Annual Report


from Robert Greifeld, Nasdaq Chief Executive Officer

Dear Shareholders,

Nearly 50 years ago, Nasdaq started a revolution as the first electronic platform to display quotes for securities not listed on national exchanges.  And while Nasdaq today is a far cry from its cutting edge beginning—one thing has remained constant; an unquenchable ambition and desire for change.  Technology has always been part of our DNA and our purpose. In fact, one of the greatest hallmarks of the capitalist system, and the financial technology (FinTech) sector in general, is a seemingly endless capacity for reinvention and technological rejuvenation.

As Nasdaq’s CEO, I have been fortunate to play an active role in the technological transformation which has occurred throughout our industry, spurring not only greater democratization of the financial markets, but a tremendous evolution of our business from a small U.S. equities exchange to a leading global FinTech franchise.

Looking back, it is hard to imagine the Nasdaq of today: over $2 billion in net revenue1, more than $580 million in non-GAAP net income and one of the most diversified portfolios in the industry are truly remarkable benchmarks of our progress.  Over the last 13 years, Nasdaq’s market capitalization has increased from approximately $448 million in 2003 to well over $10 billion as I write this today—truly an outstanding acknowledgment from our clients and shareholders. 

“At Nasdaq, we have an ongoing healthy internal dialog about the future and our ambition to lead change on behalf of our clients and the markets we serve.”

Our financial performance is a reflection of a relentless focus to leverage technology and a long-term strategy to invest in our clients’ future needs.  At Nasdaq, we have an ongoing healthy internal dialog about the future and our ambition to lead change on behalf of our clients and the markets we serve.  It is in this regard, I am confident that our future rests squarely in the continued advancement, development and innovation of financial technology on behalf of our clients.

1Represents revenues less transaction-based expenses.


Technology Disruption

As a FinTech company, we always want to be measured and thoughtful in our approach but also think creatively about the application of technology and its transformative capabilities.  Our efforts with blockchain technology and machine intelligence are good examples of how we are embracing new ideas to help solve our clients’ needs. 

Blockchain is a technology that promises a rapid, secure and inexpensive financial framework.  The immutable trusted leger has great applicability in our industry—most obviously in the post-trade world.  Let me explain.

“Our vision is to incorporate machine intelligence...to eventually extend and improve the capabilities of all of our solutions across the entire enterprise.”

Trading and clearing began as an uncomplicated bi-lateral exchange between two individuals striking a deal to buy and sell assets and settle the transaction in cash.  Exponential growth, market participant interest and access to financial markets, however, created enormous demand that made it impossible for individual relationships to adequately service the market.  Trusted third parties such as market operators and clearing houses needed to be a part of the mix.  Technology such as blockchain can allow us to move back to these simple and effective bi-lateral relationships with tremendous security.  Clearing has been stuck in a three-day settlement cycle for decades.  But with Blockchain, the potential to do this is now within 10 minutes.  The implications for the safety and soundness of our capital markets are immense.

We have chosen the private market—where we are on a mission to bring public equity liquidity to private companies, investors and employees—as the first place to demonstrate the benefits of blockchain.  In December 2015, we successfully launched the initial release of Nasdaq Linq, our blockchain technology platform, leveraging key partners for implementation.  We recorded our first private security transaction using this promising technology.  In October 2015, we also announced that we are exploring additional applications of blockchain technology such as proxy voting in Estonia.  We are currently exploring other use cases and ways for us to leverage blockchain technology in our internal systems and commercial offerings across the enterprise.

I firmly believe this technology and others have the long-term capability to reshape the capital markets ecosystem.  As an industry, we should take an unrelenting approach to adapting this kind of disruptive technology.  Nasdaq has always been an innovator—and we intend to be at the center of this transformation now and in the future.

Technology permeates every business we operate today.  Reduced barriers to entry are having a dramatic effect on our levels of innovation—not just with blockchain—but across all of our businesses, globally.  To this end, we continue to explore other promising technologies that we believe will have dramatic implications for the value we deliver to our clients.

Machine intelligence is another area we are exploring that offers the possibility for software and hardware to develop learning and predictive capabilities.  The speed, complexity and vast amounts of raw data our systems process every day is nothing short of mind-boggling.  Moreover, it is estimated that in 2020, data production will be 44 times that of what it was in 2009.  Even more amazing, it is estimated that 85% of Fortune 500 companies will not gain a competitive advantage from the data they gathered last year through the use of traditional business intelligence tools. 

The ability for machines to learn patterns and make intelligent decisions has far-reaching implications for vastly improving areas like market surveillance, indexing, data products, and market operations, among many others.  For example, a machine could analyze large amounts of raw data from multiple sources with the ability to detect fraud much more quickly than a human.  And that is just the beginning of the potential we see. 
There is potential for equity market structure in terms of intelligent spreads in trading, and machine learning indices can also serve as drivers of alpha for investors as well as harness predictive capabilities to identify likely performance of initial public offerings.  To ensure we are positioned to take advantage of these opportunities, we are making investments and building strategic partnerships with leading companies in this space.   Our vision is to incorporate machine intelligence in such a way that enables us to eventually extend and improve the capabilities of all of our solutions across the entire enterprise.  

Lastly, Nasdaq is focused on providing our clients with the technology and intelligence to address the challenges and complexities of today’s global markets.  For example, we are currently deploying new technology across all of our markets, which dramatically increases our matching engines’ processing power to handle more traffic and throughput.  The benefits of this technology are many, and we along with the rest of the industry, continue to improve our systems for greater resiliency, confidence and security in the capital markets, especially during times of volatility.  

Our clients and stakeholders expect speed and certainty when they come to a market with an assured and predictable outcome.  Our unrelenting focus on applying technology to deliver innovative and resilient solutions will continue to shape our future. 


Passion to Deliver

As a market innovator, smart and entrepreneurial talent is fundamental to our success.  Our brand is built everyday by the positive interactions clients have with our people, products, technology and service.  Over the last several years, we have taken significant steps to invest more heavily in the people and programs that continually strengthen our culture, provide learning programs and opportunities for advancement and give back to the communities where we live and work.  We have achieved the healthy equilibrium of retaining a strong institutional knowledge base and attracting new talent, skill sets and ideas, globally.

As I travel around the world to meet with staff in our various locations, our dynamic culture is perhaps best revealed.  No matter where I am, despite differences in language and culture, we are deeply united in our passion to serve clients and in our spirit to win.  We are fortunate to benefit from the best leadership and talent in our industry and I have no doubt that our future will continue to be positively influenced by the passionate team of professionals that I am so privileged to work with every day.

The leading companies today not only develop a compelling vision, but develop the talent, discipline and endurance to execute their strategy over the long term.  At Nasdaq we are doing this in sizable ways, and our business performance and competitive position continue to strengthen.  Over the last three years we have invested in excess of $100 million in R&D efforts, while returning just shy of an astonishing $900 million to our shareholders.  

“Our shared ambitions with our clients are bold and courageous.”

I point to these numbers only as indicators of how our maniacal focus on execution has led to long-term value for our clients, shareholders and employees.  I have never seen at any time during my tenure our strategic focus better positioning this organization to capitalize on its future than now.  It is tremendously invigorating. 

Over the next decade, Nasdaq will continue to focus where we can leverage the assets and expertise of the mothership to propel our business forward.  This course has firmly aligned us as a fully transformed FinTech leader.  I am confident that it will be an equally positive journey in the months and years to come that will continue to deliver benefits for all of our stakeholders. 

When you think about what we have accomplished and what we will accomplish in the days to come, our shared ambitions with our clients are bold and courageous. These attributes embody a mutual desire to make a difference and disrupt the current state for the better.  For Nasdaq, this has always been where the true power behind our success resides—now and for the future.

/ Robert Greifeld

Nasdaq Chief Executive Officer

The Power of Ambition
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