Trading Technology

01:38 PM
Blair Kanter, Consultant
Blair Kanter, Consultant

EMS vs. OMS Revisited: What Should the Buyside to Do?

Blair Kanter, Consultant, offers his vision and suggestions on steps the buy should take when evaluating the OMS vs. EMS.

During 2009, the investment management industry has faced many new challenges, including:

• The global financial crisis has caused investment management companies to experience a decrease in assets under management and poor performance. • The financial markets continue to evolve and have become more complex and fragmented. • New regulations such as Regulation National Market System (Reg NMS) and Markets in Financial Instruments Directive (MiFID) have emerged. • Despite a decrease in overall technology spending in 2009, investment management firms are still spending money on front-office technology.

In light of these factors, the buy-side trader’s job has become more challenging and complex. For example, a buy-side trader must contemplate many possible options for placing and executing an order such as internal crosses, execution through broker/dealers, direct market access (DMA), electronic communication networks (ECN), alternative trading systems (ATS), algorithms and dark pools.

Since they first appeared in the late 80’s and early 90’s, vendor-based Order Management Systems (OMS) have been and continue to be the cornerstone of the investment management firm’s front office. The OMS supports the investment management and trading process and ties together the portfolio manager, trader, back office and compliance department through a common solution.

Over the last five years, OMS vendors have received a challenge from a new type of system, the Execution Management System (EMS). The EMS can be broker-owned or an independent software vendor. The EMS provides the buy-side trader with the power and speed to deal with today’s challenging trading environment. Functionality such as smart order routing, connectivity to multiple and a large array of trading venues, market data and real-time pricing, pre-trade transaction cost analysis (TCA) and algorithms are provided by these solutions.

The buy-side trader has forcefully clamored to have better and faster technology on his/her desk. However, the global recession of 2009 has forced investment management firms to reduce their technology budgets and to spend their technology dollar wisely.

Moreover, the “OMS versus EMS Debate” has raged on in the financial markets and technology press for the last five years. Competition between the various OMS vendors and EMS vendors has been fierce and the vendor technology options continue to evolve.

Implementing one or more EMS, despite the speed, sophisticated technology and in some cases lower cost, poses many challenges. Issues include OMS-EMS integration and workflow, broker neutrality, the optimal front office technology architecture.

So what should the Buy-Side do? These are my suggestions---a look at the future and my recommendations.


The OMS will continue to be the cornerstone of the investment management firm’s front office. OMS vendors such as Charles River, Fidessa/Latent Zero, Linedata, Bloomberg, ITG/Macgregor and BNY ConvergEx/Eze Castle will continue to improve their execution management capabilities, although the timeframe for this is not clear. Therefore the author recommends that investment management firms monitor their OMS vendor closely, especially the product “Road Map” for 2009, 2010 and if available 2011. Attend industry conferences such as SIFMA and vendor-sponsored user conferences. Focus on future execution management capabilities and delivery timeframes promised by the vendors. The cost and effort of switching OMS vendors is very high and reasons for doing so must be compelling.


The EMS vendors will focus on their core competencies but will not build out the complete functionality to support the investment, trading, compliance and back office process that the OMS vendors offer. For the investment management industry, the independent EMS vendor is in the early-adoption phase. Although vendors such as Portware and FlexTrade have recently acquired a few large buy-side firms as clients, less than 15 percent of EMS vendor clients are traditional buy-side firms with over 75 percent being hedge funds, broker/dealers or proprietary trading desks. Therefore, the author recommends that large and medium investment management firms with complex requirements and aggressive trading strategies continue to research and evaluate EMS products while monitoring further developments. In the author’s opinion, investment management firms which are smaller, have small IT departments and low trading volumes do not need an EMS and will find an OMS sufficient.


There will be continued consolidation, and perhaps a shakeout among the vendors. OMS vendors and EMS vendors have experienced a series of mergers and acquisitions over the last few years. For example, OMS vendor mergers include Fidessa and Latent Zero, ITG and Macgregor, and BNY ConvergEx and Eze Castle, while Charles River, Linedata and Bloomberg have remained independent. EMS vendors have also experience consolidation. The May/June Issue of Advanced Trading provides information on over 25 EMS vendors and products and their future is far from clear. These developments further support the my opinion that 2009 should be a year of monitoring developments and doing your homework rather than implementing new systems.


New opportunities will arise for investment management firms and the vendors in Asia. For example, the Tokyo Stock Exchange, one of the world’s slowest stock exchanges, will implement faster low latency execution technology and China continues to develop rapidly. I believe that large global investment management firms will need to develop and implement an effective global strategy for front office technology and managing OMS and EMS vendor relationships globally.


The year 2009 will continue to be a difficult year and will be the year of monitoring developments. The year 2010 will be a little better and may be the year of new front office technology projects including those related to OMS and EMS vendors. Therefore, as the season for locking down 2010 technology budgets approaches, investment management firms should gather the information from OMS and EMS vendors necessary to budget wisely for 2010.

Blair Kanter, formerly of PricewaterhouseCoopers and IBM, is an independent consultant with 23 years of experience helping investment management firms with their technology and operations challenges. Blair can be reached at and welcomes opinions and questions.

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