It goes without saying that in a volatile market, traders must be on their toes and ready for anything. One way that firms are keeping pace with rapidly changing markets is by deploying the latest in order-management-system (OMS) technology. Here's how some firms say OMS technology is making their firm better and allowing using them to navigate the market's choppy waters.
Simms Capital Management
Colby Simms, director of information technology at Simms Capital Management, Inc. in Greenwich, Conn., says there has "been a great deal of development over the last five years" when it comes to OMSs. "The product we started out with and the product we have now are remarkably different," he says.
In 1998, the firm dropped its old OMS vendor, which has since been bought by another company, and went with Indata's suite of products, including Precision Trading, its OMS.
Simms is a large-cap-growth manager, investing in big U.S. businesses and international companies. The firm's Automated Depositary Receipts (ADRs) are traded in North America using quantitative and qualitative analysis. The staff of 15, including six portfolio managers, handles money for both pension funds and high-net-worth individuals.
Simms says that the reason for the change was simple. "We needed something that was more robust." The system they were using "worked very well when we were smaller, but we wanted something in-house that we could customize," in areas such as client reports.
"We needed a more robust trading system that could not only handle orders but create orders in the way we manage money," he says. "We needed something fairly sophisticated."
Simms says he found that with Indata's Precision Trading, "Traders can handle an entire order directly off the blotter" and it has cut down on paperwork. A FIX connection integrated into the system provides connectivity to "a number of different brokers who support best-case scenario for fill and execution."
As well, he says, the system pre-populates information on the screen and supports Oasys for trade allocations, which makes the firm more efficient.
"The trade blotter is actually tied to the rest of the system, so it's easy for us when we're working an order to drill down and see the actual account and see how the order might affect the individual's account," he explains.
Simms says that if there's one thing the traders would like to see, it would be more control over foreign-currency trades. While he likes the FIX connectivity and electronic order routing, he notes that it "can't replace the feedback our traders get when talking with other traders." However, he acknowledges, "The more transparent the trade, the happier they are."
As for the future, Simms notes that, while his firm uses a number of Indata products, it's not using the vendor's customer-relationship-management system, though that could change. "Eventually it would be nice to have the CRM data tied to the portfolio."
Hansberger Global Investors
Andrew Powers, vice president of information technology at Hansberger Global Investors, likes the integration he gets out of his order-management vendor.
Hansberger uses Oneva Trade EQ from Thomson Financial, which the investment manager implemented in 2000. It also uses Portia, Thomson's portfolio-management system, which integrates with Oneva.
Prior to that, Powers says, "We were using a service bureau for portfolio accounting, along with a custom-developed trading system." However, as the firm grew, it needed to revisit its technology.
The firm is part of the Hansberger Group, Inc., headquartered in Fort Lauderdale, Fla. It manages $3 billion globally and has offices in Hong Kong, Toronto, and Moscow, trading primarily international equities and emerging markets. Thomson was appealing because of its global reach, says Powers.
The firm has between eight and 11 people accessing the system.
Powers is a big fan of the integration between the accounting system and the trading system. "They run off the same database, so all your reports are up to date. There's no need for integrating two separate databases."
That means better "accuracy" and "no need for reconciliation between two systems. The reason we chose Thomson was the strength of their integration," adds Powers.
Another aspect that he "appreciates" is the "other components of the STP solution," namely the connection to Omgeo. Being a global trading shop, Powers says, that is an important element.
Another attraction was the pre- and post-trade compliance. "That was a huge factor in our decision." It's also an area where Powers thinks there's room for development and enhancements among OMS vendors.
Powers notes that, "We don't have everything they've got there yet," referring to the full suite of Thomson's products, but it's "nice that they have everything" for when the time comes to add components.
Though going with a suite of products from one vendor flies in the face of the philosophy that firms should buy best of breed, Powers says, "We felt there was less differentiation among products than there was among vendors. The difference was so slight between the products."
He adds that "best of breed can be more expensive as well." OMSs, he says, have become "a commodity. I think it's become pretty standardized and well understood," so it really comes down to picking a vendor that a firm can be comfortable with.
He says the implementation was straight forward but, in the end, it boils down to how well the investment firm has completed an analysis of its technology needs. As well, he warns, "You have to allow yourself plenty of time to get to know what's out there. There's so many different products."
When it comes to the capital markets, Jeff Harvey isn't looking for a run-of-the-mill OMS. Rather, the director of operations at hedge-fund Forstmann-Leff Associates in New York, says that being able to customize the technology is key.
"Our hedge products have special needs for special kind of investments, as do many hedge-fund managers," he says, so it was important that the firm's OMS be flexible.
In 1999, Forstmann-Leff adopted Eze Castle Software's OMS, known as Traders Console. "It suits our needs. It's extremely customizable and the Windows-based system is extremely user friendly."
Forstmann-Leff was founded in 1968 as an investment-counseling firm and manages domestic-equity portfolios for institutional investors and high-net-worth individuals. It manages about $3 billion and employs 58 people, about 10 of whom use the OMS.
It also integrates well with Forstmann-Leff's portfolio-management system, Axys, from Advent Software.
Harvey says the system has "links to many brokerages" and "being a predominantly equity house, it fits with our mid-cap and large-cap-growth products."
As well, the system means that Forstmann-Leff has been able to increase its straight-through processing, though Harvey says letting an experienced trader work an order can bear better best-execution fruit. The "human element" is still important, he adds.
As well, the compliance aspect to the OMS is appealing. He says the firm has many clients and custodians and, "It's important to make sure that you adhere to client restrictions."
In terms of finding a vendor, he says, "You have to do your homework. Every firm has its own way of dealing with procedures" and the goal is to find one that's compatible.
Trust Company of the West
When you're managing $80 billion of client's money, it can be a trading nightmare to track positions and follow trades, especially when relying on a service bureau.
It was a lack of functionality that prompted The Trust Company of the West, a Los Angeles-based investment manager that's part of the TCW Group, to bring its OMS operations in-house in 2001.
That's when the firm deployed the Longview Trading System from Linedata, a Paris-based company.
TCW has been around for more than 30 years, managing U.S. and global investments for a range of clients, from employee-retirement funds to pension-capital pools, other financial institutions, profit-sharing funds, foreign investors and high-net-worth individuals.
With more than 600 staff, including 54 portfolio managers and 17 traders, Thornton says TCW needed the full suite of Longview products, covering everything from OMS to portfolio management, compliance and connectivity.
Ned Moran, managing director of the firm, says that the system "plays a very big role" in the firm. "It's doing the job for us we wanted it to do," adds Thornton. That means managing trades and helping people make decisions.
Thornton notes that OMSs like Longview are driving FIX trading. Last year, he says, about 25 percent of trades were via FIX. He estimates that, this year, it's closer to 50 percent. "We've been adding a lot of brokers in our system so we can access them directly. I'm a big believer in FIX - It's the only way to go in terms of running the (trading) desks."
He adds that, in terms of "executing to the outside world, it does just fine. The communication all works as advertised." In terms of importing data, "All works well," although he found that the integration capabilities of TCW's third-party, back-office provider weren't as sophisticated as Longview, but it "wasn't as big a challenge as it might have been."
Moran warns that, when shopping for an OMS vendor, firms need to make sure they select a "system that has as open an architecture as possible, to allow you the option of using other third-party vendors who (later) may provide better functionality."