Setting strategic parameters

Daniela Peterhoff, SVP, President Clearing and Head European Markets Strategy at Nasdaq talks to Shanny Basar about risk managing increased volatility, setting strategic goals and the value of playing sports.

Daniela Peterhoff joined Nasdaq in January this year after spending 15 years at consultancy Wyman where she succeeded in becoming a Partner and Global Head of Market Infrastructure. During her time at the consultancy Peterhoff was also instrumental in building the European Corporate & Institutional Banking business, the Northern European market as well as European strategy development. Peterhoff said one of the reasons she decided to change roles was because she had started to miss the exchange industry as she had worked at Deutsche Börse for two years before going into consulting in 2007.

“I was really fascinated by both the strategy and vision that Nasdaq brings,” she added. “I had also been working with Nasdaq for a little while and knew the team quite well, so I knew I was going to enjoy it.”

She believes that differentiators for Nasdaq in Europe are its global brand and customer base, and the ability to link its global data and index proposition with superior technology capabilities.

Peterhoff said: “Over the next few years I would really like to help Nasdaq take its European business and market platforms more generally to the next level and we’re on a great path towards that. The timing is fortunate because sometimes, particularly when the capital markets are more volatile, you need to look at a broader set of strategic opportunities and we’re really embracing that.”

In her Stockholm-based role as SVP, President Clearing and Head European Markets Strategy, she immediately had to deal with spikes in volatility due to uncertain macroeconomic conditions and the Russian invasion of Ukraine. Peterhoff explained that Nasdaq’s clearing house runs a multi-year risk management enhancement programme with a fine-tuned set of parameters. As volatility has increased Nasdaq has made quite frequent parameter updates to adjust to the market situation in how often margin is collected and how often members are asked to provide proof of their financial means.

“We have been blessed to have a very strong team that knows these markets very well from a banking perspective and from an energy market perspective and we’ve been able to consult with them,” Peterhoff added.

She stated that Nasdaq’s processes are currently working well but in the medium-term the firm needs to think about the market and what is the ‘new normal’ in terms of the calibration of the parameters, volumes, volatility and share of over-the-counter traded versus on-exchange. As a result, Nasdaq may need to make some more medium-term adjustments to its methodologies.

In addition to leading Nasdaq’s clearing business, Peterhoff also has the role of Head European Markets Strategy which she finds complementary. The clearing business is a legal entity, has quite a lot of governance attached and a close interaction with the members, in addition to running daily operations. There is also an interesting component related to the development of new products and solutions for customers.

“The European market services strategy role looks at the business more broadly including equities, equity derivatives, fixed income, and ESG and how clearing also spans across those products,” said Peterhoff. “It is interesting to have both roles because it opens up new ideas and solutions.”

CCP strategy

In the second quarter of this year Nasdaq completed a review defining the three pillars of its central counterparty clearing house (CCP) strategy.

The first pillar is the extension of the coverage of products that Nasdaq has across equity derivatives, fixed income and commodities and to launch additional collateral solutions that reach more into the value chain to help members manage liquidity.

The second pillar is to upgrade the core technology platform and upgrade the risk model to a value at risk (VaR) methodology, which Nasdaq would like to do in the next two to three years. Other CCPs have been adopting VaR risk methodologies. For example, in June this year Euronext Clearing announced a new VaR-based margin methodology for government bonds and London Stock Exchange’s LCH RepoClear went live with a VaR model across 13 Euro debt markets. They said VaR offers better recognition of diversified portfolios, supports stability and predictability of the margin requirement, and provides more capacity to adapt to market volatility.

“The third pillar is to look at more out-of-the-box opportunities, for example, in carbon offsets and, potentially in the medium term, also looking at areas like crypto futures,” added Peterhoff.

Crypto exchange FTX US has proposed offering central clearing of margin products directly to retail customers and to replace the traditional distributed risk clearing model in the US with an automated real-time and centralised process that does not use intermediaries such as futures commission merchants. In October last year FTX completed its purchase of LedgerX, which has been rebranded FTX US Derivatives. Through the deal FTX US gained a CFTC-regulated designated contract market, swap execution facility and derivatives clearing organization.

Peterhoff believes there is clearly a tendency in the industry to have as little time lag as possible in transferring money because the lag creates risk.

“The more we can enhance our technology to reduce that gap the better,” she added. “I don’t think the industry will become as close to real-time as people might hope, but it is going to be interesting to see digital assets and traditional markets evolve in parallel.”

In the digital asset sector, she argues that the main question is what exchanges and post-trade providers can offer to have a more robust proposition from a ‘know your customer’ angle and how they manage the custody of tokens in hot or cold storage.

Daniela Peterhoff, SVP, President Clearing and Head European Markets Strategy at Nasdaq.

European markets strategy

The CCP is included in the six focus areas for Nasdaq’s European markets strategy. For example, in digital assets Nasdaq has a strong belief that transparency and trust will be crucial in driving liquidity pools medium term and that custody and post-trade will be really important entry points, so the firm is currently bringing these together for institutions.

Peterhoff added that areas being scaled include equities and equity derivatives where the firm can leverage the Nasdaq brand and global customer base.

“We are continuing to expand our fixed income proposition and the main question is how far we can get into euro and Nordic currency interest rate swaps that are going to shift due to Brexit and we are also looking at unregulated data, such as macroeconomic data,” she said.

In the environmental, social and governance (ESG) sector Nasdaq is building a global reference solution for carbon removals and expanding that business with further bolt-on acquisitions. In June 2021 Nasdaq acquired a majority stake in Puro.earth in Finland, the first marketplace to offer industrial carbon removal instruments that are verifiable and tradable through an open, online platform. In June this year Nasdaq announced an acquisition of Metrio, an ESG data collection, analytics and reporting services provider based in Montreal. Nasdaq plans to integrate Metrio’s software as a service platform into its suite of ESG solutions.

Diversity

Peterhoff said some of the companies she has worked with over the past 20 years can provide inspiration within the area of diversity.

“I think it’s a matter of creating role models that help grow the next generation and then really creating a community and having some senior roles occupied by more diverse candidates,” she added. “It is extremely inspiring to have a female CEO at Nasdaq.”

Adena Friedman became President and CEO of Nasdaq at the beginning of 2017 and the company also has a female CFO, Ann Dennison.

Peterhoff puts her success down to a combination of perseverance, which comes mostly from her sports background, ambition and the ability to gain people’s trust. Until she was 19 years old Peterhoff wanted to become a professional tennis player but then went on to study at Ecole Supérieure de Commerce de Dijon in France and Gothenburg School of Economics in Sweden. She also holds an MBA and a PhD in Business Administration from the European Business School in Germany and believes she made the right choice in joining the corporate world.

She would advise women who want to work in finance that it is important to show analytical skills, particularly in the more junior ranks.

“I’ve seen that women tend to have those skills as much as anyone else, but let themselves be pivoted more towards less strategic roles,” Peterhoff added.

©Markets Media Europe 2022

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