Financial market infrastructure services: Nasdaq

Unorthodox policies and changing economic outlooks have resulted in many central banks becoming more active in the management of their monetary operations and foreign exchange reserves in the past few years. At the same time, they face tight staffing and technology development constraints. That’s where Nasdaq has helped. The US company now offers a proven, integrated, cloud-based service that aims to optimise the management of central bank electronic cash and assets.

A critical component of Nasdaq’s financial technology offering is built upon the Calypso platform, which the US company integrated when it acquired Adenza in 2023. Nasdaq has subsequently striven to accelerate innovation in cloud transformation and artificial intelligence in its service provision, Sophie Marnhier-Foy, vice-president and head of client solutions strategy for financial technology at Nasdaq, tells Central Banking.

Nasdaq continued its cloud consolidation in 2024, streamlining the adoption of its central banks service to manage official sector reserve portfolios strategically and flexibly, helping to ensure financial stability. Nasdaq Calypso has also started to secure its first central bank clients for its new ‘digital portal for monetary policy’, which is expected to go ‘live’ in the coming months and will be integrated with European Central Bank’s Target Services, which offers a collateral management and instant payments service and settles payments and securities in central bank money.

“A couple of [central bank] clients already successfully adopted our cloud solution, CapCloud, that is also combined with a digital portal for monetary policy,” Marnhier-Foy says.

Marnhier-Foy adds that the consolidated Calypso platform offers a one-stop shop for customers in terms of tools for managing portfolios, front-, middle- and back-office activities, risk, collateral and settlement. In addition, since it runs in the cloud, overall total costs are reduced, she says.

“The new portal is  a tool enabling end-users to digitally manage their operations and funding requests, replacing time-consuming phone conversations and manual interactions,” she says.

This should improve total cost of ownership and service levels while reducing operational risks.

A European central bank successfully went live with a major upgrade of Nasdaq Calypso’s technology in the past year and is ready to go live with its monetary portal in the first half of 2025.

Use of the Nasdaq Calypso technology allows the central bank “to further streamline and future-proof” its infrastructure, positioning the institutions “at the forefront of digital transformation”.

The Nasdaq Calypso service ensures that the introduction of new market standards, new functionalities and system upgrades are all automated and there is no need to rely on multiple systems to support the same operations. This speeds up adoption and reduces operational risks.

The Central Bank of the Dominican Republic was also attracted to the full scope of Calypso’s offering. “The true front-to-back nature of the Nasdaq Calypso solution, combined with the benefits of a cloud deployment were top of mind in our decision-making process,” the central bank said in a statement in 2023.

However, it is understood that the Central Bank of the Dominican Republic is not yet live with the CapCloud system, with some delays occurring following the acquisition of Adenza.

The cloud-enabled institutions are joined by central banks such as those from Cambodia, Hong Kong, Indonesia, Namibia and South Africa, who are among Calypso’s central bank clients. Many participate in a central bank user group to provide collective feedback to Nasdaq Calypso.

Growing Eurozone footprint

In the euro area, meanwhile, the Central Bank of Ireland became the latest national central bank to go live – although it does not yet appear to be fully utilising the service – on the ‘market activities processing system’ (Maps) in 2024. Maps is a service provided by Banque de France and Bank of Spain that is based on Nasdaq Calypso software, which spans front office, back office, risk management, accounting and financial reporting functions. It is designed to support treasury and financial market operations, including related risk management tasks and accounting treatment. Banks in the European System of Central Banks that have signed up to Maps include those from Cyprus, France, Malta, the Netherlands and Spain.

Marnhier-Foy stresses Calypso is a consolidated yet flexible platform that works for central banks large or small – or even functioning as a part of a consortium, such as Maps. She adds that some central banks in growing markets can initially adopt the foundational management and treasury functionalities and front-to-back processing. But, in time, they may add services to manage liquidity and a wide range of risk analytics to ensure financial stability. Meanwhile, other central banks use everything, with Nasdaq Calypso saying it can comfortably handle the trade volumes involved.

Embedded into the Nasdaq Calypso ecosystem is access to prime brokers, fund administrators and reference and market data from a range of providers. But everything is managed via “trade workflow”, according to Marnhier-Foy, from pre-trade to post-trade, from front- to back-office. Whether the trade is going through a fully automated process or whether there is someone manually validating every step, Marnhier-Foy says, there is a full audit and mandatory checkpoint(s).

A next step for Nasdaq, says Marnhier-Foy, is related to digital assets and currencies. The company is investigating how digital assets and money are being issued and managed by central banks as well as how collateral may need to be tokenised and all of this integrated into its platforms moving forwards.