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

All right, let's get started. For important disclosures. Please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. All right. Good afternoon, everyone, and thanks for sticking with us here into the home stretch of day 3, last session at the Morgan Stanley Financials Conference. I am Mike Cyprys, equity analyst covering brokers, asset managers and exchanges for Morgan Stanley Research. It's my pleasure to welcome Tal Cohen, the President of Nasdaq. Many of you may know Nasdaq to be a global exchange operator but in recent years, Nasdaq has been transforming the business through a series of acquisitions to become a technology and platform provider to serve corporates, investment managers and financial institutions as they navigate and interact with the global capital markets and broader financial system. So we're thrilled to have Tal with us here to discuss the transformation of Nasdaq. Tal, thanks for joining us.

Pleasure being here. Am I the only thing that's between people and cocktails right now?

I think so.

That's tough. That's a tough spot.

But that's all right. A lot of people interested in Nasdaq here. You can see here around the room.

So why don't we start with just a little bit of a quick intro of your background, Tal, it's quite interesting. You've been at Nasdaq 8 years now. Before that, you served as CEO of Chi-X, an equities exchange. What brought you to Nasdaq? And how has your role and responsibilities evolved along the way? If maybe you could also touch upon where you're spending most of your time these days?

Absolutely. So thank you for having me again. So I joined Nasdaq 8 years ago, as you said. And I joined after the acquisition of Chi-X Global. So I was the CEO of Chi-X Global, but Nasdaq only bought the Canadian assets. We sold the Asian assets to J.C. Flowers. And when you do that, corporate kind of comes out of the middle and I actually didn't have a job for a couple of weeks. And then Nasdaq called me about 3 weeks after the transaction closed and said, "Would you like to join?" Which was really nice because then I felt like they really wanted me, not just the transaction. And so that was great. So I joined 8 years ago, and I joined under somebody by the name of Tom Wittman, and he was running all of what we call Global Market Services at the time. And he offered me the position to run equity markets across North America for Nasdaq. And that's a foundational business for Nasdaq, great brand, was really excited to do that. So I joined. And then over the years, I picked up a number of different responsibilities. I was fortunate in 2019 to pick up responsibilities across all of our markets, all of our transaction businesses globally. And as a result of that, I picked up our European Nordic, Baltic businesses, and that was wonderful. And then in 2023, Adena asked me to take on our Market Technology business. And that is another one of our long long-lasting foundational businesses. And then more recently, we've made the acquisition of Adenza, which is Calypso and AxiomSL, and that now also sits under me. And so now I have 2 divisions at Nasdaq. I have our Markets division, which is the 18 markets that you know and love, foundational businesses for Nasdaq. And then we have this newly constructed Financial Technology division, which includes Calypso, AxiomSL, Surveillance, Market Tech and our -- what we call our trade management business, which really wraps itself around our exchange businesses. That's our co-location and access services business. External reporting, we have Verafin roll up under Financial Technology, but a different individual runs that, Brendan Brothers runs that. And so it's been great. A lot of change, but I welcome -- and the last thing I'll say about Nasdaq, is it does a great job of welcoming people in from acquisitions, very inclusive culture, very welcoming culture. So it's been a great ride for the last 8 years.

So you have a lot of things under your belt these days. Just how are you allocating your time between all these different parts of the business? And a global business, mind you.

Global business, yes. So we have about -- now I have about 4,000 individuals across the globe that roll up into one of these two divisions. I've been spending most of my time on Financial Technology as we're trying to construct a target operating model, bring together people and assets and businesses and also have a cogent message for our clients about what we're doing there. On the Market side, I have a couple of individuals that report into me, one who runs North American Markets, one that runs the European Markets. They're very seasoned, they're experienced, I have worked with them for a very long time, and I've been in the market for a very long time. So what we can communicate in 2 minutes, would probably take most people 20, just because we've worked with each other for a long time, and I actually really understand that business. So that's where I've been spending most of my time. But invariably, there's a deeper connection between those businesses and the client conversation, they want to understand how those 2 businesses interact and why they're together.

Well, if you're spending most of your time there, why don't we spend most of our time there. And let's talk about the Fintech division. Let's dig in. You've outlined your path for growth ahead. You've done a series of acquisitions. You outlined aspirations to grow the Fintech business 10% to 14% on an annual basis. That's your medium-term target. Talk about what underpins the confidence in that growth outlook and maybe help break that down for us by the different businesses within the Fintech division?

Yes. So there's a lot to unpack there. So the 10% to 14% outlook is a medium-term outlook for the Financial Technology division. That includes Verafin in it. And as we think about -- let me just level set, the reason we did the transaction, which we think is transformational and allows us to reach the aspirations we have to be the trusted fabric of the financial system. And that's the way we think about ourselves, and that's what we aspire to be, is when we thought about the most pressing operational challenges that our clients had, it was in 3 categories: It was in risk, risk management, regulation and modernization. Those are the 3 areas that we identified early on as -- it's structural, structural or secular trends that we wanted to lean into, and we felt like we had a right to win and a right to be the strategic partners on our clients' journey across those 3 secular trends. And so when we came across AxiomSL and Calypso, they are market-leading solutions, and they fit very, very well with our other market-leading solutions. And that's really important because a lot of these financial technology divisions or solutions when they get combined, you have like one flagship product, and then you have ancillary products underneath them. For us, I think about Market Tech, Surveillance, AxiomSL and Calypso as all being leading and differentiated solutions in the spaces and the customer segments they serve, and that's really unique, and it allowed us to then be a platform player across 2 dimensions, capital markets and regtech. And when we think about what's driving the demand in capital markets and regtech, I'll give you just a few examples in thematics the way that we like to position it. In regtech, the explosion of regulatory costs and obligations while simultaneously trying to meet your capital obligations is a real challenge for our clients. And what I've seen and heard on the Voice of Customer tour that we've done over the last 4 months. I've seen -- I've done 10 countries, 50 clients and really tried to understand what the pain points were and get out in front, be outside in with our clients is that, with regulations, there's 3 dimensions to it. There's the fact that it's global, in some cases. The fact that it's regional in others. That's one dimension. The fact that it's impacting both sides of the bank, capital markets and the banking side. And it's going downstream, that's the third dimension. A lot of institutions that weren't under the umbrella of regulation are now facing -- whether it's because of Basel or other pieces of regulations, look in Europe with DORA and other things that are coming out, I think that umbrella of regulation is just widening. And so that is, if you will, a structural trend that we're leaning into with AxiomSL, it's the only global and comprehensive regtech platform in the globe and really the only competitors we have in that space is internal [ builds. ] There's a lot of, if you will, niche players, but we really have a great solution there. So that is a trend we're playing into and it's very clear to us and it is something that from an investment-thesis perspective, we had seen since, say, like 2020, 2021, we had been eyeing that space for a very long time and trying to understand what our entry point might be. On the capital markets side, we thought about it in a few ways. We wanted to be more of a strategic partner to financial institutions. We have our Market Technology business, our Surveillance business, but we didn't feel like we had a full platform play for, say, the sell side. And to get that platform play, we looked at workflow solutions and had looked at a number that have come into the market and gotten ourselves educated over the last 3, 4 years. And when Calypso, again, was part of that transaction, we looked at Calypso and we said, "It really does complement Market Technology beautifully." So Calypso strength, for those who don't know, it's a front-to-back trade management platform that's global and multi-asset class, but focuses in our OTC products. Well, what does Nasdaq do really well? We have, if you will, a full trade life cycle set of solutions from pre-trade to trade to post-trade, all on the listed side, on the exchange traded side. So we could go to our clients and really try to combine the OTC world and the listed world and complement our capabilities, the customer segments that we serve and the geographies that we serve with Calypso. And Calypso and Market Tech are both not only deeply embedded, but they're really like the beating heart, the central nervous system for the capital market operations that they serve. So they have a lot in common in terms of their ethos in terms of the way that clients think about them, and they complement each other. And we just thought we could unlock that under the Nasdaq brand. And so that's been really, really powerful for us as well.

And then how do you think about that -- driving the 10% to 14% growth for the Fintech division, arguably, that does include Verafin, which is the fastest-growing piece at Nasdaq. Maybe you could just help us sort of break down some of the under piece -- underlying growth drivers as you see it?

Yes. And I think what we've shared at the time of the transaction, I think we have even more conviction over it now, is we talked about a mid-teen growth for ARR, and we talked about gross retention and net retention because that's really how we judge the health of the business. And of course, we also gave, I think, a low to -- a low double-digit revenue target for ourselves as well. And again, it's really interesting because revenues can fluctuate depending on accounting rules, so when we think about the health of the business, there's a big focus on ARR right now for us and the way that we drive that on gross and net retention for us. And those are really healthy businesses that are growing. Another way to also break that down for Adenza, we also shared that, about 50% of that is on the upsell side just because of the penetration that we have in the market and the other 50% is on pricing, cross-sell and new logos. And so that's how we think about those businesses in terms of their growth prospects. I can tell you from the Voice of Customer tour that we walked away with even greater conviction on what we can accomplish over the longer term. It's still early days. We've only been together for 6 months. But the customer reaction and the customer engagement has been really strong. Another example of that, that just brings it to life is, when we're meeting with clients, being a strategic owner of that asset and taking it from a financial sponsor, there is a different engagement level that we're seeing from the customers. They're sharing their 3- to 5-year road maps with us. I was in a customer meeting in Japan, and we sat down there. Number one, we were able to get the CEO and the COO of the bank to meet with us, which is a win in itself, and I walked into the meeting with a 7-year road map for Calypso. Okay. How do you respond to that, except to say that this is great, and it unlocks a lot of opportunity between the 2 firms because they see you as a strategic partner. And that's the point I'm drawing upon. They see us as a strategic partner. They want to lean in with us. They want to understand how we're investing, where we're investing and what the future holds.

What is that 7-year partnership look like? Are they giving you ideas of how to sort of enhance the product set?

Yes. So what they're saying when we have that client conversation, I'm glad you asked this, they're talking about asset class expansion. So like what asset classes they're going into. How we can better support them. They're talking about the pain points they have today around risk and the full trade life cycle because remember, they're thinking about straight through processing, how they automate, convert operational spend into technology spend and meet more real-time needs. And that's a big trend I see as well, is a lot of what we see on the regulatory front and what the banks are trying to achieve is, can we solve for these opportunities and manage our capital, manage our risk better in real time. How can you help me do that? And that's part of the conversation where we convert operational spend into technology spend. And really, you don't even have to replace or displace competitors to grow when you do that. And that's a wonderful thing because we can grow both ways. And so that's part of the conversation. The other part, of course, is around modernization. We haven't talked a lot about that. But in our road map, when we think about this at Nasdaq, when we think about the competitive landscape, we're also thinking about the competitors we don't yet know of, that we have not yet seen, that haven't come to market yet. And the way that we think about that is, we have a part of our product road map that's dedicated to innovation and investments around sort of like cloud and AI and other emerging technologies that we're taking a bet on to make sure that our applications and our solutions have that as part of, if you will, the fabric of that solution. So in 2 to 3 years from now, when our clients' needs mature, when they think about the platform, they understand that the platform can grow with them, can grow with their needs, not only across the asset classes they have but across -- well, I want to take advantage of this particular piece of technology, and we think about AI as just general technology and how to apply it within these solutions, for instance. But to do that, you have to make investments now. You have to make investments in cloud and managing your data and having a mature -- if you -- a posture on information security, that's where trust is built. All of those things build trust with a customer, where they are not only happy sharing that 7-year road map, but inserting you into their 7-year road map.

Now with the acquisition of Adenza, you're targeting about $100 million of revenue synergies. So maybe you can update us on how that's progressing, talk about the cross-sell, what it takes to get there and how you're approaching it?

So when you give a cross-sell target like that, it's -- you need to make sure you have put in a plan that's sustainable and has longevity to it. And there's maybe 4 or 5 components to that. One is you have to adopt the right target operating model. How are you going to interface with your clients. And for the first time in Nasdaq, we have enterprise-wide level functions for sales, client success and technology, and that's super powerful. So we don't have individual verticals and sleeves going into and talking to our clients. Because the client is going to say to you, "This is great that you have all these assets. But how do I buy from you? How do I partner with you? Who do I speak to? What do I do?" And so we've given them a quarterback and a target operating model that gives them a line of sight of how they partner with us, really, really important. Second part of that is you allow for cross-pollination when you have the right target operating model. So that's the first thing we've done. We've put that in place in April. So that's in full effect, that operating model. We did that very, very quickly. And the reason I pointed out the Voice of Customer tour is, we got out literally on day 1 after the acquisition and started talking to our customers. Our customers said to us when we organized the trip to Asia, Latin America, everywhere, Europe, "You want to see us that quickly? What could you possibly have to tell me right now?" And after the meeting, they understood exactly why we were there and what we were trying to accomplish. So that target operating model allowed for that. Second thing is you want to do is, you make sure that you got your tooling in place. So we wanted to make sure we have unified instances of sales force, but all of the lead-to-cash tooling, all of it, through customer success, how we service our clients, how we implement and deploy software, all of that tooling, you want to make sure is unified so you can discover opportunities and you can manage risk as well. And so that tooling is very, very important because it institutionalizes client listening. The third thing you want to do is you want to put a comp model in place that supports your objectives. Your salespeople are rational. They will do what you incent them to do. And you need to have, if you will, a comp model that allows them to understand what success looks like. It's like the sports analogies, everybody on the team knows their role. They know exactly what success looks like when you put them on the field, and that was really important for us, and we drove that. And that was a different comp model for Nasdaq. So different operating model, if you will, and we had a different comp model. And the last thing is -- the fourth thing we've done is, we've invested in education and training. And we've invested in making sure we have world-class marketing materials. So you put your people out there, you want them to have the same message, the same script, and you want them to be prepared for all the questions that come up when a client -- when they're in front of a client and client says, "So what do you know about AxiomSL? What do you know about Calypso? What do you know about Market Tech?" You're not going to be an expert of every single product. God bless you, we have people who work at Calypso for 20 years and are still learning a bit about that product. So we want to make sure we arm our salespeople to be successful when they're in front of clients, and we want to make sure the clients take away the best of each of these solutions. So investing in education, training is really important. And then the last thing we've done is kind of the overlay of all of that is the go-to-market campaigns that we have and the way we go to market is very coordinated. It's very, very clear to our clients in terms of why we're going to market on these 2 products. For example, I'll give you just one go-to-market campaign we put in place that's been successful. We have a go-to-market between AxiomSL [Technical Difficulty]. So introducing AxiomSL to solve that problem, convert operational spend into technology spend where there's real value and there's a deep relationship with Nasdaq and we're not a new vendor and there's an MSA in place, makes it really easy, and it's a big unlock. And now you're taking AxiomSL into the capital market space because it was traditionally in the banking space. So that's an example of looking at something, changing the environment, putting a go-to-market around that, understanding who your clients are and making sure your sales team and your coverage team understands how to execute against that. And so that's short term. Longer term, just last point on that is, we have at the Nasdaq proper level, invested in -- on client data management. So we have a single and will have a single data lake for all of our customers globally, incredibly powerful to discover and identify opportunities. And again, it will unlock opportunities longer term with other divisions, other businesses at Nasdaq. And the concept of trust. When we talk about trust, your -- you got to walk into the client meeting knowing the client, and you can do that when you know -- when you have a handle on your data. And so having a handle on your data allows you to be more intimate, more personal, understand your clients' concerns and understand the risks that you have you with clients.

The example you gave on the 15c3 margin requirements, that sounds really interesting. Just curious what the uptake has been? What the uptake has been from customers, from either existing customers or even new customers.

Yes. So that's a campaign we just put in place in Q2. It's going well. We have a pretty robust pipeline that's just growing. And it's growing -- and that's another thing. I see our cross-sell pipeline growing every quarter. And that's the sign of a healthy pipeline and the right GTMs. So it's -- I think clients are waking up to the fact that there's a daily calculation, waking up to the fact that it's probably scaling better with a solution and also the fact that we can be a partner in that. So part of it has been education, but the uptake has been really good so far on the Tier 1 side for sure.

Great. Now as you look across the FinTech segment, I guess, more broadly, how do you ensure you've optimized the go-to-market strategy with so many different offerings, but also brands, too.

That's a great question. So the one thing we've done with any cross-sell effort, there's a little bit of branding that should go with it that has longevity, that lasts longer than anybody's town hall or a meeting once a month. And what we did is we wrapped around our cross-sell efforts, something we call One Nasdaq. And our One Nasdaq effort is around the mindset and the culture that we want to drive across Nasdaq for the next decade. And that's extremely important when you give yourself a big target like the $100 million cross-sell target that you have, because it's the salespeople that come in to Nasdaq in the next year, 2 years, 3 years, that need to buy into this strategy, that need to understand what we're about as a firm and what success looks like. So we established One Nasdaq as a way to say, "This is how we want to be client-centric. This is what we're awarding. This is the culture and the mindset that we want at Nasdaq. And this is how we want you to work together with your peers. We do not want silos. We want to work across silos, and we want to present that to Nasdaq." And so when we say that to a client, and we do, and we have a pitch on One Nasdaq to a client, the client says to us, the first reaction, this again, from a Voice of Customer tour is like, the reaction was amazing. It was like, "Oh, I get it. So you're not like the others that bought tech and that leave it as a stand-alone. It's a part of who you are. It's essential to what you do." And I said, "Exactly, it's central to what we do. And that's who we are and that's what we want to become." And they go, "Oh, we get it. That's really different. That's different than the messaging and the way that people are selling into us normally when they make acquisitions like this. Is it integrated? How should I think about it? Who's going to cover me? What kind of disruption is there?" And so that just helps us graduate into the cross-sell conversation.

Maybe zooming out to the broader Nasdaq business. You've been a leader in cloud adoption, migrating 3 markets to the cloud. How is that progressing? And more broadly, just talk about some of the cloud-enabled offerings that you have in place across the business? And what's next as you look ahead?

Yes. So this is -- we were early, and we wanted to be a leader. This is an example of -- we took a big bet a handful of years ago, and we said we're going to bet on cloud. And when I say cloud, what does that mean? We didn't necessarily bet on public cloud or private cloud or hybrid. We bet on cloud. And we saw the benefits of cloud through the pandemic. I want to be really clear about that, through the pandemic when the supply chain was broken, and we needed to order hardware, and we needed to ramp up for the volumes we were seeing. Really hard to do for those who were trying to do it, from like March to October of 2020. We learned a very interesting lesson. And the lesson is, if you want to claim that you're resilient, if you want to claim that you're five-9s, that you really need to have a strategy around cloud. You do. And you want to think about security maturely. You have to have a strategy around cloud. And so we embraced it, and we took our first market to the cloud in 2022 and that's worked out really well. We saw a performance improvement and that surprised people. And it went through seamlessly without any disruption. We allowed our clients to leverage their existing infrastructure. So that was wonderful, and now we're committed to that journey of taking all of our options markets over time to cloud. That's one. And when you do that, you do 2 things. One is you're able to embrace new technologies that come with that. And again, 4 years ago, I don't know that we were thinking about it this way. But you can embrace AI, unleash the power of AI in a bigger, bolder way when you have that central to your strategy, it doesn't become adjacent to your strategy, it becomes central to your strategy when you make investments like that. And then the other is for us, and this is unique to Nasdaq, is it creates a blueprint for us that we can then take to our clients when they're looking to modernize and transform, really powerful instant street cred. When you can go to your client and say, "This new tech solution we want to sell you is a managed service solution in the cloud." And they said, "Well, I need that. I know I need to get there. The genius is in how do I get there? How do I get there? How do I build that bridge to get there?" When you can say we're highly regulated. We work with regulators. We've done it. We can share the blueprint with you. We can tell you the pain points, and we can work with you on it. That's the sell, that's the sell. And then those clients say, "Well, I trust you, I want to do business with you." And that is coming to fruition just now. It took a long time. To be quite sincere and honest, it takes a long time, that sale is a multiyear sale. We're starting to see green shoots of that. And I think that will come through in the years to come. We're seeing a lot more on the modernization side. We're seeing a lot more transformation projects for our technology business. And that's because of the investments we made than 3, 4 years ago.

I want to shift gears over to the market side, options market, seeing significant strength, a lot of activity there in particular, in the 0-day to expiry option, 0DTEs. Also excitement, more broadly in the marketplace around potentially rolling that out to single names. So just curious your views on that, what you see happening, how much sort of growth potential do you see left in the options space? And then we also look ahead, there's also potential for the recently approved Bitcoin and Ether ETFs to eventually develop a derivative ecosystem around that, too, that could even further accelerate growth of the options market. So how is Nasdaq participating and all this excitement around the options space, where do you see scope to innovate and lean in more aggressively?

Let's unpack that. So there's a couple of things here. So number one, we love our foundational businesses. We love our option business, and we love it at a VIX of 12 or 13, and we love it even more with the VIX at 17, 18. And we're a market leader there. So we're the leader in multi-list, number one. And number two is, we have 6 of the 17 medallions in options. So we're the largest player in a growing market that has some structural tailwinds to it that you just -- that's what you're effectively touching upon. And by the way, in our market model is that we have 6 exchanges with different market models, different pricing regimes that target different customer segments. So whether the markets are fast or slow, whether they want a floor or price time, we're able to provide them with all of these capabilities to retail or institutional investors in a way that I don't think most others can. But it's become more competitive. It certainly become more competitive as well. And then there's 0DTE, as you mentioned. And 0DTE, for those who don't know, it moves in the index space, it's like 40% of [ SPY's ] volume today. It's about 18%, 19% of overall [ ADC. ] So it's a pretty big part of the market. But it's been in the market for a number of years. By the way, branded terribly, like 0DTEs, terrible branding, but because it's really in the market for 2 weeks, right? And it's not like it comes in the morning and it goes away at night. And it's not inverse, and it's not levered and it's not like the other products, and that should be well set. It allows investors to better, more precisely, more exactingly hedge risk. And if used well and if used as a tool, as a tactical tool, it can be very, very powerful. And it structurally helped grow the market. So just another stat. The options market was 17 million contracts a day or so in 2019, and now we're talking about 40 million. And that's why we're talking about this right now. And so -- and by the way, if -- for those that know options, it started with like -- and we always have this conversation is like, it's like the quarterlies and then the monthlies and the weeklies and the dailies. And all of that's done is it stretched out the accordion and the liquidity curve for options. And that's healthy, too for investors, by the way. And so 0DTE, we think is structural. We do it for own proprietary products, NDX, Nasdaq 100, which is growing and is really a growth opportunity for us, NDX and our proprietary products. We're early innings, SPY and VIX have been in this game for a very long time, very mature ecosystem, distribution partnerships, we are getting there. We are absolutely getting there. So we're excited about the potential that products have in the context of 0DTE. And I think it's additive to the market. But we're also really thoughtful and careful about expansion of 0DTE into single stocks because we think about 2 things: One is liquidity. Do some of these single stock names have enough liquidity for this accordion effect of liquidity, right? And the second is price discovery. How does that impact or help price discovery. And so we're really thoughtful about that. I think we are more reserved on the single stock side. NVIDIA and Apple, not exactly like the 250th name in options, right? We all know that. And options, it's a very concentrated market. Your top-20 names are probably 50%, 60% of the volume. So we have to be thoughtful about that before we extend it. We can't just say it makes sense for every name. And that's the position we'll take on the policy side, we'll just be very, very thoughtful. And we also understand what it means for market makers and the community that have obligations to provide liquidity and provide that access to clients. We want to make sure that we're really thoughtful and responsible about that. But we think there's a real opportunity for the dailies and the short-dated options for our NDX franchise. And we think generally, it's structural. The things that we're looking at is [ 2035 ], everybody is talking about that. I think there's a real case to be made for proprietary products. I'm not sure we're about multi-listed. We'll have to think about that. But those are the ways we think about it. And I should have said on the cloud, also like cloud -- just to connect dots, cloud allows you to think about [ 2035 ] differently. And to go to cloud, you have to have great partners, by the way, and AWS has been a great partner of ours on that cloud journey.

And Bitcoin and Ether ETFs eventually developing an ecosystem -- yes, is that's something that...

We're having -- sorry. We're having conversations with the SEC -- CFTC and SEC because depending on where it sits, right, with both regulators and OCC and the clearing houses to understand whether BTC option and an ETH option would look like, where it would sit. And we think there is a path. We think it's additive. We think the ecosystem and the complex is already being developed. You've got the future. You got the underlying. You've got the ETF. And so we think -- and we should have the underlying, by the way. And we think there's a conversation to be had with SEC and CFTC. Let's see if we can get there. I think we're motivated to get there. We're motivated to help. We think it could be additive to the price discovery and liquidity. And the ETF, I think if we get a couple of months more performance underneath our belt, feel comfortable with it and make sure we understand how the regulators then want to work together on that, there could be a path forward.

Final question, we're just almost out of time here. Let's touch on Verafin. I know that's run by Brendan Brothers, as you mentioned before. But just given that it falls under the FinTech division, and it's the fastest-growing business at Nasdaq. I just wanted to dig in a little bit here on some of the success that you've had moving up market and also across geographies. If we look back to the first quarter of this year, I know that Verafin did not sign any large Tier 1, Tier 2 bank wins, but revenue growth is still well over 20% year-on-year. So what's driving the underlying strength and how can we see potential upside from larger mandate wins from here?

So Verafin has been an absolute amazing acquisition for us at Nasdaq, great product, great team, and it's playing into a space that's growing. And so in Q1, we also did share while we didn't acquire a new Tier 1, we did say we're working and continue to work with a lot of Tier 1 customers on POCs. And what I'm seeing with Verafin is a business that I don't manage and you mentioned that is, Verafin solution, for those who don't know, it was born in the cloud, it's a SaaS solution, multi-tenant. So it's using consortium data to continuously improve its product across its vast network of clients and that improves the clients' experience as well. And why is that so powerful? If you think about how these institutions want to manage risk going forward. There's 2 things with a product like Verafin that you want to do well. One is, you want to identify fraud in financial crime, detect patterns and financial crime and you can do that better if you have more data and data across the system. And two is you -- so you want a higher hit rate on that. But two is you want to minimize false positives, which is like the enemy of scale and efficiency for banks. And so being able to do that effectively is what Verafin does extremely well, extremely well because of the way that it's set up and the way that it's been designed. And I think that we're seeing that in the POCs every time we go in there. And like a [ corridor ] example is like -- and somebody mentioned this to me today is like, in a different example, but archegos, like something happens in the system, happens in one place, how does everybody know about it? How does everybody manage that risk? Verafin does that in the fraud, AML space extremely, extremely well, like it allows banks to get on the front foot. So how do we continue to do that in the future? If they are able to embrace AI, they already have AI built into their solutions, and they're using algorithmic AI, like machine learning to cut down on false positives, increase the efficacy of their alerts. And they're using genAI to truncate analyst's investigations. So they have copilots around how -- when an alert is generated, an analyst has a number of activities, a series of activities they need to engage in. Some of those are manual. What if you can automate all that through a copilot, really powerful. And I think the staff that we have there is like it reduces investigation time by 30%. We're an extended beta now, and I think we're going to a full distribution by the end of this year with the copilots. So it's really exciting. And that's how you stay ahead. That is effectively how that solution will stay ahead. But being born in the cloud, design the way that it is, allows it to embrace these disruptive or emerging technologies in a way that most others cannot.

I'm afraid we'll have to leave it there. Tal, thank you so much for joining us today. Really appreciate your time and insights.

Thank you.