Tech Talks Business Featuring Adena Friedman

Thank you. Thanks for having me here.

Well, maybe not as an intern. But I did start as an intern. I had gotten my MBA and I really wanted to work in finance, but I also wanted to live in Washington DC. And the little known fact about NASDAQ was up until about 1999, we were headquartered in Washington DC. So I started as an intern in the trading group and really got in on the ground floor to understand our trading products. We were even at that time a technology company because we were driving technology into the markets. We were the first electronic stock market but we didn't really think of ourselves as a product company. So they actually hired me as an intern to write product plans for their trading products and it really was the first time they really started thinking about product management inside the company. So it was a lot of fun. I learned an immense amount. I had an amazing first manager. We always say that the secret to many successful careers is the first manager. Because he taught me markets. He was patient. He let me fail at new things. He gave me a lot of autonomy and empowerment to go try things and do things. And so I was able to move up through the organization quite quickly. And about seven years in, I became the head of the data division, which was a new division that we created at NASDAQ. We were the first exchange ever to have a data division within the exchange business. And so I was 30 when that happened. And then we had a new CEO come in a few years later and he asked me to become the head of strategy in addition to running the data division. So there were a few key moments in my career that I would say really defined, you know, basically built trust with the leadership, is also defining the company but defining my career as well. One was when we created the closing cross that really closed the market every day. I led that project. It was a very successful high stakes project I can tell you that because so much money flows through the markets. Another one were a couple of acquisitions we did including globalizing the business through the acquisition of the Nordic exchange group and that also got us into the technology business and we've since scaled that business to become a powerhouse within NASDAQ. So there are a lot of things that kind of defined my journey but also defined NASDAQ's journey and I became CEO nine years ago, a little over nine years ago.

Yeah. Well thank you. So we today have three key divisions but we actually think of our business in three key pillars. So the first is we architect the world's most modern markets. We continue to be the technology leader in the exchange business. So we obviously architect our own markets and we are extremely advanced at doing that and we deliver at scale. We manage at least inbound into our markets at least 100 billion messages a day. And we do order to trade at 20 microseconds of latency. So it's just an incredibly highly scaled hyper fast infrastructure and we now provide that technology to 135 markets and regulators around the world. So it's a very very advanced technology that we power about half the markets in the world today. We then also power the innovation economy. So, we obviously have these incredible innovators that choose to list on NASDAQ, but we've also been able to turn that into investable products with the NASDAQ 100 and other index products that have really made it so that these great innovators get access to investors all over the world. And we have investment management solutions that allow for investment managers to make very advanced asset allocation decisions. And that business is based here. And then we also build trust in the financial system and we do that through the financial technology around anti-financial crime, market surveillance, trade surveillance technology, regulatory compliance technology and risk management. So really and that serves 3,800 banks around the world. That really kind of drives that trust into the system so that we are, I love the you said the nervous system. I really like that word. But we kind of see ourselves as kind of the fabric that underpins the financial system.

Yeah, it's such an interesting moment I think for all of us. We're on the forefront of probably the most defining technology in our lifetime and we kind of thought the internet was, for some of us we actually started working before the internet was a big part of the corporate experience but so in '93 we had just launched email. So I just want everyone to understand like it's been an incredible journey just in the last 30 years but this technology is supercharged and it's changing everything. It is ubiquitous, it will change every industry, it will change our job experiences. It'll change how we think about the speed of change and what's possible. It will literally redefine what's possible, I think, which is kind of an amazing thing. But we also have to recognize that it's very new and it's not perfect. And then you look at how do these types of really, these types of technologies, what I would say are truly transformational technologies, how do they come across a society? The first thing is always in the consumer because it's the fastest time to market. It's the easiest to create value. It's the easiest to kind of allow someone to touch and feel the technology and experience something new. And so the consumers always kind of are in a way the first place that new technology companies tend to focus. But what makes it a durable technology is when it comes across the enterprise. And you're starting to really see that. Obviously, this year has been, I think, a big wake up for the enterprise to realize that this technology will transform workflows across every enterprise. But what it takes as a leader of an enterprise to bring this technology in is you can't just plug it in and have it go. It's got a lot of risk in it. You have to make sure and especially in our space, it has to be hyper secure. It has to be hyper resilient. Precision is critical to our success. And we have massive amounts of data. So we have a huge amount of value that we can unlock with it, but we have to use it for the right purpose. So we are using it in several different ways and we can talk about that. But we're starting to focus on in the products, how do we automate workflows? How do we get better answers faster? How do we drive more capabilities into the products faster? And then on the business as we're transforming our own company, how do we change the product development life cycle? How do we change the client experience? Finance automation, marketing automation. I mean, it's just kind of amazing at what you can do, but it takes a lot of hard work to bring it across the organization successfully.

I mean I think first you look at some of the other major transformational technology moments whether that's like the railroads which was obviously in the 1800s. You look at the internet and everything that had to be built out to support the core network telecom networking capabilities and generally at the height of spend it was like between two and 3% of GDP was being spent to build out the infrastructure that underpinned these transformations. And if we look at what we're spending at this point for the buildout of AI it's around 1% of GDP. So we're kind of scaling up to about 1% of GDP. So the question really is where are we going to land there or is it going to go higher? And I think we all understand right now as you read any sort of earnings report, you watch any tech conference, we are completely compute constrained and we are absolutely power constrained and we're memory constrained. So every single element of what's really going to drive the adoption of this technology at scale is constrained from a supply perspective. So that means that it's likely that the investment will continue to go higher because it's needed in order to ultimately satisfy that demand. I also think that there will be technologies that come out that will take down the cost of tokens, take down the cost of compute, increase the amount of compute that can be in a chip, make chips more energy efficient. I mean all of that's also coming. So there's going to be some sort of equilibrium that starts to be found between what's needed to continue the buildout versus what is coming into the actual core technology to lessen the need for that. So it's going to be an interesting I would say three or four years of finding that and calibrating around that equilibrium.

Yeah, well I think the most interesting and instant area of efficiency improvement is in the areas of fraud and what I call the risk management areas. So that's what's so exciting for us because we have incredible technology in those areas and we have an AI first orientation to all of those areas. So we provide anti-financial crime, like protecting against fraud, money laundering, all the bad stuff. And we provide that to 2,750 banks in the United States and Canada. And it is extremely advanced AI topologies around rooting out and identifying the fraudulent actors and the bad actors in general. We take the data across all 2,750 banks. So we have every transaction across all of those banks to be able to mine to find criminal behavior. But then we also have now built out this agentic AI workforce that automates all the activity and the researching and frankly the paperwork that you have to have to inform the regulator about what you find. And so we're automating all of those workflows. So that is a huge area of efficiency gain for the banks but also better detection. The criminal actors are all using this technology to the best of their ability. Financial crime has continued to ratchet up in the world not down. So it went from about a three trillion dollar problem two years ago to a four trillion dollar problem today. So in two years. And that just means that the sophistication of the bad actors, the motivation of the bad actors, the world itself is a more turbulent world. So our ability to drive that technology into these solutions and make it more effective is critically important. So that's one area where I'd say the banks are first, there's a lot of focus there. There's other things in terms of just there's a lot of manual work that gets done inside of financial institutions that you can automate. But then the more interesting stuff for them is how do they play offense with it. And algorithmic trading has been around now for 10 years at least. So the leading actors, when I first got back to NASDAQ I left for a few years and came back. So I came back 12 years ago and I met a firm that was right on the leading edge of algorithmic trading and I remember talking to him. I was like, 'So, you don't really want to?' He was an investor, so it wasn't a trading firm, it was an investment firm. And he said, 'Oh, no. It'll all show up in the data eventually.' I'm like, 'Okay.' So, but there are a lot of those firms today, and it's a very scaled part of the financial system, algorithmic AI. But what's different now is being able to use signals that are unstructured signals, written, words instead of numbers, unstructured signals from everywhere across the world to be able to key that into your models to be able to make predictive capabilities. If you add on to that the ability to tokenize equities and tokenized securities, the ability to have money flow much more seamlessly across the world. And then if you layer on top of that as we talked about behind the stage, the potential of quantum computing to come into our space, it is almost mind-blowing in terms of what will change in terms of the ability to leverage this technology to drive investment decisions, to drive trading decisions, to change markets, and to move the flow of money globally seamlessly.

Well, you know, first of all, we have 10,000 employees. So, we're not huge. We're not like one of the banks that have hundreds of thousands. But we are, so we operate, we're really like a tight-knit group. I have to say we have employees all over the world but we really are tight-knit. We bring technologies across. When we first introduced AI into the company we did eight hackathons all over the world and we involved thousands of our employees and it was so fun because we had the same team go to eight different locations and then we'd remote in other employees and it was just a great way to show the power of the tech very quickly. Early on they could do anything that would improve their productivity and we had low code, no code, low code, and high code hackathons so we were making it so that anyone could participate and it was a really good way to realize the power of the tech early. And while we were having these hackathons we were building out our GenAI platform which is an internal platform that allows us to bring models in, it's model neutral, bring models in against our IP, our code base, all of our documentation and being able to implement the technology then at scale in a secure way. So while we were teaching we were building. So now we have that platform, we continue to add on to it and it's like it'll be a continuous cycle but it's really fun now we're actually driving the adoption at scale across the company but we're doing it, it's all led by at the CEO office we have a head of AI integration who works directly for me. We're really driving it from the center down.

Yeah, it's a great question and I think it's a question that every CEO is actually trying to answer right now. But we talk openly about that. So the first thing I would say is it has to be top down. Like this technology, while you can put the tools at the hands of everyone, how you then define those motions and redefine the motions of how do you build a product that's going to change, it's going to be actually a lot more fun. First your roles are going to merge more. The product managers are going to become more tech enabled, the developers are going to have to be more client centric. You're going to have all these tech ops capabilities are going to come in and help you monitor and manage your operations in a much more product way. I mean, we already have digital workers inside our tech ops teams and it's making it so that they can be much more proactive in managing our entire environment. Obviously, IT security is going to be supercharged and there's so many capabilities. But the one thing is it is a lot of change management. So think about the product development life cycle collapsing into a group of builders that have a lot of common roles but coming at it from two or three different lenses: designers, product people, developers, testers, all of that kind of becoming, you're going to get tools in your hands that allow everyone to have those roles and it's going to be really great. And on the client success side, you're going to have, we were just talking about this today, whether it's revops or client success or anything there. You're going to have all these superpowered tools that make it so that you can predict a client's behavior a lot better so that you can address it more proactively so you're not being as reactive, but you're going to be able to deploy these great talented people to help drive deeper thinking and help hopefully build the product road maps. So it's going to be so cool, but it's a lot of change management. I need to say that you have to get people a little outside their comfort zone to realize the role can change and they get excited about it and instead of scared about it.

Yeah. So trust is everything to us. We talk about that word a lot internally. It's something that we take extremely seriously. I mean it's not just we take it seriously. It's really the core of who we are and how we succeed and it's important because we cannot move at the speed of the technology necessarily all the time. Meaning we're not going to move at the speed of the technology into building new products. So we can't take every new tool that comes off the shelf. We're going to have to take the time and do a very deep IT security review on it. We're going to have to make sure we integrate it into our GenAI platform. We're going to have to make choices because not every tool is really fit for purpose for what we do. So, we have to slow down a little bit on the front end so that we can speed up on the back end. And I think our employees actually really understand that. It's hard sometimes when you come in from an unregulated industry into the financial industry. It's a little hard sometimes because you're like, 'God, I have to be able to just use that freemium model where I can just take a tool and bring it in and start using it.' And that is not the case in the financial industry. You do have to put in the right guard rails up front to allow yourself to use the technology safely. But it is everything and I think our employees really honestly they do understand that. We do not get a lot of push back. We get some frustrations, no doubt about it, that 'couldn't we just bring this tool in and start using it?' But I have to say our team understands our role.

Sure. Because I think both of those things together will in fact create a lot more efficiency but it will open up the world of accessibility which also can make it a little more complicated and complex. So meaning today we have, money flows all over the world. Capital markets are connected all over the world, but they're not as connected as they could be. And there's a lot of inefficiency that sits inside the system, particularly in the post trade area where you are having to put capital into different clearing pools to manage your trading activities within each clearing house or within each geography or asset class. And you're probably over collateralized by a lot because to move money from one jurisdiction to another or from one clearing house to another or from one asset class to another is actually quite inefficient. So tokenization if it does get adopted at scale will absolutely streamline the flow of money globally and that will make the entire system more capital efficient. That also means that you're going to have a lot more capital to grow and expand your business and go into new asset classes which might make your organization more complex because you're going to have to go into different regulatory jurisdictions. The one thing that is not harmonizing around the world necessarily is regulation. Regulation continues to be very nationalistic, continues to be very siloed. We have a technology now called AxiomSL, the most scaled regulatory reporting technology in the world and we basically build out all the regulatory reports and allow firms to comply with 176 regulators. It's not easy. So there is still going to be an underpinning of complexity even if this technology is used to the best of its ability. But it is pretty exciting to think about how those things converge over time.

Yes. So first we got approval yesterday from the SEC. So, we're very excited about that. And it means that what we got approval for is the ability to tokenize equities within the mainstream architecture that exists. So, we are partnered with DTCC and together we'll be able to create a streamlined capability. So, if you're an investor, you can tag your order and say, I want my order to land in a digital wallet instead of a fiat wallet. And basically from the order to the trade down through the post trade into settlement, it'll settle into a digital wallet infrastructure. And then if you want to trade it back up, it'll come back up through the system and recycle out. So what we're trying to do is allow the current market model and the market infrastructure and the digital asset market infrastructure to start to coexist. But it does not mean in mainstream finance that you or like the core markets that we're going to have atomic settlement of trading of stocks right away through DTCC. That does happen as you said in the digital asset space where it's digital native but that is not an equity itself. That's a synthetic equity that they're trading not a real equity or it's a crypto asset that they're trading but not an equity. So what we are trying to do is bridge the gap between the digital asset ecosystem and the current mainstream ecosystem by building a token design that allows for that smart contract layer to basically persist into the digital asset native world. So even if you're trading it into the digital native world, you're still retaining all the rights as an owner of the shares and the issuer has a relationship with you as the owner of the shares. And that I think is going to be the next gen. So my answer to you is I think there'll be more convergence than there'll be completely parallel, but it'll take a while. It's not easy. You cannot just go to net settlement in the United States and the equities world without it being incredibly capital inefficient. So you have to find paths towards a common system. We are calling it going to always on markets. We're going to be launching into 23/5 trading hopefully before the end of the year but we'll be ready in the second half. We'll see what the SEC says. But in a way we are, so 23/5 trading moving towards always on, having tokenized structures for shares I think is also a big part of that moving closer and closer towards hopefully over time same day settlement. And so that you start to converge these two worlds in ways that haven't existed yet but it's a pretty exciting time but I would look at that as like kind of a five year journey not a one year journey.

That's correct.

Exactly. Exactly. Please do take them.

We actually already trade from 4:00 a.m. to 8:00 p.m. today. Like our systems are open and available, but we don't have it as official trading hours. So we don't have the same surveillance. We don't have the same guardrails in the markets outside of US trading hours. Tomorrow, like when we launch this, we will have all of the same guardrails. We'll have all of the same infrastructure. We'll have market operations. We will have people around the world not working 24 hours. And also we'll have the tape that is available. So everyone in the world all investors will be able to see orders and trades throughout that period of time and I think that's going to be a big difference in terms of driving adoption outside the United States for trading of US equities. I mean US futures, equity futures trades 24/5 today. So like the NASDAQ 100 future trades 24/5 but the underlying equities that make up the NASDAQ 100 don't. So at least we're going to have that match up. So, I think that'll actually drive a lot more demand for US equities over time. I'm pretty excited about that.

I do. Yes, that's a big change.

So, I really love martial arts because it's such a big discipline. It's a mental discipline as much as it's a physical discipline. So I think, if I think about what does martial arts teach you, I think first you have to get comfortable being uncomfortable. I mean, sparring is an incredibly mentally uncomfortable thing. I mean, physically obviously uncomfortable, too. But the hardest part about sparring is the mental element of it, the fear of it, the fear of being hit or being kicked. And so that I think is something that you have to face your fears and get over your fears. And that applies to your whole career, your whole life. So that's one. What I always talk about with sparring is you have to play offense and defense at the same time all the time. Like chess, the greatest thing about playing chess is realizing that you have to play offense and defense simultaneously. My son plays a lot of chess and I get so excited about the next move. I'm like, 'Oh, I'm going to do that.' And I just forget the fact that he can take my king or something or that would mean I would lose. But anyway, so I think it is important to recognize in business, you have to play offense and defense simultaneously. And that is especially with AI and new technologies coming, how do you make sure that you're shoring up your business and making sure you are well positioned defensively while you drive it offensively? So yes, we use that in the boardroom a lot.

Yeah, just start by being uncomfortable and then maybe you'll get comfortable.

Yeah. So you just you can never get complacent. It's so interesting. I've had a chance to see a lot of companies face a lot of different challenges over decades and I get a chance to talk to a lot of CEOs, which is really fun. And I would say that I think we all are at this point or those that are ready to face the future are realizing that you can literally not have a single day of complacency. And I actually was thinking about that this morning, as I was getting ready and I thought, this is such a pace, like it is something where it's really a sport. You have to be trained for it. You have to be ready for it. You have to get up every day ready to play the game and not just practice. You're practicing to be able to play that game. But I think that today you have to kind of, it's game day every day right now. So I have to say that the thing that we talk about a lot internally is that every single product roadmap we're doing quarterly reviews of those product roadmaps. We might move to monthly reviews, you know, so because it's changing so fast. So making sure that we're always together making these decisions, but we're constantly driving change through the organization is the most important way to be successful and it's the only way to endure.

So I think with AI you can kind of envision a future. I mean you can envision a very optimistic future, you can envision a pessimistic one, but you can kind of envision a future of how this technology can transform elements of the business. Of course, you can have surprises along the way. So you can kind of see, wow, it just went from being a great chatbot to having inference to having intelligence. But in a way if you're learning a lot and you're listening to everyone who's talking about it and you're talking to the leaders in it, they can give you a map. Honestly, there are movies out there that you can, there are a lot of movies where they will consult with futurists. It's kind of amazing at how they're playing out right now. So you can kind of see a future with AI. I think digital assets has been a little bit harder to define for a period of time like is it something that's going to come into mainstream finance? It takes everyone to decide to change in order for it to be effective at changing whatever you're trying to change. So, you can't just do it on your own. And so it's been a harder one to navigate in terms of understanding what's coming when and how is it actually going to make a difference because if everyone decides it's going to make a difference, it will make a big difference. But if you're the only one deciding it's going to make a difference, you're not going to make a difference at all. So that one's been a little bit harder to navigate. But I think we have a really clear direction now as to how we're going to leverage this technology. We're driving that consensus across the industry and it feels more inevitable. So that one I feel better about today than I did even a year ago.

Yeah, it's a really interesting balance. And when I first became CEO, I think that the organization was extremely, I mean maniacally focused on reliability and we were extremely proud of our resilience and our scale and how we were able to serve our clients, but we weren't as focused on how do you grow and how do you kind of look into the future to say what's next and how do we drive the future into the company. And so that has been a very intentional effort by me and the entire leadership team to unlock both this notion of responsible growth, responsible innovation and making sure that we realize that we can be resilient and innovate. It's not an either-or. In fact, I would say most of the world now I think has come to this view of we have to actually drive resilience while we innovate and you are seeing more and more of that and I think COVID was a big part of that change in mentality but we've always had the resilience side and now I think that we've been able to kind of balance out the resilience and growth, resilience and innovation. But you have to make a lot of intentional effort.

I'm so glad they hear that. So, well, I hope they sleep a little. But well first of all thank you very much for the opportunity and we do have a great center of excellence here in Atlanta where we have about 250 employees here. We have actually we have offices all up and down the east coast because we have different centers of excellence around the east coast as well as in Colorado and California. And I would just say that be curious. We are always looking for great talent. You should be able to see that and find that on LinkedIn and other places and connect with people who are already working at NASDAQ. They can help you understand what are the opportunities that are here in Atlanta versus other locations and how do we organize around the skill sets that we're looking for. So and I think we're doing more to engage with Georgia Tech. I think that we're doing more here.

Thank you.

Thank you.