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OEMS Done Right: For peanut butter and chocolate perfection, you buy a Reese’s cup

Reflections from the SimCorp TradingScreen Alliance Webinar

I love both chocolate and peanut butter, but there is also something about the right combination of the two that makes for a phenomenal dessert.  With Reese’s cups, clearly someone worked hard at getting the mixture just right so that there isn’t too much of one or the other in any single bite. The two components are simply better together, and best when combined properly

This also holds true with the OMS/EMS system landscape, which became apparent during the recent SimCorp-TS alliance webinar. To the buy side trading community that may not appreciate my choice in analogy, please bear with me.

For many years, there has been a competitive, “You got chocolate in my peanut butter” and vice-versa dynamic between OMS and EMS products on the market, like the Reese’s peanut butter cup commercial. This has left the buy side with a segregated, less than efficient, trade life cycle process to overcome. During this recent webinar, we gathered a strong line up of industry speakers to talk through the ramifications of this and the way forward.

Brad Bailey, Research Director at Celent joined to offer insights on the emerging trends in this space; Dirk Zinckeisen, Head of Solutions and Managed Services at MEAG, discussed how they’ve been solutioning for some of the challenges they’ve been presented with as well as their next steps; and finally, two of our key alliance leaders, Matt Reid, SimCorp Order Management Product Manager, and Grant Lowden, TS Sales Director for EMEA, worked together to convey what the future “Reese’s cup” should look like in the trading world.

Stop Arguing Over Which is Better, Chocolate or Peanut Butter

Brad Bailey of Celent was the first to speak, saying that the buy side is in a state of real transformation.  He noted that the “evolution on US equities alone has gone from 2-3 venues to over 100 trading venues. We are starting to see this in FX, and in European Fixed Income as well. More trading means more DMA and more algorithmic use across asset classes, which further translates to a requirement for new models.” 

Brad walked through how the existing fragmentation across asset classes has caused liquidity sourcing challenges and the emergence of multiple market structures within a number of these asset classes. Additionally, regulations like Dodd-Frank have placed pressure on the buy side to increase transparency and capture what was done in order to support the decisions made. Demand for compliance over TCA and costs in general are other added distractions over prioritizing innovation and best execution. These current dynamics are causing a remapping of the front office and making it very difficult to stay focused on achieving alpha.

“The buy side has been somewhat left on their own in deciding how to rationalize that from an end-to-end perspective, within an increasing regulatory and margin sensitive market,” says Brad Bailey.            

I believe his carefully put point here was that technology providers in this space can be doing more to simplify the flow from orders to execution, which is the key. My interpretation, they’ve been too busy arguing over which is better, chocolate or peanut butter.

At the center of it all is data and how to best access it without too much replication. There’s more content available than ever, requiring more connectivity, and at times, workflows that are quite different. The more you can have OMS and EMS speaking to each other, the better view over pre/post trade analytics, better market engagement, higher liquidity, and lower asset level risk. The goal should be to architect a system that creates a holistic front office with an end-to-end view.

Getting Multiple Chocolates to Mix with the Peanut Butter

Dirk Zinckeisen from MEAG spoke next. He’s responsible for providing applications to the portfolio managers and IT infrastructure to everyone in the company. MEAG manages over EUR 250 billion for insurance company’s worldwide, with offices in Munich, Hong Kong and New York, so they are dealing in high volumes and multiple asset classes across the globe, daily. Asset management services are offered to private clients as well as diverse institutional investors. MEAG’s portfolio managers and traders had been keying trade data into multiple places and wanted to increase efficiency of the order process. They now use SimCorp Dimension’s Order Manager to connect to various trading platforms in the outside world. Linking back to my analogy, they adopted one type of peanut butter to mix with the varieties of chocolate on the market.

MEAG’s Strategic Objective

By using the SimCorp execution interfaces, they can, against the backdrop of multiple global regulatory environments, automatically run pre-trade compliance, benchmark and other mandate checks for more than 5000 control points. They needed data from every part of the process to do these checks. They accomplished this as well as automated execution by using SimCorp Dimension. He made the point that if you have OMS/EMS capability but don’t have accounting data as well because, for example, portfolio managers need book value or compliance limit checks at distinct stages in the process, it can’t be seamless for them to make their decisions. Another example are MEAG’s successful multi-asset funds offered to private investors, where the portfolio managers require a holistic view across multiple asset classes. Seamless, holistic integration is very important for MEAG. “We are more operationally efficient because of the single platform, with reduced keying errors, higher speed, less effort, and happy faces on the portfolio managers. They are now freed from the unnecessary work of data keying and can provide more value into the execution and selection process,” explained Dirk. Who wouldn’t be happy when presented with a delicious mix of peanut butter and chocolates? For the haters out there, that was a rhetorical question.

By using the SimCorp execution interfaces, they can, against the backdrop of multiple global regulatory environments, automatically run pre-trade compliance, benchmark and other mandate checks for more than 5000 control points.

They have simplified the process tremendously with order creation, execute order, send, create transaction in SimCorp, broker confirmation, payment, reconciliation, settlement and accounting - all on SimCorp Dimension. For order execution, using RFQ (request for quote), they use multiple platforms electronically: EMSX, TSOX, 360T, Tradeweb, FXAll, Market Axess, and plan to connect with Liquidnet soon. “The traders like the integrations and it’s a great success,” says Dirk.

Plans for Future

ETFs, CDS and IRS are the next asset classes MEAG want to trade. They are using SimCorp Dimension’s Asset Manager for the selection process and Order Manager for the execution process and are looking to have specialists in each asset class to place the selected orders on the market and take advantage of some of the workflow functionality that supports communication among traders and PMs. Using the platform more for MiFID II, automated block trading between legal entities, TCA and DMA over Bloomberg are also on the horizon this year. Always on the quest for efficiency, Dirk closed by expressing his interest in the new alliance with TS and the opportunity to speed up the workflow with the different partners even more than they have in the past.

Now You Can Just Get a Reese’s Cup

Matt Reid from SimCorp and Grant Lowden from TS were the perfect duo to introduce the perfect mix of chocolate and peanut butter. The trading community’s version of a Reese’s cup. Grant began with an introduction to TS. They are one of the original EMS’s and their genesis comes from the sell side, so a multi-asset single platform has always been their premise. They have a global presence, with 11 offices and 9 data centers. They are a SaaS (Software as a Service) model, born in the cloud.

Both Matt and Grant agreed that the OMS/EMS space has been merging, but then went on to address the fact that OMS’ don’t have the Tier 1 capability that an EMS has, and that the EMS has tried to move into the OMS space, so the two don’t tend to play nicely together. This is precisely what they’re committed to change with this alliance. In terms of how they work together, the two products will continue to focus on what they’re best at, removing any overlaps. Both have very different core strengths - speed, access, light weight function is what the EMS is designed for, and as Dirk mentioned earlier, “Order Manager is designed for operational efficiency with an end to end workflow approach.”  This alliance was described in the same vein, as more than just an integration, but a single support model and seamless workflow approach – a truly dynamic and robust Workflow Management Solution (WMS), if you will. By bringing the EMS data into the OMS (i.e. streaming prices, timestamps, etc.), all the execution and transaction transparency reporting requirements are in SimCorp Dimension.

Order and execution management done right

Matt stated that, “We want to take this to the next stage and deliver a much more tightly integrated trading workflow. The alliance breaks down the silos and historical competitive nature of the two products to create STP from ideation to execution. Data from the EMS is immediately reflected in the OMS, creating an electronic feedback loop within the system that communicates with both the trader and portfolio manager.” Like the prepackaged Reese’s cup, this new customer-centric WMS aims to provide the highest level of service and satisfaction possible. Rather than clients having to connect to multiple EMS solutions (i.e. obtain a bunch of different chocolates), the relationship brings best in class benefit into a single solution.

This is a huge step in terms of what this means from a support perspective for things like MiFID II. Grant said that, “Data is king, and it is so important for users to have access to this data, wherever they sit on the chain.” The trader needs to know what is going on in the context of the orders, but there are many more touch points along the way. Both emphasized that current FIX integrations between OMS and EMS and the standard way of doing things isn’t hitting the mark based on where the market needs to go in the future. “Asset managers need the best of both worlds, using a single system approach.  This alliance is our chance to provide this for the market,” noted Matt.