Nasdaq has been moving its markets to the cloud, and it recently announced GEMX had moved to its AWS cloud infrastructure. John Lothian News interviewed Nasdaq Executive Vice President Kevin Kennedy to discuss the launch of the latest Nasdaq market.
Nasdaq is making progress with its AWS markets conversion, Kennedy said, emphasizing how this move is modernizing markets through the incorporation of cutting-edge technology. He noted that the initial focus has been on hardware improvements.
The new cloud-enabled market infrastructure using AWS Outpost delivers up to a 10% improvement in latency, which is largely attributed to hardware advancements, Kennedy said.
Nasdaq’s GEMX options market processes 12 billion daily messages, with a 71% higher daily message volume than Nasdaq’s MRX options. Kennedy said he believes this is at the top end of what Nasdaq anticipated, reflecting the industry’s recent increase in message traffic. He emphasized that Nasdaq’s investment in capacity ahead of the 2020 election has provided ample headroom for handling this increased volume.
“I think with the cloud enabled technology that we have now, we are in terrific shape. We’ve stress tested it a bit, because GEMX is a heavier lift, and it’s gone really well,” Kennedy said.
When asked about the differences between GEMX and other markets, Kennedy pointed to the higher activity levels due to GEMX being a larger market, having a unique fee model and having more customer volume. He explained that GEMX’s pro-rata distribution model drives a significant amount of message traffic.
Kennedy highlighted Nasdaq’s decade-long experience with various technologies and its comfort in partnering with AWS. He noted that while Nasdaq works with multiple technology providers, AWS has been a crucial partner in moving core trading engines to the cloud.
Discussing the migration of other markets to the cloud, Kennedy stressed that it would be a client-focused journey.
“That’s a question that we talk about every day,” Kennedy said of the migration schedule, noting that Nasdaq operates 18 markets across North America and the Nordics and provides technology for over 130 markets globally. “And one of the things that we promise to our constituents and our clients is that this will be really a client centric journey and that we would share lessons learned throughout and that we would work with them as we decide.”
Some of the operational lessons learned from the migration process to date are setting testing dates and ensuring proper attendance during crunch times, Kennedy said. He commended the seriousness with which clients have approached this transition, anticipating long-term benefits.
He confirmed that all customers successfully migrated with zero fallout and stable market share. Kennedy also mentioned the expanding demand for co-location services, particularly in Nasdaq’s data center in Carteret, New Jersey, also being driven by surveillance and risk management demand.
Nasdaq’s surveillance and data systems have integrated well with the cloud infrastructure, Kennedy said. He mentioned Nasdaq’s recent acquisition of Adenza and its role in enhancing fintech solutions across surveillance, risk management, and anti-financial crime.
“It’s really our sweet spot, you know, where we used to be listings, trading, and market technology,” Kennedy said, speaking of adding Adenza to Nasdaq. “We’re now listings, financial software and anti-financial crime. Financial crime and trading really nicely together. And then that feeds into the capital markets and that’s why we’re so strong in listings and in what we’re able to provide.”
Kennedy also addressed Nasdaq’s recent approval for short-term options on certain exchange-traded products, emphasizing a methodical approach to expansion and risk management.
“I like having more expirations,” he said. “I started in 1987 when you were only trading every month. And if you needed to cover Gamma Theta or, you know, just wings, right? Like you had one choice, one stop shopping in the crash of ’87, you had to go to Nov. or Dec. I love having more choices. I think that gap provides much safer and better risk management.”