Spending on order and execution management systems is expected to slide significantly over the coming year as buy-side firms worldwide looks to consolidate system and rationalise their use of trading technology during the downturn, according to research from analyst house Tabb.
Nearly half of the 178 buy-side firms interviewed are considering changing their trading system, swapping out an OMS or an EMS despite the complexities involved in doing so. As the number of EMSs on the buy-side trader's desktop continues to shrink - down 50% by 2010 - some firms are opting to forgo their EMS altogether for newly-delivered trading functionality in their OMS.
Platform consolidation and the search for efficiency are driving many buy side firms to look for a new OMS or EMS, says Tabb, but the current difficult financial climate has caused overall spending on these platforms to drop. Global buy-side spending on equity-focused OMSs and EMSs will decline 13% and 11% CAGR respectively from 2007 to 2009, forecasts the analyst house.
The research suggests that the convergence of the OMS and EMS, the OEMS, will maintain its elusiveness in the years ahead as vendors scale back costly development and focus on core competencies.
"Tools to help manage volatility, counterparty risk and the rapidly changing regulatory landscape will take center stage, as the ability to help deal with these newly prioritized issues will become significant differentiators," says Adam Sussman, director of research at Tabb Group.
But he cautions: "Industry providers who put a stop to developments in core execution and order-management functionality do so at great risk."
The latest downbeat assessment contradicts earlier research from Tabb, published in July, which forecast a 12% rise in global buy-side spending on order management systems (OMS) from $450 million in 2008 to $699 million in 2012.