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Electronic markets, leased lines, and high-speed computers have made high frequency,
algorithmic trading possible. Some trading firms have not successfully coped with rapid
changes in technology that enable new competitors to remove their advantage. New regu-
lations can give rise to new trades and new trading firms that specialize in automated
strategies that can kill firms that are slow to react. Products are continually being added
to the financial markets and there is an opportunity risk that a firm may miss the chance
to take advantage of new products. Following a development methodology, like the one
we propose in this text, will mitigate these risks. Teams that follow the K|V methodol-
ogy are able to quickly modify existing software and trading/investment strategies to take
advantage of technologies, new regulations, and new products.6.4. Conclusion
Trading/investment systems are small businesses and starting such a business requires
entrepreneurial effort. Product teams face unique challenges including the concurrent
development of a business strategy and a trading strategy; a hybrid of activities com-
bining concepts from software development and trading firm start-up; and two groups
of investor, seed capital providers and investment capital providers. As a result, product
teams must raise two pools of capital, seed capital for development of the trading strategy
data/software and investment capital for trading or investment.
Creating a Money Document enables product teams to clarify the fuzzy front end of
new product innovation, including:● Standardizing the communication protocol to clarify the legal and business structure
of the organization, and the investment strategy of the fund.
● Naming a product team containing the required skill sets.
● An analysis of the demand for a proposed strategy and a discussion of the distribu-
tion system, providing an understanding of investment cycles and the issues a mar-
keting plan should address.
● Starting a description of the trading system, which will evolve and grow as the prod-
uct team flows through the stages of development.6.4. CONCLUSION