Nasdaq Pivots to Technology
Nasdaq is moving full-speed ahead in its evolution from just an exchange operator to also a technology provider across capital markets.
That was the gist of Nasdaq CEO Adena Friedman’s remarks on a Thursday morning Greenwich Associates webinar.
Kevin McPartland, Head of Market Structure and Technology Research at Greenwich Associates, asked Friedman to look back on her first day as CEO in 2017.
“It was was extremely exciting and a proud moment for me and I was ready to get started,” Friedman said. “It was time for us to think through how to carry the business forward. How can we leverage technology to redefine capital markets? That’s how we looked at our strategy and the pivot we started to implement.”
Friedman described Nasdaq as “a technology company that serves the capital markets” with offerings such as market monitoring tools, data and analytics. The mission is to “become a scaled technology player in the capital markets in addition to being a world-class exchange.”
The discussion moved on to cover topics such as private equity, blockchain, buy-side relations, and data.
Nasdaq’s Private Markets unit provides technology and capital markets support for private companies, whether they wish to effect an IPO or stay private. Friedman said private companies need more automation and efficiency in their interfacing with capital markets.
A private company can allow investors to access liquidity via a tender offer, but then there is an ongoing need for capital markets activity, such as price discovery, block trading, and auctions. “We facilitate liquidity in the private equity space,” Friedman said.
Nasdaq is assessing whether real estate or other non-public markets might be suitable for similar liquidity facilitating, Friedman said.
Regarding blockchain, Friedman cited the benefits of a technology that allows traceability and creates a perfect record of transfers, but adoption is best-suited for new markets.
“It’s very nascent. There has been a lot of innovation, but there are concerns around unregulated markets and certain behaviors,” she said. “The hardest part of blockchain is distributing it across clients with legacy technology infrastructure.”
As the buy side plugs into markets via sell-side broker-dealers, investment managers are a step removed from exchanges. Nasdaq is working to change that dynamic, at least incrementally, via analytics offerings such as Quandl and eVestment.
Working directly with the buy side “gives us much deeper insights into what their challenges are and how we can better work with them,” Friedman said.
Lastly, Friedman pushed back on critics of exchanges’ market-data business and said sometimes-cited figures of 14% annualized revenue growth are inaccurate.
Nasdaq conducted a 10-year review of its equities product and determined that the compound annual growth rate in data revenue was about 6%, of which 2.4% was from price increases. The exchange operator’s Nasdaq Basic data offering is designed as a viable low-cost alternative to more expensive products.
“We try to make data affordable and high value,” Friedman said.