Sell-side needs modern approach to Order Management Systems (OMS)

A research study by market intelligence and advisory firm Greenwich Associates has found that sell-side companies are moving Order Management Systems (OMS) far beyond just receiving and routing client orders to encompass all facets of the trade lifecycle, potentially having a profound impact on the efficiency of broker-dealer sales desks and risk management practices.

The reason behind the technological shift is watching more and more institutional trading businesses moving to electronic execution, indicating the value of unified technology platforms that manage orders across asset classes and a long list of functionality that address today’s increasingly complex market structure and extensive new compliance requirements.

Richard Johnson, Vice President at Greenwich Associates market Structure and Technology Group, said: “The modern sell-side firm literally could not do business without an OMS, which today does so much more than just manage orders. The crucial role it fills makes it all the more important that brokers select wisely for their business needs and budget.”

Having interviewed 258 buy-side traders and a number of sell-side trading and technology professionals, the paper authored by Mr. Johnson concluded that broker-dealers are demanding OMS platforms that support multiple asset classes, provide pre-trade, real-time and post-trade analytics, and a wide range of sophisticated functions including risk analytics, compliance, reporting and transaction cost analysis (TCA).

A differentiating feature for sell-side OMS providers could be embedded tools that alert traders to longer-term patterns of market abuse, and a way to reduce risks for large broker-dealers, according to the report: “Going forward, we expect sell-side compliance teams to push for more thorough and auditable processes, Robust and customizable reporting within the OMS would reduce points of failure, streamline the workflow and prove more scalable over time as the business evolves.”, said Johnson.

As the shift takes place, OMS vendors become indispensable to a modern sell-side business, but a careful selection process is recommended. The renewed focus on compliance increases costs, including staff, and eats profits into already thin profit margins.