HSBC Trials Quantum-Enabled Algo Trading with IBM

HSBC announced the world’s first-known empirical evidence of the potential value of current quantum computers for solving real-world problems in algorithmic bond trading, according to a story in MarketsMedia news. Working with a team from IBM, HSBC leveraged an approach that utilized quantum and classical computing resources to deliver up to a 34 percent improvement in predicting how likely a trade would be filled at a quoted price, compared to common classical techniques used in the industry. Algorithmic trading in the corporate bond market uses computer models to quickly and automatically price customer inquiries in a competitive bidding process. Algorithmic strategies incorporate real-time market conditions and risk estimates to automate this process, which allows traders to focus their attention on larger and more difficult trades. However, the highly complex nature of these factors is where the trial results showed an improvement using quantum computing techniques when compared to classical computers working alone using standard approaches. HSBC and IBM’s trial explored how today’s quantum computers could optimize requests for quote in over-the-counter markets, where financial assets such as bonds are traded between two parties without a centralized exchange or broker. In this process, algorithmic strategies and statistical models estimate how likely a trade is to be filled at a quoted price. The teams validated real and production-scale trading data on multiple IBM quantum computers to predict the probability of winning customer inquiries in the European corporate bond market. The results show the value quantum computers could offer when integrated into the dynamic problems facing the financial services industry, and how they could potentially offer superior solutions over standard methods which use classical computers alone.