Three families of software solutions for the Sellside have emerged over recent years, covering the full spectrum of exchange-based trading:
- Execution Management Systems (EMSs)
- Order Management Systems (OMSs)
- Order and Execution Management Systems (OEMSs)
EMSs are used by brokers and dealers to access electronic markets and achieve the best executions for their clients, increasingly in combination with advanced, automated trading strategies.
OMSs are designed to manage securities and listed derivatives orders, end-to-end from pre-trade checks through compliance to reporting. The core functionality of an OMS is to track the progress on each order, be it a one shot order or part of a block trade. The workflow of each process is broken down within the OMS according to the stage in the trading cycle it has reached with various models designed to handle each step of the order life cycle. However, OMS functionality tends to be varied and the performance requirements are based on a variety of criteria.
The primary concern of traders is having OMSs and EMSs seamlessly functioning in concert, rather than in accumulating sophistication and the resulting complexity. In that context, OEMSs provide an elegant answer, combining the essential functionality of both types of systems without the challenge of integrating disparate solutions into a usable package. However, high volume and specialist traders suffer from the associated limitations of a one-size-fits-all platform. In these cases, separate OMS and EMS systems tend to be the norm, allowing more control and refinements in the trading process.
Historically, OMSs and EMSs have been developed separately. The trend to include elements of both in a single offering only recently emerged. Therefore, we categorise vendors’ offerings as follows:
- Standalone OMS solutions
- Specialised EMS solutions
- Hybrid OEMS solutions
Of the 12 vendors reviewed, six maintain a balanced offering across OMS and EMS functionality. All 12 are modular, as none wish to limit themselves to only one area of the trading process. This is the difference between broker-provided EMSs where there is an advantage in offering just an EMS, typically at no marginal cost, but without an OMS part.
