**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**




WASHINGTON,
      D.C. 20549




**FORM
      10-Q**




(MARK
      ONE)




x 
QUARTERLY
      REPORT
      PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES


EXCHANGE
      ACT OF 1934




FOR
      THE
      QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006




OR




oTRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES


EXCHANGE
      ACT OF 1934




FOR
      THE
      TRANSITION PERIOD FROM        TO




COMMISSION
      FILE NUMBER: 001-32829




**NYSE
      GROUP, INC.**


(Exact
      name of registrant as specified in its charter)




**DELAWARE**
            **20-2786071**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)




**11
      Wall Street**


**New
      York, New York 10005**


(Address,
      including zip code, of


Registrant’s
      principal executive offices)




(212)
      656-3000


(Registrant’s
      telephone number including area code)




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the Registrant was required
      to file such reports) and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes  x No 
      o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
      Exchange Act).




Large
      Accelerated Filer ࿠Accelerated
      Filer ࿠
      Non-accelerated Filer x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  o   No 
      x




As
      of November 1, 2006, the registrant had approximately 156.2 million shares
      of common stock, $0.01 par value per share, outstanding.









**INDEX**





Page


PART
      I -
      FINANCIAL INFORMATION




Item
                    1. - Financial StatementsCondensed
                    consolidated statements of financial condition as of
                    September 30, 2006 and December 31, 2005
                1Condensed
                    consolidated statements of income for the three and
                    nine months ended September 30, 2006 and 2005
                2Condensed
                    consolidated statements of changes in stockholders’
                    equity for the nine months ended September 30, 2006
                3Condensed
                    consolidated statements of cash flows for the nine
                    months ended September 30, 2006 and 2005
                4Notes
                    to condensed consolidated financial
                    statements
                5Item
                    2.
                Management’s
                    Discussion and Analysis of Results of Operations
                    and Financial Condition
                19Item
                    3.
                Quantitative
                    and Qualitative Disclosure about Market
                    Risk
                50Item
                    4.
                Controls
                    and Procedures
                50PART
                    II - OTHER INFORMATIONItem
                    1.
                Legal
                    Proceedings
                50Item
                    1A.
                Risk
                    Factors
                52Item
                    5.
                Other
                    Information
                55Item
                    6.
                Exhibits
                56








**CERTAIN
      TERMS**




Throughout
      this report, unless otherwise specified or if the context otherwise
      requires :




·
            “NYSE
                Group,” “we,” “us” and “our” refers to NYSE Group, Inc., a Delaware
                corporation, and its subsidiaries;





·
            “NYSE”
                refers to (1) prior to the completion of the March 7, 2006 merger
                between the New York Stock Exchange, Inc. and Archipelago, New York
                Stock
                Exchange, Inc., a New York Type A not-for-profit corporation and a
                registeredU.S.
                national securities exchange,and
                (2) after the completion of the merger, New York Stock Exchange LLC,
                a New York limited liability company and a registered U.S. national
                securities exchange, and its subsidiaries,NYSE
                Market, Inc., a Delaware corporation (“NYSE Market”), and NYSE Regulation,
                Inc., a New York not-for-profit corporation (“NYSE
                Regulation”);





·
            “Archipelago”
                refers to Archipelago Holdings, Inc., a Delaware corporation, and,
                where the context requires, its predecessor, Archipelago Holdings,
                LLC, a
                Delaware limited liabilitycompany;





·
            “NYSE
                Arca” refers to NYSE Arca, L.L.C., a Delaware limited liability company
                (formerly known as Archipelago Exchange, L.L.C.), NYSE Arca, Inc.,
                a
                Delaware corporation, and NYSE ArcaEquities,
                Inc., a Delaware corporation (formerly known as PCX Equities,
                Inc.);




·
            “NYSE
                Arca, Inc.,”where that specific term is used, refers to the entity registered
                as a
                U.S. national securities exchange (formerly known as the Pacific
                Exchange, Inc.);




·
            “Euronext”
                refers to Euronext N.V., a company organized under the laws of the
                Netherlands or, as the context requires, any company succeeding Euronext
                N.V. upon the implementation ofthe
                post-closing reorganization contemplated under the combination agreement,
                in each case, including its subsidiaries;




·
            “NYSE
                Euronext” refers to NYSE Euronext, Inc., a newly formed Delaware
                Corporation that will be renamed “NYSE Euronext” upon completion of the
                combination, and its subsidiaries;





·
            “combination”
                refers to the proposed combination of NYSE Group and Euronext and
                certain
                related transactions which upon completion would combine the businesses
                of
                NYSE Group andEuronext
                under NYSE Euronext; and





·
            “combination
                agreement” refers to the Combination Agreement, dated as of June 1,
                2006, by and among NYSE Group, Euronext, NYSE Euronext, and Jefferson
                Merger Sub, Inc., a Delawarecorporation
                and a newly formed, wholly owned subsidiary of NYSE
                Euronext.









**FORWARD-LOOKING
      STATEMENTS**




This
      quarterly report on Form 10-Q contains statements that may constitute
“forward-looking statements” within the meaning of the safe harbor provisions of
      the Private Securities Litigation Reform Act of 1995. In some cases, you can
      identify these statements by forward-looking words such as “may,” “might,”
“will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“predict,” “potential” or “continue,” and the negative of these terms and other
      comparable terminology. These forward-looking statements, which are subject
      to
      known and unknown risks, uncertainties and assumptions about us, may include
      projections of our future financial performance based on our growth strategies
      and anticipated trends in our business. These statements are only predictions
      based on our current expectations and projections about future events. There
      are
      important factors that could cause our actual results, level of activity,
      performance or achievements to differ materially from the results, level of
      activity, performance or achievements expressed or implied by the
      forward-looking statements. In particular, you should consider the numerous
      risks and uncertainties described under “Risk Factors” in our Annual Report on
      Form 10-K for the year ended December 31, 2005 and our quarterly report on
      Form
      10-Q for the quarter ended June 30, 2006.




These
      risks and uncertainties are not exhaustive. Other sections of this report
      describe additional factors that could adversely impact our business and
      financial performance. Moreover, we operate in a very competitive and rapidly
      changing environment. New risks and uncertainties emerge from time to time,
      and
      it is not possible to predict all risks and uncertainties, nor can we assess
      the
      impact of all factors on our business or the extent to which any factor, or
      combination of factors, may cause actual results to differ materially from
      those
      contained in any forward-looking statements.




Although
      we believe the expectations reflected in the forward-looking statements are
      reasonable, we cannot guarantee future results, level of activity, performance
      or achievements. Moreover, neither we nor any other person assumes
      responsibility for the accuracy or completeness of any of these forward-looking
      statements. You should not rely upon forward-looking statements as predictions
      of future events. We are under no duty to update any of these forward-looking
      statements after the date of this report to conform our prior statements to
      actual results or revised expectations and we do not intend to do
      so.




We
      caution you not to place undue reliance on the forward-looking statements,
      which
      speak only as of the date of this report.




We
      expressly qualify in their entirety all forward-looking statements attributable
      to us or any person acting on our behalf by the cautionary statements contained
      or referred to in this section.




ii


***PART
      I  -*** ***FINANCIAL
      INFORMATION***




**Item
      1.**  **Financial
      Statements**




**NYSE
      GROUP, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**


(In
      thousands, except per share data)




September
                30, 2006
            
            
            December
                31, 2005(Unaudited)**Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            255,604
            
            
            $
            43,492Investment
                securities, at fair value
            
            
            522,046
            
            
            
            980,591Securities
                purchased under agreements to resell
            
            
            64,600
            
            
            
            127,888Accounts
                receivable, net
            
            
            284,133
            
            
            
            184,185Deferred
                income taxes
            
            
            89,847
            
            
            
            91,919Other
                assets
            
            
            43,224
            
            
            
            36,142Total
                current assets
            
            
            1,259,454
            
            
            
            1,464,217Property
                and equipment, net
            
            
            393,000
            
            
            
            343,534Goodwill
            
            
            535,790
            
            
            
            -Other
                intangible assets, net
            
            
            582,984
            
            
            
            -Deferred
                income taxes
            
            
            344,009
            
            
            
            290,145Other
                assets
            
            
            104,925
            
            
            
            106,249**Total
                assets**
            
            $
            3,220,162
            
            
            $
            2,204,145**Liabilities
                and stockholders’ equity**Current
                liabilities:Accounts
                payable and accrued expenses
            
            $
            344,793
            
            
            $
            322,263Section
                31 fees payable
            
            
            64,600
            
            
            
            232,146Deferred
                revenue
            
            
            174,320
            
            
            
            105,313Deferred
                income taxes
            
            
            50,751
            
            
            
            25,238Total
                current liabilities
            
            
            634,464
            
            
            
            684,960Accrued
                employee benefits
            
            
            332,638
            
            
            
            323,373Deferred
                revenue
            
            
            320,971
            
            
            
            329,197Deferred
                income taxes
            
            
            267,440
            
            
            
            9,289Other
                liabilities
            
            
            23,395
            
            
            
            23,037**Total
                liabilities**
            
            
            1,578,908
            
            
            
            1,369,856Minority
                interest
            
            
            38,092
            
            
            
            35,164Commitments
                and contingencies**Stockholders’
                equity**Members’
                equity
            
            
            -
            
            
            
            807,781Common
                stock, $0.01 par value, 400,000 shares authorized; 157,787 shares
                issued;
                156,142 shares outstanding
            
            
            1,578
            
            
            
            -Common
                stock held in treasury, at cost: 1,645 shares
            
            
            (65,569
            )
            
            
            -Additional
                paid-in capital
            
            
            1,542,057
            
            
            
            -Retained
                earnings
            
            
            130,847
            
            
            
            -Accumulated
                other comprehensive loss
            
            
            (5,751
            )
            
            
            (8,656
            )Total
                stockholders’ equity
            
            
            1,603,162
            
            
            
            799,125**Total
                liabilities and stockholders’ equity**
            
            $
            3,220,162
            
            
            $
            2,204,145




The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




1




**NYSE
      GROUP, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME**


(In
      thousands, except per share data)


(Unaudited)




Three
                months ended September 30,
            
            
            Nine
                months ended September 30,2006
            
            
            2005
            
            
            2006
            
            
            2005**Revenues**Activity
                assessment
            
            $
            163,408
            
            
            $
            198,660
            
            
            $
            492,383
            
            
            $
            433,373Transaction
            
            
            179,979
            
            
            
            32,633
            
            
            
            454,139
            
            
            
            108,392Listing
            
            
            89,019
            
            
            
            85,428
            
            
            
            266,255
            
            
            
            256,888Market
                data
            
            
            57,510
            
            
            
            42,989
            
            
            
            166,115
            
            
            
            133,429Data
                processing
            
            
            27,697
            
            
            
            44,098
            
            
            
            108,969
            
            
            
            136,764Regulatory
            
            
            50,136
            
            
            
            34,437
            
            
            
            135,300
            
            
            
            96,671Licensing,
                facility and other
            
            
            35,188
            
            
            
            14,158
            
            
            
            94,252
            
            
            
            42,197Total
                revenues
            
            
            602,937
            
            
            
            452,403
            
            
            
            1,717,413
            
            
            
            1,207,714Section
                31 fees
            
            
            (163,408
            )
            
            
            (198,660
            )
            
            
            (492,383
            )
            
            
            (433,373
            )Merger
                expenses and related exit costs
            
            
            (7,701
            )
            
            
            -
            
            
            
            (21,038
            )
            
            
            -Compensation
            
            
            (130,211
            )
            
            
            (124,831
            )
            
            
            (436,840
            )
            
            
            (381,845
            )Liquidity
                payments
            
            
            (66,173
            )
            
            
            -
            
            
            
            (159,964
            )
            
            
            -Routing
                and clearing
            
            
            (20,084
            )
            
            
            -
            
            
            
            (49,687
            )
            
            
            -Systems
                and communications
            
            
            (30,382
            )
            
            
            (28,951
            )
            
            
            (90,966
            )
            
            
            (92,746
            )Professional
                services
            
            
            (28,333
            )
            
            
            (29,275
            )
            
            
            (85,527
            )
            
            
            (90,326
            )Depreciation
                and amortization
            
            
            (35,120
            )
            
            
            (25,903
            )
            
            
            (99,360
            )
            
            
            (78,522
            )Occupancy
            
            
            (22,872
            )
            
            
            (17,649
            )
            
            
            (62,936
            )
            
            
            (51,588
            )Marketing
                and other
            
            
            (23,922
            )
            
            
            (14,497
            )
            
            
            (70,246
            )
            
            
            (46,255
            )Regulatory
                fine income
            
            
            10,680
            
            
            
            10,896
            
            
            
            33,841
            
            
            
            32,872**Operating
                income**
            
            
            85,411
            
            
            
            23,533
            
            
            
            182,307
            
            
            
            65,931Investment
                and other income, net
            
            
            29,433
            
            
            
            13,366
            
            
            
            63,271
            
            
            
            36,558Gain
                on sale of equity investment
            
            
            -
            
            
            
            -
            
            
            
            20,925
            
            
            
            -Income
                before income tax provision and minority interest
            
            
            114,844
            
            
            
            36,899
            
            
            
            266,503
            
            
            
            102,489Income
                tax provision
            
            
            (46,252
            )
            
            
            (14,064
            )
            
            
            (104,517
            )
            
            
            (40,288
            )Minority
                interest in income of consolidated subsidiary
            
            
            (627
            )
            
            
            (835
            )
            
            
            (2,500
            )
            
            
            (1,195
            )**Net
                income**
            
            $
            67,965
            
            
            $
            22,000
            
            
            $
            159,486
            
            
            $
            61,006Basic
                earnings per share
            
            $
            0.43
            
            
            $
            0.19
            
            
            $
            1.09
            
            
            $
            0.53Diluted
                earnings per share
            
            $
            0.43
            
            
            $
            0.19
            
            
            $
            1.08
            
            
            $
            0.53Basic
                weighted average shares outstanding
            
            
            156,481
            
            
            
            115,699(a
            )
            
            
            146,645
            
            
            
            115,699(a
            )Diluted
                weighted average shares outstanding
            
            
            157,460
            
            
            
            115,699(a
            )
            
            
            147,742
            
            
            
            115,699(a
            )


(a)
            Adjusted
                to reflect the merger between the NYSE and Archipelago, which was
                completed March 7, 2006, giving retroactive effect to the issuance
                of
                shares to former NYSE members. See Note 1 to the condensed consolidated
                financial statements.




The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




2




**NYSE
      GROUP, INC.**


**CONDENSED
      CONSOLIDATED STATEMENT OF CHANGES IN**


**STOCKHOLDERS’
      EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006**


(In
      thousands)


(Unaudited)




**Common
                Stock****Members’
                Equity**
            
            **Shares**
            
            **Par**
              **Value**
            
            **Treasury**
              **Stock**
            
            **Additional**
              **Paid-In**
              **Capital**
            
            **Retained
                Earnings**
            
            **Accumulated
                Other Comprehensive Income (Loss)**
            
            **Total****Balance
                as of December 31, 2005**
            
            $
            807,781
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            (8,656
            )
            $
            799,125Net
                income for the period from January 1 to March 7, 2006
            
            
            28,639
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,275
            
            
            29,914Members’
                distribution
            
            
            (409,800
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (409,800
            )Members’
                dividend
            
            
            (96,400
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (96,400
            )Exchange
                of NYSE membership interest
            
            
            (330,220
            )
            
            109,522
            
            
            1,095
            
            
            -
            
            
            329,125
            
            
            -
            
            
            -
            
            
            -Merger
                with Archipelago
            
            
            -
            
            
            47,625
            
            
            476
            
            
            (65,569
            )
            
            1,150,206
            
            
            -
            
            
            -
            
            
            1,085,113Employee
                stock transactions
            
            
            -
            
            
            640
            
            
            7
            
            
            -
            
            
            62,726
            
            
            -
            
            
            -
            
            
            62,733Net
                income for the period from
              March
                8 to September 30, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            130,847
            
            
            1,630
            
            
            132,477**Balance
                as of September 30, 2006**
            
            $
            -
            
            
            157,787
            
            $
            1,578
            
            $
            (65,569
            )
            $
            1,542,057
            
            $
            130,847
            
            $
            (5,751
            )
            $
            1,603,162




The
      accompanying notes are integral part of these condensed consolidated financial
      statements.




3


**NYSE
      GROUP, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


(In
      thousands)


(Unaudited)




Nine
                months
              ended
                September 30,2006
            
            
            2005**Cash
                flows from operating activities:**Net
                income
            
            $
            159,486
            
            
            $
            61,006**Adjustments
                to reconcile net income to net cash provided by operating
                activities:**Depreciation
                and amortization
            
            
            99,360
            
            
            
            78,522Minority
                interest
            
            
            2,928
            
            
            
            1,405Deferred
                income taxes
            
            
            6,887
            
            
            
            (9,952
            )Provision
                for losses on accounts receivable
            
            
            2,596
            
            
            
            (879
            )Stock
                based compensation
            
            
            46,135
            
            
            
            -Gain
                on sale of equity investment
            
            
            (20,925
            )
            
            
            -Other
                non-cash items
            
            
            1,792
            
            
            
            8,642**Change
                in operating assets and liabilities:**Accounts
                receivable, net
            
            
            (22,218
            )
            
            
            (61,686
            )Other
                assets
            
            
            (20,894
            )
            
            
            (3,867
            )Accounts
                payable, accrued expenses and Section 31 fees
            
            
            (303,635
            )
            
            
            (51,568
            )Deferred
                revenue
            
            
            57,180
            
            
            
            58,903Accrued
                employee benefits
            
            
            9,265
            
            
            
            10,886Net
                cash provided by operating activities
            
            
            17,957
            
            
            
            91,412**Cash
                flows from investing activities:**Cash
                acquired in Archipelago merger
            
            
            218,201
            
            
            
            -Other
                sales (purchases) of equity investments and businesses
            
            
            14,616
            
            
            
            (10
            )Sales
                of investment securities
            
            
            9,853,747
            
            
            
            5,633,418Purchases
                of investment securities
            
            
            (9,392,296
            )
            
            
            (5,626,273
            )Net
                sales of securities purchased under agreements to resell
            
            
            63,288
            
            
            
            11,778Purchases
                of property and equipment
            
            
            (68,391
            )
            
            
            (75,759
            )Net
                cash provided by (used in) investing activities
            
            
            689,165
            
            
            
            (56,846
            )**Cash
                flows from financing activities:**Distribution
                to former Members
            
            
            (409,800
            )
            
            
            -Dividend
                to former Members
            
            
            (96,400
            )
            
            
            -Employee
                stock transactions
            
            
            16,723
            
            
            
            -Principal
                payment of capital lease obligations
            
            
            (5,533
            )
            
            
            (4,013
            )Net
                cash used in financing activities
            
            
            (495,010
            )
            
            
            (4,013
            )Net
                increase in cash and cash equivalents for the period
            
            
            212,112
            
            
            
            30,553Cash
                and cash equivalents at beginning of period
            
            
            43,492
            
            
            
            15,456Cash
                and cash equivalents at end of period
            
            $
            255,604
            
            
            $
            46,009**Supplemental
                disclosures:**Cash
                paid for income taxes
            
            $
            85,915
            
            
            $
            32,497Cash
                paid for interest
            
            $
            1,798
            
            
            $
            3,788**Non-cash
                investing and financing activities:**Exchange
                of NYSE membership interest
            
            $
            330,220
            
            
            
            -Merger
                with Archipelago
            
            $
            1,085,113
            
            
            
            -




The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




4




**NYSE
      GROUP, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


(Unaudited)




**Note
      1 -** **Organization
      and Description of Business**




NYSE
      Group is a holding company that, through its subsidiaries, operates two
      securities exchanges: the NYSE and NYSE Arca, Inc. NYSE Group is a leading
      provider of securities listing, trading and market data products and services.
      NYSE Group was formed in connection with the merger of the NYSE and Archipelago,
      which was completed on March 7, 2006. NYSE Group common stock is listed on
      the
      NYSE under the symbol “NYX.”




The
      NYSE
      is the world’s largest cash equities exchange. The NYSE is approximately three
      times the size of the next largest cash equities exchange in the world in terms
      of aggregate market capitalization of domestic listed companies.




NYSE
      Arca
      operates the first open, all-electronic stock exchange in the United States
      and
      has one of the leading market positions in trading exchange-traded funds
      (“ETFs”) and exchange-listed securities. NYSE Arca is also an exchange for
      trading equity options.




As
      of
      September 30, 2006, the NYSE owned two-thirds of the Securities Industry
      Automation Corporation (“SIAC”) and reported SIAC’s financial results on a
      consolidated basis. SIAC is an important industry resource providing critical
      automation and communications services to the NYSE, the American Stock Exchange
      LLC (“AMEX”) and other organizations to support order processing, trading and
      the reporting of market information, among other functions. SIAC also provides
      system support for certain national market system functions and for important
      regulatory and administrative activities. In addition, SIAC provides
      telecommunication and managed services through its wholly owned subsidiary,
      Sector, Inc. (“Sector”), to subscribers primarily in the securities
      industry.




NYSE
      Regulation provides regulatory services (including member firm regulation,
      market surveillance, enforcement, listed company compliance, and arbitration),
      to the NYSE and to NYSE Arca.





**Note
      2 -** **Basis
      of Presentation**




The
      accompanying condensed consolidated financial statements include the accounts
      of
      NYSE Group and all wholly-owned subsidiaries, as well as of SIAC. The results
      of
      operations of Archipelago have been included in NYSE Group’s results of
      operations since March 8, 2006.




The
      accompanying condensed consolidated financial statements are prepared in
      accordance with accounting principles generally accepted in the United States
      and reflect all adjustments, consisting of only normal recurring adjustments,
      that are, in the opinion of management, necessary for a fair statement of the
      results for the period. All material intercompany accounts and transactions
      have
      been eliminated in consolidation. Certain information and footnote disclosures
      normally included in financial statements, which are normally required under
      accounting principles generally accepted in the United States, have been
      condensed or omitted; however management believes that the disclosures are
      adequate to make the information presented not misleading.




The
      preparation of these condensed consolidated financial statements, in conformity
      with accounting principles generally accepted in the United States, requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities as of the date of the financial statements and the
      reported amounts of revenues and expenses during the reported period. Actual
      results






5




could
      be
      materially different from these estimates.  Certain prior period amounts
      have been reclassified to conform to the current period’s
      presentation.




The
      condensed consolidated financial statements are unaudited and should be read
      in
      conjunction with the audited financial statements as of and for the year ended
      December 31, 2005, included in the NYSE Group Annual Report on Form 10-K filed
      with the SEC on March 31, 2006. Operating results for the three and nine months
      ended September 30, 2006 are not necessarily indicative of the results that
      may
      be expected for the year ending December 31, 2006.




**Note
      3 -** **Business
      Combinations**




*Archipelago
      Holdings, Inc.*




On
      March
      7, 2006, Archipelago and the NYSE combined their businesses and became
      wholly-owned subsidiaries of NYSE Group, a newly created, for profit and
      publicly traded holding company. Through the merger, NYSE Group intends to
      continue to grow market position in trading volume and enhance the trading
      technology of both the NYSE and NYSE Arca. Together, the NYSE and NYSE Arca
      provide a full-service market that offers customers a choice of products and
      appeals to all types of investors.




On
      March
      7, 2006, each of the 1,366 members of the NYSE was entitled to receive $300,000
      in cash and 80,177 shares of NYSE Group common stock in exchange for its NYSE
      membership. In addition, a cash dividend of $70,571 was declared and paid to
      each of the 1,366 members. Each NYSE member had the opportunity to make either
      a
      cash election to increase the cash portion (and decrease the stock portion)
      of
      their merger consideration, or a stock election to increase the stock portion
      (and decrease the cash portion) of their merger consideration. The aggregate
      number of shares of NYSE Group common stock issued to all of the NYSE members
      in
      the merger, together with the aggregate number of shares reserved for issuance
      to NYSE employees, equaled approximately 70% of NYSE Group common stock issued
      and outstanding, or approximately 109.5 million shares.




On
      March
      7, 2006: (i) each share of the issued and outstanding shares of Archipelago’s
      common stock was converted automatically into the right to receive one share
      of
      NYSE Group common stock; (ii) all outstanding stock options of Archipelago,
      whether vested or unvested, converted into options to purchase an equivalent
      number of shares of NYSE Group common stock; and (iii) all outstanding
      restricted stock units of Archipelago were converted into an equal number of
      restricted stock units of NYSE Group common stock. The aggregate number of
      shares (including shares underlying stock options and restricted stock units)
      received by Archipelago stockholders equaled approximately 30% of the issued
      and
      outstanding shares of NYSE Group common stock, or approximately 46.0 million
      shares.




Under
      the
      purchase method of accounting, the total merger consideration, which was
      determined based on the fair market value of Archipelago common stock beginning
      two days before and ending after April 20, 2005 (the date the merger was agreed
      to and announced), was $1,085.1 million. The results of operations of
      Archipelago have been included in the NYSE Group’s results of operations since
      March 8, 2006.




The
      following is a summary of the purchase price in the Archipelago merger (in
      thousands):




Purchase
                price
            
            $
            1,085,113Acquisition
                costs
            
            
            25,422Total
                purchase price
            
            $
            1,110,535






6




The
      purchase price was allocated to the assets acquired and liabilities assumed
      based on the estimated fair value of Archipelago net assets as of the merger
      date as follows (in thousands):




Historical
                cost of net assets acquired
            
            $
            458,290Elimination
                of Archipelago’s historical goodwill and intangibles
            
            
            (240,095
            )Adjustment
                to fair value of property and equipment
            
            
            17,000Deferred
                tax impact of purchase accounting adjustments
            
            
            (233,531
            )Fair
                value of identifiable intangible assets
            
            
            584,500Other
            
            
            (5,919
            )Goodwill
            
            
            530,290Total
                purchase price
            
            $
            1,110,535


The
      allocation of the purchase price to Archipelago assets and liabilities are
      only
      preliminary allocations based on estimates of fair values and will change when
      estimates are finalized. Therefore, the information above is subject to change
      pending the final allocation of purchase price. NYSE Group does not expect
      any
      of the goodwill to be deductible for tax purposes.




During
      2005, NYSE Group adopted a plan to eliminate positions. As a result of this
      decision, NYSE Group recorded a $3.9 million charge consisting of severance
      and
      related costs during 2005. For the nine months ended September 30, 2006, NYSE
      Group recorded a $6.1 million charge due to 80 additional positions being
      eliminated as a result of our continued integration efforts and cost containment
      initiatives. These positions were primarily included within trading floor
      operations and miscellaneous administrative areas. The following is a summary
      of
      the severance charges and utilization for the nine months ended September 30,
      2006 and the remaining accrual at September 30, 2006 (in
      thousands):




Balance
                at December 31, 2005
            
            $
            3,804Additional
                severance
            
            
            6,150Amount
                paid in 2006
            
            
            (5,871
            )Balance
                at September 30, 2006
            
            $
            4,083


These
      costs associated with the additional severance for the nine months ended
      September 30, 2006 are included in merger expenses and related exit costs in
      the
      condensed consolidated statements of income. Based on current severance dates
      and the accrued severance at September 30, 2006, NYSE Group expects to pay
      these
      amounts through June 30, 2007.




On
        November 8, 2006, NYSE Group announced a workforce reduction of more than
        500
        positions, including approximately 400 employees and 120 full-time consultants.
        As a result of this workforce reduction, NYSE Group expects to recognize
        a
        restructuring charge in the fourth quarter of 2006 of approximately $28.0
        million consisting primarily of severance payments and curtailment
        losses.




*PCX
      Holdings, Inc. and Wave Securities, LLC.*




On
      September 26, 2005, Archipelago completed its acquisition of PCX Holdings
      (“PCX”), which is now known as NYSE Arca, Inc., for a total purchase price of
      approximately $94.0 million consisting of a $90.9 million cash payment to PCX
      stockholders and certain employees of PCX, and approximately $3.1 million of
      direct acquisition costs incurred by Archipelago. As part of the acquisition
      of
      PCX, Archipelago undertook to divest Wave Securities LLC (“Wave Securities”), a
      previously wholly-owned subsidiary of Archipelago. On March 3, 2006, Archipelago
      completed the sale of Wave Securities.




*Pro
      Forma Results*




The
      following table provides pro forma results of operations as if (i) the
      acquisition of PCX by Archipelago, (ii) the disposition of Wave Securities
      by
      Archipelago and (iii) the merger between Archipelago and the NYSE had been
      completed at the beginning of the earliest period presented (in thousands,
      except per share data):




7




**Three
                months ended September 30,**
            
            **Nine
                months ended September 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenues
            
            $
            602,937
            
            $
            624,795
            
            $
            1,861,397
            
            $
            1,727,054Net
                income
            
            
            68,254
            
            
            29,605
            
            
            195,118
            
            
            84,814Basic
                earnings per share
            
            $
            0.44
            
            $
            0.18
            
            $
            1.24
            
            $
            0.53Diluted
                earnings per share
            
            $
            0.43
            
            $
            0.18
            
            $
            1.23
            
            $
            0.52


Pro
      forma
      results do not include any anticipated cost savings or other effects of the
      planned integration of the NYSE and Archipelago’s businesses.




*Other
      Transactions*





On
      July
      17, 2006, NYSE Group acquired MatchPoint Trading, Inc. (“MatchPoint”), a
      financial services technology company specializing in call market trading and
      technologies. MatchPoint has developed a proprietary electronic equity crossing
      system that matches aggregated orders at predetermined and distinct times,
      at
      prices that are derived from the primary market for securities (NYSE, AMEX
      and
      Nasdaq), enabling MatchPoint technology to operate multiple matches each with
      a
      unique benchmark pricing model. MatchPoint can also process internal crosses
      for
      single participants and seamlessly enables residuals to participate in scheduled
      crossing sessions.




On
      September 18, 2006, NYSE Group announced that it had acquired an equity
      stake in Marco Polo Network Inc. (“Marco Polo”). Through its local exchange and
      brokerage relationships, Marco Polo offers intra-market connectivity and routing
      to brokers and exchanges in more than 40 emerging markets. Together, these
      markets provide investors with access to more than 90% of the MSCI emerging
      markets index.




**Note
      4 -** **Merger
      with** **Euronext** **N.V.**




On
      May
      22, 2006, NYSE Group proposed a business combination with Euronext which if
      successful will create NYSE Euronext, a global marketplace with an expected
      combined market capitalization of approximately $21 billion. Euronext
      is a cross-border exchange providing international services for regulated cash
      markets and derivative
      markets in
      Belgium, France, the United Kingdom, the Netherlands and Portugal. Both
      parties signed a definitive combination agreement on June 1, 2006.
      The
      combination is expected to
      close during
      the first quarter of 2007
      and is
      subject to regulatory approval and the approval of NYSE Group and Euronext
      shareholders.




Pursuant
      to the combination agreement, NYSE Group and Euronext intend to combine their
      businesses under NYSE Euronext, a Delaware corporation formed for the purpose
      of
      this transaction. Euronext’s business will be brought under NYSE Euronext
      through an exchange offer and a post closing reorganization, and NYSE Group’s
      business will be brought under NYSE Euronext through a merger.




In
      the
      exchange offer, Euronext shareholders will have the right to exchange each
      of
      their Euronext shares for €21.32 in cash and 0.98 of a share of NYSE Euronext
      common stock. Instead of receiving this standard offer consideration, Euronext
      shareholders will have the opportunity to make either a cash election to receive
      all cash for their Euronext shares, or a stock election to receive all stock
      for
      their Euronext shares, subject to proration to ensure that the total amount
      of
      cash paid, and the total number of shares of NYSE Euronext common stock issued,
      in the exchange offer to the Euronext shareholders, as a whole, are equal to
      the
      total amount of cash and number of shares that would have been paid and issued
      if all Euronext shareholders received the standard offer consideration.




8




Immediately
      after the successful completion of the exchange offer, a wholly owned subsidiary
      of NYSE Euronext will merge with NYSE Group, and, as a result, the surviving
      corporation will become a wholly owned subsidiary of NYSE Euronext, and each
      share of NYSE Group common stock will be converted into the right to receive
      one
      share of NYSE Euronext common stock.




As
      soon
      as possible after the successful completion of the exchange offer and the
      combination, NYSE Euronext intends to effectuate a post-closing reorganization
      of Euronext and its subsidiaries that is intended to result in Euronext becoming
      a wholly owned subsidiary of NYSE Euronext. In the post-closing reorganization,
      Euronext shareholders who did not exchange their Euronext shares in the exchange
      offer will generally receive the same consideration that they would have
      received had they tendered their Euronext shares in the exchange offer and
      not
      made either the cash election or the stock election: that is €21.32 in cash and
      0.98 of a share of NYSE Euronext common stock per Euronext share.




**Note
      5 -** **Segment
      Information**




Subsequent
      to the merger between the NYSE and Archipelago, NYSE Group operates under three
      reportable segments: Market, SIAC Services and Regulation. NYSE Group’s segments
      are managed and operated as three business units and organized based on services
      provided to customers.




Market
      represents primarily the fees earned from: (i) obtaining new listings and
      servicing existing listings on the NYSE and NYSE Arca, Inc.; (ii) providing
      access to trade execution; (iii) distributing market information to data
      subscribers and (iv)
      issuing trading licenses (previously membership fees).




SIAC
      Services provides communication and data processing operations and systems
      development functions to the NYSE and third party customers.




Regulation
      provides regulatory services (including member firm regulation, market
      surveillance, enforcement, listed company compliance, and arbitration),
      performed by NYSE Regulation, to the NYSE and to NYSE Arca. Regulatory fees
      are
      paid by member organizations and are primarily assessed based upon their Gross
      FOCUS revenues. In addition, Regulation collects regulatory fines that are
      applied to members and member organizations.




Summarized
      financial data concerning the NYSE Group’s reportable segments is as follows (in
      thousands):




**Three
                months ended September 30,**
            
            **Market**
            
            **SIAC
                Services**
            
            **Regulation**
            
            **Corporate
                Items and Eliminations**
            
            **Consolidated****2006**Revenues
            
            $
            553,509
            
            $
            79,192
            
            $
            79,491
            
            $
            (109,255
            )
            $
            602,937Operating
                income (loss)
            
            
            74,241
            
            
            (12,386
            )
            
            23,556
            
            
            -
            
            
            85,411**2005**Revenues
            
            $
            402,008
            
            $
            105,628
            
            $
            62,674
            
            $
            (117,907
            )
            $
            452,403Operating
                income
            
            
            12,467
            
            
            625
            
            
            10,441
            
            
            -
            
            
            23,533




9




**Nine
                months ended September 30,**
            
            **Market**
            
            **SIAC
                Services**
            
            **Regulation**
            
            **Corporate
                Items and Eliminations**
            
            **Consolidated****2006**Revenues
            
            $
            1,572,601
            
            $
            272,247
            
            $
            231,996
            
            $
            (359,431
            )
            $
            1,717,413Operating
                income (loss)
            
            
            155,497
            
            
            (23,138
            )
            
            49,948
            
            
            -
            
            
            182,307**2005**Revenues
            
            $
            1,062,063
            
            $
            326,181
            
            $
            180,963
            
            $
            (361,493
            )
            $
            1,207,714Operating
                income (loss)
            
            
            39,917
            
            
            (700
            )
            
            26,714
            
            
            -
            
            
            65,931


SIAC
      operates on a cost recovery model driven by its customers’ demands. Under this
      model, any increase or decrease in SIAC’s expenses typically results in a
      corresponding change in its revenues. During the three and nine months ended
      September 30, 2006, SIAC incurred $2.0 million and $17.6 million, respectively,
      related to stock-based compensation for awards granted to certain of its
      employees as part of the merger with Archipelago. There was no corresponding
      increase in revenue, as this expense was not shared with non-NYSE
      customers.




**Note
      6 -**  **Goodwill
      and Other Intangible Assets**




The
      following table presents the details of the intangible assets and goodwill
      acquired by reportable segment (dollars in thousands):




**Market**
            
            **Regulation**
            
            **SIAC
                Services****Estimated
                Fair Value**
            
            **Useful
                Life (in years)**
            
            **Estimated
                Fair Value**
            
            **Useful
                Life (in years)**
            
            **Estimated
                Fair Value**
            
            **Useful
                Life (in years)**Asset
                class:National
                securities exchange registration
            
            $
            511,000
            
            
            Indefinite
            
            
            -
            
            
            N/A
            
            
            -
            
            
            N/ACustomer
                relationships
            
            
            34,700
            
            
            20
            
            
            -
            
            
            N/A
            
            
            -
            
            
            N/ATrade
                names
            
            
            38,800
            
            
            20
            
            
            -
            
            
            N/A
            
            
            -
            
            
            N/ATotal
                intangibles
            
            $
            584,500
            
            
            
            
            
            -
            
            
            
            
            
            -Goodwill
            
            $
            535,790


Amortization
      expense for the intangible assets was approximately $0.9 million and $2.1
      million for the three and nine months ended September 30, 2006, respectively.




The
      estimated future amortization expense of purchased intangible assets as of
      September 30, 2006 is as follows (in thousands):




**Year
                ending December 31,**2006
                (period from October 1 to December 31, 2006)
            
            $
            9192007
            
            
            3,6752008
            
            
            3,6752009
            
            
            3,6752010
            
            
            3,675Thereafter
            
            
            55,738Total
            
            $
            71,357




10




**Note
      7 -**  **Stock
      Based Compensation**




Statement
      of Financial Accounting Standards (“SFAS”) 123R, “Share-Based Payment,” requires
      that compensation costs associated with share-based payment transactions be
      recognized in financial statements. NYSE Group adopted SFAS 123R during the
      first quarter of 2006.




Effective
      March 8, 2006, NYSE Group adopted the NYSE Group, Inc. Stock Incentive Plan
      (the
“Plan”) and converted three Archipelago long-term incentive plans. As part of
      the merger with Archipelago, 0.2 million shares underlying restricted stock
      units granted to former Archipelago directors, officers and employees and 2.6
      million shares underlying stock options granted to former Archipelago directors,
      officers and employees were converted to restricted stock and stock options,
      respectively, of NYSE Group.




On
      March
      8, 2006, NYSE Group granted approximately 1.2 million restricted stock units
      to
      NYSE employees and certain SIAC employees under the Plan. These restricted
      stock
      units vest 50% on the grant date and 25% on each of the first and second
      anniversaries of the grant date. Compensation expense is based on the market
      price of the shares underlying the awards on the grant date and recognized
      ratably over the vesting period. NYSE Group estimates an expected forfeiture
      rate while recognizing the expense associated with these awards. As of September
      30, 2006, employees of NYSE Group held approximately 1.8 million stock options
      with a weighted average exercise price of $14.15 (1.4 million of which were
      exercisable at a weighted average exercise price of $14.42) and 1.4 million
      (including 0.6 million vested units) restricted stock units. As of September
      30,
      2006, the total aggregate intrinsic value of stock options outstanding and
      exercisable was $107.9 million and $83.5 million, respectively.




For
      the
      three and nine months ended September 30, 2006, NYSE Group recorded $5.6 million
      and $46.1 million, respectively, of stock based compensation included in
      compensation in the condensed consolidated statements of income. As of September
      30, 2006, there was approximately $18.3 million of total unrecognized
      compensation cost related to stock options and restricted stock units. This
      cost
      is expected to be recognized over approximately three years.




As
        a
        result of the merger between the NYSE and Archipelago, 2.6 million Archipelago
        stock options converted to NYSE Group awards. Both
        the
        vested and unvested stock options issued by NYSE Group in exchange for
        equivalent options of Archipelago were included in the purchase price of
        Archipelago and recorded at their fair value on the measurement date. Because
        continued service is required after the date of consummation in order to
        vest in
        the unvested awards, a portion of the value of those awards is recognized
        over
        the remaining vesting period.
 
 The
        fair
        value of each option grant was estimated using the Black-Scholes option pricing
        model with the following assumptions: expected volatility of 30%, risk-free
        interest of 4.8%, expected life of 7 years and no dividend
        yield.




A
      summary
      of the stock option activity under the Plan is as follows (number of stock
      options in thousands):




**Stock
                Options****Shares**
            
            
            **Weighted
                Average Exercise Price**Outstanding
                at beginning of year
            
            -
            
            
            -Awards
                converted from Archipelago
            
            
            2,550
            
            
            $
            13.53Awards
                granted
            
            
            -
            
            
            
            -Awards
                exercised
            
            
            (769
            )
            
            $
            12.00Awards
                expired/cancelled
            
            
            -
            
            
            
            -Outstanding
                at end of period
            
            
            1,781
            
            
            $
            14.15





11




Additional
      information regarding stock options outstanding as of September 30, 2006 is
      as
      follows (number of stock options in thousands):




**Outstanding**
            
            
            **Exercisable****Exercise
                Price**
            
            **Number
                Outstanding**
            
            
            **Weighted
                Average Remaining Contractual Life (years)**
            
            
            **Weighted
                Average Exercise Price**
            
            
            **Number
                Exercisable**
            
            
            **Weighted
                Average Exercise Price**$4.91
            
            
            42
            
            
            
            6.86
            
            
            $
            4.91
            
            
            
            42
            
            
            $
            4.91$6.26
            
            
            46
            
            
            
            6.86
            
            
            
            6.26
            
            
            
            38
            
            
            
            6.26$11.50
            
            
            532
            
            
            
            7.87
            
            
            
            11.50
            
            
            
            373
            
            
            
            11.50$13.41
            
            
            696
            
            
            
            7.13
            
            
            
            13.41
            
            
            
            515
            
            
            
            13.41$19.30
            
            
            167
            
            
            
            8.46
            
            
            
            19.30
            
            
            
            119
            
            
            
            19.30$20.25
            
            
            298
            
            
            
            3.90
            
            
            
            20.25
            
            
            
            298
            
            
            
            20.251,781
            
            
            
            6.92
            
            
            $
            14.15
            
            
            
            1,384
            
            
            $
            14.42







A
      summary
      of the restricted stock unit activity under the Plan is as follows (number
      of
      restricted stock units in thousands):




**Number
                of RSUs**Outstanding
                at beginning of year
            
            -Awards
                converted from Archipelago
            
            
            125Awards
                granted
            
            
            1,207Vested
            
            
            (630
            )Outstanding
                at end of period
            
            
            702Weighted
                average fair value per share for RSUs granted during
                period
            
            $
            64.50




**Note
      8 -**  **Retirement
      Benefits**




Effective
      March 31, 2006, the future benefit accrual of all active participants in the
      pension and supplemental executive retirement plans (“SERP”) plans was frozen.
      Effective April 1, 2006, NYSE Group employees became eligible to receive
      benefits from a new employer-funded defined contribution Retirement Benefit
      Accumulation Plan (“RBAP”). RBAP expense incurred for the three and nine months
      ended September 30, 2006 was $3.1 million and $5.9 million,
      respectively.




The
      NYSE
      and SIAC currently do not expect to provide any additional funding to the
      pension plans during 2006.




12


The
      following table sets forth the pension and SERP plans’ amounts recognized (in
      thousands):




**Pension
                Plans Cost****Three
                months ended September 30,**
            
            **Nine
                months ended September 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005****NYSE**
            
            **SIAC**
            
            **NYSE**
            
            **SIAC**
            
            **NYSE**
            
            **SIAC**
            
            **NYSE**
            
            **SIAC**Cost
                of benefits earned
            
            $
            -
            
            $
            (151
            )
            $
            3,472
            
            $
            2,897
            
            $
            2,643
            
            $
            2,344
            
            $
            10,416
            
            $
            8,692Interest
                on benefits earned
            
            
            5,545
            
            
            3,071
            
            
            5,589
            
            
            3,508
            
            
            16,524
            
            
            9,003
            
            
            16,767
            
            
            10,525Net
                amortizations
            
            
            -
            
            
            (113
            )
            
            280
            
            
            44
            
            
            39
            
            
            195
            
            
            841
            
            
            131Estimated
                return on plan assets
            
            
            (8,114
            )
            
            (4,739
            )
            
            (7,412
            )
            
            (4,237
            )
            
            (24,000
            )
            
            (13,237
            )
            
            (22,238
            )
            
            (12,710
            )Recognized
                actuarial (gain) or loss
            
            
            -
            
            
            -
            
            
            -
            
            
            753
            
            
            -
            
            
            -
            
            
            -
            
            
            2,259Curtailment
                charge
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,125
            
            
            -
            
            
            -
            
            
            -Aggregate
                pension (benefit) expense
            
            $
            (2,569
            )
            $
            (1,932
            )
            $
            1,929
            
            $
            2,965
            
            $
            (3,669
            )
            $
            (1,695
            )
            $
            5,786
            
            $
            8,897





**SERP
                Plans Cost****Three
                months ended September 30,**
            
            **Nine
                months ended September 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005****NYSE**
            
            **SIAC**
            
            **NYSE**
            
            **SIAC**
            
            **NYSE**
            
            **SIAC**
            
            **NYSE**
            
            **SIAC**Cost
                of benefits earned
            
            $
            -
            
            $
            -
            
            $
            515
            
            $
            231
            
            $
            540
            
            $
            188
            
            $
            1,547
            
            $
            692Interest
                on benefits earned
            
            
            718
            
            
            378
            
            
            933
            
            
            401
            
            
            2,268
            
            
            1,136
            
            
            2,799
            
            
            1,204Net
                amortizations
            
            
            123
            
            
            27
            
            
            384
            
            
            201
            
            
            222
            
            
            80
            
            
            1,150
            
            
            603Aggregate
                SERP expense
            
            $
            841
            
            $
            405
            
            $
            1,832
            
            $
            833
            
            $
            3,030
            
            $
            1,404
            
            $
            5,496
            
            $
            2,499




In
      addition to providing pension benefits, the NYSE and SIAC maintain defined
      benefit plans to provide certain health care and life insurance benefits for
      eligible retired employees. During 2005, the NYSE and SIAC announced changes
      to
      the post retirement plans, including the underlying plan design and contribution
      strategy. Such changes were effective as of March 31, 2006. The following are
      the plans’ amounts recognized during the respective periods (in
      thousands):




**Post
                Retirement Plans Cost****Three
                months ended September 30,**
            
            **Nine
                months ended September 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005****NYSE**
            
            **SIAC**
            
            **NYSE**
            
            **SIAC**
            
            **NYSE**
            
            **SIAC**
            
            **NYSE**
            
            **SIAC**Cost
                of benefits earned
            
            $
            1,194
            
            $
            210
            
            $
            1,137
            
            $
            667
            
            $
            3,576
            
            $
            1,293
            
            $
            3,411
            
            $
            2,001Interest
                on benefits earned
            
            
            1,953
            
            
            745
            
            
            1,750
            
            
            888
            
            
            6,105
            
            
            2,506
            
            
            5,251
            
            
            2,663Curtailment
                gain
            
            
            -
            
            
            (33
            )
            
            -
            
            
            -
            
            
            -
            
            
            (33
            )
            
            -
            
            
            -Net
                amortizations
            
            
            (67
            )
            
            (62
            )
            
            (61
            )
            
            390
            
            
            79
            
            
            595
            
            
            (182
            )
            
            1,169Aggregate
                post retirement expense
            
            $
            3,080
            
            $
            860
            
            $
            2,826
            
            $
            1,945
            
            $
            9,760
            
            $
            4,361
            
            $
            8,480
            
            $
            5,833





13




**Note
      9 -**  **Related
      Party Transactions**




The
      Depository Trust Company (“DTC”) and the National Securities Clearing
      Corporation (“NSCC”) are wholly-owned subsidiaries of The Depository Trust &
Clearing Corporation (“DTCC”). DTCC is a holding company that supports DTC,
      which provides settlement and custody services to banks and broker-dealers,
      and
      NSCC which provides trade clearance, netting and settlement services to banks,
      broker-dealers, mutual funds, insurance companies and other financial
      institutions.




On
      March
      28, 2006, NYSE Group sold its shares of DTCC common stock, which represented
      approximately 28% of DTCC’s common stock, for a $23.4 million cash payment. NYSE
      Group carried this investment at its $2.5 million cost and therefore realized
      a
      $20.9 million pre-tax gain that was included in gain on sale of equity
      investment for the nine months ended September 30, 2006 in the condensed
      consolidated statements of income. The after-tax impact of this gain was
      included in the cash dividend paid to each former NYSE member in connection
      with
      the merger of the NYSE and Archipelago. As of September 30, 2006, NYSE Group
      owns 50% of the outstanding preferred stock of DTCC.




During
      the third quarter of 2006, NYSE Group recorded a $7.2 million (net of minority
      interest of $3.6 million) gain for a one-time payment received from certain
      DTCC
      subsidiaries in connection with the termination of their service agreement
      with
      SIAC.




SIAC
      performs services for AMEX, which was a one-third owner of SIAC as of September
      30, 2006.




The
      following revenues (in thousands) have been derived from:




**Three
                months ended September 30,**
            
            **Nine
                months ended September 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**AMEX
            
            $
            12,583
            
            $
            17,451
            
            $
            43,100
            
            $
            53,315DTCC
            
            
            5
            
            
            7,417
            
            
            10,348
            
            
            24,610




These
      revenues are included in data processing in the condensed consolidated
      statements of income.




On
      November 1, 2006, NYSE Group completed the purchase of the one-third ownership
      stake in SIAC previously held by AMEX for approximately $40.3 million, as a
      result of which, NYSE Group now fully owns SIAC.  In
      connection with the purchase, the SIAC shareholders' agreement and AMEX’s
      participation in the SIAC facilities management agreement (under which SIAC
      had
      previously provided technology services to the NYSE and AMEX) were terminated
      and SIAC agreed to provide substantially reduced services to AMEX, as a
      customer, under a new services agreement.




14




**Note
      10 -**  **Earnings
      per Share**




Historically,
      the weighted average number of shares was adjusted to reflect the merger with
      Archipelago giving retroactive effect to the issuance of 84,699 shares of common
      stock to each former member, corresponding to the maximum number of shares
      issuable to a member under the stock election provision.




The
      following is a reconciliation of the basic and diluted earnings per share
      computations (in thousands except per share data):




**Three
                months ended September 30,**
            
            **Nine
                months ended September 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Net
                income for basic and diluted earnings per share
            
            $
            67,965
            
            $
            22,000
            
            $
            159,486
            
            $
            61,006Shares
                of common and common stock equivalents:Weighted
                average shares used in basic computation
            
            
            156,481
            
            
            115,699
            
            
            146,645
            
            
            115,699Dilutive
                effect of:Employee
                stock options and restricted stock units
            
            
            979
            
            
            -
            
            
            1,097
            
            
            -Weighted
                average shares used in diluted computation
            
            
            157,460
            
            
            115,699
            
            
            147,742
            
            
            115,699Basic
                earnings per share
            
            $
            0.43
            
            $
            0.19
            
            $
            1.09
            
            $
            0.53Diluted
                earnings per share
            
            $
            0.43
            
            $
            0.19
            
            $
            1.08
            
            $
            0.53


As
      of
      September 30, 2006, 1.4 million restricted stock units and options to purchase
      1.8 million shares of common stock were outstanding. For the three and nine
      months ended September 30, 2005, there were no options or restricted stock
      units
      outstanding. There
      were no securities excluded from the computation of diluted earnings per share
      for the three and nine months ended September 30, 2006 because all outstanding
      options and restricted stock were considered dilutive.




**Note
      11 -**  **Litigation
      and Other Matters**




The
      following supplements and amends our discussion set forth under “Legal
      Proceedings” in Part I, Item 3 of our annual report on Form 10-K filed for the
      year ended December 31, 2005, as updated by Part II, Item 1 of our quarterly
      reports on Form 10-Q for the periods ended March 31, 2006 and June 30, 2006. The
      following should be read in conjunction with these financial
      statements.




*In
      re
      NYSE Specialists Securities Litigation*





Briefing
      on plaintiffs’ appeal to the U.S. Court of Appeals for the Second Circuit from
      the final judgment in favor of the NYSE was completed on September 18,
      2006.




*Grasso
      Litigation*





Mr.
      Grasso filed an appeal of the New York Supreme Court’s August 8, 2006 decision
      that the New York Attorney General’s claim against Mr. Grasso for restitution
      and imposition of a constructive trust is an equitable claim that must be tried
      to the court rather than to a jury, and that it would commence trial of that
      claim on October 16, 2006. On September 14, 2006, the appellate court entered
      an
      order staying the trial until the appeals of that decision, and of the earlier
      decision denying Mr. Grasso’s motion to dismiss, have been decided.





15




On
      August
      23, 2006, the New York Supreme Court granted Mr. McCall’s motion for summary
      judgment dismissing the third-party claims asserted against him by Mr. Grasso.
      Mr. Grasso filed an appeal of that decision.





On
      September 7, 2006, Mr. Grasso filed a motion seeking reassignment of the
      case to a different judge for all further proceedings, and, on September 14,
      2006, the New York Supreme Court denied that motion. Mr. Grasso filed an appeal
      of that decision.





On October 4, 2006, Mr. Grasso filed a motion for leave to amend his crossclaims
      to add causes of action against the NYSE for termination payments under his
      1999
      and 2003 employment agreements based upon an allegation that he resigned
      (including for “Good Reason”). After the NYSE opposed the motion, Mr. Grasso
      withdrew it.





On October 18, 2006, the appellate court heard oral argument on Mr. Langone’s
      appeal of the denial of his motion for summary judgment on the single cause
      of
      action asserted against him by the New York Attorney General.





On October 19, 2006, the New York Supreme Court entered an order granting the
      motions for summary judgment filed by the NYSE and Mr. Reed and dismissed all
      of
      the crossclaims asserted by Mr. Grasso against the NYSE and Mr. Reed. The court
      granted in part Mr. Grasso’s and Mr. Langone’s motions for summary judgment with
      respect to the New York Attorney General’s claim against the NYSE, dismissing
      that claim to the extent it sought injunctive relief but denying the request
      to
      dismiss the claim to the extent it seeks declaratory relief. Among other rulings
      in the decision, the court granted in part the New York Attorney General’s
      motion for partial summary judgment against Mr. Grasso, finding that Mr. Grasso
      breached his fiduciary duties to the NYSE and that certain payments made to
      Mr.
      Grasso were unlawful and must be returned to the NYSE, and ordered the New
      York
      Attorney General to provide an accounting within 30 days of the court’s
      decision. On November 2, 2006, the New York Attorney General filed an accounting
      stating that Mr. Grasso must disgorge approximately $112.2 million; Mr. Grasso
      has until December 4, 2006 to file any objections to the accounting. Mr. Grasso
      filed an appeal of the court’s decision, and also has indicated that he intends
      to seek an order from the appellate court staying the trial court from
      conducting any accounting of amounts allegedly owed.





At December 31, 2003, the NYSE accrued compensation expense amounting to $36.0
      million related to Mr. Grasso. This accrual, which remains current, reflects
      management's interpretation of the provisions contained in the most recent
      employment agreement, which provides terms outlining certain payments to which
      Mr. Grasso could be entitled upon ceasing employment with the NYSE, if that
      agreement is found to be valid and the payments were deemed to be allowable
      and
      appropriate under the law.





*NYSE/Archipelago
      Merger-Related Litigation*





On
      November 8, 2006, the court heard oral argument on the motion by the NYSE and
      Mr. Thain to dismiss the Hyman and Lief amended complaints and the Rittmaster
      complaint, and reserved decision on the motion.





*Other
      Matters*





NYSE
      Group is defending a number of other actions and investigations, the ultimate
      outcome of which cannot reasonably be determined at this time. In the opinion
      of
      management and legal counsel, the aggregate of all possible losses from all
      such
      other actions and investigations should not have a material adverse effect
      on
      the consolidated financial condition or results of operations of NYSE
      Group.




16




**Note
      12 -**  **Comprehensive
      Income**




The
      following outlines the components of other comprehensive income (in
      thousands):




**Three
                months ended September 30,**
            
            **Nine
                months ended September 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Net
                income
            
            $
            67,965
            
            $
            22,000
            
            $
            159,486
            
            $
            61,006Unrealized
                gains (losses) on available-for-sale securities
            
            
            2,998
            
            
            390
            
            
            2,905
            
            
            (3,230
            )Total
                comprehensive income
            
            $
            70,963
            
            $
            22,390
            
            $
            162,391
            
            $
            57,776


**Note
      13 -**  **Deferred
      Revenue**




Components
      of deferred revenue were as follows (in thousands):




**September
                30, 2006**
            
            **December
                31, 2005**Listing
                fees - original
            
            $
            405,344
            
            $
            414,887Listing
                fees - annual
            
            
            66,677
            
            
            -Registered
                representative and maintenance fees
            
            
            4,440
            
            
            10,180License
                fees
            
            
            12,264
            
            
            100Other
            
            
            6,566
            
            
            9,343Total
                deferred revenue
            
            $
            495,291
            
            $
            434,510Less:
                current portion
            
            $
            174,320
            
            $
            105,313Long-term
                portion
            
            $
            320,971
            
            $
            329,197


The
      long-term portion of the deferred revenue balances represented deferred original
      listing fees, which is a component of the Market segment. The current portion
      of
      the deferred revenue balances will be realized within the following reportable
      segments (in thousands):




**September
                30, 2006**
            
            **December
                31, 2005**Market
            
            $
            164,472
            
            $
            85,960Regulation
            
            
            4,785
            
            
            13,839SIAC
            
            
            5,063
            
            
            5,514Total
            
            $
            174,320
            
            $
            105,313


**Note
      14 -**  **Net
      Capital Requirements**




Certain
      wholly-owned subsidiaries of NYSE Group, Archipelago Securities, LLC (“ARCAS”)
      and Archipelago Trading Services, Inc. (“ATSI”), are registered broker-dealers
      and are subject to net capital requirements under SEC Rule 15c3-1. ATSI computes
      its net capital using the basic method. Under this method, ATSI must maintain
      minimum net capital (as defined), and the ratio of aggregate indebtedness (as
      defined) to net capital may not exceed 15 to 1. ARCAS computes its net capital
      under the alternative method. The method requires that minimum net capital
      not
      be less than the greater of $250,000 or 2% of the aggregate debit items arising
      from customer transactions.




17




As
      of
      September 30, 2006, these subsidiaries were in compliance with their respective
      net capital requirements and their net capital, net capital in excess of
      required net capital, and ratio of aggregate indebtedness to net capital were
      as
      follows (in thousands, except ratios):




Net
                capital:ARCAS
            
            $
            17,610ATSI
            
            
            7,883Net
                capital in excess of required net capital:ARCAS
            
            $
            17,360ATSI
            
            
            7,764Ratio
                of aggregate indebtedness to net capital:ARCAS
            
            
            N/AATSI
            
            
            0.15
                to 1


Advances
      to affiliates, dividend payments and other equity withdrawals are subject to
      certain notification and other provisions of the net capital rule of the SEC
      and
      other regulatory bodies.




NYSE
      Group’s international broker-dealer subsidiaries are subject to capital adequacy
      requirements promulgated by authorities of the countries in which they operate.
      As of September 30, 2006, these subsidiaries had met their capital adequacy
      requirements.




18




**Item
      2.****Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**




You
      should read the following discussions and
      analysis of the financial condition and operations of NYSE Group  together
      with the condensed consolidated financial statements and related notes as well as the
      forward-looking statements included elsewhere in this report.




Certain
      prior period amounts presented in the discussion and analysis have been
      reclassified to conform to the current presentation.





**Overview**




NYSE
      Group was organized on May 2, 2005. As of December 31, 2005 and up until March
      7, 2006, NYSE Group had no assets (other than $200 it received on December
      29,
      2005 from the sale of one share of its common stock to each of the NYSE and
      Archipelago) and had not conducted any material activities other than those
      incident to its formation. However, on March 7, 2006, upon the consummation
      of
      the merger of the NYSE and Archipelago, NYSE Group became the parent company
      of
      the NYSE and Archipelago.




NYSE
      Group is a holding company that, through its subsidiaries, operates two
      securities exchanges: the NYSE and NYSE Arca, Inc. NYSE Group is a leading
      provider of securities listing, trading and market data products and services.
      The NYSE is the world’s largest cash equities exchange. The NYSE is
      approximately three times the size of the next largest cash equities exchange
      in
      the world in terms of aggregate market capitalization of domestic listed
      companies. NYSE Arca operates the first open, all-electronic stock exchange
      in
      the United States and has one of the leading market positions in trading ETFs
      and exchange-listed securities. NYSE Arca, Inc. is also an exchange for trading
      equity options.




As
      of
      September 30, 2006, the NYSE owned two-thirds of the SIAC and reported SIAC’s
      financial results on a consolidated basis. SIAC is an important industry
      resource providing critical automation and communications services to the NYSE,
      AMEX and other organizations to support order processing, trading and the
      reporting of market information, among other functions. SIAC also provides
      system support for certain national market system functions and for important
      regulatory and administrative activities. In addition, SIAC provides
      telecommunication and managed services through its wholly owned subsidiary,
      Sector, to subscribers primarily in the securities industry.




NYSE
      Regulation provides regulatory services (including member firm regulation,
      market surveillance, enforcement, listed company compliance, and arbitration),
      to the NYSE and to NYSE Arca.





**Business
      Development**




***NYSE/Archipelago
      Merger***





On
      April
      20, 2005, the NYSE entered into a definitive merger agreement with Archipelago,
      pursuant to which the NYSE and Archipelago agreed to combine their businesses
      and became wholly owned subsidiaries of NYSE Group, a newly-created, for profit
      and publicly-traded holding company. The merger closed on March 7, 2006. As
      of
      that date, the NYSE and Archipelago became wholly owned subsidiaries of NYSE
      Group. NYSE Group common stock is listed on the NYSE and is traded under the
      symbol “NYX.”





19




In
      the
      merger, each NYSE member received in exchange for its NYSE membership $300,000
      in cash and 80,177 shares of NYSE Group common stock. In addition, a cash
      dividend of $70,571 was declared and paid to each holder of record of a NYSE
      membership as of March 6, 2006. In the merger, the NYSE members had the
      opportunity to make either a cash election to increase the cash portion (and
      decrease the stock portion) of their merger consideration, or a stock election
      to increase the stock portion (and decrease the cash portion) of their merger
      consideration. These elections were subject to proration. The aggregate number
      of shares of NYSE Group common stock issued to all of the NYSE members in the
      merger, together with the aggregate number of shares reserved for issuance
      to
      NYSE employees, equaled approximately 70% of the NYSE Group common stock issued
      and outstanding at the closing of the merger, or approximately 109.5 million
      shares, on a diluted basis.




Also
      in
      the merger: (i) each share of the issued and outstanding shares of Archipelago’s
      common stock was converted automatically into the right to receive one share
      of
      NYSE Group common stock; (ii) all outstanding stock options of Archipelago,
      whether vested or unvested, were converted into options to purchase an
      equivalent number of shares of NYSE Group common stock; and (iii) all
      outstanding restricted stock units of Archipelago were converted into an equal
      number of restricted stock units of NYSE Group common stock. The aggregate
      number of shares (including shares underlying stock options and restricted
      stock
      units) received by Archipelago stockholders, equaled approximately 30% of the
      issued and outstanding shares of NYSE Group common stock at the closing of
      the
      merger, or approximately 46.0 million shares.




As
      a
      result of the merger between the NYSE and Archipelago, NYSE Group expects to
      achieve operational synergies resulting from the consolidation of capabilities
      and elimination of redundancies, and to achieve greater efficiencies from
      increased scale, market integration, more automation and for-profit structure.
      We have identified cost saving opportunities in a number of areas, including
      hiring freezes and headcount reductions, the elimination of overlaps in
      technology, marketing, occupancy, and general and administrative costs, and
      increased efficiencies in our general business processes.




***Selling
      Shareholder Offering***




On
      May
      10, 2006, NYSE Group completed a selling shareholder offering of 28.75 million
      shares of common stock at $61.50 per share, for which NYSE Group received no
      proceeds.




***Combination
      with Euronext N.V.***




On
      May
      22, 2006, NYSE Group proposed a business combination with Euronext which, if
      successful, will create NYSE Euronext, a global marketplace with an expected
      combined market capitalization of approximately $21 billion. Euronext
      is a cross-border exchange providing international services for regulated cash
      markets and derivative
      markets in
      Belgium, France, the United Kingdom, the Netherlands and Portugal. Both
      parties signed a definitive combination agreement on June 1, 2006.
      The
      combination is expected to
      close during
      the first quarter of 2007
      and is
      subject to regulatory approval and the approval of NYSE Group and Euronext
      shareholders. For a discussion of certain risks associated with the combination,
      see Part II, Item 1A “Risk Factors” in this Form 10-Q.




Pursuant
      to the combination agreement, NYSE Group and Euronext intend to combine their
      businesses under NYSE Euronext, a Delaware corporation formed for the purpose
      of
      this transaction. Euronext’s business will be brought under NYSE Euronext
      through an exchange offer and a post closing reorganization, and NYSE Group’s
      business will be brought under NYSE Euronext through a merger.




20




In
      the
      exchange offer, Euronext shareholders will have the right to exchange each
      of
      their Euronext shares for €21.32 in cash and 0.98 of a share of NYSE Euronext
      common stock. Instead of receiving this standard offer consideration, Euronext
      shareholders will have an opportunity to make either a cash election to receive
      all cash for their Euronext shares, or a stock election to receive all stock
      for
      their Euronext shares, subject to proration to ensure that the total amount
      of
      cash paid, and the total number of shares of NYSE Euronext common stock issued,
      in the exchange offer to the Euronext shareholders, as a whole, are equal to
      the
      total amount of cash and number of shares that would have been paid and issued
      if all Euronext shareholders received the standard offer consideration.




Immediately
      after the successful completion of the exchange offer, a wholly owned subsidiary
      of NYSE Euronext will merge with NYSE Group, and, as a result, the surviving
      corporation will become a wholly owned subsidiary of NYSE Euronext, and each
      share of NYSE Group common stock will be converted into the right to receive
      one
      share of NYSE Euronext common stock.




As
      soon
      as possible after the successful completion of the exchange offer and the
      merger, NYSE Euronext intends to effectuate a post-closing reorganization of
      Euronext and its subsidiaries that is intended to result in Euronext becoming
      a
      wholly owned subsidiary of NYSE Euronext. In the post-closing reorganization,
      Euronext shareholders who did not exchange their Euronext shares in the exchange
      offer will generally receive the same consideration that they would have
      received had they tendered their Euronext shares in the exchange offer and
      not
      made either the cash election or the stock election: that is, €21.32 in cash and
      0.98 of a share of NYSE Euronext common stock per Euronext share.




***Purchase
      of Minority Interest in SIAC***




On
      November 1, 2006, NYSE Group completed the purchase of the one-third ownership
      stake in SIAC previously held by AMEX for approximately $40.3 million, as a
      result of which, NYSE Group now fully owns SIAC. In connection with the
      purchase, the SIAC shareholders' agreement and the AMEX’s participation in the
      SIAC facilities management agreement (under which SIAC had previously provided
      technology services to the NYSE and AMEX) were terminated, and SIAC agreed
      to
      provide substantially reduced services to AMEX, as a customer, under a new
      services agreement.





***MatchPoint***




On
      July
      17, 2006, NYSE Group acquired MatchPoint, a financial services technology
      company specializing in call market trading and technologies. MatchPoint has
      developed a proprietary electronic equity crossing system that matches
      aggregated orders at predetermined and distinct times, at prices that are
      derived from the primary market for securities (NYSE, AMEX and Nasdaq), enabling
      MatchPoint technology to operate multiple matches each with a unique benchmark
      pricing model. MatchPoint can also process internal crosses for single
      participants and seamlessly enables residuals to participate in scheduled
      crossing sessions. It is anticipated that MatchPoint's expansive and innovative
      trading technology will enhance the suite of crossing services provided by
      the
      NYSE in the first quarter of 2007.




***Marco
      Polo***




On
      September 18, 2006, NYSE Group announced that it had acquired an equity
      stake in Marco Polo. Through its local exchange and brokerage relationships,
      Marco Polo offers intra-market connectivity and routing to brokers and
      exchanges in more than 40 emerging markets. Together, these markets provide
      investors with access to more than 90% of the MSCI emerging markets index.




***Trade
        Reporting Facility***




21






On
      October 13, 2006, NYSE Group announced that it had entered into discussions
      with NASD to create a trade reporting facility serving NYSE Group customers
      reporting off-exchange trades in all listed national market system stocks.
      NYSE
      Group's trade reporting facility, which is expected to be launched in early
      2007, will conform to the SEC's recent approval of NASD's new trade reporting
      arrangement. It is anticipated that NYSE Group's trade reporting facility will
      enhance the range of trading products and services provided by NYSE Group to
      its
      customers by offering a reliable and competitively priced venue to report
      internally executed transactions.




**Segment
      Reporting**




Subsequent
      to the merger with Archipelago, NYSE Group operates under three reportable
      segments: Market, SIAC Services and Regulation. NYSE Group’s segments are
      managed and operated as three business units and organized based on services
      provided to customers.




Market
      represents primarily the fees earned from: (i) obtaining new listings and
      servicing existing listings on the NYSE and NYSE Arca, Inc., (ii) providing
      access to trade execution, (iii) distributing market information to data
      subscribers and (iv) issuing trading licenses (previously membership
      fees).




SIAC
      Services provides communication and data processing operations and systems
      development functions to the NYSE and third party customers.




Regulation
      provides regulatory services (including member firm regulation, market
      surveillance, enforcement, listed company compliance, and arbitration),
      performed by NYSE Regulation, to the NYSE and NYSE Arca. Regulatory fees are
      paid by member organizations and are primarily assessed based upon their Gross
      FOCUS revenues. In addition, Regulation collects regulatory fines that are
      levied upon members and member organizations.




**Operating
      Data**




NYSE
      Group revenues are affected by many factors, including the number of companies
      listed on the NYSE and NYSE Arca, Inc. (both new and continuing), corporate
      actions by these companies (for example, stock splits and mergers), trading
      activity, demand for data processing, and demand for market information. The
      following table presents selected operating data for the periods presented.
      A
      description of the manner in which the NYSE and NYSE Arca calculate their trading
      volumes and other operating measures is set forth below.




22




Three
                months ended September 30,
            Nine
                months ended September 30,2006
            2005
            2006
            2005**NYSE
                Company listings**(1)**:**NYSE
                listed issuers(2)
            2,704
            2,639
            2,704
            2,639Number
                of new issuer listings(3)
            29
            35
            82
            108**NYSE
                Listed Issues**(4):NYSE
                Group Matched Volume(5)
            108,826
            100,820
            344,061
            304,779NYSE
                Group Handled Volume(6)
            111,584
            102,543
            351,297
            309,549Total
                NYSE Listed Consolidated Volume
            154,161
            128,248
            467,454
            381,186**NYSE
                Group Share of Total Consolidated Volume:**Matched
                Volume(5)
            70.6%
            78.6%
            73.6%
            80.0%Handled
                Volume(6)
            72.4%
            80.0%
            75.2%
            81.2%**NYSE
                Arca and AMEX Listed Issues**:NYSE
                Group Matched Volume(5)
            6,873
            5,083
            20,731
            13,423NYSE
                Group Handled Volume(6)
            7,939
            5,906
            23,925
            15,468Total
                NYSE Arca and AMEX Listed Consolidated Volume
            20,663
            18,076
            67,883
            50,340**NYSE
                Group Share of Total Consolidated Volume**:Matched
                Volume(5)
            33.3%
            28.1%
            30.5%
            26.7%Handled
                Volume(6)
            38.4%
            32.7%
            35.2%
            30.7%**Nasdaq
                Listed Issues**:NYSE
                Group Matched Volume(5)
            24,700
            19,115
            76,781
            62,572NYSE
                Group Handled Volume(6)
            30,022
            23,958
            94,068
            78,618Total
                Nasdaq Listed Consolidated Volume
            117,785
            104,898
            383,437
            339,162**NYSE
                Group Share of Total Consolidated Volume:**Matched
                Volume(5)
            21.0%
            18.2%
            20.0%
            18.4%Handled
                Volume(6)
            25.5%
            22.8%
            24.5%
            23.2%**Exchange-Traded
                Funds******(4),(7):NYSE
                Group Matched Volume(5)
            9,663
            6,041
            29,294
            16,807NYSE
                Group Handled Volume(6)
            10,794
            6,816
            32,617
            18,824Total
                ETF Consolidated Volume
            24,819
            17,743
            75,779
            52,579**NYSE
                Group Share of Total Consolidated Volume:**Matched
                Volume(5)
            38.9%
            34.0%
            38.7%
            32.0%Handled
                Volume(6)
            43.5%
            38.4%
            43.0%
            35.8%**Equity
                Options**(8):NYSE
                Group Options Contracts
            44.0
            32.0
            136.7
            98.3Total
                Consolidated Options Contracts
            429.4
            333.0
            1,345.8
            966.7NYSE
                Group Share of Total
            10.3%
            9.6%
            10.2%
            10.2%**Market
                Information**(9)**:**Tape
                A share of trades (%)
            82.0%
            89.8%
            85.0%
            91.1%Tape
                B share of trades (%)
            35.2%
            47.4%
            37.2%
            47.9%Tape
                C share of trades and shares (%)
            24.5%
            21.3%
            23.5%
            21.1%Professional
                subscribers
            417,642
            415,138
            417,642
            415,138**Regulatory
                Fees:**Gross
                FOCUS revenues ($ billions)(10)
            77.6
            49.2
            204.8
            134.0**Data
                Processing Fees:**%
                SIAC revenues from customers other than NYSE
            35.7%
            43.6%
            42.3%
            43.2%**Operating
                Expenses:**Headcount
                (including SIAC employees)
            2,914
            3,389
            2,914
            3,389




23




(1)
            Number
                does not include issuers listed on NYSE Arca, Inc. There were 12
                operating
                companies exclusively listed on NYSE Arca, Inc. as of September 30,
                2006.




(2)
            Number
                of listed operating companies, closed-end funds and ETFs as of period
                end.




(3)
            Includes
                initial public offerings, quotations and transfers from other markets
                of
                common equity securities.




(4)
            Includes
                all NYSE Group Crossing Sessions 1, 2, 3 and
                4.




(5)
            Represents
                the total number of shares of equity securities and ETFs executed
                on NYSE
                Group's exchanges.




(6)
            Represents
                the total number of shares of equity securities and ETFs internally
                matched on the NYSE Group's exchanges or routed to and executed at
                an
                external market center. NYSE Arca routing includes
                odd-lots.




(7)
            Data
                included in previously identified
                categories.




(8)
            Includes
                trading in U.S. equity options contracts, not equity-index
                options.




(9)
            Represents
                the NYSE Group share of qualifying trades for Tapes A and B reported
                by
                NYSE Group to the consolidated tape, as compared to the total number
                of
                qualifying trades for Tapes A and B reported to the consolidated
                tape by
                all other participating market centers. NYSE Group share of Tape
                C
                represents the average of: (i) the share of qualifying trades for
                Tape C
                reported by the NYSE Group to the consolidated tape, as compared
                to the
                total number of qualifying trades for Tape C reported to the consolidated
                tape by all other participating market centers; and (ii) the share
                of
                qualifying share volume for Tape C reported by the NYSE Group to
                the
                consolidated tape, as compared to the total qualifying share volume
                for
                Tape C reported by all other participating market centers. The
                consolidated tape refers to the collection of market data that multiple
                markets make available on a consolidated basis.




(10)
            Gross
                FOCUS revenues represent revenues generated by member broker-dealers
                as
                reported on their ”FOCUS“ report (a report that is required to be filed
                with the SEC). A member broker-dealer's regulatory fee is based on
                the
                revenues reported. The NYSE records revenue on a six-month lag; the
                data
                is provided on this basis.




**Sources
      of Revenues**




Activity
      Assessment




NYSE
      Group pays fees to the SEC pursuant to Section 31 of the Securities Exchange
      Act
      of 1934. These Section 31 fees are designed to recover the costs to the
      government of supervision and regulation of securities markets and securities
      professionals. NYSE Group, in turn, collects activity assessment fees from
      organizations executing trades on the NYSE and NYSE Arca, Inc., and recognizes
      these amounts when invoiced. Fees received are included in cash at the time
      of
      receipt and, as required by law, the amount due to the SEC is remitted
      semiannually and recorded as an accrued liability until paid. The activity
      assessment fees are designed so that they are equal to the Section 31 fees.
      As a
      result, neither the size of Section 31 fees nor the size of activity assessment
      fees has an impact on NYSE Group’s net income.




Transaction




Prior
      to
      August 1, 2006, on the NYSE, trading fees were paid by member organizations
      based on their trading activity. Fees were assessed on a per share basis for
      trading in equity securities. The fees applied to all transactions that took
      place on the NYSE, and the fee amounts varied, based on the size and type of
      trade consummated. There was no fee for small electronic trades. All members
      and
      member organizations paid trading fees except those “$2 brokers” who effect
      transactions only for other member organizations and specialists. There were
      two
      caps that applied to the trading fees (other than fees for






24




trading
      ETFs), and member organizations paid the lesser of  these two fee caps on a
      monthly basis. The first cap was a maximum fixed dollar amount of $600,000
      per
      month. The second was a variable cap equal to 2% of the net commissions that
      a
      member organization earned on the trades it executed on the trading floor.
      As a
      result of these caps, prior to August 1, 2006, fluctuations in trading volumes,
      regardless of direction or magnitude, did not have a significant impact on
      our
      trading fees.




On
      NYSE
      Arca, trading fees are charged to customers for trade execution of equity
      securities and equity options. NYSE Arca earns transaction fees for (i) customer
      orders of equity securities matched internally on NYSE Arca, as well as for
      customer orders routed out, and (ii) customer orders of equity options traded
      or
      cleared through NYSE Arca.




For
      equity securities, NYSE Arca charges a per share fee (denominated in tenths
      of a
      cent per share) to each customer that executes against a buy order or sell
      order
      posted internally. NYSE Arca refers to these customers when they purchase or
      sell securities as “liquidity takers,” as they removed liquidity from NYSE Arca.
      A liquidity taker may be either a purchaser or a seller, and is distinguished
      from a “liquidity provider” generally by the type of buy order or sell order it
      posts on NYSE Arca. NYSE Arca also charges a per share fee (denominated in
      tenths of a cent per share) to customers whose orders of equity securities
      are
      routed out to an external market center displaying the best buy order or sell
      order in the market for a particular security.




On
      June
      30, 2006, NYSE Group announced transaction-pricing changes for NYSE listed
      equities and NYSE Arca traded options which became effective August 1, 2006.
      The
      new pricing includes, but is not limited to, the following changes:





·
            Transaction
                fees on NYSE-listed equities are based on a fixed rate of $0.00025
                per
                share rather than the former variable fee schedule.





·
            The
                monthly cap, referenced above on trading NYSE-listed cash equities,
                was
                increased to $750,000 from $600,000.





·
            The
                2% commission cap for NYSE-listed trading on theNYSEwas
                eliminated.





·
            Free
                system orders on all NYSE-listed equities transactions were eliminated
                (fees for ETF system orders under 5,100 shares continue to be waived).





·
            Specialists
                do not incur transaction fees for trading
                ETFs.





The
      pricing structures of the NYSE and NYSE Arca continue to undergo a fundamental
      examination as part of a broad strategic review of the NYSE Group’s
      opportunities for revenue growth and efficiency improvement and to better
      capture value for the services rendered by aligning more closely transaction
      revenue with executed volume, product expansion and new product development.
      Transaction fees that NYSE Group earns in the future could also depend on the
      outcome of certain regulations and rule changes, such as Regulation
      NMS.





Listing




Companies
      pay listing fees when they initially list on the NYSE or NYSE Arca, Inc., and
      annually thereafter. Listing fees consist of two components: original listing
      fees and other corporate action related fees. Original listing fees, subject
      to
      a minimum and maximum amount, are based on the number of shares that the company
      initially lists with the NYSE or NYSE Arca, Inc. Other corporate action related
      fees are paid by listed companies in connection with corporate actions involving
      the




25




issuance
      of new shares to be listed on the NYSE or NYSE Arca, Inc., such as stock splits,
      rights issues, sales of additional securities, and mergers and acquisitions,
      which are subject to a minimum and maximum fee. Annual fees are charged based
      on
      the number of outstanding shares of the listed company at the end of the
      previous year. These fees are recognized on a pro-rata basis over the calendar
      year. Original listing fees are recognized on a straight-line basis over
      estimated service periods of 10 years for the NYSE and 5 years for NYSE Arca.
      Unamortized balances are recorded as deferred revenue on the consolidated
      statements of financial condition.




Data
      Processing




SIAC
      charges data  processing
      fees to customers other than NYSE Group (fees charged to NYSE Group are
      eliminated in consolidation) for communication services, data processing
      operations and systems development functions. SIAC’s core business operates on a
      cost recovery model driven by its customers’ demands. Under this model, any
      increase or decrease in SIAC’s operating expenses results in a corresponding
      change in its revenues. In addition, SIAC earns revenues through its subsidiary,
      Sector, which offers an array of communications and data processing services,
      primarily to the broker-dealer community.




Market
      Data




NYSE
      Group collects market information fees principally for consortium-based data
      products and, to a lesser extent, for NYSE proprietary data products.
      Consortium-based data fees are determined by securities industry plans.
      Consortium-based data revenues that coordinated market data distribution
      generates (net of joint processing and administration costs) are distributed
      to
      participating markets on the basis of their respective number of trades. Last
      sale prices and quotes in NYSE-listed securities are disseminated through “Tape
      A,” which constitutes the majority of the NYSE’s revenues from consortium-based
      market data revenues. NYSE Group also receives a share of the revenues from
      “Tape B” and “Tape C,” which represents data related to trading of certain
      securities that are listed on Nasdaq, AMEX, and other regional exchanges,
      including ETFs. These revenues are influenced by demand for the data by
      professional and non-professional subscribers, as well as NYSE Group’s share of
      trades. In addition, NYSE Group receives fees for television broadcasts, vendor
      access and other usage fees related to per quote or per trade data. NYSE Group
      proprietary products make available market data covering activity that takes
      place solely on the NYSE and NYSE Arca’s markets, independent of activity on
      other markets.




Regulatory




Regulatory
      fees are principally comprised of member regulation fees and market surveillance
      fees collected by NYSE Group. Member regulation fees are based on member
      organizations’ gross FOCUS revenues, that is, revenues generated by member
      broker-dealers and reported on a six-month lag basis—as well as on the number of
      branch offices of member broker-dealers, and the number of registered
      representatives. Market surveillance fees are charged to specialists and floor
      brokers to recover some of the costs of overseeing trading on the NYSE floor.
      Other regulatory fees include revenue from applications, registration of branch
      offices and specialists, as well as fees for certain licensing examinations
      necessary to operate in the securities industry.




Licensing,
      Facility and Other




On
      January 4, 2006, the NYSE completed a modified Dutch auction, as a result of
      which it
      sold  1,274
      trading licenses at an annualized price of $49,290 per license, subject to
      SEC
      approval of applicable NYSE rules, which approval was obtained on February
      27,
      2006. The NYSE has made available a maximum of 1,366 trading licenses, and
      any
      unsold trading licenses can be purchased at a 10% premium






26




to
      the
      established auction price, on a pro rata basis, during the course of 2006.
      Currently, we anticipate approximately $51 million in revenue from trading
      licenses for the period from March 8 to December 31, 2006, which
      is
      recognized on a straight-line basis over this period. There could be significant
      uncertainty regarding the number and price of trading licenses that will be
      sold
      in a given year, which could result in fluctuation in the amount of trading
      license fees we receive each year.




Facility
      and other fees primarily comprise fees received for services provided to
      specialists, brokers and clerks physically located on the NYSE floor that enable
      them to engage in the purchase and sale of securities on the trading floor.
      These services include booth and post space, communication, trading analysis
      and
      technology.




**Components
      of Expenses**




Section
      31 Fees




See
      “Sources of Revenues—Activity Assessment” above.




Merger
      Expenses and Related Exit Costs




Merger
      expenses and related exit costs consist of severance costs, legal, printing
      and
      accounting fees incurred in connection with the May 2006 selling shareholder
      offering of our common stock, and professional fees and other expenses directly
      attributable either to the merger between the NYSE and Archipelago or the
      proposed combination with NYSE Group and Euronext.





Compensation




NYSE
      Group’s compensation expense includes employee salaries, incentive compensation
      (including stock-based compensation) and related benefits expense, including
      pension, medical, postretirement medical, and SERP charges. Part-time help,
      primarily related to security personnel at the NYSE, is also recorded in this
      category.




Liquidity
      Payments




To
      enhance the liquidity of its system, NYSE Arca pays a small fee per share
      (denominated in tenths of a cent per share) to participants, referred to as
      “liquidity providers,” that post buy orders and sell orders on NYSE Arca, when
      the quote is executed against, or “hit,” by liquidity takers purchasing or
      selling securities internally on NYSE Arca.




Routing
      and Clearing




NYSE
      Arca
      incurs routing charges when NYSE Arca does not have the best buy or sell order
      in the market for a security that a customer is trying to buy or sell on NYSE
      Arca. In that case, NYSE Arca routes the customer’s order to the external market
      center that displays the best buy order or sell order. The external market
      center charges NYSE Arca a fee per share (denominated in tenths of a cent per
      share) for routing to its system.




In
      addition, NYSE Arca incurs clearance, brokerage and related transaction
      expenses, which primarily include costs incurred in self-clearing activities,
      service fees paid per trade to exchanges for trade execution, and costs incurred
      due to erroneous trade execution.




27




Systems
      and Communications




NYSE
      Group’s systems and communications expense includes: (i) certain costs for
      development and maintenance of trading, regulatory and administrative systems,
      (ii) investments in system capacity, reliability and security and
      (iii) network connection with its customers and its data centers, as well as
      connectivity to various other market centers.




Professional
      Services




NYSE
      Group’s professional services expense includes consulting charges related to
      various technological and operational initiatives, as well as legal and audit
      fees. Our historical spending related to professional services consists
      principally of legal and consulting expenses. While we are focused on reducing
      costs, including professional services costs, we cannot assure you that our
      professional services expenses will decline in the future. Under certain
      circumstances, particularly as we pursue our business strategy, we may be
      required to incur significant professional services costs, such as legal
      expenses.




Depreciation
      and Amortization




This
      item
      includes costs from depreciating fixed assets and amortizing intangible assets
      over their estimated useful lives. It also included depreciation of computer
      hardware and capitalized software.




Occupancy




Occupancy
      includes costs related to NYSE Group’s leased premises, as well as real estate
      taxes and maintenance of owned premises.




Marketing
      and Other




Marketing
      and other expenses includes advertising, printing and promotion expenses,
      insurance premiums, travel and entertainment expenses as well as other
      administrative expenses.




**Regulatory
      Fine Income**




Regulatory
      fine income is generated from fines levied by NYSE Regulation, which regulates
      and monitors the activities on our securities exchanges and enforces issuer
      and
      member organization compliance with applicable law and the rules of the
      exchanges. We expect that NYSE Regulation will continue to levy fines for
      regulatory purposes as appropriate. The frequency in which fines may be levied
      and their amount will vary based upon the actions of participants on the NYSE
      and NYSE Arca. Regulatory fines are used for regulatory purposes.




**Results
      of Operations**




We
      have treated  the
      merger of the
      NYSE and Archipelago as a purchase business combination for accounting purposes,
      with the NYSE designated as the business and accounting acquirer. As a result,
      the historical results of the NYSE are the historical results of NYSE Group.
      The
      results of operations of NYSE Arca have been included in the results of
      operations of NYSE Group since March 8, 2006.




28


Three
      Months Ended September 30, 2006 Versus Three Months Ended September 30,
      2005




The
      following table sets forth NYSE Group’s consolidated statements of income for
      the three months ended September 30, 2006 and 2005, as well as the percentage
      increase or decrease for each consolidated statement of income item for the
      three months ended September 30, 2006, as compared to such item for the three
      months ended September 30, 2005:




**Three
                months ended September 30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)**RevenuesActivity
                assessment
            
            $
            163.4
            
            $
            198.7
            
            
            (17.8)%Transaction
            
            
            180.0
            
            
            32.6
            
            
            452.1%Listing
            
            
            89.0
            
            
            85.4
            
            
            4.2%Market
                data
            
            
            57.5
            
            
            43.0
            
            
            33.7%Data
                processing
            
            
            27.7
            
            
            44.1
            
            
            (37.2)%Regulatory
            
            
            50.1
            
            
            34.4
            
            
            45.6%Licensing,
                facility and other
            
            
            35.2
            
            
            14.2
            
            
            147.9%Total
                revenues
            
            
            602.9
            
            
            452.4
            
            
            33.3%Section
                31 fees
            
            
            (163.4
            )
            
            (198.7
            )
            
            (17.8)%Merger
                expenses and related exit costs
            
            
            (7.7
            )
            
            -
            
            
            100.0%Compensation
            
            
            (130.2
            )
            
            (124.8
            )
            
            4.3%Liquidity
                payments
            
            
            (66.2
            )
            
            -
            
            
            100.0%Routing
                and clearing
            
            
            (20.1
            )
            
            -
            
            
            100.0%Systems
                and communications
            
            
            (30.4
            )
            
            (29.0
            )
            
            4.8%Professional
                services
            
            
            (28.3
            )
            
            (29.3
            )
            
            (3.4)%Depreciation
                and amortization
            
            
            (35.1
            )
            
            (25.9
            )
            
            35.5%Occupancy
            
            
            (22.9
            )
            
            (17.6
            )
            
            30.1%Marketing
                and other
            
            
            (23.9
            )
            
            (14.5
            )
            
            64.8%Regulatory
                fine income
            
            
            10.7
            
            
            10.9
            
            
            (1.8)%Operating
                income
            
            
            85.4
            
            
            23.5
            
            
            263.4%Investment
                and other income, net
            
            
            29.4
            
            
            13.4
            
            
            119.4%Income
                before taxes and minority interest
            
            
            114.8
            
            
            36.9
            
            
            211.1%Provision
                for income taxes
            
            
            (46.2
            )
            
            (14.1
            )
            
            227.7%Minority
                interest in income of consolidated subsidiary
            
            
            (0.6
            )
            
            (0.8
            )
            
            (25.0)%Net
                income
            
            $
            68.0
            
            $
            22.0
            
            
            209.1%


**Consolidated
      Results**




For
      the
      three months ended September 30, 2006, the results of operations of NYSE Group
      included the results of the NYSE, SIAC and the results of operations of NYSE
      Arca following the March 7, 2006 merger with Archipelago. For the same period
      a
      year ago, the results of operations of NYSE Group only included the results
      of
      the NYSE and SIAC.




For
      the
      three months ended September 30, 2006, NYSE Group reported revenues (excluding
      activity assessment fees), operating income and net income of $439.5 million,
      $85.4 million and $68.0 million, respectively. This compares to revenues
      (excluding activity assessment fees), operating income and net income of $253.7
      million, $23.5 million and $22.0 million, respectively, for the three months
      ended September 30, 2005.




The
      $185.8 million increase in revenues (excluding activity assessment fees), $61.9
      million increase in operating income and $46.0 million increase in net income
      for the period reflect the following principal factors:




29




*Increased
      revenues* - NYSE
      Arca’s results of operations were consolidated for the three months ended
      September 30, 2006 and contributed revenues of $165.3 million (excluding
      activity assessment fees), which was the primary driver of the period over
      period increase.




*Increased
      operating income* - The
      period over period increase in operating income of $61.9 million was the result
      of NYSE Arca’s contribution to operating income of $35.9 million as well as
      other revenue growth and overall operating efficiencies as we continue to meet
      our integration goals.




*Improved
      net income* - Period
      over period, net income increased $46.0 million including $23.1 million related
      to NYSE Arca, revenue growth and overall operating efficiencies.




**Segment
      Results**




Subsequent
      to the merger between the NYSE and Archipelago, NYSE Group operates under three
      reportable segments: Market, SIAC Services and Regulation. NYSE Group’s segments
      are managed and operated as three business units and organized based on services
      provided to customers.




Market
      represents primarily the fees earned from: (i) obtaining new listings and
      servicing existing listings on the NYSE and NYSE Arca, Inc., (ii) providing
      access to trade execution, (iii) distributing market information to data
      subscribers and (iv) issuing trading licenses (previously membership
      fees).




SIAC
      Services provides communication and data processing operations and systems
      development functions to the NYSE and third party customers.




Regulation
      provides regulatory services (including member firm regulation, market
      surveillance, enforcement, listed company compliance, and arbitration),
      performed by NYSE Regulation, to the NYSE and NYSE Arca. Regulatory fees are
      paid by member organizations and are primarily assessed based upon their Gross
      FOCUS revenues. In addition, Regulation collects regulatory fines that
      are levied upon members and member organizations.




Market
      Segment Results - Revenues




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)**Activity
                assessment
            
            $
            163.4
            
            $
            198.7
            
            
            (17.8)%Transaction
            
            
            180.0
            
            
            32.6
            
            
            452.1%Listing
            
            
            89.0
            
            
            85.4
            
            
            4.2%Market
                data
            
            
            57.5
            
            
            43.0
            
            
            33.7%Market
                services provided to Regulation
            
            
            28.4
            
            
            28.1
            
            
            1.1%Licensing,
                facility and other
            
            
            35.2
            
            
            14.2
            
            
            147.9%Total
                revenues
            
            $
            553.5
            
            $
            402.0
            
            
            37.7%


*Transaction* - For
      the three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, transaction fees increased by $147.4 million, or 452.1%,
      primarily as a result of NYSE Arca’s contribution since the completion of the
      merger with Archipelago on March 7, 2006.




*Listing* - The
      following table sets forth the revenues from listing fees calculated in
      accordance with U.S. generally accepted accounting principles (“as reported”)
      and as would be reported on a basis without giving effect to U.S. generally
      accepted accounting principles (“billed basis”). NYSE Group believes that the
      presentation of billed basis revenues, as they relate to original fees, is
      a
      good indicator of






30




current
      listing fee activity as billed basis information excludes the effects of
      recognizing revenues related to original fees over periods ranging from 5 to
      10
      years.




**Three
                months ended September 30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)****As
                reported**
            
            **As
                billed**
            
            **As
                reported**
            
            **As
                billed**
            
            **As
                reported**
            
            **As
                billed**Annual
                fees
            
            $
            66.4
            
            $
            66.4
            
            $
            62.6
            
            $
            62.6
            
            
            6.1%
            
            
            6.1%Original
                fees
            
            
            22.6
            
            
            17.5
            
            
            22.8
            
            
            21.5
            
            
            0.8%
            
            
            (18.6)%$
            89.0
            
            $
            83.9
            
            $
            85.4
            
            $
            84.1
            
            
            4.2%
            
            
            (0.2)%


For
      the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, listing fee revenue increased $3.6 million, or 4.2%, on
      an
      as reported basis.




Listing
      fees are primarily derived from annual listing fees and original listing fees.
      Original listing fees are deferred and recognized over the estimated service
      periods ranging from 5 to 10 years. The difference between the as reported
      revenues and the billed basis revenues is due to the amortization of listing
      fees in accordance with U.S. generally accepted accounting
      principles.




Annual
      listing fees totaled $66.4 million on both an as reported and billed basis
      for
      the three months ended September 30, 2006, compared with $62.6 million on both
      an as reported and billed basis for the three months ended September 30, 2005,
      an increase of 6.1%. The period over period improvement is due to the increase
      in aggregate shares billed at the beginning of the year, from approximately
      387
      billion to 408 billion, as well as new listings of shares during the year,
      which
      generate annual fees for the period of the year listed. Annual listing fees
      are
      recognized on a pro-rata basis over the calendar year.




Original
      listing fees amounted to $22.6 million on an as reported basis. On a billed
      basis, original listing fees totaled $17.5 million for the three months ended
      September 30, 2006,  a
      decrease of $4.0 million, or 18.6%, compared to the as billed original listing
      fees for the three months ended September 30, 2005, primarily due to a change
      in
      pricing and a reduction of corporate actions period over period.




*Market
      Data* - For
      the three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, market data fees increased $14.5 million, or 33.7%,
      primarily from the contribution of NYSE Arca’s operations, following the
      completion of the merger between the NYSE and Archipelago on March 7,
      2006.




*Market
      services provided to Regulation* - For
      the three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, market services provided to Regulation increased $0.3
      million, or 1.1%. These services, which include costs associated with supporting
      IT infrastructure, finance, human resources and other administrative functions,
      are provided by Market to support the operations of Regulation.




*Licensing,
      facility and other* - For
      the three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, licensing and facility fees increased $21.0 million, or
      147.9%. License fees represented $15.7 million of the increase. Also driving
      the
      increase was the new pricing for certain facility charges implemented in January
      2006. NYSE Group did not generate licensing fees in the same period a year
      ago.




31




SIAC
      Services Segment Results - Revenue




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)**Data
                processing - non- NYSE
            
            $
            27.7
            
            $
            44.1
            
            
            (37.2)%Data
                processing - NYSE
            
            
            51.5
            
            
            61.5
            
            
            (16.3)%Total
                revenues
            
            $
            79.2
            
            $
            105.6
            
            
            (25.0)%





*Data
      Processing Fees—Non-NYSE* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, data processing fees decreased $16.4 million, or 37.2%,
      to
      $27.7 million. The decline is due to the continued reduction in services
      provided to SIAC’s major customers and lower revenues from the communication
      services of Sector.




*Data
      Processing Fees—NYSE* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, data processing fees decreased $10.0 million, or 16.3%,
      to
      $51.5 million. These fees decreased due to cost reduction
      initiatives.




Regulation
      Segment Results - Revenues




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)**Regulatory
            
            $
            50.1
            
            $
            34.4
            
            
            45.6%Regulatory
                services provided to Market
            
            
            29.4
            
            
            28.2
            
            
            4.3%Total
                revenues
            
            $
            79.5
            
            $
            62.6
            
            
            27.0%





*Regulatory
      Fees* - For
      the three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, regulatory fees increased $15.7 million, or 45.6%, to $50.1
      million. For the three months ended September 30, 2006, NYSE Arca contributed
      regulatory fees of $3.0 million. The remaining $12.7 million increase was due
      to
      higher reported Gross FOCUS revenues ($77.6 billion compared to $49.2 billion
      period over period).




*Regulatory
      services provided to Market* - For
      the three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, regulatory services provided to Market increased $1.2
      million or 4.3%. These services, which include costs associated with
      surveillance, examination and enforcement with respect to Market activities,
      and
      overseeing compliance by listed companies, are provided by Regulation. The
      increase primarily reflects increased compensation costs for cash awards granted
      to Regulation employees following the merger between the NYSE and
      Archipelago.




32




Market
      Segment Results - Expenses




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)**Section
                31 fees
            
            $
            163.4
            
            $
            198.7
            
            
            (17.8)%Merger
                expenses and related exit costs
            
            
            2.9
            
            
            -
            
            
            100.0%Compensation
            
            
            56.5
            
            
            45.1
            
            
            25.3%Liquidity
                payments
            
            
            66.2
            
            
            -
            
            
            100.0%Routing
                and clearing
            
            
            20.1
            
            
            -
            
            
            100.0%Regulatory
                services provided to Market
            
            
            29.4
            
            
            28.2
            
            
            4.3%Systems
                and communications
            
            
            11.2
            
            
            4.4
            
            
            154.5%SIAC
                support (1)
            
            
            51.5
            
            
            61.5
            
            
            (16.3)%Professional
                services
            
            
            18.0
            
            
            18.5
            
            
            (2.7)%Depreciation
                and amortization
            
            
            27.8
            
            
            14.9
            
            
            86.6%Occupancy
            
            
            11.5
            
            
            7.6
            
            
            51.3%Marketing
                and other
            
            
            20.8
            
            
            10.6
            
            
            96.2%Total
                expenses
            
            $
            479.3
            
            $
            389.5
            
            
            23.1%


(1)
            Market’s
                SIAC Support expense will not equal SIAC Services’ revenues from Data
                Processing Fees - NYSE as certain fees billed to the NYSE by SIAC
                relate
                to software developed for the NYSE’s internal use, and as a result a
                portion of these fees incurred during the application development
                stage
                has been capitalized.




*Merger
      expenses and related exit costs* . For
      the
      three months ended September 30, 2006, Market incurred $2.9 million in merger
      expenses and related exit costs consisting of severance and other professional
      fees incurred in connection with both the integration of the Archipelago
      businesses and the contemplated combination between NYSE Group and Euronext.
      NYSE Group did not incur any similar expenses in the same period a year ago.





Market
      Compensation




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)**Salaries
                and bonus
            
            $
            42.0
            
            $
            32.9
            
            
            27.7%Stock
                based compensation
            
            
            3.6
            
            
            -
            
            
            100.0%Benefits
                and other
            
            
            10.9
            
            
            12.2
            
            
            (10.6)%$
            56.5
            
            $
            45.1
            
            
            25.3%


*Compensation.* For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, compensation increased $11.4 million, or 25.3%. The
      employees of NYSE Arca accounted for $14.3 million of compensation for the
      three
      months ended September 30, 2006. Excluding the impact of NYSE Arca’s
      consolidation and stock based compensation during the three months ended
      September 30, 2006, compensation decreased by $6.5 million primarily due to
      cost
      savings initiatives. NYSE Group did not record any stock-based compensation
      in
      the same period a year ago.




*Liquidity
      payments* .
      For the
      three months ended September 30, 2006, NYSE Arca incurred liquidity payments
      of
      $66.2 million. NYSE Group did not incur any similar expenses in the same period
      a year ago.




*Routing
      and clearing* .
      For the
      three months ended September 30, 2006, NYSE Arca incurred routing and clearing
      fees of $20.1 million. NYSE Group did not incur any similar expenses in the
      same
      period a year ago.




33




*Regulatory
      services provided to Market* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, Regulation support costs increased $1.2 million or 4.3%.
      The
      increase primarily reflects increased compensation costs for cash awards granted
      to Regulation employees following the merger with Archipelago.




*Systems
      and SIAC Support* .
      For the
      three months ended September 30, 2006, compared to three months ended September
      30, 2005, systems related costs decreased $3.2 million, or 4.9%. For the three
      months ended September 30, 2006, the operations of NYSE Arca accounted for
      $5.3
      million of the $11.2 million of systems and communications. SIAC support costs
      decreased by 16.3% to $51.5 million due to structural cost effectiveness
      efforts, which resulted in lower data processing operations and systems
      development costs, lower headcount and increased utilization rates.




*Professional
      Services* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30 , 2005,
      professional services decreased $0.5 million or 2.7%. For the three months
      ended
      September 30, 2006, the operation of NYSE Arca accounted for $4.0 million of
      the
      $18.0 million of professional services. The decrease was primarily due to
      reduced legal fees and the achievement of certain integration
      synergies.




*Depreciation
      and Amortization* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, depreciation and amortization increased $12.9 million,
      or
      86.6%. The operations of NYSE Arca represented $9.2 million of the increase
      following the March 7, 2006 merger with Archipelago. The remaining $3.7 million
      increase was associated with capital expenditures on technology and
      infrastructure.




*Occupancy* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, occupancy costs increased $3.9 million or 51.3%, which
      was
      primarily the result of the consolidation of NYSE Arca’s operations following
      the completion of the March 7, 2006 merger with Archipelago.




*Marketing
      and other* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, marketing and other expenses increased $10.2 million, or
      96.2%. The operation of NYSE Arca accounted for $5.0 million of marketing and
      other. The remaining $5.2 million increase was primarily as a result of
      continued increase in advertising and promotion activity, as well as higher
      insurance premiums and additional expenses incurred as a public
      company.




SIAC
      Services Segment Results - Expenses




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)**Merger
                expenses and related exit costs
            
            $
            4.8
            
            $
            -
            
            
            100.0%Compensation
            
            
            47.0
            
            
            54.9
            
            
            (14.4)%Systems
                and communications
            
            
            16.0
            
            
            20.1
            
            
            (20.4)%Professional
                services
            
            
            7.8
            
            
            11.1
            
            
            (29.7)%Depreciation
                and amortization
            
            
            6.3
            
            
            9.9
            
            
            (36.4)%Occupancy
            
            
            8.6
            
            
            7.4
            
            
            16.2%Marketing
                and other
            
            
            1.0
            
            
            1.6
            
            
            (37.5)%Total
                expenses
            
            $
            91.5
            
            $
            105.0
            
            
            (12.9)%





34




*Merger
      expenses and related exit costs* .
      For the
      three months ended September 30, 2006, SIAC Services incurred $4.8 million
      in
      merger expenses and related exit costs consisting of lease terminations and
      related exit costs in connection with the integration of the Archipelago
      businesses. NYSE Group did not incur any similar expenses in the same period
      a
      year ago.





SIAC
      Services Compensation




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)**Salaries
                and bonus
            
            $
            35.1
            
            $
            42.2
            
            
            (16.8)%Stock
                based compensation
            
            
            1.9
            
            
            -
            
            
            100.0%Benefits
                and other
            
            
            10.0
            
            
            12.7
            
            
            (21.3)%$
            47.0
            
            $
            54.9
            
            
            (14.4)%


*Compensation* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, compensation decreased $7.9 million, or 14.4%. This decrease
      was primarily due to cost reduction initiatives and the resulting decrease
      in
      average headcount, partially offset by $1.9 million of stock based compensation
      recognized for restricted stock units granted on March 7, 2006, the date that
      the merger between the NYSE and Archipelago was completed.




*Systems
      and communications* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, systems and communication expenses decreased $4.1 million,
      or 20.4%, to $16.0 million, primarily as a result of cost containment
      initiatives.




*Professional
      Services* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, professional services decreased $3.3 million, or 29.7%,
      to
      $7.8 million. Lower average contract staff and decreased temporary support
      for
      trading operations contributed to the reduction.




*Depreciation
      and Amortization* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, depreciation and amortization expense decreased $3.6
      million, or 36.4%, to $6.3 million, as the number of assets reaching full
      depreciation outpaced capital expenditures.




*Occupancy* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, occupancy costs increased by $1.2 million, or 16.2%, to
      $8.6
      million due to increased operating expenses.




*Marketing
      and other* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, marketing and other expenses decreased $0.6 million to
      $1.0
      million.




35




Regulation
      Segment Results - Expenses




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Compensation
            
            $
            28.6
            
            $
            27.4
            
            
            4.4
            %Market
                services provided to Regulation
            
            
            28.4
            
            
            28.1
            
            
            1.1
            %Systems
                and communications
            
            
            0.4
            
            
            0.6
            
            
            (33.3)
            %Professional
                services
            
            
            3.4
            
            
            1.0
            
            
            240.0
            %Depreciation
                and amortization
            
            
            1.0
            
            
            1.1
            
            
            (9.1)
            %Occupancy
            
            
            2.7
            
            
            2.7
            
            
            -
            %Marketing
                and other
            
            
            2.2
            
            
            2.2
            
            
            -
            %Total
                expenses
            
            $
            66.7
            
            $
            63.1
            
            
            5.7
            %


Regulation
      Compensation




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Salaries
                and bonus
            
            $
            22.8
            
            $
            20.8
            
            
            9.6
            %Deferred
                compensation award
            
            
            1.8
            
            
            -
            
            
            100.0
            %Benefits
                and other
            
            
            4.0
            
            
            6.6
            
            
            (39.4)
            %$
            28.6
            
            $
            27.4
            
            
            4.4
            %


*Compensation* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, compensation increased $1.2 million, or 4.4%, to $28.6
      million. This increase was primarily due to $1.8 million of cash awards granted
      to NYSE employees on March 7, 2006, the date that the merger between the NYSE
      and Archipelago was completed.




*Market
      services provided to Regulation* .
      For the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, market support costs increased $0.3 million, or 1.1%.




*Professional
      services.* For
      the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, professional services increased $2.4 million, to $3.4
      million. These costs increased as newly established mandatory regulatory audits
      commenced during 2006.




Regulation’s
      other operating expenses, including systems and communications, depreciation
      and
      amortization as well as marketing and general and administrative expenses were
      relatively stable period over period.




Regulatory
      Fine Income




For
      the
      three months ended September 30, 2006, compared to the three months ended
      September 30, 2005, fine income decreased $0.2 million to $10.7 million.
      Regulatory fines result from actions taken by Regulation in its oversight of
      Market constituents and accordingly may vary period over period.




36




Investment
      and Other Income, Net




The
      components of investment and other income, net, were as follows:




**Three
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**Investment
                income, net
            
            $
            12.2
            
            $
            9.3DTCC
                settlement gain
            
            
            10.8
            
            
            -Other
                income
            
            
            6.4
            
            
            4.1Total
            
            $
            29.4
            
            $
            13.4




The
      increase in investment income, net, is primarily attributable to an increase
      in
      the average interest bearing investment portfolio and higher interest rates.
      DTCC settlement gain reflects a one-time payment from certain DTCC subsidiaries
      in connection with the termination of their service agreement with SIAC. NYSE
      Group’s share (net of minority interest of $3.6 million) of the one-time
      settlement gain was $7.2 million. The increase in other income primarily relates
      to insurance reimbursements received which may vary period over
      period.




Income
      Taxes




The
      consolidated effective tax rate for the three months ended September 30, 2006
      and 2005 was 40.3% and 38.2%, respectively. For the three months ended September
      30, 2006, we provided for income taxes at a 40.5% combined federal, state and
      local tax rate.




37


Nine
      Months Ended September 30, 2006 Versus Nine Months Ended September 30,
      2005




The
      following table sets forth NYSE Group’s consolidated statements of income for
      the nine months ended September 30, 2006 and 2005, as well as the percentage
      increase or decrease for each consolidated statement of income item for the
      nine
      months ended September 30, 2006, as compared to such item for the nine months
      ended September 30, 2005:




**Nine
                months ended September 30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**RevenuesActivity
                assessment
            
            $
            492.4
            
            $
            433.4
            
            
            13.6
            %Transaction
            
            
            454.1
            
            
            108.4
            
            
            318.9
            %Listing
            
            
            266.3
            
            
            256.9
            
            
            3.7
            %Market
                data
            
            
            166.1
            
            
            133.4
            
            
            24.5
            %Data
                processing
            
            
            109.0
            
            
            136.7
            
            
            (20.3)
            %Regulatory
            
            
            135.3
            
            
            96.7
            
            
            39.9
            %Licensing,
                facility and other
            
            
            94.2
            
            
            42.2
            
            
            123.2
            %Total
                revenues
            
            
            1,717.4
            
            
            1,207.7
            
            
            42.2
            %Section
                31 fees
            
            
            (492.4
            )
            
            (433.4
            )
            
            13.6
            %Merger
                expenses and related exit costs
            
            
            (21.0
            )
            
            -
            
            
            100.0
            %Compensation
            
            
            (436.8
            )
            
            (381.8
            )
            
            14.4
            %Liquidity
                payments
            
            
            (160.0
            )
            
            -
            
            
            100.0
            %Routing
                and clearing
            
            
            (49.7
            )
            
            -
            
            
            100.0
            %Systems
                and communications
            
            
            (91.0
            )
            
            (92.7
            )
            
            (1.8)
            %Professional
                services
            
            
            (85.5
            )
            
            (90.3
            )
            
            (5.3)
            %Depreciation
                and amortization
            
            
            (99.4
            )
            
            (78.5
            )
            
            26.6
            %Occupancy
            
            
            (62.9
            )
            
            (51.6
            )
            
            21.9
            %Marketing
                and other
            
            
            (70.2
            )
            
            (46.3
            )
            
            51.6
            %Regulatory
                fine income
            
            
            33.8
            
            
            32.8
            
            
            3.0
            %Operating
                income
            
            
            182.3
            
            
            65.9
            
            
            176.6
            %Investment
                and other income, net
            
            
            63.3
            
            
            36.6
            
            
            73.0
            %Gain
                on sale of equity investment
            
            
            20.9
            
            
            -
            
            
            100.0
            %Income
                before taxes and minority interest
            
            
            266.5
            
            
            102.5
            
            
            160.0
            %Provision
                for income taxes
            
            
            (104.5
            )
            
            (40.3
            )
            
            159.3
            %Minority
                interest in income of consolidated subsidiary
            
            
            (2.5
            )
            
            (1.2
            )
            
            108.3
            %Net
                income
            
            $
            159.5
            
            $
            61.0
            
            
            161.5
            %


**Consolidated
      Results**




For
      the
      nine months ended September 30, 2006, the results of operations of NYSE Group
      included the results of the NYSE, SIAC and the results of operations of NYSE
      Arca since March 7, 2006, the date that the merger between the NYSE and
      Archipelago was completed. For the same period a year ago, the results of
      operations of NYSE Group only included the results of the NYSE and
      SIAC.




For
      the
      nine months ended September 30, 2006, NYSE Group reported revenues (excluding
      activity assessment fees), operating income and net income of $1,225.0 million,
      $182.3 million and $159.5 million, respectively. This compares to revenues
      (excluding activity assessment fees), operating income and net income of $774.3
      million, $65.9 million and $61.0 million, respectively, for the nine months
      ended September 30, 2005.




38




The
      $450.7 million increase in revenues (excluding activity assessment fees), $116.4
      million increase in operating income and $98.5 million increase in net income
      for the period reflect the following principal factors:




*Increased
      revenues* - NYSE
      Arca’s results of operations have been consolidated since March 8, 2006 and
      contributed revenues of $391.9 million (excluding activity assessment fees),
      which was the primary driver of the period over period increase.




*Increased
      operating income*  - The
      period over period increase in operating income of $116.4 million was the result
      of: (i) NYSE Arca’s contribution to operating income of $81.8 million for the
      nine months ended September 30, 2006 and (ii) focus on reduction of costs and
      increased efficiencies, partially offset by $37.3 million of compensation
      expense recorded at the time of the merger following the immediate vesting
      of
      approximately 600,000 restricted stock units granted to NYSE employees, and
      the
      immediate vesting of other compensation arrangements with NYSE Regulation
      employees.




*Improved
      net income* - Period
      over period, net income increased $98.5 million primarily as a result of
      increased operating revenue as well as $20.9 million gain recognized on the
      sale
      of shares of DTCC common stock to certain DTCC participants in March
      2006.




**Segment
      Results**




Market
      Segment Results - Revenues




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Activity
                assessment
            
            $
            492.4
            
            $
            433.4
            
            
            13.6
            %Transaction
            
            
            454.1
            
            
            108.4
            
            
            318.9
            %Listing
            
            
            266.3
            
            
            256.9
            
            
            3.7
            %Market
                data
            
            
            166.1
            
            
            133.4
            
            
            24.5
            %Market
                services provided to Regulation
            
            
            99.5
            
            
            87.8
            
            
            13.3
            %Licensing,
                facility and other
            
            
            94.2
            
            
            42.2
            
            
            123.2
            %Total
                revenues
            
            $
            1,572.6
            
            $
            1,062.1
            
            
            48.1
            %




*Transaction* - For
      the nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, transaction fees increased by $345.7 million, or 318.9%,
      primarily as a result of NYSE Arca’s contribution since the completion of the
      merger between the NYSE and Archipelago on March 7, 2006.




*Listing* - The
      following table sets forth the revenues from listing fees calculated in
      accordance with U.S. generally accepted accounting principles (“as reported”)
      and as would be reported on a basis without giving effect to U.S. generally
      accepted accounting principles (“billed basis”). NYSE Group believes that the
      presentation of billed basis revenues, as they relate to original fees, is
      a
      good indicator of current listing fee activity as billed basis information
      excludes the effects of recognizing revenues related to original fees over
      periods ranging from 5 to 10 years.




39




**Nine****months ended September 30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase (Decrease)****As
                reported**
            
            **As
                billed**
            
            **As
                reported**
            
            **As
                billed**
            
            **As
                reported**
            
            **As
                billed**Annual
                fees
            
            $
            198.3
            
            $
            198.3
            
            $
            189.1
            
            $
            189.1
            
            
            4.9
            %
            
            
            4.9
            %Original
                fees
            
            
            68.0
            
            
            57.2
            
            
            67.8
            
            
            63.9
            
            
            0.2
            %
            
            
            (10.5)
            %$
            266.3
            
            $
            255.5
            
            $
            256.9
            
            $
            253.0
            
            
            3.7
            %
            
            
            1.0
            %


For
      the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, listing fee revenue increased $9.4 million, or 3.7%, on
      an
      as reported basis.




Listing
      fees are primarily derived from annual listing fees and original listing fees.
      Original listing fees are deferred and recognized over the estimated service
      periods ranging from 5 to 10 years. The difference between the as reported
      revenues and the billed basis revenues is due to the amortization of listing
      fees in accordance with U.S. generally accepted accounting
      principles.




Annual
      listing fees totaled $198.3 million on both an as reported and billed basis
      for
      the nine months ended September 30, 2006, compared with $189.1 million on both
      an as reported and billed basis for the nine months ended September 30, 2005,
      an
      increase of 4.9%. The period over period improvement is due to the increase
      in
      aggregate shares billed at the beginning of the year, from approximately 387
      billion to 408 billion, as well as new listings of shares during the year,
      which
      generate annual fees for the period of the year listed. Annual listing fees
      are
      recognized on a pro-rata basis over the calendar year.




Original
      listing fees amounted to $68.0 million on an as reported basis. On a billed
      basis, original listing fees totaled $57.2 million for the nine months ended
      September 30, 2006  compared
      with $63.9 million, a 10.5% decrease, for the same period a year ago. The
      decrease was due to reduced new issue listings, from 108 to 82 driven primarily
      by a reduction in the number of new closed end fund listings which are highly
      interest rate sensitive.




*Market
      Data* - For
      the nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, market data fees increased $32.7 million, or 24.5%,
      primarily from the contribution of NYSE Arca since the completion of the merger
      between the NYSE and Archipelago on March 7, 2006.




*Market
      services provided to Regulation* - For
      the nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, market services provided to Regulation increased $11.7
      million, or 13.3%. Market
      provides these services, which include costs associated with supporting IT infrastructure,
      finance, human resources and other administrative functions to
      support the operations of Regulation. The increase was primarily driven by
      the
      additional investment in technology supporting Regulation and increased
      compensation costs for vesting of restricted stock units granted to Market
      employees following the merger with Archipelago.




*Licensing,
      facility and other* - For
      the nine months ended September 30 , 2006,
      compared to the nine months ended September 30 , 2005,
      licensing and facility fees increased $52.0 million, or 123.2%. License fees
      represented $36.2 million of the increase. Also driving the increase was the
      new
      pricing for certain facility charges implemented in January 2006. NYSE Group
      did
      not generate licensing fees in the same period a year ago.




40




SIAC
      Services Segment Results - Revenue




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Data
                processing - non-NYSE
            
            $
            109.0
            
            $
            136.7
            
            
            (20.3
            )%Data
                processing - NYSE
            
            
            163.6
            
            
            189.4
            
            
            (13.6
            )%Total
                revenues
            
            $
            272.6
            
            $
            326.1
            
            
            (16.4
            )%


*Data
      Processing Fees* *—* *Non-NYSE* .
      For the
      nine months ended September 30, 2006,
      compared to the nine months ended September 30, 2005,
      data processing fees decreased $27.7 million, or 20.3%, to $109.0 million.
      The
      decline is due to reduced level of services provided to SIAC’s major
      customers.




*Data
      Processing Fees* *—* *NYSE* . For the
      nine months ended September 30, 2006,
      compared to the nine months ended September 30 , 2005,
      data processing fees decreased $25.8 million, or 13.6%, to $163.6 million.
      These
      fees decreased due to cost reduction initiatives.




Regulation
      Segment Results - Revenues




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Regulatory
            
            $
            135.3
            
            $
            96.7
            
            
            39.9
            %Regulatory
                services provided to Market
            
            
            96.7
            
            
            84.3
            
            
            14.7
            %Total
                revenues
            
            $
            232.0
            
            $
            181.0
            
            
            28.2
            %





*Regulatory
      Fees* - For
      the nine months ended September 30, 2006,
      compared to the nine months ended September 30, 2005,
      regulatory fees increased $38.6 million, or 39.9%, to $135.3 million. For the
      nine months ended September 30, 2006,
      NYSE Arca contributed regulatory fees of $6.5 million. The remaining $32.1
      million increase was due to higher reported Gross FOCUS revenues ($204.8 billion
      compared to $134.0 billion period over period).




*Regulatory
      services provided to Market* - For
      the nine months ended September 30, 2006,
      compared to the nine months ended September 30 , 2005,
      regulatory services to Market increased $12.4 million or 14.7%. These services,
      which include costs associated with surveillance, examination and enforcement
      with respect to Market activities, and overseeing compliance by listed
      companies, are provided by Regulation. The increase primarily reflects increased
      compensation costs for cash awards granted to Regulation employees following
      the
      completion of the merger between the NYSE and Archipelago on March 7,
      2006.




41




Market
      Segment Results - Expenses




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Section
                31 fees
            
            $
            492.4
            
            $
            433.4
            
            
            13.6
            %Merger
                expenses and related exit costs
            
            
            14.8
            
            
            -
            
            
            100.0
            %Compensation
            
            
            191.7
            
            
            137.1
            
            
            39.8
            %Liquidity
                payments
            
            
            160.0
            
            
            -
            
            
            100.0
            %Routing
                and clearing
            
            
            49.7
            
            
            -
            
            
            100.0
            %Regulatory
                services provided to Market
            
            
            96.7
            
            
            84.3
            
            
            14.7
            %Systems
                and communications
            
            
            30.8
            
            
            17.6
            
            
            75.0
            %SIAC
                support (1)
            
            
            163.3
            
            
            189.4
            
            
            (13.8)
            %Professional
                services
            
            
            57.3
            
            
            59.7
            
            
            (4.0)
            %Depreciation
                and amortization
            
            
            73.6
            
            
            45.1
            
            
            63.2
            %Occupancy
            
            
            29.8
            
            
            21.1
            
            
            41.2
            %Marketing
                and other
            
            
            57.1
            
            
            34.4
            
            
            66.0
            %Total
                expenses
            
            $
            1,417.2
            
            $
            1,022.1
            
            
            38.7
            %


(1)
            Market’s
                SIAC Support expense will not equal SIAC Services’ revenues from Data
                Processing Fees - NYSE as certain fees billed to the NYSE by SIAC
                relate
                to software developed for the NYSE’s internal use, and as a result a
                portion of these fees incurred during the application development
                stage
                has been capitalized.




*Merger
      expenses and related exit costs* .
      For the
      nine months ended September 30, 2006, Market incurred $14.8 million in merger
      expenses and related exit costs consisting of severance costs ($4.8 million),
      legal, printing and accounting fees incurred in connection with the completion
      of the merger as well as the May 2006 selling shareholder offering of NYSE
      Group
      common stock ($4.0 million), and professional and other fees ($6.0 million)
      directly attributable to either the merger between the NYSE and Archipelago,
      which was completed March 7, 2006, or the contemplated combination between
      NYSE Group and Euronext. NYSE Group did not incur any similar expenses in the
      same period a year ago.




Market
      Compensation




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Salaries
                and bonus
            
            $
            119.8
            
            $
            97.2
            
            
            23.3
            %Stock
                based compensation
            
            
            28.6
            
            
            -
            
            
            100.0
            %Benefits
                and other
            
            
            43.3
            
            
            39.9
            
            
            8.5
            %$
            191.7
            
            $
            137.1
            
            
            39.8
            %


*Compensation.* For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, compensation was up $54.6 million, or 39.8%. The employees
      of NYSE Arca accounted for $34.1 million of this increase following the
      completion of the merger on March 7, 2006. Excluding the impact of NYSE Arca’s
      consolidation during the nine months ended September 30, 2006, compensation
      increased by $20.5 million. This increase was primarily due to the $28.6 million
      recognized for certain restricted stock units granted to NYSE Market employees
      following the merger with NYSE Arca and other stock based compensation,
      including a $21.0 million charge recorded at the time of the merger for the
      immediate vesting of certain restricted stock units. NYSE Group did not record
      any stock-based compensation in the same period a year ago. Excluding the impact
      of NYSE Arca’s




42




results
      and stock based compensation awards, compensation decreased by $8.1
      million, primarily in relation to cost savings initiatives.




*Liquidity
      payments* .
      For the
      nine months ended September 30, 2006, NYSE Arca incurred liquidity payments
      of
      $160.0 million. NYSE Group did not incur any similar expenses in the same period
      a year ago.




*Routing
      and clearing* .
      For the
      nine months ended September 30, 2006, NYSE Arca incurred routing and clearing
      fees of $49.7 million. NYSE Group did not incur any similar expenses in the
      same
      period a year ago.




*Regulatory
      services provided to Market* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, Regulation support costs increased $12.4 million or 14.7%.
      The increase primarily reflects increased compensation costs for cash awards
      granted to Regulation employees following the merger with
      Archipelago.




*Systems
      and SIAC Support* .
      For the
      nine months ended September 30, 2006, compared to nine months ended September
      30, 2005, systems related costs decreased $12.9 million, or 6.2 %. For the
      nine
      months ended September 30, 2006, the operations of NYSE Arca accounted for
      $13.0
      million of the $30.8 million of systems and communications. Other systems and
      communications expenses remained relatively unchanged as compared to the same
      period a year ago. SIAC support costs decreased by 13.8% to $163.3 million
      due
      to structural cost effectiveness efforts, which resulted in lower data
      processing operations and systems development costs, lower headcount and
      increased utilization rates.




*Professional
      Services* .
      For the
      nine months ended September 30, 2006, compared to the year ended September
      30,
      2005, professional services decreased $2.4 million or 4.0%. NYSE Arca accounted
      for $8.6 million of the $57.3 million. Excluding the impact of NYSE Arca’s
      consolidation during the nine months ended September 30, 2006, professional
      services decreased by $11.0 million primarily due to reduced legal
      fees.




*Depreciation
      and Amortization* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, depreciation and amortization increased $28.5 million,
      or
      63.2%. The operations of NYSE Arca represented $20.5 million of the increase
      following the March 7, 2006 completion of our merger. The remaining $8.0 million
      increase was chiefly associated with continued capital expenditures on
      technology and infrastructure.




*Occupancy* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, occupancy increased $8.7 million or 41.2%, which was
      primarily the result of the consolidation of NYSE Arca’s operations following
      the completion of the merger between the NYSE and Archipelago on March 7,
      2006.




*Marketing
      and other* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, marketing and other expenses increased $22.7 million, or
      66.0%. The operation of NYSE Arca accounted for $11.8 million of marketing
      and
      other. The remaining $10.9 million increase was a result of increased
      advertising and promotion activity as part of the merger between the NYSE and
      Archipelago, as well as higher insurance premiums and additional expenses
      incurred as a public company.




43




SIAC
      Services Segment Results - Expenses




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Merger
                expenses and related exit costs
            
            $
            6.2
            
            $
            -
            
            
            100.0
            %Compensation
            
            
            158.8
            
            
            170.6
            
            
            (6.9)
            %Systems
                and communications
            
            
            49.7
            
            
            65.1
            
            
            (23.7)
            %Professional
                services
            
            
            25.2
            
            
            32.1
            
            
            (21.5)
            %Depreciation
                and amortization
            
            
            22.3
            
            
            29.8
            
            
            (25.2)
            %Occupancy
            
            
            25.4
            
            
            23.0
            
            
            10.4
            %Marketing
                and other
            
            
            7.6
            
            
            6.3
            
            
            20.6
            %Total
                expenses
            
            $
            295.2
            
            $
            326.9
            
            
            (9.7)
            %





*Merger
      expenses and related exit costs* .
      For the
      nine months ended September 30, 2006, SIAC Services incurred $6.2 million in
      merger expenses and related exit costs consisting of lease terminations,
      severance and related exit costs in connection with the integration of the
      Archipelago businesses. NYSE Group did not incur any similar expenses in the
      same period a year ago.





SIAC
      Services Compensation




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Salaries
                and bonus
            
            $
            109.2
            
            $
            126.3
            
            
            (13.5)
            %Stock
                based compensation
            
            
            17.6
            
            
            -
            
            
            100.0
            %Benefits
                and other
            
            
            32.0
            
            
            44.3
            
            
            (27.8)
            %$
            158.8
            
            $
            170.6
            
            
            (6.9)
            %


*Compensation* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, compensation decreased $11.8 million, or 6.9%. This decrease
      was primarily due to cost reduction initiatives and the resulting decrease
      in
      average headcount, which was partially offset by $17.6 million of stock based
      compensation recognized for certain restricted stock units granted to SIAC
      employees following the merger with Archipelago, including a $13.6 million
      charge recorded at the time of the merger for the immediate vesting of certain
      restricted stock units.




*Systems
      and communications* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, systems and communication expenses decreased $15.4 million,
      or 23.7%, to $49.7 million, primarily as a result of cost containment
      initiatives.




*Professional
      Services* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, professional services decreased $6.9 million, or 21.5%,
      to
      $25.2 million. Lower average contract staff and decreased temporary support
      for
      trading operations contributed to the reduction.




*Depreciation
      and Amortization* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, depreciation and amortization expense decreased $7.5
      million, or


44




25.2%
      period over period, to $22.3 million, as the number of assets reaching full
      depreciation outpaced capital expenditures.




*Occupancy* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, occupancy costs increased by $2.4 million, or 10.4%, to
      $25.4 million due to increased operating expenses.




*Marketing
      and other* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, marketing and other costs increased by $1.3 million, or
      20.6%.




Regulation
      Segment Results - Expenses




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Compensation
            
            $
            92.4
            
            $
            80.0
            
            
            15.5
            %Market
                services provided to Regulation
            
            
            99.5
            
            
            87.8
            
            
            13.3
            %Systems
                and communications
            
            
            1.1
            
            
            1.0
            
            
            10.0
            %Professional
                services
            
            
            6.2
            
            
            1.8
            
            
            244.4
            %Depreciation
                and amortization
            
            
            3.4
            
            
            3.6
            
            
            (5.6)
            %Occupancy
            
            
            7.8
            
            
            7.6
            
            
            2.6
            %Marketing
                and other
            
            
            5.6
            
            
            5.5
            
            
            1.8
            %Total
                expenses
            
            $
            216.0
            
            $
            187.3
            
            
            15.3
            %





Regulation
      Compensation




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**
            
            **Percent
                Increase**
              **(Decrease)**Salaries
                and bonus
            
            $
            67.8
            
            $
            59.8
            
            
            13.4
            %Deferred
                compensation award
            
            
            8.5
            
            
            -
            
            
            100.0
            %Benefits
                and other
            
            
            16.1
            
            
            20.2
            
            
            (20.3)
            %$
            92.4
            
            $
            80.0
            
            
            15.5
            %


*Compensation* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, compensation increased $12.4 million, or 15.5%, to $92.4
      million. This increase was primarily due to the $8.5 million recognition of
      certain cash awards granted to NYSE employees at the time of the merger coupled
      with an increase in headcount and related increased compensation costs within
      Regulation.




*Market
      services provided to Regulation* .
      For the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, market support costs increased $11.7 million, or 13.3%.
      These services are provided by Market to support the operations of Regulation.
      The increase was primarily driven by the increased compensation costs for
      vesting of restricted stock units granted to Market employees following the
      merger with Archipelago.




*Professional
      services.* For
      the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, professional services increased $4.4 million, to $6.2
      million. These costs increased as newly established mandatory regulatory audits
      commenced during 2006.




45




Regulation’s
      other operating expenses, including systems and communications, depreciation
      and
      amortization as well as marketing and general and administrative expenses were
      relatively stable period over period.




Regulatory
      Fine Income




For
      the
      nine months ended September 30, 2006, compared to the nine months ended
      September 30, 2005, fine income increased $1.0 million, or 3.0%. Regulatory
      fines result from actions taken by Regulation in its oversight of Market
      constituents and accordingly may vary period over period.




Investment
      and Other Income, Net




The
      components of investment and other income, net, were as follows:




**Nine
                months ended**
              **September
                30,****Dollars
                (in Millions)**
            
            **2006**
            
            **2005**Investment
                income, net
            
            $
            31.5
            
            $
            24.8DTCC
                settlement gain
            
            
            10.8
            
            
            -Other
                income
            
            
            21.0
            
            
            11.8Total
            
            $
            63.3
            
            $
            36.6




The
      increase in investment income, net, is primarily attributable to an increase
      in
      the average interest bearing investment portfolio and higher interest rates.
      DTCC settlement gain reflects a one-time payment from certain DTCC subsidiaries
      in connection with the termination of their service agreement with SIAC. NYSE
      Group’s share (net of minority interest of $3.6 million) of the one-time
      settlement gain was $7.2 million. The increase in other income primarily relates
      to insurance reimbursements received which may vary period over
      period.




Gain
      on
      Sale of Equity Investment




On
      March
      28, 2006, NYSE Group sold its shares of DTCC common stock for a $23.4 million
      cash payment. NYSE Group carried this investment at its $2.5 million cost and
      therefore realized a $20.9 million pre-tax gain that is included in gain on
      sale
      of equity investment in the condensed consolidated statement of income for
      the
      nine months ended September 30, 2006. The after-tax impact of this gain was
      included in the cash dividend paid to each former NYSE member in connection
      with
      the merger of NYSE and Archipelago.




Income
      Taxes




The
      consolidated effective tax rate for the nine months ended September 30, 2006
      and
      2005 was 39.2% and 39.3%, respectively. For
      the
      nine months ended September 30, 2006, we provided for income taxes at a 40.5%
      combined federal, state and local tax rate.




46


**Liquidity
      and Capital Resources**




Historically,
      NYSE Group’s primary source of liquidity has been cash generated by NYSE Group’s
      operations, and NYSE
      Group’s liquidity requirements have been for working capital, capital expenditures
      and
      general corporate use.




NYSE
      Group’s working capital was $625.0 million at September 30, 2006, and capital
      expenditures equaled $68.4 million for the nine months ended September 30,
      2006.
      Capital expenditures related primarily to the development and maintenance of
      corporate and regulatory systems and to trading technology, including
      expenditures relating to the development and implementation of NYSE Hybrid
      Market and compliance with Regulation NMS.




Cash
      and
      cash equivalents are generated primarily from listing services, sales of market
      information, collection of activity assessment fees (which are fully remitted
      to
      the SEC), data processing services provided by SIAC, collections of regulatory
      fees, fees generated for trading, and investment income.




At
      September 30, 2006, NYSE Group had $255.6 million of cash and cash equivalents,
      an increase of $212.1 million from its cash and cash equivalents at December
      31,
      2005. Current assets readily convertible into cash include accounts receivable,
      securities purchased under agreements to resell and marketable securities.
      These
      assets totaled $870.8 million at September 30, 2006 and, when combined with
      cash
      and cash equivalents, represented 89.4% of NYSE Group’s current
      assets.




Under
      the
      terms of the operating agreement of the NYSE, no regulatory fees, fines or
      penalties collected by NYSE Regulation may be distributed to NYSE Group or
      any
      entity other than NYSE Regulation. As a result, the use of regulatory fees,
      fines and penalties collected by NYSE Regulation may be considered restricted.
      As of September 30, 2006, NYSE Group did not have any significant restricted
      cash balance.




With
      respect to investment activities, the boards of directors of NYSE Group and
      SIAC
      have separately approved investment policies for externally managed portfolios.
      The goals of these policies are to preserve principal, maintain adequate
      liquidity at all times to fund budgeted operating and capital requirements,
      and
      to maximize returns relative to investing guidelines and market conditions.
      NYSE
      Group’s current policies prevent it from investing directly in any equity type
      investment, however, this policy can be modified at the discretion of the chief
      executive officer and chief financial officer of NYSE Group, based on the
      delegation of authority by the board of directors. SIAC’s policies permit
      investing in equity funds. Participants in supplemental executive savings and
      other deferred compensation plans are permitted to invest in equity funds.
      Under
      NYSE Group’s policies, it may invest only in securities that are rated AA or
      better by two nationally recognized rating organizations and that are in U.S.
      dollar denominations. A portion of SIAC’s portfolio is used to fund its
      non-qualified benefit obligations. The average duration of the portfolios for
      both the NYSE Group and SIAC must not exceed two years. Both NYSE Group and
      SIAC
      periodically review their respective policies and investment
      managers.




As
      of
      September 30, 2006, NYSE Group had no outstanding short-term or long-term
      debt. In
      connection with the transaction contemplated by the combination agreement,
      NYSE
      Euronext will enter into a credit facility agreement that will permit it to
      borrow amounts sufficient to fund the cash portion of the consideration to
      be
      issued in the exchange offer contemplated under the combination agreement,
      which
      is expected to be approximately $2.8 billion. NYSE Euronext may only borrow
      amounts under this credit facility agreement if the combination is successful.
      If the combination is successful, NYSE Euronext expects to use the credit
      facility as an undrawn back stop for a global commercial paper program, which
      NYSE Euronext will use mainly to finance the cash portion of the consideration
      to be




47




paid
      to
      Euronext shareholders pursuant to the exchange offer. The credit facility will
      include terms and conditions customary for agreements of this type, which
      could restrict NYSE Euronext's ability to engage in additional transactions
      or
      incur additional indebtedness. It is currently anticipated that NYSE Euronext
      will issue approximately $2.8 billion of commercial paper through a number
      of
      dealers. The dealers will offer the notes worldwide in a variety of currencies
      with maturities of less than 365 days. The goal will be to issue the paper
      in
      the most cost effective currency. The interest on the commercial paper will
      be
      paid using proceeds from operations of the combined entity; and it is expected
      that the debt will be paid off in three to four years.





NYSE
      Group believes that cash flows from operating activities and financing
      capabilities along with future cash flows from operations are sufficient to
      meet
      the needs of its current operations. If existing cash balances are insufficient,
      NYSE Group intends to seek additional financing. NYSE Group may not be able
      to
      obtain additional financing on acceptable terms or at all.




Net
      cash
      provided by operating activities equaled $18.0 million for the nine months
      ended
      September 30, 2006, consisting of net income of $159.5 million and the effects
      of non-cash items, such as depreciation, which does not adversely affect cash
      flows. Also, during the nine months ended September 30, 2006, NYSE Group
      remitted $660.0 million in Section 31 fees to the SEC.




Net
      cash
      provided by investing activities equaled $689.2 million for the nine months
      ended September 30, 2006. NYSE Group acquired $218.2 million of cash in
      connection with the Archipelago merger. Net sales of investment securities
      and
      securities purchased under agreements to resell of $524.7 million funded the
      $409.8 million distribution to NYSE former members.




As
      part
      of the merger with Archipelago, NYSE Group’s financing activities included a
      total cash distribution of $506.2 million (consisting of a $409.8 million cash
      distribution and a $96.4 million dividend) to the NYSE’s former members during
      the nine months ended September 30, 2006.




**New
      Accounting Pronouncements**




In
      July
      2006, the Financial Accounting Standard Board (FASB) issued FASB Interpretation
      No. (FIN) 48, *Accounting
      for Uncertainty in Income Taxes* ,
      an
      interpretation of Statement of Financial Standards (SFAS) No. 109, *Accounting
      for Income Taxes* .
      FIN 48
      addresses how a reporting company accounts for all tax positions including
      the
      uncertain tax positions reflected or expects to be reflected in the company's
      past or future tax returns. The interpretation also requires the company to
      recognize interest and penalties associated with the uncertain tax positions.
      This interpretation is effective for fiscal years beginning after December
      15,
      2006. We are currently evaluating the potential impact that the implementation
      of FIN 48 will have on our financial condition, results of operations and cash
      flows.





In
      September 2006, the FASB issued FAS 158, *Employer’s
      Accounting for Defined Benefit Pension and Other Postretirement Plans, an
      amendment of FASB Statements No. 87, 88, 106 and 132R* ,
      FAS 158
      requires the recognition on the statement of financial condition of the funded
      status of pension and other postretirement benefit plans. The pronouncement
      is
      effective for fiscal years ending after December 15, 2006. NYSE Group will
      adopt
      FAS 158 during the fourth quarter of 2006 and, based on our preliminary
      estimates, we believe that the adoption will have a $30.0 to $50.0 million
      after-tax impact on our accumulated other comprehensive income. The actual
      impact of adopting FAS 158 will be dependent upon the then fair market value
      of
      plan assets and the projected benefit obligation, measured as of adoption
      date.





In
      September 2006, the Securities and Exchange Commission issued Staff
      Accounting Bulletin No. 108, *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current*




48




*year
      Financial Statements* (“SAB
      108”), which provides interpretive guidance on how the effects of the carryover
      or reversal of prior year misstatements should be considered in quantifying
      a
      current year misstatement. The guidance is effective for fiscal years
      beginning after November 15, 2006 and it allows a one-time transitional
      cumulative effect adjustment to beginning-of-year retained earnings at the
      first
      fiscal year ending after November 15, 2006 for errors that were not
      previously deemed material, but are material under the guidance in SAB 108.
      NYSE
      Group does not expect the adoption of SAB 108 to have a material impact on
      its
      financial statements.







49




**Item
      3.****Quantitative
      and Qualitative Disclosures about Market Risk**




There
      have been no material changes in quantitative and qualitative disclosures about
      market risk from those disclosed
      in our annual
      report on Form 10-K  for
      the
      year ended December 31, 2005.




**Item
      4.****Controls
      and Procedures**




As
      of the
      end of the period covered by this report, we evaluated, under the supervision
      and with the participation of our management, including our chief executive
      officer and chief financial officer, the effectiveness of the design and
      operation of the disclosure controls and procedures, as defined in Rule
      13a-15(e) under the Securities Exchange Act of 1934, of NYSE Group and
      its subsidiaries. Based upon that evaluation, our chief
      executive officer and chief financial officer  concluded
      that the design and operation of the disclosure controls and procedures were
      effective as of the end of the period covered by this report. No significant
      changes were made in our internal control over financial reporting, as defined
      in Rule 13a-15(f) under the Securities Exchange Act of 1934, or in other
      factors that could significantly affect our internal control over financial
      reporting subsequent to the date of their evaluation.




*PART
      II -**OTHER
      INFORMATION*




**Item
      1.****Legal
      Proceedings**




The
      following supplements and amends our discussion set forth under “Legal
      Proceedings” in Part I, Item 3 of our annual report on Form 10-K filed with the
      SEC on March 31, 2006, as updated by Item 1 of Part II of our Quarterly Reports
      on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006. The
      following discussion is limited to recent developments concerning our legal
      proceedings and should be read in conjunction with those earlier reports. Unless
      otherwise indicated, all proceedings discussed in those earlier reports remain
      outstanding.





*In
      re
      NYSE Specialists Securities Litigation*





Briefing
      on plaintiffs’ appeal to the U.S. Court of Appeals for the Second Circuit from
      the final judgment in favor of the NYSE was completed on September 18,
      2006.





*Grasso
      Litigation*





Mr.
      Grasso filed an appeal of the New York Supreme Court’s August 8, 2006 decision
      that the New York Attorney General’s claim against Mr. Grasso for restitution
      and imposition of a constructive trust is an equitable claim that must be tried
      to the court rather than to a jury, and that it would commence trial of that
      claim on October 16, 2006. On September 14, 2006, the appellate court entered
      an
      order staying the trial until the appeals of that decision, and of the earlier
      decision denying Mr. Grasso’s motion to dismiss, have been decided.





On
      August
      23, 2006, the New York Supreme Court granted Mr. McCall’s motion for summary
      judgment dismissing the third-party claims asserted against him by Mr. Grasso.
      Mr. Grasso filed an appeal of that decision.





On
      September 7, 2006, Mr. Grasso filed a motion seeking reassignment of the
      case to a different judge for all further proceedings, and on September 14,
      2006, the New York Supreme Court denied that motion. Mr. Grasso filed an appeal
      of that decision.




50




On
      October 4, 2006, Mr. Grasso filed a motion for leave to amend his crossclaims
      to
      add causes of action against the NYSE for termination payments under his 1999
      and 2003 employment agreements based upon an allegation that he resigned
      (including for “Good Reason”). After the NYSE opposed the motion, Mr. Grasso
      withdrew it.





On
      October 18, 2006, the appellate court heard oral argument on Mr. Langone’s
      appeal of the denial of his motion for summary judgment on the single cause
      of
      action asserted against him by the New York Attorney General.





On
      October 19, 2006, the New York Supreme Court entered an order granting the
      motions for summary judgment filed by the NYSE and Mr. Reed and dismissed all
      of
      the crossclaims asserted by Mr. Grasso against the NYSE and Mr. Reed. The court
      granted in part Mr. Grasso’s and Mr. Langone’s motions for summary judgment with
      respect to the New York Attorney General’s claim against the NYSE, dismissing
      that claim to the extent it sought injunctive relief but denying the request
      to
      dismiss the claim to the extent it seeks declaratory relief. Among other rulings
      in the decision, the court granted in part the New York Attorney General’s
      motion for partial summary judgment against Mr. Grasso, finding that Mr. Grasso
      breached his fiduciary duties to the NYSE and that certain payments made to
      Mr.
      Grasso were unlawful and must be returned to the NYSE, and ordered the New
      York
      Attorney General to provide an accounting within 30 days of the court’s
      decision. On November 2, 2006, the New York Attorney General filed an accounting
      stating that Mr. Grasso must disgorge approximately $112.2 million; Mr. Grasso
      has until December 4, 2006 to file any objections to the accounting. Mr. Grasso
      filed an appeal of the court’s decision, and also has indicated that he intends
      to seek an order from the appellate court staying the trial court from
      conducting any accounting of amounts allegedly owed.





At
      December 31, 2003, the NYSE accrued compensation expense amounting to $36.0
      million related to Mr. Grasso. This accrual, which remains current, reflects
      management's interpretation of the provisions contained in the most recent
      employment agreement, which provides terms outlining certain payments to which
      Mr. Grasso could be entitled upon ceasing employment with the NYSE, if that
      agreement is found to be valid and the payments were deemed to be allowable
      and
      appropriate under the law.





*NYSE/Archipelago
      Merger-Related Litigation*





On
      November 8, 2006, the court heard oral argument on the motion by the NYSE and
      Mr. Thain to dismiss the Hyman and Lief amended complaints and the Rittmaster
      complaint, and reserved decision on the motion.





*Other
      Matters*





NYSE
      Group is defending a number of other actions and investigations, the ultimate
      outcome of which cannot reasonably be determined at this time. In the opinion
      of
      management and legal counsel, the aggregate of all possible losses from all
      such
      other actions and investigations should not have a material adverse effect
      on
      the consolidated financial condition or results of operations of NYSE
      Group.





51


**Item
      1A. Risk Factors**





Other
      than with respect to the risk factors below, there have been no material changes
      from the risks disclosed in the “Risk Factors” section of our annual
      report on Form 10-K for the year ended December 31, 2005 and our quarterly
      report on Form 10-Q for the quarter ended June 30, 2006 .





***NYSE
      Group's share of trading in NYSE-listed securities has
      declined.***





As
      a
      result of increasing competition, NYSE Group's share of trading on a matched
      basis in NYSE-listed securities has declined from approximately 78.6% for the
      three months ended September 30, 2005, to 70.6% for the three months ended
      September 30, 2006. If growth in NYSE Group's overall trading volume of
      NYSE-listed securities does not offset any significant decline in NYSE Group's
      share of NYSE-listed trading, or if a decline in the NYSE Group's share of
      trading in NYSE-listed securities makes the NYSE's market appear less liquid,
      then NYSE Euronext's financial condition and operating results could be
      adversely affected **.**





***NYSE
      Group and certain of its subsidiaries are required to allocate funds and
      resources to NYSE Regulation.***





NYSE
      Group and certain of its subsidiaries are required to allocate significant
      resources to NYSE Regulation. This dedication of resources may limit NYSE
      Group’s ability to reduce its expense structure and to dedicate funds and human
      resources in other areas.





NYSE
      Regulation has undertaken the regulatory functions of the NYSE and NYSE Arca,
      Inc. pursuant to agreements with each entity. NYSE Regulation also has an
      explicit agreement with NYSE Group, the NYSE and NYSE Market so that adequate
      funding is provided to NYSE Regulation. Moreover, under the operating agreement
      of the NYSE, no regulatory fees, fines or penalties collected by NYSE Regulation
      may be distributed to NYSE Group or any entity other than NYSE Regulation.
      The
      obligations to fund NYSE Regulation under the agreements covering those services
      could negatively affect the cash available to NYSE Group and its ability to
      invest in or pursue other opportunities that may also be beneficial to NYSE
      Group stockholders.





***NYSE
      Group’s revenues from SIAC could significantly
      decrease.***





SIAC
      is
      the principal vendor of the NYSE's data processing and software development
      services.





On
      November 1, 2006, NYSE Group completed the purchase of the one-third ownership
      stake in SIAC previously held by AMEX for approximately $40.3 million, as a
      result of which, NYSE Group now fully owns SIAC. In connection with the
      purchase, the SIAC shareholders’ agreement and AMEX’s participation in the SIAC
      facilities management agreement (under which SIAC has previously provided
      technology services to the NYSE and AMEX) were terminated, and SIAC agreed
      to
      provide substantially reduced services to AMEX under a new services
      agreement.





SIAC's
      non-NYSE revenues accounted for 8.9% of the NYSE's revenues, net of Section
      31
      fees, for the nine months ended September 30, 2006. Historically, SIAC has
      relied on three principal customers for a majority of its revenues: (1) the
      NYSE, (2) AMEX and (3) NSCC and Fixed Income Clearing Corporation (“FICC”). In
      2005, the NYSE was the source of 58% of SIAC's revenues; AMEX was the source
      of
      16.4% of SIAC's revenues; and NSCC and FICC were the source of 9.1% of SIAC's
      revenues. NSCC and FICC have entered into separate agreements with SIAC,
      pursuant to which the services previously provided by SIAC have been phased
      out.
      In addition, in connection with NYSE Group's acquisition of AMEX's interest
      in
      SIAC, NYSE Group and AMEX have




52




agreed
      that SIAC would provide substantially reduced services to AMEX under a new
      services agreement. As a result, SIAC's revenues from non-NYSE sources will
      be
      reduced. To the extent that NYSE Group is not able to reduce its costs
      associated with SIAC to offset the amount of reduction in revenue from SIAC
      (which NYSE Group may not be able to do), NYSE Group's profits and results
      of
      operations may be adversely affected.





Additionally,
      if the proposed combination of NYSE Group’s and Euronext’s businesses is
      successful, the combined company, NYSE Euronext, will face the following
      risks:





***NYSE
      Euronext may not be able to successfully integrate the businesses and operations
      of NYSE Group and Euronext in a timely fashion or at
      all.***





NYSE
      Group and Euronext operate as independent companies, and will continue to do
      so
      until the completion of the combination. Following the combination, NYSE Group
      and Euronext are committed to a policy of decentralized management under which
      their respective operating subsidiaries, including the exchanges, will have
      autonomy in respect of day-to-day operating decisions. NYSE Euronext expects
      that this approach will ease some of the challenges of integration. Nonetheless,
      NYSE Euronext expects to integrate certain of the management and technological
      functions of NYSE Group and Euronext. NYSE Euronext management may face
      significant challenges in integrating the two companies' technologies,
      organizations, procedures, policies and operations, as well as in addressing
      differences in the business cultures of the two companies, and retaining key
      NYSE Group and Euronext personnel. The integration process may prove to be
      complex and time consuming and require substantial resources and effort. It
      may
      also disrupt each company's ongoing businesses, which may adversely affect
      NYSE
      Euronext's relationships with market participants, employees, regulators and
      others with whom NYSE Group and Euronext have business or other
      dealings.





The
      merger between the NYSE and Archipelago, which was completed on March 7, 2006,
      may add further challenges and complexity. NYSE Group is currently in the
      process of integrating the businesses of the NYSE and Archipelago, and this
      process is not expected to be completed before the completion of the
      combination. In addition, on November 1, 2006, NYSE Group acquired the one-third
      ownership stake in SIAC previously held by AMEX for approximately
      $40.3 million. NYSE Group already owned the other two-thirds interest. As a
      result, NYSE Euronext's management may have to integrate the businesses of
      the
      NYSE, Archipelago, SIAC and Euronext simultaneously, which may be difficult.
      If
      NYSE Euronext fails to manage the integration of these businesses effectively,
      its growth strategy and future profitability could be negatively affected,
      and
      it may fail to achieve the anticipated benefits of the combination. In addition,
      difficulties in integrating these businesses could harm NYSE Euronext's
      reputation.





***The
      combined company may fail to realize the anticipated cost savings, growth
      opportunities and synergies and other benefits anticipated from the
      combination.***





The
      success of the combination will depend, in part, on NYSE Euronext's ability
      to
      realize anticipated cost savings, revenue synergies and growth opportunities
      from combining the businesses of NYSE Group and Euronext. NYSE Euronext expects
      to benefit from operational synergies resulting from the consolidation of
      capabilities and elimination of redundancies as well as greater efficiencies
      from increased scale, market integration and automation. Specifically, NYSE
      Group and Euronext expect that the combined company will achieve cost savings
      of
      approximately $275 million annually within three years after the combination
      (with approximately $55 million of these cost savings achieved by the end of
      the
      first year, $125 million by the end of the second year and the full $275 million
      by the end of the third year). Of this amount, an estimated $250 million is
      expected to result from the overall rationalization of the combined company's
      information technology systems and platforms, driven by the high level of
      compatibility among the current technology platforms maintained by NYSE Group
      and Euronext, and the remaining $25 million




53




is
      expected to result from the rationalization of non-information technology
      related activities, including the integration of corporate support functions
      such as finance, and the streamlining of marketing and other corporate costs
      such as insurance, occupancy and professional services.





NYSE
      Group and Euronext also expect that the combination will create approximately
      $100 million in incremental revenues annually within three years after the
      combination. Of this amount, approximately $35 million is expected to be
      generated from cash equities trading, $45 million is expected to be generated
      from derivatives and the remaining $20 million is expected to be generated
      from
      listing fees.





There
      is
      a risk, however, that the businesses of NYSE Group and Euronext may not be
      combined in a manner that permits these costs savings and revenue synergies
      to
      be realized in the time currently expected, or at all. For example, the
      completion of the combination and the post-closing reorganization may be delayed
      or challenged by parties opposing the completion of the combination or the
      post-closing reorganization. This may limit or delay the NYSE Euronext
      management's ability to integrate the two companies' technologies,
      organizations, procedures, policies and operations. In addition, a variety
      of
      factors, including but not limited to wage inflation, currency fluctuations,
      and
      difficulty integrating technology platforms, may adversely affect NYSE
      Euronext's anticipated cost savings and revenues. Also, the combined company
      must achieve its anticipated cost savings without adversely affecting its
      revenues. If NYSE Euronext is not able to successfully achieve these objectives,
      the anticipated benefits of the combination may not be realized fully, or at
      all, or may take longer to realize than expected.





***NYSE
      Euronext, NYSE Group and Euronext will incur significant transaction and
      combination-related costs in connection with the
      combination.***





NYSE
      Group and Euronext expect to incur a number of non-recurring costs associated
      with combining the operations of the two companies, anticipated to be
      approximately $70 million in each of 2007 and 2008 and $40 million in 2009.
      In
      addition, NYSE Group and Euronext will incur legal, accounting and other
      transaction fees and other costs related to the combination, anticipated to
      be
      between $50 million and $75 million. Some of these costs are payable regardless
      of whether the combination is completed. Moreover, under specified
      circumstances, NYSE Group or Euronext may be required to reimburse certain
      expenses incurred by the other party in connection with the termination of
      the
      proposed combination. Additional unanticipated costs may be incurred in the
      integration of the businesses of the NYSE Group and Euronext.





Although
      NYSE Euronext expects that the elimination of duplicative costs, as well as
      the
      realization of other efficiencies related to the integration of the businesses,
      may offset these transaction- and combination-related costs over time, this
      net
      benefit may not be achieved in the near term, or at all.





***If
      the combination is successful, NYSE Euronext will incur a substantial amount
      of
      debt to finance the cash portion of the consideration for the Euronext shares
      to
      be acquired, which could restrict its ability to engage in additional
      transactions or incur additional indebtedness.***





In
      connection with the exchange offer, NYSE Euronext will enter into a credit
      facility agreement that permits NYSE Euronext to borrow amounts sufficient
      to
      fund the cash portion of the exchange offer, which is expected to be
      $3.0 billion. NYSE Euronext may only borrow amounts under this credit
      facility agreement if the combination is successful. If the combination is
      successful, NYSE Euronext expects to use the credit facility as an undrawn
      back
      stop for a global commercial paper program, which NYSE Euronext will use mainly
      to finance the cash portion of the consideration to be paid to Euronext
      shareholders pursuant to the exchange offer. The credit facility includes terms
      and conditions customary for agreements of this type, which could restrict
      NYSE
      Euronext's ability to engage in additional transactions or incur additional
      indebtedness.




54




***Obtaining
      required approvals may delay or prevent completion of the combination or reduce
      the anticipated benefits of the combination.***





Completion
      of the combination is conditioned upon, among other things, the receipt of
      material governmental authorizations, consents, orders and approvals, including
      the approval of the SEC and certain European regulators. NYSE Group and Euronext
      intend to pursue all required approvals in accordance with their obligations
      under the combination agreement. In connection with granting these approvals,
      the respective governmental or other authorities may impose conditions on,
      or
      require divestitures or other changes relating to, the divisions, operations
      or
      assets of NYSE Group or Euronext. For example, the SEC and the European
      regulators may require changes to the structure, certificate of incorporation
      or
      bylaws of NYSE Euronext and its subsidiaries, as a precondition to their
      approval of the combination. Neither NYSE Group nor Euronext can predict what,
      if any, changes may be required. Certain changes may require NYSE Group or
      Euronext to obtain the approval of their respective shareholders and, therefore,
      to re-solicit proxies, which may result in significant additional expenses
      and
      costs. More generally, these and other conditions, divestitures or other changes
      may jeopardize or delay completion of the combination or may reduce the
      anticipated benefits of the combination.





**Item
      5. Other Information**




On
      November 8, 2006, NYSE Group announced a workforce reduction of more than 500
      positions, including approximately 400 employees and 120 full-time consultants.
      This organizational downsizing excludes NYSE Regulation and reflects ongoing
      initiatives to cut costs and improve efficiencies, eliminate duplicate services,
      and realize cost savings resulting from the March 7, 2006 merger with
      Archipelago.





As
      a
      result of this workforce reduction, NYSE Group expects to recognize
      a restructuring charge in the fourth quarter of 2006 of approximately $28.0
      million consisting primarily of severance payments and curtailment
      losses.





A
      copy of
      the NYSE Group press release with respect to the foregoing is attached to this
      report as exhibit 99.1.




55





**Item
      6. Exhibits**




**Exhibit
                No.**
            
            **Description**2.1
            
            CombinationAgreement,
                dated as of June 1, 2006, by and among NYSE Group, Inc., Euronext
                N.V.,
                NYSE Euronext, Inc., and JeffersonMerger Sub, Inc.13.1
            
            Amended
                and Restated Certificate of Incorporation of NYSE Group, Inc.23.2
            
            Amended
                and Restated Bylaws of NYSE Group, Inc.310.1
            
            NYSE
                Group, Inc. 2006 Stock Incentive Plan431.1
            
            Certification
                of the principal executive officer pursuant to Rule 13a-14(a) or
                Rule
                15d-14(a) of the Exchange Act31.2
            
            Certification
                of the principal financial officer pursuant to Rule 13a-14(a) or
                Rule
                15d-14(a) of the Exchange Act32
            
            Certification
                of the principal executive officer and the principal financial officer
                pursuant to 18 U.S.C. Section 135099.1
            
            Press
                Release entitled “NYSE Group Announces Workforce Reduction,” dated
                November 8, 2006




1 Incorporated by reference to Exhibit
          2.1 to the
          registrant’s current
          report on Form 8 K (File
          No. 1-32829 )
          filed
          on  June
          2,
          2006.
 2 Incorporated by reference to Exhibit 3.1 to the registrant’s registration
          statement on Form 8-A
          (File No. 1-32829) filed on March 7, 2006.
 3 Incorporated by reference to Exhibit 3.2 to the registrant’s registration
          statement on Form 8-A
          (File No. 1-32829) filed on March 7, 2005.
 4 Incorporated by reference to Exhibit 99.1 to the registrant’s registration
          statement on Form S-8
          (File No. 333-132284) filed on March 8, 2006.


56




SIGNATURES




Pursuant
      to the requirements of the Securities Exchange Act of 1934, NYSE Group has
      duly
      caused this report to be signed on its behalf by the undersigned thereunto
      duly
      authorized:




NYSE
                Group, Inc.Date:
                November 10, 2006
            By:
            /s/ Nelson
              ChaiNelson
              ChaiChief
                Financial Officer








57