Execution Management Systems are moving away from their bulge broker roots and are increasingly offered by various independent vendors. Traders are also becoming more comfortable with hosted and cloud-based EMSs rather than those hard-wired into their desktops.
Thats the notable findings in a recent Woodbine Associates report, Execution Management Systems: Trends, Technology, Value, and Selection Criteria. The consultancy targeted the research at buy and sellside firms that are considering implementing an EMS for the first time, those thinking about changing EMS providers, and investment managers or consultants looking to become familiar with issues, trends, and selection factors involved with execution management technology, according to Matt Samelson, principal at Woodbine.
Samelson told Traders Magazine that the movement of EMS away from large brokers was the most notable finding, as the reports database included only two EMSs from banks – JPMorgan and UBS. The other systems were from outside, non-broker providers.
Over the last few years, maybe due to the overall economy and the industrys downturn, there seems to be more of a demand for functionality but also an increasingly greater consideration to outsource a system, Samelson said. To outsource, the economics make a compelling argument – no personnel or technological support needed.
Some Woodbine research suggested that users would consider outsourcing their order management systems as well, he added.
The report said there are between 15 and 20 EMS major providers and included findings by examining systems from Bloomberg, Fidessa, Eze Software Group, InfoReach, Instinet, ITG, Knight Capital, Morgan Stanley, JP Morgan, Portware, REDI Global Technologies, TradingScreen and UBS Securities. All told, Woodbine reported that there are more than 100 different providers of EMS.
The perception is that EMS is a commoditized item, Samelson added, but it really isnt.
Another major finding, Samelson said, was the fact that more and more firms would be willing to use an EMS that was hosted and cloud-based. In Woodbines previous survey, conducted in 2010, users were more interested in functionality and how did EMS help traders. Now, in a more modest commission environment, brokers and buysiders are looking at ways to save money and decrease their technology budgets.
These influences are having a pronounced impact on delivery models for front-office technology, Samelson said.
This move to the cloud and hosted solutions, he said, was a growing trend and an example would be the recent divestiture of REDI Technologies by Goldman Sachs. With the bulge leaving the EMS space, smaller regional and second-tier brokers can fill the EMS void , as well as external supplied solutions.
According to the report, EMS users number around 12,500 firms and compensate providers, directly or indirectly (by direct payment or directed order flow), an average of $10,000 per month.
Upwards of 60 percent to 75 percent of EMS users globally are hedge funds. Asset managers, brokers and banks make up the balance.
The reports findings are broken down into four sections covering such areas as industry trends, EMS selection criteria, EMS characteristics and a review of myriad individual EMS systems.
The report was conducted via questionnaire between January and mid-summer.
