Timing is everything, or so it is said. As the coronavirus started to spread globally like wildfire at the start of 2020, Linedata had just started to launch its first wave of cloud-based and cloud-enabled offerings. By October, the French company was ready to announce its new asset management platform (AMP) that leverages cloud technology. As most traders and portfolio managers started working from home, it proved fortuitous timing for the trading platform and data analytics provider.

While Linedata has joined the growing list of order management system (OMS) providers pushing their products to the cloud, this process has set the foundation for the next build—modularity.

Platform modularity, which incorporates the technologies and tactics of microservices and containerization, takes each OMS function and makes it discrete. So in the case of Linedata’s Longview OMS, which can now run on AMP via the cloud, the system is broken down to different functions, such as order generation, trade blotters, model management, pre- and post-trade compliance, investment decisioning, or electronic trading—all those functions and features that, when aggregated, make up an OMS.

“Forget what the market used to call a collection of features as a product—forget that,” says Gary Brackenridge, global head of asset management for Linedata.

“If we can now show up and provide the technology features, and if it’s mostly OMS-y, PMS-y [portfolio management] related, fine. We still use the names Longview and what have you—maybe we’ll keep [the names]; maybe we won’t over time, I don’t know—but the rest of the story becomes very interesting. We’ve spent a lot of money over the last few years acquiring services organizations; we have spent a lot of money and time launching a data business, as well as a machine learning-based analytics business that’s purely focused on operations. The collection of those capabilities is now the interesting offer to a client.”

By modularizing its systems, Linedata can provide continuous integration and continuous delivery. As such, once developed, new features can be delivered globally, instantly. It also allows them to target upgrades by the individual user, strategy, asset class, or geography.

“It’s not some big upgrade; it’s not some years-long release cycle; it’s not giant and impactful—but it allows that little piece of goodness to come right away,” Brackenridge says. “With our clients, their strategies are literally evolving by the minute. So if it doesn’t work, fine, turn [the module] back off; turn a different one on; reconfigure it. That dynamism and flexibility moves us away from the world of, ‘We bought an OMS! It’s got 7,000 features!,’ to, ‘I need 12 new features today; tomorrow I’ll turn off three; the next day I’ll turn off another two and add four different switches,’ kind of setup.”  

Increased pressure on asset managers

The OMS space has been going through a period of considerable consolidation, most notably with State Street acquiring Charles River Development, and SS&C Technologies nabbing Eze Software. An OMS is incredibly sticky. It serves as the heart of most asset manager’s trading operations because it connects into the portfolio management, execution management, risk and analytics systems, depending on how it’s configured.

At the same time, though, asset managers are under increasing pressure to deliver alpha, forcing them to consider their trading technology setups, says Brad Bailey, research director for Celent’s capital markets vertical.

“It’s a competitive business—every part of the buy-side value chain is under pressure,” he says. “It’s tougher and tougher for all types of asset managers due to the fee compression that exists, the competitive nature of the industry, the consolidation of assets, the competition with passive and lower-cost strategies, and increased regulatory pressures—all of these factors add together and asset managers need to figure out how to do things cheaper and better.”

To help buy-side firms answer these challenges, vendors have to adopt new strategies. The days of closed-off systems are fading due to the growing demand for cloud, APIs, and open-source tools and datafeeds. It’s led to the likes of Goldman Sachs (Marquee) and BlackRock (Aladdin) to embrace the cloud so as to drive greater interoperability with emerging data and analytics providers, which buy-side firms are clamoring to tap into to find unique insights to outperform passive strategies and better manage risk. It’s also behind State Street’s interop drive with its Alpha platform, and SS&C Advent’s cloud-native strategy.

“The opportunity is that people need more efficiency, more technology, and more services,” Bailey says. “The challenge is that there’s a lot of consolidation in the buy-side OMS space and their core clients are under a lot of pressure.”

Compared to other OMS providers in the space, Linedata has a unique setup. It is publicly listed on Euronext Paris, which accounts for 37% of its capital ownership, with the rest being mostly controlled by a family trust led by Anvaraly Jiva, the company’s founder. While Linedata has been relatively acquisitive itself, the deals are not exactly eye-catching in the way that SS&C, Ion Group, and State Street have grabbed headlines. It’s also that independence through family ownership that has allowed it to carve out a niche in the consolidating buy-side OMS space.

Over the past five years, the vendor has experienced financial highs and lows. From 2015 through 2019, its net income fell year-on-year, but at the same time it became more profitable and efficient, as earnings before interest, taxes, depreciation, and amortization (Ebitda) grew from 2017 through 2019, as did recurring revenue. At the same time, it has grown its workforce from about 1,000 people four years ago to more than 1,300 today. Meanwhile, Linedata Services stock price dropped from a high of almost €38 ($45) near the start of 2019 down to just below €19 at the start of Q1 2020. It has since rebounded to €35.50 as of the writing of this article.

Furthermore, in 2020, while revenues dropped 5%, net income grew 16%, and Ebitda went up 3.8%. As the company wrote in its earnings report, “This increase [in Ebitda] reflects both reductions in expenses related to the pandemic, such as travel freezes and event cancellations, and operational cost reductions, particularly in certain support functions.”

So the question becomes, is that expense reduction sustainable into 2022?

WatersTechnology spoke with Brackenridge two weeks before the company released its financial report on February 17, 2021, but he believes that these moves toward modularization will ultimately help the company retain current clients and add new ones that have experienced disruption as the result of M&A in recent years. While modularizing the product base is at the forefront of the company’s plans, it’s the work it has made on the data and analytics business that will prove a true differentiator, he says.

Internally, Linedata has built a data hub, which, like AMP, it started to roll out at the beginning of 2020. Natively built with direct API integrations, the hub is where users and internal staff will now go to collect data from various vendors and data types. At the same time, its analytics service incorporates machine learning to analyze operational performance, identifying patterns to help users identify operational issues and make suggestions for improvements.

That’s live today, but the next step is to expand the use of ML for other OMS-related processes. Cloud was the ground floor, the entry point that every vendor must get to. Modularization was the next level, allowing the company to be more flexible to the changing needs of asset managers. After that comes intelligence-driven, machine learning algorithms.

Brackenridge says that today most systems across the industry are transaction-oriented—they manage orders, book trades, create NAVs, etcetera. But by creating an intelligence layer through the use of machine learning, it will help the company to truly capitalize on the cloud and module moves.

“We are underway and have started taking that level of intelligence by function or module and shoving it into these systems so that when you go to rebalance a portfolio, it will tell you, ‘Here’s a better way to do it.’ Or, ‘Don’t do it this way.’ Or, ‘If you do it this way, your outcomes may not be what you want.’ That level of intelligence is coming, and we’ll be releasing things all through 2021.”