Investments

9 Months Ended

Sep. 30, 2011

Investments [Abstract]

Investments

6. Investments

Trading Securities

Trading securities, which are included in financial investments, at fair value in the Condensed Consolidated Balance Sheets, were $270 million as of September 30, 2011 and $220 million as of December 31, 2010. These securities are primarily comprised of Swedish government debt securities, of which $212 million as of September 30, 2011 and $190 million as of December 31, 2010, are restricted assets to meet regulatory capital requirements primarily for NASDAQ OMX Stockholm's clearing operations.

Available-for-Sale Investment Security

Investment in DFM

Our available-for-sale investment security, which is included in financial investments, at fair value in the Condensed Consolidated Balance Sheets, represents our 1% investment in Dubai Financial Market PJSC, or DFM. In May 2010, we completed the exchange of our equity interest in NASDAQ Dubai Limited, or NASDAQ Dubai, for a 1% investment in DFM. See "Investment in NASDAQ Dubai" below for further discussion.

As of September 30, 2011 and December 31, 2010, the cost basis of this security was $36 million. As of September 30, 2011, the fair value was $24 million and as of December 31, 2010, the fair value was $33 million. The gross change of $12 million between the cost basis and fair value as of September 30, 2011 is reflected as an unrealized holding loss in accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets, net of taxes. We reviewed the carrying value of this investment security to determine whether an other-than-temporary decline in value exists. We considered factors affecting the investee, factors affecting the industry the investee operates in and general market trends. We also considered the length of time the market value has been below the cost basis and the near-term prospects for recovery of unrealized losses. As of September 30, 2011 and December 31, 2010, we have not recognized an other-than-temporary decline in value on this investment security. As of September 30, 2011, we recorded a deferred tax asset of $5 million, representing the tax effect of the $12 million unrealized loss, in accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. However, since it is not more likely than not that we will realize such benefit, we have also recorded a valuation allowance of $5 million in accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets, thus reducing the net tax benefit to $0.

Equity Method Investments

In general, the equity method of accounting is used when we own 20% to 50% of the outstanding voting stock and when we are able to exercise significant influence over the operating and financial policies of a company.

Equity interest in our equity method investments was $27 million as of September 30, 2011 and December 31, 2010, which consisted primarily of our equity interest in European Multilateral Clearing Facility N.V., a leading European clearinghouse in which we own a 22% equity stake. Equity method investments are included in other non-current assets in the Condensed Consolidated Balance Sheets.

Income recognized from our equity interest in the earnings and losses of these companies was $1 million for both the three months ended September 30, 2011 and 2010 and $2 million for both the nine months ended September 30, 2011 and 2010.

Investment in NASDAQ Dubai

In May 2010, we participated in the realignment of the ownership structure of NASDAQ Dubai, in which NASDAQ Dubai became a wholly-owned subsidiary of DFM, a publicly traded company controlled by Borse Dubai Limited, a Dubai company, or Borse Dubai. We received a 1% equity interest in DFM in exchange for our equity interest in NASDAQ Dubai. Our existing technology and trademark licensing arrangements with Borse Dubai and NASDAQ Dubai remain unchanged.

NASDAQ Dubai and DFM are related parties, as both of them are primarily owned by Borse Dubai, our largest stockholder.