Reducing Costs Through OMS Selection

Retail investment is undergoing a shift away from managed equity funds and towards index tracking passive funds and exchange-traded funds. Passive funds charge their clients lower fees than managed funds, mainly due to the simplicity of their operations, the buying power they can exert on their brokers and the lack of the requirement for brokers to provide research offerings. By focusing on following their indices and reducing commissions for re-balancing trades, passive funds are becoming increasingly attractive investments.  

The need to drive down costs has a knock-on effect for brokers who are now being asked to compete on transaction cost and market coverage alone. This has reduced the need for brokers to differentiate through the provision of specialised services, therefore increasing the commoditisation of the software systems required to perform standardised services. The market is now open to software vendors who provide affordable and reliable off-the-shelf market access and order management systems (OMS) that are now being used to replace the expensive to maintain, in-house systems that banks have been constructed piecemeal over the years.

Several major banks and brokers are replacing older systems with vendor solutions for portfolio and electronic trading that emphasise speed and reliability rather than the provision of specialised services. The current order management systems on market differ wildly by price, functionality and deployment model in order to attract different size firms and types of brokers. These vendors range from small regional- or country-specific vendors to large and truly global shops that can provide a single system for a Tier I investment bank.

Given the vast amount of solutions and vendors available, the process of selecting a system and correctly integrating it can be daunting. GreySpark has global experience in not only helping clients select the right vendor OMS for their business needs, but also in overseeing the entirety of the project. On a recent project for a large Tier I US investment bank, GreySpark helped the client choose the correct product from a large and highly-saturated field, managed system implementation by providing on-site business analysis, developers and project managers and educated necessary stakeholders throughout the entire project.

As banks will continue to work to reduce their IT spending whilst still providing the right services for their clients, GreySpark believes that this type of full-functionality, end-to-end management and oversight service will be essential to help guarantee success.