The trial session conducted by HSBC and IBM explored how present-day quantum computers are used when requests are asked for quoted in over-the-counter markets, where assets like bonds are exchanged directly between parties without any centralised exchange or broker.
There is a rapid evolution of quantum computing, which is reshaping the way all industries operate globally. Using quantum technology in financial institutions will help bring solutions to increasingly complex market challenges.
HSBC has announced that it has reached a significant milestone. It claimed to have made a world-first breakthrough in using quantum computers to solve real-world financial problems.
They are working with a team at IBM. HSBC used a combination of quantum and classical computing to achieve a 34% increase in the likelihood of predicting how likely a trade would be completed at the quoted price. It is an improvement compared to the widely used classical methods in the industry.
In the corporate bond market, algorithmic trading uses computer models to quickly and automatically process customer inquiries during the competitive bidding process. These processes will take into account current market conditions and risk to determine the price, allowing traders to focus on larger and more complex transactions.
However, since the nature of the process is complex, it was a win for the company when the trial results showed better outcomes using quantum computing compared to classical computers, which used traditional methods.
The trial session conducted by HSBC and IBM explored how present-day quantum computers are used when requests are asked for quoted in over-the-counter markets, where assets like bonds are exchanged directly between parties without any centralised exchange or broker.
During this process, the algorithm and statistics models used will estimate the chance of a trade being executed at a particular price.
The teams will test real, large-scale trading data on multiple IBM quantum computers to predict the probability of winning customer inquiries in the European corporate bond market.
The findings prove the potential that quantum computers can bring to the financial sector as they deliver better solutions to complex challenges compared to computers alone.
According to Philip Intallura, HSBC’s Group Head of Quantum Technologies, the results were a significant advancement in bond trading as quantum computers solve real business problems at scale and offer a competitive advantage. He believes that, based on the progress made by quantum technology in practical applications in financial services, it is more advanced than previously thought.
Jay Gambetta, Vice President of IBM Quantum, noted that this project unlocked new opportunities through the collaboration of deep industry expertise and algorithm development in quantum computing.
Quantum computing is a new branch of computation that uses the principles of quantum mechanics to process information exponentially more efficiently and dynamically than classical systems can.
The quantum computers will solve certain problems that are beyond the reach of even the most advanced supercomputers.
In the project, IBM was able to improve classical computing workflows by uncovering hidden pricing signals in noisy market data, outperforming traditional, classical-only approaches used by HSBC and providing improved results in bond trading.
The collaboration between HSBC and IBM holds transformative potential for quantum computing in the financial sector. As quantum technology continues to advance, it will handle complex processes more efficiently, much like the groundbreaking collaboration between HSBC and IBM, which helped solve real-world financial problems and drive advancements in algorithmic trading.
For the future, continued investment and collaboration in quantum computing research will help realize its full potential. As more financial institutions explore quantum solutions, the industry can see more breakthroughs that will change how risk assessment, pricing strategies, and market analysis are done in the industry. Ultimately, quantum computing will redefine the boundaries of what is possible in finance, setting new standards for performance and innovation.