Quantum Computing and Financial Trading

Union Bank of the Philippines adopts Refinitiv's Electronic Trading

The following article was written by Adinah Brown, content manager at Leverate.

If you have not heard of quantum computing, you are not alone.

To date, most of the work of quantum computing has been taking place in universities, where super smart tech geeks work with never-before-seen technology to change the world using algorithms that most of us can’t comprehend.

If you’re not a tech head or theoretical mathematician, defining quantum computing doesn’t really give you an understanding of what it means and what it is likely to be able to achieve. But let’s give it a go anyhow.

The difference between current computing and quantum computing is the difference between binary bits of technology, where each bit is either a binary 0 or 1, and quantum computer’s qubits, which can be zero, one or a quantum superposition of the qubit states. In my head, I guess it is like the difference between 2D and 3D movies, but that’s just an educated assumption.

What does this mean practically?

At its basic level, quantum computers are able to figure out many of the encryptions that are not possible to the figure out on a normal computer, because of the limitations of the binary bits in traditional computing. This is just one of the practical advances, but the current level of cryptographic encryptions would not be effective defense against quantum computing, leading many in the security community to fear a “cryptopocalypse” (which is a pretty cool way of mixing cryptography and apocalypse, even if it is a totally scary concept).

For the financial industry, it has certain impacts. The first is obviously the need to create a more secure situation to protect money, since the current encryptions will be useless in the face of quantum computing.

The second interesting one is its potential to seriously disrupt the financial markets. Quantum computers are able to execute more complex algorithms than today’s computers and execute them more quickly. It can solve issues in algorithmic trading in a way that is unfeasible by current standards of computing. This means that the capabilities of algorithmic trading will increase significantly with the advent of quantum computing. By changing the capabilities of certain types of trading, the market metrics will also change, making it a significant disruptor.

Not only are existing algorithms able to be more effectively computed, but a significant potential exists to develop new algorithms. Each development will represent a new, greater level of computational capabilities, potentially rendering the previous algorithm obsolete. Companies will focus on creating new algorithms for both profit and competitive advantage.

Quantum computing has the chance to impact security in the financial industry and develop algorithmic trading, disrupting existing market dynamics and creating a new dynamic in the process. This brave, new world of computing capabilities has the power to create new unique disruptions in a similar way to AI and machine learning. Quantum computing can harness data and create algorithms to solve problems in ways that we cannot yet fathom, and like each iteration of technology that came before it, quantum computing will have the power to change the world.

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