OMS or EMS?                                                                     The Buy-Side Perspective on Selection and Convergence Executive Summary Trading systems have seen a tremendous metamorphosis in the past decade.  The touch-screen blotters of yesterday have given way to multifaceted platforms that sit at the heart of the trading operation.  A usable trading blotter and exchange connectivity are now standard, while the value comes from the ability to bring together disparate trading tools into a single interface.  Mashups have moved beyond the web.

We are in a place where technology is needed more than ever to manage the constantly changing and faster-moving markets, yet the economic crisis has IT budgets being slashed.  Whether investing in cutting-edge technology to reduce execution times by a few milliseconds, or moving away from a paper blotter and onto a trading system for the first time, a hard choice exists in that the buy side must spend to survive, but the spending undermines profit margins.

Central to this dilemma is trading technology – the Order Management System (OMS) and the Execution Management System (EMS).  Despite budget woes, the buy side continues to adopt these systems, though attitudes have changed dramatically.  Only a few years ago many buy-side traders had a combination of broker-owned and third-party systems because each provided some unique functionality.  Even if only one function was used, the explicit cost for each system was close to zero, so there were few disincentives to add another application.

Things are changing.  Long gone are the days in which investment banks were happy to provide applications for free, or when growing asset bases resulted in an abundance of commissions. The buy-side trader no longer has the luxury of having any and all system.  The mantra for this year and the foreseeable future will be one of efficiency and the ability to do more with less. Consolidation is the trend.

Despite the tough economic climate and fewer buy-side dollars up for grabs, OMS and EMS providers should not try to be all things to all people, but rather to focus on their target demographic.  The requirements of a given trading strategy should drive development efforts, rather than a list of functionality associated with the OMS or EMS label.  This does not mean that the OMS and EMS labels are irrelevant, but rather that preconceived notions about what they mean should be tossed out and rewritten by each provider.  The buy side is increasingly in tune with their technology needs, and the providers who both understand that and deliver accordingly will be the ones still around to see the next market cycle.

The TABB Group Report on OMS or EMS?
The Buy-Side Perspective on Selection and Convergence

This report is based on conversations with 178 buy-side traders primarily with equity-focused strategies, conducted in the latter half of 2008.  Study participants on both sides of the Atlantic with a variety of trading strategies present a broad view of OMS and EMS usage around the global.  The report focuses on the continued importance of the OMS and EMS, the difficult task of selecting the most suitable system and functionality convergence, both wanted and unwanted.