Nasdaq, Inc. (NDAQ) September 2026 Conference Transcript

Good morning everyone. I'm Eli Abood, Craig Siegenthaler and I cover US exchanges here at B of A and I'm pleased to be joined on stage by Nasdaq CFO Sarah Youngwood. With 4,500 companies on its exchange Nasdaq is the largest listing venue in the US. It is of course a leader in both stock and options exchange options trading but since 2017 it has been in the midst of a strategic pivot to being a scaled technology and information services provider as well today nearly 80% of Nasdaq's revenue is from non-trading businesses this includes indexing data corporate services marketplace technology regulatory reporting and financial crime management technology Sarah was appointed as CFO in 2023 before coming to Nasdaq she was the CFO for UBS where she played a key role in modernizing the bank's infrastructure and facilitating the acquisition of Credit Suisse. She also has 25 years of experience at JP Morgan where she held senior roles in investment banking and investor relations and as the CFO of Chase and JP Morgan's technology unit. Sarah thank you for spending some time with us.

Thanks for having me.

So Sarah to get started my sense is that a fair number of our European clients still think of Nasdaq as an exchange so to start why don't you talk to us about the strategic pivot that the company has undergone over the past decade and lay out the motivation and vision behind your entry into these adjacent business lines yeah thank you and so we are the trusted fabric of the financial system so by that we mean that we architect the world's most modern markets we power innovation, and we build trust in the financial system.

And so, you're right. When you think about all of the exchanges that we run, including of course Nasdaq, that is 30% of what we do. 30% and that includes the market services piece and the listing piece. All of that is 30% of what we do. 15% or over 15% at at this point, is actually an index business, including the NESAC 100, but one trillion in ETPA-UM constitute that index business, and has grown tremendously over the last seven years. And then the balance of it, about 50%, is core infrastructure for the financial system. And by core infrastructure, you've named many of those. those are really important rails and gold data that enables the financial system to run and to transform. And our vision was about, I'll call it a decade ago, we saw trends, technology trends, that we're going to transform the financial system. And to be honest, it's all happening today, but it was visible ten years ago. The first one is the cloud, the second one is the distributed ledger, And the third one, of course, is AI, originally algorithmic AI, and now gen AI. And by catching those trends, cloud 12 years ago, the distributed ledger nine years ago, and AI 10 years ago, we were able to put ourselves in a position where today, naturally, we're at the right place at the right moment. But that all started a decade ago. And what's very important is that we have modernized continuously during those 10, 12 years. And as we've done so, we've prepared ourselves to be ready to modernize the financial system. And our clients, the financial system operators, need solutions that are going to be Gen AI ready, that are going to be digital ledger ready, that are going to have data they can't buy somewhere else, that help them have the liquidity, the trust, the integrity in a financial system as the financial system changes. But I think what is even more powerful is that as we did that, we did it with the shareholders in mind. And so we did it trying to get, okay, a higher sum addressable markets share, like serviceable addressable market, and more alpha, more solutions revenue. You mentioned the 80%. And today, we are a rule of 70 business. So if you think of the rule of 40, we score at 70. There are only 18 companies that are at scale in growing mode, 8% or more, and that are at rule of 60. So it's a very good company in which we are. and it's a very rare occurrence to have rule of 70. And so rule of 70, 80% solutions, double-digit alpha growth in the last two quarters, and also mid-teens revenue growth over the last two quarters. So we feel very good about where we are, and we feel that that transformation has been not only very timely starting ten years ago, but also really giving us an opportunity to deliver for the shareholders i see let's dig in on tokenization for a moment so you announced that you'd be launching nasdaq equity tokens in the second quarter of 2027 can you help us understand how these are going to work yeah um so our big principles and you're going to hear those words all the time hopefully they stick are liquidity integrity and transparency um and so this transformation of the financial system is happening. You've got the convergence of AI and the digital assets with continuous transformation and those trends reinforce each other. So when we're looking at what we need to do, we need to maintain liquidity in this particular case as we introduce the digital ledger, because the digital ledger is going to provide benefits for both the issuer and for the investor, but the problem is to make sure you do that without breaking what we have today which is a very deep liquidity pool. So we provide Nasdaq equity token is maintaining one unified liquidity pool. You have all of the rights of the security itself. It trades in the same way the current fiat security actually trades and in addition you have the benefits the token, which issuer benefit from having some of the actions that are written into your token or that enable you as an issuer to have a closer relationship with your shareholders by embedding in some ways messaging or actions, dividend could be an action for example, into your token. And so you've got no harm done on the liquidity because of the unified liquidity, you've got more potential for the issuer to have capabilities on its token. And then from the investor's point of view, you have the ability, if you are in token mode, to use it more swiftly in terms of moving it as collateral, for example, to reduce your collateral needs. I think there's probably about a dozen other competing stock tokenization initiatives at this point including some other issuer centric models like super state securitize can you maybe speak a little bit more about how what you guys are doing with stock tokenization differs from those other initiatives already in the market yes I'm going to go back to that word liquidity to the extent that you do a wrapper for example and I'm not saying that every solution is a wrapper a wrapper is breaking the liquidity pool And so what you really want to make sure is that you are enabling the trading to happen in the way it does because whereas you can have the ability to trade a few shares here or there in a small liquidity pool, the beauty of the financial system here is the speed at which it operates as well as the depth with which it operates. And so we go back to, for us, making sure that we have something that has a transparency, all of the integrity, but very importantly, that does not break the liquidity pool. And we believe that markets will decide in some ways. Markets are valuing connectivity, are valuing nanoseconds, are valuing depth. And there is a reason why half of the capital markets happen to be in the U.S., in the deepest liquid market. There is a reason money goes where liquidity is. So whether it's the corporates that are going there or whether it is the investors that want to trade there.

Got it.

Let's switch gears to the other hot topic in our space, AI. so it can you speak to how your conversations with bank executives around AI have evolved over the past six months yeah it's really an interesting trend because we talked about the cloud adoption and it really took 10 years the gen AI adoption is on a very different pace and the dialogue is becoming very very deep over the last six months. There are general applications, I would say, everywhere. And so from how you use your data, are you going to deliver my data in token-efficient way? And we do. We have even patent-pending ways to provide our data in token-efficient way, for example, for investment, whether it is what are the features that are upcoming that are Gen AI that enable the issuer to either have a copilot or to also have, if you are a large financial institution, a lot of the work done independently. So I'll give an example. In financial crime management, which is a 4.4 trillion issue, there are lots of things that need to be done. The first thing is we use Gen AI to actually catch the fraud itself by putting that consortium data of 2,800 banks, 13 trillion of assets into one cloud well-segregated that enables us to give better alerts to our customers. So the quality of the alert is the first Gen AI output. But then you can go further and you can have agents. We have 800 out of our 2,800 banks that operate with our agents, which means that they have gone through AI governance committees and they are using, on a daily basis, agents. Sanctions is one that we introduced in December. We have six of them at this point, two in beta. But the sanctions one, for example, is going to enable you to file the sanctions with 80 80% of the sanctions not being touched by a human. And so 80% not being touched by a human can translate into real efficiencies for our clients. And that's what we're seeing with now a pretty good level of experience with 800 of our clients using that. And that's just an example. If you go into our RegTech, we have different solutions that are also serving both the quality as well as the efficiency. All of the regulatory reports are generated benefiting from Gen AI, reg to code for example, but also delivering capabilities to the clients to make sure that we help them detect the data that they are giving us in terms of like is it going to comply with the thousand ways that it needs to comply. And what I think becomes more and more interesting is when you actually converge the two trends. And you say, Calypso, you're going to have in the cloud Gen AI capabilities, but you're also going to be able to move collateral. And so now you are using digital assets and Gen AI. And those solutions are enabling us to be viewed by our clients as their trusted transformation partner. they need to go on their journey they need to meet that transformation of the financial system the needs are very strong and they are very few counter parties that are as trusted as we are and as innovative as we are you launched an MS MCP server for Nasdaq data link earlier this year can you talk about the extent to which that data demand has been additive and incremental versus cannibalizing other data delivery channels so I start to say that when we deliver the data in a better way we charge more not less that's a good thing to do and and and so when we deliver the data in a way that is easier to consume we benefit from it as Nasdaq and you benefit from it as our shareholders and what we have is the ability to deliver the data to you in the way you want. MCP is a very very useful way to deliver the data, but we can do it also by API, by whatever it is that works for different financial institutions or brokerage houses. What has been very powerful is that we can really embed ourselves in your trading systems. So if you need to trade, again, it's not like you're going to check a screen and then trade. We have the ability for you to embed that data at the point where you want to consume it. If you're a hedge fund and if you want to embed it in strategies, it's there, it's basically available in real time where you need it. If you're a retail brokerage house somewhere in Asia or in Europe and you want to enable your clients to trade in the US financial system especially December 6 as we go always on you have the ability to have that data at the fingertips of your clients in whichever app they may be consuming on your behalf as a brokerage house. Over at Verifin, a pillar of your growth strategy has been the movement of upmarket into the tier one banks can you update us on where verifin stands today amongst the tier ones and is it a meaningful portion of ARR yet yeah so I will answer that we have three pillars really of growth in financial crime management financial crime management is underlying all of the majority of the 350 million dollars that we have is small and medium-sized banks. We come in and we are the financial crime management platform for those banks. And that has been how Verifin constituted its brand in the financial system. But once you have 2,800 banks, majority of which are smaller banks, you become extremely attractive to the larger banks. Because where fraud will go is It's not just between one large bank and a second large bank. It's actually wherever fraud goes. And if you're a large bank, you can maybe have an agreement with two or three large banks or five or ten. But what you're not going to be able to do is one by one, under being an agency of the government, because you cannot mix in personal information without the right rules and frameworks, assemble 2,800 banks of data. And with that, we've been able to add approximately 20 large banks. And those large banks that would be Tier 1 and Tier 2 banks, example Citi, example Goldman Sachs, those are names that we can name, but there are many others that we can't name. In Canada also we've been very successful with some of the large banks and so we we have that second leg of growth which is today to answer your question still small in terms of its base but growing in a fast way and we had 11 signings this year to date which is more than what we had on the year before. So we are accelerating. We talked about the year before being back-ended in terms of like those large signings, but the second half of the year is upcoming. And so we have a lot of potential tailwinds coming from the fact that those large banks represent half of the sum, the serviceable, addressable market share in the financial crime management. We're talking about approximately a $9 billion sum. And so when you're taking half of that, it's $8 billion. We are able to have a very, very large potential share that is today untapped.

Your Calypso business is very well known globally for its capabilities and rates, but we've seen a lot of product innovation across derivatives over the past couple of years. We've got perpetuals, we have compute futures coming. Can you talk about the opportunity to expand Calypso's capabilities across more asset classes?

Yeah, so Calypso is a pre-trade, trade, post-trade, treasury management system. And when you think about that, if anybody thought it was simple to do all of that before the proliferation of products, before the digital assets, before you could even think about moving a collateral in token form, that's what, I mean, it was probably reckless to imagine that you could do that on your Excel form. But some people did. When you add the complexity that we are seeing today, there is no doubt, even at fairly small institutions, that you need help. And you're going to want to have that help from somebody who is cloud ready, gen AI ready, digital assets ready, and ready for all of those products that we are talking about. And that's basically us. We're also very modular, which means that we're not gonna sell you like a very large package if you're looking for something that's pretty precise. We're able to give you exactly what you need and to enable you to grow with us as you go to new geographies, as you expand into other products. It's a very easy decision to make and this has been a product that has been very much modernized under our watch since we bought it and that is I'm very modern at this point and ready for all of those technologies to help to benefit the financial system and axiom you already count every single g-sib bank as a client yeah can you talk to us about the moving pieces to let that business continue to grow high single digits low double digits in line with your guide yeah so there is a very difference big big difference between having landed in Axiom SL and having fully penetrated your opportunities. So we are very fortunate that every GSIB except one actually uses Axiom SL. And beyond that, we have very large opportunities with the rest of the banks as some of the regulation is now affecting smaller banks than the GSIBs, including some of the parts of Basel that came through. And so when we think about that, we talked at Investor Day about a penetration that is close to approximately 10% overall in the space of regulatory tech. So when you're thinking about having most of them, but having a penetration that is approximately 10%. That is really the root of our land and expand strategy. We're doing extremely well. Again, we have a cloud solution. We're selling a greatly majority in the cloud for Axiom SL. And that also enables us to help our clients with the Gen AI features, which are available on the cloud, and which enable them to participate in the modernization of their regulatory framework in a very simple way. Think of regulatory as thousands of updates. We have 64 countries, 150 regulators, thousands of reports. I believe it's 6,000 reports that we update. Every year you have thousands of updates that have to come through. and so if you're a financial institution you definitely want the help which is why everybody but one that we're working on is working with us and is working with us more and more which enables us to support the medium-term outlook within your index business what new products are you excited about do you have anything in the lab that could be the next nasdaq 100 And so, we don't think of we need the next NASDAQ 100 necessarily. What we try to have is, first of all, a very good ecosystem against the NASDAQ 100. Because having the NASDAQ 100 is great. We all refer to it, we all watch it as we do one of the top three indexes that tells you how the market is doing. But more importantly, it's becoming part of portfolio composition, which means that an ecosystem needs to be built around it. Whether it's the futures, which we do through a partner, whether it's the index option, which we have built from scratch and create some good offer opportunities at a good capture within our market services business, whether it's the NASDAQ 100 binary option, which we have filed for. And we have a whole lot that can be done on that. The next piece is we do have a lot of new products. Last quarter, for example, 34 new products, half of which were international, 11 of which were institutional. And so we try to fit into lots of different pockets so that we can grow our ATP AUM and we certainly do grow them. We added a hundred and eleven billion dollars in the last 12 months and that's on a base of one trillion so a growth rate that is extremely good. And then to answer your question like is there a thematic that is the thematic obviously AI infrastructure is an important thematic today so we have indexes that are around data centers for example semiconductors for example I bet it could be that somebody in Australia comes to us with a need and we will have something that is specific to that particular market and so we're very flexible to capture the opportunity and the alpha on behalf of our clients wherever it is let's circle back on your oldest business the stock exchange yeah based on your conversations with issuers what does the ipo pipeline look like for the rest of the year yeah um the ipo pipeline is robust um so if you uh look at uh the first half first of all uh we have had uh the best first half we have had um ever um that's um 110 billion dollars that were raised um and that is including of course the spacex ipo but that is only i won't say only but that's 86 billion dollars so to get from the 86 to 110 you've got a lot of breadth of other sectors on the sectors that we're seeing as active today are of course the ai infrastructure and all of it creating opportunities broadly. But second of all, there is still some fintech activity more in insurance and real estate actually. The biotech sector which had been not very active is coming back and we're very happy to see that happening. Defense is also a sector that has some tailwinds nowadays and so you are seeing a pretty broad spectrum and of a consumer tech also coming and we're very fortunate as Nasdaq to be extremely well positioned and to have a very strong pipeline on the trading side I know there's been something of a drift downward of not just Nasdaq on exchange trading broadly relative to off exchange trading over the past 10 years more recently the regulatory winds have shifted around reg ats i wonder as you look out over the next 10 years do you think you can return to growth in cash equities market share yeah so when you think about um the um 50 of the market that are off market so it's about 50 of what is on market versus off market, we have a real opportunity to participate. And we were thrilled to acquire the level ATS, which is the third largest ATS. That ATS is not only interesting in its own right, but it has a gateway that connects it to 2,500 buy side and sell side. So now you can start to think about liquidity pool that are off markets that can be connected through a gateway and we didn't have to have a cold start issues since we were able to acquire the level ats and so that enables us to have participation in what we believe ends up being an important pocket of opportunity of market which of course we continue to be focused on on markets but it's great to have optionality to wherever investors would like to be We're going to open it up here for audience questions in a moment.

But to wrap, Sarah, is there anything that we didn't hit on today that you're spending a lot of your time thinking about?

Yeah, we hit on it, but I do want to come back to, at the end of the day, when you try to think about what's happening today, it's the moment of convergence of three technology trends which are transforming the financial system. I've been in the financial system for the last 29 years, and I have never seen a time of further transformation of the financial system. And when you think about that, it's the Cloud Gen AI distributed ledger that are meeting towards continuous markets. And if somebody is very well positioned because we operate our own markets and because we're helping as a trusted transformation partner to transform the financial system in the right way, preserving the trust, the integrity, and the liquidity of the financial system. It's absolutely Nasdaq, and being that well positioned is also transparent in the strength of the results that we are posting.

Great, so is there any questions in the audience. One in the front.

Question on Verifint. Yeah. There's few businesses out there that are growing as fast as Verifint. It looks like you're growing faster in Europe. The competitive landscape might be softer in Europe. So I wanted an update on how the outlook looks in Europe relative to the broader business. And also you've been announcing several partnerships in Verifint. What's What's driving that, and should we expect more partnership announcements in the future?

Yeah, so in Europe, that's really our third leg of potential growth. We have the ability to work with European financial institutions, first on their close border payments, where all of the debt that we have in the U.S. is very helpful. but also, eventually, on their local payments too. And we have several POCs that are successful, and we have not yet announced that we have signed a European, so we are looking forward to a moment where we will be able to announce that, but we are highly confident that that moment will come. So good momentum, good things that are in the work but not yet ready to announce something for Europe. When we are trying to think about the regulatory construct in Europe it's very much evolving in a way that is productive. The regulator is well aware of financial fraud being actually proportionately even higher in Europe than it is in the US and therefore different regulators are at different stages of readiness in enabling the banks in the right way to an intermediary like NASDAQ to pull the information. But that needs to be done, I would say, in very close cooperation with the rules being changed. The partnership question is a great one, because when you think about us being the platform for banks, we can benefit from that situation where we are embedded in 70 core infrastructure systems. So it's whichever core infrastructure they use, we embed ourselves in it. And we are in 70 of them. And so therefore, if a partner who doesn't have the distribution that we have, and the integration points that we have, has great data or has great capabilities, we can actually be a way into those banks without having to put those banks through the difficult fit of having to reintegrate with somebody else. It's always very complicated for banks to do that. So we're in that position of strength, which enables us to have partnerships, and we certainly like that strategy.

Was there another question in the audience? I thought I saw one more back there. Okay. In that case, thank you, Sarah, for spending some time with us.

It was a great conversation.