Front-office technology has changed. Your OMS and EMS system of yesterday are almost unrecognizable today. Systems of the past required a great deal of investment from asset managers who often encountered rocky implementations, a continuous need for custom development, and scalability issues. While the underlying needs remain relatively the same, today there are more complexities: growing adoption of global multi-asset strategies, changing regulatory and compliance requirements, and increased operational risk. OEMS integration, when done right, creates a streamlined, automated, and efficient front-office – and cloud deployment has emerged as a major operational benefit. In a recent white paper on this subject, Spencer Mindlin, Capital Markets Technology Analyst at Aite Group, says: “With hundreds of users and billions of dollars being run through trading technologies, there are significant opportunities for asset managers to further embrace these tools. Spending decisions on technology must advance further toward streamlining investment processes that become quintessential to a firms’ DNA and its ability to maintain a competitive edge.”
First- and second-generation order and execution management systems were built to serve specific tasks and functions, supporting discrete and siloed departments, and as those grew to more areas of the front office, third-generation OMS/EMSs began to emerge. Mindlin notes, “In some cases, firms have organically built out incremental functionality to support more of the value chain. In others, firms have acquired complementary vendor systems to rapidly expand upstream or downstream.” Over time, buy-side firms found it harder to keep up with changing markets and the evolving needs of their trading desks. But finding a platform that simplifies front-office workflows and simultaneously creates operational efficiencies across the firm was difficult.
“While the instruments that [traders] are actively trading may have become more commoditized, the markets they face have become more complex, with a never-ending stream of regulations, increasing market fragmentation, inconsistency in price discovery and liquidity sourcing, and a rapidly changing technology landscape.”
So, what’s driving the new OEMS landscape now?
True OMS/EMS integration can only happen when technology solutions meet the needs of your entire firm, not just the front office. When introducing a technology provider that will handle your workflows of the future, you set yourself up for operational success and save yourself the cost and hassle of switching providers down the line. Before settling for the cheapest solution out there, consider whether your choice offers these must-haves.
As trading requirements become more advanced and with firms now more likely to trade globally across multiple asset classes than ever before, a unified OEMS — one that shares a single, centralized source of truth—is critical not just to the front-office but downstream as well. Adopting a full front-to-back office platform approach, going beyond the front office, allows clients to partner with one vendor for all of their investment technology needs. Seamless workflows between order and execution management are required for more than just the handoff between PMs and traders. Compliance, operations, accounting, and other middle- and back-office functions find greater efficiencies when using the same platform, with one data set, across the firm. According to Mindlin, asset managers looking to break down silos and enable better collaboration need to think differently, “first- and second-generation systems were built to support discrete purposes.”
“…while the instruments that [traders] are actively trading may have become more commoditized, the markets they face have become more complex, with a never-ending stream of regulations, increasing market fragmentation, inconsistency in price discovery and liquidity sourcing, and a rapidly changing technology landscape.”
- SPENCER Mindlin, Capital Markets Technology Analyst at Aite Group
Operational risk meets operational efficiencies
Mitigating risk while at the same time capturing alpha is harder than ever before. Firms trying to distinguish themselves have to look at every angle to attract investors and ultimately grow and scale their business. Tackling operational inefficiencies with technology can help create operational alpha, whereas competitors may be struggling. This could mean deploying your platform via public cloud, so you don’t have to sacrifice resources on servers and costly, disruptive upgrades. Seamless OMS/EMS workflows across portfolio managers and traders not only increase your speed-to-market, but advanced trading tools can also help you achieve best-execution, incrementally you're reducing overall trading costs.
Lack of automation and evolving compliance and regulatory requirements directly result in increased risks for your firm. Long-standing asset managers may face manual processes that build up over time. Firms that may have started with a proprietary, internal system have outsourced to vendors to help deal with adding new asset classes find themselves dealing with siloed systems requiring expensive custom development and manual workflows. “There may be multiple touch points for the same function, increasing operational risk,” Mindlin writes. “This is usually the most significant risk firms face.” On top of operational risks stemming from a lack of automated workflows, regulatory and compliance requirements have evolved significantly since the first- and second-generation platforms and are more demanding than ever. Managing compliance holistically, in real time, across asset classes and strategies allows managers to reduce that risk.
Cloud is Here to Stay
Poorly integrated, patched together platforms that lack the infrastructure for cloud deployment put firms at risk of falling behind. “Cloud-based web services APIs that are enabled to speak to each other in the cloud make their integration orders of magnitude simpler and quicker, and with less custom software development work. We expect this trend to continue, and we expect it to favor asset managers who embrace cloud-based front-office trading technology.” The value proposition of SaaS in a could deployment model is now compelling to all firms, regardless of their size and complexities. Cloud deployment models eliminate the need for expensive infrastructure, enables real-time mission-critical support, and provides operational efficiencies across a firm. Future-proofing your investment firm means choosing a vendor that is future-proofing their technology lineup through continued investments in the platform and a robust, flexible architecture supported by an agile development process that continually looks to the market to make product and functionality enhancements.
Staying ahead of your competition using technology also means choosing a vendor that invests in the future and scalability of your business. “Investment alpha will be discovered in the details, and the details will be found by mining a diverse set of data. In order to stay competitive, investment firms need to ensure they are focused on outfitting their teams with the best-of-breed tools that will remain so for years to come.”
If you’re interested in learning more about the current and future state of OMS/EMS integration, download our sponsored whitepaper, “OMS/EMS Convergence in the Cloud: The Road Less Traveled,” from Aite Group: