The Transformative OMS: From Tickets & Timestamps to Today’s Technologies

The sell-side Order Management System (OMS) is the central component used by brokers to transact with their buy-side clientele. Over the years it has evolved from a basic communications and data capture tool into the primary communications and transaction portal between the buy-side and the sell-side. Not only does it represent one of the most important technology investments a broker may make it is the focal point of data management as sell-side institutions look to address transparency concerns resulting from expanded regulatory requirements and to fully understand the profitability of their trading businesses. From bulge brackets to boutiques, sell-side firms have been forced to reconfigure their business models to deal with this new paradigm. Fortunately, sell-side firms are rapidly adjusting to these changing market conditions; unfortunately, many of their OMS platforms are not.

In order to provide additional value to today’s buy-side clients, brokers must prepare themselves for broader conversations regarding their use of Alternative Trading Systems (ATSs). They must also be transparent regarding revenues derived from Maker-Taker and Payment for Order Flow pricing models offered by various trading venues. In addition, these firms must also be prepared to explain their trade-routing strategies and the effect of those strategies on the delivery of best execution to their clients. To do this effectively, not only do they need a flexible and efficient OMS, they need a system that can be readily adapted – one that has the flexibility to incorporate new trading strategies, products and geographies without overhauling the entire system or creating a data management nightmare.

To continue proving their worth to the buy side, sell-side firms must recognize the increasingly urgent need for the deployment of OMS technology capable of more than simple execution of individual assets. Today’s more complex environment requires the technological infrastructure for global multi-asset trading, compliance management and the ability to assess client profitability.

In this report, TABB Group will look at how sell-side institutions should respond to heightened buy-side expectations, including increasing their investment in trading technology. We examine how broker-dealers are taking a more nuanced approach to their client offerings, providing clients with elements of both high- and low-touch services that will consistently yield quality executions. Only by leveraging the latest OMS technology will these firms be able to offer the complex products and achieve the level of scalability now required to successfully attract buy-side clients.