This Gurugram-based fintech startup helps retail investors make money with algorithm trading
In the stock market, losses are often more common than gains. Reason enough for investors to look for smart technological tools that can help them make better investment choices and navigate volatility. Enter Kuants, the fintech platform of Gurugram-based MeanBox Technologies Pvt Ltd. The fintech startup functions as a "code-free, web-based technology platform that can backtest and deploy trading algorithms at 75 percent lower costs and 100 percent efficiency".
But why is algo, or algorithmic, trading so important? This form of trading uses a computer program, that follows a defined set of instructions (an algorithm) to place a trade. The advantage of algo trading is it generates profits at a greater speed than a human trader.
Started in 2017, Kuants offers an Algorithm Lab, on which stock traders, investors, and enthusiasts can create, and test different trading algorithms without the need for coding.
“We have created a completely new format from scratch that can take in one-line expressions from the user and convert them to an actual 300-liner algorithm in the backend without the user realising it. We have developed a programming-free interface to do so. That's why our website says, ‘uncode your way through algorithmic trading’,” says Ayush Gangwar, Co-founder of Kuants.
Not only does the platform lets traders create and test the algorithms but it also allows them to sell it on a marketplace called SMART.
“The Algorithm Lab is directly connected to SMART, the company’s marketplace wherein algorithm creators can share their results and allow other investors to verify, and invest in their algorithms for a fee. The creators can get anywhere between 40 percent to 70 percent of the total fee that ranges from Rs 6,000 to Rs 20,000 per investor,” he added.
Ayush says that a lot of investors are looking for alternatives to market-driven mutual funds while stock traders are full of trading ideas but they cannot scale up all alone.
“Kuants combines the capital of the first to the expertise of second, the investors get to trade on tested algorithms while traders can scale up with additional capital,” he explains.
It all began with a part-time project
Kuants was started by Ayush Gangwar and Mohit Bansal, graduates from IIT-Kharagpur.
In his third year of engineering, Ayush worked for a US-based hedge fund and developed trading algorithms that worked successfully in the US markets. His success motivated his team back in the US to start a similar platform for the Indian markets as well.
“Initially, we wanted to start our own hedge fund and while conducting trials in live trading, we realised the lack of a single platform to create, test, and use live trade algorithms. We found it difficult to use the tools available then, in terms of usability, setup procedures, and costs. That's when we decided to create one,” recollects Ayush.
The initial program for the backtesting system was written during the summer of 2016 as a part-time project.
In 2017, Kuants was started as a full-time venture. It raised angel funding of Rs 31 lakh in cash from angel investors and started developing the full-scaled product from December 2017. In early 2018, it bagged funding of Rs 50 lakh from Delhi-based angel investors Pankaj Chopra and Ankush Gupta.
Regulator and market
The Securities and Exchange Board of India (SEBI) allowed algorithmic trading in India in April 2008 by opening up direct market access to institutions.
Since then, it has grown rapidly. According to a study by the National Institute of Financial Management (NIFM), around 50 percent of total orders at both NSE and BSE are algo trades on the client side, while on the proprietary side, algo trades consist of 40 percent plus of total orders placed at both the exchanges.
In August 2017, the Finance Ministry stressed on necessary safeguards to prevent disruption of the equity market, and media reports quoted Economic Affairs Secretary Subhash Chandra Garg as saying, “algorithmic trading gives ‘unequal access’ to institutional investors over their retail counterparts as they have access to speed and co-location”.
SEBI, in April last year, asked stock exchanges to introduce ‘managed co-location services’ to facilitate small- and medium-sized trading members. Managed co-location services refer to spaces provided to vendors in close proximity to the bourses, along with technical know-how and other expertise.
According to a new market research report published by MarketsandMarkets, the global Algorithmic Trading market size is expected to grow from $11.1 billion in 2019 to $18.8 billion by 2024, at a Compound Annual Growth Rate (CAGR) of 11.1 percent during the forecast period.
Low-cost and accuracy is key
Kuants competes with companies like Quantopian, Amibroker, Streak, and others. Ayush says that algorithmic trading is at a very nascent stage in India, similar to what ecommerce was in 2009.
Ayush believes the sector will open up with more players providing genuine algorithmic trading platforms in the next five years.
“There are certain extremely good software like Amibroker, NinjaTrader, and Metatrader but they require programming-based interfaces and cost around Rs 60,000 per year. At Kuants, we provide the same level of accuracy at 25 percent of the costs,” he says.
Kuants is looking to change the equation by boosting financial participation of retail investors. In the broader picture, any person who is enthusiastic about investments and stock markets can be a user. “We have kept the doors open with all the necessary resources to everyone on our platform to test an algorithm within five minutes of signing up.”
Kaunts’ specific target users are stock traders, quantitative researchers, and investors.
“These are most important guys in our funnel who would help in populating the SMART marketplace with algorithms. The market size of algorithmic trading is expected to stand at $2.3 trillion by 2025 globally and we are taking steps in the same direction,” he adds.
In terms of revenue, the startup was running on pre-revenue stage since the inception. This month, it introduced the freemium version of the platform after establishing its Proof-of-Concept.
Ayush shares, “We launched version one of Algolab in June last year and the same for SMART in December. We have so far received over 350 reviews, responses, and suggestions from users. After understanding them, we have incorporated a few in a branded and upgraded freemium version.
So far, the platform has more than 4,000 registered users with organic monthly growth of 17 percent for Algolab, with over 30 algorithm submissions for review on the SMART platform. Kuants has generated a trading turnover of Rs 30 crore so far, and there are 200 new clients in the waitlist for SMART.
“We are an organisation of two miserly founders,” says Ayush with a laugh. The company is looking to create a cross-functional team and is eyeing funding to the tune of Rs 2.5 crore to reach their goals.
As the startup introduced its freemium version only recently, it is looking at increasing paid users on the platform. However, the founders did not share any revenue targets.
(Edited by Rekha Balakrishnan)