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Quantum Computing and the Implications for the Securities Industry

Quantum Computing

Quantum mechanics is a branch of physics that deals with the complex properties of atoms and sub-atomic particles.2 Quantum computing leverages the principles of quantum mechanics to solve problems too large or complex for traditional computers. Although quantum computing is still in its early stages, numerous financial institutions have begun experimenting with this evolving technology, given its potential to dramatically alter the types, and speed, of computations that are possible. In addition, some regulators and other key market participants are exploring the implications of quantum computing for the securities industry.3 In December 2022, President Biden signed the bipartisan Quantum Computing Cybersecurity Preparedness Act into law, recognizing the potential threat that quantum decryption (i.e., the ability for quantum computers to bypass existing data safeguards) may pose to the government, and encouraging U.S. regulators to adopt technologies to protect against quantum computing attacks.4

In recent years, several major financial institutions have reportedly identified quantum computing as a technology with the potential to dramatically disrupt the securities industry over the next decade and beyond.5 While reportedly only one percent of companies budgeted for quantum-related expenses during 2018, by some estimates as much as 20 percent may do so in some form by 2023, with up to $850 billion in investments anticipated over the next 30 years.6 In addition, equity investment in quantum computing has significantly increased in recent years.7 For example, funding in the quantum computing space has reportedly seen record levels—$2.35 billion in investments in quantum technology start-ups (both hardware and software) in 2022—with a significant ramp-up in the last two years.8 In addition, major financial institutions have committed significant resources to the technology.9 Some of these firms are actively working with major cloud service providers to most efficiently access quantum computers.10

The public sector has also committed to investing in quantum computing. Last year, the U.S., European Union and Canada collectively invested over $3.1 billion.11 There were also notable technical breakthroughs in the area, as demonstrated by the Nobel Prize in Physics in 2022 being awarded to quantum computing research groups.12 These investments and accomplishments can be seen as a sign of increasing confidence in the potential for quantum computing. While the extent of technical achievement in the field of quantum computing has been debated,13 global investment and interest in the potential of quantum computing continues to steadily grow. Despite having an uncertain timetable for its development, quantum computing has the potential to reshape the financial services industry by presenting newfound capabilities and challenges for firms. 

In light of the potentially transformative impact that quantum computing may have on the securities industry, staff from FINRA’s Office of Financial Innovation (OFI) initiated a research initiative focusing on the opportunities and risks quantum computing presents, culminating in this report. As part of this research, OFI staff engaged more than 20 stakeholders, including financial institutions, quantum computing hardware and software providers, academics, industry observers, government entities, security specialists and trade institutions. We conducted this research, in part, to better understand the implications of quantum computing, including the most likely applications within the financial industry and potential threats to data security.

This report summarizes the main findings of our research:

  • Section I provides a brief overview of quantum computing, highlighting certain basic principles.
  • Section II identifies and analyzes the potential applications for quantum computing that the securities industry is exploring.
  • Section III addresses the potential threats to cybersecurity that quantum computing may pose.
  • Section IV outlines some potential regulatory considerations associated with quantum computing.

This report is intended to raise awareness among FINRA member firms and the broader the securities industry by providing an overview of how developments in quantum computing may impact business models and processes. While the true implications of quantum computing may not be known for years, this report is designed to serve as an initial step in beginning an important dialogue with market participants about the use of quantum computing in the securities industry. Accordingly, FINRA requests comments on all areas this report covers.14