Nasdaq’s CEO on crypto, valuations, and the ‘true digital transformation’ shaping the markets

Apart from its function as a capital markets operator, Nasdaq has expanded to provide technology in areas like governance and investor relations as well as trading, clearing, and surveillance to 130 exchanges around the world. Earlier this year, it acquired anti–money-laundering software company Verafin for $2.75 billion, in an effort to address the rise in financial crimes during the pandemic and strengthen market integrity. 

“We’d like to think that in the next 20 years, we’d provide an interconnected web of technology where all the participants in the markets can use advanced technology, advanced data and analytics, to manage their lives and their money,” said Friedman.

And while the price of Bitcoin as well as other digital, decentralized cryptocurrencies have reached new peaks, Nasdaq does not currently have plans to become a crypto exchange. It has, however, incorporated blockchains into its next-generation technology, in hopes that it can become more scalable and capable of managing commercial markets in future.  

“I think that right now [blockchains are] a version 1.0 demo,” said Friedman. “The distributed currencies, though, are a really, really interesting next-generation way to think about the potential to serve in commerce and also as an investment class.”

Earlier this year, the Securities and Exchange Commission signed off on another part of Nasdaq’s vision of the future—a diversity rule requiring its companies to include at least one woman and another underrepresented minority on their board, or if they fail to meet those benchmarks, to explain in writing why. The rule reflects a historic step toward greater transparency and diversity in corporate America, and will assist investors in making informed decisions in the future.

When asked whether there was a market bubble, Friedman pointed to several factors driving up market valuations, including a new generation of investors who are using their money to make an impact in areas like ESG; monetary policy that makes it easier for businesses to borrow money to grow; and the explosion of tech during the pandemic. “First is a true digital transformation of the corporate community and everyone’s lives. The technologies that are really enabling that transition have a long-term growth opportunity that is massive,” she said. “Investors are…rewarding companies that can deliver that.”

When asked whether growth investing might be “the new normal” over our grandparents’ traditional way of value investing, Friedman emphasized that while there’s no way to know for sure what the future holds, the economy is already undergoing a technological transformation that will leave an impact over the next few decades.

“I have no crystal ball as to what’s going to happen in the markets, but I can say that these trends are real,” said Friedman. “And the companies that are coming into the market today are taking advantage of the opportunities that are in front of them.”