Bond buy-siders plan EMS and OMS overhaul

Liquidnet study found fixed income asset managers are looking to implement, upgrade or switch OMS and EMS providers.

Corporate bond asset managers are looking to switch or upgrade their order management system (OMS) and execution management system (EMS), according to a new study by Liquidnet.

Over three-quarters of buy-side respondents interviewed across Liquidnet’s member network said they plan to upgrade their technology services in 2018. Half of those said they will implement an EMS, while 43% said they will upgrade their OMS and 10% will switch OMS providers.

Of those looking to implement an EMS, 94% stated they are doing so to manage liquidity more efficiently, although the size of the asset manager plays a factor due to the cost of implementation.

The study found 57% of small firms are not investing in an EMS at this stage, compared to 64% of large firms who have opted to invest in the technology.

Compliance with regulatory initiatives such as MiFID II is driving the adoption of technology across European bond dealing desks, particularly with the focus to meet best execution requirements.

“Historically, some European fixed income portfolio managers were seen as slow to appreciate the role bond dealing desks can play in implementing investment strategies and generating alpha,” said Rebecca Healey, head of EMEA market structure for Liquidnet and author of the report.

“Firms are now beginning to recognise the central role technology plays in making workflows more efficient, allowing trading desks to better evaluate the true cost of execution and not solely focusing on the lowest price possible as that is not necessarily ‘best execution’.”

Liquidnet added it also expects the role dealing desks play in implementing strategies will shift from executing based on a portfolio manager’s instructions, to an execution partnership with technology providing greater control to the buy-side trader.

“Basically, what the survey points to is that the main requirement for the corporate bond trading desk of the future is the ability to combine order management, data aggregation, and access to electronic liquidity with the overarching goal of empowering the trading desk to deliver more alpha,” Constantinos Antoniades, Liquidnet’s global head of fixed income concluded.

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