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Joining us now is Dina Friedman, Chair and CEO of NASDAC, and of course there is a lot of excitement investor excitement for the IPO market to be coming back the largest IPO.
Of the year.
Of course, listing on NASDAC, what does the pipeline look like? Can you say the second half of the year has more room to run, especially when you have the election ahead.
Well, first of all, thank you so much for having me.
It's great to be on your set, and we are really really proud of the overall results that we've delivered for the quarter with ten percent overall growth. We've had twenty nine percent growth in our index business and sixteen percent growth in our financial technology business, which of course has been an area of real strategic focus for us as we look at the IPO landscape and the market's part of our business, and we've seen slow progression, I
would say, in the IPO market. Were coming off of a very tough year in twenty twenty three, so we're seeing slow progression. Very excited about lineage this morning, join the NASA family of companies.
We had one.
Stream yesterday, so you're starting to see the investor appetite increase for taking risk with the IPOs, But I would have to say that we still think that it'll be slow progression as we continue through the year. The monetary policy outlook and other geopolitical factors I think are still keeping investors a little bit more risk of.
Our you know, they have a little bit more risk aversion.
But we're seeing some really good progress and we think that going into twenty twenty five, we should see more momentum in terms of the pipeline of companies that we've been talking to.
When you think about the competition ahead in this market as well, do you think that Nasdaq has an ability to gain even more share? What does it look like behind the scenes. Are you out there courting every twenty twenty five potential right now?
We meet with companies what years before they go public, so we really focus on the complete life cycle of a company. When they are early stage companies, we work with them in terms of helping them in the private markets manage their liquidity. With Nazek private market, we work with them on their governance practices and making sure they're.
Maturing their governance.
We start to introduce them to investors who are IR services before they go public, and then of course they go public, and then they become public companies, and that's where we have a whole cadre of capabilities that help them become great public companies. But we're talking to invest companies well before their IPO plans, so that as they think about the public markets, they think about NASAC. We had a seventy two percent win rate in the quarter.
You know, we're continuing to show that NASAC is the venue of choice.
You know, we saw a global IT outage a couple of days ago, reminded the world how fragile things are. Nasdaq was fine, actually, and you offer a suite of IT services to exchanges to guard against those things and financial crimes that I didn't even really know about.
Showing huge growth.
Talk to us about the new businesses that you've diversified into.
Sure.
Yeah, So with the cross strike challenge, our markets were not affected. The technology we provide to other markets and to the entire financial community were not affected. But of course you can always learn lessons from those types of situations.
And we are partners with our clients.
We talk to them and work with them on run resilience and redundancy and all of the things too that they can effectuate to help manage those types of challenges or at least prevent those types of challenges. As say now, our fintech division is where we sell technology to other exchanges. We have risk management technology, anti financial crime, regulatory reporting, all the core challenges that banks and brokers face and managing their lives across the capital markets and banking and
that actually grew sixteen percent. As we mentioned in the quarter, we're seeing a huge amount of demand from our clients. We had sixty seven new clients sign up for technology. We had almost one hundred of seals and four cross sales, which actually is really starting to show the power of the NASAC platform across those vectors of risk.
As we prepare as we look forward to an election in a November and prepare for a slate of maybe new regulations or fewer regulations, how do you think about the outcome of the November election for your clients.
Yeah, we kind of look at the fact that Nazek of course as a market we're successful in any administration.
I think that Nazac as.
A company, we really focus on managing through political cycles, and we're you know, we've been here for fifty two years, the expect to be here for another two hundred and fifty two years. But I think that when it comes to overall, what are the corporate environment?
What do corporates really look for?
I think they look for consistency, predictability, and in an administration that really fosters growth and innovation because that really fosters economic growth. And so regardless of the you know, who's ultimately in office, can they create consistency, can they create some predictability in the regulatory environment, and can they put in policies and practices that really drive innovation and growth. I think that's what companies in general look for.
I want to go back to to what Matt was asking about these other businesses that are not IPOs, the financial technology businesses. When you think about artificial intelligence generative AI, where are you seeing the biggest payoff? Because you look across corporate America and people are investing, investing, investing, So where where are the dollars at the end of the road.
Well, first, I would say it's super important to get the right infrastructure in place and the right architecture of your solution. So NAZEC has been investing in moving all of our technology solutions into a cloud environment now for over ten years, and that is really paying off because by doing that, you're modernizing your data infrastructure, you're modernizing your architecture, and you're making it so that you can bring new technologies in faster and you can play with
i'd say offense much more quickly. So a couple of things that we've been looking at that we've been doing. First is in our markets, we launched something called the Midpoint Extended Life Order, which is an AI driven order type, the first one that's SEC approved. We've seen a twenty percent improvement of field and fil rates and a twenty percent improvement in our volumes and that order type since we launched that in April. So that's an algorithmic AI capability.
And then JENAI is a new technology that's really come onto the scene very quickly.
If you already have all of your.
Infrastructure and data in a cloud environment, it allows you therefore then to take those capabilities in So in verifin cloud based anti financial crime tool we launched an entity research copilot that automates the process of researching entities that might that have generated an alert in the system takes down the time to do that research by ninety percent, So it's really a great way to automate.
More of those workflows.
And we have a new one that's come out in our investment tool for asset managers to summarize the pensions board meetings, which gives them really really quick insights into the strategies of the pensions, allows them with their business development to engage better.
As a CEO, how do you think about future investment in aijen Ai? Is most of that investment going toward new technology or retraining your workforce?
Well, it's actually we say it's on the business and in the product. So we're quickly launching these cabilities in the product and then teaching our clients how to use them and automate and make it so they can be more efficient. But then we're also introducing new tools, so we've introduced the copilot tools for our development organization. We should be fully rolled out across all our developers.
By the end of Q three.
But then you have to educate, and so we've been managing our education throughout the year making sure they understand how to use them. What is it good for where do we see the most benefit. And we've had hackathons. We've done had over six hundred and fifty employees participating in some hackathons we ran this quarter, so that you're starting to really get them to understand what's the power of this technology. How can we drive productivity? How can
we drive efficiency? But then how do we also create new cabilities in the products and to us, that's a big part.
Of our future. I want to ask separately from Nasdaq.
You're on the board of the New York Federal Reserve and we've got some pretty stunning GDP numbers in today. Two point eight percent, we got higher quarterly PCE.
Than had been expected.
Two point nine percent, we got lower jobless claims then had been expected. What's your view on the economy here and do we need rate cuts?
Yeah?
I mean at the highest level, the economy continues to be quite resilient. Now we all are seeing that inflation is coming down, and so it's coming down and normalizing.
You're seeing GDP growth slowing but still robust, which is fantastic, but you are seeing the higher cost of capital start to impact larger parts of the population and citizens are really starting to be impacted by that cost of capital, So that's all, you know, that's a hard that's an interesting calculus for the FED to have to manage through. And then with rates at what I would say restricted levels at five and a half percent, you know, you do have a pretty big delta between GDP growth and
the cost of capital. So there is an opportunity there for the FED to start to think about how do they moderate that and get that more in line. Now that even though you know, PC maybe came up a little bit higher, it's really still coming down quite precipitously from last year.
Do rates and IPOs I mean, is there an inverse relationship there? I would imagine if rates are high, than the cost of capital from private credit lenders is higher, and you might prefer an IPO, and the opposite must be true.
Well, actually I would look at a little differently. So when investors evaluate a company for an IPO, they look at what is the potential future earnings of that business, and they do what we call discount of cash flow analysis, and if the cost of capital is higher, they're going to discount the future cash flows more and so they actually so it actually has an interesting inverse reaction, where the higher the cost of capital, the lower they put on the lower value they put on future earnings, and
that is therefore, I think, had the effect that we've seen on IPOs. Why has the IPO environment been so difficult, it's because the cost of capital has gone up precipitously. Investors have a hard time modeling future cash flows. Now we're starting to think that perhaps the cost of capital could moderate.
That makes it easier for them to.
Predict future cash flows, and we actually think that could be a catalyst for more IPOs going forward.
It's a whole market working on that valuation, said Adina, We thank you so very much for your time. Of course, that as Adena Friedman, chir and CEO of Nasdaq