Although spending on order-management systems (OMSs) is rising, the challenge for technology vendors going forward is figuring out what functionality to add that will attract fickle buy-side firms to their offerings.
That means buy-side firms can expect to see a closer marriage between OMSs and portfolio-management systems, as vendors strive to make their offerings compatible with other systems, says Fritz McCormick, an analyst at Celent Communications in Boston. It also means the development of smart-order routing, more analytics and better compliance modules that plug into the basic OMS to provide an integrated dashboard or menu of services.
McCormick says that the interest in OMSs by buy-side firms is "gaining momentum," because it provides firms with better straight-through processing, improves client service and boosts operational efficiency.
While the blotter and order creation remain core to an OMS offering, the fact is that vendors are expanding their horizons, he says. "We're seeing a move to n-Tier architecture," which allows better scalability. N-Tier, or three-tier architecture, means that an application has at least three separate logical layers. Each of the layers is responsible for a specific function, making it easier to scale up applications.
As well, he says, "With XML and Web services on the horizon," OMS vendors are "trying to align themselves for that."
Building better connectivity is also key and firms are adding "a lot of transaction capacity" and "direct-access capability is being worked into the systems," adds McCormick. Moreover, buy-side-OMS vendors are adding more asset classes to the mix, such as fixed income and foreign securities, and the use of FIX messaging is growing.
McCormick, whose firm recently completed a study on buy-side OMSs, predicts that spending on such systems will hit $700 million annually by 2005, up from less than $500 million in 2003.
He says that buy-side firms have sat out "several technology cycles," but the slumping market has clients demanding more information about the investment process and best execution. That means buy-side firms are ripe for the operational efficiencies that an OMS can bring.
When it comes to buy-side-OMS vendors, the market features a range of players, each fighting for market share, catering to all firms from small hedge funds to large investment managers.
Here's a sampling of eight key players and what they can offer buy-side firms. This is by no means and exhaustive list of vendors in the marketplace.
Web site: Thomsonfinancial.com
Head Office: New York
Company Offering: Oneva Trade EQ (formerly Thomson Open Trader).
Oneva Trade EQ, first released in 1994, supports a full range of instruments from equities to fixed income, derivatives and currency. Oneva can operate as a stand-alone product, supporting other portfolio-management systems (PMS) or works in conjunction with Portia - Thomson's PMS offering.
Christy Bremner, vice president of operations at Thomson Financial, says what sets Oneva apart from its competitors is its integration with Portia and its "real-time pricing capabilities" and customizable workflow.
Bremner says the system's programming language is C++ and it supports Sybase or Microsoft SQL databases. It runs on AIX, Unix, Sun, and Windows NT or Windows 2000.
The trade blotter acts as a gateway and tracks real-time movement of the market through 12 different data feeds. The system allows users to monitor, manage and update their orders instantly. It includes a range of tools for modeling and compliance. Oneva Trade EQ Connectivity provides seamless integration with a host of diverse portfolio-management, data and settlement systems. Thomson targets firms with more than $5 billion in assets under management, but it's "not a hard line," she says. "Firms with less than $1 billion would not be appropriate."
Bremner says that, because an OMS system sits in the middle, investment firms tell her that it's important an OMS can integrate with other systems. "We are focused on building an integration framework around products that support interoperability."
In 2003, Bremner says, Thomson is perfecting "what we would call a reliable messaging infrastructure" to allow firms to capture, publish and queue information. It will act as an "integration tool kit." Thomson Financial will also be enhancing OMS support for portfolio managers and is building out screen blotters geared to them.
The firm employs 220 people globally and, according to Celent, has about 45 customers using Oneva. That number includes firms like Fiduciary Trust Company International, Invista Capital Management and Principal Capital Management.
However, Bremner says that there are a lot more firms using Portia, so the challenge is to convince those clients to switch their OMS to Oneva. Pricing is based on the number of users and modules deployed.
Charles River Development
Web site: www.crd.com
Head office: Burlington, Mass.
Company offering: Charles River Trading System
First released in 1995, the Charles River Trading System (CRTS), supports a range of financial instruments, including equity, international equities, fixed income, derivatives and currency. It's a stand-alone, global, buy-side trade-order-management system that integrates with Charles River's compliance and portfolio-management modules.
Tim Kelly, director of software quality at CRD, says that CRTS "covers a wide range of security types" and its FIX engine and external connectivity to ECNs sets it apart from competitors.
Chris Huckstepp, product manager at the firm, says that the system is written in C++ and PowerBuilder and it supports Oracle, Sybase or Microsoft SQL databases. It runs on UNIX or NT servers.
CRTS provides real-time connectivity to liquidity and streamlines order management across users. The trading component is designed for global 24X7 trading and features open and scalable technology. ManagerWorkbench provides a portfolio-analysis tools, while ComplianceMaster provides pre- and post-trade-execution monitoring.
Huckstepp says the firm targets a wide range of clients, from "small hedge funds to a lot of big players. We're not focused on any particular segment of the market. We like them all." According to Celent, the firm boasts about 95 users of CRTS and employs about 130.
Huckstepp says the challenge that he sees investment firms tackling is building a system that supports global operations, versus single-site trading. That requires more functionality around international equities and currencies.
For 2003, Huckstepp says the firm is migrating to a new version of CRTS, based on its n-Tier platform, which will support Web services. He says in this "economic climate, firms are looking toward more cost-efficient solutions that allow them to scale up and scale down."
"It's a very competitive market at the moment," says Huckstepp. The space is "growing rapidly" and vendors are "improving their systems month by month. I think there's going to be turnover in vendors." Pricing depends on users and assets.
Web site: linedata.com
Head Office: Paris
Company Offering: The Longview Trading System
First released in 1994, the Longview Trading System is a trade-order-management system that facilitates global 24X7, real-time trading and straight-through processing. Longview covers equity, fixed income, derivatives and currency instruments.
Annie Morris, senior vice president of client services and product strategy at Linedata, says the product integrates with Linedata's investment-accounting program, Chart, and its compliance offering, Spice.
Morris says that in this "uncertain market, there is a tremendous demand for enterprise-wide-compliance monitoring and risk assessment."
Longview features pre-trade compliance that links to the order-generation process. It has multi-currency capabilities and features analytics that allow what-if scenarios. It supports FIX and interfaces with Omgeo's Oasys.
Morris says that Linedata is one of the early adopters of Microsoft's .NET tools and, last year, introduced n-Tier architecture, which allows firms to "add more and more users from around the world."
The system relies on MS SQL and Sybase relational databases and runs on Windows NT and Windows 2000. It is programmed in VisualStudio.NET.
Morris says the firm has more than 70 clients on the Longview system, which is priced on a user basis, and the firm is targeting middle- to high-end firms.
For 2003, Morris says expect to see the firm's OMS interface become more proactive as trading becomes more automated and rules based. "Clients want a high-speed system and need to get to the market very, very quickly." she notes. "They want functionality that is robust enough to handle all the different workflows."
Web site: www.sungard.com
Head Office: Wayne, Penn.
Company Offering: Decalog Trader
Originally released in 1992, Decalog Trader covers the full panoply of instruments: equity, international equities, derivatives, currency and fixed income. The Java-based and FIX-compliant trading blotter has been redesigned and the system features better workflow and more functionality.
Roland Tuffier, senior vice president for product strategy and business development at SunGard Investment Management Systems, says Decalog is a stand-alone, front-office asset-management system which links to other products within the SunGard space. Programmed in Java and C++, it uses Oracle and Sybase relational databases and runs on Windows, NT, UNIX and Solaris servers.
Tuffier says that the Decalog suite of products includes portfolio-management, modeling and compliance modules, including pre- and post-trade. "Before orders are sent to traders, they're checked for compliance."
He says there's a trend to centralize trading desks and that's bringing both order-management and portfolio-management systems closer together and creating a need for the OMS to handle a broad range of financial instruments.
As for 2003, Tuffier notes that SunGard, which employs 8,000 people across the organization, recently improved the Decalog-graphical-user interface to allow for more real-time messaging. The firm targets large institutions and has about 40 clients running Decalog. It's priced by module and number of users.
Eze Castle Software
Web site: www.ezecastle.com
Head Office: Boston
Company offering: Traders Console
Launched in 1996, Traders Console is one of the youngest players in the game but has garnered more than 160 clients. Traders Console is an n-Tier, message-based order-management system for buy-side firms. It provides connectivity to the front, middle and back offices, and out to third parties.
Dave Quinlan, president of Eze Castle, says that the system supports equities, international equities, fixed income and currency instruments. "We sell it as a singular system," or as a package with other offerings, such as Eze-Connect, which provides access to 100 execution destinations and Tradewinds, a secure data-transfer service. Traders Console incorporates pre-trade compliance and integrates the information with Watchtower, the firm's post-trade-compliance product. "Compliance is becoming critical," he says.
Traders Console provides customizable blotters, real-time pricing and position information and portfolio-management tools for modeling and conducting what-if scenarios.
The system runs on Windows NT and Windows 2000 and is programmed in Delphi and Visual Basic. It supports the Microsoft SQL relational database. The firm employs about 110 people and targets hedge funds and investment managers.
As for 2003, Eze Castle released a new version in January, moving to the n-Tier architecture. It has been adding more functionality, such as time stamping, cash management and modeling, Quinlan says. It's priced on a user basis.
Web site: www.advent.com
Head Office: San Francisco
Company offering: Moxy
Part of the Advent Office suite, Moxy was first released in 1994 and automates the manual-trading and order processes. It covers the full range of financial instruments; including equities, international equities, fixed income, derivatives and currency.
William Penney, director of product management, says Moxy works as a stand-alone OMS or integrates with Advent's other products, such as Axys - its portfolio-management system.
Moxy is programmed in C++ and uses a Microsoft SQL relational database. It runs on Windows NT and Windows 2000.
The system includes modeling and rebalancing tools. Users can create groups of portfolios on the fly and block orders can be entered. Firms can trade across multiple brokers and FIX order-routing tools speed up the trading process.
Advent, which employs about 1,000 people, boasts more than 600 users of Moxy, with a focus on a broad range of clients from hedge funds to institutional money managers and wrap programs. Penney says Advent doesn't generally "sell Moxy on a stand-alone basis to large firms."
It provides functionality such as: portfolio modeling, reporting and compliance with audit trials and time stamps, electronic order routing and trade execution, flexible order allocation and integrated portfolio management.
For 2003, Penney says, it will be more of the same. "We'll continue to respond to customer requests" and modify functionality as needs change. He expects to see more remote users tapping into the system as firms look for solutions that give them a holistic view of their accounts and activities. Moxy has variable pricing, depending on how it is licensed.
Web site: www.indataweb.com
Head Office: San Diego
Company Offering: Precision Trading
Released in 1993, Precision Trading can operate as a stand-alone OMS or as a package with other Indata software solutions, including portfolio management, billing and CRM. The system integrates with third-party portfolio-management systems and it covers equities, derivatives, fixed income and currency.
Dave Csiki, managing director at Indata, says the system is "completely modular. You can start of with the OMS component and license other modules, such as CRM."
He says the system uses "a standardized data model, which allows us to deploy applications easier than competitors and allows clients a lot more flexibility."
Precision Trading supports FIX and runs on Windows NT, Windows 2000 and Windows XP. It relies on a Microsoft SQL database and is programmed in Visual Basic and Visual Basic.net. The firm targets a range of buy-side firms and has about 50 users. It includes portfolio modeling and rebalancing and has real-time capabilities.
Csiki says that Indata, which employs about 40 people, automatically upgrades clients when it introduces new versions, so they are "never really stranded with any legacy versions."
Indata has also been busy building online ASP solutions for some of its products, such as CRM, and Csiki expects that to continue. "We see the Web as a significant advantage to clients," especially for those with remote offices. Pricing is based on modules deployed and number of users.
The Macgregor Group, Inc.
Web site: www.macgregor.ws
Head Office: Boston, Mass.
Company Offering: The Macgregor Financial Trading Platform
Launched in 1991, Macgregor supports equities, international equities, fixed income and derivatives. The firm employs 225 and boasts 85 clients using its OMS. Macgregor targets buy-side institutions managing over $1 billion in assets.
The OMS integrates decision support, compliance, trading and post-trade functions to give users deep functionality and facilitates straight-through processing. The system is scalable and runs on IBM AIX, Windows NT, Solaris or HP UX and uses a Sybase or Microsoft SQL database. It is programmed in C++ and Visual Studio.
It features a 24X7 trading environment with customizable blotters. Macgregor has developed a FIX Network that is integrated with the OMS system. The network supports indications of interest, orders, executions and allocations, with connections to more than 130 brokers, ECNs and alternative-trading systems.