Open Source and Trading Algorithms

At Quantopian, we love open source software.  Our servers run on Linux. our website runs on Rails. our blog is powered by WordPress. and so on.  We’re reaping the benefits that the open source community advertises — flexibility, interoperability, transparency, lower cost of ownership, and more.  (Yes, we give back to the community, too.  When we have a good change to an open source project, we provide a patch.  And, we plan on open sourcing our entire backtesting software so that anyone can use it!)

Software didn’t used to be created like this.  It used to happen only behind locked doors in encrypted files, touched by a chosen few.  Now, everyone with a computer and an internet connection can see the code source, download it, and modify it to their own purpose.  Open source  is  a revolution-in-progress in the software industry.

When you look at the financial services industry, though, the idea hasn’t taken hold.  From news sites behind paywalls (Wall Street Journal ) to paid newsletters (Kirk Report ) to closely-held hedge fund balance sheets, it is a culture of secrecy.

Algorithmic trading is also hidden behind the curtain.  The only people who can write trading algorithms right now are a small group of professionals, plus a handful of people who have been able to make huge time investments in data collection and programming and have cobbled together their own trading mechanisms.

To us, that sounds like a revolution that needs to be started. Instead of a small handful of people working on an investment problem, what happens when you get hundreds?  Thousands?    Great things happen, we believe.  Quantopian wants to sweep the technical obstacles to the side, pull away the veil, and let smart people all over the world work together on building better algorithms.  We think the results will be surprising and industry-changing.

When we tell people our plan, we are regularly told that finance is a secretive business, and no one will want to share their information. But we think we have a trump card: the development community.  Developers know what open source software is.  They know what open source can do, and they know how open source helps the community.

Quantopian is aimed at people who write code.  Developers can write their own algorithms in Python. We’re writing an algorithm backtester that lets developers see how their algorithm does in the real world. We think developers will enjoy the challenge of building better algorithms.  We think they will bring their open source ethos to the endeavor, and they will share and collaborate.  We think they will find sharing algorithms to be just an extension of the open source software sharing that they already do.

In the end, writing an algorithm is like any writing other program. Some of them are written for fun, some for learning, and some for making money. We think we’ll see all three.  We can’t wait to get started!

This entry was posted on Tuesday, August 7th, 2012 at 1:50 pm and is filed under Quantopian. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.