Nasdaq CEO Bob Greifeld talks David and Goliath battles, making computers work harder, and the future of trading

NASDAQ Bob Greifeld 5Hollis JohnsonNasdaq CEO Bob Greifeld in Nasdaq, Inc. HQ in Manhattan.

When Bob Greifeld became Nasdaq’s CEO in 2003, he was presented with outdated tools and a company that was bleeding cash and rapidly losing market share.

Thirteen years later, Nasdaq has the largest market share for options and equities of any exchange in the US. Through acquisitions and partnerships, Greifeld has shaped Nasdaq into what he primarily views as a cutting-edge technology company.

During a recent interview with Business Insider, Greifeld discussed his vision for the future of Nasdaq and how it fits into the exchange industry.

What follows is that portion of our interview, edited for length and clarity.

Richard Feloni: What are you trying to create with Nasdaq for 2016, and what is your vision going forward?

Bob Greifeld: We have done five acquisitions in the last six months, the largest being International Securities Exchange [ISE] for $1.1 billion, and the others significantly smaller. Each of the five really represent a continuation, rather than an extension, of our strategic direction.

I think it’s fundamentally important to understand that we are leveraging the mother ship in some core way with each of these acquisitions.

With SecondMarket, we committed to the private market. We believe that more companies will want to stay private, and this gave us more of a leadership position in that place.

We’re the No.1 player in the options business and the purchase of ISE will allow us to extend our lead, after we get SEC approval on the deal. We’ll have 40% market share in the US options business. And the transaction businesses are about scale and so it’s always great to be the scale player.

The acquisition of Chi-X Canada expanded Nasdaq’s equities trading business beyond the U.S. and the Nordics, and will ultimately enhance the trading experience for customers by promoting greater uniformity in technology and functionality across U.S. and Canadian trading venues. We believe that more competition in the Canadian market is overdue and market participants deserve a compelling alternative.

With Boardvantage, we’re expanding on what we had with Director’s Desk, a protected portal for board directors that replaces their big loose leaf binders.

And the same thing with Marketwired — we’re building on our global newswire services.

We’ve done a long march from 13 years ago.

When I first got here, there was nothing strategic about what we thought about. It was about survival, because we were burning money every day. It really wasn’t until after 18 months that we had the ability to put our heads up above the parapets and say, “OK, what do we want to be when we grow up?”

Feloni: And where do you see Nasdaq headed beyond this year?

Greifeld: The first thing we have to do is integrate these five acquisitions successfully, and we should have the bulk of the work done in the next year. We integrate acquisitions pretty aggressively into our culture, because the last thing I want to do is turn into a collection of companies.

On a broader perspective, we certainly identify ourselves as a technology company. I want the computers to work harder as we do higher-volume activities through them, and not have to hire lots of people to do that.

Now, in that pure technology basis, we’re clearly in what I call the “applied technology” game, in that I don’t want to invent basic technology, I want to be wired into the best of what is becoming available and apply it as aggressively as we can in our chosen business disciplines.

Two things that we need to be a rapid applier of stand out very clearly. One is machine learning [artificial intelligence]: We think that is coming of age for our industry, and we’ve announced a joint-venture with the company Digital Reasoning, which specialises in this. And the second is blockchain [the technology that powers Bitcoin].

Our relationships in the Valley and other technology centres helps us with this vision, because our relationships allow us to know what the venture capital firms are funding and what’s coming down the pike.

Feloni: How do you view the competition?

Greifeld: In certain areas we are the big player in the transaction business, such as in US options, US equities, and Nordic equities.

In others, we have the great enjoyment of being the upstart. We’ve started Nasdaq Futures (NFX) and NLX, and those are to do financial futures and commodity-based futures, in an area where you’ve got existing vertical monopolies. For us, it’s fun to be David going up against Goliath.

Feloni: And in terms of the industry, are you predicting that there’s going to be more consolidation, like with Deutsche Börse and the London Stock Exchange?

Greifeld: I think the trend of consolidation came about when exchanges went from being mutualized organisations either owned by brokers or by the government, and as they separated out and then went public or stayed private but as an independent enterprise, then they started to think about what they could do.

It also tied to the fact that in 1971 Nasdaq pioneered the floor-less trading, and so as the markets followed the Nasdaq model and became electronic, it became a lot easier for electronic exchanges to merge.

From our vantage point now, providing technology around the globe, we know all the different order types. There are certainly different order types and some variations on market structure in different parts of the world, but there’s really been a massive conversion on how exchanges operate as compared to the different practices that existed when the markets were floor-based.

So, between those two dynamics — the fact that exchanges de-mutualized and went electronic — you had the benefits of scale available through transactions. And we’re obviously doing that with ISE.

The easiest transactions to affect in the exchange space is within your home country because you’re under the same regulator, assuming you don’t trip an anti-trust law.

But in no way, shape, or form should you be surprised at Deutsche Börse and LSE coming together.

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