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Lessons from a Decade of Change at Nasdaq
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Nasdaq Comes Calling
Nasdaq Names Greifeld CEO
Wall Street Journal, April 16, 2003
I’m six months too late.
That’s the phrase that kept popping into my head as I started my job as CEO at Nasdaq in May 2003. I’d been hired to engineer a turnaround at this storied financial institution, which was struggling through perhaps the most precarious period of its three-decade history. It was not a position I’d sought out; I’d initially been hesitant to even take the interview. I knew enough about Nasdaq and its problems to question whether it was really where I wanted to be. But I’m not one to turn away from a challenge. When I got inside, however, I began to wonder if the window of opportunity had already closed.
Earlier that year, I had been happily employed at SunGard Data Systems, a large software and services provider for the financial industry. Prior to that, I’d been a software entrepreneur, co-owner of ASC, which had been sold to SunGard—the second largest acquisition they had ever done. I was promoted quickly, becoming an Executive Vice President responsible for a collection of subsidiaries with annual revenue of more than $1 billion and thousands of employees. It was a fast-moving, stimulating field, and I loved my job. Building new technologies is a deeply creative and satisfying activity. In my heart, I have always loved software—it seems like you have the freedom to create anything. So when the recruiter first called me and told me Nasdaq was seeking a new CEO, I was flattered but hesitant. Did I really want to leave all of this behind for a highly regulated organization that I knew had some serious issues, even one as prestigious as Nasdaq?
“Oh, I don’t know, that’s not really my thing. I’m a technology guy, not an exchange guy,” I told him. “Plus, Nasdaq has so many problems.”
That was an understatement. In 2003, Nasdaq was reeling. The dot-com bust had dried up the IPO (initial public offering) market. The tech stars that had lit up the financial firmament only a few years before had lost their luster—and their lofty valuations. The organization was bogged down in transitioning from regulated nonprofit entity to for-profit company. Nasdaq was losing money. The ever-increasing trading volume (and the revenue that goes with it) that had made the platform a favorite of traders during the market expansion of the 1990s was a thing of the past.
Nasdaq’s predicament was a classic tale of the disruptor becoming the disrupted. The three-decades-old exchange had once been a technological leap forward: the world’s first virtual stock market. Traditionally, exchanges used the “trading floor” model. You’ve seen it in the movies—traders negotiating, yelling, and gesticulating in the financial world’s equivalent of the mosh pit. There were other venues for trading stocks of small companies, like the telephone-based over-the-counter (OTC) market, but these were insignificant and lightly regulated. Nasdaq* was founded in 1971 to bring order and fairness to the OTC market. It was a kind of virtual floor, a centralized system for showing prices. Dealers and traders across the country no longer had to read the daily “pink sheets” or pick up the phone to get prices; they could now see stock quotations in one place, in real time. Instead of making constant calls to keep quotes current, Nasdaq dealers, known as “market makers,”† only had to use a telephone when they wanted to actually execute a trade.
In the excitement that accompanied the long boom of the nineties, Nasdaq found its stride. There had been a time when all America’s stock markets played second fiddle to the New York Stock Exchange (NYSE). But in the final decade of the twentieth century, Nasdaq had facilitated and nurtured the rise of a new generation of technology companies, firms like Cisco, Microsoft, Dell, Apple, and Intel. Most of these started small, raising money with Nasdaq back when significant venture capital was hard to come by and NYSE wouldn’t list such unproven startups. Nasdaq was their only option, and so it became the public-market parent to hundreds of promising children. Not all of them survived, of course, but the ones that did changed the world. And as they grew ever stronger, becoming national and global leaders, their loyalty to Nasdaq persisted. Indeed, as the center of American business began to shift west, away from the industrial factories of the East and Midwest to the sunbaked streets of Silicon Valley, Nasdaq was a primary beneficiary. Its brand became a global signifier of success, technology, and globalization.
In the late nineties, when the boom became a bubble, Nasdaq continued to thrive. In those heady gold-rush days of “irrational exuberance,” the promise of internet riches inspired thousands of startups to create online business models. All you needed were enough “eyeballs,” and it seemed that investors were smitten. A few such companies, like Amazon, were successful beyond all expectations and became pillars of the global economy. Many more are now remembered only for their sky-high valuations and disastrous flameouts—like eToys or Pets.com. Nasdaq was at the center of all of it—opening the door to a new world of global online trading, stock speculation, and wealth creation that would have been unimaginable a decade earlier. In fact, it would not be unreasonable to claim that there could not have been a dot-com boom at all without Nasdaq. In 1999 alone, the Nasdaq Composite—a weighted index of several thousand stocks listed on the exchange—increased almost 86 percent. But even as its brand reached new heights of prominence, Nasdaq was under threat from a new wave of innovators.
I was one of them. As an entrepreneur in what is now known as the “fintech” (financial technology) industry, I created one of the early Electronic Communications Networks (ECNs) for ASC. ECNs were computer-based trading systems that not only posted quotes but electronically matched and executed orders. On Nasdaq’s system, you could see the bid and the offer right there on the screen—close enough to kiss, as I like to say—but the trade could not be consummated without a middleman. Customers still had to pick up the telephone to complete the deal. Indeed, a Nasdaq trading desk at opening bell was almost as loud as the NYSE floor—the phones ringing constantly, the traders yelling into headsets. ECNs came along and automated the last step, empowering customers with direct access, cheaper costs, and greater speed. The future was here and it was digital. And while it might not have been evenly distributed yet (to borrow a phrase from author William Gibson), it was coming soon to a stock exchange near you. Little by little, ECNs were gaining influence and market share, in a market that was exploding with activity.
Indeed, the rise of online brokerages, day-trading, and other nontraditional market activity created massive amounts of new order volume that had to go somewhere. Like a flood of water heading downhill, all of this order flow demanded new methods of trading. It overwhelmed traditional venues and cut new pathways in the extended Nasdaq trading landscape. ECNs rose in tandem with this flash flood of new volume, providing real-time execution in fast and flexible trading forums. The new platforms were online, always on, and global. A massive decentralization and democratization of stock trading was underway. Anyone could do it, and ECNs were facilitating the revolution.
ASC had sold for a good price in 1999, but as the boom persisted and I watched valuations continue to skyrocket over the following year, I sometimes lamented that we’d sold so soon, or hadn’t decided to do an IPO in that once-in-a-lifetime bull market. By 2003, however, such thoughts were long gone. The party was over, and the hangover was not pretty. It’s always better to sell a year early than a year late.
Over at Nasdaq, the market’s tumble was initially not a problem. Volatility and high trading volume are good things for stock markets, and in the immediate aftermath of the dot-com bust, there were plenty of both. But as the IPO market dried up and the economy struggled to recover, Nasdaq’s deeper issues became starkly visible. As legendary investor Warren Buffett once said, “It’s only when the tide goes out that you learn who’s been swimming naked.”1 Ironically, Nasdaq’s problems centered on its signature area of focus—technology. The new and more nimble ECNs had surpassed Nasdaq’s once-innovative systems. More and more of the buying and selling activity was deserting the traditional dealer marketplace. Nasdaq was uncompetitive, and in danger of becoming an irrelevant sideshow in the new century. Like a large and imposing battleship, it was solid, resilient, and designed for stability. It still commanded all the attention, but it had been built for a different war. Every day, it was being outmaneuvered by a smaller, lighter, faster armada of experimental new watercraft. Sooner or later, the battleship was going to sink.
The Marketplace of the Future?
You can learn a lot about a civilization from its marketplaces: who they were, what they were good at, what innovations they fostered and delivered into society. In the ancient world, marketplaces were hubs for traders in goods and services, cultures and ideas. In the modern world, marketplaces evolved and expanded to be public and private, real and virtual. Now, as ever, when we want to find out what’s happened and what will happen next, we look to the marketplace. The marketplace is a reflection of how a culture is changing and evolving. Often, historic events and innovations get their start there. The canon of history’s most influential marketplaces includes such names as the Rialto in Venice (fourteenth century), the Grand Bazaar in Turkey (seventeenth century), the Amsterdam Bourse in Holland (seventeenth century), and the New York Stock Exchange (twentieth century). As the twenty-first century dawned, Nasdaq had looked ready to join these ranks as the market that would define the information age. But by 2003, all such aspirations were in doubt.
I hadn’t just read about Nasdaq’s problems in the papers. I had firsthand experience of dealing with them, often on a daily basis. The main product of ASC was a trade order management system designed for integration with Nasdaq trading desks, and my job involved a constant relationship with many individuals who worked there. It was a frustrating process, to say the least. It took forever to get things done. Nasdaq was unresponsive, slow, and monopolistic. Staff seemed unmotivated and disengaged. From my perspective, it had all the hallmarks of a dysfunctional bureaucracy. It reminded me of my dad’s tales of working at the post office. Clearly, whoever took the CEO job would need to do a lot more than update Nasdaq’s technology and make it competitive. A cultural transformation was also desperately needed.
When the recruiter called, all of this was going through my mind. It was an honor to be considered, but my enthusiasm for the opportunity was tempered by my knowledge of the organizational dynamics at play. I had no illusions about what the job entailed. Was this the right next move for me? Did I really want to trade in an exciting role at the forefront of a growth industry for a grueling turnaround? I certainly didn’t intend to be at SunGard for life, but I had imagined moving on to a new entrepreneurial challenge, possibly leading a startup, not diving into a struggling legacy company. Moreover, Nasdaq was actually a smaller operation than the one I was running. Nevertheless, its brand stature and relevance to the global economy far eclipsed its head count. I had a personal connection to it too: I’d actually written my graduate thesis on Nasdaq, exploring how technology was changing the people dynamics in the equity-trading world. Was this a moment of destiny? I was torn.
Whatever its problems, Nasdaq was a global icon. An organization like that doesn’t come calling every day. When the recruiter reached out a second time, I agreed to take an interview. It was a unique opportunity, and I was intrigued by the challenge of turning Nasdaq into the defining market of the twenty-first century.
The next morning my name appeared in the Wall Street Journal. This was before we all held the internet in the palm of our hand, and I think I heard the news over breakfast when my phone started ringing. Apparently, there was a story about Nasdaq interviewing me as a candidate for their CEO position. It was the first time I’d ever been mentioned in the Journal. It was also my first glimpse of the new world I was entering—fast, furious, and very public.
I talked to Cris Conde, my boss at SunGard. I didn’t want to leave him hanging, but I asked him to give me a week to consider the opportunity. I had great respect for Cris and felt loyal to him, and also appreciated that he had seen the value of ASC and paid well for it. He generously agreed to my request. Nasdaq called me in for a video interview with the Board. We didn’t have that technology in our pockets in 2003, either, so I was invited to an office in Midtown. On the screen in front of me were several of Nasdaq’s Directors, including Arthur Rock, one of Silicon Valley’s original venture capitalists; Warren Hellman, whose private equity firm owned 27 percent of Nasdaq at the time; and Frank Baxter, CEO of global investment bank and institutional securities firm Jefferies and Company. In the room with me was H. Furlong “Baldy” Baldwin, a Baltimore banker, former CEO of Mercantile Bank, and highly respected elder in the financial world.
The composition of the Nasdaq Board was notable for its ties to the technology industry. In particular, Hellman and Rock both had deep roots in Silicon Valley. Rock is a legendary investor who helped found the tech pioneer Fairchild Semiconductor, was a founding investor and Chairman at Intel, and was a key player in the early days of Apple. Hellman, a former President of Lehman Brothers, had gone on to become a major player in West Coast venture capital and private equity. (In San Francisco, Hellman is fondly remembered as the banjo-playing patron of the popular music festival Hardly Strictly Bluegrass, which he endowed generously in his will.)
The presence of these two men on the search committee signaled Nasdaq’s commitment to embracing tech as its future. While its listed companies included numerous tech brands, Nasdaq itself was not considered to be a technology company as of yet. It used technology, of course, but the information revolution had not yet rewritten the DNA of Wall Street. Quants, high frequency traders, and algorithmic trading systems had yet to appear on the scene in any significant way. In fact, the old guard—the traders, brokers, and bankers who ran the financial institutions—were not natural technologists. Nasdaq, NYSE, and many other exchanges around the world were undergoing—and in some cases resisting—a generational transition from the nonprofit, cloistered “brokerage clubs” of yesteryear to the more transparent, public, fast-moving, technology-driven, global trading platforms they would become.
This changing face of the industry demanded a new kind of leadership. Remarkably, the Nasdaq Board exhibited great foresight in recognizing the moment. It would have been too easy for them to look toward Wall Street’s past rather than its future in choosing a new CEO. The top job at Nasdaq, as with NYSE, conveyed a certain ceremonial power, and it was often bestowed on a respected elder in the financial industry as a kind of sinecure. But Hellman, Rock, and their fellow Directors were clearly not attached to tradition when it came to writing Nasdaq’s next chapter.
The first interview went very well; it was clear the Board and I saw eye to eye on the technological and cultural challenges facing the organization. Soon, any lingering questions about why they’d tapped me for the role dissipated. I might not have come from an investment bank or a brokerage firm, but my entrepreneurial background and my technological orientation were part of my appeal. Nasdaq needed that kind of energy.
I began to feel like the job might be mine if I wanted it. However, I’d soon learn that I had serious competition. At some point in our discussions, the headhunter let slip that the other person being considered was Bob McCann, then head of global equity trading at Merrill Lynch. I knew that McCann was articulate, charming, and formidable, and would be hard to best in a traditional interview format. If we both simply answered questions, I feared that the job would be his.
It was only when I considered that I might lose the role to someone else that I realized how much I really wanted it. Who are you kidding? I asked myself. You’re not going to walk away from an opportunity like this. My entrepreneurial mind had already started to mull over the types of transformations that might help Nasdaq execute a turnaround. The more I thought about it, the more determined I became to do whatever I could to show the Board that I was the right person to lead Nasdaq into a new era. I would take a more proactive approach in my second interview. After all, the struggling exchange didn’t need conversational skills; it needed decisiveness and action.
When the day came, I sat down in front of the video screen and before anyone from the Nasdaq Board uttered a word I said, “Here are the five things I’m going to do in the first hundred days.”
My plan was simple:
1. Get the right people on board.
2. Reduce bureaucracy.
3. Embrace fiscal discipline.
4. Overhaul technology.
5. Stop being satisfied with No. 2.
I spent about fifteen minutes going through this five-step plan, describing how I would implement each step. No posturing. No sugarcoating. No charm. Just a straightforward, hit-the-ground-running blueprint for change. As I finished, I looked around at the faces on the video monitors (and a couple in the room with me). I could tell I had won them over. Two weeks later, it was official.
I had a firm point of view on what it would take for Nasdaq to be successful. It was going to involve a significant change of culture. Inevitably there would be ruffled feathers and disgruntlement, and I would need to part ways with some of Nasdaq’s existing management team. There was no avoiding it, and only so much I could do to prepare. On the final day before assuming my new role, I decided to do the best thing I knew to keep my mind focused and blow off some tension—I ran a marathon.
As a young man, track had been my preferred sport, and in my adult years I had taken to running longer distances. The only race I could find that particular weekend was in Ottawa, Canada. I brought Bobby and Greg, my two teenage sons, along with me. It was a surprisingly chilly day in late May; in fact, it was so unseasonably cold that our flight home was almost cancelled because the deicing equipment was in storage. Am I going to miss my first day as CEO of Nasdaq? I thought as we sat on the tarmac. Thankfully, we made it out. As I watched the skyline of Ottawa fall away, I wondered when I would have the time and opportunity to do something like this again. As it turned out, that would be my last marathon.
The next day, I was sitting in the kitchen of my New Jersey home when my wife, Julia, called from the front room. “Bob, there’s a great big black Cadillac parked out front. I’m guessing that’s for you!”
As the driver opened the door to the plush private limousine, I reflected on how far I had come. I wasn’t bred to be a captain of industry. Growing up working-class, I had worked hard to get an education. I’d not attended private schools or Ivy League colleges. I was lucky enough to have genuine opportunities to advance, but I’d had to earn every one of them. As a hungry young executive, I put myself in a good position to succeed. I got my MBA at NYU Stern, taking classes at night. I helped build and sell a successful company, gained important experience in leadership, and created a good life for my family. But this situation was different. I was stepping onto a bigger stage. Nasdaq was more than an organization or a business; it was an American institution and a global symbol of capitalism—a signature brand that spoke to the aspirations of millions. In my own mind, I was still just a kid from Queens, but I knew that somewhere along the way, I had crossed an invisible line. Private cars and Wall Street Journal mentions were only the first indications of that change. There would be more to come.
The car pulled up to One Liberty Plaza, Nasdaq’s home office. This imposing skyscraper had originally been commissioned in 1973 by U.S. Steel—a once iconic, top ten American company that today doesn’t even crack the top five hundred. If I needed a reminder that there are no guarantees in business, the large steel girders of this architectural giant sent a pointed message.
I could never have imagined then that this massive structure would be my workplace for the next fourteen years—a lifetime in terms of global markets. In the days, months, and years ahead, I would oversee the near death and rebirth of Nasdaq and build it into one of the world’s premier stock exchanges, a globally dominant company active on six continents and in twenty-five markets around the globe. I would help Congress and the Securities and Exchange Commission (SEC) overhaul and modernize financial regulations, and shepherd Nasdaq’s antiquated technology through a massive restructuring and upgrade. During my tenure, I would have a front-row seat for the Lehman Brothers bankruptcy and the ensuing financial panic. I would be center stage during the frightening Flash Crash, in the spotlight for the infamous Facebook IPO, and caught up in the controversy around high frequency traders. Like everyone else, I would be shocked by the fall of Bernie Madoff, and encouraged by the resiliency and recovery of global markets in the wake of the greatest recession of my lifetime.
Through it all, I would participate in hundreds of successful IPOs, as America’s next generation of great companies—in biotech, technology, energy, renewables, medicine, and more—found funding and empowerment in the public markets. It would be a period of tremendous upheaval, and even the nature of my own job, as CEO, would be hardly recognizable by the end.
But that was all to come. On that cool spring morning in May 2003, I only knew that Nasdaq was in a fight for its survival, and there was not a minute to waste. Perhaps I was already too late. I walked in the door, headed up to my new office on the fiftieth floor, and parted ways with three of my executive team before 8 a.m.
Two Executives Leave Nasdaq As Greifeld Assumes the Reins
Wall Street Journal, May 13, 2003
Get the right people on board.
That was number one on the list of priorities I had presented to the Nasdaq Board in my interview. The right people leverage everything else in a business—even more so when you are undergoing a turnaround and cultural shift. Business, like life, is unpredictable. No matter how good your strategies, you can be sure you will face unexpected challenges, new opportunities will arise, and shifting market conditions will take you by surprise. You can’t control circumstances, but what you can do is to ensure that you have the best people in place so that when the world changes around them, they can adapt, respond, and step up. That’s why my motto has always been people first.
In management circles, we talk a lot about engagement. If you have workers who show up every day merely because they’re getting a salary, your company is unlikely to thrive in the long term. Engaged employees come to work for more than a paycheck. They show up with purpose and even passion. They want to work hard and are connected to the mission of the organization. That’s the type of workforce a thriving business needs. In the early days of any culture change, the critical first step is to find the people who want to work in that new culture—and to part ways with the people who don’t.
When corporate leaders say, “People come first” or “People are our most important assets,” the message may seem warm and fuzzy. But it’s not always a line that a CEO can deliver with a hug and a smile. There is another side to the “people first” principle. Just as the right people are extremely important to the success of any given business, the wrong people—individuals who do not fit, for whatever reason—need to be let go. And letting people go is never easy.
The first firings during my tenure happened immediately. I had done my homework, evaluated the executive team, and already knew several changes in senior management that needed to be made. It was still early morning when the first person came in. This was an individual with a long history at the company. I considered him part of the old Nasdaq and knew that he was not a good fit for a company embarking on the changes I had planned. I needed someone who could get out ahead of our issues; he seemed only able to analyze what went wrong after the fact. It was the right step to take; there was no benefit in dragging it out. “We’re taking Nasdaq in a different direction,” I explained, “and we don’t think your skill sets are aligned with where we want to go. We might as well part ways now and give you time to go look for something else.”
He was surprised, of course. Perhaps he’d had an inkling that this might happen, but I could see he wasn’t expecting it before 8 a.m. on my first day. Nor were the other two people I let go in that first hour. Around the office, as staff arrived, there was a palpable sense of shock at the events of the day and how quickly they were unfolding. As word got out that personnel changes were already underway, not surprisingly, people were reluctant to come into my office.
Personnel changes can be painful—there’s no way around it. The people I said good-bye to on that first day, along with the nearly three hundred I let go in my first year, weren’t faceless cogs in a machine; they were colleagues and teammates. Change had come to them uninvited. In these situations, I was glad Nasdaq had the resources to be generous with severance packages. After all, many of these employees weren’t leaving because of underperformance in relation to the original expectations of their job. Rather, the expectations had suddenly and dramatically shifted.
I knew that these changes would temporarily impact morale. But I kept in mind a great piece of advice I’d received from a friend and business associate, Vinnie Viola: “Good morale in a bad organization isn’t worth much.” He is absolutely right. What use is a contented workforce if the business is failing? I was willing to temporarily sacrifice morale if that’s what it took to achieve the goal—good morale and a great organization.
- "Market Mover spins a fascinating tale of Nasdaq's near-death experience and remarkable revival over the last decade. Readers will come for the many hard-won lessons, but they're likely to stay for the surprising stories and colorful characters that populate Greifeld's narrative. Market Mover has both wit and wisdom, which is something I don't usually say about Wall Street!"—LarrySummers,former Secretary of the Treasury
- "Through his leadership, Robert transformed Nasdaq and ushered in a new era for the global capital markets. I was so fortunate to experience his leadership lessons over a decade of working together, and they are now memorialized for tomorrow's leaders in his exciting stories and no-nonsense narrative. Bob's personality and his many accomplishments are encapsulated for everyone to enjoy and for all us at Nasdaq to remember."—Adena Friedman, President & CEO, Nasdaq
- "As CEO of Nasdaq, Robert carefully shepherded one of the leading global exchanges through a tumultuous decade of change and transformation. Refreshingly honest and thoughtful, Greifeld encourages readers of Market Mover to learn from both his successes and setbacks. Covering a wide range of areas from technology, markets, and turnarounds, to deal-making, public relations, innovation, and crisis management, this book is truly a crash course for anyone interested in leadership."—John Chambers, CEO and founder, JC2 Ventures, and formerExecutive Chairman and CEO, Cisco
- "Market Mover captures the dramatic stories and indispensable lessons Bob Greifeld learned as Nasdaq grew and thrived amidst the digital disruption of Wall Street. Itis a primer in the stock market, a textbook in management, and a user manual for high technology-all rolled into a highly readable and deeply insightful book written by one of the best CEOs in the business. I highly recommend it to readers interested in learning how apply best practices in managing a complex enterprise at the intersection of high finance and cutting edge technology. Read Market Mover and discover a unique formula for success."—Glenn Hutchins, Chairman, North Island and co-founder, SilverLake
- "In 2003, Robert Greifeld was given an incredible opportunity and challenge-resurrect one of America's great business icons. Like all true leaders, he rose to the occasion. Robert's tireless leadership and superior strategic vision proved successful. Market Mover gives us the inside story of Nasdaq's turnaround and that dramatic era on Wall Street. Robert is on my short list of people whose advice I seek out, and whose leadership instincts I trust. It's truly a pleasure to be able to recommend this wonderful book by one of America's most formidable business leaders."—Vincent Viola, founder, Virtu Financial
- On Sale
- Jan 12, 2021
- Page Count
- 304 pages
- Grand Central Publishing