With no single âHoly Grailâ of buy-side trading platforms in sight, says TABB Group in the interview-based research study released today, âOMS, EMS or DMA: The Future of the Desktop,â there are a number of areas where direct market access, order management system and execution management system platforms are in fact converging.
According to TABB Groupâs Jeromee Johnson, senior research analyst and author of the study, in the near term, these platforms will offer multi-asset capabilities, have a base level of commission-management and multi-broker functionality, offer a base level of trading ability at the single-stock and portfolio levels with access to custom and mass-market algorithms residing within both sets of blotters.
The buy-side has turned the corner in the adoption of new desktop-trading technology, explains Johnson. Instead of adding more systems to their desktop, they are reducing their number of broker relationships at the same time they are consolidating and reducing the number of systems they rely on. âDespite this downward trend in the number of trading platforms,â he says, âthe industry remains far from being able to converge on a single platform and architectureâ
âAnd yet,â Johnson concludes, âif an algorithm built within an EMS can be executed through the smart-order routing and sweeping capabilities of a DMA platform and the trader can seamlessly start and manage the execution from his OMS, does it really matter that three different systems from three different vendors are under the covers?â
The recent changes in the agency brokerage landscape will also have a significant impact on the future of the trading desktop, Johnson claims. âWe believe at TABB Group that the merger and acquisition activity is just beginning. The recent broker-platform combinations of Macgregor and ITG and Eze Castle and Bank of New York will do a much better job bringing together certain OMS and execution functionality, and the breadth of their offerings is creating a new standard for the agency broker.â
Key findings of the study include:
â¢ 80% of the buy-side requires multiple-trading platforms to execute trades.
â¢ The number of desktop platforms used by the buy-side grew at a 42.6% CAGR between 2004 and 2006. TABB Group forecasts that number will decline at an 8.3% rate between 2006 and 2008.
â¢ Platforms with the highest desktop penetration in the OMS, DMA and EMS categories are Macgregor on 20% of desktops, RediPlus at 46% and Flextrade at 18%, respectively.
â¢ Nearly 70% of the buy-side is concerned about their OMS moving to a transactional / connectivity-based pricing model.
â¢ Half of firms with multiple-disconnected platforms would opt for a converged platform versus only 30% of firms with integrated-trading platforms.
This study, based upon the interviews of over 80 long-only and hedge fund head traders, summarizes the state-of-the-buy-side trading desktop today, covering the differences between OMS, EMS and DMA platforms, the selection process and market share of vendors in these segments as well as the shifting technology gaps between different buy-side firm segments. In addition, the report examines the OMS/EMS/DMA vendorsâ distribution models, explains the technology challenges of certain platform features and analyzes how the buy-side and their vendors are working together to meet these challenges. The 47-page study with 36 charts also addresses the future of the buy-side desktop, how some of these platforms will successfully converge and where and why some will remain separate.