by a $56 million increase in Eurobonds book value caused by the stronger euro. Our total debt to EBITDA ratio ended the period at 2.6 times, unchanged from the third quarter of 2019.

During the fourth quarter of 2019, the Company paid a dividend in the aggregate of $77 million. And during 2019, the Company returned $505 million to the shareholders through dividends and our share repurchase program, with the latter achieving objective of keeping our diluted share count flat.

With that, thank you for your time, and I'll turn it back to the operator for the Q&A.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Richard Repetto with Piper Sandler. Your line is now open.

Richard Repetto -- Piper Sandler Companies -- Analyst

Yeah, good morning, Adena. Good morning, Mike. I guess the first -- my question -- first question is on market structure. It seems like there's a lot of things going on. And you made some comments about the SIP and the proposals of the SEC and the recent approval of the CBOE market on close -- market close order. So I guess, Adena, the question would be, first I guess on the SIP, what -- it leaves you to come up with a plan if the proposal is approved. I guess, what's your response to that? Would you come up -- is there going to be any -- how are you thinking about -- will you just follow that plan? Or do you think the changes will be positive for Nasdaq?

Adena T. Friedman -- President and Chief Executive Officer

Well, I think that, as you all know, the way that the SEC process works is, they are putting out a proposal for rule making, and they actually -- it really was a pre-proposal before the proposal for rule making. So that is the start of a pretty long and comprehensive process to consider changes in the governance and composition of the securities information processor plans. And so there will be ample opportunity for us and all of our clients and peers to comment and provide recommendations to the SEC along the lines of their proposals. And I think that that will ultimately kick off most likely a multi-year process for determining the future of that part of the market structure.

And we are pretty encouraged by some of the things that they have in their proposal, and there are other things that we certainly will have an opinion about as we think through what is best for the markets, how do you leverage the securities information processor the right way. If you think about it, it has a regulated, in our opinion, kind of monopoly component to the industry. So how do you make sure that you're governing it the right way and how do you make sure that you also are giving our clients proper choice and alternatives with our proprietary products in the market?

So we have a lot to think about as we go forward. But we are pleased that the SEC is taking it on and considering it. We do think there are some elements that need to be modernized, as we had laid out in total -- the total markets proposal.

Richard Repetto -- Piper Sandler Companies -- Analyst

Thank you. And then my related follow-up would be, you beat me to the punch on sort of outlining your strategy going forward after sort of implementing the strategic pivot over the last two to three years. And I guess, what I'm trying to understand is, it seems like the strategy -- the strategic pivot and then divesting of assets that weren't providing a good return has been well received. So the question is, on what you outlined, the five things, could you just highlight the differences -- or what would you highlight as the differences between what you've been doing for the past three years?

Adena T. Friedman -- President and Chief Executive Officer

Well, it's a good question, Rich. I would say that the five goals that we have for the next several years are in line with the pivot that we've already established, but we're moving down the road on it. So when we first announced that we have a strategic pivot, we really focused on what do we believe are the long-term trends that our clients are managing through, and long-term meaning over a period of the next 10 years, back in 2017, kind of what are we seeing over the next 10 years that could really impact our clients, and therefore, how should we be positioning ourselves?

And so we're kind of three years into a long-term journey. The ambitions that we have laid out for the next several years are not a change, but rather continuing down the road. And I think the difference is that we've continued to gain confidence in our ability to actually deliver against some of the ambitions that we have, meaning to be the most trusted market tech and reg tech provider to the industry. We really feel that our Nasdaq Financial Framework and technology implementations, our cloud-based services, how we're delivering against SaaS now, all of those things give us a lot more confidence that we can continue to expand and accelerate the business.

At the same time, within our data and analytics business, we've really gotten to know the investment management industry in a way that we didn't, frankly, coming into the strategic pivot. I think eVestment has really given us a level of insight and expertise there, and it allows us to continue to think through, how do we expand our offerings to be even more of a strategic partner to them? So there's kind of a couple of examples where we did see more and more confidence that we're going down the right road. And then also having that -- I laid out five different ambitions, but the fifth one being private markets. It's still very small business for us, but the momentum in the private asset space in terms of liquidity solutions is really picking up. We're seeing really good feedback on the private equity fund offering, as well as our core private shares offering and how we can continue to expand that. So we've elevated that up to be one of our key ambitions.

Richard Repetto -- Piper Sandler Companies -- Analyst

Got it. Thank you very much, Adena.

Adena T. Friedman -- President and Chief Executive Officer

Thanks.

Operator

Thank you. And our next question comes from Dan Fannon with Jefferies. Your line is now open.

James Steele -- Jefferies & Co. -- Analyst

Good morning. This is actually James Steele filling in for Dan.

Adena T. Friedman -- President and Chief Executive Officer

Hey, James.

James Steele -- Jefferies & Co. -- Analyst

My question is, in the Info Services segment, just on the sequential decrease in market data revenue, I think you mentioned FX is the driver of that. But I was just hoping you can maybe elaborate if there's anything else that drove that sequential decrease.

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

On the sequential side, one of the other key factors was a drop in the unreported revenue from -- unreported revenue usage. And so that was $9 million in Q3 and it was about $5 million this quarter. So that was one of the other key drivers quarter to quarter.

James Steele -- Jefferies & Co. -- Analyst

Okay, that helps. And then my follow-up is, just sticking with the same segment, the 400 bps decrease in operating margin sequentially, was that $9 million also a factor there?

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

Yeah. So that was a part of it. And there was also some increased investments, both in infrastructure and in the new initiatives that Adena referred to earlier, as well as there's some timing around some of the compensation in there as well. So that was some of the key drivers of why the expenses were up higher in the quarter.

James Steele -- Jefferies & Co. -- Analyst

Great, thank you.

Operator

Thank you. And our next question comes from Ari Ghosh with Credit Suisse. Your line is now open.

Ari Ghosh -- Credit Suisse -- Analyst

Hey, good morning, everyone.

Adena T. Friedman -- President and Chief Executive Officer

Hello.

Ari Ghosh -- Credit Suisse -- Analyst

So just on Market Tech, this was another strong quarter, even after like accounting for some seasonality. So do you -- could you give us an update on the customer mix and revenue contribution that you're seeing from non-financial and maybe some of the newer markets where you're getting traction? And then, just related to that too, if you could give us an update on the competitive landscape in this business, either from in-house client initiatives or maybe newer FinTech entrants in the space, just as your TAM continues to evolve in the business?

Adena T. Friedman -- President and Chief Executive Officer

Sure. Great. So I think we look at the business in terms of how we are measuring revenue success and growth in four key areas. One is in our -- what we call our core marketplaces business, so exchanges, financial markets. That's one key area of revenue and revenue opportunity. The second is in our reg tech, so really our SMARTS Surveillance offering and how we offer that out to the banks and brokers. The third area is in the banks and brokers in terms of selling trading solutions to them, trading technology solutions to them. And then the fourth is in this new market space.

And certainly, still the vast majority of our revenue really comes from the first two, which are our core marketplace businesses and the reg tech space. And both of them had strong growth characteristics, and we're renewing client contracts, expanding those client contracts and signing up new customers, particularly in the post-trade area. That's where the majority of the marketplace demand is coming from, in addition to continued expansion of SMARTS.

But what we really tried to focus on in my remarks is the fact that we went from having one in-place banks and broker client coming into 2019 to now having six on the exit of 2019. And those are really interesting opportunities because they're often offered -- not in every case, but often offered either as a managed service or as a SaaS offering. So it's a new way of delivering a service. It's a more comprehensive service than just delivering the software. We're also providing hosting and surveillance for some of the clients. So that's a really interesting area and that's definitely one of the key growth opportunities that we have.

And then the last, as you mentioned, is in new markets; still very small. What we are focused on as we go into 2020 is the fact that we have been expanding the number of clients in the sports betting and gaming space. We launched two new clients in the horse racing area, both in Australia and Sweden, this year. We have the Football Index, which is in soccer, or I should say European football, and that space. And then also insurance, with the acquisition of Cinnober, they have a really interesting risk modeling tool that they've deployed out to insurance. So it gives us an opening into insurance. And then in the transportation space, as we mentioned, with the Airbus partnership.

So we definitely are seeing growth opportunities there. But it's going from a very small base to something that where we see a growing TAM as we get more engaged in each of those industry verticals. I would just say, from a competitive perspective, this is a business I would argue that's very much a scale business, particularly in the core Market Tech and trading solutions business. It is a scale play. And we believe that we are the most successful scale player in providing these comprehensive end-to-end trade life cycle solutions to the marketplace industry and also to banks and brokers.

And then on the surveillance side, there are always little niche players that are trying to come up with new things, but frankly, we've been really investing in machine intelligence in that business. We've launched the Nasdaq Data Discovery platform for surveillance. And so we've continued to innovate to make sure we stay ahead of these niche players that are coming into the market. So long answer, but it's a big area of opportunity for us, and the TAM is growing as we're expanding into the banks and brokers and into the new markets.

Ari Ghosh -- Credit Suisse -- Analyst

Very helpful. And then just a quick related follow-up on the margins in the business. Again, following the heavy investment phase, the improvement has been solid over the last couple of quarters. Now, I appreciate that this can be lumpy, but should we expect some of these margin benefits in the business to play out more in 2020 or think of more of a sustained level as a 2021 event, again, thinking of it as a year-over-year improvement? Thank you so much.

Adena T. Friedman -- President and Chief Executive Officer

Yeah. And we do look at that from a year-over-year perspective. So quarter -- as you said, things can be a little lumpy on a quarterly basis, but on an annualized basis, we do expect to start to demonstrate that we can grow our margins along with the top line growth as we go through 2020 and -- in 2020 and 2021. So we've been saying that all along and we do expect to deliver that.

Ari Ghosh -- Credit Suisse -- Analyst

Great, thank you very much.

Operator

Thank you. And our next question comes from Jeremy Campbell with Barclays. Your line is now open.

Jeremy Campbell -- Barclays -- Analyst

Okay, thanks. With the Airbus -- and I'm going to butcher this, but Skytra deal? I was hoping to...

Adena T. Friedman -- President and Chief Executive Officer

That's right, Skytra. You got it.

Jeremy Campbell -- Barclays -- Analyst

I was just hoping to get a little bit more detail on what that opportunity looks like, maybe first, what exactly air travel price derivatives might look like. And is there any way for us to think about the size of that potential market?

Adena T. Friedman -- President and Chief Executive Officer

Sure. So it was really interesting. Airbus came to us, by the way. They're the ones who really came up with this really creative idea, which is how do they create more stability of revenue for the airlines and for the travel agencies so that, in particular, airlines feel that they can look further out into their planning cycle and they can be more confident in their revenue opportunities so that they obviously can make larger capital investments over time, including new airplanes. So you can kind of see where the natural alignment of interest comes with Airbus being the provider of this.

But they -- it really came out within a group within Airbus, they said, OK, let's go for it, let's create a new subsidiary and launched this thing as a de novo start-up called Skytra. They are basically leveraging a lot of data. It's the vast majority of the ticket prices in terms of both tickets sold but also actual settlement of tickets, meaning it's one thing to sell a ticket to a client, it's another thing for the client actually get on the airplane and fly. So they have both, what I'd say, pre-trade pricing information from the airlines and then the post-trade execution of the tickets actually being sold and used.

And they have data from certain industry sources and they are basically creating index and an index that looks at different routes. So it could be a route from New York to London, or it could just be a route from Eastern US to Europe. It can -- they can look at different routes and look at trends in pricing. And so if they have this index, it allows them to create trends in pricing. They can then create a future on that index, and that then will enable the industry to use it as a hedging tool. So airlines and travel agencies are natural users of this where they -- through broker dealers. So it is a broker dealer professional system. They can basically hedge out their revenue risk and allow for them to have a longer-term orientation. So it's really creative.

In terms of our involvement, we are providing them the trading solution. We're providing them surveillance overlay. And then there are other services that we hope that we will continue to be able to offer them as well across our trade life cycle solutions and operations. It is offered as a SaaS-based service, and they are leveraging our next-gen technologies. So we're really excited about that.

Jeremy Campbell -- Barclays -- Analyst

Interesting. And then just, I guess, on the follow-up, and this is similar to your answer to Ari on the last question, but can you just remind us -- for Market Tech wins, can you remind us of a typical ramp timeline from signing to kind of P&L contribution for something either like this, the non-financial markets or more traditionally like the two new sell-side execution venues you guys signed in 4Q?

Adena T. Friedman -- President and Chief Executive Officer

Yeah. So from signing -- so frankly, the longest -- for trading solutions, the longest timeline is to get a signature on a page, so from the first meeting until signing. Then from signing until we actually launch is usually -- we can easily do that in, for a very simple system, six months, for a more comprehensive system, nine to 12 months, depending on the level of complexity of the client. And so -- and then also, of course, they often need to make sure that they're integrating it inside their systems as well. So I would say, nine to 12 months is a more common time from signing to production.

And then in terms of post-trade systems that are much more complicated, it can be anywhere from 18 months to two years to deliver a full end-to-end post-trade solution clearing and settlement into some of these larger scale clients. And we do have several of those ongoing right now.

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

But from a revenue recognition standpoint, though, as we start to build out the platforms in that six to nine to 12-month period that Adena described, there will be revenue recognized as we're building the platform. There'll be typically a higher cost in that delivery. As we move and more to SaaS, it will become lower cost going forward. But right now, there is bit of a higher cost. And then you see more of the run rate revenues in that -- after that 12-month period, or after the implementation.

Adena T. Friedman -- President and Chief Executive Officer

And that was a change to the revenue recognition rules a few years ago. So we now recognize revenue as soon as we sign through to deployment. The costs are higher between signing and deployment, and then it goes into more of a service and maintenance cost base.

Jeremy Campbell -- Barclays -- Analyst

So once you get to that six, nine, 12 finalized implementation level, that's -- you're at full run rate for revenue and margins at that point?

Adena T. Friedman -- President and Chief Executive Officer

Yeah, the margins do improve as we go into production after we've been able to complete the development phase.

Jeremy Campbell -- Barclays -- Analyst

Perfect. Thank so much you, guys.

Adena T. Friedman -- President and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from Alex Kramm with UBS. Your line is now open.

Alex Kramm -- UBS -- Analyst

Yeah. Hey, good morning, everyone. I wanted to stay on Market Tech but I want to bring it back to the numbers for a second. Mike, you went through kind of the growth numbers here, and I think you said the organic growth was primarily driven by the non-recurring portion. So maybe you can also tell us how organic was on the recurring side, given that's how we are supposed to measure you. And then related to that, maybe just dimensionalize like how we should be thinking about the non-recurring portion because that obviously was up more than 50% this quarter. So is this going to be more bouncy? Is Cinnober making it more bouncy? Or as we think about 2020, how do I think about the trajectory of those kind of like more onetime-ish items or [Indecipherable] items?

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

Yeah, so there was -- as you know, there is typically more in the fourth quarter with respect to some of the change request and the other elements that come into play. I think if you look at the annualized recurring revenue slide, you can see that the ARR went up from $255 million to $260 million in the quarter. So I think that's an indication of the type of growth you're seeing in more of the recurring revenue side of the business, and you can look at that on a regular basis to see what's happening from recurring standpoint relative to more of the change requests etc.

Adena T. Friedman -- President and Chief Executive Officer

And I wouldn't say Cinnober necessarily changes the composition of that. So I think that we are finding that their revenue was generally consistent with the way that we look at it in terms of the recurring and non-recurring revenue.

Alex Kramm -- UBS -- Analyst

Okay, fair enough. And then -- sorry.

Adena T. Friedman -- President and Chief Executive Officer

And on Slide 19, you can kind of see the sequential quarter-over-quarter increase.

Alex Kramm -- UBS -- Analyst

Sure. And then just coming back to Rich, I think at the beginning of the call, you mentioned the CBOE, I guess, closing cross [Phonetic], but then I think there was not really a question about it. So I guess coming back to it for a second, now that we're a little bit closer to this -- I know you commented on it a couple of years ago when this was first envisioned, but any updated thoughts on kind of like the addressable market there? Clearly, some of this pre-cross [Phonetic] already exists in the brokerage world. So what is really the addressable market? Maybe dimensionalize a little bit more, and it'll be great if you could actually give us some of the economics that you're deriving from that maybe at-risk portion of the closing auction.

Adena T. Friedman -- President and Chief Executive Officer

Sure. Well, I think -- first of all, we don't separately disclose kind of different components of the US equities trading business. But I would say that generally, we don't expect this to be a material change to our financials in terms of how we're going to address it. I think what we've been focusing more on, Alex, over the last couple years is enhancing the functionality of the close. We've been making some changes and really working very closely with the buy side and the sell side to implement changes that really continue to make the close as -- I would say, as functional and as useful as possible and generating a true reflection of supply and demand at the close. If you think about it, several trillion dollars of assets under management are tied to that price. So having it'd be a really -- a comprehensive supply and demand price discovery event is critical.

We were quite disappointed to see that the SEC ultimately approved that rule filing, not from a financial perspective, but really frankly from a market perspective and investor perspective. We had issuers write in. There were indexes who wrote in. There were investors who expressed concern. And yet the SEC really didn't address a lot of their concerns in the approval order but rather just decided that exchange competition is more important, in our opinion, than the quality of the closing price. So we're pretty disappointed in that. But having said that, we've been working with our clients for the last couple of years. We expect to be able to address any concerns they have with regard to this new entrant and make sure that we continue to have a very vibrant close. And we don't see any material impact on that -- on our financials from that.

Alex Kramm -- UBS -- Analyst

Fair enough. Thank you.

Operator

Thank you. Our next question comes from Chris Allen with Compass Point. Your line is now open.

Chris Allen -- Compass Point -- Analyst

Morning, everyone. I wanted to dig into actually the new order intake in Market Tech a little bit. It's obviously a very big number. I wonder if that was concentrated -- if you think color [Phonetic] in terms of the concentration and in terms of -- not specific names, but was it just one or two deals that drove that? And then just what type of deals they were so we can think about the revenue realization?

Adena T. Friedman -- President and Chief Executive Officer

Yeah, we had -- it was -- we're very pleased with the number. We've been working on these new contracts for many months, so they just all kind of came into play in the fourth quarter. There are some significant existing clients like we mentioned in terms of the Japan Exchange Group and FINRA. Those are large-scale, long-term contracts that we were working on to make sure we expand and extend our agreements with those existing clients. Those are significant. As we mentioned, the two new banks that came in, as well as some of these other -- and some smaller new deals that came into play in the fourth quarter, all kind of came to fruition all at the same time. So we've always said that order intake is quite lumpy. This is a particularly lumpy year, but it is actually positioning us very well into -- in terms of securing our revenue, growing our revenue into our existing base, as well as signing up some new customers.

So I don't -- I mean, there were definitely more names in the fourth quarter than in prior quarters, but some of the bigger names came into play in that quarter.

Chris Allen -- Compass Point -- Analyst

Thanks. And then just on the change requests, I believe you mentioned last quarter, you pulled forward $2 million to $3 million. So just kind of going back to Alex's question a little bit, is this just increasing just in overall magnitude? It seems a little bit outsized relative to what we've seen in the past.

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

Yeah, I think there were a couple of other deals that -- specific requests that came through and specific transactions, both on the change requests and also on some of the software deliveries that were higher this quarter than we would typically see in a Q4. So we had both last quarter and this quarter that we continued to see the increase in that business. So you're right, there were a couple of other specific situations where we had some additional requests being done.

Chris Allen -- Compass Point -- Analyst

Thanks.

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

And since we're just -- I just want to go back to Alex's question on the recurring side, I just want to make sure it's clear, Alex, when I mentioned the $255 million to $260 million, that was Q3 to Q4. So that has continued to progress on the annualized recurring revenue rate. So that's -- going back to last year's $222 million, that would include Cinnober, but there -- as Adena said, the makeup of their business would be very similar. So we are seeing the benefit of the recurring revenue continue to grow, in addition to the change requests that we were just talking about.

Operator

Thank you. [Operator Instructions] Our next question comes from Brian Bedell with Deutsche Bank. Your line is now open.

Brian Bedell -- Deutsche Bank -- Analyst

Great. Thanks very much. Good morning, folks. Maybe just go back on to the ramp-up in Market Technology, Adena, can you frame how many client -- how many non-financial clients you have now -- I know that was just a handful way back when you were starting this effort -- and how large that contribution is? You mentioned the four different elements of Market Tech, this being the fourth. Just wanted to get a sense of how big that is. And when you think about the new air travel price derivatives, is that something that can be rolled out, you think, potentially to many carriers? And then, as we look at the growth trajectory in this business, it was 12% in the fourth quarter. It's above your 8% to 11% guide. If you combine that with pretty good growth in the other segments, are we looking at a potential of even exceeding once again the 5% to 7% growth for -- target for 2020 in recurring revenue?

Adena T. Friedman -- President and Chief Executive Officer

So there's a lot to unpack there. So let's start with the non-financial markets. I think we are trying to do account in our heads. I would say we're probably around 15 clients today in the non-financials, but that's not an exact number, but that's kind of the range. Of those, at least five to seven of them were new clients that we signed this year. So it is definitely a growth area for us. And as I mentioned, we signed new clients in the sport space, we signed new clients in the transportation space, and we signed other -- kind of other new clients along the way that are in non-financial markets. But it's still -- as we mentioned, it's definitely a small but growing area, and the TAM keeps expanding there.

In terms of our overall growth rate in Market Tech, we are where -- we still believe that the 8% to 11% is the right way to evaluate the business going forward, and we will continue to evaluate that as we do move forward. But we're very pleased to see that the growth characteristics of the business are consistent with that kind of growth rate, and we want to make sure that we continue to deliver against that, which is why we continue to invest in the business. But our -- as I mentioned before, the growth in our investment should be outweighed by the growth of the revenues. So we should start to be able to demonstrate some margin expansion going into 2020 and 2021.

And you also mentioned overall the non-trading businesses, overall growth rate. We are -- again, that 5% to 7% is what we believe is kind of the right way to look at our longer-term -- mid-to-longer term outlook. And so we continue to believe that's the right way to evaluate our business.

Brian Bedell -- Deutsche Bank -- Analyst

Okay, great. Thank you.

Operator

Thank you. And our next question comes from Ken Hill with Rosenblatt. Your line is now open.

Ken Hill -- Rosenblatt Securities -- Analyst

Great, thanks. Good morning. I wanted to touch on the ESG offering a little bit. I know this has been important for you guys for a long time, probably particularly within your European businesses, a little bit more. But I was hoping you could kind of flesh out a little bit more about the offering, how it kind of differs from some of the competitors, particularly in the exchange base we've seen more recently, and how you're sizing about -- how you're thinking about sizing for this category going forward.

Adena T. Friedman -- President and Chief Executive Officer

Sure. Well, it is very much a nascent commercial area. And we have two areas of focus. One is on investable products. So, that could either be sustainable bonds, and we have our sustainable bond market in Europe, and we're now -- we've just launched the sustainable bond network in the United States with our European team who is really leading that, as well -- and then any ETFs or ESG-related indexes. So those are kind of, what I'd call, investable products.

And then the other side is really supporting our corporate clients. So we are different than a lot of our peers in that we are really focusing in on how can we be the right partner to all of these companies now who have just increasing demands from investors on managing and reporting on ESG. It's a very complicated world that's [Phonetic] helping out there. There are all these different standard setters and metrics makers, and the companies really need our support. And so we've chosen to be the right partner to them in terms of encouraging them to report on ESG, particularly in our European markets, but also giving them tools, advice, consulting services to support this growing area. And that has been a really interesting commercial area for us.

So I would say, you'll hear more about it going into 2020 because we are supplementing our consulting services with some technology offerings as well. But it's very small at this point. I just want to say, I think, it's a new area for everyone.

Ken Hill -- Rosenblatt Securities -- Analyst

Okay. Thanks for taking the question.

Operator

Thank you. And our next question comes from Alex Blostein with Goldman Sachs. Your line is now open.

Alex Blostein -- Goldman Sachs -- Analyst

Hey, good morning, everyone. Just wanted to touch base on capital priorities as you guys look out into 2020. So you paid down a little bit of commercial paper in the fourth quarter. It feels like the leverage level is kind of where you want it to be. So maybe some updated thoughts around the buyback, in particular, as you guys are looking out into 2020. Thanks.

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

Yes. So thanks for the question. We're going to continue on with the capital plan that we've stated and consistent with that, so again, look for great opportunities to invest and continue to grow the business, number one priority. In addition to that, we look to grow the dividend as our earnings and cash flow grow. And then with respect to the buybacks, we are using the buybacks to offset the dilution that we would see from any of our equity programs. And then at the end of that, if there is additional cash available -- from a debt standpoint, you're right, we've achieved the debt leverage targets that we were targeting. And so we are comfortable maintaining our investment-grade status. And so if there is additional cash available after we take all those things into consideration, looking at -- if there's nothing specific that we are looking to invest in within the horizon, then at some point, we'll consider doing additional buybacks beyond that point. But that's really not a quarter to quarter thing. That's going to be something that we'll look at over a longer period of time. So very consistent capital plan with the way that we've articulated in the past.

Operator

Thank you. And our next question comes from Owen Lau with Oppenheimer. Your line is now open.

Owen Lau -- Oppenheimer -- Analyst

Good morning. Thank you for taking my question. Again, I want to go back to the Skytra deal. I have never thought of Nasdaq can do business within an airplane manufacturer. So Adena, you mentioned that Airbus reached out to Nasdaq for this partnership. But was there a competitive bidding process? Also, could you please talk about what are the things Nasdaq is doing to increase the chance of inbound calls [Phonetic] like this and how Nasdaq increased outreach to identify new markets and new industry? Thank you.

Adena T. Friedman -- President and Chief Executive Officer

Sure. So in terms of the process -- that would be a question for Airbus not for Nasdaq, in terms of how we ended up becoming their partner. But I think in general, we like to make sure that people know about what we're doing with companies like Airbus so that we do get more inbounds. But at the same time, we have actually been sizing up our sales organization in the new market space. It's been one of the areas of investment in Market Tech, continuing to make sure that we have the right expertise that we can apply into the industries that we're finding the most interest to think about a markets-economy-like approach. So whether that's in transportation, insurance and the sports space, these are all areas where we've been investing in sales, in addition to making sure our technology is relevant. So we also have been creating modules within our technology where we can showcase our capabilities to these new non-financial markets where they need a little bit more of an education. And then we're also looking at other partners that we can provide to make it easier and faster to deploy these technologies to the customers.

So all of those are things that we're doing to expand and grow that part of the business. We love inbounds, but it's very important for us to be able to surface opportunities, too. So the sales effort has been definitely a ramp-up for us.

Owen Lau -- Oppenheimer -- Analyst

That's very helpful. A related question is, I want to go back to Slide 19. I'm trying to understand the numbers a little better. So you mentioned that the third quarter new order intake was $62 million. 4Q was $204 million, which is like three times higher. But the ARR was kind of flat. How should we kind of handicap this number? Should we expect the 1Q 2020 or second quarter of 2020 for ARR would be higher? What's the right way to kind of reconcile these two numbers?

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

Yeah, so with respect to the new order intake, again, some of that is temporary -- or not temporary, but it's within the quarter that this is going to be recognized for some of that. But the ARR, a good portion of that $204 million will turn into ARR on an ongoing basis. It depends somewhat on -- with respect to some of the contracts that are recognized in that $204 million would -- they are renewals of contracts that we already have recognized. So if we have a client that was already in the ARR, and then we are renewing a contract and extending that for, let's say, another five-year period, then there could be the -- if there is an increase in the amount that they'll be paying us, then that will have some reflection in the ARR. But -- so that will be a continuation of it. It's -- but the new contracts for the new clients, that's what's going to continue to increase it. And the new order intake is not an annualized number. It is multi-year. So that could be a five-year number, the $204 million, or depending on the size of the contract. So that reflects the total amount of the order intake for the total contract time that's being contracted.

Adena T. Friedman -- President and Chief Executive Officer

Yeah, the way that I would look at that also in terms of ARR, we actually feel like it's a pretty good progression of ARR from quarter to quarter to quarter through 2019. And Michael is right, the $204 million, the majority of that will turn into either continuation or growth of ARR. But I would say that it's -- there's a lot of -- there's a lot that goes into the combination of the two numbers. And we're getting used to giving out ARRs. That's a new stat for us. So we'll continue to make sure we're evolving our explanations around it so that you guys have better understanding of how to interpret that versus the order intake going forward.

Owen Lau -- Oppenheimer -- Analyst

Thank you.

Operator

Thank you. And our next question comes from Michael Carrier with Bank of America. Your line is now open.

Sameer Murukutla -- Bank of America Merrill Lynch -- Analyst

Good morning. This is actually Sameer Murukutla on for Michael Carrier. Thanks for taking my question. Just a question related to the expense guide. And I think you announced the divestment of NFX to EEX, I think. So when is that expected to close? And I guess how much of the benefit are you seeing from that divestment in the 2020 expense guide? And I guess just with the R&D guide, I think that's up around 20% year-over-year. Can you provide some details on what's flowing into R&D guide in 2020?

Adena T. Friedman -- President and Chief Executive Officer

Yeah. So a couple of things. The first thing is the NFX, we expect that to continue to migrate over to EEX through the first quarter of 2020 and start to come out of our financials as we go through the second quarter. However, it was an R&D initiative, so it has been reflected in our R&D numbers. And so therefore, what we're basically saying with the our R&D numbers are that we are moving the money that we were otherwise spending on NFX into some of these higher-growth, higher-potential opportunities, and we're really concentrating our R&D on those things that we think have a very large total market opportunity and have real growth potential. The reason why the investments in ARR -- I mean, in R&D are increasing is because the revenues are also increasing. So a good example of that would be banks and brokers. That's actually considered in R&D initiatives in terms of building out and supplying our trading solutions to the banks and brokers. But we have a very significant increase in number of clients, so the revenue from that business is going up, but so are the investments in that business to supply -- to support this revenue. So we're only showing you one side of the ledger when we're showing you our cost guidance and the R&D spend, but the revenues are also increasing along the lines. So that is the net -- the net cost of that program is around the same year-over-year.

Operator

Thank you. And our next question comes from Chris Harris with Wells Fargo. Your line is now open.

Christopher Harris -- Wells Fargo -- Analyst

Good morning. Thank you. Is strategic M&A still a priority for Nasdaq? Or do you feel like the focus, at least for 2020, will be more centered on your organic growth opportunities?

Adena T. Friedman -- President and Chief Executive Officer

Well, we evaluate acquisitions all the time, frankly. So it's a part of what we look at, and we always -- the way that we think about acquisitions are, can they accelerate our ability to achieve our strategy in a particular segment, so are we either expanding our client base or expanding our capabilities to support our clients in new ways within a segment, with a particular focus on technology and the data and analytics. But frankly, we also have done -- we did a small acquisition within Corporate Services last year. And we always look at -- we will look at acquisitions within Market Services as well, so long as it provides the right financial framework. So I would say, we always look at them. The environment right now is, they're pretty pricey. So we are -- we definitely really focus on making sure we have real conviction around the financial model in addition to, obviously, the strategic benefit before we make a decision to move forward with an M&A initiative. And that has definitely created a discipline inside of Nasdaq where we obviously look at a lot, but we have only executed on a few.

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

I think if you look at the priorities and strategic ambitions that Adena outlined in her comments, the five that we mentioned earlier, those are organic pursuits that we are engaging in. And if there are opportunities to accelerate that with M&A, then we will look to do so as long as that obviously meets the strategic and the financial criteria that we're looking at. But those additions [Phonetic] are ones that we're pursuing organically.

Operator

Thank you. And our next question comes from Kyle Voigt with KBW. Your line is now open.

Kyle K. Voigt -- Keefe, Bruyette & Woods -- Analyst

Hi. Maybe just a follow-up on a prior question related to this Consolidated Tape proposal. Obviously, it's still really early days, but the SEC seems to want to develop this new Governance Committee to develop fair and reasonable fees for this new SIP. Do you have any idea what the SEC would view as fair and reasonable? Would it be a certain maximum operating margin or some other metric? And if that language makes its way into the final rule, do you see some risk to this overall SIP revenue pool? Or do you see that even being stable through the transition?

Adena T. Friedman -- President and Chief Executive Officer

So the first thing I would say is that these fees in the SIP are -- have always gone for a pretty rigorous regulatory process ever since the SIP committees were formed many, many moons ago. So it already does have a lot of regulatory oversight and overlay whenever there is a fee -- proposal of free change there. They have not defined what they mean by fair and reasonable. I think that our view is that it will -- the governance of the SIP and the way that it'll be structured will help make sure that we have client involvement in these types of decisions, but also recognizing the fact that there is a lot of value that comes from the products that are created. And the other thing is that these -- the fee is not only just paid for the creation of the product, but also paid for the regulatory oversight that the exchanges have to support a fair and reason -- a fair market environment. So all of those things are taken into consideration. I don't think the SEC, though, has clearly defined their ambitions there. And we'll have to see how it goes, how it moves forward in the comment period.

Kyle K. Voigt -- Keefe, Bruyette & Woods -- Analyst

Understood. Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I would now like to turn the call back over to Adena Friedman for any closing remarks.

Adena T. Friedman -- President and Chief Executive Officer

Great, thank you. In closing, Nasdaq's fourth quarter and full year of 2019 was a solid performance, and we are starting off 2020 with strong momentum. Our leadership team remains focused on executing our technology-led strategy to deliver for our stakeholders. And I look forward to our continued discussions throughout the year on the progress we aim to make against our strategic priorities. Thank you very much for your time today.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Ed Ditmire -- Vice President, Investor Relations

Adena T. Friedman -- President and Chief Executive Officer

Michael Ptasznik -- Executive Vice President, Chief Financial Officer

Richard Repetto -- Piper Sandler Companies -- Analyst

James Steele -- Jefferies & Co. -- Analyst

Ari Ghosh -- Credit Suisse -- Analyst

Jeremy Campbell -- Barclays -- Analyst

Alex Kramm -- UBS -- Analyst

Chris Allen -- Compass Point -- Analyst

Brian Bedell -- Deutsche Bank -- Analyst

Ken Hill -- Rosenblatt Securities -- Analyst

Alex Blostein -- Goldman Sachs -- Analyst

Owen Lau -- Oppenheimer -- Analyst

Sameer Murukutla -- Bank of America Merrill Lynch -- Analyst

Christopher Harris -- Wells Fargo -- Analyst

Kyle K. Voigt -- Keefe, Bruyette & Woods -- Analyst

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