Nasdaq CEO Adena Friedman Says Machine Learning, Blockchain, and Cloud Tech Will “Drive Evolution” of Capital Markets

Adena Friedman, President and CEO of Nasdaq, the world’s second-largest stock exchange with a market cap of over $17 trillion, says that emerging technologies (Emtech) continue to “drive the evolution” of capital markets. 

As covered, Friedman believes that Cloud technologies will transform financial services and other key sectors of the global economy. She recently noted that machine learning (ML) and blockchain technology also have the potential to improve key business processes. 

Friedman thinks that the Cloud, ML, and distributed ledger technology will be “critical” to defining or shaping the future success of global capital markets.

Friedman, whose comments came during a recently held virtual event at Hofstra University’s Frank G. Zarb School of Business, stated that the benefits that the Cloud offers can be pivotal for keeping capital markets operating smoothly, especially during black swan events, like the COVID-19 pandemic.

During the peak of financial market volatility in mid-March (around the time when the Coronavirus crisis began), Nasdaq reportedly reached historic peaks of over 60 billion messages per day— which is notably twice as much as any previous record. The exchange was required to support that volume in a “20-microsecond latency experience” for its customers.

Friedman stated:

“As we look at the power of the cloud, we can create a more globalized system, more globalized connectivity, so that markets can operate more seamlessly over time. If we can leverage the cloud, I think that we’re going to find, more and more, that any new market that we build and deploy today primarily is in the cloud.”

Nasdaq Executive Vice Presidents Brad Peterson and Lars Ottersgård have also mentioned that the investment trend and innovation in Cloud-based technologies are most likely permanent or here to stay and have been accelerated due to the pandemic.

Peterson and Ottersgård noted:

“The writing is on the wall. More than ever, the capital markets will need to be dynamic, consistent and future-focused if we want to drive the economy forward. Shifting on-premises operations to the cloud will allow us to leverage evolving industry trends, launch new offerings quickly, improve service, as well as manage costs, risks, and unexpected volume spikes.”

Friedman added: 

“I would argue that machine learning probably will have the most impact on the industry in the long-term. But within the exchange business and certainly within the capital markets, there are three ways that machine learning will evolve the system…”

Friedman thinks that ML can enhance capital markets by boosting their overall efficiency, “defense” and “offense.” She believes that machine learning algorithms might be able to replace inefficient processes by “creating more repeatable methods.” Meanwhile, on the defense side, ML may be used to identify and eliminate “nefarious” trading behavior by finding any new patterns that could have a negative impact on the performance of capital markets. 

Freidman confirmed: 

“[Nasdaq] wants to be on the forefront of the technology on the defensive side.” 

She pointed out that the stock exchange had launched Nasdaq Market Surveillance, which is used by regulatory authorities, trading platforms and market systems across the globe. On the offense side, ML may be used for conducting predictive analytics or analyzing other aspects of market data in order to assist traders with making more informed investment decisions.

Friedman added that blockchain may be considered more of “an evolution than a revolution,” as widespread adoption of the technology is vital.

She remarked:

“[Exchanges] have to be on the rear guard making sure the whole industry moves forward. While we can implement blockchain technology easily within our infrastructure, the entire ecosystem has to adopt it, and that becomes more complicated. So, I think blockchain will continue to become bigger inside of our industry, but I think it will take longer.”

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