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Quantopian-as-a-Marketplace

Quantopian makes it very clear what they're looking for to allocate capital to: low beta, low single stock exposure, virtually 0 net exposure etc. The trouble is, not everyone has the same investment criteria as Quantopian, including many of us developers.

Many of us have developed investment strategies that, although a viable option to many, don't meet the specific requirements of Quantopian's market neutral hedge fund: i.e. ETF strategies, smart beta strategies, momentum strategies with indicators switching asset allocation etc.

I'd like to see Quantopian develop a service which would allow developers to market and sell their strategies directly. This could be a similar service to Motif's Royalty Program. In their model if people invest in a motif made by a "creator" that person gets a cut of the commission. Couldn't Quantopian set something similar up?

Quantopian can/is theoretically not looking at source code yet are live trading the algorithms. So couldn't this be exposed to common investors? In this model a developer could market his/her algorithm for other investors to use for a low fixed fee per month. That fee could then be split between the developer and Quantopian. This model could represent a decent revenue stream for Quantopian. Yet it also will help motivate developers to not only write more algorithms, but attract both fellow developers and common investors to the Quantopian platform. I would think that the legality and risk here for Quantopian is muted and similar to the current setup? Quantopian and the developers are still not directly holding cash, and users of algorithms could end it at any time.

I think this type of setup is a win-win-win!
- Quantopian can build its community and develop another revenue stream.
- Developers are motivated to create and market algorithms and incentivized to make more sustainable ones that will not only attract investors, but keep them.
- Common investors not interested in writing code but still want access to low cost investment products will now have that source.

9 responses

I'd like to second this request. There is definitely a portion of the investment community that wants market neutral strategies; but I think it's safe to assume that there are larger opportunities if Quantopian starts building out the ability for users to sell their strategies (and get a cut in the process).

Thanks for the suggestion. It's definitely one that we've gotten before.

I agree there is a market for strategies beyond what Quantopian is currently making allocations. Remember, though, at our heart we are a startup company. One of the core lessons for a startup is to do one thing really well - it's far likely to succeed than trying to do many things well. We're focused on this market-neutral type of strategy because we think it is wide enough to be profitable, but narrow enough for us to focus.

The marketplace you're describing is a lot of work, and it would be distracting to our community. We may decide to add other products in the future, including a marketplace, but it's not something we have the bandwidth to do in the near future.

Thank you for time and thoughts.

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Dan,

I can certainly appreciate that Quantopian needs to stay focused, especially in these early stages of the company's evolution.

I don't need to be the one to tell you that "FinTech" is hot. A financial technology that allows retail investors to have the selection of algorithmic trading strategies is an attractive and profitable venture, especially when they have full transparency into the stocks/companies they own in real time. It's also one that would truly Level Wall Street's Playing Field by directly working to upend the high cost mutual fund industry.

Quantopian has already developed the infrastructure. I believe this to be a significant opportunity, one that I would be interested to pursue venture capital for.

Can we speak at some point about what investment would be needed to use the Quantopian backend to make this possible? If Quantopian isn't directly interested in making the algorithm marketplace an option, maybe there can be a way to pay you for your backend, and I can pursue funding to make the frontend a reality?

Opening up the investment into the algos to outside investors certainly looks like a very good idea. There are certainly a lot of algos here that don't fall under Q fund criteria, but that may fit into investors who have different investment strategies. Looks like a win-win-win situation (for developer/Quantopian/Outside Investor everyone involved). All that is needed is to put up a searchable UI for outside investors and some logistics.

I was shocked that only ~200 people are live trading through Quantopian. And that makes sense with these numbers why Quantopian would view the business opportunity as small. I know it could be daunting for folks that don't have the right combination of analytics, programming, and investing acumen and confidence to develop strategies to use.

But there is a market for investors to pay others to algorithmically trade for them. This is why the Quantopian-as-a-marketplace should be reconsidered before shutting down live trading. If users had a breadth of options to pick from and pay $20 a month (maybe $5 goes to the developer) I bet there would be a significant interest.

I still am hopeful that Dann can get back to me regarding my interest to pay/buy for the backend software that you've already developed (and apparently stopping without getting paid for?). I would be interested to find seed funding to make a Fintech company that allows users to have algorithms trade their own money for them for a low cost.

I like the market place concept and willing to assist where I can in a startup. As a former institutional trader, I would probably wave the monthly fee (unless there are additional data charges) and suggest the market place take a truly scalable model. Firms that cleared our trades (Goldman, Cantor Fitzgerald, Wolverine) would add a 1/2 to 1 cent per share charge for clearing.

If Q would be willing to partner, it may be doable with a volume based approach vs a fixed monthly fee. The half a penny or penny charge per share is negligible to the trader.

I understand Dan's point as being focs but I second the idea of a market place for algo trading.
I've used collective2 (a market place for investment strategies), and while I find the concept to be great there are a lot of garbage and discretionary trading that end up blowing up after huge returns. I find there is a complete lack of transparency about what the investment leads are doing. Also you pretty soon figure out that people don't trade their strategies and that they don't scale up once you have more than a handful of subscriber...

Having an algorithmic strategy which can be backtested and evaluted out of sample would be great and you would know that it won't changes without your knowledge ....

just my 2 cents, in the end I love the Q platform and there are many things that I wish it would become but being also a company CEO, I know it is better to do one thing good that many poorly and I wih Q good luck, I think the backtesting platform and research itself are fantastic and having spent the time to learn them I don't see the point of abandonning them... I'll just have to figure out how to go live with my algos....

There are other places that are doing marketplace type things - i.e. Collective2.
If someone wanted to really build this marketplace thing, they could do it - just take zipline, add some brokerage connections and build the marketplace around it.

@Stephen It should not come as a shock. Trading on quantopian requires coding skills, something most investors don't have.