Let's go down right now to the Nasdaq marketsite in Times Square, where David
Westin, the host of Wall Street Week, standing by right now with a very
special guest. Thank you so much, Roman.
Yes, we do have a very special guest. She is Edina Freeman.
She is the chair and CEO of NASDAQ, which announced its earnings today.
So thank you very much for having us down here to your headquarters.
So great to have you here. Thanks for coming.
Congratulations on the earnings. You beat expectations as far as I can
understand. At the same time, as I looked at it, it
looked like it's a tale of two companies.
You've got the more traditional trading facilities, which are fine but not
growing really fast. And then you have the software part of
your business, which is really growing fairly robustly.
What's the connection between those two parts of your business?
Sure. Well, just a quick around the horn on
the results. We had 4% top line growth and then 6%
growth within our solutions businesses. And there are two highlights for the
quarter. One is our index business that returned
to growth after a couple of tough quarters.
And then the other is our anti financial crime business, which grew 19% in the
quarter and continues to have a really nice growth trajectory for the business.
And as we think about how we've been able to bring, you know, start with the
foundation of the markets and then bring new services to our clients, we actually
look at it across three key themes know what is the role of an exchange in the
marketplace to provide liquidity, transparency and integrity.
And so whereas we've been branching out and providing more technology services
to our corporate clients, investment managers and to banks and brokers, we've
really keyed in on making sure that our markets and the market we provide to
other markets provides and promotes liquidity.
And then we have transparency tools to support corporates and investors as
they're managing through the complexities of the capital markets.
And then on the integrity side, we have our anti financial crime suite that
really helps banks and brokers really solve one of their biggest problems,
which is making sure that they can root out criminal behavior across the
financial system. On the trading side, talk about cloud,
because that's sort of a foundation, as I understand it, that is really allowing
you to deliver some of the things you need to deliver.
Yes. So we've been migrating our own markets
to the cloud, but we spent really when I became CEO, we really decided to invest
heavily in our next generation trading system.
So we have our entire trade lifecycle technology as a cloud ready cloud first
architecture, and we're now implementing that across our clients.
And then we're also implementing it in our own markets.
We've moved one of our options markets to the cloud.
We are moving on to second one at the end of the year and we continue to
partner with us to bring our markets into the cloud over the coming years.
And then we're now able to deliver markets out in the world, regulated
markets in a cloud format, which really is kind of the next generation of how
the markets are going to operate. So that's been a great growth driver.
Then within our anti financial crime business, that's a cloud platform.
And that and what's great about that is we have 2500 clients.
We're able to bring the data together and look at patterns of behaviors across
banks, not just within a bank. And that's where you have to realize
that criminals just don't bank in one bank.
You know, so we have 2500 banks where we can look at transaction data and find
criminal behaviors through modern AI algorithms and get smarter and smarter
and smarter. And rooting out those criminals.
Talk about the criminals, as it were, and the financial integrity side of your
business, your VeriFone you bought VeriFone that accounted for some of the
growth that you saw from this, these reports that you just had.
How big can verify and get for you? Yeah, well, so very often within the
anti financial crime business, we have two solutions.
We have our surveillance solution and we have the VeriFone and what we call
family fraud and AML solution that grew about 23% in the quarter.
And it is a business that has a giant total market opportunity.
I mean, you're talking about a $4 trillion problem out in the world and
about a 7 to $8 billion serviceable addressable market, which means direct
addressable market that VeriFone can, can, can serve.
So it has a huge growth trajectory. And what's important, though, is the
banks need more and more sophisticated technology, The cloud capabilities and
the consortium data is what really makes VeriFone unique.
And you know, I was just up in Canada visiting with the team, and one of the
people that we have work with us is actually a former victim of human
trafficking. She now runs an organization that helps
other victims and then really works with law enforcement to say, how are the
criminals behaving? You know, so if you're really going to
solve this criminal problem, you have to get into the mind of the criminal.
And so what she does is she helps us actually think about how the models are
operating, how the transaction, how do criminals use the banks to perpetrate
their crimes, what kind of behaviors to exhibit so we can tune our models, make
them smarter, and continue to make it so that the banks have a better ability to
fight human human trafficking, which is obviously one of the biggest problems
that this society faces. So you're seeing real growth in things
like VeriFone. So the integrity aspect, your business,
you also announced that you are buying a fairly substantial transaction here.
Explain how that fits into your strategy overall and what that can do for NASDAQ.
Yeah, well, that fits squarely into this kind of theme of liquidity and
integrity. So in Danza is a risk management and
regulatory reporting platform that serves banks and brokers all over the
world. And so when we think about how do you
manage risk liquidity, risk your capital markets, risk trading, risk Addenda has
a platform called calypso that is squarely meets the.
Of banks and helping them manage their risk as they're managing their
transactions across the capital markets. And then they also have a platform
called Acxiom that helps banks manage all their reporting and regulatory
reporting obligations. That actually fits very nicely with our
surveillance and anti fin crime business because it really is a regulatory
obligation, compliance and what they call regtech.
It's a growing space. Again, giant total market opportunity of
about $16 billion, 8 billion in and of itself from a serviceable addressable
market growing really quickly. And it really does allow us to partner
very holistically the banks in helping them solve their biggest problems.
It's hard to have a discussion about the markets these days without talking about
crypto in some way, shape or form. And you made an announcement today about
pulling back and part of crypto at the same time you're going forward, for
example, with BlackRock applying for an ETF.
What does NASDAQ want to do with crypto and what do you not want to do with
crypto? Yeah, so we do want to help really
advance the ecosystem with our technology.
We provide trading technology, surveillance technology, and then we
also of course will work with BlackRock, Valkyrie and others to bring tradable
products onto our exchange so that the potential for there to be a Bitcoin ETF
that allows for retail investors to kind of invest in the asset class through a
very resilient marketplace. I think though, that as we thought about
being an operator of a custodian solution and being a custodian in the US
market, we also do like to be able to operate in a pretty well, well regulated
environment in a well understood regulatory framework.
And right now that regulatory framework is changing.
So we decided to halt those efforts right now and really just focusing on
the tech business and on the listings business.
So that's a fascinating point because I have to ask if and when the regulations
get clarified, federal level, state level, does that mean at some point down
the road you might reconsider and go into it more aggressively?
Well, we've actually built all the products we're now product causing them
to be able to sell to other market operators.
The question is, would we at some point become a market operator?
I think it really depends on what the regulatory framework looks like and
we'll have to see how that goes. I think that will take a while that to
shakeout.