Due in Q1: Order Execution Management Systems, 2022; Market Update and Vendor Landscape

Report in brief

This report examines the key trends driving demand for order execution management systems (OEMS), which combine the functionality of order management systems (OMS) on the buy-side and execution management systems (EMS) on the sell-side to address investment managers’ trading requirements.

Key takeaways: market landscape

For the past decade, the investment management industry has experienced intensifying margin pressure, demand for lowered fees and ever increasing regulation. Industry consolidation has come from all sides, as firms aim to cut costs and boost economies of scale. Buy-side firms are working to integrate their front-to-back platforms and service modules across the entire investment process.

Investment managers are increasingly taking a holistic view of their investment technology stack. Integration across portfolio management systems, OMS, EMS and interoperable service modules helps managers improve efficiency and control system costs. Access to an integrated and customizable investment technology platform is important when the manager’s goal is to generate the best possible trading performance and seamless integration between in-house and outsourced trading teams.

At the forefront of interoperability in the OEMS environment are containers, modularization and components. Chartis envisages the future of the market as resembling conglomerates of open, connected digital ‘investment ecosystems’. In the next decade, we expect end-to-end investment technology solution suites to dominate and evolve into more open, ‘industry operating infrastructures’, with a network of specialist providers developing and enhancing different parts of the value chain that these technology platforms support.

Automation is a priority across asset classes and through the complete investment management lifecycle, but specifically on the trading desk. Fixed-income, derivatives and other asset classes are moving toward digitalization but are not as far advanced as equities. Although few firms have completely digitalized, investment managers have realized that maintaining legacy systems is not a viable competitive path forward. At the forefront of interoperability of the OEMS trading environment are trading desk and OEMS integration, application programming interfaces (APIs), Financial Information eXchange (FIX) messaging and Financial Desktop Connectivity and Collaboration Consortium (FDC3) desktop message standardization. Glue42, Finsemble and OpenFin provide the technical building blocks to integrate the trading desktops digitally, along with analytics, risk, compliance and trade cost essentials.

Low-code has also come into play, giving more tech-savvy trading personnel the tools to construct analytic modules to begin replacing spreadsheets, which are still pervasive on trading desks and across all investment management functions. Low-code development is expected to spread across all aspects of investment management, replacing unwieldy operational risk spreadsheets and becoming another part of the digital technology stack.

Alternatively, outsourced trading obviates the need for internal automation. Many investment managers are considering outsourcing their whole trading desk or taking advantage of this option for certain asset classes and/or regional coverage. Outsourcing the investment management lifecycle is and will continue to be a major trend across the buy-side.

Key takeaways: vendor landscape

The OEMS vendor space continues to consolidate, merge and partner. OEMS convergence between buy- and sell-side vendors is not only about marketing strategy and bridging the functionality gap but is also a reflection of the changing OEMS user landscape.

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