The adoption of order management systems by the buy-side is expected to continue growing, despite the economic slowdown that has gripped the financial industry, according to a new report from research firm Aite Group.
The study predicted that OMS spend will increase by 1% in 2009, to $408 million, and to over $420 million by 2011. However, to remain successful, OMS vendors will have to keep up with the needs of hedge funds (which accounted for 25% of OMS use according to the study) and asset managers (which accounted for 60% of use) and evolve with the electronic trading landscape.
The report entitled, ‘Buy-side OMS Market 2009: Adjusting to a New Market Reality’, asserted that to remain competitive, OMS providers should look to develop execution management system (EMS) functionality by either building EMS functionality on top of an existing OMS platform, or by integrating with an existing EMS.
In addition, the report noted that OMSs must expand the asset classes they offer from equities into a wider range of exchange-traded instruments and OTC products, and have a more global focus as other regions adopt electronic trading and experience market fragmentation. The report did note, however, that global adoption could be restrained by lack of market infrastructure, regulatory and cultural idiosyncrasies and dominant local competition.
The study also suggested that OMS uptake by the wealth management market and other more retail-oriented firms could offset any revenue shortfall OMS vendors suffer as a result of reduced investment from institutional buy-side firms.
“The evolution of the buy-side OMS market will continue in 2009, but at a slower pace,” said Sang Lee, managing director with Aite Group and author of this report. “A great deal of resources have already been committed by the vendors to make the next generation of multi-asset class platforms faster, more flexible, global in scope, and scalable. As the market enters what looks be a very difficult year, vendors that have built the foundation for the next-generation platform find themselves in the enviable position of future growth.”
The Aite report profiled and examined key trends affecting eight OMS vendors: Advent, Charles River, Eze Castle, Fidessa LatentZero, INDATA, ITG, Linedata and SunGard.