172 CHAPTER ◆ 1 8 Gate 2
The combination of top-down and bottom-up works because it overcomes deficien-
cies of each approach. From the top, the best firms proceed with strategy development, a
product road map, and strategic buckets of money. Concurrently, from the bottom, these
firms also proceed with a review of their most promising innovations. To reconcile con-
clusions based on the two perspectives, we recommend using a Modified Delphi-style
process with a scoring or ranking model; a ranking approach will force relative priority.
The top-down/bottom-up approach:● Analyzes the markets for different kinds of risk and the competition in those markets.
● Assesses the company ’ s strengths and weaknesses, and innovations.
● Reconciles the two (possibly at a gate meeting) to set new product goals.After ranking, top management must check for alignment of the tentative portfolio with
strategic initiatives. If the set of projects is overweighted in one market, instrument, time
horizon, strategy, or geographic region, management may need to rearrange projects and
priorities. This can be an iterative process of reranking and rearranging until the right
balance is found. A well-run process is messy. Everyone has a key project they will fight
to build. If the process is open and fair, most will agree with the final resource allocations
and the IT project plan of record. Also, all top managers must be able discuss the firm ’ s
focus and the direction with their employees. Top management must focus resources on
completing projects.18.2. Inputs/Deliverables
● Full description of the database and real-time data feeds, including comparison of
alternative data sources.
● Full investment policy outlining the investable universe.
● Complete definition of the data cleaning rules and optimization methodologies. This
may be included in an updated version of a business rules catalog.
● A data dictionary, data and data flow maps, and a database design document.
● Gold standard run package with in-sample and out-of-sample results and perform-
ance metrics. This package should include mocked-up reports, SPC charts, and user
interfaces.
● Complete prototype of the trading system containing calculations and interfaces.
This should include a discussion of software quality attributes.
● Shadow trading data, including results of regression tests versus prototypes delivered
at the completion of Stage 1.18.3. Summary
Gate 2 is the make or break point for a new trading/investment system. At the gate meeting,
top management will decide whether to commit the resources necessary for full implemen-
tation. As with all gates, the product team should distribute the gate deliverables a week
before the meeting, and arrive at the meeting with a recommendation as to how to proceed,
backed by hard facts. Should the project be allowed to proceed, the product team should
also have an overview plan for Stage 3, including forecasts and resource needs.