Technology within any industry has driven innovation, operational efficiency, and better performance. For investment firms, the platform that enables this the most is a trade order management system (TOMS).
For those users or organizations just beginning their digital transformation, it’s key to understand how a TOMS works and the features it should possess. Having the right platform in place can make all the difference, both from a day-to-day perspective and in achieving long-term success. Modern TOMS platforms are cloud-native, SaaS-based solutions that combine scalability, agility, and integrated compliance.
In this guide, learn about the basics of a TOMS and how to choose the best execution order management solution.
What is Trade Order Management?
Trade order management describes all the tasks and workflows involved in the lifecycle of a trade. It encompasses everything from initiation to settlement, including routing, executing, allocating, and tracking of orders.
The best approach to developing a standardized, automated workflow process is to use a trade order management system. A TOMS supports front-office, middle-office, and integrates with back-office. The tools within it support many tasks, including:
- Managing portfolio holdings
- The creation of orders
- The execution of trades
- Compliance checks
The most valuable TOMS combines order management and execution (OMS/EMS) in a centralized platform.
Key Features of a Trade Order Management System
The landscape of TOMS solutions has become very busy. These cloud-native, SaaS-based systems have become the hub for trading activities, some flush with features that help organizations meet goals around efficiency, performance, and risk management.
What features are the most essential? This list is a good starting point.
- Comprehensive functionality for order and execution management: A well-designed TOMS will include all aspects of the transaction. Firms should also have the option for a full Investment Book of Record (IBOR) or “flush-and-fill” methodology.
- Order routing: Intelligent automation of order routing should be available, delivering each order to the appropriate venue based on pre-defined rules.
- Execution of trades: The actual trade aspect should, of course, be part of the TOMS. An upgraded feature of this would also include optimization for speed and price.
- Risk management: Monitoring risk within the TOMS is imperative, and it’s easier with the capability to enforce pre- and post-trade compliance rules.
- Portfolio modeling: With AI tools, a TOMS can provide ways to experiment with portfolios that are much more exact and quicker than other approaches.
- Reporting: Every TOMS has reporting options, but some have more than others. Firms should assess what their needs are and compare them to the system’s functionality. Key reporting features should include ones for regulatory, performance, and portfolio accounting. Additionally, customizable dashboards are essential for maintaining visibility across the company.
- Built-in BI Reporting: Access to insights from BI reporting sets firms on a new level of capabilities. With this integrated into the TOMS, organizations have the opportunity to make more data-driven decisions.
- AI automation tools: Workflows in a trade order management system can be complicated and have multiple aspects. However, AI automation features can streamline these workflows and eliminate a lot of repetitive, manual tasks.
Benefits of Trade Order Management Systems
Having a robust TOMS delivers many benefits for firms, which can be essential in staying competitive and growing.
Here are some of the most sought-after benefits.
Operational Efficiency
Every business needs to achieve operational efficiency, and technology is the answer. A TOMS increases this in many ways. Automation streamlines repetitive tasks and accelerates processes. Real-time data access also means less manual work in combining data. Firms can execute trades faster with the same level of confidence that everything is correct and compliant.
Error Reduction and Data Accuracy
Automated workflow decreases the chance of human error. Since there are pre-trade compliance checks, firms also see a reduction in regulatory mistakes.
Integrated Compliance
A TOMS gives an organization stronger compliance controls. It integrates compliance into every aspect of trading automatically. It makes compliance less complex from a user perspective but reinforces checks and balances with ease.
Choosing the Right TOMS
When reviewing the best execution management system for trades, stakeholders can make comparisons based on features and the benefits they offer.
There are key considerations, too, including:
- Scalability: Can it grow as the firm does?
- Integration: Does it provide open APIs and a master data model to connect seamlessly with PMS, EMS, custodians, accounting, and BI tools?
- User roles: Can the software support multiple roles in the organization?
- Customization: How easy is it to tailor the system to a business’s specific needs?
- Onboarding, training, and ongoing support: Does the provider have a program to get the team up to speed and launched?
Ready to Explore Trade Order Management Platforms?
To fully understand the value of a cloud-native, SaaS-based TOMS, firms should see these capabilities in action. For a demo of the INDATA TOMS, make a request today.
FAQs – Frequently Asked Questions
What is Trade Order Management?
Trade order management encompasses all activities and tasks that comprise a trade. These typically involve ordering, routing, executing, allocating, and tracking.
Why is Trade Order Management important for beginners?
It involves the essentials of the transaction, and anyone new to investment firms should be well-versed in all the components. Doing so ensures these people follow the right internal and regulatory rules.
How does a Trade Order Management System work?
The software encompasses all parts of a trade lifecycle. It begins with order creation and entry, then moves to routing and executing the trade to the appropriate exchange or venue. Before the trade, a TOMS can make compliance checks and offer real-time monitoring of trades, positions, and risk exposures. Post-trade, the solution can automate confirmations, settlements, and allocations.
What are the key features of a Trade Order Management System?
Top features of a TOMS include order entry, routing, execution, confirmation, reconciliation, and allocation. Other capabilities outside of the main activities include compliance monitoring, portfolio modeling, reporting, BI insights, automation via AI, data aggregation, and integration options.
How can Trade Order Management Systems benefit beginners?
Trading is a complex discipline that involves numerous factors. A comprehensive TOMS helps simplify the workflows, providing a guide to trading based on pre-determined rules and policies. It also has instant checks for compliance to identify any errors. With real-time data access, it also enables more informed and accurate decision-making.
