Market Overview

3 Takeaways About The Sell-Side Execution And Order Management Industry

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3 Takeaways About The Sell-Side Execution And Order Management Industry

The order management systems (OMS) and execution management systems (EMS) business saw a big headline earlier this month, with Waters Technology reporting that Bloomberg is exiting the sell-side EOMS business.

Though Bloomberg is still the dominant player in the $1.4 billion industry according to Greenwich Associates, their decision to leave the SSEOMS business line (as well as the Know-Your-Customer business), comes at an interesting time for an industry still coming to terms with the MiFid II regulations enacted in 2018.

InfoReach has been in the execution and order management system for the buy-side and sell-side since 1995. In light of Bloomberg’s decision and the other recent changes to the industry, Benzinga asked CEO Allen Zaydlin and Director Of Operations Nick Halversen for a few takeaways about the state of the sell-side execution and order management business.

Takeaway One: Increased Costs Are Forcing The Industry To Focus On Flexibility

Nick Halversen: I think there’s a demand traders have to become more innovative in the moment. You have greater compliance restrictions and costs. You have technology providers that are experiencing these restrictions and costs as well, so their costs are going up. You have market data costs that have been continuously going up.

And so traders are trying to be more innovative and they’re trying to find solutions that are flexible to meet new ideas and new ways of trading that they’re coming up with to stay in the business. Traders are being forced to innovate because a lot of their old solutions don’t work anymore.

Drilling down on flexibility, they’re looking for something that they can afford that provides them the trading system that does for them the thing they want to do. Whether that’s multiple assets across multiple countries...but also “I want to have my functionality set up in a specific way that meets my trading workflow.”

A system that can flex to meet the trader where he is rather than say “You have to conform to what we have.” Our clients point to us that that’s the most important thing.

Allen Zaydlin: There is a huge amount of traders, maybe 90 percent of traders, that are doing pretty simplistic stuff. Therefore most of the systems that are geared for that purpose are good enough. We’re dealing with customers that are really sophisticated and need the flexibility, especially when they’re sell-side.

In many cases what they need depends on the customers. If they’re dealing with a customer who is trying to execute a certain type of order flow through them, and they can’t accommodate it because the system they use is not built for it, they can’t take that business.

Takeaway Two: It’s A Challenging Industry, Particularly on the Sell Side

Allen Zaydlin: The sell-side broker-dealer side of the business is definitely shrinking. It’s a shrinking side of the market. We have fewer participants because the cost of operating is high because of the compliance, and there is no growth in terms of transactions or new security types.

There are not too many new broker-dealers that come into play. It’s probably been six or seven years since we implemented a new broker-dealer into the system. Lately, new clients are somebody who’s been using other technology and they’re seeking to improve it. They’re looking for more flexible, more adjustable technology for their client needs.

Takeaway Three: The Biggest Challenge Is Keeping Up With The New Regulations

Allen Zaydlin: Regulations are the biggest challenge right now. We must follow reporting and compliance inside of the various markets, including the European Zone, not only the technical perspective to implement it, but understanding the knowledge of what needs to be done. So that is a significant burden right now.

Posted-In: Fintech Government News Regulations Movers & Shakers Markets Interview General

 

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