Originally on Hedge Fund Alert, By James W. Prado Roberts.
A new technology shop wants to bring quantitative investing to the masses.
QuantConnect is rolling out a cloud-based service that gives aspiring quant managers the tools to design and execute trading strategies and back-test their programs with historical market data. The offering promises to remove a big hurdle for many quant traders — namely, the high cost of accessing years of market data and the computing power needed to crunch the numbers. QuantConnect is offering the technology free of charge.
The New York firm has been beta-testing the service for the past year with 20-30 programmers, including computer engineers already employed at financial firms and graduate students pursuing careers in quantitative-investment management. In recent months, it has signed up nearly 600 prospective clients at conferences such as TechCrunch in San Francisco and Finovate in London — among them, dozens of Facebook and Google staffers. On March 14, QuantConnect alerted those individuals that they could begin using the service anytime. The firm also is working with the organizers of the Battle-Fin quant-trading tournament to support contestants.
In the near term, QuantConnect hopes to make money by helping clients set up trading accounts with Interactive Brokers. QuantConnect plans to charge $100 a month for access to the accounts. Down the road, the firm envisions a number of others businesses, including a hedge fund built around the strongest managers. Other possibilities include packaging the top algorithms as an exchange-traded fund and marketing individual strategies to retail investors via online brokerages.
First, however, the firm needs to raise additional capital. It has been running on $60,000 of seed money, and wants to raise another $500,000 to $1 million.
QuantConnect is accessible to investors who use the C# programming language. Programmers can design and back-test their strategies for free. They’ll only be charged when they set up trading accounts. Users currently have access to 14 years of market tick data on a basket of U.S. stocks. The firm plans to significantly expand the availability of historical data over time.
“The reason we are putting it out for free is there are huge barriers to entry into quant trading,” said Jared Broad, who co-founded the firm in 2011 with Shai Rosen. “We can break open the quant market — any engineer can try this, even if they don’t have capital to play with.”
At least one other technology shop, is working on a similar offering. The Boston firm is backed by high-frequency market maker Getco and venture-capital investor Spark Capital.
QuantConnect’s data resides on storage leased from Amazon.com. With instant access to the vast capacity, a simulation based on the 30 stocks in the Dow Jones Industrial Average could be run in a few minutes, versus a day or two on a desktop computer.
Broad, himself a programmatic trader, co-founded Stocktrack.org. Rosen previously was chief executive of Option TI.
- James W. Prado Roberts, Hedge Fund Alert
Jared Broad
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