Nasdaq and AWS Collaborate to Transform Capital Markets

Stock exchange operator and financial services provider Nasdaq Inc. (NDAQ) has entered into a multiyear collaboration with Amazon Web Services, Inc. (AWS) a unit of Amazon.com Inc. (AMZN).

The two entities will combine their expertise to build a state-of-the-art, cloud-based infrastructure for the world’s capital markets. Shares of NDAQ closed down 2.8% at $203.23 on November 30.

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Since 2008, Nasdaq has used AWS’s elasticity and high security to deliver client-driven solutions. With the partnership, Nasdaq will start migrating its North American markets to AWS in a phased manner starting in 2022.

The first to migrate will be Nasdaq MRX, which is a U.S. options market, followed by the rest.

Cutting Edge Technology for Capital Markets

Both entities have co-developed a new edge computing solution exclusively designed for market infrastructure. The solution will also use AWS Outposts, which can extend its infrastructure, services, and tools to any datacenter, location, or space, or on-premise facility.

The AWS Outposts enable ultra-low latency edge computing capabilities and Nasdaq intends to incorporate it into its core network. This will make Nasdaq the first-ever private AWS Local Zone for the capital markets industry.

The new infrastructure will provide Nasdaq’s clients ease of usage and high-frequency trading capabilities, coupled with access to virtual connectivity services, market analytics, and machine learning. Additionally, the new solution will accelerate Nasdaq’s business and enable the exchange to effortlessly transact billions of dollars in daily trades.

The solution could also be used by other market participants and exchanges to migrate their trading systems to the cloud.

Solutions for the Global Economy

In addition to the current partnership, both entities will also explore ways to use AWS’s cloud capabilities across other Nasdaq solutions including anti-financial crime, data and analytics, and market infrastructure software solutions.

Nasdaq has over 130 infrastructure clients including exchanges, banks, clearinghouses, central securities depositories, and regulators. These clients rely on Nasdaq for activities such as core trading, clearing, settlement, and surveillance technology. For the effective functioning of these activities, Nasdaq plans to partner with AWS to build viable public cloud and hybrid models.

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Management Comments

President and CEO of Nasdaq, Adena Friedman, said, “This landmark partnership with AWS seeks to power a truly cloud-based market infrastructure that is more resilient, scalable, and accessible for all market participants… Our innovative, new collaboration with AWS creates a bridge to the future for our markets and represents the next major step forward in Nasdaq’s cloud journey.”

CEO of AWS, Adam Selipsky, said, “Together, Nasdaq and AWS will change what’s possible for capital markets organizations, helping them to speed up innovation and improve business processes… Our partnership will give Nasdaq a way to more easily move their core infrastructure to the cloud and innovate new services as they continue their second decade of cloud adoption.”

Analysts’ Consensus

The Wall Street community is cautiously optimistic on the NDAQ stock with a Moderate Buy consensus rating based on 6 Buys and 3 Holds. The average Nasdaq price target of $218.11 implies 7.3% upside potential to current levels.