V16-022 State of the OMS Final

State of the OMS: A Time for Change? | May 2018

St at e o f t h e OMS:  A Ti Tim m e fo f o r Ch Chan ang g e? V16-022 | May 2018 | www.tabbgroup www.tabbgroup.com .com

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State of the OMS: A Time for Change? | May 2018

Table of Contents Introduction ................................................................................................................... 3  A Com mu ni nitt y Und er Press Pr essur ure e ......................... ................................................... ................................................... .................................. ......... 4 How Bu Busi siness ness Press Pressur ures es Ar e Changin Chang ing g B uy uy-Side -Side IT ........ ............. .......... .......... .......... .......... .......... .......... .......... ..... 4

Infrastructure Infrastruc ture Consolid Consolidation ation........................................................... .................................................................................... .............................. ..... 5 OMS Inn Innov ovati ation on .......................................................... ................................................................................... ................................................... .......................... 6

Portfolio Management & Construct Construction ion System ................................................... ............................................................ ......... 6 New Liquidity Sources .......................................................... .................................................................................... ....................................... ............. 6 Fixed Income ..................................................................... .............................................................................................. .......................................... ................. 7 Equities ...................... ................................................ ................................................... .................................................. ............................................... ...................... 7 Research and Unbundlin Unbundling g ....................... ................................................. ................................................... ........................................ ............... 10 Analytics ........................ .................................................. .................................................... ................................................... ........................................ ............... 11 Market Sizing, Share, and Growth ............................................................................. 11

Geographic Focus .......................... Geographic .................................................... ................................................... ................................................. ........................ 13 Market Share ..................................................................... .............................................................................................. ........................................ ............... 15 Con cl us Concl usio io n ....................... ................................................. .................................................... ................................................... ........................................ ............... 17  Abou  Ab ou t ....................... ................................................. .................................................... ................................................... ................................................. ........................ 18

TABB Group ...................... ................................................ .................................................... .................................................... .................................... .......... 18 TABB Group Equities Practice......................... ................................................... ................................................... ................................ ....... 18 The Author ............................................... ......................................................................... .................................................... ........................................ .............. 18

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State of the OMS: A Time for Change? | May 2018

Introduction The order management system (OMS) has been the center point for buy-side equity traders since the first buy-side OMS (Merrin Financial) was founded more than 30 years ago. Envisioned as a central platform for connecting portfolio managers to traders, the O MS was used to stage, prioritize prio ritize and execute primarily equity orders. Trade execution, at the dawn of the OMS era, was nothing like it is today. Order execution 30 years ago was mostly buy-side traders talking with a host of brokers. While there was the NYSE DOT system that delivered orders directly to specialists, there were few of what we could call today electronic trading channels, and firms were lucky to have anything more than a consolidated top-ofbook market data feed broadcast from the two major US equity exchanges, NYSE and NASDAQ. That changed in the early 1990s as Salomon Brothers and Fidelity developed the FIX protocol, which electronically connected buy-side trading desks with their executing brokers. This expanded the order management system to an increasingly electronic world, allowing brokers to send buy-side traders indications of interest and notices of execution and facilitating the manually challenging processes of generating average prices and managing electronic allocation and confirmation. In 2000, Robert Algren and Neil Chriss wrote their defining paper, “ Optimal Execution of Portfolio

Transactions,” which kicked off the development of execution algorithms in ea rnest. Add to the flight to algorithms market structure change, decimalization, and the cost pressures associated with the managing of money in a more competitive age, and now almost 66% of a buy- side trader’s equity trading order flow is channeled via low-touch/electronic trading protocols across 13 US equity exchanges, upward of 30 dark pools, and 60 or more internalizing brokers. This trend is not limited to US equities, as it has migrated across geographies and, increasingly, across different asset classes. But what about the lowly OMS? Is it still the center of the buy- side traders’ world? Have they ad apted? And where is the OMS market headed? This note will look at changes in the industry, how OMSs are keeping up , and where the OMS industry is headed.

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State of the OMS: A Time for Change? | May 2018

A Community Under Pressure The money management business has become much more competitive. New money management strategies, technologies, products, and regulatory changes are shifting not only how firms manage money, but also how investors want their money managed. The almost 10-year bull market has propelled the S&P 500 from approximately 675 to a high (in January 2018) of 2,875 – a 325% return. During the same period, more than US$3 trillion of assets flowed from actively traded funds to passive funds as the growth of low-fee ETFs/ETPs escalated to more than $3.42 trillion in assets under management at the end of 2017, according to ETFGI, an independent ETF research and consulting firm. In addition, the MiFID II changes in Europe threaten traditional ways of sourcing and paying for investment research, and regulatory changes on both sides of the pond are driving up reporting and compliance costs. This has put tremendous pressure on asset managers across all aspects of the investment value chain, from traditional long-only managers to hedge funds, of which even the largest and most successful are reducing their management fees; it’s only the rare outlier that can still garner the

traditional 2% AuM fee. The push of investors from active managers to passive strategies, the introduction of low-fee assetallocating robo advisors, and new regulatory burdens are striating the investment management world into providers of alpha (uncorrelated returns) and beta (returns attributable to more generic indexbased returns)  – or investment strategies that can be easily copied and transitioned into an indexdriven ETF or passive strategy (beta) and those that can’t (alpha). The funds that can outperform

and find alpha-generating strategies are being rewarded with greater asset retention levels and higher fees, while those that can’t either are quickly redefining their investment strategies, process,

technology and/or business models, or losing assets.

How Business Pressures Are Changing Buy-Side IT More than at any time in my 22 years of analyzing the securities and investments industry, the active management buy-side community is under pressure. pr essure. Threatened by the challenges c hallenges of performance, cost, technology, and regulation, buy-side firms only have a limited number of options: improve performance, reduce cost, develop new products, or consolidate. While consolidation isn’t fun, and

developing a passive strategy business is tremendously competitive, most firms need to focus on driving alpha, beating their benchmarks, and reducing cost. © 2018 TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission.

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State of the OMS: A Time for Change? | May 2018

Infrastructure Consolidation While I would love to discuss alpha, the key to most funds’ success will revolve around efficiency –

executional, operational, and organizational, with the key to survival revolving around the order management system (OMS). The order management system is the platform that links portfolio managers with their traders. It is the system that implements trading decisions, manages the pricing and allocation of orders back to portfolio managers, and ensures that firms’ investment decisions are aligned with their investors’

constraints. While many firms have a heterogenous h eterogenous best-of-breed infrastructure, we are seeing firms increasingly work to consolidate their technology stacks, reduce the number of platforms, and even combine their investment and trading technologies onto a single platform. While this is much easier said than done, the firms that can make this transition not only can minimize the cost of technology licenses, they also can reduce the number of platforms that need to be run, supported and maintained and more easily and seamlessly aggregate their data across products and geographies. However, the complications of mixing asset classes, products and geographies on one core infrastructure aren’t easy challenges, as tradi ng and processing bonds, equities, FX, and swaps

products are quite different – not to mention the challenges associated with multi-currency processing and the integration of different jurisdictional product and process nuances. While best-of-breed infrastructures will not disappear, we do believe that it will be increasingly difficult for all but the largest firms to remain a best-of-breed shop. This is not only because of the cost of licenses, integration, and support, but also because, as the industry becomes more cost-pressured, traditionally separate groups will become more consolidated and booking these products on different systems and subsequently aggregating the output of these systems into a seamless process or reporting structure is incredibly inefficient. TABB Group believes that as we move into the future, equity managers increasingly will work with their fixed income brethren, derivatives will become a more important aspect of the money management business, and managing money will become a more global enterprise. As hedge funds have demonstrated, gaining exposures to various opportunities does not just lie within one asset class. Opportunities will increasingly be found in the interplay between related assets, such as equities, corporate bonds, sovereign debt, and/or derivatives. To harvest these opportunities, firms will need a fully integrated environment to drive interpersonal communications as well as the tools to efficiently harvest alpha, in all its forms.

© 2018 TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission.

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State of the OMS: A Time for Change? | May 2018

OMS Innovation To be competitive, order and execution management platforms are raising the bar. In addition to adding robust execution management technologies and increasing asset class and geographical coverage, we see OMS platforms improving their institutional integration, adding analytics, more fully implementing brokers’ algorithmic suites, and adding new technologies to help traders understand

which algorithms to use for what products during which market scenarios.

Portfolio Management Management & Construc tion Syste System m Integration Since the invention of the EMS, OMS platforms have been trying to integrate EMS functionality into the order management system. While this is possible, it isn’t easy. The order management system

connects the portfolio manager to the trader; it features, or is integrated with, a sophisticated compliance platform; and it typically is part of the books-and-records infrastructure of the firm. This means that the order management platform needs to have a much more robust database, transaction history, compliance rule set, and facilities to allocate and confirm trades with brokers. The execution platform, however, needs to integrate market-based functionalities such as algorithms and direct market access capabilities, and it needs to be able to manage the 100/20 0-share fills of a 100,000-share order that is thrown off by a trading algorithm, without bogging down with compliance checks on each of the 500 to 1,000 fills. EMSs also do not need to have histories or data permanence, as once the trading day is over, most of the history is transferred to the OMS and the database is flushed. While integrated EMS/OMS platforms are becoming more popular, an increasingly popular feature for the OMS is tighter integration with the portfolio management platform. This facilitates greater portfolio manager and trader integration and allows more seamless communication between the investment decision maker (the PM) and its implementer (the trader). This close relationship is important, as the decision-making behind the order will absolutely color how the trader executes the order; an order with a high information content will need a very different execution strategy than an order issued on behalf of an investment of additional capital into an existing strategy. The ability to obtain liquidity for a specific investment will also have a significant impact on a trader’s strategy and performance, especially in less liquid investments. A c lose relationship and interaction between the PM and the trader can help the PM better understand the dynamics and cost of getting into or out of a product.

New Ne w Liqui dity Sources One of the most interesting areas for innovation is the restructuring of the trading function for many asset managers. Historically, portfolio managers and analysts worked to select their preferred investment strategies and the portfolio managers implemented those decisions. This began to change for the equity side of the business a few decades ago, as the investment-decision process © 2018 TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission.

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State of the OMS: A Time for Change? | May 2018

stayed with the portfolio manager but trading was delegated to separate trading groups that could better focus on execution. While this changed for equities, however, it didn’t for many other asset

classes, until now.

Fixed Income One of the most interesting developments in order management is the increasing demand for fixed income trading technology integration. Traditionally, fixed income products have been traded by phone or through request for quote (RFQ) platforms such as Tradeweb, MarketAxess and Bloomberg. RFQ platforms send a request for quote message to liquidity providers (typically dealers) to obtain the price at which each dealer will execute. Once the quotes are received, investors select a dealer and the trade is executed. During the past decade (post the global financial crisis), the market has changed. To bolster the economy, the Federal Reserve Bank and central banks around the world lowered interest rates, creating an incentive for corporations to issue debt at the same time regulators have been reining in bank balance sheets. This has changed the balance of power on Wall Street, shrinking the banks and brokers, and leaving the buy side holding a larger percentage of assets. In a declining interest rate environment, this isn’t much of a worry; however, as the economy improves, cent ral banks begin

to reduce their balance sheets and interest rates begin to rise, the buy-side worry has become palpable. To allay these fears, an increasing array of new fixed income trading platforms and protocols has been introduced, expanding the traditional one-way RFQ protocol from dealers to clients to a bidirectional channel where both buy- and sell-side firms can interact with RFQs. In addition, new and different matching mechanisms, from more traditional limit order books to auction formats and various dark pool platforms, are being developed and launched. For these platforms to be successful, they need to be conne cted to investors’ order and execution management platforms. This connectivity facilitates the buy-side trader ability to more easily interact with the trading platform.

Equities While the electronification of the equities markets happened well over a decade ago, regulation still is driving innovation in the equities market as well. There are three major drivers changing the nature of the equities market: MiFID II in Europe, greater transparency and better equities analytics, and the capital/balance sheet restrictions placed on the industry by Basel III and the Volcker Rule. Regulations have forced banks to more closely manage their balance sheets, while better execution metrics improve the performance of trading algorithms. If these two drivers acted solely on their own, it would push more flow into dark ATSs. This has occurred in the US, as the share of off-exchange trading has increased to record levels (almost 39.9% © 2018 TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission.

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State of the OMS: A Time for Change? | May 2018

of total equity trading volume) and the volume traded on ATSs has increased to 14.9% of total shares traded (see Exhibit 1 ). Basel III and the Volcker Rule force banks both to reduce their balance sheets and manage their capital much more judiciously. This makes it more expensive for the buy-side to trade using the broker’s capital and pushes the buy side toward agency execut ion and, into dark

ATSs. Exhibit 1:  Exchange vs. Off-Exchange Volume (by Exchange Group/Independents)

March 2018 60.0%

49.7%

50.0%

39.6% 35.3%

39.6%

40.0% 35.3%

33.5% 30.0% 22.3%

23.0%

20.1%

20.0%

19.5%

10.0% 2.8% 0.0%

Off -E -Ex ch ch an ange

N as as da daq G ro ro up up

NY SE SE G ro rou p

C bo bo e/ e/BA TS TS G ro rou p

I nd nde pe pen de de nt nt

Source: TABB Group

However, as the European MiFID II rules kick into gear in Europe, the use of dark pools has been curtailed by the 4% and 8% double volume caps. While the designers of MiFID II anticipated that the flow driven out of the dark by these double volume caps would be routed to lit exchanges, it hasn’t.

Flow, by and large, has shifted away from dark pools toward systematic internalizers, which are, for all intents and purposes, market makers/dealers. Systematic internalizers use capital to trade directly against investors’ order flow. The SI provides a client or agency broker with a quote, and the client

can route to the SI if it is in its best interest. Just one month after the implementation of the double volume caps and four months since the initial MiFID II implementation, systematic internalizers have garnered almost 15% market share in European equities ( see Exhibit 2, next page ).

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State of the OMS: A Time for Change? | May 2018

Exhibit 2:  European Equity Volume (notional) by Execution Venue Type

Source: TABB Group

Trading platform providers have also innovated. Cboe had developed a periodic auction while the LSE’s Turquoise, Liquidnet and ITG POSIT have developed technologies to fit into the MiFID II Large -

in-Scale waver. After only four months, the periodic auctions have garnered 2.25% market share (see Exhibit 3, next page ).

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State of the OMS: A Time for Change? | May 2018

Exhibit 3:  Periodic Auction Volumes by Venue April 2018

Source: TABB Group, big xyt

These new liquidity sourcing mechanisms need to be integrated into new trading strategies, access paths, analytics and metrics, which will need to be integrated into the OMS. In addition, there are a few new matching platforms/ATSs that are launching using different and novel matching methodology, such as OneChronos and Imperative Execution, which are attempting to use artificial intelligence/machine learning in their matching methodology and, depending upon their structure, may need OMS support. The bottom line is that the relatively staid mechanism used to trade, manage risk, and match buyers and sellers across both fixed income and equities is changing, and the platforms that can most easily interact with these new venues will have a significant advantage, both for themselves and for their clients.

Resea Re search rch and Unbu ndli ng The unbundling of research from execution will play a major role in the deployment of technology on the buy-side trading desk. Traditionally, execution commissions were used to compensate brokers for their research, analyst support, conferences, and corporate access arrangements. Known as “soft dollars,” many funds used the OMS to track these commissions and research payments. In 2001, © 2018 TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission.

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State of the OMS: A Time for Change? | May 2018

Paul Myners called upon the industry to start unbundling research payments from execution commissions, arguing that there was an inherent conflict of interest in this payment mechanism that incentivized giving orders to less qualified execution agents for the provision of research. This push to unbundle was reinforced under MiFID II, which defines strict rules for the procurement of research, allowing two payment mechanisms: paying for research out of the profits of the investment manager or setting up research payment accounts (RPAs) for each investor, where they are required to track and allocate commissions and research payment by account and inves tment strategy. While MiFID II pushed a number of funds to pay for research out of earnings, changes to the OMS were required to ensure that the order execution environment, compliance, and research relationships were aligned and in compliance not only with MiFID II rules, but also with the client, portfolio manager and the research provider.

 An al alyt ytii c s The integration of pre-trade TCA into order management platforms is nothing new. However, most pre-trade TCA metrics are geared toward helping the portfolio manager and the trader think about the theoretical cost of implementing orders in total, or at the parent level. While this helps the portfolio manager better understand what he will be paying to get into or out of an investment, and it gives the trader a benchmark to aim at, OMS platforms increasingly are working to help the trader actually hit these numbers. The next level of pre-trade equity trading analytics is helping traders select algorithms and stage, monitor, and benchmark an in-flight algorithm’s performance against a theoretical execution curve. This is much more difficult. It is one thing to integrate into a historical measurement and/or theoretical benchmark based on history through a batch-like offline process that feeds an order blotter; it is quite another to manage trades and/or performance in real time. The challenge with attempting to help course-correct a trading model in flight is that the amount of data and analytics needed to perform these calculations is not insignificant and the level of precision to measure an algorithm’s

performance across even 13 lit exchanges, not to mention 30-plus ATSs, is taxing.

Market Sizing, Share, and Growth The current market for order management platforms is large and growing. TABB Group estimates that the global market for buy-side execution infrastructure is approximately $5.5 billion, including proprietary software development. This is primarily comprised of EMS, OMS, and transaction cost analysis spending. We believe that this market segment will grow at a rate of approximately 4.95% CAGR over the next 3 years. This is in relation to a 3.6% CAGR during the same period for total buyside spend (see Exhibit 4, next page ).

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State of the OMS: A Time for Change? | May 2018

Exhibit 4:  Buy-Side Trading Technology Spending

Source: TABB Group

Spending for EMS/OMS technology will start shifting across asset classes, from predominantly focusing on US equities toward other geographies and other asset classes. The biggest cross-asset class shift we see is the push p ush toward connecting foreign exchange and fixed income trading desks . The EMS and the OMS have traditionally catered to the equities market, as equity trading has become a centralized function and has moved from portfolio managers trading their own positions to professional buy-side equity traders aggregating the flow from multiple portfolio managers and executing them electronically over a fragmented and very complex execution network. This is also starting to occur within the foreign exchange and fixed income markets. Foreign exchange was historically traded by the custodian, not by the money manager, as more of an operational function. After a few high-profile lawsuits and scandals, however, this began to change. Increasingly, FX is being traded by the asset manager, and more precisely by FX trading professionals. Like FX, fixed income desks are beginning to learn the power of centralized trading. Whether this is being driven by efficiency, performance, operational risk, or the increasing electronification of the fixed income markets, we see fixed income products (credit and rates) as the next product to spur EMS/OMS growth. With this conversion, we see the FX and fixed income EMS/OMS markets growing at a 3-year CAGR of 4.9% and 8.2%, respectively, while the global equities EMS/OMS market will grow at only a 2.8% pace and US EMS/OMS spend will decline by 0.3% a year over the next three years ( see Exhibit 5, next page).

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State of the OMS: A Time for Change? | May 2018

Exhibit 5:  EMS/OMS by Asset Class

Source: TABB Group

Geographic Ge ographic Focus While the focus of OMS/EMS clients is in the US, we believe that Europe and Asia will grow at a faster clip, with European and Asian markets growing at approximately a 6.3% CAGR, c ompared to only 2.3% in the US. European trading technology growth is outpacing the US based on changes needed to comply with MiFID II, while the growth of an investor class, the inclusion of China A shares in the MSCI index, and the increasing sophistication of the Asian investment class is jump-starting buy-side IT spend in Asia ( see Exhibit 6). Exhibit 6:  EMS / OMS by Geo

Source: TABB Group

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State of the OMS: A Time for Change? | May 2018

While the EMS/OMS world is significant, it cannot be looked at without including connectivity spending. Many EMSs and OMSs require connectivity connectivity to execution venues and their brokers’ brokers’ trading

platforms. While these costs are typically paid for by the brokers, they are heavily influenced by the buy side. Many order management platforms actually own their own networks or work closely with network providers – such as ITG and Charles River. The cost of connectivity to these platforms is not insignificant and adds an additional $1.6 billion to the $5.5 billion buy-side EMS/OM EMS/OMS S trading technology budget. If included in the buy-side trading tech category, the cost of connectivity (though paid for by the sell side) increases the spending into this category to $7.1 billion globally ( see Exhibit 7). Exhibit 7:  EMS/OMS Spending and Growth

Source: TABB Group

Spending on trading infrastructure is fairly well diversified across North America, Europe and Asia; however, spending on network infrastructure is much more heavily aligned toward North America, where the US connectivity spend is double the s pend in Europe or Asia. The US connectivity spend is higher most notably because the US business is more reliant on electronic connectivity. Virtually all buy-side firms are connected to most, if not all, of their brokers, and many firms have redundant networks to aid in their business continuity initiatives. European connectivity spend is lower than t han in the US, as the price of connectivity is more competitive c ompetitive in Europe. In addition, there are fewer managers, managing fewer assets. However, many of the connection points are pan-European and cross telcom boundaries and national lines, making the process of connecting more challenging. © 2018 TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission.

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State of the OMS: A Time for Change? | May 2018

Asia spends less in network fees than the US, but for a different reason than Europe. The Asian telcom market is more expensive than the US because the distances are generally greater and the markets are more fragmented. While there are a number of pan-Asian brokers, the bulk of markets are more local. The preponderance of local brokers, vast geographical distances, and expensive telcom fees pushes the execution to be more local and less electronic. Buy-side firms connect to larger global brokers, located in major financial centers, but much of the local investment is managed by smaller firms via traditional interpersonal channels. The larger global banks have an outsized electronic presence and the local players continue to trade in more traditional ways.

Market Share TABB Group, on an annual basis, interviews approximately 100 head and senior buy-side traders from institutional asset managers; many of these firms are the largest and a nd most sophisticated asset managers on the globe. As part of this year’s study (executed from December 2017 through March 2018), we inquired about the funds’ OMS and EMS platforms. Currently, and for the past few years,

Charles River Development has led the field as the most utilized OMS  – by 30% of the 95 firms interviewed. This was followed by Eze Software, with an 18% share, and Advent Moxy, with 14%. Charles River Development’s top spot was predominantly driven by its lead in servicing traditional

asset managers. If we compare platforms by firm type, 67% of the hedge funds we interviewed used Eze Software and 13% developed their own proprietary solution. Only 7% of hedge funds we interviewed selected Charles River, which tied with ITG Macgregor XIP. On the long-only side, ITG MacGregor XIP garnered 35% share and an d Advent Moxy captured 17%, followed by Bloomberg, which was utilized by 13% of the traditional asset managers we interviewed ( see Exhibits 8 and 9) Exhibit 8:  OMS Usage 2016 vs. 2017

Source: TABB Group

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State of the OMS: A Time for Change? | May 2018

Exhibit 9:  OMS Usage 2017 by Firm Type

Source: TABB Group

While the EMS and OMS spaces overlap, they have a very different set of vendors. In our discussions with the 95 head and senior US equities traders, Bloomberg’s EMSX was the most extensively used

platform. It was deployed by 27% of the firms we interviewed. ITG Triton was No. 2 after Bloomberg, followed by firms not using an EMS, and Instinet Newport and Charles River were next. When split by fund-type, Bloomberg EMSX and ITG ITG Triton tend to be more evenly used by both asset m anagers and hedge funds, while Instinet Newport and Charles River tended to be favored by asset managers, and Factset/Portware and Eze Software’s EMS tended to be favored by hedge funds ( see Exhibits 10 and 11).

Exhibit 10:  EMS Usage 2017 by Asset Managers

Source: TABB Group

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State of the OMS: A Time for Change? | May 2018

Exhibit 11:  EMS Usage 2017 by Firm Type

Source: TABB Group Source: TABB Group

Conclusion The order management platform of the future will be a fully integrated, cross-asset, multigeographical and cross-functional platform. It will be modular, built on a multi-platform infrastructure that will take the best of the EMS, OMS and portfolio p ortfolio management platform environments. This new platform will enable the trader, no matter what asset class or geography, to seamlessly trade across multiple markets, and brokers. Depending on the regulation and demand, it may also trade crypto. It will facilitate all (or most) trading protocols, from DMA, streaming quote, algorithm, crossing and auctions, to request for quote. It either will calculate or integrate real-time analytics on the fly and enable traders to select the appropriate tools/algorithms for the right liquidity profiles and guide the user toward the best providers of those services. s ervices. The platform of the future will also more seamlessly tie together the buy-side trader with the portfolio manager. As markets become more competitive, the ability to harvest every bit of alpha out of an idea becomes even more critical, as it will help portfolio managers model liquidity to ensure they are choosing the right products, and help traders know more about what the PM is trying to accomplish. Compliance, both regulatory and with investor mandates, will be another critical aspect of the platform, as ensuring the appropriate assets are selected for the right accounts at the appropriate levels will be critical for servicing an increasingly more discerning client that, given the increasing penetration of ETFs, will have to be given higher levels of service for the same or even lower fees. In a few words, the buy-side infrastructure will need to be more connected, more seamless, and more straight-through; and it is the OMS that increasingly will be looked to as the pivot point enabling asset managers to capture alpha and execute on their investing visions. © 2018 TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission.

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State of the OMS: A Time for Change? | May 2018

About TABB Group Group TABB Group is a financial markets research and strategic advisory firm focused exclusively on c apital markets. Founded in 2003 and based on the methodology of first-person knowledge, TABB Group analyzes and quantifies the investing value chain, from the fid uciary and investment manager to the broker, exchange, and custodian. Our goal is to help senior business leaders gain a clearer understanding of issues and trends within financial markets, so they can better grow their businesses. TABB Group members are regularly cited in the press and speak at industry conferences. For more information about TABB Group, visit http://www. http://www.tabbgroup.com/. tabbgroup.com/.

TABB Group Equiti es Practice Practice TABB Group’s Equities Research Practice covers market structure, trading, regulatory and

technology issues impacting global equity markets. TABB research is a critical decision-support tool that provides financial institutions and the support ecosystem with proprietary data and analysis on trends within our community of equity capital markets professionals. Our clients include asset managers; hedge funds; brokers and banks; hardware, software and services vendors; and regulators globally.

The Author Larry Tabb, Founder & Research Chairman [email protected] Larry Tabb is the founder and Research Chairman of TABB Group. He has published industry research analyzing both US and European market structure; central clearing, credit default swaps, fixed income, equity and foreign exchange trading; financial markets trading and processing systems; analytical trading tools; financial markets infrastructure, including grid and cloud computing; and foreign and emerging market technologies. Larry has written extensively on the changing market structure, exchanges and regulatory issues, as well as new technology trends in high frequency trading, market data, risk management, order management, best execution, algorithmic trading, dark pools, multi- and cross-asset trading, liquidity management, FIX connectivity, custody, and advances in emerging technologies. Larry is quoted extensively and in virtually all industry and general news publications. He has been cited in The Wall Street Journal, The Financial Times, the Associated Press, The New York Times, CNN, Bloomberg, CNBC, Reuters, Dow Jones, Barron’s, Forbes, Bloomberg Businessweek,

Financial News, WatersTechnology, Computerworld, eWEEK, American Banker, The Banker, Hedge Fund Review and Wall Street Letter. He continues to be a featured speaker at major industry and business conferences throughout the United States, Europe, Asia, and Canada.

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State of the OMS: A Time for Change? | May 2018

www .tabbgr oup .com | New York +1. +1.646 646.722 .722.780 .7800 0 | Lon don +44 (0) (0) 208.133 208.133.502 .5022 2 © 2018 TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission.

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