According to Sapient's Israel, Bloomberg has the functionality with AIM and EMSX. "Charles River--they are good at workflow and continue to add EMS functionality," Israel says. Fidessa has the EMS functionality and the connectivity with Latent Zero, he says, and Portware, FlexTrade and ITG (with Triton) add OMS functionality.
Still, there's an ongoing debate about OMS-EMS convergence into an integrated system. Some head equity traders are skeptical about whether the merged functionality would be fast enough for algo trading. "I'm curious to understand what they mean by EMS functionality," says a buy side trader who uses Charles River's OMS. "I haven't seen it from them in the way that I'd classify as an EMS."
One West Coast asset manager uses Charles River for its OMS and Inforeach for its EMS. "It's common for an OMS to have overlapping EMS functionality, such as order routing capabilities," the trader says. However, he questions the capabilities of a combined solution: "Everyone has heard the saying 'jack of all trades, master of none.'"
Others maintain that to embed EMS functionality, the OMS has to do more than integrate broker algorithms into the front end. "To me it's glorified order routing, " says the head trader at an East Coast asset management firm. "It's having an interface into a Level 2 quoting environment, the ability to efficiently click amongst algo providers and change specific preferences in a low latency environment. The workflow advantage that an EMS has over an OMS is integrated transaction analytics that assist the trader in enhancing execution quality. That's more of an EMS."
Some OMSs are staging orders through a routing procedure using the Financial Exchange Protocol (FIX), moving from the OMS blotter to the EMS. "But it's not nearly as dynamic as coming from the EMS," says the head trader.
While the OMS and EMS can be brought together, they are designed for entirely different purposes. "The OMS is really about workflow from order inception to running it through compliance to executing it to making sure you can comply and confirm," says Sapient's Israel.
The EMS, he says, "is about the speed of execution and being able to adjust to change based on market conditions, being able to create your own algos." While asset managers typically have one OMS on the desktop, they often have multiple EMSs that specialize in a particular asset class, such as equities and options, Israel says.
Historically, the EMS has been a single asset class platform, with a couple of bond and equity platforms, says Robin Strong, director of buy side market strategy at Fidessa. "The demand we're seeing is to consolidate that, routing to a single point and then routing out to the various liquidity venues. It's a complete hosted platform in the Fidessa private cloud."
Fidessa's EMS will sit on top of any of the OMSs in the market with "non intrusive access to all the global liquidity and different asset classes," Strong says. Some of the OMSs, including Charles River and Linedata, come with a FIX engine, he notes. Rather than hire a staff to maintain a FIX engine and do certification and testing, Fidessa has moved all the connectivity infrastructure into its data center. It even offers FIX network experts. "You realize an intangible cost savings in staff you can free up to focus on your issues in trading," Strong says.
FlexTrade Systems hosts FlexTrader, its multi-asset EMS, in its global data centers, says president and CEO Vijay Kedia. Having added expertise in options and FX, FlexTrade is now adding fixed income capabilities. But Kedia cautions that some other OMSs and EMSs aren't as open to being able to connect with other EMSes and OMSes. "Some are trying to be protective, and they try to discourage connecting to any OMS or EMS provider," he says.
To rein in costs, some asset managers are switching to OMSs that are hosted as a managed service and can integrate with an EMS as well as bring in real-time depth-of-book data and access to liquidity venues. For example, Allianz Global Investors recently moved to Bloomberg's AIM OMS platform, which works with Bloomberg's EMSX.
"Bloomberg is putting it all together," says Chapman of Allianz Global Investors, which has $39 billion in assets under management. "Everybody is using Bloomberg for their global information. They've had an order management system for a few years, and they've made it top notch." In addition to switching its OMS/EMS to Bloomberg, Allianz has also moved to its transaction cost analysis (TCA) system, which can use Bloomberg's tick data. "They have the pre-trade models for the order management and the execution management and the TCA--it's all there and it's all their data," Chapman says. As a result of the integration, he says, "our compliance people are coming up with new reports that they haven't had in the past, and looking at things differently."
Although some firms complain that Bloomberg is expensive, its global news and market data services are pervasive. "If you can get everything through there, that is the choice people are going to make," Chapman says.
[Would Traders Want OMS/EMS Access on an iPhone?]
In September, Bloomberg announced Bloomberg Pool, or BPool, a service that matches orders across all of its equity trading platforms, in addition to Tradebook's blotter. BPool looks for matches across all of the firm's EMSs and OMSs via a matching engine from BIDS Trading. Chapman compares BPool to what Blackrock is building with Alladin Systems, a dark pool that sweeps the Alladin blotter and matches buy and sell orders for clients. "If they have a contra order, they'd rather just trade it internally and not send it to the exchange," says Chapman, who notes this innovation could hurt the other blotter scraping networks.
Chapman compares Bloomberg's potential dominance to Apple's iPhone. "If they keep coming up with better tools, then do you keep switching back and forth between BlackBerry and Nokia?" he asks. "You stick with Apple."
Large companies like Bloomberg have the resources to invest in R&D and global economies of scale to run these businesses, whereas some of the smaller firms may struggle to keep up-to-date. However, it's not clear that any one company will dominate the OMS and EMS space. "I don't think any provider will ever rule the world," says TradingScreen's Buhannic. He predicts that a small club of two, three or four players will emerge with a software-as-a-service model in an integrated world.
To stay relevant, smaller OMS and EMS providers will need to massively invest in R&D, and continue to enrich their product functionality. "Every firm has a core strength and that's where they will excel," says FlexTrade's Kedia. Clients should be able to pick the best EMS or OMS and connect it via a standard protocol, rather than be held hostage to any one company's integrated solution, he says.
"As long as customers have the choice to pick any OMS or EMS and let them work seamlessly they will be the winners," Kedia says. But, if trading volumes stay in the doldrums, and commissions remain tight, then asset managers will be more cost conscious and eager to simplify their OMS-EMS installations, as the march toward convergence continues.