Challenging times ahead for buy side OMS vendors
10 October 2011
The buy side Order Management System (OMS) market has been going through a period of transition. It has had to cope with the aftermath of the financial crisis and the need for improved technology for multi-asset trading and also high frequency trading. While the buyside is very well aware that there would always be best-of-breed solutions for different asset classes and requirements, they are interested in having a solution that allows them to meet most of their needs and minimizes their requirement for an Execution Management System (EMS) wherever possible. Hence, it is becoming more challenging for the leading OMS vendors. There are some other challenges that are also affecting the choices of the buy-side firms for OMS products. The falling margins and rising costs due to volatility mean that clients are demanding value for money in a manner seldom seen before. The business and pricing models of the industry are changing and vendors are having to become much more flexible in their approach. While the leading vendors are still growing and acquiring new clients, the competition has become more severe. In the last few years, the acquisitions of LatentZero by Fidessa, Eze Castle by ConvergEx and Macgregor by ITG, while often taking advantage of the synergies between OMS and EMS, not to mention sell-side and buy-side OMS, have created a more compact market where the continuous innovation has become the key. Importantly, there has been a stagnation in demand for OMS in leading markets in the US and Europe. Due to the economic uncertainty, we believe that this is expected to continue for the next couple of years. There will be a growth in demand from Asia that will partly compensate for it, but the Asia-Pacific market will take time to mature and would also require the OMS vendors to set up their offices in the region from both a business development and customer service point of view.