It was 2019, and Rajiv Kedia felt as if the stars were aligning.

The principal and associate founder and global head of sell-side technology at US-based FlexTrade Systems, a provider of multi-asset execution (EMS) and order management systems (OMSs), had ambitions to expand the business globally, having just appointed two new London-based heads of sell-side OMS business development for Europe, the Middle East, and Africa (Emea).

At the same time, coincidentally, Ion Group acquired sell-side trading platform provider, Fidessa. And then a domino fell: Bloomberg announced it was exiting its equities Sell-Side Execution and Order Management Solutions (Sseoms) and know-your-customer (KYC) businesses. Was this a chance for FlexTrade to take a few steps up the sell-side OMS ladder?  

“As we were gearing to ramp up operations from the US—growing the team globally, increasing functionality to make sure it addressed client needs from a global perspective—the marketplace changed considerably,” Kedia recalls. “The biggest player in the market, Fidessa, was taken over by Ion Trading, and suddenly a lot of their clients started looking at the company very differently. We started getting a lot more phone calls and enquiries. And then immediately after that, Sseoms decided to exit the market. It was like, when it rains it pours!”

WatersTechnology broke the news in 2019 that Sseoms was to cease operations in April 2021. Since then, the small universe of competitors that supply OMSs to the broker community have, to a greater or lesser extent, scrambled to win clients from Sseoms, with some even using the sunsetting of the OMS as an impetus to beef up their own teams and offerings.

The OMS is a critical piece of software and migrating it is a nightmare. … You’re not going to [migrate] to save 10%. … So you make the switch when you have to make the switch.

Bank CTO

Like FlexTrade, these businesses see this as a unique opportunity. Migrating from an OMS is a costly and risky affair. Many heads of technology would rather swallow the known costs of staying with something they don’t like, rather than risk their careers and involve their firm in an implementation project that could take up to two years to complete.

“The order management system is a critical piece of software and migrating it is a nightmare,” says the CTO at a tier-2 bank with operations in the US and Europe.

“What do you gain from migrating? What’s the benefit? There are a million new things out there, but if you have something that’s working—maybe it’s not sexy and maybe it’s a bit boring, but it’s working—to move off of that and go through the whole hassle is usually not worth it. You have to move all the data, all the accounts, and there’s a lot of transfer of information and migration—it’s a huge project. You’re not going to do it to save 10%; the payoff from the engineering time to do the move for a 10% cost savings is not going to happen. So you make the switch when you have to make the switch.”

With that said, for those Sseoms clients that didn’t prioritize looking for a new OMS home, very soon—in late April—they will come to a rude awakening that Sseoms is gone, and they have nowhere to go.

Impetus for improvement

Itiviti has noticeably been the most public about its plans to capitalize on Bloomberg’s exit from Sseoms. Robert Mackay, chief executive at the Swedish trading and technology provider, told WatersTechnology back in May 2019 that it was looking to fill at least 79 new roles to handle anticipated growth. The company—which is also known for its Fix global connectivity platform, Nyfix—has since filled all 79 positions, which included product and partnership strategy leaders, as well as implementation and sales roles.

It is now on another hiring spree to support its growth and investments in its Fix and fixed-income trading technology. It will be adding more than 200 research and development, quality assurance, and client service positions within the next two years.

For the 79 roles it has filled, quite a few came from senior posts within Bloomberg’s Sseoms unit. These include Linda Middleditch, now head of product strategy at Itiviti; various heads of product and product managers, including Alex Brown, Shelley Magee, and Shantanu Goyal; implementation engineer Alex Bloomfield and implementation consultant Naing Ye Thu; project manager Kevin Jackson; and senior salespeople Frederic Villain and Greg Cooper.

Ofir Gefen, Itiviti’s head of sales and revenue for Emea and Apac, says the vendor felt it needed to enhance its tools and functionality to provide clients with more than what they had previously with Sseoms.

Part of the conversation with clients was, not only did they want to migrate, but clearly, we were also coming at a higher price point, so they wanted to get more out of the tools.

Ofir Gefen, Itiviti

Clients migrating from Sseoms will, in many cases, pay more for their new OMSs. Sseoms was relatively cheap, as it offered less customization and fewer features than its competitors—a “plain vanilla OMS”, as one competitor describes it—but customers benefitted from pre-existing integrations with Bloomberg, as the majority would also have Bloomberg Professional licenses.

The situation showed Itiviti that there were areas where it could offer more to its clients than Sseoms had, Gefen says. “Part of the conversation with clients was, not only did they want to migrate, but clearly, we were also coming at a higher price point, so they wanted to get more out of the tools,” he says.

Itiviti’s research and development team, which Gefen says makes up 40% of its workforce, had to race against tight implementation timelines to deliver changes to the workflows in the OMS. 

A complex product

While Bloomberg is shedding Sseoms, this decision, along with exiting its KYC business, is aimed at streamlining its product offering. The information giant does not have plans to exit any other business lines, such as its multi-asset, sell-side focused Trade Order Management Solutions (Toms) unit or its Asset and Investment Management (Aim) buy-side OMS.

But Bloomberg has also not said why it decided to abandon Sseoms, and declined to comment specifically on its decision. However, competitors say it makes sense: Bloomberg’s core business, after all, is data provision and the Terminal, and running a sell-side OMS is difficult and human resource-intensive. Also, says Medan Gabbay, chief revenue officer at Quod Financial, a global multi-asset OMS/EMS provider, Bloomberg’s Sseoms client base was “primarily brokers with very simplistic flow.”

While Sseoms’ 150-strong client base included large banks, such as Commerzbank and DZ Bank, it serviced mostly tier-2 and smaller broker-dealers, many of whom are seeking a way out of the equities trading business as consolidation and declining commissions bite. Even large firms are exiting equities trading, with Commerzbank deciding in February to shutter its equity trading and research unit, following Deutsche Bank’s exit from its global equities business in 2019.

Gabbay says one of the reasons Bloomberg left the business was due to the complexity of the product. Running an OMS may seem relatively simple, but delivering data, connectivity, algos, and automation to the product requires a varied and costly multi-year strategy, he says.

“Every customer has a unique configuration. EMSX [Bloomberg’s multi-asset execution management system] is a totally standard product across all clients. Every sell-side order management [platform] is slightly unique in what it’s integrating with, how it’s integrating, and the messaging it needs to generate. So, there was a huge technical and human cost to Bloomberg for delivering Sseoms,” he says.

Sseoms had an edge, however, in that it belonged to Bloomberg, and its clients could benefit from the vendor’s data and relationships with exchanges, says InfoReach’s CEO Allen Zaydlin.

“Bloomberg delivers a lot of useful built-in infrastructure: market data, security master, licensing, connectivity. Many clients lived very comfortably with Sseoms, but now they have to go to a third party and license it. Many of them don’t understand they are no longer in Bloomberg, and now this is reportable to Sedol [the stock exchange daily official list] that [goes] to the London Stock Exchange. [They don’t understand] that these [services] have a cost, and it’s quite steep,” he says. “They didn’t realize that once you are no longer using Sseoms, you have to buy the master license from Bloomberg or other sources, and that can cost you as much as the full Sseoms product did in the first place.”

Other vendors say their clients are paying more now than when they were at Sseoms. That said, they are getting more functionality for that higher price. Emmanuel Faure, head of Apac sales at Horizon Software, says Horizon brought in one client that’s paying more than what they used to with Sseoms because the client wanted to extend its capabilities. For example, the client wanted to leverage Horizon’s algo framework, which gives it the ability to do more than the “plain-vanilla OMS” they had before.

Heart transplant

Migrating clients from one OMS to another can be an arduous process, which is why clients don’t often switch providers. This is also why Bloomberg exiting Sseoms provides an exciting opportunity for competitors to scoop up new business.

Vendors say the complexity and duration of a migration depends on the client, and the transition can take anything from a few weeks to two years for vast and complex operations. The bigger the client, the more customer positions need to be ported, and the more connections built for inbound clients and outbound order flow. Traders at the various firms develop their own workflows over the years, and customizing to those workflows and building new configurations can drain resources. Then the traders require training, and compliance reporting needs completing.

It’s such an expensive and difficult process that it can partly account for why Bloomberg didn’t have a higher-profile client base. Quod’s Gabbay says there is a reason many clients stuck with a product like Fidessa, which cost them $1 million–4 million a year, on top of which they still had to pay for Bloomberg data, when they could have moved to Sseoms, which cost more in the order of $100,000–300,000.

If the OMS fails, your business cannot continue. You have built so many business processes around the central organ—the OMS—that making the decision to change and detach those is very expensive.

Medan Gabbay, Quod Financial

“The pain of change is so excruciating and so threatening to a business that there was very little chance in the near term of Sseoms taking many significant customers on board,” he says.

He says a migration is like a heart operation: just as there is a lot of risk to the human body in detaching it from arteries and veins, there is risk to the business in detaching its OMS. “If the OMS fails, your business cannot continue. You have built so many business processes around the central organ—the OMS—that making the decision to change and detach those is very expensive,” he says.

Nick Halvorsen, director of operations at Chicago-based InfoReach, which offers a multi-asset OMS, says he is currently untangling a client from Sseoms. “They have relied on it for a long time; it was an inexpensive solution, with their Bloomberg relationship. They got very comfortable there. And there are a lot of moving parts for these clients to be able to keep doing business. For some, the cost of moving to a new OMS might have been prohibitive, but they couldn’t operate without one.”

Twisting in the wind

This is one reason why, vendors say, up until very recently they were still getting interest from firms that have yet to find a new OMS provider—mere weeks before Bloomberg pulls the plug on Sseoms.

Itiviti’s Gefen says the company was still fielding prospective client requests from firms in Q4 2020.

“We told them, ‘if you’re not going to close this by around October, we’re not going to take on the project.’ We had a couple that came back to us in November, December, and I said, ‘look, as much as I’d love to take your money, there’s no way we’ll have you ready by that timeframe,’” Gefen says.

Kedia says FlexTrade also saw some last-minute requests. “One reason is analysis paralysis—they have been waiting to make a decision, and they must have looked at the clock and said, ‘Sseoms is going away in April.’ And now they are scrambling and want everything quickly,” he says.

FlexTrade anticipated this, he adds. “We had a team ready to deal with such clients. We have several installations going on right now but, even with just two months to go [from when Kedia spoke to WatersTechnology] to the official deadline, there are some still making decisions. So we are coming up with a two- to three-week installation plan to get them live and ready before the hammer falls.”

Meanwhile, InfoReach’s Halvorsen says these clients may have spent so long with Bloomberg—Sseoms has been around for about 20 years—that they were ignorant of the vendor universe outside it and took too long in trying to understand the market.

“I do get the feeling many were kind of slow in this process, like they thought it might not really happen, as if Sseoms wasn’t going to sunset. And we were telling them, Bloomberg are serious, they want to close this thing down in April and end of the month is the goal for everybody. Bloomberg has been very accommodating in making sure all these people land in their new homes before they sunset Sseoms, but they do intend to be taken seriously that it’s shutting down,” he says.

The difficulty for clients still looking for a vendor is that some vendors are selective about who they take on. This is partly because they prefer larger firms, partly because they want to stick to what they do best, and partly because, in the short term, they don’t want to risk their reputations by overextending their capabilities. With so many clients looking for a new home all at once, and migrations taking as long as they do, few firms have the resources to onboard everyone before the last bell rings.

We have several installations going on right now but, even with just two months to go to the official deadline, there are some still making decisions.

Rajiv Kedia, FlexTrade

FlexTrade was afraid of overpromising and under-delivering, so it handled only clients it was sure it could onboard without straining capabilities, Kedia says. “Word travels fast in our industry, and we wanted to ensure effective implementations. Therefore, we have been focused on those clients that partnered early, and are committed to investing in technology and their business as a whole. This naturally selected for larger, more global investment banks and broker-dealers.”

FlexTrade also turned away smaller customers that were just looking for the lowest priced option, he adds. “That is not really the kind of clientele we normally cater to. We tend to focus on those clients solving for growth in volumes, asset classes or pivoting into more complex businesses. Sseoms had a very decent number of smaller, cost-focused clients on their platform but, while a number of them reached out to us, they were qualified out during our sales process. There is a certain price point below which it doesn’t really make good business sense for us.”

Horizon, too, turned away Sseoms’ customers, as their needs didn’t match its solutions, Faure says.

“Every client is potentially a good client. We had to ensure that what they were looking to do was in line with what we were able to offer. For example, if someone wanted something that was completely out of scope—and I wouldn’t even say it’s the size of the client, but just the type of market and the type of trading—sometimes we have to say, ‘Sorry, we are not the right fit,’” he says.

For example, Faure says a potential client (not from the Sseoms client base) asked Horizon to add phone execution capabilities. “As of today, it’s not something we’re offering,” he says.

“Sometimes it’s important to stick to your guns and to be clear on what you can do, and not promise everything just to do a deal. If you want to be relevant and you want to be good at what you do, you need to be focused. And that’s what Horizon has been trying to do. We are developing, enhancing, and expanding the coverage per product and per market, but we stick to our core business,” he says.

Who went where?

So who has gone where? Quod’s Gabbay says most of Sseoms’ clients have simplistic order flow and no need for a sophisticated OMS. Many are exiting equities anyway, he says. And some Sseoms users have simply opted for Bloomberg’s EMSX for routing orders, though they would still need an OMS to manage order and trade flows.

“The clients Sseoms took are the people who didn’t really have significant OMS needs. I’ve seen a lot move just to EMSX for routing orders because the functionality in the sell-side order-management cycle is quite complex. And certainly, what we do, which extends all the way through machine learning and data intelligence and execution management, algos, etcetera—none of that was present in Sseoms,” he says.

Some have defaulted to either cheaper or free alternatives offered by small regional or local OMSs. A managing director at an institutional trading firm says he observed other brokers going to smaller regional or local single-market OMS providers that service, for example, only the Hong Kong market.

Quod, which hired Ling Lee from Bloomberg as its director of product management in July 2019, won DZ Bank, the second-largest bank in Germany by asset size. Gabbay says Quod took the “more advanced” customers, clients that value automation, transaction cost analysis, and smart order routing.

“It also means they’re more tolerant to change and more invested in how they can make use of technology to benefit their customers,” he says. Quod took on “fewer than 10” Sseoms clients and those implementation projects took between six to eight months. “Anyone that says they can change your OMS in less than that is not telling the truth,” he says.

FlexTrade, too, went for Sseoms’ large and mid-sized clients, including China-based institutional broker TF International, but Kedia notes that even smaller broker-dealers are going multi-asset, and want to be able to do some kind of programmatic trading and have some amount of global coverage, he adds.

Nasser Khodri, FIS’s sell-side group president for capital markets, says his company has been engaged in helping Sseoms clients. In some cases, these were already clients of FIS, using other solutions for risk management, back-office tools, banking, and/or payments. 

FIS has completed 23 migrations onto its OMS, Valdi, with three more to go. “Clients were asking whether we could help them with the April deadline, sometimes leveraging existing relationships and infrastructure to accelerate delivery,” Khodri says.

These clients range from big, tier-1 banks to smaller firms spread out across Europe, the US, and Asia, he adds.

Horizon’s Faure says the firm took on fewer than 10 Sseoms clients, while Itiviti has onboarded “roughly 10” former Sseoms clients. Itiviti’s Gefen says these migrations were mainly in Europe and Asia, as that is where its OMS is the most mature. He adds that Itiviti has completed two implementations, and expects the rest to be finished before the end of March.

Itiviti’s client wins include the cash equities desk at investment firm SMBC Nikko London Capital Markets; DZ Privatbank, the private bank arm of DZ Bank, which it is supporting in multiple asset classes; Philippine stockbroker Salisbury BKT Securities; and US equity brokerage Atlantic Equities.

Other vendors would not say how many clients they have migrated over from Sseoms. Fidessa did not respond to requests for comment.

Any time a platform such as an EMS or an OMS is sunset, it presents unique opportunities and challenges to both the trading firms and the competing vendors, similar to what’s been happening in the reg reporting space with the exits of CME Group and Deutsche Börse. Some client firms will go for the cheapest solution they can find to keep business running, while others may opt to rethink their trading architecture completely, and use the end of the service as a reason to futureproof their systems and access additional capabilities. For the vendors, this represents an opportunity to be in the top spot of OMS provision, and create a sticky offering that can lead to a relationship that lasts decades, because end-users are not quick to switch out these systems once they’re installed.

“In order to make a change of OMS, you’d need a game-changing situation,” says the bank CTO. “I guess that Bloomberg leaving the space qualifies.”

Trading firms do not want to have to undergo OMS transition projects, so right now is a period of extensive change for the industry. Following the April sunset of Sseoms, there will be winners and losers—the latter of which may be forced to make similar decisions to Bloomberg, which will lead to new opportunities for the winners. It’s the circle of life played out in the sell-side OMS space.