HSBC says it used quantum computing to improve bond trading — a “world-first”
HSBC made waves on Thursday by announcing a successful trial using quantum computing to optimize bond trading. This groundbreaking achievement marks the first time in the world that quantum computing has been proven valuable in the financial services industry. Collaborating with IBM, HSBC combined classical computing with IBM’s Heron quantum processor to achieve a remarkable 34% improvement in algorithmic bond price predictions, as stated in a release shared by HSBC.
Philip Intallura, HSBC’s group head of quantum technologies, hailed the trial as a “ground-breaking world-first.” In a video included in the announcement, he explained that the enhanced trade predictions resulting from quantum computing ultimately translate to “increased margins and greater liquidity.”
The trial aimed to explore how quantum computers could optimize requests in over-the-counter markets, where financial assets are traded without a centralized exchange or broker. Leveraging IBM’s latest quantum computing technology, the collaboration between HSBC and IBM demonstrated a significantly more accurate estimation of trade likelihood at a quoted price compared to conventional methods using classical computers alone.
Josh Freeland, global head of algo credit trading at HSBC, highlighted the significance of this advancement, stating, “This is something that we do thousands of times a day already and that’s estimating the likelihood of winning a trade.”
Technology has long played a crucial role in Wall Street trading, with automation systems introduced at the New York Stock Exchange in the 1950s. The emergence of algorithmic trading followed, revolutionizing the industry by automating trade executions. By 2009, about two-thirds of all trades were conducted using computers, according to research from Deutsche Bank.
HSBC’s trial results showcased the superiority of quantum computing techniques in addressing the complex factors involved in algorithmic trades compared to classical computing. The addition of quantum computing methods facilitated a better understanding of hidden pricing signals in noisy market data, leading to significant improvements in the bond trading process.
According to HSBC, this trial marks the first empirical evidence of quantum computers’ practical application in algorithmic bond trading.
“We have great confidence we are on the cusp of a new frontier of computing in financial services, rather than something that is far away in the future,” Intallura expressed in HSBC’s statement.
What is quantum computing?
Quantum computing, a burgeoning field in computer science and engineering, utilizes quantum mechanics to solve problems and process information across various sectors, including finance, logistics, and cybersecurity. Major tech players like Amazon, Google, IBM, Intel, and Microsoft have heavily invested in this technology.
IBM predicts that quantum computing, although still evolving, will soon surpass classical supercomputers in speed and problem-solving capabilities. Tasks that could take classical computers thousands of years to complete may be resolved in mere minutes or hours with quantum computing.
