TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.
Technology was a key theme at last week’s International Futures Industry Conference in Boca Raton, Florida – specifically, its capacity for increasing operational efficiency, bolstering resilience, and modernizing markets.
The Exchange Landscape: The View from the Top panel on March 12 highlighted big-picture challenges. The industry is looking to navigate through increased regulatory pressures, political and economic uncertainty while ensuring that their businesses are well-positioned to leverage technology to their advantage.
“Money flows continue to be global while politics become more local,” Nasdaq CEO Adena Friedman said at FIA Boca. “Exchanges want to attract capital, banks and brokers are managing through increasing regulation. As the world gets more complicated, there is more need for advanced solutions to keep capital flowing.”
Also, upcoming elections in the US and UK are expected to boost trading volumes and market volatility. “Our job is to manage through political cycles and provide the infrastructure that allows buyers and sellers to express their opinions about political cycles,” Friedman said, adding that financial market infrastructures (FMIs) have proven their mettle in recent years through a global pandemic, regional wars and prior political cycles.
“Through the incredible rise in volumes that we’ve seen, we’re providing a very good service and continuing to advance technology around that,” Friedman said.
Panelists on the March 13 Modernizing Markets discussion noted that the emergence of newer technologies, such as cloud, has upended financial institutions’ infrastructure investment plans that were set a decade ago. Advantages of cloud include agility, scalability, security, and cost savings; migrating technology to the cloud enables financial services firms to better focus on their core business.
“Cloud is an equalizer in terms of infrastructure,” said Magnus Haglind, SVP of Marketplace Technology at Nasdaq. “The more people see it come out to the market, the more comfortable people become.”
Haglind cited three broad trends: changes in market structure, changes in regulation, and technology innovation. “Right now, the three forces are coming together in confluence,” he said. “The regulatory and market structure changes are affecting the industry’s ability to embrace technology.”
Specific to one of Nasdaq’s main businesses of servicing markets globally, Haglind highlighted standardization.
“Standardization is a very strong trend,” he said. “People want to standardize to attract liquidity into the market. It takes some time to change interfaces, but the outcome is reduced barriers and reduced friction.”
Artificial intelligence, specifically its very buzzy offshoot generative AI, was covered on almost every panel over the three-day FIA Boca event.
Friedman said Nasdaq has formed an AI team to bring AI innovation into the markets.
“AI as a construct is a revolutionary technology, because there’s such an opportunity to unlock intelligence and information from massive data sets,” Friedman said. “Generative AI in particular offers a huge productivity opportunity to automate manual workloads for banks and brokers, for example in surveillance.”
Regarding AI deployment, Haglind said: “An obvious place is around integrity and compliance – ensuring markets are secure, people are behaving as they should, and there’s no fraud. That’s where this technology is best.”
Gen AI brings risk though, Friedman noted, for example in the form of “deepfakes” or synthetic media, that the financial industry needs to be better at rooting out.
Markets are at a pivotal junction when it comes to critical technology infrastructure, and, if one thing is clear, it is that organizations must transform their businesses to secure long-term operational and business resilience – or risk being left behind.
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