Innovation in data science and capital markets

Reza Chady …challenging conventions

Innovation around us…

Impacting our lives…

Agenda

Welcome &

disclaimer

Innovation game

Lab work

MACHINEINTELLIGENCE

BIGDATA

VISUALISATIONCRYPTOGRAPHY

AUGMENTED REALITY / VIRTUAL REALITY

BLOCKCHAINQUANTUMCOMPUTING

MICROSERVICES

TECHNOLOGY TRENDS SHAPING FINANCIAL SERVICES

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Impacting our

everyday lives

An Innovation

Game

Let’s take a few…

Threats to our nutrition

9 Billion by 2050

Obesity

What is in our processed food?

Food innovation

Organic farming everywhere

3D Printed food

Insects as protein

Health, Love & Sport

Stress

Longer lifespan

Increasing medication

Health, Love & Sport

(e)Sport, Gambling, & AR/VR sports

AI Augmentation of General

Practice

Data driven entertainment

Work

Working longer hours

Rising automation

Lacking in meaning and

security

Work

Emergence of the gig economy

Innovation in Capital Markets for start ups and

job creation…

Uncovering tax avoidance,

market manipulation and

other financial crime

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Foundational ideas:What happened to the people yelling at each other?That is (was) called OPEN OUTCRY.

It’s long gone in most developed markets around the world, but people still hang on to the mental image.

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Trading evolution

Types of trading:ALGO(RITHMIC) TRADING = a method of sending orders to market based on an automated algorithm.HFT = HIGH FREQUENCY TRADING = a subset of algo trading that sends lots of order management messages to market in a short period of time. Orders can result from management of large orders, or for taking advantage of opportunistic trading opportunities.ULTRA-HIGH FREQUENCY TRADING = a subset of HFT that sends lots of order management messages to market in a really short period of time.

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Market Manipulation“MARKET MANIPULATION is a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a product, security, commodity or currency.”https://en.wikipedia.org/wiki/Market_manipulation

Traditional methods include RAMPING, MARKING THE CLOSE, WASH TRADING, and SPOOFING.

More recent innovations include QUOTE STUFFING, RUMOURTRAGE.

At the fuzzy uncertain edges of dodgy practises is the reverse engineering and subsequent exploitation of trading algorithms, and even some order types offered by exchanges (e.g. .

NASDAQ IS TRANSFORMING

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New vision for capital markets

• Smart Beta• Analytics• Machine Intelligence

Applications• Geography Expansion

• Post-Trade & CSD offering• Blockchain Enabled Solutions• Holistic Surveillance• SMARTS Buy-Side Offering• Index Calculator• Bwise eGRC• NPM & Linq Platform

• Canadian Equities• ISE• eSpeed Elect• NFX• NLX

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WHAT?

Community Engagement

Profile & Behaviour

Data Tools & Strategy

Insights & Visualisations

Alerts Analytics

Simulators

LabData Engineering

StatisticsMachine Learning

Visualisations

NASDAQ INNOVATION LAB

5 FOCUS AREAS FOR MARKET SURVEILLANCETO BUILD MVP AND GUIDE SOLUTIONS FOR PRODUCTION

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SMARTS ALERTS

SCORING

PEER GROUP BENCHMARKI

NG

DATA POLICY, AUDIT &

STRATEGY

PARTICIPANT CLUSTERS

AND PROFILE

HOLISTIC MARKET

MONITOR

5 ENABLING TECHNOLOGY PROJECTS IN 2017-18MEDIUM TERM INNOVATION PROJECTS

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VISUALISATION

ARCHITECTURE

ANOMALY DETECTION

BLOCKCHAIN

PARTICIPANT BEHAVIOURAL

GRAPH MAPPING

EVOLUTION OF DATA SCIENCE

SECURE DATA STOREOnly parties who should access it, can access it.

STABILITY THROUGH DECENTRALIZED

CONSENSUSInput is guaranteed / validated

through decentralized consensus.

CRYPTOGRAPHY ENSURES INTEGRITY

Data remains consistent, once written it cannot be

modified.

WHAT IS THE BLOCKCHAIN?

FOUNDATIONAL TECHNOLOGY

It is not a financial asset, it is not a business.

GROWTHPotential enabler for cost savings but also for growth, new business

models and market structures.

INNOVATIONPart of Nasdaq’s larger tech

innovation portfolio.

SECURITY. INTEGRITY. CONSENSUS. FOUNDATIONAL. GROWTH. INNOVATION.

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NASDAQ’S BLOCKCHAIN JOURNEY2013-2016

Linq, proxy voting, establishing clearing

and settlement partners

20152013

Nasdaq recognizes applicability of

blockchain technology to Financial Technology

Nasdaq Linq enables first-ever Private

Securities Issuance documented with

blockchain technology

Nasdaq R&D –Blockchain tuned to

handle the U.S. equities trading

volume -1st Nasdaq patent filed investment in

chain.com

MT Design Studies

2016Design studies and

Proof of Concepts(POCs) with Market Technology

customers

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R&D

PILLARS OF INTEREST

POST

TRA

DE

PLU

MBI

NG

RELA

TIO

NSH

IP

ISSU

ERS/

INVE

STO

RS

REG

ULA

TORY

TR

ANSP

AREN

CY

Cheaper Operations

Faster Processes

Provenance

Regulatory Reporting

Reduced Reconciliation

Cross border Solutions

Alternative Business-and Market Models

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NASDAQ PROXY AND E-VOTINGSECOND OFFICIAL BLOCKCHAIN PROJECT

“Nasdaq is to use blockchain technology to streamline proxy voting on companies listed on the Tallinn Stock Exchange”

• Streamlined service for proxy voting• Votes are tracked stored in the immutable ledger• Digital authentication to onboard users• Issued and recorded votes on the blockchain• Built on Nasdaq Financial Framework

We are going to put proxy voting on the blockchain, on the immutable ledger and obviously enable people to do that with their cell phone and have that record with them forever.”

- Nasdaq CEO Bob Greifeld in Bloomberg, Oct 2015

““

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HURDLES TO WIDE-SCALE ADOPTION OF BLOCKCHAIN TECHNOLOGY IN CAPITAL MARKETS

The technology itself needs to evolve and be

proven

Visions need to be distilled down to workable market

models and structures

Existing legislation and regulation does not

anticipate new business models

enabled by blockchain technology

New technology and market structures

need to be integrated with existing complex

ecosystem of infrastructure

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ASSURANCE

AUTOMATION

AGENCY

EVOLUTION OF DATA SCIENCE

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Impacting our

everyday lives

THANK YOU