126 CHAPTER ◆ 1 2 Gate 1
As a prelude to a successful gate meeting, management should provide an overview
of the economic environment, financial markets, and significant changes since the last
gate meeting, and review the portfolio of current trading systems as well as those under
development. At the meeting the audience should first address the current environment to
ensure that there is consensus as to the feasibility of proposed new systems in the current
environment. If current projects are slipping, it makes no sense to add new projects with-
out removing others. The audience should understand, then, how time and seed capital
are already being allocated. Then, they can review the appropriateness of these alloca-
tions in the current economic environment. From there, the discussion can move on to
new proposals and changes to existing projects. We recommend review of no more than
four or five products in a single meeting.
Well-run gate meetings end with another review of all trading systems currently under
development, including new decisions, approvals, and prioritizations made at the meet-
ing. Gate meeting minutes should be published immediately; written confirmation of
decisions and priorities will clarify objectives. As discussed, decisions regarding under-
development systems fall into one of five categories—Go, Kill, Hold, Return, and, poten-
tially, Trade.● Go. If it is added to the list of approved systems, the next stage is started.
● Kill. If there is not sufficient justification to continue development, or it no longer
fits into the organization ’ s strategy, then it should be canceled and removed from the
list of priorities.
● Hold. At times a system may need to be tabled for what ever reason. In such a case,
whatever additional activities should be performed and the project should be dis-
cussed at the next gate meeting. For example, if the system fits into the company
strategy, but additional resources are unavailable, we may put it on hold until some
future time.
● Return. Return to a previous stage for additional research or testing.
● Trade. Trade the existing prototype. (Only for short-lived strategies, e.g., tax trad-
ing algorithms.)Additionally, decisions may take into account the following criteria:● Does the project fit into the organization ’ s long-term competitive strategy?
● Does the market opportunity for the project align with the company strategy?
● Will there be sufficient revenue from the product to justify the work required?
● If there is not sufficient revenue, are there other highly compelling reasons to justify
the work?
● Are there resources available to do the work?
● If the resources are not available, should this project take priority over other projects?Beyond the basic format of presentation, allotting significant time for discussion of
risks to the project can facilitate alignment between the product team and management.
Product teams naturally want to start by pointing out the merits of the trading/investment
strategy they are pursuing and what impressive progress they are making. But, teams also
need to engage in an open dialog about risks and risk management techniques. Risk fac-
tors might involve development cost overruns, operating-cost miscalculation, technical