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July 5, 2006

OMS Solutions: The Buysides Key to the Trading Highway

By Nina Mehta

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Last year Investment Technology Group Inc. decided that asset management firms were ready for an investment technology makeover. In July 2005, the agency broker and transaction research firm announced its purchase of Macgregor, the granddaddy of buyside trade order management firms, for about $230 million. Two months later, it brought transaction cost analysis firm Plexus Group into its fold. ITG's plan is to integrate these systems with its suite of trading and analytical products to give buyside clients a comprehensive end-to-end solution for all their investment and

trading technology needs. In January the company formed a subsidiary, ITG Solutions Network, to usher in the new dawn. Ian Domowitz, who ran ITG's products and research unit, was named CEO of the division.

The flagship offering will eventually include portfolio management, execution, compliance and post-trade analysis, all integrated within one system. What isn't-or won't be-offered through the one-stop OMS solution can be roped onto the platform through licensing arrangements or interfaces with other vendors. ITG Solutions Network "will be broker-neutral and vendor-neutral with respect to the integration of systems into the Macgregor platform, as well as through the vending of our analytics into other platforms," Domowitz promises.

So is an all-inclusive OMS platform what's in store for the buyside? Will ITG's grand vision be replicated by other brokers or technology providers? The answer is probably yes-on both fronts.

"The better OMSs are evolving into execution management systems," says Tom Driscoll, vice president for sales and marketing at OMS provider Charles River Development. Over the last year, Charles River has added more algorithmic trading, real-time third-party transaction cost analysis and smart order routing to its platform. The firm recently integrated Nasdaq's Level II data into its direct access display; the next version of the Charles River's Investment Management System, due out in the fourth quarter, will enable traders to trade directly off that data.

Although the phrase "execution management system" is something of a catch-all, it's often used to refer to a platform that offers multi-broker algorithmic trading, direct access to multiple market centers and electronic communications networks, smart order routing, and an order management capability. FlexTrade and Portware, for example, are considered high-performance execution management systems.

Seamless Workflow

Driscoll adds that buyside customers also want a more seamless workflow of execution through downstream trade processing, including FIX allocations, confirmations, and settlement. "These processes have been moving out of the back office and into the OMS over the last few years," he says.

There's little doubt about what's churning competition in the OMS world and pushing vendors to build out their applications. The buyside doesn't want a smorgasbord of technology systems and broker or vendor front-ends on their desks. They want fewer systems that will integrate more of their tasks more efficiently and seamlessly, improving the entire investment process from front to back.

David Quinlan, president of OMS vendor Eze Castle Software, agrees that ITG has drawn a line in the sand. "I share a vision where you converge these pieces and parts onto a single platform," he says.