After a period of multiple historic events that forced markets to withstand major waves of unprecedented volatility and volume, Nasdaq’s Magnus Haglind sees a clear need for a change of mindset in the industry. This is particularly the case in post-trade, where he believes adoption of new technologies has fallen behind other parts of the capital markets ecosystem.
“Major industry transformations happen every 15-20 years and while there have been steady incremental improvements over recent years, I think we’re set for a period of significant reform,” said Haglind, head of products, marketplace technology within the Market Platforms division of Nasdaq. “Until now, adoption of new technologies has lagged other industries. For example, we’re now in the second full decade of cloud adoption in many parts of the global economy, but its potential has yet to be realized in financial markets. It’s now reached a level of maturity that makes it fit for purpose also to operate mission critical FMI applications, and we are investing across our post-trade technology portfolio, teams, and services to guide and empower necessary modernization of infrastructures.”
Having held various roles in the exchange industry over two decades and now responsible for Nasdaq’s broad suite of mission critical market infrastructure solutions provided to capital markets, Haglind thinks more radical transformation could be just around the corner. However, while cloud has been foundational to the modernization of many industries, he highlights that in order to truly capture its benefits organizations need to think holistically about their approach.
“It isn’t just about technology. Firms need to think more broadly about hiring and retention to make sure they have the right people, training to make sure employees have the right skillset, and ask whether their operating model supports agile, customer-centric developments,” he said. “And fundamentally whether they have the right culture to embrace new ways of doing things.”
He believes that organizations must look within to foster the necessary change.
“A key stakeholder group that often gets overlooked is the organization’s own staff. The significance of skills goes beyond knowledge and technical competence. It’s about transforming operations and processes which are highly demanding, but also critical tasks.”
Haglind points to the need for companies, large and small, to take a longer-term view on value recognition, with margin compression having created significant complexity for the post-trade ecosystem over recent years.
“The mindset around cost dynamics must shift to value dynamics,” he said. “In our journey at Nasdaq, we’ve seen that we’re not only able to scale more quickly with more elastic development teams and burst capacity, but we’re able to expedite time to market and enable a more horizontal approach to global product management.”
He continued: “We are finding new ways to empower our teams, ideate, develop and deploy new offerings and cultivate client relations – all of which enable the organization to recognize value over a longer time horizon, or even in perpetuity. The versatility of cloud and these foundational technology changes will enable us to expand our business in ways we’ve never fathomed.”
Haglind also believes there are significant first-mover advantages for early adopters of the technology.
“Past transformational shifts have favored those moving the quickest, with better ability to navigate competition, avoid major disruptions and control the pace of movement, while making financially prudent decisions,” Haglind said.
“Given the pace of technological evolution, a strategy limited to upgrading existing infrastructure will not lead to the kind of comprehensive modernization that will become necessary in a few years. Without a long-term vision and dedicated strategy for modernization, there is a risk of falling behind the overall pace of change in the industry,” he said.
Perhaps most importantly, Haglind believes that operating models need to shift to operate with a customer lens.
“As customers adapt their processes and systems to match the evolving ecosystem, market operators with older infrastructures or processes will be viewed as obstacles that increase costs,” he said. “The result could be losing business to better options. An effective modernization strategy will focus on reducing costs for customers and making services more attractive to them.”
“Firms need to be thinking not only about their own customers but of their customers’ customers as well. Change requires readiness from everyone in the value chain. The goal is to bring value to the marketplace, not simply change for the sake of modernizing,” he said.
He went on to reflect on the wider benefits to society of embracing market modernization.
“For decades financial markets have demonstrated their ability to serve as powerful engines for economic growth,” he said. “As financial institutions increasingly adopt transformational technology, it will unleash the power of markets to drive efficiencies, bring new assets classes online and ultimately create a more inclusive and prosperous future.”
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The views, thoughts and opinions contained in this Focus article belong solely to the author and do not necessarily reflect the WFE’s policy position on the issue, or the WFE’s views or opinions.