Selling systems I developed to hedge fund

M

mchugh

I am a former floor trader and have spent the last year developing and trading bond systems. I have developed 12 systems, 11 on the bonds. I have been trading these 11 systems for seven months and have not had a losing month. Backtesting on the systems indicates that 98% of months should be profitable.

Here's the catch - I don't want to continue trading them. I enjoy developing the systems but don't enjoy the daily grind of trading them. Over the long haul, I believe I could make more money trading them, but I'm already financially stable and would prefer to sell the systems.

So my question is does anyone know of a way I can sell my systems to hedge fund managers without giving my systems away prior to the transaction? Does anyone have any experience in such transactions. With backtesting becoming so mainstream, it sounds like a good opportunity for a lawyer to become some sort of "agent" or middleman between system developers and hedge fund managers.

Any info would be appreciated.
 
First off, before you start marketing or selling, you must learn this word: None Disclosure Agreement. Everyone and the world will want to know the details.
1) Create a solid NDA thru an attorney knowledgeable in Intellectual Propery.
2) Create a documented track record of :
a) live / real-time trades
b) back-tested results
3) Verify and document all whom with you come in contact vise-a-vise the "NDA".
 
Thanks, Syswizard - I figured there was some sort of IP lawyer involved.

It just seems that it would be incredibly difficult to:

a) find out it someone actually ripped me off and started trading my systems after turning me down, and

b) enforce this IP even if I had an inkling that someone was doing so.

Have you ever completed this type of transaction?
 
Thanks, Syswizard - I figured there was some sort of IP lawyer involved.

It just seems that it would be incredibly difficult to:

a) find out it someone actually ripped me off and started trading my systems after turning me down, and

b) enforce this IP even if I had an inkling that someone was doing so.

Have you ever completed this type of transaction?
 
The same thing happened to me, swine learned about my system and said got to work on it..........although it was not 98% but 73% winner and had losing months.

I do not believe in non-disclosure-arguments. What you can do is give a free trial to Hedge Fund Managers and after six months say that you will give the signals only if they commit say 5-10% of their Assets Under Management with you getting 1/4th of the 20% Incentive or whatever sounds suitable. This way, you send them the signals and they make money for some return to system developer ofcourse.

If I may ask, what is the total trade winner percent of your system, you write it has 98% winner months.
 
Toc, with all the skeptism/bitterness/arrogance apparent in the forums i've glanced through, I'd rather not get into the numbers too much, but the 11 systems in aggregate have a 69% winning trade ratio, with individual systems having anywhere from 64% to 82% winners.

Quah, I believe that large hedge funds spend millions on research and development of new trading systems, always trying to get more edge. This would just be a sort of shortcut for them. Does that make sense to you?
 
Another option is to supply your systems coded with the code encypted and time limited. The code simply stops working after a given period and if they wish to continue using it, they have to pay you for a working version of the system.

This is pretty easy to do. And I know you can do it in esignal and tradestation.

Runningbear
 
Quote from mchugh:

Quah, I believe that large hedge funds spend millions on research and development of new trading systems, always trying to get more edge. This would just be a sort of shortcut for them. Does that make sense to you?
More...

Maybe. How many millions did you spend in the research and development of these 11 systems you want to sell?
 
Thanks, Runningbear. Good idea.

Quah, I didn't spend millions. I spent time and energy, which is what they pay their "wizards" for when they hire their development team. Right?
 
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