Republished courtesy of Innovation Week Newsletter, written by Rob Orchard on May 18, 2017.
Before February 1971, the world had a fixed idea of what a stock market looked like — big halls with busy floors where traders shouted at one another while gesticulating wildly. But then came the launch of the Nasdaq, the first electronic stock market. It was an innovation that would change the way we all do business.
Today Nasdaq is a colossal technology it provides to the capital markets powers more than 89 marketplaces in 50 countries, and is home to 3,800 total listings with a market value of USD11 trillion. It has earned a reputation for being the preferred market of high-tech Silicon Valley firms — Apple, Alphabet (parent company of Google), Cisco, Intel and Amazon are all listed on the exchange.
One man who has been a key driver of Nasdaq’s dynamism and innovation in recent years is YPO member Hans-Ole Jochumsen. Jochumsen, the organization’s Vice-Chairman, who is now based in London, England, UK, came to the Nasdaq from OMX, the Nordic stock exchange group acquired by Nasdaq for USD3.7 billion in 2007. Before OMX, he was President and CEO of the Copenhagen Stock Exchange. Throughout a distinguished career he has overseen numerous strategic acquisitions and launched several initiatives which have challenged the status quo in global finance. The key to such innovation? Patience.
“When it comes to innovative projects, you sometimes need to be patient,” Jochumsen explains. “For example, when we launched the Nasdaq Futures Exchange (NFX) in July 2015, the prep work took two years.” The NFX made the Nasdaq a major player in the global energy derivatives market, an enormous sector in which Jochumsen says the combined revenue of the two biggest players totals around USD1.2 billion. “The NFX was a very innovative concept because we were able to keep costs down by utilizing systems we’d already developed for other markets, and we also teamed up with one of the foremost clearing houses in the world, OCC. After two years we already have a market share just below 5 percent of the total and we should be able to break even later in the year. It’s an example of how the Nasdaq is prepared to go out and be innovative and competitive, but also how to achieve success through patience.”
COMMITTING TO INNOVATION
Innovation doesn’t happen in a vacuum. It demands significant time and resources so individuals and teams are empowered to engage in the kind of research and collaboration that can spark great ideas. Jochumsen says the Nasdaq has an established innovation fund of several million a year. This commitment to innovation seems to be paying dividends — money from this fund was used to create the NFX.
And the innovation drive looks set to continue. “A big part of our strength when it comes to innovation is that we are able to create a dynamic between technologists and business people,” he adds. “There is an eagerness inside Nasdaq to create new things.” One such recent innovation, the Nasdaq Private Market, was founded with the aim of making liquidity more accessible to smaller companies. “It has created new possibilities for growing companies, which perhaps one day will be listed companies,” explains Jochumsen. “We find that entrepreneurs, people who innovate, in reality they care about the product, what they create. They don’t care that much about the rest. We want to make life easier for them.”
For Jochumsen, however, an easy life might not be an option. There’s always something new to create so the Nasdaq can continue its growth. He’s proud of the New York Interactive Advertising Exchange (NYIAX), a Market Technology client that launched in March 2017, which uses blockchain technology and cloud computing to make media trades more efficient and transparent. Another key area of growth for the Nasdaq in recent years has been in surveillance technology. “As trade monitoring continues to become more complex for compliance team, we see it as imperative to find new ways for technology like machine learning to improve and strengthen this process,” says Jochumsen. “We have been very innovative in investing in this technology, developing it, and expanding it globally.” And the cutting edge trading systems that underpin the Nasdaq’s business have also been sold across the world, enabling their sophisticated technology to be widely applied. “The Singapore exchange is primarily run on our systems, as is the Swiss exchange,” says Jochumsen. “Hong Kong is a long-term user of our technology, so are Australia and Japan. We have more than 85 exchanges in the world which have been buying our market technology.”
In April 2017, the Nasdaq celebrated a landmark event — it topped the 6,000-point mark for the first time in its 46-year history. Its ability to lure major tech companies has been cited as a key reason for the index’s impressive recent surge. Jochumsen takes this most recent achievement in his stride. He knows this isn’t an overnight success, a flash in the pan. It’s the result of years — indeed, decades — of patient, persistent innovation.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.