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Friedman said informal talks that led to Thursday’s acquisition began a few months ago with one of Verafin’s owners, but she added that the Canadian company has been on Nasdaq’s radar since the global exchange and technology company initiated a strategic review of its own businesses and the industry about three years ago.
A focus on anti-financial-crime technology and platforms led to Verafin, and Friedman said they concluded the Canadian firm, which deliberately built its customer base from small banks to larger ones in North America, is “the best of the group.”
They provide a very modern way to solve big problems in the financial industry
Adena Friedman, Nasdaq CEO
“They provide advanced technology in a very modern way to solve big problems in the financial industry,” she said.
“They have a modern technology stack, it’s cloud native … (the business has) highly recurring revenue, they have incredibly high client retention at 98 per cent, and they’re scaled” with more than 2,000 customers.
She said the market is poised for growth because regulators have put banks and brokers “on the front lines” of cracking down on market malfeasance and white-collar crime, including manipulation, insider trading and money laundering.
A United Nations estimate cited by Nasdaq and Verafin suggests some US$2 trillion in laundered money flows through the financial system annually, with perpetrators finding new and sophisticated ways to move funds undetected.
The Verafin transaction is not Nasdaq’s first acquisition in Canada. In 2016, the exchange group bought Chi-X Canada, an alternative trading system, which was renamed Nasdaq CXC Ltd.