The Nasdaq Stock Market Inc. reported second quarter net income of US$16.6 million, up from US$14 million in the second quarter of 2005, but down from US$18 million in the first quarter of 2006.

Gross margin increased 31.2% in the second quarter to US$171.1 million, up from US$130.4 million in the year-ago quarter, and increased 5.6% from US$162.0 million in the first quarter of 2006. The quarter also included pre-tax charges of US$17.9 million relating to Nasdaq’s continuing efforts to reduce operating expenses and improve the efficiency of its operations, as well as to integrate the INET ECN.

“As this quarter’s results clearly demonstrate, our business fundamentals remain strong as we grew revenue while driving down core operating expenses. As a result our operating income has improved when compared to both prior year and the first quarter,” said Nasdaq’s CFO, David Warren, in a news release.

“Excluding non-recurring charges, Nasdaq’s operating income improved 21% from the first quarter 2006 and 69% when compared to second quarter 2005. The INET integration and our systems migration to a single book remain on schedule and we remain confident of achieving all of our milestones. Our execution to date and our confidence leads us to increase our 2006 outlook for both gross margin and net income.”

Nasdaq also raised its guidance for the full-year 2006. Net income is expected to be in the range of US$68 million to US$78 million for the year, including the impact of charges associated with the cost reduction program, INET integration, and losses on extinguishment of debt. Total expense projections include approximately US$60 million to US$70 million of pre-tax charges associated with the continuing cost reduction efforts and INET integration.

CEO Robert Greifeld commented, “Solid execution of our growth strategy throughout the organization drove
Nasdaq’s strong top line performance. During the quarter our trading systems continued to handle more market share and we further increased our potential for future growth through the introduction of new
products and services such as the Global Select Market, the IPO Cross, and Nasdaq Market Velocity. This continued progress enhances our already strong competitive position. Looking into the second half of
2006, we are maintaining our consistent focus on innovation and execution that anticipates and responds to the needs of our customers.”