As 2024 came to a close, trends that have defined the OMS/EMS landscape over the past few years will remain long-standing. Demand for access to new markets, new asset classes, and new workflow connectivity across an increasingly complex patchwork market structures are accelerating. In this article, Colby Jenkins, an electronic trading and market structure consultant, breaks down how OMS and EMS systems have been tasked with shouldering an increasingly heavy burden against a backdrop of rapidly evolving operational and technological challenges.

If a rising tide lifts all boats, a rising tide of market complexity has lifted all expectations. For OMS and EMS vendors, remaining competitive means finding new ways of providing efficiencies across a widening (and interconnecting) array of investing, trading, risk, and compliance processes.

In this 2024 update of TABB Forum’s OMS/EMS Annual Trends report, we interviewed several OMS and EMS providers and clients to uncover the key trends defining the space this year. What our interviews uncovered was a mix of continuing trends and cutting-edge developments.

Putting it all together

Central to any OMS/EMS value proposition is the technology it leverages – and by extension – what it enables the trader to do (or not have to do) within an expanding menu of workflows. Participants across the board cited cloud access, automation, customizability, and API solutions as key areas of focus for freeing up trader bandwidth.

“The shift towards passive investment, whether due to fee pressures or additional factors, has taken off significantly in recent years,” said Vidya Guruju, Director, Fixed Income and OTC Derivatives, Product Management at Charles River, A State Street Company. This pivot has significant downstream implications for OMS/EMS providers during times of peak activity.

He went on to explain, “the major trends we have seen play out in recent years – such as the rise in passive investment, expansion into new asset classes, and the dramatic adoption of Ai/ML technology – are all very much interrelated.” This poses a challenge and opportunity for a technology vendor. While passive investing may drive an overall low ADV, it also drives huge spikes around times of rebalancing. And now these spikes are very much multi-security. These peaks could pose a burden for some technology vendors today that need to be able to scale up and down quickly.

The opportunity is in how much can be automated. Said Guruju, “the good news is these trading spikes are in smaller sizes – which lends itself very well to automation – and in turn – AI and machine learning. Ultimately that allows us to automate this flow such that traders can focus on the higher risk, larger sized trades.”

Ultimately, the required level of sophistication, breadth of capability, and ease with which a system can integrate within an existing technology stack depends on the end-user’s preference. While some participants across the capital markets landscape may prefer the simplicity of an end-to-end solution, others opt for a modular, best-in-class approach. In speaking to a key technology decision maker at a large hedge fund that had recently been in the process of onboarding a new OMS/EMS, the technologist highlighted this tension, “A lot of the time you simply do not know what you don’t know. For cutting-edge technology, in particular with respect to fixed income solutions, this can lead to a lot of analysis paralysis.”

Jennifer Nayar, President & CEO at Sterling Trading Tech, pointed out that simplifying workflows allows for scalability. “What we provide is the ability to for our end clients to connect once into our infrastructure and we will handle everything else. We have connectivity to clearing firms and execution providers and we support CAT reporting and other compliance reporting features. And then we built on top of our OMS administrative console, that trade support teams and customer service desk can utilize in real time. It allows clients to be more efficient and focus on building out their front-end solutions and what makes them different.”

Andrew Rosenthal, Senior Director, Head of Strategic Sales, North America for SS&C Eze, emphasized the importance of integration if building out a robust ecosystem. “There are front office technology stacks out there that stitch together OMS and EMS, but ours is truly unified and fully synchronized. Our users no longer have ‘swivel syndrome’. In other words, any activity occurring in the EMS is simultaneously reflected in the OMS in real-time and vice versa. Eze OEMS standardizes requirements for bespoke, rigid workflows across systems while still providing a tailored user experience. Our technology allows the user to choose their views and customize dashboards that best suits their role and responsibility with the confidence that their output is visible across teams. We are very proud of the fact that regardless of the asset class, we have connectivity out of any part of our OEMS platform to hit liquidity venues for all asset classes – equity based and derivatives all the way through electronic loan liquidity venues.”

Blurred Lines, Clear Mandates

Evolving trading dynamics have dramatically blurred traditional definitional lines across markets and participants alike. Whether speaking in terms of workflows, buy-side client types, or the asset classes themselves, the drastic technological leaps forward in recent years have resulted in a wholly new trading ecosystem. “It’s just about night and day how we are approaching markets today compared to even just a decade ago. Technology, and how we choose to deploy it, is certainly the driving factor there,” remarked a fixed income trader at a US based asset management firm.

“The lines are blurred. It used to be very clear. Twenty years ago, you’d say here’s an asset manager or here’s the wealth manager and so on. But even the largest firms today have blurred lines,” said Scott Scherr, Managing Director, Head of Product Strategy at Flyer Financial Technology. He expanded on how there is no one size fits all for clients. “So how do we approach it? We start with the data, the workflow, and then the functionality. We know we need to meet the clients where they’re at. We believe each investment manager’s approach to trade decision making is the art of investment management and what differentiates investment managers. We recognize there is not a “one size fits all” providing diverse functionality and best practice is fundamentally, what makes us very different.”

OMS and EMS are increasingly tasked with core investment, trading, risk, and compliance responsibilities. This has resulted in a burden on the part of the vendors to provide new efficiencies within a backdrop of compounding complexity.

Brian Pomraning, Chief Product Officer for Trading and Connectivity Solutions at Broadridge pointed out the opportunity in the new middle ground. “There is no doubt that formerly supplementary products are now being viewed as core components within an OMS. The center of the Venn diagram has been continually expanding over time with clients expecting more and more out of the box. The question you have to ask when building and EMS, OMS application is how do we service that middle portion and give clients everything they need to run their business.”

New Markets, Same Traders

Access to additional markets is a source of revenue traders are increasingly pursuing. Charles River’s Vidya Guruju explained, “there is higher demand for more diversification and increased interest in generating Alpha through derivatives and other instruments. Nowadays, it’s not just fixed income and equity.”

Standardizing workflows seamlessly across disparate market structures and regulatory regimes is a constantly shifting puzzle. “More recently we’re seeing heavy inflows into private markets, whether it be real estate or private equity. What does that mean from a platform perspective? It means that we have to ensure that there is a unified framework across all these asset classes for the trader. They need standardized workflows across all markets.”

Similarly, Sterling Trading Tech’s Jennifer Nayar emphasized the recent surge in interest in derivatives and what it means for technology vendors. “One of the areas we are focused on is the APAC region and their interest in US Options. Their interest is growing, and we are leveraging that opportunity. We have people working now in Asia, and our offerings, including OMS and Risk & Margin, have traction. What also comes with this opportunity is the need to educate the APC market around pre-trade risk and margin specific to US options.”

“One major market shift we’ve seen is how the market is deploying capital in more diverse ways,” said SS&C Eze’s Andrew Rosenthal. Increased adaptability on the part of the buy side in turn requires increased adaptability for software vendors supporting them. Rosenthal went on to explain, “Requirements for accepting capital are changing faster than ever. This means that the software firms leverage to manage their business must be flexible enough to match those demands. Our OEMS is and has always been governed by the ethos of “how can we provide a single solution that can satisfy all manager profiles?” Eze OEMS was conceived for and built to support all asset classes and strategies without the need to bring on auxiliary platforms. No matter how our clients adjust their strategies, explore new asset classes, or implement new compliance rules, they have a tech stack that enables to do so with confidence.”

Looking forward, the time requirement for tasks big and small will be an increasingly important factor in technology decision making. Across the board, people are being asked to do more and manage more diverse clients with all degrees of wealth. This creates challenges using a “cookie cutter” investment approach said Flyer Financial Technology’s Scott Scherr. “For instance, historically investment managers were dealing with clients’ with only a single custodial account primarily investing into equities. As wealth increases so do the investment requirements and the need for a more tactical approach to manage a client’s investment strategy. The introduction of more diverse asset classes, multiple custodial accounts, households, tax implications all require greater attention. Simply running an account against a model strategy is not enough. The challenge then is that some of these folks are using legacy technologies, and what they want is a vendor who can provide them the data, the connectivity and functionality around the trade construction and trade management function that fits into their current tech stack allowing them to advance forward without upending the entire firm and tech budget.”

Participants agreed that the long-term direction of the industry ultimately comes down to the intersection of Ai and liquidity. A trader at a large hedge fund put it bluntly: “It’s just about impossible to overstate the extent to which Ai is changing what we can do at the desk.”

Speaking to the trend, Broadridge’s Brian Pomraning explained, “Where I see the marketplace evolving really comes down to the shifting liquidity landscape. Going way back, liquidity lived solely on exchanges. Then it shifted to dark pools. Now it’s delivered through liquidity providers. For the most part, regulation has led to significant fragmentation of liquidity and a hyper-competitive market. Market participants need to navigate a complex landscape to achieve their desired goals like improved execution quality, price improvement, and lower implicit and explicit costs. The compelling part of the story for me as a solutions provider is how we help our clients discover liquidity, measure performance and improve decision making as the market continues to shift leveraging whatever advances in technology help them to achieve these goals.”

TabbFORUM would like to thank veteran Wall Street consultant Colby Jenkins, who tackled this extensive project with editorial freedom and gusto. Firms quoted in this Special Report partnered with TabbFORUM in this endeavor and were given the opportunity to be advocates for their business and their market niche. The OMS/EMS plays a critical role in the investment process and these emerging trends outlined will lead to better trading and ultimately best execution, which benefits clients.

Colby Jenkins is a veteran electronic trading and market structure consultant. With more than 10 years of experience in the capital markets. Mr. Jenkins specializes in the electronic evolution of institutional fixed income trading, emerging liquidity venues, cross-asset workflow solutions, and regulation. His work experience includes stints at Datos Insights/Aite-Novarica, Burton-Taylor International Consulting and TABB Group, where he spend 9 years. He has produced dozens of articles and research reports focusing on trends in U.S. fixed income trading and OTC derivatives. He has led research teams and consulting engagements, and participated in numerous conferences. He is a regular contributor to trade publications.