The buy side continues to struggle with increasing regulatory requirements, and having the right compliance tools is all the more important in today’s trading environment, where tracking risk is key. As a result, order management systems have become essential to the trading and portfolio management process.
There is no doubt, however, that installing an OMS is no easy task; it is a large undertaking that can’t be easily reversed once implemented. According to a recent TABB Group survey of buy-side firms, including traditional asset managers and hedge funds utilizing a wide array of trading strategies, 68% of the 52 respondents described switching to a new OMS as “very” or “extremely difficult.”
Meanwhile, opinions on EMS technology can be summed up in one phrase: Less is more. The buy side is consolidating the number of EMS platforms on the desktop from an average of six platforms five years ago, down to just one or two today. Interestingly, those platforms tend to be broker-neutral, as the preference for EMSs on the buy side shifts to independent providers and agency brokers.
Overall, constrained wallets are forcing asset managers and hedge fund managers to seek ways to lower their tech costs; but at the same time, they need sophisticated trading and back-office technology to stay competitive in a market with withering liquidity and increased fragmentation. This introduces the idea of combining the two technologies into one system to accommodate smaller budgets. While it is possible for the OMS and EMS to be brought together into one platform to form an “OEMS,” however, 44% of the respondents to TABB’s survey said “no” to a combined platform (see chart, at left).