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GreySpark explains the growing popularity of OMS and EMS.

Capital markets participants are increasingly turning to combined execution and order management systems that include tools for algorithmic and basket trading strategies in multiple asset classes, according to a new report by consultancy GreySpark Partners.

The report which canvassed 12 vendors noted that OMS and EMS technology spending is expected to rise between 1% and 5% over the next two years. By contrast broker-funded EMS platforms are becoming less popular, with a 3% decrease since 2008.  This is because firms are choosing to access preferred brokers through a single platform, increasing execution efficiency.

OMS first came onto the scene in the 1990s to connect the buyside to their brokers while reducing errors and fostering a paperless trading environment. They revolutionised the way the industry conducted business. Fast forward to today and they are robust, multi-functional and continually evolving as regulation and technology develops. The same trends have applied to EMS, which is a relative newcomer. They typically provide smart order routing (SOR), connectivity to an array of trading venues, market data (directly or through third party vendor feeds), real-time pricing, pre-trade transaction cost analysis (TCA) and algorithms, as well as integration with upstream OMSs.

Traditionally, these systems were separate, but in recent years, they have become more integrated as the services such as best execution reporting and regulatory reporting are becoming commoditised and their position as competitive advantages is being challenged. The goal of these hybrid OEMS solutions is to try and straddle the whole trade life-cycle and to rely on a catalogue of dedicated modules in order to cater for specific client uses. New features include real-time TCA, limit checking, basket and list trading, and strategy as well as algorithmic trading and execution benchmarking,

Multi asset class trading has also become a prominent feature due to relatively poor returns from equities over the last five years. This trend has led trading desks to widen and diversify their coverage both geographically and in terms of asset classes. Moreover, baskets of securities, such as exchange-traded funds, have gained traction.

There are several benefits to the integrated platform most notably cost reductions wrought from automation, straight-through processing and simpler work-flow. The speed and efficiency also helps sharpen the buyside trader’s edge over the use of a slower less integrated platform.   In addition these platforms are helping to usher in a new era of consolidated market data which has been one of the biggest bones of contention with the fragmentation of trading venues in the wake of the introduction of MiFID.

As with any technology, there is always room for improvement. According to Anna Pajor, consultant at GreySpark, these include functionality around margin management, books delegation and transfer, netting and give-up management as well as further development of the connectivity coverage. These can be managed by other buyside systems, for example portfolio management or treasury systems, but investment in developing these features should be considered in the context of the entire client offering, beyond order management.

GreySpark Partners is a business, management and technology consultancy specialising in the capital markets. The company has a demonstrable track record across the marketplace and a deep understanding of the industry. GreySpark Partners works with investment banks, hedge funds and asset management firms to deliver solutions that work across all asset classes, with a particular focus on risk management and electronic trading. For further information please visit www.greyspark.com

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