🎙️ All-In Podcast: The New Era of the Stock Market with Nasdaq CEO Adena Friedman
PODCAST INFORMATION
All-In Podcast
The New Era of the Stock Market with Nasdaq CEO Adena Friedman
Hosts: Chamath Palihapitiya, Jason Calacanis, David Sacks, David Friedberg
Guest: Adena Friedman (CEO of NASDAQ)
Episode Duration: Approximately 28 minutes
🎧 Listen here.
HOOK
As markets evolve toward 24/7 trading and tokenization, NASDAQ CEO Adena Friedman reveals how the exchange is transforming from a simple marketplace to a global technology powerhouse that could revolutionize how we think about financial infrastructure.
ONE-SENTENCE TAKEAWAY
The future of markets lies in balancing technological innovation like tokenization and extended trading hours with regulatory clarity and investor protection, while maintaining the fundamental principles that have made markets engines of economic growth.
SUMMARY
This episode of the All-In Podcast features a conversation with Adena Friedman, CEO of NASDAQ, who discusses the transformation of stock markets and the financial industry. The interview begins with Friedman highlighting NASDAQ's evolution from a simple marketplace to a global technology powerhouse with three core business pillars: market infrastructure technology, powering the innovation economy, and building trust across the financial system.
Friedman announces NASDAQ's plans to introduce tokenization into their core markets, which could streamline post-trade processing and reduce friction in financial transactions. She explains that while NASDAQ is moving toward extended trading hours (24/5), full 24/7 trading for equities remains a future goal. The discussion explores how this technological evolution could change market dynamics while acknowledging concerns about the need for market closure points to allow for proper settlement and NAV calculations.
The conversation shifts to the challenges facing the IPO market, with Friedman noting that the burden of being a public company has become so daunting that many companies choose to stay private longer. She advocates for regulatory reforms to make the public market experience less burdensome, including disclosure reforms, proxy reforms, and litigation reforms. Friedman expresses optimism about the new SEC leadership under Chair Atkins, describing him as forward-leaning and supportive of innovation in markets.
Regarding cryptocurrency and digital assets, Friedman emphasizes that NASDAQ has been hesitant to enter the space due to lack of regulatory clarity. However, she expresses excitement about the potential for regulatory convergence between traditional and digital markets, which would allow NASDAQ to bring its institutional clients into the crypto ecosystem while maintaining investor protection standards.
The discussion touches on prediction markets and how they compare to traditional options markets. Friedman notes that while options markets are essentially prediction markets, they are more complex, whereas prediction markets make these types of bets more accessible to average investors. She expresses support for SEC and CFTC efforts to create a more comprehensive regulatory framework for these markets.
Friedman also addresses private markets and secondary sales, explaining how NASDAQ Private Market works with issuers to create liquidity for employees and early investors while allowing companies to maintain control over their shareholder base. She contrasts this approach with other providers who may go around company management.
The conversation explores the rise of index investing and its impact on market dynamics. Friedman acknowledges that index investing has made investing more accessible but emphasizes the importance of maintaining a balance between passive and active management. She notes that the concentration of market value in a few large companies makes it difficult for active managers to outperform, but this also creates arbitrage opportunities.
Regarding the dollar's status as a reserve currency, Friedman expresses confidence in its continued dominance while acknowledging concerns about U.S. debt levels. She discusses her role on the New York Fed board, describing the Fed as data-driven and apolitical, and emphasizing the importance of Fed independence for long-term economic stability.
The interview concludes with a discussion of market risks, including commercial real estate and leverage in the financial system. Friedman suggests that while there are concerns in these areas, the distributed nature of risk across thousands of banks helps mitigate systemic threats.
INSIGHTS
- NASDAQ has transformed from a simple marketplace to a global technology powerhouse with three core business pillars: market infrastructure technology, powering the innovation economy, and building trust across the financial system.
- Tokenization of equities represents the next frontier in market evolution, potentially revolutionizing post-trade processing and reducing friction in financial transactions.
- The IPO market needs significant reform to reduce the burden on public companies and encourage more businesses to access public markets rather than staying private for extended periods.
- Regulatory clarity is essential for the integration of digital assets and traditional markets, with the new SEC leadership showing promising signs of forward-thinking approaches.
- Extended trading hours (24/5) represent a natural evolution for global markets, but full 24/7 trading requires careful consideration of settlement processes and market structure.
- The balance between passive index investing and active management is crucial for market health, with passive investing creating arbitrage opportunities for active managers.
- Private markets require specialized approaches that respect issuer control while providing necessary liquidity for employees and early investors.
- The dollar will likely maintain its status as the global reserve currency despite concerns about U.S. debt levels, due to the strength of the U.S. economy and rule of law.
- The Federal Reserve remains fundamentally data-driven and apolitical, with its independence being crucial for long-term economic stability.
- Commercial real estate concerns exist but are being managed across a distributed banking system, reducing the risk of systemic failure.
FRAMEWORKS & MODELS
NASDAQ's Three-Pillar Business Model
This framework represents NASDAQ's evolution from a simple marketplace to a diversified financial technology company. The three pillars include:
- Market Infrastructure Technology: Providing technology to 17 NASDAQ markets and 135 other markets globally, serving as the architect of modern markets
- Powering the Innovation Economy: Supporting companies like ARM through index business with $700 billion in assets under management and creating better pathways for companies to navigate public markets
- Building Trust in the Financial System: Offering anti-financial crime technology, market surveillance technology, and other solutions that banks and broker-dealers need to manage their market activities
Tokenization Framework for Market Modernization
This approach represents NASDAQ's strategy for integrating blockchain technology into traditional markets. The framework includes:
- Core Market Integration: Bringing tokenization directly into main markets rather than side sleeves
- Post-Trade Processing: Streamlining settlement and reducing friction in the post-trade environment
- Global Capital Flow Management: Enhancing the ability to manage capital flows across the global ecosystem
- Extended Trading Hours: Supporting the evolution toward 24/5 trading as a stepping stone to full 24/7 markets
- Regulatory Convergence: Working with regulators to ensure tokenized securities operate within established investor protection frameworks
Public-Private Market Balance Model
This framework represents Friedman's philosophy on the relationship between public and private markets. The model includes:
- Complementary Roles: Recognizing that both public and private markets have valid reasons to exist and serve different purposes
- IPO Process Reform: Advocating for reduced regulatory burden through disclosure reforms, proxy reforms, and litigation reforms
- Alternative Pathways to Public Markets: Supporting direct listings, SPACs, and potentially tokenized direct listings as alternatives to traditional IPOs
- Liquidity Solutions: Providing structured liquidity solutions for private companies that respect issuer control while meeting employee and early investor needs
- Investor Access: Ensuring that everyday citizens have opportunities to participate in economic growth through public markets
QUOTES
"We are here to advance economic progress for all." - Adena Friedman, stating NASDAQ's mission and purpose beyond just operating markets.
"I've always believed in the balance between public and private markets. I think there are reasons for them both to thrive and be great for everyone." - Adena Friedman, explaining her philosophy on the importance of maintaining both public and private markets.
"Disclosure is a cleansing event. But there's so they have to disclose so much more than that's actually necessary for an investor to make a smart investment decision." - Adena Friedman, advocating for streamlined disclosure requirements for public companies.
"Chair Atkins is my first meeting with him was just amazing. He's great. He's forward-leaning. He wants to create change. He wants to make IPOs great again." - Adena Friedman, expressing optimism about the new SEC leadership's approach to market regulation.
"I say that NASDAQ is really good at operating regulated markets and so you ask us to go into a completely unregulated space that's a pretty different existence. The risk tolerance is much higher." - Adena Friedman, explaining NASDAQ's cautious approach to entering the cryptocurrency market without regulatory clarity.
"Whenever it skews towards the passive, what happens is that that creates arbitrage opportunities for the active. If the herd really kind of starts to move the socks in a certain direction, the active manager should step in and take advantage of that arbitrage." - Adena Friedman, describing the dynamic relationship between passive index investing and active management.
"I am a huge believer in dollar as a reserve currency and the fact we will be persistent as a reserve currency over a long period of time. I think our economy is just is such a powerhouse." - Adena Friedman, expressing confidence in the dollar's continued status as the global reserve currency.
"The Fed we've benefited for almost 250 years on having Fed independence. I think that it's important to to have allow the Fed to think long term and that's why the term of the Fed chair is six years like to think longer term than through individual political cycles." - Adena Friedman, emphasizing the importance of Federal Reserve independence.
"Leverage is a part of the system but we also I think there's a responsibility we all have to think about how much leverage is appropriate." - Adena Friedman, acknowledging the risks associated with leverage in the financial system.
HABITS
Embrace Technological Evolution While Maintaining Stability
Friedman demonstrates the practice of pushing technological boundaries while respecting market stability. This involves:
- Introducing innovations like tokenization and extended trading hours gradually
- Maintaining core market functions during technological transitions
- Balancing innovation with investor protection and market integrity
- Learning from past technological implementations to improve future ones
- Recognizing that markets evolve but fundamental principles remain important
Advocate for Regulatory Reform
Friedman consistently advocates for thoughtful regulatory updates to support market evolution. This practice includes:
- Engaging with regulators to explain market needs and technological capabilities
- Supporting specific reforms like disclosure, proxy, and litigation reforms
- Encouraging regulators to be forward-leaning while maintaining investor protection
- Building relationships with regulatory leadership across different administrations
- Framing regulatory discussions in terms of advancing economic progress for all
Maintain Issuer-Focused Approach
Friedman emphasizes the importance of keeping companies' needs at the center of market design. This habit involves:
- Working with issuers to understand their challenges and concerns
- Designing market solutions that respect company control while providing necessary liquidity
- Creating differentiated approaches for public versus private companies
- Recognizing that companies have legitimate reasons for choosing to stay private longer
- Building solutions that address the specific needs of innovative companies
Data-Driven Decision Making
Throughout the interview, Friedman emphasizes the importance of using data to inform decisions. This practice includes:
- Relying on comprehensive data analysis when evaluating market trends
- Considering multiple data sources when forming perspectives on economic conditions
- Supporting institutions like the Fed in their data-driven approach to monetary policy
- Using market data to identify opportunities for innovation and improvement
- Balancing quantitative data with qualitative insights from market participants
Build Global Perspective
Friedman consistently considers global implications of market developments. This habit involves:
- Recognizing that NASDAQ-listed companies are global entities with global investors
- Understanding that market innovations must work in a global context
- Considering international perspectives when evaluating U.S. market policies
- Recognizing the interdependence of global financial systems
- Balancing U.S. market leadership with global cooperation and standards
REFERENCES
NASDAQ's Business Evolution
Friedman explains how NASDAQ has grown from $2.5 billion in revenue to over $2.5 billion in EBITDA, expanding from a simple marketplace to a global technology company with multiple business lines serving markets worldwide.
Tokenization Announcement
The interview includes a major announcement about NASDAQ's plans to introduce tokenization into core markets, representing a significant step in the evolution of market infrastructure and post-trade processing.
Extended Trading Hours
Friedman discusses NASDAQ's move toward 24/5 trading hours, explaining the rationale and implementation approach while acknowledging that full 24/7 trading remains a future goal.
SEC Leadership
Friedman expresses optimism about the new SEC leadership under Chair Atkins, describing him as forward-leaning and supportive of innovation in markets, including potential IPO market reforms.
IPO Market Challenges
The discussion covers the significant challenges facing the IPO market, with companies staying private longer and the public market experience becoming increasingly burdensome for companies.
Regulatory Convergence
Friedman emphasizes the importance of regulatory clarity and convergence between traditional markets and digital assets, suggesting this would allow NASDAQ to bring its institutional clients into the crypto ecosystem.
Index Investing vs. Active Management
The conversation explores the rise of index investing and its impact on market dynamics, with Friedman noting the importance of maintaining a balance between passive and active management.
Federal Reserve Independence
Drawing on her experience on the New York Fed board, Friedman discusses the importance of Fed independence and describes the institution as data-driven and apolitical despite political pressures.
Commercial Real Estate Concerns
Friedman addresses concerns about commercial real estate and potential systemic risks, suggesting that the distributed nature of the banking system helps mitigate these threats.
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