Do All Buy Side firms need both OMS and EMS?

Markets are now flooded with OMS and EMS offering making it tough for the buy side firms to pick the best one. Let’s have a quick glance on what are the factors which any buy side firm should consider before finalizing the product

What is OMS and EMS?
OMS which existed from 1980’s was one of the pet of all buy side firms, but later with evolution of technology and need to connect to multiple vendors , and perform the executions at an increased speed across market gave way to EMS invention. In modern times there exist and very thin line between the two and often the term OMS/EMS is referred as same due to the fact that many functions could be handled by both the system[Ref figure below]. And with the ongoing war by the product rivals, to capture lion’s share, a new ellipsis has been devised as OEMS , ruling out that there exist any difference between the two technologies.

OMS

Do All Buy Side firms need OMS and EMS?
To the point answer to this question is No.
The passive investors , which usually buy and hold the stock and are not worried of the market fluctuations [in short term] don’t necessarily need multiple brokers for execution and can rely on single broker, so the need of EMS for such firm nullifies. On the other hand hedge funds for sure need the EMS as they rely on fast and multiple executions. Also, the order placing mode differs each time with hedge fund, say a DMA order or a Proprietary trade which usually don’t need OMS but an EMS for sure.

EMS Offering
Basically there are two types of offering made.

  • Broker owned EMS — These are the system offered by broker to their clients mostly free, with no charges comes a restriction that they would only understand the sell side language, so if the customer wants to get the executions from other broker’s, a new bridge has to be setup.

Now let’s quickly look what all are the other factors which should be considered in a product before choosing an OMS/EMS?
Cost of buying a new system or migrating from an old[oms/EMS] to a newer one

  • The size of the firm does matter, as a small company with lower trading volumes doesn’t necessarily need an EMS due to the simple fact of budget constraint, on the other hand the large/middle level investment firms, who are quite aggressive in trading and have complex strategies may still need an EMS to cater their needs.

With the above factors in consideration, there would be still few firms who would need both OMS and EMS none of the system offers a complete solution. A solution to them would be an integrated platform OEMS, but as of now no one plans to offer an OEMS and road to fully equipped OEMS is bit long.

Hey I am Samiksha, a Fintech Product Manager currently sailing solo