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An Introduction to Quantitative Investing: Regulatory Action, Guidance and Risk (Part Two of Three)

Global regulators seldom prescribe rules for, or offer guidance on, quantitative trading generally. Nevertheless, fund managers employing quantitative strategies can glean lessons from the literature that does exist – such as SEC guidance on robo-advisers – even if it may not strictly apply. This article, the second in a three-part series, analyzes regulatory actions and guidance applicable to quantitative managers, as well as the special regulatory risks that those managers may face. The first article provided an overview of quantitative investing and the ways it differs from fundamental investing; discussed the growth of quantitative investing; and evaluated the practical risks and misconceptions of quantitative investing. The third article will explore the heightened importance of cybersecurity and intellectual property protection for quantitative managers; negotiations with investors over capacity constraints; and methods for quantitative managers to attract and retain talent in the face of stiff competition. See “Will Inadequate Policies and Procedures Be the Next Major Focus for SEC Enforcement Actions?” (Nov. 30, 2017).

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