Quant India Risk Disclosure Statement
Last revised: July 01, 2017
Welcome to Quant India!. Quant India is both a web-based platform and a community for developing, testing and running trading algorithms. As a community, it's a place to meet other algorithm writers and to share algorithms, tools, ideas, strategies, and trading experiences. By sharing algorithms and other content, members of the Quant India community can use, adapt, and learn from one another.
In addition to basic services that allow you to write and test trading algorithms, Quant India also provides a set of supplemental services, called Brokerage Connection Services, that allow you to engage in live trading through an unaffiliated registered broker-dealer based on the use of algorithms and trading strategies.
Using Quant India's Services, including its Brokerage Connection Services, presents several different types of risk. We have summarized these below. You should read and understand these risks before you use any of Quant India's services.
The risks that can arise from using Quant India's Site and Services fall into three broad categories:
ANY PERMUTATION OR COMBINATION OF THE OCCURRENCE OF THE POTENTIAL EVENTS THAT DEFINE THE RISKS DESCRIBED IN THIS DISCLOSURE STATEMENTS CAN LEAD TO A TOTAL OR PARTIAL LOSS OF OPERABILITY, RESPONSIVENESS, FUNCTIONALITY, AND FEATURES THAT COULD MATERIALLY AND ADVERSELY EFFECT YOUR USE OF QUANT INDIA.
Risks of Using Internet-based Technology - Generally
The Internet-related technological risks arising from using Quant India's Site and Services to write, test, analyze, and run trading algorithms and related trading strategies fall into three categories: (a) risks related to Quant India's software; (b) risks related to Quant India's computing and communications infrastructure; and (c) risks related to your software, hardware, and Internet connectivity. It is your obligation to thoroughly and appropriately test any trading algorithm before you put it in production and to continually monitor the operation of any trading algorithm in production to ensure it is running properly and in compliance with any applicable rules.
The operation of Quant India's Site and Services depend heavily on our infrastructure of computing and communications systems. The operation of this infrastructure is subject to several risks:
Any of the components of your computer system and/or your Internet connectivity could fail entirely, function erratically, or function very slowly. The result of any of these occurrences could make it difficult or impossible for you to access the Quant India Site or use the Quant India Services.
Risks in Writing, Testing, and Running Trading Algorithms
Writing, testing, and running computer-based trading algorithms is subject to several risks, any of which can cause your algorithms to not function as you had intended or fail to achieve one or more of the objectives of your algorithms. Algorithmic trading is rapidly changing as a practice and as an industry. Models of markets used to write and test trading algorithms are inherently limited and often fail to perform as expected. In addition, trading algorithms are implemented in software programming code, and no matter how well designed and thoroughly tested, any such code can have logical errors and bugs that cause the algorithms to malfunction or suggest trades that, if executed, would result in losses. It is your obligation to thoroughly and appropriately test any trading algorithm before you put it in production and to continually monitor the operation of any trading algorithm in production to ensure it is running properly and in compliance with any applicable rules
Risks of Engaging in Live Algorithmic Trading and Related Strategies
Quant India's Brokerage Connection Services allows you to engage in live trading through an unaffiliated, registered broker-dealer based on the trades suggested by running your algorithms. Engaging in live trading subjects you to (a) the risks associated with trading generally, and (b) the risks associated with live algorithmic trading using Quant India's Brokerage Connection Services.
THE OCCURRENCE OF ANY OF THE EVENTS ASSOCIATED WITH THESE RISKS, ALONE OR IN COMBINATION WITH ANY OF THE OTHER RISKS DESCRIBED IN THIS DISCLOSURE STATEMENT, COULD RESULT IN THE LOSS OF ALL OF THE MONEY YOU HAVE DEPOSITED IN THE BROKERAGE ACCOUNT YOU USE FOR LIVE TRADING BASED ON THE ALGORITHMS YOU WRITE, TEST, AND RUN ON QUANT INDIA. LOSSES CAN HAPPEN MORE QUICKLY WHEN USING ALGORITHMIC TRADING THAN OTHER FORMS OF TRADING. YOU SHOULD DISCUSS WITH AN INVESTMENT PROFESSIONAL THE RISKS OF TRADING IN GENERAL AND ALGORITHMIC TRADING IN PARTICULAR. YOU USE ANY ALGORITHM IN LIVE TRADING AT YOUR OWN RISK AND IT IS YOUR OBLIGATION TO THOROUGHLY AND APPROPRIATELY TEST ANY TRADING ALGORITHM BEFORE YOU PUT IT IN PRODUCTION AND TO CONTINUALLY MONITOR THE OPERATION OF ANY TRADING ALGORITHM IN PRODUCTION TO ENSURE IT IS RUNNING PROPERLY AND IN COMPLIANCE WITH ANY APPLICABLE RULES.
You may incur losses (or fail to gain profits) while trading securities. You should discuss the risks of trading with the broker-dealer where you maintain an account or other investment professional. Quant India provides you only with trading technology and can provide no investment, financial, regulatory, tax or legal advice.
In addition to all of the risks described above, live algorithmic trading is subject to the following types of types of risk:
It is not possible for a computer model to truly predict what might have happened if an algorithm-based trading strategy was in play in a live trading environment. For example, the implementation of such a strategy can itself have an impact on the market, and the model may fail to account for real-life factors that impact the model. Moreover, the model may fail to account for execution costs including broker commissions, fees, and trading slippage. And, in a live trading mode, your broker may not permit orders or actions that were executed in the model.
A promising model result does not necessarily predict a successful strategy. Execution of the code comprising the algorithm and the performance of that code may prove to be impossible in a live trading environment. Changes in various market factors not foreseen in a model can change, causing a strategy to fail. A backtest might be over-fitted to past data, and fail when the strategy is applied to new, live data. Orders that were executed correctly in the backtesting environment may be disallowed or rejected by your broker, causing the algorithm to fail or otherwise not perform as expected. Attempts to place, edit, or cancel orders might fail, or might result in unexpected outcomes. Moreover, your algorithm might not handle market conditions that cannot be reasonably anticipated, i.e., a “flash crash” or an exchange outage. These market conditions, by definition, will not have been tested.
Market centers in which you seeking to implement your trading strategy may fail or behave incorrectly because of technical reasons relating to infrastructure, connectivity, and similar factors.
Your algorithm might suffer from adverse market conditions. Those conditions can include lack of liquidity, and abrupt and unwarranted price swings. Also possible are late market openings, early market closings, market chaos, and mid-day trading pauses, and other such disruptive events.
Your broker's infrastructure and/or applications program interface (API) to which you connect the system on which you are running your algorithm might fail. In addition, even if your broker's infrastructure and API are working correctly, your broker may reject orders in error or by design, incorrectly execute orders, or induce errors through unexpected behavior (such as returning messages out of sequence, incorrectly acknowledging orders, or posting incorrect execution reports). You should refer to the brokerage agreement between your broker and you for how, if at all, any losses arising from these risks are allocated between your broker and you. Quant India bears no responsibility for this.
If your broker fails to comply with laws and regulations applicable to trading in general and algorithmic trading in particular, trades for your account that were previously permitted may be disallowed without warning.
The substance of your orders to buy, sell, correct, or cancel might not be what you desired because of errors in the algorithmic trading system that you are using. Such errors could include various incorrect parameters. Even if the substance of your orders is correct, because of errors in your system, your desired orders might not be placed at all or might be placed too early or too late. Latency (i.e., delays) within and between your system, as well as those of your broker and the market in which you seeking to effect trades, might cause orders, corrections, and cancels to be placed or not placed in ways that are not desired. You may receive incorrect information, or be unable to get information, about your orders, your positions, or market conditions. Incorrect actions may be taken, or correct actions may not be taken, because of inaccurate or missing information. In addition, you may be unable to terminate or edit your algorithm.
Algorithmic trading depends on the availability of various services from third parties in addition to your algorithm services provider and broker. These, for example, include providers of data services, computational services, and network connectivity. The operations of these third parties are beyond all of our reasonable control. Regardless of the reason for any failure by your broker, the market in which you seek to have trades executed, or these other third parties, we will not have any liability for any such failure.
Accurate and complete real-time price data is critical for the success of algorithmic trading. The systems of these data providers could experience failures, errors, and latency, which could result in missing, incorrect, or stale market data.
In some cases, providers of algorithmic services may rely on third parties to meet the computational needs entailed by algorithmic trading.
Your ability to engage in algorithmic trading through Internet-based services depends critically on network connectivity between you, your broker, the other third party service providers described above, and the applicable markets.
Any failures or delays in the third party data, computational, and connectivity services described here could materially and adversely affect your ability to successfully engage in algorithmic trading.
All computers and networks are subject to malicious hacking attacks and criminal activities designed to misappropriate intellectual property, compromise personally identifiable information, steal funds, or any combination of such purposes. These attacks might be attacks on a target of opportunity or specifically targeted. Each of the various systems described above that are necessary for you to engage in live algorithmic trading is subject to such attack. Any such attack could cause the system so attacked to function improperly or not at all and could result in the misappropriation of your intellectual property, the compromise of your personally identifiable information and personal financial information, and the theft of your funds.