Nasdaq, Inc. (NDAQ) Earnings Call Transcript & Summary

Perfect. So good morning, again, everyone. Our next session here is with Nasdaq. I'm very pleased to welcome Adena Friedman, President and CEO of Nasdaq, who is participating in the SDC for the first time. So welcome, Adena, and thanks for participating in our virtual conference.

Great. It's great to be here. Thanks for inviting us.

Fantastic. Before we get started, just some quick housekeeping, again for viewers of the webcast. You can submit questions for Adena by -- via Pigeonhole, which is a link on the left-hand side of your screen. Also at the end of the session, please fill out the Procensus pole. And you'll have immediate access to results once we put it out.

We'll get started, Adena. So very good place to start is you've been CEO now for, call it, 3 years. Only leadership Nasdaq has undergone quite significant strategic transformation. So for investors who're may be less familiar with the Nasdaq story today and maybe just give us a sense of how your business has pivoted away from your core exchange franchise.

Sure. And I would say -- first of all, thank you very much for having us. And it has been an interesting journey over the last 3 years, really to make sure we're leaning into the strengths of Nasdaq. And so we've actually been pivoting towards the technology, our Market Technology business and our Information Services business, while maintaining the resiliency of our Markets business. And I think when I came in to become CEO of Nasdaq, what we really saw was a capital allocation, where the vast majority of our capital, whether it's CapEx or innovation spending and acquisitions were really geared towards the exchange business, the trading businesses and our -- and the corporate businesses. And so what I really wanted to do is make sure that we were creating more of a balance. And we were balancing out that capital allocation between our legacy and our foundational exchange businesses, but also making sure we give room to really lean into the growth of Market Tech and our Data & Analytics business. So we started to make sure we have innovative -- new initiatives in our data analytics business and in Market Tech, and we've turned on some of those engines. We made a significant investment in the next-generation trade life cycle technology solution and platform, which frankly will benefit both our own exchanges and all of the exchanges that we operate on behalf of others. And then also, we made some acquisition decisions, whether it's the acquisition of eVestment or Cinnober or Solovis that really help lean into the technology and data analytics businesses. So those are the types of things we've done, and it has been able to catalyze more organic -- more growth, both organically and through acquisition, and it's enabled us to kind of go after a bigger total market opportunity.

Great. Maybe one of the benefits of the pivot has been really a predominance of recurring subscription-type revenue base at Nasdaq, particularly now that we're going through a recession, and I'll dig into this a bit more. But just bigger picture, how do you think that sort of impacts the resiliency of group for Nasdaq franchise over a cycle?

Yes. I think the benefits of the recurring revenue streams that we have and about 70% of our revenue is generally recurring in nature. So it's not transaction-based revenue, it's everything else. It could be data sales, it could be Market Tech sales, Corporate Solutions sales, annual fees, so that we have a more predictable revenue stream in the recurring revenue businesses that we now operate. And it also, as I said before, it's opened us up to a larger total market opportunity across Market Tech and the data and analytics business, which then, of course, gives us more of a growth runway. Now in this particular period of time, the trading business -- in times of volatility, the trading business actually really provides a great benefit, which is in times of volatility, there's generally more trading. So that -- we kind of saw that play out in the first quarter when we saw a significant spike in trading revenues and trading volumes. And that's -- we've seen some of that persist into the second quarter. But we also -- it's on the back of having a more recurring revenue stream with a bigger opportunity in front of us.

Okay. I'm trying to put some numbers around this. So top line over your 3 years, it's been about 4% organically, EPS has been double digits, about 11% growth. As you think over the next 3 to 5 years, given the strategy in place and the backdrop we have, how do you think about the firm's growth prospect? What is it for the last 3 years? And then sort of what are the key opportunities that you see that could help sustain and potentially accelerate sort of the growth?

Yes. So we've been able to provide our shareholders with longer term -- we call it medium to long-term outlook on the nontrading businesses. Trading revenue is hard to predict, as I mentioned. But our other businesses, whether it's Market Tech or Corporate Solutions business and our Data & Analytics businesses are more -- we are able to kind of have a longer runway in view as to the growth potential of these businesses. So when we announced our strategic pivot, we also announced medium to long-term outlook across our nontrading businesses as 5% to 7% growth annually. Over the last 2 years, we've been able to overachieve that. And so either kind of hitting at the top or even a little above the top of that band because we definitely have been able to step into bigger opportunities, and we've been able to really lean in, in terms of our investment in those areas as well. I think that the reason -- now in this current year, in our first quarter call, we did say that some of the impacts of COVID could have somewhat of a dampening effect on our growth potential in those businesses this year, and we really did not give any outlook beyond that, other than to reaffirm our 5% to 7% longer-term outlook. So we continue to say over a 3-year period, 5-year period -- we continue to see good opportunities to achieve the 5% to 7% growth. But this year, we could be at the -- below the low end of that just because of some of the disruption that comes with the remote working environment. So I'm happy to go into that more. But the last thing I would say on this is the reason we see that kind of growth trajectory is the index business is a growing business. Our Data & Analytics business, eVestment is a strong growing business. And our Market Tech business has really great growth trends as well as us opening up new growth opportunities. And for all of those reasons, we see the ability for us to grow to 5% to 7% is being strong across our overall franchise.

Can we dig into that a little bit more in terms of the near-term challenges? Maybe what specifically are you seeing is the issue? And if you could talk about that maybe by some of the businesses. And then do you have a time line for when you think those start to abate and you can get back to your longer-term growth rates?

Yes. So when we -- when -- on our first quarter call, we tried to give at least some view as to well how the year could shape up. And it's obviously hard to predict right now, as we all know. But what we were seeing in terms of the immediate aftermath of moving to remote were a few things. One, obviously, in the Corporate Services business, we have 4,000 listed companies, but we also have over 6,000 companies that leverage our Corporate Solutions, IR advisory services and technology as well as our governance solutions. And some of those clients are pretty heavily impacted that runs the gamut across every industry. So there are definitely some clients who have experienced a very significant impact. So we had some concern around customers looking to pare back some of the services. I mean -- I think the good news has been, we've also had companies wanting to add services because of the fact there's been so much turnover in their stock, they want to have a better understanding of who their new investors are, how they should target those investors. And the other thing that has actually been quite positive is that we started -- really launched into an ESG advisory effort, coupled with the technology purchase with one report. And that actually -- I thought that would end up seeing a pause, it has not. So we've continued to have good strong demand for our ESG advisory services and technologies. I think that if we turn to the data and analytics business, the Index business is -- has a beta component to it. As we went through March, we definitely saw some drop in AUM, but not as much as other indices saw because the Nasdaq 100 has been really resilient through this whole situation and the Nasdaq Biotech has been really resilient. And our smart beta strategies have generally been resilient through like we've just had -- we've had strategies that have been more tech oriented and have really played well in this particular time period. So our AUM is quite strong. And I think that -- but there's a little bit of unpredictability to that for the rest of the year, so we're cautious in our comments there. And then eVestment has not yet seen an impact, but I think that's partly because the investment management industry -- the markets have recovered to a degree that has saved off the worst of what people could have expected. And so we continue to have great engagement there. And the Solovis acquisition continues to do quite well for us. So, so far, that's been relatively resilient. We gave some markers. We said, well, but there could be in the future, if the markets really continue to do poorly, you could see further effect on the investment management industry, but so far, we have not experienced that. Moving to Market Tech, I think that's where we saw more of the immediate effect in that we had -- we have really strong client base, it's incredibly resilient client base in terms of market infrastructure operators and the broker-dealer community. But immediately, during March, we saw certain kind of enhancement requests. Basically, we got a code freeze in place. So a lot of the exchanges like us -- included us, we kind of did a code freeze, which then put a pause on some of the enhancements that we were working on. We have other large-scale projects that are underway, but they needed to take some of those people and deal with certain immediate needs. So some of those projects got a pause, and we've restarted them, but some of those had a temporary pause to them. And then also some of the new markets clients where they're really thinking about changing their business model that's outside our traditional client base, those clients, I think, also saw more of a disruption in their industry. And they, again, while they have an interest in making these changes, we see that as a longer-term trend, but not one that is as executable this year. So for all of those reasons, we did give some caution around the growth of that business. But I can tell you that long-term contracts, the market infrastructure operators are doing quite well. So they -- we have a really strong client base. Our broker-dealers continue to have very strong demand for our Surveillance solutions and for our Execution Services solutions. And so we have some nice drivers, but some of those -- the growthier things and some of the new enhancements were put on hold.

Okay. And then any sense of a time line, when you think our books will get back? You do have an Asia business, I think Asia is a little bit further along the whole pandemic thing. So is there any signs you're seeing there in terms of a normalization of activity?

Yes. Yes, we are seeing our exchange clients as well as us start to do enhancements again and continue. But some of them are a little slower. So if it's like something new and different, where they're going to have to introduce a brand-new thing, they might continue to pause that, but some of the enhancement requests have been around just managing to capacity or adding functionality that gives them more resiliency, and those things are coming back into play. And then also signing new contracts are -- that's moved along as well as continue the projects that we -- where we saw people getting pulled out of the project are coming back in. So the projects are getting back on track. So I think that we're seeing some normalization. But the area, though, that I would say that continues to be more, I'd say, in the short run, harder to rekick in is the new markets business, which, again, is a very small part of our current business, but it's a growth driver for us is that just in terms of meeting new customers, it's harder right now. And on the customers we've been working with, they've been a little slower in making decisions.

Okay. Perfect. Maybe a bigger picture question. This is what we're asking every CEO at the conference this year. But as you kind of think through and beyond sort of the client issues with pandemic, how do you think about maybe your priority shifting whether it relates to cost cuts and expense managements or some level of investments?

Sure. Well, we've been pretty prudent in managing our expenses over the last 3 years. And going into this year, we've had a very particular focus on that. We are a very resilient business. And so we have not put -- we haven't done any layoffs, and we've committed to our team that we won't do any layoffs this year. We have not committed beyond this year just because we really don't know what next year is going to look like, but we have been able to give that commitment to our employees. We're continuing on the normal cycle in terms of generally kind of how we're managing our employees and managing to the growth initiatives. We've continued down the road on those growth initiatives. We haven't paused any of our growth initiatives. But as we look into the future, if the economy gets significantly worse or persists where we can't kickstart the economy back up or there are other things that happen as we get into 2021, then we do have the ability to continue to be very prudent on our expenses and manage our variable expenses. Obviously, travel is way down, events are way down. We have discretionary spending and marketing and things like that, that we can manage. The one thing we really don't want to do if we can help it is cut back on the investment spending we're making into our future because we are big believers that we are doing the right things to manage to the future growth of this company. And that, in fact, our pivot really is playing into the trends. To build a more scalable, modular and cloud-based technology solution for markets, we think is actually absolutely the future of markets, and we've thought that for several years. And if anything, this has taught us is that, that is absolutely the case, getting to more scale on demand, getting to a more cloud infrastructure, enabling a more modular approach to managing the functionality, all of those things are playing right into the needs of the industry. And then on the broker-dealer side, playing into having really robust but also really a nimble Surveillance Solutions is playing very much into the trend. The data analytics business and going into the private markets business is very much on trend. And then, of course, the markets themselves have been remarkably resilient. So we don't want to cut off those investments, but we will be managing our discretionary spending as much as we can.

Okay. Perfect. Maybe you already spoke some of this in terms of the opportunities going forward, I think everyone talks about COVID accelerating technology trends that were already in place. So pure tech provider, kind of help us talk about how you can play offense in terms of taking advantage of some of the opportunities ahead?

Yes. I think we've been -- that's why I said, I think we have really good conviction as to where we're going. Because if you're sitting there in a remote environment, first of all, you need to have all these tools be able to be delivered to you in the remote environment. So -- and you need to be able to trade in a remote environment. You need to be able to analyze your portfolio in a remote environment, all of those things. So our technology and the data analytics are all delivered that way. We're B2B software and data provider. So all of that does play into the trends that we're seeing right now, and we think that those trends will accelerate. I think the big thing that will be interesting to see is whether or not the financial industry accelerates its move to the cloud. And the financial industry on data storage, nonreal time types of data capabilities, I would say parts of the financial industry have gone to the cloud. But there is still this sense of concern over data privacy and data confidentiality that I think has held the industry back. And the other thing is the real-time nature of the industry has held the industry back from the cloud. But we've been working very closely with the cloud providers to make sure we can move into a real-time environment with the scalability and resiliency that we would demand. And they've been making big investments to facilitate that. We just launched real-time data in the cloud just last month, and we already have 3 clients signed up. We have a really good pipeline of opportunity there to kind of create a more -- an easier and more nimble way to deliver our data in real time, not ultralow latency, but still, I would say, low latency for an eyeball. And then moving into that ultralow latency state, we do believe is highly achievable in the cloud. So all of those things I think could move the industry and accelerate the move to the cloud.

And help me understand some of the frictions around latency and security. Are those things that get -- that need to be solved still by the cloud providers? There's something Nasdaq can take advantage of opportunity? Just trying to understand the road blocks and what eases those road blocks to fully capitalize on the opportunity.

Well, I do think that cloud providers are recognizing that to go from straight on-prem to full public cloud for some of parts of the industry is hard. So how do you maybe create like Azure, has the Azure Stack that you can deploy in your data center and now Amazon has the Outpost that you can employ in your data center. So you get the scalability advantages of having the cloud infrastructure but you don't have to go and put your data into public cloud yet. I think there's also a lot of data that is not as sensitive as people think. It's not PI -- it's not personal identifiable information, it's not necessarily trade secret information. It's just a lot of data. And so there are definitely -- I think there's a lot more openness to moving certain transaction-based data into a cloud environment going forward. And then the last thing is this idea of scalability on demand that is what I think is really going to drive the interest. That's always been there as part of the cloud. That's been their core competency. And then secure -- security around that. I mean they are investing each of them probably -- each of the 3 major providers, Google, Amazon and Microsoft they're probably investing more than $1 billion a year in IT security. So you know that they're going to be on the forefront of security going forward, especially as they get more and more involved in the government, too. So we feel confident there's a path, but you have to find a path. You can't just -- there's not necessarily a lead function necessarily. There's a path that they're starting to create for people.

Okay. Let's talk numbers. Your Market Tech business, I think, today, makes around $350 million to $400 million. But I think you think the TAM is near $22 billion, which obviously is an eye-popping number for investors. Maybe help us understand, in the next 5 years, what is truly addressable there? What's an aspirational market share? Are there any things that Nasdaq needs to do in terms of investing in the business or acquisitions to get you there? Really help us understand the path from what you have today to really attacking a sizable piece of that $22 billion.

Sure. Yes. No, it's a great question. So well, I would say -- what we believe is the technology that really serves the market infrastructure operators, the exchanges around the world is probably a $2 billion TAM, right? So we have a lot of runway of opportunity there, particularly number one, because we still maybe just bringing one component of an exchange's technology stack. We have a few of our clients where we are the entire stack, but we still have a good land and expand strategy across a lot of our change clients. The second is a lot of their cost is infrastructure. And if we can work with them on Nasdaq -- implementing Nasdaq Financial Framework and then working on with them on moving at least portions of their workflow into the cloud, it helps lower their infrastructure cost, and it gets us a bigger piece of that in terms of being a managed service operator with them. So that's a long-term strategy. So the first would be the NFF deployment itself, working with our clients over the next, let's say, 5 to 7 to 10 years to make sure we get them into the next-gen technology stack. And then over that same period of time, starting to move them towards that cloud infrastructure and hopefully seeing some acceleration there as it takes hold. If we then look at the broker-dealer community, which is obviously where the big TAM is. That's a big TAM. So -- but what's the serviceable addressable market today is really in 2 areas. One is in regtech, and we are a niche provider there with our Surveillance solution. We still think we're probably only 10% to 20% penetrated in our surveillance capabilities across the industry. So we have a long runway there but it's not $22 billion. And then -- but then if we -- and then if we were to continue to expand our regtech capabilities organically and through acquisition, we could then really broadly expand the serviceable addressable market in the coming years. But we see overall regtech being a $5 billion to $7 billion opportunity or even bigger actually. But it's one -- just on tech, not on all of the people, but just on tech. But we need to make sure that we continue to expand what we do to be able to capture all of that. And then on execution services, trading systems, that's a pretty niche offering inside the broker-dealers, but there are a lot of them. So I don't think we actually know what the exact TAM is, but I would definitely put it above $1 billion. If you look at the entire industry and all the execution capabilities that they have inside their shop across all asset classes, and that's a brand-new business for us. We only launched that 2 years ago, and we now have 6 clients, and we're continuing to see some really good demand characteristics there. But that's a -- we're just at the beginning there. And then the bigger technology opportunity would be in if -- and this would have to be through further investment and acquisition would be in like post trade, but that's not an area of focus for us right now.

On the broker-dealer side, you have 6 clients now. Can you maybe share with us because it seems to be like a no-brainer for a broker-dealer? I can associate have the same sort of like capacity and capabilities brought clearly cheaper and potentially with more scalable and better technology. But now that you have 6 clients, do you have statistics around? Are there -- did the brokers save X amount? Do they have faster systems? Is it cheaper to put in new capabilities? Help us understand what the value prop looks like for those 6 clients that have already taken on the Nasdaq services.

Yes, sure. And this is specific to our execution solutions. And what they are able to achieve is definitely a cheaper all-in cost of ownership because we can do -- we can just deliver them a solution on-prem or we can manage it for them inside our data center, and we do both. We can just provide software or we can also provide services around it like surrounding systems and surveillance. And so the more we provide to them, the more money they frankly save against their internal infrastructure. But we've done both. So on-prem or hosted just trading or trading and surrounding services, including surveillance. So all the needs that they have to run an ATS as a broker-dealer. So we have that capability. And I think that there -- and every client, frankly, chosen a different level of service there. The other thing is we can operate global trading systems, not just U.S. equities, but we also have deployed a global FX system, and we have the ability to do it across asset classes. So for all -- and then in terms of -- the total cost of ownership goes down, they don't have to rely on their internal teams to do things that just get them on the field. The way I look at ATS is it gets you on the field with your clients and provides a good service to them. It's not a huge profit driver, but it's a service that your clients expect you to have in terms of execution capabilities in real-time with -- and delivering them instantaneous execution capability. What we do better is that we are -- it's hyper-low latency and super-scalable. And particularly if we host it, then we can also put it in our data center and we can provide them routing solutions as well. And so there's a lot that we can do for them that if you look at the performance of our systems during the peak times, they were excellent, even though not all of the trading systems of the broker-dealer level performed as well just because that's not their core competence, but that is our core competence. Hyper-scalable, hyper-resilient, low-latency, high-throughput, high-capacity systems is what we do. So if we can then do that across the businesses, then where they provide value is on the algorithms. We don't build their algorithms for them. So how they route, how they execute, any features and functions they want to have in their ATSs, we can build for them, but that's their intellectual property. And that's where they can differentiate themselves and where they should be leveraging their talent. So that's our proposition to them.

Perfect. And I think you used the word I think, land and scale or land and graph, something along those lines this...

Land and expand.

Land and expand, interesting phrase. I think for the [indiscernible] exchanges, what I wanted to ask a question around brokers. I think you signed the deal with Goldman quite a while ago. So you've had a few years now of providing services to brokers. Has that land and expand strategy worked? Are you expanding services within the broker that you've signed up with?

Yes. And it may not be across execution systems, although we have ability to do that. But they -- but our clients who really work with us closely will take -- that we'll look at both pre-trade risk management, post-trade risk management and execution services. And so for some of our clients, we have been able to expand into other risk management solutions that surround the trade in addition to the trading itself. And then, of course, most of them are already surveillance clients because we have over 160 broker-dealers who are surveillance clients. A lot of times, the surveillance person is different though than the front office trading person. So it's really 2 different -- to me, there are 2 different doors we're opening most of the time. There are some clients where the front office is very involved in the surveillance and there that's a great opportunity because we have one relationship that we can expand into. But most of the time, we're trying to expand our surveillance footprint, we land on a desk like an equities desk in one region, and we expand globally across that asset class or we expand vertically across asset classes in a region on surveillance. And then on the trading and execution side, we can do all the risk management around the trade to support their trading.

Perfect. Let's switch over to some regulation, maybe not as exciting a topic for you, but it's one, I guess, a lot of headlines U.S. equity market data is a smaller business for you, but again, you get to a lot of headlines. And it feels like the SEC is on a mission to massively increase competition around data provision and that could impact you negatively. So maybe, first of all, you look at some of the packages that we put through so far by the SEC, kind of, how do you think those impact your business? Maybe can you just touch on like between the SIP data that you provide, proprietary data, access fees? And talk about how you think the proposals could impact your business?

Sure. Well, we really look at the proposal that the SEC has recently put out as being Reg NMS 2.0, right? So it is not a market data proposal, it's a market structure proposal. There are so many components to it. It's over 600 pages long. So -- and there's a lot in there. It includes changes in locked and crossed quotes, allowing locked and crossed quotes to persist all day because of the way that they want to trade odd lots, changes in the order protection rule around odd lots and round lots, changes in actually the NBBO, the National Best Bid and Offer, eliminating the National Best Bid and Offer essentially and allowing multiple National Best Bid and Offers, which means there is no longer a National Best Bid and Offer. And so there is a lot there to consume that could fundamentally disrupt the interworkings of the U.S. market structure system. And if we look at how the markets performed over this period of -- this critical period, I do -- I would say that the U.S. equities markets operated and performed among the best in the world, in terms of our ability to serve our clients, provide transparency and instantaneous execution throughout in a connected and networked infrastructure across the exchanges. So to sit there and blow that all up, and eliminate the golden source of truth around the National Best Bid and Offer and to put in a rule that would have lock and crossed quotes across many of the largest companies in the world and have that persist all day and create confusion, it just doesn't seem like the right next move to us. But in terms of the impact on -- specifically in market data, you're saying it's going to create hyper competition. Our view is it's actually going to eliminate a lot of choice. Because today, they have a choice to take the SIP, the consolidated feed or individual feeds from the exchanges and the exchanges essentially create competition against the SIP, whereas now they're basically trying to requisition everything in and they're trying to appropriate all their data into the SIP, which will eliminate the ability for the exchanges to compete against the SIP. So you're really basically creating a hyper monopoly. And I do worry a lot about that. I think that even if you have multiple consolidators, the pricing is still going to be done by a central committee. And so that's very concerning. So our view is that it actually eliminates -- limits choice, it creates confusion in terms of what's the source of truth in the market and creates a lot of market structure issues. We've put in our comment letter, even though we asked for an extension of the comment period because it was right through this entire period, but shocking that they didn't extend the comment period, but we did submit our letter, and it's -- I think it's a pretty comprehensive review of the concerns we have.

So maybe just -- maybe hitting your point around competition. I guess to the extent that if the rules go through and to the extent you have effectively everything in the SIP in terms of what sort of data that it provides, you have competitor consolidators. If that should go through, how do you then think of the impact to your business?

Well, I mean, we are a consolidator today of the Nasdaq SIPs -- Nasdaq SIP. And that's not a big business to us, frankly. We run that through our Market Tech business, and it's a pretty modest contract. So to us, that's not a big impact if there are multiple SIPs. I would expect that we will continue to be a consolidator, and we'll be able to consolidate the New York data and other things. So that could actually be an opportunity for us. I think that -- so I don't anticipate that being a major disruptor. I think that in terms of taking the proprietary feeds and through government appropriating them and turning them into government monopolies, I think that, that's -- it's actually impossible to know from their proposal whether that's a positive or negative to us because they didn't address pricing. They basically said, I'm punting the pricing decision down the road to the Central Committee and regardless of who's consolidating it, they're going to have to live with whatever pricing comes out of that committee. And if you look at like the Canadian model, that would be a benefit. There's some -- each of the exchanges on the depth side get to choose what they charge and the regulator has an ability to give you a balance of increasing or decreasing. It's actually pretty good. It's not terrible for exchanges. So I think that there are ways that you could manage it where there's some benefit, but there's also risk too because you are handing your data, our data that is belonged to us and where suddenly governments basically taking it. It's a government taking of our property and then putting it into a monopoly. I just don't understand how that's good for the industry, but that's our view of it.

On your points around the committee, I guess based on what I understand, the new operating committee will be less exchange driven, I think it should have about less than half of the voted shares. So it does feel like there will be much more industry participants on the committees that set pricing, et cetera. So I'm just curious why you don't think that will be a negative to the extent effectively your competitors could set price. Not saying it's right or wrong, I'm just saying, to the extent your users effectively seen it -- effectively set the price of the data. Why doesn't...

Yes. Well, that's obviously what they've been most wanting, but that's -- again, that's what the SEC has put forward. But obviously, we have lots of concerns around that. So -- and we did express our concerns there, too. And so I think that while we would like to have industry participation, that's actually a federal statute. And so it does actually require congressional action to make that decision. I also would say that we have been supportive of having industry participation. We do want our clients to have a voice but we have to do it in a responsible way since the data does belong to the exchanges. So we have -- that's something that we have been pretty -- I think, pretty constructive around but we have a lot of concerns with that proposal as well. So these are all things that are debated. I think it's probably important to note for investors that all of these types of proposals that the SEC make go through a process themselves. And then there's, of course, if you really believe that they have not done their job of proving why these proposals improve the market or eliminate harm and why there is a need for those changes in an -- with an economic analysis and if they haven't also proven the legal right to make the changes, then, of course, then you have the ability to challenge it in court. And that is -- so everything in this realm happens in slow motion and takes several years to even get approved, much less go into effect. So I do think it's important to note that these are all kind of longer-term issues, ones that we're obviously extremely active in, and we also would say that our markets have operated quite well, we're really proud of the performance of our systems, but we're also proud of the overall structure that exists. I think the SEC over the last 20 years has done a nice job of creating a really resilient market model. I think that there are other markets to focus on right now in terms of coming out of this crisis that did not perform as well. So we're hoping that there'll be some prioritization also on that.

Okay. I think we've hit the topic enough. Let's switch over to industry consolidation, which has been a big long-term trend in the exchange world and it does feel like the bigger getting bigger, well it's ICE, CME, Addison now with its acquisition. I guess from your perspective, do you think scale really matters? I know you've really done a good job in transforming the business, focused on incredibly well in your 3 years. But do you think scale really matters? And do you think Nasdaq would benefit in some way from being part of a sort of bigger and larger group to be able to compete more effectively?

We feel very comfortable in the position we have today amongst the overall landscape of exchanges. I think that a few things I'd say. Within an asset class like U.S. equities, there is a scale benefit to being a larger player in an exchange in a certain asset class. I would say that across geographies that, that scale benefit is less because you still have to operate systems separately, you still have to have infrastructure separately. You still have to have regulatory operations in each of the countries, et cetera. But I also would say that we've also been able to scale ourselves in terms of diversifying our business. And so we feel really good about the fact that we have businesses where we can scale up in Market Tech, scale up in Data & Analytics and scale up in Corporate Services that allow us to differentiate and scale our businesses in ways that our peers are not doing. So it actually allows us to go into places they are not. And give us a runway for growth that does not butt up against what the interest of those other exchanges. So I'm a big believer that you establish a strategy. Obviously, you adapt the strategy to the situation. But if you have the right approach and you stay true to yourself, you'll find a lot of opportunity like we are finding in the strategy we've undertaken. And I don't need to just focus on my competitors, if I only focus on our competitors, it would limit the opportunity that we have in front of us because then you're only -- you're just limiting yourself to what they're doing as opposed to limiting yourself by what your customers need. And our customers' needs are changing, they're evolving, and we're leaning right into that. And I do believe we have plenty of opportunity to grow and scale beyond just the exchange landscape that we're in.

Perfect. Let's talk about that. I think a lot of investors give you credit for really using M&A and the divestments to really expand the growth rate of the business. As you kind of look at your portfolio today, are there places or types of assets that you think would be helpful to sort of bolster your ambitions and ultimately the growth of the company?

Yes. The vast majority of our time and attention is spent on organic growth. But we do, of course, look at acquisitions, too, as a way to accelerate our growth or expand the opportunity we have within our strategy. So a couple of examples of ones we've already done, and then I'll talk about kind of how that translates into what we're thinking is we've had -- we've been able to expand and really bolster onto our market tech strategy with the Cinnober acquisition. We've been able to expand our opportunity with the eVestment acquisition and now Solovis is now a bolt-on to that. And so we have ways that we are -- and you can tell the capital allocation decisions around that have been in Market Tech and in the Data & Analytics space. On an organic basis, also, we've recalibrated our capital spend to balance it between our markets and our Market Tech and Data & Analytics businesses with a lot of our new initiatives in the technology and data space. So -- and a lot of our capital allocation, big focus there. So I think that if we were to look at acquisitions going forward, we have evaluated exchange acquisitions like the Oslo deal. That was a good bolt-on to our Nordic strategy, high synergies, same client base. But in general, when we kind of look at leaning into our strategy, we're leaning more into the Market Tech space and with some focus on regtech and then in our data analytics space, with a big focus on private markets and the investment management industry in general.

Perfect. China-U.S. seems to be a basis of geopolitical tension. You do have a listings business that does have some Chinese exposure. Maybe just talk about -- I think you made some changes recently to your listings criteria. Just talk about that, what changes you made, broadly speaking, how you think U.S.-China impacts your business?

Sure. Yes. No, we are very proud of the companies that have chosen to list on Nasdaq from China. We have some great companies that are listed in the United States. And we do want the United States to continue to be the place to come for companies around the world to raise capital and to get access to the deepest set of investors in the world. So we would like to make sure we maintain a vibrant market for companies from all over the world, including China. I do think though that there is a challenge that's very specific to the relationship between the U.S. and China. And it's unfortunately been politicized, which is that we have -- there are certain limitations that the SEC has accepted around their ability to oversee the audit firms that audit the companies from China. And so that restriction and their willingness to live with that, that limitation has kind of come to light as being, well, do we want to make sure, though, that we have proper oversighted insight into the audit firms that are auditing the companies that come from China. And that's a relationship issue that I think the SEC needs to establish with the regulators in China because that's really at that level. What we've been able to do in terms of our own listing rules is to make sure that we look at a couple of things. We want to just -- we've kind of given guidance or further, I would say, clarification of the quality of the audit firms that we expect to have taking companies to the U.S. So we've kind of put some quality standards in place with our new rule filing as well as also saying that the management team or consultants to the management team should have U.S. public company experience. So the management team, the Board, or if they can hire consultants in that have that experience, we just want to make sure they have U.S. public company experience as they come into U.S. public markets. And then the last thing is you put a minimum threshold on rate, how many dollars are being raised. So then we kind of have a little bit of a higher floor there. But I think those are things we can do. But what the government needs to focus on is this broader issue of the relationship between the U.S. and Chinese regulators. And the SEC is committed to having a roundtable on this topic, so we're looking forward to that and getting the whole industry and ecosystem to focus on it. And we just hope that the political side of things give the SEC the time to figure out the right solution for this.

Perfect.

And one other thing I should just mention is, when we look at the overall revenues generated from our Chinese listings, our trading of those listings, our trading of New York Stock Exchange-listed Chinese companies and any certain corporate solutions we provide to those clients, it is less than 1% of our revenue. So it's not a significant revenue driver for us. But it is something we care a lot about in terms of the quality of our markets and maintain the U.S. as a center for capital markets.

Perfect. So we're bumping up on time here, Adena. And there are a couple of questions from the audience...

Okay, great.

That I wanted to take. But I actually wanted to ask you one other question before that. ESG. You mentioned ESG earlier on as an opportunity. Maybe just briefly -- because everyone talks about it. So just briefly help us understand how are you thinking about addressing the opportunity there? What exactly is Nasdaq providing? How does it differ from everyone else?

Sure. Well, we do think we have a special opportunity to really become the trusted partner to companies as they're managing through a sea change and the expectations that investors have around ESG reporting and the transparency that companies need to provide around ESG. We have our 4,000 listed companies in the U.S. and Europe, and we have all of our [indiscernible] clients and they are turning to us as a trusted adviser to say, "okay, how do I communicate my ESG efforts? How do I make sure that they get into the metrics providers the right way? How do we make sure that we are focused on the right things that investors care about?" So we have an advisory practice that's been growing. It's really taken hold, and we're getting a lot of new demand from companies to help advise them on that. And then in January, we bought a company called OneReport, which is a small technology company that enables companies to report in their data in one place and send it out to multiple metrics providers. There's been a proliferation of those metric providers. So it's becoming an ever more confusing and frustrating world for corporates right now. And so if we can simplify that and give them a better ability to manage this situation and manage their investor relations, we think that plays right into what we're good at. And it's a highly valuable service that no one else is providing right now, so -- in a scalable way. So we're really excited about that as a long-term revenue opportunity for us, but also, frankly, a great way for us to provide a strategic service to our customers. The other key opportunity that we see in front of us is also on sustainable bonds and sustainable securities. Because in the Nordics, we have the Nasdaq Bond Market, Sustainable Bond Market, and we actually have launched the Sustainable Bond Network in the U.S. with our Nordic team to create a really good way to get a clear -- if a company sets clear criteria for what the bond is for, what the instrument is for, we get it certified, and so that then it can go onto the bond network to get listed. And that then gives investors kind of that good to housekeeping sale of approval, that this is a valid sustainable bond product or sustainable instrument that then they can -- they feel good about investing in. So that's the other area where we've had -- we're just getting started there, but we've had some good early success.

Perfect. So on the Market Tech question, I think one is a clarification question on the TAM. And the question really is, did you say that the nonfinancial Market Tech, i.e., sort of matching technology for nonfinance players is not a focus over the long run?

Oh, I just didn't -- I didn't mention it. So we don't actually have -- so the $22 billion in TAM doesn't really address that opportunity, and we call that the new markets opportunity. And what we've said publicly is we don't have a TAM for that because what we're trying to do is work with companies to change their business models to think about pricing and transparency differently, to look at hedging capabilities using financial instruments. And so -- and to create 2-way price discovery in assets that are not in the financial space. And so there's really no TAM for that because we're really trying to change business models in other industries. And we are actually quite excited and engaged in that area. That's one area, though, that we've seen a little bit more of an impact of COVID in terms of just the ability for us to engage with those customers, the focus of those customers frankly back on the core business for a while. And also just making sure that we are building out our solutions so that they -- that as that kind of kicks back in and reaccelerates because we definitely saw some good acceleration ahead of COVID that we'll be really ready with some really great solutions for those customers. So we have high engagement and really interesting clients as well as prospects, but it's still very small, and that's not part of the TAM.

Okay. Perfect. And I think you answered second question with your answer, so I'll leave that. Maybe just lastly here. I can't think of another company at least in my coverage has changed as much over the last 10 years, whether it's what you do or investors' perception of what you do. So looking forward to the next 10 I guess or may be 5 to 10, what do you -- what does Nasdaq look like over the next 5 to 10 years?

Yes. Well, we really want to be that trusted partner to all segments of the industry that have the capital markets. We love being a capital market ourselves, but we want to be an embedded strategic partner to all of the participants in the market as they're managing their data and technology needs and their interactions with the capital markets. And then, of course, being that trusted partner to the capital markets themselves is one that we want to continue to grow. So we are a technology company. We have our own capital -- technology serves our own capital markets, and we are a trusted provider to the industry. We just want to continue to expand that capability and be more of a strategic player to our clients.

Fantastic. I think that's a good place to end it. Thank you very much, Adena, for taking the time. It was very insightful.

Thank you very much.

Thanks.