TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.
As the first quarter of 2023 nears its end, it remains clear that the institutional adoption of digital assets, the convergence of traditional and decentralized finance, and the technology and governance controls that help firms meet the demands of market participants, continue to be focus areas.
In the below Q&A, Nasdaq’s Alastair McAlpine, Marketplace Technology Sales, and Gerard Smith, Head of Business Development for Digital Assets, share some of the key trends for the remainder of the year and how Nasdaq’s Marketplace Technology business is innovating the digital assets ecosystem.
Alastair, you work closely with both crypto-native exchanges as well as financial market infrastructures that are trading digital assets. As crypto and digital assets continue to grow in popularity, how do technology and market infrastructure play a role in helping crypto and digital assets exchanges achieve institutionalization?
Alastair: As crypto and digital assets markets continue to grow in popularity among institutional and retail investors, they need to make sure they can meet the requirements of market participants with the proper technology, governance controls, and processes in place.
Nasdaq is well known for being a market operator. In addition to owning and operating 30+ markets around the world, we are also a mission-critical technology provider to 130+ market infrastructure organizations. From our experience, institutions must offer stability and resiliency for participants and investors. To offer reliable market infrastructure for the long term, firms must ensure that they implement trusted, transparent, and scalable technology.
Crypto markets are almost always on, with many trading 24/7/365 days a year. Always-on market access combined with volatile market conditions can threaten an exchange’s core business if the technology is not designed and built to flexibly scale. Leveraging trading technology tailored for large order volumes with a redundant, scalable infrastructure is a must.
Several crypto exchanges are using Nasdaq’s technology to meet the needs of retail-oriented market participants and markets designed to cater to low-latency and high throughput institutional trading models while benefiting from the flexibility to introduce new asset classes and market models. An example of this is Bitstamp, one of the world’s longest-running crypto exchanges. Bitstamp is leveraging Nasdaq’s trading technology, allowing them to comfortably scale all aspects of its exchange and systems without worrying that it will hit the limits of its core infrastructure’s capabilities, bringing its platform’s execution efficiency on par with traditional finance standards.
Nasdaq recently announced a new business that will power the digital asset ecosystem, which further underpins Nasdaq’s ambition to advance and help facilitate broader institutional participation in digital assets by providing trusted and institutional-grade solutions focused on enhanced custody, liquidity, and integrity. As these markets continue on the path toward institutionalization, partnering with a technology provider that has a crypto-forward strategy is mission-critical for success.
Gerard, there’s been heightened interest from both retail and institutional investors in the trading and issuing of carbon credits. What do you think are the key challenges facing carbon markets today, and how does Nasdaq technology address these challenges?
Gerard: The voluntary carbon markets are still evolving. Lack of standardization, transparency, and efficiency are some of the key challenges facing these markets, coupled with the increasing need to establish market practices. With some carbon assets, lack of supply is one of the largest macro issues, so we need to expand reduction, avoidance, and removal capabilities to bring more supply online.
In Nasdaq’s view, creating a marketplace model can help solve many of these challenges by allocating capital to carbon projects efficiently. Our trading technology can enable both existing marketplaces and new entrants. Additionally, as a trusted and resilient market operator, we can help create market norms based on best practices in the capital markets, so intermediaries can access carbon markets in a way that they understand.
How is Nasdaq supporting marketplaces such as Puro.earth and Climate Impact X (CIX) from a technology perspective?
Gerard: Singapore-based CIX, a global marketplace and exchange for quality environmental credits, is using Nasdaq’s cloud-based Marketplace Services Platform to power its spot trading platform. The trading technology features multi-parameter matching capabilities, which makes it easier for counterparties to source the types of carbon credits they are interested in and execute transactions based on their specific needs and regulatory requirements. By leveraging Nasdaq’s technology, CIX is providing a resilient foundation for its market participants and ensuring the integrity, durability, and scalability of the market.
In 2021, Nasdaq announced its acquisition of a majority stake in Puro.earth, a leading platform for engineered carbon removal. Puro.earth and CIX are partnering to provide a carbon credit portfolio blending nature-and-technology-based removal credits, addressing the demand for net zero-aligned solutions for the voluntary carbon market.
Nasdaq and Puro.earth are working together to design carbon registry services and tokenization functionality that can be offered to the wider carbon market and beyond. We’re looking forward to bringing both components of our trading technology and the registry service together to standardize the market, as well as seeing how our SaaS technology can mobilize a standalone marketplace quickly. We look forward to our continuous innovation path in cloud-based technology that supports the digital assets ecosystem and beyond.
To learn more about Nasdaq’s technology solutions for marketplaces, visit our website.
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