In its recent global survey of brokerage firms and investment banks, TABB Group reveals the sell-side’s “striking level of tepid satisfaction and even outright frustration” with current OMS solutions. It also notes that, by having a more flexible infrastructure and a single point of execution, with execution capabilities for multiple asset classes and global locations, organizations could increase efficiency and reduce their overall trading costs.
This best-case scenario, however, appears to contrast sharply with the reality for many investment banks and brokers. Notably, when discussing OMS technologies, one head of equity trading for an agency broker told TABB Group: “None of them are ideal. Unfortunately, you’ve got to pick your poison.”
This could be viewed as an extreme comment that reflects the sentiment within today’s front offices when it comes to technology. In times of continued budgetary constraints and margin pressure, there is a tendency to view any large-scale transformation of the technology environment as an expensive headache. The easier option, ostensibly, has been to meet new and specific requirements on a piecemeal basis, as and when they arise: turning to a packaged solution for one asset class here and another there.
[For more on OMS initiatives, read No Rush to Upgrade OMSs Among Sell-Side Firms.]
The long-term result of this approach can itself be chronically painful: swiveling between multiple systems to perform tasks, inputting the same data over and over again, and increasing opportunities for manual error. But the front office in particular seems resigned to this far-from-perfect situation. There is also an awareness that, post-trade, the problem is passed elsewhere. What’s bad for the front office in this context will be considerably worse for compliance, the middle office, and beyond.
Is a better OMS out there?
An answer, however, is available. The challenge for sell-side firms is to do their research and find a provider that has invested in both its own technology and its future, continually innovating to expand and improve its solutions. It’s also well worth investigating the vendor’s technology partners. Does it, for example, partner with a similarly credible hosting provider or engage with the best performing execution services?
In establishing a new technology partnership, the front office has important questions to ask itself, too. Is it carrying excessive overheads? Are too many of its staff employed as stop-gaps to technology? How much of their time could be better repurposed elsewhere? In other words, choosing the right OMS solution is less about picking your poison than making the right decisions. Regardless of the cost and complexity of a migration project, it will certainly be less painful in the long run than limping along with an inefficient combination of inadequate solutions.
The new front-office team doesn’t settle
There’s another increasingly important reason for ensuring that front-office teams are working with exactly the right solutions: the changing characteristics of the teams themselves.
In the early 2000s, developments in technology and the internet changed the face of trading, but not necessarily the people behind it. Seasoned traders who typically majored in finance or economics gradually had to swap manual tickets and phone orders for keyboards and monitors. More than a decade later, a new generation of the front-office workforce has emerged. While these up-and-coming traders might have a minor in finance, their skills and interests are predominantly focused on math and technology. First and foremost, they understand the algorithms, calculations, and complex data sets that power today’s trading environment.
In short, the front-office teams of 2014 have completely different skill sets from those of 10, 20, and 30 years ago. So, when it comes to attracting top talent, a firm that’s operating an outdated, confusing set of technologies is likely to lose out to a competitor with a fully integrated, multi-asset class OMS. The harsh truth is that these high-flying, technology-driven young brokers would never settle for “picking their poison.” Instead, they might just say: “I can’t do what I need to do with this. There must be a better OMS solution out there.” What’s more, they’d almost certainly be right.