The buy-side must tread the fine line between chaos and stagnation when looking to improve upon legacy “monolithic” order management systems (OMS), an all-star automation panel has concluded.
Speaking at the Fixed Income Leaders Summit Europe 2023, panellists were united in their stance that many firms are still using out of date legacy systems, likening some buy-side firms to battery farm chickens – unaware of the agile world outside of their monolithic systems.
Due to the sheer size and depth of integration of these systems, they are naturally more challenging to swap out, leaving many firms with sub-par workflows due to a sheer lack of choice.
“There has been an acceptance of mediocrity and poor workflow, like a battery hen chicken. There’s a new world of technology,” said moderator and founder of Vision57, Steve Grob.
In light of the current need for evolution of antiquated OMS, panellists from across the industry explored varying paths firms should be taking when looking to upgrade.
Interoperability and improvements through partnerships were championed by speakers including buy-sider Jon Tricker, head trader, global credit at Vanguard who confirmed the investment manager was leveraging the “maturing API community” to expand its systems.
Integrated capabilities and extensions of systems via APIs is a heavily used solution for many firms, particularly larger asset managers, as a means to enhance old systems without having to do an entire overhaul – an expensive and timely process that is subsequently rarely opted for by the buy-side.
However, while speakers acknowledged the need for the modernisation of decades old legacy systems, they were also quick to highlight the fine line between agility and chaos when looking to expand these systems with add-ons using APIs.
“Ten years ago, everyone solved problems with a core O/EMS system and scarily these still exist today. The industry needs to adapt but we need to do it in a controlled way, making sure systems are resilient, scalable and compliant. It’s freedom within boundaries,” said Ben Jefferys, VP of sales engineering at Genesis Global.
While participants exercised caution when it comes to adapting legacy systems, it was noted by one speaker that a lack of chaos leads to stagnation, something many firms are only too familiar with today.
“Chaos is experimentation,” said Andrea Pirino, head of solutions at Valantic FSA. “New technology allows you to do controlled experiments. It’s a spoonful of chaos to taste. You can keep your ecosystem and add a new layer and see how that works.”
The proof is in the testing
Testing of new systems prior to implementation is essential to ensuring business continuity and reducing risk, speakers agreed.
“Looking at new technology you need to understand the explainability of it. You need to understand the risk and impact of a new technique or algo. You need to make sure it’s simulateable and that you can back test to see how it reacts in market conditions,” said Tushara Fernando, head of fast trading technology at Man Group.
“You don’t need your own lab. Technologists are out there providing tools to test workflows. Learnings are being brought from faster markets into fixed income,” added Gavin Miller, sales director for fixed income in EMEA at Trading Technologies.