Back in 2008, Nasdaq received its first bill from AWS. It was for the princely sum of $20. Since those pioneering days in the cloud, the financial market operator has expanded its relationship with the platform provider to become a SaaS provider itself to a global ecosystem that includes equities, derivatives, crypto and sports betting.
Today Nasdaq’s ambition is, according to CEO Adena Friedman, to become the first financial marketplace and solutions provider that is 100% cloud-enabled. It’s a bold vision and one that’s considerably more demanding than the operator’s early forays into the cloud with AWS:
Our partnership with AWS really has been built on many milestones across years of innovating together. In the early days of the cloud back in 2008, we launched a new product called Market Replay, which fittingly allows users to replay a full market day on every single stock down to the milli-second. It was a perfect early application for the cloud - a lot of data, but not a real time application.
The ubiquity of cloud computing today perhaps leads some to forget how disruptive a technology movement it was only a decade or so ago. But Nasdaq has been built on the principles of disruption and pathfinding since its founding half a century ago, says Friedman:
It began with the electronification of the markets and then the race to zero latency as volumes and investor participation exploded. We [now] embark on the next era of innovation, which is to bring the cloud to the financial markets in partnership with AWS.
Nasdaq's footprint today extends beyond its markets, she adds:
We're a technology company and a SaaS provider to the broader capital markets ecosystem. As a market operator, we serve millions of investors globally and the largest corporate issuers in the world with highly advanced equities and derivatives markets. Our technology also powers 130 other markets around the world and we provide mission-critical trading, clearing settlement and surveillance solutions.
In recent years, we've applied our financial markets expertise to build new marketplaces, including crypto exchanges and sports betting platforms. Our footprint as a technology provider gives us a unique ability to bring the world's markets to the cloud and to understand the complexity of completing that journey.
All of this imposes some very demanding requirements for the systems underpinning such expansion. Friedman explains:
Because our systems are responsible for seamlessly transacting hundreds of billions of dollars a day, there are certain key attributes that are critical to successfully executing that activity in the cloud. They have to be hyper-scalable, ultra-resilient, highly performing down to the nanosecond and fair for all participants.
There are some remarkable stats she can cite to back up the success of meeting those objectives:
Today within Nasdaq systems, we perform at extremely low latency. Our end-to-end order-to-trade processing occurs in 20 micro-seconds or less. To put that in perspective, that's 10,000 times faster than the blink of an eye. On any given day, our systems manage 3 million messages a second, and on our peak days we've had 60 billion messages entering our trading engines and 120 billion messages exiting those on our busiest days.
And that’s just data from Nasdaq’s own markets. But there is a bigger picture, Friedman points out:
Today Nasdaq is beyond our markets and our market technology. We provide SaaS solutions to the broader capital markets ecosystem, serving corporate clients, investment management clients and banks with a suite of of AWS-based SaaS solutions. We provide highly advanced anti financial crime technology, serving 2000 banks and credit unions. The data-centric architecture of the cloud really allows us to deploy very advanced algorithms to catch criminals across the whole financial system. We are also helping to modernize investment management firms with a comprehensive suite of workflow and analytics tools. And we help thousands of corporate clients manage their investors with a suite of AWS-based built-for-purpose solutions.
Over the past five years, there’s been a particular focus on bringing Nasdaq’s market services to the cloud, starting with what Friedman calls its surrounding systems, such as data distribution systems, market operations systems, revenue management, regulatory reporting. These are, she says, the systems that are foundational to well-functioning markets. Next up comes the biggest challenge to date - the matching engine. This is the technology that makes the markets tick, she says:
It's the technology that changes an order into a trade. We only wanted to take this journey when we were confident that we could do it while maintaining - or even improving - the latency and resiliency of our markets. Now, through our engineers deep engagement with AWS, we know we are ready, and we are going to start this new phase with our US options markets.
Nasdaq operates multiple options markets in the US and, combined, we are the largest marketplace for multi-listed options in the United States. We will work with AWS to bring our first US options markets to the AWS cloud in 2022. We will follow with more of our markets as we work closely with our clients, regulators and other constituents.
The close nature of the relationship between Nasdaq and AWS has helped address extremely complex technical challenges, says Friedman, and that continues today:
Over the past two years we've worked with AWS and together we have pioneered the creation of ultra low latency edge compute systems that are designed specifically for the capital market. Leveraging the hybrid cloud capabilities of AWS outposts, we can now bring the edge directly into our primary data center in Carteret, New Jersey, creating the first ever capital markets private local zone. Together, we will create a cloud center right inside the NASDAQ footprint which allows us to transition our US markets into the cloud.
And there's more to come, she promises:
Our partnership with AWS extends beyond our own markets and we are going to include a go-to-market approach for our 130 market technology clients. In fact, we're already engaged with AWS to deploy cloud-based trading and clearing solutions for several marketplaces and clearing houses around the world. And as we consider our largest and most complex exchange technology clients, those with similar latency and scale needs as Nasdaq's US markets, the steps we will take in our own markets will help standardize the cloud journey for them as we work together to transform the backbone of the global economy.
All of this has a wider importance, she concludes:
Our purpose at Nasdaq is to champion inclusive growth and prosperity. We fundamentally believe that if you have a great idea, markets can provide you the capital to turn that great idea into a great business. And if you are saving for the future, markets can help grow your wealth and achieve more with your money. So it is our responsibility to investors and to corporate issuers to continue to advance the markets, to make them safer, more accessible, more global and more affordable.
Our ambition at Nasdaq is to become the first financial marketplace and solutions provider that is 100% cloud-enabled, with AWS as our ally. Combined with our amazing technology talent at Nasdaq, we believe we have the joint team to make this a reality. Together we will truly redefine the future of the capital markets, a future that is safer, stronger, and more accessible in the cloud.