Tight Integration Is Key
The key for any vendor seeking to offer a combination of EMS and OMS functionality is tight integration of market data screens, pre- and post-trade compliance, portfolio accounting, and commission management - in as close to real time as possible, TowerGroup's Butterfield wrote in his report. This view is echoed by Tim Olsen, head trader at ICM Asset Management, a Spokane, Wash.-based small- and mid-cap value management firm with about $1.3 billion under management.
Olsen says he uses Bloomberg Tradebook for its market data screens and for sending orders to ECNs, alongside Channel ITG for sending periodic sweeps of his order book to brokers and Charles River's IMS for order management. Although it is possible to feed data directly into IMS from Bloomberg, Olsen says he has avoided doing so because it slows down his company's network.
"I would be interested if CRD could use the real-time trade data against benchmarks and indexes, or execute an arrival-price strategy on whole order, versus just individual stock trades, which is what I get from Tradebook," Olsen says. "And if I were able to put an EMS on top of CRD and take account reports from multiple venues through FIX, that would be great."
CRD's Engdahl says few have attempted full EMS-OMS integration because of the complexity. "There are other EMS products out there that have claimed they will get into the OMS space, and we feel they have underestimated that undertaking, not just in terms of commission management and inventory; it is also post-trade processing and settlements, and it has extended upstream onto the portfolio managers' desktops," Engdahl says. "The idea of pre-trade compliance is totally foreign to those in the DMA space - and it is getting more complicated as we enter more foreign markets."
The burgeoning prime brokerage business, which involves trading and clearing on behalf of hedge funds, was one of the guiding reasons for Lehman Brothers' purchase of RealTick. As they are serving hedge funds with more-shallow fiduciary requirements than large institutions, prime brokers tend to be more conservative when extolling the breadth of their EMS offerings.
"RealTick does make for a good on-ramp to our other offerings; it fills in a major vertical within our division of e-trading," says Brian Fagen, Lehman's head of U.S. electronic sales. "We are not at this point trying to make a soup-to-nuts application. We are continuing to develop and build on our prime brokerage business, but that does not necessarily mean we are working on an OMS for it."