How Nasdaq and OMX combined and reshaped the exchange landscape
When Nasdaq and OMX announced the close of the acquisition in February 2008, the financial world was a completely difference place. There was no sight of regulations such as Dodd-Frank or MiFID II. Lehman Brothers was still operating and financial technologies like blockchain were completely unheard of.
When the deal closed in 2008, the newly formed company, called The NASDAQ OMX Group, was considered the world's largest exchange company — and, more tellingly, was one of the last major cross-border exchange combinations.
Recently commenting to the Swedish financial daily "Dagens Industri," Nasdaq president and CEO Adena Friedman, who led Nasdaq's M&A strategy at the time, said, "There were several attractive aspects of the Nordic financial ecosystem. For example, a strong equity culture, self-regulation as a complement to regulations, a strong foundation for entrepreneurship and great stock market interest among institutions and pension companies."
In 2008, Nasdaq was predominantly known as a U.S.-focused equities exchange company.
"We were trying something that hadn't been done before," said Ed Knight, Nasdaq's general counsel, who also led Nasdaq's legal and regulatory unit at the time.
"If you look back over 10 years and recognize that this was the last cross-border exchange transaction that was successfully completed. We were the last ones to do it," Knight said.
"At the time, people were not sure we could do it. It was very complicated and complex, but a major turning point for the company. It involved multiple jurisdictions and laws and regulators that all had to be dealt with and we couldn't afford to make any errors. We were working under tight deadlines in a very competitive situation."
When the intent to combine was announced in 2007, the Combined Group would have approximately 2,350 employees in 22 countries with a pro forma market capitalization estimated at $7.1 billion.
Ten years later and now called Nasdaq, the company has expanded to over 50 locations worldwide and with a market capitalization of $13 billion.
Another major component of combination was technology.
"The acquisition of OMX was the starting point for Nasdaq's increased focus on technology," said Friedman.
"We are now world leading in technology for financial markets, and that is our fastest growing business unit," Friedman says.
In 2018, Market Technology represents 13 percent of the group's revenue. Overall, 1,700 employees at Nasdaq work in technology, with Stockholm serving as the unit's global headquarters.
"It's partly explained by the history of OMX. Sweden also has good universities. Another factor is that our employees in Sweden love to travel, they really love getting assignments abroad when we are about to open new markets," said Friedman.
"From a Market Technology perspective, I think [the acquisition] was a blessing for us," said Lars Ottersgård, executive vice president and head of market technology. Ottersgård was head of sales for market technology at OMX before the combination.
"To be honest, I didn't really know Nasdaq at the time — to me it was an equity exchange in the U.S. I knew OMX well. Nasdaq made OMX what we always wanted to be. So with Nasdaq, we have made something that has surpassed my dreams. It has been more than I could imagine at the time."
With Nasdaq now under Friedman's leadership, technology and information services have been given even more significant roles, which has given the Nordics, and in particular Stockholm, a more prominent part in the future of Nasdaq.
"We were strong in technology if you combine the teams we had in Stockholm, the teams we had in the U.S. — we were strong on the listing brand, we were strong on transactions," said Bjørn Sibbern, executive vice president for global information services at Nasdaq. "But I think what really strikes me is that we have been even better as a team, and now I see us as a strong industry leader."
"The fact that we spent time defining the new strategy for Nasdaq and now we're executing on the strategy — that is what is most important for me.