Investments

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

The following table presents the details of our investments:


	March 31, 2020		December 31, 2019
	(in millions)
Financial investments	$	254	$	291



Equity method investments	$	172	$	156
Equity securities	$	44	$	49

Financial Investments

As of March 31, 2020, financial investments are comprised of trading securities, and are primarily comprised of highly rated European government debt securities and highly rated corporate debt, of which $160 million are assets primarily utilized to meet regulatory capital requirements, mainly for our clearing operations at Nasdaq Clearing. As of December 31, 2019, financial investments are comprised of trading securities, and are primarily comprised of highly rated European government debt securities, time deposits and highly rated corporate debt, of which $169 million are assets primarily utilized to meet regulatory capital requirements, mainly for our clearing operations at Nasdaq Clearing.

Equity Method Investments

As of March 31, 2020 and 2019, our equity method investments primarily included our equity interest in OCC.

The carrying amounts of our equity method investments are included in other non-current assets in the Condensed Consolidated Balance Sheets. No material impairments were recorded to reduce the carrying value of our equity method investments for both the three months ended March 31, 2020 and 2019.

Net income recognized from our equity interest in the earnings and losses of these equity method investments was $17 million for the three months ended March 31, 2020 and $45 million for the three months ended March 31, 2019.

The change for the three months ended March 31, 2020 compared with the same period in 2019 is primarily due to an increase in income recognized from our investment in OCC in March 2019. Following the disapproval of the OCC capital

plan in February 2019, described below, OCC suspended customer rebates and dividends to owners, including the unpaid dividend on 2018 results which Nasdaq expected to receive in March 2019. We were not able to determine the impact of the disapproval of the OCC capital plan on OCC's 2018 net income until March 2019, when OCC's 2018 financial statements were made available to us. As a result, in March 2019, we recognized $36 million of income relating to our share of OCC's net income for the year ended December 31, 2018. In March 2019, we also recognized our share of OCC's first quarter 2019 net income of $9 million.

OCC Capital Plan

In March 2015, OCC implemented a capital plan under which the options exchanges that are OCC’s stockholders contributed $150 million of new equity capital to OCC, committed to make future replenishment capital contributions under certain circumstances, and received commitments regarding future dividend payments and related matters. Nasdaq PHLX and ISE each contributed $30 million of new equity capital under the OCC capital plan. OCC adopted specific policies with respect to fees, customer refunds and stockholder dividends, which envisioned an annual dividend equal to the portion of OCC’s after-tax income that exceeded OCC’s capital requirements after payment of refunds to OCC’s clearing members (such refunds were generally 50% of the portion of OCC’s pre-tax income that exceeded OCC’s capital requirements). In 2018, 2017 and 2016, OCC disbursed annual dividends under the capital plan and Nasdaq, as the beneficial owner of shares held by Nasdaq PHLX and ISE, received $13 million in 2018 and $10 million in 2017.

In February 2016, after the SEC approved the rule change establishing the OCC capital plan, certain industry participants appealed that approval in the U.S. Court of Appeals. In February 2019, on remand from the Court of Appeals, the SEC disapproved the OCC rule change that established the capital plan. OCC began a phased return of capital contributed under the capital plan, and we received $44 million in February 2019, and the remaining $16 million in November 2019. As a result of the SEC's disapproval of the rule change, we are also released from any future capital replenishment obligations under the 2015 capital plan.

Equity Securities

The carrying amounts of our equity securities are included in other non-current assets in the Condensed Consolidated Balance Sheets. We elected the measurement alternative for primarily all of our equity securities as they do not have a readily determinable fair value. No material adjustments were made to the carrying value of our equity securities for the three months ended March 31, 2020 and 2019. As of March 31, 2020 and December 31, 2019, our equity securities represent various strategic investments made through our corporate venture program as well as investments acquired through various acquisitions.