Barron\'s - April 6 2020

April 6, 2020 BARRON’S 27

Nasdaq

Founded:

1971

Headquarters:

New York, N.Y.

(42nd Street)

Employees:

4,361*

2019 Revenue:

$4.3 billion

2019 Net Income:

$774 million

Nasdaq Stock

Market

Listed

Companies:

3,140*

2019 IPOs:

188

*As of 12/31/19

home, coronavirus has been a major

test for increasingly electronic stock

exchanges. So far, they’ve gotten an

excellent grade.

Nasdaq (ticker: NDAQ) began pre-

paring for the outbreak back in Febru-

ary by restricting visitors and splitting

teams to limit the number of people in

the office simultaneously. While its

plan to operate in the age of coronavi-

rus came about quickly, Nasdaq has

been preparing for this moment since it

introduced electronic trading in 1971.

This past week, Barron’s spoke with

Nasdaq CEO Adena Friedman, who

became the first woman to lead an

exchange when she took the chief ex-

ecutive post in January 2017. Barron’s

recently named Friedman to its first

list of 100 Most Influential Women in

U.S. Finance. Her edited comments:

On the Nasdaq keeping markets

running smoothly:

The planning for this has been 20

years in the making. After 9/11, the

entire financial industry came to the

view that we had to change the resil-

iency of the industry. It was really on

the back of a physical issue, but our

risk-management team really came

together and has been driving

business-continuity planning with

every kind of scenario. We do lots of

emergency planning scenarios. We do

emergency market scenarios. We are

in a constant business-continuity

planning mode.

And today, you’re seeing the finan-

cial markets and the financial indus-

try really being able to operate and

provide capital liquidity and the tech-

nology and the infrastructure to sup-

port the markets in an unprecedented

time and still maintain the safety of

their people.

On marketwide circuit breakers

being triggered:

We’ve done an enormous amount of

full-industry testing for many years to

make sure that these things are ready

to go, but we’ve never actually triggered

one. When you’re in a stressed envi-

ronment and stressed market situation,

and suddenly you’re implementing

something that has never happened

before, you have this moment of, “I

really hope this goes well.” This is

something that had never been experi-

enced before, and it worked exactly as

it was designed.

On the need to keep markets open,

despite volatility:

It’s absolutely critical to keep markets

open. You have to think about what

markets are for. There are two key

constituents in the markets. The first

is the companies themselves, which

need to have access to capital. And the

public markets are meant to be a per-

manent capital vehicle, meaning a

way for companies to get capital

whenever they need it. They may not

like the price they’re going to get for

it, but they know it’s open and avail-

able to them. The other constituents,

of course, are individuals. You’ve got

all these hardworking Americans

who put their savings into the mar-

kets. If they don’t have access to their

money, that is a fundamental break

in the system. If you close the mar-

kets, and you choke off their access to

their savings, you have to imagine

what’s going to happen when you

reopen the markets, because you’ve

broken their trust.

On short selling:

I understand that short selling is a part

of the market that feels like, “Gosh why

do we let people sell what they don’t

own yet?” We have to recognize that it’s

a fundamental part of the overall li-

quidity picture in the markets to allow

investors and market participants to

express themselves and manage their

strategies. It is a liquidity-generating

activity. When you have a great stress

in the markets, one of the critical things

you want to do is maintain liquidity

and allow investors to express them-

selves appropriately. We have been able

to do some analysis ... of markets

where they have banned short selling.

What you see is spreads widen and

liquidity disappears or diminishes.

And that’s actually a very bad outcome

for everyone else who’s in the market.

On the 2020 initial-public-offering

pipeline:

The pipeline of companies looking at

the public markets continues to be very

healthy. I think that the moment is

hard. It’s definitely not an easy time to

go out into the public markets. There

are a lot of great companies that are

profitable and growing and have busi-

ness models that are extremely resil-

ient. When the time is right, they’ll be

able to come out into the market and

have a successful experience.

On how Nasdaq has operated

in this difficult time:

We’ve been really proud of the fact that

Nasdaq has been able to be that central

place where people come to manage

their way through the markets.

We’ve been able to provide a lot of

intelligence behind that. In addition to

being a market operator, we provide

the technology to 120 other markets

around the world. The global footprint

we’ve had in helping all of our mar-

kets and clients manage through this

unprecedented time has been really

gratifying.B

“The

planning

for this

has been

20 years

in the

making.”

Nasdaq CEO

Adena Friedman

I

t has been a difficult time for

investors who have watched

their portfolios shrink during

the coronavirus pandemic. But

while asset prices have been

volatile, the markets themselves

have functioned with little dis-

ruption. With many of New York’s

financial professionals working from

AsNewYorkersWorkFrom

Home,NasdaqKeepsGoing

Nasdaq’s innovations are helping to keep markets open. How CEO

Adena Friedman is dealing with circuit breakers, short selling, and more.

By CARLETON ENGLISH

Phillip Montgomery