Nasdaq Invests in Fighting Financial Crime Using AI Technology

Katherine Doherty and Ed Ludlow, Bloomberg News

The Nasdaq MarketSite in New York, US, on Tuesday, Jan. 2, 2024. The Nasdaq index slid 1.6% in the tech-heavy benchmark's biggest drop in about a month as Apple fell after an analyst at Barclays Plc warned that iPhone demand is cooling. Photographer: Michael Nagle/Bloomberg , Bloomberg

(Bloomberg) -- Nasdaq Inc. is throwing its weight behind technology that protects against financial crime as the demand to stop sophisticated, bad actors rises, according to Chief Executive Officer Adena Friedman.

“We are investing in the technology in a very significant way,” Friedman said Wednesday at the Consumer Technology Association conference in Las Vegas. The anti-financial crime business is also Nasdaq’s fastest-growing, up roughly 20% year-over-year, she said.

Nasdaq is enhancing its anti-crime offerings using artificial intelligence, which can predict and speed up the process of identifying criminal behavior, and rooting out bad actors in the industry, she said. The firm is working with banks, other exchanges and brokerage firms that can use the software to eliminate threats.

“This is just the next leg of our growth,” said Friedman, 54.

Since become CEO in 2017, Friedman has helped Nasdaq evolve beyond its roots as an exchange. Over time, it has shifted its resources into offerings with more predictable revenue streams as opposed to relying solely on income from trading and market volatility. Last year, it completed its largest acquisition ever, buying software provider Adenza for $10.5 billion to help transform the trading and markets firm into a fully fledged financial-services company.

Read More: Nasdaq Leans Into Tech in Quest to Become More Than an Exchange

Friedman also discussed the Securities and Exchange Commission’s approval Wednesday of spot Bitcoin ETF’s. Nasdaq is among a number of exchanges that filed to list the new product on their venue. The ETF offering is regulated and liquid, which provides more access to Bitcoin without directly owning it, she said.

“It opens the door for more accessibility for that particular asset class,” Friedman said.

More broadly across capital markets, Friedman said she expects to see a “more vibrant” backdrop for initial public offerings in 2024. “We’re cautiously optimistic,” she said. Last year, in a muted year for dealmaking, Nasdaq beat out the New York Stock Exchange for the most listings.

Friedman said activity could pick up, even as the cost of capital remains high.

“There are some great companies looking to get out,” including in the biotechnology sector, she said. AI may also come into play, with some companies demonstrating how they’re leveraging the technology, using it as a way to differentiate their businesses.

The number of public offerings coming to market will also depend on the economic environment.

“A lot of the economic unknowns are more known,” with inflation coming down and rates potentially falling over time, Friedman said in a separate interview with Bloomberg Television. “Investors feel more ready to put more capital to work this year.”

(Updates with CEO comments from television interview in final paragraph.)