Democratizing Finance Before It Was Cool: Opening Our Market For Alpha
Our mission at QuantConnect is to democratize quantitative finance and empower individuals: we do this by providing institutional-grade trading tools to all levels of quantitative traders. We have seen firsthand in the past few weeks — with r/WallStreetBets-inspired retail trading influx — that the retail trader is incredibly powerful, and we want to continue to change the landscape of retail trading by providing everyone access to high-level alpha.
Starting this week, we are making a momentous change in our Alpha Streams licensing model. What was once only available to large institutions will now be open to all: Everyone, from small trading firms to individual quants, can license algorithmic trading strategies in our Alpha Streams marketplace. We stand to further enable and empower the modern retail traders who are making strides to shake up the market.
In quantitative finance, alpha is used as a measure of risk. A strategy is deployed and an investment is made, then alpha is measured by the excess return on the investment after adjusting for market volatility.
Alpha Streams is our global marketplace of algorithmic investment strategies, connecting creators to quantitative funds competing to license those insights. Alpha is submitted by our community of over 130,000 quants, reviewed by our team, and is then hosted on the Alpha Streams marketplace to be licensed and deployed for a profit to the creator.
We’re making alpha pricing a true “alpha market,” where the alphas have a fixed number of shares and maximum capacity. To ensure high-quality performance, the maximum allocation to an Alpha is limited, where each share represents a $10,000 capital allocation.
The available alpha allocation is sold according to the highest bidders in an auction. An auction will take place daily to allocate shares, and interested parties will bid based on their desired allocation and how much they are willing to spend to license the alpha. Bids come with a minimum 7 day commitment.
This should keep costs low for the investors, and find a fair market value for the quant author. We’re optimistic this will also increase licensing volumes for the quant-authors, as a diverse audience of investors will include a wider range of investment goals.
We’re excited to continue providing the tools for smaller firms and individuals to compete in the quantitative arena and continue on our mission to break open the doors to quantitative finance.