Squared-S sprung into life in 2017, not long after Soujit Ghosh (pictured below, right), an investment professional with a successful career in derivatives trading, crossed paths with Seth Huang (pictured), an entrepreneur and educator, who has dedicated his life to artificial intelligence research and its use in asset management. The artificial intelligence-driven financial technology company provides 'state-of-the-art' trading, investment and risk management analytics, delivered through an application programming interface.
"Our mission is to vastly raise the value propositions for institutions and investors, by transforming and enhancing trading and asset management with artificial intelligence," said Ghosh, co-founder and chief executive officer. "We work with both traditional asset managers and derivatives trading desks."
The company is headquartered in Hong Kong and has a particular focus on China, given the rapid increase in assets under management and the demand for high-level AI solutions in that country, according to Ghosh. "Many large institutions in China have already reached out for collaboration with increasing interest from other countries in Asia," said Ghosh. "South Korea is also an obvious candidate for expansion, given that it has one of the world's largest structured products market."
Although other companies in the market claim to have proprietary AI systems, Squared-S is the only one to file patents on its methodologies and systems, according to Ghosh. "The company has eight AI patents pending in the US and Asia," said Ghosh. With AI fintech so new, there are few companies with the expertise of the two co-founders: Ghosh has spent 17 years in structured products and equity derivative trading, and Huang has spent than 10 years of working in the practical research and implementation in AI applied to finance.
The company's AI Engine is based on deep learning and recurrent neutral networks to combine "with other advanced methodologies, which feed off large data sets and provide automated and enhanced decisions", according to Huang, co-founder and chief AI officer. "Utilising this technology, we can extract patterns from financial data (ie. extract signals from noise) and make improved risk management and investment decisions," said Huang.
The company has already several 'beyond-proof-of-concept' tools, such as an AI portfolio optimisation tool and an intelligent self-learning trading system (AI trading bot), which can train itself on stock price data and make autonomous trading decisions that outperform 'random trading decisions'. "AI will be used to transform the structured products industry with increasing speed," said Huang. "We are also certain that AI technology is underutilised in many aspects of the product lifecycle and, therefore, soon we will witness AI influencing the industry at [different] levels."
The uses are as follows: to enhance equity derivatives trading strategies adopted by large financial institutions, such as hedge funds and proprietary trading desks at banks; identifying and picking trending asset classes based on predicted client investment trends when structuring [the company already has a classification platform to screen out products for potential clients based on their investment thesis]; in the trade execution platform for these structured products, meaning that the pricing and initial hedging will be automatically managed with little human interaction; and in risk management and derivatives hedging for trading books at big banks, according to Huang.
The company is building tools to carry out these functions, and expects the net effect to trigger a greater shift towards efficiency for institutions issuing structured products and greater transparency and cost savings for investors. "Like all new technologies, the common challenges for our company are the lack of understanding and fear from existing players in the industry," said Ghosh. "Human beings generally fear and distrust something they don't understand, and AI is something that is still poorly understood, even though it is becoming a popular buzzword."
In addition, many portfolio managers "fear disruption and redundancy as the financial industry moves toward treater automation of trading and investment decisions by AI", according to Ghosh. "The irony is that almost everybody uses AI technology on a daily basis without even thinking about it," said Ghosh.
Squared-S has already secured a collaboration with one of Asia's largest asset managers and has more deals and partnerships in the pipeline, according to Ghosh. "We plan to raise venture capital funding in order to meet the growing demand from our clients, but our immediate objective for 2018 is to continue building robust and scalable AI-driven solutions for global institutions," said Ghosh.