HSBC says it has created the empirical evidence of the potential value of current quantum computers for solving real-world problems in algorithmic bond trading in what the bank says is a “world first”.

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.

Strategies using algorithms incorporate real-time market conditions and risk estimates to automate this process, which would allow 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.

The trial from IBM and HSBC 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.

IBM and HSBC say their teams validated real and production-scale trading data on multiple IBM quantum computers to predict the probability of winning customer enquiries in the European corporate bond market.

“This is a ground-breaking world-first in bond trading,” Philip Intallura, HSBC group head of quantum technologies said.

“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.

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“We have been relentlessly focused on the near-term application of quantum technology, and given the trial delivered positive results on current quantum computing hardware, 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.”

Jay Gambetta, Vice President IBM Quantum, said: “This exciting exploration shows what becomes possible when deep domain expertise is integrated with cutting-edge algorithm research, and the strengths of classical approaches are combined with the rich computational space offered by quantum computers.

“Such work is essential to unlock new algorithms and applications that are poised to transform industries as quantum computers scale, and the future of computing takes shape.”

Image: HSBC