Equity

The Company currently sponsors employee and director stock option and restricted stock plans. Stock options and restricted stock are granted at the discretion of the compensation committee of the board of directors. All stock options and restricted stock awards are granted at an exercise price equal to the fair value of the common stock on the date of grant. The grant date fair value is based on the closing stock price on the date of grant. The fair value of the stock options and restricted stock on the date of grant is recognized as expense over the vesting period, net of estimated forfeitures. The non-cash compensation expenses recognized in the Company’s consolidated statements of income for stock options and restricted stock were $39 million and $30 million for the six months ended June 30, 2014 and 2013, respectively, and were $22 million and $15 million for the three months ended June 30, 2014 and 2013, respectively.

Stock Option Plans

The following is a summary of stock options for the six months ended June 30, 2014:



	Number of Options		Weighted Average Exercise Price per Option
Outstanding at December 31, 2013	872,347		$	97.92
Granted	154,202		206.87
Exercised	(135,620	)	34.55
Outstanding at June 30, 2014	890,929		126.97

Details of stock options outstanding as of June 30, 2014 are as follows:



	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (In millions)
Vested or expected to vest	890,929	$	126.97	6.1	$	58
Exercisable	642,627	$	107.94	5.0	$	52

The total intrinsic value of stock options exercised during the six months ended June 30, 2014 and 2013 were $23 million and $13 million, respectively, and were $11 million and $6 million during the three months ended June 30, 2014 and 2013, respectively. As of June 30, 2014, there were $9 million in total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of 2.1 years as the stock options vest.

The Company uses the Black-Scholes option pricing model for purposes of valuing stock option awards. During the six months ended June 30, 2014 and 2013, the Company used the weighted-average assumptions in the table below to compute the value of all options for shares of common stock granted to employees:



	Six Months Ended June 30,
Assumptions	2014			2013
Risk-free interest rate	1.23		%	0.53		%
Expected life in years	5.0			4.0
Expected volatility	27		%	37		%
Expected dividend yield	1.26		%	0		%
Estimated weighted-average fair value of options granted per share	$	45.23		$	38.41

The risk-free interest rate is based on the zero-coupon U.S. Treasury yield curve in effect at the time of grant. The expected life computation is derived from historical exercise patterns and anticipated future patterns. Expected volatilities are based on historical volatility of the Company’s stock. Expected dividend yields have historically been 0% prior to the November 13, 2013 acquisition of NYSE since the Company did not pay (and had not contemplated paying) a dividend prior to the acquisition of NYSE. The Company's new dividend policy will impact the expected dividend yield on all stock options granted post-acquisition.

Restricted Stock Plans

In February 2014, the Company reserved a maximum of 351,310 restricted shares for potential issuance as performance-based restricted shares to certain Company employees. The number of shares that will ultimately be granted under the performance awards will be based on the Company’s actual financial performance as compared to financial performance targets set by the Company’s board of directors and compensation committee for the year ending December 31, 2014. These restricted shares are also subject to a market condition that could reduce the number of shares that are ultimately granted. The reduction would occur if the Company’s 2014 total shareholder return falls below the 2014 return of the S&P 500 Index and the Company achieves an above “target” financial performance level threshold. If the Company’s 2014 total shareholder return were to fall below the 2014 return of the S&P 500 Index, the reduction would be either 10% or 20% of the number of shares granted, depending on the difference in the aforementioned returns (the "market condition").

The grant date of this award was February 27, 2014, which was the date when the Company and the employees reached a mutual understanding of award terms. February 27, 2014 is also the service inception date as that is the date when the requisite service period began. The maximum compensation expense to be recognized under these performance-based restricted shares is $71 million if the maximum financial performance target is met and all 351,310 shares vest. The compensation expense to be recognized under these performance-based restricted shares will be $35 million if the target financial performance is met, which would result in 175,655 shares vesting. The Company will recognize expense on an accelerated basis over the three-year vesting period based on the Company’s quarterly assessment of the probable 2014 actual financial performance as compared to the 2014 financial performance targets. If the market condition is not achieved, compensation cost will not be affected since the grant date fair value of the award gave consideration to the probability of market condition achievement.

As of June 30, 2014, the Company determined that it is probable that the target financial performance level will be met for 2014. Based on this assessment as of June 30, 2014, the Company recorded non-cash compensation expense of $7 million and $5 million for the six months and three months ended June 30, 2014, respectively, related to these shares and the remaining $28 million in non-cash compensation expense will be recorded on an accelerated basis over the remaining vesting period, including $11 million of which will be recorded over the remainder of 2014.

The following is a summary of the non-vested restricted shares for the six months ended June 30, 2014:



	Number of Restricted Stock Shares	Weighted Average Grant-Date Fair Value per Share
Non-vested at December 31, 2013	1,234,552	$	147.00
Granted	625,413	205.13
Vested	(408,182)	119.75
Forfeited	(29,052)	149.79
Non-vested at June 30, 2014	1,422,731	180.31

Restricted stock shares granted in the table above include both time-based and performance-based grants. Performance-based shares have been adjusted to reflect the actual shares to be issued based on the achievement of past performance targets. Non-vested performance-based restricted shares granted are presented in the table above at the maximum number of restricted shares that would vest if the maximum performance targets are met. As of June 30, 2014, there were $129 million in total unrecognized compensation costs related to the time-based restricted stock and the performance-based restricted stock. These costs are expected to be recognized over a weighted-average period of 2.3 years as the restricted stock vests. These unrecognized compensation costs assume that a target performance level will be met on the performance-based restricted shares granted in February 2014. During the six months ended June 30, 2014 and 2013, the total fair value of restricted stock vested under all restricted stock plans was $87 million and $53 million, respectively.

Stock Repurchase Program

As of June 30, 2014, $450 million remained available for stock repurchases under the Company's stock repurchase program. In March 2014, the Company entered into a Securities and Exchange Commission Rule 10b5-1 trading plan permitting open market repurchases up to the full $450 million of authorized stock repurchase authority based on certain triggers described in the trading plan. The Company did not repurchase any shares of its common stock during the six months ended June 30, 2014. In July 2014, the Company's board of directors increased the capacity available for stock repurchases under the stock repurchase program by $600 million for a total authorization of $1.05 billion, with no fixed expiration date. During the third quarter of 2014, the Company repurchased 1.8 million shares of its common stock on the open market through the Company's Rule 10b5-1 trading plan at an aggregate cost of $350 million through cash on hand and the issuance of commercial paper. The shares repurchased are held as treasury stock.

The Company expects to fund any remaining share repurchases with a combination of cash on hand, future cash flows and by borrowing under the Company's credit facilities and the Commercial Paper Program. The timing and extent of any future repurchases is at the discretion of the Company's management and will depend upon market conditions, the Company's stock price, the Company's target debt ratio and corporate debt rating, and the Company's strategic growth initiatives at that time. The Company may discontinue the stock repurchases at any time or may enter into a new Rule 10b5-1 trading plan in the future. In addition, the Company's board of directors may increase or decrease the amount of capacity the Company has for repurchases from time to time.