We’re pleased to present the first installment of the TrendSpotters Thought Leadership Series. In our first podcast, we interview Bill Hebert, an authority in order management systems (OMS) and execution management systems (EMS). You can read Bill’s bio here.
Podcast: Download (18.8MB)
Bill is currently an executive director with CFS Consulting Services in Boston. I met Bill back when he was a Vice President of Strategic Development and Electronic Trading at Fidelity. He’s also worked in senior positions at Thomson Financial, the Boston Stock Exchange, and Charles River Development.
In this podcast, Bill and I explore the history, current state, and future trends for the order management and execution management platforms. We discuss the genesis of the OMS systems, which were originally designed to consolidate and manage order flow for the buy side, aggregate orders for the same stock from multiple portfolio managers, process indications of interest, route orders to the sell side, and handle post-trade allocations. OMSs either started with or evolved to include compliance, modeling, and functionality to make intelligent trading decisions. They also generally incorporate FIX connectivity systems using the FIX protocol for electronic communication and trading. In the past 10-15 years, OMS platforms have progressed to become the hub of processing within the institutional trading room.
We also discuss the evolution of the execution management systems. Originally developed for the sell side, these systems evolved out of the trading universe, supporting program trading desks that were handling lists and block orders from the buy side. EMSs evolved as liquidity became more fragmented, and as market structure changed with the proliferation of ECNs, ATSs and “Dark” pools. Regulatory changes such as Regulation NMS also created more demand for liquidity discovery and intelligent order routing. In developing the tools to efficiently access multiple liquidity sources, EMSs incorporated more sophisticated market and analytical data management and intelligent electronic trading capabilities.
The market has evolved, and demand for the EMS platforms on the buy side has grown dramatically in the past several years. This has driven some convergence between OMS and EMS systems. The systems have also evolved, incorporating execution algorithms, often provided by brokers, that the buy side can configure according to their specific trading objectives. The buy side has become increasingly sophisticated in accessing liquidity, increasing demand for sophisticated EMS systems.
Development roadmaps for EMS and OMS platforms are being heavily influenced by the hedge fund community, which tends to focus on quantitative trading strategies and functional sophistication. It is conjectured that the next generation of EMSs may include access to algorithms with research, news, and other data analytics as input – combining qualitative and quantitative data to drive trading decisions. Revenue models have also evolved. While many buy side trading desks pushed for multi-broker OMS platforms years ago, now execution management systems are seeing a similar push as the buy side strives to consolidate the number of trading platforms on their desks. While the distribution of OMS and EMS systems is seemingly ubiquitous in the US, Europe and other regions, substantial growth opportunities still exist from a global perspective, including growing interest in Asia Pacific and Latin America.
I hope you enjoy the podcast. We welcome your comments. Engage with us in the TrendSpotters discussion community, where you can share your opinions, ask Bill questions and debate the issues with other community members. You can also join the conversation on Twitter by using the hashtag #TrendSpotters.
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Warm regards,
Candyce
