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OMS & EMS

  • OMS

    • An Order Management System (OMS) is a software application for facilitating and managing the order and trade flow between the (buy-side) client and different execution venues.

    • The client normally sends orders to the sell-side (intermediary, typically a broker), using the FIX protocol.

    • Order Managements Systems are employed both with the buy-side and the sell-side, where the more complicated set up is found at the latter.

    • OMSs first appeared as a natural outgrowth of electronic equities trading. With increasing order volumes, traders needed better support for managing the agency order flow in an efficient and cost-effective manner.

    • The solution to this technology-created need was obviously to add more technology; the OMS, which became the hub that structures the inbound order flow and enables traders to route orders and to track trading activity and the progress of each order for various types of securities.

    • The OMS performs vital functions such as allocations, position management, and communication between portfolio managers and traders. It ensures that orders are updated, reported back to the client and sent to mid/back office.

  • EMS

    • An Execution Management System (EMS) is designed to display market data and to provide seamless and fast access to trading destinations for the purpose of transacting orders.

    • In contrast to an OMS, an EMS is focused on real-time trading, real-time market data, and analytics. An EMS typically offers the capability to manage orders across multiple trading venues, including exchanges, brokerage firms and alternative trading systems, sometimes with algorithmic support.

  • OMS & EMS integration

    • And while an OMS can operate separate from or without an EMS, large efforts have been made over the past decade to integrate these two functions.

    • The EMS platform is likely newer, and often provided as a managed application service. This may preclude a tight integration with an older OMS or other trading applications that are deployed on-premise.

    • One of the great “architectural” issues in the OMS/EMS space deals with integrating and migrating trades from front-end execution to back-end clearing and settlement — to manage trades throughout the trading process.

  • Key requirements of a future-proof OMS-EMS:

    • Status monitoring of each order for both high and low touch flow (DMA).

    • Database integration to allow clients to keep track of MiFID II parameters such as LIS-thresholds, SMS, liquidity classification and capped/non-capped

    • Facilitates compliance with requirements on storing, analyzing, monitoring and presenting

    • Enables easy add-on functionality (within a unified software platform), such as:

      • Pre-trade risk

      • Transaction Cost Analysis

      • Advanced Trading allocation

      • Composite order management and execution

      • Program/List trading

      • Pairs/Spreads monitoring and trading

      • Market Making and RFQ responsiveness

      • Inbound FIX (request view)

      • Smart Order Routing

      • Execution algorithms

      • Algo/order performance monitoring

      • Integration into Mid- and back office systems

    • Tight integration between components. The user should view it as a single system with add-on functionality easily enabled by permissions.

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