A new study shows that there's still a lot of disagreement about merging order and execution management systems. Functionality will be the key differentiator for the winners.
The line between a hedge fund or asset manager's order management system (OMS) and execution management system (EMS) has been blurring for quite some time. As Dallas Lundy, head equity trader at asset manager Atlanta Capital, told my colleague Jake Thomases last year, "Having all these things in front of you allows you to be faster and more efficient by having your eyes focused in a very limited amount of space, with more data in front of you."
Consultancy Tabb Group recently released a survey of 52 buy-side firms, which showed a fairly even split between asset managers and hedge funds. In that survey, 50 percent of respondents say OMS and EMS functionality should be merged, with 44 percent saying they should not. The other 6 percent were on the fence.
Clearly, there is no consensus on this debate. But the current trend is that buy-siders are working toward consolidating the number of EMSs on their desktops. According to Tabb, in 2006 the average number of EMSs on a trader's desktop was 6.3. In 2012, that number was down to 1.5.
And to address this downsizing, buy-side spending on EMSs has steadily increased since 2009. In 2013, Tabb estimates that hedge funds will spend $166 million on EMSs and asset managers will spend $119 million. In 2009, those numbers were $138 million and $92 million between hedge funds and asset managers, respectively. Since 2009, those numbers have risen every year.
The winners in this OMS–EMS conversion will be the vendors that can prove they provide complementary functionality, rather than too much overlap.
Functionality has to be the main focus in order to convince a trader to go through the painful process of an OMS/EMS switch. Combining those functionalities into a streamlined system is the differentiator.
Anthony and James look at developments pertaining to the Consolidated Audit Trail and wonder if big-tech companies could challenge traditional asset managers.Subscribe to Weekly Wrap emails
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