By Medan Gabbey, CRO, Quod Financial
This is the second article in our multi-part series on industry themes, following Why your Legacy OMS is costing you more than you think? published on February 5, 2025.
Change is inevitable—and often difficult. When buy-side or sell-side firms attempt to address legacy technology, they typically uncover outdated, poorly documented systems with outdated integrations. The common approach of “If it ain’t broke, don’t fix it” leads to obsolescence – much like species that, through natural selection, failed to adapt to their changing environment (sorry, Dodo).
The Trap of Analysis Paralysis
One of the biggest obstacles to modernization is analysis paralysis. Extensive audits of existing processes, often involving external consultants, rarely yield practical outcomes. These lengthy and expensive reviews frequently delay action rather than facilitate meaningful change.
While consultants can play a role, relying on them to analyze internal systems can sometimes be an excuse to defer responsibility, rather than creating a roadmap for success. Even worse, framing technology decisions around solving yesterday’s problems only increases the risk of Darwinian peril.
The Real Secret to Success
The key to success is surprisingly simple. Start with a vision for the future—not an autopsy of the past. Just as buying a new car doesn’t require a detailed analysis of your old one, transforming trading technology starts with a vision for the future.
Ask yourself: What should your trading technology enable? What capabilities should it provide? How should systems and people interact with it? Defining this future state will help you select a vendor that aligns with your goals. This allows you to focus on building the new system while selectively migrating valuable components from the old one.
A successful transition doesn’t require an in-depth understanding of legacy technology—it requires a roadmap for the future. Importantly, your target system should support a staged migration, enabling incremental adoption without disrupting operations.
The Power of Modular Applications
The ideal solution is modular. Instead of attempting a massive overhaul, implement the smallest viable project within your existing infrastructure. The system should provide clear value for every specific workflow, allowing legacy features to be addressed or retired gradually.
This approach can be tailored to individual functional areas—such as algorithms, Smart Order Routing (SOR), middle-office workflows, and market-making—or to specific trading desks and flows, including portfolio trading, convertible bonds, and DMA.
When evaluating modular solutions, firms should consider: Can the system integrate with existing static data? Are real-time APIs available for every function? Does it align with a broader technology strategy? (See Article 3: Leveraging Microservices in Modern Trading, coming on March 5th.) More importantly, does it future-proof workflows, reduce complexity, and allow firms to decommission redundant systems? Finally, is the vendor offering a truly unified technology, or merely a collection of disconnected solutions under one brand?
The right modular approach ensures that firms can replace multiple existing systems, preventing further complexity.
Buy-vs-Build Dilemma: A Common Pitfall
Building OMS/EMS functionality in-house is a monumental challenge. These systems involve years of building complex functional requirements and require ongoing maintenance to remain competitive. Many firms initially define success as “building exactly what we need today”—but a more realistic question is: Are we prepared to maintain and evolve this system for the next 20 years? Redefining success changes the success-criteria in the Darwinian landscape.
The limited number of vendors in the market reflects the complexity of trading technology. If external companies struggle to thrive in this space, in-house development will likely be even more costly and will risk falling behind industry innovation.
The optimal approach is “Buy-AND-Build.” — leveraging a vendor’s proven API infrastructure while tailoring it to your firm’s needs. This is like customizing an existing car rather than rebuilding the engine.
When selecting a vendor, firms should assess whether their API and data model support a Buy-and-Build approach and examine how the vendor is innovating. The key to long-term adaptability and success lies in outsourcing core technology while maintaining flexibility for customization where it truly matters.
Future-Proofing Your Trading Systems
This article provides a high-level overview. The path from legacy to modern systems involves vision, focus and investment in the future — not the status quo. Firms that select a vendor aligned with their end-state vision and adopt a modular, incremental approach will achieve most cost-effective and sustainable modernization. This approach also presents better opportunities to monetize all the workflows within their firm and deliver better outcomes for their clients.
