SIFMA Vendors Push Global OMS/EMS Platforms To Satisfy The Buy Side
As electronic trading causes a surge in market data volumes, and buy-side traders seek connectivity to liquidity pools, algorithms and exchange venues that are moving into multiple asset classes, there's a rising demand on the buy side for execution management systems (EMSs).
The concept of a global OMS/EMS that can provide access to multiple destinations, depth-of-book market data feeds and broker algorithms is one of the hottest trends sweeping this year's SIFMA Conference. The concept has fueled several mergers and acquisitions, such as ITG-Macgregor (booth #2609), Fidessa-LatentZero (booth #3400) and Eze Castle Software-BNY ConvergEx Group (booth #1815).
Many order management systems (OMSs) provide access to broker algorithms and operate order routing networks, but they are not as fast as the EMSs, industry sources say. While hedge funds that focus on fast executions across multiple destinations can make due with just an EMS, traditional asset managers still need the OMS, which they use to document trades, rebalance portfolios and handle everything from pre-trade compliance to post-trade allocations.
Rather than force asset managers to make a choice, technology providers are pitching integrated global OMS/EMS solutions. OMS vendors are taking various approaches to achieving OMS and EMS functionality in a single platform, including acquiring an EMS and merging the two systems, building an EMS on top of an OMS, or building an interface that can connect with third-party OMSs.
Today, Boston-based Eze Castle Software — the OMS provider that merged with BNY Securities Group in June 2006 to form BNY ConvergEx Group — is demonstrating for the first time the Eze Castle OMS/EMS, which is due to be released this summer. The solution will leverage all of the capabilities that Eze Castle has built into its OMS integrated with access to the world's 40 markets on one platform, according to Bill Capuzzi, managing director at BNY ConvergEx Group.
"While the Eze Castle OMS is a multi-asset class system, the EMS functionality on day one will be for global equities and in asset classes," such as options, futures and foreign exchange, says Tom Gavin, CEO of Eze Castle Software. The company says the system has access to 90 percent of the world's liquidity. In terms of execution capabilities, the system offers sophisticated DMA, crossing capabilities and algorithmic trading through one shared blotter, Gavin adds.
According to Eze Castle COO Jeff Shoreman, customers will have DMA provided through the EMS components, leveraging the ConvergEx pipes. They'll also be able to access 350 brokers and 30 different algorithm racks from different brokers — all with global integrated Level One and Level Two market data and DMA, he says.
Eze Castle executives say they are trying to eliminate the predominant workflow in which traders have an OMS linked to a third-party EMS, with a swivel chair so they can rekey trades from the EMS back to the OMS or vice versa. "The integration is not passing FIX messages between two entities ... or staging orders between two systems engines — it's full integration," stresses BNY ConvergEx's Capuzzi.
"The workflow benefits are not just for DMA," Gavin says. "Those workflow benefits are for enhancing the use of algorithms, for [order] routing and for using our crossing system."
Taking a different approach, Linedata Services (booth #2210), which provides the buy-side OMS LongView Trading, is building a new technology interface, called LongView Live, that pulls together everything a trader needs, including order management, commission tracking, IOIs, pre-trade analytics, access to markets and real-time data, according to the company. A design of the platform was previewed to Linedata customers at the vendor's user conference last month.
Comparing the interface to the cockpit of a jet fighter, Linedata Services COO Annie Morris says the platform uses charting, visualization and 3D graphs rather than a spreadsheet approach. "It allows you to react to a dynamic environment very quickly and in a very intuitive way," she says.
Rather than build an EMS or acquire one, Linedata will partner with destinations that clients want to access, Morris explains. "We are partnering with the top EMSs to embed their functionality in LongView Live," she says. "LongView Live is not an EMS — the functionality covered by LongView Live is much broader than [an EMS]."
While many of the EMSs have been acquired by brokers, Morris emphasizes that LongView Live will be broker-neutral. "We are actually the only major order management provider that is not a broker-dealer," she contends. "And not being a broker-dealer is critical to our strategy."
There are concerns about how these OMSs and EMSs are being integrated. One of the main reasons for deploying an EMS is to have faster access to execution venues, an area in which OMSs get bogged down with message traffic. "Algorithms are kicking back hundreds of messages a minute," cautions Larry Tabb, CEO of TABB Group. "It's a significant issue."
How OMS providers integrate EMS functionality into their architectures is critical, Tabb continues. "This is not like adding another compliance rule or adding a new product into the database," he says. "When you start going global or multi-asset, or you want to add in an EMS, that's major functionality you're adding, especially on these older systems."
But Linedata's Morris says, "We have no problems with volume coming from the EMSs and algorithms. I know that some of our competitors do. So the perception is that all order management providers have problems. We do not have that issue."
Morris says Linedata is the only major OMS provider built on N-tier technology. The underlying technology, she notes, is Microsoft Windows Presentation Foundation Technology.
Jeff Gavin, electronic trading product manager at Eze Castle, says his company's OMS/EMS solution is designed to be fast. The firm adopted a service-oriented architecture that allows it to plug in new asset classes or markets on the front end, he explains. "It allows us to scale the back end [given that] rates of market data and rates of execution are going up," Gavin adds.
ConvergEx's Capuzzi says Eze Castle spent a lot of time benchmarking the speed of its platform and reducing latency. "You are effectively operating in an EMS environment within an OMS," he says. While OMS providers reportedly are slower at bringing in market data, ConvergEx says it will internally source the market data, meaning it will come through ConvergEx rather than piping in a separate provider's data feed.
Meanwhile, Fidessa, which offers its own standalone buy-side EMS, is sharing a booth at the SIFMA show with LatentZero, the buy-side OMS provider it acquired in April. Last January, LatentZero said it had integrated EMS functionality into its buy-side OMS. While Fidessa EMS is being marketed to the hedge fund community, "For the larger players looking for an integrated OMS, we're offering the integrated solution with LatentZero," explains Martin Hakker, EVP of marketing at Fidesssa.
Fidessa is looking to add the market data and connectivity — to 82 exchanges worldwide and 210 brokers — from its global network into LatentZero's suite of applications, according to Hakker. Since LatentZero didn't have its own network, "One of the key bits to the merger is to integrate our network and our products, providing them with global reach and market data so they no longer need to look to third-party suppliers to integrate market data into their application suite," he says.
But not every OMS provider will look to acquire an EMS platform. "Charles River [Development] is probably the furthest along in building their own EMS," says TABB Group's Tabb. "They tend to have a not-invented-here mentality, so they tend to do things on their own."
According to one technology executive with a Charles River competitor who requested anonymity, Charles River is "trying to build a more complex tool kit. They're going to embed more order types and bits of functionality from a slew of brokers and use the market data from various third-party providers. It's a much more complex approach."
Though the OMS/EMS debate is not over yet, the vendors aren't waiting to develop offerings to meet buy-side demand for integrated functionality. "The other OMS providers are or will be moving in this direction," asserts Eze Castle's CEO Tom Gavin. But, he adds, he expects competitors to continue to take different approaches.
But does the buy side really want a single OMS/EMS, as Eze Castle-ConvergEx, Fidessa-LatentZero and ITG Macgregor are betting? Or do buy-side firms prefer the flexibility to integrate with their favorite EMS, as Linedata is proposing?
"It all comes down to enabling a workflow that is simple and fast," says Tom Gavin. "Though Eze Castle's OMS will still work with all of the third party EMS providers, a two-system workflow is cumbersome," he cautions. "What we're bringing to the table is a simple, fast workflow that can only be provided through a single-system approach."
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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