Until relatively recently, the practice of quantitative finance was considered to be the purview of Western trading hubs such as New York and London. Even when major investment banks, hedge funds, and propriety trading firms finally started to expand into Asian in the latter part of the last century, quant teams on the continent would still largely deploy mathematical models and quant programming strategies that had been developed for, and implemented in, Western markets.
In 2023, Disruption Banking ran a series that aimed to shine a light on the innovation that is taking place in Asian quant markets. Our top five are below:
Taiwan
“We are seeing liquidity being withdrawn, much more frequent rotations are happening as no new money is flowing in. We’re seeing net sells every day. However, Taiwan is growing.” That was the blunt assessment of a quant trader at a prominent asset management firm in Hong Kong who pointed to the rapid rise of Taiwan which is fast challenging the more established finance hubs in Asia. Taiwan’s innovation in the realm of artificial intelligence (AI) and other forms of cutting-edge technology is facilitating the growth of a quant industry deploying some of the most advanced trading tools available on the market today.
Mumbai
Indian equity markets are still dominated by domestic investors for now, however foreign hedge funds and quantitative trading firms are paying ever-closer attention to the possibilities offered by Indian markets. A quant trader in Mumbai told Disruption Banking that “in the past two or three years, the quant trading industry has developed at a very rapid rate – and personally, I would say the industry has become very sophisticated as well.” Will more quant funds look to join New York’s Tower Research and Amsterdam’s Optiver in setting up shop in Mumbai?
Seoul
Seoul, which has traditionally had restrictive financial regulation given the legacy of the Asian Financial Crisis, is taking liberalising steps to encourage the growth of its quant trading space. South Korea could look to leverage the leading role it currently plays in global crypto and decentralised finance (DeFi) markets to build up its quant space, too. Could Seoul be carving a lucrative niche as the hub for Asian crypto quant trading?
Beijing
The Chinese capital has long been the commercial and political centre of the country, but its finance activity has traditionally taken place elsewhere. However, the launch of the Beijing Stock Exchange in November 2021 has encouraged “China’s economic centre of gravity to shift to Beijing,” spawning an ecosystem of investment firms, hedge funds, and quant trading companies.
Shanghai
While Shanghai is one of China’s more established finance cities, its quant industry remains relatively nascent. A string of controversies in Shanghai and Shenzhen has prompted the regulators to consider considerably tighter regulation. Will quant funds be able to take advantage of the opportunities that are undoubtedly present in Shanghai, or be blocked from doing so by protectionist authorities?
Author: Harry Clynch
