Convergence and Cloud Transform Equity Trading Systems03.23.2022
The typical U.S. buy-side firm has been using the same order management system for a decade. Despite this consistency, the OMS business is in a state of transformation, as functions, platforms and providers converge, and the entire business shifts to the cloud.
Buy-side firms are spending $2.6 billion annually on portfolio management, order management, and execution management systems, according to a new report from Coalition Greenwich. Most firms (86%) use third-party systems.
— Coalition Greenwich (a division of CRISIL) (@CoalitionGrnwch) March 22, 2022
“While the top three providers continue to dominate the desktop, there is an ongoing push forward by smaller providers and new entrants hoping to disrupt the incumbents,” says Shane Swanson, Senior Analyst at Coalition Greenwich Market Structure & Technology and co-author of Equity Trading Systems Continue to Converge, Move to the Cloud.
Chasing the Dream of OEMS
Convergence isn’t limited to the universe of providers. Equity trading systems themselves are converging as the industry continues pursuing the goal of integrating order management and execution management systems. In Q1 2021, 41% of buy side firms reported using a single OEMS, up from only 30% the year before.
“Coalition Greenwich has been researching the order and execution management system marketplace for at least a decade, and the dream of a single OEMS has existed even longer,” says Kevin McPartland, Head of Research for Coalition Greenwich Market Structure & Technology and report co-author. “Our research results this year, coupled with conversations over the past year, suggest that the long-desired solution is finally here—albeit with some caveats.”
Nowhere is platform integration easier than in the cloud. Half of respondents say their OMS and EMS are delivered via the cloud, up from 40% and 47%, respectively, the year before. The percentage of those with hybrid deployments (i.e., part of the system is cloud-deployed) also grew year over year, with roughly 20% of OMS and EMS delivered this way.
“Although the move to the cloud was already under way, the market’s sudden need to work from home during the COVID-19 crisis acted as a huge catalyst, pushing firms toward trading systems that can be logged into from anywhere on any machine and via any internet connection—with the right security and credentials in place, of course,” says David Easthope, Senior Analyst in the Coalition Greenwich Market Structure and Technology group and co-author of the report.
Source: Coalition Greenwich
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