Nasdaq Eyes Always-On Markets With Tokenized Equities and 23/5 Trading

Key Points

• Nasdaq is pursuing an “always-on” market model through planned 23/5 equity trading, tokenized equities, event contracts and the pending LeveL acquisition, aiming to expand access while maintaining regulatory oversight.
• Its planned Nasdaq Equity Token would be issuer-sponsored and backed one-for-one by the underlying stock, preserving shareholder rights such as voting, dividends and corporate-action participation. A partnership with Kraken will support distribution and surveillance of tokenized stocks.
• Nasdaq sees a potential $3 billion to $6 billion serviceable market by 2030 across extended trading, tokenization, digital-asset services, data and financial technology, while also developing 24/7 collateral-management infrastructure and regulated index-based event contracts.

Nasdaq NASDAQ: NDAQ is building its equities and financial technology businesses around an “always-on” market model that it believes can expand investor access while maintaining regulatory oversight, President Tal Cohen said at the Future of Commerce conference hosted by Autonomous.

Cohen said the company’s initiatives—including planned 23/5 equity trading, tokenized equities, event contracts tied to Nasdaq indices and the pending acquisition of LeveL—are intended to support more continuous markets and provide investors with greater choice.

“Everything you described is us building towards an always-on world,” Cohen said. “We are trying to increase access for investors. We are trying to provide investors with choice, and we are doing it under a well-regulated umbrella.”

Extended Trading and Tokenization

Nasdaq currently operates its equity markets for 16 hours daily, from 4 a.m. to 8 p.m. Eastern time. Cohen said roughly 10% of U.S. equity-market activity currently occurs outside regular market hours, with only about 1% to 2% occurring during the overnight period when Nasdaq is closed.

He said Nasdaq expects extended trading to develop gradually, potentially shifting more activity onto exchanges from over-the-counter channels. The broader opportunity also includes market data, financial technology, asset servicing and collateral-management capabilities, according to Cohen.

On equity tokenization, Cohen emphasized Nasdaq’s planned Nasdaq Equity Token would be issuer-sponsored and backed one-for-one by the underlying security, with associated economic and governance rights. He said the structure is designed to preserve investor protections and accommodate functions including proxy voting, corporate actions and dividends.

“It’s really, really important for us that your rights and your protections travel with you,” Cohen said.

Cohen said Nasdaq’s approach differs from forms of tokenization that do not require issuer sponsorship. The company is seeking to connect issuers and investors more directly while avoiding compromises to market quality, integrity or investor protections, he said.

Kraken Partnership and Digital-Market Infrastructure

Nasdaq has formed a strategic partnership with Kraken parent Payward, which includes Nasdaq Ventures’ investment and a commercial and technology relationship. Cohen said Kraken is expected to distribute the Nasdaq Equity Token and has adopted Nasdaq’s surveillance technology for monitoring tokenized stocks.

He described the partnership as an effort to bridge “permissioned” and “permissionless” blockchain environments. Cohen said Nasdaq sees benefits in permissionless network infrastructure that allows developers to build applications, while believing that the assets and applications on top of those networks should be permissioned to address governance and compliance requirements.

Nasdaq’s goal is to establish a model it can replicate with other international partners, Cohen said. The company aims to promote interoperability and standardization between regulated markets and blockchain networks rather than allowing separate on-chain and off-chain systems to develop independently.

Nasdaq has previously identified a $3 billion to $6 billion serviceable available market by 2030 related to always-on markets, Cohen said. He described the opportunity as including trading across equities and derivatives, licensing of the Nasdaq Equity Token, digital asset-servicing capabilities, data and financial technology products.

However, Cohen said Nasdaq does not plan to become a custodian of digital assets. Instead, it expects to work with partners while providing certain services as a tokenization agent or through its tokenization technology.

Financial Technology and Collateral Management

Cohen said Nasdaq’s Capital Markets Technology division recorded 14% revenue growth and 17% annual recurring revenue growth in the second quarter. The unit includes Calypso, Trade Management Services and Market Technology.

He attributed momentum in part to capacity investments that Nasdaq began making in 2021, when it anticipated that elevated market volumes and volatility would persist. Those investments in data-center capacity, power, computing resources and space began producing benefits in 2024 through 2026, he said.

Nasdaq is also connecting Calypso’s collateral-management capabilities to digital rails, including the Canton Network and other layer-one networks. Cohen cited a test trade involving Vanguard and Wellington that Nasdaq announced in July.

The company is seeking to provide clients with real-time initial-margin and variation-margin views, scenario analysis and greater ability to move collateral on 24/7 infrastructure. Cohen said the longer-term opportunity involves developing financing, margining, optimization and orchestration tools that help clients determine how to deploy collateral once it is mobilized.

Market Structure, LeveL and Event Contracts

Discussing U.S. market structure, Cohen said off-exchange activity accounts for more than 50% of daily trading volume. Nasdaq’s pending acquisition of LeveL, an alternative trading system, would add connectivity with buy-side and sell-side firms as well as an orchestration layer, he said.

Cohen said Nasdaq could use LeveL to support always-on trading and tokenization, add execution protocols and expand internationally. The transaction remains subject to review under the Hart-Scott-Rodino Act, he said.

Nasdaq is also preparing to introduce binary-outcome event contracts tied to financial and economic outcomes, beginning with a Nasdaq-100 up-or-down contract. Cohen said the products would trade on Nasdaq’s regulated options exchanges and use established post-trade and risk-management processes.

He said Nasdaq does not plan to enter sports-related event contracts, citing litigation involving states and the federal government. Cohen said the company will assess retail demand for its products but does not expect to offer contracts with leverage of 50-to-1 or 100-to-1.

Looking ahead, Cohen said Nasdaq would judge the success of its always-on strategy by whether it builds trust, improves outcomes for issuers and investors, addresses needs such as capital efficiency, risk management and liquidity, and establishes standards and interoperability across tokenized markets.

About Nasdaq (NASDAQ:NDAQ)

Nasdaq, Inc NASDAQ: NDAQ operates financial markets and provides technology, data and analytics services to exchanges, brokers, institutional investors, corporations and other financial institutions. The company is best known for operating the Nasdaq Stock Market, a major U.S. equities exchange and a prominent venue for technology and growth companies.

Nasdaq's businesses include listings, trading, market data, indexes, clearing and market infrastructure solutions. Through its technology platforms, the company provides exchange operators and financial institutions with systems for trading, surveillance, risk management, regulatory compliance and other market functions.

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