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Wrestling with OMS and EMS Decisions
Traders Magazine Online News, December 22, 2017
Many asset managers are wrestling with the decision on whether to keep the order management system (OMS) and execution management system (EMS) as two separate best-of-breed systems, or switch to a single unified platform known as the OEMS.
Buy-side firms have been demanding tighter integration between their order management and execution management systems for years. Some are looking to consolidate their trading platforms to drive down costs. Others want a single platform to reduce the complexity of trading across multiple asset classes and geographies.
Some critics contend that the OEMS has not lived up to the hype of creating a synchronized blotter and a complete audit trail in both systems. They argue that it’s been difficult to pull data from the OMS into the EMS or visa versa.
“The debate on whether the OMS and EMS should be merged or integrated continues to rage,” wrote James Wolstenholme, senior analyst at Celent in a report published Oct. 25, 2017.
As the debate rages, the interaction between portfolio managers and traders is becoming more critical to earning incremental returns, stated the report. With assets shifting from active to passive investments, portfolio managers are relying on advice from quantitative tools – like pre-trade transaction cost analysis – to earn precious basis points.
There are 15,000 financial advisers in the United States, ranging from $5 trillion in AuM all the way down to $5 billion, and then there’s hundreds under $10 billion and then family offices with $100 million in AuM that need a complete investment life cycle, said Wolstenholme in an interview.
For many asset managers, the choice between integrating a best-of-breed OMS and EMS, or migrating to an OEMS, hinges on multiple factors and is by no means black or white.
“The best-of-breed EMS and OMS tends to go with the separation of asset classes and geographies,” said Wolstenholme.
In the case of an asset manager trading a majority of credit bonds and associated derivatives, the firm won’t specifically need a high-speed EMS, according to the report. In addition, the same firm investing in commodities, real estate, direct investment, or private lending, might use a specialized second OMS.
“One size doesn’t fit all, and so now as you move down the different AuM levels, some firms are going to want best-of-breed and are going to go across many multi-assets and geographies. Therefore, one behemoth system is not the answer,” said Wolstenholme.
If a hedge fund is investing in specific, highly liquid asset classes, and dealing in high volumes, then “the idea of an integrated OEMS is a better architectural method to follow,” said Wolstenholme. For example, a hedge fund that tends to concentrate in North American equities and is doing a high-frequency trading strategy or market neutral strategy, “that efficiency is gained within the combined OEMS,” he asserted,
Different Segments and Workflows
“Generally speaking, you can break the decision down into two client types — the institutional management space and the hedge fund space,” said Aaron Levine, vice president of FlexONE OEMS Solutions at FlexTrade.
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