Here is the breakdown for the quants at the bank I worked for in 1995-1999 (I may have forgotten a few people):

Cornell physics PhDs: 3

Harvard physics PhDs: 2

Princeton physics PhDs: 2

Univ of Penn physics PhD: 1

Other physics PhDs: 2

Cornell applied math PhD: 1

Other applied math PhD: 1

Cornell mechanical engineering PhD: 1

Univ of Chicago finance PhD: 1

So, if by "dropout" you mean that they didn't complete their PhDs, then no, that's wrong. If by "dropout" you mean people leaving physics, then yes, it's very common (especially for theorists -- all physicists on the list above where theorists except maybe one or two).

On the assumption that their dissertations were not on relevant topics, I can't help but feel this is such a terrible waste of highly specialized education resources.

Are there lots of unfilled physicist jobs where you are?

Yes, very snarky, but I can promise you that science faculty do not consider it a good use of their efforts and resources to train students for jobs moving money around in circles.

Beats training students to work at Starbucks. Not everyone can become a professor.

We get to train them, not choose what they do afterwards.

That's not in dispute. I'm saying it's a waste, not that I know how to fix it. More relevant jobs is obviously a part-answer.

I hope the same faculty understand that here are not many science jobs available.

Don't worry, they do. Who else will write their publications/advance their research agendas?

not necessarily, I often feel the same way about people who are experts in literature. But just mastering SOME topics is still a contribution to humanity and can be applied in other areas.

It's a good point, but what part of ETF trading is a contribution to humanity? Seems like quite the opposite in fact.

ETFs are a broad topic. They still bring liquidity to market, but they are a trading vs. investment opportunity. Like any other financial vehicle, they are subject to abuse, but are not the cause of such actions. The FED purchases numerous bonds in some of these portfolios, and therefore some of the costs are hidden. These do not reveal themselves in the market, and as such are bad trades or investments.

I wasn't saying that ETF's contribute to humanity, I meant the non-financial research that Ph.D's do prior to wall street. That research adds up and eventually people can apply it to do amazing things.

Not that I've heard. Quants tend to hold PhDs in technical fields.

in the sense that they've dropped out of academia