Recapping WFE 2023: Focus on Transformation

The World Federation of Exchanges (WFE) recently held its annual meeting, hosted by the Bermuda Stock Exchange and staged on the island from Sept. 19–21. We were both happy to represent Nasdaq, interacting with other industry leaders as the agenda highlighted overarching trends of regulation, innovation and market infrastructure transformation.

Here are our top takeaways from the event and conversations with clients and other attendees.

WFE a bellwether

Founded in 1961, the WFE is a global industry association for exchanges and clearing houses representing over 250 market infrastructure providers. Its annual meeting gathers exchanges, regulatory authorities, buy-side institutions, academic experts and media stakeholders for in-depth discussions on the major issues impacting the exchange industry.

This year, panel sessions touched on the state of market infrastructure in 2023 and beyond, T+1 settlement, exchange regulation, colocation and exchange connectivity, the growing importance of exchange data analytics, emerging technologies, market integrity, digital assets and more.  

The legacy issue

While the topics were varied, there was an undercurrent to them all: technology transformation to drive growth and global relevance. Many financial market infrastructures (FMIs) are facing the challenge of legacy technology and how it limits their modernization while also draining resources. A recent report from Nasdaq and the ValueExchange found that 78% of FMI budgets go toward maintaining legacy systems, and 37% of FMIs expect to go through a major market-wide transition within the next five years.

 “The majority of FMIs are on the offensive, eager to make investments that will create long-term value and benefit the ecosystems they serve, with many being open-minded to how emerging technologies can play a role in that value creation. This is especially true in regions that lack scale relative to global peers. Another oft-discussed point with FMIs is their need for modern, fair and world-class connectivity and colocation solutions. This is especially true for those FMIs that value international participation on their venues to enhance liquidity.”— Marc Murphy

FMIs need performance, scalability and dependability to meet increasing regulatory burdens and demands for resilience. At the same time, they need to be quick to market on growth opportunities (like derivatives, single-stock futures or digital assets) and compete. Legacy systems, typically rigid and costly to upgrade, hamstring FMIs in these operational priorities, which underscores the importance of technology transformation and explains why it was such a hot conversation topic. We both saw a large willingness among attendees to learn and understand more about modernization, particularly as to how Nasdaq has navigated its own technology journey.

“Our client conversations revealed that, without fail, it’s time to make those modernization investments. But it requires striking a fine balance between being able to drive current and future business initiatives, limiting impact on members, whilst at the same time driving tech transformation.”— Paul McKeown

Change management importance

While FMIs know modernization is a must, how they get there is a complex endeavor. Firms appreciate that their technology needs modernization but are realistic that it can’t all be done in one single project. The challenge is then to break down the modernization process into a series of change efforts that are more consumable and manageable that address culture, vision and buy-in alongside core technology considerations. With each success, momentum is built, and transformation progressively manifests.

Internal change affects external stakeholders, too. FMIs will want to limit the impact on members, a problem that can be solved for.

“It’s important to engage with customers very early on in the change process. Keeping stakeholders close helps to mitigate risks, refine scope and optimize investment. Nasdaq has found that a modular approach to delivering change can help FMIs regulate projects more efficiently in real time. Also, standardization can help further limit the impact to members amid change.”— Paul McKeown

Modernization a constant theme

WFE 2023 was full of insights, connections and conversations, and we look forward to attending again next year. We’re sure market modernization will be no less of a trend by then, and we encourage those interested to contact Nasdaq to learn more about how our expertise, technology and connectivity solutions can help advance modernization.

If you are interested in additional insights into the post-trade report cited above, visit this webpage, where you can also download an FMI change management checklist.