Nasdaq CEO Adena Friedman is on a roll, leading the organization through rapid innovation, cloud adoption and integration of AI and machine learning technology that power global markets. Here she discusses Nasdaq’s plans, the benefits of partnering with organizations like the Consumer Technology Association, and what Nasdaq’s platform groups will tackle next.
Q: The name Nasdaq often evokes the eponymous stock exchange, but Nasdaq’s business today far extends beyond the exchange. How would you describe Nasdaq, the company?
A: Today, Nasdaq is a highly scaled, global technology provider that serves the world’s financial system.
When I took on the CEO role in 2017, we initiated what we called the “strategic pivot,” a journey through which we have continuously looked to grow and expand Nasdaq’s role within the wider financial system.
For instance, we now provide the technology that we built to power Nasdaq’s markets to more than 130 markets worldwide. We also serve the corporate and investment communities with a diverse suite of technology, data and analytics solutions that help them navigate the complexity of capital markets. And our anti-financial crime solutions are used by markets, banks and credit unions to detect and fight financial crime and market abuse.
Q: You have described Nasdaq’s vision as “becoming the trusted fabric to the global financial ecosystem.” Where is Nasdaq on that journey?
A: We want to lead the world in developing and maintaining healthy, trusted and advanced market ecosystems. At our core, we deliver leading platforms that improve the liquidity, transparency, and integrity of the world’s economy. Those three themes serve as the foundation of our culture, and they drive our focus and our priorities within Nasdaq.
Earlier this year, we announced a new corporate structure with three core divisions that align us more closely to the megatrends we believe will redefine and reshape our industry over the next decade.
The first is the modernization of markets and market infrastructure. Our new Market Platforms division will focus on bringing the latest technology into the market space to maximize the liquidity of the global economy.
Second is bringing new technologies to manage the increasing complexity that investors and companies must navigate within the capital markets. Our Capital Access Platforms division connects the corporate and investor community not only through our markets, but also through a range of transparency and workflow tools to reduce friction and bring them closer together.
Third is the use of machine learning and other advanced technologies to manage and maintain the integrity of the global financial system. Our Anti-Financial Crime division encompasses our broad suite of technology solutions, from fraud- and anti-money laundering to trade and market surveillance solutions, and focuses on protecting the world’s financial transactions.
Q: As global markets continue to shift in the face of significant macroeconomic forces and technological innovation, what are Nasdaq’s priorities to evolve with those changes?
A: We have been on a decade-long cloud journey, hitting another key milestone in that journey with the migration of our first market to the cloud at the end of 2022. That is a major achievement for Nasdaq, but importantly, it provides our clients with a roadmap to help them on their cloud journeys.
We see the cloud as foundational infrastructure. It allows us to modernize the infrastructure that underpins markets and integrate additional analytical tools and capabilities to serve our clients. The cloud enables us to scale and innovate while retaining the same level of performance, reliability and integrity that our customers expect of us.
We are just beginning to tap the potential of the cloud architecture for markets. In the future, as we integrate Artificial Intelligence, Machine Learning with our micro-service architecture, we will start to see the true scale and power of cloud-enabled markets. We believe that will increase participation by lowering the cost of entry for market participants and create a more consistent experience for them all over the world.
Q: Financial crimes like fraud and money laundering are a growing problem in an increasingly complex and globalized financial ecosystem. It is also a major focus area for Nasdaq. What is Nasdaq’s role in fighting financial crime, and why is this such an important priority for the company?
A: Financial crime is a global challenge and a major strain on the financial system. Financial crime is also intrinsically linked to wider societal harms such as human trafficking, drug and terrorism networks, weapons trade and other nefarious behaviors that affect communities.
Banks have been at the forefront of the fight against financial crimes for decades. Estimates show financial institutions spend more than $1.28 trillion a year in the fight against financial crime. Yet, spend alone has proven insufficient. The United Nations estimates that 2% to 5% of global GDP — about $4.4 trillion — is laundered annually, and less than 1% of those funds are seized.
The fight against these crimes is still largely analog in a digital world. We’ve leveraged the cloud, AI and machine learning to bring more modern solutions to the problem, increasing banks’ and brokers’ crime fighting effectiveness and success rates.
Q: The last few years have seen a rise in the popularity of thematic investing. How is Nasdaq, through its index business and partnerships, with third parties like the Consumer Technology Association, continuing to capture this area of investor interest?
A: Passive investing has experienced substantial growth and become a larger part of institutional and retail investment strategies. It is a great market invention that allows investors to hold a diversified mix of assets representing different investment strategies and outcomes in an ultra-accessible and liquid format.
At Nasdaq, we are committed to designing transparent, rules-based, and relevant indexes that expand market access and lower the barriers for investors to gain exposure to evolving markets and trends.
Our Index business offers an ever-increasing suite of index offerings. One of the most prominent is the Nasdaq-100®, which tracks the 100 largest, non-financial companies listed on the Nasdaq Exchange. It captures companies that bring amazing new innovations to enterprises and consumers worldwide, including companies such as Apple, Intel, Amazon and Microsoft.
We work with partners to find new and unique ways to drive innovation across our index platform. Our partnership with CTA, which dates back to 2010, is a great example of that. We partner with CTA to develop thematic equity indexes across numerous technology segments. For example, our “digital utility” indexes include the Nasdaq CTA Cybersecurity Index™, Nasdaq CTA Artificial Intelligence & Robotics Index™, and the ISE CTA Cloud Computing Index™.
CTA delivers a real benefit to how we build and manage those indexes, and offers market-leading research and analytical expertise to assess the role and impact of companies on a wide range of consumer and enterprise industries.
Q: In your tenure as CEO, what accomplishment are you most proud of? What accomplishment are you most looking forward to achieving next?
A: I am still early in my tenure as CEO. It is truly a privilege to serve our clients every day with tools and technology that open doors to the world’s financial systems. Over the last six years, I have led the company through a strategic pivot that has unlocked growth while expanding our role in helping corporates, investors, and banks navigate the complexity of today’s economy.
While I am extremely proud of all of the progress we have made so far, I am most proud of how we managed the markets through the early days of the COVID crisis. As volatility and trading activity spiked dramatically throughout the world, we were able to demonstrate, both in our markets and those that we serve with our technology, the true strength and performance of our market systems. Our daily peak message traffic more than doubled from about 27 billion to more than 67 billion daily messages, matching orders on average in less than 30 microseconds throughout the trading day. Our team was absolutely amazing in managing our markets and our clients through those turbulent days, all while moving to a remote work environment. It was extremely rewarding to see the strength of our team and our technology shine through.
We are just beginning our journey to become the trusted fabric of the global financial system. I can’t wait to see what we accomplish in 2023
Q: Nasdaq is committed to playing a key role in markets’ modernization. How do you see market infrastructure evolving, and what role do digital assets play within that context?
A: Today, Nasdaq is the largest market in U.S. equities and multi-listed U.S. options. We also own many of the markets across the Nordic countries. Nasdaq powers more than 130 of the world’s market infrastructure organizations in more than 50 countries with end-to-end trade lifecycle technology solutions. But in many ways, we are only just getting started.
We are excited about the evolution of markets and market infrastructure in the decade ahead. New technologies, including cloud and blockchain, present significant opportunities to enhance market resiliency and make markets even more scalable and accessible.
We firmly believe that these technologies will open more opportunities for market participants and new asset classes to be integrated across markets globally and ensure market participation is even more seamless, more frictionless than ever before. It is a tremendous opportunity for us, one that requires a holistic approach to deliver on that premise by designing solutions that will set the standard for markets to reach their full potential, and open new possibilities for market operators around the world.