Employing a single system to manage both order and execution management, rather than using one or the other or attempting to integrate two disparate systems, is gaining currency among technology vendors and the buy-side, according to Tom Driscoll, managing director, global, at trading technology firm Charles River Development.
Charles River has launched version 9.1 of its Investment Management System (IMS), which completes the system’s migration to service oriented architecture (SOA) and marks its transition from an order management system with execution capabilities to a fully integrated order and execution management system (OEMS).
“The line between the order management system (OMS) and the execution management system (EMS) is so blurred that they really need to be one and the same,” Driscoll told theTRADEnews.com.
He argues that having separate systems can give some of a buy-side firm’s OMS users, such as portfolio managers, an incomplete picture of order status. “If you take an order out of an OMS and send it to an EMS which then breaks the order into pieces to work it, there is a disjointed audit trail,” he said.
According to Driscoll, the lack of continuity can make it more difficult to verify best execution. “Ideally, you want a strong audit trail that shows from the beginning what happened to the order at what time, with time stamps, and an understanding that the order was worked with multiple brokers and venues. A combined OEMS makes it so much simpler,” he said, adding that
a complete audit trail can also ease regulatory compliance.
The increased cost pressures experienced by buy-side firms recently have further strengthened the case for a single system, argued Driscoll.
“A big advantage of an OEMS is that you are rationalising, eliminating multiple systems and you can significantly lower the IT cost and total cost of ownership,” he said
A typical argument against a combined OEMS has been that such systems tend to be developed from OMSs, which generally use older technology than EMSs and lack the scalability required for execution management functions. Many, for example, use a two-tiered structure, comprising only a user interface and a database. However, in upgrading its IMS, Charles River has adopted a so-called n-tier service oriented architecture model, which introduces a middle tier that sits between the interface and database. Instead of hosting the business logic for the services provided by the system at the user interface level, which limits scalability, this model allows the logic to be shifted to the middle tier, where more computing power can be applied, making the system faster and more scalable.
“Part of the whole purpose of our rewrite was scalability and real-time capabilities such as order updates. While the older OMSs have older technologies that don’t lend themselves to execution management, provided you have a scalable real-time architecture, it makes much more sense to have a combined order and execution management system. I think a number of the vendors are coming around to that and a number of clients ultimately are moving away from a ‘best of breed’ scenario,” he said.
Divorcing the services from the user interface also allows them to be delivered to clients in different ways, for example through Charles River’s web-based Charles River Anywhere remote workstation or directly to the clients, enabling them to integrate their own tools into the system. Clients may want to add an optimisation engine, suggests Driscoll, or, in the case of a hedge fund, integrate a quantitative analysis system.
In converting from an OMS with execution functionality to a full-blown OEMS, Charles River has also added a number of new advanced execution functions to its IMS. These include integral stock-related news feeds, stock watch lists and advanced smart order routing.