Nasdaq’s head of sell-side and buy-side technology talks to Joy Macknight about the impact of machine intelligence and behavioural science in surveillance and investigations, as well as how sell-side firms can stay competitive in the current environment. 

Valerie Bannert-Thurner

Valerie Bannert-Thurner

The sell-side dynamic has seen great change over the past decade, says Valerie Bannert-Thurner, head of sell-side and buy-side technology at Nasdaq. She and her team work with more than 170 institutions globally on trade surveillance technology, pre-trade risk management and execution services.

“Their biggest focus today is trying to find cost savings, particularly as transaction fees continue to fall,” she says. “In addition, they must identify areas where they can generate value for their customers and stand out from their peers.”

Career history Valerie Bannert-Thurner  

  • 2019 Nasdaq, senior vice-president (SVP) and head of sell-side and buy-side technology
  • 2016 Nasdaq, SVP and global head of risk and surveillance business
  • 2015 Nasdaq,VP and global head of sales, risk and surveillance
  • 2013 Nasdaq, VP, market technology

While compliance is still sapping the coffers, the competitive landscape is also more challenging. “Tier 1 investment banks are coming under pressure from big players in the high-frequency trading and buy-side world, which are moving into the execution services business; they operate at half the cost, are nimble and can quickly adjust their business models,” she says.

According to Ms Bannert-Thurner, the most effective way for sell-side firms to address these four challenges and remain competitive is to deploy new technology, such as cloud and artificial intelligence (AI), and transform into platform businesses. “They will likely struggle in the long run unless they can operate like a platform, which means being quick and innovative, as well as access the data needed to make intelligent decisions,” she says. “Our mission is to help market participants be successful through greater business agility, powered by technology.”

In 2019, her team worked with four new large sell-side customers on providing better execution quality and a more tailored experience for their clients. “Initially we thought the main aim was in reducing costs, but it is more about being swift to market and offering differentiated services. We are helping our customers be competitive by provisioning their liquidity in a customised way to respond to end clients’ changing demand,” she says.

Getting ahead

Nasdaq’s market technology business services sell-side front office teams with its execution platforms, multilateral trading facility/organised trading facility infrastructure and risk management systems. More recently, it has started to make inroads into the buy-side space as well, as this segment comes under similar cost pressures to those the sell-side has always faced.

“The pressure the buy-side is under is unprecedented, as it comes to terms with the move to passive investments, such as exchange-traded funds, as well as the lack of performance,” says Ms Bannert-Thurner. “Many buy-side firms are struggling for their existence.” She adds that the regulators have turned their attention to the buy-side and are pushing firms to adopt more automated and sophisticated surveillance systems, for example.

Ms Bannert-Thurner and her team manage this ecosystem of customers and product suites. The team also helps its customers adopt new technology, as illustrated in its use of behavioural science and AI in the surveillance arena. “It is important for our customers to showcase to the regulators how they are continually pushing their surveillance programmes to be ahead of the curve,” she says.

Nasdaq runs many alpha and beta programmes during product development. “Today we are working with more than 10 firms on different initiatives, whether using machine intelligence, behavioural science or other data analytic tools to try out new technologies, approaches and solutions,” she says. “They experience a huge benefit because they see what becomes possible by using emerging technologies and help shape the uses of these innovations.”

Nasdaq also benefits as it can ensure that the solutions are solving real client problems, which is its primary objective. “By working together closely, ultimately we get stronger products. Across all our product lines, we wouldn’t push products unless we see that they fuel our customers’ success, whether that is cost reduction, differentiation or competitiveness,” Ms Bannert-Thurner adds.

Automation drive

Nasdaq’s next product release is supporting self-service calibration, and it has plans to go beyond detection into supporting the investigative process, says Ms Bannert-Thurner. “A recently released product allows customers to do deep-dive investigations and support regulatory inquiries using better tools, technologies and data access. We are working on a set of robots but also behavioural tools that help investigators become better at what they do, automate it, learn from it, identify correlations and so on.

“Our customers will continue to explore how they can be better at fighting financial crime but also how they can run a streamlined programme,” she adds. “We are helping our customers become more self-sufficient, smarter and efficient in the way they work, while being highly effective in detection.”

Nasdaq is currently working on next-generation surveillance in over-the-counter trading. “It is still not covered well by anyone, so our product, data science, and behavioural science teams are working on it,” says Ms Bannert-Thurner.

It is also leveraging a cloud-based platform for overall compliance and has just launched the first product, a data discovery service in the cloud for regulatory inquiries. “That is the baseline of our cloud-based compliance platform, launching one service after another, which allows our customers to be highly innovative,” she says.

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