All right. Next up, it's my pleasure to introduce Tal Cohen, President of Nasdaq. Tal leads the market services and financial technology divisions at Nasdaq. He's responsible for North American and European market services businesses as well. Also, the company's portfolio of marketplace technology, surveillance, risk management, regulatory, reporting solutions. One of the central voices behind Nasdaq's always-on markets vision 24/7 trading. Big topic here at this conference. Tal, thanks so much for joining us.
Yeah, thanks for having me.
I'll start off with a question on perps. Big news on Friday, CFTC approved Cboe's Bitcoin perpetual futures contract to put some pressure on the exchange names here recently. With perps seemingly on a path to becoming onshore in other asset classes, how is Nasdaq thinking about this? Is it an opportunity? Is it a threat? Is this overblown? What's your take?
Yeah. It's great going after David and hearing what he had to say, o n perps. I think what came out of the CFTC, folks construed that and extrapolated that and said, "Okay, if you can do that for Bitcoin, maybe they'll provide approvals for equity linked products." I think that's the extrapolation that folks were making. There's a couple points I would make there. One is from a Nasdaq perspective, when we first looked at it, we were kind of surprised at the reaction you just talked about because we don't think it has an impact on our equities or options business. I'll describe why. The first is options have great utility. It's hedging, risk management, income generation, and obviously you can express sentiment with options.
When we looked at perps or our understanding of it's more kind of a linear exposure product. You heard about the funding rate, and you heard some of the things and some of the use cases for perps. The second is, and this is an important one, is when we think about our index options franchise, we've invested in that to curate an ecosystem of institutional and retail investors. As a result, we have great liquidity, great market depth, great market quality, and that's hard to replicate from a price discovery perspective when we continue to invest in our index options franchise. The third is, I would say that it's centrally cleared, it's scaled, it's well-regulated, and it has strong risk management around it.
When you think about retail participation, we want retail and institutions to be in our markets for the long run, and we want that experience to be positive. If you take everything I just said in terms of the utility of the product, the scale that we have in that product, that product being essentially cleared and the economics that we have around it's pretty compelling. I just would garner to say is like we're already pretty competitive with the futures market. Like Nasdaq's products compete with futures products that are highly levered, 13 to 17 times leverage on the E-minis, on the futures. We're already in a competitive environment. Again, I think these products are more akin in the way
David was describing it to like a swap or a CFD and maybe some off-exchange products that we see today. The other thing I just want to weigh in on is just the process, and this is important to Nasdaq, and I think to others as well. You need to balance innovation with a good regulatory process for things that are new and novel and complex. What I mean by that, it needs to be an open, collaborative industry consultation that whether you're the SEC or the CFTC, we want to see you engage in. When it's new and novel, we think the input from the industry is going to lead to better outcomes for investors. It's going to lead to better outcomes for issuers, investors, and the markets in general.
That is one thing around the process I would note. Then the third is just in terms of just the opportunity. It's a massive opportunity for Nasdaq in that regulators are open for business, and they're willing to have conversations around innovation. We're moving our markets to 23/5 in equities. We're extending trading hours and options. We're doing binary index options. On the tokenization front, we got our filing approved. We announced a Nasdaq equity token. We're really excited. We're embracing innovation, but at the same time, we're trying to do it in a responsible way that generates outcomes for investors and issuers that not only in the short term, but in the long run, look positive.
Maybe just to follow up on that. Something Terry Duffy has talked about is the leverage in perps and worries about the U.S. importing that leverage structure that you see in Europe and Asia into the U.S., and the stress that that could put on U.S. capital markets and equity markets. Is that a concern to you at all, or do you think that should be something that's addressed by regulators as we kind of go down this path?
That's why we have to have the open consultation process. There is, and I think Terry spoke about this yesterday, and I've heard him speak about it more generally, which is there's leverage in the system today whether it's five times, 10 times, 15 times, but it isn't 100 times, 200 times. People understand the products they're in and some of these leverage products, and you heard about the funding rate and how that works. That's an arbitrage mechanism, but it can also be used for a squeeze. It has to be an open consultation process. People have to understand that. Retail, in particular, when they're using these products as tactical products, we want to make sure the retail understands what they're getting into and what the auto liquidation mechanism that works on perp franchises.
It's really important to understand how that works when you're at 100 times leverage.
Yeah. Okay. All right, moving on. Another very timely announcement recently on May 1st, you implemented meaningful changes to the Nasdaq 100 methodology. You added the fast entry rule that lets top 40 IPOs into the index within 15 trading days. Can you just talk about what went into the decision to make these changes now, and is this primarily about index integrity or about competing more aggressively for the IPO listings in the ETF ecosystem?
Yeah, great question. Just the context, Susie asked me how we came to this decision. This process started for us in the fall of 2025, and we opened up a consultation process with the industry. It was open, transparent, and the methodology of the index, most importantly, is open and transparent. We engaged the industry, had a consultation process, and we actually took in their input and made some changes as a result of that, and I'll talk about what those were. The second thing is we understood that other indexers were updating or modernizing their methodologies. The reason was we all saw this, and it's not just this year, we've seen this coming for the better part of a year or two, is market dynamics have changed.
Companies are staying private longer. IPOs, you have larger companies with smaller floats. Market dynamics are just changing and evolving. What do we want to do about that? The third is, for those that might recall, we had some large switches last year that were Nasdaq-100 eligible. We also anticipated some of the larger IPOs. All of that kind of went into the decision-making, and that's the context-setting for the decisions we made. The changes we made, and I want to talk about what it was and what it is. The first is we had an annual rebalance, and we went to a quarterly rebalance. Why did we do that? Because companies could be outside of our index for the better part of a year if we didn't do that.
Think about the great companies that are coming into our market being out of an index up to a year and not being able to access that pool of capital that is becoming more and more prevalent and important, and think about investors' preferences on that. The second, you mentioned the free float adjustment. We had a free float adjustment that worked like this prior, where if you had 10% of your equity free float, we showed you at 100% market cap. That's how it worked. There was a minimum of 10%, and once you crossed 10%, we showed you the 100. What we've done is actually made it more in line with the liquidity in the market.
I think it's much more elegant with how it matches up against liquidity, where the example is now, if you have 5% of your equity free floating, and say that represents $25 billion, we'll put a 3X multiple on that. Now we represent you at $75 billion, but not at your market cap. That's much more tied to what the liquidity and the underlying markets are. Once you hit 33%, which is much higher than the 10%, then we reflect you at 100%. Right? We do like a 3X on the free float up to 33%, and at 33%, you go to 100%. If you think about it actually lines up with the liquidity and the trading in the market. That was one of the suggestions.
By the way, great suggestion from the committee that we had. We said, "Should it be 5X?" Committee and consultation process, they said, "No, it should be three." We implemented that. The last one is just the fast entry, the Fast Entry rule. The way that works is really simple. If you're a top 40 Nasdaq company, so Nasdaq-listed non-financial company, and that means your market cap is about $120 billion. Pretty big company. If you are, we're going to fast track you. The reason we're doing that is if you have a company that large, investors and issuers, the preference there was to show it within the index and not wait, for example, up to a year. We've done those three changes based on the consultation process.
It's been generally well-received, but there's been a lot of debate about what this means with respect to whether it's SpaceX or other incoming IPOs. We've just been really open about, here's what we've done, here's why we think it benefits the markets, here's how we think it plays out for investors, here's the conversations we've had for issuers. It isn't about an issuer. It's about changing market dynamics that we and other indexers have noticed over the last two to three years. Anybody who's been in the markets is seeing the same dynamic we have.
Sure. Sure. Zooming out, the macro picture this year has been volatile, but it seems recently to be trending in more favorable direction. Capital markets activity seems to be picking up. From your seat overseeing financial technology and market services, what is the state of those businesses today, and how would you characterize the tone of conversations with issuers, clients, market participants?
Yeah, there's a lot there. Just on the macro side for our markets, there's four things. There's corporate earnings, very constructive. Obviously, AI is a backdrop. The regulatory environment, constructive, and retail engagement is high. All of that has been really constructive as a build-up into the markets. Volatility has been generally well-behaved. There's been volatility intraday and in the markets, but if you're looking at the VIX as an indicator of that, it's been pretty well-behaved. That has been a really good backdrop. From a markets perspective, we're generating alpha in a high beta environment. I love our competitive positioning. We continue to invest in our markets, whether it's in the technology, the service side, what we offer in terms of features and functionality.
I really love our competitive positioning, both in options and equities, and that's been showcased in whether it's our revenue capture or our market share or just our engagement with our clients, which is most important. Going to the financial technology side, ignoring just the macro backdrop we just talked about, there's three or four trends that I hear. We have 3,800 clients across six continents, Tier 1, all the way to your smallest community banks. Let me share with you what they're telling us every single day we talk to them, whether it's in Latin America, Southeast Asia. There's three things going on in the environment that is top of mind for them. One is modernization transformation.
Those words mean different things to different people, but everybody's thinking about modernization and transformation, whether it's going to the cloud, adopting new technologies like AI, or simply automation. The second is complexity, the increasing complexity in the global landscape where you have divergence, geoeconomic divergence, geopolitical divergence, regulatory divergence. Complexity is increasing, and our customers need solutions to help them manage that. The third is just managing risk. If you're talking about an always-on world, 24/7, with automation, the more granular, the more real-time you can manage your risk, the more successful you can be in the businesses you run. That is an obvious statement, but our clients are struggling to figure out how to do that. Our solutions are unique in that they're all mission-critical solutions.
They're both run the bank and change the bank solutions. That makes us really, really unique in how we can come in and have those conversations. As a result of that, customer engagement has been great. The sales cycles have been strong. You saw that in the first quarter where we had 18% growth in financial technology. Really nothing has changed there, and we feel really good again about our position product by product.
Sure. I want to double-click on always-on markets. At Investor Day, you laid out kind of the vision for that. Adena, I think last year, talked about 23/5, targeting that for back half of 2026. You spoke about it at Investor Day too. Where are you today on that rollout, and when do you expect Nasdaq to go live with extended hours trading?
Yeah. I can't remember who coined always-on, but I feel like we were really early to the concept of Always On. Always On has a few defining features in the innovation economy, and it's what you said. We think about 23/5 accelerated settlement, the mobility and the velocity of capital and collateral throughout the system, and faster movement of money and securities. All of those things kind of come to and tokenization, of course, come together to form Always On. A couple of things we're doing. One is, at the ground level, we have on our fintech side, an exciting opportunity with Calypso, which is a treasury and capital management or a collateral solution. We serve 24 central banks. We serve a number of Tier 2s, Tier 3s, and some Tier 1s.
Everybody's talking to us about collateral management and optimizing for that in a 24/7, if you will, tokenized digital asset world. We have a real opportunity across collateral management. 23/5, we've announced in December 6th of this year, we're taking our equities markets to 23/5. We're extending trading hours in our options market. We have the approval for tokenization. On top of all that, what we're seeing is demand for solutions like surveillance. As we go to 24/7, a lot of clients are coming to us and saying, "Well, we need to surveil the markets 24/7. How do we do that?"
From a trading perspective, because we're taking our markets to 23/5 and some of our markets to 24/7, ultimately, a lot of our market technology clients are coming to us and saying, "You're highly regulated. You've taken your own technology there. How can you help us?" We service 130 institutions, exchanges, and regulators across the globe. It's a tremendous opportunity for us. When you combine all of that, Always On, really, there's a flywheel with that across all of our businesses, including the businesses that I'm now part of, which is the data business and the index business.
Yeah. Switching gears to the fintech business, the One Nasdaq cross-sell strategy, another term, I think, you obviously coined, was tracking ahead of plan last year. Pipeline mix is at about 15%, and you're targeting $100 million of cross-sell revenues by 2027. Could you help us get a better sense for how that's c ome together? I think at Investor Day, you said you were already at $45 million there. Where are you seeing the most traction across Eqlipse, Calypso, AxiomSL, and the others?
Great question. On Investor Day, we talked about achieving that $100 million target. We are confident that we're on track to do that. Since then, we've seen real uptick, and I'll talk about that in a second. The buildup to that is on Investor Day, as you said, we talked about the $45 million run rate, 43 clients signed. Since then, we also announced for Verafin, we had a Tier 1 bank. We shared that with the investment community. That was very well-received. Our pipeline continues to showcase above 15% of our pipeline is cross-sell, and we've seen that quarter-over-quarter. That's been a consistent trend, and it's building. That gives us the confidence that we can achieve that. In terms of our go-to-market strategy, where we've seen the real uptake is in a couple of places.
One is Verafin with Tier 1 banks, global expansion. That's been really exciting for us to see. Two is as Axiom, which is our regulatory compliance and reporting solution, goes down market, we're seeing real synergies with Verafin, which is really interesting, and that is opening up more discussions for us. Then we have Calypso and our trading and post-trade platforms. We're able to go into financial market infrastructure operators and actually provide them with post-trade solutions for both exchange clearing and OTC clearing, and help them with cross-margining and cross-collateralization. Then we have new products like the intelligence platform that we developed, which is really, it's a data and analytics platform that's very modern.
When we go into a lot of clients and we're looking to replace a vendor, they'll say to us, "Do you have a data management solution? I can't just rip out my trade management solution. I need to have a data solution under that. Do you have that for us?" We have that now. The intelligence platform plus Calypso has formed a really, really nice, if you will, complementary set of capabilities for us. On the surveillance side, I talked a little bit about surveillance and always-on, but surveillance and trading have always gone together, and that's been a strong cross-sell opportunity for us. We have a number of go-to markets that we implement every quarter. We've been pretty successful. Customer reception's been strong.
I've just kind of noted a few there, and I think we'll continue to build on that. It's really important to note one thing, which is that's just one part of our entire revenue growth algorithm. We have upsells, new logos. All of that comes together in terms of our revenue growth algorithm.
Sure. I want to ask about AI. At Investor Day, you also announced a $100 million efficiency target that you were expecting to receive. I think AI had a lot to do with that. From your seat, where are you actually getting operating leverage from AI today, and where do you think the next kind of inflection or acceleration is going to be in that area?
We talk about AI in two areas. One is in the product, the second is on the business, and I think that's what you're referring to. In the product, let me just start there because we're seeing great traction with our clients there. A couple highlights. Verafin, since Investor Day, now has 500 clients using its agentic workforce. That's up 40% since Investor Day. That's incredible. We've seen Axiom, which has a suite of agentic capabilities, from Reg-Copilot to agents to workflow management, all of those, and we call it Reg Investigator, Reg Simplify, RegNavigator. We have names for it. It's a workforce, if you will. We've seen great traction there because we're empowering our clients to take control of regulatory reporting and think just about the pace and intensity of regulatory change and having an end-to-end solution.
It's also pushing more discussions on cloud and managed services for us. It's not just what AI does for us, it's what AI does for us from a perspective of cloud and managed services. A third one to note is on surveillance. We recently launched what we call a Calibration CoPilot, which is basically how you set your alerts, how you calibrate your alerts. What we're doing there is there's a collective intelligence or a compounding intelligence piece to it, where across our entire client base, and we serve most Tier 1s, we can share with you how to reduce false positive, be more accurate about your detections, and help you instead of that trial and error that most people go through around how do I set my alerts.
We can actually use AI to help you set it correctly earlier and manage that through the process. Think about what that does for your conversations with regulators, and your clients. All of that's been really good. On the business, because you just mentioned that, we have the $100 million run rate to expense target for the end of 2027. This is about transforming Nasdaq from an engineering perspective and a client success perspective. Obviously, we have that in our coding, in our QA process, the whole SDLC process. If I could take you through it for one of our products, we have a, if you will, a collection of agents from business requirements all the way through QA that we've developed for one of our products, Surveillance.
You kind of see the string of agents that are coordinated and orchestrated through a master agent. You got a master agent up top, and we have all these individual agents of business requirements, QA, testing, all the way through the process that allows us to enhance the productivity of our developers. More importantly, it generates higher quality code, and our cycle times have come down. We're able to get into that backlog that everybody has. All of our products have a backlog. We're able to basically burn through that backlog faster, deliver higher quality code, and have our engineers and our client success teams focus on higher value activities. We're kind of stringing that along through all of our products.
That's just a great example of how we're thinking about it across Nasdaq and how that truly transform us beyond just the $100 million efficiency. There needs to be a benefit for you all.
All right. I want to end on a big picture question. I think the last 10 years or so for Nasdaq, there has been a lot of focus on the non-exchange business. I think going forward, the market services business, there is a lot of exciting things going on. There is a lot of tailwinds for volumes. You have the pattern day trading rule today going away. You have AI trading agents. You have all these big IPOs that people think could boost option volumes by upwards of 10%. As we move in that direction, 24/7 trading, tokenization, all the other things I mentioned, do you think market services will become a more meaningful driver of growth for Nasdaq in the next 10 years?
Yeah. I'm not independent on that question. I'm a markets guy.
Sure.
The markets are always going to be Nasdaq's foundational business. It gives us the credibility to go into financial technology and talk to our clients about their modernization efforts. If you're a highly regulated institution that's trying to modernize, do you want to talk to somebody who just sells software or somebody that actually uses that software, is highly regulated, and is going on that journey as well? That establishes credibility when you walk in the door, and that's really important to us. The foundational business is growing. It's been a great business for us. We love that business. We love it during volatile times. We love it during non-volatile times because we structured that business to be successful in different market environments. What I would say to you is we're investing in that business.
That's the important thing to note is for 24/7, I'll give you one example we're really excited about. Some people might have heard me speak about this. We have a digital twin now that we've stood up, which is basically a replica of our production environment that we spin up through AI, and we spin it up in the cloud, we design it through AI, and it's an exact replica of our trading environment. What makes it special is we place agents on top of that. We give the agents personas. You are a retail broker. You are a high-frequency trader. You are a global bank. You are XYZ. Then we have them inject orders into this environment. So we're able to replicate extreme market conditions, race condition s, edge conditions, much faster. Why is that important?
In a 24/7 world, where if you have an issue, you don't have the downtime to actually remedy that issue, or you need to stop the market, and that's a big deal anytime you stop a market or pause a market. Our ability to have a much more robust simulation environment that's cost-effective, that allows us to replicate all these different conditions, use AI for that, and also be able to offer that as a product through financial technology, that's the connective tissue right there for you. We can go to our clients and say, "We can offer you this." That's an incredible game changer for us in the way that we kind of communicate with our clients. That is why that foundational business is so powerful and so important to us.
That's just one simple example of how we're using AI in our foundational businesses to drive a flywheel across our greater businesses.
All right. Well, I think we're out of time, but Tal, thanks so much for joining us.
Thank you.
Exciting times.
Appreciate it.