Today, I got email after email asking me to comment on a new paper from HSBC—yes, the bank—together with IBM. The paper claims to use a quantum computer to get a 34% advantage in predictions of trading data. (See also blog posts here and here, or numerous popular articles that you can easily find and I won’t link.) What have we got? Let’s read the abstract:

The estimation of fill probabilities for trade orders represents a key ingredient in the optimization of algorithmic trading strategies. It is bound by the complex dynamics of financial markets with inherent uncertainties, and the limitations of models aiming to learn from multivariate financial time series that often exhibit stochastic properties with hidden temporal patterns. In this paper, we focus on algorithmic responses to trade inquiries in the corporate bond market and investigate fill probability estimation errors of common machine learning models when given real production-scale intraday trade event data, transformed by a quantum algorithm running on IBM Heron processors, as well as on noiseless quantum simulators for comparison. We introduce a framework to embed these quantum-generated data transforms as a decoupled offline component that can be selectively queried by models in lowlatency institutional trade optimization settings. A trade execution backtesting method is employed to evaluate the fill prediction performance of these models in relation to their input data. We observe a relative gain of up to ∼ 34% in out-of-sample test scores for those models with access to quantum hardware-transformed data over those using the original trading data or transforms by noiseless quantum simulation. These empirical results suggest that the inherent noise in current quantum hardware contributes to this effect and motivates further studies. Our work demonstrates the emerging potential of quantum computing as a complementary explorative tool in quantitative finance and encourages applied industry research towards practical applications in trading.

As they say, there are more red flags here than in a People’s Liberation Army parade. To critique this paper is not quite “shooting fish in a barrel,” because the fish are already dead before we’ve reached the end of the abstract.

They see a quantum advantage for the task in question, but only because of the noise in their quantum hardware? When they simulate the noiseless quantum computation classically, the advantage disappears? WTF? This strikes me as all but an admission that the “advantage” is just a strange artifact of the particular methods that they decided to compare—that it has nothing really to do with quantum mechanics in general, or with quantum computational speedup in particular.

Indeed, the possibility of selection bias rears its head. How many times did someone do some totally unprincipled, stab-in-the-dark comparison of a specific quantum learning method against a specific classical method, and get predictions from the quantum method that were worse than whatever they got classically … so then not publish a paper about it?

If it seems like I’m being harsh, it’s because to my mind, the entire concept of this sort of study is fatally flawed from the beginning, optimized for generating headlines rather than knowledge.  The first task, I would’ve thought, is to show the reality of quantum computational advantage in the system or algorithm being studied, even just for a useless benchmark task. Only after one has done that, has one earned the right to look for a practical benefit in algorithmic trading or predicting financial time-series data or whatever. If you skip the first step, then whatever “benefits” you find from QC are overwhelmingly likely to be cargo cult benefits.

And yet none of it matters. The paper can, more or less, openly admit all this right in the abstract, and yet it will still predictably generate lots of credulous popular articles about HSBC using quantum computers to improve bond trading—which, one assumes, was the whole point. Qombies roam the earth: undead narratives of “quantum advantage for important business problems” detached from any underlying truth-claim. And even here at one of the top 50 quantum computing blogs on the planet, there’s nothing I can do about it other than scream into the void.