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.
