How Market Operators Should Approach Innovation

Ageing market platforms - built decades ago for different market realities - simply cannot meet today's demands for resilience, efficiency and innovation. With global markets increasingly experiencing extreme volume and volatility events, one thing is clear: the status quo for global market infrastructure is not sustainable.  

Prudence Has Led to Technological Inertia 

Market operators have long approached technology transformation with caution, and for good reason; the critical nature of market infrastructure demands thorough risk management and meticulous planning. However, that prudent approach has, in many cases, evolved into inertia and given rise to a significant amount of technological debt. In recent years this has been exacerbated as organisations reacted to the global pandemic by pivoting their technology investments to ensure they could maintain operations while working from home, further moving resources away from central modernisation programs.  

Today’s market operators are faced with flipping the script, embracing innovation not just as a response to challenges but and as a proactive strategy to secure future resilience and growth. However, mobilising an organisation to invest in market infrastructure modernisation is no small feat. In dynamic times it requires a fundamental shift in how market operators approach investment and transformation programs, all while meeting the demands of maintaining critical business operations.  

Supporting Teams Through Technology and Service Models 

Ongoing maintenance consumes a substantial portion of budgets and constrains investment in innovation. Meanwhile, finance teams are focused on Return on Invested Capital metrics and risk failing to attach sufficient value to the long-term benefits of modernisation.  

Market operators are starting to reassess the way they upgrade their ageing architecture. They're moving away from the traditional capital expenditure model which forces them to make substantial upfront investments in systems that rapidly depreciate - both financially and technologically.  

We are increasingly seeing client demand shift towards a services-deployment model, where operators look to third-party technology providers to be responsible for many aspects of their operational heavy lifting, such as ongoing platform maintenance. This approach allows market operators to free up management time to drive strategic growth by staying focused on their core competences and growth-driven capital allocation. It also ensures internal teams can remain focused on advancing innovation and maintaining the long-term competitiveness of the business.   

This demands a comprehensive approach to modernisation, not only upgrading technology stacks but simultaneously fostering an internal culture of continuous innovation and agility. By partnering with technology providers and adopting flexible solutions, operators can ensure the long-term resilience of their technology and business model, while unleashing the potential of their workforce. It can also be executed in a way that maintains their control of the entire technology estate to safeguard their regulatory responsibilities as a marketplace. 

A Comprehensive Modernisation Blueprint 

Addressing these challenges was one of the key drivers behind Nasdaq’s recent announcement with AWS, setting out a new suite of solutions that offer a blueprint for global market operators to chart their path to modernisation. 

For market operators’ own investment programs, the proposed managed infrastructure and service deployment model can help redirect resources from maintenance to innovation, accelerate technology adoption, enhance security capabilities, and ultimately deliver improved experiences to all market participants. Furthermore, the recent launch of Nasdaq Eqlipse – the fourth generation of Nasdaq’s technology platforms across trading, clearing, central securities depository and data intelligence – allows market operators to drive extensive benefits from a unified and interoperable suite of solutions.  

Each platform offers the flexibility to connect to global capital markets and institutions through industry-leading protocols and standardised technology. With the platforms, market operators can gain buy-in from both current and future members and help advance modernisation throughout their wider ecosystem.   

Support from members has always been a critical success factor when a market operator undertakes significant platform enhancements. Members can face short-term challenges during these transitions, such as technical integration costs, operational disruptions and potential compliance adjustments.  Initial hurdles must be weighed against the transformative long-term benefits that modernised infrastructure delivers such as: 

• enhanced market efficiency through faster execution and settlement
• improved risk management capabilities through real-time monitoring and analytics
• reduced operational costs through automation, and 
• increased market opportunities through new asset class support or extended trading hours.  

Communicating this value proposition and involving members in the planning process - perhaps through phased implementations, comprehensive testing environments and specialised support resources - can transform potential resistance into collaborative partnership.  

The most successful infrastructure enhancements create virtuous cycles where initial member investments yield exponential returns through resilient, competitive and innovative market ecosystems that benefit all participants. For example, the Stock Exchange of Thailand (SET) recently promoted the adoption of Nasdaq’s risk and surveillance platforms within its member community to help strengthen market-wide resilience and integrity, with consistent infrastructure operated throughout its market ecosystem.  

With this community-driven approach, operators can leverage the combined benefits of common market infrastructure as well as the third-party’s investment program to modernise, standardise and strengthen their platform capabilities, application architecture, APIs, AI integration and product development.  

As the competitive dynamic for international marketplaces becomes more intense, market operators are increasingly going a step further and driving modernisation across their wider ecosystem. The evolution of market infrastructure is not just about keeping pace with change; it's about leading it. Those who recognise and act on this opportunity will redefine the future of financial markets, ensuring they remain competitive and relevant in a rapidly evolving landscape.