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least at a high level, and scoped prior to initial seeding. A seed capital provider will not
allocate capital both to well-planned strategies and to vague ideas. Such an inconsistency
would create a disincentive to document properly. Most traders or money managers tend to
dislike processes and if left to their own devices more than likely do the minimum amount
of work to get their trading system approved. Consistently applied standards for a Money
Document greatly increase the chances of the success of the trading/investment strategy
as well as successful completion of the development project.6.3.1. Projected Revenues
In the Money Document, the product team must represent projected revenues and expenses
honestly, even if they are abstract at best. The formulas for revenue estimates may be, for
example, 1% on assets under management plus 20% of the excess returns over and above
some benchmark. The revenue projections go forward quarterly for at least the first year
with annual projections over the ensuing four years. The same can be said for projected
expenses based on the increased capacity in technological infrastructure and personnel
over the five years. We recommend product teams use a Delphi method for arriving at
estimates for revenues, expenses and time lines.6.3.2. Estimated Development Costs
In this section, the product team provides an estimate of how much it will cost to get up
and running and how much it will cost to maintain the trading/investment system on an
ongoing basis. The estimate will include the development costs and year-by-year fixed
costs for management, as the project is not yet well defined. No specifications will be
defined until seed capital providers are confident of a return on investment. We recom-
mend the team communicate clearly the rough nature of revenue and expense estimates,
and the expectation that expenses will become clearer as the team progresses through
the design and development process. Management can expect firmer estimates at gate
meetings.6.3.3. Data and Technological Infrastructure Requirements
This section of the Money Document will present an overview of the technological
infrastructure necessary to implement the trading/investment system, as well as address
its technological feasibility. Furthermore, if the technology itself will be a competitive
advantage, this is the place to describe how the team will accomplish this. Such discus-
sion should remove doubt as to whether or not the trading system development team will
in fact be able to get the system up and running. An overview of the technological infra-
structure should include discussion of the following items:● Markets to be traded and the connectivity required for real-time data feeds and order
execution, including clearing firm connections.
● Available third-party software vendors and their respective application program-
ming interfaces.
● Necessary data and databases.6.3. REQUEST SEED CAPITAL