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Share-Based Compensation
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Share-Based Compensation SHARE-BASED COMPENSATIONWe have a share-based compensation program for employees and non-employee directors. Share-based awards granted under this program include restricted stock (consisting of restricted stock units), PSUs and stock options. For accounting purposes, we consider PSUs to be a form of restricted stock. Generally, annual employee awards are granted on April 1st of each year.
Summary of Share-Based Compensation Expense
The following table presents the total share-based compensation expense resulting from equity awards and the 15.0% discount for the ESPP for the years ended December 31, 2022, 2021 and 2020, which is included in compensation and benefits expense in the Consolidated Statements of Income:
 Year Ended December 31,
 202220212020
 (in millions)
Share-based compensation expense before income taxes$106 $90 $87 
Common Shares Available Under Our Equity Plan
As of December 31, 2022, we had approximately 26.4 million shares of common stock authorized for future issuance under our Equity Plan.
Restricted Stock
We grant restricted stock to most employees. The grant date fair value of restricted stock awards is based on the closing stock price at the date of grant less the present value of future cash dividends. Restricted stock awards granted to employees below the manager level generally vest 33.3% on the first anniversary of the grant date, 33.3% on the second anniversary of the grant date, and 33.3% on the third anniversary of the grant date. Restricted stock awards granted to employees at or above the manager level generally vest 33.3% on the second anniversary of the grant date, 33.3% on the third anniversary of the grant date, and 33.3% on the fourth anniversary of the grant date.
Summary of Restricted Stock Activity
The following table summarizes our restricted stock activity for the years ended December 31, 2022, 2021 and 2020:
Restricted Stock
 Number of AwardsWeighted-Average Grant Date Fair Value
Unvested at December 31, 20194,460,268 $25.79 
Granted2,229,900 29.98 
Vested(1,498,071)24.32 
Forfeited(274,944)27.06 
Unvested at December 31, 20204,917,153 $28.07 
Granted1,523,235 50.52 
Vested(1,624,809)27.78 
Forfeited(416,559)34.04 
Unvested at December 31, 20214,399,020 $35.39 
Granted1,785,138 57.65 
Vested(1,525,442)31.22 
Forfeited(278,203)42.07 
Unvested at December 31, 20224,380,513 $45.48 
As of December 31, 2022, $111 million of total unrecognized compensation cost related to restricted stock is expected to be recognized over a weighted-average period of 1.8 years.
PSUs
PSUs are based on performance measures that impact the amount of shares that each recipient will receive upon vesting. Prior to April 1, 2020, we had two performance-based PSU programs for certain officers, a one-year performance-based program and a three-year cumulative performance-based program that focuses on TSR. Effective April 1, 2020, to better align the equity programs for eligible officers, the one-year performance-based program was eliminated and all eligible officers now participate in the three-year cumulative performance-based program. The performance periods are complete for all PSUs granted under the one-year performance-based program, and all shares underlying these PSUs have vested as of December 31, 2022.
One-Year PSU Program
The grant date fair value of PSUs under the one-year performance-based program was based on the closing stock price at the date of grant less the present value of future cash dividends. Under this program, an eligible employee received a target grant of PSUs, but could have received from 0.0% to 150.0% of the target amount granted, depending on the achievement of performance measures. These awards vest ratably on an annual basis over a three-year period commencing with the end of the one-year performance period. Compensation cost was recognized over the performance period and the three-year vesting period based on the probability that such performance measures will be achieved, taking into account an estimated forfeiture rate.
Three-Year PSU Program
Under the three-year performance-based program, each eligible individual receives PSUs, subject to market conditions, with a three-year cumulative performance period that vest at the end of the performance period. Compensation cost is recognized over the three-year performance period, taking into account an estimated forfeiture rate, regardless of whether the market condition is satisfied, provided that the requisite service period has been completed. Performance will be determined by comparing Nasdaq’s TSR to two peer groups, each weighted 50.0%. The first peer group consists of exchange companies, and the second peer group consists of all companies in the S&P 500. Nasdaq’s relative performance ranking against each of these groups will determine the final number of shares delivered to each individual under the program. The award issuance under this program will be between 0.0% and 200.0% of the number of PSUs granted and will be determined by Nasdaq’s overall performance against both peer groups. However, if Nasdaq’s TSR is negative for the three-year performance period, regardless of TSR ranking, the award issuance will not exceed 100.0% of the number of PSUs granted. We estimate the fair value of PSUs granted under the three-year PSU program using the Monte Carlo simulation model, as these awards contain a market condition.
Grants of PSUs that were issued in 2020 with a three-year performance period exceeded the applicable performance parameters. As a result, an additional 764,748 units above the original target were granted in the first quarter of 2023 and were fully vested upon issuance.
The following weighted-average assumptions were used to determine the weighted-average fair values of the PSU awards granted under the three-year PSU program for the years ended December 31, 2022 and 2021:
 Year Ended December 31,
 20222021
Weighted-average risk free interest rate2.61 %0.33 %
Expected volatility
30.04 %30.30 %
Weighted-average grant date share price$60.55 $51.88 
Weighted-average fair value at grant date$63.68 $72.75 
In the table above, the risk-free interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant; and we use historic volatility for PSU awards issued under the three-year PSU program, as implied volatility data could not be obtained for all the companies in the peer groups used for relative performance measurement within the program.
In addition, the annual dividend assumption utilized in the Monte Carlo simulation model is based on Nasdaq’s dividend yield at the date of grant.
Summary of PSU Activity
The following table summarizes our PSU activity for the years ended December 31, 2022, 2021 and 2020:
PSUs
One-Year ProgramThree-Year Program
 Number of Awards Weighted-Average Grant Date Fair ValueNumber of AwardsWeighted-Average Grant Date Fair Value
Unvested at December 31, 2019951,753 $26.96 2,392,353  $32.77 
Granted80,340 28.06 960,984 35.81 
Vested(415,269)26.03 (902,301)27.19 
Forfeited(108,180)27.47 (21,069)32.75 
Unvested at December 31, 2020508,644 $27.78 2,429,967  $36.04 
Granted— — 1,081,707 58.66 
Vested(299,292)27.66 (1,178,181)38.95 
Forfeited(60,150)27.76 (41,121)47.43 
Unvested at December 31, 2021149,202 $28.01 2,292,372 $45.01 
Granted— — 1,495,092 45.66 
Vested(142,459)28.02 (1,735,842)32.57 
Forfeited(6,743)27.85 (85,080)52.27 
Unvested at December 31, 2022— $— 1,966,542 $56.44 
In the table above, the granted amount under the three-year program reflects additional awards granted based on overachievement of performance parameters.
As of December 31, 2022, total unrecognized compensation cost related to the three-year PSU program is $44 million and is expected to be recognized over a weighted-average period of 1.3 years.
Stock Options
In January 2022, in connection with a new five year employment agreement, our Chief Executive Officer received an aggregate of 613,872 performance-based non-qualified stock options, which will vest as follows:
•50% will vest contingent upon the achievement of certain performance conditions; and
•50% will vest five years after the grant date, subject to continued employment through such date.
The fair value of stock options are estimated using the Black-Scholes option-pricing model. These options expire 10 years after the date of grant. There were no stock option awards granted for the years ended December 31, 2021 and 2020.
A summary of stock option activity for the years ended December 31, 2022, 2021 and 2020 is as follows:
 
Number of Stock Options
Weighted-Average Exercise Price
Weighted-
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value (in
millions)
Outstanding at December 31, 20191,137,306 $18.11 
Exercised(255,585)7.97 
Forfeited(1,662)6.98 
Outstanding at December 31, 2020880,059 $21.07 5.5$20 
Exercised(73,227)8.43 
Forfeited(381)8.43 
Outstanding at December 31, 2021806,451 $22.23 5.0$39 
Granted613,872 67.49 
Outstanding at December 31, 20221,420,323 $41.79 6.2$32 
Exercisable at December 31, 2022806,451 $22.23 4.0$32 
The net cash proceeds from the exercise of 73,227 stock options for the year ended December 31, 2021 was $1 million. The net cash proceeds from the exercise of 255,585 stock options for the year ended December 31, 2020 was $2 million. The total pre-tax intrinsic value of stock options exercised was $3 million for the year ended December 31, 2021 and $9 million for the year ended December 31, 2020.
As of December 31, 2022, the aggregate pre-tax intrinsic value of the outstanding and exercisable stock options in the above table was $32 million and $32 million, respectively, and represents the difference between our closing stock price on December 31, 2022 of $61.35 and the exercise price, times the number of shares that would have been received by the option holder had the option holder exercised the stock options on that date. This amount can change based on the fair market value of our common stock. As of December 31, 2021, 0.8 million outstanding stock options were exercisable and the weighted-average exercise price was $22.23. 
ESPP
We have an ESPP under which approximately 12.1 million shares of our common stock were available for future issuance as of December 31, 2022. Under our ESPP, employees may purchase shares having a value not exceeding 10.0% of their annual compensation, subject to applicable annual Internal Revenue Service limitations. We record compensation expense related to the 15.0% discount that is given to our employees.
Year Ended December 31,
202220212020
Number of shares purchased by employees591,820 605,274 663,369 
Weighted-average price of shares purchased $43.54 $41.41 $31.93 
Compensation expense (in millions)
$8 $7 $5