Grappling with volatile market conditions, sluggish economies, and declining trading volumes, buy side firms are compelled to reduce their operating costs and increase efficiency. Many asset and hedge fund managers are cutting down their technology budgets and at the same time seeking greater value from sophisticated trading technology to stay competitive. The increasing need for balancing cost and efficiency has led to the combining of two systems by technology vendors, namely, Order Management Systems (OMS) and Execution Management Systems (EMS). Read Full Story Visit: http://www.fsokx.com/Thought-Leadership-Prespecitves/Is-OMS-and-EMS-Integration-Appealing

1. Integration of OMS and EMS – Is it appealing enough?
Grappling with volatile market conditions, sluggish economies, and declining trading volumes,
buy side firms are compelled to reduce their operating costs and increase efficiency. Many asset
and hedge fund managers are cutting down their technology budgets and at the same
timeseeking greatervalue from sophisticated trading technology to stay competitive. The
increasing need for balancing cost and efficiency has led to the combining of two systems by
technology vendors, namely, Order Management Systems (OMS) and Execution Management
Systems (EMS).
EMS and OMS are considered of high value to the buy side firms. Since the advent of electronic
trading and the ‘go global’ concept has derived demand for these technologies, the integration of
both systems has been a topic of debate for the past few years.Many technology firms have tried
to integrate their trader-focused EMS with the portfolio manager-focused OMS. However, the
holistic acceptance and successof such an integrated system is yet to be measured.
Brief Look at the Anatomy of the Two Systems
OMS is an electronic trading system designed to manage securities and listed derivatives orders
in a centralized and cost-effective manner starting from pre trade, execution, and to post trade
processing. OMS enables the trader to allocate trades among portfolio as well as communicate
post trade information to the back office and settlement systems.
EMS was designed to manage the processing of securities and listed derivatives orders in
organized markets.EMS utilizes advanced and automated trading strategies to accomplish best
executions. It is completely dedicated to executionand meets the needs of traders who want
direct market access.
The OEMS Integration Dilemma
Should EMS and OMS Functionality Merge?
6%
Yes
50%
44%
Source: Tabb Group
No
Not Sure

2. The current wave of regulatory reforms, low liquidity and segmented customer base gave rise to
the idea of combining both the functionalities. With the regulatory environment pushing the buy
side players to have the state of the art compliance infrastructure at the lowest cost, it has
become essential to have the right OMS and EMS platform in place.
However, there is a lot of debate around the combining of the two platforms, commonly referred
to as the OEMS platform. As can be inferred from the above graph,respondents are divided in
their opinion on such combination.While half of the respondents are clearly in favor of the
combination, a large proportion is also against it. Given such mixed revelation, we pause to look
at the pros and cons of OEMS platform.
The PROS
The Process of Alpha Generation
The shrunken market environment has made it tricky for the buy side firms to generate
absolute return on investment. The recent years has seen a significant change in the
strategies adopted by the market players to generate the so called alpha, which has put the
traders and portfolio managers on the same seat. Like portfolio managers, now the traders
are provided with the opportunity to generate returns.This process of alpha generation has
given rise to new partnership betweentraders and portfolio managers, which requires
transparency and good know how about the investment tools. The prospect of a symbiotic
relationship between the two makes OEMS platform a lucrative option.
The Evolving Practice of Best Execution Duty
The definition of best execution has evolved over the past years. The scope has expanded
beyond equities trading. The various regulatory practices have put all the asset classes under
the roof of best execution duty. The latest to fall under the umbrella is foreign exchange. And
the coming years are expected to witness fixed income and other Over-theCounter
derivatives (OTC) falling under the same umbrella. The development of best execution
across the investment workflow calls for the integration of OMS and EMS.
The Regulatory Landscape
The wave of new reforms under Dodd Frank Act in the U.S. and MIFID II coupled with
various regulations across the globe has posed new test for the OTC asset classes migrating
to exchange traded models. This migration is extremely electronic in nature as many asset
classes will move from phone based to screen based trading.Moreover, collateral
management and coordination of payments and receipts will face host of new challenges,
which can effectively countered by the unification of
OMS and EMS.
The EconomicalBuy Side Firms
The buy side firms are navigating in the environment of intermediation and margin
compression, which calls for immediate steps such as cost cutting and lower headcount to be
implemented without compromising on efficiencies. The smooth sailing in this setting will
be ensured by the integration of the two functionalities - OMS and EMS.

3. Simplified Operations
A comprehensive front office suite of EMS and OMS will reduce the pain of asset managers
by simplifying the processes such as providing credit analysis over time as well as efficient
control over risk functions, which otherwise would have been difficult with incongruent
systems.
The CONS
Budget Constraints
Buy side firms have constrained budgets towards IT investments under the setting of low
AUM. Given the scenario, it will be intimidating to integrate OMS and EMS as the process
and time required for a unified system makes it a long term investment.
Functionality of a Unified Matrix
The unified platform (OEMS) will be ineffectual if it endeavors to offer all the
functionalities of OMS and EMSand try to address all the market and asset classes.
The Execution Difference
Bigger firms want light and speedy execution, hence a distinct EMS will ensure it.However,
the huge compliance need and audit trails record will be ensured by a separate OMS
functionality.
The Performance Difference
Many industry players look at OEMS as an unfeasible option since buy side firms do not
operate on both the functionalities the whole day. As an OMS is needed only at the start and
the end of the day, an integrated system under this scenario means compromising on
trading performance during the rest of the day.
The Increased Trading Volume
The trading volume has increased manifold over the years. With heavy transaction flow,
traders might have difficulty in trading by an OMS window appearing and EMS screen
cutting down the blotter, order screen, data and analytics. On the other hand, it would be an
equally unpleasant experience for the buy and wholesale traders with the list of algo
configuration options appearing on their OMS screen.
The Integrated Road Ahead
The buy side firms continue their quest for best tools for each of the functionalities. However, it
remains to be seen how buy side firms revolutionize the trading experience -whether they adopt
multi window option of a unified EMS and OMS or choose to have a distinct set of
functionalities with a bespoke technology. If the trading volumes continue their downward
direction,and commissions remain unyielding,then the stridetowards the integration will rapidly
pick pace in the coming years.