MiFID II turns spotlight on buy-side systems
June 21, 2018

The increasing importance of trading desk order management systems (OMS) and execution management systems (EMS) is contributing to steady growth in technology costs for institutional investors, according to a new report from Greenwich Associates. 

Europe's MiFID II (markets in financial instruments directive II) and post-crisis regulations in the US have raised the bar on "best execution" requirements and significantly increased operational burdens with stricter transaction reporting rules. These rule changes have increased investor reliance on OMS and EMS, which together now account for approximately one quarter of buy-side technology budgets.

Just 20 years ago, many buy-side firms used in-house technology platforms. "In fact, working with in-house technology was seen as a badge of honour and competitive advantage," says Kevin McPartland, Head of Greenwich Associates Market Structure and Technology Research and Author of Order and Execution Management Systems Increasingly Indispensable, which analyzes the fast-shifting landscape of buy-side technology platforms and budgets.

Today, 77 percent of these investors use third-party OMS and approximately two-thirds use third-party EMS due in large part to the lower total cost of ownership. The share of buy-side firms using in-house EMS has been cut in half in the last five years alone. Equity desks led the way in the adoption of OMS and EMS, but most fixed income desks now employ at least an OMS, with EMS finally gaining some traction. 

"Maintaining a fully staffed team to keep up with not only regulations but also user requests and new features has become too expensive for most investment companies to justify," says Brad Tingley, Co-Author of the report. "Platforms from the major third-party providers can perform those functions affordably and with scale."

Due in part to increased spending on OMS and EMS, technology costs now account for 40 percent of total budget for the typical buy-side firm, up from slightly less than one-third only two years ago.

 





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The increasing importance of trading desk order management systems (OMS) and execution management systems (EMS) is contributing to steady growth in technology costs for institutional investors, according to a new report from Greenwich Associates. 

Europe's MiFID II (markets in financial instruments directive II) and post-crisis regulations in the US have raised the bar on "best execution" requirements and significantly increased operational burdens with stricter transaction reporting rules. These rule changes have increased investor reliance on OMS and EMS, which together now account for approximately one quarter of buy-side technology budgets.

Just 20 years ago, many buy-side firms used in-house technology platforms. "In fact, working with in-house technology was seen as a badge of honour and competitive advantage," says Kevin McPartland, Head of Greenwich Associates Market Structure and Technology Research and Author of Order and Execution Management Systems Increasingly Indispensable, which analyzes the fast-shifting landscape of buy-side technology platforms and budgets.

Today, 77 percent of these investors use third-party OMS and approximately two-thirds use third-party EMS due in large part to the lower total cost of ownership. The share of buy-side firms using in-house EMS has been cut in half in the last five years alone. Equity desks led the way in the adoption of OMS and EMS, but most fixed income desks now employ at least an OMS, with EMS finally gaining some traction. 

"Maintaining a fully staffed team to keep up with not only regulations but also user requests and new features has become too expensive for most investment companies to justify," says Brad Tingley, Co-Author of the report. "Platforms from the major third-party providers can perform those functions affordably and with scale."

Due in part to increased spending on OMS and EMS, technology costs now account for 40 percent of total budget for the typical buy-side firm, up from slightly less than one-third only two years ago.

 



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