OEMS Still a Dream for 2/3 of Buy Side
There is a slow but steady march towards integrated order and execution management platforms, according to recent research published by industry analyst firm Greenwich Associates.
Of the 205 global buy-side traders surveyed for the recent study, ‘Order and Execution Managment Systems Increasingly Indispensable’, the authors found 32% of those polled are using an OEMS platform, which is up from 11% in 2013.
“Having a fully integrated OEMS could lead to an increase in efficiency and ease of use with execution functions entering the OMS and compliance and risk in the EMS,” wrote the study’s authors. “Discrete OMS and EMS platforms are no longer a necessity, due to open architecture and improved APIs allowing better-integrated systems. We expect the trend of consolidation to continue to accelerate.”
There is still a long way to go as 41% of those surveyed have separate OMS and EMS platforms while 15% have one or the other, the authors noted.
“There is a somewhat Utopian view that if you could be on a nicely integrated piece of technology, then that would be ideal,” Kevin McPartland, managing director, head of market structure & technology research at Greenwich Associates and a co-author of the report, told Markets Media.
Both platforms have a post-installed lifespan of approximately eight or ten years, which leads to little turnover in the market.
The authors noted that 12% of the respondents plan to switch out their OMS platforms and only 5% plan to change their EMS platforms.
“It has been less slamming the two together and adding execution capabilities to OMS platforms and order management and compliance capabilities to EMS platforms,” he said.
The trend also holds true for EMS platforms that serve the equities and fixed income desks.
“Options traders prefer options-trading platforms; bond traders prefer bond-trading platforms, and equities traders want to trade on cash equities platforms,” McPartland added.
Trading equities and fixed income is far from typical, according to the multi-asset traders polled for the report. Of the 44% equities traders who trade multiple asset classes, only 16% trade fixed income. On the other hand, only one in three of the 33% of fixed income traders that trade across asset classes trade equities.
The most common secondary asset class both desks trade is foreign exchange, which is 29% and 17% respectively.
However, recent regulations like MiFID II may have asset managers rethink their IT investments due to greater transaction-reporting requirements and the increasing complexity of the markets, according to McPartland
Electronification of the municipal bond market also presents a large opportunity.
The success of Northbound trading showed electronic execution is way forward for the bond market.
Algorithms have become more prevalent in the spot FX market.
Increased electronification has created useable and accessible real-time and historic trade data.
Buy-side firms can discover liquidity more efficiently and execute on Turquoise.