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The "secret weapon" of Citadel Securities quants is bolstered by AI

In the world of banking, AI looks like many to be a harbinger of doom for certain jobs. Across the road, at trading firms like Ken Griffin's Citadel Securities, the opposite is true. Costas Bekas, head of research for the company, spoke yesterday at the Google Cloud Next conference about the "secret weapon" that makes Citadel Securities quants great, and how AI will make them greater still.

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Bekas said Citadel Securities people are set apart by the fact that they know "how to price things very well." Quants there are managed in an "unsupervised fashion," and asked to find patterns in data. It doesn't have to be similar to what other quants are doing, it just has to be "interesting." From there, quants then try to model the market, combining "key constituents," in a way that helps predict the future.

Bekas said Citadel Securities' quants are victims of their own success when it comes to data: they have so much of it that it's impossible to read it all.  Yes, you can add constraints to a search that make it "easier to find a solution," but it remains "very difficult to find the best solution." Bekas says AI allows quants to "explore the space with less constraints," but maintains that "the human is in the center" of any strategy tested.

AI isn't infallible, though. Bekas said it's vital to keep "feet on the ground" to not only prevent costs from growing out of hand, but keep the tech from going on unprofitable tangents. "If you're not careful," Bekas says, "the purpose will be defeated, and we will lose money instead of making it."

Bekas was speaking at the Google Cloud event after the FT reported this week that Citadel was moving data and algorithm testing to Google Cloud.

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AUTHORAlex McMurray Editor

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