Crispin Hanshaw, Managing Director, Charles Schwab & Co.Georgina Lai, Equity Programs, Pinterest

Carine Schneider, CEO, WFFConnectJohan Toll, Associate Vice President, Nasdaq

Disruptors in the Stock Plan World

Agenda• Introduction• Understand new technology

o What is Blockchain?• Changes in brokerage

o Robo advisingo Voice recognition verification (versus pin codes)o “intelligent” advisors

• Change in the private marketo Liquidity programs and secondary shares trading

• Millennial behavioro Changes in communicatingo Changes in plan design (private and public)

What is blockchain?

Microservices

Quantum Computing

Cryptography

Augmented / Virtual Reality

BLOCKCHAINCloud

ServicesSmartphone Ecosystem

Big Data

Machine Intelligence

INNOVATIONS ADVANCING THE FINTECH LANDSCAPE

Intelligent/Personal Virtual

Assistant

Internetof

Things

DigitalMoney

Technology trends shaping financial services?

SECURE DATA STOREOnly parties who should access it, can access it.

STABILITY THROUGH DECENTRALIZED

CONSENSUSInput is guaranteed /

validated through decentralized consensus.

CRYPTOGRAPHY ENSURES INTEGRITY

Data remains consistent, once written it cannot be

modified.

WHAT IS THE BLOCKCHAIN?

FOUNDATIONAL TECHNOLOGY

It is not a financial asset, it is not a business.

GROWTHPotential enabler for cost savings but also for growth, new business

models and market structures.

INNOVATIONPart of Nasdaq’s larger tech

innovation portfolio.

SECURITY. INTEGRITY. CONSENSUS. FOUNDATIONAL. GROWTH. INNOVATION.What is the Blockchain?

What is a ledger?

Paper Wallet

Web Wallet

What is a blockchain (distributed ledger)?

• Essential components:o Public-key cryptography (Diffie-Hellman ca 1976)o Proper decentralized peer-to-peer network (Gnutella 2000)

Nodes

Ledger

Private Keys

NETWORKUSERS

There are different kinds of blockchains

BUSINESS APPLICATI

ON

Public Blockchains► Open Internet

► Many miners / independent nodes

► Any and all can join the network

► High complexity / difficulty in verification process

► Independent nodes provide full auditability

Private Ledgers► Restricted Network

► Centralized mining / limited nodes

► Participants must be permissioned

► Lowered complexity / quicker verification

► Requires trust of the node operators and/or third party verification

Public vs.

Private

Where can distributed ledgers be useful?

This technology is good at keeping track of possession of any digitized asset.

Securities

Votes

Money Intellectual Property

Deeds of Ownership

Blockchain affecting us quicker than expectedNASDAQ STRATEGIC DIRECTION• Full senior management commitment• Initial blockchain offering launched to the market in 2015, i.e. Nasdaq Linq• Continued strong focus on investment and evolution of our blockchain

technology into more tangible assets during 2016• Several projects now ongoing within our own clearinghouse as well as with

external customers, to develop and launch BC enabled business applications on our core framework

• A global play where major benefits occur through collaboration between major marketplaces

• Market Technology well placed with more than 80 marketplaces running on our framework

FINANCIAL INDUSTRY MOVING FAST• > 1B USD in venture capital invested since 2012• World Economic Forum believes 10% of global GDP will be registered in

blockchain by 2025• More than 40 banks in a blockchain consortium for how to tap into the

blockchain technology. Pilot case launched in January 2016• Linux Foundation unites industry leaders to advance the blockchain

technology• Exchanges and Clearinghouses invest and pilot on several initiatives• Adoption will occur much faster than expected, heavy focus on

clearing/settlement with clear synergies also in the derivatives clearing

Strategy

Industry

CAPITAL MARKETS ON BLOCKCHAIN

Investor InvestorMarketplace

Government

Corporation

Asset and Cashledger(s)

Central Bank

Capital Markets on Blockchain

ESTONIA VOTING APPLICATION

VOTING SERVICECreated to provide a uniform method of developing secure voting applications.

First generation powered by Chain Smart Contract Scripts developed jointly by Nasdaq and Chain.

Second generation powered by Trusted Oracles developed by Nasdaq.

BLOCKCHAINBallot Record of Truth

VOTING APPLICATIONCreated to manage the voting life-cycle for the Estonia Proxy Voting Proof of Concept.

Built using the Voting and Blockchain Services and supports:

Creation of Voter and Administration AccountsIssuance/Transfer/Rescinding of Voting RightsCreation of Voting Token(s)Registration To Vote/Cast VoteViewing Voting Results

Estonia Voting Application

VOTING SERVICE TOKEN STATE DIAGRAM

RegisteredDistributed LockedVoted

Register To Vote Revote

Reset

Cast Ballot

Session End

Voting Service Token State Diagram

► A Blockchain-enabled platform for managing electronic records of ownership in privately issued securities

► Issuance and immediate transfer of shares without CSD or CCP

► Complete historical record,► Cap table management interface to

blockchain► Will support liquidity events through

integration with bank partners

IN PRODUCTION

“Enables First-Ever Private Securities Issuance Documented with Blockchain Technology”

Nasdaq Private Market - LINQ

The technology itself needs to evolve and be proven

Visions need to be distilled down to workable market models and structures

Existing legislation and regulation does not anticipate new business models enabled by blockchain technology

New technology and market structures need to be integrated with existing complex ecosystem of infrastructure

E.g. in relation to security. Smartcontracts. 50 different ledger protocols.

Governance a key piece of this. Information security policies, data policies.

Legislative and regulatory voids.

Credible integration and transition plans need to be developed and communicated before market participants are willing to make a bet on new technology and market models.

Increasing belief that the technology will work.

Industry initiatives. Legal certainty not fully in place.

Hurdles to Wide-Scale Adoption of Blockchain Technology in Capital Markets

Changes in the Brokerage World

Important trends are reshaping investment advice

Evolving technology

Rapid Industry Growth

Changing investor demands

Digital advice is growing rapidly

Sources: Cerulli, Retail Direct Firms and Digital Advice Providers 2015.

Cerulli's estimate of US digital-advisory AUM, $B

2016 2017 2018 2019 20200

600

400

200

800

ProjectionHigh Estimate

Low Estimate

40-60% annual growth

Underpinning the projected growth of digital advice is a broad appealConsumer likelihood to use robo-advice

Sources: A.T .Kearney 2015 Robo-Advisory Services Study of 4000 banked consumers. Likely+ is Likely, Very Likely or Extremely Likely. Schwab data as of 1/12016.

Schwab Intelligent PortfoliosTM

shows wide age appeal

Existing Clients

35%

24%

New to Schwab

Clients under 40

40% over 60

Likely+

36%Somewhat Likely

33%

NotLikely

31%

Schwab Intelligent PortfoliosTM illustrates appeal of digital advice

• Launched Mar 2015• $12.1 B in AUM• 118K accounts • $105K account averageo 14% have $250 K+ in Intelligent Portfolios

o 14% have $1 Million or more at Schwab For Illustrative Purposes Only

What we are learning about clients

Need

Help making good investment choices

Peace of mind

Benefits

Technology Diversified portfolio Automatic rebalancing No Advisory Fees Charged

Human Backed Professional investment insight from

Charles Schwab Investment Advisory, Inc. Access to Schwab professionals

24/7/365Schwab Intelligent Portfolios™ charges no advisory fees, account service fees, or commissions. Schwab affiliates earn revenue from the underlying assets in Schwab Intelligent Portfolio accounts. This revenue comes from managing Schwab ETFs™ and providing servicesrelating to certain third-party ETFs that can be selected for the portfolio, and from the cash feature on the accounts. Revenue may also be received from the market centers where ETF trade orders are routed for execution.

17 million calls per year1 million chats per year14 contact centers335 branches

Voice Biometrics Improving Customer Experience and Security

530ktotal voice

authentications

3000hours of handle

time saved

77%enrollment opt-in rate

94%successful

authentication rate

The numbers, thus far…

Update from the Private World

U.S. Companies are staying private longer• On April 5, 2012, the Jumpstart Our Business Startups (JOBS) Act was signed

into law by President Barack Obama. The Act requires the SEC to write rules and issue studies on capital formation, disclosure and registration requirements.

• JOBS Act primary objective is to “increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies.”

• The JOBS Act is considered as the most significant Congressional relaxation in memory of restrictions surrounding the IPO process, public company reporting and private capital formation

• Includes provisions that ease the IPO process and subsequent public reporting obligations for emerging growth companies. EGC is defined in the Securities Act and the Exchange Act as an issuer with “total annual gross revenues” of less than $1 billion during its most recently completed fiscal year.

• Increases the shareholder threshold requiring a private company to begin public reporting.

Liquidity Programs continue to be popular

• Average time from founding to IPO is between 11 – 13 years (depending on the source)

• Shareholder rights are changing (i.e., Snap class A versus B stock)

• Concern should be taken with your stock plan (ISO/NQSO issues in the U.S.)

• Are private company ESPP’s becoming trendy?

Nasdaq Private Market statistics• $1 Billion in Transaction Volume over 32 Liquidity Programs -- 58% share

repurchases• -- 42% third-party tender offers• Median Program Size: $34 million• Average Company Profile of NPM’s Clients in 2016:-- Company age: 11

years• -- Number of employees: 220• -- Primary capital raised: $120 million• -- Valuation: $500 million• Profile of Eligible Seller Pool-- 74% current employees• -- 17% former employees• -- 8% investors• -- 1% other

How does this impact public companies?

• Recruiting• Retention• Flexibility• The rise of the private market/liquidity

Changing labor demographics

• Disruption from a changing labor force• Millennials to baby boomers – work is changing

Millennials

• Those born in 1982 or after• Endpoint is 2004

Graph credit – TheAtalntic.com

Millennials - Characteristics

• Most educated generation• Multitaskers• Instant gratification• Connected

Millennials - Communications

• E-mail is considered “old-school”• TL:DR• Be ConciseoUse bullets

• Provide various optionsoOn premise presentations Stream/record

o Intranet/WikioOffice hours

Millennials - Mobile

• Consumption of information via mobile deviceoMobile phoneso Tablets

• Format friendly• Brevity• Use of videos• Interactive

Trends in Employee Equity

Stock Option Extensions

• Private companies are staying private longer• Employees have less liquidity to exercise their stock options

• Extending the time to exercise stock options is becoming more acceptable

Stock Option Extensions

Pros• Value to employees• Parity with RSU Grants• Allows employees who want to move on the leaveoNo handcuffs or those employees “resting and vesting”

• Competitive with other pre-IPO companies

Stock Option ExtensionsCons• Potential Turnover • Triggers Modification for SBC Expense • Tracking of Terminated Employees • ISO/NQ 100K Rule* • Administrative Difficulties o System Limitationso ISOs will require a Tender Offero Education/ Need to partner with Tax Advisors

Stock Option ExtensionsThings to Consider • Estimated Timing of IPO (if private)• Expense Impact• ISO/NQ• Adverse International Impact...?• Population Affected • Equity System Capability

o Will workarounds be needed; what is the cost?

• Strategy• Are Stock Options Still Being Awarded?• Already Terminated Employees• Consistent Messaging

Stock Option Extensions

Recommendations• Extend “Post-Termination Exercise Period” to the life of the grant

• “One and Done” and• “All or Nothing” Approach

Stock Option Extension

Plan Design Considerations• ISO/NQ benefit• Design the option award with exercisability for the life of the awardoNo worries of a modification of the award

• Expense concern

Thank YouCrispin Hanshaw

Charles Schwab & CoCrispin.Hanshaw@schwab.com

Carine SchneiderWFFConnect

carine@wffconnect.com

Georgina LaiPinterest

georgina@pinterest.com

Johan TollNasdaq

johan.toll@nasdaqomx.com

Thank You Thank you for attending GEO’s 18th

Annual Conference in Rome. We hope you enjoyed this session. • If you require CPE Credit, don’t forget to Sign Out

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