v2.4.0.8
Commitments and Contingencies
6 Months Ended
Jun. 30, 2014
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Legal Proceedings
The Company is subject to legal proceedings and claims, like the ones described below, that arise in the ordinary course of business. Typically, the Company does not believe that the resolution of these matters will have a material adverse effect on the Company’s consolidated financial condition, results of operations, or liquidity. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially and adversely affected by any developments relating to the legal proceedings and claims.
In April 2014, the first of four purported class action lawsuits was filed in the U.S. District Court for the Southern District of New York (the “Southern District”) by the City of Providence, Rhode Island, against more than 40 defendants, including “Exchange Defendants”, “Brokerage Defendants” and “HFT (High Frequency Trading) Defendants”. New York Stock Exchange LLC and NYSE Arca, Inc., two of the Company’s subsidiaries, are among the named Exchange Defendants. The plaintiffs are suing on behalf of a class of “all public investors” who bought or sold stock on a U.S.-based exchange or alternative trading venue from April 18, 2009 to the present. The complaints assert violations by all Exchange Defendants of Sections 10(b) and 6(b) of the Securities Exchange Act of 1934. The complaints seek unspecified compensatory damages against all defendants, jointly and severally, as well as various forms of equitable relief. On July 2, 2014, the court ordered the cases consolidated for all purposes, appointed lead plaintiffs and lead plaintiffs’ counsel, and directed the plaintiffs to file an amended, consolidated complaint within 60 days. After the plaintiffs’ filing, the defendants will have 60 days in which to move to dismiss or otherwise respond to the complaint.
In May 2014, three purported class action lawsuits were filed in the Southern District by Harold Lanier against the securities exchanges that are participants in each of the three national market system data distribution plans, the Consolidated Tape Association/Consolidated Quotation Plan, Nasdaq UTP Plan, and the Options Price Reporting Authority (the “Plans”), which are established under the Securities Exchange Act of 1934 and regulated by the U.S. Securities and Exchange Commission. New York Stock Exchange LLC, NYSE Arca, Inc. and NYSE MKT LLC are among the defendants named in one or more of the suits. Lanier is claiming to sue on behalf of himself and all other similarly situated subscribers to the market data disseminated by the Plans. Lanier’s allegations include that the exchange participants in the Plans breached agreements with subscribers by disseminating market data in a discriminatory manner in that other “preferred” customers allegedly received their data faster than the proposed class. The complaints seek, among other relief, restitution of the fees for data paid by the purported class members, disgorgement of the fees paid by the so-called preferred customers, and injunctive and declaratory relief. At an initial court conference on July 31, 2014, the court set a schedule for the filing of amended complaints (if any) and for the briefing of any motions to dismiss to be filed by the defendants.
One of the Company's subsidiaries, NYSE Brazil Holdings, B.V. ("NYSE BV"), is a party to a pending arbitration proceeding initiated by an arbitration demand dated June 4, 2014 in Brazil, filed by ATG Americas Trading Group, S.A. ("ATG") and ATS Brasil S.A. (“ATS”). NYSE BV and ATG own 20% and 80% respectively of the equity in ATS, a prospective start-up cash equity trading platform in Brazil, which is not yet operational. ATG and ATS allege NYSE BV breached certain obligations and assert damages of at least 100 million Brazilian Reais ($45 million based on the Brazilian Real/U.S. dollar exchange rate of 0.4491). NYSE BV has served ATG and ATS with a responsive statement which denies the claims, and the Company is defending the proceeding.
Tax Audits
The Company is engaged in ongoing discussions and audits with taxing authorities on various tax matters, the resolutions of which are uncertain. Currently, there are matters that may lead to assessments involving the Company or one of its subsidiaries, some of which may not be resolved for several years. Based on currently available information, the Company believes it has adequately provided for any assessments that could result from those proceedings where it is more likely than not that the Company will be assessed. The Company continuously reviews its positions as these matters progress.
Redeemable Non-controlling Interest
Prior to the Company’s acquisition of NYSE, NYSE completed the sale of a significant equity interest in NYSE Amex Options, one of its two U.S. options exchanges, to seven external investors. Under the terms of the sale, the external investors have the option to require the Company to repurchase a portion of its equity interest on an annual basis over the course of five years, which began in 2011. As of June 30, 2014, the external investors held 32% of the outstanding shares of NYSE Amex Options. Since the likelihood of the Company acquiring the non-controlling interest in the future is probable, the Company has recorded the full 32% redemption fair value of $244 million as of June 30, 2014 as mezzanine equity and classified the related balance as “redeemable non-controlling interest” in the accompanying consolidated balance sheet.
In July 2014, the Company repurchased one-half of the remaining outstanding shares of NYSE Amex Options from the seven external investors for $128 million in cash (this was based on the fair value of the 16% in March 2014 as stipulated under the terms of the original sale). After the repurchase, the Company owns 84% of NYSE Amex Options and the remaining 16% of the outstanding shares of NYSE Amex Options, currently valued at $116 million, can be put back to the Company by the external investors in 2015 and these shares combined with the shares repurchased in July 2014 are recorded as redeemable non-controlling interest as of June 30, 2014.