The evolution of EMS: Where are we now?

With growing client expectations and a continuously shifting market landscape, WESLEY BRAY looks at the evolution of EMS, how tech providers are adapting to changes in the market and how they remain competitive.

The Execution Management System (EMS) arena has in the past been undeniably monolithic, with several established vendors dominating the space. While incumbent players continue to dominate, various new players have entered the space, offering alternatives as a means of differentiation and to position themselves in what has proved to be a highly competitive landscape. These challengers believe that there is room for new vendors in the EMS space. But how exactly are EMS platforms adapting to meet the evolving demands of their users – and how easy is it to exist in this highly competitive marketplace?

Describing the monolithic nature of the EMS landscape, Chris Hollands, head of sales, EMEA at TS Imagine, explains that running an EMS platform comes with huge technological and investment demands, which makes the space difficult for new entrants to access. “In terms of ongoing development, i.e. continuously connecting to new venues and new sources of data for analytics, the barriers to entry are very high,” he tells The TRADE. “The cost and maintenance involved in running a global, multi-asset FIX network and trading application, that offers connectivity to every meaningful counterparty and venue, is huge. As a result, it’s hard for new entrants to break into this market.”


Alexander Harris, chief product officer at AxeTrading, agrees: “From a fixed income standpoint, I would say yes, certain players dominate the space – very much so. However, if you’re looking at it from a cross asset class angle, there’s probably a few more participants in the market, as certain players have specific strengths in other asset classes in the EMS space. Certainly, if you’re looking at the split between buy-side and sell-side, the buy-side EMS has traditionally been focused on more mature electronic markets, for example, equities and FX. As for fixed income, traditionally, it’s a little bit more fragmented.” 

Speaking on the key players in the EMS space, Michael Beattie, director of product strategy at Charles River Development, highlights the advantage of EMS providers that are integrated with both an Order Management System (OMS) and a Portfolio Management System. “Also, providers that are truly asset class specific – not just a retro-fitted equity trading system – are able to shift focus across different asset classes, while maintaining the anomalies required to trade each individual asset. For example, vendors that can support price discovery differences between fixed income and equities, and those that support key pricing anomalies across asset classes such as spread and factor-based pricing.”

Over the last few years, EMS platforms have evolved into multi-asset solutions, driven by client demands as well as competition for space on traders’ desktops. Investment firms have also expressed interest in dealing with fewer vendors and system integrations, which has led EMS platforms to adapt to cater to these desires. 

“We’ve seen the furthest advancement in fixed income trading over the past three years. During that time, EMS platforms have become increasingly automation-focused as AI/ML applications begin providing real value, driven by the ability to harness historical trade and market data to train trading algos,” adds Beattie. 

“Additionally, the growth of advanced trading protocols and shifts in market structure have delivered new innovations, like all-to-all trading, enabling buy-side firms to evolve from mere liquidity takers to liquidity makers. We’ve also seen a need for greater collaboration, especially on fixed income desks, which has expanded the role of traders to portfolio advisors. This requires much tighter integration between the EMS and other front office systems.”

New players

But a host of new challengers are coming to market, offering agility and innovation as their source of appeal. 

Cloud-native software-as-a-service (SaaS) provider Enfusion recently launched a new order and execution management system (OEMS) named Enfusion Express, tailored specifically to the needs of smaller fund managers with AUM typically less than $100 million. Enfusion describes the new system as a means for smaller managers with limited recourses, but comprehensive requirements, to access sophisticated pre-trade, execution, and post-trade solutions. In addition, Enfusion Express aims to help reduce manual processes, improve real-time, portfolio-level visibility, and streamline connectivity to managers’ execution, fund administration, prime brokerage and other partners.

“Enfusion Express addresses the operational needs of smaller funds, both newly launched and existing, that remain an underserved but growing segment of the market. Sell-side firms are recognising and responding to their unique needs, as evidenced by an uptick in solutions like outsourced trading desks. We see an opportunity to provide best-in-class solutions to these managers as they look to scale their firms while deepening our relationships with our ecosystem partners,” says Thomas Kim, chief executive of Enfusion, in a statement announcing the launch.

Proprietary trading systems provider, Adaptive, although not an actual EMS vendor, has also been a key player within this landscape. The firm builds systems that are used by both sell-side and buy-side institutions, as well as venues and exchanges and market service providers – building systems for the electronic trade life cycle more broadly. 

“What we have done in the last couple of years is implement some EMS like functionality for larger buy-side firms that are looking for a higher level of customisation and control over the way EMS functionality, in a more general sense, interacts with the rest of their organisation,” says Matt Barrett, chief executive of Adaptive. “So rather than relying fully on an EMS vendor solution, they are, instead, coming to us to build specific focused EMS like functionality on top of our technology stack to augment the vendor solution capabilities. But it’s not like we have an EMS product that competes directly with established players in the space – it’s a very different offering. What we let people do is focus on the part of their business – the part of the tech stack – that they’re building.”

Adaptive differentiates itself from established EMS providers by giving clients the opportunity to develop bespoke system that address their specific needs. “The reason that people have worked with us is because they’re frustrated with some parts of their current EMS functionality not working the way they need it to and not being as sophisticated or flexible enough to support the way they want to run their overall business,” adds Barrett. “What we’re enabling is a de-bundling of traditional EMS functionality, but not requiring clients to build from the very bottom all the way up. We are enabling clients to control a subcomponent, or part of that EMS functionality that’s locked up within an EMS vendor supplied application.”

By doing this, Adaptive not only helps clients get exactly what they desire in terms of EMS functionality, but its approach in this space also allows for a decrease in costs. Having the option to create bespoke functionalities removes often expensive and time-consuming technology that was required to provide EMS-like capabilities, such as market connectivity, workflow resiliency and availability. Instead, all these things come out-of-the-box with Adaptive’s open-source software and the proprietary platform it provides as well, lowering costs for firms and allowing them to experiment and innovate to create the specific capabilities that they desire. 

Speaking on the new features and opportunities Adaptive brings to the table, Barrett adds: “The ability to really move peoples electronic trading infrastructure and execution management system capabilities to the cloud really differentiates us a trading system provider. Our technology is cloud native, which means it can run in AWS, GCP or Azure. It also supports the ability to deal with systems that are deployed both on cloud and on any proprietary existing data centre infrastructure that firms might have, as well as in co-located venues, meaning they can take a very innovative approach to how they deploy and architect their systems. In addition, the system that we have takes care of all the data distribution amongst all those locations to make sure the whole thing works. Now that was not technically possible with previous messaging systems or electronic trading infrastructure – that level of flexibility – and that enables a huge amount of innovation on behalf of the client.”

Improving efficiency

Developments within the EMS space to improve efficiency have been a key priority for vendors, including the ability to capture, store and validate historical data generated in the EMS to support algo development and back testing. According to Beattie: “This enables built-in trade decision support, informing traders where and how they should trade a particular name and order size, informed by better use of enriched trade data history.”

In addition, longstanding EMS providers such as Charles River Development are adopting advances in Robotic Process Automation (RPA) to accurately replicate human decisions processes and workflows, which it believes will enable users with the ability to transition more low touch orders to no touch. Elsewhere, more visually intuitive dashboards, with fewer grids, are expected to be delivered to traders which will incorporate event driven and persona-based functionality to speed time to insight. 

“As a forward-thinking EMS provider, we have evolved our platform to extend beyond the traditional EMS execution world. We have moved into areas that genuinely help our buy-side clients overcome some of the current inefficiencies they experience,” says TS Imagine’s Hollands. 

“Functionality such as pre-trade compliance, allocations, and trade automation can now be carried out by the EMS. This may come across as a straightforward process, but it requires a lot of connectivity to various providers. For example, FIX allocations towards brokers require considerable certification and maintenance, I think this is actually a key differentiator of an EMS. I would say a best-in-class EMS will maintain all of its own FIX connectivity and pre-certify all of this connectivity to the sell-side, platforms and venues.”

Bloomberg is another well-known player that is working hard to lower costs and automate processes to make the path smoother for its clients – and protect against challenger encroaches. 

“As clients continue to seek solutions that lower their overall costs and reach closer to a unified workflow experience, we remain laser-focused on interoperability of solutions across the Bloomberg ecosystem, as well as with third-party providers, and we expect to see more focus on integration across the industry in the coming years,” says Elona Tepshi, global head of execution management systems at Bloomberg, speaking to The TRADE.  

“Addressing the challenge of bringing together workflow across those various systems used, Bloomberg EMSs incorporate all trading applications into a single interface and we continue to invest in new trading capabilities to meet clients in their workflow.”

Fixed income focus

With continued expansion into new asset classes, EMS platforms have seen increased developments in the fixed income space. However, compared to established equity systems, these new territories come with new challenges. The equity market typically centralises the interests of buyers and sellers mainly through exchanges where liquidity is built from the contribution of all market participants. As a result, concentrated liquidity and improved transparency occurs. However, within fixed income, bonds are priced and traded by market makers to any interested investors, which brings a whole set of different challenges. 

“If we compare the two markets, liquidity in the fixed income market is highly fragmented, and this is intensified by the wide range of trading venues, the different APIs available and trading protocols on offer,” says Tommaso Di Grazia, head of fixed income product development at ION Markets, talking to The TRADE. “In addition to this, the equity market is much more efficient compared to fixed income, having achieved a higher rate of electronification. On the other hand, some segments in the fixed income market will inevitably take longer to be fully low touch. This is primarily due to the high number of instruments, and lack of transparency requiring extra due diligence during price formation.”

Unlike in the equities space, fixed income EMS platforms are still dealing with the standardisation of underlying products. “Fixed income can appear to be a long way behind the curve,” says AxeTrading’s Harris. “The fixed income space is still incredibly diverse from a product point of view. Every instrument has its own unique piece of mathematics in terms of how you price it, how you look at it and how it’s traded. In the fixed income space, we’re still looking at how we can standardise products, how we can move to more electronic markets, how can we get it on a platform which gives you that transparency and standardisation, allowing people to feel comfortable trading such products. Now, saying that, we’re starting to jump ahead as well. We’re looking at equity markets and where they are going in terms of algorithmic trading, auto trading, auto hedging and using data to make decisions. We’re trying to do that as well, in parallel, and trying to catch up while also moving ahead at the same time.”

Looking at the biggest gaps between the two offerings, the largest structural difference relates to transparency in general, as ION Market’s Di Grazia notes. 

“Consolidated Tape System (CTS) and Transaction Cost Analysis (TCA) are practices traditionally followed by the equity market due to the availability of data and these have in turn led to greater efficiency in price discovery by promoting transparency and encouraging tighter controls on execution. While we are now beginning to see these practices incorporated into fixed income, it is still at the early stages, particularly for CTS, where market venues and software providers are still reviewing ways to best deliver the solution.”

In addition, the fixed income market struggles with the challenge of a lack of a full understanding on how these products work. A greater understanding of how shares work benefits the equities market in this space, meaning people are more willing to trade such products. On the contrary, the fixed income space is challenged with relatively less understanding on how bonds work. Because of this, pricing bonds becomes an issue, meaning the bid offer spreads are bigger and people are less likely to trade it. 

“To combat this challenge, better information needs to be provided to the end user, alongside putting it in a setup which is standardised with an aim to broaden that market liquidity,” recommends Harris. “Having more people understanding how bonds work will in turn lead to an increase in people who want to invest and trade. With broader education and knowledge, you then create more liquidity, more chances for trading opportunities and higher levels of flows and ultimate more revenue opportunities in the market.”

Staying competitive 

In an ever-evolving landscape, with new players threatening the positions of established EMS providers, there are several ways in which vendors can maintain their competitiveness. Supporting an open architecture and interoperability with a growing ecosystem of analytics, application, data and liquidity providers is crucial, according to Beattie. 

“The ability to leverage open desktop protocols such as FDC3 is another development that’s increasingly critical for the expansion of trading ecosystems. This provides our clients with diversity in new market integration, especially in global fixed income markets, where connectivity to new venues has become critical to both price discovery and execution,” he stresses.

“Additionally, firms are becoming increasingly data-driven. Providing traders with innovative data sets from vendors including BondCliQ, Neptune Networks, Refinitiv/LSEG and Factset is key to better informed decision making. Also, the rapid growth of ESG investing necessitates partnerships with a growing number of ESG data and analytics vendors.”

Elsewhere, Charles River Development plans to expand support for trading digital assets, harnessing distributed ledger technology (DLT) as a means to improve investment and post-trade processes. 

For EMS vendors to maintain competitiveness, they need to ensure they continuously meet client demands and expectations while not falling behind rival platforms. The marketplace is continuously evolving with clients always moving forwards, not backwards. In addition, regulatory change also has an impact. Investments in research and development, which larger vendors can afford to prioritise, has also proven to be an effective way to remain competitive. This, however, is no easy feat, as it is a big undertaking to keep platforms relevant and up to date – something that smaller, new players may struggle with.

“As an EMS vendor it’s paramount to support all different trading protocols, and the various market models across asset classes as they evolve and increasingly electronify. This will offer a competitive edge and equally future proofs the client’s operations. A best-in-class EMS will streamline and normalise workflows across asset classes, counterparties and venues. This makes it very easy for a multi-asset class trading desk to efficiently trade across all instrument types,” notes TS Imagine’s Hollands.

Another approach is to ensure vendors provide enough aggregation. Connectivity to a wide range of trading venues can attract clients by giving increased transparency all in one place.  

“To remain competitive in the EMS landscape, we want to keep connecting to up stream and downstream venues and services out of the box. We want to keep bringing in new workflows. We want to continue to expand our fixed income universe of electronically tradable instruments. This all leads to a greater ability to aggregate your views, but also to aggregate the data coming out of the back of our systems, which leads to the next steps,” adds Harris. 

“We know our clients want data now. This feeds into what they want to do upstream and how they want to automate the systems, how they want to make it more efficient. Obviously, efficiency and scalability is important to them, because if they’re more efficient they can be more profitable and they need data to do that. Once they have the data, this opens up a whole new world of utilising this data through both in house and external machine learning and artificial intelligence algorithmic modelling.” 

Over the last few years, The TRADE’s annual EMS Survey has found that the buy-side want more from their vendors when it comes to innovation. Survey results have shown that improvements are being made gradually, rather than suddenly, in the EMS space. The buy-side expects more from their EMS providers when it comes to product development and those providers that are able to offer innovation, will likely find themselves with a competitive advantage. Last year’s survey found that an increasing buy-side demand for multi-asset class solutions from EMS vendors, particularly more fixed income support and offerings, currently exists.

As providers look at ways in which they can remain competitive, it’s clear to see that EMS provision is evolving rapidly and is no longer the sole province of the incumbent providers. The monolithic landscape is fragmenting as new challengers emerge to offer faster, cheaper, more agile offering, and the bigger players must keep up or risk being left behind.