Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Joining us now is Dina Friedman, Chair and CEO of NASDAC,
Speaker 2: and of course there is a lot of excitement investor
Speaker 2: excitement for the IPO market to be coming back the
Speaker 2: largest IPO.
Speaker 1: Of the year.
Speaker 2: Of course, listing on NASDAC, what does the pipeline look like?
Speaker 2: Can you say the second half of the year has
Speaker 2: more room to run, especially when you have the election ahead.
Speaker 1: Well, first of all, thank you so much for having me.
Speaker 3: It's great to be on your set, and we are
Speaker 3: really really proud of the overall results that we've delivered
Speaker 3: for the quarter with ten percent overall growth. We've had
Speaker 3: twenty nine percent growth in our index business and sixteen
Speaker 3: percent growth in our financial technology business, which of course
Speaker 3: has been an area of real strategic focus for us
Speaker 3: as we look at the IPO landscape and the market's
Speaker 3: part of our business, and we've seen slow progression, I
Speaker 3: would say, in the IPO market. Were coming off of
Speaker 3: a very tough year in twenty twenty three, so we're
Speaker 3: seeing slow progression. Very excited about lineage this morning, join
Speaker 3: the NASA family of companies.
Speaker 1: We had one.
Speaker 3: Stream yesterday, so you're starting to see the investor appetite
Speaker 3: increase for taking risk with the IPOs, But I would
Speaker 3: have to say that we still think that it'll be
Speaker 3: slow progression as we continue through the year. The monetary
Speaker 3: policy outlook and other geopolitical factors I think are still
Speaker 3: keeping investors a little bit more risk of.
Speaker 1: Our you know, they have a little bit more risk aversion.
Speaker 3: But we're seeing some really good progress and we think
Speaker 3: that going into twenty twenty five, we should see more
Speaker 3: momentum in terms of the pipeline of companies that we've
Speaker 3: been talking to.
Speaker 2: When you think about the competition ahead in this market
Speaker 2: as well, do you think that Nasdaq has an ability
Speaker 2: to gain even more share? What does it look like
Speaker 2: behind the scenes. Are you out there courting every twenty
Speaker 2: twenty five potential right now?
Speaker 3: We meet with companies what years before they go public,
Speaker 3: so we really focus on the complete life cycle of
Speaker 3: a company. When they are early stage companies, we work
Speaker 3: with them in terms of helping them in the private
Speaker 3: markets manage their liquidity. With Nazek private market, we work
Speaker 3: with them on their governance practices and making sure they're.
Speaker 1: Maturing their governance.
Speaker 3: We start to introduce them to investors who are IR
Speaker 3: services before they go public, and then of course they
Speaker 3: go public, and then they become public companies, and that's
Speaker 3: where we have a whole cadre of capabilities that help
Speaker 3: them become great public companies. But we're talking to invest
Speaker 3: companies well before their IPO plans, so that as they
Speaker 3: think about the public markets, they think about NASAC. We
Speaker 3: had a seventy two percent win rate in the quarter.
Speaker 3: You know, we're continuing to show that NASAC is the
Speaker 3: venue of choice.
Speaker 4: You know, we saw a global IT outage a couple
Speaker 4: of days ago, reminded the world how fragile things are.
Speaker 4: Nasdaq was fine, actually, and you offer a suite of
Speaker 4: IT services to exchanges to guard against those things and
Speaker 4: financial crimes that I didn't even really know about.
Speaker 1: Showing huge growth.
Speaker 4: Talk to us about the new businesses that you've diversified into.
Speaker 1: Sure.
Speaker 3: Yeah, So with the cross strike challenge, our markets were
Speaker 3: not affected. The technology we provide to other markets and
Speaker 3: to the entire financial community were not affected. But of
Speaker 3: course you can always learn lessons from those types of situations.
Speaker 1: And we are partners with our clients.
Speaker 3: We talk to them and work with them on run
Speaker 3: resilience and redundancy and all of the things too that
Speaker 3: they can effectuate to help manage those types of challenges
Speaker 3: or at least prevent those types of challenges. As say now,
Speaker 3: our fintech division is where we sell technology to other exchanges.
Speaker 3: We have risk management technology, anti financial crime, regulatory reporting,
Speaker 3: all the core challenges that banks and brokers face and
Speaker 3: managing their lives across the capital markets and banking and
Speaker 3: that actually grew sixteen percent. As we mentioned in the quarter,
Speaker 3: we're seeing a huge amount of demand from our clients.
Speaker 3: We had sixty seven new clients sign up for technology.
Speaker 3: We had almost one hundred of seals and four cross sales,
Speaker 3: which actually is really starting to show the power of
Speaker 3: the NASAC platform across those vectors of risk.
Speaker 4: As we prepare as we look forward to an election
Speaker 4: in a November and prepare for a slate of maybe
Speaker 4: new regulations or fewer regulations, how do you think about
Speaker 4: the outcome of the November election for your clients.
Speaker 3: Yeah, we kind of look at the fact that Nazek
Speaker 3: of course as a market we're successful in any administration.
Speaker 1: I think that Nazac as.
Speaker 3: A company, we really focus on managing through political cycles,
Speaker 3: and we're you know, we've been here for fifty two years,
Speaker 3: the expect to be here for another two hundred and
Speaker 3: fifty two years. But I think that when it comes
Speaker 3: to overall, what are the corporate environment?
Speaker 1: What do corporates really look for?
Speaker 3: I think they look for consistency, predictability, and in an
Speaker 3: administration that really fosters growth and innovation because that really
Speaker 3: fosters economic growth. And so regardless of the you know,
Speaker 3: who's ultimately in office, can they create consistency, can they
Speaker 3: create some predictability in the regulatory environment, and can they
Speaker 3: put in policies and practices that really drive innovation and growth.
Speaker 3: I think that's what companies in general look for.
Speaker 2: I want to go back to to what Matt was
Speaker 2: asking about these other businesses that are not IPOs, the
Speaker 2: financial technology businesses. When you think about artificial intelligence generative AI,
Speaker 2: where are you seeing the biggest payoff? Because you look
Speaker 2: across corporate America and people are investing, investing, investing, So
Speaker 2: where where are the dollars at the end of the road.
Speaker 3: Well, first, I would say it's super important to get
Speaker 3: the right infrastructure in place and the right architecture of
Speaker 3: your solution. So NAZEC has been investing in moving all
Speaker 3: of our technology solutions into a cloud environment now for
Speaker 3: over ten years, and that is really paying off because
Speaker 3: by doing that, you're modernizing your data infrastructure, you're modernizing
Speaker 3: your architecture, and you're making it so that you can
Speaker 3: bring new technologies in faster and you can play with
Speaker 3: i'd say offense much more quickly. So a couple of
Speaker 3: things that we've been looking at that we've been doing.
Speaker 3: First is in our markets, we launched something called the
Speaker 3: Midpoint Extended Life Order, which is an AI driven order type,
Speaker 3: the first one that's SEC approved. We've seen a twenty
Speaker 3: percent improvement of field and fil rates and a twenty
Speaker 3: percent improvement in our volumes and that order type since
Speaker 3: we launched that in April. So that's an algorithmic AI capability.
Speaker 3: And then JENAI is a new technology that's really come
Speaker 3: onto the scene very quickly.
Speaker 1: If you already have all of your.
Speaker 3: Infrastructure and data in a cloud environment, it allows you
Speaker 3: therefore then to take those capabilities in So in verifin
Speaker 3: cloud based anti financial crime tool we launched an entity
Speaker 3: research copilot that automates the process of researching entities that
Speaker 3: might that have generated an alert in the system takes
Speaker 3: down the time to do that research by ninety percent,
Speaker 3: So it's really a great way to automate.
Speaker 1: More of those workflows.
Speaker 3: And we have a new one that's come out in
Speaker 3: our investment tool for asset managers to summarize the pensions
Speaker 3: board meetings, which gives them really really quick insights into
Speaker 3: the strategies of the pensions, allows them with their business
Speaker 3: development to engage better.
Speaker 2: As a CEO, how do you think about future investment
Speaker 2: in aijen Ai? Is most of that investment going toward
Speaker 2: new technology or retraining your workforce?
Speaker 3: Well, it's actually we say it's on the business and
Speaker 3: in the product. So we're quickly launching these cabilities in
Speaker 3: the product and then teaching our clients how to use
Speaker 3: them and automate and make it so they can be
Speaker 3: more efficient. But then we're also introducing new tools, so
Speaker 3: we've introduced the copilot tools for our development organization. We
Speaker 3: should be fully rolled out across all our developers.
Speaker 1: By the end of Q three.
Speaker 3: But then you have to educate, and so we've been
Speaker 3: managing our education throughout the year making sure they understand
Speaker 3: how to use them. What is it good for where
Speaker 3: do we see the most benefit. And we've had hackathons.
Speaker 3: We've done had over six hundred and fifty employees participating
Speaker 3: in some hackathons we ran this quarter, so that you're
Speaker 3: starting to really get them to understand what's the power
Speaker 3: of this technology. How can we drive productivity? How can
Speaker 3: we drive efficiency? But then how do we also create
Speaker 3: new cabilities in the products and to us, that's a
Speaker 3: big part.
Speaker 1: Of our future. I want to ask separately from Nasdaq.
Speaker 4: You're on the board of the New York Federal Reserve
Speaker 4: and we've got some pretty stunning GDP numbers in today.
Speaker 4: Two point eight percent, we got higher quarterly PCE.
Speaker 1: Than had been expected.
Speaker 4: Two point nine percent, we got lower jobless claims then
Speaker 4: had been expected. What's your view on the economy here
Speaker 4: and do we need rate cuts?
Speaker 1: Yeah?
Speaker 3: I mean at the highest level, the economy continues to
Speaker 3: be quite resilient. Now we all are seeing that inflation
Speaker 3: is coming down, and so it's coming down and normalizing.
Speaker 3: You're seeing GDP growth slowing but still robust, which is fantastic,
Speaker 3: but you are seeing the higher cost of capital start
Speaker 3: to impact larger parts of the population and citizens are
Speaker 3: really starting to be impacted by that cost of capital,
Speaker 3: So that's all, you know, that's a hard that's an
Speaker 3: interesting calculus for the FED to have to manage through.
Speaker 3: And then with rates at what I would say restricted
Speaker 3: levels at five and a half percent, you know, you
Speaker 3: do have a pretty big delta between GDP growth and
Speaker 3: the cost of capital. So there is an opportunity there
Speaker 3: for the FED to start to think about how do
Speaker 3: they moderate that and get that more in line. Now
Speaker 3: that even though you know, PC maybe came up a
Speaker 3: little bit higher, it's really still coming down quite precipitously
Speaker 3: from last year.
Speaker 4: Do rates and IPOs I mean, is there an inverse
Speaker 4: relationship there? I would imagine if rates are high, than
Speaker 4: the cost of capital from private credit lenders is higher,
Speaker 4: and you might prefer an IPO, and the opposite must
Speaker 4: be true.
Speaker 3: Well, actually I would look at a little differently. So
Speaker 3: when investors evaluate a company for an IPO, they look
Speaker 3: at what is the potential future earnings of that business,
Speaker 3: and they do what we call discount of cash flow analysis,
Speaker 3: and if the cost of capital is higher, they're going
Speaker 3: to discount the future cash flows more and so they
Speaker 3: actually so it actually has an interesting inverse reaction, where
Speaker 3: the higher the cost of capital, the lower they put
Speaker 3: on the lower value they put on future earnings, and
Speaker 3: that is therefore, I think, had the effect that we've
Speaker 3: seen on IPOs. Why has the IPO environment been so difficult,
Speaker 3: it's because the cost of capital has gone up precipitously.
Speaker 3: Investors have a hard time modeling future cash flows. Now
Speaker 3: we're starting to think that perhaps the cost of capital
Speaker 3: could moderate.
Speaker 1: That makes it easier for them to.
Speaker 3: Predict future cash flows, and we actually think that could
Speaker 3: be a catalyst for more IPOs going forward.
Speaker 2: It's a whole market working on that valuation, said Adina,
Speaker 2: We thank you so very much for your time. Of course,
Speaker 2: that as Adena Friedman, chir and CEO of Nasdaq