Fair Value Measurements

The Company’s financial instruments consist primarily of cash and cash equivalents, short-term and long-term restricted cash and investments, short-term and long-term investments, customer accounts receivable, margin deposits and guaranty funds, cost and equity method investments, short-term and long-term debt and other short-term assets and liabilities. The fair value of the Company’s financial instruments are measured based on a three-level hierarchy:


•	Level 1 inputs — quoted prices for identical assets or liabilities in active markets.


•	Level 2 inputs — observable inputs other than Level 1 inputs such as quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are directly observable.


•	Level 3 inputs — unobservable inputs supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In general, the Company uses Level 1 inputs to determine fair value. The Level 1 assets consist of U.S. Treasury securities, equity and other securities listed in active markets, and investments in publicly traded mutual funds held for the purpose of providing future payments of the SERP plans and the supplemental executive savings plan. The fair value of each of these assets are based on quoted prices. If quoted prices are not available to determine fair value, the Company uses other inputs that are observable either directly or indirectly. Level 2 assets consist of foreign exchange derivative contracts not designated as hedging instruments. Such values are based on published currency rates. As of June 30, 2014, the fair values of the Company’s $1.39 billion Senior Notes and $2.17 billion NYSE Notes are $1.46 billion and $2.19 billion, respectively. The fair values of these fixed rate notes were estimated using quoted market prices for these instruments. The fair value of the Company’s other short-term and long-term debt approximates the carrying value since the rates of interest on the debt approximate market rates as of June 30, 2014. All other financial instruments are determined to approximate carrying value due to the short period of time to their maturities.

Financial assets and liabilities recorded in the accompanying consolidated balance sheets as of June 30, 2014 and December 31, 2013 are classified in their entirety based on the lowest level of input that is significant to the asset or liability’s fair value measurement. Financial instruments measured at fair value on a recurring basis as of June 30, 2014 are as follows (in millions):



	Level 1		Level 2		Total
Assets at fair value:
Long-term investments in equity securities	$	557	$	—	$	557
Mutual Funds	26		—		26
Total assets at fair value	$	583	$	—	$	583

Financial instruments measured at fair value on a recurring basis as of December 31, 2013 are as follows (in millions):



	Level 1		Level 2		Total
Assets at fair value:
Long-term investment in equity securities	$	324	$	—	$	324
U.S. Treasury securities	100		—		100
Mutual Funds	33		—		33
Foreign exchange derivative contracts	—		4		4
Total assets at fair value	$	457	$	4	$	461

The long-term investments in equity securities as of June 30, 2014 represents the Company's 12% investment in Cetip, S.A. ("Cetip") and the Company's 6% stake in Euronext (Note 13), recorded at their fair values using quoted market prices. The long-term investment in equity securities as of December 31, 2013 represents the Cetip investment only. The Company's investment in Cetip, which is recorded as an available-for-sale, long-term investment and was recorded in and is held in Brazilian reais, was valued at $450 million as of June 30, 2014, including an unrealized gain of $126 million. The Company's investment in Euronext which is recorded as an available-for-sale, long-term investment and was recorded in and is held in euros, was valued at $107 million as of June 30, 2014, including an unrealized loss of $8 million. Changes in the fair values of the Cetip and Euronext investments are reflected in accumulated other comprehensive income and do not impact earnings, except to the extent that unrealized losses are deemed to be other than temporary.

The mutual funds represent equity and fixed income mutual funds held for the purpose of providing future payments to the supplemental executive retirement plan and supplemental executive savings plan. As of December 31, 2013, the Company was holding $100 million in U.S. Treasury securities, all of which had maturities of less than one year from the date of purchase. The Company accounted for these securities using the available-for-sale method. Of these securities, $37 million were recorded as short-term investments and $63 million were recorded as short-term restricted cash and investments in the accompanying consolidated balance sheet as of December 31, 2013. As of June 30, 2014, the Company is no longer holding any U.S. Treasury securities and the regulatory requirement for U.S. Treasury securities have been satisfied by member deposits.

The Company did not use Level 3 inputs to determine the fair value of assets or liabilities measured at fair value on a recurring basis as of June 30, 2014 or December 31, 2013. The Company measures certain assets, such as intangible assets and cost and equity method investments, at fair value on a non-recurring basis. These assets are recognized at fair value if they are deemed to be impaired. As of June 30, 2014 and December 31, 2013, none of these assets were required to be recorded at fair value since no impairment indicators were present. Cost and equity method investments were $24 million and $177 million as of June 30, 2014 and December 31, 2013, respectively. The decrease in the cost and equity investments relate to two investments owned by Euronext, the cost method investments in LCH.Clearnet and Euroclear, which were assets of Euronext and were removed as part of the de-consolidation of Euronext.