Stock exchanges have been at the heart of financial markets for centuries, but an explosion of innovations – in digital assets, sports betting and real estate trading – gives them a chance to apply their technology to new markets.
Many transactions that took place physically moved online. Cryptocurrencies and digital assets use exchange-like mechanisms, while digital art and digital sports memorabilia, authenticated by non-fungible tokens (NFTs), are also exchanged electronically.
“Since my beginnings 25 years ago in this space, there are [are] many more asset classes are now looking for some kind of market, exchange or trading platform, ”says Hirander Misra, founder of GMEX Group, a provider of trading technology.
“In the past it was stocks, derivatives, you know, securities. . . now all of a sudden over the last few months we have been inundated with requests to provide our technology for NFTs.
The Nasdaq was one of the first exchanges to recognize that its expertise had applications outside of traditional finance. Since Adena Friedman became its chief executive in 2017, the New York-based group – which now has a market value of $ 27 billion – has expanded its tech activities.
“The trends around digital assets make things marketable in a market format that has generally not been the case,” said Scott Shechtman, head of new markets at Nasdaq. “This movement gives the impression that it is going in our natural direction.”
In addition to providing trading and monitoring technologies to traditional financial institutions, the Nasdaq has established itself in markets such as sports betting, cryptocurrencies, and real estate trading. Its clients include the Hong Kong Jockey Club, which operates a government-granted gaming monopoly on the territory, the LEX and IPSX real estate exchanges, and Bitstamp, one of several cryptocurrency exchanges.
On its website, the Nasdaq draws a parallel between sports betting and financial markets, highlighting the increase in bets placed during sporting events, much like the way traders trade stocks in real time.
As US states legalize and regulate sports betting activities, more opportunities may arise to provide surveillance technology. However, Shechtman warns that the state-by-state approach to sports betting – as opposed to a national approach – creates challenges.
“Surveillance technology could be extremely useful in sports betting – and we’ve talked about it a lot – but what you need that is essential are the operators in this space sharing the betting data,” said Shechtman. “One thing you see in the exchanges is [that] regulators are very keen to ensure that all transactions are seen. . . our surveillance technology works by examining all of these transactions. . . across the market.
There are also risks in working with start-ups in sectors less regulated than the financial markets.
In March Football Index, a start-up betting operator in the UK and Jersey, collapsed, leaving customers with losses and unable to immediately access their remaining funds. The company had made a deal to adopt Nasdaq technology to match bets but never completed the move. “We will continue to be thoughtful as we approach space,” said Shechtman, highlighting the trade-in verification process for new customers.
Stéphane Boujnah, managing director of Euronext, the European stock exchange group, admits that competitors may see opportunities to sell their technology to new sectors.
However, Boujnah, who oversaw the acquisition of national exchanges in Italy, Ireland and Norway, said his mandate was “to do more of the same but bigger and to do better what we do well”. Once Euronext buys a competitor, it sets out to equip it with its Optiq trading system. The exchange also sells technology to financial institutions.
Boujnah is more cautious about selling trading technologies to non-financial markets. “Our risk appetite to become a technology provider in areas where we are not experts is low,” he says.
Other technology providers are more open to the idea. Aquis Exchange, the listing and trading platform founded by City of London veteran Alasdair Haynes, is among those examining its role in the digital economy.
In the short term, however, he says, Aquis must continue to focus on providing trading and surveillance technologies to banks, brokers, investment firms and exchanges. He warns that expansion in the digital economy is a mid-term goal being discussed by the board rather than a looming opportunity.
Aquis, which has agreed to provide trading and monitoring services to UK-based Archax, a digital securities market that plans to launch this year, is also considering trading digital items in video games, sports. electronic and competitive games, as well areas of consumption growth.
“We have to understand that the world is on the move,” says Haynes, facing the boom in esports and other markets. “It gives us a huge playing field to go out and decide where our strengths are and where we get involved in this.
“You are catching something when we talk about exchange technology,” he says. “I don’t think it will be called swap technology in the future.”