What is an 'Order Management System - OMS'

An order management system (OMS) is an electronic system developed to execute securities orders in an efficient and cost-effective manner. Brokers and dealers use order management systems when filling orders for various types of securities and are able to track the progress of each order throughout the system.

An OMS is also referred to as a "trade order management system."

BREAKING DOWN 'Order Management System - OMS'

To execute a buy or sell order for a security, an order has to be placed in a trading system. An order typically contains information such as security identifier (ticker), order type (buy, sell or short), order size, order limit (e.g., market, limit, stop, etc.), order instructions (e.g., day order, fill or kill, good-till-canceled, etc.), and/or order transmission (broker, ECN, ATC, etc.).

An order management system is a software system that facilitates and manages the execution of trade orders through the FIX protocol. FIX, or Financial Information eXchange, is an electronic communications protocol used to share international real-time exchange information related to the trillions of dollars of securities transactions and markets. However, communicating transactions can also be done through the use of a custom application programming interface (API). The FIX protocol links hedge funds and investment firms to hundreds of counterparties around the world using the OMS.

The OMS can be used on both the buy-side and sell-side to allow firms to manage the lifecycle of their trades and automate and streamline investments across their portfolios. Typically, only exchange members can connect directly to an exchange, which means that a sell-side OMS usually has exchange connectivity, whereas a buy-side OMS is concerned with connecting to sell-side firms. When an order is executed on the sell-side, the sell-side OMS must then update its state and send an execution report to the order's originating firm. An OMS should also allow firms to access information on orders entered into the system, including details on all open orders and previously completed orders. The order management system supports portfolio management by translating intended asset allocation actions into marketable orders for the buy-side.

Some order management systems offer real-time trading solutions, which allows the user to watch market prices and execute orders in multiple exchanges and markets instantaneously by real-time price streaming. Some of the benefits that firms can achieve from an order management system include managing orders, allocations and executions across asset classes from a single platform; automating pre-, intra- and post-trade compliance checks; tracking and reporting on the full lifecycle of a firm’s orders; and more.

Order management systems are an important development in the securities industry because of the significant cost savings they provide to investment firms. Many OMS platforms have been developed by various firms looking to capitalize on the increased spending for these systems.

RELATED TERMS
  1. Limit Order Information System ...

    A limit order information system is an electronic system used ...
  2. Order

    An order is an investor's instructions to a broker or brokerage ...
  3. Immediate Or Cancel Order - IOC

    An order to buy or sell a security that if not immediately filled, ...
  4. Order Driven Market

    An order driven market is where buyers and sellers display their ...
  5. Bracketed Buy Order

    Bracketed buy order refers to a buy order that has a sell limit ...
  6. Day Order

    An order to buy or sell a security that automatically expires ...
Related Articles
  1. Trading

    Understanding order execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
  2. Investing

    Understanding Market Orders And Limit Orders

    A market order executes a transaction as quickly as possible at the present price. Immediacy is the main concern. A limit order is executed at or below a purchase or sale price. Price is the ...
  3. Trading

    High-Frequency Trading: A Primer

    An in depth look at how high-frequency trading works and who the players are.
  4. Personal Finance

    Buy-side versus sell-side analysts

    Learn about the key differences between the jobs of buy–side analysts and sell-side analysts.
RELATED FAQS
  1. How do I place an order to buy or sell shares?

    Read a brief overview of how to open a brokerage account, how to buy and sell stock, and the different kinds of trade orders ... Read Answer >>
  2. What's the difference between a stop and a limit order?

    A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. With ... Read Answer >>
  3. Why can't I enter two sell orders on the same stock?

    The limitation on sell orders protects investors. Learn 3 reasons why you can't enter multiple sell orders and the downsides ... Read Answer >>
  4. What is the difference between a buy limit and a sell stop order?

    Understand the differences between the two order types, a buy limit order and a sell stop order, and the purposes each one ... Read Answer >>
Hot Definitions
  1. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  2. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  3. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  4. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  5. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  6. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
Trading Center