Apex Fintech Solutions has announced the public launch of its 24 hour trading capabilities, five days a week.
This further opens up optionality for those clients who do not want to be restricted to traditional US trading hours.
Apex began operating overnight trading – a 24 hour, Monday-Friday trading market for its clients in February of 2023.
Several industry leading clients are already using Apex to access the 24/5 marketplace.
Bill Capuzzi
“Here at Apex, our mission is to bring frictionless investing to everyone. Prior to this, investors were limited by US East Coast market hours. Now, no matter where you sit around the world, you have the opportunity to trade in your timezone,” said Bill Capuzzi, CEO at Apex Fintech Solutions.
“This is just one step in the development of a market structure that will better democratize access to investing worldwide.”
Apex clients will be able to place trades from 8:00pm EST Sunday through 8:00pm EST Friday during non-holiday weeks.
For fintech companies servicing clients who want more immediate and around-the-clock trading execution, Apex empowers them with the ability to open up the flexibility and freedom these investors demand.
“While there are potential concerns around after hours trading that investors should be aware of, like uncertain prices and low liquidity, Apex understands the need for our clients to accommodate this feature and the firm is prepared to offer the capability, along with the customer service they have come to expect,” Capuzzi said.
FIA Tech, a leading futures industry technology provider, today announced that it raised an additional $25.4 million in a funding round led by six existing shareholders, Bank of America, Barclays, Citi, Goldman Sachs, J.P. Morgan and Wells Fargo, in addition to BNP Paribas. As a result, BNP Paribas joins FIA Tech’s ownership consortium and will serve on its board of directors. This capital raise brings the total funding for FIA Tech to almost $70 million.
Raphael Masgnaux
Raphael Masgnaux, Head of Global Technology Platforms for Global Markets at BNP Paribas, said: “We are thrilled to join the board of FIA Tech, a firm we have worked closely with over the years. Technology is a central pillar of BNP Paribas’ GTS 25 (Growth Technology Sustainability) Strategic Plan, and the TDN initiative promises to deliver a pivotal platform for the ETD industry.”
Funds raised will be used to accelerate the development of the Trade Data Network (TDN), an initiative that provides a shared ledger of trading information to address the fragmentation and lack of transparency in exchange traded derivatives (ETD) post-trade processing. The successful rollout of TDN is also expected to help reduce clearing delays for brokers and overall costs. The TDN initiative currently includes 16 banks/brokers and 40 investment managers and hedge funds with combined assets under management of over $37 trillion.
The initial rollout of TDN is focused on allocations processing and trade confirmations, with trade lifecycle transparency across the multiple brokers and the clearinghouse on each trade. Additional features include benchmarking, metrics tracking and reporting to drive best practices across the ecosystem. The initiative is also designed to drive value for the independent software vendor (ISV) community by reducing complexity in delivering services to clients.
Nick Solinger, President and CEO of FIA Tech, said: “We are delighted that BNP Paribas will be supporting us on our next stage of development and equally pleased at the support from our existing investors to launch the Trade Data Network. TDN has already proven its operational resiliency for participants in recent times of high market volumes and volatility.”
In 2021 FIA Tech announced its Series A investment round of $44 million to fund the spin-off of the firm and advance FIA Tech’s efforts to bring innovative solutions to the derivatives industry. Original investors were ABN AMRO Clearing, Bank of America, Barclays, Citi, Credit Suisse, Goldman Sachs, J.P. Morgan, Morgan Stanley, UBS, and Wells Fargo.
TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.
Tony Sio, Head of Regulatory Strategy and Innovation, Nasdaq Anti-Financial Crime has worked closely with exchanges and regulators around the globe for over 20 years and advises on surveillance best practices. In this Q&A, Tony shares insights on how detecting and preventing market abuse has evolved over the past few decades, how advances in technology continue to protect the markets, and what compliance professionals can do to combat market abuse.
Tony Sio, Nasdaq
What is the historical background of protecting markets from manipulation and abuse?
Fraudsters and market manipulators have always sought to cheat financial markets – the first known insider trading scandal in the U.S. was in 1792! As methods of fraud and manipulation have evolved, those whose role it is to protect markets have also had to evolve. Initial approaches to protecting markets tended to be very manual, passive, and reactive, with a high reliance on whistleblowers or investigating the trail of events after they have happened. Like a good beat cop, intimate personal knowledge of the markets and the people that traded was key. However, as markets opened, became more international, and much more electronic, these historical approaches could no longer be relied upon.
When Nasdaq opened the first electronic stock market in the 1970s, it ushered in a new world of electronic trading and huge volumes of data. Automated, data-driven approaches to surveillance were developed, able to trawl huge data sets for abusive behavior in real time. This enabled protectors of markets to keep up the higher speeds and increased complexity that was only going to accelerate.
How has protection of markets evolved more recently?
Markets continued to evolve in the 1990s and 2000s with the emergence of high-frequency and algorithmic trading. This had two major impacts: it introduced large amounts of noise into the trading activity, and it allowed for new forms of manipulative behavior. For example, spoofing, a form of order book-level manipulation, made its initial appearance and has been a focus of regulatory scrutiny since. The algorithms themselves were also being manipulated, with multiple examples of individuals placing orders to trick algorithm flow or multiple algorithms interacting with each other to cause market instability. Surveillance programs needed to monitor for all of this.
The need for a cross-market, cross-asset, order book understanding of market interactions was shown with the ‘Flash Crash’ of 2010. Not long after, we also saw multiple complex market abuse examples in derivative and commodity markets, prompting many jurisdictions to put in place cross-market surveillance programs or requirements. And at the same time, extending surveillance in the derivatives and commodities space.
With these scandals there has been a greater recognition that market abuse can also occur in markets beyond equities, and surveillance practitioners have spent much of the past few years extending their programs into Fixed Income, Derivatives, FX, Commodities, and Power. Each new asset class has its own specific potential abuse scenarios. Crypto and digital assets are the most recent additional to the continually expanding perimeter.
In the 2020s we have seen a surge in retail participation who bring with them a greater role of social media in financial markets. The meme stocks craze has required surveillance practitioners to grapple with a new type of market force and we have already seen several prosecutions of market manipulators who have used social media as a key part of their manipulation techniques.
What are some key takeaways for compliance professionals to consider to best combat market abuse?
Even a high-level history of market abuse shows that we are in a constant state of change, and compliance professionals should always focus on the effectiveness and efficiency of their programs with evolving landscape. Regular reviews are required to ensure that processes and tools in place have adequate coverage of the changing compliance risks. At the same time, new approaches to surveillance should be incorporated if they can improve overall efficiency of the limited team.
How are we seeing emerging technologies like artificial intelligence impacting this and where will it head in the future?
The problem of market surveillance involves finding complex patterns of behavior within large datasets which are constantly growing over time, a problem well suited for many AI techniques. I see great opportunities for AI to make a large impact and I see this occurring in three different ways.
First, there are opportunities for new tools using AI and Nasdaq has a variety of initiatives in this space. Some of these initiatives involve using AI to detect patterns of abuse, and others use AI to reduce the workload of the surveillance analyst allowing them to focus on the investigation.
Second, we are already seeing new types of trading develop which involve AI, and these will need to be handled by the surveillance system. For example, Nasdaq Exchange is releasing the world’s first AI-based order type
Finally, and potentially more immediately, we will see AI as a potential threat and risk. ‘Deep fakes’ and fake news have always existed, but AI tools make them much easier to use and larger in scale. AI tools are right now an unknown risk that will almost certainly impact the financial industry for years to come.
What do you see as the greatest challenge that compliance and surveillance teams will face in the future?
We are approaching a time of multiple converging changes to the who, how, and what people trade. Retail participation is projected to continue to grow and with that social media has an increasing impact on all markets. New technologies such as DLT and AI have shaken up the traditional regimes and introduced greater experimentation of product types and trading styles. These changes both allow for new forms of market abuse and alter how existing techniques are performed. The greatest challenge to compliance, surveillance, and regulators is navigating these changes whilst still allowing firms and markets to innovate.
To learn more about regulatory news and trends in surveillance, visit us here.
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By Ed Tyndale-Biscoe, Product Owner for Secured Funding at ION Markets
Ed Tyndale-Biscoe
In March 2024, the time it takes firms to settle their trades will half. The move to a T+1 settlement time has the potential to increase operational efficiencies within firms and ensure a smoother trading process. However, with the current background market volatility from macroeconomic factors the last thing any market participants want is further disruption. In fact, against the backdrop of inflationary and interest rate instability, the war in Ukraine, confidence in the banking sector being impacted from the collapse of Silicon Valley Bank and the acquisition of Credit Suisse, the potential impact of operational efficiency gains is even larger.
Therefore, it is essential to ensure that the transition to the new settlement time is as seamless as possible – the key to which is greater automation. Especially in a market which has historically lacked a full-scale adoption of electronic trading and suffers from the impact of disconnected legacy systems and data siloes, encouraging interoperability and transparency through greater automation is essential.
The transition
The move to T+1 is expected to have a significant impact on the financial industry, similar to the impact of the move to T+2 in 2017, and can be considered a dress rehearsal for an eventual move to T+0. Currently, most trades are still settled on this basis, meaning that it takes two business days for the buyer and seller to exchange payment and securities. The intention of the Depository Trust and Clearing Corporation (DTCC) is for trade settlements to soon take just 24 hours.
Settling trades in a condensed timeframe has many benefits, most significantly are the potential improvements to counterparty risk and operational efficiency. However, this significant change to the market means that firms’ current trading systems may not be quite up to scratch anymore.
Automation to the rescue
Previously, less attention has been given to the automation of post-trade processes than to the front office operations. Today, the automating of post trade systems no longer signifies that a firm is undertaking best practice or is at the very top of its game. Automation of post trade systems is necessary for firms to future-proof their technologies and ensure they can survive in a T+1 market.
The condensed timeframe places a greater emphasis on acquiring immediate insights into the market and predictive analysis. Traders must be able to observe what deals are taking place as close to real-time as possible. As trades are expected to take place more frequently and at greater speeds, any firm analysing the market with a significant delay will be left behind.
By increasing automation, firms can increase their competitive advantage as they will gain the ability to analyse current settlements more quickly and more accurately identify the reasons behind settlement errors and failures. This, in turn, allows for more correct and completed trades. According to a whitepaper by SIFMA, ICI and DTCC, firms using automated post trade processes have been achieving a near 100% affirmation rate by 21:00PM on the date of trade thanks to the reduction in the number of post-trade exceptions and costly reconciliation efforts.
Overcoming volatility
In periods of volatility, reducing the time period between trade execution and settlement can lead to a reduction of risk not only for individual firms, but across the entire settlement ecosystem. This consideration makes it even more necessary for firms to ensure they are future-proofing their technologies to thrive in a condensed settlement environment.
The move to T+1 is not without its challenges. For financial services firms, it is not as simple as increasing automation, it is important to remember that they are part of a wider financial ecosystem. The success of T+1 settlement, and hence more productive and less volatile markets, hinges on market participants ensuring that their systems are compatible with each other. There is no market that needs to focus on this more than the repo market.
What’s next?
In order to gain from the potential operational efficiencies of greater automation, improved resiliency and faster settlement, firms must ensure that interoperability and transparency is at the heart of their systems.
Embracing greater automation is essential for firms to stay afloat as markets move towards T+1, not just to maintain or gain a competitive advantage thanks to improvements in accuracy and efficiency, but also if they wish to thrive in a volatile market. It is not just in the US where the transition will impact market behaviour. European and UK markets are in the sights to follow-suit, and the complexities involved – multiple currencies and clearing paths – make this no less of a complex challenge.
Automation will be the backbone of a seamless transition to the new standard. What’s more, we can expect to see more advanced technologies such as distributed ledger (DLT) become more commonly adopted to help firms settle trades not only faster but also more securely and accurately.
Supporting the investment process with best-in-class tools and data is the biggest operational challenge for North American asset managers, according to the Global Asset Management Survey, a biannual report on investor sentiment conducted by Linedata.
Timothée Raymond
“In the midst of today’s economic landscape, it comes as no surprise that operational efficiency takes center stage as the top strategic priority for asset managers in 2023,” said Timothée Raymond, Head of Innovation and Technology at Linedata.
“This underscores the urgent need for companies to harness the power of automation and drive digital transformation to optimize processes, boost margins, and stay competitive,” he said.
The report reveals that in North America, the use of AI tools has been concentrated in the front office, to support investment research (33%), portfolio analytics (25%) and investment data management (24%).
However, up-take has been slow across middle and back-office functions, with less than one-fifth of firms having implemented AI in areas such as post-trade compliance and operational risk management, the report said.
According to the findings, from an organization-wide perspective, cybersecurity and data management are the main areas of focus for IT investment among North American firms.
The report also reveals that adapting to new regulation is seen less of an issue in North America than in other regions, with just a third citing this as a key operation challenge, versus 50% of European firms that say this.
Now more than ever, embracing transformation is essential, and the emergence of disruptive technologies such as generative AI presents unique opportunities for accelerated progress.”
In the US, new regulation from the SEC and NYDFS, among others, is putting pressure on asset managers not to only have robust cybersecurity processes and technology in place, but to be able to document these, the report said.
As both regulatory pressure and sophistication of cyber attacks intensify, security initiatives will demand a significant share of IT budgets in the near term, according to Linedata.
The survey also reveals that many asset management firms are moving towards outsourced solutions.
“Outsourcing is viewed not only as a cost and resourcing play, but as a means of accessing the most advanced technologies in the market,” Raymond said.
The allegations made by the U.S. Securities and Exchange Commission (SEC) against cryptocurrency exchanges, Binance and Coinbase could significantly shape the trajectory of crypto in the United States, according to CoinShares.
These unfolding legal developments surface amidst a stark divergence in regulatory developments between the European Union and the United States.
The EU, armed with the MiCA (Markets in Crypto-Assets) framework scheduled to commence in late 2024, has chosen to acknowledge digital assets as a new class of assets.
This stance mirrors an intricate understanding of digital assets’ unique attributes, while simultaneously supporting innovators striving for regulatory compliance, even when past efforts have been less than perfect, CoinShares said in a report.
As a contrast, without political guidance, the U.S. approach is being driven by the SEC and state regulators, endeavouring to place digital assets within pre-existing regulatory structures, such as securities or commodities.
“This approach seems less forgiving of past non-compliant behaviours, notwithstanding the hitherto lack of clarity within the regulatory environment,” CoinShares said.
“The lawsuits against Binance and Coinbase, and let’s not forget the on-going Ripple/XPR litigation, can be viewed as an embodiment of this differing regulatory philosophy,” CoinShares added.
The allegations against Binance, Binance.US, and their executive Changpeng Zhao (CZ), including offering unregistered securities and violating securities law, necessitate thorough examination, according to CoinShares.
Likewise, the charges against Coinbase, encompassing registration and custody issues, will critically influence how the United States comprehends and regulates cryptocurrency exchanges and custodians.
Of particular interest, according to CoinShares, is how the SEC is weaponising Coinbase’s marketing efforts as part of this lawsuit, highlighting the need for explicit definitions and standards within the crypto industry.
The SEC’s case implies that cryptocurrency platforms should be regulated commensurate with their operational roles within the financial ecosystem.
While the lawsuit seems to carry more severe implications for Binance, the potential impact on Coinbase and the broader crypto industry is significant, CoinShares stressed.
“The charges insinuate that a majority of crypto assets should be categorised as securities, which would radically modify the regulatory landscape, potentially confining access to regulated Wall Street entities (assuming that they have the appetite once the litigation is over),” CoinShares said.
This shift could potentially place the control of the crypto industry firmly within the grasp of traditional financial institutions, with profound implications for the promise of innovation and democratisation inherent in blockchain technology, CoinShares added.
CoinShares anticipates regulatory certainty becoming a critical factor for digital asset players.
Places like the EU, Switzerland, UAE and Hong Kong are endeavouring to develop bespoke crypto frameworks, the asset manager said.
Given the existing regulatory discrepancies, a volume shift in trading and innovation from the U.S. to jurisdictions with more accommodating regulatory landscapes might be imminent, according to the report.
“This shift could have significant economic and strategic repercussions for the U.S. within the burgeoning digital asset space,” CoinShares said.
“This lawsuit and its potential outcomes, while significant, do not spell doom for the crypto industry. Instead, they underscore the critical need for robust regulations to protect investors and maintain market integrity. We believe that clarity and appropriate regulations are vital to carving a sustainable path for the crypto industry,” CoinShares added.
Looking ahead, CoinShares foresees a dichotomy developing in the global crypto landscape.
In the U.S., the asset manager anticipates that traditional finance, with its existing regulatory compliance and familiarity, is poised to assume a commanding role in the crypto sector.
The regulatory restrictions are likely to mould the crypto industry in such a way that it could potentially mirror the existing financial system, with its well-established regulations and institutions, CoinShares said.
On the other hand, in the EU and other countries developing a bespoke framework for crypto, CoinShares’s outlook is that innovative, crypto-native financial entities are likely to continue flourishing and shaping the future of the finance industry.
“These emerging entities, armed with novel technologies and nurtured by a more permissive regulatory environment, are poised to drive significant advancements and disruption in global finance,” CoinShares said.
“This regulatory arbitrage is evident in the data, where we are seeing a shift away from the U.S., having seen market share of spot Bitcoin & Ethereum volumes fall from 85% at the start of 2023 to 70% today. It is reasonable to expect this trend to continue,” CoinShares added.
CoinShares said it remains steadfast in their commitment to contributing to these pivotal discussions and collaborating with regulators to nurture a transparent, secure, and equitable crypto ecosystem.
Nasdaq, Inc. (Nasdaq: NDAQ), a technology company serving the global financial system, today announced it has entered into a definitive agreement to acquire Adenza, a provider of mission-critical risk management and regulatory software to the financial services industry, from Thoma Bravo, a leading software investment firm, for $10.5 billion in cash and shares of common stock.
The acquisition accelerates Nasdaq’s strategic vision to become the trusted fabric of the world’s financial system. Upon the closing of the transaction, Holden Spaht, a Managing Partner at Thoma Bravo, is expected to be appointed to Nasdaq’s Board of Directors, which will be expanded to twelve members. Adenza is a fast-growing software company created through the combination of two highly respected and well-recognized global brands – Calypso and AxiomSL.
Calypso serves capital markets participants with end-to-end treasury, risk, and collateral management workflows, and AxiomSL supports financial institutions with leading regulatory and compliance software. The addition of Adenza to Nasdaq’s trusted brand and platform of mission-critical solutions complements Nasdaq’s Marketplace Technology and Anti-Financial Crime solutions and significantly enhances Nasdaq’s offerings across an even broader spectrum of regulatory technology, compliance, and risk management solutions.
With Adenza, Nasdaq will also be able to provide comprehensive support to financial institutions, establishing a multi-asset class, full trade lifecycle platform with unmatched regulatory technology solutions.
Adenza brings an attractive financial profile, with approximately $590 million of 2023E revenue, organic revenue growth1 of approximately 15%, annual recurring revenue growth of 18%, and an adjusted EBITDA margin1 of 58%. The company has a loyal and growing client base, with 98% gross retention, 115% net retention, and a durable mix of approximately 80% recurring revenue.
The addition of Adenza is projected to enhance Nasdaq’s already strong financial profile by growing Solutions Businesses revenue2 from 71% of total revenue today to 77% in 2023E, increasing adjusted EBITDA margin to 57%3, and adding approximately $300 million of annual unlevered pre-tax cash flow1.
“This is an exceptional opportunity to acquire a leading software company that enhances Nasdaq’s position at the heart of the global financial system,” said Adena Friedman, Chair and Chief Executive Officer, Nasdaq.
Adena Friedman
“The acquisition of Adenza brings together two world-class franchises steeped in market infrastructure, regulatory, and risk management expertise at a time when financial institutions are navigating some of the most complex market dynamics in history. From fast-evolving global regulations to rapidly increasing pressures to modernize infrastructure, our clients are seeking trusted partners equipped to support them in this challenging environment. Nasdaq aspires to be that partner every day, and with Adenza we can offer an even broader range of mission-critical solutions that enhance the liquidity, transparency, and integrity of the world’s financial system.”
“The addition of Adenza accelerates our ambition to modernize and advance the world’s economies,” said Tal Cohen, President of Market Platforms, Nasdaq. “It also introduces a fast-growing $10 billion serviceable addressable market to Nasdaq. Since the implementation of Dodd-Frank in 2010, banks have increased their compliance costs by more than $50 billion per year. With Adenza, we will have a more complete suite of essential software and technology solutions that make managing risks and complying with regulations simpler and more efficient for our clients. With complementary capabilities and geographic footprints, we can see a clear path to deepening our client relationships globally with leading end-to-end platforms across risk, trading, and regulatory reporting.”
“When we combined AxiomSL and Calypso almost two years ago under Didier Bouillard’s leadership, we had a vision to create a truly unique software franchise that could help financial institutions across the globe manage their most complex trading, risk, and regulatory reporting requirements,” said Holden Spaht, a Managing Partner at Thoma Bravo.
“This acquisition is a clear validation of that strategy, and as part of Nasdaq, Adenza will be in a stronger position to build on its impressive momentum and serve an even larger global client base. Nasdaq has a long and impressive history of developing innovative solutions that have revolutionized the global capital markets, making them the perfect partner for this next phase of Adenza’s journey. We are excited to become a strategic shareholder in Nasdaq and bring our deep software and technology experience to help drive further innovation and digital transformation across the global financial system.”
“This transaction is an endorsement of the entire Adenza team and what we have built with Thoma Bravo, from our market-leading products to the immense value we have delivered for our customers,” said Didier Bouillard, Chief Executive Officer at Adenza.
“Together with Nasdaq, we will be in an even stronger position to take advantage of the growing market opportunities and to provide customers with expanded solutions to solve their most complex problems.”
Compelling Strategic Rationale and Attractive Long-Term Value Creation
Excellent Strategic Fit: The acquisition of Adenza is an exciting opportunity to align two great cultures with complementary technologies and client reach to create a world-class technology solutions provider for the financial industry. Both Nasdaq and Adenza drive success with similar client-centric, results-oriented, and innovative cultures. Nasdaq’s trusted brand and leading artificial intelligence and cloud capabilities, combined with Adenza’s modular solutions and streamlined go-to-market operating model, significantly enhances the value proposition to clients with an even broader, more scalable suite of software and technology solutions.
Highly Complementary Platforms: The transaction enables Nasdaq to serve an expanded client base with holistic, multiasset-class, and cloud-enabled risk and regulatory management solutions. With a shared global footprint, Adenza brings additional relationships across the European banking system to Nasdaq’s strong presence in North America and the Asia Pacific region, positioning the business to meet worldwide demand for outsourced risk management and regulatory solutions. Nasdaq and Adenza also bring together complementary capabilities in asset classes to address the full spectrum of clients’ needs from over-the-counter fixed income to listed equities.
Strong Growth Opportunities with Secular Tailwinds: Adenza’s focus is uniquely centered around key risk and regulatory trends affecting financial institutions, from continuously evolving regulation and reporting complexity to ongoing digitization of markets and migration to the cloud. Adenza serves a $10 billion SAM5 growing 8% per year, increasing Nasdaq’s SAM by approximately 40% to $34 billion.
Contributes to Nasdaq’s Strong Profile and Outlook: The acquisition is expected to grow Nasdaq’s ARR 1 as a percentage of 2023 pro forma total revenue to 60% from 56% in 2022 and increase Nasdaq’s Solutions Businesses as a percentage of 2023 pro forma total revenue to 77%, from 71% today. It also increases Nasdaq’s Solutions Businesses medium-term organic revenue growth outlook6 from 7-10% to 8-11%. The transaction also improves Nasdaq’s adjusted EBITDA margins from 55%7 to 57% on a 2023 pro forma basis. The acquisition is expected to enhance Nasdaq’s growth, margins, and revenue quality and deliver non-GAAP diluted EPS accretion by the end of year two.
Compelling Synergies: The addition of Adenza provides significant value creation potential over the medium and long term. Nasdaq expects to achieve $80 million in run-rate net expense synergies by the end of year two through functional alignment, product rationalization, location optimization, and consolidation of vendors and real estate. The transaction is also expected to unlock additional value through cross-sell opportunities, with anticipated run-rate revenue synergies of $50 million in the medium term and $100 million over the long term.
Alignment with Nasdaq’s M&A Criteria: Adenza meets Nasdaq’s acquisition criteria across all dimensions, delivering tight strategic fit and cultural alignment, enhancing performance and valuation potential, and meeting clear and consistent financial requirements. Nasdaq’s enterprise-wide return on invested capital will return to greater than 10% by year five.
Financing, Balance Sheet Impact, and Approvals
Nasdaq is acquiring Adenza for $10.5 billion, comprised of $5.75 billion in cash and 85.6 million shares of Nasdaq common stock, based on the volume-weighted average price per share over 15 consecutive trading days prior to signing.
Nasdaq has obtained fully committed bridge financing for the cash portion of the consideration and plans to issue approximately $5.9 billion of debt between signing and closing and use the proceeds to replace the bridge commitment.
At the closing of the transaction, Nasdaq will issue the shares to the owners of Adenza, which is a company controlled by Thoma Bravo, representing approximately 14.9% of the outstanding shares of Nasdaq.
Following the transaction, Nasdaq expects leverage1 of approximately 4.7x and investment grade ratings of BBB/Baa2 Stable. Nasdaq is committed to reducing leverage to 4.0x in 18 months and to approximately 3.3x in 36 months.
Nasdaq intends to pursue its existing capital deployment plan, including steadily increasing its dividend per share and dividend payout ratio1 to achieve 35-38% within three to four years.
The company intends to repurchase shares over time to partially offset dilution from the transaction in addition to continuing to offset employee share-based compensation. The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close within six to nine months. www.nasdaq.com/adenza.
Advisors Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are serving as financial advisors to Nasdaq, with Goldman Sachs & Co. LLC serving as lead advisor.
Bridge financing for the transaction has been provided by Goldman Sachs Bank USA and JPMorgan Chase Bank, N.A. Wachtell, Lipton, Rosen & Katz is serving as legal advisor to Nasdaq. Qatalyst Partners LP is serving as lead financial advisor to Thoma Bravo and Adenza, along with Barclays, Citi, Evercore, HSBC Securities (USA) Inc., Jefferies LLC, and Piper Sandler. Kirkland & Ellis LLP is serving as legal advisor to Thoma Bravo and Adenza.
Traders Magazine recently caught up with Adam Inzirillo, Head of North American Equities at Cboe Global Markets, to learn more about what’s happening at the company and in the industry at large.
What sets Cboe apart from other U.S. equities exchanges?
Adam Inzirillo, Cboe Global Markets
Cboe aims to continuously enhance our customers’ trading experience through our global network and accessibility, unbiased market insights and innovative approach. We take pride in being the source for objective equities markets insights, and evidencing that, Cboe utilizes empirical evidence to make informed decisions. Take for example, the SEC’s recent market structure reform proposals. We leverage data we think would be beneficial to drive conversations with regulators and other industry participants.
We also leverage data to create new trading features and functionalities. We continue to see growth in our innovative order type, Quote Depletion Protection or QDP, which helps mitigate adverse selection. Recognizing the strong customer interest in QDP, we provide data to help our customer effectively utilize this order type and improve performance, whether it’s for their customers or principal trading strategies.
Cboe has grown beyond its U.S. options heritage into a more diversified and expansive company. What opportunities and benefits have been, or will be, realized for its global equities business?
Our breadth, scope and economies of scale differentiate us. With Cboe’s significant growth in recent years, we now operate 26 different markets in five different asset classes and have close to 1,200 listings globally.
On the equities front, we’re able to leverage our extensive global equity transaction network – spanning U.S, Canada, UK, Netherlands, Australia and Japan – and our global listings business to help make our customers more successful.
Technology is key and paramount to our success. Most of our customers, particularly the large banks and brokers and some of the principal market makers, are global and want a seamless experience across all the markets they trade. So, we continuously explore the technologies, features and functionalities that work well for customers in one region and could be deployed to another. For example, Cboe launched Periodic Auctions in Europe to great effect and subsequently brought it to the U.S. market. We continue to get good feedback from clients, who find tremendous value in using Periodic Auctions to source block-sized liquidity on exchange.
In Canada, we’ve continued to expand our footprint by acquiring MATCHNow, the country’s largest conditional trading network, in 2020 and Cboe Canada (formerly the NEO Exchange) in 2022 – which brought to us a corporate listings business that we’re now taking to a global scale. With a strong foundation in place, we are building a one-of-its-kind, global listings offering that leverages our network of stock exchanges around the world.
Turning to market structure and regulatory policy. Which particular aspect(s) of the SEC’s proposals does Cboe support or oppose the most?
First, we applaud the SEC for taking a deeper dive into the markets and trying to figure out ways to enhance them. At Cboe, we’ve always been a proponent of more disclosures and transparency. With regard to the specific reforms on the table, it is important to first illustrate that there truly is a problem.
So, when we think about lowering access fees or changing tick sizes, which is the one reform that we’re most focused on, we think tick size reform should be empirically driven. To that end, we’ve published papers and a joint letter with UBS, State Street, Virtu, and T. Rowe, commenting on leveraging data for tick size changes and using that information to only focus on constrained names.
With access fees and rebates, there’s a perception in the market that brokers route solely based on cost. The only way to prove that is to provide more disclosures and transparency around brokers when they route orders on customers’ behalf. If somebody is trading principally – if they incorporate costs – they have full discretion over those orders. But, when they’re working client orders, whether institutional or retail, and they want to route to particular markets, we need to provide greater disclosure and transparency around that. We believe it should be a more pragmatic and methodical approach and regulators shouldn’t go after fees and rebates just on the perception that firms are routing based on those factors.
As it relates to auctions, Rule 605 and best execution, we have different views on those. With best ex, we think there should be more focus on the digital assets space, and we’ve highlighted this in our comment letter. With auctions, we think certain things can be enhanced. For example, we have a retail price improvement feature in our inverted market. We think providing price and size will help that program, and attract more marketable flow to the public market, as opposed to doing an auction that will change the way retail orders are handled, which includes an auction that may occur every 100 to 300 milliseconds. Individual investors are very accustomed to having their orders executed immediately at or better than the prevailing market.
If the SEC decides to go that route, there’s a lot to learn from the options market. A two-sided auction is important in facilitating the auction. There is a sizable difference between how an exchange and an intermediary operates We really can’t determine the right course of action until there’s a final proposal for all these proposed reforms, and then we’ll evaluate it to determine how we best move forward.
What market trends are you seeing across different customer segments and geographic regions, and how is Cboe meeting evolving customer demands?
In the U.S., retail participation continues to be a theme and makes up 20-25% of the equities market. In the first quarter, we saw sub-dollar names reach 15% of share volume, driven by activity in Bed Bath & Beyond and some regional bank stocks which have since been delisted. But that has retracted a bit more recently. In Canada, we’ve seen volumes subside, to around 850 to 900 million shares daily, also driven by lower retail activity. The big difference between Canada and the U.S. is Canadian investors generally trade on-exchange, whereas in the U.S. you see a sizable amount of retail volume trading off-exchange, via wholesalers and intermediaries.
In Europe, retail trading is lower than in the U.S., and lot of exchanges and market centers are trying to figure out how to attract retail flow. Japan is a fairly sizable retail market, and Cboe Japan has an opportunity to handle retail flow from a routing perspective, considering many best execution obligations in Japan are similar to what we have in the U.S. We also continue to see significant upside in Australia, and Cboe Australia is well-positioned versus the incumbent exchange to gather more order flow.
What is Cboe seeing in pre-market and after-hours trading? Is this retail-driven?
We launched early trading hours on our U.S. equities exchange in 2021 to meet demand from a growing base of individual investors and retail broker-dealers throughout the world that want access to the U.S. equities market.
Not only did we start accepting orders earlier at 2:30 AM ET, we also started early trading at 4:00 AM ET, and we’ve seen sizable volume growth since. It’s not uncommon for Cboe to capture somewhere between 20-30% of the pre-market trading volumes on any given day. When there is news-driven market volatility, pre-market trading also increases. Retail investors from all around the globe are the most active participants during those early morning hours.
How is Cboe and your team specifically working to promote diversity and inclusion within your workforce and the industry at large?
Diversity and inclusion are critical to Cboe’s success. Some of my team’s more recent hires are women or other diverse candidates and bring a different background and thinking to the traditional exchange space. Hiring diverse talent allows us to gain a range of perspectives and create healthy debate that lends to new ideas for product innovation, data and content – which ultimately enables us to serve our clients better.
It’s very important to create a diverse and inclusive workforce, and it’s something we are doing organizationally, not just in equities. Cboe just celebrated its 50th anniversary and when I think about the next 50 years, it’s really taking our talent and harnessing it to create additional opportunities for us to grow with our clients, both here in North America and globally.
Finsemble and Glue42 had been fierce competitors in providing desktop interoperability technology to capital markets firms, though the companies’ executives were friendly on a personal level and respectful of each other’s businesses.
Earlier this week, the two firms agreed to a merger of equals, with the combined enterprise called interop.io.
Dan Schleifer
“We’ve both been working in parallel on a very similar vision for how to solve the problems that our industry has around fragmented user experience and workflow,” Dan Schleifer, previously CEO of Finsemble and now President of interop.io, told Markets Media.
“At a certain point, it became clear that we were both investing a lot of money to build basically the same technology to get our customers to the same place, and we’d be able to better serve our customers and the market if we joined forces,” Schleifer said. “As a team, we’re able to innovate twice as fast, and plow more resources into serving our customers instead of investing those resources to simply compete against each other.”
interop.io brings together the award-winning technologies of both companies to offer a complete suite of interop products, the company said in a June 8 release. At the heart of the platform is io.Connect, which enables clients to build and deploy highly intuitive front ends that combine different applications and functionality into a single, harmonized smart desktop.
Schleifer said he and Leslie Spiro, formerly CEO of Glue42 and now CEO of interop.io, began discussing a merger about nine months ago, and commenced technology due diligence in late 2022.
“As two technology companies coming together, making sure our technologies can be seamlessly integrated in a way that benefits customers of both product lines is absolutely crucial,” Schleifer said. “Mergers never happen quickly. It’s a very thoughtful exercise to make sure that the technology is compatible, the culture is compatible, the vision is compatible, and that in the end, it will better serve our customers.”
Spiro highlighted the importance of cultural compatibility. “As we started to bring more people to work together, everybody got on really well, and I think that’s driven primarily by our shared core value of caring about our clients, rather than caring about selling to our clients,” he said. “We really care about how our clients use our technology, and making sure they have a good experience. Figuring out how to do that served as a bond.”
Leslie Spiro
Spiro said Glue42 was heading into a new funding round, and the merger was “a fantastic alternative to raising money…We doubled our client list overnight, and we fill in gaps in each other’s business, both technically but also managerially and geographically.”
Clients will see benefits of the merger “more immediately than you might think,” Spiro said. For example, “there are a couple of products that are part of the Glue42 portfolio, which Finsemble clients can get today.”
interop.io’s clients include large capital markets institutions across the sell side and buy side, ranging from tier one sell-side broker dealers, to $50 billion hedge funds to $200 billion asset managers.
“These are massive institutions and they want to know that the technology firms that they partner with are stable, profitable, growing, and innovative,” Schleifer said. “The other bit that changes immediately for our clients is a renewed assurance that they have selected the undisputed market leader in interoperability, which will be around for the long haul.”
Leo Arduini will serve as interim Head of Foreign Exchange in addition to his role as Markets COO at Citi. Arduini will work with Stu Staley leading up to Staley’s last day in the office. Citi is conducting a search for a permanent Head of FX and expects to fill the position in the coming weeks. Arduini was appointed COO of Markets in 2022. Prior to that, he was EMEA Head of Markets – a role he held since 2014.
Louise Brinkmann
CanDeal, a provider of electronic Canadian fixed income marketplace solutions, data, and information services, has launched a new division to focus exclusively on benchmark administration and related services. Louise Brinkmann has been named Head of CanDeal Benchmark Solutions. Brinkmann has over 25 years of compliance experience, leading multi-functional, regionally dispersed teams in government and the broader public sector. Prior to joining CanDeal Benchmark Solutions, she was Chief Audit Executive at the Ontario Securities Commission.
Chatham Financial, a provider of financial risk management advisory and technology solutions, has hired Jennifer McLellan as a Managing Director in the global OTC derivative instruments, ISDA and regulatory practice. She established a leading practice in 2011 for law firm Dickson Minto, where she was the Head of Derivatives before joining Chatham.
William Blair, a global boutique with expertise in investment banking, investment management, and private wealth management, has expanded the firm’s private capital advisory investment banking practice with the addition of two senior hires. Based in Charlotte and focused on fund placement in the Mid-Atlantic, Southeast, and South regions, Matthew Flynn joins as managing director and Hudson Collins joins as director in New York.
Edge & Node, a web3-focused software development company, has appointed Tegan Kline to the role of CEO. Kline, a Co-founder of Edge & Node, previously served as Chief Business Officer. She is a member of the initial team working on The Graph, an indexing and query protocol.
If you have a new job or promotion to report, let me know at alyudvig@marketsmedia.com
The Move to T+1: A Path to a Less Volatile Market
By Ed Tyndale-Biscoe, Product Owner for Secured Funding at ION Markets
In March 2024, the time it takes firms to settle their trades will half. The move to a T+1 settlement time has the potential to increase operational efficiencies within firms and ensure a smoother trading process. However, with the current background market volatility from macroeconomic factors the last thing any market participants want is further disruption. In fact, against the backdrop of inflationary and interest rate instability, the war in Ukraine, confidence in the banking sector being impacted from the collapse of Silicon Valley Bank and the acquisition of Credit Suisse, the potential impact of operational efficiency gains is even larger.
Therefore, it is essential to ensure that the transition to the new settlement time is as seamless as possible – the key to which is greater automation. Especially in a market which has historically lacked a full-scale adoption of electronic trading and suffers from the impact of disconnected legacy systems and data siloes, encouraging interoperability and transparency through greater automation is essential.
The transition
The move to T+1 is expected to have a significant impact on the financial industry, similar to the impact of the move to T+2 in 2017, and can be considered a dress rehearsal for an eventual move to T+0. Currently, most trades are still settled on this basis, meaning that it takes two business days for the buyer and seller to exchange payment and securities. The intention of the Depository Trust and Clearing Corporation (DTCC) is for trade settlements to soon take just 24 hours.
Settling trades in a condensed timeframe has many benefits, most significantly are the potential improvements to counterparty risk and operational efficiency. However, this significant change to the market means that firms’ current trading systems may not be quite up to scratch anymore.
Automation to the rescue
Previously, less attention has been given to the automation of post-trade processes than to the front office operations. Today, the automating of post trade systems no longer signifies that a firm is undertaking best practice or is at the very top of its game. Automation of post trade systems is necessary for firms to future-proof their technologies and ensure they can survive in a T+1 market.
The condensed timeframe places a greater emphasis on acquiring immediate insights into the market and predictive analysis. Traders must be able to observe what deals are taking place as close to real-time as possible. As trades are expected to take place more frequently and at greater speeds, any firm analysing the market with a significant delay will be left behind.
By increasing automation, firms can increase their competitive advantage as they will gain the ability to analyse current settlements more quickly and more accurately identify the reasons behind settlement errors and failures. This, in turn, allows for more correct and completed trades. According to a whitepaper by SIFMA, ICI and DTCC, firms using automated post trade processes have been achieving a near 100% affirmation rate by 21:00PM on the date of trade thanks to the reduction in the number of post-trade exceptions and costly reconciliation efforts.
Overcoming volatility
In periods of volatility, reducing the time period between trade execution and settlement can lead to a reduction of risk not only for individual firms, but across the entire settlement ecosystem. This consideration makes it even more necessary for firms to ensure they are future-proofing their technologies to thrive in a condensed settlement environment.
The move to T+1 is not without its challenges. For financial services firms, it is not as simple as increasing automation, it is important to remember that they are part of a wider financial ecosystem. The success of T+1 settlement, and hence more productive and less volatile markets, hinges on market participants ensuring that their systems are compatible with each other. There is no market that needs to focus on this more than the repo market.
What’s next?
In order to gain from the potential operational efficiencies of greater automation, improved resiliency and faster settlement, firms must ensure that interoperability and transparency is at the heart of their systems.
Embracing greater automation is essential for firms to stay afloat as markets move towards T+1, not just to maintain or gain a competitive advantage thanks to improvements in accuracy and efficiency, but also if they wish to thrive in a volatile market. It is not just in the US where the transition will impact market behaviour. European and UK markets are in the sights to follow-suit, and the complexities involved – multiple currencies and clearing paths – make this no less of a complex challenge.
Automation will be the backbone of a seamless transition to the new standard. What’s more, we can expect to see more advanced technologies such as distributed ledger (DLT) become more commonly adopted to help firms settle trades not only faster but also more securely and accurately.