2007 Review: Progress Made on OMS-EMS Integration
The Year in Trading
December 2007
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."
By August, another major buyside OMS vendor had an integration tale of its own to tell. Linedata Services announced its LongView Trading OMS would include "innovative technology designed to keep OMS and EMS blotters in perfect sync." The company plans to sign agreements with a number of third-party EMS suppliers, so that traders using its platform and theirs will be able to work seamlessly with both systems. Linedata's first deal is with Goldman Sachs and its REDIPlus EMS.
Users of both platforms will no longer need to move data between their LongView and REDIPlus blotters, the company said, and they can trust that the order data on each is kept up to date with changes on the desk or in the market.
Linedata is one of the few remaining independent suppliers of OMSs or EMSs to the buyside. Most are controlled by major broker-dealers. Linedata chief operating officer Annie Morris believes that is an important distinction.
"We strongly believe that buyside traders not only want access to their preferred tools," she said in August, "but that they want to do so in a truly broker-neutral manner. Linedata is not owned by a broker-dealer, nor do we participate in commissions on trades that flow through the LongView platform. This integration technology supports our broker-neutral mandate."
With the pace set by three of the leading firms, what of the other two? Investment Technology Group, which bought buyside OMS vendor Macgregor two years ago, says it is working on integrating its portfolio trading EMS software, Triton, into Macgregor's XIP platform. It has not set a date for completion.
Charles River Development, for its part, announced at the start of the year that it intended to migrate its Investment Management System OMS to a new underlying service-oriented architecture. That will permit it to release Version 9 of the OMS software, which will feature "fully integrated execution management capabilities," the vendor said. So far, no word on when.
For more information on related topics, visit the following:
