Nasdaq ToF 2024 Conference

Recapping ToF 2024 in Barcelona

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Nasdaq’s 2024 Technology of the Future (ToF) Conference is now in the books! After kicking off with a welcome reception at the stunning seaside Hotel Arts Barcelona, the 19th edition of ToF offered a packed agenda for the more than 100 global guests from our Financial Technology client community.

 

ToF Barcelona 2024

Over the course of three days, attendees heard from Nasdaq business leaders and industry experts on a number of key topics including market infrastructure, AI, regulation, innovation and much more, while also experiencing Nasdaq technology in action and participating in roundtables.

Here are some highlights from ToF 2024:

Becoming the trusted fabric

Day 2 began with an introduction led by Magnus Haglind, SVP, Marketplace Technology, Nasdaq, and Valerie Bannert-Thurner, EVP, Chief Revenue Officer, Financial Technology, Nasdaq (which featured instructions on using the ToF app to answer poll questions and network). Soon after, Nasdaq Chair and CEO Adena Friedman was the first to address the audience in her fireside chat moderated by Brian Buckley, SVP, Chief Marketing Officer, Nasdaq​.

Friedman touched on some of the core themes underpinning Nasdaq’s strategy and the importance of infrastructure. Market operators, including Nasdaq, sit in a key position of influence between participants, regulators and corporations, among others. From that seat, they can bring together stakeholders to drive sustainable growth and build a “ring of resilience” that fosters efficient markets and trust.

 

ToF 2024 Adena Friedman Keynote

This task to create this trusted fabric is even more vital, Friedman noted, amid a dynamic, complex and fast-moving landscape, especially with respect to increasing regulation.

“Resilience is the precursor to growth,” she said. “If you don’t have resilient infrastructure, or a resilient business model or resilient technology, then you frankly aren’t given the latitude to grow. Resilience [is what gives participants] confidence in you to drive that efficient growth.”

How does Nasdaq plan to navigate the environment while building this fabric? Inside the business, Friedman said cloud and AI will be critical to delivering the scalability, resilience, data intelligence and innovation needed. For clients, the addition of Nasdaq AxiomSL and Nasdaq Calypso will further broaden the company’s financial technology offerings to serve a wider client base more comprehensively. 

Keynote: State of AI in financial services and capital markets

Next up, Brad Peterson, Nasdaq CIO and CTO, was joined by Matthew Wood, VP of AI at Amazon Web Services, for a conversation on the state of AI and its potential. For Wood, financial services and capital markets already have considerable momentum. He attributed it partly to entities like market operators having existing data governance and quality standards (paired with massive volumes of proprietary data) to jumpstart adoption and value realization.

 

ToF Keynote AI

The opportunities with AI are clear, but success will come down to culture, not just technology, Wood said. Specifically, market operators will need to find the right cultural, technical and process levers to pull and overcome inertia in a sustainable way. Wood mentioned the importance of transparency (a point Peterson also emphasized when explaining how Nasdaq has come to market with AI), encouragement and pervasiveness in getting teams to experiment and kickstart adoption guided by top-down goals.

In terms of the AI tools the industry can expect to use, Wood is confident that no one model will be able to adequately serve the diverse use cases that pop up. “Swiss Army knives are good in a pinch, but not consistently great at anything,” he said, explaining that market operators will want to lean into the strengths of a particular tool given the application.

In a live poll question during a presentation by Nasdaq Chief Economist Phil Mackintosh, the vast majority of attendees expected AI to change trading “a lot” with few thinking its impact could be “too much”

T+1, a timely subject

The panel “Operating in a T+1 World: Effects on Market Operators and Their Participants” couldn’t have come at a better time, happening the same week that saw the long-awaited implementation of T+1 settlement in the U.S., Canada and Mexico. Moderated by Barnaby Nelson, CEO of the Value Exchange, the panel discussed the impact of settlement acceleration, how firms are coping and what the rest of the world is doing to align. Key points included:

 

ToF Barcelona 2024
  • Adrian Dale, Head of Regulation and Markets at ISLA, talking about how accelerated settlement compounds challenges related to settlement processing; he gave the example of securities lending and how one trade generates as many as 30 instructions, now required in a tighter settlement window, expanding on the downstream impact to operations.
  • Emma Johnson, Executive Director, Securities Services, Global Custody Industry Development at J.P. Morgan, touching on the importance of people and processes. “It’s not just doing things quicker and relying on batches. It’s more about how we do things and why.” Market operators need to be on the front foot and deliver seamless connectivity and interoperability to clients.
  • Phil Van Dine, Managing Director, Head of Banks and Market Infrastructure Client Coverage, Securities Services, Asia-Pacific at Citi, stressing the inevitability of global acceleration. It’s something market infrastructure operators and participants will need to be ready for, as differing deadlines and time zones across jurisdictions possibly impacting funding and FX. This requires market infrastructure operators to be proactive with members to solve challenges as they occur.

89% of respondents to a Value Exchange survey expect to be on T+1 or T+0 settlement within five years

Risk, regulation and resilience in focus

Maria E. Tsani, Head of Financial Services Public Policy, EMEA, AWS, promised to make her presentation engaging on a traditionally dry subject: regulation. Tsani was here to talk about the EU’s Digital Operations Resiliency Act (DORA), which establishes a risk management framework for information and communications technology (ICT) in the bloc’s financial sector. The act establishes rules for detection, incident reporting, containment, recovery and repair, as well as requirements for operational resilience testing and third-party ICT systems providers. Tsani said DORA represents something more intrinsic to the industry than just another compliance checklist; rather, it’s an opportunity to raise the bar for resilience and in effect enhance the security and dependability of markets.

 

ToF 2024 - Risk and Regulation

Such regulations are necessitated by the evolving cyberthreat landscape, which was the subject of a presentation from Charles Carmakal, CTO, Consulting business, Mandiant. Carmakal (whose experience includes responding to the massive SolarWinds hack) walked attendees through common attack vectors including social engineering, fake internet ads, phishing, SIM swapping and zero-day vulnerabilities. Carmakal noted that the stakes are higher than ever and continue to escalate as threat actors evolve their tactics to include psychological manipulation to ensure extortion demands are met.

Evolution of markets

For a more practical look at how the leading edge of tech is impacting markets, Marc Murphy, SVP and Head of Global Connectivity Services at Nasdaq, sat down with Garrett Arnold, Senior Manager, Capital Markets Sales, NVIDIA, to talk about accelerated compute, inference at edge and deep learning. Inference at edge—essentially generating AI insights at ultra-low latency round trip speeds in close proximity to exchange trading systems—is fast becoming a priority for trading firms who are looking to maximize performance of their trading strategies while enhancing their risk management capabilities. It’s critical for market operators to be aware of the increased use of GPUs for inference at the edge of trading as it will drive new standards and requirements across the industry. Arnold listed a number of inference use cases at the edge of trading he’s seen, including:

  • Parallel data processing
  • Signal detection / alpha research
    • Alternative data (e.g., open-source weather models used to forecast crop yields for commodities trading)
    • Transformers for time series predictions
  • Synthetic data generation for enhanced back testing
  • Pricing options in real-time with deep learning
ToF 2024 Evolution of Markets

Spotlight on AI use cases

AI is perhaps the technology of the future, so it’s no surprise that it was the first topic of Day 3, when the crowd heard from Michael O’Rourke, SVP, Head of AI and Data Services, Nasdaq, Doug Hamilton, VP, Head of AI, Nasdaq, and Brenda Hoffman, EVP, CTO, Market Platforms, Nasdaq, about current AI use cases at Nasdaq.

As Hoffman noted, Nasdaq’s strategy is two-pronged: layering AI on the business to drive efficiency and savings, while also incorporating AI in our business to push the leading edge and meet modern markets demands.

 

ToF Barcelona 2024 Recap

The session gave the audience more detail on how AI-enhanced products are helping to shape dynamic markets of today, including:

  • Dynamic M-ELO, an order type that uses AI to analyze 140+ data points every 30 seconds to detect market conditions and optimize the holding period prior to which a trade is eligible to execute.
  • Strike Price Optimization, tooling that uses predictive AI to identify options strikes most likely to trade. The program was purpose built to increase efficiency and improve liquidity on Nasdaq option exchanges. As the industry thinks about capacity management and long-term needs based on the expanding markets, utilizing AI to optimize strikes is a part of the company’s effort to improve the efficiency and transparency of our markets.

How to mature carbon markets

Voluntary carbon markets are growing across the world as carbon credits emerge as an institutional asset class. These markets are vital not only on a functional level to support the trade lifecycle, but they also drive much-needed investment toward developing areas while also supporting corporations' net-zero transition.

The challenge, however, is that these markets are constrained by fragmented infrastructure that makes it costly and intensive to transact. This was one of the major findings of a recent study done by Nasdaq and the Value Exchange, which found high interest levels amid operators and participants, but persistent blockers to trading and issuance.

 

ToF 2024 Day 3_02

Roland Chai, President, European Market Services, Nasdaq​, moderated the fireside chat and was keen to tie the journey of voluntary carbon markets back to the backbone issue of technology.

In the minds of Anthony Miller, Chief Coordinator, UN Sustainable Stock Exchanges (SSE)​, and Nandini Sukumar, CEO, The World Federation of Exchanges (WFE), technology will play a pivotal role in the maturation and growth of these carbon markets.

“All of you are integral to the evolution of this market. Without you and without your thinking and innovation, the market won’t grow,” Sukumar said to the audience, particularly technologists in attendance. Sukumar stressed the importance of infrastructure technology in enabling the transparency and dependability needed to build trust in the market.

This was a notion Miller expanded on, focusing especially on verification. Greenwashing and credit integrity is a problem that has stifled carbon markets. He gave the imagery of an inverted pyramid, with the carbon market balancing precariously on less-than-ideal verification. Miller mentioned while current verification processes have got markets to this point, the market ecosystem desperately needs technology to bring integrity so that entities can “trade what they trust,” he said.

66% of respondents to our carbon survey said registries will be “critical enablers” of change, as participants look to them interoperability and standards

Trendspotting: Collateral optimization and the business opportunity

Next up was Gil Guillaumey, Head of Capital Markets Product Strategy, Financial Technology, Nasdaq, who talked about portfolio optimization and the expanding collateral management function with Dhiraj Bawadhankar, Managing Director, Clearing and Post-Trade Product Management, CME Group, and Pablo Rodriguez Elorza, Head of the Risk Department Reporting to the CEO and Board, ComDer.

An increasing amount of collateral is locked up in central counterparty clearing houses (CCPs), even as new clearing programs offer member firms a way to optimize their collateral requirements. As discussed by the trio, the clear opportunity for post-trade infrastructures here is giving member firms cross-margining services to help their clients retain capital flexibility. 

 

ToF 2024 Day3-03

Rodriguez, in his work for the Chilean domestic CCP, noted volatility and acceleration of markets can considerably increase the collateral requirements for which firms often need to move cash and assets across time zones and jurisdictions. Without sophisticated margin models, there is a risk of over-margining.

Bawadhankar noted that technology can help address some of these challenges. Cloud-enabled data stores, for instance, can help provide firms with greater, more timely visibility into their data, helping them to monitor exposure more effectively and frequently with information for capital optimization.

Looking ahead, both thought that new regulation would open the door to increased innovation, as the U.S. will require treasuries and repos to be cleared within two years’ time, possibly leading the rest of the world to manage risk by expanding clearing mandates.

Grateful for the opportunity to connect

Besides the wealth of programming, attendees of ToF 2024 Barcelona also got to take in a dinner at celebrated winery Caves Codorniu, a sight-seeing tour (hello, Basilica de la Sagrada Familia) and a farewell reception at the Noxe, W Hotel overlooking the beautiful Balearic Sea.

Nasdaq Financial Technology once again wishes to thank all the attendees and speakers. We were overjoyed to have this opportunity with our clients and value this time to discuss, collaborate and grow together as the trusted global fabric of the financial system.

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