Opening the black box of finance

Why have the powerful tools of quantitative trading historically only been available for use by the world’s biggest traditional finance entities? Could they be opened to a wider community of traders and investors?

These are the questions Jared Broad set out to answer when in 2011, he established QuantConnect, a quantitative trading platform, based in Seattle.

“I’ve always been passionate about the markets and applying my engineering background to capture opportunities,” says Jared, a former participant in the University of Auckland’s Velocity entrepreneurship programme, delivered through the Centre for Innovation and Entrepreneurship

Quantitative trading uses mathematical models, algorithms, and large datasets to identify market opportunities and execute trades automatically, relying on statistical analysis and computing power rather than human judgement alone. For years the software capable of analysing vast datasets, running complex simulations and executing trades at scale was the exclusive domain of top-tier financial institutions.

Enter Jared. In 2007, after graduating with a degree in Biomedical Engineering, he spent time working with humanitarian organisations in places like Myanmar, Haiti and Chile. Those experiences inspired Jared to launch a small quantitative investment fund, from which profits would go to support humanitarian work.

What followed was a crash course in the realities of quantitative finance.

“I was completely naive to the challenge and spent the next two years building the technology, raising capital, and trading the fund live. It was an enormous effort, but I came to understand the barriers to entry for the quant space,” he says. “The data required to analyse markets was expensive, the statistical techniques were complex, and the technology platforms needed to run trading algorithms simply didn’t exist in an accessible form. It is an opaque industry as funds have no incentive to share or educate people about their quantitative technology and techniques, or risk market losses.”

Within that challenging environment Jared recognised opportunity. He pivoted, converting his fund into QuantConnect, a platform that would make quantitative trading accessible to everyone.

“QuantConnect removes the barriers to quantitative trading, allowing users to design and live-trade strategies directly from their brokerage accounts. Our AI can implement new quant strategies in minutes.”

Today the platform serves around 480,000 registered users who collectively run roughly one million market simulations each month, and live-trade $US70 billion ($NZ115.5b) in trading volume per month.

QuantConnect’s growth and success has come steadily, rather than rapidly on the back of hype, and the early years were tough, Jared says.

In the early years the company was entirely bootstrapped, with Jared and a small team funding development through consulting work and side jobs. What kept them going was a belief in the mission and a culture that prioritised curiosity, humility and persistence. It remains one of the things Jared is most proud of today.

“We have a strong company culture that eschews ego and drives excellent decision-making. We work hard, but sustainably, so our heads stay clear. I think that’s contributed to our grit, as we continue to outlast and compete.”

Jared traces part of his entrepreneurial mindset back to Velocity (then known as Spark) saying the experience exposed him to early-stage venture thinking and the process of pitching ideas, though with hindsight, he says the most valuable lesson was simpler.

“Focus on code (product), customers and cash flow. Everything else is a distraction.”

Today QuantConnect’s ambitions remain bold. Jared believes the platform could eventually become the open-source infrastructure underlying modern capital markets; technology capable of supporting trillions of dollars in investment activity.

If that vision becomes reality, it will stem from the same idea that first inspired the company: that the most powerful tools in finance shouldn’t be locked away, but opened up for anyone determined enough to use them.