Despite a drive among buy-side firms to reduce technology spend, most are unlikely to lower costs through a combined execution management system (EMSs) and order management system (OMSs), according to new research.
The report by consultancy TABB Group showed buy-side firms remain divided on whether OMS/EMS functionality should completely overlap, with 50% supporting a combined system, 44% against it and 6% unsure.
Cheyenne Morgan, research analyst at TABB Group and author of the report, said the idea of a combined system made perfect theoretical sense, but its practical application was still seen as prohibitive.
“The time and expense required to integrate a new OMS is daunting, making it a long-term investment,” said Morgan. “Over 60% of the firms describe the process of switching to a new OMS as ‘very difficult’.”
The report, ‘Buy-side OMS & EMS: A market snapshot’, incorporated the views of 52 buy-side firms, spanning both traditional asset managers and hedge funds.
It found that although several leading OMS and EMS providers have formed combined systems, buy-side firms continue to use separate systems for a number of reasons including trader preference, asset class specialisation and the prohibitive cost of shifting to a new system.
The report also signalled the impact of new regulatory regimes on asset managers’ choice of OMS systems as the industry undergoes massive regulatory shifts, particularly in the US and Europe.
Regulatory compliance topped the list of factors guiding OMS choice with 69% of respondents saying it was ‘very important’, with portfolio modelling second, registering 53%.
Areas where functionality of the two systems meet include the automation of execution, transaction cost analysis, multi-broker access and program trading.
Despite the potential to consolidate similar OMS and EMS functions, Brennan Carley, global head of transactions and platform for Thomson Reuters, affirmed to theTRADEnews.com last year that concentrating functionality in one system would present more disadvantages, not efficiencies.
“If one platform attempted to offer the complete matrix of all possible permutations between all sets of EMS and OMS functionality and try to address all market segments and all asset classes it would be unusable,” Carley said.