Nasdaq CEO Adena Friedman sees blockchain reshaping the traditional financial system in three major ways. These include overhauling post-trade infrastructure, increasing collateral liquidity to free up trapped capital, and enabling faster, more seamless payments.
“There’s so much capital locked up, whether it’s clearinghouses or clearing brokers,” Friedman said Tuesday in a conversation with Ripple president Monica Long at the Swell conference in New York. “If you do it right, you can actually turn it into an opportunity to feed more capital into the system.”
Post-trade processes, or the systems that finalize and settle securities trades, remain highly fragmented and often rely on decades-old infrastructure. Friedman noted that while some of the complexity is often intentional, for reasons such as risk management and allocation tracking, much of the friction is unnecessary. She believes blockchain can help integrate and streamline these workflows, reducing inefficiencies that tie up capital and slow financial activity.
The second major opportunity lies in improving the way financial institutions move and manage assets pledged as collateral in trading and lending transactions to reduce risk. Digital assets could make it easier to quickly transfer collateral across platforms and borders, Friedman said. “What we really like about the idea of digital assets is that you can move that collateral,” she said. “We can create a collateral mobility initiative and … free up a lot of capital.”
Payments is the third area ripe for change. Although Nasdaq does not operate a payments division, Friedman emphasized that a smoother, more efficient payments system is key to allowing investors to participate in global markets without friction.
She explained that today’s payments infrastructure has become a bottleneck, slowing down the flow of capital. If these systems can be improved or rebuilt using blockchain, she said, it could free up significant amounts of capital currently tied up in outdated processes. As a result, investors will be able to more easily move funds across platforms, borders and asset classes, making the financial system more open and efficient.
Nasdaq has already begun the groundwork. The exchange operator recently filed an application with the U.S. Securities and Exchange Commission to support trading of tokenized securities. Under the proposed framework, investors will be able to flag transactions for tokenized payments, and post-trade systems, including clearing house DTCC, will route the transactions accordingly, allowing them to be delivered to digital wallets. Friedman said this approach provides greater flexibility for investors while preserving the core structure of existing securities.
She was quick to point out that the goal was not to replace or fragment the U.S. stock market, which she described as “very resilient” and “highly liquid,” but to strengthen it by layering technology that reduces friction and improves investor choice.
He said the tokenization market could start with post-trade functionality, but could ultimately change the way securities are issued and traded. “Let’s keep everything that’s great about[the U.S. market]and put technology in places where it can actually reduce friction.”
