New Aité report provides detailed analysis of fixed income EMS capabilities

Matt Simon, AITÉ

A new report from the Aité Group, penned by Audrey Blater and Matt Simon, has provided an in-depth look at the execution management system (EMS) toolset for fixed income markets. EMSs are set to become increasingly important according to senior buy-side trading experts, making the report timely and potentially valuable for firms reviewing their current and future platforms.

Audrey Blater, AITÉ

Noting that the fixed income EMS can solve the patchwork of information that bond markets are beholden to, and possibly lower the total cost of ownership (TCO) for connectivity, data and management of systems, the report looks in detail at each system on the market, along with its capabilities and connectivity to different asset classes.

The authors find that EMS integration with new pricing sources, such as composite, evaluative, and liquidity scores, mean that “clients can calculate a host of metrics that didn’t exist a decade ago. The real value of a fixed income EMS holistically lies within the “three P’s”: price discovery, placements, and pre-trade/post-trade analysis.”

Although drivers for fixed income EMS system adoption include regulatory mandates for best execution, “some headwinds are preventing greater adoption.”
An example given is that fixed income EMS solutions are seen by many firms as ‘nice to have’ technology.

“With budgets always in mind, many companies don’t have the ability to open the purse strings for yet another solution—especially one that isn’t being pushed by a regulator,” Blater and Simon wrote. “These firms may continue to just use an order management system (OMS) combined with various execution methods.”

The Aité analysts note that, while the end game of fixed income EMS solutions is the same as investors look for when trading other asset classes — such as liquidity aggregation, decision support, and analytics where necessary — the peer group of vendors offering tools varies widely and is expected to keep growing, with most vendors predicting increased competition or consolidation in the space.

The ecosystem includes technology firms that have initially developed EMS and/or OMS solutions in other asset classes and has expanded to include niche entrants – Aité has included pre-trade data analytics provider Algomi in its analysis.

Over the next 12 to 18 months, the fixed income EMS market will specifically need to tackle is in price discovery including historical analysis; engagement with trading protocols including automated/click-to-trade with strong connectivity; and pre- and post-trade analysis of execution quality.

The report is available here: