Quantopian is a Boston-based company that aims to create a crowd-sourced hedge fund by letting freelance quantitative analysts develop, test, and use trading algorithms to buy and sell securities.
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History
Quantopian was founded in 2011 by John Fawcett and Jean Bredeche. In 2012, it raised a seed round of $2 million from Spark Capital and Global Electronic Trading Company, followed by a Series A round of $6.7 million in 2013 (led by Khosla Ventures and Spark Capital), and a Series B round of $15 million in 2014 (led by Wicklow Capital, Spark Capital, Khosla Ventures, and Bessemer Venture Partners). As of September 2014, the company consisted of about 20 employees, up from 12 in January 2014. As of July 2016 the company had about 85,000 members, compared to about 10,000 and 20,000 in October 2013 and May 2014, respectively.
In July 2016 Steven A. Cohen, chief executive officer of Point72 Asset Management, announced his firm will put up to $250M under the direction of algorithms managed by Quantopian and in addition make an investment in Quantopian itself.
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Business model
The company has a two-sided market business model:
The first side consists of algorithm-developer members who develop and test for free, and trade for no charge (other than the associated brokerage commission and spread). These members can compete against other members in a series of contests called the "Quantopian Open." Anyone can join the site and (optionally) enter the contests: no particular educational qualification nor work experience are required.
The second side is investor-members in a so-called crowd-sourced hedge fund. These members have their investments managed by the winning algorithms. Successful developer-members can get a royalty or commission from investor-members, who profit from the former's algorithm. Board member Andrew Parker claims that Quantopian is aiming for modest number of users and a large average revenue per user (ARPU); more like Bloomberg than Facebook.
The business model capitalizes on a trend jokingly dubbed "the latest DIY craze" by the Wall Street Journal.
Technology
Quantopian's web-based product is written in Python. Live trading is completed by coupling the trading algorithm's buy/sell orders to a brokerage account at Interactive Brokers. Parts of the company's technology are available under an open source license, in particular their backtesting engine dubed "Zipline." The uploaded algorithms of users remain the trade secrets of the individual (unless the person chooses to publish them). The company claims that its employees are forbidden from accessing the submitted algorithms (except in certain circumstances) and that protection is ensured by "alignment of interests," meaning that all users would leave and the company collapse if that trust were ever violated. The company does however reserve the right to review the performance and other outputs of user's algorithms. Allowing users to run arbitrary code on its servers poses some unusual cyber-security challenges.
Usage in study of corporate governance
In 2015, Quantopian's Director of Products, Karen Rubin, used the service in a study that showed that a hypothetical portfolio of investments in women-led companies would perform three times better than an investment in an index fund based on the S&P 500 over the same period. Her study was inspired by a Credit Suisse's Gender 3000 report, specifically that "Companies with more than one woman on the board have returned a compound 3.7% a year over those that have none..." and yet paradoxically only "12.7% of boards had gender diversity."
Usage as alternate platform for higher education
Writing for Wired magazine, Fawcett proposes that Quantopian be used as a MOOC-like platform for higher education.
Awards
Quantopian was ranked #98 on Forbes' 2014 "List of America's Most Promising Companies." Also in 2014, Mike Hogan of Barron's called it "Best site for quants."
Source of the article : Wikipedia
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