In its latest investment in buy-side trad ing technology, Goldman Sachs has taken a $20 million stake in order management system (OMS) vendor Eze Castle.
The move is a sign of the growing role of the technology in the transmission of orders, executions and IOIs between the buyside and the sellside.
Goldman managing director Duncan Niederauer said the investment is "an important step forward in our strategy to lead rather than follow the evolution of the equity marketplace."
An investment of this size in an OMS by a large investment bank is unusual. The deal, however, is not so unusual in light of Goldman's past investments in electronic trading venues, such as the Arizona Stock Exchange, that allow buy-side traders to bypass brokers for liquidity.
An OMS can be used by a buy-side trader to route orders to non-traditional trading venues. But it also enables more efficient communication with the sales trader. An OMS, for example, is a popular way to receive execution reports which otherwise would be phoned in to the buyside. The buyside increasingly expects the sellside to communicate with their OMSs via the FIX protocol.
David Quinlan, an executive with Eze Castle in Boston, suggests the Goldman arrangement is logical. "They [Goldman] know order management is becoming critical," he said. "They want to make sure they understand it and can make a good strong recommendation to their clients."
Niederauer, who will join Eze Castle's board, also said the move was made to "offer our clients access to the most innovative trading technologies available."
Goldman is expected to promote the OMS to its clients, but the deal is non-exclusive for Eze Castle, according to Quinlan. The vendor is free to work with other broker dealers and non-Goldman buy-side clients. "There are no explicit mandates where we have to do things with them," Quinlan said. The Eze Castle product, TradersConsole, is used by about 90 buy-side clients and links to 70 endpoints including Goldman.
