Supercharge Your Rebalancer With An API-Based OMS

Supercharge Your Rebalancer With An API-Based OMS

By Charles Kozler

“Technology goes beyond mere tool making; it is a process of creating ever more powerful technology using the tools from the previous round of innovation.”

— Ray Kurzweil, American Futurist

We are accustomed to new ideas spreading like wildfire not just in the US, but across the globe, at speeds once thought to be impossible. Facebook reached one billion active users in only nine years while smartphones hit a billion users less than five years after the iPhone was released in 2007.

This expanding rate of change has not spared the wealth management industry as new competitors stream in to grab a piece of the wealth management space.  Existing technology providers react by expanding their service offerings with financial planning, trading and rebalancing functionality. They are looking for ways to differentiate themselves while making their client experiences more seamless.

What wealth tech vendors are discovering is that even if they become experts in trading and rebalancing, a robust order management system (OMS) is still a required piece. These are complex to build as well as time consuming and expensive to maintain.

Advancements in software development, specifically application programming interfaces (APIs), have drastically reduced the time required to go from OMS concept to production. Enterprise OMS applications that once took years to build and deploy now can be delivered in much less time by efficiently leveraging a vendor with a well-supported set of APIs to build an OMS.

But what are the criteria to know if an OMS vendor has the infrastructure that you will need?  How can you ensure that your time to market will benefit from what they are offering?  We believe that if you find the right vendor, you can implement an API-based OMS in just a few months.

There are three key questions to ask of any OMS vendor before deciding to select them as your development partner:

1)    Are their APIs well-documented and include sample code so that your developers can work with them on their own?

2)    Does the vendor provide a complete testing simulator that supports the data formats of all the top custodians and broker-dealers?

3)    Can the vendor support your company’s business workflows and do they have experience integrating with your key systems?

How to Evaluate a Vendor’s APIs
The search for OMS functionality should begin with a build vs buy decision. But we can help you rule the build option out almost immediately.

Building an OMS is expensive and time consuming and can take two years or longer, depending on the types of securities being traded. It requires serious domain expertise in areas such as development of block trading algorithms, centralized trade blotters, post-trade allocations, and connectivity to the largest trading networks. We would not recommend going this route, except for the largest firms with the deepest pockets.

These days, almost every OMS vendor has some form of APIs available to allow their partners to tap into their system. But whether they are well-documented or not is another story.

Many vendors will claim their APIs are the best, but when you peek behind the curtain, you will find that they do not make the grade. More often than not, they are inaccessible and poorly documented, requiring an expensive custom development project that must be contracted from the vendor. This is not how APIs should work!

Properly supported APIs come with extensive online documentation and sample code that makes them easy to implement without requiring hand-holding from the vendor. These can be used as building blocks to enable rapid OMS deployment in as little as a few months, as opposed to a year-long effort usually required.

Don’t Skimp on the Simulator
At its core, an OMS connects an advisory firm’s trading system with the external counterparties needed to execute their trades.  These counterparties include custodians, broker-dealers and trading venues.

Each counterparty can have slightly different connection workflows and file formats, all of which can require custom development work. However, their technical documentation is not always up to date which leads to errors and further delays.

Every connection must be tested and debugged before the OMS can be put into production.  This phase can drag on for weeks or even months to complete since it’s necessary to schedule each test separately with each counterparty. Larger firms, such as the big four RIA custodians, will require more lead time since they are testing with many more customers and partners on an ongoing basis.

This is why a simulator is a critically important part of an OMS implementation project. It enables your developers to be able to test your OMS implementation anytime on your own schedule. When bugs are found, the code can be updated and immediately retested. Without a simulator, the custodian will require you to reschedule your test date for a time that’s convenient for them. This cycle of testing, debugging and rescheduling is a common issue and a primary reason that OMS development projects go months or years beyond their target dates.

A best of breed OMS vendor will have staff to keep their simulator updated with all the latest changes from every counterparty, which means that after your code is tested, it’s guaranteed to work when you go live. This is peace of mind that is worth its weight in gold, especially when it comes to keeping an aggressive deployment schedule for your OMS.

Workflow & Integration Support
Even the world’s best OMS is useless if it doesn’t integrate with your firm’s technology platform and business workflows.  This is a hidden landmine that many firms run into after they have to implement a new OMS.

Before making any decision, the first thing to check is that the new OMS meets all the requirements defined for your future trading process.  This includes seamlessly integrating with your portfolio rebalancing system to provide straight through processing (STP).  Some OMS systems might claim they support your rebalancer, but actually require manual steps for mutual funds and certain security types.  This introduces unnecessary delays and operational risk into your trading process and should be avoided.

When meeting with prospective OMS vendors, ask them how their system handles block trading and trade aways.  Can they send block trades to your clients’ preferred brokers for execution and efficiently manage allocations, confirmations, and affirmations? All of this functionality should be accessible and manageable through their APIs.  If there are any gaps, custom development will be required and the extra cost may be steep.

The difference between a firm’s current workflow organization and how it will differ from the end result can present challenges during deployment of a new OMS.  Check that any OMS vendors being considered have the necessary configuration options to adjust to fit your processes rather than the other way around.

A major part of any OMS implementation is integrating it into your existing ecosystem. Industry best practice is to document your trading requirements and the needs of upstream and downstream systems to ensure that there are no surprises after you sign the contract.

What to Look for When Selecting an OMS

All OMS platforms are not created equal. When shopping for an OMS, there are a number of factors to take into consideration. These include:

·       Are APIs available? The benefits of using an OMS are numerous, but not all OMS vendors offer APIs. Given the advantages APIs offer in deployment speed and customization, checking to see if an OMS vendor offers APIs is highly recommended.

·       Ask if the OMS vendor offers a full-featured simulator that allows you to test counterparty responses for every step in your trading process.

·       Are the core workflows fully supportable via the OMS vendor’s APIs? We’re all familiar with vaporware – announced software tools or features that are not now, and may never be, actually in production – so make sure to verify that the features advertised by the OMS vendor are currently available.


Four decades ago, there were no personal computers. Fifteen years ago, smartphones (as we know them today) didn’t even exist. Yet last year, the US passed the 80% threshold (the level considered as mass adoption) of smartphone ownership with even the cheapest one having more processing power than 100 original IBM PCs.

Intuitively, it feels like technology is progressing faster than ever.

Wealth management platforms also need to keep pace with accelerating changes especially if they offer or are planning to offer portfolio rebalancing and trading tools.  Adding a world class OMS to their platform is a great way to differentiate their offering and provide STP to clients as a complete package.

Platform providers and wealth tech vendors should look for an API-based OMS that has the best in class attributes necessary to support deployment and integration in a matter of months.  If the vendors you’re talking to have never implemented their OMS in less than half a year, it is probably not the best choice for your firm.  Do your due diligence when selecting an OMS partner to ensure it is the best fit to keep your product set on the cutting edge of wealth management technology.

For more information on how you can extend your portfolio rebalancing and/or trading system with an API-based OMS in as little as several months, click here to contact a member of the Flyer team.