Audience Note & Disclaimer: the targets of this article are primarily financial institutions (large and small) that either build or buy trading systems to help manage the order & trade lifecycle. Whether you are a user (e.g. trader, supervisor, portfolio manager, dealer, support, compliance) or involved in the creation (e.g. development, integration, product, sales) this contains ideas to help you identify your needs, and how these needs can be met (by build or buy). The article is a teaser, and will be accompanied by additional posts that examine some of the aspects, and context in further detail.
Any cursory glance at multi-dealer vendor website graphics or single-dealer glossy marketing brochures is enough to imagine that Execution Management Systems (EMS) and Order Management Systems (OMS) are both cutting-edge and super-intuitive. You imagine these trading platforms are designed to augment a PM, Trader or Sellside Dealers’ highly tuned market reflexes. It’s inbuilt capabilities allow them to manage high volumes of orders swiftly, efficiently and with the utmost ease. This must be the case, given Best Execution surely depends on it, and technology is so advanced these days.
The sad truth is that the retail apps and websites we readily use, for ordering food, taxis or even spread-betting have far greater financial investment. Therefore they command far greater levels of R&D, than the trading platforms used by the capital markets’ trader. As well as the high pressure these employees are under, they are often up against an automated algo-competitor.
This begs the question: how do I know which of these EMS/OMS platforms are suitable for my critical needs?
These platforms sit in an important, yet discrete component of the entire idea/order/trade/position lifecycle. Integration to components upstream (to the PM/CIO) and to components downstream (to brokers, venues, clearing, settlement and custody) will also define the utility of these platforms as well as of the entire lifecycle system. Big Data (and what you do with it) is only possible if all components are integrated and normalised (to feed CRM and further MIS).
It’s important to go beyond simply knowing the basic dimensions of these trading systems. These basic dimensions being the scope, scale and reach, covering connected counterparties, connected venues, supported products, and even the set of simple trading algorithms. These aspects will be explored in other posts.
Beyond this integration (within the lifecycle) and beyond these basic dimensions of the trading platforms, there are some commonly-ignored, core considerations:
A) Pricing and Analytics
What levels of pricing are available? What types of pricing are available? and are there further price discovery tools?
Are there any associated price and trade analytics? These should be pre-trade if they exist, at-trade to understand realtime market impact, and post-trade? If so, how intuitive are these Analytics, and can they be adjusted for my investment and trading performance needs? Does the data belong to me, and can the data at least be exported for my use?
B) Execution Management
How intrusive or configurable are the price & order alerts? These can be pop-ups, messages, emails, sounds, for example. And can I trade directly off the alerts?
How customisable is the order entry (for efficiency as well as for safety)?
Is order modification and cancellation also easy and safe?
How intuitive is it to understand what happened (and even what is about to likely happen), which events in which sequence, and at what micro-second? How can I instantly see what’s been traded and at what price? Auditability and traceability is important, but to the trader, you need to see what’s been done instantly, without unnecessary navigation through the screens.
C) Order Management
How far back historically can I see my orders and trades, and how intuitive is it to trade products across different time zones (but shown in one single blotter)?
How are my colleagues’ orders shown (or hidden), and what level of control do I have over them? Can I allocate, tag, route or transfer resting orders without losing queue position or causing downstream trade breaks?
How are parent/child order relationships shown, alongside the granular level of transparency in how the algos or allocation algorithms work?
Are structured, multi-leg or even grouped or combined orders easy to manage? Depending on the type of products and transactions, doing more of these more complex types will become arduous and prone to manual error if platforms don’t easily support and require copy paste out of our old friend excel.
How easily can I see the commercials I care about? What have I received from whom, where or to whom have I routed it to, or traded with, and what fees have I received or payed out. This aspect is often sensitive information and absent from most systems – but prevents empowering traders and encouraging first line decision making.
Audience Note: These questions are only a sample, to prompt proper consideration and full due diligence when selecting your EMS/OMS platform. More information, guidance and formal selection review is available upon request.
Norton Edge provides Subject Matter Expertise, helping you understand what is available, what you should avoid, and what you would struggle without. Our experience is cross asset class, and across a broad range of firms from small family office and proprietary trading companies, to large buy or sell side institutions integrating or developing new platforms. Norton Edge provides guidance straight from the designers-in-chief of market leading EMS and OMS platforms, those with experience of integrating, selling and managing trading systems.