Nasdaq Pivots to the Buy Side
Despite the industry focus on market data fees and access fee pilots, global exchange operator and technology provider Nasdaq plans to take a three-prong approach to expand its relationship with the buy side, according to Adena Friedman, president and CEO of Nasdaq.
“Having worked on the buy side, I recognize how underserved the buy side is regarding technology, tools, and data that help them make informed and well-controlled investment decisions,” she said during the Sandler O’Neill’s Global Exchange and Brokerage Conference.
Nasdaq has had a direct historical relationship with the buy side via its market data and index businesses, but the buy side still need to go through the broker-dealers for trading, said Friedman
As part of her tenure as CEO, the company has pivoted much of its focus and investment into the high-growth opportunities of data, analytics and market surveillance technologies, which buy-side firms can use to hone their investment decisions.
Nasdaq is not trying to compete head-to-head with rival exchange operator Intercontinental Exchange regarding its financial data strategy, she added.
“ICE has a very specific strategy around fixed income, and it is teaming that strategy with the buy side and sell side. We are using our assets and strengths, which is that we really understand risk management.”
The firm also does not envision developing a ticker plant for various asset classes beyond what it already has for US equities.
Much of the investment Nasdaq recently made is in the nascent area of alternative data with the launch of its Nasdaq Analytics Hub in May 2017 and its acquisition of alt data aggregator and provider Quandl at the end of 2018.
Since the acquisition, Nasdaq has expanded Quandl’s offerings to include machine-readable versions of all its data offering, said Friedman.
However, Nasdaq plans to stop short of becoming a full ticker plant that supports the buy side, she said. “We have that with our equities exchange, but our strategy is more on the intelligence side in providing deeper capabilities to them.”
Nasdaq truly dipped its toe into buy-side offerings with its $705 million purchase of eVestment in September 2017, which provided access to the vendor’s institutional clients as well as their strategies and capabilities.
eVestment’s database provides a significant amount of intelligence regarding buy-side firms, which helps users drive their business forward and continues to grow via the network effect, according to Friedman.
The final prong is its market surveillance business, which has a sizeable existing footprint outside of the buy side with more than 150 broker-dealers, 50 exchanges, and 12 market regulators leveraging Nasdaq’s technology.
For the buy side, it is managing to the rule and making sure that no one is manipulating the market, inside trading, and other things, she added. “It is much more around behavior driving trading. You look at the portfolio managers and traders within the buy side and see whether there is any anomalous behavior happening at which they need to look.”
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