Envision the possibility of having your own trading desk and a quant or two on staff collaborating to create trading algorithms.
An online service called Quantopian came out of beta last week. The site and its tools provide the data needed for back-testing trading algorithms and the infrastructure to support them. Included in the Quantopian tool set is the firm's Zipline open-source back-testing application.
Quantopian is meant to be an online community for quants — those with the math skills to learn and develop their own algorithms — and members retain full ownership of their intellectual property.
“Three-quarters to 80% of the market is controlled by computers, and what we are trying to do is empower those with the abilities and willingness to be able to build their own algorithms rather than having just a walled garden of a couple thousand quants on Wall Street,” co-founder Jean Bredeche said.
Despite their engineering backgrounds, the two Quantopian founders, Mr. Bredeche and John Fawcett, worked more on the qualitative side of Wall Street. They said they knew many quants who got restless after only a few years on the Street and dreamed of trading on their own.
“People on the management side are dismissive: "We spend a lot more money on this than you ever will.' This definitely fires me up, and I think it is total nonsense and hubris,” Mr. Fawcett said.
Both men argue that the idea of keeping this knowledge secret is very dangerous.
“Things like the flash crash, hacking and even regulators' playing catch-up with what is going on should prove that,” Mr. Fawcett said. “If you have faith in humanity like we do, this is a reason to be hopeful.”
Industry experts sound a more cautious tone.
“It is a bit scary, to be perfectly honest,” said analyst Sang Lee, a managing partner at Aite Group LLC.
He argues that even at the most sophisticated large firms with automated algorithms and quality control, and “many Ph.D.s ... constantly back-testing them,” big things have gone wrong over the last few years.
One example is Knight Capital Group, which lost $440 million last summer when a glitch in its automatic trading software had the company inadvertently buying and selling millions of stock shares.
“I'm all for innovation, and I'm sure they could come up with a safe way of doing this, but I want to know that necessary safeguards are in place,” Mr. Lee said.
Other experts are impressed by the technological aspects but wonder about the potential for profitability.
“I actually think this is a cool concept,” said Darren Tedesco, managing principal of innovation and strategy at independent broker-dealer Commonwealth Financial Network.
“As far as converting back-tested thoughts into future profits, it remains to be seen that anyone will find a way to beat the system over the long haul. It's hard to speculate that alpha will ultimately be extracted for the end-users,” Mr. Tedesco said.
Check out a Q&A session with Quantopian's founders for additional background.
Scivantage rolls out mobile platform
Broker-dealers and other firms that have yet to develop their own mobile applications for investors, worry not. Last Wednesday, independent financial technology provider Scivantage Inc. launched its new HTML5-based mobile brokerage platform called Investor Mobile, available for Apple's iOS and Android devices.
Firms can label it as their own, and though pricing is on a negotiated case-by-case basis, it will certainly cost less than firms would spend developing their own platforms.
The platform is fully hosted on Scivantage's cloud architecture, and with it, investors can access financial research, manage their portfolios and execute trades.
In addition, the app's use of HTML5 makes it much easier to update than many other applications built on proprietary platforms. Scivantage took a hybrid approach to developing the application, which combines existing native code and HTML5.
VERSIONS SHARE CODE
In fact, the versions for the two operating systems shared about 95% of the same code, said Chris Psaltos, vice president of product management at Scivantage.
“Clearly, within the brokerage and banking space, there is a lot of data and data enrichment, and having to do something entirely in a native application and maintaining and extending it would be very painful and expensive,” he said.
“We can quickly compile the application for new operating systems as they become available,” said Mr. Psaltos, adding that the time frame has shrunk to days or a week, from months.
A version intended for use by registered representatives at independent broker-dealers will be rolled out within a year.
For more information visit the pages for Scivantage Mobile online.