Trends in the EMS market

Abstract

This paper looks at the recent trends in the execution management system (EMS) market and analyses the various offerings of the leading EMS vendors globally. The number of EMSs being utilised by buy-side firms has gone down and broker-neutral EMSs have become the industry norm. Hedge funds tend to make more use of sophisticated application programming interfaces (APIs) than traditional asset managers. Due to customer requirements, EMSs have had to become much more global in nature and also provide functionality to deal in different asset classes such as equities, derivatives and foreign exchange. There is a lot of common functionality across the various EMS products, partly due to client requirements, but also because of vendor emphasis on ensuring that they offer a product with broadly the same capabilities as competitors’ products. Due to buy-side requirements, vendors are providing more order management system (OMS) functionality to their clients. As a result of the crisis, commissions are lower than ever before, and competition has increased while barriers to entry have gone up. Market data volumes have risen due to high volatility, combined with falling trading volumes. The net result is that there is much more pressure on the back office to meet the operational requirements of such a development, something that affects the EMS as well. The rise in regulatory requirements will increase the compliance burden for EMSs, especially in the leading markets of the USA, Europe and Asia. Europe and Asia-Pacific are both important target markets and, in terms of geographical potential, the EMS industry has room to grow.