Supporting the Evolving Marketplace Landscape
Technology is transforming the financial markets at an accelerating pace with key innovations, such as cloud computing, blockchain and machine learning gaining ground across the industry, improving efficiency and helping organizations gain competitive advantages. At the same time, extreme market volatility and volume spikes, breaking previous volume records by far, as well as several serious cyberattacks during 2020, have tested our mettle and reminded us that we need to expect the unexpected. In a session on the Evolving Marketplace Landscape at Nasdaq’s Technology of the Future conference, Ulf Ahlenius, Head of Marketplace Products, emphasized that the industry must be prepared to meet constant and unpredicted changes.
Against this backdrop, marketplaces’ mission remains to guarantee efficient price discovery and execution, fair and transparent markets, as well as resilience, capacity and security. As a technology partner to exchanges globally and supplier of core marketplace technology, Nasdaq supports marketplaces in operating robustly through extreme conditions such as those we have seen during 2020. Ahlenius outlined six key product investment areas his team is focusing on to help take marketplaces to the next level:
1. Next Generation Matching Engines – Nasdaq continues to invest heavily in its matching engines and the underlying platform Nasdaq Financial Framework (NFF) to further enhance multi-asset capabilities, performance, operational efficiency and optionality, as well as connectivity. NFF serves as the foundation across Nasdaq’s many solutions to enable scalable and robust, high-speed transaction processing. The applications running on NFF take advantage of code sharing and shared services within NFF to facilitate efficient operations and interoperability between key components of a marketplace.
The matching engines are highly configurable and scalable, facilitating multi-asset trading and various market models. A recent focus has been on increasing the commonality between the matching engines and downstream components, such as the market surveillance application and data platform. Thereby making product features developed in one engine available by the other engines. In addition, the connectivity services have been expanded to now also include a REST API along with the more traditional financial protocols.
2. New Digital Services – Another focus area is facilitating efficient and secure interaction between the marketplace operator and its members and help improve customer satisfaction with user-friendly digital services. Cost savings continue to be a key driver for marketplace operators to digitalize services, as well as the opportunity to capture data that can be used to analyze, develop, and improve services. In addition, users increasingly expect and demand digital access to support and operational services through consumer-grade interfaces.
Nasdaq’s new Member portal, already in operation on Nasdaq’s Nordic and American markets, provides a digital interface designed for secure communication and interaction between a marketplace and its members. This allows for efficiency gains and cost reductions, improved user experience as well as enhanced traceability and reduction of manual errors with the provision of a central audit trail for all customer communications. The portal covers not only case management functions but also various self-services such as automatic port requests and software certifications, a regulatory compliance toolset, as well as advanced information and report distribution.
3. Business Agility – being agile allows Nasdaq to respond to client demands and adapt to market changes without compromising quality. While continued investments are being made into extending test automation and implementing a “one-click deployment” approach, Ahlenius emphasized the critical role of a modular design and how Nasdaq is increasingly adopting a product-oriented design in its matching engines where product code is clearly separated from add-ons and customizations. This provides customers with flexibility while allowing them to benefit from shared core product development.
4. Providing a Complete Marketplace Ecosystem
Operating a marketplace requires more than just a matching engine; there is a range of additional services needed. To facilitate easy access and setup, Nasdaq is creating a marketplace ecosystem where all required components are seamlessly integrated, using the same operations and user interface framework as well as common reference data. The main ecosystem components surrounding the matching engines are pre-trade risk management, an index calculator supporting the full index lifecycle, the member portal for digitized client services, market surveillance, the Nasdaq Cloud Data Service allowing marketplaces to reach a global audience with its data while outsourcing connectivity services, a data platform, and tokenized asset transfer using distributed ledger technology. All user interfaces are web-based, so there’s no need to download an application and bandwidth is optimized to the data used.
5. Cloud Operations
Given its potential to increase flexibility, elasticity, scalability and security, Ahlenius pointed to the cloud as being the future deployment method also for marketplace operators and to a hybrid model balancing on-premise and cloud operations as the optimal way to get to there. Data-intensive activities, such as surveillance as well as test systems and disaster recovery sites, are good candidates for cloud deployment, while low-latency services might still benefit from running on-premise. NFF supports operations both in the cloud and on-prem or in a hybrid implementation between the two, giving customers the ability to choose the most suitable setup given their circumstances.
6. SaaS Expansion
Marketplaces are increasingly looking at unlocking efficiency gains, accelerate expansion and simplify overall management by leveraging a Software as a Service (SaaS) delivery model. Nasdaq recently launched the Marketplace Services Platform, a marketplace infrastructure service that supports all the functional requirements for creating, operating and overseeing a marketplace, initially primarily targeted at startup marketplaces and new initiatives. It is deployed in the cloud and operated by Nasdaq so that clients don’t have to dedicate resources to build and manage the infrastructure.
Market surveillance is an area where the growing SaaS trend is clear. In 2020, about 80% of new Nasdaq Market Surveillance clients took advantage of either SaaS-based or cloud-based delivery, a substantial turnaround from 2019 when the majority of clients had the software delivered on-prem. One of the main drivers of this change is the difficulty in dealing with large amounts of data, especially in periods with increased levels of volatility. The problem clients seek to solve isn’t just in terms of size but around elasticity and flexibility. In addition, a SaaS-based delivery enables operations support, development and management teams to allocate resources to other priorities.
Key takeaways:
In summary, Nasdaq’s technology investments that will help transform the industry and prepare marketplaces to meet the challenges of the future include:
- Continued investments in its matching engine technology to further improve performance and multi-asset capabilities
- Rollout of new digital services that are making communications with clients more efficient, helping marketplace streamline support and improve services
- Architectural refactoring to promote business agility
- Build out of a complete marketplace ecosystem of components needed to operate a marketplace
- Launching cloud and on-prem hybrid deployment options as well as SaaS offerings that are helping clients become more efficient and agile
If you are a Market Technology customer, please click here to request access to the full presentation. To learn more about the Nasdaq’s trading and matching technology, visit our website.
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