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June 6, 2006

3 Better Tools for Sales Traders: The OMS Reborn

By Peter Chapman

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  • 3 Better Tools for Sales Traders: The OMS Reborn

As goes the sales trader, so goes the vendor.

Vendors selling trading and order management systems to the sellside are scrambling to rejigger their platforms to accommodate the rapidly changing role of the sales trader. Sales traders are being asked to take on more responsibilities for executing customer orders. As the number of position traders shrinks, orders that were once automatically routed to the trading desk are nowadays under the jurisdiction of the sales trader. The sales trader may work the order himself or simply monitor its progress while it is being worked by an algorithm.

"We are seeing more and more firms want to do this," says Jim Vassak, Bloomberg's exec in charge of order management. "We definitely see the sales trader taking on a bigger role."

No one keeps track of the number of sales and position traders in the equities business, but Bloomberg has as good a view as any. It maintains hundreds of thousands of terminals on trading desks worldwide. The bulk of the layoffs are in the past, says Vassak, but his firm still sees more decreases ahead on the position trading side.

Bloomberg, which caters to Tier II brokers and boutique-type firms, once offered its OMS (which comes with the Bloomberg terminal) with both a market making and a sales trader module. No longer.

Bloomberg recently mothballed its sales trader module and now offers a "hybrid trader" module instead. The hybrid platform contains all of the functionality of the execution trader module as well as the traditional sales trader functionality.

All of the sales traders using Bloomberg's OMS now process stock orders as well as perform their traditional customer-related duties.

"The sales trader has the same access to the market that the execution trader does," Vassak says. "He has his own position blotter, so he can execute the order, put it in the proper account and report it back to the customer at an average price."

Sungard Trading Systems/Brass, the OMS vendor with the most accounts, is also having to re-work its order management workhorse, Brass, to accommodate changes in the trading room. Sungard's Ralston Roberts describes three scenarios.

Consultants

At one end, sophisticated firms are trying to fashion their sales traders into so-called "execution consultants." These men and women are helping their customers make decisions as to how they should be executing their orders.

Should the client use a sponsored direct market access product? Should one use an algorithm? Or should the customer hand me the order to work with my block desk?

In the middle, the traditional sales trader is simply being asked to cope with an array of trading tools and new market centers.

And, at the opposite end, the sales trader is converging with the position trader. In this case, Roberts says, the firm has decided to opt out of committing capital and offer agency-only executions.

That means routing decisions. Orders may get directed into the marketplace or black boxes, for instance. Roberts calls the sales traders at these shops "universal" or hybrid traders.