For 15 years, the cloud has been a foundational component to Nasdaq’s efforts to modernize global markets and build a more resilient, scalable and accessible financial ecosystem. From the outset of our journey in 2008, with the migration of non-critical workloads to the cloud, Nasdaq embraced a cloud-first mindset when it came to software development as we sought to future-proof platforms. Now, Nasdaq continues to advance its commitment to the cloud by migrating mission-critical infrastructure with Amazon Web Services (AWS), fueling the future of the capital markets by leveraging technology that can increase liquidity, drive transparency and preserve the integrity of the global financial system.
"[At] Nasdaq, our mission is to be the trusted fabric of the world's financial system," Nasdaq Co-President Tal Cohen said at the 2023 AWS re:Invent conference. "We do that through the markets that we operate and the mission-critical infrastructure that we power around the world. And the cloud journey has been instrumental in us achieving that ambition over time."
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As Nasdaq embarked on its journey to the cloud, we started by migrating non-critical workloads to AWS as a precursor to advancing our position as a Software-as-a-Service (SaaS) provider to the global capital markets and beyond. Those workloads included foundational data storage, T+1 reporting and billing. Beginning with these non-critical workloads and making key investments in data management allowed Nasdaq to “gain valuable insight” and “build a cloud muscle,” Cohen noted.
After gradually and systemically moving our foundational data and systems, then came time to test Nasdaq’s strategy as drastic increases in trading volumes provided confidence and the conviction to advance our cloud journey.
Recent Drivers of the Cloud Journey
Over the past couple of years, global events, such as the pandemic, the war in Ukraine and an uncertain economic environment, have led to unprecedented volatility and volume. As trading activity tested the limits of traditional infrastructure, Nasdaq — and global financial market infrastructures (FMIs) — had to accelerate its modernization strategies to ensure long-term resiliency and growth.
Cohen highlighted a confluence of factors that shaped our journey, such as:
The re-platforming of our trading system so it's cloud-enabled and future-proofed.
Lessons from the pandemic around real-time capacity management, as well as the need for greater business agility during times of uncertainty and high volatility.
Advancement of our clients and our regulators' readiness for the cloud.
These factors ultimately led to Nasdaq building the next generation of markets and developing a blueprint to assist our more than 130 global market infrastructure clients to move to the cloud.
Advancing our Ambition
In a move reminiscent of Nasdaq’s foundation as the pioneer of electronic markets, Nasdaq accelerated its cloud ambitions, seeking to be one of the first to move markets to the cloud. Announcing the commitment at AWS re:Invent in 2021, Freidman declared Nasdaq’s intent to move its options markets to the cloud. To date, Nasdaq migrated MRX in 2022 and GEMX in 2023, as well as the Nasdaq Bond Exchange in early 2023 to AWS.
“We were able to deliver value to our customers because we showed improvement from a latency and performance perspective by 10% with each of those deployments. We're really proud of that,” Cohen said.
Moving markets to the cloud requires the migration of an intricate web of processes, systems and native protocols that are used by multiple layers of the overall capital markets ecosystem. To meet the rigorous performance, resilience, and regulatory demands for the capital markets, Nasdaq and AWS pioneered an edge computing system leveraging Outposts, a fully managed solution which provides market operators and participants with added agility to rapidly adjust operational systems and strategies, as well as innovation capabilities, to keep pace with evolving industry dynamics.
“Together, Nasdaq and AWS will change what’s possible for capital markets organizations, helping them to speed up innovation and improve business processes,” Adam Selipsky, CEO of Amazon Web Services, said in a statement. “Combining Nasdaq’s 50 years of expertise in pioneering technology for capital markets with the proven security, reliability, and resilience of the world’s leading cloud will help our joint customers and Nasdaq to continue to grow their businesses and seamlessly transact billions of dollars in trades per day. Our partnership will give Nasdaq a way to more easily move their core infrastructure to the cloud and innovate new services as they continue their second decade of cloud adoption.”
“Our ambitions to modernize the financial system go beyond our markets. By sharing lessons and proof points on how the hybrid infrastructure we have adopted enhances our agility and drives operational efficiencies, other market infrastructure providers are able to leverage our experience and expertise to transform their markets and better serve clients,” Cohen wrote.
Adding in AI
Our experience with the cloud, alongside a strong governance structure, has allowed Nasdaq to unleash the power of AI in a safe and responsible manner. Cohen noted that Nasdaq is approaching AI with two distinct focus areas: Integrating AI into our products and services and incorporating AI into our business. On the latter, Nasdaq is using AI to power a co-pilot with our engineering teams to modernize code and to enable code development, an endeavor that Cohen believes will yield a 25 to 35% uptick in productivity once fully mature and scaled. On the product side, Cohen highlighted Dynamic M-ELO, which was recently approved by the U.S. Securities and Exchange Commission. Leveraging AI, this new order type allows like-minded buyers and sellers of equities to minimize the extent to which their transactions impact prices.
“We're able to optimize the execution time per order as a result of this new order type. So, we can tailor that experience for a user or for an investor for when they trade a large-cap versus a small-cap name,” Cohen said. “It's really delivering better outcomes for investors.”
Cohen noted that Dynamic M-ELO will launch in the first quarter of 2024, running on Amazon SageMaker. Beyond this solution, Nasdaq has about 20 products that are currently AI-powered or AI-enabled, with a number of other products in the pipeline.
“[AWS has] enabled us to integrate and adopt emerging technologies like AI more cost-efficiently and effectively than we otherwise would have on our own,” Cohen said. “We recognized right from the start that we need partners to help us accelerate our journey and ultimately drive our success. And in our quest, we found a partner that really understood and appreciated the mission-critical platforms and solutions that we're delivering from a performance and resilience perspective.”