12. Share-Based Compensation

We have a share-based compensation program that provides our board of directors broad discretion in creating employee equity incentives. Share-based awards granted under this program include stock options, restricted stock (consisting of restricted stock units), and PSUs. Grants of equity awards are designed to reward employees for their long-term contributions and provide incentives for them to remain with us. For accounting purposes, we consider PSUs to be a form of restricted stock.

Restricted stock is generally time-based and vests over two to five-year periods beginning on the date of the grant. Stock options are also generally time-based and expire ten years from the grant date. Stock option and restricted stock awards granted prior to 2014 generally include performance-based accelerated vesting features based on achievement of specific levels of corporate performance. If Nasdaq exceeded the applicable performance parameters, the grants vest on the third anniversary of the grant date, if Nasdaq met the applicable performance parameters, the grants vest on the fourth anniversary of the grant date, and if Nasdaq did not meet the applicable performance parameters, the grants vest on the fifth anniversary of the grant date. Beginning in 2014, restricted stock awards granted vest 25.0% on the second anniversary of the grant date, 25.0% on the third anniversary of the grant date, and 50.0% on the fourth anniversary of the grant date. The grant date fair value of restricted stock awards is based on the closing price on the date of grant less the present value of future cash dividends.

PSUs are based on performance measures that impact the amount of shares that each recipient will receive upon vesting. PSUs are granted at the fair market value of our stock on the grant date and compensation cost is recognized over the performance period and, in certain cases, an additional vesting period. For each grant of PSUs, an employee may receive from 0.0% to 150.0% of the target amount granted, depending on the achievement of performance measures. We report the target number of PSUs granted, unless we have determined that it is more likely than not, based on the actual achievement of performance measures, that an employee will receive a different amount of shares underlying the PSUs, in which case we report the amount of shares the employee is likely to receive.

We also have a performance-based long-term incentive program for our chief executive officer, presidents, executive vice presidents and senior vice presidents that focuses on TSR. This program represents 100.0% of our chief executive officer’s, presidents’ and executive vice presidents’ long-term stock-based compensation and 50.0% of our senior vice presidents’ long-term stock-based compensation. Under the program, each individual receives PSUs with a three-year cumulative performance period that vest at the end of the performance period. 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 payout 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 payout will not exceed 100.0% of the number of PSUs granted. We estimate the fair value of PSU’s granted under the TSR program using the Monte Carlo simulation model, as these awards contain a market condition. The following weighted-average assumptions were used to determine the weighted-average fair values of the PSU awards granted under the TSR program for the years ended December 31, 2015 and December 31, 2014:



	Year Ended December 31,
	2015		2014


Weighted-average risk free interest rate		0.81%		0.78%
Expected volatility(1)		21.5%		28.4%
Weighted-average grant date share price	$	50.97	$	36.94
Weighted-average fair value at grant date	$	64.08	$	42.80

(1) We use historic volatility for PSU awards issued under the TSR program, as implied volatility data could not be obtained for all the companies in the peer groups used for relative performance measurement within the TSR 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 2015 Equity Awards

In March 2015, we granted restricted stock to most active employees. During 2015, certain officers received grants of 609,591 PSUs. Of these PSUs granted, 424,821 units are subject to the performance measures and vesting schedules of the TSR program as discussed above, and the remaining 184,770 units are subject to a one-year performance period and generally vest ratably on an annual basis from December 31, 2016 through December 31, 2018. See “Summary of Restricted Stock and PSU Activity” below for further discussion.

During 2015, certain grants of PSUs with a one-year performance period exceeded the applicable performance parameters. As a result, an additional 87,582 units were considered granted in the first quarter of 2016.

During 2014, certain grants of PSUs with a one-year performance period exceeded the applicable performance parameters. As a result, an additional 21,429 units were considered granted in the first quarter of 2015.

Certain grants of PSUs that were issued in 2013 under the TSR program with a three-year performance period exceeded the applicable performance parameters. As a result, an additional 406,075 units were considered granted in the first quarter of 2016.

Certain grants of PSUs that were issued in 2012 under the TSR program with a three-year performance period exceeded the applicable performance parameters. As a result, an additional 224,805 units were considered granted in the first quarter of 2015.

See “Summary of Restricted Stock and PSU Activity” below for further discussion.

Summary of 2014 Equity Awards

In March 2014, we granted restricted stock to most active employees. During 2014, certain officers received grants of 818,307 PSUs. Of these PSUs granted, 553,846 units are subject to the performance measures and vesting schedules of the TSR program as discussed above, and the remaining 264,461 units are subject to a one-year performance period and generally vest ratably on an annual basis from December 31, 2015 through December 31, 2017.

During 2013, certain grants of PSUs with a one-year performance period exceeded the applicable performance parameters. As a result, an additional 64,330 units were considered granted in the first quarter of 2014.

See “Summary of Restricted Stock and PSU Activity” below for further discussion.

Summary of 2013 Equity Awards

In July 2013, we granted restricted stock to most active employees. The restricted stock granted included a performance-based accelerated vesting feature based on achievement of specific levels of corporate performance, as described above. In 2013, we achieved the applicable performance parameters, and therefore, we will continue to expense the grant over the four-year vesting period.

Also in July 2013, certain officers received grants of 800,152 PSUs. Of these PSUs granted, 530,823 units are subject to the performance measures and vesting schedules of the TSR program as discussed above, and the remaining 269,329 units are subject to a one year performance period and generally vest ratably on an annual basis from December 31, 2014 through December 31, 2016.

During 2012, certain grants of PSUs with a one-year performance period exceeded the applicable performance parameters. As a result, an additional 28,028 units were considered granted during 2013.

See “Summary of Restricted Stock and PSU Activity” below for further discussion.

Common Shares Available Under Our Equity Plan

As of December 31, 2015, we had approximately 6.9 million shares of common stock authorized for future issuance under our Equity Plan.

Summary of Share-Based Compensation Expense

The following table shows the total share-based compensation expense resulting from equity awards and the 15.0% discount for the ESPP for the years ended December 31, 2015, 2014 and 2013 in the Consolidated Statements of Income:


	Year Ended December 31,
	2015		2014		2013

	(in millions)
Share-based compensation expense before income taxes	$	68	$	62	$	47
Income tax benefit		(28)		(26)		(19)
Share-based compensation expense after income taxes	$	40	$	36	$	28

Summary of Stock Option Activity

A summary of stock option activity for the years ended December 31, 2015, 2014 and 2013 is as follows:


	Number of Stock Options(1)		Weighted-Average Exercise Price


Outstanding at December 31, 2012		7,545,777	$	21.10
Exercised		(2,346,220)		12.05
Forfeited or expired		(273,035)		24.32
Outstanding at December 31, 2013		4,926,522	$	25.21
Exercised		(1,578,050)		20.31
Forfeited or expired		(31,690)		24.23
Outstanding at December 31, 2014		3,316,782	$	27.56
Exercised		(682,054)		26.84
Forfeited or expired		(8,241)		28.53
Outstanding at December 31, 2015		2,626,487	$	27.74

(1) No stock option awards were granted for the years ended December 31, 2015, 2014 and 2013.

We received net cash proceeds of $18 million from the exercise of 682,054 stock options for the year ended December 31, 2015, received net cash proceeds of $32 million from the exercise of 1,578,050 stock options for the year ended December 31, 2014 and received net cash proceeds of $28 million from the exercise of 2,346,220 stock options for the year ended December 31, 2013. We present excess tax benefits from the exercise of stock options, if any, as financing activities in the Consolidated Statements of Cash Flows.

The following table summarizes significant ranges of outstanding and exercisable stock options as of December 31, 2015:


					Outstanding and Exercisable

					Number of	Weighted-Average Remaining		Weighted-Average		Aggregate Intrinsic
Range of Exercise Prices					Stock Options	Contractual Term (in years)		Exercise Price		Value (in millions)
$	17.36	-	$	24.94	1,203,865	3.51	$	21.11	$	45
$	24.95	-	$	35.91	378,061	4.35		25.32		12
$	35.92	-	$	45.38	1,044,561	0.99		36.27		23
								0
	Total				2,626,487	2.63	$	27.74	$	80

The aggregate intrinsic value in the above table represents the total pre-tax intrinsic value (i.e., the difference between our closing stock price on December 31, 2015 of $58.17 and the exercise price, times the number of shares) based on stock options with an exercise price less than Nasdaq’s closing price of $58.17 as of December 31, 2015, which would have been received by the option holders had the option holders exercised their stock options on that date. This amount can change based on the fair market value of our common stock. The total number of in-the-money stock options exercisable as of December 31, 2015 was 2.6 million. As of December 31, 2014, 3.3 million outstanding stock options were exercisable and the weighted-average exercise price was $27.56.

Total fair value of stock options vested was immaterial for both the years ended December 31, 2015 and 2014. The total pre-tax intrinsic value of stock options exercised was $17 million during 2015, $33 million during 2014 and $48 million during 2013.

Summary of Restricted Stock and PSU Activity

The following table summarizes our restricted stock and PSU activity for the years ended December 31, 2015, 2014 and 2013:



	Restricted Stock					PSUs
	Number of Awards			Weighted-Average Grant Date Fair Value		Number of Awards			Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2012		3,204,188		$	23.20		1,879,799		$	23.14
Granted		1,182,870	(1)		32.69		828,180	(2)		39.68
Vested		(266,724)			23.77		(512,890)			22.68
Forfeited		(293,864)			24.40		(279,488)			25.77
Unvested balances at December 31, 2013		3,826,470		$	25.96		1,915,601		$	30.03
Granted		1,196,441	(1)		36.87		882,637	(2)		40.34
Vested		(1,529,792)			23.29		(442,781)			27.75
Forfeited		(299,889)			29.87		(142,850)			28.75
Unvested balances at December 31, 2014		3,193,230		$	30.99		2,212,607		$	32.69
Granted		823,950	(1)		49.26		855,825	(2)		49.32
Vested		(370,998)			29.90		(1,084,382)			24.33
Forfeited		(302,444)			34.34		(120,365)			36.43
Unvested balances at December 31, 2015		3,343,738		$	35.36		1,863,685		$	47.57

(1) Restricted stock granted in 2015, 2014 and 2013 primarily reflects our company wide grants as described above.

(2) PSUs granted in 2015, 2014 and 2013 primarily reflect awards issued to certain officers, as described above.

At December 31, 2015, $88 million of total unrecognized compensation cost related to restricted stock and PSUs is expected to be recognized over a weighted-average period of 1.6 years.