HSBC has 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.
Working with a team from IBM, HSBC leveraged an approach that utilised quantum and classical computing resources to deliver up to a 34% 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 optimise requests for quote in over-the-counter markets, where financial assets such as bonds are traded between two parties without a centralised 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.
“This is a ground-breaking world-first in bond trading,” said Philip Intallura, head of quantum technologies at HSBC.
“It means we now have a tangible example of how today’s quantum computers could solve a real-world business problem at scale and offer a competitive edge, which will only continue to grow as quantum computers advance,” said Intallura.
