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December 19, 2007

2007 Review: Progress Made on OMS-EMS Integration

The Year in Trading

By Peter Chapman

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Mating an OMS with an EMS moved beyond the realm of theory this year, easing some frustrations on the buyside.

Three of the five major suppliers of buyside order management systems claimed victory in successfully integrating execution management systems into their platforms. The other two are hard at work doing the same. The achievements are notable and expected to make life easier for busy buyside traders.

Until this year, the EMS and the OMS were largely separate tools. Some OMSs could communicate with some EMSs, but none of them were seamlessly integrated. An order could travel via the FIX protocol from the OMS to the EMS, but the process was slow and error-prone. The goal for many vendors and brokers was to integrate the coding of the OMS into that of the EMS, creating, in effect, a single system.

Fidessa LatentZero was the first vendor to merge its OMS with its EMS when legacy buyside vendor LatentZero mated its Minerva OMS with its EMS. The new setup means buyside traders "no longer need to stage orders to third-party EMSs, manage orders in two or more separate systems, or be hampered by inefficient, error-prone workflow," the company said in February. (LatentZero merged with sellside OMS vendor Fidessa in April.)

Fidessa's triumph brings together two systems that were developed for largely different purposes but have been pushed to work together in recent years because of two related trends: the rising status of the buyside trader and the growth of electronic trading.

Buyside OMSs, at the heart of which are databases, were originally meant to serve the internal needs of money management firms. They allowed traders to keep track of orders and allocate trades to a firm's many accounts. EMSs, on the other hand, were originally developed to enable traders to interact with the outside world of exchanges and electronic communications networks.

There has been overlap. OMSs, like EMSs, sometimes come with order routing so traders can send orders to brokers and receive reports from brokers. And relatively newer systems--Portware and AFA, for instance--offer both EMS and OMS functionality.

But aside from those specialty products, OMSs and EMSs remained independent of each other, prompting buyside traders to clamor for their integration. It took LatentZero 18 months to complete the job, Richard Jones, its chief executive at the time, said when it happened. "Now that the market demand is there," he added, "we expect EMS functionality to become a standard and necessary feature of an OMS very rapidly."

Four short months later, in June, BNY ConvergEx became the second OMS supplier to fully integrate an EMS into an OMS. BNY ConvergEx, the result of a merger between agency broker BNY Securities and buyside OMS vendor Eze Castle, mated Eze Castle's Traders Console OMS with BNY's Sonic EMS. The firm is characterizing its offering as an "enhanced Eze Castle OMS" or a "single-system OMS that includes global EMS capabilities."

In June, BNY ConvergEx chief executive Joseph Velli told Traders Magazine that the "workflow resulting from the combined solution is much more efficient, with fewer clicks needed to trade and lower latency between the OMS and EMS."