Quantum News Nexus

Update, Oct. 1: After HSBC’s announcement, IBM this week has another bit of news about a finance-related quantum application, revealing the results of a portfolio optimization study with Vanguard that showed promising metrics and “robust performance even in the presence of [quantum] hardware noise…”

You can dig into IBM’s post linked above for all the juicy technical details.

Portfolio optimization was seen as one of the earliest potential applications for quantum computing in banking and finance, with just about every quantum hardware and software company, and finance giants like JPMorgan Chase and Wells Fargo exploring its potential. But, it also seems like one of those areas where pilots and trials have not necessarily led to broader implementation yet.

The healthcare and pharma sector, with applications like drug discovery, and transportation and logistics, with all its optimization scenarios, have stolen a bit of the thunder from the finance sector’s early interest in quantum, but perhaps we’re seeing the beginning of some renewed interest on the part of financial firms.

Anyway… Back to the earlier story:

If you want to move a market, show the people whose business is money how to make more of it.

Yes, it sounds like something that was said by Gordon Gekko in a scene from “Wall Street” that was left on the cutting room floor. But, at a time when quantum computing interest is at an all-time high, it would be good to re-up on efforts to demonstrate practical value–and even revenue-generating potential–rather than use it as an excuse to elevate the hype with bombastic claims about cleaning the clocks of classical computing companies.

Financial services giant HSBC late last week said it used the IBM Heron quantum processor in an experiment that showed the potential for significant improvement in algorithmic bond trading versus what classical computers can do on their own. Specifically, the demonstration, which involved “quantum and classical computing resources,” could 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.”

HSBC further explained the significance at length:

“Algorithmic trading in the corporate bond market uses computer models to quickly and automatically price customer inquiries in a competitive bidding process. Algorithmic strategies incorporate real-time market conditions and risk estimates to automate this process, which allows 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.

“HSBC and IBM’s trial explored how today’s quantum computers could optimize 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. The teams validated real and production-scale trading data on multiple IBM quantum computers to predict the probability of winning customer inquiries in the European corporate bond market.

The results show the value quantum computers could offer when integrated into the dynamic problems facing the financial services industry, and how they could potentially offer superior solutions over standard methods which use classical computers alone.”

Philip Intallura, HSBC Group Head of Quantum Technologies, called the experiment “a ground-breaking world-first in bond trading. 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. 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.”

Ok, “ground-breaking world-first” is bombastic, and I would be interested to hear what anyone else has to say about that claim, as many companies in quantum computing and finance have been working together for at least half a decade on ways to apply quantum processors and algorithms to optimize a variety of different trading use cases. Also, let’s boost that this was an experiment, and a lot will depend on what HSBC decides to do next.

The better words to focus on are “competitive edge.” Show the financial sector exactly how quantum computing can give them an edge to make more money. It’s better than talking about qubits or quantum volume or even logical qubits and roadmaps to fault-tolerance. It sounds really basic, but show them how you make a difference.

Other words I like: “quantum and classical resources.” Show them a natural evolution. Show them not how quantum will kick butt on all the computing resources they already invested in, but rather how to maximize those resources with an assist from quantum.

The announcement appeared to directly pump IBM’s stock price, boosting it from $267.44 to a height of $283.44 within a few hours on Sept. 25.

IBM making some big quantum news has all the feels of 2021. Big Blue was an achiever of early technical milestones in the space, as well largely responsible for raising quantum’s business and commercial profile during that period of, let’s say, 2016 to 2021 when it was still mostly wandering through the forest of academia.

It was November 2021 when IBM announced its 127-qubit Eagle processor  at the IBM Quantum Summit, which arguably was the biggest technology-related news in the sector that year, and seemed to help boost quantum computing into the public eye. These were the days when it was all just about counting qubits, and that meant IBM was clearly the leader, especially with Google and Microsoft at that time preferring to work quietly on quantum, and not publicly appear like they were too in love with it. Fidelity was a goalpost glimpsed through the fog, not many people at all were discussing error correction and logical qubits. (That would start the following year.) 
IBM has kept up a drum-beat of new system, processor, and roadmap announcements every year, although “pure play” quantum computing start-ups have grabbed more headlines in the last four years. When IBM told CNBC earlier this year that it had earned $1 billion in revenue from quantum, cumulatively, since 2017, the message was clear: IBM has been at this quantum stuff longer than most companies, and (if that statement was true) has made more money from it than any other. So, we’ll see if the HSBC announcement signals more to come from IBM.

Image: Screen capture from the HSBC website

Quantum News Nexus is a new site from freelance writer and editor Dan O’Shea that covers quantum computing, quantum sensing, quantum networking, quantum-safe security, and more. You can find him on X @QuantumNewsGuy and doshea14@gmail.com.