170 CHAPTER ◆ 1 8 Gate 2
● Is there a development team for Stage 3? Assignments of programmers to the devel-
opment team will be done with top management to ensure lines of control and con-
solidated IT project plan of record.This gate will prevent development of the trading/investment system from moving for-
ward until the required activities and deliverables have been completed in a quality man-
ner. At this point, the project may be put on hold until IT resources are free to proceed
through Stage 3. Whatever the gate decision (i.e., go, kill, hold, return, or trade) this gate
should chart the path ahead by ensuring that plans and budgets are in place.
Good traders understand the importance of good technology, and buying and develop-
ing technology takes resources. Senior traders sometimes even steal resources from other
projects. We recommend the Gate 2 meeting be scheduled to coincide with a periodic IT
resource meeting. This will ensure that projects that pass through Gate 2 are allocated IT
resources from a firmwide perspective.● Management should hold IT resource and gate meetings at least quarterly. At this
meeting, top management must lock an IT project plan of record. This will force
completion of projects before a change of focus.
● Discussion of IT resources and projects should be open to all managing directors
and product team leaders. Politics in the open is better than politics in private.
● Once top management sets the IT project plan of record, it must be unchangeable.
While slack may be built in for critical code fixes, these should be limited. If the IT
project plan of record is allowed to change, then traders will circumvent it to steal
resources. Then, money and time for IT development are up for grabs, and teams
start to build competing technologies and redundant internal systems. Economy of
scale is lost; good programmers will leave the firm to seek a better, more stable
environment; and product teams spin off to create their own firms.Good IT resource allocation goes beyond just IT, eventually becoming a management
style keeping all employees focused on goals of the firm, not their own goals. A properly
run Gate 2 meeting and the setting of an IT project plan of record cements together the
firm with a singularity of purpose. A poorly run Gate 2 meeting will pull the firm apart
into competing groups that believe in star traders and individual rewards.
Beware the fast-track project. “ Fast tracking ” is a commonly used rationale to get
around or disregard an IT project plan of record. If the current project is a “ fast-track ”
project (and speed, by the way, is a great way to introduce errors), the firm still needs
to review the firmwide resource allocation. To ensure an orderly queue of work for IT
development teams, reallocating resources for fast-track systems should preferably not
be done; if traders or top managers learn of back doors to resources, every system will
soon be on a fast track. In such a case, development of new systems under a project man-
agement framework would immediately cease. We strongly recommend that all personnel
and resource allocations follow the gate-defined schedules.
Gate 2 now is the point at which the specification of the system should be considered
ready for full-scale production, and a freeze applied to the strategy, execution, data cleaning,
and optimization algorithms; the look and feel of GUIs and reports may still evolve through
user testing. After this, specifications may be changed only through a change control proc-
ess, requiring a return to a previous stage for review, testing, and verification, including an
evaluation of the change ’ s effect on other parts of the trading/investment system.
System verification at Gate 2 ensures that output documents from the backtest stage
meet the input requirements of the implement stage, K | V Stage 3. The results of this verifica-
tion must be documented and delivered to all interested parties prior to the Gate 2 meeting.